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Sat July 11 2020

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Midland Met hospital contract not to exceed £267m

9 Jan 19 Sandwell & West Birmingham NHS Trust has given contractors a deadline of 6th February to pitch to take over construction of the new Midland Metropolitan Hospital in Smethwick and it is seeking strict assurances on costs.

Construction stopped when Carillion went into liquidation a year ago
Construction stopped when Carillion went into liquidation a year ago

The contract notice, published in the EU Official Journal today, says that the price to finish the hospital that Carillion started has been capped at £267m (or £320m including VAT).

The advertisement states that the wants to enter into a contract for the construction of the Midland Metropolitan Hospital under a NEC 4 Contract with a construction company experienced in acute hospital construction.

It is seeking to resume main construction works on 28th October 2019 and complete by 31st December 2021, three years later than originally planned.

In December 2015 a PF2 contract was signed with The Hospital Company (Sandwell) Ltd to design, fund, build and maintain a new acute hospital in Smethwick but in January 2018 THC’s construction contractor Carillion, was liquidated. The project agreement with THC was thus terminated on 20th July 2018.

The original capital cost of the construction works taken on by Carillion in 2015 was £297m (net of VAT) and overall PF2 contract value was put at £440m.

Following termination of the original contract, the trust entered into an early works contract on 5th October with Balfour Beatty to manage the site and prevent further dilapidation until the construction arrangements for the new hospital could be re-procured.

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Under the new contract, tenderers are expected to assume full design and construction responsibility for various packages of work including: mechanical, electrical and public health engineering (MEP); internal fit-out; and hard and soft landscaping. Other packages are build-only works.

The contract notice* states: “During the dialogue process tenderers are required to develop an aggregate contractor price, comprising price elements, a contingency schedule, fee (a variable percentage fee as defined under the contract) and a risk management payment. The Trust has specified a “not to be exceeded price” of £320m (inc. VAT) in the ITPD [invitation to participate in dialogue]. Contractor price submitted as part of the final tender must not be greater than this not to be exceeded price.”

It continues: “During the preferred bidder phase the Trust will work collaboratively with the preferred bidder to increase outcome-certainty on those items on the contingency schedule and to mitigate cost exposure to the project. As clarity is achieved, the revised costs for each item will crystallise and be re-allocated from the contingency schedule into the price elements. At the end of the preferred bidder stage, the balance of the contingency schedule will be liquidated, with any remaining items (and their associated values) moving across to the price elements which becomes the activity Schedule for use within the construction phase.

“For the avoidance of doubt, the aggregate Contractor price will not increase during the preferred bidder stage and the contract mechanism will only accommodate reduction. Similarly, the fee or the risk management payment will not increase during the preferred bidder phase. The saving generated by this reduction will be shared on a 50:50 basis with the preferred bidder. This gainshare will be added to, and treated in the same manner as, the risk management payment. This gainshare sum is not subject to a cap (as is that within the subsequent construction phase).”

Deadline for submissions is 6th February 2019 and invitations to tender will be sent out on 22nd February.

* View the full contract notice here.

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