Liverpools new hospital

[excoriator]

Cranes still seem to be moving there. I have no idea how long they'll keep doing so, but for the moment, at least something is happening there.

[jean]

At least something is happening. That should not be the best you can say about this star example of PFI, the only possible model (according to you) for the provision of schools and hospitals.

You like to say the Sheffield tree fiasco was just one bad deal. But they keep coming, one way and another.

As for the great justification of transferring all the risk to the private sector, how do you think that's going to play out now?

[excoriator]

You and I don't know how bad or good a deal this will turn out to be. I will refrain from comment until this becomes clear. It could be good, with the gov. taking up the cost of completion and reducing the PFI payments on it. I suggest we both wait before applauding or booing.

[jean]

Jan 16, 2018 11:28:03 GMT excoriator said:

...I will refrain from comment...

Bit daft to start a thread about it, then.

I must point out, though, that if the solution for Liverpool’s hospital turns out to be a ‘good deal’, it’ll only be because it’s not PFI any more.

I think we can agree about that.

[excoriator]

R4 claims there is little work going on there at the moment. I think the crane I saw moving could well have been the result of the wind...

It can't be THAT far from finished now, surely.

[jean]

Carillion never officially revealed exactly which deals had gone so badly wrong, but it quickly became an open secret in the market: the construction of two English hospitals – where workers said on Monday they have already begun to be laid off – one Scottish road and a development in Doha, the capital of Qatar. Together they were enough to kill off the company.

The three UK deals were Merseyside’s “new”£335m Royal Liverpool University hospital, the £350m Midland Metropolitan hospital being built in Smethwick and a road project called the Aberdeen western peripheral route – all of which were beset by seemingly innocuous problems that caused more and more embarrassing delays and mounting costs.

Construction of the Royal Liverpool University hospital – a prestige project to build a new facility with 646 beds, the biggest single-bedroom hospital in England – ran into problems when workers found “extensive” asbestos on the brownfield site and cracks in the new building.

In Smethwick, delays were blamed on “the fitting of pipes and wires [taking] longer than expected”.

The opening of both new hospitals has been delayed by a year. At least, those was the last estimates: no work was being carried out at the Royal in Liverpool on Monday, while local West Midlands media was reporting a similar suspension at Smethwick...

...PPP is one of those financial inventions that was sold as being a win-win for both sides: the companies could be awarded lots of lucrative contracts to build stuff for the state; the government would get new infrastructure more quickly and without the financial risk, as private companies would bid for the work and the market would ensure taxpayer value.

At least, that was the theory. What actually happened was that companies kept bidding for projects, but tough competition meant the contracts came with skinnier and skinnier margins. So, if problems occurred, a contractor’s 2% profit would not just be wiped out – huge losses could be incurred too.

Sam Cullen, an analyst at investment bank Jefferies, said: “That is why construction can be such a fundamentally horrendous business. Under pressure to grow the top line and operating on wafer-thin margins, everyone bids each other to death. It’s a situation not helped when your largest customer, the government, is under huge pressure to get value for money and is more susceptible to accept the lowest bidder.”

The big question is: why do companies keep bidding, if the contracts can cause so much pain?

The answer probably lies in the structure of major PPP construction deals, because they hand the contract winner a large chunk of cash upfront.

Work on construction can then begin, while contractors like Carillion may not need to start paying sub-contractors for another 120 days.

During those four months, much of the upfront payment might be used to pay other debts within the business, meaning these deals can create situations where firms have to keep winning new contracts just to keep going.

Or, as it turns out, not keep going.

Still happy about the model, exco?

[jean]

Good letters today, too. Especially

• In 1988 I was a member of the team that wrote the specifications and assessed the tenders for the first large, outsourced, training contract awarded by the MoD. I then spent the next year monitoring in detail the contractor’s adherence to a large part of the contract.

The original team warned at the time that major outsourcing would eventually lead to a lack of in-house expertise that government departments would need to be the “intelligent customer” when the time came to renew contracts. If an in-house capability was not maintained as a benchmark, then the contractors would become a self-perpetuating group whose costings and standards could not be challenged.

It has taken longer than I expected for Carillion to fulfil our prediction.

David Bowman



• The failure of Carillion illustrates what we have known for some time – that when private companies deliver public services they privatise the profit and socialise the risk. For obvious reasons the government cannot simply allow the public sector contracts to fail. The answer is to take these contracts back in house and recognise outsourcing for what it is – an unaccountable, expensive and risky way of delivering vital public services.

Dr Jacky Davis
(Founder member, Keep Our NHS Public), London

[excoriator]

I was never happy about it. However, when there is no alternative...

By hook or by crook we will have a new hospital in Liverpool. We would NOT have had it if it had been left to the gove. to finance. I really don't care much about the money. You seem to obsess about that more than enough for both of us.

The other point is that it would have been built by Carillion anyway, which might have gone bust anyway or even a lot sooner, so I can't really see what the point is in your continuing your slagging off of PPI. However, it it cheers you up to do so I suppose its worth it.

[jean]

Jan 17, 2018 18:34:44 GMT excoriator said:

I really don't care much about the money.

You would iF you were unfortunate enough to be one of the subcontracted-to who won't get paid.

[excoriator]

That might have happened with or without any PFI contract being involved. I don't therefore see the point of your comment.

My point is that whether it costs the government a lot more than it should to get a hospital built is a lot less important to me than the fact that it IS built.

[jean]

The point that is being made now by many who are more closely involved with the process than you or I is that the whole PFI thing is a 'giant Ponzi scheme' which was always going to fall apart in the end, even if some people did get their schools and hospitals before it happened.

Please read the article and letters I've linked to.

[excoriator]

Carillion collapsed because it took on too much at too low a price and was badly managed. Nothing to do with PFI.

[jean]

Continue to deceive yourself, exco.

The failures that brought down Carillion were inherent in the whole outsourcing system, of which PFI is just (probably) the most egregious example.

[excoriator]

Outsourcing is distinct from PFI.

[jean]

I'm not sure Jeremy agrees with you, exco:

“In the wake of the collapse of the contractor Carillion, it is time to put an end to the rip-off privatisation policies that have done serious damage to our public services and fleeced the public of billions of pounds”, he said.

“This is a watershed moment. Across the public sector, the outsource-first dogma has wreaked havoc. Often it is the same companies that have gone from service to service, creaming off profits and failing to deliver the quality of service our people deserve.

“The evidence is clear and it is everywhere. Look at the up £2bn public bailout of Richard Branson’s Virgin and Stagecoach for their own failure to run East Coast rail properly – or the scandal of the NHS being sued by private companies like Virgin after losing a contract bid.

“Staff and patients in our NHS are facing shocking conditions this winter. Tory underfunding has caused the crisis, but privatisation, outsourced contracts and profiteering has made it worse.

“Our public services – health, rail, prisons, even our Armed Forces’ housing – are struggling after years of austerity and private contractors siphoning off profits from the public purse.

“It’s time we took back control. We not only need to guarantee the public sector takes over the work Carillion was contracted to do – but go much further and end contracts where costs spiral, profits soar and services are hollowed out.

“Labour will end the PFI rip off, put an end the private-profit-is-best dogma and run our public services for the benefit of the many, not the profits of the few.”