Construction giant Carillion earned £205million from a contract to build a multi-million pound hospital despite completing just 10% of vital engineering work before it went bust.
New figures show that Carillion, which collapsed under a mounting debt pile in January last year, pocketed the money for starting the Midland Metropolitan hospital in Smethwick, West Midlands.
The £205m pay-out was a significant chunk of the initial £350m overall budget for the project, which has run over significantly and has left taxpayers picking up the tab.
In response to a written parliamentary question, the government conceded this week that the firm managed to finish less than 10% of the building’s mechanical, engineering and plumbing works before it folded.
Carillion had already delayed Midland Met’s opening date by a year, and now the mega-hospital won’t open until 2022, four years later than originally planned.
HuffPost UK reported earlier this week how wards at nearby City Hospital, which were due to be replaced in part by the Midland Met, are potentially unsafe.
The situation has prompted the Treasury to provide an extra £400m to hurriedly revamp City’s wards and finish off Midland Met, which remains effectively frozen and partially exposed to the elements.
Before it went bust, Carillion sought to blame Sandwell and West Birmingham Hospitals NHS Trust for running a bid process that meant it would struggle to build the hospital on budget.
It said that the trust’s focus on costs, combined with Carillion’s own business model – described by MPs as “an unsustainable dash for cash” – meant it struggled to keep the project profitable, a board meeting heard.
Labour’s shadow cabinet office minister, Jon Trickett, has called on the government to oversee the award of a new contract to finish Midland Met amid fears under-pricing could happen once more.
Trickett told HuffPost UK: “One year on from Carillion we are reminded that the cost of this outsourcing giant’s collapse goes well beyond the £148m bill footed by the taxpayer.
“They have left a trail of destruction that is still being cleaned up over a year later.
“The government must step in and assist the trust in properly evaluating all bids to complete construction at the Midland Metropolitan, so as to prevent under-pricing and to ensure that public money is properly protected”.
Among the companies believed to be launching bids for the contract is Balfour Beatty, which has picked up millions of pounds worth of Carillion’s business, and which was awarded a £10m contract to “weatherproof” the outside of Midland Met for the winter months.
Health minister Stephen Hammond said in response to a parliamentary question that independent technical advisors had certified that £205m was a fair price for the work Carillion had completed.
Sandwell and West Birmingham NHS Trust’s chief executive, Toby Lewis, hit back at Trickett’s suggestion it had under-priced the contract.
Lewis said the trust had appropriate arrangements in place to award the new contract.
He added: “Carillion were paid only for work done. It is well documented that issues with their [mechanical, engineering and plumbing] sub contractor’s design caused a delay in projected opening date from 2018 to 2019. [Carillion’s] collapse led to a delay now estimated as 2022.”
Carillion’s demise has affected at least two big NHS construction projects, including Midland Met.
In Merseyside, a replacement for the Royal Liverpool Hospital was left standing unused next to ageing existing facilities, which were shown on a recent BBC documentary to have flooded 10 times in the past year.
Health chiefs expedited the process for finding a contractor to take over where Carillion left off, and work re-commenced on site late last year.
The new development is expected to open in 2020 at a reported additional cost of £100-120m.
A Department of Health and Social Care spokesperson said: “We continue to support and fund the Sandwell and West Birmingham Trust to get the new hospital built as quickly as possible, while making every penny of taxpayers money count.”
CORRECTION: The introduction to this article was amended to make clear that the 10% figure relates to vital work on mechanics, engineering and plumbing.