2.23 Nine projects were not ready to use when originally expected, but six were only delayed by two months or less. Therefore, 34 of the 37 projects surveyed (92 per cent), were ready to use within two months of the date specified in the contract.
2.24 At the time of the census, only two of the projects due to be completed were still unfinished. These are the Army Foundation College and the redevelopment of the National Physical Laboratory. The Army Foundation College was due to be completed in May 2002. The construction of the project was fully completed in November 2002. Reasons for the delays include project management and construction problems within a tight site (see case study opposite). The redevelopment of the National Physical Laboratory has been delayed whilst the PFI Contractor and the Design and Build contractor tackle the technical aspects of meeting the contractual output specifications. There have been extensive negotiations between the department (the Department of Trade and Industry), the PFI Contractor (Laser) and the builder (John Laing Construction). The building is modular and is being delivered and occupied in phases. The early phases of the project were 12 months late.
The Department estimates that final completion, which was due to have been in August 2002, is likely to be 24 months late. As this is a PFI project the Department is currently paying only where a service is capable of being provided, that is for those modules of the building which are certified complete and capable of occupation. Had this been a traditional procurement it is likely that the Department would have paid for the construction work undertaken to date regardless of whether the modules were complete and capable of being occupied.
2.25 Where PFI buildings have been delivered late, departments have been able to defer payments or seek financial damages. For example, it became apparent that construction of the British Embassy in Berlin18 would not be complete by the date agreed in the contract mainly due to the need to strengthen part of the curtain walling because of regulatory changes. The Foreign and Commonwealth Office (FCO) then negotiated a new deadline and increased damages if the consortium failed to meet it. Additionally, the consortium agreed to undertake a series of minor changes collectively worth an estimated £1 million with no additional charge to the FCO. In the event, the consortium failed to meet the new deadline so the FCO sought damages under the revised arrangements. The building was completed in June 2000 compared with the original requirement of February 2000 and the revised deadline of May 2000.
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| Case Study |
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| Construction delays The MOD's Army Foundation College The Army Foundation College suffered from delays during its construction. The project was due to have been completed and all buildings occupied by MOD by May 2002, but at the time of our census (Summer 2002) some building was still incomplete, even though the majority of buildings had already been occupied by the College. The construction of the project was completed in November 2002. Asbestos on site has played the greatest role in these delays. This problem was discovered just before contract signature and the PFI contractor considered that it would not be able to obtain funding for the project if it accepted asbestos risk. Therefore the department retained the risk and has taken full responsibility for related cost increases and programme delays. Negotiations continue on the price of the additional work attributable to the asbestos remedial work. However, the Ministry of Defence's project manager is aware that the PFI contractor has experienced delays and cost increases for a number of additional problems on site. These have been mainly project management and construction difficulties, including the management of subcontractors. |
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18 See National Audit Office report 'The New British Embassy in Berlin' (HC 585, Session 1999-2000).