The National Physical Laboratory (NPL) works on the measurement of physical properties such as time, length and mass. It stands at the centre of the UK's National Measurement System.
Since its inception in 1902, the NPL has spread across its Teddington site, occupying a disparate collection of buildings. By the early 1990s many of the buildings could only with difficulty provide the conditions required for the NPL's scientific work. In 1998, the Department of Trade and Industry (the Department) and Laser, a special purpose company jointly owned by Serco Group plc and John Laing plc, signed a 25-year long Private Finance Initiative (PFI) contract, under which Laser would redevelop the NPL facilities.
The redevelopment of the NPL involved the replacement of many existing buildings and the construction in 16 linked modules of over 400 laboratories, many of which had to meet exacting environmental requirements. The project suffered considerable construction delays and problems, the most serious of which involved 30 laboratories in which stringent temperature and/or sub-audible noise requirements had to be met.
In July 2004, Laser recognised that it did not have the financial capacity to complete the project to the required specification and proposed either revision of its contract or termination. After negotiations, the PFI contract was terminated in December 2004 and the Department paid Laser £75 million for its interest in the new buildings. The termination was the first for a major PFI contract involving serious deficiencies in contractor performance.
On the basis of a report by the Comptroller and Auditor General,1 we examined the problems that led to the termination of the PFI contract for the NPL and considered the lessons that might apply to future PFI projects. We took evidence from the Department, Serco Investments Ltd, John Laing plc and Abbey National plc.
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1 C&AG's Report, The Termination of the PFI Contract for the National Physical Laboratory, HC (2005-06) 1044