3.2 After signing the contract with Laser in July 1998, the Department did not expect much involvement in the project until the first construction phase neared completion. However, it retained responsibility for some parts of the NPL site and needed to plan for post construction fitting out activities. To manage this work, the Department established a small project team, which included two key members of its procurement team. It also retained, on call-off contracts, four of the advisers used during the procurement: Hulley and Kirkwood (services engineering), PricewaterhouseCoopers (financial), Metron (laboratory specifications) and Turner & Townsend (quantity surveyors).
3.3 In late 1998, after construction had started, the Department re-assessed its cost to procure the PFI project, its estimate to manage its obligations during the construction of the new buildings and its estimate of the cost of its residual responsibilities for the NPL site (Figure 10). The Department revised the total upwards from £30 million to £53 million. The Department told us that most of the increase was unrelated to the PFI procurement and would have been necessary whatever procurement route had been used.
10 | The Department's estimate of the costs to procure the PFI contract, to manage its obligations during the construction phase and to meet its residual responsibilities increased from £30 million to £53 million | |||
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| Sunk and forecast expenditure (£ millions) | ||
Cost item | July 1998 | April 1999 | Increase | |
Site preparation, decontamination, demolition | 8.2 | 16.4 | 8.2 | |
Move from old to new laboratories | 4.3 | 7.5 | 3.2 | |
New radiotherapy standards facility | 2.8 | 4.7 | 1.9 | |
Design costs for new laboratory | 2.0 | 2.5 | 0.5 | |
PFI advisers | 3.3 | 3.5 | 0.2 | |
Variations in design | 0 | 4.0 | 4.0 | |
Use of advisers during construction phase | 0 | 3.0 | 3.0 | |
Other works required by the Department | 4.7 | 6.5 | 1.8 | |
Miscellaneous items | 4.5 | 4.9 | 0.4 | |
Total | 29.8 | 53.0 | 23.2 | |
Source: National Audit Office |
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3.4 The Department reworked its cost/benefit analysis and concluded that, despite the increase in the costs of its residual responsibilities, the project was still value for money. Nevertheless, concerned about the increase, the Department established a project steering group to which the project team would report. Apart from members of the project team, the group included individuals associated with the project from the Department's financial and legal centres. The group's function was to monitor the project team's management of the PFI project, the progress of the project and the project team's execution of the Department's residual responsibilities. Fortuitously, the group was established just as Laser's construction related problems began to emerge.
3.5 In 1999, the Department strengthened the project team by engaging HDR, a leading firm in the design of buildings like the new facilities at the NPL. Initially HDR's role was limited to investigating the problems afflicting JLC Ltd's design for controlling temperature to the most stringent requirements. Later, as Laser's problems increased, the Department widened HDR's remit to investigate all the problems with the new facilities.
3.6 In 2000, the Department engaged Leading and Junior Specialist Counsel from Keating Chambers to advise on contractual issues. By autumn 2001, the steering group realised that the team required more legal support, so the Department reappointed Herbert Smith, the solicitors that had advised the Department during the procurement. Altogether, since awarding the contract to Laser in July 1997, the Department has spent nearly £9 million on advisers (Figure 11).