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Department of Health – The Paddington Health Campus scheme

Sir John Bourn, the head of the National Audit Office, reported to Parliament today on the cancellation of the Paddington Health Campus scheme in June 2005 at a cost of £15 million.

The scheme was a complex and ambitious attempt to build a world-class healthcare facility and ultimately proved to be beyond the capacity of the scheme partners to deliver. There were three main reasons for this. The first was the number and scale of the risks and the lack of a single body in charge of the scheme. The second was the way in which the partners organised and carried through the scheme. The third was the lack of active strategic support for the campus vision.

The 2000 Outline Business Case estimated the gross capital construction cost to be approximately £300 million (£411 million at 2005 prices), with completion of the hospitals due by 2006. By the time the scheme was cancelled in 2005, projected costs had risen to £894 million and the expected completion date had slipped to 2013.

The National Audit Office considers that the North West London Strategic Health Authority should either have required the campus partners to draw up a new Outline Business Case in early 2003 or cancelled the scheme at that stage. In late 2002, external construction consultants confirmed that the estimated capital construction costs had more than doubled and Westminster City Council confirmed that the scheme could not fit on the land available.

The report concludes that the failure of the Two NHS Trusts – St Mary’s NHS Trust and the Royal Brompton and Harefield NHS Trust – to merge at the start of the process was a key factor in the failure of the scheme. Their diverging clinical and financial interests were exposed as the scheme wore on, exacerbated by developments in NHS policy.

The scheme eventually failed in May 2005 for three specific reasons:

  • The Campus partners were unable to secure adequate land for the scheme;
  • The Campus partners, and others, differed over whether the scheme was affordable;
  • Capacity planning in 2005 indicated that the local NHS in North West London needed to reduce capacity by 500 to 600 beds.

All three reasons caused the Board of the Royal Brompton and Harefield NHS Trust to decline to recommend the scheme for approval to proceed in May 2005. The scheme was formally cancelled in June 2005.

The report notes that hospital building schemes cost, on average, more than double (117 per cent) their initial estimated cost. It recommends that the Department of Health should implement its own Capital Investment Manual guidance on reappraising business cases if estimated construction costs rise more than 10 per cent above approved values. It also recommends that no NHS hospital scheme should proceed without the formal identification of a single sponsor, even if this means NHS Trusts must merge before starting procurement.

“A hospital development of this scale and ambition was always going to be a challenge but the original business case was inadequate, the lack of a single sponsor was a fatal flaw and the final scheme was not deliverable. The cancellation of the Paddington scheme at a cost of £15 million has left patients, staff and visitors to the hospitals with outdated facilities.

“The Department of Health should draw on my report’s conclusions and recommendations when deciding how best to initiate and manage its £7 billion to 9 billion capital investment programme in order to provide value for money to taxpayers, patients and staff.”

Sir John Bourn

Notes for Editors

  1. The scheme aimed to replace three run-down hospitals: St Mary’s, the Royal Brompton and the Harefield, with state of the art clinical accommodation. The scheme also included space for new research facilities for Imperial College, including the National Heart and Lung Institute, currently housed mainly on the Royal Brompton and Harefield sites. The campus partners were Royal Brompton and Harefield NHS Trust, St Mary’s NHS Trust, Imperial College and, from 2002, Partnerships UK.
  2. The estimated capital construction cost of £894 million in 2005 included £117 million of optimism bias. Optimism bias, which was introduced in 2003, is an adjustment required by the Treasury to redress the tendency of capital schemes to be overly optimistic when assessing the cost of projects. Judgements on affordability after 2003 were based on the capital value including optimism bias.
  3.  Press notices and reports are available from the date of publication on the NAO website at www.nao.org.uk Hard copies can be obtained from The Stationery Office on 0845 702 3474.
  4. The Comptroller and Auditor General, Sir John Bourn, is the head of the National Audit Office which employs some 800 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

PN: 37/06