13 May 2005
One of Scotland's biggest and most controversial Private Finance Initiative projects, the Royal Infirmary of Edinburgh, is embroiled in a row over £30m in extra payments demanded by the operating consortium.
NHS Lothian and the consortium, Consort Healthcare, said this week they were trying to resolve the issue by negotiation. If that fails, the dispute might go to the Court of Session in Edinburgh. The health board has already applied to the court but the case has been put on hold while negotiations continue.
NHS Lothian is resisting Consort's demand for an extra £1.1m a year over the 30 years of the contract on top of the £7.5m annual fee for providing support services.
Consort, which is led by the Royal Bank of Scotland and construction firm Balfour Beatty, is already due to receive about £1.26bn for the building and running of the hospital's non-clinical services.
It argues that it is justified in seeking the extra payment because the contract with NHS Lothian allows for benchmarking exercises and the adjustment of fee levels.
The health board insists that extra payments should arise only if fresh demands are placed on Consort, such as the opening of new wards.
The use of the PFI for the hospital project, which became fully operational in 2003, was the subject of a fierce political row.
This week the Scottish National Party, which opposes the use of the PFI for public projects, said the dispute exposed fundamental flaws in the policy. It has called on the Scottish Executive to think again about the system as its preferred model of finance.
NHS Lothian said a 'technical issue' had arisen in the contractual arrangement relating to the provision of services and it had exercised its right to protect its position by initiating court action.
A spokeswoman for Consort said it was committed to working with the health board to resolve all contractual issues. 'We welcome the constructive dialogue that is under way as a firm basis for resolution of these issues,' she added.
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