NHS Lothian paid £11.6m 'settlement' to kids hospital contractor

NHS Lothian paid contractors building the new children’s hospital in Edinburgh £11.6m to fix a range of problems – including drainage issues – in a settlement agreement after it decided against pursuing legal action, an Audit Scotland report has revealed.

The payment to HIS Lothian Ltd (IHSL) to fix “drainage issues, heater batteries and void fire detectors” was made before recent issues, which forced the indefinite postponement of the opening of the Royal Hospital for Children and Young People (RHCYP), came to light in July.

Auditor General for Scotland Caroline Gardner said she had decided to publicly release the board’s annual audit report today – one-month early – due to “high levels of interest in the new children’s hospital”, while she considered whether to raise issues in the report with the Scottish Parliament.

Over the weekend Unison official Tam Waterson, who represents NHS staff in Edinburgh, told The Herald the new hospital could be “ripped down” before it is opened, due to drainage issues.

The report, by NHS Lothian external auditor Scott Moncrieff, was conducted in early 2019 and stated NHS Lothian had “identified a number of issues that it believed were not compliant with the original contractual requirements and raised concerns over what it felt would be a significant adverse impact on patients, staff and visitors” with the contractor.

The board then negotiated with IHSL to come up with a “potential framework solution to overcome the points of dispute and assist in the completion of the facility” in a settlement agreement, which included a £11.6m payment to IHSL, to fix issues at the hospital.

This was in addition to “the £150m construction cost as at financial close and £80m of enabling and equipment works”, the report said.

“The settlement agreement was jointly drafted by NHS Lothian and IHSL, setting out all the remaining actions to complete the facility in return for an £11.6m payment. The agreement was signed with board and Scottish Government approval,” the report said.

It stated that NHS Lothian had decided against legal action, as any benefits of pursuing “legal redress” through the courts were outweighed by “adverse impact, whether financial or non-financial, including impact on service redesign”.

Before deciding on a settlement, the report said NHS Lothian carried out a “detailed evaluation of the qualitative and quantitative options available to it”, including legal advice.

“NHS Lothian has consistently maintained its position that the issues experienced were materially non-compliant with the original specifications and raised concerns over the facilities for patients, visitors and staff (relating to aspects such as function, safety, adequacy and future capacity).

“However, legal and contractual expert opinion did not give the board sufficient confidence that the likely benefits of pursuing resolution through legal redress in the courts outweighed the qualitative and quantitative implications of such a route. There were also differences of opinion between NHS Lothian and contactor external experts.”

The report called for the NHS Lothian board to evaluate “whole-project contracting, monitoring/timetabling and related ‘lessons learned’” from the hospital build.

“This should go beyond what may have otherwise been standard on more straightforward projects which have gone closer to plan,” it said.

“The key outcomes should be shared within NHS Lothian and with other NHS bodies in Scotland and other public bodies (as appropriate) to help with cumulative understanding of the issues arising, and to help with both preventative and reactive measures to mitigate the likelihood and impact in future projects.”

National Services Scotland is undertaking a detailed assessment of compliance of all building systems which could impact on the safety of patients and staff at the new site, and KPMG is independently reviewing the governance arrangements for RHCYP.

by Gemma Fraser

Further delays to opening of new children’s hospital after more safety checks ordered

Gardner said Audit Scotland continued to monitor events since the report concluded in June, and “will be taking a close interest in the NHS safety review’s findings and KPMG’s report on the governance of the project”.