Concern that cost of controversial New Velindre cancer centre is rocketing

Martin Shipton

A report in one of the world’s leading project finance and infrastructure journals has led campaigners to fear that the total cost of a controversial new cancer centre for south east Wales will be far higher than previously estimated.

Opponents of the planned New Velindre centre in Cardiff object to it on both environmental and clinical grounds.They say it will destroy a well-loved green space in the north of the capital and that a state-of-the-art cancer facility should be co-located with a district general hospital.

Recently it was discovered that two of the construction companies involved in the Acorn consortium that has been earmarked to build the new centre, and was in July 2022 announced as the preferred bidder, have previously been convicted for bid-rigging in Japan and Spain respectively.

Now, members of the Colocate Velindre campaign group are pointing to an article in the journal IJGlobal that describes the project as having a capital value of £300m. Previously the capital value was said to be £200m.

The article states: “Wales’ £300m ($365m) Velindre Cancer Centre is nearing financial restructuring ahead of financial close.

“The debt-equity split is 70% debt and 30% equity.

“The lenders’ terms are only valid until March 31 2023, with a costing refresh in the works, IJGlobal can share.

“The project comprises the DBFM (Design, Build, Finance, Maintain) of Velindre Cancer Centre, which will replace existing facilities on the outskirts of Cardiff which were built more than 60 years ago – it is being procured by Velindre University NHS Trust.

“The scheme is being procured under the Welsh mutual investment model (MIM) process, in which the government retains an equity share of up to 15%.”

MIM is a variation on PPP {public private partnership) under which privately raised finance is used to pay for a project’s construction and maintenance. The commissioning public body typically repays the private sector consortium over 25 years. The whole life cost of the contract works out as substantially more than the initial capital cost.

When New Velindre’s capital cost was £200m, the estimated whole life cost was £562m.

Uncontrolled

The Colocate Velindre group said in a statement: “In April 2021 the Velindre Trust’s CEO Steve Ham said: ‘The estimated capital cost of the new Velindre Cancer Centre… is anticipated to be in the region of £200m, and the estimated value of the contract (£562m) is an indicative assessment of the whole life cost of the scheme.’

“So the 2021 tender’s estimated construction cost was £200m and now it’s £300m. Even if non-construction costs remained at the 2021 figure, the ‘total cost’ according to IJGlobal would already have come to a minimum of £662m (£300m+£362m) + VAT.

“However it seems fair to assume that the 25-year maintenance contracts etc will still reflect inflation and a negotiated increase. And if that reaches a full 50%, the bill would come to £843m (+ VAT) – heading towards a billion. This is staggering and could be mistaken as a joke on us.

“This is now an uncontrolled and irrational expenditure. It is quite unrelated to what’s best for cancer patients.

“NHS Wales has focussed at great expense on building a new mainly outpatient unit that lacks the general hospital environment needed to be a world-class cancer centre.

“This record Welsh NHS capital spend is the fruit of negotiations by Welsh Government with two companies convicted of a criminal fraud offence.

“A complete pause is needed on a project that cannot give patients the best cancer care. We suggest it’s time for a total rethink on management performance too.

“Moreover, the vast expenditure from public funds has never been submitted to scrutiny by the Senedd.

“Many MSs have not even realised that the proposed unit will not have a capacity any greater than that of the present Velindre and few further medical advantages because it is not on a general hospital site.

“We suggest a way out of this dilemma. The present Velindre site should be greatly improved but plans should be made for a modern cancer centre, freestanding but on a hospital site, pooling NHS resources and costs. There, close to multi-speciality expertise, the New Velindre may become a genuine world-class centre for cancer care excellence.”

Indicative

Responding, a Velindre University NHS Trust spokesman said: “The capital cost of the new Velindre Cancer Centre is currently being finalised in discussions with the Acorn Consortium ahead of financial close.

The estimated value of the contract is an indicative assessment of the whole life cost of the scheme which has been clearly identified in all related documentation on the development of the new centre.

“It is important to remember that the cost includes not only the capital value of the construction of the new centre, but also the cost of funding, maintenance and lifecycle investment over the contract life of 25 years from the opening of the new cancer centre which is vital for the future of non-surgical cancer services in south Wales.”