Procure 21 row erupts as firms withhold annual fee

A row has broken out between the government and contractors on the multibillion-pound health building programme Procure 21 over the charges companies must pay to stay on it.

The firms, which are thought to include Taylor Woodrow, Wates and Carillion, are refusing to pay the annual fee of £170,000. They are understood to be dismayed at their failure to win projects and the lack of work from the public sector. Most of the NHS schemes have been won by Kier and Laing O'Rourke.

A source at one firm said it was not fair that it was required to pay the annual fee if the workload that was promised had failed to materialise.

He said: "At the moment there are several of us on the framework that will not pay anything at all - but maybe a deal can be brokered whereby we make a pro-rota payment related to the volume of work released by the public sector."

However, it is understood that officials at the health department, which has recently taken control of the framework, have rejected these suggestions and told the firms to pay up or leave the 11-strong list of consortiums.

The row takes place against a background of tightening budgets and a spending review of PFI schemes within the health service.

The framework contractors also want the government's report into Procure 21, compiled by independent consultant Symbia, to be released to the public.

The source said: "The assumption is that we will only see a report of the report, and that stinks. We want to know exactly what the findings are and why we aren't accessing and winning contracts."

The source said rumours were circulating that the Symbia report had recommended that the number of consortiums on the framework be cut to five but, for contractual reasons, the government could not remove any companies.

If the firms continue to refuse to pay the fees the government may then have a case for terminating the framework agreements - although the companies may then take legal action.

The contractors have already met Rob Smith, director of estates at the Department of Health, to discuss the issue. However it is understood that Smith was not sympathetic.

A Whitehall source said it was up to the contractors to win work. He added that a definite effort was being made to make the Procure 21 process more transparent.

Peter Couch, Procure 21 alliance director at Taywood, said: "Taylor Woodrow Construction continues to support the Procure 21 initiative. We are looking forward to working with Rob Smith and securing further works within this vitally important procurement strategy.

"We also welcome Rob Smith's desire to discuss changes within the strategy, which we believe will enhance its overall delivery."

A Department of Health spokesperson said: "The companies are aware of their contractual obligation to pay the annual fee under the framework, and Rob Smith has contacted those with outstanding payments, many of which have been settled.

"No set volume of work is guaranteed under the framework, companies must win contracts.

"Symbia's report is not yet in the public domain and comment on its recommendations are speculation."

Meanwhile the Skanska Innisfree consortium behind the troubled £1.2bn Barts and Royal London NHS Trust scheme has written to the DoH to call for a meeting to clear up confusion over the project.

A source close to the consortium said it was in daily contact with the NHS trust but needed clarity on the attitude of central government.

The North East London Strategic Health Authority's report into the affair was to be released as Building went to press.