Poor project management behind Paddington campus scheme downfall

A National Audit Office report into the failed St Mary's healthcare campus project has revealed the scheme suffered from a massive underestimation of costs.

The decanting strategy - aimed at keeping the existing hospitals operational while work was taking place on site - was priced in the original outline business case at just £1m. But in 2003 the campus partners bumped this to £80m, the NAO report said.

The report found that the scheme's overall cost spiralled by 200% in less than five years (see 'Increases in estimated capital cost since original OBC'). In the original outline business case construction costs were estimated at around £300m (£411m at 2005 prices). By the time of the scheme's collapse in May 2005 the projected costs had risen to £894m.

The NAO pinpointed poor project risk management as a key cause of the scheme's problems.

It said the project floundered mainly because of the number and scale of risks it involved. These were mishandled by the NHS Trusts concerned and their partners, according to the report.

Other key problems were the lack of a single sponsor and the failure to secure enough land for the scheme.

The NAO highlighted the mismatch between the size of the scheme and the land and funding available as a particular project risk.

It found that the project director was blamed for the scheme's project risk management approach. The report claimed: "In summer and autumn 2004 the project director made a deliberate decision not to embed risk management processes in the scheme as the scheme did not have sufficient resources or capacity to do so at the same time as drawing up a new OBC."

The NAO also cited opportunity costs as one of the reasons for the scheme's spiralling costs and resulting failure. It said "delay is expensive when building cost inflation is running ahead of general inflation in the economy". The NAO said if the project had gone ahead in May 2005 in substantially the same form as in October 2003, the 17-month delay would have added about £103m to the cost of construction (see 'Construction Costs Inflation between October 2003 and May 2005').

The report, The Paddington Health Campus Scheme, was published this week.