Law training study secures funding from Linklaters

Lawyers working on more than 120 health Private Finance Initiative (PFI) projects will have to stand down at the end of this month when health minister Alan Milburn announces a list of around a dozen schemes that will be allowed to proceed.

Milburn has announced that his officials are reviewing the 43 hospital schemes to identify the ones most needed and most likely to sign within the next 18 months. He refused to say how many would be on the list, but commentators believe it will be between six and 15.

Bidders for the other projects and their lawyers will have to stand down while the Health Department concentrates on bringing the target projects to completion.

Schemes not on the list will be prioritised alongside projects competing for public funds on the basis of health service need.

Milburn said he expected the £194m Norfolk and Norwich scheme and the £115m Dartford and Gravesham project will be signed next month when the private finance bill is passed. Six projects in London will be subject to a separate review.

By next spring, Milburn aims to have trusts tendering for a second wave of schemes under a new model of the PFI process that uses standardised documents and procedures.

Dibb Lupton Alsop partner Paul Ridout, who at Nabarro Nathanson acted for the preferred bidder for the Dartford and Gravesham scheme, predicted there would be around 15 projects on the final list and said most of the rest were not viable because of some “dreadful” NHS managers and “blinkered” contractors and banks.

He said lawyers with expertise would have more fulfiling work as the second wave of projects progressed next year.

Lawyers had, in the past, been going “month after month to meetings that got nowhere. It puts money on the timesheet but it is not very satisfying,” he said.

Marisa Broadhurst, health partner at Beachcroft Stanleys said she expected at least two and possibly four of the 30 schemes the firm is advising on to be on Milburn's list. She said there would be more work for health lawyers since hospital budgets would be freed up for publicly-funded deals like outsourcing catering, which had been put into the PFI pot.

But Lovell White Durrant's Mike Matheou, who is advising banks on financing the Norfolk and Norwich scheme, warned that many hospitals that had agreed on a price with a preferred bidder would lose that price if they were not on the priority list. “Construction costs are going up faster than inflation,” he said. “Opportunities may well be lost to the detriment of everybody.”