Macfarlanes in PFI first with Berwin Leighton

Macfarlanes and Berwin Leighton have signed the first standard form private finance initiative contract in the health sector. It marks a turning point that will speed up negotiations and cut legal fees for future projects.

The £60m combined new build and refurbishment project for West Middlesex University Hospital Trust was signed on 30 January.

Macfarlanes partner Jeremy Courtenay-Stamp, assisted by Neil Wallis, was first instructed by the trust in 1995. But the project was halted in 1997 when the incoming Labour government put about 50 health projects on hold while it decided whether the PFI was the most appropriate method of procurement. Courtenay-Stamp was reinstructed in 1998. The project is the first so-called second wave PFI deal to sign and the first to achieve the correct balance of risk within the NHS executive standard form project agreement.

Berwin Leighton partner Carol McCormack led the team advising the private sector consortium led by French construction giant Bouygues and was assisted by Mark Richards. She says: “It will certainly speed things up. It will allow people to focus on what is important for the trust and the private sector in relation to their specific deal.”

Courtenay-Stamp adds: “We were involved in a process which set the standardisation, whereas the next lot of schemes will really benefit from the fact that we now have a standard system.

“This will make a huge difference to the level of fees generated in future deals.”

The overall level of fee reduction is expected to reach 60-70 per cent, possibly more. The standard form project agreement means that lawyers can focus exclusively on the scheme-specific aspects, the biggest of which is the payment mechanism. The standard form contract sets out basic contractual agreements for the development of a private finance hospital and the provision of services. The NHS executive expects it to be used substantially unamended, although a certain degree of customisation is likely to reflect individual features of particular schemes.

Moreton Hall, a consultant at the Private Finance Unit of the NHS Executive, says: “If you start off with a blank sheet of paper it can turn into trench warfare. You can end up with long, torrid negotiations, which mean high costs in terms of time. I think the standard form will have an immediate effect on the whole process.”