Works being carried out on the new Velindre Cancer Centre

Martin Shipton

The management of the project to build a new cancer centre for south east Wales has received half-hearted praise from Audit Wales.

In a report published on February 5, the public sector audit body said there were significant costs, but a “sound enough” basis for recent decisions, although it was still too early to say whether it would provide value for money.

The project has been riven with controversy from the outset, with opposition from groups who believe it should have been built adjacent to a general hospital and not on a much-loved green space in north Cardiff.

There has also been controversy over the fact that two of the companies involved in the project have been convicted of bid-rigging in their home countries of Spain and Japan.
The report states: “Our work has focused on decision-making since Outline Business Case approval in March 2021.

“In March 2024, after Welsh Government approval, Velindre University NHS Trust (the Trust) agreed a long-term contract with a private consortium, ACORN, to design, build, finance and maintain the new Velindre Cancer Centre (nVCC) in Whitchurch, Cardiff.

“The Trust’s existing cancer centre in Cardiff, serving around 1.7 million people, is no longer deemed fit for purpose. Improving cancer services is a key priority for NHS Wales and the nVCC supports national and regional healthcare objectives. It is a central part of the Trust’s wider Transforming Cancer Services programme for south-east Wales.

“We examined whether the Trust and the Welsh Government can demonstrate a sound basis for key decisions on the nVCC taken so far.

“To date, the nVCC is the only NHS project to use the Welsh Government’s Mutual Investment Model (MIM) [a variation on the Private Finance Initiative (PFI) used by Tony Blair’s UK Labour government, but largely spurned by Welsh Labour].

“The project has already attracted a lot of public interest, including around its location, the model of cancer care, the use of the MIM, and the appointment of ACORN [the development consortium]. The significant long-term costs make a sound basis for decisions even more important.

“Cost estimates have evolved over time but delays in the latter stages of the nVCC project’s development increased its exposure to price inflation. The most significant cost is the MIM contract with ACORN (the nVCC contract) which is projected at £885m over 25 years. Within this, the contracted construction cost of £321m appears reasonable given the Trust’s benchmarking and other advice.

“As well as the nVCC contract, there are other costs to bring the nVCC into operation and manage it. These costs are expected to be at least £765m over 25 years.

“However, we estimate that continuing to manage and maintain the existing centre would otherwise have cost at least £600m over 25 years. This would also have been without any additional benefits the nVCC offers.

“Overall, the governance arrangements supporting key decisions provide assurance that they were properly made. The Trust followed well-established business case and project management processes satisfactorily enough, and there has been appropriate scrutiny and expert and stakeholder input. The procurement process followed the regulations in place at the time, informed by extensive legal advice. While we have identified areas for improvement in the parts of the process we examined, we do not consider that they undermine the overall integrity of the final decisions to proceed with the nVCC contract.

“Whether spending on the nVCC delivers value for money will depend on whether it delivers the expected benefits over time and in a changing environment for cancer services. It will also depend on whether provisions in the nVCC contract to protect the public purse stand strong.”

Sound basis

Auditor General Adrian Crompton said: “Decisions about the nVCC project have been for the bodies involved to make, mindful of the overall costs and the inherent risks of long-term private finance contracts. While I recognise there are those who remain opposed to the project, the processes followed by the Trust and the Welsh Government during the period we examined have, overall, provided a sound enough basis for those decisions.

“Our findings do not, however, mean that the construction and operation of the nVCC will be problem-free. And it will be some years before a broader assessment of value for money can be made.”

The report states: “Through the MIM, ACORN will build and maintain the nVCC in return for an Annual Service Payment (ASP), payable for 25 years. Long-term private finance arrangements such as the MIM carry inherent risks. The nVCC contract seeks to address some of these risks.”

‘Narrow evaluation’

A spokesperson for campaigners who have sought greater transparency about the new Velindre project said: “The Audit Wales report published today shows AW’s customary depth and technical quality, but surprisingly majors on a very narrow evaluation of Velindre University NHS Trust (VUNHST) performance. The audit mostly restricts its key evaluation of Velindre to how adequately it discharged a fairly routine following of a pre-set MIM Wales process (the Welsh private funding method). A somewhat muted verdict says that management followed ‘this well-established business case and project management processes satisfactorily enough’. A low-key verdict rather than a glowing one just for being in lock step with the MIM, official, tick-box process.

“However the smoking gun here lies in the discipline and planning needing attention when in an MIM, especially regarding the external specialists needed to support such managers. In particular the cost.

“There will be disappointment that the audit absolved itself from examining those very points of contention that most needed an official, independent drilling down. These decisions include location and the full involvement of all stakeholders, mentioned even here only as no more than ‘appropriate’. “The customary overwhelming clinical consensus in decision-making fell outside the time-period in mind but other factors that did not yet were still skimmed over, for example: the Nuffield Advice; the role of the Infrastructure Investment Board; the External Advisory Board’s correct predictions of losses in brand recruitment and retention at Velindre, powerfully confirmed in the meltdown reported this week by Velindre staff.

“Critics coming at it from the all-important clinical viewpoint express surprise at only one page devoted to the vexed question of Velindre approving a construction company found guilty of a 25-year record in organised crime. For them, the report seems to repeat the original mistakes made on the legal position such as accepting the company’s tender because a ‘final judgement’ had not taken place.

“In UK law, ‘final judgement’ is not the end of the appeal process. This sense has been strongly challenged by a senior barrister who recently led a team to success in a major HS2 competition case.

“He has also questioned the handling of the issue in 2022. The weakness of this page, then, is its seeming dependence solely on the legal advice of the firm running the MIM programme in Wales which has an (understandable) investment in the programme’s advance. The legalities, we suggest, deserved further and wider consultation in the audit’s work especially using a British-based firm.”

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