The construction of Southmead Hospital has become wrapped up in a legal claim worth up to £1.3 billion after "delays and problems" were caused by the company which built it. The government is suing auditor KPMG for its alleged involvement in the collapse of one of Britain's largest construction companies, Carillion.
KPMG is being sued by an office of official government liquidators known as the Official Receiver, who claim that KPMG failed to properly audit Carillion. The firm collapsed in 2018, leading to 3,000 job losses and causing chaos in private-sector construction projects including hospitals, schools and roads.
The £1.3 billion sum for which KPMG is being sued could help to recoup the losses of some of Carillion's creditors, according to the Official Receiver. And according to documents submitted with the legal claim, Carillion’s effort to build and manage Southmead Hospital was troubled by "delays and problems", and was one of a small handful of projects which led to Carillion's collapse.
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Carillion was responsible for building and maintain the new £430m hospital, which opened in 2014. The legal claim argues that once the hospital was constructed were a "number of problems" became apparent. The claim says: "They included problems relating to the above-ground drainage system, the theatre doors and the ventilation and power systems for the operating theatres."
Bristol Live reported in 2015 that the hospital was forced to use fan heaters to keep patients warm during one winter, and the government's legal case argues that this was a direct result of Carillion’s mismanagement of the hospital’s operations. In March 2015, North Bristol NHS Trust brought claims against Carillion for its role in mismanagement, and the company eventually settled with the Trust for £11.1m as a result.
When Carillion initially bid for the Southmead Hospital project in partnership with Lloyd's Banking Group, it sought to make a margin of 8 per cent, which amounts to approximately £35m. However, the company was unable to meet profitability targets.
It later attempted to bring several lawsuits against its own local subcontractors, which failed, but local Carillion management still accounted for them as if they had been won. The new legal claim argues that KPMG, who were responsible for auditing the company, wrongly signed off on the accounts which made the project out to be a far greater success than it was.
A KPMG UK spokesperson said: “We believe this claim is without merit and we will robustly defend the case. Responsibility for the failure of Carillion lies solely with the company’s board and management, who set the strategy and ran the business.”
A spokesperson for the Official Receiver said: “Following extensive investigations looking into the causes of Carillion’s liquidation, the Official Receiver has submitted a claim to the High Court concerning KPMG’s role as auditor for the company’s accounts.
“The Official Receiver has taken this action in the interests of creditors who lost substantially in the liquidation. The decision is based on legal advice, which is that KPMG is answerable to Carillion’s creditors for a portion of their losses.”
