UK grounds £5bn helicopter project

The UK government has suspended procurement for the Search and Rescue Helicopter private finance initiative project, awarded to an RBS/Thales consortium, because of a spending review. The review also threatens numerous projects awarded in a school-building initiative, where the UK believes it ‘has been overcommitted’.

UK chief secretary to the treasury Danny Alexander has suspended one of the country’s largest project finance initiative (PFI) projects – the £5 billion (€5.7 billion; $7.9 billion) Search and Rescue Helicopter programme.

The 25-year contract was awarded in early February this year to a consortium comprising the Royal Bank of Scotland (RBS), French defence contractor Thales and helicopter specialist CHC, requiring them to provide search and rescue services from 2012 onwards.

However, as part of the new coalition government’s spending review of projects committed to after January 1 2010, it has now been suspended, although it will be reviewed with urgency as part of a broader ‘value for money’ review of Trident – the UK’s nuclear defence programme.

In his review statement, Alexander also said the current government had “inherited a large number of school building projects approved in recent months as part of the Building Schools for the Future (BSF) programme”. BSF is a UK programme aiming to renew or rebuild nearly every secondary school in England. 

As such, the government will review the entire programme, including projects entered into before January 1, with a view to taking “tough decisions […] on reducing costs and addressing where spending has been overcommitted”.

New chancellor George Osborne had warned on the campaign trail that PFI – the UK’s standardised process of tendering public works to the private sector – would stop being taken for granted as the default procurement process for public works, with new projects having to demonstrate clear value for money and tighter risk transferral to the private sector.