AMEC HAS pulled out of the Department of Social Security's £4bn PRIME property redevelopment project, the largest private finance initiative scheme to be let, it emerged this week.
The contractor was part of the PPM consortium which has now agreed final terms for the refurbishment and management of almost all of the DSS's property estate. Its decision came just before the deal went through.
Amec is refusing to say exactly why it withdrew after such a lengthy bid process, other than that its planned involvement failed to justify the size of equity investment demanded by other consortium members.
It is thought Amec invested heavily in the bidding process. Last year Amec's interim results statement expressed hopes that it would soon recoup some of the £3M spent on negotiating PFI deals, including PRIME, in the first half of last year.
An Amec spokesman would only say of the PRIME withdrawl: 'We decided we could not get what we wanted out of it.'
PPM's remaining members are merchant bank Goldman Sachs, property investment fund Whitehall Street Real Estate, real estate investment and management company Vines Management, consultant Symonds Group, facilities manager Compass Management & Leasing, and property consultant Richard Ellis.
Amec claimed the split with PPM was amicable and that its relationship with PPM remained 'exceptionally good'. 'We remain in contact and in discussions with them,' said the spokesman, adding that it would now be able to bid for some of the refurbishment contracts as a subcontractor to the consortium.
The vast project includes an estimated £41M in annual maintenance work and £85M a year of facilities management contracts.
Amec is still preferred bidder for the £150M redevelopment of DSS buildings in Newcastle under a separate arrangement, although negotiations on this project have been under way since June 1996.
PRIME would have given the contractor access to work on the whole of the DSS estate.
This is not the first time Amec has split with PFI consortium partners. In August 1994 the consortium it had formed with Wimpey and prison management firm Mancare disintegrated after Mancare was ordered to pull out.
Since the PRIME deal was signed just before Christmas, PPM has only released sketchy details of the terms agreed. It was unavailable to comment this week on Amec's departure.
Sources close to the project say the consortium is not expected formally to conclude the concession deal until March as it is still mobilising resources. But terms of the deal are thought to have been approved by PPM's bankers.
It is understood that the consortium wants to finance the project with a bond issue, although details have still to be firmed up.
PRIME involves the transfer of around 700 buildings ranging from benefit offices and large administration centres to PPM under a 20 year concession. In return PPM has to supply and maintain accommodation to agreed standards and sell off surplus property. The DSS had initially offered guarantees to occupy 60% of the office space with options on a further 30%.
The deal is complicated by the fact that the DSS's estate is a collection of buildings in different, often poor states of repair. Some 20% were built before 1960 while only 25% were built after 1980.