Carillion is to begin construction work on the new Government Communications Headquarters in Cheltenham - the largest facility to be built under the UK's Private Finance Initiative - having concluded the financial arrangements and signed contracts.

Carillion, along with partners Group 4 and BT, have formed Integrated Accommodation Services (IAS), the special purpose company which will manage the concession to finance, design, build, maintain and service the new GCHQ over a 30 year concession period.

Whilst Carillion is designing and constructing the new building, BT is providing and managing the technical infrastructure in addition to acting as data and telecoms supplier to Carillion and its sub-contractors. Group 4 will take over certain services at the existing estates, following construction of the new accommodation and will provide comprehensive services throughout the concession. The total net present cost to the Government of this project over the concession period will be some £800 million.

Carillion will build the new GCHQ, under a three-year contract worth around £330 million, and be responsible for maintenance work over the life of the concession with an estimated value of over £40 million. In addition, Carillion has a 40 per cent equity share in IAS.

The largely outdated buildings on two existing sites in Cheltenham – many of Second World War vintage – are now inefficient and expensive to run. The new building that will replace them has been designed to the most modern standards and will "ensure GCHQ’s readiness for the high-tech national security and intelligence-gathering challenges of the 21st Century."

Euan McEwan, executive director responsible for Carillion Private Finance says, "GCHQ is one of the largest PFI concessions to be awarded and today’s contract signing is a landmark for PFI and a tribute to the hard work of the IAS team in bringing the negotiations to a satisfactory conclusion. By 2003, GCHQ will have a superb facility which will provide excellent working conditions and provide the best value for money solution for replacing the existing out-dated buildings."

With the addition of GCHQ, Carillion has now closed 14 PFI deals involving construction contracts worth some £860 million and management and maintenance contracts worth over £650 million, to provide the assets and services involved over the concession periods.

Anna Lagerkvist