FOLCA 2 Explained: The NHS Medical Centre Deal, the £13.2m Business Case, and the Tender Trail Behind Folkestone’s Town-Centre Redevelopment

On Tuesday 27 January, Folkestone & Hythe District Council’s Overview & Scrutiny Committee will look at a draft Cabinet paper that lands formally on the Cabinet agenda on 11 February 2026: “FOLCA – Update and FOLCA 2 Business Case”. In plain English, it is a moment of decision about what the Council now wants FOLCA to become—and how much financial and delivery risk local taxpayers should carry in order to rescue a highly visible town-centre asset while also trying to unlock a long-promised NHS “flagship” medical centre.

The draft Cabinet report (C/25/73) makes the central ask straightforward: Cabinet is asked to agree to a mixed-use commercial redevelopment of FOLCA 2 that includes a medical centre, but also to note a fall-back position—if the NHS route does not proceed, a commercial-only plan would be pursued.

That is the big “political” choice. The more technical (and arguably more consequential) question is whether the story the Council is telling about procurement, funding, and NHS commitment stacks up when you follow the paper trail—particularly the tender trail.

First, the basics: what is FOLCA, and why does it keep changing shape?

The former Debenhams building was bought by the Council in 2020 to control an “anchor” site in the town centre and stop it drifting into long-term vacancy.The property is split into two elements: FOLCA 1 (in orange below) and FOLCA 2 (in purple below). 

The original political pitch combined regeneration and healthcare. As the Council itself has described the initial ambition, it was “to accommodate a new Health Centre… [and] act as a driver for footfall in the town centre.”

But the project then ran into the hard wall of post-pandemic construction costs, interest rates, and viability. By mid-2025, Cabinet papers were explicitly acknowledging “extraordinary” economic challenges since the purchase and the need to “pivot” to a viable solution.

The pivot now has two moving parts:

1. Dispose of FOLCA 1 (to generate capital receipts to support the wider programme).

2. Push ahead with FOLCA 2, beginning with “Phase 1” remedial works (strip-out, separation works, weatherproofing), then a later “Phase 2” fit-out/occupation strategy (commercial space plus—potentially—a medical centre).

The draft February 2026 report states that FOLCA 1 disposal has progressed to the point where six bids were submitted on 12 December 2025, a preferred bidder has been identified, and the Council intends to finalise commercial terms and complete the transaction.

So the direction of travel is clear: sell one half, rebuild the other.

The regeneration context: why the Council argues it must press on

The Council’s FOLCA programme sits inside the wider Levelling Up Fund package, branded “Folkestone: A Brighter Future”. Kent County Council’s own decision papers on the Levelling Up programme describe the economic headwinds the scheme is meant to confront: the town centre saw a 16% fall in footfall and a vacancy rate reported at 14.7%. In that framing, FOLCA is not a vanity project; it is meant to be an enabling piece of infrastructure—bringing activity back into a visibly struggling core.

This is the Council’s strongest political argument: a large, empty, deteriorating building in a key location becomes a symbol of decline. Occupying it—especially with a high-footfall public service such as primary care—becomes a symbol of renewal.

Even the more technical May 2025 Overview & Scrutiny presentation makes the same case in “benefits language”: bringing “a vacant building in [a] key town centre location” back into use; increased footfall; and the ability to attract and retain medical staff.

Phase 1 works: what is actually being built first?

By July 2025, the Council was describing Phase 1 works as: separating FOLCA 1 from FOLCA 2; stripping out redundant mechanical/electrical infrastructure; and weatherproofing the structure “to prevent further deterioration.”

The July 2025 Cabinet report put Phase 1 at £2.48m (funded as part of the Levelling Up programme) and provided a high-level programme showing construction running January–June 2026.

This matters for scrutiny because Phase 1 is the “no regrets” spend: even if Phase 2 changes direction, Phase 1 is meant to stop the building getting worse and make later work easier.

The tender trail: what the public procurement notices reveal

The draft February 2026 report is unusually specific about procurement outcomes: it says procurement for the Phase 1 construction contract started in October 2025, nine bids were received, evaluation took place in December, contractor appointment is scheduled for January 2026, and construction is programmed to begin in February with completion in July 2026. 

So what do the procurement notices say?

A public notice on the UK Government’s Find a Tender service, issued by Folkestone & Hythe District Council, matches the Phase 1 description closely. It is titled “Refurbishment Works at Folca 2, Folkestone” and describes the scope as “strip out,” “damp proofing,” “roof repair and improvements,” “replacement windows to the first floor,” and associated enabling works.

The notice also gives hard commercial facts that are useful for councillors—and the public—to understand:

• Estimated value: £2,000,000 (ex VAT).

• Contract term: 12 January 2026 to 30 June 2026 (six months).

• Award criteria: a weighting that is, in practice, the Council’s formal statement of what “good value” means here—Cost 60% / Quality 40%.

• SME/VCSE suitability: the notice explicitly flags the opportunity as suitable for SMEs.

• Portal: tender documents are accessed through the Kent Business Portal, and the notice includes portal instructions and a passcode.

Crucially, Find a Tender shows the notice was first published 6 October 2025 and last edited 11 November 2025—which dovetails with the draft Cabinet report’s statement that procurement began in October.

This is where scrutiny becomes practical rather than rhetorical. The Council is asking councillors to endorse a business case that depends on delivery certainty. The procurement trail shows:

• There was a live competitive process with a defined value and timetable.

• The Council weighted cost heavily (60%), which may be appropriate in a constrained budget environment but also raises classic construction-risk questions: cheapest rarely stays cheapest if the building holds surprises.

• The public notice sets a contract end date of 30 June 2026, while the draft Cabinet report anticipates completion by July 2026. That is not necessarily a contradiction—mobilisation, snagging, and handover often slip beyond the nominal end date—but it is exactly the kind of detail scrutiny committees exist to probe.

A second tender story: FOLCA 1 disposal bids

While Phase 1 works attract the procurement spotlight, the draft February 2026 report also quietly reveals a second bidding process: six bids were received for FOLCA 1 on 12 December 2025, and the Council has chosen a preferred bidder. 

That matters financially because FOLCA 1 sale proceeds are intended to be applied towards FOLCA 2. That dependency is explicit throughout the Council’s narrative: capital receipts are repeatedly described as reducing borrowing or repaying borrowing.

The obvious scrutiny question is: how robust is the Council’s funding plan if the sale price is lower than hoped—or delayed? The draft report’s language indicates active progress, but commercial terms are not yet finalised.

The healthcare question: is the NHS committed—or still “informal”?

The Council’s political sell has always included healthcare. But for scrutiny, the crucial issue is governance reality: when does “working with the NHS” become “the NHS has approved a business case and funding”?

The two FOI responses from the Kent & Medway Integrated Care Board (ICB) are revealing precisely because they are cautious.

In July 2023, the ICB stated plainly: “has not received a full business case”, the proposal was “still in development,” and no plans had been finalised; the timeline would be reviewed once plans were finalised. 

In 2025, when asked for updated business cases, board papers, minutes and correspondence, the ICB said the requested information was exempt under FOIA section 41, and confirmed it had only engaged in “informal discussions” with the Council; “there has not been consideration of any proposals or business cases through ICB governance.”

At the same time, the ICB confirmed that the service vision remained essentially unchanged: relocation of GP services for Manor Clinic and Guildhall Street Surgery, and broader primary care network roles such as a clinical pharmacist, first contact physiotherapist, dietician, podiatrist, social prescribing link worker, care co-ordinator and mental health practitioner.

This is the heart of the healthcare implication: the clinical concept persists, but the ICB’s FOI language suggests that as of the FOI response, the scheme had not passed through formal ICB governance as a fully-developed business case.

The Council’s answer: “agreement in principle” and the Section 2 route

The draft February 2026 Cabinet report attempts to bridge that gap. It says the Council and ICB have reached an “agreement in principle” on the terms for delivering the medical centre in FOLCA 2, and that the “most appropriate mechanism” for NHS capital support would be a Section 2 contract under the NHS Act 2006. 

For lay readers, a Section 2 contract is essentially a legal mechanism that allows NHS funding to flow into a local-authority delivered project, while the authority remains responsible for delivery. The report explains that it would also involve a nominations agreement—the NHS reserves the right to nominate who will use the asset, and the Council then leases to the nominees (here, GP contractors). 

The draft report further states that after NHS England notified ICBs of capital allocations on 17 November, the ICB said it would review prioritisation of capital for the FOLCA 2 medical centre; and that a letter confirming “in principle support” was received by the Council on 12 December 2025. 

This is the Council’s best evidence that things have moved on since the ICB’s FOI caution: it frames December 2025 as a milestone—support “in principle,” with a defined approvals process still to follow.

The balanced point is this: “in principle” is not “approved.” The same draft report makes clear that the formal business case still needs to be developed and run through ICB approvals, and that if approvals do not come, the Council says it will proceed on a commercial-only basis. 

Money: what does the business case say the scheme costs—and who pays?

The May 2025 Overview & Scrutiny presentation put a mixed-use plus medical centre cost estimate at £13.2m, split roughly into Phase 1 and Phase 2.

The draft February 2026 Cabinet report repeats the same headline development cost for the mixed scheme (£13.2m) and also provides a comparator: a commercial-only scheme at £8m. It projects surpluses over 40 years of £9m (mixed) versus £10.5m (commercial only), both described as “medium” risk.

It then sets out the intended capital “stack” for the mixed model:

• NHS/ICB funding £5.6m

• Salix (PSDS) £1.4m

• Levelling Up Fund £2.2m

• CIL £1.0m

• Council borrowing £3.0m

(Those figures are presented in the draft Cabinet report’s funding table; councillors should note that other Council papers have described Phase 1 LUF works at different totals in different places—July 2025 report uses £2.48m for Phase 1 works )

For the commercial-only option, the Council projects higher borrowing (£4.4m) and the same LUF/Salix inputs. 

Here is the political-financial trade-off in one sentence: adding the medical centre makes the build bigger and more complex, but also potentially brings in major NHS capital and anchors footfall.

The “boring” detail that decides whether this works: payback periods and rent mechanics

The May 2025 presentation put the NHS financing dilemma very bluntly: under a market-rent model the business case break-even is 27 years, whereas under a Section 2 contract with full cost recovery it is over 6 years (with “peppercorn rent” once costs are recovered).

The draft February 2026 report’s modelling is even more bullish: it states the medical centre element breaks even in year 1, commercial floors break even in year 5, and the combined scheme breaks even in 4 years (noting the calculation excludes repayments for capital borrowing, which is treated separately).

That is a substantial claim and it is exactly why scrutiny matters: small changes in occupancy, fit-out costs, interest rates, and void periods can turn “break even in year 4” into “pressure on the revenue budget for a decade.” The Council’s own narrative recognises this sensitivity by flagging occupancy assumptions (75% with 25% vacancy allowance), rent-free periods for tenants, and the importance of capital receipts to repay borrowing.

Transparency and the “restricted enclosure” problem

Residents will notice a pattern: key documents are redacted, some appendices are restricted, and the ICB has relied on confidentiality exemptions in FOI responses. 

There are legitimate reasons for that—live procurement is one of them. Publishing bid prices and evaluation material before award would be reckless. But there is also a democratic cost: the more a scheme depends on commercial sensitivity, the harder it becomes for the public to judge whether “value for money” is real or simply asserted.

The tender notice at least gives the public one non-negotiable fact: the Council chose to weight cost at 60%. That is not inherently wrong, but it does mean councillors should ask what quality safeguards were built into the 40% and how risk around unknown building conditions is handled contractually.

What scrutiny should focus on now: the balanced checklist

If councillors want to support Cabinet decision-making, the most useful scrutiny is not “are we for or against regeneration?” It is whether the Council is locking itself into avoidable risk.

Three areas stand out:

Procurement realism (Phase 1): The draft Cabinet report says nine bids, appointment in January, start in February, complete in July.

The public tender notice points to a six-month contract ending 30 June 2026. Scrutiny should ask: what is the mobilisation plan, what are the contingency triggers, and what happens if opening up the building reveals extra defects?

NHS commitment (Phase 2): The ICB’s FOI position was that there had been no governance consideration of business cases.

The Council now says it has a letter of “in principle” support (12 December 2025) and a route via Section 2 contract.

Scrutiny should ask: what approvals remain, what is the timeline, and what is the “drop-dead” point when the Council switches to commercial-only?

Funding dependency: The Council’s model depends on capital receipts from FOLCA 1 and potentially the Civic Centre being used to repay borrowing. Scrutiny should ask: what are the minimum receipt assumptions, what happens if the market shifts, and what is the impact on the revenue budget if receipts are delayed?

The wider politics: how FOLCA has become a test of credibility

Local media criticism (not least from ShepwayVox) has long framed FOLCA as a high-stakes gamble—pointing, for example, to an approximate purchase price and warning of sale at a loss. You do not have to share that editorial stance to recognise the political reality: FOLCA is now a credibility project.

If the Council delivers a functioning mixed-use hub with a modern primary care facility, it will look like strategic intervention that paid off. If the scheme drifts—Phase 1 spent, Phase 2 stalled, NHS approvals delayed, commercial lettings weak—then FOLCA becomes the kind of project that corrodes trust in local decision-making.

The bottom line for Cabinet

The Council is effectively asking Cabinet to back a two-track plan:

• Track A (preferred): mixed-use plus medical centre, underpinned by NHS capital via Section 2 and a nominations/lease structure.

• Track B (fallback): commercial-only, if the NHS route fails. 

And it is asking them to do so while Phase 1 is already moving through procurement and into delivery: nine bids received, appointment imminent, start date approaching.

The tender trail does not undermine the Council’s story. In many ways it strengthens it: procurement began when officers said it did, the value matches the scale of Phase 1 works, and the Council has run a competitive process with a clear price/quality framework.

But it also sharpens the scrutiny challenge. Once contracts are signed and strip-out begins, the Council’s bargaining power shrinks and the “unknown unknowns” of the building become painfully real.

That is why Overview & Scrutiny’s role on 27 January is not ceremonial. It is the point at which councillors can insist—before Cabinet signs off—that the next report makes the uncertainties plain, quantifies the downside scenarios, and explains (in plain English) exactly how the Council protects residents if the NHS element arrives late, smaller than hoped, or not at all.

The Shepway Vox Team

Journalism For The People NOT The Powerful