The $315 million project to redevelop Bermuda's ageing hospital enters a critical phase this week, as the three bidders submit their final bids.

The news emerged yesterday, when Health Minister Walter Roban and Finance Minister Paula Cox updated the public on the progress made.

Government is seeking an international private firm to partner with Bermuda Hospitals Board (BHB). The private firm is to pay around $260 million for the project, with the remaining $55 million footed by BHB.

Government will guarantee the financing for the project, which is the first ever public sector capital development to be delivered as a public-private partnership in Bermuda.

Parliament passed legislation tabled by Ms Cox earlier this month to help reassure potential private investors. The Government Loans Amendment (No 2) Act 2010 changed the Government Loans Act 1978 so as to state clearly that Government has power to guarantee the debts and other obligations of third parties.

The new wording also states clearly what indebtedness and what guarantees are to be included in the Government statutory debt ceiling, which currently stands at $1.25 billion.

Mr. Roban said yesterday that the amendment represents an integral component of the project.

"The passage of the Government Loan Act amendment clarifies that the Government guarantee is not treated as debt in the context of the Government Loan Act and hence will not impact the debt ceiling," he explained.

"The Government Loan Act also ensures that the Government has express authority to provide this guarantee and the Government will not be required to provide any further representation on this matter."

According to Ms Cox: "The Government guarantee is an important feature of the KEMH redevelopment project. The advisors to the BHB for this project had indicated that having this amendment approved by the legislature prior to the House recessing for the summer was key.

"The benefit of this was to clearly establish bidders' certainly and confidence with respect to the Government guarantee in the context of the KEMH redevelopment project."

Mr. Roban said the preferred bidder will be named on September 29 and the project remains on track for contract and financial close on or around November 29. Ground is expected to be broken by the end of the year.