The latest cost blowouts for hospital projects include two Bay of Plenty mental health units poised to triple in price to $150 million.
Briefings to the Minister of Health also show Wellington Hospital faces spending $120m on car parking.
The latest briefing, for March, said 60 of the country’s 110 projects worth $7.7b were on track, but 15 were at high risk. Construction inflation was fuelling cost escalations that could hit $300m.
But “other factors that have driven poor performance” included “insufficient planning and a lack of assurance activity” - that is, quality control - which Te Whatu Ora Health New Zealand was trying to address.
The minister’s office released two copies of the two latest briefings on capital projects. One had large parts blanked out - much of it the costs - but the other was not, providing greater visibility of what was happening to health tax dollars.
They showed some business cases having to be redone, with the drag of overly optimistic plans keenly felt on the upgrade of mental health facilities.
Four major projects had a $170m shortfall between them: Manukau Health Park, Tower 3 at Christchurch and the Whangārei and Dunedin rebuilds.
The board was asking the government for $82m to cope with “urgent cost pressures”.
New information came to light in the briefings:
· fixing Wellington Hospital’s holey copper pipes was expected to cost $90m, in two parts
· providing new car parking at Wellington had a $120m price tag
· recladding the outside of several buildings at leaky Middlemore would soak up $94m
· $77m for new exterior panels and firestopping at Christchurch Hospital buildings
· a $50m blowout at the Ōtara spinal unit to $185m, with a 2027 finish date
· Whakatāne and Tauranga new mental health units were mired in business case resets - as was Nelson’s rebuild - with the prospect of costs rising from $45m to $150m.
The briefings to Minister of Health Ayesha Verrall showed 11 of the 17 largest projects were going okay and at low risk.
Health Minister Ayesha Verrall. Photo / Mark Mitchell
Among the smaller projects on track was Starship’s ICU expansion, which is $7m into a $40m project.
The briefings cover the redevelopment of regional hospitals and also the mental health upgrade, launched in 2019 but just $95m into a $725m budget.
Some of the more tortuous of the 15 high-risk projects were:
· shifting medical scanning out of a quake-prone building at Middlemore Hospital. Only one contractor offered to do it in a “live” hospital environment and sought a year-long delay to start. The cost was expected to double to $43m
· expanding the Hawke’s Bay linear accelerator project to include chemotherapy and haematology, bumping the price from $33m to $57m
· Te Whare Ahuru mental health inpatient unit in Lower Hutt facing a revision of its agreement with private benefactor Mark Dunajtschik, due to “significant cost pressures”.
Providing new carparking at Wellington Hospital had a $120m price tag, while fixing its copper pipes was expected to cost $90m. Photo: RNZ / Dom Thomas
At Taranaki Hospital, $30m had been added to the $400m budget due to “escalating costs, changing specifications and time delays”, an echo of the problems across many other projects.
“There is insufficient contingency considering the project risks,” a note on Taranaki said.
Whangārei had spent just $3m of its $759m budget for the first of a two-part rebuild. Kaitaia’s new hospital looked like costing $15m, not $10m.
Counties Manukau’s core infrastructure upgrades were up a third to $44m, and shifting its radiology services faced a $21m deficit. Fortunately, its smallish neonatal expansion was $1m under budget.
At West Coast Hospital, asbestos and ground contamination had added $6m but things were ahead of schedule. Wellington’s $50m phase-one copper pipe fix faced “an eight-month” delay.
Some of the sizeable new requests for ministerial approval were $23m more at the $65m Waitākere inpatient capacity project, $25m more at MidCentral’s mental health unit, and $13m more for the $100m rapid hospital improvement programme of small projects at two dozen hospitals.
Twenty-three of the 110 projects were in their final stages, 40 worth $2.4b were being built, 35 worth almost $3b being designed, and 12 at business case stage. Another 14 had been due to be finished by now.
Waitematā's $65m project to add inpatient beds was among the projects that undertook what is called “value engineering”, that is, trying to find cost savings off the original design.
Hawke’s Bay Hospital, which used to hand out iceblocks in the Hastings’ summer because the air conditioning did not work, got to within a whisker of getting its long-awaited $4m electrical supply work done, only to hit a pandemic supply chain problem; meanwhile, fixing its seismic problems had been pushed back nine months.
Te Whatu Ora has been promising to deliver “improved asset management of health facilities” to the public but has struggled.
The Government got a stocktake of hospital buildings done back in 2020, and pledged to have a national plan to manage them in place by 2022.
But the “urgent” identification of “critical” health assets was held up, as were resources for hospitals to improve their business case planning.
Just last week, Te Whatu Ora told RNZ that the 2020 stocktake “was not detailed enough to develop a national asset management plan”.
It aimed to get a management strategy, to underpin the plan, done by December, as well as an infrastructure investment plan, it said.
This plan was looking at the “total demand” for investment in car parking, though individual plans - such as at Wellington - were under way, too, it said.
“Patients, visitors and staff currently experience challenges finding parking on or near” Wellington Regional Hospital in Newtown, Te Whatu Ora Capital, Coast and Hutt Valley said on Wednesday.
A business case to identify options and how they fit with a master plan for the hospital would be considered as part of national infrastructure processes. It did not say anything further about the “estimated costs”, which in the briefings were put at $120m.
“Alternative funding is being explored,” said the March briefing. This refers to possible commercial funding, a previous Te Whatu Ora statement has said.
