Mr. Seamus McCarthy:

The National Paediatric Hospital Development Board was established in 2007 as a "special purpose" agency to procure and oversee the planning, design, construction and fit out of the new national children's hospital and associated paediatric outpatient and urgent care centres based at Tallaght and Connolly hospitals. Separately, the Minister for Health formally established Children's Health Ireland with effect from 1 January of this year to plan for, and ultimately to operate, the hospital services. The agency took over this role from the Children's hospital group, which previously operated within the HSE. It is expected that the hospital buildings will transfer from the board to Children's Health Ireland in due course.

To date, the board has been funded by State grants provided via the Health Service Executive. In 2017, such funding amounted to €67.2 million. Total accumulated project costs of the board to end 2017 amounted to €132 million, inclusive of VAT. This excludes €35.5 million of capital expenditure that was written off in 2013 following a Government decision to change the location of the hospital.

As members are aware, the budget for the development of the hospital has escalated significantly. In 2014, the Department of Health approved a total budget of €790 million for the board's work. As of December 2018, the costs expected to be incurred under the board's remit were estimated at €1.433 billion. However, additional costs will be incurred by other agencies, including Children's Health Ireland, to fully equip and commission the hospital before it can get up and running.

I note that the Department of Health is engaging a firm of consultants to review the causes of the budget cost increases. Members will be aware that all public capital projects are subject to the provisions of the Department of Public Expenditure and Reform's public spending code. This sets out key principles and a framework for the appraisal, planning and management of capital projects. It includes specification of the respective roles and responsibilities of project contracting authorities, project sponsoring authority and sanctioning authority.

A core requirement for all capital projects is that they are underpinned by a suitably detailed project appraisal setting out projected capital and running costs and expected benefits and explaining the assumptions underpinning the projections. This should be capable of being readily updated as planning proceeds and new information about costs and benefits becomes available so that ongoing decision-making is properly informed. The code may provide a useful context and benchmark for the committee's consideration of the project cost escalation that has occurred in this case.