Mr. David Gunning:

I thank the Chair and members of the committee for their invitation to discuss the 2019 accounts. I am joined by Mr. Phelim Devine, Mr. Jim Farragher, finance officer, and Dr. Emma Curtis, medical director, all of whom are on the National Paediatric Hospital Development Board.

The board was appointed to design, build and equip the new children’s hospital on a campus shared with St. James’s Hospital in Dublin 8 and the outpatient and urgent care centres at Connolly Hospital in Blanchardstown and Tallaght University Hospital. In December 2018, the Government approved an investment decision of €1.433 billion for the project. As has been stated since the outset of the project, there are a number of items not included in this investment figure as there was no price certainty for them and nor can there be for the duration of the project. These include construction inflation, statutory changes, any change in scope resulting in healthcare policy changes and the employment order. From August 2019, in accordance with the contract, the contractor has recovered the cost of national construction inflation in excess of 4%. The inflation payment to the main contractor for the period of August to December 2019 was €1.6 million including VAT, paid in July 2020.

The board's 2019 accounts were audited and approved by the Comptroller and Auditor General on 12 June 2020. The expenditure as of 31 December 2019 for that year on the design and build of the hospital was €199,622,610. This spend was against budgeted spend of approximately €262 million. This underspend in 2019 is primarily due to the fact that the main contractor did not advance the construction of the build against the planned original programme. This lack of advancement of programme is primarily due to under-resourcing of the project by the main contractor, a situation that has been in place since the beginning and which continues. By way of an example, at the end of December 2019, the year in question, the contractor had progressed 8.5% of the works by value when it should have progressed 22% of the works by value and this delay has continued to grow month on month.

An analysis of the expenditure to December is set out in the table in the document provided to the committee. I do not propose to read out the numbers as I presume members have them in front of them.

Moving on to the programme timeline, the construction contracts for the project were awarded in August 2017 and the construction completion date for the new children's hospital set out under the terms of the contract was August 2022. When the construction is completed, the hospital will be handed over to Children's Health Ireland for a period of commissioning ahead of opening. When we last presented to the Committee of Public Accounts in November 2019 and to the Joint Committee on Health in 2020, we informed both that the project was behind schedule. Since then, the delay has been exacerbated as a result of the Covid-19 crisis and ongoing issues with resourcing on the site.

The outpatient and urgent care centre at Connolly Hospital Blanchardstown was completed in May 2019 and successfully handed over to and opened by Children's Health Ireland in July 2019. The 4,600 sq. m paediatric outpatient and urgent care centre at Tallaght University Hospital was contractually scheduled to be completed this month. However, the contractor has advised us that construction will not complete before September. The  building will then be handed over to Children's Health Ireland in order that it can open the facility after an eight-week period of operational commissioning and equipping.

The National Paediatric Hospital Development Board tracks progress and performance on a weekly and monthly basis and continues to engage with the contractor in an attempt to make up lost time. The contractor is contractually obliged to provide the development board with a compliant programme of works which sets out its approach to delivering the new children's hospital in accordance with the contract. However, since the agreement of the programme as part of the phase B instruction, the programme updates provided by the contractor have not been compliant with the contract. As a result, the development board is currently withholding 15% of monthly certified payments until such time as a compliant programme is submitted. This is one of the levers permitted to the board under the contract to incentivise the contractor to deliver on its contractual obligations.

While the contractor has been underperforming as regards project execution, it has been extremely assertive as regards claims, as has been indicated at previous meetings of the Joint Committee on Health and the Committee of Public Accounts. Since the commencement of this project, there has been a significant number of claims of a very substantial value.  There is an agreed dispute management process in place under the contract. As matters stand, claims are active at all levels of the dispute management process, which involves the employer's representative, the project board, conciliation and adjudication. One of the cases has reached the High Court. We have also been involved in a number of adjudications. The board is defending each claim robustly in order to manage the cost of the project and defend the public purse. However, the sheer volume and nature of claims on the project is consuming a significant amount of executive and project team time and incurring significant costs.

Updates on timeline challenges and the associated impact on cost have been shared with all key stakeholders through the established reporting and governance structures, primarily the children's hospital project and programme steering group and the children's hospital project and programme board, which has members from the Department of Health, the HSE and Children's Health Ireland.  In addition to the regular reporting, the development board has undertaken a detailed review of progress on the project. The objective of this report is to provide as much clarity as possible to all stakeholders on the implications of any delay, both in terms of the ultimate delivery date of the hospital and the forecasted impact on cost.

The development board's analysis has been submitted to the Department of Health and we continue to work closely with our colleagues in both the Department and the National Treasury Management Agency, NTMA, as the analysis submitted is now subject to a robust, independent review and scrutiny. We look forward to returning to the committee in due course to discuss the final details of this report upon its completion.

Notwithstanding the fact that there are delays to the programme, the building is taking shape, as committee members will see from the images distributed in the briefing pack. Over 90% of all concrete has been placed and we have been advised by the contractor that the concrete frame will be complete by the end of this quarter. The stone and glazed facade to the south fingers, the south elevation and part of the east elevation is well advanced, with the first finger block at the Rialto bridge now completed. The main mechanical and electrical plant at basement level is nearing completion, with the primary distribution under construction up through the building. The fit-out of the south fingers comprising outpatients, cardiology wards, therapies, etc., is progressing well and the fit-out of the hot block, which comprises the emergency department, critical care and theatres, has already commenced.

The development board is aware of how badly needed the new children's hospital is and of the impact that further delay will have on the children and young people, their families and the staff who are waiting for it to open and indeed on the residents who live close to the site. Everyone working on the project is focused on making the new children's hospital a reality as soon as possible. I look forward to answering any questions the committee might have on the project.