Mr. Colm Desmond:

I am joined by my colleagues, Ms Tracey Conroy, assistant secretary in the acute hospitals policy division, Ms Fionnuala Duffy, head of the acute policy unit, and Ms Aonraid Dunne, principal officer in the finance unit.

There are many challenges before us to deliver a new national children’s hospital. The infrastructure and the fragmented nature of the existing children’s hospitals in Dublin are not fit for purpose to deliver the best possible service for children and young people in Ireland. We must not lose sight of the ultimate goal to deliver a new children’s hospital that will provide national services of the kind that can only be provided in a centre with the scale of services, critical mass of clinical expertise and highly specialised healthcare facilities.

Last week in this committee, the National Paediatric Hospital Development Board outlined the current position on this project, including progress in the completion of foundation works at the St. James’s campus, phase A, and work on the two urgent care centres, together with approval to proceed with the main construction contract, phase B.

On 18 December 2018, the Government approved the construction investment to allow the National Paediatric Hospital Development Board to instruct the main contractor, BAM, to proceed with phase B of the hospital at an overall capital cost of €1.433 billion. To complete the build of the hospital and outpatients and urgent care centres, an additional €450 million will have to be found over the period 2019 to 2022, including an additional €100 million in 2019.

The total of €450 million requires net additional Exchequer funding of €320 million, of which €50 million is VAT, and an additional €130 million in philanthropic funding. This is a very significant and disturbing escalation in cost. On balance, the Government decided to proceed with the project in the face of these higher costs because of the importance of the project for children’s healthcare. At the same time, a full independent review of the cost escalation has been commissioned and is under way.

In February 2018 Project Ireland 2040 and the national development plan were launched and included a very significant overall increase in capital funding for health services in the next ten years. The new children's hospital is a major element of public health investment provided for in the national development plan. The capital funding provides the opportunity to reform and modernise the health service to deliver one that is fit for purpose, that citizens can be proud of and that can meet the needs of the growing and ageing population. Capital funding for the health service will be 165% higher for the next ten years than it was for the last ten. We have an ambitious plan to build a better health service for the future through the combination of a significant capital investment programme alongside the implementation of Sláintecare reforms.

Looking at capital investment plans for the public health sector, in addition to the new children’s hospital, there are many other health capital projects under way and at various stages of development in the public health sector. They include the national programme for radiation oncology in Cork, Galway and Dublin, building the new National Forensic Mental Health Service hospital at Portrane, County Dublin, redeveloping the National Rehabilitation Hospital in Dún Laoghaire, the primary care centre construction programme, the replacement and refurbishment of community nursing units for older people and long-term residential care units and housing in the community for people with disabilities and the ongoing need to maintain and update buildings and healthcare equipment and ambulances in response to critical clinical risks.

In the coming decade the national development plan will also support reform in the public health sector, in line with health policies and the implementation of Sláintecare, including integrating healthcare and a decisive shift towards primary care, investment in maternity hospital relocations in line with strategy, delivery of additional health capacity, including the development of dedicated ambulatory, elective-only hospital facilities which will be provided in response to demographic changes and future demands and investment in health service ICT infrastructure to enable the integration of services and the flow of information across and within hospitals, primary care and community care services.

The health capital allocation in 2019 is €567 million for the construction and equipping of health facilities. This represents an increase of €129 million on last year’s provision. In the 2019 budget the Government has also provided for additional capital of €50 million in 2020, bringing the 2020 provision to €659 million. Following publication of its national service plan for 2019, the Health Service Executive is developing its capital plan for 2019. The capital plan will determine the projects that can progress in 2019 and beyond, having regard to the available capital funding, the number of large national capital projects under way, the cashflow requirements attaching to each project and the relevant priority. A number of projects in progress are contractually committed to and nearing completion, including the National Forensic Mental Health Service hospital at Portrane and phase 1 of the National Rehabilitation Hospital.

In developing its capital plan for 2019 and future years the HSE must consider a range of issues, including the expenditure that is contractually committed to, the annual requirement to meet risks associated with clinical equipment, ambulances and healthcare infrastructure and the total capital Exchequer funding required for the new children’s hospital in 2019. The impact of the increased costs for completion of the new children’s hospital will, based on the HSE’s analysis and Government priorities, see the timing of non-contracted capital commitments managed within the available health capital allocations.

In line with statutory requirements and consultation with the Department of Public Expenditure and Reform, the Department of Health and the HSE are engaged in a process to finalise the HSE's capital plan for 2019, informed by the Government's decision on the children’s hospital. Details of total capital investment in 2019 will be set out in the plan and the HSE will be required to manage its capital expenditure within the agreed plan. In line with the recent Government decision, the Minister for Public Expenditure and Reform is to revert to the Government in the near future on capital allocations post-2019.

In terms of the financing of the children’s hospital project in 2019, €150 million had already been included in draft HSE capital profiles for the project in 2019. Based on the outcome of the guaranteed maximum price process, an additional €100 million is required to fund the project in 2019. The Government decided €50 million of this sum is to be provided from the health capital allocation. The balance will have to be met by reductions in the capital allocations for all Departments out of a proposed capital allocation of €7.33 billion in 2019, which is an increase of €1.33 billion, or 22%, on the 2018 allocation. Overall, a total of €10.9 billion is provided for the health sector in the national development plan in the period 2018 to 2027, inclusive. As regards meeting the additional funding requirements for the project in future years, the Department is engaging with the Department of Public Expenditure and Reform and the HSE.

The new children’s hospital project includes a national hospital being developed on the campus shared with St James’s Hospital. Together with its two paediatric outpatients and urgent care centres on the campuses shared with Connolly and Tallaght hospitals, it will provide all secondary, or less specialised, acute paediatric care for children from the greater Dublin area. The hospital will become the single national tertiary and quaternary centre providing specialist and complex care for children from all over Ireland. The fundamental aim of the project is to ensure best possible health outcomes for children with significant ancillary benefits through the creation of a research-intensive academic healthcare institution. There are also significant wider economic and community benefits. The new children’s hospital development is the most significant capital investment project ever undertaken in the healthcare sector in Ireland, a hospital designed and built to support its staff to deliver the best care and treatments for Ireland’s sickest children.

In terms of construction and development, considerable progress has been made on the project since April 2017. Enabling works on the main hospital site are complete, while phase A construction works, substructure works on the main site, commenced in October 2017 and are now also nearing completion. Development work is also well advanced on the paediatric outpatients and urgent care centres. Works at Connolly hospital are on target for practical completion of the building in spring 2019, with the opening scheduled for July. Works at Tallaght hospital are under way, with a target hand-over date of July 2020. A fully aligned construction programme has been agreed to, with main hospital construction to be completed by July 2022.

A key milestone in the programme of work under way to integrate the paediatric services across the existing sites in advance of the move to the new facilities is the Children’s Health Act which was signed into law at the end of November and commenced in December. The Act provided for the historic establishment of a new body, Children’s Health Ireland, CHI, which has taken over responsibility for the paediatric services provided by the three hospitals from 1 January 2019.

As the committee is aware, operational responsibility for the delivery of the construction project lies with the National Paediatric Hospital Development Board which is charged with planning, designing, building and equipping the new children’s hospital and outpatients and urgent care centres. It is headed by a board, appointed by the Minister for Health, the chairman of which the committee met last week. The board has full statutory responsibility for the design, procurement, building and equipping of the new hospital. A comprehensive review of the governance structures for the children's hospital project and programme was undertaken in 2017 by the Department and the HSE, in collaboration with the Department of Public Expenditure and Reform, in the context of embarking on a new phase of the project. Revised governance structures, including the establishment of a children’s hospital project and programme steering group and a children’s hospital project and programme board, were approved by the Government in April 2017. They were implemented in recognition of and to reflect the need to prepare well in advance of completion of the facilities for the integration of the clinical and non-clinical services of the three children’s hospitals, preparation for the opening of the outpatients and urgent care centres and the need to manage dependencies across the various components of the project which will support the operation of the new hospital.

The children’s hospital project and programme board which is chaired by the Secretary General of the Department of Health oversees and monitors progress on the children’s hospital project and programme. The children’s hospital project and programme steering group is chaired by the deputy director general of the Health Service Executive who is also before the committee today. The steering group directs the overall programme of work within agreed parameters and reports to the children’s hospital project and programme board. The national paediatric development board receives its capital funding for the project from the HSE, as the sanctioning body for the new children’s hospital programme. The paediatric development board provides regular updates on progress on the capital project for the HSE chaired children's hospital project and programme steering group.

It is acknowledged that the challenges and operational environment for the project will be fundamentally different in some respects as the project moves into phase B. In particular, the focus on design and value engineering will switch to construction management. The construction activities and monitoring of the guaranteed maximum price will need constant and active management as the project proceeds and oversight by the governance arrangements. When the Government approved, on 18 December 2018, the construction investment to allow phase B of the hospital to be constructed, it also made very clear its concerns to ensure the project would be delivered on time and within budget.

There is no doubt but that the additional costs associated with the project are of great concern and we must have assurance that phase B of the construction project will be delivered within budget and timescale. Accordingly, the Government has also approved the commissioning of an independent review of the escalation in cost in determining the adjusted contract sum, a review of the existing oversight arrangements between the Department of Health, the HSE and the National Paediatric Hospital Development Board and a scenario analysis to identify potential costs of any residual risks to the capital project. The independent review of the escalation in cost in determining the adjusted contract sum, which commenced last week, will examine the contributory factors and associated responsibilities in order that any potential weaknesses are identified and comprehensively and speedily resolved in the interests of the successful completion of the project and the effective management of public funds. The Department, the HSE and the National Paediatric Hospital Development Board are fully committed to collaborating with these reviews and to implementing any recommendations arising.

In parallel with the building of the new children’s hospital and the urgent care centres, the integration of the three existing paediatric hospitals and the transfer of services to the new hospital facilities represent a highly complex project in its own right. Children’s Health Ireland is leading this major programme of work of integration and change management to, first, run integrated services on the existing hospitals’ sites and, second, achieve a successful transition to the new facilities as they open. My colleagues and I are happy to address any queries members may have.