Mr. Jim Breslin:

When the committee met on 31 January to consider the 2017 financial statements, I circulated in advance of that meeting a briefing note which had been prepared by the Department for the Joint Committee on Health setting out the detail of the cost escalation on the new children's hospital capital project. In advance of this meeting I circulated an update on developments since.

As is well known, the Government approved the construction investment to allow phase B, the above-ground works of the hospital, to be instructed in December. At the same time the Government approved the commissioning of an independent review of the escalation in cost of the capital project. The purpose of the review was to examine in detail the contributory factors to the cost escalation and associated responsibilities in order that any potential weakness would be identified and comprehensively resolved in the interests of the successful completion of the project and the effective management of public funds. The terms of reference also required the review to identify and address major residual risks, as well as control and oversight issues. It also was required to develop recommendations which may identify any areas of potential cost savings or reductions, which are consistent with the applicable contractual undertakings and the delivery of the project. The report of the review was presented to the Government on 9 April last and published on the same day.

The PwC report is the result of an intensive and extensive body of work carried out by a team of experts over a period of nine weeks. The PwC team was composed of a number of international capital project and infrastructural specialists, including chartered engineers, quantity surveyors, chartered accountants, commercial specialists, data analysts and healthcare experts with extensive experience in the review of complex capital projects and programmes. In publishing the review, the Government requested that an implementation plan be prepared and submitted to the Government for its consideration. Extensive work has been undertaken between the Departments of Health, Public Expenditure and Reform and the Taoiseach, the National Paediatric Hospital Development Board, NPHDB, Children's Health Ireland, CHI, and the HSE. The Minister for Health updated the Government on this work earlier this week and it is envisaged that the draft implementation plan will be considered by the Government shortly. The PwC report accepted that the two-stage procurement process used to award the contract for construction of the new children's hospital is a widely used approach and can deliver significant benefits. It also identified failures that occurred in the set-up, planning and budgeting stages for the project, and in the implementation of the two-stage process. It warns that the guaranteed maximum price, GMP, established through the process does not provide a contractual ceiling on cost and significant residual risks remain. A primary focus of the development board must be on managing this risk and preventing further cost increases.

The report synthesised the findings of the review into a set of 11 recommendations. The first nine are specific to this project, and identify steps to be taken by all stakeholders in this project relating to project delivery, control, and assurance. This ranges from a review of the scope and responsibilities of the advisory firms that constitute the design team to reflect their roles in the performance monitoring of contractors, to strengthening the capacity and capability of the development board executive and to putting in place a scrutiny process that includes all levels of the governance structure to review all proposals that are focused on reducing the GMP. The remaining two recommendations relate to the management of other public sector spending on major capital infrastructure projects more generally, and therefore are a matter for the Minister for Public Expenditure and Reform. The Government noted the report's findings and requested the Ministers for Health and for Public Expenditure and Reform to revert with a proposed implementation plan for these nine recommendations. The implementation plan will set out for each of the 11 recommendations the actions taken to date and the further actions proposed, together with timelines. The implementation plan is being developed on a collaborative basis by key stakeholders and will be brought to the Government shortly for consideration, following which it is expected it will be published. The implementation plan will address the deficiencies identified in the report, including developing and implementing, where necessary, more robust project control and project assurance plans appropriate for a project of this national importance throughout the remaining construction programme.

The development board is fully committed to implementing the recommendations, as are the Department, the HSE and Children's Health Ireland. As the chair of the board will outline, he has established and leads a sub-committee of the board to ensure full implementation of the recommendations relevant to it. The National Paediatric Hospital Development Board has already taken a number of important steps to strengthen its project control systems, capacity and capability. Work is under way to improve reporting standards and introduce revised working arrangements with the design team. Consideration will need to be given to the report's warning of potential loss of corporate knowledge. It is appropriate that the focus is on maintaining corporate knowledge and expertise and on strengthening the project by building further capacity and capability. In that context, the committee may be aware in relation to the executive of the NPHDB, that the project director of the development board, who holds the statutory function of chief officer, announced his resignation in March, effective from early June. Given the scale and complexity of the project and the challenges associated with both roles in this current phase of the project, the NPHDB decided that the roles should be divided. Following receipt of sanction by the Department of Public Expenditure and Reform in respect of the remuneration rate for the chief officer post, the job campaign was advertised by the Public Appointments Service last week. Discussions are ongoing with the Department of Public Expenditure and Reform regarding the terms and conditions for the recruitment of the project director post.

The PwC report's findings did not identify that the existing governance structures above the NPHDB contributed to the cost escalation. The review was satisfied that these structures did not impede the flow of information in relation to the cost escalation but did find that the terms of reference and composition of the children's hospital project and programme steering group and board meant that their collective ability to provide challenge to the role of the NPHDB was limited, and accordingly recommends a review of these matters. Such changes will form part of the implementation plan to be approved by the Government.

The project is now in the major construction phase. Above-ground works at the St. James's site are progressing well with the structural frame, walls, slabs and columns now above ground level in most advanced areas. Basement excavation and piling are now substantially complete. The mechanical and electrical fit-out of the basement plant areas will commence in this quarter. Construction work on the new children's hospital will be completed in the third quarter of 2022. This will be followed by a period of commissioning and the hospital will open in 2023.

Work at the outpatient department, OPD, urgent care centre at Connolly is on target for handover to CHI this month followed by equipment installation and operational commissioning. In fact, as the chair of the board will update us, the handover of the Connolly facility has taken place this week. The delivery of services at the Connolly centre will be provided on a phased basis from the end of July 2019. Decant works at Tallaght University Hospital are now complete and the new crèche, changing facility and offices are open. Construction work on the Tallaght paediatric outpatient and urgent care centre started last month and it is due to open next year.

Extensive engagement has taken place with the Oireachtas health committee and the Committee of Public Accounts on how the cost escalation came about and its reporting. PwC reviewed more than 2,000 project documents, records and data. The report documents what happened and the timeline of reporting. I believe the review's findings on the reporting of the cost escalation are consistent with previous information provided to the Oireachtas, including this committee, and the documentation published by the Department and others. The scale of the review, and the consequent robustness and comprehensiveness of the recommendations mean that the benefit of the review is of very considerable additional significance.

When we met the committee at the end of January, the Chairman impressed upon the witnesses the importance of the work required to complete the project and that the learning from the PwC should be used to inform the quality of that work. We now have very detailed recommendations regarding the enhancement of control processes across the design team and the development board. The board of the new development board has accepted these recommendations and implementation is under way. PwC also quite correctly identifies that the nature of the project, which has now entered the major construction phase, will change as we approach the opening of the main hospital at St. James's. The commissioning and bringing into operation of a project at this scale requires co-ordinated delivery of the building, equipment, technology, staff and clinical and non-clinical operations. There is a very good working relationship between the development board and CHI. This will be enhanced further with the support of the HSE and the Department and in line with the recommendations set out in the PwC report, for the benefit of the successful delivery of this major investment in children's health services.

I thank the Chairman and I am happy to address any queries