Anne Rabbitte (Galway East, Fianna Fail) | Oireachtas source

I wish Members a good evening. I am taking the report on behalf of the Minister for Health, Deputy Stephen Donnelly, who sends his apologies. When I use the word "I" in this response, I am referring to the Minister.

I thank the Business Committee for raising this matter. I welcome the opportunity to address the Public Accounts Committee's report on the National Paediatric Hospital Development Board's 2019 financial statements. As Members are aware, the National Paediatric Hospital Development Board, NPHDB, has statutory responsibility for designing, building, and equipping the new children's hospital and the two completed and operational satellite centres in Blanchardstown and Tallaght.

Under the ministerial order that established the development board in 2007, the board is charged with keeping all proper and usual accounts and all special accounts as the Minister may from time to time require. Additionally, the development board must submit an annual financial statement to the Comptroller and Auditor General for an audit report to be carried out in accordance with the Comptroller and Auditor General (Amendment) Act 1993. The board's annual financial statements for 2019 were submitted to my Department following completion of the Comptroller and Auditor General's audit in June 2020. They were then laid before the Houses of the Oireachtas on 13 August 2020, pursuant to section 11 of the 1993 Act.

The board receives its capital funding for the project from the HSE, as the sanctioning body for the new children's hospital programme. As set out in the 2019 financial statements, costs of €199.6 million were incurred by the board in 2019. On 8 March 2022, the Committee of Public Accounts published its report following the examination of the 2019 financial statements and related financial matters. In line with Department of Finance Circular 01/2011, every Committee of Public Accounts report requires a formal response prepared by the Department of Public Expenditure and Reform, in consultation with relevant Departments and offices. This response is known as the minute of the Minister for Public Expenditure and Reform. My Department reviewed the report and its recommendations in conjunction with the development board and engaged with Department of Public Expenditure and Reform officials to draft the minute in response to the report of the Committee of Public Accounts.

The report contained three recommendations which were examined, noted and responded to in the form of the minute on 3 May 2022. Recommendation 1 was that a detailed report outlining the timeline and estimated costs for the completion of the national paediatric hospital be published as a matter of urgency. I can advise that the development board undertook an analysis of the new children's hospital project to determine the implications of any delays and the most effective pathway to ensure the timely completion of this critical project. The Minister for Public Expenditure and Reform was informed by my Department that it noted the recommendation to publish this analysis but that it was not, and still is not, possible to publish or furnish the analysis to the Committee of Public Accounts as requested at this time. The analysis relates to the best way forward on a project subject to a live contract and, as such, its contents are commercially sensitive and confidential. The unpredictable course of the pandemic, recent geopolitical events and the consequential uncertainty make speculation and definitive forecasting of time and costs, hypothetical or otherwise, very challenging. Discussion or publication of any likely out-turn would prejudice enforcement of the existing live contract and would be very likely to negatively impact or jeopardise the board in its ongoing confidential commercial engagement with the main contractor, including its responsibility for ensuring the timely completion of the construction works.

Recommendation 2 was accepted by the development board, and this was reflected in the minute, that future financial statements will include a note that details the additional costs paid to date that are not included in the approved budget of €1.4 billion. It will also include a note that indicates the overall claims received by the employer representative and the current stage that they are at in the dispute management process. The development board has also committed to attaching a monetary value to resolved claims to show any impact they may have on the overall cost and to providing a quarterly report to the Committee of Public Accounts on both open and settled claims. I welcome this approach by the development board.

My Department accepts recommendation 3 of the report of the Committee of Public Accounts that future capital projects of the scale of the new children's hospital where the primary aim is functionality should prioritise value for money for the taxpayer. All Irish public bodies are obliged to treat public funds with care and to ensure the best possible value for money is obtained whenever public money is being spent or invested. The public spending code sets out the rules and procedures that apply to ensure these standards are upheld across the Irish public service. Lessons have already been learned and are now being applied in respect of capital investment projects of this scale.

The 2019 PwC independent review into the national children's hospital made 11 recommendations, nine of which are directly related to the national children's hospital project with the remaining two relating to the management of capital projects more generally. A new updated public spending code with a project life cycle approach to better ensure value for money has been introduced by the Minister for Public Expenditure and Reform. Last November, the Government noted the implementation plan for the PwC report's recommendations and the actions taken to date. On the same day, the Government approved the revised programme management and programme oversight arrangements for the next phase of the national children's hospital project, including the new national oversight group. All 11 recommendations of the PwC report have now been addressed.

The Department of Health is committed to ongoing investment in health infrastructure with a focus on improving the delivery of such projects to ensure speed of delivery and value for money. My Department has introduced a new major capital projects function to oversee the application of the public spending code for capital projects costing over €100 million and to provide the necessary challenge function to ensure future proposals represent value for money.

My Department is also undertaking a process to strengthen our capital investment planning and delivery process so that commitments and deliverables under the National Development Plan 2021-2030 and any emerging needs and priorities can be considered in an evidence-based manner and capital investment undertaken in a more strategic way that is better aligned to population-based needs. Furthermore, in late 2021, the Minister, Deputy Michael McGrath, introduced an external assurance process that all major projects are subject to as they progress through the public spending code. Under recommendation 3, it was also accepted that a comprehensive review should be carried out following completion of the national children's hospital project to ensure lessons are learned for future capital projects. In line with the updated public spending code requirements, there will be a review stage process and an ex postevaluation process.

The Department and I have every faith and confidence in the development board to deliver on this project. The building is now 70% complete. Anyone who has been on site will know that it is truly awe-inspiring to see what has been delivered to date.

In November 2021, the Minister, Deputy Stephen Donnelly, opened the new outpatient and emergency care centre in Tallaght. It will accommodate up to 42,000 outpatient and emergency care attendances each year. Children’s Health Ireland at Connolly opened in July 2019. In 2021, it saw over 11,000 urgent care attendances. More than 95% of these children were discharged home after their visit. Children’s Health Ireland at Connolly also saw more than 13,000 outpatients and enabled a 65% reduction in the waiting list for general paediatrics within a year of opening. Recently, it extended services to a seven-day working model, ensuring more access to the children in the greater Dublin region.

Despite the unprecedented challenges and uncertainty that have not only delayed this project, but also affected the wider construction industry, broader sectors and the general economy, it is important to acknowledge the great progress that has been made on the new hospital at St. James's. We have a building that, to all intents and purposes, looks complete from the outside. The focus is now on the internal fit-out of the over 6,100 internal spaces. The most advanced areas have intact floors, walls, ceilings and joinery, such as nurses' stations, installed. The ICU pendants that hold all medical equipment, along with bathroom fittings, are being installed. The fit-out of ceilings, walls and glazed screens within the concourse at all levels is well under way. The fit-out of the 22 operating theatres' ceilings, walls and floors, with medical equipment already being installed. I am informed that the first rooms will be completed this summer. The other 4,600 clinical rooms will follow in a planned sequence to the middle of next year. The ambition is being realised by the development board and the contractors. The difference the new children's hospital will make to children, their families and healthcare professionals is clear to see.

While the delays are not welcome, it is important that they are not overstated and that the complexities of this project, combined with externalities beyond the control of the development board and contractors, are understood. This remains a very complex project with over 40,000 activities detailed in the contractor's programme. The development board has advised that the contractor's own schedule now suggests completion of the project could be achieved by the end of January 2024, which would mean the new children's hospital at St. James's could open in the second half of 2024, after the necessary commissioning period. I am informed that the development board continues to engage with the contractor to ensure the project can be completed as quickly and effectively as possible. Work is also ongoing to determine whether the timeline for some of this commissioning activity can be reduced or whether such activity can be conducted in parallel with substantial completion, where it is safe and appropriate to do so, in order to expedite the opening of the hospital.

However, there remain risks to the timeline beyond the control of the development board and the contractor arising from the disruption to supply chains that has resulted from the pandemic over the last two years. More recently, the war in Ukraine has given rise, and will likely continue to give rise, to global economic uncertainty, supply chain disruption and shortages of raw materials for construction. The wider construction industry is challenged by these same supply chain issues and dramatic price increases. The new children's hospital project cannot be immune to these external risks. It is fortunate that most of the steel and concrete has been installed and that many materials have been procured and assembled off-site. As a tier 1 construction company, BAM has global reach into supply chains and continues to make every effort to mitigate these risks.

The degree of construction inflation we are currently experiencing is a once-in-a-generation phenomenon and could not have been foreseen. The contract between the development board and BAM provides for a risk-sharing mechanism for construction inflation. Until recently, this collaborative risk-sharing approach was unique in our capital programme. However, more recently, the Government has identified that the risk of inflation in this current economic environment is not tenable, viable or sustainable for the construction industry or for the achievement of our goals under the national development plan and has acted accordingly.

In November 2021 and May 2022, the Minister, Deputy Michael McGrath, announced measures to address the impact that exceptional inflation in construction sector and energy is having on public works contracts. In recognition that neither party is responsible for the global events that have given rise to inflation, the inflation co-operation framework apportions the additional inflation costs between the parties, with the State bearing up to 70% of the additional inflationary related costs, subject to budgetary constraints. While the new framework does not apply to a project as advanced as the new children's hospital, the children's hospital contract already includes a bespoke risk-sharing mechanism with the contractor bearing the costs of the first 4% of construction inflation and the development board, and ultimately the State, making up the difference thereafter. As a result, total inflation payments from 2019 to date have been €21 million.

The compound effect of the unprecedented increase in construction inflation will be a driver of additional costs which have always been outside the €1.433 billion budget for the capital project. However, in the current climate, inflation is a challenge for all capital projects. Importantly, I can confirm the capital budget has not been depleted. However, there will be additional costs associated with delays, inflation and the impact of external factors. To date, just over €1 billion, or 71% of the €1.433 billion budget, has been drawn down. The development board continues to monitor and respond to the risks to cost and timelines and to administer the contract as mandated by the Government.

While I acknowledge the new children's hospital project has had its difficulties and delays, I also acknowledge the great progress made to date. We now have paediatric outpatient and urgent care being delivered at Connolly, outpatient and emergency care being delivered at Tallaght and a site at St. James's that is visibly progressing towards construction completion.

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