Jim Daly (Cork South West, Fine Gael) | Oireachtas source

I thank Senator Davitt. I welcome the opportunity to address the House on this matter. I assure him that I take the matter of the increased cost of the new children's hospital very seriously. The significant increase in costs was and remains extremely disappointing and concerning.

When Government approved the construction investment decision in April 2017, the capital cost for the delivery of the hospital build project, following the evaluation of main construction tenders and selection of preferred contractors, was €983 million, of which €916 million was to be met by the Exchequer. In December 2018, following completion of the guaranteed maximum price process, the capital cost for the delivery of the hospital build project stood at €1.433 billion. 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 philanthropy funding.

In December 2018, when the Government approved the construction investment to allow phase B of the hospital to be instructed, it made very clear its serious concerns about the major escalation in the cost of the project. The Government considered the alternative options and made the decision on 18 December to proceed with the project with the current contractor.

The new children's hospital project is under way, the contractor is on site at the St. James's Hospital campus and construction work is well under way on the two associated outpatient and urgent care centres, with the outpatient urgent care centre in Connolly Hospital due to open in a couple of months and the centre in Tallaght Hospital opening next year. We must replace outdated hospital buildings with modern and appropriate infrastructure designed to best serve the needs of our children and their families and of the staff who care for them as soon as possible. This project will not be halted.

As the Senator will be aware, however, the Government approved the commissioning of an independent review of the escalation in cost in determining the adjusted contract sum in respect of the new children's hospital. This independent review has been commissioned by the HSE and is being undertaken by PwC. The terms of reference have been revised and finalised and have now been published. The primary focus of the review is on the governance and management arrangements in place within and between the National Paediatric Hospital Development Board and the executive, design team, relevant consultants, user groups and contractors. The review will deal with the accountability of the relevant key parties, functions and roles. This may inform appropriate next steps by decision-makers, including Government. The review will establish the sequence of events regarding the cost increases experienced by the project; what was known, when and by whom; and the reporting of relevant information from the project team to the relevant oversight and governance bodies, including the National Paediatric Hospital Development Board and its committees, the HSE and the Department of Health. The terms of reference also require the review to develop any further 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 in light of its current status, address major residual risks, control and oversight issues and bring greater oversight of performance and value for money.

The development board is fully committed to collaborating with this review and to implementing any recommendations arising. The HSE and the Department will equally fully support the expeditious conduct and implementation of the review.