Thursday, 7 February 2019
Nithe i dtosach suíonna - Commencement Matters
National Children's Hospital Expenditure
The Minister of State has seen the outline of the Commencement matter. I know that the Minister is scheduled to come before us after lunch today to discuss the national children's hospital. I do not know whether he will come in person or whether the Minister of State, Deputy Daly, will deputise again at that stage. He might enlighten us in this regard if possible. As we know, there is a cost review of this project ongoing at a cost of just under €500,000. We are told the review will be carried out relatively quickly and that we could press pause on the project while the review is ongoing because there has not been much more than the base works and groundworks completed on the site so far. That is the general gist of the Commencement matter, as the Minister of State can see.
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.
I thank the Minister of State for coming here to handle this matter. I am sure this is not this Minister of State's fault, but "this project will not be halted" is the punchline before we get to talk about the review or whatever else. I come from a business background. If these guys carry out a review and come back and tell us what we all know, that is, that this has got out of control and is costing double what we originally thought it would cost, how can we say "this project will not be halted" before we get back the results of the review? That is a very childish response, not from the Minister of State - he is here reading the statement he has been given - but it is very silly. I could say many more things about it but I do not want to be demeaning. To have that punchline in the response before we talk about the review process and what it will come back with regarding expenses and so on, I do not know how anyone can do business like that. That is probably why we are in the mess we are in.
I believe the date of the publication of the review is the last day of March. If the Minister of State could confirm that, I would appreciate it. I would go back to whoever wrote up this wish-wash in the Department and ask why he or she put the line "this project will not be halted" in the Minister of State's response before the review committee we have heard so much about has reported.
I thank the Senator for his questions. The decision not to halt the project was taken by the Government. It was not a wish-wash response from any Department official, as the Senator is trying to suggest. It was carefully considered at a meeting of Government on 18 December last year, at which all the options were considered. There was much consideration of the options by the Department, the Minister and officials in the HSE prior to that meeting. A decision was taken not to halt the project, and that decision was not taken lightly, I assure the Senator.
As for the issue of the review being undertaken and commissioned by the Government, it is important to maintain a distance between the two different issues. One is whether there is value for money here. That is what people want to know. It may be the case that the projected costs were unrealistic and not right. We do not know where the error lies, whether it was on the side of whoever projected the costs on the first day and got it so badly wrong, or whether we are still getting value for money. That is the key issue I, as a taxpayer and Minister of State, and the Government want to get to the bottom of and that is what the review will determine. We have decided to wait for that review. It will not be a very long time. I do not have the exact date that the Senator asked me for, but we will have the review imminently. When it will be-----