John McGuinness (Carlow-Kilkenny, Fianna Fail)
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789.To ask the Minister for Health the current projected final cost of the National Children’s Hospital; if he is satisfied that the projected final cost is accurate; if any extension of time has been granted to the contractor and, if so, for how long; the quantum of claims and variations issued by the contractor to date; the amount of money certified to date and the quantum of claims and variations certified to date; if the contractor has an entitlement to seek increased costs in light of the inflation experienced in 2022, 2023 and 2024; if any liquidated or other damages have been sought from the contractor, and the quantum of same; and if he will make a statement on the matter. [25131/24]

Stephen Donnelly (Wicklow, Fianna Fail)
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On 13 February 2024, Government approved enhanced capital and current budget sanctions for the New Children’s Hospital (NCH) project and programme, bringing the total approved budget to €2.24billion.

Included in this is the capital budget of €1.88 billion for designing, building and equipping the NCH and the two satellite centres. A separate €362 million budget is in place for the programme of integration and transition of services to the NCH, including commissioning, ICT, and the Electronic Health Record system.

This approved increase in the capital budget will address risk areas identified in the 2019 PwC report, which had the potential to place further cost pressure on the approved capital budget, including the impact of construction inflation greater than 4% and the contractor’s right to claim for additional true costs in line with public works contract provisions

The Government considers that the project now has sufficient funding to address identified risks and see the hospital completed and opened.

In line with the provisions of the public works contract, a contractor is entitled to submit claims for additional true costs on the project or extensions of time on the contractual completion date. The original contractual completion date for substantial completion was 29 August 2022 and the current adjusted contractual substantial completion date is 25 November 2022, following extensions of time granted by the Employer’s Representative for Covid-19 and certain successful contractor claims.

The contractor has submitted 2,182 substantiated claims at a claimed value of approximately €785 million. The reported value of claims is that attributed by the contractor and is not indicative of outcome of claims process or as a liability on the project. The National Paediatric Hospital Development Board (NPHDB) is entitled to defend claims it considers to be without merit and has been very active in doing so on to protect taxpayers' money. All claims will be dealt with in line with the contract and will not delay the opening of the hospital.

Approximately 1,890 of those claims (with a claimed value of approximately €653 million) have been determined by the Employer’s Representative (ER) - the independent third party responsible for enforcing the contract - with the net result being approximately €22.8 million (excluding inflation) determined in favour of the contractor. This represents just 3.5% of the claimed value.

The net change in the contract to date as a result of claims is just €27.2 million (including the €22.8m determined by the ER and the value of other claims resolved through the dispute resolution process or adjudication). This represents a change of less than 3% on the overall contract value of €910 million.

The construction contract between the NPHDB and the NCH main contractor contains a tender inflation recovery clause, where construction tender inflation above 4% is recoverable by the contractor. This came into effect from August 2019. This mechanism for allowing for adjustments as a result of construction inflation has since been incorporated into all public works contracts.

The cost associated with the tender inflation recovery clause was not included within the original 2018 budget and was noted as an embedded risk in the 2019 PwC Report. The 2024 Budget sanction addressed this and included provisions for tender inflation over 4%. To date, approximately €55 million has been paid out for inflation including VAT/RCT.

The tender inflation recovery payment only applies until the contractual substantial completion date (which includes any extensions of time determined by the ER). The contractor is not entitled to any inflation payment after the contractual substantial completion date . Therefore, there is no inflation payment for 2023 or 2024 due.

In line with the public works contract, there are provisions for the NPHDB to seek liquidated and ascertained damages from the contractor for delays beyond the contractual completion date. These liquidated damages can only be pursued when there’s certainty on the substantial and contractual completion dates.

The NPHDB is using all levers available to it under the contract to secure substantial completion of the NCH. Once substantial completion is achieved the hospital will be handed over to Children’s Health Ireland for operational commissioning.