National Children's Hospital Expenditure

Thursday, 14 February 2019

Questions (174)

Michael McGrath

Question:

174. Deputy Michael McGrath asked the Minister for Health the possible inflationary pressures that may result in the final build cost of the national children’s hospital rising further taking the current gross maximum price of €1.433 billion as the base; the details of the contract terms relating to the treatment of costs associated with sectoral employment orders and hyperinflation as defined in the contract; if the €1.433 billion includes a provision for construction inflation or other inflation; if so, the potential for further percentage and nominal increases that could impact on the final build cost; the reason provided for in the contract that could result in the build cost rising; and if he will make a statement on the matter. [7529/19]

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Written answers

Minister for Health

There are clearly defined procedures around the recovery of excessive tender inflation in relation to the build cost for this project. The Guaranteed Maximum Price (GMP) procurement process agreed with the contractors requires the contractors to take all risk for quantities following completion of the GMP process, and limits their recovery of additional costs incurred by them to clearly defined scope changes and in excess of 4% inflation (as per the average of three published tender price indices) which may occur post July 2019.

The National Paediatric Hospital Development Board has also identified as a potential risk the industry-wide Sectoral Employment Order which was introduced in 2017. The independent review underway into the cost escalation associated with the new children's hospital construction project, as part of its Terms of Reference, will comment on the major residual risks and the robustness/completeness of the current forecasts and, where possible, quantify those risks contractually excluded from the GMP/adjusted contract sum. This review is expected to be completed by the end of March 2019.