Wednesday, 13 March 2019

Questions (6)

Stephen Donnelly


6. Deputy Stephen Donnelly asked the Minister for Health if a value engineering exercise has been or will be carried out in regard to identifying opportunities to reduce the building costs for the national children's hospital; if so, if changes are being implemented or considered for implementation further to this work; and if he will make a statement on the matter. [12197/19]

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Oral answers (10 contributions) (Question to Health)

When major construction projects go over budget there is commonly something done called value engineering which examines the building, its shape, the way it is built and laid out, the services and all sorts of other issues, to find ways to drive down costs. It is done all over the world and regularly in Ireland and is typically very successful. Has such an exercise been done for the national children's hospital? If it has, what changes have been identified and are being implemented and what savings should they yield?

The National Paediatric Hospital Development Board has confirmed that significant value engineering analysis has been carried out on the project, at each of the stages, namely, pre-tender, pre-contract award and post contract award.

At an early stage in the process, the development board determined that the traditional method of procurement was not suitable or realistic for a project of this size and complexity. Accordingly, the contract is subject to a two-stage process with stage one consisting of a scope refinement and value engineering process, based upon tendered rates, to finalise the phase B works above ground. This value engineering process yielded savings of approximately €20 million.

Following the completion of the second stage of the two-stage tender procurement process, the final cost of the design, build and equipment programme for which the National Paediatric Hospital Development Board is responsible now stands at €1.433 billion, €450 million more than advised to Government in April 2017.

As the Deputy will be aware, in light of the concerns over the major and sudden cost escalation associated with the finalisation of the guaranteed maximum price, the Government also approved the commissioning of an independent review of the escalation in cost at the same time.

The terms of reference require the review to develop recommendations, if possible, which may identify any areas of potential cost savings or reductions which are consistent with the applicable contractual undertakings and the completion of the project to deliver on the vision to improve services for the children and young people of Ireland.

This independent review is under way and PwC has recently advised that the report is now expected to be completed by early April.

It sounds as if one value-for-money engineering exercise was completed and identified savings of €20 million which, in the context of construction costs of €1.433 billion, represents a saving of 1.4%. The national children's hospital is a big glass doughnut with a massive garden on the roof. As anyone who has ever built a wall or an extension or watched a Dermot Bannon television programme knows, curves are expensive while straight lines are less so. That is why most buildings are constructed using straight lines. Doughnuts are not a good use of space, which is why none of us lives in a glass doughnut-shaped house. Such houses are expensive and are not a good use of available space. The design of the hospital looks to be extraordinarily expensive. It is a big glass doughnut with curves everywhere. The whole building is curved; even the roof is curved. Why was no work done to identify design changes that could be made that would save money so that the services provided within the building could be protected?

Obviously, the design has been agreed and planning permission has been secured. The Deputy is now suggesting that we go back and look at the design again. While I cannot say for sure, I think that is unlikely to happen. The points being made by the Deputy will be addressed in the PwC report and it is best to wait for the publication of same. PwC, which has professional expertise in this area, will examine these issues and see if there is merit in doing further analysis on this. However, I do not see merit in looking back at the design at this stage when planning permission has been secured. That said, I am not an expert in this area and do not have a background in design or engineering. If the PwC report makes recommendations on the design and engineering aspects of the project, the Government will certainly be open to embracing them and engaging with a view to securing further savings.

The idea that we would not look at the design of the building when a cost overrun of this scale has happened is not acceptable. It certainly would not be acceptable to people who were spending their own money. The project costs have risen from €650 million to €1.4 billion. That is like getting a price of €250,000 to build a house and then two years later being told that the price is now €650,000. At that point, any individual would call in the architect, quantity surveyor and builder and tell them that it was not possible to build a house for the revised price because he or she does not have a budget of €650,000. They would all sit down and redesign the house to the budget available. They might go over that budget a little. Indeed, that usually happens but nobody would just accept the design as it is and agree to spend the €650,000. That is essentially what the Government is doing.

Does the Minister of State know why, given the massive overrun, consideration was not given to redesigning the building? That is what any individual would do with his or her own money and house.

I am not sure how familiar the Deputy is with the history of this project and the effort, time and expense-----

I am very familiar with it-----

I am not talking about the current position but, rather, the history of the project. I am not sure if Deputy Donnelly knows how long it has been on the go and how long it took to secure planning permission. However, he knows enough about the system to know that if one changes a design, it has planning permission implications. If the Deputy is suggesting that we go back to the drawing board and redesign the hospital and then apply again for planning permission, that is fine but I am making the point that it is unlikely that we will go back to that stage of the process.

I asked if it was considered.

Of course, as part of the PwC review, it will be considered. If a recommendation to that effect is made, the Government will consider it. It is not as simple as saying that we will not change the design. Nobody is saying that but there are implications to doing so. We would have to go back through the planning process again, which took years to complete. This project was before An Bord Pleanála and went around the houses for a very long time. If we decided to re-engage with the planning process, we would have to put up our hands and admit that this hospital will not be built for another five years or more. That is the implication of what the Deputy suggests. That said, the issue will be considered by PwC in its review.