Thursday, 31 January 2019

Ceisteanna (163)

Bríd Smith


163. Deputy Bríd Smith asked the Minister for Health the reason a contract with a company (details supplied) for the new national children's hospital was not a fixed price contract. [4788/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Health)

The size, complexity and specialist nature of the new children's hospital project informed the decision by the National Paediatric Hospital Development Board (NPHDB) to adopt a two-stage procurement process comprised of:

Procurement Stage 1: A full tender and contract for Phase A (below ground including basement works) on the basis of a detailed design with the tendering of Phase B (the main above ground works) on a Preliminary 1st stage design with an approximate and re-measurable bill of quantities reflecting the Preliminary 1st stage design; and

Procurement Stage 2: While the basement Phase A works were under construction, the 2nd stage detailed design for the above ground Phase B works was completed with a full bill of quantities priced at the 1st stage Preliminary design tendered rates. The contract becomes in effect a lump sum contract.

The procurement strategy was developed and finalised from 2014 to 2016. The Government Contracts Committee, the cross-government consultative committee for construction procurement matters, accepted that given the project’s scale, complexity and its programme, the circumstances were such as to warrant a deviation from the standard form of Government contract and agreed a derogation from its use.

Reasons for adopting the two-stage process include:

- Early commencement on site, two years ahead of traditional procurement (Phase A works commenced on site on 3 October 2017 and are nearing completion. Finalisation of instruction for Phase B main works in parallel allows these works to commence on site at end January;

- Market engagement with Irish and international contractors identified this procurement approach would attract increased competition in a situation where there are a very limited number of contractors with the ability to undertake a project of this scale. This was borne out by the competitive nature of the tender process with 5 contractors shortlisted for the main contract, 4 for the mechanical installation and 4 for the electrical installation;

- Claims are addressed up front, prior to main construction, rather than as is traditional throughout the project and beyond;

- Reduce exposure to rising inflationary pressures in the construction market through procurement at 2016 tender market rates (versus 2018 tender rates);

- Provide opportunity for the 3 contractors (main contractor and Mechanical & Electrical contractors) to influence/interrogate the detailed design and assume contractual responsibility for completeness including quantities at end of Stage 2 Design;

- The programmes for main works are fully aligned across 3 contractors with a single point accountability for site management;

- A Guaranteed Maximum Price (GMP) is determined prior to the instruction to proceed with the main Phase B works (with the GMP only adjustable for clearly defined exclusions such as changes in scope, excess national construction tender inflation above 4% post July 2019, changes in legislation (e.g. VAT, PRSI, statutory labour rates, building regulations);

- Other than in respect of exclusions, the GMP ceiling cannot be exceeded with any amount in excess not recoverable by contractors;

- Project substantially de-risked in relation to ground conditions with Phase A nearing completion prior to instructing and commencing the main hospital build (Phase B); and

- Incorporation of streamlined dispute resolution including using an independent expert whose decisions are binding on all parties.