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, as per the contract, 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. In relation to the extra amount that must be paid for each 1% that construction tender inflation exceeds the agreed threshold of 4%, I have asked the National Paediatric Hospital Development Board to reply to you directly.
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.
