Committee of Public Accounts (PAC) seeks urgent publication of detailed report to Minister for Health outlining timeline and estimated costs for completion of National Paediatric Hospital

In its report published today on the Examination of the National Paediatric Hospital Development Board 2019 Financial Statements and Related Financial Matters, the Committee makes recommendations on three issues which were discussed with the NPHDB and the Department of Health at a number of meetings last year. They concern:

• Report on the analysis of the project;
• Contractual ceiling on costs; and
• Design complexity and cost.

Deputy Brian Stanley, Cathaoirleach of PAC, said “The costs for the development of the hospital have escalated significantly. In 2014 the Department of Health approved a total budget of €790 million for the project. As of December 2019, the construction cost to the Exchequer was expected to be approximately €1.4 billion.

“The total cost of the hospital including fit-out is expected to exceed €1.7 billion. As of 16 December 2021, overall expenditure on the project was approximately €873 million and the approved capital budget for the project remained at €1.4 billion.”

In the summer of 2020, the Minister for Health sought an analysis of the National Paediatric Hospital project. In January 2021, this analysis was completed by the NPHDB and a report was submitted to the Department of Health for review. The NPHDB informed the Committee that the report includes a determination of potential updates to the timeline and costs for completion of the project.

Deputy Stanley said: “Since this commitment was made by the NPHDB in February 2021, the Committee has made several attempts to obtain the report of the analysis of the project from both the NPHDB and the Department. Each of the requests has been declined on the basis of the information being deemed to be ‘commercially sensitive’.

“The Committee believes that the failure to make the report available to it has impeded the oversight of expenditure on this project. It is of critical importance that government departments and public bodies that are allocated Exchequer funding can be held accountable and that expenditure of taxpayers’ money is transparent.

“The Committee finds it unacceptable that none of the entities with responsibility for the National Paediatric Hospital can give a reasonably accurate estimate, or estimates allowing for qualification, of the expected final costs for the completion and fit-out of the project.”

The Committee also expressed concern that the Guaranteed Maximum Price established through the two-stage tender process for the National Paediatric Hospital does not provide a contractual ceiling on the cost and that significant residual risks remain for further cost escalation. The residual risks, for which there cannot be cost certainty, includes items such as construction inflation, design variations, provisional sums, claims and adjustments, and certain uncontrollable risks, such as potential costs relating to Brexit and COVID-19.

Deputy Stanley said: “By the end of January this year, the Employer Representative (ER), who independently assesses the claims, had been notified of 1,139 claims. Of these, 1,023 were substantiated, meaning that the ER can pass judgement on these claims. The total value claimed by the contractor in respect of the 1,023 substantiated claims is €554 million.

“The ER assesses the value of each claim and at end January 2022, the ER had made determinations on 862 of the 1,023 substantiated claims, crediting €14.4 million to the contractor and €5.5 million to NPHDB.”

The ER is not the end of the dispute process provided for in the contract, and claims determined by the ER can be referred to the Project Board, referred to conciliation, which is the next step in the process, and appealed to the High Court.

Deputy Stanley said: “The Committee is concerned about the level of claims and is also aware that claims being disputed in the High Court could also give rise to legal costs and thus increase the overall financial burden for the taxpayer. The Committee has a made a series of recommendations around how the monetary value of each of these claims is recorded and is seeking quarterly reports on the number of claims by place in the dispute process, and the potential cost by category, for both settled and open claims.”

On the issue of the design complexity and cost, the Committee said that following a visit by Members to the National Paediatric Hospital site on 14 July 2021, the Committee is of the opinion that the scale and ambition of the project is clear. However, the Committee is not convinced that it was the appropriate project through which to pursue a design statement of this complexity and cost.

Deputy Stanley said: “The Committee recommends that future capital projects of this scale – where the primary aim is functionality – should prioritise value for money for the taxpayer. We further recommend that a comprehensive review is carried out following completion of this project to ensure lessons are learned for future capital projects.”

The PAC is a standing committee of Dáil Éireann which focuses on ensuring public services are run efficiently and achieve value for money. Further information on the role and remit of the Committee can be found here.

The PAC Report Examination of the National Paediatric Hospital Development Board 2019 Financial Statements and Related Financial Matters is available on the Oireachtas website.