Children’s hospital costs ‘will top €2bn’

Children’s hospital costs ‘will top €2bn’

The final price of the National Children’s Hospital is set to surge past €2bn after an independent report into the costs crisis warned that officials can do little to mitigate the runaway bill.

The damning conclusion was made by Price Waterhouse Coopers (PwC), which warned the hospital was never going to stay within budget because of widespread governance failures and “red flags” being missed from the start of the project.

In a detailed 128-page report, published by the Government yesterday afternoon — 12 days after originally planned — PwC said it is now inevitable the hospital price will hit at least €1.73bn.

The independent accountants also said the inability to mitigate other costs means the price will rise even further.

    According to the report:

  • The current €1.43bn project cost is set to rise by at least another €290m, bringing it to €1.73bn, while VAT and other design problems are likely to drag it above €2bn;
  • 85% of the €1.43bn cost to date “has already been contractually committed” and cannot be changed;
  • €294m (65%) of the cost overruns “should have been identified prior to the approval of the project”; €56m (12%) has been caused by “delays to the guaranteed maximum price process”; and €64m (14%) by VAT and construction;
  • by contrast, just €16m (4%) of the overruns were considered “uncontrollable”.

The report said the National Paediatric Hospital Development Board in charge of the project failed to see a series of cost “red flags” at the very start of the project which made it inevitable that costs would surge far above the original €650m estimate.

The report said these “missed” warning signs created a “false sense of security” that was added to by the fact officials in charge did not have as much expertise as contractors with whom they were negotiating.

And, while the PwC report has said some future costs can be mitigated by better planning, it concluded: “Whilst cost reduction may be technically possible, exercises of this nature come with considerable risk.”

In a statement last night, Health Minister Simon Harris said he and Finance Minister Paschal Donohoe will “consider the findings” over the coming weeks and will provide a detailed response next month.

However, opposition parties lashed out at the latest confirmation of cost rises, with Labour’s Alan Kelly warning the project is now certain to exceed €2bn.

“I remember saying the costs wouldn’t stop at €2bn and I was criticised, but it’s very clear in this report it will escalate. It is talking about €1.73bn and there are other add-ons that haven’t been accounted for,” he told RTÉ Radio’s Drivetime.

“We have a project now that was €400m, then €650m, and which is now over €2bn. Any semblance that this Government can say it is in control of fiscal management has just gone out the window.”

Fianna Fáil health spokesperson Stephen Donnelly was equally critical, saying in a statement there are now “no guarantees” on the cost of the project.

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