Inflation costs for National Children's Hospital likely to reach €12m  

Inflation costs for National Children's Hospital likely to reach €12m  

Construction of the new National Children's Hospital taking place in Dublin.

Inflation costs on the €1.7bn National Children’s Hospital have increased eightfold from what was paid in 2020 due to a hike in construction spending last year, the Irish Examiner can reveal.

An update delivered by the National Paediatric Health Development Board to the Public Accounts Committee states that such costs will likely amount to €12m for 2021.

By contrast, the figures incurred for inflation-related costs were €1.8m in 2019 and €1.5m in 2020, the NPHDB said.

Construction on the controversial hospital first commenced in April 2017. The build has been subject to intense scrutiny due to perceived delays in construction, which is not expected to conclude before the latter half of 2024, and unquantified cost overruns.

The board said that the inflation payments on the project are calculated using the average of two tender price indices, currently forecast at between 6.5% and 8%.

Tender price index

A tender price index is used to recalculate the value of an initial tender on foot of subsequent inflation movements, relating to increases in the cost of labour, or the price of raw materials such as steel or timber for example.

Typically, a tender price index is used in terms of projects which have seen delayed construction, with the initial contract requiring a revaluation in order to keep costs to the contractor constant.

However, the €1.8 million inflation cost incurred by the new hospital in 2019 also resulted from an average tender price index of 6.7% The NPHDB said the projected €10.5m increase in inflation costs in just one year “is a calculation which is based on the overall construction spend in any one year”.

“The increased inflation costs in 2021 reflect the increased amount invested in the project in that year,” a spokesperson said, adding that “inflation associated cost is one of the exceptions that sits outside the Government-approved budget”.

The board said that the valuation of works completed on the project as at end October 2021 was €531.5m.

This contrasts with a briefing note prepared for the PAC by Department of Health secretary-general Robert Watt last month which suggested that approximately €873 million of the project’s capital budget would have been drawn down by the end of 2021.

Final costs?

Since February of 2021 the NPHDB and the Department of Health have repeatedly declined to project what the final cost of the new building, which was last estimated at €1.7bn in January of 2019, will be, citing issues of “commercial sensitivity”.

Speaking at his own PAC appearance last month Mr Watt said: “We’re not speculating, there is no benefit in speculation at this stage”. He acknowledged however that the suggestion that the previous budget will not be met is a “fair assumption”.

The NPHDB said in its PAC update that roughly 1,350 people are currently engaged in works on the project site at St James’s Hospital in Inchicore, south Dublin - 120 of whom are office-based staff.

That figure represents a “slight decrease” in numbers, it said, which “may be related” to the impact of the current wave of Covid-19.

The board added that over 95% of the concrete required for the project has now been placed, with the overall frame completed since March of last year.

Over 800 windows have been installed, and installation of the hospital’s roof has commenced, it said.

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