In a publicly released Treasury paper outlining an array of challenging government projects, the outpatients building is prominently listed.
Treasury says it has been delayed by three-quarters of a year and is expected to be complete by the end of this year with an approved capital expenditure of $342 million, and a spend to date of $251m.
Treasury has flagged its position as a major "cost pressure" alongside the Christchurch Hospital redevelopment and the Ministry of Education’s schools expansions programme.
The paper was released this month, and compiled in October.
The same report lists the new Dunedin hospital’s inpatient building as a "high-profile, high-risk" project, ranking alongside the Nelson Hospital redevelopment and the Christchurch Men’s Prison redevelopment.
Former University of Otago academic Prof Robin Gauld, now executive dean of Bond Business School at Bond University in Queensland, said he would not be surprised if the overall costs for both the inpatient and outpatient projects eventually exceeded the $1.88 billion stipulated by the government.
"It’s going to be extremely difficult to hold it within that cost without altering the overall plan, reducing bed numbers and wards and so forth."
Prof Gauld said Health New Zealand Te Whatu Ora (HNZ) had "just not been able to control the cost of it and they’ve been discovering areas that they need to spend more on".
A good piece of news was the confirmation of the contract for the project, signed by the government and Australian construction giant CPB in late September, Prof Gauld said.
"I would say that the new Dunedin hospital certainly is going to be, I think, front and centre of Cabinet discussions on an ongoing basis.
"And front and centre of the minister of health’s portfolio of multiple risks that he has to try to manage, and for any subsequent minister, I’d say it’s going to be right up there," Prof Gauld said.
"Unless you have locked down all costs from the outset, within a budget of say $1.8 billion, then you’re going to have to deal with inflation costs and cost overruns.
"It’s a simple fact, really."
He was, however, pleased Treasury was being transparent.
"It’s good for the public to know what’s going on with taxpayer money because it helps bring some accountability to the process."
The inpatients building is scheduled for completion and operation in 2031.
In September 2024, the government paused the project to deliberate over whether it would continue with a scaled-back version of the inpatients building or an upgrade of the existing hospital.
The project was approved in January last year.
Big projects needed to be "locked-in" at the start, Prof Gauld said, "right down to the costs of the desks and chairs".
"I think at the end of the day, if it’s going to cost another $300 million to deliver a decent hospital in Dunedin, that’s probably a pretty important investment as opposed to cutting back once again in an important area like health."
Asked about the potential for cost overruns at this stage of the project, an HNZ spokesman said "the new Dunedin hospital has an approved total budget of $1.88 billion. The outpatient building remains on track to be operational in late 2026".
Cr John Chambers, a former head of the Dunedin hospital emergency department, has been a longtime campaigner for the new hospital.
He said health projects were "inherently inflationary and costly" and he was impressed by those in charge of the project.
"If there’s ongoing financial risk, then that’s quite separate, but it’s still going to be built, I’m sure."
