Hospital document highlights varied risks

An artist’s impression of the new Dunedin Hospital. PHOTO: ODT FILES
An artist’s impression of the new Dunedin Hospital. PHOTO: ODT FILES
Risks of delay, rising costs and the need for others in the health sector to compensate for cuts to the new Dunedin hospital have been highlighted in a newly released document.

The value management advice briefing made public by Te Whatu Ora Health New Zealand (HNZ) on Tuesday weighs up the impacts of three different ways to tackle a $200 million cost overshoot on the project.

It was provided to former health minister Andrew Little and Finance Minister Grant Robertson for approval before design cutbacks to the value of $90 million were announced last December, along with a funding boost of $110 million.

This was HNZ’s recommended option and the option approved by the Government.

It kept the funding increase within the $111 million cost escalation already provisioned for in Budget 2022, the document revealed.

Also discussed was the option of keeping the original design and seeking more funding, or a hybrid option which would also required more funding.

The approved option would push the start of construction back by one year. The value management exercise had caused a nine-month delay, and three more months of design would be required.

Mitigations to the delay would be sought as the project progressed, the document said.

The planning was "at an early stage of its development", so future design and construction risks, in addition to clinical and capacity risks could become apparent.

"These will be addressed as design progresses and could require further investment."

The risk of the hospital not being able to meet future demand would need to be mitigated by developing regional service plans and models of care.

The design would probably not meet the expectations of all local stakeholders, the report warned.

However, it was the only option HNZ could endorse, as the funding was already provisioned.

"To add further funding from the health capital envelope would require the deferment of other projects prioritised by the ministers."

All options were subject to cost escalation risk above the $200 million already identified, the report said.

"Final pricing may not be known for some time yet."

Cuts under the approved option included 12 fewer beds, two MRI scanners rather than three and no PET CT scanner. However, shell space would be provided to install these in future.

On-site pathology space would also be reduced to acute clinical function only at 350sqm, although Southern Community Laboratories recommended a minimum of 500sqm.

The pharmacy aseptic production unit would also be deleted from the build.

The time and budget also needed to to be made to allow for a co-design process with consultancy Aukaha and mana whenua, to achieve appropriate expressions of cultural narrative.

Aukaha found the loss of the staff-focused pavilion building and "cloak" facade as part of the cuts disappointing, the report said.

The option to keep the original design was deemed the "least risky" as no further redesign would be needed, although the value management exercise still meant there would be a nine-month delay.

If the ministers chose this option, the Treasury would need to provide advise on how the additional amount - $89 million - could be funded.

The extra funding was also flagged as an issue under the "design lite" option, which would require additional funding of up to $65 million. However it would have retained the Pavilion building.

Following a description of the options, the report said ministers agreed to release the Crown contribution of $17 million in the hospital budget for the planned interprofessional learning centre to cover cost pressures.

They had invited third-party financing as an alternative.