New hospital build needs cash injection as costs balloon

The new Dunedin hospital’s eastern facade and link bridge as envisioned from St Andrew St.
The new Dunedin hospital’s eastern facade and link bridge as envisioned from St Andrew St. Photo: supplied
The new Dunedin hospital (NDH) needs another cash injection to deliver the project on time and avoid further cuts, an official paper has warned.

A Te Whatu Ora Health New Zealand (HNZ) briefing on health infrastructure supplied to the Otago Daily Times said costs on the $1.59 billion project had ballooned again.

The briefing made in December last year to Health Minister Shane Reti said completion of the inpatient building in 2029 as planned was reliant on "additional funding being made available to cover known cost pressures".

"To keep NDH on programme with the current scope and estimated budget, a decision as to additional funding needs to be made in a timely fashion to avoid delays," it said.

The new estimate for how much the project was expected to cost was redacted.

The briefing also pointed to other costs such as parking and the refurbishment of the old hospital buildings, which had not been factored in to date. These figures were also redacted.

Dr Reti did not respond to specific questions from the ODT about the briefing yesterday, including how much the total cost of the project had risen, or if the government was still committed to reinstating $30 million to the project it promised during the election campaign.

He also did not say whether the government was looking at making cuts.

A spokeswoman for his office said the new Dunedin hospital was one of a number of large and complex hospital projects under current consideration.

"It remains a priority which is under active consideration by myself and ministerial colleagues."

The project has been repeatedly hit with escalating costs since 2017, when an indicative business case estimated it would cost between $1.2b and $1.4b.

In the face of ballooning construction costs the Labour government announced $90 million in savings in 2022 before promising to reverse most of the cuts last year.

Former Labour Cabinet minister Pete Hodgson, who previously oversaw the construction of the new Dunedin hospital, said it was no surprise further costs had been identified, as there were still issues that needed addressing.

Ingrid Leary
Ingrid Leary
When asked if there was a risk of a lengthy redesign process being started under the coalition government, Mr Hodgson said both buildings had long since reached "the point of no return".

"Major redesign is now known to be more expensive than getting on and finishing the job.

"There comes a point in every construction project’s life where if you stop and try to save money you will cost yourself more than you save."

While there were still pieces of "unfinished business", the pile-driving on the two main buildings was a little over halfway done — which was what determined the point of no return, Mr Hodgson said.

"You can’t go back and make major changes now, I’m certain of that, and only a fool would try."

Mr Hodgson said there was no evidence that the government was going to make "stupid decisions" such as cutting pathology or IT.

The fact the government was yet to sort out the money for the project was a concern, but he hoped it would have its ducks lined up in time for next month’s Budget, he said.

"Unless we hear the government is displaying that sort of stupidity, my best guess is that we have now got ourselves an assurance of a good-quality hospital.

"I have no reason to believe that the government will now try and short-circuit the building in Dunedin because it would be a false economy."

Labour Taieri MP Ingrid Leary said Dr Reti, despite the promises of the additional $30m that the government was elected on, had made no commitment to a PET scanner and additional beds, which were now subject to further business case work.

"That’s worrying because that was an election promise and now it’s suddenly subject to more business case work — I’m concerned as to whether they will actually deliver on that," she said.

"The fact that the minister has publicly spoken about the need for further business case work should make people very cautious about trusting that this government is prioritising the Dunedin hospital."

When asked if Labour was partly to blame for handing down a troubled project to National, Ms Leary said her party was the one which historically built hospitals, whereas National only "talked a big game" about doing it.