The comments come after Master Plumbers New Zealand chief executive Greg Wallace reported the costs of construction material such as PVC had increased by more than 30% since the start of the United States-Israel war with Iran.
He believed it could have an ongoing effect on the new Dunedin hospital.
‘‘So we’ve got twofold; we’ve got the cost increase, which is challenging, and then obviously accessing the raw material for our manufacturers is another hurdle.’’
Mr Wallace said those behind the new Dunedin hospital needed to prepare for cost increases.
‘‘Whether there’s provisions for escalating costs or whether the job has to allow for increased costs, there will be costs that will have to be passed on for the project, because you can’t, as a subcontractor, absorb 30% increases.
‘‘And that’s without, you know, taking on your own diesel and fuel prices that have gone through the roof.’’
Asked what he would do in HNZ’s position, Mr Wallace said ‘‘it’s always cheaper to build yesterday’’.
‘‘We’re going to absorb some cost increases as taxpayers now. But we could do that by smarter procurement and getting some product on and ... getting on with actually building something.’’
When HNZ was asked about construction costs, a spokesman said the contract for the new Dunedin hospital inpatient building had suitable contingencies in place to allow for unforeseen circumstances such as construction cost increases.
‘‘We are not currently considering any changes to the design of the inpatient building.’’
The cost of the new Dunedin hospital project is about $1.88billion, although some commentary suggests it could be closer to $2b.
Executive dean of Bond Business School Prof Robin Gauld, who has been keeping a close eye on the hospital development, said he hoped the contingency measures in the contract were strong.
‘‘So, if this is a ‘rainy day’, and there’s a contingency fund of maybe 10% or something built into the budget, then maybe these kinds of costs would be absorbed within the contingency funding.
‘‘Of course, that means that down the road, there could be considerable pressure that the contingency is being absorbed early on now.’’
While transparency of costs was important, it was also ‘‘tricky territory’’ because of contract agreements, he said.
The government signed with Australian construction giant CPB in September last year.
‘‘You’re dealing with contracting parties as well, so you put too much out into the public, then you potentially are dangling a flag to say, ‘if the costs go up, we will cover them’.
‘‘If the government has put together a shared risk model for the project that means that the risks and cost increases should be absorbed by both parties.’’
It would be unfortunate to focus on cost-cutting at this stage of a project that has already lost a lot from its original proposal, Prof Gauld said.
‘‘To respond to the current circumstances with more cost cutting would have a broader impact on the workforce for the hospital and ultimately limit the ability for the health system to treat the needs within the population.’’
Construction on the inpatient building is expected to be complete in 2031.
