In a proactively-released document, Treasury outlines a litany of concerns with the $1.88 billion project, including doubts about the overall management of HNZ.
In a heavily redacted passage dated June 19, Treasury says HNZ has an opportunity to reduce key financial and programme risks for the Crown through the preparation of an implementation business case.
"Project costs may increase significantly without an adequate risk management strategy," Treasury warned.
Treasury had criticised HNZ’s handling of the project, and in the document, it said governance continued "to be a key risk area".
The Treasury recommended HNZ compile a risk assessment for the new Dunedin hospital programme to "understand the risks and costs across the facilities".
But it suggested this would not be enough to turn the project around.
"However, given the issues encountered to date on the new Dunedin hospital and the concerns ministers have expressed regarding Health NZ’s capability, we recommend that you [Health Minister Simeon Brown] communicate key expectations for the planning to be undertaken and presented to Cabinet, to support decision-making."
On June 16, Mr Brown announced Evan Davies as the Crown Manager for the project.
In its document, Treasury warned of potential pitfalls which stemmed from his appointment.
"The appointment of the Crown Manager will entail changes to decision-making, delegations and governance with the existing project team.
"It is vital that governance changes maintain or establish a clear project structure, defined accountability for financial and programme risks and clear articulation of Crown Manager versus Health NZ responsibilities."
Mr Brown announced the signing of the contract with construction giant CPB, several years after the initial negotiation, in Dunedin last week.
When Mr Brown was asked about CPB’s track record, he said "any project of this size will have its complexities".
"Ultimately, that is why we’ve also put in place a Crown Manager, whose responsibility is to work closely with the contractor to ensure it’s delivered on time and within budget," he said last week.
Former Labour health minister Pete Hodgson, who led the early stages of the hospital project, said Treasury’s assessment of the problems largely chimed with his own.
"I think Evan Davies will stay the distance ... he’s not going to be second-guessed by officials because he’s made it clear that as a condition of him taking the job on, he doesn’t get that pushback.
"I’ve never spoken to Evan about this, but that’s my reading between the lines."
