The recent announcement of Evan Davies as ‘crown manager’ of the New Dunedin Hospital inpatient block might signal that the government has finally come to its senses.
Mr Davies was first appointed as chair of the governance group, succeeding me, four and a half years ago. At that time planning was nearing completion, most of the big decisions were taken, construction was due to start — or so we thought — and someone with his skills was needed in the chair. But he resigned about two years ago, upon his appointment as chief executive of Todd Corporation. By then costs had risen a lot, as they had globally, and the project was well over budget. He has very considerable experience in construction. He chaired the governance structure of the Christchurch hospital rebuild; he chaired the national health capital investment committee when it existed; his history includes the construction of Auckland’s Sky tower.
He and I are not like-minded people, and we certainly have very different skill sets. He will have little time to devote to his new, somewhat invented, role. I expect he will travel to Dunedin rarely. By his own admission he has little knowledge of how a health system works in practice, and many will think he is paid too much.
But none of those things much matter in my view. What matters most is that his knowledge and experience in construction are beyond doubt. He knows how to complete a difficult project, including how to convince this tin-eared government of a way forward. That was evident in the language from the Minister of Health announcing Evan Davies’ appointment.
There are several important clues.
My reading is that Mr Davies agreed to return to the job only if he was given the authority to re-appoint Tony Lloyd as the programme director. Sure enough, that announcement has now been made and Mr Lloyd returns to a role he was, very stupidly indeed, sacked from last November.
The minister wants a deal to be signed with the main contractor by mid-September. That tells me that Mr Davies has convinced the government that contracting CPB, a large multinational, is the only logical option. He will have successfully argued that to abandon that existing relationship and return to the Australasian construction sector for a new main contractor would create uncertainty, delay, and cost. That sector would increasingly view our public health system as a capricious and unreliable client.
Mr Davies has ensured he reports directly to the minister, as I did back in the day. This will obviate the excessively convoluted food chain that has existed at times, during which assorted middle managers have had far too much influence. Of course, government officials will remain engaged, and will add value, but they cannot gatekeep. Progress will quicken, again.
Critically, Evan Davies has convinced the new Health Minister that a fixed price contract for a job such as this will not work, and that a return to some sort of shared risk arrangement is a superior strategy. That will allow the Crown’s relationship with CPB to move from an ‘I lose if you win’ mentality to one of ‘how do we resolve this together’. One is lower trust, with wall-to-wall lawyers; the other is higher trust, often with obligatory information sharing.
The fixed price approach was a consequence of ministerial vain-glorious behaviour last September. Then, two ministers rode into town, misrepresented the truth, and caused work on the inpatient block to stop. They said the costs were out of control, and that they weren’t going to pay a cent over $1.88b. That became the fixed price, no matter what.
Two days later 35,000 citizens marched.
Almost unbelievably, the ministers’ ill-fated visit occurred just as Tony Lloyd’s team and CPB were closing in on a shared risk agreement that was within the $1.88b cap. I doubt either would poke the bear by confirming that publicly today, but it was indeed the case. Sadly, ministerial conceit has cost the project about a year, during which time inflation alone will have added a further $40m of costs.
This is a government U-turn, pure and simple, and one that is well overdue. Both Evan Davies and Tony Lloyd will be focused first and foremost on cost containment. Taxpayers should welcome that. But their approach will be much more informed, negotiated and nuanced than the hubris of the last nine months.
From the outset the new Dunedin hospital project has had excellent input from local health officials and from local clinicians. They have provided consistent and high-quality thought, ideas and advice, and we ought to be proud of them. The changes are all occurring where they are needed — at the centre. The government has finally stopped accelerating down a cul-de-sac.
We might at last start building a hospital.
• Pete Hodgson chaired the governance group of the new Dunedin hospital for three years, chaired the Southern District Health Board and is also a former minister of health.
