Just over seven years ago, work on the new Dunedin hospital began in earnest.
Seven years later, the main building site has all the piles driven, but nothing else. How did such failure come to pass? What can be learnt?
Delay costs. Roughly, the cost of the project has leapt 50% from about $1.4 billion to about $2.1b in the past six years.
Yet the hospital that will be built is smaller than Cabinet planned six years ago, so the problem does not lie with anyone quietly adding capacity or finery.
Inflation over that time is 25% and the building materials price index during the same period is 39.8%, but the rest of the cost overrun is due to the cost of repeated redesign.
Architects and engineers are asked to ditch their designs, time and again. More drawings are put in the rubbish bin. More project staff have enforced downtime.
Productivity drops sharply. The costs of delay quickly mount. Hoped for savings evaporate.
Delay has had three main causes to date — incompetence, startling cost increases and vainglorious egos.
Incompetence occurs at the level of the bureaucracy rather than with ministers or consultants or contractors. Usually it shows up as simple indecision.
New Zealand has had a stop-start approach to hospital building in recent decades. Therefore there has been no cadre of experienced officials to draw upon.
Those few that did exist were "let go" after the new Christchurch hospital was completed.
Over the next few years, progress was painfully slow. No-one wanted to take any decisions.
Then about four years ago a new specialist group, the infrastructure and investment group, was finally established in the Ministry of Health. It is based on Australian models, especially in Victoria and New South Wales, and has since been transferred to Te Whatu Ora.
One hopes it will become increasingly coherent and competent.
Startling cost increases started to arrive in 2021, thanks to Ukraine, Covid-19, supply chain constraints and a global round of inflation. That spooked everybody, including Treasury and ministers.
Over 2022, the first major round of cost cutting — "value management" — got under way.
But the project was already approaching the point of no return, meaning that it was nearly as cheap to proceed as it was to pause and review. In other words, the costs of delay significantly reduced any savings.
Even though most of the savings were "non-clinical", cuts to pathology services were later found to be too deep. They still need to be corrected.
We all know a vainglorious ego when we see one. In the case of the new Dunedin hospital, each time a new one arrives the end result is more delay.
Usually, it is another new senior bureaucrat or, in more recent times, new ministers. The one thing these personalities have in common is a propensity to trash the work of their predecessor. They know best.
Such cavalier condescension would be less likely and less acceptable on a motorway project or a private sector office block. Sadly, in the Dunedin hospital project, it thrives.
So it was in late September when ministers arrived in Dunedin to announce they had set a budget cap on the project of $1.88b. The new hospital would need to be downsized to come in under that figure, no matter the clinical impact.
Ministers claimed the cost was now "towards $3b", when at the time the truth was closer to $2.1b. They, and the prime minister, have repeated that figure time and time again since, knowing it to be wrong.
Deceit is not tolerated by Southerners. Our hogwash antennae fire up when confronted with such low-quality guff. Two days later, 35,000 citizens marched angrily.
By now the project has certainly passed the point of no return. Any additional cost savings will be achieved only by reducing clinical capacity.
The budget cap does not relate to clinical need. Instead it is an accounting construct.
The government promised new decisions would be made before Christmas. They haven’t been, of course. They were never going to be. Inflation costs alone are now running at around $12m since late September. The costs of redesign, the costs of downtime and the costs of keeping the lights on in the existing hospital probably double that figure. And so a sorry saga persists.
All large taxpayer-funded projects should be subject to ongoing oversight, such as that currently afforded by Treasury’s gateway review process. Taxpayers must demand good cost control. That requires an appropriate level of continual surveillance.
However, that is not the experience of the new Dunedin hospital project. Instead the experience is one of delay, and the costs of delay.
Build it now.
• Pete Hodgson is a former chairman of the new Dunedin hospital governance group, a former chairman of the Southern District Health Board and a former Labour minister of health. He is not a health professional and has no construction experience.
