NMH plan broke rules
Report finds ‘optimism bias’ for new hospital may prove costly
A BUSINESS case presented for controversial plans to move the National Maternity Hospital to Elm Park was non-compliant with multiple public spending rules, a report found.
The review by PricewaterhouseCoopers (PwC) also stated that ‘optimism bias’ in terms of design completion and robustness should be considered ‘major gaps’ in the proposals, and ‘may prove very costly’ to the project.
Plans to move the facility to a co-location at the Elm Park site in Dublin’s St Vincent’s Hospital two years ago caused controversy amid fears the religious ethos of the Sisters of Charity, who owned the land, would impact the provision of abortion services. However, the Cabinet was ultimately satisfied the contract allowed for ‘all legally permissible’ services to be available at the new site. Last July, Health Minister Stephen Donnelly secured Cabinet support to allow the project to proceed to the procurement phase. It is expected to cost around €1billion to build.
Prior to this approval, a report by PwC was undertaken in March 2023, at the request of the Department of Health, to support key decision makers in ‘prioritising public investment proposals in order to improve outcomes and deliver value for money’.
It was released to the Irish Daily Mail under Freedom of Information legislation as part of considerations by the Major Projects Advisory Group (MPAG), which sits within the Department of Public Expenditure and Reform. The report looked at ‘optimism bias’ within the plans for the site.
While it found the project was compliant and broadly took account of optimism bias, it noted: ‘Optimism bias in terms of design completion and robustness should be considered as major gaps in design completeness and may prove very costly to the project.’
It added: ‘It is important to account for optimism bias in the estimation of life-cycle costs, particularly given the significant changes to costs since 2019, which has increased uncertainty. The optimism bias for construction costs and design team fees should be verified and should take account of future prolongation.’ It also warned operating costs, and, in particular life-cycle costs, ‘do not take optimism bias into account’.
The report found ‘key elements’ of the business case were ‘not aligned’ with the requirements of the Public Spending Code. It said the procurement strategy was not given ‘sufficient consideration’ and ‘investigation’ in the business case and other support documents to ‘allow a robust selection of the procurement route’.
The PWC report said: ‘Fundamentally, we do not find that there is a robust justification for the selection of restricted procedure as the procurement route.’
On reviewing what was known as the ‘project execution plan provided by the HSE’, PwC found it failed to address the Public Spending Code requirements on the development of programme, maintenance and whole life-cycle considerations. The report said: ‘We conclude that sufficient and robust market/supply/industry testing has not been undertaken. It is concluded that this section is noncompliant and does not meet the requirements of the Public Spending Code at Decision Gate 2.’
As a result, the MPAG agreed there was ‘still significant risk to the proposed procurement strategy’ given the requirement of tenderers to work under the terms of the given contract, and various other considerations.
The Department of Health said: ‘The preliminary business case was subject to an external assurance process and a Major Projects Advisory Group review... and Government gave the sanction for [it] to proceed to procurement. This process is currently under way.’
Key elements ‘not aligned’