Varadkar defends high cost of hospital
Taoiseach: €2bn is ‘misleading’ ‘Nobody will be sorry it was built’
TAOISEACH Leo Varadkar has mounted a strong defence of the escalating cost of the National Children’s Hospital, comparing it to “bad press” controversies over other major state infrastructural projects in the past and claiming “nobody will think it a poor investment” when the hospital is opened.
Speaking exclusively to the Sunday Independent yesterday, shortly after the chairman of the hospital’s development board, Tom Costello, resigned citing concern about “reputational damage” over “ongoing commentary”, Mr Varadkar defended the spiralling cost when spread over eight to 10 years and described estimates that the final cost could be between €1.75bn and €2bn as “misleading”.
He said: “The cost of construction is higher than we budgeted for. There’s no denying that. We budgeted for €1bn and it will cost around €1.4bn or €1.5bn, but that’s spread over eight to 10 years.”
The Taoiseach also said that other infrastructure projects would not be cancelled as a result of the cost overrun, stating “some projects might be deferred by weeks or months” which, he said, the Government would clarify over the next two weeks.
“Bear in mind,” he said “the 10-year capital budget for health is €10bn — less than 20pc of that will be spent on the children’s hospital. More than 80pc will be spent on other healthcare projects all over the country.”
Speaking while on his way to the Ireland vs England Six Nations rugby international, Mr Varadkar said: “I predict it’s going to be a bit like the inter-urban motorways, the Luas or the new airport terminals in Dublin or Cork. There will be bad press, claims and counterclaims about costs and delays, but once open to the public, nobody will be sorry it was built and nobody will think it a poor investment.
“Once it’s built, it’s an asset we’ll have for 150-200 years. Children in school today will have it if they need it and so will their grandchildren who will use it in the 22nd Century.”
While the Taoiseach was careful to state that the “huge focus” on cost was “understandable” and to refer to “enormous anxieties” about the impact on other projects, his trenchant defence of the cost will cause some surprise and may fuel criticism ahead on an ongoing Public Accounts Committee examination and a review by business consultants PwC, a report which Mr Varadkar claimed would itself cost between €200,000 and €400,000 and not €450,000 as reported.
The PwC review will stop short of determining culpability at an individual level.
Notwithstanding the Taoiseach’s attempt to defend the project, and direct the public’s imagination to a “state-of-the-art and one of the best in the world” hospitals when completed, the Sunday
Independent understands that there are serious tensions between the departments of Public Expenditure and Health over the scale of the overrun.
Yesterday, Fianna
Fail Public Expenditure spokesman Barry Cowen accused the Government of being “economical with the truth” on the “spiralling costs”, claiming Health Minister Simon Harris knew last September that the cost was €200m ahead of budget but did not tell the Dail.
A source close to Mr Harris yesterday said “commercially sensitive information” was never disclosed by the Government while costs were still being negotiated and said that this has been privately pointed out to Mr Cowen.
Mr Cowen also criticised the Department of Public Expenditure for its handling of the overrun: “The department were able to leak to the media that it had supposedly expressed concerns to the Department of Health some two years ago. It’s not clear however, what it did to act on these concerns other than to simply express them,” he said.
The Department of Public Expenditure is responsible for policy on allocating public funds across each area of government spending and ensuring that expenditure is managed in line with allocations. “Well, it has clearly failed in this case,” Mr Cowen said.
However, Mr Varadkar said: “I have heard figures like €1.75bn or even €2bn. I think this is misleading. Those figures include parts of the project that are commercial, and that won’t be paid for by the taxpayer like the multi-storey car park, retail and restaurants, as well as IT and equipment, all of which we’d have to upgrade and pay for anyway if we stayed in Crumlin and Temple Street. It even includes €40m spent mostly by Fianna Fail on the failed plan to build it at the Mater. I think people using those figures are just trying to undermine the new hospital and aren’t giving the public the full picture.
“We need this hospital; our children need it and deserve it. We will work hard over the next few weeks to restore public confidence in the project through changes in personnel and an independent review. We’ll also examine ways to recover some of the cost — €150m will be recovered in VAT, for example. When the Crumlin site is vacated, there will be value that can be realised in terms of a health asset and also for housing.”
Yesterday, Mr Costello said: “I have acted with professionalism and integrity in all my dealings with the project stakeholders including the Minister for Health and his department. Every decision made by the board has been guided by what was deemed best for the project. I am concerned about the reputational damage that the ongoing commentary about the increased cost of the hospital is having on this critically important project and so I have decided to step down from my role to help ensure that focus is restored on delivering the project.”
The resignation came just a day after the Health Minister, Mr Harris, said there would be personnel changes and accountability. Yesterday, Mr Harris thanked Mr Costello for his service and his “exceptional commitment” to the project.
THE property developer who offered the Government a free site for a children’s hospital 15 years ago has blamed the procurement processes for the escalating costs of building the facility at St James Hospital.
Noel Smyth, a lawyer and one of Dublin’s largest property investors, said the costs which are now likely to exceed €2bn were an “absolute disgrace”.
As a developer, he said he cannot “spend a pound” without “getting complete and total value”. “If something moves on a chart or somebody misses a timetable or a deadline, or if somebody wants to change a design. That can open the door for people to charge you more money,” he said.
“In a procurement system, you don’t have the same shareholder requirement, somebody holding on to the reins.”
He believed the National Children’s Hospital development board had little or no real influence.
“Unfortunately, the board with respect to the people giving up their time and energy, have about as much power as a dud battery because ultimately at the end of the day, it goes back into the minister and more likely back into the civil servants,” he said.
Mr Smyth’s comments follow a further week of turmoil over the escalating costs of the development project. The Public Accounts Committee was told last week that the final cost was “highly unlikely” to be less than €2bn. The chairman of the National Children’s Hospital Development Board, Tom Costello, resigned from his role yesterday.
Costs have risen from €983m in February 2017 to €1.433bn and currently stand at €1.73bn. The Government is spending a further €450,000 on a review of how the costs escalated.
“Before you do anything, somebody gets a bill of quantities which prices everything down, the door, the nail, the window. Every single inch of it,” said Mr Smyth.
He said construction inflation has not gone “through the roof ”. “But what can happen is that from people involved can decide they want to move a wall, or they want to move a stairs, and that is great fun for the builder [because of the extra costs]. If someone drills into it, you will find out that inflation is probably the smallest part of the costs that have been going on here,” he said.
“As I said, it will go back to one thing. When you go into procurement, who is in charge? Who says, no you are not getting that?”
The reporting lines for the children’s project have been criticised at Oireachtas meetings, with members ask- ing who was in charge. The National Children’s Hospital Development Board reports to the Children’s Hospital Project and Programme Steering Committee, chaired by a Health Service Executive manager, which in turn reports to the Children’s Hospital Project and Programme Board, which is chaired by the Department of Health’s secretary general.
It was reported last week that the Department of Public Expenditure and Reform (DPER) raised concerns nearly two years ago about governance arrangements for the development of the hospital. The Public Accounts Committee will question officials from the Department of Public Expenditure.
Smyth put together a plan to build a children’s hospital on a not-for-profit basis in 2003, offering a free site to the Government on the Naas Road, with philanthropic and European Investment Bank funding. He led a consortium that offered to donate a site near Newlands Cross in Dublin and to build at cost price. Consultants including architects Scott Tallon Walker, legal firms and KPMG offered professional services at cost. The plan included co-locating a maternity hospital and included 1,000 beds coming in at a cost of €600m for the building and infrastructure, including car parks and a heli-pad. The option was turned down in favour of a site on at the Mater Hospital in the north inner city, a location the planning authorities ultimately rejected.
“The disappointment from my point of view is that there is a certain immaturity in our country still, that when people offer to do things, they ask ‘what’s in it for him?’ People do it out of a genuine interest in helping people,” he said.
“We kept it alive for a number of years after that but in the end we just got rid of it, there was no point in holding on to it,” said Mr Smyth said.
He sold the site in the past two years.