NEW CHILDREN’S HOSPITAL COSTS ‘OUT OF CONTROL’
Donnelly must ‘come clean’ on bill, insists PAC
HEALTH Minister Stephen Donnelly has come under fire over the snowballing bill for the National Children’s Hospital as sources close to the project revealed construction costs are ‘galloping away’ due to hyperinflation and soaring wage demands.
Several members of the Dáil Public Accounts Committee (PAC) called on the minister to provide up-to-date costings for the development, which has been beset by delays and cost overruns.
PAC member Neasa Hourigan, who is also chairperson of the powerful
Budgetary Oversight Committee, told the Irish Mail on Sunday: ‘There is huge concern that the costs are now out of control.’
Chronic labour shortages are also adding to the single biggest development in the State amid escalating tensions between the main contractor and the Government over more than 900 disputed cost claims.
The latest revised budget for the development is estimated at €1.73bn, making it one of the most expensive hospital projects in the world. However, a source close to the project said this revised price tag is also now ‘unrealistic’.
The source told the MoS: ‘The goalposts have changed many times since we started this project but the last 12 months have seen the biggest challenges of all.
‘The construction costs are soaring. We had Brexit and we had the pandemic and labour shortages. Now the pandemic is over but the housing crisis means Dublin is not an attractive place to be.
‘We should have 2,000 workers in an optimum situation and we’re not hitting that. Our construction partners have had to raise wages – that’s a cost. Then there’s the building materials. They’re up 20% due
‘Materials up 20% due to Brexit and Ukraine’
to Brexit, and now Ukraine.
‘That’s all on the price tag. The estimated final cost for the entire project being floated last year was €1.7bn – that’s unrealistic now.’
Neither the Department of Health, the Children’s Hospital nor the main contactor BAM, were able to say how much the project will cost the taxpayer by the time it is completed, when contacted by the MoS.
Mr Donnelly has acknowledged the NCH project will cost more than the revised €1.73bn budget, but insists he does not know how much the taxpayer will eventually have to fork out to fund the hospital.
In response to parliamentary queries from Sinn Féin TD and PAC chairman Brian Stanley, Mr Donnelly said of the €1.73bn estimate, ‘There are a number of items not included in this investment figure as there was no price certainly for them and nor can there be, for some, for the duration of the project’.
He added: ‘These include construction inflation, the impact of Covid-19, statutory changes, any change in scope resulting in healthcare policy changes, and the Employment Order.
‘Brexit, the pandemic and recent geopolitical developments have severely impacted supply chains and the NCH project is not immune to these external challenges.’
And while Mr Donnelly insists work on the NCH site at St James’s Hospital in Dublin ‘is ongoing and progressing well’, he was unable to give a concrete timeframe for its completion.
‘The National Paediatric Hospital Development Board has advised that the main contractor’s current schedule outlines completion can be achieved by December 2023 which would mean the NCH at St James’s could open in the second half of 2024,’ he said in response to parliamentary queries.
However, Green TD Neasa Hourigan accused Mr Donnelly and the Department of Health of refusing to provide the PAC with details on costings and issues with the contractor. She told the MoS: ‘It is not just that it is spiralling out of control, it is that we have so little information, they have not given us details of costings, it is incredibly opaque. It is a huge concern in PAC that we have so little information in PAC on the actual numbers.
They have consistently not given us details of costings, not given us details of issues in question with the developer.’
PAC deputy chair and Social Democrats co-leader Catherine Murphy also criticised the lack of transparency surrounding spending and timelines.
Ms Murphy told the MoS: ‘We do not know how much further beyond €1.7bn spending will get.
‘The number of claims BAM have lodged together with building inflation which is written into the tender are a major cause of concern. The project has gone on years longer than projected, partly due to how it was handled in areas such as not enough construction workers.
‘There is real concern in PAC about costs escalating further with no knowing how much beyond €1.7bn it will get,’ she said.
‘All information is now a closelyguarded secret. The object for PAC is to ensure costs don’t escalate.’
She added: ‘We are very concerned at this stage it will breach €2bn and the absence of information increases concern about spending controls.’
At the PAC meeting on March 24, the committee chair complained that correspondence from department secretary general Robert Watt failed to address members’ queries and concerns about rising cost levels and staff shortages.
‘Each month this project is prolonged impacts on the cost. Inflation in the costs of construction, especially in the prices of timber, steel and other such materials, is skyrocketing. The reply [from Mr Watt] falls very short,’ said Mr Stanley.
Sinn Féin health spokesman David Cullinane said delays and cost overruns had turned the children’s hospital project into ‘a never-ending saga’.
The Waterford TD added: ‘The project is certainly heading towards €2bn and may even go beyond. There are huge additional costs and disputes where all we are seeing are rising costs and broken timelines – it has gone beyond control.’
Independent TD Seán Canning, a former quantity surveyor and lecturer in building and civil engineering, said simply keeping a major site open can add a fifth to the final bill.
Mr Canning said: ‘Outside of the cost of building, if there is a time delay the costs alone of keeping a site open could be between 10% and 15% – security, cranes, machinery, hoarding, electricity and maintaining workers on site.
‘The costs in material is unquantifiable, but if you add in inflation that’s another 6%, at a minimum,’ he said.
Latest figures published by the Central Statistics Office reveal the cost of building and construction materials has risen by 17.7% in the year to February.
The latest data also shows productivity in the construction sector remains below 2010 levels and is less than the EU average, again highlighting the huge lack of skilled tradespeople needed to complete State developments and housing projects.
Soaring costs, labour shortages and the recent influx of more than 20,000 Ukrainian refugees are also threatening to derail targets to build 33,000 new homes a year under Minister Darragh O’Brien’s Housing For All plan.
Amid growing concerns over the NCH project, industry sources this weekend warned rampant inflation could bring the construction of schools and hospitals to a halt.
One source told the MoS: ‘Contractors are losing millions on rising costs as their public works contracts are fixed price and no increases can be recovered.’
This was echoed at a recent meeting between the Construction Industry Federation (CIF) and Public Expenditure Minister Michael McGrath.
CIF director general Tom Parlon warned hyperinflation is creating ‘exceptional challenges’ within the sector, increasing the likelihood of some contractors being unable to
‘They won’t provide PAC with the costings’
‘Huge costs – it has gone beyond control’
tender for projects and potentially becoming insolvent.
The CIF is seeking for an effective price variation clause to be included in all new public works contracts and for that mechanism to be applied retrospectively to all projects currently under way.
And Mr Parlon warned: ‘If the system isn’t altered… contractors will be unwilling to tender for public contracts. It will also have implications for projects that are already at the construction stage, as it may become uneconomical for some of the contractors involved to complete their work without turning insolvent.
‘These are very real risks at the moment, and they will have to be addressed if the public works are to keep progressing.’
In response to queries from the MoS, Mr McGrath acknowledged contractors are carrying a very significant amount of risk with public price contracts.
He added: ‘In making any changes in this area I have to strike an appropriate balance between protecting the interests of taxpayers. I will be meeting my officials again next week to examine the options open to me.’
A spokesman for BAM said the contractor ‘is precluded from making any comment’ under the terms of its contract.
The Children’s Hospital Group did not respond to queries for comment this weekend.