The government is reconsidering the rebuilding of Dunedin Hospital after costs have ballooned. Photo: RNZ/Tess Brunton
The ‘chaos’ in overseeing the major construction of a Dunedin hospital came at a critical time – while fixes were made, key people were not told whether the fixes worked or not It took months to confirm, then a $200 million cost hit.
Reviewers have called the oversight of Dunedin’s hospital rebuild “difficult” and “chaotic” at a critical time when costs were spiraling out of control, according to a newly published paper.
The biggest weakness was identified as poor governance and oversight, and we spent several months ensuring this was fixed.
Costs rose by $200 million over the same period in 2021-22.
The price has since increased by at least another $300 million, causing the government to reconsider. That, in turn, sparked a “Save Southern Hospital” campaign, with doctors warning that a hasty redesign could destabilize the region’s health service.
The slide between 2016 and 2023 is revealed in 16 new reviews and papers published by New Zealand Health.
Ministers, who have questioned how the previous government ran the project, are keen to push for a review.
They said these showed “a steadily deteriorating outlook for the project.”
The paper states that by June 2020, the project, which was amber (on a scale of green, amber and red) in 2017, was now amber, with Treasury saying it was “high on the success of New Dunedin Hospital”. is a huge risk and is questionable.”
“In recent years, a series of delays in decision-making have resulted in increased costs, making progress more urgent than ever,” the project said.
Since 2015, governance, the Southern Partnership Group’s core work to “ensure projects are delivered on time and on budget”, has been rated as a major issue by the Treasury. Ta.
“Almost universally, interviewees cited governance as one of their most salient concerns,” the paper said.
“Governance has been variously described as “struggling”, “disorganized”, “lack of delegation”, “debatable accountability” and “suffering from a lack of trust”.
“A strong opinion was expressed that so far little action has been taken to address these concerns.”
The Labor-led government, led by Health Secretary Chris Hipkins, moved to resolve the issue by replacing the Southern Partnership Group with a new Executive Steering Group.
This was to provide “guarantees regarding financial management, timely delivery of fit-for-purpose buildings and the development of quality services”.
It was also intended to be a model for use in other large-scale health projects.
But the newspapers soon showed that another major blunder occurred. The Southern Bureau of Civil Affairs was not informed of the governance findings for months.
Local residents are protesting against hospital cuts. Photo: RNZ/Tess Brunton
A Treasury review in November 2020 said “effectively five months have been lost”.
“The review team considers this to be a significant missed opportunity,” it added, noting tensions within district health boards and between DHBs and the Department of Health.
The lapse comes at a crucial time in negotiations with the building company over the contract for the outpatient block.
Governance changes finally took place in December 2020, six months after the June warning.
But even so, a report that was scheduled to be submitted to Cabinet in May 2021 to confirm that governance had improved was instead postponed by nearly a year to February 2022.
A month later, in March 2022, ministers were forced to launch a rescue operation centered on design changes aimed at saving money as costs ballooned by $200 million.
The review showed that in the 2021-2022 period, when governance was supposed to improve, the situation worsened further.
Treasury’s final review in December 2021 said the project was “generally on track” but that “delivery of (Dunedin’s new hospital) within scope, deadline and approved budget is now at risk.” “I’m exposed,” he said.
“Budget pressures resulting from material supply and labor market disruptions are at levels not seen in recent memory and threaten to derail projects.”
He called for urgent measures.
Labour’s Tracy McClellan said the issue was a “huge distraction”. Photo: VNP/Phil Smith
In its review, the Treasury renewed its call for governance arrangements to be reviewed a full year after the steering group established under Hipkins took over governance.
In the December 2021 review, Treasury reiterated its call for hospital data and digital technology upgrades to be included in projects rather than treated separately.
“We will integrate the buildings, ICT and transformation programs into a single coherent program of work.”
All told, the project has a budget of about $2 billion, $500 million more than budgeted at the time, the company said.
So far, ICT has not been included, with the state-led government citing this as another factor in increasing costs that could push the overall project to $3 billion.
Labour’s deputy health spokesperson Tracy McClellan rejected suggestions that the last government was asleep at the wheel.
“I disagree…the problems with the project were well known and well managed,” she said. This includes disruption to the supply chain due to the new coronavirus infection.
In its final review in December 2021, it said the project was largely on track but needed to be aware of “headwinds”.
At the time, there were limited cost-cutting measures they could take, she added.
McClellan said the issue was a “huge distraction.”
“This is what we’re talking about now, rather than the government refusing to build the hospital that Dunedin deserves. That’s the point here.”
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