Infrastructure Minister Chris Bishop and Health Minister Dr Shane Reti sent ripples through the South by suggesting scrapping the massive construction project was now a possibility.
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Mr Bishop said the hospital construction in Dunedin’s city centre could approach $3 billion and upgrades to other regional hospitals would be at risk if the project’s budget blowout was not addressed.
If it went ahead in its present form, the new Dunedin hospital would be one of the most expensive hospitals ever built in the southern hemisphere.
That was after it had initially been estimated to cost between $1.2b and $1.4b in 2017.
"The cost of this project cannot be justified when hospitals around New Zealand are crying out for maintenance.
"Upgrades and new facilities and, to be blunt, badly needed infrastructure upgrades in Whangārei, Nelson, Hawke’s Bay, Palmerston North and Tauranga may be put at risk if Dunedin continues to go so far over budget," Mr Bishop said.
To make the budget woes worse, Dr Reti said no business cases had been prepared and not enough money had been set aside for a pathology laboratory, the refurbishment of existing facilities or car parking.
To bring the project back into line, the main inpatient building could be drastically scaled back or dropped altogether in favour of a staged development on the old hospital site, he said.
"Health New Zealand and Infrastructure Commission advice has made it clear that this project was troubled from the moment the site was selected in 2018," Dr Reti said.
Contaminated ground, piling difficulty, flood level risk and "an extremely constrained construction site", flanked on three sides by state highways, had hampered the work.
Since the 2017 business case for the hospital was completed, the cost of construction per square metre had increased by 200%, from $10,000 to $30,000 per square metre.
The government was seeking urgent advice on options for the project — but it had to be be delivered within the present budget of $1.88b, he said.
The first option was to review what could be built within the existing building envelope under development.
Cuts could include reducing the number of floors, delaying the fit-out of some areas and identifying further clinical services that could be retained at the old hospital site.
The second option was a staged development on the old hospital site, including a new clinical services building and refurbishing the existing ward tower.
Health New Zealand Te Whatu Ora (HNZ) head of infrastructure delivery Blake Lepper said yesterday’s announcement did not affect the outpatient building, due to open about the end of 2026.
HNZ also continued to work "collaboratively" with Australasian construction company CPB to try to address the cost challenges for the inpatient building the ministers outlined, he said.
The options HNZ had been instructed to deliver urgently would be designed to "deliver a modern hospital and health services that [were] driven by clinical safety and new models of care", he said.
"We have been instructed to complete this work and report back to Cabinet with a preferred option over the coming weeks."
To back up their announcement, the ministers yesterday made public an independent review of the project led by former Health Infrastructure New South Wales chief executive Robert Rust.
The "Rust Review" in May made 14 recommendations.
They included that the scope of the project should be resolved as a matter of urgency "and no further changes" considered unless they were "matters which would render the facilities no longer fit-for-purpose".
The project should have a greater focus on ensuring that a suitable workforce was in place to deliver health services within the new hospital.
A delay to the execution of the construction contract should be considered in order to get a stronger cost certainty, it said.
"Health NZ are clearly committed to progressing the development on the new Dunedin hospital and their dedication and drive is noted.
"There are, however, significant risks that should be understood, considered and appropriately mitigated as the project moves into its next phase," the report said.
The hospital
Budget blowout
Initial estimate: up to $1.4billion
Present budget: $1.88billion
Present estimate: up to $3billion
Two options to go to Cabinet
1: Inpatient building drastically downsized at planned site, a reduced number of floors and some clinical services returned to the old hospital
2: Staged development on the old hospital site, including a new clinical services building and refurbishing the existing ward tower
