Health NZ Te Whatu Ora chose Australasian firm CPB as the preferred contractor for the inpatient building in 2021, but former Southern Group Partnership chairman Pete Hodgson said he understood the contract had not been formally signed.
He understood CPB had been asked to find more savings after submitting a final price significantly higher than the government was prepared to pay.
Mr Hodgson was worried CPB would not be able to make the savings the government wanted while delivering all the services the city had been promised.
"The temptation will be for the latest set of bosses to do some sort of bottom-up review to address what I assume to be serious cost overruns.
"It will not work. This project has been subject to various episodes of what is called value management all along.
From inception there were some "rather assertive assumptions about increased productivity", which was part of the reason there were not many additional medical and surgical beds in the project, Mr Hodgson said.
"In addition the project has been subject to several external reviews, and then one bottom-up redesign.
"These various episodes of value management, or cost cutting, are a good thing. They give the taxpayer some assurance of value for money. They also force innovative design and careful clinical thinking into the project.
"But value management can go too far, and in this project it undoubtedly already has.
"The pathology capacity of the hospital was reduced too enthusiastically. Additional, and costly, pathology facilities are now needed."
Mr Hodgson said it was imperative the costs of delay were fully accounted for.
"They haven't always been, and some earlier analyses that went to ministers were less than honest in that regard.
"The costs of delay can balloon quickly. There is the cost of keeping consultants and contractors on hold, the cost of price escalation over time and the cost of trashing thousands of drawings and redoing them.
"Then there is the additional costs of keeping the lights on at the existing hospital, such as the most recently announced expenditure on the sterile supplies facilities, as well as all the social costs that occur with delay in providing health services to the public."
Mr Hodgson said there was "no doubt" there were "a bunch of commercial bids and estimates" that were not to Health NZ’s liking.
The project was eventually budgeted at $1.59 billion, but the Otago Daily Times understands the costs have ballooned to more than $2b.
"The pile-driving on the inpatients building is almost complete. To maintain momentum the contract for the so-called groundworks will need to be let soon."
Mr Hodgson was concerned if contract matters did not get resolved then there could be another redesign.
That would be a "reckless waste of taxpayer funds", he said.
Last year, National announced a $30 million boost to roll back some of the Labour government’s cuts and said it would build the hospital to the specifications originally intended.
The uncertainty over CPB continuing as the main contractor was revealed in a January Treasury briefing on health spending to Finance Minister Nicola Willis obtained by the ODT earlier this year.
Treasury and government infrastructure adviser Te Waihanga was supporting HNZ in reconsidering the contract, the briefing said.
Cost information was redacted.
Asked whether HNZ had the ability to cancel contract negotiations with CPB at this stage, Mr Hodgson said anything was possible.
Health NZ head of infrastructure delivery Blake Lepper said CPB had the early contractor engagement contract for the inpatients building, contributing to the building’s design, and planning and pricing the subsequent construction phases.
"The project is receiving pricing for the above-ground construction of the inpatients building and we remain committed to working in good faith with the preferred contractor to achieve an acceptable commercial proposal for the delivery of the building in accordance with early contractor engagement agreement.
"Any discussions between parties are commercially sensitive."
A spokeswoman for Health Minister Dr Shane Reti deferred questions to Health NZ.
