Documents released by Te Whatu Ora Health New Zealand (HNZ) showed the "lessons learned" from the project so far included the fact the project simply might be too big for the New Zealand market.
The documents were presented in the form of an "aide memoir" to Health Minister Dr Shane Reti from HNZ infrastructure and investment officer Jeremy Holman.
The document suggested in future the government should stage projects.
"For large hospital redevelopment projects, more emphasis will be placed on reusing existing infrastructure and staging investment over time to support smaller, more deliverable projects, over several years, rather than a build as big as the new Dunedin hospital, which is too large for the New Zealand market.
"By developing a staging plan, this will also ensure that the full extent of the investment is understood in advance, albeit at a high level."
The project was eventually budgeted at $1.59 billion, but the Otago Daily Times understands the costs have ballooned to more than $2b.
Former Southern Partnership Group chairman Pete Hodgson said the document was "an important and honestly written, if incomplete, paper".
"I am hopeful that the still relatively new Infrastructure and Investment Group will professionalise and co-ordinate health capital works in the same way that, say, Waka Kotahi New Zealand Transport Agency manages state highways."
The story of the project had been punctuated "with a series of people arriving to take charge and inflict their ‘wisdom’ on the project", Mr Hodgson said.
"The result has usually been delay. I spent a lot of my effort demanding that the cost of delay be included in the cost-benefit analyses. At one point these costs totalled $900K per week.
"I am therefore delighted to see that the aide memoir notes that the cost of delay can be considerable."
"During the later stages of the design, the focus should be on optimising or tweaking the design ... rather than making wholesale design changes", the document said.
"It is most important that any change to design provides a benefit in either service delivery or cost savings that is greater than the cost of the change, including calculated additional risk."
The documents said there had been "constant changes to governance throughout the life of the project".
"These have directly impacted on the project team in terms of delayed decisions, relitigating of key issues and scope."
The project scope began as a single building (clinical services building) replacement, the documents noted.
"As the complexities of this integration into other existing buildings became clear, it turned into a full hospital replacement.
"The engagement with users at this time encouraged ‘blue-sky’ thinking that set unrealistic expectations and stretched the project budget beyond its original indicative estimate.
"This has required several reviews of scope over and above what could be considered normal practice in a large-scale project."
Mr Hodgson said that the main part missing in the documents was the fact the health sector had lost considerable competence over the 2010s.
"It is sadly no exaggeration that the Ministry of Health began the project not knowing what to do, so they did as little as possible.
"Skills evaporated in that time; the Ministry of Health became much less equipped than when I was minister.
"The exception was Christchurch, post-earthquake, but most of the key people on those projects were ‘let go’ for one reason or another, and their expertise was lost."
Dunedin MP Rachel Brooking said while reports like this were important in identifying ways in which future projects were to be looked at, "my concern is that it states the new Dunedin hospital is too large for the Dunedin market".
Taieri MP Ingrid Leary agreed.
"Dunedin and the southern region just want the hospital they were promised — so the government should stop the feeble excuses and just get on with it."
A spokeswoman for Dr Reti said he had read the documents and had "always acknowledged that there are many challenges with the project".
"This project remains under active consideration, as the government works to deliver an important health facility that represents value for money."
