When announcing earlier this month the beleaguered inpatient build would go ahead, Health Minister Simeon Brown said the government would conclude negotiations with Australian construction giant CPB within the existing budget, leading to activity back on site by mid-year.
However, a senior source said there would likely be price creep. Even if it was possible to agree a fixed-price contract with CPB, there would likely be wiggle room still for some costs to keep rising.
"Whatever price they come up with, good luck with that. There will be lots of negotiation and even if a maximum price is negotiated there will be variations [of pricing] allowed under the contract," the source said.
"You can have a fixed-price contract that you are absolutely getting screwed on ... the devil will be in the detail."
The source blamed the lack of health construction expertise in New Zealand leading to a lack of a competitive field for the work CPB is slated to do, plus rising construction costs.
There had already been delays and price increases on other health projects to prove the point, they said. One example was the acute services building at Christchurch Hospital that opened in 2020.
An initial contract between Health New Zealand Te Whatu Ora (HNZ) for CPB to lead an 18-month early planning stage of the hospital build started in August 2021 and there was an expectation, back then, that CPB would be awarded the contract to oversee the build from 2023.
The source said the problem of sticking to budget was compounded further by ongoing concerns about lack of experience in the HNZ team that was trying to negotiate and take responsibility for the build.
Since the unexplained removal of programme director Tony Lloyd, who had hospital-building experience and had led the project for two years, there had been a leadership void, the source said.
Senior responsible officer for the project Blake Lepper indicated at the announcement of the inpatient build that the organisation was still seeking help.
Pete Hodgson, the former chairman of a committee governing the new Dunedin hospital build, hospital campaigner and a former Labour minister of health, said the price of the build would not be known until it was complete, but agreed it would likely be over budget.
"There is no way that the figure of $1.88b will be the final figure. It suits the government to say that, but it is inevitable that it will be more than that.
"In addition, the political pressure to stay within $1.88 [billion] means it is likely people are playing fast and loose with variables, such as contingency costs."
He blamed continued government delay as the main reason for likely continued price hikes.
"It is five months since ministers came to town [to say they were reconsidering whether to build the inpatient building] and there is still no contract with CPB or anyone else, that alone will push the price beyond."
Mr Hodgson slammed the recent announcement of the hospital build going ahead within budget as a tactical move designed to deal with the "significant political embarrassment caused by 35,000 people marching and the subsequent campaign".
"It is a legitimate thing for politicians to try to contain concern, but they have no contract to announce, no programme director to announce.
"We now know what the government wants to build, but we have no idea how they will build it. At the moment they are looking to replace the programme director ... we have lost two good programme directors so far and it is not clear to me how we will find someone to fit the bill ..."
Threats to the project, due to changing or missing staffing, could be wider.
Engineering New Zealand Te Ao Rangahau chief executive Dr Richard Templer said "hundreds of engineers" were leaving the country as the pipeline of infrastructure work had "all but dried up" and that was having a "devastating impact" on the profession.
"The shutdown of education rebuilds, the shutdown of hospital builds and upgrades, the slowdown on roading, the changes in the Three Waters space, has meant that New Zealand engineers and New Zealand constructors, the people who build the roads, waters network and buildings, have all had to look for work elsewhere and that has seen people heading overseas or contracting to work overseas and significant numbers."
Health Minister Simeon Brown and HNZ were approached for comment.
