Hospital report finds lack of early-warning costs system

Mazars says checks and balances failed to protect board from project price spiralling

Independent TD D Michael Harty: it is incumbent on the Department of Public Expenditure, whose officials have not appeared before the health committee, to explain its involvement. Photograph: Gareth Chaney Collins

Independent TD D Michael Harty: it is incumbent on the Department of Public Expenditure, whose officials have not appeared before the health committee, to explain its involvement. Photograph: Gareth Chaney Collins

 

A new report examining the reasons behind the cost escalation at the national children’s hospital has found that a lack of early-warning systems left the paediatric board unable to lessen €450 million increase in the project’s cost.

The report by Mazars, the final version of which was issued on December 17th, 2018, was commissioned by the National Paediatric Hospital Development Board.

The report, which has been seen by The Irish Times, finds that the project’s “fundamental systems and checks and balances failed to protect the board from a large sudden increase in the cost of construction”.

It found that the capital cost budgeting process “failed to determine and therefore secure the necessary capital budget” from the beginning of the process. The budgeting process “failed to properly estimate the likely future costs of the project within the stated contingency limits”.

It also found that “because of the lack of early warning that the capital budget was under pressure, the NPHDB executive were provided with little opportunity to manage or mitigate the cost escalation”.

The spike in costs has also “exposed the project to significant reputational risk”, the document states.

Design plans

It pointed towards delays in finalising the design plans of the hospital which delayed the emergence of the cost escalation, although it was not a significant contributory factor in causing the increase.

It also found that early plans to make savings were not fully realised and furthermore, “notwithstanding the good working relationship between the design team and the NPHDB executive, the design team did not highlight or signal the looming capital budget overrun”.

The report found “a variance of this magnitude would also suggest that the interface and working arrangements between the design team, the executive and the board’s governance of the project should be reviewed to determine the suitability and robustness of the oversight and governance activities” as the project enters its next phase.

The report also recommends the capital project organisational structure be “reviewed and changed, where necessary, to ensure that the specific capital budgetary control systems properly operate in terms of design, process and reporting”.

“The responsibilities for the operations of this system should be crystal clear.”

Furthermore, those responsible for the oversight of the project should complete a report on what the total cost will be to complete the exercise, and this should be reviewed on a quarterly basis.

‘Detached’ officials

Meanwhile, the chairman of the Oireachtas health committee has accused the Department of Health and Department of Public Expenditure of being “detached and disconnected” from the project, despite their officials sitting on the development board and various oversight bodies.

Dr Michael Harty said it was incumbent on the Department of Public Expenditure, whose officials have not appeared before the health committee, to explain its involvement.

Dr Harty said administrative and political lessons had to be learned from the scandal. “Political decisions which go wrong have serious consequences for the health of patients. The nation has been let down by those entrusted to manage its health service. Efficient management of resources, accountability and transparency are still distant aspirations.”

The cost of the project will ultimate rise above the current €1.43 billion, he predicted. The location, on a confined brownfield site at St James’s Hospital, also “undoubtedly” contributed to the costs.