Rising cost of national children’s hospital a scandal in the making

High levels of construction inflation resulting in bigger payments to main contractors

The construction cost of the new national children’s hospital, the State’s biggest construction project, will probably come close to €2 billion.

The construction cost of the new national children’s hospital, the State’s biggest construction project, will probably come close to €2 billion.

 

It is no exaggeration to say the escalating cost of the new national children’s hospital is a scandal in the making. One can certainly see the Comptroller & Auditor General, or the Dáil Public Accounts Committee, poring over the horrifying rise in project costs with interest at some time in the future.

When all the bills are paid four or five years from now, the price of the State’s biggest construction project will probably come close to €2 billion. Throughout this period, there will be little money to build anything else in the health sector, unless the purse-strings are loosened further.

It is clear already that mistakes have been made. For a start, the scale and complexity of the project appear to have been underestimated. As a consequence, earlier estimates of the cost involved were far too low.

It is true that the Irish economy has rebounded more strongly than most would have expected. While general inflation has remained low, construction inflation is rising quickly. The project is proofed up to 4 per cent inflation, but actual rates are more than twice this, resulting in bigger payments to the main contractors.

Perhaps this trend could not have been foreseen, but there are other problems. A report drawn up by the project team building the hospital found the original estimates “should have been more reflective of the scale and complexity of the project relative to the capacity of the Irish construction market on a difficult congested site in the city-centre location”.

Critics of the decision to locate the project at St James’s Hospital always claimed it would be far better, and cheaper, to build on a greenfield site by the M50. They pointed to multiple alleged difficulties, such as drainage, archaeology, traffic and the need to decant existing buildings on the site, that could add to cost.

‘Difficult’ site

Now even the project team, which rejected all these arguments at the An Bord Pleanála oral hearing into the development, is conceding that the site is “difficult” and congested.

Other failings are apparent. The project team’s report says there should have been a “more robust early-warning process” during the design stage.

Another report carried out by external consultants says a number of the project’s “fundamental systems” and “checks and balances” failed to protect it from “a large sudden increase in the cost of construction and the probable costs emerging from the developing plan,” according to a confidential memo presented to Cabinet this week. This lack of early warning about the rising costs left staff with “little opportunity to manage or mitigate the situation”.

If some of the problems that have arisen are particular to the children’s hospital project, others will affect all construction work.

What hope now is there of completing the building of the National Maternity Hospital at St Vincent’s Hospital on budget? Why would we accept as valid the estimates of the cost of building the maternity hospital – last put at €300 million – given the escalation in other projects?

Up at St James’s, the financial pain will continue after the hospital is finished in 2022. The hospital’s 473 beds represent an increase of just four over the total number of beds in the existing three Dublin children’s hospital, though all children will be accommodated in single rooms. This makes them more expensive to staff.

Already, the cost of operating the hospital has been revised upwards, from €325 million a year ago to €366 million now. That’s on top of the €86 million bill for integrating the three existing children’s hospitals.