Hospital board discussed spiralling costs seven times in 2017-18

Government says it learned in November 2018 of massive overrun in costs

 Taoiseach Leo Varadkar and Minister for Health Simon Harris turn the sod on the National Children’s Hospital in 2017. The cost overrun for the hospital has placed the Government and Mr Harris under severe political pressure. File photograph: Dara Mac Dónaill/The Irish Times

Taoiseach Leo Varadkar and Minister for Health Simon Harris turn the sod on the National Children’s Hospital in 2017. The cost overrun for the hospital has placed the Government and Mr Harris under severe political pressure. File photograph: Dara Mac Dónaill/The Irish Times

 

The board responsible for the oversight of the construction of the National Children’s Hospital flagged rising costs at the project seven times, new documents reveal.

Information provided by the National Paediatric Hospital Development Board shows the board discussed significant cost escalations seven times throughout 2017 and 2018, with estimates provided each time.

The cost overrun for the hospital, which could ultimately cost €2 billion, and how the details of it emerged, have placed the Government and Minister for Health Simon Harris under severe political pressure. At the time of the final tender in 2017, the expected cost of the hospital was €636 million.

The Government says it learned in November 2018 of a massive overrun in the costs and has come under pressure for not intervening earlier.

A new timeline provided to TDs this morning revealed that concerns were being raised as early as the summer of 2017.

In September of that year, the project was over budget by €61 million. On June 6th, 2018, the board discussed how the project was €95 million over-budget.

On August 1st, 2018 the finance committee attached to the board reported that it was €180 million over-budget.

Additional claims

The board told the HSE on August 17th, 2018 and Department of Health on August 24th that it was then €191 million over budget, and that the contractor had submitted additional claims of €200 million.

On September 5th, 2018 the board discussed how the overrun had reached between €235 million and €305 million over-budget.

On October 26th the board reported the price was nearly €300 million over-budget, although this was not yet finalised. On November 7th, that rose to €320 million.

Those who sit on the board include Paul Quinn, the Government’s chief procurement officer, who also chaired the finance committee of the board. The Government has said that Mr Quinn, along with other board members, was appointed in a personal capacity.

He was also one of three board members who were appointed in the public interest.

Minister for Public Expenditure Paschal Donohoe said he is “absolutely satisfied that he met all of the responsibilities that he had as a member of the board”.

“It was the view of Mr Quinn that this matter was being dealt with by the board,” Mr Donohoe said.

Sinn Féin TD Jonathan O’Brien said the documents showed the scale of the overrun was known from an early stage.

“We now know that the scale and trajectory of the overrun was known to the Development Board and its subcommittees from early summer, rising from €95 million in June to €191 million in August.

The Minister was informed of this on August 27th, yet told no one at Cabinet, misled the Dáil, and Fianna Fáil during budget negotiations.

“The contract had no guaranteed maximum price, but was a moving feast with costs escalating in one direction over the summer of 2018, upwards.

“Yet Simon Harris reappointed the Board on 1 August 2018 without any questions asked and no engagement with the project.

‘Out of his depth’

“What is clear is a Minister out of his depth who allowed the biggest capital project in the history of the Department of Health to escalate upwards without any intervention, any questions, or any communication with the Minister for Finance.”

The documents also show the finance committee discussed growing concerns about overruns in the budget of the project in July 2017 – more than a year before the Government says it was informed of a substantial increase in costs.

According to minutes from an August 2017 board meeting, the finance committee had raised a number of concerns the previous month.

“The commercial adviser explained that there were three areas in which additional costs could potentially be incurred,” the minutes state.

These were in the programme of the project, design team fees and new fire cert costs.

“The board was made aware that the matter was discussed at the recent finance committee and that the head of estates in the HSE was a member of that committee and was fully aware of the challenges and their potential financial impact on the budget.”

The minutes show “considerable time” was spent discussing the matter.

Labour TD Alan Kelly said he wanted an explanation from the Taoiseach and Minister for Finance Paschal Donohoe about the newly released memos.

“These minutes show that a senior official in the Department of Public Expenditure chaired the finance sub-committee and sat on the procurement sub-committee and the board, so how is it credible for Mr Donohoe and the Taoiseach to say that he is acting in a personal capacity?

“On top of the Minister’s apology, we need the Taoiseach and Mr Donohoe to stand over their claim that he was acting in a personal capacity and could not inform them of cost overruns.”