Many of 16 mental health facility projects face cost and time over-runs, a report shows. Photo: RNZ / Richard Tindiller
Health officials in charge of getting massive hospital projects built have been making basic, costly mistakes for years around budgets, schedules and design.
That is according to a newly released report into three-quarters of a billion dollars worth of mental health projects.
Many of those 16 projects face cost and time overruns, four years on from the government promising to deliver them urgently to meet huge deficiencies in mental health care.
"Planning and designing new health facilities takes longer and costs more than it should," said the report from the Infrastructure Commission report, done last December but released now.
It covers the overlap between the old 20-DHB health system's exit and the new centralised regime's entry, and said it contained big lessons for doing better from here on in.
Te Whatu Ora Health NZ said on its website it was now working on stronger central planning and delivery of projects.
More centralised leadership since 2021 had helped but "the way projects are being planned and delivered remains variable across the sector. There is variability in capacity and capability, management and governance", the report said.
It provides a harsh snapshot of what has been going wrong with health investment - as opposed to underinvestment - for years, describing a slow-motion fight between hospitals to get key things built when intentions "far exceeded" funding.
"To date, investment in health infrastructure has almost entirely been driven by DHBs (...bottom-up). Prioritisation ... has largely been based on a first-in, best-dressed
approach," it said.
The absence of any long-term national investment strategy meant hospitals had not known what projects would win funding, so skimped on planning because it cost a lot.
"This placed a heavy burden on DHB resource with no certainty of a successful outcomes. Many business cases were not well supported by robust planning."
A worrying example was at Capital and Coast's mental health project, where "design was largely completed in isolation from the users with a lack of consultation".
"There is always a risk with this approach that the facility is not fit for purpose once constructed."
Even so, cutting corners did not translate into speed: The time taken from business case to completion was anywhere between three to 12 years, it said. Covid had made delays worse, and these pushed up costs.
The mental health project total that was $722m a year ago has risen now to $830m - and ministerial briefings indicate only $90m of that has been spent so far.
Ironically, government attempts to bring in nationalised asset plans and management have themselves hit delays; instead of delivering them last year, as ministers had promised, these now were not due till next year at the earliest.
The newly released report provides extra details on top of a ministerial briefing into it, that RNZ reported on in March, identifying several basic failings demonstrated by one or other of the mental health projects:
- Project schedules and budgets lacked detail, room to move, and were too optimistic - many showed "optimism bias" including West Coast and Taranaki projects
- Managers did not understand how to get projects, or changes to them, approved - "Capital and Coast were unsure exactly who was required to be engaged."
- Lack of planning sometimes meant even a project's location had to be shifted - such as at Waikato, Hutt Valley and Lakes hospitals
- Lack of coordination: Sometimes a hospital's own facilities managers were left out of things, such as happened at Counties Manukau. This could mean "a fit-for-purpose outcome is hard to achieve."
- Lack of standardisation, as projects did not draw on past experiences - "A quantity surveying firm ... noted that anti-ligature components were separately investigated for each project."
- Lack of expertise, though it varied a lot. When clinicians got involved in planning, it could be good, but not if it was added on to their fulltime jobs, it said.
- Possibly putting too much business the way of too few - "a small number of consultants [had] been engaged on a large number of the projects."
Whakatāne has gone from a $15m budget based on "a low level of information" to a $50m one.
The Whakatāne, Tauranga, Lakes and Hutt projects have recently been taken over by Te Whatu Ora's central planning arm, the Infrastructure and Investment Group.
The government had called the review a "deep dive". But the report itself said it was not that deep as it did not have time - and did not, for example, interview any contractors.
Te Whatu Ora has faced a lot of criticism for not giving the public enough information, ever since local representation on DHBs and publicly open DHB meetings were done away with a year ago.
However, in this case, even its own official reviewers struggled to find out about costs, schedules and plans.
"We were not supplied with a clear programme for review and so are unsure how the team intend to deliver the project," it said about a $130m project at Hillmorton in Christchurch.
Taranaki seemed to have come up with a schedule on the spot after being asked by the review, it said.
"We understand that Te Whatu Ora can sign the contract if the offer is within budget. We are not aware who can sign the contract if it is over budget," was another comment.
And "we have had very little information to review with respect to the budget, and so it is very hard to provide any insight", it said about Lakes' $33m project in Rotorua.
In response to the review's recommendations, Te Whatu Ora had said it was working on:
- Strengthening business cases, with a new framework
- Building expertise in budgeting and cost estimation
- Standardising things - the report listed design, contracts, schedules and contingency funding all needing standardising
- Increasing project delivery resources
"All the work being undertaken in relation to business case standardisation, planning, facility design guidance, project delivery frameworks, governance and the like will reduce the need to have lengthy and significant stakeholder engagement," the report quoted Te Whatu Ora saying.