The government is rethinking its rebuild of Dunedin Hospital after costs blew out. Photo: RNZ/Tess Brunton
- A 'mess' in the oversight of Dunedin hospital's big build came at a crucial time
- While a fix was put in, key people failed to be told
- It took months to check if the fix worked, then a $200m cost blowout hit
Reviewers were calling oversight of Dunedin's hospital rebuild a "struggle" and a "mess" at a critical time when costs were spiralling out of control, newly released papers show.
The biggest weakness was pinpointed as poor governance and oversight - and months were lost trying to make sure this had been fixed.
In the same period in 2021-22, costs blew out by $200 million.
They have subsequently gone up another $300m at least, sparking a government rethink. That, in turn, has sparked a 'Save Our Southern Hospital' campaign, and warnings from doctors that a hasty redesign could leave health services in the region in a precarious state.
The slide between 2016-23 is revealed in 16 reviews and papers newly released by Health New Zealand.
Cabinet ministers, who have called into question how the previous government ran the project, have been eager to promote the reviews.
Papers show 'struggle' behind Dunedin hospital rebuild
These showed "a steadily worsening outlook for the project", they said.
The papers show that by June 2020, a project that had been amber (on a green-amber-red scale) in 2017 was now amber-red, with Treasury warning "successful delivery of New Dunedin Hospital is in doubt with major risks".
The project had "suffered from successive delays in decision-making in recent years, resulting in increased costs and an ever-more pressing need to make progress", it said.
Governance - the core job of the Southern Partnership Group, since 2015, to "ensure the project is successfully delivered on time and within budget" - was rated by Treasury as the major problem.
"Almost without exception, interviewees cited governance as one of their most prominent concerns," it said.
"Governance was variously described as 'a struggle', 'a mess', 'lacking delegation', having 'contested accountabilities', 'suffering from a lack of trust'.
"A strong opinion was voiced that so far little action has been taken to address those concerns."
The Labour-led government, led by Health Minister Chris Hipkins, moved to fix it by replacing the Southern Partnership Group with a new executive steering group.
This was to provide "assurance around fiscal controls, the timely delivery of fit for purpose buildings and the development of quality services".
It was also intended to be a model for use on other big health projects.
But straight away another major lapse occurred, the papers showed: The Southern DHB was not told about the governance findings for months.
Locals protest against cuts to the hospital. Photo: RNZ / Tess Brunton
"In essence, five months have been lost," a Treasury review in November 2020 said.
Noting tensions within the district health board, and between the DHB and the Ministry of Health, it added: "The review team considers this to be a significant loss of opportunity."
The lapse came at a time that was critical for engaging with building firms about the contract for the outpatients block.
Finally, in December 2020, six months on from the June warning, the governance change was made.
Yet even then, a report back to Cabinet that had been due in May 2021 to check that governance had improved was instead delayed by almost a year, to February 2022.
A month later, in March 2022, ministers were forced to mount a salvage operation that revolved around making design changes to make savings amid a $200m cost blowout.
During the 2021-22 period when governance was meant to be improving, matters had got worse, the reviews showed.
The final Treasury review in December 2021 said both that the project was "generally on track" but also that, "Delivery of [new Dunedin hospital] to scope, time and approved budget is at risk.
"Budgetary pressures arising from disruption to materials supply and labour markets, to levels unseen in recent times, are threatening to derail the project."
It called for urgent measures.
Labour's Tracy McLellan says the issue is "a big distraction". Photo: VNP / Phil Smith
Treasury in that review called, once again, for governance arrangements to be looked at - a whole year after the steering group established under Hipkins had taken over governance.
The December 2021 review also repeated Treasury's call for the upgrade to the hospital's data and digital technology to be included in the project, instead of being treated separately.
"Integrate the buildings, ICT and Transformation Programmes into a single and coherent programme of works," it said.
Bundled like this, the project budget would be about $2 billion, it said - half a billion more than the budget at that time.
Even up until now, ICT has not been included, and the National-led government has cited this as another driver of cost increases that could push the whole project to $3 billion.
Labour's associate health spokesperson Tracey McLellan rejected a suggestion the last government was asleep at the wheel.
" I don't agree ... the issues with the project were well known and they were well managed," she said. Those included supply chain disruption caused by Covid-19.
The final December 2021 review said the project was largely on track but to be aware of "headwinds", she said.
There was only so much cost-saving moves they could make at the time, she added.
The issue was "a big distraction", McLellan said.
"This is now what we're talking about instead of this government's refusal to build the hospital that Dunedin deserves, that is the point here."
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