Did National check its numbers before new Dunedin Hospital promises?

After announcing the Dunedin Hospital rebuild plan is now too costly, Minister of Infrastructure Chris Bishop says he regrets election promises that it would go ahead - but would not say if his party had run the numbers before making promises.

Opposition to plans to downgrade the project has been vocal, including from the healthcare sector and local politicians. Among them was Waitaki District mayor Gary Kircher, who described the latest development as "a pig's breakfast".

Kircher said the south had not been served well when it came to healthcare, and the hospital was needed to deliver tertiary care that smaller regional hospitals such as Oamaru Hospital were not resourced for.

Today, thousands are expected to protest over the latest setbacks.

Minister for Infrastructure Chris Bishop told Checkpoint host Lisa Owen on Friday the about-turn was "regrettable".

During campaigning for the last election, the National Party had promised this hospital would be built, Owen said. Asked if they had done their numbers properly before making those promises, Bishop said they knew more now than they had then.

"We didn't have access to the information we have now - like most people, we thought the project was going pretty well and on track, and unfortunately it isn't," he said.

On Thursday, the government released a report saying Dunedin's new hospital could not be delivered within the current $1.88 billion budget - and the cost could balloon out to $3b, so the plans will have to be reduced or carried out in stages. The government has now asked for urgent advice about how to keep the costs in line.

Before the election, however, National had pledged they would do more than Labour to make the new build happen, saying: "The south deserves a hospital that will be fit for purpose for generations, not a patch-up job - National knows how to get things done and it's past time to accelerate this painfully slow project."

Asked about whether they had made those promises without good insight into the numbers, Bishop said he wished they had not made them: "Yeah - and I wish we hadn't, because we didn't know about the information we now know.

"And that's regrettable, but these are the facts, and we're in government now and we have to face the reality of a situation fiscally and financially. And the facts on the ground as we know it - construction costs have risen."

Earlier this year, the government was asked to add another $290m to the project's budget, and had done that in Budget 2024, bringing the total pool set aside for the project to $1.88b, he said.

At the same time, they also commissioned an independent review into the project by Robert Rust, a former chief executive of health infrastructure in New South Wales, which had raised "a lot of concerns about the project", Bishop said.

"The cost of the new Dunedin hospital has risen from $10,000 a square metre to $30,000 a square metre," he said.

The first estimate for the Dunedin Hospital project was done in 2017. Asked whether he knew how much New Zealand construction costs (which are recorded by StatsNZ) had risen since then, Bishop said: "There's been increased construction costs across the economy, you can't just take a generic amount, it will depend on specific circumstances."

Owen pointed out there was a category for hospital facilities, hospitals and nursing homes construction, in which StatsNZ had recorded a 49 percent increase since 2017.

"But the point is this... we're in government, we have to grapple with the situation. We are now dealing with it and we are cleaning up a mess that we inherited," Bishop said.

"And it's as frustrating for us as it is frustrating for the people of Dunedin and Oamaru, and Invercargill and Queenstown and the wider Otago-Southland region.

"We have to deal with it, we are doing that and getting the project back on track. We've pumped in an additional $290m, and we've asked for urgent advice about bringing the project back within the appropriate amount at $1.88b."

Owen challenged Bishop that the Rust Report did not "definitively say" the hospital could not be constructed within the allocated budget: "Our conclusion is the delivery of the project, as currently scoped and planned, is probably not achievable in the approved [$1.88b] budget."

Asked if the government were now presenting the predicted cost of about $3b as a way to manage expectations and cut back what the people of Dunedin would get, Bishop said the Rust Report had been received in May.

"Since then, in July, we've received the latest cost estimates from the contractor that have come in several million dollars above the $1.88b.

"Then you add on top of that the $400m that the Rust Report identifies as unfunded and not even business-cased projects that are required as well, like the pathology lab, the refurbishment, and the car park."

While much of that had been redacted in the Rust Report because of business sensitivities, Bishop said more investigation was still needed to nail down what those parts of the project would cost, as they were currently only rough estimates. However the total sum of those additional projects had been released and was estimated to be "around $400m".

One option being discussed was outsourcing the potential $45m cost for a pathology lab.

"Even a $1.88b hospital build would make it one of the most expensive hospitals in the Southern Hemisphere - so it's a significant investment of money," Bishop said.

"There are trade-offs with money. There is a fixed sum of money for hospital, [capital expenditure] and infrastructure builds, and if you spend more in one area you have to spend less in another area... we don't have an unlimited money-tree for health infrastructure. There are trade-offs when it comes to investment, that's the blunt reality. "