Children’s hospital costs: Coalition braced for sharp rise in final bill

The Coalition is braced for potentially significant increases in the budget for the national children’s hospital after the HSE and the board overseeing the project were told final costs need to be presented to Government.

A new national oversight group has been set up within the Department of Health which is chaired by secretary general Robert Watt and is staffed by senior HSE officials. A source has said a meeting of that group has now been scheduled for January and that the HSE and the National Paediatric Hospital Development Board (NPHDB), which is overseeing the delivery of the project, have been told that there is a need to “bottom out” the final costs ahead of this. The source said there is “constructive engagement” between all parties but there is an increased urgency to finally understand what the actual cost of the hospital will be.

At a meeting of the group in September, pressures on the budget for the project were discussed on number of occasions.

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Minutes of the oversight group, seen by The Irish Times, show that Mr Watt told the meeting that if “additional funding requirements exist, it would be necessary to seek Government approval on further funding”.

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The meeting also heard how any changes to the budget “would need to be provided to Government soon”. The meeting was told that the project costs would be “finalised shortly” and would be “subject to scrutiny.”

The meeting also discussed “pressures on the integration budget” because of revised dates for the completion of building on site. Construction on the site is due to be completed by mid-2024. The original completion date envisaged was August 2022.

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The cost of building the facility at St James’s Hospital in Dublin has increased from €987 million to more than €1.4 billion. When integration costs of around €300 million are included, this rises to €1.7 billion. That €300 million is expected to be spent on the integration and transfer of services from the existing three children’s hospitals in Dublin.

According to minutes of the meeting, the HSE “is currently reviewing a paper by Childrens Health Ireland (CHI) on the impact of construction beyond the contract substantial completion date on the CHI integration programme. This will impose pressures on the existing integration programme budget”.

The HSE has also submitted a review of additional capital costs and this too was discussed in September.

The updated costs could provide one of the first political headaches for the newly installed taoiseach Leo Varadkar, who is due to take over from Fianna Fáil leader Micheál Martin on December 17th.

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Sources have said there is an extensive list of budgetary pressures now on the project, including sectoral employment orders, recovery by the main contractor for construction inflation above 4 per cent, the impact of the Covid-19 pandemic and claims being made by the contractor for extra costs.

These pressures are understood to have been exacerbated by Brexit and the invasion of Ukraine because of the impact on supply chains, energy and transport costs.

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At a meeting of the Oireachtas Committee on Health in October, the NPHDB chief officer Derek Gunning warned the total cost of the project may not be known for years after construction ends due to outstanding legal claims.

The HSE disclosed earlier this year that there were almost 900 claims and adjustments submitted by the contractor in relation to items on the contract. While the overall value was more than €500 million, the amount agreed to date on claims and adjustments was €14.4 million in the spring.

The last budget actually approved by Government was for €1.4 billion. Around €1.1 billion of that figure has been drawn down as of September 20th, which is approximately 76 per cent of the approved budget.

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