Building the national children’s hospital at St James’s Hospital rather than a greenfield site in Dublin adds up to 5 per cent a year to the cost of construction, a report indicates.
Construction inflation for a “brownfield” city-centre site – such as at St James’s – ran at 12 per cent last year and in 2017, according to the report by Linesight, quantity surveyors for the project. This compared with 9 per cent generally in Dublin, with greenfield sites attracting lower costs.
The report says heavily-serviced sites in the centre of Dublin, particularly those with large basements and a high percentage of mechanical and electrical services, are attracting premiums of between 3 and 5 per cent above the rates for more conventional and less serviced projects.
The report was commissioned by the hospital’s project board last year after it became apparent construction costs at the hospital were overrunning by €450 million and has been used to justify the increased price.
One-year delay
Its says most of the increased price can be ascribed to a one-year delay in starting construction of the hospital and higher levels of tender inflation since these were estimated in 2016.
The report says inflation levels of 10-12 per cent will continue to operate for the lifetime of the children’s hospital construction. As the project is proofed against inflation to just 4 per cent, this means it is likely further costs will be incurred.
Linesight says the construction industry is recovering after the economic downturn and contractors are seeking to recover margins by submitting higher tenders for projects. The increase in tender prices has been highest in Dublin and the rest of Leinster, particularly for large, complex projects.
Hospital projects in particular have been affected by the rise in tender inflation, because they involve highly serviced buildings with more specialist works and longer pre-construction lead-in times. In addition, they are often located on active hospital campuses with work adjacent to existing buildings and patients, leading contractors to price in extra risk.
Specialist work, such as mechanical and electrical systems, cladding and lifts, typically account for half the cost of hospital tenders, the report says. “These are the areas which are attracting particularly high levels of tender inflation, when compared with other sectors of the construction industry and this in turn is resulting in disproportionately higher average tender inflation levels being experienced for acute hospital projects.”
Another report, by Aecom consultants, benchmarked the cost of the children’s hospital project against other hospital projects internationally. The St James’s project ranked third most expensive of 15 examined.
The report found the Irish project, at a cost of €6,500 per square metre, was 10 per cent higher than the €5,900 average of the other 14 projects, which were not identified.
A comparison was not drawn with a UK children’s hospital project costing about €4,000 per square metre – almost 40 per cent cheaper than the Irish project – because this was still at the business case stage.
