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Hon Secretary's Notes: 'The Escalating Cost of the National Children's Hospital: are white elephant'
Published on 25/03/2019

Frank Sheridan (President), John Bolton, (Vice – President), Paddy MacManus (Treasurer), Myles Duffy (immediate Past President), Raymond Burke, John O’ Neill, John Ryan (Secretary).

Notes-

Apologies

Donal Denham

Conal Harvey

The President welcomed all members.

2. The President welcomed and introduced guests attending the meeting – (John Scrivener and Donal Duffy)

3. The President requested the immediate Past President Myles Duffy to introduce the speakers.

Myles said that Dr. Sean Barrett is an eminent economist, Pro-Chancellor of Trinity College and a former Senator. Dr. Charles Larkin is an academic with Trinity College Business School and a Research Assistant to the Oireachtas Joint Committee on Health.

Myles referred to the title of the talk “The Escalating Cost of the National Children’s Hospital,are white elephants stampeding again?” and outlined the background to the talk commencing with the 2006 Government decision to build a new children’s hospital following a detailed evaluation by McKinsey & Company.

At that time the Government promised that the proposed hospital would ‘transform paediatric services in Ireland’; establish ‘international best practices’ and become ‘a dynamic powerhouse of research, innovation and education’.

The National Paediatric Hospital Development Board, established in 2007 by Mary Harney Minister for Health, has a mandate to plan design, equip, build and furnish the new hospital. The indicative cost disclosed to the public in 2007 for a 100,000 metre2 hospital complex was put at €200 to €260 million, based on published estimates of the cost of comparable hospitals.

The Hospital Development Board spent €36 million in connection with a site at the Mater Hospital complex between 2007 and 2011. When planning permission to locate the Hospital on this site was refused in 2011 some €24 million in expenditure was deemed irrecoverable. Furthermore, no budget provision had been made for a computerized patient information system.

The Chief Procurement Officer of the State has been a member of the Hospital Development Board since 2013 and the Chief Financial Officer of the Health Services Executive has been a board member since 2015. Planning permission for the Children’s Hospital at a site on the St James Hospital complex was obtained in 2016.

The 2015 Annual Report of the Hospital Development Board advised that progress on the delivery of its mandate ‘had been exceptional’. The Board’s 2016 Annual Report also declared that progress that year ‘had been exceptional’.

The 2016 Annual Report also declared that ‘robust risk management processes’ are in place.

The Society of Chartered Surveyors Tender Price Index reported last year that ‘construction tender prices increased by 6.7% in 2017 and that a 7% increase was forecast for 2018 – ‘bringing prices to 2008 levels’.

Total expenditure between 2013 and 2017 in connection with the St James Hospital site amounted to €127 million – a 350% increase on the amount spent on the Mater site by the time planning permission was refused.

The Minister for Health, Simon Harris, in April 2017, approved the construction investment decision and associated capital budget of €983 million – based on a proposal submitted by the Hospital Development Board - after ‘a comprehensive tendering process was completed’. The Minister’s decision enabled the awarding of a construction contract to BAM Ireland in August 2017.

Four months later, in December 2017, the European Investment Bank approved a long-term loan of €419 million, its largest-ever capital loan in Ireland. Minister Harris declared this to be ‘a huge vote of confidence in the Hospital and in Ireland’.

It was revealed to the public in late January 2019 that the Children’s Hospital project capital cost estimate had risen to €1,433 million but that the Minister had been aware of this since last August. The final cost would likely rise to €1.7 billion, or more. This would potentially represent a 650% increase on the indicative cost mooted in 2007– much of it said to arise from ‘project cost inflation’.

The revenue of BAM in Ireland was €553 million in 2018 and the profit before tax, €24.8 million, was a 3-fold improvement on profit earned in Ireland in 2017. The BAM Group, based in The Netherlands, cites its capacity to mitigate risk and to tender efficiently as core competences in the achievement of its 2018 results.

The Royal Adelaide Hospital in South Australia, which opened in September 2017, at a total cost of €1.5 billion is currently the most costly hospital in the world to construct. It has 800 single-room beds – costing equivalent of €1.8 million per bed. This compares to a per bed cost of €3 million + for the National Children’s Hospital.

Minister Harris expressed ‘great concern’ at the projected cost of the National Children’s Hospital but stressed that there ‘was no going back’. He established an independent review to report on the matter but stated in a radio interview with Marian Finucane last month that ‘no one is blaming anyone’.

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