Chris Bishop: Infrastructure Minister on the cost blowout impacting the construction of new Dunedin Hospital project

The Government has been forced to go back to the drawing board with the plans for the new Dunedin Hospital.

An independent review has found the project as currently planned is 'probably not achievable' within the budget of $1.88 billion.

Ministers Shane Reti and Chris Bishop have asked Health NZ for solutions and warned that upgrades to other hospitals are at risk if costs don't come down. 

Chris Bishop says there are two possible options to keep costs at the $1.88 billion cap.

"One is that we revise the current project within its existing structural envelope - that's on the new site - that could look at reducing the number of floors - or identifying some services that could be retained on the existing hospital site."

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Episode Transcript

Speaker 1 (00:00):
The drawing board for the new to need In hospital.
Government's commissioned to report that's found that the plans cannot
be delivered for the one point eight eight billion dollar
is budgeted more realistic price tag, where around three billion
bucks in the government says that is completely unaffordable. The
Infrastructure Minister is Chris Bishop hay Bish. Hello, okay, so
what are you planning to do? Are you are you
going to cut this down? Are you going to make
it a smaller thing, or are you just going to

(00:20):
build it bit by bit by bit.

Speaker 2 (00:23):
We're going to take advice from Health New Zealand on that,
but what's clear is that we can't deliver a hospital
at the cost that it's going to come in at.

Speaker 3 (00:32):
We're looking at a three billion dollar bill.

Speaker 2 (00:34):
It started life as one point two to one point
four billion back in twenty seventeen. The current project funding
is one point five to nine billion. We tipped in
another two hundred and ninety earlier in the year and
we've got the latest pricing in from the contractor and
it's hundreds of millions of dollars out of that and
it turns out that there's four hundred million bucks that
no one even thought about, and the last government didn't
even do business cases for all of those other things

(00:58):
that are required, so you're looking at the thick end
of three billion bucks.

Speaker 3 (01:01):
Frankly, we need to think about the trade offs here.

Speaker 2 (01:03):
There are hospital facilities around the country and Hawk's Bay, Pami,
Toron Fong Ray Nelson. Those regions need upgrades as well,
they need maintenance and they need CAPEX going into them.
If we spend three billion dollars on a hospital for Dunedin,
it potentially comes at risk of those projects, so we
do have to try and deliver it for the one
point eight eight billion we've set that as a cap.

Speaker 3 (01:25):
There's two options on the table.

Speaker 2 (01:26):
One is that we revise the current project within its
existing structural envelope that's on the new site. That could
look at reducing the number of floors, delaying the fit
out of some of the areas, or identifying some services
that could be retained.

Speaker 3 (01:39):
On the existing hospital site.

Speaker 2 (01:41):
Second options we do a stage development on the old
hospital site and we've asked for advice on that and
once we've got some clarity on the next steps, we'll
make that public.

Speaker 1 (01:51):
What's going on here is the contract taking the mickey,
or is this just what it costs to build a hospital.

Speaker 2 (01:57):
Look, the history of this project is a troubled one
and it goes back to twenty seventeen twenty eighteen. The
new site, the old Cadbury site, has significant issues. So
there's contaminated ground issues, there's piling difficulties, flood level risk,
it's surrounded by three state highways. It's got an extremely
constrained construction site. So since the twenty seventeen business case,

(02:20):
the original one, the cost per square meter to build
it has gone up by two hundred percent. So it's
ten thousand bucks a square meter back in twenty seventeen,
it's now thirty thousand dollars a square meter and that
is largely down to the site selection which was done
back in twenty eighteen.

Speaker 3 (02:34):
So look, we are where we are.

Speaker 2 (02:36):
We're just trying to be as upfront and transparent with
the people of Duneda and in fact the people of
New Zealand about this project.

Speaker 3 (02:41):
It's been troubled for quite some time.

Speaker 2 (02:43):
We've been shocked upon coming to government at just how
troubled the project is. And what we need to do
is be a is upfront and transparent as possible, so
Shane Red and I went down to Dunedin today. We
met with all the mayors and the local leadership. We
met with the clinical leadership there, we met with the
hospital team down there. We've been as completely transparent as possible.
We've released the independent report that we have commissioned into
the project and the people have to need and need honesty.

(03:07):
The projects in trouble and it's now our job to
get it back on track.

Speaker 1 (03:10):
Besh, thank you very much for your time. I appreciate
it and good luck. That's Chris Bishop, the Infrastructure Minister.

Speaker 2 (03:14):
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Speaker 1 (03:18):
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