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Otago Daily Times
13-07-2025
- Health
- Otago Daily Times
Signs of life on rebuild
The Health Minister roaming about the new Dunedin hospital site last week may have been little more than a public relations exercise, but it was welcome all the same. Diggers are back on the site, working on the foundations, and billboards have gone up proclaiming the involvement of Australian construction giant CPB which is expected to get the contract for the new inpatient building. All of these things suggest action at last on the beleaguered project. Questions remain about whether the hospital, in its scaled-back state, can possibly come in within its $1.88 billion budget and be sufficient to serve the population when it is hopefully completed in 2031. Former head of the new hospital's governance group Pete Hodgson estimates inflation alone would have added an extra $40 million in costs since the government stalled the project last September citing cost concerns. There has been much airy talk of changed models of care affecting the demand for various services at the new hospital when it opens in 2031, without any detail of what this involves and how it will be achieved. The whole of the health system still faces workforce shortages. If changes mean moving to more care in the community, it is hard to understand how when basic issues such as boosting the pay of nurses working there to match their Te Whatu Ora Health New Zealand counterparts remains unresolved. (The government seems to have conveniently forgotten Prime Minister Christopher Luxon, in the televised pre-election leaders' debate, promised he would ensure they would be paid the same if he won the election.) Mixed messaging from the government about the project continues. In the New Zealand Gazette notice of the appointment which will bring back Evan Davies to the project, but this time in the supremo role of Crown manager, Health Minister Simeon Brown blamed delays and extra costs on HNZ, ignoring the role the government has played in that. He said HNZ had struggled to maintain momentum on the project and identify a path forward following consistent cost pressure and extensions to the estimated delivery time for the project. That seemed at odds with his on-site comment last week that HNZ staff had been "playing a critically important role in getting us to where we are here today". During his visit Mr Brown announced the establishment of the Southern Engagement Group, to help ensure the local community was kept well informed as the project progresses. The group will involve HNZ leaders and a variety of other representatives including local government, infrastructure partners and tertiary institutions to provide regular updates and support ongoing engagement throughout the project. It will meet quarterly to consider "a broad range of matters relevant to the successful delivery of the hospital" but will not provide advice on the building's design scope, clinical models of care or procurement decisions. Although Mr Brown said he was making this announcement alongside Dunedin Mayor Jules Radich, basic questions posed to Mr Radich's office about whether the meetings would be held in public, whether members would be free to speak about hospital matters outside the group and if the group's terms of reference were finalised, were directed to HNZ. At the time of writing no answers had been received. Not a great start to make such an announcement on a group supposedly designed to improve communication and then not have relevant details promptly available. Making hay while the drizzle dries There's nothing quite like a closer-than-expected All Blacks game to take much of the nation's minds momentarily off more important matters such as the fallout from the foul weather which has ravaged much of the country in recent days. The sold-out All Blacks/France match would also have been a welcome midwinter fillip to Dunedin's hospitality sector at a time when the cost of living continues to affect domestic spending. It is an uneasy time for the local sector, as it awaits the impact of the competition from the new, bigger, covered Christchurch stadium expected to be completed next year and while Forsyth Barr Stadium continues to struggle financially and to attract major events.
Otago Daily Times
22-06-2025
- Business
- Otago Daily Times
Hospital stall due to contract
The government bungled the opportunity to crack on with the new Dunedin hospital's in-patient building last year by blowing up contract negotiations in sight of the finish line, sources say. It is understood a type of shared-risk deal was previously being nutted out with global construction giant CPB, meaning any overspend above a threshold would be shouldered by both government and CPB. Contract signing with Health New Zealand Te Whatu Ora (HNZ) was close but, sources say, negotiations stalled around the time government ministers came to Dunedin in September, announcing there had been a blow-out of the hospital's $1.88 billion budget. A fixed-price deal was then sought from CPB. It was the type of deal government had originally hoped to achieve when the project was conceived seven years ago and prices were lower and fluctuated less. The flip-flopping was condemned by former Labour health minister and hospital campaigner Pete Hodgson. Mr Hodgson said it risked CPB now walking away from the deal — with the government having no guarantee of a cheaper deal with another contractor — causing further delays. "The government would have to re-engage the market with the reputation of being a risky client, always changing its mind ... and if CPB can't pull it together with their array of subcontractors, it seems unlikely anyone else would be able to." CPB, which has many contracts overseas and consistently declines to comment about the Dunedin hospital negotiations, had agreed in 2021 to an Early Contractor Engagement (ECE) contract to plan the inpatient build. There was an expectation it would then be contracted , with work starting in 2023 — but two years on, it still has not happened. CPB has successfully built a hospital in Christchurch, but it has not always had cordial relations with the government — two CPB government-commissioned construction projects have resulted in legal wrangles. Multiple sources have told the Otago Daily Times that a shared-risk contract for the Dunedin hospital build had been discussed with CPB for years. Construction experts, engaged by government to help seal the deal, had advised that a shared-risk contract would likely prove the cheapest, and deliver the best build outcomes, through a collaborative client-contractor relationship. It is understood that the experts included Evan Davies, Todd Corporation boss, who led a new Dunedin hospital governance committee from December 2020 until mid-2023 and who was last week brought back by Health Minister Simeon Brown to lead the build project as Crown Manager. According to sources, CPB wanted a shared-risk contract and its senior managers have also stated, in public forums, fixed-price contracts can be inappropriate for large, complex builds due to pricing variables. A shared-risk contract means the contractor does not need to charge a premium to cover its risk exposure and the public purse benefits from any cost savings achieved, possibly countering any over-spend. After the last election, construction expert Robert Rust was commissioned to review the project. His report, published in May last year, pointed some blame for the project's delays at poor governance and explained that a "target total cost" model was being proposed. The model would provide a "threshold for any potential pain or gain sharing". In January this year, two months after the project's latest programme director left, and four months after former health minister Dr Shane Reti and Infrastructure Minister Chris Bishop came to Dunedin with their budget blow-out announcement and pressed pause on the build, Mr Brown said it would go ahead within budget and with cutbacks. It is unknown if the cutbacks were due to concerns about being saddled with a premium-laden fixed price above budget. No timescales for the build have been announced by HNZ but Mr Davies' role as Crown Manager requires him to seal a contract within three months.
Otago Daily Times
26-05-2025
- Business
- Otago Daily Times
Fear contractor may quit if HNZ still ‘changing minds'
Pete Hodgson. PHOTO: PETER MCINTOSH One of the former leaders of the new Dunedin hospital project is worried the protracted negotiations will convince the lead contractor to "walk away", resulting in the project's costs spiralling out of control. It comes after the Otago Daily Times reported CPB Contractors' lawyer, Tom Horder, had publicly slammed the government's approach to contracting major infrastructure projects. The Australian construction giant is set to build the new Dunedin hospital, but Mr Horder said New Zealand governments over the past decade had gone with the lump-sum model for contracts, which had been inappropriately applied to major projects, with "disastrous" results. Former Labour health minister Pete Hodgson, who led the early stages of the project, said Mr Horder's remarks were "concerning, to say the least". "If Health New Zealand Te Whatu Ora [HNZ] go back to the market, sooner or later CPB are going to say, we will not build this thing at a fixed price at $1.88 billion because we won't get subbies [subcontractors] to come and do their bit." Mr Hodgson said there was always a risk of unknown problems with major infrastructure projects. "It probably just goes with the territory that you walk into problems that will have to be resolved once they've been discovered — and you can't prediscover them." He described HNZ's approach to contracting the new hospital as a "shambles" and a potential reputational risk. "If CPB pull out, then I'm sure [Christchurch-based construction company] Southbase and others would look at it, but they would be adding money, and some of that money would be the risk of the client's behaviour. "They cannot stop changing their minds." This would lead to further delays and ballooning costs beyond the $1.88b set aside by the government, he said. "HNZ have been deciding and undeciding themselves for years now and that means that the Crown, or the health system, will get a reputation across Australasia for being a bad client. That puts the price up." The project was delayed for several months last year after the government deliberated over whether to build a new hospital on the former Cadbury's site or retrofit the existing hospital. Financial commentator Bernard Hickey told the ODT he would not be surprised if CPB decided to walk away from the contract. "It was a mistake [to stop work] because it alienated and shocked so many people who had geared up for significant infrastructure spending for many years; they had invested in people, invested in plant. "When you're in the contracting game, you need certainty." An HNZ spokesman said it was progressing commercial negotiations with CPB and was also finalising designs following decisions announced by the new Minister of Health, Simeon Brown, in January. "While negotiations are continuing, Health NZ is progressing work to get pile capping and foundations work under way by the middle of this year." Mr Horder has been contacted for comment. Mr Brown met CPB on February 3. "Contract negotiations for the completion of the new Dunedin hospital are being led by HNZ," Mr Brown said yesterday. "What matters now is getting the best possible value for taxpayers — and delivering the hospital that the people of Otago and Southland have been waiting far too long for. "New Zealanders elected this government because they wanted action, not excuses. ... This government is focused on delivery — and that's exactly what we are doing."
