HSE says ‘hyperinflation' among factors behind building projects' €26m price rise
'Hyperinflation' is among issues blamed by the
Health Service Executive
(HSE) for a €26 million increase in costs across nine building projects in recent years.
The largest price rise was for a new 98-bed wing of the
Mater hospital
in Dublin, which ended up costing some €9.75 million more than the sum initially approved. The HSE and the Mater hospital say value for money was achieved with this nine-storey trauma building, which opened in April 2023.
The figures, which exclude VAT, were contained in a report submitted to the HSE's audit and risk committee on works contracts greater than €10 million.
Set out in the data, which was provided to
Social Democrats
TD Aidan Farrelly, are projects where the 'agreed final account value' was higher than the 'contract award value approved'.
READ MORE
A HSE statement said it would not be accurate to describe these projects as over budget because these before and after figures do not match.
It said contract figures are 'not a fixed price' and 'provision/contingency is made in the contract for claims where there may be scope changes to the project, service delivery, legislative or socioeconomic issues which may impact on the delivery timelines and the out-turn cost of the project such as inflation, poor weather events, etc'.
The approved contract value of the Mater's Rock Wing was €58.5 million. The agreed final account for the construction of the main ward block, several shell and core spaces and subsequent fit out of nine rooms, ended up at €68.25 million.
A HSE statement said 'the project was sanctioned in 2020 in direct response to the Covid-19 emergency'. It 'went through an accelerated design and contract award process to ensure the infrastructure was provided as swiftly as possible', the statement said. A post-completion examination indicated contract price rises were 'offset by inflationary cost increases' that would have occurred if the project had not been accelerated, the statement said, adding that this shows the HSE secured 'value for money'.
A Mater hospital statement said that 'working closely with its construction and funding partners' it had 'demonstrated good value for money and delivered the Rock Wing on time'.
Other projects with increased costs were a radiation oncology building at University Hospital Galway that cost €33.1 million, up €4.16 million from the contract price; a community nursing unit in Nenagh that was up €3.32 million to €18.12 million; and a ward block at
Mercy University Hospital
,
Cork
that saw a €2.73 million price rise for a final bill of €22.53 million.
A residential care centre in Tuam cost €19.76 million, some €2.38 million more than originally expected, while a critical care unit at
Tallaght University Hospital
cost €15.74 million, up €2.23 million.
The HSE said the average increase across all projects is within 15 per cent of the original contract award, 'which would be within normal contingency expectation for projects of this scale and complexity'. It said the majority of these contracts were carried out 'during a period of hyperinflation in the construction industry'.
The HSE said a Government 'relief' under the
Office of Government Procurement
co-operation framework agreement was applied, which 'entitled contractors to ex-gratia payments to assist in dealing with hyperinflation'. Such payments on these contracts were in the region of €7.5 million, it said. If these ex-gratia payments were excluded the increases are within 10 per cent of the original contract award, it said.
A HSE statement said it adheres to strict national and European Union public procurement procedures when undertaking any capital build works.
Responding to the figures he received, Mr Farrelly described the situation as 'extremely disappointing'.
The TD said he wanted to see 'what the Minister for Public Expenditure brings to the table on curbing financial overruns on capital projects now that infrastructure forms part of that brief'.
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