Te Whatu Ora board papers reveals new delays to an acute adult mental health unit at Waikato Hospital – it's now on track to double in cost. And it's just one of the health building projects hit by cost escalations.
Jane Stevens wonders how many more mothers will lose their children, like she did, while Te Whatu Ora ploughs more money and more time into big building projects.
Nicky Stevens, who was 21 and suffered from schizophrenia, died in Waikato River in March 2015. He had been allowed out of the hospital's Henry Rongomau Bennett mental health unit to take an unsupervised cigarette break.
His death prompted calls for a new secure unit and, in October 2019, the Prime Minister Jacinda Ardern announced $100m for a new mental health unit in Waikato. It was to open in mid-2023.
But four years later, the contractors haven't even broken ground, and board papers released to Newsroom reveal that Te Whatu Ora has gone back to Cabinet this year for another $20.5m – a second funding increase for the project.
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The costings for the mental health unit and neighbouring regional renal centre blew out to $155.1m in last year's business case, and the start date was pushed back to mid-2023.
Now it's late 2023 and officials are still quibbling with quantity surveyors over costings, which have now increased to $175.6m. No substantive start has been made on construction – though it's understood construction firm Naylor Love has won the tender and has begun preparing the ground.
Te Whatu Ora proposed to fund the blowout from the wider health capital envelope, provisioned to cover just this eventuality of cost escalations in infrastructure projects.
"This is a crisis for NZ, in my view. We've got billions of dollars worth of assets and infrastructure that we need to build and there just doesn't appear to be enough money right now. But we can't skimp on people's health." – Paula Southgate, Hamilton mayor
"I've lost confidence," says Stevens. "This project was labelled as is our son's legacy. But our family has always said the focus on a building is all very fine, but actually, the biggest problem that we faced was around the competency and safety and appropriateness of the provision of care to people in mental health services in the Waikato.
"And it really, really concerns me that not only is there so much focus going on this new build, but the things that we feared are coming to bear in terms of the amount of money that's being spent on it, without actually listening to what people wanted for this facility."
She believes health leaders have been so distracted by the cost and delays to their new building that they've taken their focus away from serving their community's mental health needs. "That's been really shockingly reinforced to me by the number of people that have been making contact with me about the tragic outcomes that they have had, losing family members who have been in that service. It's actually worse than it was seven years ago, when our son died."
There are similar questions about the cost of other big Te Whatu Ora projects. There were delays in the relocation of Canterbury mental health services to Hillmorton Hospital in July, and two other hospital builds have already exceeded their budgets.
Te Nikao Grey Base Hospital blew out its budget beyond the initial $54m overspend (final $128m), and was two years late opening. Te Wao Nui children's hospital in Wellington also opened late and over budget ($114m).
The completion of three more projects has been delayed by supply chain delays to get fire doors, and air management equipment. And it's believed there are already delays emerging in the construction of a new Nelson hospital.
"With the materials and constant construction costs inflation over the past few years, it is very difficult for the quantity surveyors to get a reliable budget up front." – Rick Herd, Naylor Love
As of May this year, the board papers show there were 110 big projects with a combined total value of $7.767 billion. Fourteen of those were scheduled for completion by next month; another nine were to have started construction by this month.
Ministers have approved $71.2m health capital envelope funding for escalations in four prioritised projects; that's offset by $4.4m of underspend returned to the envelope in June.
Another five projects are signalling forthcoming cost increases, but the scale of those increases has been redacted in the board papers released in response to an Official Information Act request from Newsroom.
Te Whatu Ora's infrastructure boss Jeremy Holman earlier told Newsroom that the new health agency is also running a fine-tooth comb over proposed investment in three regional hospitals – Hawkes Bay, Palmerston North and Tauranga – before reporting to Cabinet by the end of this year.
In the election campaign, Labour had promised to fund the new Hawkes Bay hospital, but that's now up in the air. Te Whatu Ora is tendering for a preferred supplier to design a site master plan, but the project doesn't yet have Cabinet sign-off.
Each of these new regional hospitals would cost more than $500m, the board papers show, despite attempts to standardise their design with modular components.
Construction firm Naylor Love has won the contract to build the Waikato acute mental mental health unit. Chief executive Rick Herd says the cost escalations are typical of many health and wider public sector infrastructure projects, the length of New Zealand. "With the materials and constant construction costs inflation over the past few years, it is very difficult for the quantity surveyors to get a reliable budget up front."
He's unwilling to put a date on when construction will start on the Waikato project: "There's already a lot of deep in-ground works, that sort of thing. So the actual construction start will be months away, it won't be years."
The good news in yesterday's consumers price index is that inflation in the cost of construction is now slowing rapidly – but that's come too late for many public projects.
Construction costs drop below consumers price index
"Things have settled down, and I would expect prices to stabilise," Herd says. "Things needed to quieten off a little bit. So I'm hopeful that we will see some sanity in the market.
"But anything that was priced more than 12 months ago, you know, it's very difficult."
Hamilton Mayor Paula Southgate says it's critical that Waikato's mental health facility is completed as soon as possible. "Everybody's been anticipating this new facility to arrive and seeing the need for it, to care for our most vulnerable community," she tells Newsroom.
"There has been severe inflation and interest rates increases, the construction index is up, the labour cost index is up, the cost of building materials is up. So it's a perfect storm." – Paula Southgate, Hamilton mayor
"It is really awful to see critical projects like this being victim to inflation, interest rates, construction cost increases and those kinds of things. We know how that feels, because that's hit some of the work of council as well – escalation of costs in very many of the big infrastructure projects.
"This is a crisis for New Zealand, in my view. We've got billions of dollars worth of assets and infrastructure that we need to build and there just doesn't appear to be enough money right now. But we can't skimp on people's health. And we certainly can't skimp on people's mental health and wellbeing.
"People were anticipating this service to be built and completed by now, so it is frustrating.
"But we've dealt with an awful lot in the last three years, haven't we? We've come out at the other side of Covid, there has has been a cost-of-living crisis, there has been severe inflation and interest rates increases, the construction index is up, the labour cost index is up, the cost of building materials is up. So it's a perfect storm."
