Dunedin Hospital rebuild: $17 million saving approved by mistake

There has been confusion over funding of the Interprofessional Learning Centre as part of the Dunedin Hospital rebuild. Photo / George Heard, ODT

A bill of at least $17 million has landed back in the lap of Te Whatu Ora Health New Zealand (HNZ) after a saving on Dunedin’s new hospital complex was approved by mistake.

This comes as HNZ has yet to confirm whether it will recommend or decline proposals to severely cut back the size and scope of the new Dunedin Hospital.

A HNZ report written in September details the University of Otago proposal to take over HNZ’s share of the cost of the Interprofessional Learning Centre to allow savings to be made.

The centre is planned as a collaboration between HNZ, the university and Te Pukenga, formerly Otago Polytechnic.

It has not been finalised and the university withdrew its funding offer in February.

However, this update was not incorporated into written advice to ministers.

“Accordingly, the record shows ministers approving a saving that did not, and does not, exist,” the report said.

The centre will be constructed just north of the hospital’s outpatient building, in Cumberland St.

Cost division was settled two years ago, when each party agreed to pay in proportion to the space they would occupy, the report said.

“The [Ministry of Health] had earlier set aside $17 million, being the estimated cost of the [professional development unit].”

With the new hospital facing cost pressures, the university proposed to take over the construction of the centre, expand its own share of the build, and cover the hospital’s share.

“There was an urgent effort under way to identify some quick savings.

“It was quickly incorporated in a paper to ministers being drafted up at the time.”

When the offer was withdrawn, due to the university’s spare capital evaporating, the Ministry of Health was notified and responded, emails within the report show.

The error damaged the “trust and goodwill” on which the collaborative project was conceived.

“Had the [university] never made the offer to help late last year, we would not be in this position,” the report said.

The Otago Daily Times reported in 2021 the approximate cost for the build — according to a Cabinet paper — was $51 million.

The projected cost of the centre has risen to $115.5 million, due to inflation and a planned size increase by the university.

University chief operating officer Stephen Willis said several funding and delivery options had been discussed, but none had been formally endorsed.

The centre was a “unique opportunity” for the project partners to collaborate for the mutual benefit of students, staff and the community.

“As such, the university remains committed to the joint vision of the [centre] and continues to discuss options and potential ways forward with its project partners.”

The facility is planned to be operational by 2027. - ODT