Replacing the crumbling Victoria General hospital will be the largest infrastructure project in the province’s history with no estimated timeline for when an expansion at the Halifax Infirmary site and a new Bayers Lake Community Outpatient Centre will be completed. It will cost at least $2 billion (undoubtedly more once the bids come in) and a lot could go wrong if the province fails to plan properly for the multi-year project.
Which is why in his last act as the province’s auditor general, Michael Pickup examined the decision of the McNeil government to choose a P3 (public private partnership) model to design, build, finance, and maintain the new QE2 hospital facilities for 30 years.
“The Department of Transportation and Infrastructure Renewal conducted a reasonable and appropriate analysis to select a project delivery model for the Halifax Infirmary Expansion and the Community Outpatient Centre,” concludes the Auditor General. He also praised the Nova Scotia Health Authority and Department of Transportation and Infrastructure Renewal for using “reasonable and documented” methods to develop a Master Plan for the new hospital facilities begun back in 2016.
Unlike the public or journalists — which the government has refused to let examine “the business case” put forward by its consultant Deloitte in 2018 — Pickup has read the Deloitte report. He notes in his report “P3s can create value by government transferring risks related to the construction and long-term maintenance of infrastructure to the private sector.” And, on the other hand, “Government pays a premium to the private sector for taking on these risks.”
Pickup would not reveal “the business case” for P3. He has not seen the tender documents for the Bayers Lake Outpatient facility even though the province is preparing to award the job this August to begin construction. (This timeline has slipped by a few months.) Pickup said until all the bids come in for the many buildings that form part of the QE2 Regeneration Project, it’s impossible for him to estimate the size of the premium or “how much more” choosing a P3 model may cost taxpayers.
He said it’s unusual for an auditor to look at a project before contracts are awarded and “part of the downside for people is that they have to appreciate we can’t give away the competitive position of the province and confidential information. We had to balance that with having an examination of these early phases of the project.”
“What the cost is going to be I think at this point is unknown,” said Pickup. “That two billion dollars was floated as an early estimate, right?”
Page 17 of the AG’s report makes clear there is still no detailed estimate.
While Executive Council was informed of the estimated $2 billion cost for the Project, a formal affordability analysis was not completed. Management at the Department of Transportation and Infrastructure Renewal told us they did not believe it was necessary at this stage. A preliminary cost estimate has been established and funding for the initial stages of work on the Halifax Infirmary Expansion and the Community Outpatient Centre has been approved. However, until bids from potential private sector partners are received and a final contract reached, the actual cost of the Project remains unknown. Management indicated once a final cost is determined, it will be presented to Executive Council for approval.
Union Fears P3 Job Losses
Pickup refused comment on whether the choice of a P3 model to provide maintenance at the new Cancer Centre, outpatient clinics, ORs, and a new impatient facility at the Halifax Infirmary could mean the loss of hundreds of unionized jobs.
The president of the Nova Scotia Government Employees Union has expressed that concern. Pickup said that question should be asked of the political leaders. He did say the P3 model chosen by the McNeil government differs substantially from a P3 model chosen by an earlier government to build dozens of schools in Nova Scotia, which wound up costing taxpayers tens of millions of dollars more.
Unlike the public-private-partnership used to build schools, the government retains ownership of the hospital and outpatient buildings from Day 1 and will not have to pay to buy them back. (At least we’ve learned something.) Pickup compared the current P3 model to the one was used to build the Central Nova Correctional Centre in Burnside and the East Coast Forensic Hospital.
Pickup said while he was satisfied with the planning done to date, as well as the fact the government has implemented all 18 consultant’s recommendations to avoid the risk of being defrauded by contractors, “there is still much work to be done” to ensure the QE2 Regeneration project delivers value for money. His report offers this checklist for the future:
Questions Nova Scotians May Want to Ask
1. How does COVID-19 impact the business case and what is being done to assess its impact on the project?
2. Is the government prepared to consider alternative project delivery models if private sector bids on the project are significantly higher than estimated in the business case?
3. Have timelines been established for when the transition, stakeholder engagement and benefits realization plans are going to be completed?
4. How does the province plan to manage contracts with private sector partners to ensure the mistakes experienced with the P3 schools are not repeated?
5. How will the Province ensure what was planned for the Halifax Infirmary Expansion and the Community Outpatient Centre through the functional programming and master planning processes is what gets built?
To help answer question 5, the Auditor General suggests the province develop a risk mitigation strategy “to ensure a P3 delivery model remains the best option. This includes: updating the Business Case during procurement; ensuring final contracts with private sector partners are consistent with the Business Case; and effectively managing and overseeing the contracts with private sector partners.”