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Hospitals

Report on Thunder Bay hospital cost overruns

TORONTO – The Ontario government released a report by Special Advisor Tom Closson (pictured at left) on the construction of the new Thunder Bay Regional Health Sciences Centre (TBRHSC) and outlined the lessons from this redevelopment project and steps the government is taking to improve hospital construction.

“This report is a sober read about the consequences of poorly planned and controlled capital redevelopment projects,” said Ontario Health and Long-Term Care Minister George Smitherman. “We owe it to patients and local citizens to make sure that this kind of situation doesn’t happen again. Our government takes this report to heart and has already made significant improvements to the capital redevelopment process to ensure hospital projects are conducted in the best interest of patients and local communities.”

The final project cost of the new TBRHSC was $283.9 million. Construction costs were approximately 58 percent more than the budget approved in April 2002 when the hospital’s programs and project scope were agreed to by the ministry.

Closson’s report found that costly building design and poor project management practices throughout the building of the new hospital contributed to the cost of the project, which is approximately 39 per cent more expensive than a comparable project over the same period of time. The hospital received approval to construct a new facility in October 1998. The facility was completed February 2004.

The ministry has taken the following steps to ensure hospitals are more accountable and better prepared to take on large capital projects:

• Instituting planning and design grants to develop a truer sense of the costs before undertaking a project;
• Ensuring a suitable project management framework is in place for each hospital;
• Instituting new accountability mechanisms like project charters and funding agreements to ensure that all parties fully understand and agree in advance to the project scope and deliverables, and requiring hospitals to report back to the ministry on a quarterly basis.

Last May, the government named Tom Closson, President and CEO of the University Health Network, Special Advisor to work with TBRHSC and the ministry on a plan to help TBRHSC fulfil its role as a regional hospital with a teaching mandate.

As part of his responsibilities, Closson was also asked to assess the hospital’s recently completed redevelopment project. Closson retained PRISM, a redevelopment consulting group with expertise in large-scale capital projects to conduct the review, which found the building of the new Thunder Bay Regional Health Sciences Centre resulted in:

• A final project cost of $283.9 million. Construction costs were approximately 58 percent more than the budget approved in April 2002 when the hospital’s programs and project scope were agreed to by the ministry;
• Costly building design and poor project management practices;
• A facility size increase of 18 percent that was completed one year behind schedule;
• The cost of the project is approximately 39 percent more expensive than a comparable project built over the same period of time.
• More than 2,800 change orders.

The report outlined lessons to be learned as a result of the cost
overruns of the new Thunder Bay Regional Health Sciences Centre. They are:

• Hospitals need to develop and submit the most cost-effective building design at the beginning of the process for ministry approval;
• The ministry should require hospitals to submit a comprehensive project and risk management plan that outlines the scope of the project, cost and construction schedule;
• The ministry should make sure hospitals hire independent companies for each of the following: project management, cost control and monitoring, and project scheduling;
• All hospital contracts should be properly tendered and executed with evidence supplied and approved by the ministry prior to the allocation of funds;
• The ministry should withhold project approvals until the hospital finalizes key contracts, such as those for prime consultants and construction manager;
• There should be a “guaranteed-maximum-price provision” in the contract of the construction manager, who should assume responsibility for the performance of trade contractors;
• The hospital should develop project cost control policies that are approved by its finance committee and the Board of Governors;
• Accountability/funding agreements should be established between the hospitals and the ministry before major capital projects begin.

 

 

 

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