Mental health building projects face soaring costs, delays - review

By Phil Pennington for RNZ

Government ministers are considering what to do about large cost escalations and delays in mental health building projects.

The deep dive was ordered last year as data came to light that despite the $1.9b allocated to mental health in the 2019 Budget, by 2022 the number of beds for acute patients - about 600 - had not increased and shortages persisted.

The government wanted to know how its new builds and rebuilds were going in what it says is a top health priority area.

"Expert reviewers found there were no opportunities to accelerate projects," the newly released briefing based on the deep-dive assessments said.

The deep-dive revealed projects falling foul of basic skills gaps and rose-tinted expectations.

"The gaps in capability included business case development, defining project budgets, scheduling, and stakeholder management."

Some were being managed by doctors, on top of their regular jobs.

Big budget problem

The overall picture painted by independent experts rushed in to assess the Mental Health Infrastructure Programme (MHIP) in mid-2022 presents yet another major Budget problem for an inflation-weary government, and for new Health Minister Ayesha Verrall.

Te Whatu Ora needed to "urgently" reset the five worst projects, the October 2022 briefing said.

The briefing to the finance and health ministers has just been proactively, if quietly, released by the Department of Prime Minister and Cabinet. Ministers have had subsequent updates, which have not been released, and which RNZ has requested.

Of a total of 16 MHIP projects, as of October, in order of the severity of problems:

  • Five needed their budgets and timelines reset all over again - Lakes, Tairāwhitī, Taranaki, Canterbury Stage 1, West Coast
  • Four needed need urgent action "to reduce risks to delivery" - MidCentral, Waikato, Whakatāne, Tauranga
  • Four were on track to be delivered (albeit with cost rises) - Northland, Canterbury relocation, Nelson, Waitematā
  • Two were completed - Capital and Coast, Counties Manukau
  • One was being privately funded - Hutt Te Awa Kairangi

Cost increases at October included Northland at $19.5m, up from $12m in 2021; Lakes at $33m ($30m); Tairāwhitī at $24m ($19m); West Coast $20m ($15m in late 2021).

The briefing repeatedly referred to ways to gain "momentum".

However, completion dates have been pushed back, on Lakes by a year to August 2024; Tairāwhiti by a year to October 2024; Taranaki's $90m project to October 2024.

In Northland completion dates have been pushed back to July 2023; Canterbury's $80m relocation project to April this year; Nelson to this coming August; and Waitematā to August 2025.

Canterbury's stage one project had "overly optimistic" times to get consents.

West Coast, pushed back to October 2024, had "considerable programme risks".

'Light touch'

The core problems were that original plans lacked detail on cost and timelines "leading to unrealistic schedules and budgets", the experts found.

The briefing talked of "avoiding the mistakes of past business plans".

Previously, consultants had taken a "light touch" to plans, it said - and got it wrong.

Funding did not match what was wanted, driving up costs.

Contingencies - "just-in-case" money - were hotchpotch and not in line with industry standards.

Design efforts were duplicated.

"Master planning" to cover, say, standardised room layouts and equipment, should be shared nationally, but were not being.

How good the project management teams were varied a lot.

"At the decision-making level there was a lack of clarity with approval pathways, signoffs, and delegations."

Māori co-governance was inconsistent and not being assessed "so the effectiveness and impact is currently unclear".

"Majority of projects did not report procuring services from iwi Māori."

Ministers considering advice

The expert assessment was done when Te Whatu Ora had just taken over, offering hope.

Under-strength regions could benefit from the central agency's "maturity and health expertise", within an MHIP team that was "well regarded".

Where they put in a project director, things went better.

Health Minister Ayesha Verrall told RNZ that "ministers are currently considering advice on managing cost escalation".

The business cases and funding were approved "some time ago" and all health infrastructure projects had been affected by cost escalation, she said.

Proceeding with haste

The pressures are driving uncertainty.

The experts recommended going ahead with getting building going even where funding or a business case was not done yet, such as at MidCentral and Waikato.

However, this could store up trouble down the track. "It does create risks in the marketplace if funding not approved," the briefing said.

The briefing puts MidCentral's budget at $35m, but RNZ reported last week it has since risen by 70 percent.

"Options to reduce scope and realised project benefits appear very limited," the briefing said of MidCentral.

Work at Whakatāne and Tauranga has not even begun, and is already complicated by a poor business case, and new earthquake information, as RNZ revealed last week.

Whakatāne's $15m budget was based on a "low level of information from 2019 business case".

Tauranga's $30m forecast will not hold - and separate official papers in January said there was not enough money to do both.

The reviewers favoured refurbishing Tauranga "to address immediate health and safety issues". But this has not washed with the Te Waihanga Infrastructure Commission, as other factors came into it like whole-of-life costs and the model of care.

A new joint business case for the Bay of Plenty is due in the second half of 2023.

Alongside the deep-dive briefing, a progress report has also been released, albeit dated to mid-2022, on how the investment of $1.9b in mental health in Budget 2019 has been going.