Hospital: $13 Million Under Original Estimate

February 24, 2011

Bermuda Hospitals Board [BHB] reported today [Feb 24] that the design and construction related cost of the new facility being built by Paget Health Services is $247 million. This is about $13 million less than the original estimate of approximately $260 million in the 2008 Johns Hopkins Medicine International Report.

A spokesperson said: “BHB has chosen to deliver the new facility through a public private partnership [PPP] that transfers many of the project’s risks, such as cost overruns and on time completion, to the private partner. The PPP model also allows for cost certainty, and frees funds to be used by BHB now to improve patient care and facilities because the first payment on the new building will not be made until 2014. A fair and competitive bidding process between the three bid teams shortlisted by BHB helped keep the project costs down.”

Chairman of Bermuda Hospitals Board, Herman Tucker, says, “As Chairman, it gives me great satisfaction to see us come in under estimate. We have entered into a project we know we can afford, and our private partner has financial incentives to build, on time, a high quality hospital building. Paget Health Services will also maintain the building for the length of the contract, giving Bermuda an assurance that we will have a high quality, modern healthcare facility for the next 30 years.”

He continues, “As this is Bermuda’s biggest construction project, any delays and cost over-runs could be very damaging to us, especially as we face one of the most challenging economic times in living memory. A key benefit of the way we are delivering this new facility is that Paget Health Services take on the risks of delays and cost over-runs. This is very good news for us and Bermuda as we seek to control healthcare costs for the community.”

Chief Executive Officer, David Hill, comments, “BHB implemented a financial strategy two years ago to build a fund to meet our entire financial commitment of redeveloping KEMH. This includes meeting the annual payment obligations to PHS for the new facility, purchasing required equipment and furnishings, as well as revitalising our existing KEMH building. Coming in under budget for the costs of the new facility means we are confident that BHB is well positioned to meet its 30 year payment schedule.”

Deputy Chief Executive Officer, Venetta Symonds, adds: “At the heart of this project is the provision of high quality healthcare. We have met best international practices with regards to the competitive public private partnership procurement process and this ensures that we got the best value we could for Bermuda. We would like to thank the many people involved in this project, from staff to government employees, community groups, neighbours and advisors. It should give all of us great pride that we have managed to come in under budget and that work has already started. We are really looking forward to treating our first patients in the new building in 2014”.

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Comments (6)

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  1. sandgrownan says:…the risks are still shouldered by the taxpayer.

  2. Triangle Drifter says:

    I am no finacial guru but we can be sure that Paget Health Services intends to make a very tidy profit on this job,& so they should.

    The question is, how much less would it have been if the PLP Government had the financial skills to manage the project themselves? The PLP obviously does not have these skills. Berkley, Cruise Ship Terminal, TCD, Court building & others are clear evidence of that.

    I suppose we should be thankful that the PLP is not managing the hospital project. How much over budget would it be if they were?

    Of course all bets are off until the first doctor walks in the new front door. Who knows how many revisions, like the court building, will be made which will add to the contract price.

    They are busy patting themselves on the back right now over a supposed $13M ‘saving’. Watch it disappear behind a whole load of excuses.

    • Cleancut says:

      hopefully the Financial process will be followed. there should be no interference from any Minister. this is a huge project and all the sharks will be swarming for this one. No matter how the government tries to control THE FINANCES, they will always find a way, whether it be a dollar or a million dollars or even a cruise ship dock. THEY WILL ALWAYS FIND A WAY.

  3. crazytalk says:

    First, the building has only just started, so I don’t see how they can claim any credit for being “under estimate”. All that has happened is that the estimate has been updated since the original plans drawn up three years ago.
    Also, this is a fixed cost contract. In fixed-cost contracts the contractor builds into the price the risk of cost increases. Therefore a fixed-cost contract just ensures you pay top dollar. Frankly, it isn’t much of an achievement.

  4. Joe says:

    At first I couldn’t believe what I was reading. Then, I looked again.
    This is a story about an estimate being lower than another estimate. The place is a long way from being built. Is it me, or is this just absolute nonsense?

  5. sandgrownan says:

    Further, the orignal estimate is too high since it costs more for the private sector to borrow than a government. It’s dodgy off the balance sheet accounting designed to keep borrowing off the books. the bets part is, we still service the loan, we don’t own the asset and there’s no guarantee of services. Look at PFI/PPP schemes everywhere.

    It’s short termism at it’s worst.