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Paschal Donohoe says it's 'frustrating' to see another costs row over National Children's Hospital

BAM released a statement saying that it was excluded from the government’s Covid-19 ex-gratia payments, which it called “unfair”.

The building site of the National Children's Hospital.
The building site of the National Children's Hospital.
Image: Sam Boal via RollingNews.ie

Updated Jul 10th 2020, 1:17 PM

FINANCE MINISTER PASCHAL Donohoe has said that it’s “really frustrating and disappointing” to see that the National Children’s Hospital build is in another row.

Today, the Irish Independent reports that work on the Children’s Hospital has stalled over a dispute about who should pay for the extra costs associated with reopening the site.

The hospital has been dogged by controversy over where it would be built, what it would be called, and after it was revealed that costs had ballooned to double the original estimate.

The project was expected to cost €983 million in 2017; Taoiseach Leo Varadkar told the Dáil in late 2018 that it was expected to cost €1.4 billion; it’s now expected to cost €1.73 billion – although it’s been said that the total cost of the project is “highly unlikely” to come in under €2 billion. 

“The key thing now is that these issues are resolved,” Donohoe told Newstalk Breakfast today, “and of course it is really frustrating and disappointing to see a project of this scale, a project that can make such a difference to children in a difficulty like this.”

But what is more important than my own personal feelings in relation that is to support NPHDB [the National Paediatric Hospital Development Board] and the work, there’s a legal process on the way, and the key thing is to focus on the project on children, and get the best value for the taxpayer at a difficult moment.

 In April, NPHDB issued legal proceedings against BAM in the High Court.

The dispute centres around the requirements in the contract to have a design in place before construction, which developer and construction company BAM claims has still not been completed.

BAM has “welcomed” the legal proceedings, adding that it will lead to “proper and careful analysis, and ultimately resolution”.

Paschal said today that the “challenges and difficulties” with the Children’s Hospital “are so well known”, and were “a cause for such anger to so many, that we’re aware of that when we’re delaing with this issue now”. 

In May, the Director General of the Construction Industry Federation said he “misspoke” when he claimed the cost of the National Children’s Hospital could rise by as much as 40% due to the fallout from Covid-19. 

Statement from the NPHDB

In a statement to TheJournal.ie in relation to the story, the NPHD Board said that construction stopped on 31 March because of Covid-19.

Since the easing of restrictions on 18 May, the NPHDB has been engaging with BAM “to ensure the earliest possible reopening of the site”.

Some matters still remain unresolved at this time, relating primarily to the cost implications of the closure and reopening of the site and who should bear them.

It emphasised: “This should not prevent BAM from returning to the site however as these matters can be resolved through the agreed dispute management process while work on site continues, and for that reason the NPHDB has been clear on its expectation that the Main Contractor meets its obligation by returning to the site without further delay.”

The NPHDB has stressed that the children’s hospital is scheduled to be completed by the end of 2022, and although they were behind schedule before the Covid-19 pandemic hit, that it was possible to make up the time.

In a statement this evening, the NPHDB said that it has been “clear in its expectation that the main contractor should meet its contractual obligation by returning to the site without further delay.”

The Board also sought to clarify points about payments to builders on other public sites from the State, saying that the issue of costs should be resolved through the agreed mechanism for dealing with disputes as work continues on the site. 

“There is a claims mechanism through the contract which allows the contractor to make a claim where they feel they have an entitlement,” NPHDB said in a statement released through a PR company this evening. 

“As set out in the contract, the contractor may submit a claim with substantiation to the Employer’s Representative for determination. Where a dispute arises it goes forward for recommendation to the standing conciliator. This mechanism is available for use for all claims and has been used extensively by the contractor since the commencement of the contract.” 

Because construction ceased in March this year, there will be further delays to the project, as well as due to social distancing requirements when construction resumes.

The NPHDB said: “It is too early to fully assess the time or cost impact of the pandemic”. 

It said that the Board are working remotely on “all non-site-based construction elements” of the project in the interim.

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A statement from BAM 

In a statement released this afternoon, the main contractor of the National Children’s Hospital build, BAM, outlined it’s side of the row over the costs associated with the Covid-19 pandemic delay:

“The consequences of these public health restrictions are significant delays which will continue until there is a vaccine widely available, as well as additional costs on a once-off and ongoing basis.

“The government has recognised this by confirming it will make ex-gratia payments to contractors on public works contracts throughout the country to meet these costs.

The National Paediatric Hospital Development Board has confirmed that these payments will not be available to BAM on this project. It is unclear why the National Children’s Hospital has been excluded from this compensation regime.

“The Board has confirmed that its view is that the contract has no mechanism for dealing with this issue, and it makes BAM responsible for the entire Covid 19- impact.

This means there would be no compensation for the extra costs incurred, or extensions of time allowed for the inevitable delays and resulting damages payable to the client (Liquidated Damages) on the project.

“This is unfair and must be addressed as a matter of urgency,” it said.

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