Second hospital project in South Australia may test market

19 November 2018 - 12:00 am UTC

South Australian Treasurer, Rob Lucas, said it is possible a new Women’s and Children’s hospital could be offered as a PPP, but has stressed there is a lot of “reputational damage” to overcome.

A working party is looking at options for locations and procurement of the new hospital to replace the existing facility in Adelaide, he said. The working party is due to report back to the government by year-end, he added.

When asked about what projects would be considered for privatisations or PPPs, Lucas said the Women’s and Children’s Hospital is “on the horizon” and the government would consider options for private investment to help build it, although the experience of the Royal Adelaide Hospital PPP (RAH) “cautioned against” it.

He said it is “open to private sector investment for the delivery of infrastructure”, but the government will await the recommendations of the working party before making any decisions on the new hospital.

The SA Health Partnership consortium that built the RAH was sued by the state under the previous government for design defects and slapped with a default notice and millions of dollars in fines for late delivery. Significant unforeseen contamination of the site with diesel and other toxins, as it is situated on an old railway yard, were among the several other problems the project had to face.

The cost of the building blew out by AUD 640m (USD 468m) to AUD 2.3bn and it opened more than a year late in September 2017. The consortium was due to refinance about AUD 2.5bn in debt with 15 banks in June 2018, but had to settle for an “amend and extend” for two years with 29 banks and institutional  lenders.

The only PPP in the market in SA at the moment is for the construction of two schools in Adelaide. This was kicked off by Labor in its 2017 budget. The present government called for EOIs on this by 12 October.

The project is relatively small in size but has garnered a high degree of interest, which one bidder said is in part due to it being treated as a test case by the new government to re-engage with the market.

Lucas confirmed this information.

“We have suffered reputational damage over the RAH,” he told Inframation. “Absolutely, we want to demonstrate to the private sector that there is a new government in town, we believe one that will take a more professional approach to the private sector. We want to demonstrate we can manage a project.” 

A site next to the new RAH has been earmarked for the new Women’s and Children’s hospital. But the former Labor government had planned to build only a Women’s hospital initially and then subsequently a children’s hospital at another site, due to cost and complexity of the build.

Local media have reported initial studies by the previous government showed the cost to build it – at around AUD 1.8bn – was about twice as expensive per bed as the RAH.

 

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