Cost of Halifax Infirmary redevelopment could top $3 billion

CBC News has learned the estimated price of the Halifax Infirmary redevelopment project has ballooned to more than $3 billion, a number so high that the group bidding on the work has concerns about its ability to get sufficient insurance coverage.

The information indicates Plenary PCL Health, the lone consortium in the running for the work, could require the province to provide an indemnity for any additional coverage required to cover project risk.

Representatives for PCL and Plenary Group declined comment, citing the ongoing tender process, and referred questions to the province. A spokesperson for the province's Public Works Department declined to speak to insurability of the project because the tender remains open.

In an email, the spokesperson said the department is seeing "significant cost escalation in the past year due to inflation, supply chain issues, commodity price increases and general labour rate increases, but we are working to try to manage these costs."

As evidence of these challenges, the government signed an order in council this week approving an additional $2 million for renovations at the Summer Street and Robie Street entrances of the infirmary to accommodate expansion plans. The original budget for that work was $3.8 million.

The new estimated cost of the infirmary redevelopment is more than $1 billion higher than the original total estimate for multiple projects the former Liberal government first announced in 2016 as the Queen Elizabeth II Health Sciences Centre New Generation project.

The Halifax Infirmary, the largest portion of that project, is part of a suite of work that includes renovations at the hospitals in Dartmouth and Windsor and the creation of a new outpatient clinic in Bayers Lake. When all the work is complete, it's intended to allow the retirement of aging buildings on the Victoria General Hospital campus.

All of that work was estimated in 2018 to cost $2 billion. And while the work in Dartmouth and Windsor is complete and the Bayers Lake project remains on schedule and budget, uncertainty about the Halifax Infirmary redevelopment has only increased.

The tender was supposed to close in the spring, but was delayed until this fall. Documents CBC reported on earlier this summer showed concerns about the scope of the project and whether it was big enough to accommodate population projections that are now much higher than what was used to draft the original plans in 2015.

Although there were proposals discussed that would have added more inpatient beds, operating rooms and a new emergency department to account for the recent population growth, the minister charged with political oversight for health-care redevelopment, Colton LeBlanc, recently told CBC that the tender is proceeding as initially designed.

"Any expanded scope, those are things that would be looked at in the future," he said last week. "We're looking at the project as it stands."

The project, which is scheduled to use a public-private partnership model, or P3, originally had two pre-qualified consortiums bidding on the work.

However, EllisDon Infrastructure Healthcare served notice to the province in June that it was pulling out of the process. It cited concerns about the project scope in the face of rising material costs and labour and supply shortages that contributed to "unprecedented cost escalation."

At the beginning of this year, EllisDon and Plenary PCL proposed a joint venture to do the work. In documents obtained by CBC, the two consortiums argued the approach has worked with other projects and would deliver more certainty for the infirmary project.

Part of that effort would have included a proposed affordability cap the province would set to help guide the rollout of the work. The consortiums said the work could also be done in phases and prioritized based on need and affordability.

Premier Tim Houston said the government rejected the idea because it wanted multiple bids for the work. The premier has said that although there is only one bidder for the project, it is not a guarantee the tender would be awarded to PCL.

At the time details of the health-care revitalization plan were announced in 2016, it was anticipated demolition of the Victoria and Centennial buildings on the VG campus would begin in 2022. The aging buildings have long suffered from problems with water quality, ventilation and other issues.