Procurement issues contributed to hospital upgrade overspend

posted by Lucy Patchett
8 September 2020

A seven-year project to upgrade a hospital in Wales neglected concerns around affordability, design and procurement, according to an audit. 

The Wales Audit Office (WAO) outlined how the £170.8m project in North Wales went over budget by 55% (£60.4m) and ignored key concerns around costs, design and procurement models set out in the outline business case. 

The refurbishment of the Ysbyty Glan Clwyd Hospital, including removal of asbestos and 300,000 tonnes of contaminated waste, was approved and carried out between 2011 and 2019. While it was delivered largely on time, there was significant overspend. 

According to the audit report, “ineffective project governance” resulted in the project board, the local health board and the Welsh Government misrepresenting the project’s overall affordability and financial performance.

The audit also found “an understated target cost, an unauthorised contract strategy and an ineffective project governance framework”.

In 2014 an audit by NHS Wales Shared Services Facilities Services found the “depth of project design and costing detail”, as well as procurement processes, in both the outline and business cases “fell short” of basic requirements. 

But not all issues raised were “escalated or considered more widely within the health board” and no reference was made in briefings and submissions to the government before the project was approved.

An overspend was identified in 2014 due to late payments worth £5m. “The discovery of invoices that had not been submitted for payment raised initial concerns about the reporting of the project’s financial status and that the total agreed funding package of £110.4 million might be well below that required to complete the project,” said the WAO audit.

The WAO also highlighted that the “the contract strategy set out in the approved business case was later changed without appropriate authorisation or notification.”

Since 2014 the health board has implemented changes to strengthen controls, including improvements to project management through additional consultants, a new project director with a revised governance framework, and the introduction of the Infrastructure Investment Board. 

WAO said that “had these controls been in place at the time of the submission of the Ysbyty Glan Clwyd business cases, the risk of non-compliance with capital procedures on the project would probably have been reduced”.

The Welsh Government provided £110.4m in initial funding, £53.2m additional funding, and the health board provided the remaining £7.2m.

Adrian Crompton, auditor general at WAO, said: “This report demonstrates the fundamental importance of good governance and robust oversight of complex capital projects.

“Whilst the complex refurbishment has been delivered largely on time, the very significant cost overrun might well have been avoided if concerns about the original business case had been properly addressed at the outset.”

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