A new Royal Children's Hospital (RCH) is under construction on a site immediately to the west of the current RCH site in Parkville and is due for completion in late 2011. The new hospital is being built by a private sector consortium and will be maintained by them for 25 years, under the Partnerships Victoria framework.
The planning and business case for the new facility was sound, with the procurement exercise fair to all proponents and compliant with relevant requirements. The government was provided with robust analyses of the options to replace the existing hospital, and procurement strategies available to achieve that outcome.
The new hospital will have 50 more beds than the existing hospital and the Department of Human Services (DHS) has demonstrated that this, together with the flexibility in the design of the new hospital, should be able to handle currently projected increases in service demand. A residual risk, however, is that although a network response to paediatric services has been identified since 2002 as a key strategy to meet observed increases in service demand, DHS has not yet addressed the detail of implementing such a strategy.
The recent downturn in global financial markets has not adversely affected the project's financing arrangements, but it has created uncertainty about the receipt of promised donations to the RCH Foundation of $35 million by one of the original private sector parties.
I encourage DHS to complete the development of its contract management systems and processes for the new hospital. This will further assure effective management of project risks on behalf of the state as well as delivery of the expected levels of service by the private sector.
The results of this audit were consistent with our recent audits of the planning and construction phases of public private partnership (PPP) projects and point to a mature PPP model in Victoria. The ongoing challenge is to deliver the anticipated value for money and other public benefits over the life of a lengthy contract.
D D R PEARSON
Auditor-General
6 May 2009