In November 2007 the Government announced that it had selected a private partner to construct a new Royal Children's Hospital (RCH), on a site immediately to the west of the current RCH site on Flemington Road in Parkville. The existing research precinct building and the front entry building will be retained and incorporated into the new complex.
The new hospital is scheduled to open in December 2011, and following RCH's relocation, much of the old site will be demolished and reinstated as parkland, replacing park land taken up for the project. The Department of Human Services (DHS) has the lead role in supervising delivery of the project.
This project is the largest hospital redevelopment undertaken by the state. The project outcomes are expected to have a major impact on the quality of tertiary health services for children in metropolitan Melbourne and other regions of Victoria.
The hospital redevelopment is being delivered as a public private partnership (PPP) in accordance with the state's Partnerships Victoria framework. This application of the Partnerships Victoria procurement model involves a private sector consortium taking responsibility for designing, building, financing, and maintaining the facility. The public sector keeps full responsibility for the clinical services delivered within the hospital.
Over the 25-year operating phase of the contract-which commences after completion of construction and successful hospital commissioning-the state will make total service payments of $3.742 billion in nominal terms to the private sector project company. According to the 2007-08 RCH Annual Report, this was equivalent to $1.016 billion in net present value terms, as at 30 June 2008.
In addition to the service payments over the operating phase of the hospital, the government approved:
• $27.3 million for project management costs during the planning, procurement and construction phases of the project
• $4.6 million for park reinstatement at the end of construction.
The government committed funding for the project on the understanding that RCH will contribute $90 million to reduce the net cost to government of the project. RCH is expected to source this funding from fundraising, borrowings and asset sales.
The objective of this audit was to assess the adequacy of the state's planning, procurement and management of the RCH PPP redevelopment.
This involved examination of:
• project planning and development documents, including the service plan and business case
• the procurement process
• contractual arrangements for the project, and documentation and data relating to the management and governance of the project.