Design and construction costs for the hospital-other than for state attributable variations-are to be fully met by the project company during the construction phase of the project. As the project is a PPP, funding for the delivery of the facility is an agreed sum, disbursed over the life of the agreement in accordance with the payment schedule contained in the project agreement.
The project agreement requires the project company to deliver a 'fit-for-purpose' facility that has been constructed in accordance with a set of detailed design requirements. Under this arrangement, the majority of the construction risk has been transferred to the project company. To deliver its construction obligations the project company has engaged a builder under a fixed time and price arrangement.
The project company is only entitled to capital cost variation under a limited set of circumstances clearly defined in the project agreement and it is not entitled to receive any payments before the final completion milestone date of 22 December 2011 has been achieved.
The state will commence payment of quarterly service payments (QSP) when the building is commissioned. The QSP cover the build cost and the cost of delivering services over the life of the agreement. The QSP will be managed through the performance monitoring and abatement regime discussed earlier in this report.
Figure 6A sets out amounts approved by government for project costs relating to the new RCH-excluding QSP-as well as actual costs, as at January 2009.
| Figure 6A | ||
| Funding | Approved | Actual |
| Project management(a) Royal Park reinstatement | 27.26 4.60 | 14.60 0.00 |
| Total | 31.86 | 14.60 |
(a) The initial budget approved in November 2007 for project management costs was $24 million based on a four year construction period. This budget was increased by $3.2 million in April 2008 to reflect the five year construction period.
Source: Victorian Auditor-General's Office, using data provided by DHS.
Under the project arrangements, the state must fund reinstatement works relating to Royal Park upon completion of the construction of the new hospital and the decommissioning and demolition of buildings on the existing RCH site. Funding of $4.6 million has been approved for this task.
The project company's contractual responsibilities in this area do not extend beyond remediating the existing hospital site to a standard suitable for park reinstatement. A brochure issued by the state in relation to the project in its early planning phase indicated that the park would be reinstated by 2011, however park reinstatement activities are only planned to commence in late 2013.
To date, the state's actual project costs are on target.