BY HEIDI ULRICHSEN
Sudbury Regional Hospital CEO Vickie Kaminski says she's not concerned about media reports stating another hospital construction project in the north will end up costing twice as much as originally estimated.
It was reported in the media earlier this week a confidential government letter reveals taxpayers will fork out $1 billion, instead of $551 million, to build and maintain the new North Bay Regional Health Centre after interest rates are factored in.
The North Bay hospital project is being financed under the province's alternative financing and procurement strategy.
The successful contractor, Plenary Health, will borrow money to build the project and will eventually be paid back by the government. The builder will also have the contract to maintain the complex for the next 30 years.
Greater Sudbury's one-site hospital is being built under a similar scheme, with one major difference – EllisDon, the successful contractor in this community - will not receive the contract to maintain the building.
Construction on both hospital projects began at the end of March. The one-site hospital in Greater Sudbury, which was partially built earlier this decade, is supposed to be completed in late 2009.
Infrastructure Ontario put out a press release stating media reports about the North Bay hospital are inaccurate, and an independent value-for-money assessment of the contract revealed projected savings of $57 million compared to a traditional construction model.
Half of the $551 million price tag is for construction costs, and the other half is for other aspects of the contract, the release said.
Net present value or today's dollars were used to evaluate the three proposals received for the project against the traditional delivery estimate, according to the release.
Kaminski said the contractors in Greater Sudbury will only have to pay interest on two years' worth of borrowed money, rather than 30 years in the case of the North Bay hospital project.
“North Bay is more like your traditional mortgage,” she said.
“You get a mortgage for 30 years on a $250,000 house, and over the course of that 30 years the house probably costs you $480,000. You never say your house costs $480,000. If you look at the difference, it's the amount of time on the loan.
“Ours is two years, their's is 30 years. There will be some interest on our (contractor's) loan, but it will be minimal.”
Kaminski said citizens should know how much the one-site hospital project in Greater Sudbury will cost fairly soon. She said she doesn't expect interest charges will make up a large proportion of the cost of the project.
“Because we're already through phase one (of the hospital construction), we would have had to pay those short-term interest costs anyway, so EllisDon was able to negotiate better rates.”
Construction on phase one of the city's one-site hospital began in late 1998, and at the time, the project was supposed to cost $132 million. Earlier estimates were just $85 million.
The hospital board halted construction in 2001 after costs skyrocketed even further.
A provincial review of the project later revealed the project would cost more than $363 million including decommissioning, commissioning, furniture, equipment and information technology, which were not included in previous estimates.
Kaminski said construction work on phase two of the one-site hospital project has so far been limited to site preparation work.
“It's so exciting. I was here yesterday, and it was a staff holiday, and I was in my office. I said 'What's that noise?' I realized it was a backhoe moving dirt. It is so great hearing those machines.”
Nickel Belt MPP Shelley Martel has been critical of the alternative financing and procurement strategy from the beginning.
The province can borrow money at much lower interest rates than companies like EllisDon and Plenary Health, said Martel.
She said the one-site hospital project in Greater Sudbury won't be subject to as much interest charges as the hospital in North Bay, but the cost will definitely be higher than originally estimated.
“I think it's going to cost more too,” she said. “It may not be as much because the time frame is not 30 years out, it's two years out. But it is going to cost more. And it's going to be interesting to see how much.”
