Vaughn Palmer: Run on politics, not business, B.C. hospital project budget soars 63%

VICTORIA — The New Democrats are scrambling to explain the sudden, dramatic escalation in the cost of replacing the aging Cowichan District Hospital on Vancouver Island.

The all new 204-bed hospital was costed at $887 million in budget documents as recently as September, based on a business plan the provincial government approved two years ago.

But in the financial update released Friday, the “anticipated total cost” was revised to $1.446 billion, an increase of $559 million or 63 per cent.

The only warning for the change was in the fine print of the September financial update. The Finance Ministry extended the completion date for the project to 2027 from 2026 without revising the budget.

The fine print of Friday’s report said the completion cost was increased “to reflect the updated post-tender budget.”

“We are experiencing surprising challenges and labour shortages in projects across the government capital plan, which is leading to increased costs, and challenges to project delivery timelines,” Finance Minister Selina Robinson told reporters. “This is more acute on projects like the Cowichan hospital.”

Though labour shortages are real enough in the construction sector, not likely would that alone boost the project cost by more than half a billion dollars.

Other factors include inflation, supply chains, installation costs and the like, according to a statement from the government late Wednesday afternoon.

They also redesigned the project to increase the floor space by almost 20 per cent. Incredible that could happen after the business plan was approved, especially since the replacement hospital was already planned to be three times the size of the original.

One factor that earlier increased the project cost was the cabinet’s insistence that it be built under one of the NDP’s union-favouring community benefits agreements.
The government’s Partnerships B.C. agency warned that the program would by itself boost the total capital cost of the project by more than 20 per cent, according to a leaked document obtained by the B.C. Liberals.

Partnerships also warned that the pool of bidders would be reduced. Some companies won’t bid on community benefits agreements projects, considering them an NDP attempt to unionize their company through the backdoor.

Despite those cautions, the New Democrats made the Cowichan hospital replacement “the first major health capital project to be subject to a CBA.”

This is but the latest controversy for a project that the New Democrats have used as a political football for going on six years.

John Horgan first promised in the 2017 election campaign to replace the then 50-years-old Cowichan hospital in a bid to try hold on to the Cowichan Valley seat for the New Democrats.

The promise wasn’t enough. Sonia Furstenau captured the seat for the Greens.
However, with the Greens supporting the New Democrats in forming a government, the Cowichan hospital project was an obvious fit for the new partners in power-sharing.

On July 6, 2018, Premier Horgan travelled to the existing Cowichan District Hospital to announce that the replacement would go ahead.

He was flanked that day by the Greens’ Furstenau, who readily voiced approval for the decision by the senior partner in the power-sharing arrangement.

“Since becoming MLA for the region, I have heard from hospital staff struggling with low morale due to the overstressed infrastructure,” the Cowichan Valley MLA declared. “This announcement will go a long way to restoring their sense of optimism.”

The project was costed at $600 million, though Horgan cautioned that a firm figure awaited completion of a business plan, expected in 12 to 18 -months.

The New Democrats did approve such a plan in 2020. They also added the Cowichan replacement project to the government capital plan in September 2020, on the eve of Horgan’s snap election call.

The project was then costed at a seemingly firm $887 million with a target completion date of 2026.

Though the project was launched under the auspices of the NDP-Green partnership, Horgan then tried to use it against Furstenau in a bid to defeat her and return the seat to the NDP.

During a campaign stop in Furstenau’s riding he suggested that the hospital would only go ahead if the New Democrats were elected.

Furstenau fired back that Horgan was politicizing the project and engaging in fearmongering because the replacement was already approved as part of the capital plan — as, indeed, it was.

The New Democrats again failed to defeat Furstenau, despite the best efforts of Horgan, Health Minister Adrian Dix and national NDP leader, Jagmeet Singh, all of whom campaigned in her riding.

The next step in the saga came April 1 2021, with a call for proposals to build the replacement, based on the business plan and the then costing of $887 million.
Construction was scheduled to start this year and the hospital was to be ready to take patients in 2026.

Then in September the New Democrats extended the completion by a year and in November came the budget revision. Nor are those necessarily the last revisions.

But such is the fate of projects that are launched, costed and driven by a political agenda, not actual real world business plans.

vpalmer@postmedia.com

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