The government is considering options to address cost overruns on the new hospital, including scaling back the project or breaking it into smaller stages.
Vital Healthcare Property Trust, which currently leases health facilities to the government and owns significant assets in Australia, is willing to contribute to finding a solution for Dunedin. Fund manager Aaron Hockly mentioned the possibility of acquiring part of the project and leasing it back to the government long-term.
While Vital cannot take on a billion-dollar build, they are open to projects up to $100 million and are willing to collaborate with other interested parties. Hockly emphasized the benefits of involving private companies with expertise in construction best practices.
Breaking the project into stages could help address resource and skill challenges, particularly in a regional setting like Dunedin. However, Hockly cautioned that a build-leaseback arrangement might result in higher costs in the long term and urged the government to approach such deals cautiously.
Vital’s approach differs from traditional public-private partnerships, as they function primarily as landlords. In a PPP model, the Crown owns the asset and pays a consortium to construct and operate it for a specified period. The potential use of PPPs in Dunedin, particularly for projects like the new pathology block, remains under consideration by government officials.
Infrastructure Minister Chris Bishop and Act MP Simon Court have been exploring the feasibility of PPPs for health projects, though the applicability to Dunedin is yet to be determined. While the main contractor for the Inpatients block is being retendered, switching to a PPP at this stage may be challenging.
Overall, Vital Healthcare Property Trust’s offer to participate in Dunedin’s hospital project presents an opportunity to leverage private sector expertise and resources to address the current challenges facing the development.
