Yellowknife's new Stanton Hospital to cost $750M over 34 years
Public-private partnership to build new facility instead of renovating existing hospital building
A surprise new hospital to replace existing Stanton Territorial Hospital in Yellowknife is expected to cost a total of $750 million to build and operate over the next 34 years.
The N.W.T. Department of Finance says the territorial government didn't initially plan to build an entirely new hospital, instead putting out a request for proposals to update the existing hospital. But Boreal Health Partnerships, the winning contractor, submitted a plan for an entirely new hospital to sit beside the existing building.
The government announced the winning contract late last month.
The hospital project is being funded using a public-private partnership, or P3 model. Under a P3 model, government hires for-profit companies to finance, design, build and operate public facilities.
Under the contract, the territorial government will pay Boreal Health Partnerships $300 million to build the new hospital and $18 million a year to operate it. The project is the largest ever undertaken by the N.W.T. government, according to the Stanton Renewal website.
The territorial government will also spend another $50 million on services such as financial advisors, lawyers and project managers. All together, over 34 years, the new hospital is expected to cost the territorial government $750 million.
Sandy Kalgutkar, deputy secretary with the N.W.T. Department of Finance, says the government chose the P3 model over a more traditional model because it's more cost effective.
He says if the territory were to hire a company to design and build a new facility and then run it like a traditional hospital, it would cost an estimated $1 billion over the next 34 years. Kalgutkar says the P3 model provides a cost savings of 25 per cent.
Under the contract, once the new hospital is built, the current building will be maintained and operated by Boreal. The land and building will still be owned by the territory, but will be leased to the partnership. It is up to Boreal to find a use for the old building.
"The GNWT does have the final say of what actually goes in there," Kalgutkar says. "They obviously can't put a casino in there or things that are inconsistent with a health facility, campus-type setting."
When choosing which company or partnership to go with, Kalgutkar says the territory also looked at how many local companies would be hired. He says Boreal must disclose which northern companies it uses and how much they were paid.
Kalgutkar says he can't comment on whether any jobs will be lost at Stanton when the new hospital is built. But the project's website says, "It is very likely that some will be lost, some will be created, and some will be redefined."
Past P3s over budget
Boreal Health Partnerships is made up of several companies, but is led by a British company called Carillion. It has a history of building P3 hospitals in the province of Ontario that went over budget.
According to a report done by the Ontario Health Coalition, a partnership led by Carillion won the contract to build and operate the Royal Ottawa Health Centre. The centre was originally supposed to cost $95 million and have 284 beds, but when it opened in 2006, it had ended up costing $146 million and had only 188 beds.
Carillion also led the partnership that built the William Osler Hospital in Brampton, Ont., a decade ago. It was originally supposed to cost $467 million. The hospital later announced the final budget was $614 million.
The Auditor General of Ontario issued a report on the hospital's budget and found it should have put a cap on the cost of the construction. It also found the hospital should have done a better job of monitoring the performance of Carillion and the other partners.
"Like all major projects, I think every developer will have some issues," Kalgutkar says.
"Even though they might have had challenges with some projects, they might have delivered other projects successfully. As more and more hospitals started getting procured under a P3, the market matured and in my view it's stabilized and I feel fairly confident they will deliver."
Kalgutkar says the territorial government has placed a cap ceiling on Boreal and it has to stick to the $300 million construction cost.
A groundbreaking ceremony for the new hospital will be held Oct. 7. Construction is expected to be completed in 2018, with the new hospital fully operational by 2021.