SA Government settles RAH compensation case over defects and running costs


August 21, 2019 15:40:03

During construction it was flagged as the most expensive building in Australia, but the new Royal Adelaide Hospital is actually costing SA taxpayers far less than the “million dollars a day” originally envisaged, according to the State Government.

Key points:

  • The SA Government has reached a $16m settlement in a legal dispute with the group running the RAH
  • The hospital is costing less to operate than expected
  • Labor says the “very strong contract” it put in place while in government has proved useful

The hospital is operated under a public-private partnership, which will see taxpayers make annual payments to a private consortium over a 30-year period.

Those payments were anticipated to be in the range of $360–$400 million per year, but Treasurer Rob Lucas today confirmed those payments had so far been averaged between $285–$310 million.

Mr Lucas said the reduction in cost had been driven by lower interest rates, among other factors.

“There’s a bit of good management and some good luck in relation to that as well,” he said.

Mr Lucas made the admission while announcing the State Government had reached a financial settlement to end a long-running legal dispute with the private consortium which operates the hospital.

He said the in-principle deal, agreed by the consortium Celsus last night, would cost taxpayers an extra $16 million in today’s dollars, with payments to be staggered over several years.

He said the settlement to end the dispute had been recommended by all of the State Government’s advisers, including the Crown Solicitor and external lawyers.

“It was a lawyers’ picnic, costing tens of millions of dollars to all parties,” Mr Lucas said.

“The prospect was we either continue with more of that at a cost of tens of millions of dollars to all parties, or seek a sensible commercial settlement.”

Spotless to get more money under agreement

The legal dispute centres on disagreements over the provision of orderlies, room cleaning, as well as building defects and problems with the hospital’s air conditioning.

Under the settlement, Celsus has agreed to construct two new cooling towers and fix the hospital’s duress alarm system, which has been plagued with failures.

The agreement will also see a change in terms for hospital services provider Spotless, which had been losing money.

In a statement to the ASX, Downer EDI, which owns Spotless, said the agreement included an increase in Spotless’s monthly service fee and settled historical claims.

“All parties have worked hard during the settlement discussions to address the various legacy issues and come up with solutions that provide better outcomes for patients,” Downer Group chief executive Grant Fenn said.

It does not absolve the State Government of any legal responsibility in a separate long-standing arbitration by the hospital builder.

Government cutting costs with settlement

Health Minister Stephen Wade said that arrangement would help reduce costs and improve outcomes for patients.

“It’s not in the interests of the hospital as a whole for people … to be waiting for discharge, waiting in their bed to leave, or waiting for the bed to become free after being cleaned,” Mr Wade said.

“So, we believe that the some of the measures in this agreement will be important for both the hospital and for the patient.”

The in-principle settlement is expected to be concluded next month.

Deputy Opposition Leader Susan Close said a “very strong contract” had been put in place with Celsus when Labor was in government.

“I’m not going to second-guess the legal advice that the Government has received … and this is a very big, very expensive hospital that’s doing an excellent job for South Australians, except for the threats that this Government is cutting and cutting and cutting,” Dr Close said.










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