'Dead in the water': claims hospital redevelopment $100m over budget

The Standard received an anonymous letter from a source close to the project, but all efforts to contact representatives from the builder or South West Healthcare were met with silence over fears of legal retribution from the government.

In the letter, the source said the redevelopment had run $100 million over budget, potentially putting the entire build in jeopardy.

They said "poor management" and "increased costs" put the project "dead in the water", with the Victorian Health Building Authority (VHBA) trying to pressure South West Healthcare to remove crucial items from the scope to save money.

The state government wouldn't address the alleged budget blowout or VHBA pressure directly, but insisted "the scope of this project has not changed" and the budget wouldn't be increased.

"We are getting on with delivering our significant $384.2 million Warrnambool Hospital Redevelopment - ensuring the local community has access to world-class healthcare facilities right on their doorstep," a spokesperson said.

But government contracts obtained by The Standard show the original scope of the project has already been significantly cut.

South West Coast MP Roma Britnell said if the original scope was reduced the redevelopment would no longer be fit for purpose. But if the scope and budget didn't change, the project simply couldn't proceed.

"If the Minister maintains that neither the scope nor the budget will change then the Victorian Labor government are taking us all for fools," Ms Britnell said.

"Without additional funding the community will not be getting the redevelopment we have fought for.

"The government needs to come clean about this."

The Standard reported on a cost crisis within the redevelopment in November 2023, calculating the project was at least $50 million over budget.

But the source said cost estimates for the build had consistently been "way off" and it would cost at least $100 million extra to meet the original scope.

They said the pricing for the early works to prepare for the construction of the new six-storey hospital tower had come in at $130 million, double the $65 million budget.

The quantity surveyor for the project - the person in charge of estimating and monitoring costs - has been fired. The source said there was now "no cost planner on the project".

Commercial builder Hansen Yuncken has been appointed as the managing contractor for the project under an arrangement known as "early contractor involvement".

This allows a builder to become involved in a project, and even start work on it, before the design has been finalised. That is why Hansen Yuncken can begin "early works" on the redevelopment while the scope and final design are still in limbo.

Hansen Yuncken declined to comment on the redevelopment.

The Standard raised concerns in November 2023 about a new 120-space underground car park being removed from the project. The government consistently said the scope hadn't changed but also refused to guarantee the car park would be built.

The VHBA has since removed the car park from its webpage showing an overview of the project.

The source said the car park wasn't the only item being cut from the plan with VHBA insisting SWH remove entire clinical departments planned for the new building and leave buildings intact that were originally marked for demolition.

It could mean a smaller emergency department than first promised, fewer new operating theatres and inpatient beds and "probably no new paediatric ward".

Evidence uncovered by The Standard suggests the scope has already been cut deeper than just the car park.

Contracts for consultant roles on the project from December 2021 show the scope included a 10-bed paediatric ward and 32-bed inpatient unit.

But in response to questions from The Standard the government would only commit to 22 inpatient beds and didn't specify the number of paediatric beds.

The government has consistently said there would be no extra money added to the project.

The source said SWH had "been raising massive concerns about costs, timelines and the project in general with the VHBA CEO and government officials for two years".

The Standard asked the government why these repeated concerns hadn't been addressed but it declined to say.

While the government said there was no extra money for Warrnambool, its mid-year financial update showed it had made a $334 million budget variation for the redevelopment of Melbourne's Thomas Embling hospital.

Ms Britnell said the government had to show it was as committed to regional healthcare as it was to hospitals in Melbourne.

"The Warrnambool Base hospital is the largest healthcare provider in our region. Our community needs and deserves the redevelopment that was promised and I will be fighting to ensure that the Victorian Government stays true to its word," she said.