Project Costs Of The New NHS Health-Care Complex
The Contract with Plenary Health Niagara
Plenary Health Niagara has signed a contract with the Niagara Health System (NHS) to design, build, finance and maintain the new health care complex in St. Catharines and will receive annual payments from the NHS over a 30 year period. These payments cover:
- lifecycle repair and renewal (building maintenance for 30 years)
- project financing
The contract with Plenary Health Niagara is for a fixed price of $759 million in today's dollars, to be delivered by a fixed completion date. The contract agreement also makes Plenary Health Niagara responsible for design errors and omissions, project management and sub-contractor co-ordination, increases in construction material prices and labour costs, schedule and project completion delays, and other related constructions risks. In the past, the public sector was responsible for the risks outlined above. However, the Alternative Financing and Procurement (AFP) model now transfers these risks to Plenary Health Niagara - the private sector.
The hospital's 30-year maintenance agreement with Plenary Health Niagara will ensure its new facility's roofing structure, windows, floors, elevators, heating and cooling systems and other physical components are kept in excellent working condition over the term of the agreement. In the past, the public sector was responsible for repair and renewal of the building but now the private sector has this responsibility. Under the project agreement, if the hospital needs a new roof or a new boiler, the private sector replaces and pays for it. The public sector has built in a 30-year guarantee for these physical features, which previously had a one year guarantee only.
The hospital remains responsible for soft maintenance services (housekeeping, laundry and waste service) and non-clinical support services (patient transportation, patient food services and medical equipment maintenance).
Annual Payments to Plenary
The annual payments are like a fixed-rate mortgage with maintenance and repair expenses included. For example, if a homeowner signs a mortgage agreement today, he commits to the cost of the house in today's dollars (this is known as the net present value). However, over the lifetime of the mortgage, the homeowner pays monthly mortgage payments plus the costs of updating and maintaining the house during that period. This cumulative cost is called the nominal cost. In the case of the NHS project, while the cost of the contract in today's dollars is equivalent to $759 million, after 30 years, this will total approximately $1.42 billion.
Annual payments to Plenary Health Niagara are performance-based. Payments can be withheld if Plenary Health Niagara does not meet the agreed to performance standards.
Additional Project Costs
In addition to the contract costs, the NHS pays for other non-capital and fixed costs such as:
- Replacement furniture, equipment and information technology
- 100% covered by local share
- Permits, architectural and engineering fees, transaction fees and project management fees
- Cost shared with Ministry of Health and Long-Term Care
Including these other costs, the total cost of the Niagara Health System project is approximately $1.56 billion