Daniel Wills: New RAH legal fight a high-stakes poker game to play out in court

CONFUSED by the legal fight over the new RAH? Daniel Wills explains what’s happening — and why it could backfire badly for the State Government.

FROM the outside looking in, the new Royal Adelaide Hospital looks good to go.

But from such a distance, it’s impossible to know if all the details are in place.

As this legal brawl explodes over the $2.1 billion centrepiece of the state’s future health system, it’s just as hard to know who is going to finish on the right side of the truth.

Pretty much the only thing we know for sure is that the hospital is late. First planned for an opening in April this year, there is now no official date for the new RAH’s first admission.

From there, everything becomes extremely murky and confused.

The State Government’s position is that it hasn’t got what it paid for.

It argues that the hospital is not safe and a rock-solid contract signed in 2011 gives taxpayers huge leverage to demand that it be fixed and no money handed over until that is done.

On the industry side, there are claims that the Government now doesn’t seem to even want to move into a hospital that it was so keen to build in sunnier economic times five years ago.

Variously, they claim the Government no longer wants to pay for a Rolls Royce that it can no longer afford or so badly botched its electronic records program that it can’t turn the key.

This has all become extremely messy and looks set to be mired in the court for years.

There is no will on the industry side to give the Government what it wants, understood to be a payment of up to $600 million to compensate for what the builder considers minor flaws.

If they refuse to budge, the Government is threatening the nuclear option of contract termination.

It would then have to bring in new builders to finish the job, adding further time delays, and trigger a huge industry backlash with some of the most expensive lawsuits in SA history.

An outcome may not be reached for years, certainly not before the next state election.

Politically, the Government is also taking a huge gamble.

In the past year, it has fairly successfully shifted blame for delays from itself and on to the consortium and builder.

Benefited by a gag order in the new RAH contract, Health Minister Jack Snelling has unloaded on so-called “partners” in the deal who have been totally unable to defend themselves.

They have no such restriction in the court, and are already becoming vocal opponents.

Labor has staked a lot on the new RAH, a key symbol of its pledges to “keep building SA”.

At the election in 16 months’ time, depending on how all players in this high-stakes poker game play their hands, the new RAH could either be a shining example of the Government’s vision and determination to deliver infrastructure, or hubris and incompetence with public money.

Your questions answered

What is the deal on this partnership?

In June 2011, the State Government signed a public-private partnership agreement with a consortium operating under the umbrella of SA Health Partnership. The consortium is financed by investors and banks to manage the project over 35 years. It subcontracts building, computer, cleaning and catering work.

What does it cost the taxpayer?

Taxpayers start paying about $400 million a year for three decades when the hospital is finished. This covers $2.1 billion construction cost repayments, and services and maintenance when the hospital is running. The Government has so far saved $100 million from the delays.

What are they arguing over?

The hospital was meant to open, and payments begin, in April. The Government claims builders have not kept to the timetable or delivered what it contracted for. It claims there are errors, including small loading docks and shallow ceiling cavities. The consortium offered a “cure plan”. The Government rejected this, insisting the hospital is not safe. Industry sources say the Government is trying to force the builders and consortium to drop the agreed price.

What’s going to happen?

The Supreme Court is hearing disputes over the cure plan and the best way in which the hospital can be declared “complete”. In the negotiations, the Government could agree that the hospital is “complete” if the consortium gives taxpayers a one-off compensation payment for delays, or a reduction in the long-term price. The Government could also try to terminate the contract and get a new builder to finish the job, likely leading to further delays and more lawsuits.

When will the new hospital open?

Best-case scenario appears to be a handover in June next year, but flu season could complicate this. Ongoing court action and disputes could push that back further. Some in the Government believe it remains an outside chance that the hospital will not open before the next state election in March, 2018.