ROYAL ADELAIDE HOSPITAL

112 Mr HAMILTON-SMITH (Waite) (17 July 2012). With respect to 2012-13 Budget Paper 4, vol. 3, p. 71—

1. What functions will be included in the operating lease of the new Royal Adelaide Hospital with the consortia and will it be all functions other than clinical functions?

2. What will be the estimated annual cost to the health budget of the new hospital paying all operating costs (including salaries) not included in the contract with the consortia?

3. What will be the total government cost for the fit-out and equipping of the new hospital not included in the contract with the consortia?

4. Are there contingencies or unexpected costs added into the contract with the consortia that may be triggered during its 30 year lifetime, thus increasing the $397 million payment per annum and if so, what are the triggers?

5. What interest rate or discount rates have been locked into the contract with the consortia throughout the life of the contract, and how do they compare with current interest rates for government borrowing?

6. Are the Public Sector Comparator assumptions still current given the Global Financial Crisis and corresponding reductions in interest rates?

The Hon. J.D. HILL (Kaurna—Minister for Health and Ageing, Minister for Mental Health and Substance Abuse, Minister for the Arts): I am advised:

1. The scope of facilities management services that are to be provided under the new Royal Adelaide Hospital (RAH) contract with SA Health Partnership (the consortia) include:

building maintenance

maintenance of grounds and gardens

general services, including facilities management helpdesk

provision of utilities and medical gas management

cleaning and domestic services

orderly services

patient support

waste management

pest control

security

on-site catering

bulk stores and linen distribution

2. The expected clinical operating costs are based upon the implementation of the service changes and bed numbers set out in the SA Health Care Plan. These take into account the anticipated population-driven growth in demand for services by that date. As stated in the information provided publically at Financial Close, the new RAH will provide a 30 per cent increase in clinical activity, with a 15 per cent increase in physical capacity and 10 per cent increase in staff numbers.

SA Health is currently in the process of further refining an operating cost model that will take into account a number of factors including the overall implementation of the SA Health Care Plan, current and future industrial negotiations with SA Health clinicians and the level of acute presentations anticipated at the new RAH. It would be premature to advise an estimated annual cost of providing these clinical services until such time as these variable factors are better known.

3. Under its contract with the State, SA Health Partnership is responsible for the full fit-out of the new Royal Adelaide Hospital, including coordination with SA Health's specialist clinical equipping contractors. The approved budget for the project includes a range of activities required to be undertaken by the State and its contractors to deliver the project. This budget is $244.7 million, which includes the provision of clinical equipment.

4. The annual service fee payable to SA Health Partnership accounts for:

the facilities management services provided

the cost of replacing elements of the hospital over the 30 year operating term

the cost to service and fully repay the private debt and equity raised to fund the design and construction of the hospital.

It has been acknowledged that there are a number of factors that may influence the actual amount paid by SA Health, reflecting the overall risk transfer inherent in the project, for example these include the Consumer Price Index, volume of actual patient meals provided and abatements. The triggers for these adjustments are set out the in the contract, which is publically available on the SA Tenders and Contracts website.

5. Interest rates applicable under the contract with SA Health Partnership are the subject of confidentiality terms. However, the cost of finance was competitively tendered as part of SA Health Partnership's proposal and the benefit of that competition is reflected in those rates.

6. The Public Sector Comparator is an estimate of the hypothetical whole of life cost of a public sector project if the State procured the infrastructure and services for the new RAH under a conventional design, construct and maintain arrangement. It is primarily an evaluation tool to ascertain the value for money inherent in a Public Private Partnership proposal, in other words, a pre-tender estimate. It is not a tool by which delivery of a project is measured.

Furthermore, the project was competitively tendered at the height of the Global Financial Crisis and the new Royal Adelaide Hospital contract affords the State to benefit for refinancing gains should and when they occur.