North Wales health board rapped by auditors for £60m Ysbyty Glan Clwyd revamp overspend
A health board was rapped by auditors for “deficiencies in governance and management” that led to a project soaring £60m over budget and arrests being made.
The final bill for removing asbestos and revamping Ysbyty Glan Clwyd, Bodelwyddan, went almost 55% over its original budget to £171m.
The Wales Audit Office (WAO) report sets out how “weaknesses in the business cases” for the works were not addressed by Betsi Cadwaladr University Health Board or Welsh Government prior to being signed off.
In January 2014 more money would be needed for the £110.4m project, after the health board discovered invoices totalling £5m had not been paid.
NHS Wales auditors were called in and found “two different versions of the regular reports about the project’s financial performance”.
They also discovered “instances of progress reports being amended to misrepresent the project’s position to the project board”.
The report said: “The information presented at commercial meetings between the supply chain partner, the external advisors and the health board showed correctly anticipated spending was likely to exceed the approved project budget.
“However, these meetings operated outside the project’s governance structure, with no defined reporting line internally to the project board.”
North Wales Police arrested a number of health board staff and external partners after Betsi referred the dual reporting of figures to NHS Counter Fraud Service Wales in May 2014.
A second NHS audit in September 2014 found the outline and full business cases for the scheme were “insufficiently prepared” with no evidence of “effective internal review and scrutiny”.
Betsi failed to tell the contractor its maximum costs were £89.9m, “substantially lower than the supply chain partner’s own expectations”.
It then emerged only one contract was signed – for £42.6m.
However, unknown to Welsh Government or Betsi, a member of staff “subsequently amended the strategy to a two-contract strategy”.
While two staff faced disciplinary action by the health board, the CPS decided not to bring charges against any individual or organisation in 2019.
The board also chose not to pursue civil proceedings against anyone involved.
WAO auditor general Adrian Crompton said: “This report demonstrates the fundamental importance of good governance and robust oversight of complex capital projects.
“The very significant cost overrun might well have been avoided if concerns about the original business case had been properly addressed at the outset.”
He added lessons learned “are of relevance to all Welsh public bodies engaged in major capital programmes”.
The board was served with statutory improvement notices by the Health and Safety Executive (HSE) in 2010, following two “asbestos-related incidents”.
In January 2010 a leak above two wards showed a risk of asbestos falling onto the floor below – and in November the board learned the ceiling void above main theatres was contaminated.
The HSE asked for a plan detailing how it was going to remove the fire-retardant material from its premises by 2011.
In 2012 Welsh Government agreed funding of £110.4m to strip out 300,000 tonnes of waste from the hospital.
However concerns about the business case, raised by health board facilities staff, were not fully addressed and not communicated to Welsh Government.
Although the project was “largely completed on time” according to the WAO, it cost Welsh Government an additional £53.2m.
Betsi Cadwaladr UHB also had to find a further £7.2m from its own funds.
The report accepted the deadline set by HSE created “challenges for both the Health Board and the Welsh Government”.
Other improvement works at Ysbyty Glan Clwyd were carried out during the asbestos removal, completed in 2019.
They included state-of-the-art operating theatres, new emergency treatment quarter, new wards, new pathology department, new critical care unit and new communal areas.
North Wales MS Llyr Gruffydd said: “It’s unbelievable Welsh Government should sign off on such a large contract without first ensuring there is a water tight business case to support it.
“Any other organisation or business in receipt of public funds must provide these assurances, with supporting evidence, before receiving public money.
“It seems this failure by Welsh Government resulted in the project going significantly over budget, which might have been avoided had they done their work properly at the beginning.
“While the Health Board needs to answer questions about their poor governance and management of large projects, it’s ultimately Welsh Government that failed in this instance, and they need to be held to account.”
Mark Wilkinson, executive director of planning and performance, accepted the board had been “overly optimistic” about costing the “ambitious and complex” project.
He added: “The urgency at which we were required to begin construction work to meet the HSE’s requirements, as well as the nature of removing asbestos from a live working environment, resulted in costs which were unforeseen at the outset of the project.
“We took immediate actions in 2014 to strengthen the project governance and, following the commissioning of an external review, implemented revised governance and management structures and processes for all capital projects in 2015.
“As acknowledged in the report, the health board has learned lessons from this project, including strengthening governance arrangements both on this and all other capital projects in North Wales.”
Mr Wilkinson said independent analysis of 14 subsequent capital projects had “provided assurance that appropriate project governance and oversight are in place”.
He added: “The team behind the project can take pride in successfully delivering improved facilities and services while minimising disruption to a live hospital site.”
A Welsh Government spokeswoman said the work had “significantly enhanced the facilities for patients and staff” at the hospital.
She added: “The report recognises the programme was complex due to the hospital continuing to operate whilst the work was undertaken.
“It also notes improvements made by the health board and ourselves around the management of capital schemes.”
Jez Hemming – Local Democracy Reporter (more here). Spotted something? Got a story? Send a Facebook Message | A direct message on Twitter | Email: News@Deeside.com