2024 Report of the Auditor General of Canada to the Northwest Territories Legislative Assembly—Stanton Territorial Hospital Renewal Project will cost the Northwest Territories hundreds of millions more than originally reported

2024 Report of the Auditor General of Canada to the Northwest Territories Legislative Assembly—Stanton Territorial Hospital Renewal ProjectStanton Territorial Hospital Renewal Project will cost the Northwest Territories hundreds of millions more than originally reported

Yellowknife, 29 October 2024—A report from the Office of the Auditor General of Canada tabled today in the Northwest Territories Legislative Assembly concludes that the departments of Finance, Infrastructure, and Health and Social Services, and the Northwest Territories Health and Social Services Authority could not show how the Stanton Territorial Hospital Renewal Project provided residents of the Northwest Territories with good value for money.

“The departments and the authority could not show that the project provided good value for money on behalf of the residents of the Northwest Territories because of 3 failures,” said Deputy Auditor General Andrew Hayes. “First, decisions that significantly changed the project’s scope over time were not based on evidence or analysis; second, key costs were not considered or were underestimated when planning the project; and third, there was little evidence to show whether the project provided expected economic benefits to local and northern businesses.”

When the government first approved the renewal project, it was only for the renovation and expansion of the existing hospital building. Based on this project scope, the government approved a public-private partnership (P3) procurement process to transfer most of the financing and construction, operating, and maintenance risks to the private sector. The winning bid accepted by the government significantly changed the project scope—instead of a renovation and expansion, the project now included building a new hospital and renovating the existing hospital to lease it out. The project then moved forward without analyzing whether a P3 process still delivered the best value for money compared with a traditional procurement model.

According to the government, the original contract value of $750 million was already the largest project it had ever undertaken. The audit estimated that by June 2023, the project’s overall costs were in the range of $1.21 billion. These actual and projected costs over the 30‑year life of the project represent a 62% increase from the $750 million reported by the government in 2015.

The Government of the Northwest Territories went on to sublease the original hospital back from a third-party developer, becoming a rent‑paying tenant in its own building with a lease that committed it to paying rent and other fees to the third-party developer for 30 years. The sublease also resulted in the government taking back some of the risks it had intended to transfer using the P3 model.

“The people of the Northwest Territories and the government will feel the consequences of decisions that were made without proper analysis for decades to come,” said Mr. Hayes. “This project provides many lessons to be learned for future large-scale projects to ensure that the government and residents of the Northwest Territories receive good value for money spent.”

The report Stanton Territorial Hospital Renewal Project is available on the Office of the Auditor General of Canada website.

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