2024 Report of the Auditor General of Canada to the Northwest Territories Legislative Assembly—Stanton Territorial Hospital Renewal ProjectOpening Statement to News Conference

Andrew Hayes, Deputy Auditor General, Office of the Auditor General of Canada—29 October 2024

Good afternoon. I am here today to discuss the findings of our audit on the Stanton Territorial Hospital Renewal Project. Our report was tabled by the Speaker of the Legislative Assembly earlier today.

In this audit, we wanted to know whether the departments of Finance, Infrastructure, and Health and Social Services, as well as the Northwest Territories Health and Social Services Authority delivered on their responsibilities and commitments for the renewal project. This included whether the project, which was a public-private partnership, provided good value for money for the government and residents of the Northwest Territories. Under a public-private partnership, which is often referred to as a P3, government organizations partner with private sector companies to deliver goods or services while sharing resources, risks, and benefits.

Overall, the departments and the authority could not show how the hospital renewal project, as a P3, delivered good value for money for residents of the Northwest Territories. In our view, this was due to 3 failures: 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 the expected economic benefits to local and northern businesses.

When the government first approved the project, it was only for the renovation and expansion of the existing hospital building. Based on this project scope, the government approved a P3 procurement process. The reason for using a P3 was 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 still delivered the best value for money compared with a traditional procurement model.

The departments and the authority reported in 2015 that the total value of the contract with Boreal Health Partnership was about $750 million. We estimated the project’s overall costs were in the range of $1.21 billion by June 2023. The difference is because property taxes for the new hospital were not factored in, operating costs for services in the new hospital were underestimated, and leasing costs for the existing hospital building were later added. These actual and projected costs over the 30-year life of the project represent a 62% increase from the reported $750 million.

With the revised project scope, the Department of Infrastructure conducted a value-for-money analysis related to leasing the existing hospital building to a third-party developer for 30 years. At the time, the departments and the authority believed a lease had the potential to achieve value for money. However, the Government of the Northwest Territories then subleased the building back from the third-party developer without the required approval and without re-doing or updating its value-for-money analysis.

As a result, the government became a rent‑paying tenant in its own building with a lease that committed it to paying rent and other fees to a third-party developer for 30 years. This 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. 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.

This concludes my opening remarks. I am now ready for your questions.