By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Construction costs for the second New Providence hospital are 27.5 percent higher than those for the Minnis administration’s aborted PMH expansion because the latter did not include medical equipment.

A “feasibility study” for the new hospital, to be located near Perpall Tract, reveals that its construction costs of $7,857.65 per square foot - some $1,693.07 higher than the $6,164.58 estimate for the $55m proposed Princess Margaret Hospital (PMH) tower - are greater because the latter project did not factor in the costs associated with purchasing medical equipment.

For that reason, the study suggested that a better cost comparison was provided by the Arima General Hospital in Trinidad & Tobago, which was completed in 2020 via a design-build contract. A 150-bed facility spread over 26,500 square metres, meaning it is not dissimilar to the new New Providence hospital, its cost per square metre of $7,750.7 is in line with that eyed by the Davis administration.

“The proposed hospital project in The Bahamas has similar geographical conditions with the Arima General Hospital in Trinidad,” the study asserted. “Both are located in the Caribbean region, with building materials relying on imports and a shortage of construction labour. In comparison to Trinidad, the prices for local materials and labour in The Bahamas are generally higher.”

Some $102.4m, or 35.9 percent and over one-third of the planned $285.25m investment in the second New Providence hospital, represents the cost associated with purchasing and installing the necessary medical equipment. Such funding was not included in the Minnis administration’s $55m plan to construct a new four-storey tower at the existing PMH site, thus making it a poor cost comparison.

“The contract did not include the purchasing of major medical equipment,” the “feasibility study” said of the now-abandoned PMH expansion. The Government and Opposition have long sparred over which option was better for delivering quality, affordable healthcare to the Bahamian people - expanding PMH or developing the second New Providence hospital.

The Minnis administration has secured $115m in financing, provided by Banco Santander and underwritten by the World Bank’s Multilateral Investment Guarantee Agency (MIGA), with around $85m of this sum dedicated to construction of a four-storey tower at the existing PMH site similar to the Critical Care Block.

This would have included an accident and emergency (A&E) unit on the ground floor, with additional beds on the third and fourth levels to address the hospital’s capacity challenges. The World Bank-guaranteed loan also had an interest rate of just 1.879 percent - similar to the 2 percent rate obtained from the China Export-Import Bank for the hew hospital.

However, following the 2021 general election, the Davis administration elected not to proceed with the PMH plans and returned the funding back to the lender. Dr Michael Darville, minister of health and wellness, explained that the Government was uncomfortable that $20m of the financing had been allocated to funding the start-up and expansion of micro, small and medium-sized enterprises (MSMEs).

He explained that the Davis administration wanted the entire $115m facility to be dedicated to improving The Bahamas’ healthcare infrastructure and sought to renegotiate the loan terms with Banco Santander. However, the bank had “no appetite” for such a renegotiation, and the Ministry of Finance advised that the best course was “to send the money back” which it did in April 2022.

Dr Duane Sands, the Opposition’s chairman and minister of health during a period when the PMH expansion was conceived, yesterday told Tribune Business that the increase in construction costs - particularly since the COVID-19 pandemic - has been “mind boggling”.

He asserted: “I cannot speak to what’s happened to construction costs with the era of tariffs. It’s mind-boggling. The difference in costs may be legitimate, but I am shocked. You hear about the increase in construction costs, but I don’t know how much of that is real and how much of that is fudge for profit margins.

“Given that much of the construction [for the new hospital] is coming from the Chinese contractor, there ought not be a whole lot of wiggle room.” Dr Sands signalled he remains wedded to the belief that the PMH expansion and upgrade would have been a better option than a second New Providence hospital.

“The question, ultimately, particularly given the fact they need a ‘win’, is I think they are going to press on regardless,” he argued of the Government’s approach to the second hospital. “I use the word ‘win’ advisedly. They need something to point to to say: ‘We did this’.

“That’s certainly not going to be in Grand Bahama. I doubt any of the other airports, other than Cat Island, are going to take off. They may throw up a little hut in Mayaguana. For the most part, they have to get some kind of signature project they can point to.

“They are going to burn whatever geopolitical capital they don’t have on the altar of getting re-elected. They’re going to proceed.” A private sector source, speaking on condition of anonymity, voiced concern to Tribune Business that Bahamian taxpayers will likely have to pay an extra $2.2bn over the next 30 years to sustain the second New Providence hospital as revealed by this newspaper.

“We’re all going to have to pay somehow,” they warned. “I’m not so sure we really, really need a brand new hospital. I think we could fix up PMH, like Duane Sands has been saying all along, but the Government seems determined to build this new hospital. It just bothers me that we’re going to be stuck with a $2.2bn bill to pay over 30 years. There’s not much we can do about it.”

Meanwhile, despite stating that the cost comparisons for the second New Providence hospital involved “similar projects in the region”, meaning the Caribbean, the “feasibility study” asserted that a “good reference” for the project was the $160m new patient facility constructed at Hawaii State Hospital.

This was due to the area’s similarities with The Bahamas - multi-island geography and dependence on tourism, with “higher commodity prices and higher labour costs”. That hospital’s costs per square metre were higher than for the proposed New Providence hospital, standing almost $1,000 higher at $8,745.08 per square metre compared to the project’s $7,857.65.

The total investment required for the second New Providence hospital is some $285.25m, which is some $18m higher than the project’s $267.16m construction costs due to the inclusion of various loan-related fees and accrued interest. The China Export-Import Bank is contributing $195m in debt financing, at an interest rate of 2 percent, with the Government to raise the remaining $72.16m.

The loan is due to be repaid over 20 years, inclusive of a five-year “grace period”, and is “expected to be fully repaid by 2041”. The study added, though, that physical construction of the hospital - to be completed in three years from its start - will only account for 55.7 percent or just over half the total investment.

“The total investment of $285.25m is comprised of building costs of $158.75m, purchasing and installation of equipment of $102.4m, preliminary design cost of $6.01m, a loan commitment fee of $210,000. a loan management fee of $1.27m, and interest during the construction period of $10.39m,” the report said.

“Initial working capital is set at $7.7m, tentatively based on the working capital required to start a business in the first year of the project.”