Evaluation of the GP Super Clinics Program 2007-2008

7.2.2 Managing Delays in the Construction Processes

Page last updated: 2012

Delays in the various phases of development occurred in the GP Super Clinics Program. Many of these delays appeared to relate to inaccuracies in estimates, by the Directors and associates, of times associated with the processes required for the design, documentation and approvals for construction of the GP Super Clinics. Once the GP Super Clinics were committed to construction, the rate of completion almost universally aligned to contract requirements.

Given many of the GP Super Clinic Directors were medically trained it is hardly surprising that estimates of time for the other phases of development were inaccurate. However, particularly post-2010, most Directors contracted independent project managers who had a greater understanding of these processes and timeframe implications. These findings suggest the need, in this or similar programs, for funding recipients to include for the appointment of these management resources at project development stages much earlier than they might assume them to be required.

Land Acquisitions

Most GP Super Clinics developments that have included one form of land acquisition or another as an essential component of their delivery, have not progressed to the original program or Funding Agreement milestones. As with commercial property developments, it is common for construction projects that include land acquisition, to experience subdivision or consolidation of existing parcels of land commonly taking longer than the transfer of title in a single block of land because of the multiple processes involved.

Funding recipients should have an extensive understanding of these multiple processes and the resultant effects on final land acquisition. This was not evident and therefore is a potential risk not only to the funding recipients but also to the Department of Health and Ageing. The Funding Agreement approach of requiring a measurement of progress on land acquisition against only one milestone date – the date on which the funding recipient is to notify full and final tenure over the land - does not reflect a sufficient number of interim steps in the process for the Department of Health and Ageing to be able to monitor that progress effectively until too late.

Development Approval and Re-zoning

Development approval and re-zoning requirements are always unpredictable in any form of construction or property development. No-one is in a position to correctly anticipate planning approval times regardless of relationships with Council or Council members. Ultimately, the planning staff in the Council office, and the public in the case of public notification and consultation, will finally determine these outcomes.

In the GP Super Clinics Program 2007-2008, virtually all initial estimations of the timelines for DA approvals were inaccurate. In the initial design and development application submissions, funding recipients and/or their architects did not correctly anticipate Councils’ requirements for these land uses. These errors in estimation have always led to delays, most of which were incorrectly blamed on the Councils.

The GP Super Clinics are generally classified in urban planning Law and Regulation around the country as a “Medical Centre” or “Health Care Building”. Consequently, the GP Super Clinics have tended to be encumbered with significantly greater requirements for parking than other, similar land uses (e.g. professional offices). The relatively tight requirements of the GP Super Clinics within these two definitions (as opposed, for example, to “Shop” or “Office”) has, in several cases, required some level of re-zoning because the existing zoning did not provide for this land use. In contrast, GP Super Clinics that have been or are being developed on “campus” land (whether university or hospital campus) have generally been delivered with fewer DA delays because “third party” Council approvals are not required.

Re-zoning (or Material Change of Use in some states) has always required additional, lengthier approval processes through Councils and has been a trigger for demands from Councils and Utilities for “extra-over” infrastructure works.

Funding

There is no evidence that any of the GP Super Clinics have been delayed by funding processes within the Department of Health and Ageing. The majority of funding delays have, in fact, been budget over-run delays. The budget over-run delays have been, in the main, the result of non-existent, late or ineffective application of qualified design management or cost planning resources to the designs.

In a few notable cases, the legal securing of funding from third parties has been unreliable. The consequences of a shortfall of funds at or near the end of the construction phase of a project are always expensive and generally highly problematic for the progress of the project. This was evidenced by the circumstances behind the two GP Super Clinics which were not completed at the time of this evaluation due to their inability to secure additional funding .

Appointment of Contractors

Delays in obtaining Building Approvals (or Construction Certificates) to allow building commencement have generally been due to the “carry-over” effects of DA approval conditions into BAs. There has only been one instance of delays arising through poor documentation and/or tardiness on the part of a funding recipient. There has been only one instance of delays arising because the funding recipient chose a non-competitive construction delivery approach.

Construction Delays

There have been few, if any, major delays to practical completion during the construction phase, that have not been related to funding shortfalls. A significant number of GP Super Clinics have been delivered on program.

There has, however, been significant evidence of funding recipients not incorporating more “time is of the essence” provisions in their building contracts. Further, there has been significant evidence of funding recipients not using the preferred AS 2124 form of contract. In both these instances variation-driven delays and cost increases have resulted.

There have been a number of instances of funding recipients requiring design changes after construction has commenced or is well advanced. Design changes after commencement of construction always cost more than usual (because they are procured in a non-competitive setting) and nearly always delay the project. These design changes have been linked, in some instances, to problems with sourcing additional capital (by loan or other investment).

In summary, there are lessons and recommendations which are applicable more broadly for managing grants programs with capital funds for property development. Of all 36 GP Super Clinics across the 37 sites, which were commenced in the establishment aspect of the program only one is not continuing. This was due to the Funding Recipient’s inability to secure funding required in addition to the capital component provided by the Australian Government.

This failure to complete rate (2.7%) of the total number of GP Super Clinics committed or 5.6% of completions as at the date of the surveys needs to be viewed in the context of construction in Australia at this time. Given the financial conditions during the past three years this rate is very low. The Construction Sentiment Monitor published by Davis Langdon in August 2011 records: “Worries about the GFC and a shortage of work have eased somewhat, while the relatively new problem in sourcing project finance persists.36 The availability of finance was the largest single risk to the property development and construction industries in Davis Langdon surveys (17%).36

36Construction Sentiment Survey: Findings Report 15. Melbourne: Davis Langdon 2011.