IMANinsight: Our understanding of the Matter : Ridge Hospital Re-Construction

The controversy over the cost of re-construction of the Greater Accra Regional Hospital at Ridge, Accra (Ridge Hospital) brings to bare yet another failure of the governing authorities of this country to act in a timely manner, but rather after the fact. This in turn has resulted in massive losses to the state in numerous judgment debt cases. Complicating the issue is also the incomplete information being circulated via various media outlets. It is important first of all to clarify that, the construction at Ridge Hospital is not a mere refurbishment but a re-construction of a fully functional ultra-modern new and purpose built hospital (to be built on an already occupied site). The project has passed through all necessary constitutional approvals for Single Sourced Procurements which include parliamentary approvals.

The facts of the matter are that Messrs Bouygues Batiment International (BBI) proposed to re-construct Ridge Hospital into a new an ultra-modern hospital with 620 in-patient and intensive and day care beds at a cost of USD 306million. However, the government was limited to borrowing only USD 250,000,000 at a time hence the project was to be completed in two phases. Phase 1 was estimated at a cost of USD 219million and Phase 2 at a cost of USD 88million.The report that Ridge Hospital is being renovated to a 420 bed capacity (from its present 200 bed) at a cost of USD 306million is misleading.

Second fact is that, Single Source Procurement was used to fulfill the terms of conditions of the Financial Agreements between the Government of Ghana and Messrs BBI. Parliament approved the two credit Agreements between GoG and the USA EXIM Bank and the HSBC Bank respectively for the sums of USD 157.5million and USD 92.5million on 16thAugust 2012. Conditions tied to the EXIM loan required 85% US Procurement of prime QUALITY made in USA goods and equipment. This detail is crucial because it is one reason for the substantially higher than estimated fair market prices (EFMP). Parliament agreed to these terms and at present, work at Ridge Hospital has commenced.

Thirdly, Value for Money (VFM) Assessments was carried by Crown Agents Ghana Limited (CAGL) in which the final report issued on 15th September 2013, indicated an over pricing by USD 142million. Negotiations moderated by CAGL were carried out to arrive at a compromise between GoG and Messrs BBI. Negotiations were suspended between October 4 and November 12, due to non-payment of fees to CAGL for 2013. After resumption, extensive negotiations were made, during which Messrs BBI justified its position. Crown Agents however insisted that the project could still be reduced by USD88 million.

Some justifications provided by Messrs BBI were that, in comparison with the Legon Hospital, the total 54144m2 space for the Ridge Hospital project 'are entirely developed and fitted out and that neither 'Shell & Core only' areas provided for future spaces is considered under the Ridge Hospital Space programme'. Comparisons then cannot be made by virtue of number of beds but also to the nature of the space available for the rehabilitation amongst others. Drawing parallels to Aliko Dangote's ability to build a 1000 bed hospital at a cost of USD 12.38 million in Nigeria is not informative. So it is also with comparisons to the Legon Hospital, another 620 bed hospital estimated at a cost of USD182million. Claiming bloating of total cost on the grounds of the Tamale Teaching Hospital, a 400 bed capacity hospital constructed at a cost of USD 50 million in January 2014 is equally devoid of any constructive lesson.

Informed deductions can be made only from comparisons to the rehabilitation of the Police Hospital. The rehabilitation shares key characteristics with the Ridge Hospital in that, it is being financed internationally, and also being rehabilitated in a restrictive area similar to Ridge Hospital. This means that, 'the entire construction activity will be concurrent and adjacent to the operated existing facility and therefor involves significant enabling works (generator and transformer relocation, demolition of some existing installations, and construction of new temporary utilities), as well as a high strict traffic, environment and acoustical management control'. The Police Hospital rehabilitation is priced at USD 7363/m2. This sum is higher in comparison to Ridge Hospitals USD 5637/m2 (see appendix).
Additionally, the contractor put forth additional value added features and challenges such as Leadership in Energy and Environment Design (LEED), 'consolidation of a number of major department of the hospital in a 5 storey building and under one roof (instead of small and light single storey pavilions for different departments) which presents technically challenging structural configurations, imposed by the available narrow land and even more when designed under zone 4 seismic conditions'.

Additionally, Messrs BBI during its discussions with MoFEP, MoH and Crown Agents shared data on similar hospital constructions in terms of standards and quality, around the world which have been constructed at a cost range between USD4888/m2 and USD11708/m2. Information on ten international standard hospitals by Messrs BBI, as well as a case study to two US standard hospitals and lastly, a comparison to the Police hospital were given. (Summary of comparison in appendix)The data indicates that, Messrs BBI is rendering the re-construction of Ridge at a highly competitive rate.

After the following justifications were provided by Messrs BBI, an agreement was reached by all the stakeholders which was formalized on 15 November 2013 to decrease the cost of the project by USD27 million. This money was to be remitted to MoH in the form of concessions offered by Messrs BBI which included 3 year maintenance program on major items, double the number of staff housing units, BBI to shoulder additional costs in insurance, transportation of materials and equipment due to source of supply, amongst others. Altogether, the concessions were valued at USD27 million.

When all the cards are laid on the table, a few things become clearer. The minority in Parliament should have been given the facts on the finality of the negotiations that revised initial claims of over valuation to what it is we have now. To perform Retrospective amendment of these terms may be more costly, a cost that will be borne by the ordinary Ghanaian. Messrs BBI was awarded this contract by the book and there is great difficulty in seeing malfeasance as alleged by certain outlets. Lastly, given the justifications, Ridge Hospitals Re-construction is within the range of other international hospitals of equal specifications, if not more competitive, and also more importantly is being renovated at a lesser cost in comparison to the Police Hospital. IMANI decided to investigate the details of this project just as we did with STX, GUMA and SNECOU housing projects on the principle of ensuring value for money analysis.

For interviews, please speak to Ms Maud Martei on 0302 972939.

Appendix
Table: Local and International Hospital Comparisons