Rockhampton Hospital.
Rockhampton Hospital. File

Dispute over Rocky Hospital project payments revealed

THE 1988 Ahern Government cabinet papers unsealed and released this month have revealed an interesting discussion over payments to contractors on Rockhampton Hospital's expansion.

The documents detail exchanges between the then-cabinet and Health Minister Leisha Harvey, who had been approached by project managers of the mid-1980s construction work.

In July 1988, more than a year after practical completion of the work, Optimum Project Consultants claimed additional fees beyond their initial contracted payment.

The company had previously sought the additional payment from the Rockhampton Hospitals Board, but was referred to the State Government.

They were claiming $136,812.35 in additional work and interest after a project overrun of 62 weeks.

A letter from the firm to the health department said the initial contract period was 124 weeks, but ran to 186 weeks.

The company said it was "involved in a huge amount of additional work” to resolve "many hundreds” of defects, negotiated "hundreds of variation claims” made by the contractor, and researched and assessed the contractor's "inflated prolongation claim”.

In a brief to cabinet, Ms Harvey said the Rockhampton Hospitals Board was not contractually obliged to pay for the service as the project manager was employed with an agreed total fee for service.

"However, certain other consultants on the project were paid additional fees of varying amounts but as the Department of Works advises, the contractual rights of the consultants varied on this point,” she wrote.

Ms Harvey said the request could be considered due to the extent of additional, unforeseen expenses.

Additionally, the project manager had recommended selected tendering but this advice was not taken by the Health Department which used an open tender process.

In her summary, Ms Harvey advised cabinet the request could escalate into litigation and favour the project manager.

"Although the Project Manager accepted 'possibly inequitable terms, conditions and direction' in full knowledge of the potential risks, he may argue that he was subject to excessive direction and thus restrained from exercising effective control,” she wrote.

Ms Harvey suggested the Rockhampton Hospitals Board should offer $75,000 as an ex gratia payment.

On November 14, 1988, the cabinet budget committee rejected Ms Harvey's submission.

A further document shows Ms Harvey then wrote to Cabinet on November 22, 1988.

In this submission, Ms Harvey said "the firm will, without doubt, institute arbitration proceedings and will very likely receive at least half of its claims, i.e. about $70,000 as a minimum amount”.

"As a commercial decision, and by far the cleanest method of finalising the above project, it is considered that my former recommendation would in the long term be the most economical and create fewer problems for the Government generally,” she wrote.

"It is also pointed out that the only "winners” in this situation are the legal advisers whose fees would probably exceed $75,000 proposed as the settlement.

"By making the ex gratia payment to the project manager, it is felt that the firm would thus be afforded natural justice, even though in the strictly legal sense, it does not appear to have a legitimate claim.”

Ms Harvey again recommended a $75,000 payment be offered to the firm.

However, Cabinet confirmed the decision of the budget committee and refused the payment recommended in a decision on November 28, 1988.

As these are the only documents to be released, The Morning Bulletin has been unable to confirm the final outcome of the dispute and has approached the Health Department for further information.