Hospitals held back as building costs rise

Medical projects are being postponed, reduced in scale or are running over budget as the price of building increases.

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ABU DHABI // Medical projects are being postponed, reduced in scale or are running over budget as the price of building increases. The Ministry of Public Works has asked the Ministry of Health to re-evaluate all planned healthcare and hospital projects in the northern Emirates. The Health Ministry plans to build as many as 13 primary healthcare centres and increase the number of hospital beds in Ras al Khaimah. Al Qassimi hospital is also establishing a heart centre.

Dr Abdullah al Nuaimi, the director general of public works, said construction costs had increased so much that the ministry could no longer afford to continue with plans as they were. He said his ministry had asked health officials to "reconsider downscaling or reducing some of their requirements? to look into what pieces could be saved and what pieces should be postponed for another phase". He added that projects had been put through feasibility studies to determine whether all elements of each plan were necessary, and in some cases the scope of the project had been reduced.

Projects that were due for early 2009 have been pushed back until later in the year. Dr Nuaimi would not say which projects have been delayed or how they have been scaled down. The budget problems have been blamed on a lack of qualified contractors, high steel prices over the past year and a shortage of concrete. While prices and supplies have recently returned to normal, the damage has already been done.

"2008 is abnormal," said Dr Nuaimi. "Construction costs increase every year due to inflation but the increase is within five or six per cent." The medical system in the UAE is expanding every year, and the Government is attracting private investors to help meet demands. The exact scope of the problem is not known as many medical projects that have been planned are private arrangements. "I've heard that people who were planning on coming online in 2010 or 2011, are now saying 2012 or 2013," said Richard Larison, the chief executive officer of the American Hospital Dubai. "Nobody is really coming out and saying there is a problem but there is a lot of anecdotal evidence out there about things being pushed back."

He said the plans already being executed for the expansion of his hospital are not affected, but that the inflation is something to bear in mind for future endeavours. "There are situations that, before the project has begun, people are asking if they can make it into a viable business model. People are asking whether they can raise the prices high enough to be able to get a return." Both health authorities, in Abu Dhabi and Dubai, say the increase in prices has not affected them in a significant way, and that no projects have been stopped. The Ministry of Public Works is proceeding on the basis that this situation was a blip and will not be repeated.

Brian de Francesca, the chief operating officer of Tawam Hospital in Al Ain, said the budget of its expansion project had soared from Dh10 billion (US$2.7bn) to "Dh12bn or Dh14bn". "Generally we were always very conservative both on the timing of the project and the inflation rate, which I'm glad we did. If we had estimated 10 per cent inflation over three years [similar to other countries] then we would have been sunk.

"Everyone sees the UAE and the Middle East as an endless bucket of money and people are coming out of the woodwork to get involved on projects," said Mr de Francesca. "There are a lot of very good organisations but there are a lot of questionable ones as well. That is one of the greatest challenges, to weed out who is what."