Source: Radio New Zealand
Health NZ had a $315m discrepancy between forecast and actual capital spending in the first quarter of 2025-26. RNZ / Samantha Gee
Health New Zealand (HNZ) is struggling to build new hospital projects, partly because staffing cuts have slowed down procurement activities, according to a newly-released report.
HNZ is headed into another Budget with long-standing infrastructure delivery challenges caused partly by job cuts, according to the Treasury report released under the Official Information Act.
The report showed that when the finance and infrastructure ministers met Health Minister Simeon Brown in December for a “please explain” meeting, “health capital underspends” were a focus.
“Health NZ is significantly underspending its capital expenditure compared to forecasted intentions,” was a key message.
A second was that “individual projects are also frequently running over time and over budget”.
The Infrastructure and Investment Ministers Group has been pushing chief executives and ministers of capital-intensive agencies with “the highest levels of Crown capital underspend” like HNZ to make their forecasts much more accurate.
Health NZ had a $315m discrepancy – including $190m on buildings and plant – between forecast and actual capital spending for the first quarter of 2025-26.
The Treasury papers tracking this are only released publicly months after they were given to ministers.
RNZ requested additional documents from Infrastructure Minister Chris Bishop and was provided one from December 2025, written just ahead of Brown’s meeting with Finance Minister Nicola Willis and Bishop.
That three-page report said that fixing the underspend and under-delivery of hospitals faced big hurdles.
“Health NZ has long-standing infrastructure delivery challenges stemming from two key factors: Health NZ’s organisational capability and market capacity,” Treasury told Bishop and Willis.
The construction sector has 2.1 percent fewer jobs now, compared to a year ago.
“These challenges are further exacerbated by difficulties in recruiting and retaining experienced project directors for major projects, reductions in staff numbers which have slowed procurement activities [and a third factor that was blanked out],” Treasury said.
“Efforts to address these challenges are ongoing (via improving project sequencing and bundling, and staff capacity building) but progress is slow.”
It did not help that health’s project teams tended to be optimistic in forecasting capital expenditure and “often do not accurately update forecasts to reflect experience and trends in expenditure”.
Despite myriad costly efforts to improve this since HNZ was set up in 2022 – in part to fix the fragmented hospital building-and-management regime under 20 health boards – the weaknesses have persisted between governments.
HNZ was promising in 2023 to “make health infrastructure delivery quicker and more efficient by standardising Te Whatu Ora infrastructure planning, design, decision making and construction”.
That year Health NZ set up a new national infrastructure team, but the whole agency has since undergone financial upheaval and a reset, and had now embarked on decentralisation which Brown this month said was the government’s most significant structural move on health.
In April 2025, the government put out a multi-billion-dollar, 10-year plan for rebuilding hospitals and promised building would become more efficient, partly by doing things in phases. At the time health projects with ministerial approval worth $7.44 billion were underway.
One of the first projects to go the bite-size route has been Nelson Hospital, which HNZ recently said was on track but that Treasury last year said faced an 18-month delay on its inpatient block.
At the time the government launched the 10-year plan, HNZ papers show it foresaw significant risk it would not invest in the right place or “meet government expectations around providing a prioritised pipeline of capital investments”.
Early this year, a study to assess the agency as the rapid decentralisation ordered by Brown got underway found it had workforce gaps in its infrastructure and investment group particularly in the northern and central North Island regions.
The January 2026 internal report said the delays in delivering projects had a favourable short-term effect on HNZ’s cash balance.
But it added that “delays are likely to lead to increased project costs such as increased labour, equipment and material costs in the long term”.
Related extra depreciation costs had taken $85m off the bottom line in 2025-26 – when HNZ aims to report a $200m deficit – and that would jump by another $160m next financial year, even as it tried to get to break-even.
One of the causes of the delays was lack of capacity – Treasury in December had said: “Common issues across infrastructure investments include challenges with HNZ capability, sector capacity and internal prioritisation”, – but a second one carried a ring of hope: That more effort was being put in to get better decisions round investments, the January report said.
In December, ahead of the ‘please explain’ meeting for Willis and Bishop, Treasury listed some questions “you may wish to ask Minister Brown…” but Bishop’s office blanked them out.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
