HALIFAX -- Nova Scotia's auditor general says the COVID-19 pandemic has the potential to raise costs for a health care expansion project that represents the largest capital output in the province's history.

Michael Pickup released his second report today on the expansion of the Halifax Infirmary and the construction of a community outpatient centre, which has an estimated $2-billion price tag.

He concludes that, so far, the public-private partnership model the Liberal government is pursuing is reasonable and appropriate.

Pickup notes, however, the pandemic can shake financial markets, alter the availability of supplies and create delays in construction.

He says the private-sector partner bears responsibility for any budget and schedule overruns and is also financing the construction of the project.

The auditor comments in his report that COVID-19 "may further increase the financing cost for the private sector," and lead to higher bids.

Pickup's report calls for the Department of Transportation and Infrastructure to complete a thorough assessment to determine the impact of the pandemic on the project and on the chosen public-private model.

The report notes that the department accepts the recommendation. A COVID-19 impact assessment, the department says, has already been carried out on the Bayers Lake Community Outpatient Centre Project.

"This has led to agreed upon processes and procedures with proponents to address COVID-19 as the direct impacts become known, realized and able to be quantified," the department says in the report.

Pickup says the public-private model -- known as "design-build-finance-maintain," or DBFM -- appears to be a sound choice based on solid analysis.

This form of partnership makes the private partner responsible for designing the project to provincial specifications as well as for construction and long-term maintenance.

Pickup says while there may be a higher up-front cost, over time the province may benefit because some financial risk is transferred to the private sector, depending on the details of the contract.

In a report last December, Pickup had raised concerns about inadequate safeguards to prevent fraud and errors, and he called for improvements on systems to keep the project within cost and on schedule.

In Tuesday's report, however, Pickup says four out of five of his earlier recommendations have either been completed or were in the process of being finalized.

The latest report also notes the final cost of the project is yet to be determined, and can't be analyzed until formal bids from potential private sector partners are received and a final contract approved.

"Much is left to be done and significant milestones remain," Pickup commented in a news release.

He notes specifications for design must still be drafted, private sector partners identified and contracts for maintenance will have to be hammered out.

In 2015, the province made the decision to involve the Department of Transportation and Infrastructure Renewal in all building projects over $1 million.

Last year, the province created a Crown corporation to oversee the Queen Elizabeth II project. It reports directly to the deputy minister of the Transport and Infrastructure Department.

This is Pickup's last report to the Nova Scotia Legislature. He is leaving Nova Scotia to become Auditor General of B.C. on July 27.

This report by The Canadian Press was first published July 14, 2020.

With a file from CTV Atlantic's Bill Dicks.