Nova Scotia auditor critical of province's $34.5 million purchase of unfinished hotel

HALIFAX -

Nova Scotia's auditor general is calling the province's $34.5-million purchase of an unfinished hotel to convert it into a health facility an "unusual arrangement" that lacked appropriate due diligence.

In a report released Tuesday, Kim Adair says the government didn't take the time to assess other properties that may have turned out to be better for their needs than the one bought on Hogan Court, in the Halifax suburb of Bedford.

Adair also says officials failed to take the necessary steps to minimize costs and did not assess the feasibility of converting the property. Furthermore, the company with which the Health Department made the deal, Cresco Holdings, had not even completed purchase of the hotel from another developer at the time.

"The province spent $34.5 million in an unusual purchasing arrangement with a developer that did not own the property and then quickly approved a $15-million renovation budget without detailed cost estimates," Adair told reporters.

Purchased from Cresco in January 2023, the hotel is currently being converted into a transitional care facility that will serve patients who no longer need a hospital bed, as well as people waiting for a long-term care bed who can't live at home. A second such facility is also planned for Bayers Lake in the Halifax area.

The auditor's report estimates renovation costs for Hogan Court have risen to $17.4 million, while the number of beds has been reduced from as many as 80 to 68. The facility was projected to become operational last month, but the completion date has been delayed until July, and the report says "it is unclear when the facility will become operational."

"Not surprisingly the conversion has resulted in project delays, cost increases and reduced service capacity for patients due to unforeseen design limitations," the auditor said.

Adair's report also finds that about $81 million in untendered contracts for the development of the two transitional care facilities did not comply with government procurement protocols.

Included in that $81 million is a five-year, $67.5-million contract to have a third-party operator run Hogan Court once it's operational. In December, the government quietly announced that health management company Shannex would be the operator, although the value of the contract wasn't disclosed at the time.

"At the end of the day, this 68-bed facility will be extremely costly to Nova Scotia taxpayers," said Adair, who noted much of the problems she uncovered were a result of the government's haste to deal with pressure and challenges in the health system.

"Addressing significant challenges should not promote a culture where expediency takes precedence over appropriate due diligence and value for money," she said.

But the government made no apologies for its approach Tuesday, saying it needs to work quickly to free up beds at crowded hospitals and emergency departments.

"Hogan Court will give us 68 more beds at least two years faster than building a facility from scratch," Health Minister Michelle Thompson said. "We are learning things and we know we can improve, but buying this building was absolutely the right decision."

However, Braedon Clark, the Liberal health redevelopment critic, said the report produced "more red flags than I can count." He noted that the Tory government's 2023-24 budget document was titled "More Health Care, Faster."

"What we see from this report is less health care, slower and more expensive," he said.

NDP Leader Claudia Chender said the report raises serious questions about how the government deals with private interests.

"This is a government that continues to prefer to deal with private interests in a way that is not transparent, and so the question is who are they helping?"

Adair's report has six recommendations including that contracts be signed with private-sector entities before work starts, that conflict-of-interest disclosure be required for teams evaluating and approving procurement and that sole-source contracts be reviewed to determine whether public tendering is more appropriate.

This report by The Canadian Press was first published Feb. 13, 2024.

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