Auditor General reveals new Mississauga Hospital project $4 billion over budget 

A recent report by Ontario’s Auditor General revealed the estimated costs for the redevelopment of the new state-of-the-art Mississauga Hospital are more than $4 billion higher than the approved budget. If cost savings are not found, the audit warns the hospital’s ability to offer the full range of services could be in jeopardy.

While Trillium Health Partners, the organization that manages hospitals in the city, and the Province have been wary about releasing detailed cost figures for the project, the audit conducted by the AG analyzed the procurement and delivery of it. The total project cost has not been finalized, but the rebuild and maintenance through the period of the contract is now projected to cost more than $16 billion, exceeding the current Treasury Board-approved budget by over $4 billion (for design, construction, financing, maintenance over 30 years and ancillary costs), according to the latest estimates in October. 

Among several findings, the AG reported EllisDon, the construction company behind the expansion, has been reluctant to provide details about what is driving the alarming cost overruns, which have exceeded the Provincial treasury board’s approved budget threshold for the project by more than $2 billion (40 percent) for design and construction costs alone.

Perhaps most alarming is that construction of the massive 22-storey hospital with more than 950 beds has not even started.

“[Infrastructure Ontario’s] internal analysis has indicated the project is not meeting the affordability target (the treasury board-approved budget), and that the development phase has not been effective at ‘simulating competitive market conditions necessary to obtain the desired value for money on this project,’” the Auditor General reported.

Contrary to the Auditor General’s findings, Infrastructure Ontario, the provincial agency, includes the following glowing remarks on its website to describe the unique type of P3 procurement process it selected: The “model typically has delivered a value for money savings in the range of 15% to 22% compared to undertaking the same projects using traditional delivery models.” It does not mention that the project is already more than $4 billion over budget.

Though it's hard to comprehend how the cost could have skyrocketed so rapidly before construction, the audit shows that in February of 2023, EllisDon's projected design and construction cost for the hospital exceeded the approved budget by $301 million. By October of 2024, 19 months later and well after the developer secured the contract as the only bidder, the estimate was $2.337 billion over the budget.
 

Construction of the new Mississauga Hospital project has not started but it is already a staggering $4 billion over budget.

(City of Mississauga)
 

“Despite working with IO (Infrastructure Ontario) during the development phase of the project, the development partner’s cost estimates for the project have been increasing at each stage as the design has advanced,” the audit report highlights. 

It identified, through Infrastructure Ontario’s own internal analysis (which was not shared with the public) that the developer “has been reluctant to provide details on its significant cost drivers, such as design elements exceeding prior benchmark expectations of specific examples of higher subcontractor rates.” When further details were requested by IO to better understand the significant increases driving EllisDon’s costs, the developer “informed IO that it has already provided information as required by the development phase contract.

“In its January 2024 analysis, IO noted that the lack of transparency in contingency calculations has limited IO’s ability to effectively review and challenge the assessments used in this project, as it has been able to do in another Progressive P3 project,” the audit revealed. “In the next cost estimate provided in June 2024, IO again noted the DP’s submissions ‘lack transparency, hindering effective review and challenge’ of costs provided by IO.”

EllisDon did not respond to a request for comment on the findings of the audit and the concerns that have been raised about its excessive cost overruns. 

One of the most troublesome findings was that EllisDon was effectively handed the contract, as not one other company submitted a bid, effectively creating a sole-source dynamic which puts taxpayers at risk, without the ability of competitive pricing to keep costs down for a project being covered by the public.

The Auditor General pointed out EllisDon was also the lone bidder in a competition to build a new Ottawa hospital around the same time as the procurement in Mississauga.

The provincial watchdog questioned the use of a form of P3 (Public Private Partnership) procurement for such large, complex public projects and the risk created for taxpayers using a process that allows the developer to increase charges with little ability for governments to control them. The audit revealed the bidding process “was changed for the purpose of increasing market interest (attracting more bids)” but in both Ottawa and Mississauga, using a P3 model, the PC government only managed to get one bid for each project, from the same developer, EllisDon.

According to the audit, an analysis of the chosen procurement model was supposed to have been submitted by the Ministry of Health and Infrastructure Ontario to the Treasury Board so it could approve the budget of the project, but in 2021 this analysis to justify using the particular P3 model selected, to ensure it would not lead to excessive cost overruns and other problems, was never completed. 

The audit notes that in Toronto, the University Health Network did not use a P3 bidding process for a recent 11-storey project, instead procuring through a system that does not give the entire control of construction to one developer. The hospital network, not the developer, oversaw contracts with trades, subtrades and suppliers, to ensure the best price for taxpayers. 

“I think it's very concerning, especially for residents of Mississauga, that we have not been told the whole story in terms of what the costs are, what the timelines are going to be,” Councillor Alvin Tedjo told The Pointer. “The Auditor General's report highlights the fact that we weren't really told or aware what the total cost was going to be, and now it's going to be significantly higher.

“Four billion dollars is quite a bit of money for taxpayers to bear, and it's certainly not one that we want just the residents of Mississauga to have to bear. And I think it's consistent with the City's position that we think the provincial government's responsibility for health care has to accommodate for, and pay for, delivering those health care services in Mississauga.” 

Councillor Alvin Tedjo says he is concerned about the lack of transparency around the development process for the Mississauga Hospital rebuild, and questions the effectiveness of the Province’s procurement process.

(Alexis Wright/The Pointer Files) 

EllisDon has also been the construction company for a number of major hospital projects across the province, including a new Ottawa hospital, the second expansion under Trillium’s network at its Etobicoke Ambulatory Site and previously completed the West Park Healthcare Centre in Toronto and new Oakville Trafalgar Memorial Hospital.

The audit found that generally, the private sector companies selected for the projects examined in the report were chosen “fairly and in a timely and transparent manner,” however, it found that, “as part of the planning and process, the new delivery model introduced (for Mississauga, called a Progressive Public Private Partnership model) has not achieved the objectives of increased market interest or competition during the procurement of new infrastructure projects.” It also found the risks and costs for the project could have been better managed by Infrastructure Ontario.

“I don't know if it's a problem with the developer, necessarily, or the builder. I think the structure in terms of a public private partnership works for certain types of projects. It doesn't work for others,” Tedjo said. 

EllisDon — the only developer that eventually submitted a bid — was selected using the Progressive Public Private Partnership (P3) procurement model, which, according to the audit, was intended to increase collaboration between the private sector and public sector to manage the risks of the project. The report found IO “did not undertake a formal assessment to ascertain the reasons behind the lack of bids received,” but that, “according to IO, informal discussions with contractors indicated they were engaged in other projects and found the size and complexity of the project too extensive to undertake and manage.”

Tedjo says the Province needs to be reviewing large scale projects like the Mississauga Hospital rebuild to determine how to protect taxpayers from cost overruns, delays, legal issues and other critical problems that commonly arise when governments require large pieces of public infrastructure. 

“Essentially, this project became so complicated that a public private partnership only was possible with two types of builders working together. So there was only really one consortium that came in. And they know that, and they know that being the only bidder that could be part of this partnership, that they could download all the risks associated with the building and not have that competitive process, because they were the only ones who had the capacity to deliver it,” he said. 

“So I think that's one of the challenges that the Province is going to have to find a way to overcome. Otherwise this project is going to continue to find overruns and delays, and this is just $4 billion today. There's no way that this is going to be the final price. It's going to go up between now and when it gets completed.”

With the project already substantially over budget, all of the feasible cost savings have been exhausted, according to Infrastructure Ontario and Trillium. The audit warns that, “to address their budget contracts, THP (Trillium Health Partners) may need to consider removing key clinical requirements from the design, with [Ministry of Health] approval, which could impact the quality and scope of health-care services provided.” Alternatively, it found that Trillium “would need to request additional funding approval from the treasury board”, which has already approved three increases (in 2021 and twice in 2023) to the budget due to changes in market conditions and in the scope of the rebuild, marking a 70 percent increase in the cost since 2021.  

“To ensure Mississauga residents continue to receive essential services and the timely, high-quality care they need and deserve, we are working with all our partners to advance The Peter Gilgan Mississauga Hospital in its current scope,” a Trillium spokesperson told The Pointer. There was no comment on the findings in the audit or how it would impact the construction timeline.

The Auditor General’s report warns that if cost savings can not be achieved, Trillium may need to scale back critical requirements from the design, which could impact the healthcare services.

(Trillium Health Partners)

In response to the possibility of Trillium having to remove parts of the design, Tedjo told The Pointer, “I'd be very concerned about reducing the amount of health care services that Mississauga residents have access to. 

“Everything that Trillium Health Partners has identified as a need that our healthcare experts are saying need to be delivered for our community and for the neighboring communities in this area. So it's up to the provincial government to deliver on their responsibility of a quality, accessible healthcare system, and we need them to step up and do a better job.”

After the first cost estimate IO received from EllisDon exceeded the project budget, IO, in collaboration with Trillium and the developer, reviewed the hospital design in 2023 to find cost savings, which looked at finding more effective construction solutions such as choosing less expensive materials. Savings identified so far included changing the material for wall panels and the hospital exterior, reducing window sizes and ceiling heights on some floors and deferring some construction work. These changes were estimated to cut costs by $450 million to $525 million.

However, the audit found that “even after incorporating these design changes for cost savings, the DP’s construction price estimates have increased by over $1 billion throughout the various design and cost estimate milestones and continue to exceed budget.” While many of the cost savings identified came from changing smaller design features or removing items from the design and construction plans, the audit acknowledged “there are significant costs associated with this large, complex hospital project that cannot be reduced.”

The report recommended that IO collaborate with the Ministry of Health to “conduct a cost/benefit analysis for the project and determine whether the increase in estimated project costs still represents the best solution for delivering the hospital project, including an analysis of other options” for delivery. IO accepted the recommendation and said it will “apply the price validation framework in order to recommend to the government whether the final price proposal from the development partner represents value to taxpayers.”

In an email to The Pointer, a spokesperson for IO confirmed the agency is conducting a price validation review for the hospital, adding that, “This framework, specifically designed for IO’s progressive P3 projects, has been used throughout the Development Phase of the project” and “includes detailed cost reviews and collaboration with the development partner at each design stage to address concerns and explore opportunities.” 

The spokesperson said the “process ensures the final price delivers value to taxpayers, meets the framework's value standards, and will help the province deliver high-quality care for the province.” The timeline for completing the review is “by the end of the development phase,” which is currently underway, and construction is anticipated to begin after the phase’s completion in 2025, “subject to the builder's construction schedule.”

“Pessimistically, I expect the budget will continue to grow given the length of time this project is predicted to take to complete,” Mayor Carolyn Parrish told The Pointer.   

“It is not affecting Mississauga taxpayers in that we have not made a commitment to assist with funding the hospital based on several principles: healthcare is mandated to be paid by upper levels of government, hospitals within the boundaries of Toronto are fully funded by the Province and the hospital itself is of a size and complexity that it is obviously geared to care for residents from the whole west side of the GTA, making it a larger responsibility than what should be taken on by the population of Mississauga.”

Mississauga Mayor Carolyn Parrish expects the budget for the already $16 billion project (including 30 years of maintenance) will continue to grow, though she says it will not impact the city’s taxpayers.

(Alexis Wright/The Pointer Files) 

Trillium’s own responsibilities were made more difficult after Mississauga City Council turned down a request for a $450 million local share contribution — part of the larger $1.5 billion Trillium needs to cover for its “local share” responsibility outlined by the Province for the transformation of Mississauga Hospital. 

In October, council members cited the financial stress the request by Trillium would create for the city’s property taxpayers, along with concerns about the fairness of paying for a healthcare facility that will also be used by residents outside Mississauga. The health network will now have to turn to the Province for more funding, or increase Trillium’s own contribution to cover the entire $1.5 billion for the local share as outlined in the provincial government’s Hospital Capital Planning and Policy Manual.

Commitments to cover the $1.5 billion were to be finalized by December to trigger construction this coming spring, Karli Farrow, president and CEO of Trillium, previously told councillors. An October staff report to elected officials stated that Trillium “must secure the municipal contribution” to “proceed with the hospital construction.” A motion presented to council at the time highlighted that the $1.5 billion local share was the largest amount requested of any municipality in Ontario and the $450 million City Hall was asked to pay was approximately 42 percent higher than the average recent local share request requested of other municipalities in the province. 

The PC government is not jumping to provide any assistance with the local share requirement. A spokesperson previously told The Pointer, “the Province will be funding the project through the agreed share amount as is the case with every single other hospital development across the province.”

A spokesperson with Trillium previously said in an email that, “On a per capita basis, our funding request is below the median when compared to other municipal contributions for large-scale health care infrastructure projects. The size of the request is a result of this being the largest health infrastructure investment, by the Government of Ontario, in the province’s history.” Trillium said after the council decision to reject the $450 million request that it “will be reviewing our next steps.” 

In a recent correspondence with The Pointer the network did not provide an update on the current funding model. “Trillium Health Partners remains fully committed to addressing the health care challenges facing our community. Together with the City of Mississauga and the Government of Ontario, we are focused on delivering this critically needed health infrastructure project to our community.”

The Auditor General also found the estimated design and construction costs per square foot for the hospital expansion are 16 percent higher — despite the approved budget estimate of $1,800 per square foot — compared to other hospitals based on a review of five recent hospital projects procured by IO between 2022 and 2024. The analysis found the average cost per square foot for the projects (with an average size of approximately 477,000 square feet) was roughly $1,700 and ranged from $1,200 to $2,300. 

“The development partners price quotes have increased at each milestone of the development phase, but the information that the development partner is required to disclose does not provide enough detail for IO to fully understand the significant cost drivers,” the audit underscored.
 

The Auditor General’s report found that the developer’s cost estimates for the project have continuously exceeded the overall budget throughout the development process.

(Office of the Auditor General) 

The audit noted IO also requested greater transparency in the developer’s inputs driving the projected costs after EllisDon’s estimates “differed significantly” compared to IO’s shadow bid (used to compare pricing). One example was in the last three cost submissions for interior work — specifically windows, doors, ceiling and other fixtures — where the developer’s design and construction cost estimate exceeded the shadow bid by 14 percent as of August 2023, 80 percent as of January 2024 and 58 percent (as of June 2024). Following the June submission, six months after the information was initially requested by IO, EllisDon agreed to provide additional details on pricing, but the audit reported that,  as of the end of July, the construction company “had not shared details on the key areas that IO requested.”

It also found that while the developer had conducted preliminary assessments on the significant risks associated with the project, such as mechanical and electrical risks, they were not included in the cost estimates. The audit warned that, “According to IO, as of June 2024, these risks are significant and likely to add to the total project cost, but there have been limited discussions on risk sharing or other mitigation strategies. These risks were included in the cost estimate for the latest design and cost milestone in October 2024, requiring IO to retain some risks to minimize the impact on project cost.” 

Trillium has not commented on how the financial challenges identified in the audit, or council’s decision, will impact the project’s timeline and it remains unclear how the organization will come up with the $1.5 billion local share on its own. The organization has already committed $330 million of the approximately $1.5 billion local share, while community donors have provided $260 million and the organization will put another $498 million from revenues such as parking toward the total, leaving the remaining $450 million to be found. 

Tedjo echoed many in the booming city, waiting for more frontline healthcare capacity.

“We have long wait times. We have great staff, but they need a new, modern hospital, and Mississauga needs it as soon as possible. But it needs to be done in a responsible way, and the way the provincial government has been delivering some of these large infrastructure projects is a concern for taxpayers and for citizens and residents who need health care services,” he said.

“We've seen a number of other projects when it comes to transit or Ontario Place be significantly over budget and sort of tied up in issues caused by provincial management. So that means we need to find a better way to do that, and we need the government  to do a better job in terms of delivering these essential services for all residents.”

Email: [email protected] 

Twitter: @mcpaigepeacock

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