Mr. Speaker, Stanton Territorial Hospital in Yellowknife is the NWT's largest healthcare facility and serves residents across the territory and Nunavut's Kitikmeot region. The original 1988 hospital was replaced on the same site in 2019. The former facility, later named the Liwegoati Building in October 2023, was designated for future leasing.

On March 11, 2020, Members of the Legislative Assembly requested a performance audit to be conducted by the Office of the Auditor General of the Stanton Territorial Hospital Renewal Project, which used a public-private partnership (P3) model.

The OAG audited the Government of the Northwest Territories' Departments of Finance, Infrastructure, Health and Social Services and the NWT Health and Social Services Authority to assess whether they fulfilled their responsibilities in the Stanton Territorial Hospital Renewal Project (aka "the Stanton Project") and delivered value for money. The audit reviewed project planning, design, construction, selected non-medical operations of the new hospital, and planning and leasing of the legacy facility through document analysis, public records, and stakeholder interviews.

The OAG found that the project's original plan - to renovate and expand the existing hospital - shifted to a full rebuild under a P3 model. However, this major change in scope was not accompanied by a reassessment to confirm whether the P3 still offered greater value than the original request for proposal.

Additionally, the OAG found that a 30-year lease agreement for the legacy hospital, initially intended for third-party use, resulted in the government subleasing the building back for its own purposes without required approvals. This made the government a rent-paying tenant in a facility it owns and exposed it to risks that it had intended to transfer.

The Standing Committee on Public Accounts has conducted an extensive review of the OAG's report and many of the confidential documents that informed it. Based on this review, Committee concludes that the Stanton Project was mismanaged throughout its lifecycle. From the initial scope change to the final leasing arrangements, the project suffered from weak oversight, inadequate due diligence, and a failure to reassess key financial decisions in light of major changes to the project scope. The result was a significant cost overrun, with costs rising from an estimated $750 million to $1.21 billion — a $462 million (62 percent) increase over the originally projected costs reported in 2015 when the project was still under development. This leads committee to conclude that the P3 structure ultimately delivered poor value for money. Taxpayers are now committed to paying rent on a building the government already owns while assuming long-term risks that were originally intended to be transferred to the private sector. These outcomes reflect systemic failures in planning, procurement, and accountability.

Committee found no evidence that any analysis had ever been done by the GNWT to assess the merits of the option to use the legacy hospital building for its own purposes. This is concerning to committee given that the GNWT was aware that there were known space issues for the delivery of healthcare services prior to the establishment of the lease arrangements. Because the analysis was not done, Committee cannot verify that the GNWT achieved value for money in their decision-making. Moreover, because the evidentiary record for conflict-of-interest declarations is also incomplete,

Committee can neither verify nor disprove that there were real or perceived conflicts of interest throughout the lifespan of the project.

While the GNWT has agreed with most of the OAG's recommendations, Committee notes that a number of the responses back to the audit report lack substance. In several places, the GNWT states that it is already aligned with the OAG's recommendations and "mno further work is required." Committee disagrees. Given the lack of transparency and failure to demonstrate value for money, Committee maintains that the GNWT must do significantly more to show how it will meet the recommendations — including clearly outlining what will change going forward to prevent similar failures and restore the public's confidence in the process.

Finally, the OAG recommended that the Department of Finance publicly report comprehensive and timely cost information for the Stanton Project as a P3. The reporting should include long-term leasing costs for the legacy hospital building and updates for significant cost changes to enhance transparency in public fund use. The Department of Finance disagreed, stating that legacy hospital leasing costs are part of a separate project and not applicable to P3 reporting requirements. The department committed to maintaining its current reporting practices through capital estimates and the public accounts.

Committee finds this position problematic, as it undermines the spirit of the OAG's recommendation and raises concerns about the adequacy of current reporting practices. The refusal to provide full and integrated cost disclosures limits transparency and diminishes the public's ability to assess value for money. Committee emphasizes that meaningful accountability requires a more comprehensive and open approach to financial reporting on public infrastructure projects.

In light of Committee's review of the OAG's report, committee consequently makes nine recommendations:

Recommendation 1 The Standing Committee on Public Accounts recommends that the Government of the Northwest Territories provides a detailed and updated response to each agreed-upon recommendation, clearly outlining specific actions taken, timelines for full implementation, and measurable progress to date.

Committee expects this response to demonstrate how future decisions will differ to ensure improved transparency, oversight, and value for money.

Recommendation 2 The Standing Committee on Public Accounts recommends that the Government of the Northwest Territories implement and publicly disclose robust measures to ensure strict compliance with cost-control and conflict of interest policies in the development and execution of large capital projects. Furthermore, the Government should clearly demonstrate — through transparent reporting, regular audits, and measurable outcomes — how these measures will prevent a recurrence of the mismanagement and ethical concerns seen in the Stanton Territorial Hospital Renewal Project.

Recommendation 3 The Standing Committee on Public Accounts recommends that the Government of the Northwest Territories provide a detailed update on how each component of the OAG's recommendation has been implemented in practice. This should include specific actions taken, timelines, and clear explanations of how future procurement processes will differ to ensure strong oversight, conflict-of interest management, and public confidence.

Recommendation 4 The Standing Committee on Public Accounts recommends the Government of the Northwest Territories provide clear, demonstrable evidence of how procurement processes have been improved and how lessons from the Stanton Territorial Hospital Renewal Project have been applied to improve future procurement processes. This should include documented examples of how bidder communications are now consistently recorded, how equal access to information is ensured, and what mechanisms are in place to monitor compliance and enforce accountability across departments.

Recommendation 5 The Standing Committee on Public Accounts recommends that the Government of the Northwest Territories establish a threshold as defined by cost, complexity, or risk, and appoint an internal auditor under the Comptroller General, or other qualified expert, to oversee and scrutinize a project that exceeds these thresholds.

Recommendation 6 The Standing Committee on Public Accounts recommends that the Government of the Northwest Territories adopt the most comprehensive and transparent approach possible for reporting public-private partnerships in the capital estimates and public accounts as part of the forthcoming updates to public sector accounting standards and financial reporting requirements. Committee further recommends that the GNWT provide a public update outlining the new reporting approach for P3s and clearly demonstrate how it will meet enhanced standards for transparency, accountability, and fiscal clarity prior to the release of the 2024-25 Public Accounts.

Recommendation 7 The Standing Committee on Public Accounts recommends that the Government of the Northwest Territories either classify Stanton Legacy Project as a P3, which was originally procured as a P3 project, or establish in the financial statement discussion and analysis in the public accounts the point in time when this ceased to be the case.

Recommendation 8 The Standing Committee on Public Accounts recommends that the Government of the Northwest Territories publicly release sufficient financial and contractual information to substantiate claims that the lease of the legacy hospital building represents value for money, including the basis for the reported 30 percent discount relative to market rates.

Recommendation 9 The Standing Committee on Public Accounts recommends that the Government of the Northwest Territories provide a response to this report within 120 days.