Construction is continuing on the Dawson City and Watson Lake hospitals, the chair of the Yukon Hospital Corp. told a Whitehorse news conference this morning.

This is happening as the now-defaulted general contractor, Dowland Construction, faces legal action from subcontractors.

The Watson Lake Hospital is now expected to open some time this summer, with the Dawson City Hospital planned to open in the fall, said corporation chair Craig Tuton.

Dowland Construction's bonding company, Intact Insurance, has agreed to complete both projects for the contract amount.

It has named TSL Contractors as the construction management company.

TSL, the general contractor for the Whitehorse nurses' residence completed in 2012, has staff onsite this week to ensure work is underway.

Jason Bilsky, the hospital corporation's CEO, provided the latest budgets for both projects at this morning's news conference.

The Watson Lake hospital is now expected to ring in at $26.8 million, up from its original budget of $22.2 million.

Dawson City's hospital is estimated to cost $30.9 million, up from $26.5 million.

The latest estimates exclude any capitalized interest or financing costs.

They're also higher than estimates included in the Auditor General's report on the corporation's management of capital projects released in February.

Bilsky said capitalized interest, equipment costs and change orders, account for the increases.

Intact Insurance had secured Dowland's bid for the hospital projects with $40.5 million.

"In the event that the contract default, the bonds were in place to ensure that all of the contracts within that general contract were fulfilled, including all of the subtrades getting paid,” said Tuton.

"I think it's fair to say that this whole situation has been rather unfortunate, unforeseen, and it's created a lot of insecurity amongst all of the subtrades as well as everyone involved,” he said.

"We reacted as quickly as we could under all the circumstances that were presented to us.”

In response to reporters' questions asking what went so wrong, Tuton replied, "Let's look at what went right.

"Both of these projects are completed to over 90 per cent,” he noted.

"Dowland was the low bidder on both projects, and at the time of the issuance of the contract to Dowland, they had a lot of experience building big projects,” Tuton continued.

He later noted that Dowland, which has not commented on the litigation it faces, is an excellent general contractor.

"Obviously, something happened within the corporate structure of Dowland that I can't explain.

"What I do know is we became aware of it when the subtrades that were involved in these projects were not getting paid,” he said.

"What happened was totally unforeseen; nobody could have anticipated or expected that.”

Bilsky added that the Auditor General gave them a fairly positive review with regard to their procurement and project management processes for both projects.

"As a corporation, I've certainly learned that we've done a lot of things that we should have, and potentially, this situation could have been much worse,” he said.

Bilsky highlighted the tender process, the required bond, and independent external consultants who verified progress before releasing payment.

Tuton also commented on staffing concerns at the two hospitals.

While Watson Lake already has a fully staffed hospital, the doctor situation is of concern.

For the time being, the shortage is being managed with a rotation of doctors, and recruitment is a priority for the government, said Tuton.

The situation is Dawson appears to be more positive, he added.