Ill-conceived projects should not be delivered, they should be cancelled

Project selection and project delivery are distinct tasks in executing a successful public capital programme.

Selection means identifying priorities and choosing the best investments to meet them.

It covers both the avoidance of white elephants (projects with little or no benefit) and of expensive ways to meet objectives when better value is available.

Delivery means “on schedule and on budget”, or as close to these parameters as the nature of the project will permit.

There is no excuse for white elephants or for choosing the most expensive route to meeting a worthwhile objective. But there is an irreducible element of risk about timetable and cost with big once-off projects, and there needs to be some tolerance for delays and cost over-shoots.

Fortunately, there is a procedure in place, called the Public Spending Code, which is intended to ensure that only good projects are selected, that timetables are realistic and that cost over-shoots are infrequent.

Unfortunately there have been poor project choices, lengthy delays and appalling over-shoots and the reason is that the Public Spending Code is being ignored.

Bad projects should not be delivered, they should be weeded out at the project selection stage.

Whenever politicians focus on delivery, as they have done in recent months, there must be a suspicion that the hidden agenda is to short-circuit the project selection stage, with the risk that politically convenient commitments to foolish projects will be honoured.

Bureaucracy

Delays can be blamed on “bureaucracy”, a code-word for compliance with the Public Spending Code.

If the Public Spending Code is being adhered to, politicians who make premature commitments to projects which fail the evaluation process would occasionally have to eat humble pie and cancel the project. They never do.

When a monster over-shoot emerges, those involved in project selection and delivery should be held publicly to account, and never are.

There is a widespread fatalism about over-shoots, as if initial cost estimates were not serious in the first place and everyone knew that the bill would escalate.

The Public Spending Code is supposed to be Government policy

Aside from poor value for money, this has resulted in a boom-and-bust capital programme, with heavy spending when Government finances permit followed by a capital programme collapse when borrowing has to be curtailed.

This is what happened after the banking bust of 2008, when the State ended up in an IMF programme and the axe fell principally on public investment and not, as is regularly asserted, on current services.

There has been a stop-go capital programme through Ireland’s modern history in virtually every decade.

The Taoiseach has vented his frustration about project delays, which he attributes to the operation of the review procedures in the Public Spending Code. This is not the source.

The source is a failure by politicians and Government departments to operate the code as intended.

Commitments

Projects should not be announced as Government commitments, much less included in the National Development Plan, until the Department of Public Expenditure has certified that the necessary design work has been done, that the cost estimates are credible and that the chosen scheme is superior to available alternatives, as envisaged in the code as published.

The Public Spending Code is supposed to be Government policy. Does the Taoiseach feel that the code’s checklist has been complied with in the case of the National Children’s Hospital, expected to cost around €2.5bn versus €800m when cabinet approval was first given? This will be the biggest cost over-shoot in the history of the State, at least €1.5bn.

An oversight mechanism for public capital spending is meaningless unless some projects fail the test

There have been sworn public inquiries about matters of far less consequence. This is a country which exited an official bailout programme less than a decade ago, when nobody apart from the IMF and the European Union rescue funds would lend a penny to the Irish State.

An oversight mechanism for public capital spending is meaningless unless some projects fail the test.

Recent history

In recent Irish history, the most significant near miss was the Bertiebowl, a white elephant which would have cost the state up to €1bn to deliver a third stadium for a city with two fine stadiums available or under construction, neither over-burdened with fixtures.

It was not stopped by the Public Spending Code but by Michael McDowell and Mary Harney, and would have been “delivered” had they not intervened. It would today be a middle-aged elephant gleaming white, the one colour that never fades, out in the northwest of Dublin, with no fixtures other than those diverted from Croke Park and the Aviva.

The National Children’s Hospital, located in a traffic black hole in the inner suburbs of Dublin 8, is nearing completion and was not stopped by the code either, even though few medics aside from those directly involved thought Dublin 8 was a smart location.

Ill-conceived projects should not be delivered, they should be cancelled.