Revelations about overshoots in public construction contracts have become commonplace.

The most recent concerns the €50m written off by Irish Rail on a project to upgrade its signalling system, intended to accommodate more frequent services on existing railway lines.

Meanwhile, there is an ambitious programme to spend billions on new lines and on reopening old ones. This latest overshoot seems to have nothing to do with expansion but rather with getting more safe capacity from what already exists, a less controversial project and in the category of prudent long-term maintenance rather than investment.

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The National Children’s Hospital cost €1.6bn more than the figure initially approved

The response to the write-off has been the familiar routine of blaming the contractor, in this case the Spanish company Indra, a blame-shifting technique also deployed in the far bigger scandal at the National Children’s Hospital.

The National Children’s Hospital cost €1.6bn more than the figure initially approved.

Public discussion of the National Children’s Hospital overshoot has pointed the finger at a Dutch contractor, BAM, and no heads have thus far rolled at any of the State agencies responsible for overshoots.

Working group

One could be forgiven for imagining that the problem could be resolved through the establishment of a generic inquiry into overshoots across the board, especially when the even bigger MetroLink project is on the Government’s agenda.

The Government could establish a working group to look into the broader issue and to make recommendations and could call it the working group on cost overruns on public construction contracts. Happily there is no need for such a group.

The late John Bruton, when he was minister for finance, established a group with this precise title in 1981, 45 years ago, and its report is on the record. The minister charged the first meeting with tightening up procedures following a major scandal about excess cost at the Nitrogen Éireann plant at Marino Point in Cork Harbour.

The contractors were criticised initially but the report recommended that government approval should be withheld in the absence of adequate project planning and credible cost estimates.

Contractors who bid fixed sums for construction jobs are operating in a very precarious business

The primary responsibility should rest with the client, the State, rather than the contractor.

Contractors who bid fixed sums for construction jobs are operating in a very precarious business unless they protect themselves from sources of cost which are outside their control. They sign contracts only if there are clauses which enable them to recover costs arising, for example, from design changes instigated by clients or the latter’s failure to conduct proper site investigations before the finalisation of plans.

There is a prior source of waste, even if all of these boxes have been ticked, the failure to select the best projects to begin with.

Delivery

This project selection task was a prominent feature of the Public Spending Code, introduced with the establishment of the Department of Public Expenditure and Reform (DPER) as it was initially styled, in 2011 after the financial crash. The current emphasis on delivery, delivery, delivery is fine if there is a high degree of confidence that dud projects, even delivered on time and on budget, have been weeded out.

Had the delivery mantra ruled, the Bertiebowl would have been completed, incinerating around £800 million in money of the day.

To this end the practice of relying on economic evaluations of major projects commissioned by the State agency promoting the scheme was to end and DPER was to have the final say. The Public Spending Code has unfortunately been abandoned for large projects, replaced by a process of approval by ministerial press release even in advance of cabinet approval.

Thus the Government is effectively committed to the Dublin suburban rail project called MetroLink, a largely underground rail investment northwards from the city centre to the airport and Swords, for which there is no cost estimate beyond rough guesses in the range around €15bn, six or seven times the capital cost of the National Children’s Hospital.

The only available economic evaluations of this huge project, by a distance the largest ever undertaken here, have been undertaken by consultants working for the project promoter, a State agency called Transport Infrastructure Ireland.

One of the benefits of the Public Spending Code was intended to be the preparation of independent evaluations of large projects, a test the Bertiebowl would have failed.

Instead there is a steady stream of so-called cost-benefit studies prepared by consultants to whatever State body is promoting the scheme and paid for out of public funds.

It is salutary to recall that the Bertiebowl got the thumbs up in 1999 from a team of consultants appointed in this fashion, only to be halted by Bertie Ahern’s coalition partners, the Progressive Democrats. They thought it would be a waste of taxpayers’ money.

The corporation tax bonanza has made politicians careless, and will not last long enough to pay for MetroLink.