State will no longer commit to projects ‘until design and price are clear’

Robert Watt to tell PAC greater cost controls being introduced following hospital overspend

The site of the national children’s hospital in Dublin. The €450m overrun in the project, now expected to cost €1.7bn, has led to a major political controversy. Photograph: Gareth Chaney/Collins

The site of the national children’s hospital in Dublin. The €450m overrun in the project, now expected to cost €1.7bn, has led to a major political controversy. Photograph: Gareth Chaney/Collins

 

Major infrastructural projects could take longer to complete in future because of greater cost controls being introduced in the aftermath of controversy about overspending on the national children’s hospital.

Robert Watt, the secretary general of the Department of Public Expenditure and Reform, will on Thursday tell the Public Accounts Committee (PAC) the State will no longer “commit to projects until the design and price are clear”.

Mr Watt will appear on Thursday before both PAC and the Finance and Public Expenditure Committee on the children’s hospital issue.

The €450 million overrun in the project, now expected to cost €1.7 billion, has led to a major political controversy, including a motion of no confidence in Minister for Health Simon Harris, which was defeated in the Dáil.

PAC has a remit to examine historical rather than future spending. It will examine projects in the first phase of the development plan, covering the 2018 to 2027 period, on which there has been preliminary work and use it to look at the broader plan.

In his opening statement to PAC, Mr Watt says: “Government will no longer pre-commit to major bespoke projects until there is 100 per cent clarity on tendered costs. The Government will approve major projects to be evaluated and designed, but there will be no final commitment until after the tendering process is complete.

“It is not possible to know the price of a capital project with a high level of certainty until there is a full design spec, planning if necessary has been achieved, and the project has been competitively tendered.

“Government will not commit to projects until the design and price are clear. This could delay projects, but will ensure greater cost certainty.”

Advisory firms

The statement also says that a number of profile projects have “highlighted issues with the performance of advisory firms”.

“We will link payments to advisory firms to clear performance standards. We will bring in performance standards linked in future contracts with those firms.”

A “risk premium” will also be put on the budgets for larger projects.

PAC chairman Sean Fleming said a new agency should be established to control and oversee spending of the €140 billion national development plan. He pointed in particular to the fact that management of each project in the plan was overseen by each line department, with no overarching supervision.

“My own view as chairman stems from over 20 years ago when the national debt was unmanageable, and we set up the National Treasury Management Agency to manage national debt.”