Fees paid to consultancy firms to be linked to performance standards in series of reforms

Fees paid to consultancy firms to be linked to performance standards in series of reforms

Fees paid to consultancy firms hired to advise the government on high profile projects will be linked to clear performance standards in a series of reforms to strengthen management of capital projects.

If companies fail to meet these metrics, they will be penalised in future tender evaluations.

Robert Watt, general secretary of the Department of Public Expenditure and Reform (DPER), told the Oireachtas Joint Committee on Finance that the measure was on foot of a number of high profile projects that had "highlighted issues with the performance of advisory firms".

Mr Watt was addressing the committee to discuss his department's role in relation to the new National Paediatric Hospital (NPH), the cost of which could exceed €2bn.

A spokesperson for DPER subsequently told the Irish Examiner that it would be exploring "new mechanisms for the management and recording performance on projects".

"In consultation with the Attorney General’s Office, the Office of Government Procurement will investigate how such mechanisms can be used to ensure that companies who fail to meet those performance metrics are penalised in future tender evaluations," the spokesperson said.

Asked by Fianna Fail finance spokesperson Michael McGrath to explain why the cost of the hospital had escalated so dramatically, Mr Watt said the estimation of the Bill of Quantities was "fundamentally wrong".

He said there was "95% certainty" around the approximate Bill of Quantities, but "that turned out not to be the case".

Mr McGrath said it was "just extraordinary" that details of the cost overrun were not known to DPER until November even though the Department of Health knew since August.

He asked Mr Watt why details of the overrun were not included in the Revised Budget Estimates (REV) which include additional information to the estimates published on Budget Day in October. Mr Watt said it "wasn't possible" because they didn't have all the information they needed.

He said it was "not clear" that the hospital would have been cheaper if they had opted for the 'lump sum" approach instead of a two-stage tender process. He said the Government Contracts Committee for Construction had awarded 12 derogations from the lump sum approach since 2011. Not all involved a two-stage tender process, but the Dunkettle Interchange in Cork did.

Labour Party finance spokesperson Joan Burton said the runaway costs of the new hospital "has put very big question marks over the ability of the public service to provide reliable estimates".

Mr Watt defended his record saying they'd produced a balanced budget over the last number of years. He said the €100m that would have to be found this year to make up for the hospital cost overrun was "a manageable amount".

"People will spin it if I say it's not significant," he said, but in the "overall context" of an €8bn budget "it's a manageable amount".

Ms Burton said it would be "shocking to an awful lot of people" that "this is a manageable amount". She asked if there was "in effect a cartel in place among a small group of contractors" in this country "as they seem to be able to call the shots on [project] variations".

Mr Watt said there was an issue "around the depth of contractors in Ireland" but he wouldn't describe it as a cartel.

Sinn Fein Senator Rose Conway Walsh asked how many people in DPER were monitoring health spending, given its responsibility to protect the public purse.

Mr Watt said: "Not enough, it would seem, given our record".

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