On the road to nowhere
AS learning curves go, the one that the National Roads Authority (NRA) is currently on could turn out to be the most expensive in the history of the State.
Charged with overseeing the national roads programme, many NRA projects are billions of euro over budget.
A report published earlier this year by the State's public spending watchdog, the Comptroller and Auditor General makes worrying reading.
It found substantial delays in the completion of projects and major cost over-runs, many due to a lack of expertise in the NRA in the early years of the roads programme.
An original 5.6 billion estimated cost, for roads programmes in the November 1999 National Development Plan (NDP) for 2000 2006, rose to €7 billion when adjusted by the NRA to take account of certain changes. By 2002 the estimate had risen to €15.8 billion, and it had risen to €16.4 billion by the end of 2003.
The report found more than 40% of the increase was due to inflation, with a quarter due to underestimation of prices at the beginning of the building programme.
A further 16% of the increase was due to a failure to cost certain elements of schemes at the planning stage and 20% was due to changes in the scope of projects and the introduction of new works.
The rest was due to increases in costs of specific projects, such as the Dublin Port tunnel and the section of the M50 near Carrickmines Castle.
In its defence, the then Minister of Transport Seamus Brennan said he believed the NRA would confess that it was on "a learning curve" at the start of the process.
He said, back in 1999 the NRA had used a "rough ball park, back of the envelope cost" when costing the national roads programme, and came up with €7 billion.
But he reassured taxpayers nationwide, that everything was back on track.
However, a quick glance at recent figures undermines his grounds for optimism.
latest updates on the cost of the South Eastern Motorway, which recorded huge price hikes due to soaring land costs, puts the cost at €569 million a 300% increase on the original estimate of €153 million the cost of the Dublin Port Tunnel is now €495 million up from €220.
price hikes on the N3, N4/N6, N7, N8 and N9 and N25 amounted to over €3.5 billion in just two years
the N4/N6 Kilcock-Kinnegad recorded a €741 million overrun from €849 million to €1,590 million while the N7 Dublin-Limerick road upgrade was €662 million over budget
the N9 was €635 million over original budget
the N8 cost €631 million more than the original €719 million estimate
the N3 upgrade cost €755 million rather than the €250 million original estimate
the N25 improvement cost an extra €413 million
Not that the NRA is the only organisation guilty of bad planning. The cost of the Luas has risen by almost €280 million and is proving an expensive headache for the Railway Procurement Agency.
The proposed Dublin metro, with an estimated bill of almost €5 billion, was proving so expensive, Taoiseach Bertie Ahern was forced to do a spectacular U-turn in the Dáil last week, saying it was no longer on the Government's immediate agenda.
Trinity College Lecturer and Economist, Dr Sean Barrett said the scale of the over-runs would not be accepted in any other company.
"Can you imagine if you saw a coat in Cleary's with a tag for €80 and when you went to buy it, you were told that it now cost €180. You just wouldn't stand for it and you would know the law was on your side. This is happening wholesale with Irish infrastructural projects and nothing is being done to change it," he said.
In 2002, economic consultants, Fitzpatrick Associates expressed concern about the NRA's initial estimates of the road programme, saying they were worryingly inaccurate.
Average cost estimates for road projects ranged from 58% too low to 48% too high in their study of five national projects. The report found that the final costs averaged 38% higher than initial tender prices.
"Outturns of this scale beyond estimates must cause concern about control of cumulative cost at project level, however valid the individual explanations," the report noted.
But, cost overruns are just half of the problems besetting the infrastructural sector with a vast number of projects not arriving on time.
The Enterprise Strategy Group Report said that substantial amounts of the NDP will not be delivered by 2006, with just one of the inter-urban roads ready by the end of next year.
The star pupil in the class of 2003 seems to be Ballincollig by-pass which was built by Turkish company, Gama Tubin and came in on budget and six months early.
"We need more international involvement. The protocol is in place for this to happen but it's not happening enough. We must actively encourage it. People go to the North for cheap dental work. Why isn't this being done in construction?" asked Dr Barrett.
"Do you remember all the objections from the trade unions to the Gama Tubin job? There seems to be a wish to keep foreign companies out which doesn't exist in other countries," he said.
However, this isn't just a typical Irish mess. Just look at the massive overruns which nearly scuppered 'grands projets' like the Washington DC metro and the Channel Tunnel.
Dr Edgar Morgen-Roth is a German economist with the Economic and Social Research Institute (ESRI). He admits their development sector isn't without problems either.
"Projects need to be more efficiently costed and then inflation proofed so the State isn't facing mounting bills and the developer instead absorbs rises. The price can then be fixed and changes to plans will cost the builder instead," he explained.
"As it stands you can't blame construction companies for charging more when they can. They have a lot of people over a barrel."
Dr Morgen-Roth also believes that the expertise of government departments and agencies are "stretched at present" due to the huge amount of work facing a few people.
"They should hire from outside and especially in the area of legal advice. Currently, their work is inefficient and even if they are using consultants, the advice from consultants is only as good as the questions asked."
New Public Accounts Committee (PAC) Chairman, Michael Noonan remembered one PAC meeting this year where it emerged that there wasn't a single accountant, and just engineers, employed at the NRA.
The committee was told by officials that they intended immediately remedying this deficit.
Meanwhile, for Labour party finance spokeswoman, Deputy Joan Burton it all comes down to a "culture of bad planning."
"Internationally, project management is recognised as being hugely important. Here, we have fallen into it without recognising it as a vital discipline to develop efficient schemes," she said.
"Bad planning is systematic here though. Just look at all those health facilities that were developed like the Ballymun Health Centre and the new A&E at Cork University Hospital. Each were built without any commitment to ensuring running costs for them."
She is fervent believer in 'design and build' projects where the one contractor designs and builds the project so they can't claim for design faults made by a second company.
One construction industry source agreed that this is a practical development.
"It's starting to happen and should make a huge difference. Up to now, most contractors had the opportunity to make millions extra out of each job if they were of a mind to do so due to design change and inflation claims."
Dr Morgen-Roth firmly believes that a central value-for-money unit must be established as was in place to examine usage of European structural funds.
"The buck will fall with this office then and so there will an increased emphasis on contractual issues, transparency and accountability from the very outset," he said.
"What we need is somebody operating an early warning system as the Auditor and Comptroller General doesn't come in until the problem has taken place. I worry sometimes that we're not shocked by his findings anymore," said Dr Barrett.
A Department of Transport spokesman said yesterday that they "believe they have turned a corner" in the area of infrastructural overruns.
"By introducing fixed pricing and the 'design and build' concept into newer projects we have begun to avoid some of the increases that we experienced in the past. Roads like the Cashel bypass and the Ballincollig bypass have come in on time and on budget," she said.
Economists believe also State agencies are beginning to "learn their lesson" and all forecast a drop in prices as the house building boom grinds to a halt.
But, all agree that taxpayers were the victims of contracts riddled with loopholes, insufficient penalties for overruns and a lack of emphasis on value for money.
In the words of Deputy Michael Noonan: "If it was the private sector, they'd have shut up shop."
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