Flaws led to €9bn roads cost overrun

GLARING weaknesses in the National Roads Authority (NRA) and two Government departments led to the cost of the national roads programme being underestimated by €9 billion, the Dáil spending watchdog heard yesterday.

In the initial years of the Government’s six-year National Development Plan, which began in 2000, the roads programme rose in cost from an estimated €7bn to €16bn.

Yesterday, the Dáil Public Accounts Committee said the NRA and the Departments of Finance and Transport needed to improve their estimating capabilities for the next national development plan.

The recommendation was one of several in the committee’s interim report on transport, based on hearings it held between 2003 and 2004. The report found the cost of numerous road projects had been underestimated, in many cases by tens of millions of euro.

They included:

* the Drogheda bypass in Co Louth, originally estimated at €112.5 million but which costed €244m;

* the combined Newmarket-on-Fergus and Hurler’s Cross road project in Co Clare, which cost €143.6m, almost €58m more than had been anticipated; and

* the Dunleer/Dundalk and Ardee link, put at €100m but which cost €134m more.

The price of land accounted for a substantial portion of the money spent by the State on all the projects. But one of the major reasons for underestimating costs was that there tended to be a significant difference between the tenders companies submitted for projects and the final price they settled on with the State.

In the case of the Dunleer/Dundalk and Ardee link, for instance, the company submitted a tender saying it would build the road for €75.3m, but negotiated a final price of €97.2m. In the case of the Drogheda bypass, the company involved tendered at €150.3m, but negotiated a final fee of €199.8m.

Committee chairman, Fine Gael TD Michael Noonan said private sector expertise had far outweighed that of the State when it came to negotiating the contracts. It was “men against boys” in many instances, he said.

The committee recommended the NRA should appoint more financial experts to its management team and “improve its reporting on governance issues” in its annual report.

Similarly, the committee recommended that the Departments of Finance and Transport take a number of steps to improve the situation. The committee found the latter department was left open to fraud for “the best part of a year” because of poor accounting controls.

Transport was established as a dedicated department in June 2002, emanating from the old Department of Public Enterprise. The restructuring resulted in a “serious breakdown in accounting controls in the department during the second half of 2002 and in the first months of 2003”, leaving it in a “susceptible to fraud”.

However, the committee was satisfied no fraud had occurred.