State projects - Cost overruns poor value for taxpayers

WITH an aggregate overrun of almost €7.5 billion on planned infrastructural projects, it is self-evident that there is something radically wrong in the current system of costing and evaluating major State ventures.

The level of cost overruns has been revealed by the Enterprise Strategy Group Report, which also points out that substantial amounts of the National Development Plan will not be delivered by 2006.

It is a euphemism, in the first place, to describe such a massive escalation of those costs as an "overrun," because they equate with about three-quarters of the budget allocated to the Department of Health.

No commercial company would tolerate, or survive, the extraordinary degree of distortion that has infected practically all of these State-planned projects.

For example, in the case of the South Eastern motorway, the cost has gone from €153 million to €569 million an increase of 300% on the original estimate.

The Luas and Dublin Port Tunnel massively outstripped their original estimated costs by €496 million and €495 million, respectively.

While estimating the costs of multi-million euro projects may not be an exact science, and it is understandable that they might somewhat exceed the original figure, these projects represent a litany of bizarre distortions.

The cost-benefit analysis in this sector has been described as "weak." Put another way, the costs have soared so exorbitantly, that they represent very bad value for the taxpayers, who have to carry the burden.

In the case of half-a-dozen road developments the extra cost has amounted to a huge €3.5 billion. Yet, the National Roads Authority (NRA) admits it does not have individual cost-benefit analysis available on these road developments, and that they were analysed as part of a group project with all the other national primary routes.

This, according to a spokeswoman for the NRA, is "standard methodology and is in accordance with international practice".

It may well be in accordance with international practice, but it is a practice that this country simply cannot afford. There are too many crucial areas, such as education, health and public order control, to mention just a few, where €7.5 billion would be better spent.

One would not have to be a financial wizard to recognise that projects on the scale of those referred to, and others, demand regular evaluations to ensure they do not develop into capital guzzling monsters because of out-of-control price rises.

Such a review, and commercial sense, should be applied to those State projects which are still at the planning stage and others which remain to be commenced.

It is fortunate that the Department of Transport recently introduced fixed pricing and the "design and build" concept which saw the Cashel and Ballincollig bypasses delivered on time and within budget.

Presumably, the success with those two projects will encourage the State to engage the concept in future ventures and to investigate whether such a regimen could belatedly be applied to aspects of the National Development Plan yet to materialise.