Opinion: Last week the Public Accounts Committee published its report on transport in which it considered the report of the Comptroller and Auditor General (C&AG) and raised serious questions regarding the National Roads Programme and its cost to the taxpayer.

First and foremost, has the taxpayer been overcharged? There is no suggestion in either report that there has been any element of overcharging. What is clear is that the market determined the real cost of each road project.

In this instance, it is a Europe-wide open market where individual projects are competed for and regularly won by leading Irish and international contractors.

The essential conclusion of the C&AG and the Public Accounts Committee (PAC) is that the estimate in the National Development Plan (NDP) was wrong; it is as simple as that. The reality is that Dublin's Port Tunnel, the M50, along with motorways to the North, Galway, Limerick, Cork and Waterford could never have been built for €5.6 billion.

This salutary fact was clearly evident as far back as 2001, when the Construction Industry Federation was the lone voice identifying the problem.

At the time, the Federation was forcefully rebuked by the then ministers for finance and environment for raising the issue.

There are other questions to be answered: why was the estimate so wrong? Did the taxpayer get value for money? Why did construction contracts cost more than the tender?

To deal with the first question we need to look no further than the PAC report where the C&AG provided a detailed analysis of the following errors in estimation:

Failure to allow for inflation: 30 per cent;

Estimation based on outdated prices: 10 per cent;

Failure to fully cost projects: 16 per cent;

Changes to the scope of projects: 20 per cent;

Inclusion of very complex projects: 21 per cent (eg Dublin Port Tunnel).

It is also clear that large additional projects such as the M9 motorway to Waterford were added in after the publication of the NDP, without adjustment to the estimated cost.

It is also worth reflecting on the basket of 30 projects examined by the PAC. Most of these were originally approved for inclusion in construction programmes as far back as 1989 and 1994 and, in most instances, the first estimate of cost was made many years earlier. At that time, the political direction from successive governments was that we were a poor country and would have to settle for roads with a relatively low level of service and an inter-urban travel speed of 50 miles per hour was considered adequate.

This kind of thinking gave us the Red Cow and the Kinsale Road roundabouts. The mindset changed in the NDP and for the first time we aspired to the type of roads enjoyed by our neighbours throughout Europe. What is now obvious is that, while the plans were vastly upgraded, there was no corresponding adjustment in the estimated cost. Comparing the out-turn cost of a modern motorway with a 20-year-old estimate for widening an existing road is a futile exercise.

The report deals with value for money, which is ascertained by reference to the long-term return to the State on road building investment and to the comparative cost of equivalent infrastructure in other European states. This is dealt with by evidence given by the Department of Transport that road investment is a key priority for national competitiveness and, not withstanding the greater-than-expected cost, continues to give a high rate of return.

It was also established that "Ireland's road building costs were not seriously out of line with experience in other European countries" and were, at the time, 27 per cent less than the UK for two-lane dual carriageways.

The C&AG analysis of a selection of completed projects indicated that the final cost was, on average, 42 per cent in excess of the original tender. It is important to understand what the "original tender" is in traditional civil engineering contracts - essentially an estimate of price based on the cost of labour and materials 10 days before the tender is made. It also assumes a given quantity of work and expected working conditions.

The contract provides that, if the amount of work or the cost of labour and materials increases or decreases, the price is adjusted accordingly. This type of contract benefits the State as it allows a rock-bottom price to be tendered and limits payment to the actual amount of work carried out.

The C&AG found that, in the case of the projects considered, half of the price increase was due to changes made by the State, while a further one-third was due to actual labour and material cost increase. Only one-sixth of the increase is accounted for by contractors' claims. The reality is that the State was always aware that the "original tender" was a basis price and would vary as the exact nature of the work became evident. It beggars belief that this reality was not recognised and provided for.

Don O'Sullivan is director for main contracting, Construction Industry Federation