A World Bank management tool could ensure better value for money in government projects, writes Michael Casey.
OVER THE past decade several different reasons have been advanced to explain why so many government projects have gone bad in Ireland at the cost of billions of euros to taxpayers that could have been used in other priority areas such as health, crime detection and road safety. The explanations range from lack of political leadership to poor skill levels in the public sector, from over-reliance on consultants and advisers to lack of accountability by Ministers.
These explanations are valid and need to be put right as a matter of urgency, but there is one elephant in the corner that goes to the heart of our virtual inability to do joined-up projects in time and on budget. If we look at how the World Bank goes about development projects in poorer countries we will see what is missing from our approach. It is the vital ingredient necessary to ensure a fully joined-up approach. It is called project cycle management (PCM). This is not to be confused with project management; we have that to some extent here but it is only a small part of a complete project cycle.
The World Bank uses interdisciplinary teams of economists, engineers and project-specific specialists. They often employ sociologists to examine the wider aspects of large projects which might have social and "stakeholder" implications.
The first stage of the project cycle is project identification. This is where vision and strategy come in. We need to know how the country should grow and develop over the medium to long term. The National Spatial Strategy for Ireland would be a good starting point though unfortunately it was more or less abandoned by government before the ink was dry. Narrow sectional (and constituency) interests must be absolutely ruled out at this stage. The projects must be chosen and prioritised against an overall strategy for the country, involving social and environmental as well as economic factors.
Good forecasting skills are essential at this stage. When the M50 motorway was being designed the forecasts were so wide of the mark that the road was inadequate almost as soon as it was built, and not fit to purpose. Suppose, for example, that in a few years' time it is decided to move the port out of Dublin (as other capital cities have done), then the Port Tunnel will prove to have been a white elephant. This illustrates how important project identification is and how it must be done against the widest strategic canvas. Too many projects, eg Knock airport, are adopted on a whim or on the basis of sectional interest.
When a list of projects has been drawn up each project must be subjected to rigorous cost/benefit analysis. This involves predicting the future stream of benefits, tangible and intangible. On the cost side, ongoing maintenance costs should be computed as well as capital costs. Only when the benefits significantly exceed the costs should the project be considered. But at this stage even if the cost/benefit ratio is favourable it does not mean that the project should be adopted.
The next stage involves comparing the project with its closest alternatives. For example, before adopting the Luas project it should have been compared with other modalities such as quality bus corridors. The latter could clearly have been accomplished at much lower costs. The benefits might also have been higher. It is only when the project in question is seen to be the best available that it should be adopted.
The remaining stages in the project cycle include, invitation and selection of tenders, project management, commissioning and signing-off, and evaluation of the project some while after its completion.
Great care must be taken during all these stages. Possible contractors need to be thoroughly checked out, each deadline of the project should come in on time and on budget. The signing-off should not be done without thorough testing because once contractors leave a job it is very hard to get them back again. Private-sector contractors tend to regard government contracts as very lucrative, ie ones where cost control will not be too rigorous and where top-dollar can be charged for everything. This may well explain why so many of our projects come in way over cost. The regeneration of Ballymun is the most recent example. The cost overrun is in the region of €500 million. This is "explained" on the basis of "costs and inflation". This is meaningless. Such enormous overruns are unacceptable. The results of the final stage, evaluation of the project, should be fed back into the process so that lessons are learned and there is a process of continual improvement.
We do not use this proven analytical tool of project cycle management in Ireland. We are told that one element of it, cost/benefit analysis, has been done for the airport metro project but the figures are not being revealed for reasons of commercial sensitivity. It would be reassuring if a list of the benefits (without any figures) could be published as well as the closest alternatives examined. With our track record it is possible that when the airport metro is built we will find ourselves with a second airport on the south side of the city.
Without full-scale project cycle management, institutions like the World Bank would not undertake project work. They would see it as a waste of time and money. In Ireland we have much less rigorous standards, and that is part of the reason why so much taxpayers' money is wasted. Whether we can improve standards in this area without radical reform of the public sector, including politicians as well as officials, is a moot point.
Michael Caseyis a former senior executive with the Central Bank and a member of the board of the International Monetary Fund.