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Time, due diligence and indecision blamed for driving up costs of State infrastructure projects

Amid controversy over a bike shelter and security hut, people involved in planning such projects argue that, in an era of high construction inflation, lengthy processes drive up costs

The security hut between the Department of Finance and Government Buildings. Photograph: Nick Bradshaw
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Martin Wall
Sat Sept 28 2024 - 06:00

Eleven years ago when the then minister for health James Reilly announced the development of a new national maternity hospital, he said an “indicative sum” of €150 million had been approved for the project.

Few, if any, believe the final cost for the planned 244-bed hospital will be close to this figure.

If the costs end up far higher than the “indicative” amount set out in 2013, there will undoubtedly be criticism about another State project running way over budget – just like the new national children’s hospital, the cost of which has spiralled from €650 million a decade ago to an estimated €2.2 billion, or the €336,000 Leinster House bicycle shelter and the €1.4 million Department of Finance security hut.

However, academic experts and some in government who are involved in the development of new projects argue it is wrong to maintain that all State projects end up way over time and budget.

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They maintain that government structures for approving large projects mean there can be years between when they are first proposed and when they become operational. And in the meantime construction and other cost inflation will push up the prices.

In the case of the new national maternity hospital, which was announced in 2013, Cabinet only gave its approval in 2023 for the project to proceed to tender for a main contractor.

At the same time the State’s spending watchdog, the Comptroller and Auditor General, each year identifies examples of risky behaviour or wasteful expenditure.

Earlier this month it sharply criticised University of Limerick over two botched property deals that resulted in combined financial losses of more than €8 million.

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In 2022 a comptroller’s report following the cyber attack on the health service, which cost about €100 million, found HSE computers had been only monitored for viruses during daytime hours.

A new report by the comptroller on Monday may contain further criticism of public service bodies.

Prof Eoin Reeves, who specialises in the economics of infrastructure at the University of Limerick, maintains the State sector has been successful in delivering some projects on time and on budget. He points to the National Development Finance Agency and the former National Roads Authority (now part of the Transport Infrastructure Ireland) and the roll-out of the motorway network.

In 2019 the HSE maintained that the new national central mental hospital was on time and on budget.

Reeves said that internationally there have been several examples of cost overruns in large projects. He highlighted cases such the “big dig” highway project in Boston in the United States.

He said international research on mega projects suggested 90 per cent ran over budget, and in nine out of 10 of these projects the average overrun was about 28 per cent.

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In Ireland large projects costing more than €200 million have to go through a whole series of procedures and “decision gates” before securing final approval.

Economic consultant Tom Ferris said the Government introduced new “infrastructure guidelines” earlier this year. He said for large projects there has to be an external assurance process at the strategic assessment and preliminary business case stage.

This is followed by a review by the Major Projects Advisory Group of the Department of Public Expenditure at the preliminary business case stage and consideration by government at the preliminary business case and final business case stage. “Proposals must be approved at each stage,” he said.

All of this is aimed at protecting exchequer resources. However, some involved in this process argue that in an era of high construction inflation, lengthy processes drive up costs.

Some projects that are rejected at one point sometimes re-emerge for consideration at a later date when the costs are much higher.

Former Health Service Executive chief executive Tony O’Brien has criticised “mandarins” in the Department of Public Expenditure for blocking electronic health records in hospitals. It was estimated that this project would cost about €1 billion several years ago.

The Irish Times reported this month that Minister for Health Stephen Donnelly was pushing for the roll-out of electronic health records across the HSE to be funded from the proceeds of the €13 billion tax bill the EU ordered US tech giant Apple to pay to the exchequer.

The cost now is likely to come in at in excess of €1.5 billion.