LARGE-SCALE STATE projects will include a significant budget for risks so that cost estimates are realistic and don’t overrun, according to the Secretary General of the Department of Public Expenditure and Reform, Robert Watt.
In future, Watt said projects will only be signed off on when there is certainty about the final figure.
Earlier in the day, the secretary general caused quite a stir when he referred to the Oireachtas Public Accounts Committee (PAC) as a “mob” while waiting outside the committee room. He later apologised, though he said he didn’t recall what he had said 45 minutes earlier.
He told the Oireachtas Finance Committee this afternoon that it is now “pretty clear” what went wrong with the build of the National Children’s Hospital (NCH) overspend.
The NCH is now expected to cost €1.7 billion. The controversy over the cost resulted in a motion of no confidence in Health Minister Simon Harris, which was defeated.
Delivery of the hospital with a two-phase plan was thought to be the best way forward at the time, he said, where the final design of the hospital was not yet finalised. He told the finance committee today that it was believed early on in the project, during phase one, that there “was certainty about the bill of quantities”.
“That didn’t turn out to be the case,” he said.
He said the amount has clearly risen significantly.
“We thought we knew the final cost, but that wasn’t true,” Watt added.
Comparisons
However, the secretary general said comparisons being drawn that architect Dermot Bannon’s designs “wouldn’t be done this way” has nothing to do with the debate on the children’s hospital.
He stated that the sheer scale of the NCH project means the two aren’t comparable.
Some committee members today made comparisons about the straight-forward project management and budgeting of building houses compared to that of the dysfunctional delivery of the NCH.
In the future, Watt said the State will no longer “commit to projects until the design and price are clear” adding that projects should not be announced based on “guesstimates” of what they will cost.
“People are putting out numbers about the cost of a project without having set out the detailed design, or tested the market.
“It is a guesstimate, it is not certain,” he said, adding that reforms of how public contracts are awarded is needed,” he said.
In his opening statement to PAC, Watt said the government will no longer pre-commit to major bespoke projects until there is 100% clarity on tendered costs.
“The government will approve major projects to be evaluated and designed, but there will be no final commitment until after the tendering process is complete.
“It is not possible to know the price of a capital project with a high level of certainty until there is a full design spec, planning if necessary has been achieved, and the project has been competitively tendered.
Delays in projects
“Government will not commit to projects until the design and price are clear. This could delay projects, but will ensure greater cost certainty.”
“Don’t go to tender unless you have a detailed design – that is tender 101,” Fianna Fáil’s Marc McSharry told Watt earlier today.
Both committees questioned whether it was credible that Watt was only informed about the massive overspend in November. Harris has said he was first flagged about the potential overspend in August, though he said he did not know by how much.
There were tetchy responses from Watt to Labour’s Alan Kelly’s questioning, when he was quizzed over details on when exactly he knew of the costs.
“I really find this absolutely pointless,” he said, for which Kelly said he had a right to ask such questions.
Watt said he was informed of the issue in a report on 19 November, however, he later said that he was told in person about issues around the overruns by the Finance Minister Paschal Donohoe on 9 November.
Questions about the estimates prior to the Budget were also raised with Watt today. Kelly and Fianna Fáil’s Michael McGrath questioned how the Dáil was not informed about the escalating costs during the revised estimates debate on 19 December.
Watt said the estimates “were accurate” adding that it is always the case that estimates are published when the government might know of additional costs that might arise.
The issue of PwC doing the review of what went wrong with the project, which is costing €450,000, was also raised.
The Controller and Auditor General was asked if the government asked him to conduct such a review, would he be able to carry one out.
The C&AG said he would be able to do so, but would not speculate as to whether he could do it for less than PwC.
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