To ask the Minister for Transport the steps he will take to ensure better value for money in view of the findings of the Comptroller and Auditor General of the serious cost over-runs in the national roads programme; and if he will make a statement on the matter
- Róisín Shortall
For PRIORITY answer on Wednesday, 7th July, 2004.
Ref No: 20787/04 Lottery: 2
To ask the Minister for Transport the action he intends to take to ensure that the NDP roads programme is delivered on time and within budget
- Denis Naughten.
For PRIORITY answer on Wednesday, 7th July, 2004.
Ref No: 20800/04
Answered by the Minister for Transport
(Séamus Brennan)
Reply
I have consistently highlighted to the National Roads Authority the importance of strengthening cost estimation, control systems and procedures in relation to the management and implementation of the national roads programme.
The NRA has over the last few years implemented a range of measures to improve cost estimation and control. These include: the greater use of Design and Build (D&B) Lump Sum fixed price contracts offering cost efficiencies, greater certainty of outturn costs and reduced scope for claims; standardisation of economic designs for high cost items such as bridges and other structures; securing greater involvement by foreign contractors; buyout of Price Variation Clause and Risk (Traditional Procurement) where this gives good value; further attention to improving quality of site investigations and acceptance of such investigations by contractors as agreed basis for pricing; and greater use of PPPs which leverage private sector investment in the programme, incentivise private sector innovation and limit the risk exposure of the Exchequer by transferring risk, including construction risk, to the private sector.
In order to provide greater certainty about resources which facilitates more cost effective implementation of the programme I have secured the agreement of the Minister for Finance to the introduction of a multi-annual funding framework for national road investment. It provides for total national road development investment of €8.2 bn, of which €6.9 bn is Exchequer funding and €1.3 bn will be invested by the private sector in PPPs, over the period 2004-2008. I have asked the NRA to submit a five year plan to ensure that the resources being made available under the capital envelope are utilised to best effect. The envelope will be underpinned by an agreement between my Department and the Department of Finance, which will incorporate provisions relating, inter alia, to the annual funding levels, contractual commitments and reporting and monitoring arrangements.
Since publication of the National Development Plan (NDP) in 1999 the cost of the national roads programme mandated in the NDP has increased substantially from €6.96bn (early 1999 prices and at preliminary design stage) to €16.4bn (end 2003 prices and more refined estimates).
The reasons for this increase from initial estimates drawn up in advance of detailed scheme design to the more refined scheme estimates now available have been examined in some detail by the Comptroller and Auditor General and major independent evaluations on the national roads programme by Fitzpatrick's in 2002 and Indecon in 2003.
The main reasons for the increase in costs are:
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construction cost inflation which accounts for over 40% of the increase (since 2001 construction cost inflation has moderated from an annual average of 12% to less than 5%),
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more reliable estimates as schemes were refined as the design process proceeded changes in scope of projects including upgrading of routes and higher road standards, and
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additional cost of land acquisition
In general, comparisons of outturn with tender costs as opposed to initial unrefined scheme estimates provides the most reliable guide to project and programme management performance.
The various measures taken to date are acknowledged in the C&AG Report and the other evaluations of the roads programme both of which acknowledged that the national roads investment programme is, in general, well managed, and in particular, as regards factors within the control of the NRA.
As part of the continuing effort by the NRA to improve management of the programme, a major consultancy assignment on arrangements for the implementation of the programme, including cost estimation and control, has recently been completed. Its recommendations are currently being given detailed consideration and I will be anxious to ensure that those relating particularly to programme management and cost control will be implemented as a matter of priority.
