Wednesday 21 August 2019

State's approach to infrastructure projects criticised by CEO of construction giant behind National Children's Hospital

Theo Cullinane, CEO of BAM, speaks as Taoiseach Leo Varadkar looks on.
Theo Cullinane, CEO of BAM, speaks as Taoiseach Leo Varadkar looks on.
M11 Gorey to Enniscorthy Public Private Partnership Scheme, a 39 km of the M11 motorway now open to traffic
The cost of building the new national children’s hospital in Dublin increased by 450 million euros, health chiefs said (Brian Lawless/PA)
€1.7BN bill: How the new National Children’s Hospital will look

Ralph Riegel

The boss of the giant construction firm at the centre of the National Children's Hospital row has criticised Ireland's handling of the State project-procurement system, warning that it was generating "a race to the bottom".

BAM chief executive Theo Cullinane criticised Ireland's project procurement system at a Wexford roads opening in front of Taoiseach Leo Varadkar - five months after Mr Cullinane had given the Fine Gael leader two hours to clarify controversial comments he had made in the Dáil.

BAM officials were furious after Mr Varadkar made controversial comments about bidding practices in large projects in the Dáil last February - at the height of the debate over the €450m cost overrun of the National Children's Hospital (NCH).

The construction firm, part of the Dutch group Royal BAM, were angry with what they claimed was the widespread public belief that Mr Varadkar was referring to them.

READ MORE: 'First-class piece of transport infrastructure' - new €400m Gorey-Enniscorthy motorway opens

The specified clarification was never given by the Taoiseach to the firm, which employs 2,500 people and has been involved in  €2bn worth of public private partnership (PPP) schemes nationwide.

Mr Cullinane, speaking in front of Mr Varadkar at the opening of the €400m new M11 Gorey-Enniscorthy motorway built by BAM in Wexford, warned that State procurement systems handling needed to change.

"The main problem with these procurement models is the allocation of uncontrollable risks," he said.

"This issue is the focus of many governments throughout Europe as the largest of the construction companies cannot and will not take these risks."

Mr Cullinane said that BAM had made a major contribution to Irish developments, ranging from State office complexes to the construction of new courthouses nationwide.

"This problem of uncontrollable risk management is the main problem facing the Irish Government from the procurement point of view and it must be addressed," he said.

"These risks do not go away - they just go elsewhere.

"In the end they will end up costing society. These risks, if they are not addressed early on in a project, will trickle down through the supply chain or will revert back to the Government and will cause a lot of legal issues and take up an awful lot of time.

"So I would say that it is better that these uncontrollable risks are addressed early on in these large projects."

N M11 opening 3 (2).jpg
M11 Gorey to Enniscorthy Public Private Partnership Scheme, a 39 km of the M11 motorway now open to traffic

The BAM boss said the Government had to take action.

"It is best if the Government, as the real benefiting party, takes ownership and leads the management of these risks.

"On the supply side where we have many contractors in competition for work from the single, dominant client we see a race to the bottom as a result of this procurement process as uncontrollable risks cannot be priced.

"This is leading to a very fragile and under-resourced industry with questionable capacity to meet the demands of the (Ireland) 2040 (capital development) programme.

11An artist1s impre (SUN_ED3_S01) (Read-Only).jpg
€1.7BN bill: How the new National Children’s Hospital will look

"However, we have seen good examples in other market segments - both at home and abroad - where clients take a partnering approach.

"We now see Irish contractors being asked by the large multinationals, such as Google, Facebook and the likes, to operate all over Europe and outside Europe with them.

"These companies feel that Irish contractors are the best.

"The Government must play its part in ensuring we have a top-class functioning construction market and it should aim to be the best-in-class project manager and not just best-in class procurement manager."

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The cost of building the new national children’s hospital in Dublin increased by 450 million euros, health chiefs said (Brian Lawless/PA)

READ MORE: Children's hospital building firm BAM will 'continue to look for additional funds'

READ MORE: Cost of children's hospital at risk of rising another €50m

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