Wednesday 17 July 2019

Colm McCarthy: 'There must be financial prudence with the planning of major public projects'

Three recent debacles in major capital projects show the need for care before making political commitments

'Depending on whose estimates of ultimate cost are to be believed, the NCH cost appears to have at least doubled, or possibly trebled, since the project was approved less than four years ago.' (Niall Carson/PA)
'Depending on whose estimates of ultimate cost are to be believed, the NCH cost appears to have at least doubled, or possibly trebled, since the project was approved less than four years ago.' (Niall Carson/PA)
Colm McCarthy

Colm McCarthy

A few weeks ago, this column asserted that ''elected politicians are being given the run-around by the promoters of large public capital projects. The political decision-makers have been solemnly approving major schemes based on cost estimates which bear no relationship to the bill which is ultimately presented. This is not just a threat to the sustainability of the state capital programme. Even if you believe that the scarcity of public resources has magically been abolished, there is no democratic accountability when sheepish ministers are reduced to mumbling acquiescence as the costs escalate.'.

The sheepish minister on that occasion was Simon Harris, fielding hostile questions in the Dail about the fiasco at the National Children's Hospital. Mr Harris, who was not the project manager, has deservedly survived the ritual Opposition motion of no confidence. He has declined, however, to initiate the public sworn inquiry which the fiasco merits. Depending on whose estimates of ultimate cost are to be believed, the NCH cost appears to have at least doubled, or possibly trebled, since the project was approved less than four years ago.

Last week it was the Taoiseach's turn. Leo Varadkar admitted that the National Broadband Plan, now reduced to just one bidder, will cost ''many multiples'' of the original estimate, which was understood to be about €500m. Sinn Fein's Pearse Doherty took a stab at the multiplication and suggested €3bn, as good a guess as anybody can offer since the project promoters, the Department of Communications, has yet to reveal an official figure. The Taoiseach conceded that other public capital projects may have to be curtailed if the NBP goes ahead, observing lamely that the cost would be spread over many years.

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To complete a challenging week for government financial management, another flagship capital project has gone back to the drawing board. The Metro Link project has seen the southern leg amputated and will presumably revert to its former moniker of Metro North. The burghers of leafy Ranelagh and points south will be spared the feared disruption of the existing Luas line. Whether the taxpayers will be spared the original bill (€3bn or more according to the project promoters) remains to be seen.

The ''many multiples'' overshoot on the NBP admitted by the Taoiseach last week will have come as no surprise to readers of the Sunday Independent who were informed 13 months ago, on February 4, 2018, that ''…Ireland is the only EU country which has embarked on a 100pc fibre-only broadband connection policy with the promise of zero connection charges. This has never been done in Ireland for electricity, fixed-line telephony or piped water supply. It is entirely reasonable to seek improvements to broadband access in remote areas but there is a serious cost issue with the official broadband policy.

The problem is that rural Ireland is characterised by large numbers of sparsely populated areas - there has been no policy to inhibit rural sprawl and high coverage for a wires-based system will be very expensive.

If the connection charge to the customer is to be zero (no politician has mentioned the notion of connection charges) then every potential customer will sign up, and the costs will escalate exponentially as the 100pc coverage target is approached.'

Last February the potential bidders included Eir, the telephone company which opted instead to build out the least costly areas of provincial Ireland, leaving the expensive bits for the Government. The next to depart was the ESB, which knows how much it costs to hook up every premises in rural Ireland, since it has already done so.

Just one bidder is left, and they would be insane not to insist on a cost-plus contract. This project was misconceived from the start and should now be scrapped before Pearse Doherty's guess at the ultimate cost is tested.

If the truncated Metro North plan re-emerges, it will duplicate on the route northwards from the city centre the existing Dublin Port Tunnel, built and paid for, which accommodates the speedy and frequent bus services provided by Dublin Bus and Aircoach to the airport, as well as the popular Swords Express direct from that suburb into the city centre. Dublin Airport enjoys other direct bus links from around the suburbs of Dublin, from all the main provincial cities and towns and from Northern Ireland. The public transport share of passenger trips at the airport (bus-only) is higher than at several European airports which have rail as well as bus service. There are few large airports in Europe offering public transport service from the city centre in just 20 or 25 minutes, a figure which the promoters agree cannot be bettered by the proposed rail tunnel.

Only a terse and incomplete summary of an economic evaluation of the now-abandoned Metro Link scheme, commissioned from an engineering firm by the project promoters, is publicly available. There is no firm cost estimate. A new ''cost-benefit- analysis'' of the truncated scheme, which must also circumnavigate two influential football clubs on the northside, has been promised. The study carried out on the now-abandoned scheme has not been released and accordingly cannot be evaluated. No new scheme should be brought for consideration by what ought to be a chastened government until the sums are done properly.

According to Senator Michael McDowell, €170m has been spent to date on studies relating to Metro North, while deputy Pearse Doherty has unearthed a figure of €22m as the cost to date of the broadband plan. Not a sod has been turned on either project and both may have to be abandoned. Ministers should reflect that the deferred M20, from Limerick to Cork, would be half-way to Charleville for the same money.

The technique of cost-benefit analysis has been brought into disrepute in Ireland, where it has become an adjunct to the public relations industry, through the persistent practice of permitting the project promoters to commission the studies.

If you end up in court over a serious matter, you are not permitted to bring along 12 of your friends to act as the jury. Projects need promoters but effective government needs independent assessment of the case made by the project promoters, including the credibility of cost estimates and the claimed benefits of the projects.

It is salutary to recall that the stadium proposed by Mr Ahern's government at Abbotstown, the ''Bertiebowl'', was abandoned on the grounds that the city already had two stadiums, more than adequate to its needs, despite a favourable cost-benefit ''study'' prepared for its promoters by a long, and outwardly impressive, list of Dublin consultants.

Last summer there were press reports that the Fine Gael party had been road-testing with focus-groups some possible general election slogans and that ''Prudence before Promises'' was in the frame. The period since has seen three major capital projects descend into chaos. It is welcome that the Government has embarked on serious long-term planning of the public capital programme but the lesson of these three debacles is that projects must be properly evaluated as well, and prior to political commitment.

If Fine Gael ministers have not absorbed this lesson, it might be wise to leave "Prudence" off the posters.

Sunday Independent

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