Sunday 24 March 2019

Ivan Yates: 'Pull the plug on the State broadband plan before it is one more money pit'

Press conference: Richard Bruton TD following the publication of a report on the NBP. Photo: Collins
Press conference: Richard Bruton TD following the publication of a report on the NBP. Photo: Collins
Ivan Yates

Ivan Yates

The outcry over the National Children's Hospital (NCH) scandal comes too late to apply either the handbrake or effect any cost reductions to the project. The time for all this scrutiny was 2016, when the project design, procurement procedures and legal tender documents were being finalised.

That critical pre-construction phase was when the lack of clarity on the brief led to the ultimate 56pc cost escalation between April 2017 and November 2018.

We've had miscalculation of quantities of materials: budgets not legally fixed; and design creep.

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These factors added €391m, rising to €450m - eventually set to spiral to over €2bn; 350 beds rather than 472 may have been more prudent, certainly more affordable.

Finance Minister Paschal Donohoe claims new, tighter procedures will be deployed on critical future flagship projects, further to IMF recommendations. They'd better be.

We're about to expend between now and 2027 €116bn on the biggest vanity project of them all - the National Development Plan, with €40bn annual capital spending. We've learned the hard way tender prices bear no relation to final costs.

Yet, amidst all the political handwringing, Dáil questions, committee hearings, PwC review and controversy over the NCH, we face the danger of another blank taxpayers' cheque being written. The National Broadband Plan (NBP) contract awaits Government approval, with potential costs anywhere between €1bn and €3bn.

Last week, the Public Accounts Committee heard from the main players in the Irish telecommunications market: BT, Eir, Imagine, Enet and the regional Internet Providers Association. These companies, along with other operators (eg Virgin, Sky, Pure Telecom, Ripple, Digiweb) have/are investing billions of euro in rolling out fixed, mobile, fibre-optic and wireless infrastructure. Without state subsidy.

Dangerous parallels mirror the National Broadband Plan and the NCH, travelling along similar tracks. Both were borne out of a political promise - to provide a world-class state-of-the-art children's hospital and rolling out fibre-optic cable broadband to every home/business in the country, irrespective of population density or remote locations. Coverage for all and world beaters, too.

The other striking common factor is that the tendering process has resulted in one final bidder. Phase 2 tender stage of the NCH was effectively stuck with in situ BAM, Mercury Engineering and Jones Group. NBP ended up with the solo group of Granahan McCourt Capital, whose consortium has radically changed since it passed the original Pre-Qualification Questionnaire. Taxpayers face the same captive circumstances, when costs overrun - there are no alternatives.

Circumstances since former communications minister Pat Rabbitte promised the NBP in 2012 have altered radically.

Original guiding principles (as recommended by government advisers KPMG) were that best value for money would be obtained by availing of both the scale and synergy of existing broadband providers in the market.

We've ended up with GMC, which has no operational presence or track record of broadband delivery.

Those original bidders are rolling out their own competing broadband plans. Siro (joint-venture of Vodafone/ESB) plan to connect almost half-a-million customers across a nationwide network of 50 towns. Eir, with historic biggest fibre/copper wire national footprint, just announced they'll invest €500m to provide 400,000 customers enhanced broadband cable coverage.

Imagine (in conjunction with Brookfield global asset management fund) plans to invest €300m in 325 base stations for fixed wireless broadband to 400,000 premises - targeting the 27pc of the rural countryside that doesn't have broadband. It is availing of the existing fibre infrastructure, but instead of running fibre to every building, it'll install antennae within 13km radius to beam/receive the last leg of telecommunications capacity.

This at a customer charge of once-off €150 for the equipment, plus a monthly €60 fee. This technology is being adopted in the US by Google, AT&T and Verizon, replacing laid fibre. The costs of running fibre cable to every nook and cranny between Donegal and Kerry was found to be prohibitive and uneconomic by every established operator.

Imagine has secured from ComReg's auction the high-frequency spectrum for 5G transmission. While there will undoubtedly be capacity restraints and teething problems, the pace of global technological advancement cannot be ignored by government.

Fifth Generation mobile networks will provide ultimately much faster download speeds. New opportunities for data will emerge, such as driverless cars and remote surgical hospital operations. 3G ushered in video calling and mobile data. 4G facilitated mobile internet, video streaming and gaming.

Transformative 5G will have maximum download speeds of 2gbps. The pace of technology threatens to undermine dated assumptions in the NBP.

The most searing lesson of the NCH quagmire is that trying to extract the taxpayer from open-ended liability is only possible before contracts are signed. All the committees and steering groups can't stop the runaway train.

This same Department of Health has form, presiding last year over another €655m budget overrun and €15.8m rent payments for unoccupied headquarters over 17 months.

The Department of Public Expenditure and Reform simply has to take Secretary General Jim Breslin and his mandarins in hand. Their oversight of the National Paediatric Development Board, which bears primary responsibility for all the quantity surveying/design weaknesses, is an appalling record of inept corporate governance.

The belated blame game doesn't provide solutions. Even if procurement rules provide contract law to re-tender where costs exceed 50pc of the original agreed price, it's illusory. Charges of "low-balling" represent political rhetoric rather than remedies.

Now is the time to pre-empt another catastrophic capital expenditure misadventure of the original NBP. Total costs and returns on investment of laying fibre-optic cable to every home in the State is going to prove as unaffordable and wasteful as the NCH.

Irish Independent

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