Committee Reports::Report - Control of Capital Projects::15 July, 1985::Report


Control of Capital Projects

1. Background

1.1Arising from public concern about major cost over-runs on public construction contracts the Committee decided that an urgent review should be undertaken of

(a) the extent to which public sector contracts were monitored/ controlled at present.

(b) two projects in which there had been major overruns namely Howth Harbour development scheme and the Department of Justice prison building programme.

Tables 1 & 2 from the 1985 Public Capital Programme which illustrate the size of capital expenditure are set out in the Appendices.

1.2Because of the Committee’s concern about apparent lack of control of expenditure on public capital projects it was decided to appoint the first sub-Committee to examine this important area and in as much depth as was possible, given the resources available and within a very limited time scale. The sub-Committee, which met for the first time on 31 October, 1984 consisted of four Members - Deputies Liam Fitzgerald (Chairman), Richard Bruton, Joe Doyle and Noel Treacy. The sub-Committee’s terms of reference are set out in Appendix 1.

1.3The sub-Committee met on 12 occasions and heard evidence from officials of the Departments of Finance, Fisheries & Forestry, Justice and also the Office of Public Works. Submissions were received from the Royal Institute of Architects of Ireland and the Society of Chartered Surveyors in the Republic of Ireland. The latter two submissions are at Appendices 2 & 3.

2. Report of the Working Group on Cost Overruns on Public Construction Contracts

2.1The sub-Committee examined the Working Group’s report (Pl. 1566) which was published in 1982. The then Minister for Finance, Mr. John Bruton, T.D., addressing the Group on its establishment, spoke of the Government’s concern about the escalation of costs on public projects and requested the Group to consider what measures if any might be taken, firstly, to avoid non-viable investment decisions and secondly, to reduce the increase in costs on public contracts during construction. Monies saved thereby would help to reduce taxation or borrowing, or serve to increase the output from the public capital programme without increasing its overall cost.

2.2Appendix 4 sets out the Working Group’s main conclusions and recommendations. Paragraph 2 of the conclusions stated that “it was clear that some public bodies exercised a greater degree of control over costs than others, giving rise to a range of cost over-runs on public capital projects. The extent of the current problem was identified as being of the order of 2½% to 7½% of project costs. In 1982 terms, the potential saving was between £20m and £60m”. (The latter figures would be £25m and £76m approximately in May 1985 terms).

2.3The Working Group’s report also referred (Chapter VI) to consultants costs particularly in relation to payment of fees.

“Inflationary pressures have meant that consultants have made windfall benefits from contracts since fees are calculated as a percentage of the final cost of the project. The major part of consultants’ work is carried out in the period prior to the completion of the contract documents. Delays thereafter either in obtaining tenders or commissioning work on site may mean that the final cost is considerably higher than the initial estimated cost. Yet the consultants are paid by reference to the final cost. This inequitable practice should be changed. Also, where public contracts are repetitive in nature, they should qualify for a reduced design fee”.

2.4The Committee noted that professional fees in the building industry were last reviewed in January 1975 by the National Prices Commission (Occasional Paper No. 19, Prl. 4314).(1) It is noted that paragraphs 8.4 to 8.6 of the recommendations contained in the National Prices Commission report referred to appropriate follow up action. However, there is no evidence that any action was taken to review professional fees during the ten years since the publication of that report though it is understood that the Restrictive Practices Commission is now considering this subject.

2.5The Committee’s main concern, therefore, was with serious lack of control on major capital projects and the manner in which professional fees in absolute terms are causing a considerable drain on scarce Exchequer resources. The Committee regrets to note the lack of any real progress in those two key areas and will comment in detail on them later in the report.

3. Present Controls

3.1Following the report of the Working Group on Cost Over-runs on Public Construction Contracts, the Minister for Finance, in his February, 1983 Budget Statement, indicated that improved procedures for planning and controlling capital expenditure generally were being prepared. The result was that the Department of Finance, in March 1983 issued a comprehensive Circular (1/83) “Capital Expenditure in the Public Sector” to all Departments/Offices (Appendix 5). The purpose of Circular 1/83 was to ensure a systematic approach to capital project planning and implementation throughout the public sector. In particular it encouraged the review of and, where necessary, the improvement of planning and control procedures already in operation as well as providing guidelines for Departments and agencies in introducing formal procedures where none previously existed. The Circular made clear that responsibility for the design and implementation of detailed procedures consistent with the guidelines rested with individual Departments and agencies as

(i)differences in procedure may be appropriate with different programmes;

(ii)capital appraisal is an integral part of the responsibility which departmental managements hold.

3.2The Committee’s view is that it is patently clear that not all Departments and agencies have succeeded in monitoring or controlling expenditure on capital projects. The Department of Finance role should be much more positive in ensuring that cost overruns are avoided. The Minister for Finance presents the Public Capital Programme to the Dáil each year and his Department is closely involved in examination of Departmental estimates (capital and non-capital), monthly monitoring of actual expenditure and sanctioning of individual projects.

3.3The Committee was particularly interested in assessing to what extent the guidelines laid down in Circular 1/83 (a) had been implemented and (b) effective in reducing public expenditure.

4. Department of Finance memorandum

4.1In response to a letter to the Department of Finance (Appendix 6) a comprehensive memorandum was compiled and sent to the Committee by that Department on action taken in response to Circular 1/83. The memorandum is set out at Appendix 7 to this report.

4.2The Department of Finance memorandum summarises the purpose of Circular 1/83 and follow-up action taken by that Department. Key sections of the memorandum include the following:

4.2.1The 1985 Public Capital Programme booklet drew attention to the fact that not enough progress had been made on rigorous evaluation based on the Department of Finance guidelines (par. 5).

The Committee notes that some Departments did not respond within the three months deadline as laid down in Circular 1/83 and that others did not respond at all. It should also be noted at this point that the Department of Finance issued somewhat similar directives to Departments in 1971 and the lack of progress which ultimately led to the above Circular is proof that the desired evaluation and controls on capital expenditure did not materialise.

The Committee finds this position disturbing and questions whether any follow-up action was taken to ensure adherence to the guidelines.

4.2.2A constraint on progress is the scarcity of trained staff (par. 6). The Committee noted from earlier evidence (Jan. 1984) that the Department of Finance trainee analyst scheme has been operating since the 1970’s and would have expected that such analysts would now be operating in important areas such as project appraisal. Where such analytic or accounting skills were not available, Departments responsible for the major capital projects should have employed suitable professional staff. The savings in public expenditure resulting from a more rigorous appraisal of projects would have more than offset the cost of employing such skilled staff. The Committee is of the opinion that providing analysts to Departments in itself is not enough because those analysts may be quite isolated from the management decisionmaking teams.

4.2.3The Committee noted that Circular 1/83 excluded a number of major areas of public expenditure, namely, loan finance advanced by agencies such as the Industrial Credit Company, Agricultural Credit Corporation, Fóir Teoranta, Housing Finance Agency and local authorities for houses (par. 7). The Committee would wish to ensure that all capital projects which are financed from public funds should, as a matter of routine, be subject of rigorous appraisal and evaluation.

4.2.4The Department of Finance memorandum excluded reference to the commercial State-sponsored bodies as those fall within the remit of the Joint Oireachtas Committee appointed to review those bodies (par. 8). Nevertheless, to the extent that Departments reviewed by this Committee have responsibility for controlling expenditure generally, the Committee would wish to be satisfied that all proper central financial/ management controls were firmly in place.

4.2.5The Committee was concerned to see the following statement of paragraph 9 of the Department of Finance memorandum:

“Broadly speaking the guidelines are being implemented by Departments and agencies where they consider it appropriate to do so. The intensity with which they are applied varies, depending, inter alia, on the size and nature of the projects/programmes in question. In many cases Departments apply procedures of equivalent effect to that of Circular 1/83. But some Departments also feel that the quantitative/evaluative provisions of the Circular are not fully, or in some cases, at all applicable to capital expenditures under their aegis, notably those of a social nature”.

While acknowledging that individual Ministers and their Departments have day to day control of their expenditure, the Committee could not accept that the guidelines set out in Circular 1/83 may be liberally interpreted by those Departments. The consequences of ignoring proper evaluation/appraisal of capital projects are all too obvious i.e. there may be lack of adequate justification for expenditure and the projects might not be tightly monitored or controlled. Furthermore, the Committee would feel, in the case of projects of a social nature, that appraisal and evaluation needs to be undertaken at least as rigorously as projects of an economic or infrastructural nature.

Objective evaluations can narrow down the degree of uncertainty where subjective or social judgements need to be made. They can also prevent excess resources going to desirable but limited social objectives.

4.2.6Reference is made in par. 11 to the effectiveness of the Circular 1/83 guidelines to date. The Department of Finance stated that conformity to 1/83 is required for inclusion in the PCP where a project has to be sanctioned by that Department. We note that this is far from all inclusive in that it omits small projects; ongoing programmes, like roads and housing; projects vetted by the parent department alone; and projects where authority is delegated and no sanction is required. The Committee would like to have seen a more positive statement here, namely, that no capital project would be considered for inclusion in the Public Capital Programme unless it has first satisfied the criteria laid down in those guidelines. (See recommendation 13.11).

4.2.7The Committee will be interested in obtaining a detailed progress report on the developments referred to at par. 11 of the Department of Finance memorandum.

4.2.8The Committee accepts, as set out at pars 12 and 13, that many of the capital projects included in the 1984 and 1985 Public Capital Programmes were planned or initiated before the issue of Circular 1/83. However, while Departments gave the Department of Finance an assurance “that procedures broadly similar to Circular 1/83 were generally applied to those projects”, the Committee would wish to have that assurance tested by a specific analysis being undertaken of those projects to certify that the basic requirements of the above-mentioned procedures were, in fact, adopted. Where such action was not taken, the Committee will ask for a report to identify, inter alia, whether public expenditure has been wasted or invested less effectively than it might have been.

4.2.9As stated above the Committee would wish to see in-depth appraisal and evaluations undertaken of all capital projects. If Departments become more cost conscious in relation to their capital expenditure they will tend to assume more positive responsibility than heretofore. Paragraph 12 of this report details the direction that the Committee feels needs to be taken if there is to be the much tighter centralised control of capital expenditure than has operated to date.

4.2.10The Committee is aware, as stated at paragraph 15 of the Department of Finance memorandum, that decisions to undertake a programme of particular capital works are normally taken by Government. Nevertheless, whatever the source of such decisions the cost effectiveness of such major expenditures can only be as good as the input to those decisions. It goes without saying that the quality and professionalism (administrative and technical) of the advice given to Ministers and Government is paramount in relation to major programmes. Personal responsibility and accountability are essential elements of that process and there can be no room for uninformed or vague proposals which may involve literally millions of pounds, funded by way of costly and long term foreign borrowing. On the general question of Ministerial advice the Committee does not accept that such advice should be regarded as classified information shrouded in the secrecy of Ministerial loyalty. The public is entitled to know the facts laid before the Minister and equally to know if that Minister chooses to ignore them. These aspects are further developed in the context of recommendations 13.8 to 13.11 inclusive. The Committee places great emphasis on the need for change in this area and suggests a basic solution at recommendation 13.7.

4.2.11On the general question of Circular 1/83 the Committee was of the view that there is no established procedure for vetting assumptions underlining cost benefit studies undertaken by individual Departments. This omission may enable some Departments to present a case for capital expenditure that may not be fully justified. In addition the Committee would wish to point out that follow-up studies or even end of project reviews are not an integral part of current procedures. This position needs to be rectified at an early date.

5. Reports from Departments

5.1The appendix to the Department of Finance response summarises reports from Departments/Offices on capital expenditure appraisal and management applied by them. Most of the statements are self explanatory.

5.2By way of a general comment the Committee is dissatisfied with the content of the Public Capital Programme booklet which is published with the Budget Statement each year. Only the barest details are given about major capital projects which involve a large proportion of overall public expenditure. The public are entitled to details of the true cost of capital projects (including interest) and a summary of the appraisal/ evaluation process on which the relevant Public Capital Programme decisions are based. The Committee suggests how this could be improved (See recommendations 13.9).

5.3Comments on individual capital projects

The Committee’s comments are necessarily tentative and are merely an immediate reaction to the data made available in the appendix to the Department of Finance response. The figures shown are for 1985. The Committee drew the following general conclusions:

(1) The overhead cost on any capital grants should be stated in the Public Capital Programme even if they are financed from the current budget. The Committee is disturbed to learn that in many cases such information is not even available.

(2) There is no logic apparent in the distribution of funds under many of the ongoing programmes such as housing, roads, etc. Circular 1/83 did not apply to those areas.

(3) Any contractual arrangement making a commitment to the future payments should be treated as part of the Public Capital Programme and submitted to evaluation, for example, grant subsidies by the IDA or other contractual commitments.

(4) The Committee is very disturbed at the lack of ex-post evaluation of public capital spending items, for example, there is no cohort analysis of project performance in IDA or SFADCo.

5.3.1 Western Development Fund (£0.5 million)

For the amount involved and the fact that small-scale investments are involved, the Committee feels that, in this case, too many agencies may be involved i.e. if the administrative/overheads were taken into account the cost might well equal or exceed the value of the individual investments. It is suggested that this scheme might, on a trial basis, be re-examined to see if responsibility could be delegated to County Development Teams. This would, naturally, imply tighter overall control at local level.

5.3.2 OPW Public Works & Buildings (£24.956 million)

The Committee would wish to assess the extent to which the formal inter-departmental monitoring system operates in the case of projects costing over £10 million. This question will be followed up separately following the publication of this report. The Committee would also be concerned to ensure that projects costing less than £10 million are tightly controlled.

5.3.3 OPW Arterial Drainage (12.85 million)

The Committee has certain reservations about the rationale under which arterial drainage schemes are drawn up and intends reviewing this important subject in the near future.

5.3.4 Department of Justice (£13.58 million)

As stated earlier the Committee’s review was prompted in part by the major cost overruns on the prison building programme and a later section of this report deals specifically with this problem (Par. 8).

The Committee is concerned with the system of approval or sanction “in principle”, not only in the case of the Department of Justice but for all public expenditure. Such sanction implies that the Department of Finance is satisfied as to the merits of the particular project. The onus must rest with that Department to satisfy itself as to the overall project as irreversible and costly commitments are made on the basis of this practice. Therefore, no approval or sanction in principle should be given in the absence of the rigorous appraisal and evaluation procedures referred to in this report. The Comptroller and Auditor General may wish to consider this aspect separately.

In the case of the Probation Services and Courthouses capital expenditure the Committee’s view is that all such financial outlays should be justified by reference to appraisal/evaluation procedures.

5.3.5 Department of the Environment - Housing (£205.75 million)

The Committee would be interested in obtaining up-dated information on a comparative analysis of effectiveness of expenditure on housing in a sample of local authority areas. This issue will be followed up with An Foras Forbartha through the Department of the Environment in view of the Exchequer involvement in funding of local authorities.

Roads (£125 million)

The roads capital investment programme appears to be the subject of a well developed cost benefit analysis system which should ensure a maximum return on the expenditure involved and which are 100 per cent State financed.

Sanitary Services (£91.108 million)

The Committee noted that quantitative evaluations showing rates of return, payback period etc. are not carried out at present and recommends that such a system should be developed with the least possible delay.

5.3.6 Department of Education - Primary and Second Level (£67.33 million)

The Committee is generally satisfied that in relation to Second Level school building projects the programmes are adequately appraised, managed and controlled. However the division of responsibilities between OPW and the Department of Education on the Primary School building programme suggests that the planning, management and control of those projects may need to be improved.

Third level (£26.9 million)

The Committee, as of now, has no immediate comments to make on Third Level capital expenditure but this subject will be further considered in the context of a review of the cost effectiveness of expenditure in this area.

5.3.7 Department of Fisheries and Forestry - Harbours (£2.2 million)

As in the case of the prison building programme the Committee was concerned at the cost overruns on harbours, in particular, the Howth Harbour development scheme. This is further discussed at paragraph 7.

Forest Development - (£15 million)

The Committee understand that Forestry is subject of a current review by the Minister and reserves comment until that review is completed.

5.3.8 Department of Agriculture - Farm Development Service (£34 million)

The Committee intends to obtain an up-to-date of the study on the scheme undertaken by the Department of Agriculture (1977 - 1978) to see if the predicted increases in output have been achieved or maintained.

5.3.9 Department of Labour - AnCO (£4.9 million)

The Department of Labour systems appear to be very detailed and, on the basis of the information provided, are generally satisfactory. This area will be examined in greater depth during the review of the Department and its State-sponsored Bodies.

5.3.10 Department of Industry, Trade, Commerce and Tourism - IIRS (£0.2 million)

The Committee, in its review of the Institute for Industrial Research and Standards (IIRS), drew particular attention to the £5 million cost overrun on the new administration building and which was accepted by the Minister as being due in part to lack of adequate controls by the IIRS Board and management. This particular case will be further described and commented on in the Committee’s report on the IIRS review which will be published in the near future.

SFADCo. - (£12.5 million)

The Committee is in the process of reviewing and evaluating SFADCo’s expenditure programmes and how, inter alia, they compare with other similar bodies such as Bord Fáilte, Córas Tráchtála and the IDA. We were concerned to note that no cost-benefit analysis is carried out in project evaluation and would recommend that this omission should be rectified immediately by SFADCo’s Board. Similarly, in building operations, a system of quantitative analysis (in terms of financial returns) which is not undertaken at the moment, should be introduced.

IDA grants (£155 million)

The Committee notes that all projects involving grant aid above £2.5 million must be submitted to the IDA Authority and to Government for final approval and that all projects are subject to a full economic, commercial and other appraisals. In the time available the Committee was unable to test the present systems but will do so in the context of the IDA review which is scheduled to begin in 1985.

IDA Building Operations (£22 million)

As with similar projects in other agencies the Committee will wish to establish how final costs (and fees) compare with original estimates and the extent to which significant variations may occur. The memorandum under review does not provide any information in that regard. From a public expenditure viewpoint any variations which result in cost overruns must be fully explained.

The Committee notes that fixed price contracts are only used at the request of clients.

5.3.11 Department of Communications - Regional/Local Airports (£0.75 million)

The Committee notes that, in relation to new projects, present procedures and those for State Airports (£4.287 million and Port Development £13.029 million) conform fully with Circular 1/83 guidelines.

5.3.12 Department of Defence (£5 million)

The Committee would wish to be assured that cases other than “very major projects” are properly appraised and controlled and recommend that the Department of Finance, if not already doing so, should ensure that the Circular 1/83 guidelines be adhered to in all cases.

5.3.13 Department of Health (£58 million)

The Committee understands that the Department of Health has a technical unit (as in the case of the Department of Education) which has specific responsibility for design, control and monitoring of capital projects and the systems used, with some notable exceptions, appear to be operating reasonably well. Some of the hospital building projects have however been a cause for concern and these issues will be addressed by the Committee at a later date.


On the evidence of the data supplied in the above-mentioned Department of Finance memorandum the Committee concludes that:

(i)the guidelines laid down in Circular 1/83 have been adopted by some but not all Departments or State-sponsored Bodies. The degree to which the systems have been implemented needs to be accelerated and universally applied.

(ii)The Department of Finance issued the guidelines in March 1983 and “urged the adoption of rigorous investment planning and implementation procedures” (par. 5 of memorandum) but acknowledged that not enough progress had been made. The Committee finds this unacceptable and recommends that the Minister for Finance should issue a follow-up to Circular 1/83 in much stronger terms, which would state categorically

(a)that the guidelines are now mandatory, and

(b)no proposals for capital expenditure will be entertained unless feasibility studies and appraisals/evaluations are undertaken in all cases. (See recommendation 13.11).

The Committee would assume that such a Circular would also apply to the State-sponsored Bodies and other agencies which do not fall within its terms of reference at present.

6. Cost Overruns

6.1As stated earlier in this report the Committee’s decision to investigate existing controls of expenditure on capital projects was influenced by the cost overruns to two major public sector undertakings, namely, Howth Harbour development scheme and the Department of Justice prison building programme.

6.2The following sectors of the report summarise the background to the two cost overruns: the factors which led to the excesses; the role of the individual Departments and consultants; the Committee’s views on what went wrong and its conclusions/recommendations.

6.3While accepting that both the Howth Harbour and prison building cases arose originally several years before Circular 1/83 was issued, the Committee would point out that

(a)basic management/financial controls which should have been in place were obviously absent in both projects and

(b)on-going expenditure, which falls within our remit, is directly affected i.e. in the two cases final costs as yet are unknown and will be a drain on Exchequer funds (principal and interest) for years to come,

(c)other capital projects which resulted in major cost overruns may exist but which, due to the time constraint, do not fall within the Committee’s present review. To the extent that this analysis highlights what went amiss and such cases can be avoided in future, the Committee believes that the inclusion of these two cases are suitable examples for review and debate in the Dail.

7. Howth Harbour Development Scheme

7.1The initial objective of the Committee’s enquiry was to examine the steps which had led to a reported increase on a Howth Harbour development scheme from an estimated £3.58 million to £11.8 million. Following the hearing of evidence from Department of Fisheries and Forestry officials on 14 September and 20 October 1984 the Committee established that an in-depth enquiry should be made. The review was included in the sub-Committee’s terms of reference as part of the general enquiry into capital project control.

7.2Given the technical nature of the Howth Harbour project the Committee decided to engage the services of Mr. John Ballance B.Sc. (Eng.) B.Sc. (Arch.) as consultant to assist in that particular aspect of the report. Mr. Ballance’s report follows at paragraphs 7.7 to 7.9 below.

7.3Apart from officials of the Department of Fisheries and Forestry (referred to here as the Department) the sub-Committee heard evidence from Mr. P. McCabe, Commissioner of Public Works and his advisers.

7.4The Committee found that

7.4.1The Department changed its plans radically after going to tender.

7.4.2Despite the fact that two independent borehole investigations showed discrepancies OPW went ahead with excavations and much greater quantities of rock were found than anticipated (costing an estimated £1.241 million compared with a tender price of £0.243 million).

7.4.3Additional works would cost £1.69 million; effects of a Price Variation Clause, £2.25 million; syncrolift £0.91 million; other works £0.56 million.

7.5The Committee was gravely concerned at the lack of control on the Howth Harbour development scheme and the lack of action in the Department of Fisheries and the Office of Public Works when the costs began to get out of control. The consultant’s report shows clearly the evolution of the project and how the original tender price rose from just over £3½ million to almost £12 million. It should be noted that the final cost of the scheme has not yet been determined.

Appendices 8.1 to 8.4 include correspondence between the Committee, the Department of Fisheries and Forestry and the Office of Public Works on the Howth Harbour scheme.

7.6The Committee decided to include the abovementioned case and the Department of Justice prison building programme (par. 8) as examples of how public expenditure capital projects should not be managed and hope that the lessons learned will ensure that such major waste of expenditure will be avoided in future.


The Department of Fisheries stated that a detailed feasibility document had been done in 1977 and submitted to the Department of Finance to obtain approval for the project. The Department of Fisheries provided subsequently a copy of this document to the Sub-Committee on a confidential basis. In evidence, officials from the Department stated that the feasibility study was of a general nature and was not of a form to facilitate the analysis of extra costs on the basis of economic return.

However the data supplied by the O.P.W. defines clearly the basis for proceeding on the project and covers estimates prepared in 1969, 1974 and 1977. These estimates have been converted to 1977 prices using the Royal Institute of Chartered Surveyors’ index of building costs.


Phase 1

Phase 11


1969 Estimate (1977 costs)


No estimate


1974 Estimate (1977 costs)




1977 Commitment




Considering the intervening years and the inevitable development of the scheme, the figures are quite consistent.

After award of the contract, the transfer of certain works from Phase 1 to Phase 11 and certain extra costs, the O.P.W. highest projection for the project in 1977 costs was -


Phase 1

Phase 11


1977 Adjusted




Thus it would appear that the Department of Fisheries considered the Howth Harbour Development Project to be a viable and economic investment on the basis of:

Total expenditure for Phases I and II = £4.6m. (1977 costs)

The final outcome of the project as defined by the OPW is now £11.8m (final account 1983/84). If this figure is adjusted to 1977 costs, i.e. excluding inflation and VAT, the final estimated expenditure for Phases I and II would be £8.5m. (1977 costs).

It is difficult to envisage that a development originally justified on the basis of £4.6m (1977 costs) would be providing a similar economic return on a final estimated cost of £8.5m (1977 costs).

The Committee also believes that the lack of any proper investment appraisal based on the commercial value of fish catch, etc. was a serious flaw in the Howth Harbour proposal.

7.8Performance on the Project


The O.P.W. were quite clear as to their role on the project. They were the technical Agents acting for the Department of Fisheries with the responsibility of ensuring that the engineering design approved by the Department of Fisheries was correctly installed. They were not responsible for the assessments of economic return on the works, but did have a responsibility to pass cost information as quickly as possible to the Department of Fisheries.

The O.P.W. role was complicated by the responsibility for the management and maintenance of Howth Harbour and it was in fulfilling that role that they instructed the contractors to carry out the under-pinning of the West pier.

If this work, the work on sundry items of £165,000 and the Dublin Corporation Amenity Works of £32,000 are included in the O.P.W. area of responsibility the situation becomes

Original Tender


£3.6M (1977 costs)

Basic Contract

Final Estimated Cost


£5.9M (1977 costs)

This is a very large over-run of £2.3M and is accounted for by the extra rock dredging in the approach channel, fishing harbour area and yacht basin and the underpinning the West pier. The O.P.W. insist that the provision of 118 bore holes was reasonable in the circumstances and that the difficulties were occasioned by a most complex and unusual geological formation. It is unlikely that anyone could have foreseen a variation of this magnitude but there must be criticism of the very low contingency of 4%. Apart from a contingency in the Bill of Quantities there should have been a client controlled contingency to cover the inevitable and expected difficulties in the sea works.

The Department of Fisheries complained that the O.P.W. did not highlight to them the risk element.

The Committee was informed that the original contract was for two years and included contractor’s preliminaries of £378,000. In light of the extension of the project to four years and the doubling in the scope of the work from £4.6M (1977 costs) to £8.5M (1977 costs), it is not surprising that there is a claim from the contractor for extended preliminaries and disruption.

With regard to inflation, the amount involved would be based on

Basic Contract

Final Estimated Cost


£5.94M (1977 costs)

Using the R.I.C.S. Index from January 1977 to July 1983 when the bulk of the civil engineering work was complete, we have averaged the inflation over this period. The result is




(Based on R.I.C.S. Index)



The amount as actually negotiated by the O.P.W. is

O.P.W. Negotiated Inflation



This has to be considered a very good outcome.

On the matter of information procedures, the O.P.W. themselves accept that they were slow in getting data to the Department of Fisheries. In addition, certain works were proceeded with the approval obtained later from the Department of Fisheries and the Department of Finance. While this is acceptable in emergency situations and for small sums of money, it is in general a bad practice. An example of this arises in the Comptroller and Auditor General’s Report in 1982 referring to the fact that expenditure had exceeded the sanctioned amount by £3M. This practice also created difficulties with regard to keeping the Department of Fisheries fully informed of the total cost.

(b)Department of Fisheries

It is clear that the Department of Fisheries did not have a Management Control System for the project which involved assessment of any extras on the basis of economic return. The only system was a cash flow control which involved a quarterly report from the O.P.W. covering

-Invoices in hand

-Invoices expected in the next quarter

-Advice on the “impressed account” to arrange transfers of finance to the O.P.W.

The Departemnt of Fisheries adopted a very passive role and operated on the basis of picking up over-runs from this cash flow control.

There did not appear to be a realisation on the part of the Department of Fisheries that they were in overall control and needed monthly reports showing the final estimated cost which would allow them to monitor the economic value of the final investment.

The project went from a projected cost of £4.6M (1977 costs) to £8.5M (1977 costs) and yet there is no evidence of a fundamental re-appraisal of the whole project in light of the unexpected problems and the client extras sanctioned by the Department of Fisheries. The Department of Fisheries assessments were not helped by the delays in providing information from the O.P.W.

The Department of Fisheries sanctioned extras of £2.7M during the course of the project from 1977 to 1983. No evidence was produced to show that these extras were justified on the basis of an improved economic return from the investment.

The Department of Fisheries did not include in their feasibility or at any stage during the project for either interest charges or inflation.

They considered that it was the responsibility of the Department of Finance to make allowances for these items.

An outlay of £11M spread over the period 1979 to 1983 at a rate of interest of 12% would involve internal charges of £2.5M.

The Department of Fisheries leaned heavily on the O.P.W. in the matter of assessing the risks involved in sea works. They had not included any client contingency to cover the inevitable and expected over-runs.

7.9Lessons to be learned

The following lessons can be learned from the experience on this project.

-A comprehensive feasibility document showing all expected outlay and with provision for inflation and interest charges must be prepared.

-An adequate and carefully thought out contingency in line with the prospective risks in the project must be included in the feasibility document.

-A clear definition of the roles of the parties involved must be made with a strong emphasis on the overall responsibility of the client department for the total project outcome in cost and time.

-Regular management controls based on the detailed feasibility document and showing a regular assessment of the final estimated cost of the project and final likely programme should be set up.

-Circular 1/83 from the Department of Finance provides a very good basis for the preparation of feasibility documents from now on.

-There must be strong emphasis on the responsibility of the client department to re-appraise the project during the course of its execution particularly in light of unexpected over-runs.

-Client departments should not sanction extras during the course of the project unless these extras can be justified on the basis of an improved economic return from the total investment.

-The O.P.W. or other design agency must carefully spell out to the client department the broad implications involved in extras such as the additional inflation, extensions to the programme and possible contractors claims for disruption, extra preliminaries etc.

8. Department of Justice Prison Building Programme

8.1In September 1984 the Committee became aware that, in the case of a number of major capital projects for the prison service, considerable expenditure had been incurred on professional fees. The buildings and installations were designed as commissioned by the Department of Justice and the design work had reached an advanced stage before it was decided that the projects would have to be redesigned in order to secure economies of cost by modifying the requirements originally envisaged by the Department of Justice. In one case the redesign was proceeded with even though the Department of Finance had refused to sanction expenditure on the site development works for the project.

8.2The Committee decided to follow up their initial enquiries by seeking written material from the Department of Justice and subsequently by hearing evidence (see Department of Justice letter of 1 October 1984. (Appendix 9.1).

8.3In summary, the Committee found the following:

(1)Four prison building projects were involved; Wheatfield (two), Cork and Portlaoise.

(2)Total fees of £12.7 million will be payable as follows:


Original Design

Revised Design


Fees paid


Fees paid


Estimated total fees payable on completion





Place of Detention








Rathmore Road Cork




Place of Detention








Security Prison








(3)During 1982 the Department of Justice decided to modify the prison designs to increase the accommodation while reducing unit costs. The reasons given were that

-financial stringency had diminished the prospect that the new accommodation would materialise as rapidly as it had been expected earlier.

-the prospect of having the accommodation originally planned completed within the original time scale was no longer realistic and

-the need for even more accommodation “was becoming more apparent”.

8.4The Committee was seriously concerned at the fees that had been paid for design work on prisons when work had actually commenced on only one site. For that reason a sub-Committee was appointed to undertake an urgent investigation of this and other aspects of capital expenditure control generally.

8.5The Committee, through the sub-committee, set out to establish

(a) why very considerable fees were paid, (b) what caused the delay in getting work off the ground and (c) what information e.g. projections of prison population, were used by management in the Department of Justice in deciding on the original designs and the subsequent redesigns of the new prison accommodation?

8.6As regards fees the position is that professional fees are payable in accordance with the scale of fees approved by the respective professional institutes. This fee represents a percentage of the total final cost of the project and, therefore, the actual fee rises in line with any subsequent increases in costs arising from inflation or other causes. This aspect is further discussed at paragraph 9 below.

8.7The Committee has to report that, despite intensive enquiries with the Department of Justice, it was unable to make a judgement as to whether the expenditure to date on the prison building programme was efficiently/effectively spent or otherwise. The reason for this view is that the Department refused to divulge the basis on which decisions were made on grounds that the Committee’s terms of reference refer to reviewing the justification for and effectiveness of ongoing expenditure, while the issues involved related to decisions which were taken by various Ministers and/or Governments. The Department of Justice felt that fundamental policy decisions taken in the past were being questioned and that it was not possible to respond to such questions by the Committee except in general terms.

8.8The Committee is of the view that the information sought was of a factual nature, particularly in relation to details on prison population projections and why a particular type of prison design was agreed and then subsequently amended at great cost to the taxpayer.

8.9Appendices 9.1 to 9.8 detail the correspondence between the Committee and the Department of Justice.

8.10Arising from the lack of progress the sub-Committee sought an interview with the Minister for Justice with a view to clarifying outstanding questions generally. The Minister was not, however, in a position to meet the sub-Committee and the result was that this section of the report had to be drawn up on the basis of incomplete and unsatisfactory responses. The following views are, therefore, necessarily constrained by the lack of comprehensive information on the prison building project.

8.11Committee views

8.11.1The Committee found no clear evidence as to why design on four separate prison building projects were initiated in 1979 or in the case of the one that went ahead, why priority was given to a women’s prison when the pressure for space seemed to be almost exclusively in the male sector. (The new women’s prison was designed for 144 while the daily number of women prisoners was less than 50).

8.11.2The Committee could not accept the reasons advanced by the Department of Justice for deciding on abandoning original designs and commissioning four new designs and questions why the projects were not cost effective in the original design.

8.11.3The Committee cannot understand the rationale behind the decisions to re-design when, presumably broadly similar statistical data were available to the Department of Justice at the time the original designs were commissioned. Were the original decisions taken based on inadequate or faulty information? The Committee was unable to ascertain the answer to this important question and must reiterate that, as a Dail Committee charged with the specific task of reviewing such expenditures, we should be in a position to provide the answers. The only conclusion that can reasonably be drawn was that the Department of Justice acted injudiciously in changing its plans “in mid stream”, at considerable expense to the taxpayer.

8.11.4This particular case graphically illustrates the level of consultants’ fees that must be paid under existing agreements, whereby the greater proportion is paid before construction work gets underway. The Committee, as stated at paragraph 9.2 below, regards the present fee system as inequitable and is recommending that this situation should be altered immediately.

8.11.5Office of Public Works

OPW letter of 14 February 1985 in response to the Committee’s enquiry of 12 October 1984 (Appendix 9.3) details that Office’s role in relation to the prison building project. That letter states that

(1)Accommodation was increased as follows:-

(a)Wheatfield Prison: from 60 to 144 places

(b)Wheatfield Place of Detention: from 150 to 320 places

(c)Cork Detention Centre: from 120 to 180 places

(d)Portlaoise: reduction and other modifications to facilities

(a) to (c) above involved substantial changes to existing accommodation and original designs.

(2)Consultants’ fees paid are the minimum charges allowed by the institutes. Details of those fees are set out in A to D inclusive of the OPW letter.

(3)Paragraphs (v) to (viii) of the OPW response describe the relationship between the Department of Justice and OPW during the progress of the projects.

8.11.6The Committee might have assumed that, given the detailed steps described in the above letter that the Department of Justice, if not aware already, would have been alerted by OPW by the fact that delays and redesigns would involve greatly increased expenditure. As stated elsewhere in this report, OPW must, in its capacity as professional/technical adviser to Government Departments, assume responsibility for warning client Departments of the financial and other consequences of modifying or amending designs on public construction projects. It is not sufficient for OPW merely to act as agents for Departments and implement instructions as it receives them. The Committee believes that the fees debacle in the case of the prison building programme would not have occurred if a more professional relationship had existed between the Office and the Department of Justice.

9. Consultants’ Fees

9.1It is clear from the evidence provided in the case of the Howth Harbour development scheme and the prison building programme that a considerable proportion of the combined excesses were due to payment of fees to consultants.

9.2Consultants’ fees based on a percentage of total cost were last fixed by the National Prices Commission in June 1975(1). Applications for increases in amounts have been processed. The scales for public sector contracts are as follows:-


The Royal Institute of Architects of Ireland fee system is as follows:-

Six per cent of the total cost of the project - 1972 regulations require three quarters of the total fee to be paid at Stage 3 of a project i.e. at the end of preparation of “working drawings and specifications and such details as are necessary to enable quantities to be prepared to tenders obtained”.(2)

In other words, architects must be paid the bulk of their fee before any actual construction work commences. Stage 4 is described as the remainder of the architects’ normal service. In its own right it attracts the remaining quarter of the total payment, payable “in appropriate instalments from time to time” as the work proceeds.

The Committee wishes to draw particular attention to par. 2.39 of the N.P.C. report:

“The RIAI scale is quite explicit on how costs are to be calculated. During the course of the project, payments are to be based on the estimated cost, or on the tender cost. But when the work has been completed the actual construction cost is known and the total fee due is based on this and the final payment has to bring the total amount paid up to the appropriate percentage of this actual cost.....”

The Committee is strongly of the view that this practice is indefensible and that the fee payments system should be radically altered. This is further discussed below and included as a specific recommendation at. 13.4.

(2)Quantity Surveyors

The Royal Institute of Chartered Surveyors (RICS) has a recommended scale of fees applicable in Ireland (The Society of Chartered Surveyors in the Republic of Ireland is a constituent body of the RICS). Except where time rates are involved, the fees are related to various percentages of the cost of the building or of some part of the building. There are two alternative scales - the Basic Scale and the Inclusive Scale. Either may be subject to the provisions of a common Supplementary Scale.

The most frequently used scale, in the case of a completed project, is the Inclusive Scale, which is a lump sum of £38,000 plus 3½ per cent of the balance of the total project over £1 million. For the purpose of calculating Quantity Surveyors’ fees the costs of the mechanical and electrical installations and V.A.T. are not taken into account. Fees are payable in instalments, being 60 per cent upon submission of completed tender documents and Bills of Quantities, the balance is payable during progress and at completion.

(3)Consulting Engineers

Two kinds of consulting engineers are normally involved in capital projects: the structural engineer who is involved in building contracts and the mechanical and electrical engineer. The basic fee charged by consulting engineers is normally in accordance with a Scale of Fees published by the Institution of Engineers of Ireland in agreement with the Association of Consulting Engineers of Ireland.

The fee scale for structural engineers applied in normal cases tapers and depends on whether there is reinforced or prestressed concrete work. First, there is a lump sum of £12,750. For works over £2 million and not involving concrete there is a fee put at 4 per cent of the cost of the works. If reinforced or prestressed concrete is involved all of these percentages increase on a sliding scale.

Again, the Committee must point out that (a) fees are calculated as a percentage of the total cost of the works and (b) the bulk of the fee is paid before the Construction Stage of the project.

For mechanical and electrical engineers the fee payments system is as follows:

£12,750 plus 4 per cent of the cost of the works plus additional fees for reinforced concrete and structural steel work.

9.3Therefore, like the architect and the surveyor, the engineer has a scale related to a final cost. It should be noted, however, that some Departments and other bodies have negotiated their own conditions of engagement and scales of fees with the professions.(3) See also OPW letter of 14 February 1985 at Appendix 9.3.

9.4The “Report of the Working Group on Cost Overruns in Public Construction Contracts” referred (P.26) to the existing problem whereby “the present system of paying consultants means that extra costs on a project also entail extra costs in consultants’ fees.”

The report went on to say

“Inflationery pressures have meant that consultants have made windfall benefits from contracts since fees are calculated as a percentage of the final cost of the project. The major part of consultants’ work is carried out in the period prior to the completion of the contract documents. Delays thereafter either in obtaining tenders or commissioning work on site may mean that the final cost is considerably higher than the initial estimated cost. Yet the consultants are paid by reference to the final cost. This inequitable practice should be changed. Also, where public contracts are repetitive in nature, they should qualify for a reduced design fee.

A new system whereby the major part of the percentage fee for all consultants is based on the tender price (or, in cases where there may be delay in going to tender stage, the estimated cost at tender stage) and the remainder related to the final cost, should be adopted as being fair and equitable to client and consultants.

The general relationship between the client and the consultant may need to be more clearly defined. In particular, the consultant should not be able to take any action involving the client in extra expenditure without the client’s consent. Consultants will need to accept greater financial responsibility for extra costs that arise as a result of their mistakes, e.g. design changes necessitated by inadequate initial design of the project, late issue of drawings, instructions, etc.

Finally, it should be noted that the National Prices Commission do not accept that there should be mandatory minimum fees to be charged by consultants. Fees should therefore not be treated as minima, and negotiations should be pursued with a view to obtaining a reduction on fees, if warranted. Furthermore, there is no reason why contracts for design and other professional services particularly on large projects, should not be open to price competition”.

9.5The Committee notes that recommendation “P” of the above mentioned report stated:

“Consultants’ fees should be paid in two moieties (i) related to the cost of the project at tender stage and (ii) (the smaller portion) related to the final cost of the completed project. The second portion of the fee is in respect of management of the project in the post-contract stage and this duty should in future be emphasised to consultants. All steps should be taken in good time by consultants’ to ensure that the client does not incur unnecessary extra costs. In appropriate cases, reductions in normal consultants fees should be sought, particularly where repititious projects are involved, and for major contracts, design etc., costs should be open to price competition”.

We see no good reason why the above recommendation was not immediately implemented given the fact (a) that very considerable sums of public monies are being paid by way of fees in cases where construction had not actually commenced and (b) the amounts are related to final costs which, in the normal way, are subject to price increases.

9.6In its June, 1985 Monthly Report (Prl. 4642) the National Prices Commission commented on Professor J.P. Lewis’s report which was published in full as Occasional Paper No. 19 and which was discussed above. The Commission accepted Professor Lewis’s recommendation “that any further significant revision of fees for any of the professions concerned should not be entertained by the Commission until adequate information has been supplied and analysed and the proposed working party has reported” (Par. 7.22 of the N.P.C. report). In the following paragraph the Commission went on to say that the making of fee scales mandatory on members of the professional body concerned is open to serious criticism.

9.7The Committee notes that the formal working group referred to above was not, in fact, established (though an informal arrangement was) and that the fee scales which, of course, are based on a percentage of overall project costs) have remained unchanged.

9.8It has been clearly illustrated that fee payments to consultants engaged on capital projects are a considerable drain on scarce resources. The Committee, therefore, strongly recommends that the present system of paying consultants be amended forthwith (see recommendation 13.4).

9.9The Committee understands that the Department of Finance has been recently negotiating a revised system of professional fee payments on public contracts with the institutes representing architects, quantity surveyors and engineers with the main objective of negotiating fees to achieve maximum savings, consistent with an adequate level of service. The Committee endorses any action that can be taken to reduce public expenditure on such fees such as the exclusion of the VAT element in calculating fees on public construction contracts.

10. Role of the Office of Public Works

10.1While the Committee acknowledges that OPW normally acts as agent for Departments in public construction contracts, the fact is that OPW’s role in the two projects detailed in this report left a lot to be desired and OPW must accept responsibility in part for the cost overruns.

10.2In the case of the Howth Harbour development scheme there was clear evidence that the management and cost control of the project was of an unacceptable standard. Similarly, in the case of the Department of Justice prison building programme the delays which led to redesigns and large fee payments were, in the Committee’s view, indefensible. It may be argued that the client Department should accept overall responsibility for cost overruns. The Departments must, of course, be held accountable for management and control of their budget allocations. Nevertheless, the Committee believes that OPW, which is the repository of the bulk of technical/professional expertise for the public service, should have assumed a much more stringent and responsible role than was, in fact, the case. OPW provides the liaison between a Department and the consultants and contractors and as such should ensure that projects are tightly controlled and monitored at all stages from design to completion of the project. It was made clear to the Committee that the system which operates at present allowed Departments change plans “in mid-stream” and OPW merely accepted such instructions and passed them on to the consultants. The Committee concluded that, if OPW is to have a meaningful role in project control in future, the Office must adopt a much more aggressive and professional approach (a) with Departments/Offices and (b) with consultants/contractors generally.

10.3One of the problems identified by the Committee was that OPW, which operates under the control of a Minister of State, simply has not used its central role and influence to ensure that projects are adequately controlled in Departments generally. This is a major question that must be addressed as a matter of urgency, if there is to be an immediate change for the better in capital project appraisal and control. The Committee considered a number of options and agreed that a solution would only evolve from change at three levels:

(i)O.P.W. in providing a professional service for Departments must charge in full for such services; this would ensure that the responsibility will rest with Departments to plan and budget for capital proposals.

(ii)The Office of Public Works itself needs to adopt a more business-like and aggressive approach so that capital expenditure on projects on which O.P.W. acts on behalf of Client Departments will be managed more efficiently and effectively.

(iii)O.P.W. and Departments generally must accept the indisputable maxim that “time is money”. Delays in the past have led to considerable waste of public expenditure and such delays have been found, in the main, to be due to changes of plan and slow decisions/movement of files between officials at administrative and technical level.

11. Other submissions to the Committee

11.1The Committee received submissions from

-The Royal Institute of Architects of Ireland (Appendix 2)

-The Society of Chartered Surveyors in the Republic of Ireland (Appendix 3).

11.2The sub-Committee received the R.I.A.I. paper “Cost Control Procedures on Public Building Projects” on 26 March 1985 i.e. after deliberations had been completed (Appendices 10-11).

However, on the basis of the data provided in the R.I.A.I. submission the Committee is of the view that the R.I.A.I. proposals should be examined by the Office of Public Works, in consultation with the Department of Finance with a view to examining their feasibility and possible adoption.

11.3Government Contracts Committee (GCC)

The following is a brief description of the role of the G.C.C. in relation to contracting procedures:

In 1926, the Department of Finance laid down rules of procedure for Government purchasing which require Departments to apply normal contracting procedures - i.e. the holding of a tender competition among an adequate number of suppliers, the receipt of at least two tenders and the award of the contract to the lowest tenderer. In addition, a list was issued specifying the articles to be purchased, on behalf of all Departments, by the Central Purchasing Departments.

The Government Contracts Committee was established in 1922 under the aegis of the Department of Finance to advise on policy matters and to oversee the implementation of the regulations laid down by the Department of Finance. The G.C.C. consists of representatives of the Departments of Finance (chairman), Defence, Environment, Industry, Trade, Commerce & Tourism, the Office of Public Works and the Stationery Office.

The Committee’s main function in practice is to decide on the placing of individual contracts exceeding a certain value (at present £10,000) for which the prior approval of the G.C.C. is required. Such approval is required only in cases where normal contracting procedures have not been followed. (In urgent cases the Department of Finance may give verbal sanction to the placing of contracts subject to the covering authority of the Committee being sought). A certified copy of the G.C.C. No. 1 Form approved by the Committee must be sent to the Comptroller and Auditor General by the Purchasing Department.

All Departments and Offices must furnish a monthly return to the Committee of all contracts placed during the preceding month in excess of £5,000 in the case of the Central Purchasing Departments and of £1,000 in other cases.

The G.C.C. does not exercise control over contracts placed by local authorities or State bodies. However, local authorities are expected to adhere to Government Contract Procedures.

In addition to policy matters the Department of Finance is specifically responsible for deciding on proposals by Departments concerning ex-gratia payments on contracts.

12. Conclusion

12.1The Committee, in its review of control of capital projects, concluded that:

12.1.1 The guidelines laid down in the Department of Finance Circular 1/83 left an undue level of discretion to Departments, Offices and State-sponsored Bodies.

12.1.2 The guidelines had not been universally adopted by all agencies.

12.1.3 Approval and/or sanction “in principle” by the Department of Finance is used. There is a need for clarification on the contractual or other commitment involved in such a practice. If it implies that public expenditure is committed in the absence of detailed project appraisal/evaluation, then this approach should be changed.

12.1.4 On the basis of the evidence heard in the case of (a) the Department of Finance Circular 1/83, (b) the Howth Harbour development scheme and (c) the Department of Justice prison building programme, the Committee is convinced that radical changes are required in the management and control of capital projects if major cost overruns are to be avoided in future.

12.1.5 The Office of Public Works needs to improve its present approach to project management and this will only occur if there is a commitment by OPW management to introducing a system of tighter technical/administrative control. One of the main problem areas identified by the Committee lay in the rather passive role adopted by OPW in its relationship with client Departments. The Office should act with more decisiveness and authority and should refuse to accept projects on behalf of any Department/Office which do not conform to standards laid down by OPW (particularly in relation to briefing, monitoring and control systems).

12.1.6 The present system of fee payments to consultants must be changed immediately if the Exchequer is to eliminate or greatly reduce the excessive sums that have been paid in fees on public capital projects.

12.1.7 The present contract system in relation to capital projects has in many cases operated to the detriment of the Exchequer i.e. contracts which are not on a fixed price basis are, the Committee believes, open to abuse by virtue of contingency and other additional costs being added in subsequently.

13. Recommendations

13.1Departments/Offices and the relevant State-sponsored Bodies must improve present systems of briefing, monitoring and controlling of public expenditure on capital projects so that cost overruns will be eliminated.

13.2Fixed price tenders should be sought in all cases of contracts of shorter duration than two years.

13.3Project proposals should be drawn up on the basis of estimated total costs i.e. allowing for inflation, interest, contingencies etc. rather than where only current costs are shown.

13.4The system of fee payments for consultants must be immediately amended as follows:

(i)Fees should be paid in two moieties (a) related to the cost of the project at tender stage and (b) the smaller portion related to the final cost of the completed project.

(ii)Fees should be negotiable.

(iii)In the case of repetitive projects fees should not be on a percentage basis but at a reduced rate.

(iv)In general fees should be open to price competition.

(v)Under no circumstances should fees be fixed as a percentage of the final cost of a project.

13.5Reporting systems between the Department of Finance, the Office of Public Works and client Departments/Offices and State-sponsored Bodies must be improved. Better planning, regular reporting and early warning systems should ensure that (a) the most cost-effective schemes are undertaken, (b) delays are avoided and (c) cost overruns will not occur.

13.6Department of Finance

A small technical advisory unit should be set up immediately in the Department of Finance reporting direct to the Second Secretary, Public Expenditure Division. This unit, which would be small (consisting of, say, a construction economist and an experienced architect/engineer) would bridge serious gaps that exist at the moment. The function of such a proposed technical unit would be to provide the Minister for Finance with professional advice on the Public Capital Programme and which, the Committee believes, is essential if the P.C.P. is to be adequately monitored and controlled. This unit would liaise with OPW on an on-going basis.

13.7Full costs of capital projects should be charged to the budget allocation of the Departments/State Body involved. This should include such costs as interest, depreciation and, where Office of Public Works services are involved, the full OPW cost should also be included. Such an accounting system would ensure that all concerned, including the public, will know the true costs of capital projects. The Committee accepts that this may involve a change in present Government accounting systems but believe that this is an essential prerequisite to comprehensive financial controls.

13.8Specific responsibility/accountability for capital projects and their budgets should be assigned to individual management teams appointed within the Department which should liaise with OPW or outside consultants. The Committee, while recognising Constitutional and statutory position of Ministers and Accounting Officers, feels that no real progress can be made in the elimination of excess expenditure unless individuals are assigned responsibility and are held accountable on a personal basis.

13.9The format and layout of the Public Capital Programme booklet needs to be radically improved. Given the size of the P.C.P. (£1800 million for 1985) the Committee feels that the data provided is generally uninformative. Details along the lines of the “Comprehensive Public Expenditure Programmes 1984” (Pl. 2186) and including the true costs referred to at par. 13.8 above should be set out in a much expanded P.C.P. booklet. A summary of the feasibility study or appraisal which preceded the decision to allocate funds to the project should also be included in the revised format. The P.C.P. details should include current costs and prospective costs including interest and inflation; also a summary of progress to date which would summarise whether the project is within the projected time scale, estimated costs, budget, and whether completed within budget.

13.10The P.C.P. should set out capital project data on a multi-annual basis i.e. not merely the current year’s allocation. If the data is to be meaningful it must provide an overall picture of the cost implications of such projects. As a corollary to that the Committee strongly recommends that the Government, where possible, should make a commitment i.e. beyond the first year to the total funding of the Exchequer element of capital projects once they are approved.

13.11No capital project should be considered for inclusion in the P.C.P. unless it has first satisfied the criteria laid down in Department of Finance Circular 1/83. A further circular should be issued which would set out much more stringent controls and eliminate the discretion now available to Departments to interpret the guidelines. Reference should be made to the need for adequate controls of on-going projects e.g. housing and roads. (See par. 4.2.3).

14. Acknowledgements

The Committee wishes to record its appreciation to the sub-Committee members who drafted this report; Deputies Richard Bruton, Joe Doyle, Liam Fitzgerald (Sub-Committee Chairman) and Noel Treacy; to the Departmental Officials who gave evidence; to the Royal Institute of Architects of Ireland; the Society of Chartered Surveyors; also the National Prices Commission and Mr. John Ballance who acted as consultant in the review of the Howth Harbour development scheme.



15 July, 1985.

(1) See also NPC Report of June 1975.

(1) Based on N.P.C. Occasional Paper No. 19: “Professional Fees in the Building Industry” (Prl. 4314), April 1975.

(2) Pars. 2.8 (c) and 2.10 (c) (ibid).

(3) Par. 5.1 (ibid)