It is important to recognise that all public investment projects are now required to go through six planning stages. The stages are:
- Strategic Assessment;
- Preliminary Business Case;
- Final Business Case;
- Review, and
- Ex-Post evaluation
The schedule has been designed to ensure that the progress of projects is fully checked at each stage. The objective is the delivery of efficient and effective projects at the final stage. It is the responsibility of project sponsors to give approval for projects, at each stage, before they advance to the next stage. The guide for ‘Evaluating, Planning and Managing Public Investment’, published by the Department of Public Expenditure and Reform in December 2019, recognises that if projects do not meet the requirements for advancement they should be re-evaluated
‘Tackling systematic cost overruns in infrastructure projects’
“... A tendency for projects to cost, on average, more than expected indicates a problem with the estimation method or the decision making process. Researchers have in the past identified ‘optimism bias’ and ‘strategic misrepresentation’ as the main culprits for systemic cost overruns. However, all current explanations do not entirely conform to the existing empirical data from actual projects. Research carried out at the International Transport Forum suggests there are in fact additional drivers of cost-overruns in public investment appraisal.
- The accuracy of future cost estimates also depends on past construction market developments and bidder behaviour.
- The functional relationship between the past development of prices on the construction market, bidder behaviour and current prices on the construction market is sufficient to explain the persistence of cost-overruns through time even in the absence of other explanations.
- The usefulness of simple calculatory provision (‘uplift’) for expected cost overrun is questionable.
- For informing decisions on the choice between direct public procurement and a public-private partnership solution, using the uplift as an input for a cost comparison is also questionable”.
Source : International Transport Forum, February 2015, www.itf-oecd.org
The strengthening of checks and controls of capital projects, in the updated Public Spending Code, has been influenced by experience from over-runs on projects, including the National Children’s Hospital. Ireland is not unique in experiencing cost over-runs on capital projects. In 2015, the International Transport Forum produced a paper on cost-runs, which points out that projects that cost more than planned create budget pressures and this can translate into political difficulties. Table 1 summarises the reasons for over-runs identified by the International Transport Forum www.itf-oecd.org