Tarawatch has stated that the National Roads Authority (NRA) has a €16 billion cost-overrun. It said it will lodge a complaint against the NRA with the Comptroller and Auditor General (C&AG).
“The C&AG has primary responsibility for ensuring value for money in public spending,” TaraWatch spokesman Vincent Salafia said. “It should not allow one penny to be spent until there has been cost-benefit analysis and Strategic Environmental Assessment (SEA) on every single road plan. “It is illegal and disgraceful for the Construction Industry Federation (CIF) to now negotiate more cost-plus, rather than fixed-price contracts, and a continuation of business as usual. This is a reference to the
Mr Parlon used his insider knowledge to get €150m of building contracts approved which do not contain new “better value for money” provisions, documents obtained by the Irish Independent under the Freedom of Information Act reveal.
The former minister of state, who now earns €250,000 a year as director general of the Construction Industry Federation (CIF), got an agreement from Finance Minister Brian Lenihan to go ahead with 50 key projects under old-style ‘costs plus’ contracts.
This is despite the fact that the projects should have been carried out under new fixed-price contracts, which were brought in to achieve better value for money for taxpayers.
These contracts were introduced last year in a bid to curb massive overspending on key road and infrastructure projects. Under the old ‘costs plus’ model, builders could add on extra bills on top of the agreed contract if they ran into problems during construction.
According to the documents obtained from the Department of Finance, Mr Parlon sent a strongly worded letter to Mr Lenihan last May warning him of the “expense and disruption” that builders would face if the water service contracts were changed from ‘costs plus’ to ‘fixed price’ ones.
“I cannot overstress the importance of this matter to the industry,” he said. Mr Parlon denied his lobbying had resulted in builders benefiting at the expense of the taxpayer – who is now left exposed to the potential of cost overruns in the projects.
He told the Irish Independent that it had not been the fault of builders that local authorities had persisted in using old-style contracts instead of fixed-price contracts.
“Our members tendered at substantial expense and then all of a sudden a circular went out from the Department of Finance and it became apparent they would be knocked on the head. It would have taken 12 to 15 months to re-tender and it was just common sense,” he said.
Mr Parlon said that the CIF had not been threatening the Government when it warned that not using old-style contracts would lead to “public disquiet”, but had only been pointing out the inevitable reaction from local councillors “They are bread-and-butter issues for them and you would obviously have that. We chose to do this very discreetly, we contacted the minister and alerted him to what was happening,” he said.
A spokesman for Mr Lenihan said he had made his decision so the projects, some of which had been in the pipeline for years, would not be delayed. He stated that the Government was “still committed” to using fixed-price contracts.
It is to be noted that claims that cost-overruns are a feature of past contracts is a regular PR device. In 2005, the former Taoiseach, Bertie Ahern stated in the Dail that cost control in some road construction projects in the past had not been ‘up to the mark’. Mr Ahern went on to state that changes in the contract procedures operated by the National Roads Authority now meant that projects were coming in on time and under cost. He said that these problems related to a time before structures had been put in place to cope with a rapidly expanding road building programme.
TaraWatch wants the C&AG to freeze all public spending on NRA projects under the National Development Plan, until a cost-benefit analysis has been carried out.
The C&AG has expressed concerns before about the spending controls on roads projects. In 2002 the NRA was summoned before the Public Accounts Committee to explain a massive €6.6 billion overrun. By 2004, the overrun had gone up to €10 billion. In 2005, PAC chairman Michael Noonan said the interim report would support Prime Time’s claims (‘The Money Pit‘ Monday, 9 May 2005), that 30 road projects originally cost at €6 billion would end up costing the taxpayer €18 billion.
TaraWatch said an engineer’s report it commissioned, and submitted to the Department of Finance on Friday, shows how the M3 motorway will cost the taxpayer an additional €1.8 billion, and will be responsible for €320 million in emissions penalties.