With a new national development plan out next week, the ESRI is damning of the Government's spending record, writes Marc Coleman

'The Berlin profile": what a cool name. Possibly Daniel Craig's new movie; a hairstyle trend doing the rounds among the jetset, perhaps. Not a chance.

The term appears in a report by the Economic and Social Research Institute (ESRI) and applies to something distinctly uncool: that august organisation's main critique of the outgoing National Development Plan (NDP). With details of the next NDP due to be announced next Tuesday, it is a good time to profile the Berlin profile.

The phrase refers to the strategy of spending as much as you can as soon as you can whenever you are running a large infrastructure spend. The term's most likely origin was the German government's desperation in the immediate wake of reunification to get as much of old east Berlin rebuilt in time for the coming election. Nostalgia for the old regime was lingering and it was touch and go whether east Berliners would revert back to supporting the old regime.

To make sure they wouldn't, Helmut Kohl's government decided to give Berliners lots of spanking new roads and buildings in double quick time.

For Germany, the strategy coincided with what the economy needed. With the recession of 1991/92 on the way, it was the best possible timing for any large injection of money, although, as German economists have subsequently noted, the "Berlin profile" had a nasty aftertaste. The post-unification building boom made Germany's economy heavily dependant on the construction sector. When the east was rebuilt, the sector declined, taking Germany's economy down with it.

A decade later, the ESRI had this to say about Ireland's approach to its third major investment plan: "The problem of inflation, and the capacity constraints in the building and construction sector, especially housing, require special attention . . . the building and construction sector is close to an output peak."

Written in 2003, this comment was looking back on a plan that was halfway through its six-year course, a plan that had been planned in the late 1990s when the lower interest rate regime and its inevitable consequence - a building boom - were easy to predict.

A following sentence gives the missing piece of the jigsaw: "This report recommends an increase in funding for the economic and social infrastructure operational programme over the rest of the planning period."

Reading between the lines, it seems the ESRI was taking issue with the Berlin profile, criticising too much spending in the third half of the NDP and, in relative terms, too little in the second.

Value for money was another of the ESRI's concerns. The planned budget for national road improvements between 2000 and 2006 was initially €5.6 billion. This was later revised to €7 billion, but reached €15.8 billion within a two-year period. By 2003 the figure had risen again, to €16.4 billion.

In total, the Government spent €9.4 billion more than planned. The mind boggles to think how many schools and hospitals could have been provided had this waste been avoided.

Some 40 per cent of this cost overrun - almost €4 billion - was due to the effect of inflation on initial costings.

This brings us back to the Berlin profile issue: the cyclical timing of the spending under the outgoing plan at the peak of a building boom made such cost overruns inevitable.

Shifting the weight of spending into the cooler period between mid-2003 and mid-2005 would have been a better option. Although it is easy to be wise in hindsight, it seems fair to say that good economic forecasting could have shaped infrastructure spending planning to achieve a far better outcome.

More worrying still is the remaining 60 per cent of this cost overrun that could have been avoided. The comments made by the ESRI in its 2003 evaluation on this topic are, in the ESRI's own subtle way, damning: "Weaknesses are evident in relation to the transparency of project selection and prioritisation," which translates into "Why the hell did you spend money on so many unnecessary projects?".

And again: "Consideration should be given to the establishment of a unit in the Department of Finance devoted exclusively to the conduct/commissioning of cost/benefit studies on major projects," which translates as "If you're going to spend €51 billion of taxpayer's money, get a group of appropriately trained people to make sure it's not wasted."

Finally, there is perhaps my favourite quote: "Weaknesses in project management are manifest both in excess cost and in delayed project delivery. Management structures do not always 'enable' management of the programmes," which translates as "Billions of euro are being spent by people who couldn't run a fruit stall."

The fact that no costings were done for several projects has been examined by the Comptroller and Auditor General.

It has estimated that more than €1.5 billion - some 16 per cent of the total overrun - can be blamed on this.

Yet another 20 per cent of the overrun occurred because of last-minute changes to the original plans of the project, another feature strongly criticised by the ESRI. The Dublin Port Tunnel and the Luas are two examples.

On the positive side, the ESRI acknowledges that the third NDP did the economy a power of good, pushing Gross Domestic Product (GDP) up by seven percentage points by 2003 alone.

Added to this was a 3 per cent increase in GDP which, the ESRI said, would come as a happy by-product of greater "supply-side factors" (geekspeak for being able to get to work faster because you have more roads to drive on).

The ESRI has already commented on the next plan.

This time its fears are slightly different. Improved budgeting procedures mean that, once chosen, projects should be less liable to run over budget although some inevitably will. But it still criticises the absence of effective cost-benefit appraisal in choosing projects in the first place. And with its economists' eyes ever on the macroeconomic cycle, it has called on the Government to scale back its planned spend from €9.9 billion a year to €8.4 billion to minimise the risk of overheating the economy.

In spite of yesterday's proof that inflation is rising rapidly, that call is likely to go unheeded when Brian Cowen unveils details of the new plan next Tuesday.