A major shift in the Government's approach to big construction projects, so that the taxpayer is no longer liable for escalating costs, has been signalled by the Minister for Finance.
Mr McCreevy said yesterday he was no longer willing to tolerate the "current regime" of open-ended construction contracts which multiplied in cost over time. Officials in his Department, he said, would examine ways to ensure the State got better value for money and more certainty about project costs.
He made his remarks as the Minister for Transport, Mr Brennan, announced he was considering raising the height of the Dublin Port tunnel by a foot at a cost of €30 million. He said the option had been suggested by consultants to address the concerns of industry groups who claimed the tunnel's existing clearance of 4.64 metres was too low.
Mr McCreevy, addressing a Construction Industry Federation conference on value for money, said the private sector would not tolerate the cost overruns accepted by the State. "I intend to ensure that the best practices that apply in the private sector are followed in the public sector too."
He said a start had been made by agencies such as the National Roads Authority to strengthen project cost-estimation and management.
Mr McCreevy's reference to the NRA suggests a radical change in the Government's approach to major public projects. At present, State agencies engaging in civil engineering projects are bound by a standard form of contract, prescribed by the Government Contracts Committee.
This requires the State agencies to carry the risks associated with price variations and other cost-increasing changes in conditions.
In the recent past, however, the NRA, with the approval of the Contracts Committee, has adopted a different approach which transfers responsibility for some of the risks involved to the contractors, forcing them to absorb the costs.
Mr Michael Egan, the NRA's head of corporate affairs, said the new system had been tried on a pilot basis on the Kilmacthomas and the Moone-Timolin by-passes in Co Kildare. The NRA was applying the new approach to other projects.
While transferring the risk of cost increases to contractors gives the State more certainty about the price of projects, it has a downside.
It forces contractors to calculate for potential costs in advance and drives up the price of initial tenders. This means the State could end up paying for possible cost increases which never actually materialise.
Cost overruns and delays to major infrastructural projects have seen the projected cost of the National Development Plan increase from €6.9 billion to €16 billion.
