If you were building an extension, it’s most unlikely that you would hire a builder just to knock down the old extension and get the site ready and then start work on the extension without agreeing the total price. The plan would mean agreeing the price while the project was under way. Part of the deal would be that if you couldn’t agree the price, you could get someone else.
The flaws in the approach are obvious. The main one is that you are starting a project without any clarity as to what it will cost. The second one is that while the ability to change the builder might give you some comfort, in practice it would only push up costs further and delay the project. If your planning permission was about to expire or you had some other urgent reason to get the project started you might be tempted to go down this route. But if you were not careful, things could go badly wrong and the job could end up costing you a fortune.
On a very simple level this is what went wrong with the national children’s hospital project which is currently €1.6 billion over budget and years behind schedule.
The Government was under pressure in 2015 to get the project off the ground. It had been talked about for years and a proposal to build it beside the Mater hospital had been shot down by the planners in 2011 and an alternative site selected at St James’s Hospital. An election was in the offing and a decision to split the project into three separate parts was made. The procurement process for the first part – clearing the site at St James’s – was launched in August 2015. It was won in June 2016 by BAM, the Dutch-owned construction giant, and work started two months later. BAM went on to win the tender for the main works the following January. It covered the other two parts: constructing the basement and foundations and a separate contract for the main hospital building. No price was set and instead both sides agreed to a process by which a guaranteed maximum price (GMP) would be agreed while the basement was being built. If the GMP could not be agreed, the Government had the option of finding someone else to build the hospital building.
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The Government pretty soon found itself hopelessly out of its depth. An extensive report on the fiasco carried out by PwC in 2019 concluded rather pithily “the necessary controls required to mitigate the associated risks and consequences of this approach were not put in place”.
The report concluded that the Government simply did not know what it was doing either in terms of the risk it was running or the consequences of its decisions. The option to find a different contractor for the hospital building turned out to be essentially worthless. It was very critical of the National Paediatric Hospital Development Board, which oversees the project. The board put too much trust in the management team, which gave rise to “insufficient scepticism and challenge”.
The picture painted by the PwC report is one of incompetent management of the project by the State. There have been various efforts to shift the blame on to BAM, which has not helped itself by adopting a combative approach, but the Government’s problems were of its own making. Skirmishes between the Government and BAM continue, but going back to the house extension analogy, they are at the stage where you just want the builder out of your life.
An extensive report by PwC in 2019 concluded ‘the necessary controls required to mitigate the associated risks and consequences... were not put in place’
With any luck, the whole saga will start to fade from the national memory once the doors of the new hospital open in about a year’s time.
But the State is just about to embark on the construction of an 18km high-capacity rail link that will run between Swords and Dublin city centre. Metrolink is estimated to cost €9.5 billion and is not expected to open until early in the next decade. It is one of a number of mega-projects under consideration.
The National Transport Authority – which is responsible for the project – has identified the capacity of Transport Infrastructure Ireland to manage the project as the single biggest risk to its successful completion. It singled out the need for a project director with “international experience of managing and leading other large metro or tunnelling projects”. Failing to secure someone who met this description would “represent a significant and unacceptable increase in the overall risk profile” and “potentially expose the taxpayer to foreseeable and avoidable costs in the future”, according to the Department of Transport.
People with that sort of skillset that don’t come cheap and the Government has greenlighted the appointment of New Zealander Sean Sweeney as project director on a salary of €550,000. He has an impressive CV including delivering New Zealand’s first metro, City Rail Link in Auckland, where he was paid about €475,000 in 2023. His salary will make him one of the best-paid individuals in the public service but to date no one has raised an objection.
We seem to be learning the lesson about biting off more than we can chew when it comes to mega-projects, albeit the hard way.