Paul McGrath (Westmeath, Fine Gael)
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Question 107: To ask the Minister for Finance if he will require all agencies with capital projects of over €30 million to publish the cost-benefit evaluation before committing to proceed with the projects. [4364/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Under the Department's February 2005 guidelines for the appraisal and management of capital expenditure, a full cost-benefit analysis or CBA is required to be carried out by public sector agencies as part of the detailed appraisal for all major projects over €30 million in value. It is the responsibility of the project sponsoring agency to carry out the cost-benefit analysis. The cost-benefit analysis is an important input into the appraisal of major capital projects and it must take place prior to entering into any commitments to proceed with the project.

As a general rule, the cost-benefit analyses are not published. They contain commercially sensitive information, the publication of which could be prejudicial to the State's capacity to get best value for money in the procurement of capital projects; for example, they include the estimates of the capital and operating costs of projects. It would not be in the interests of getting best value for money to share this information with potential tenderers in advance of procurement.

There are, however, a number of checks in place as part of the Government's value for money framework to ensure reporting on and scrutiny of the appraisals undertaken by Departments and agencies for capital projects, without compromising the confidentiality of commercially sensitive information. Under the arrangements applying to the multi-annual capital investment framework, Departments must put systems in place to carry out spot checks of compliance with the various elements of the value for money framework, including appraisal and cost-benefit analysis where appropriate, and they must report the findings of these spot checks annually to the Department.

The central expenditure evaluation unit, which I recently established in the Department, will review these spot check reports and will, both on its own initiative and as part of this review process, also directly undertake a series of spot checks of individual capital projects. More generally, the new unit has a remit to promote best practice in pursuit of value for money, including appraisal and cost-benefit analyses. Individual projects and the associated appraisal processes, including the cost-benefit analysis, may also be subject to audit or examination by the Comptroller and Auditor General.

Paul McGrath (Westmeath, Fine Gael)
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The Minister referred to 2005, when he reduced the cost of projects which would require a cost-benefit analysis from €50 million to €30 million. The Minister said the various agencies are producing the cost-benefit analyses and they are being sent to his Department. It is unfortunate that he will not allow them to be published. He said they might contain commercially sensitive information. However, will he allow the publication of any of these cost-benefit analyses retrospectively? Is it not important from a public perspective point of view and for public confidence that the Department is spending money wisely?

The recently announced Transport 21 plan will cost approximately €34 billion and the national development plan will cost €184 billion. There are also various local announcements that projects will go ahead but there is no mention of the cost-benefit analysis that will be required for each of those projects. Perhaps the Minister would examine the situation in New Zealand, which has a very open system. In New Zealand all these information documents are published and they are even available on the worldwide web. One can see the cost-benefit analyses for all the projects. It does not seem to cause damage in New Zealand and does not appear to cause the problem cited by the Minister with regard to commercial information being seen by the opposition. We must take the road of being more open and honest with the public by publishing these cost-benefit analyses.

Brian Cowen (Laois-Offaly, Fianna Fail)
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With regard to Transport 21 and the national development plan, there is a strong framework in place for the delivery of value for money in the planning and administration of projects. As regards appraisal, a full cost-benefit analysis is required for projects worth over €30 million, with other forms of appraisal required for projects below that level. We are moving to fixed price contracts to ensure greater cost certainty. Departments and agencies are extremely proactive in monitoring the cost of projects by reference to project level budgets. Recent experience is positive, with the bulk of projects now coming in at or below budget and on or ahead of time. Constance vigilance is, however, required in this area.

My Department, in co-operation with other Departments, notably through the agency of the central expenditure evaluation unit, will seek to ensure that best value for money practice is applied in the national development plan and in all expenditure under it. If we want a value for money culture across the system, the responsibility for carrying out the cost-benefit analyses and, more generally, for delivering value for money at individual programme and project level should rest with the sponsoring Department or agency. This is the best way to inculcate a culture of value for money across the system. It is fully consistent with the concept of delegation from the centre which is a key part of the public sector modernisation agenda. My Department's role is primarily to set out the framework to be implemented across key value for money areas, such as procurement, PPPs and capital appraisal. It can also offer advice and assistance and as stated in my reply it will carry out spot checks to verify compliance. More generally, cost-benefit analysis is just one element, albeit a very important one, of the appraisal and management process for major capital projects. In my view it is essential throughout this process to have an identified sponsoring agency responsible for all major projects of the appraisal and management of the project and ultimately for the delivery of a value for money outcome for the taxpayer.

All the projects in Transport 21 must be evaluated in accordance with the Department of Finance capital appraisal guidelines. A significant amount of analysis has taken place relating to various aspects of Transport 21. The DTO Platform for Change provides the basis for the proposed investment in Dublin. This was subject to an independent economic evaluation which was reported in the document. Iarnród Éireann carried out an appraisal of its greater Dublin integrated rail network plan. This was reviewed by independent consultants and found to be robust. A full appraisal was undertaken of the strategic rail review by the independent consultants who prepared it. Major projects of more than €5 million such as the metro and the interconnector will require the specific approval of Government before any contract is signed. I am not aware of the New Zealand experience as referred to by the Deputy but I will ask my officials to follow it up and brief me on the situation there.

Paul McGrath (Westmeath, Fine Gael)
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The Minister and I agree on a lot of things. We agree it is necessary to have the cost-benefit analysis and we agree that the sponsoring body is the body that should be responsible for producing this. However, the major disagreement between us and where we differ is that the Minister wants to keep secret all this cost-benefit analysis material such as the research and so on. Is there not a case to be made that this should be made public at some stage, not under the 30-year rule but within a much shorter timescale? There must be public confidence in these projects. Public confidence has been lost in recent times because of overruns and so on but thankfully, this situation has tightened up now. Will the Minister give a commitment that he will move forward towards making this material available and give the public an opportunity to see and analyse it?

Brian Cowen (Laois-Offaly, Fianna Fail)
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During the course of the latter years of the last development plan, a level of expertise and competence has been built up in the implementing agencies and as a result large projects are coming in on time and within budget, even before time in many instances. Everyone now recognises that this learning curve has been achieved and will continue.

Paul McGrath (Westmeath, Fine Gael)
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It has been achieved at a big cost.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I disagree. The price of these projects included the cost of acquiring the land which was an issue and subsequent negotiations put a much higher figure on the cost than would have been the case in the original appraisal. It is a fact that construction inflation occurred because we did not have the capacity in the economy. Construction inflation in 2000 amounted to 12% and 9% in 2001 but it is only 3% to 4% in the recent past. We now have the benefit of fixed price contracts, improved procurement procedures, revised capital guidelines and increased expertise in the agencies. We are achieving results such as project cost equalling tender price. There has been more heat than light shed in the many arguments about project costs and the basis for the initial pricing and original tender price. The test is whether the job is completed for the tender price when the tender is approved. For example, the cost of building a house today will cost more than it did six years ago. If a bigger extension is put on the house and the final result is a different design from the original then it will cost more than what it would have cost six years ago and it is a nonsense to argue otherwise. Such a discussion undermines confidence. The Deputy has acknowledged the much greater degree of confidence in our capital programmes because we are delivering them in the way that taxpayers are entitled to expect.

The Deputy's ultimate point is whether they will ever be published. It may be that in some exceptional circumstances — on the basis that it will not compromise a future tender or contract — it will be possible to show that the work was done in accordance with procedures. However, the easiest way to find out whether there has been value for money is to test whether the job was done for the tender price, within time and on budget. If a contract is given for the construction of a road and it costs €200 million, then that is the cost of the project. When it was designed by a local authority 20 years ago and the cost was estimated at €20 million, it is a nonsense argument to suggest it could be done for that price of €20 million which would only supply a tenth of the road now. The tender price is the issue and the bottom line is that all of these projects, almost without exception, are now coming in on time and within budget. I believe we all recognise this fact. It is good for the taxpayer and it reflects well not just on Government but on the implementing agencies and on the level of expertise and competence with which they are delivering projects.

The Government's job is to ensure that funds are available to proceed with those projects in the way that they wish to do it. There has been some re-profiling of expenditure on Transport 21 and the national development plan on the basis that the NRA had the capacity to do more work than three years ago when Transport 21 was introduced. This level of flexibility with such a framework and being able to respond in a way that does not cause construction inflation but gets the job done more speedily makes eminent sense and proves both the robustness and the appropriateness of the framework we are setting out.