Mr. Michael Nolan:

I thank the committee for the invitation to attend. I am joined by my colleagues, Mr. Peter Walsh, director of capital programme, Ms Geraldine Fitzpatrick, head of roads capital programme, and Mr. Paul Moran, regional manager. I understand the committee wishes to receive an update on the current position regarding the upgrade of the Dunkettle interchange, County Cork. I am happy to provide this update insofar as is appropriate at this time and to provide context about the overall scheme and its procurement. However, I must emphasise the need to avoid straying into specific areas which might prejudice the outcome of the deliberations concerning the contract. I am sure the committee will understand and appreciate the position in this regard. In recent weeks, there has been speculation in the media on the cost of the Dunkettle interchange project. As we are in an ongoing process, TII cannot offer any more clarity relating to cost or budgets until the process has concluded.

The Dunkettle interchange is the most complex interchange project in our roads programme. More than 100,000 vehicles, including cars, buses and HGVs, daily wind their way through the junction. It is located next to the Jack Lynch Tunnel, intersects with one of Irish Rail’s main corridors and provides access to areas of high employment activity, such as Little Island. It also borders a sensitive marsh habitat adjacent to a tidal zone. In addition, there are major utilities traversing the site, including gas, water, power and telecom networks. In recent years, incidents at the Dunkettle junction have caused significant traffic congestion throughout the city. Delays at the junction regularly feature on national traffic reports. The primary objective of the Dunkettle interchange project is to provide safer and more efficient movements through the junction by maximising free-flow traffic movements and reducing the potential for traffic incidents.

On procurement strategy, due to the scale and complexity of this project, TII decided that the risk profile warranted an alternative approach to the standard design and build form of contract used on less complex projects. This decision accords with the recommendation of the Department of Public Expenditure and Reform that consideration should be given to developing forms of contract or adopting standard forms published by bodies such as the Institution of Civil Engineers in the UK or the International Federation of Consulting Engineers for projects where risks cannot be accurately quantified. The contract type selected to de-risk the project is the new engineering contract, NEC, with early contractor involvement. This is a standard form of contract used internationally. Following a review by the Government construction contracts committee, approval was given by the Office of Government Procurement for the use of a non-public works contract. This decision was consistent with the findings of the Department of Public Expenditure and Reform into the use of alternative contract forms for complex and high-risk projects.

This form of contract breaks the project implementation process into two stages. The objective of the first stage is to de-risk the project in advance of the stage 2 mains works construction. At stage 1, TII works with and pays the contractor to develop the detailed design and seek clarity on costs associated with stage 2 construction. Utilising the contractor’s expertise, construction methodologies are developed, including the design of complex traffic management arrangements. The design is developed in detail to assist with reducing risks. Quantities of materials are produced, as well as calculations of labour and machinery requirements. Using these quantities and the tendered rates, the contractor’s forecast of the cost to construct the project is produced. The contractor’s forecast of costs is referred to as the target cost.

On the history of the Dunkettle process, in May 2018, following a competition, stage 1 of the contract was awarded to John Sisk and Son Limited. On the basis of the award for stage 1, the contractor has undertaken additional ground investigations, engaged with utility owners, undertaken environmental surveys, constructed a compound and developed traffic management plans and a construction methodology. The design of the project has also been developed in detail. The contractor commenced the submission of cost details to make up the final target cost in June. These submissions continued into last week.

On the next steps, TII is now assessing these submissions to decide whether the target cost set by the contractor is acceptable. This can only be determined when the submissions have been fully and carefully assessed. It is anticipated that the decision will be made before the end of this month. If TII and the contractor agree the target cost, the business case for the project is updated to reflect the agreed target cost. As required by public spending rules, the updated business case is submitted to the Department of Transport, Tourism and Sport for approval by Government. If TII and the contractor do not agree the target cost, stage 2 will be removed from the contract. TII will then return to the marketplace to seek to achieve better value for the taxpayer. I wish to stress that this decision has not been made. If the target cost is agreed, the process will remain on schedule. However, if TII and the contractor do not agree the target cost, stage 2 will be removed from the contract and TII will return to the marketplace. The construction of the project will then be the subject of a new procurement process. However, I emphasise that the site investigation, planning and design work that has been undertaken by the contractor in stage 1 will be used as TII has retained ownership of this information. A new tender process has the potential to delay project completion by some 12 to 18 months.

Notwithstanding the strategic local and national importance of this project, it is certainly not a question of awarding the contract at any cost. Rather, it is a question of achieving the goal of constructing a fit-for-purpose interchange scheme with the maximum value for taxpayers’ money. TII is committed to ensuring that this goal is achieved. As I stated, we cannot stray into areas which might prejudice the outcome of this stage 1 process. It was for this reason that TII sought to defer this appearance before the committee until such time as the stage 1 process is completed. We did not seek to refuse to appear. As our appearance before the committee comes during an ongoing commercially sensitive and confidential process, answers to certain questions may be perceived to be prejudicial to decisions which TII has yet to make and, for that reason, we must proceed with caution.