Brian Cowen (Laois-Offaly, Fianna Fail)

The new guidelines provide for a clearer definition of the respective roles and responsibilities of Ministers, the Department of Finance, other Departments and public bodies involved in the management and appraisal of capital programmes and projects. In arriving at policy decisions on either investment programmes or individual projects, Ministers must take all relevant factors into account, such as the economic costs and benefits associated with programmes or projects and considerations of social and public good.

Under the multiannual capital investment framework, Departments must arrange to carry out project level checks for compliance with the capital appraisal guidelines and report on these to the Department of Finance. My Department in turn will carry out spot checks to satisfy itself regarding adherence to the guidelines.

On public procurement, I have announced measures designed to ensure a much closer alignment between the agreed tender price and the final outturn cost of construction projects. I want to achieve much greater cost certainty in construction projects. It will facilitate implementing agencies to plan their capital programmes in an optimal and efficient way by providing relative financial certainty at project level. To achieve this, the Government has decided to introduce fundamental changes in how public sector construction contracts are carried out. With effect from the end of 2005, public sector construction projects will be tendered competitively on the basis of a fixed-price lump sum contract in which appropriate construction risks are identified and transferred to contractors. Under this system the amount of variation, or extras, will be limited to the greatest extent possible.

The Government is also modernising the system for employing consultants, such as engineers and architects, to decouple professional fees from project costs. The existing system which sees consultant costs going up as project costs increase is unacceptable. The new system will involve moving away from paying consultants a percentage fee based on the final cost of a project, and instead requiring professionals to tender for fees on a fixed lump sum basis. Competitive fee bidding is being introduced in a way that will not compromise design quality.

The construction industry is being consulted about how these changes will be implemented. It is time that best practices followed in the private sector are implemented. I am satisfied that the Government side and the contracting side will benefit from the certainty introduced under the targeted arrangements. The cumulative impact of the three initiatives will be to radically improve the management of capital programmes and projects. They will decisively tackle the historical tendency for wide variations between original concept and tender prices so as to further narrow the variation between tender and fixed outturn costs. My Department will be proactive in monitoring the impact of these measures.

The Opposition motion alleges a so-called mismanagement of public finances by the Government which has resulted in areas of need being deprived of resources. This is not true. The returns on investment in physical infrastructure are substantial. The ESRI, in its mid-term evaluation of the national development plan, concluded the GNP level will be approximately 3% higher than it would have been in the absence of the plan's infrastructural investment. Since 1997, the Government's economic policies have greatly increased employment and prosperity. The resources generated by this have been applied in a way which has benefited all sectors of society.

In 1997 we inherited a situation of virtually zero Exchequer capital investment in public transport.

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