Mairead Farrell (Galway West, Sinn Fein)
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87. To ask the Minister for Public Expenditure and Reform the measures that will be taken by the review to renew the national development plan, which will look to incorporate an independent peer review at two key points in the life of a contact worth over €10 million in order to ensure that successful tender bids are coming in on cost. [36712/20]

Mairead Farrell (Galway West, Sinn Fein)
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The Aire recently launched the Review to Renew consultation on the national development plan, NDP. I understand that this will incorporate an independent peer review at two key points in the life of a contract worth over €10 million, to ensure successful tender bids are coming in on cost. As cost overruns have been something of a problem in large public procurement contracts, can the Minister please advise what measures will be taken as part of this independent peer review to ensure contracts come in on cost?

Michael McGrath (Cork South Central, Fianna Fail)
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In order to ensure programme for Government priorities are achieved and to respond to the unprecedented impact of Covid-19, it is timely now for the Government to bring forward the previously planned review of the NDP and to consider the most important challenges facing us, including climate action, housing, balanced regional development, healthcare, social welfare policy, transport, education, and the associated resourcing requirements.

As one of the work streams of the review of the NDP, the national investment office in my Department is developing a new governance and assurance process for major projects with an estimated cost of over €100 million. Delivering greater value for money in the expenditure of public funds is a key element of all public capital investment policy. The majority of capital projects are delivered on time and on budget and there is a high level of professionalism across the sectors.

Following last year’s update of the public spending code, and in line with the principle of proportionality, the process for smaller projects in the public spending code has been streamlined and the process for larger projects supports a better consideration of options, risks, costs and deliverability. However, that update, combined with lessons learned from domestic projects and international best practice, highlighted the need for more structured scrutiny of major public investment projects, particularly in the areas of planned delivery, costing and risk.

Major public investment projects are considered to be those with an estimated project cost in excess of €100 million and there are over 40 projects in this category in the NDP. All the evidence shows that the greatest impact on improving project outcomes comes from careful project preparation and that external reviews from an independent party can be instrumental in enabling good project and investment governance.

Additional information not given on the floor of the House

The new process is being informed by international practice and consultation with public sector stakeholders. It will involve an independent peer review of two key stages in the project life cycle for major projects, specifically, when the preferred delivery option is chosen and before approval is given to go to tender. The reviews will be conducted by experts in infrastructure delivery and will draw on international expertise where relevant.

The reviews will consider key issues, including robustness of planned delivery, accuracy of cost forecasts, consideration of risk and appropriateness of procurement strategies. External reviews of major projects will mean the Government making decisions with a full picture of the proposal, including its costs, risks and benefits. The detail of the process and arrangements for implementation will be delivered by summer 2021 with the review of the national development plan.

Mairead Farrell (Galway West, Sinn Fein)
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Gabhaim buíochas leis an Aire. That is interesting. Getting value for money is very important in the area of public procurement. We often hear talk of the supposed cost efficiencies of the market relative to the public sector, yet many of the large cost overruns come from large public procurement capital projects. The national children's hospital is a noteworthy example but 35 out of 38 health and education projects nationwide ran over the agreed contract price, which is an issue the Minister raised during his time in opposition. Given that price is generally the deciding factor in the awarding of contracts for large capital projects, will this review examine abnormally low contract bids or lowball offers with a view to ascertaining whether there is a relationship between successful low-cost tenders and large cost overruns? If such a relationship were shown to exist, this would indicate that increased regulation is also required for low-cost contracts, as such bids could be a precursor to cost overruns.

Michael McGrath (Cork South Central, Fianna Fail)
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The key objective is to introduce a degree of external assurance for major projects. As part of the review of the NDP, we are producing a range of research and technical papers, which will be published before the end of this year or early next year. That will feed into the process of adopting a revised NDP in the second quarter of next year. In essence, we are proposing an independent peer review of two key stages in the project life cycle for major projects, specifically, when the preferred delivery option is chosen and before approval is given to go to tender. These reviews will be conducted by experts in infrastructure delivery and will draw on international expertise where relevant.

Mairead Farrell (Galway West, Sinn Fein)
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Again, that is interesting and I would like to get more information on it so perhaps the Minister can send that on to me. How will the independent peer review process itself, and the Government's interaction with it, be decided? As the Minister has stated it could involve people from different countries and so on, how will the make-up of the independent peer review be decided? Where will the reports from the review process be sent or made available? Will they be sent to the chief procurement officer and if so, will he have powers to intervene? What will the Minister's role be in all of this? If companies had a track record of abnormally low tender bids and cost overruns, would they be excluded from future tender processes? That may be a separate point.

Michael McGrath (Cork South Central, Fianna Fail)
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There will be a specific paper on this issue, which will be one of the outputs from phase 1 of the review of the NDP. In broad terms, I am a strong believer that time spent at the project preparation stage is time well spent, by ensuring the project has been comprehensively appraised and assessed, that the potential pitfalls have been identified in advance and that the design work is essentially complete. We are proposing that, at key decision points in the process and before we press the final button and commit significant public funds to a project, we ask outside parties and external people with expertise in this area to have a look at projects and make sure that the process has been robust. They will feed that into the final decision, which will be ultimately be made by the Government, on projects with a cost in excess of €100 million.