Bernard Durkan (Kildare North, Fine Gael)
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93. To ask the Minister for Public Expenditure and Reform the extent to which all public capital projects under his aegis are subjected to appropriate tests of costing and administration with a view to minimising any potential overruns; and if he will make a statement on the matter. [10895/21]

Michael McGrath (Cork South Central, Fianna Fail)
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Evaluation, management and delivery of public capital projects are a matter for the Sponsoring Agency and Approving Authority in each case. My Department is responsible for setting the overall capital expenditure allocations for Departments. My Department is also responsible for maintaining the national frameworks within which Departments operate to ensure appropriate accounting for and value for money in public expenditure such as the Public Spending Code. The Public Spending Code sets the value for money requirements and guidance for evaluating, planning and managing capital projects.

The Public Spending Code is not static and was updated in 2019 following an extensive consultation process. This update has strengthened the guidance to better align with the realities of project delivery and with a particular focus on improved appraisal, cost estimation and management. In line with the principle of proportionality, the requirements for smaller projects in have been streamlined and the requirements for larger projects supports a better consideration of options, risks, costs and deliverability.

The updated Public Spending Code brings a renewed focus to:

- Gaining a more developed view of costs, risks and timeframes before committing to proceed with a project;

- Tighter governance of key decision points during project preparation and delivery;

- Ongoing updating of the business case for a project as it proceeds through design and planning phases; and

- Continued scrutiny of affordability throughout the process.

As part of the ongoing reform of the Public Spending Code and as one of the work streams of the review of the National Development Plan, my Department is developing a strengthened assurance process for major projects with an estimated cost of over €100 million. This will involve an independent peer review of major projects at two key stages in the project life-cycle, specifically when the preferred delivery option is chosen and before approval is given to go to tender. The reviews will be conducted by independent experts in infrastructure delivery.

The reviews will consider key issues including:

- Robustness of planned delivery;

- Accuracy of cost forecasts;

- Consideration of risk; and

- Appropriateness of procurement strategies.

The detail of the process and arrangements for implementation will be delivered by summer 2021 with the review of the National Development Plan.

Bernard Durkan (Kildare North, Fine Gael)
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95. To ask the Minister for Public Expenditure and Reform if steps are needed to address potential overheating in the costs for capital projects; and if he will make a statement on the matter. [10897/21]

Michael McGrath (Cork South Central, Fianna Fail)
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The BUILD Reports produced by the National Investment Office in my Department in 2019 and 2020 have highlighted capacity constraints arising in the construction sector in recent years, noting that “potential risks and constraints are present in the form of cost inflation, limited sources of additional labour supply and stagnant productivity growth”.

A key metric to consider is the Construction Tender Price Index, which is based on tender returns for non-residential projects. It is based on predominately new build projects with values in excess of €500,000 across all regions. The Index is therefore a measure of average price increases across differing project types and locations.

In recent years there as been an elevated level of inflation in the Irish construction sector. In 2019 the construction tender price index surpassed its previous peak from 2007. The index was estimated to have increased by 6.6 percent over 2019. However, the rate of inflation slowed significantly in 2020 to 1.3 percent. This is an issue which is highly uncertain at present due to issues including Brexit and Covid-19.

Continued monitoring of inflation and capacity constraints by the National Investment Office in conjunction with the Construction Sector Group will be necessary to inform any policy decisions in this area in the future.