Malcolm Byrne (Wicklow-Wexford, Fianna Fail)
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415. To ask the Minister for Public Expenditure and Reform if any measures of optimism bias compensation are applied in decisions around the awarding of public sector contracts particularly with regard to time and budgets; and if he will make a statement on the matter. [61612/25]

Jack Chambers (Dublin West, Fianna Fail)
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The Infrastructure Guidelines and the Capital Works Management Framework provide comprehensive guidance and best practice advice to client organisations (contracting authorities) on public works delivery.

In terms of construction project delivery and where large, bespoke projects are concerned, optimism bias is more often associated with the client body and its advisers rather than contractors.

As part of the capital appraisal process for projects under the Infrastructure Guidelines, contracting authorities are asked to critically consider the potential schedule and cost implications of a project, which is further developed as a project progresses through the approval gates and more information becomes available.

This process includes both detailed financial and economic appraisal, sensitivity analysis, accounting for behavioural influences such as optimism bias, as well as consideration of appropriate levels of contingency. To further ensure value for money, where a project's potential costs are likely to exceed €200 million, this project must also be reviewed through the External Assurance Process (EAP) and the Major Projects Advisory Group (MPAG) at Approval Gate 1. This is overseen by my Department, to allow for greater scrutiny and clarity regarding such projects.

At the point that the project’s requirements are fully developed, and prior to going to tender, the project budget is finalised and includes a final contingency for risk. The budget then sets the benchmark for the assessment of the prices received at the conclusion of the tender process.

The time required to construct a project is also considered from the earliest point and reviewed as the design is finalised prior to tender. The preliminary health and safety plan, which is developed by the project team, must take into account appropriate time periods to enable the project to be safely constructed.

Once determined, the construction period is usually set out in the tender documents and tenderers are not normally permitted to offer a reduced time period unless the tender makes specific provision for this. Where tenderers are permitted to propose the time period to completion their tender submission would also include details as to how this is to be achieved.

Once tenders are submitted the procurement regulations impose a duty on contracting authorities to require tenderers to explain the price or cost proposed where the tenders seem abnormally low in relation to works, supplies and services.

There is a balance to be struck in deciding to award a public contract between value for money and a quality project outcome. From the perspective of a public body’s duty to the taxpayer, it can be very difficult to justify a decision to reject the lowest price out of hand, particularly in the circumstances where the contractor who has bid the price is willing to undertake the project.

Procurement regulations do not permit a tender to be rejected because it may be perceived to be abnormally low. The contracting authority must first engage with the tenderer to establish how the low cost has been achieved.

The only circumstances where a contracting authority is obliged to reject an abnormally low tender is where it has been established that the tender is abnormally low because it is not complying with relevant labour, social and environmental law.

Recent Irish court judgments have endorsed EU jurisprudence and re-emphasised contracting authorities’ obligations in respect of tenders that appear abnormally low and the requirement to be alert to same.

Fully measured bills of quantities are required for those projects which use the traditional, Employer-designed contract type. This measure increases the focus of the design team in preparing more comprehensive design information that can be accurately measured for pricing purposes. With a comprehensive price breakdown, it is easier to identify abnormally low pricing strategies.

A mechanism to directly tender specialist works is also available so that these critical work elements are priced directly by the specialist market thus reducing the extent of the contract sum for which the main contractor has overall price responsibility.