From top: The National Children’s Hospital, set to be ‘the most expensive hospital in the history of the world’; Sinn Féin TD Mairéad Farrell
Mairéad Farrell writes:
When many people describe large public infrastructure projects in this state, good value for money aren’t usually the words that first spring to their lips. In fact, expletives aside, they are likely to tell you that large cost overruns are often the order of the day. With the taxpayer left to pick up the tab.
Most people are now aware that the new National Children’s hospital is set to be the most expensive hospital in the history of the world, having already run over cost by around 500%. The National Broadband plan has proved an equal fiasco, also running 500% over cost.
But the point is this is by no means a recent phenomenon. I could lay this out in detail, but rather than waste word count, I’ll let the table below do the heavy lifting. Let just say the words ‘fiscal prudence’ don’t jump off the page.
Now it’s important to point out that cost overruns can arise from a range of factors, and there’s no singular underlying cause to the cost overruns identified above. There can be poor planning on the part of the contracting authority, or the contractor, litigation arising from contractual disputes, poor performance in the management of risks, and so on.
But poor value for money for the taxpayer can also arise from more suspect reasons. Take the issue of bid rigging, which is particular form of collusive price-fixing behaviour. This is where firms coordinate their bids in order to maintain high prices.
It is by no means a recent phenomenon. Adam Smith, the great hero of free marketeers, in his Wealth of Nations described this form of collusive behaviour. He said that people of the same trade “seldom meet together, even for merriment”, but when they do, “the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”.
Senior officials in the Department of Business and Enterprise have acknowledged that this is a significant problem, and the government recently sought to empower the Competition Authority to address this. But I think it will take more than this, as such collusive behaviour, by its secretive nature, can be very difficult to detect.
My bill, the Regulation of Tenders bill (2021), was designed to tackle another suspect source of cost overrun, namely those arising from ‘abnormally low’ tender bids.
In practice these “abnormally low” bids, often referred to as “low ball offers”, occur when contractor submits a very low bid, say for the building of a school or hospital, and given the heavy focus on “lowest price” criteria in this state, a contracting authority may choose this lowest offer believing it to be the best value for money.
Then due to some “unforeseen” circumstances the contract runs over cost leading to poor value for money for the taxpayer. As the Tánaiste has said himself:
“Companies are low balling, coming in with very low tender prices to get the contract, then coming back with claims thereafter.”
The current legislation, the Award of Public Authority Contracts (2016), which governs this allows for bids which are considered “abnormally low” to be excluded from the process.
However, the legislation doesn’t have a definition of what an “abnormally low” bid is. This means there is a strong subjectivity involved and contracting authorities can be hesitant to exclude contractors from the process.
My bill would have established an objective criterion which contracting authorities could use to establish whether a big was “abnormally low”. So, for example, if there was competition with four or more bidders, then a bid which was 15% below the adjusted average would be deemed to be abnormally low and considered for disqualification, if the contractor could not explain this.
In other words, if the contractor makes an abnormally low bid for a contract, thus claiming it can complete the project at a significantly lower cost than its competitors, they must explain to the contracting authority how this is achievable.
Has it developed some new industrial process to slash costs? Has it gained access to some new cheaper supplies? Has it managed to assemble a workforce that’s willing to work for minimum wage? Unless it can justify on specific and objective grounds how this is achievable, then it would be rejected.
The bill would also have ensured that poor past performance in prior public contracts would be grounds for exclusion from participation in procurement procedure. So, when we think of recent examples like the Mica and Pyrite scandal, the use of bogus self-employment, and so on, would we want companies found to engage in these kind of practices to be winning public contracts?
Unfortunately, just before the turn of the Dail finished for Christmas the government decided to vote it down. I was flabbergasted to hear Minister for State (Procurement) Ossian Smyth tell me that apparently the state already has all the tools it needs to get value for money when it comes to large capital works. Supposedly we’re already doing all we can to protect the taxpayer.
I was only elected in 2020 and I’ve introduced four pieces of detailed legislation in that time. But already I’ve grown weary of this government claiming the opposition aren’t offering solutions, and then when we do bring forward comprehensive and constructive legislation they just blindly and blithely shoot it down.
It’s another missed opportunity. But I just can’t shake the feeling that this government never misses an opportunity – to miss an opportunity.
Deputy Mairéad Farrell is Sinn Féin Spokesperson on Public Expenditure & Reform.