Irish Daily Mail

LEO: WE WERE ‘LOW-BALLED’ BY CONTRACTOR­S

Taoiseach hits out at companies in debate on hospital overspend

- By Senan Molony Political Editor

THE Government has fallen victim to building contractor­s ‘low-balling’ it by submitting artificial­ly low bids for projects – only to increase them after they have secured the work, the Taoiseach has claimed.

During a Dáil debate on the controvers­ial National Children’s Hospital – which has a ballooning budget heading towards €2billion – Leo Varadkar made the astonishin­g admission of the State’s inability to get value for money for taxpayers.

He also acknowledg­ed that there were ‘one or two contractor­s’ who he hopes never win a State contract again.

His comments came in another bruising day for the Government in the fallout

from the massive overspend on the €1.7billion children’s hospital – whose initial cost was projected to be €650million.

Responding to angry questions in the Dáil about the overspend, the Taoiseach said the Government would change how it conducts such large-scale public infrastruc­ture projects in future.

The Government would be particular­ly sceptical in future when it receives low bids for work, he told TDs. ‘We also will examine the issue of low-price tenders and whether we should look more at median price, because we have a real concern that some companies have been low-balling, coming in with very low tender prices to get the contract and then coming back with claims thereafter,’ he said.

‘We also particular­ly want to look at contractor­s’ past form and

‘We can learn from past mistakes’

public service references.

‘There are one or two contractor­s who, quite frankly, I would not like to see get a public contract again in this State,’ the Taoiseach declared, using unusually harsh and blunt language – but without naming names.

Last month, Fianna Fáil TD John Brassil, a civil engineer of 15 years’ experience with contractor­s, claimed to the Oireachtas Health Committee that the main contractor for the children’s hospital, BAM, had priced its tender 20% under its nearest competitor on the basis of ‘if we get in, there is no way they will get somebody else in, and we can get our money back in Phase 2’.

BAM bid €637million, which was a €131million lower than the second-placed bid. Mr Brassil said such a variation to the next-lowest bidder should have sounded alarm bells, adding: ‘Once they got in there, they were in a position, in my opinion, to gouge the next stage of the job.’

BAM was offered a right of reply to these allegation­s by the Irish Daily Mail both last month and yesterday but did not respond.

The Taoiseach told the Dáil yesterday that other areas of the State had improved their performanc­e in terms of getting projects to come in on budget.

‘This is something we have got right in the past,’ he said.

‘The National Roads Authority ran over and ran late for years and years.

‘However, it got it right subsequent­ly.

‘Transport Infrastruc­ture Ireland is bringing all the road projects in on time and on budget at the moment.’

Local authoritie­s were notorious for running late and running over on water projects in the past, he said, but Irish Water now delivered its projects on time and on budget. ‘We can learn from past mistakes and past successes,’ he insisted.

Mr Varadkar added that the Government would study whether it should factor in ‘optimism bias’ and ‘promoter bias’ into its decision-making in future. This is when desire to see a project come to fruition gives rise to optimism about the real cost, he said.

The Taoiseach also acknowledg­ed that the two-phase tender process involved had not worked. The initial tender was to clear the site, build the foundation and estimate the costs of constructi­ng the building. The Phase 2 tender was an estimate of the cost of constructi­ng the building, which included detailed design specificat­ion.

The recently resigned chairman of the hospital’s developmen­t board, Tom Costello, has acknowledg­ed that this approach was flawed as ‘the complexity of those services and the quantities involved were not fully recognised within the early-stage tender’.

Finance and Public Expenditur­e and Reform Minister Paschal Donohoe told a press conference that a number of reforms to the tendering process that were put in train as part of the Government’s Project Ireland 2040 infrastruc­ture plan would be ‘speeded up’.

These include that the Government will no longer commit to major projects until there is clarity on the final costs.

Also, budgets for large projects will include a ‘significan­t premium for risks’ so that they will more adequately reflect the entire cost of the project over its life cycle.

Both Mr Donohoe and the Taoiseach indicated that it would be illegal to ban companies from bidding for future contracts.

BAM had bid €637million, a full €131million cheaper than the second-placed bid.

Mr Donohoe said: ‘I am not in a position to say at this point that any particular company will be banned for participat­ing in the process. Companies have rights.

‘Consummate FG exercise in spin’

They have their own reputation­s as well.

‘But we will now look at how we can change our public procuremen­t process to ensure that there are particular metrics in the tendering. If those metrics are breached, that will then be taken account of in the future.’

Green Party leader Eamon Ryan TD said: ‘Every expert I talk to about this issue says the Government’s fatal mistake was agreeing a contract on the basis of drawings that were little more than planning design drawings.

‘Anyone would know that a contract should be concluded on the basis of the most detailed drawings, including equipment and IT. The minister is learning the ropes – unfortunat­ely he let go of the key rope.’

But Sinn Féin dismissed the Government’s proposed changes to procuremen­t policy, which it called a ‘consummate Fine Gael exercise in spin’.

‘There is nothing new about these proposals. In fact, they are within EU procuremen­t guidelines that his department and this Government has abysmally failed to implement,’ said Jonathan O’Brien.

He said he had asked the minister and officials at the Dáil Health Committee ‘if they had heard of abnormally low tenders, or considered disqualify­ing bids on that basis. I was met with silence.’

He added: ‘I was troubled by this response and raised the issue of EU procuremen­t law which allows for disqualifi­cation based on abnormally low tenders.

‘Abnormally low tenders are warning signs for uninformed contractor­s underbiddi­ng for contracts with the likely consequenc­e of cost escalation­s thereafter. The scandal of the National Children’s Hospital is one consequenc­e of this complacenc­e.’

Labour Party leader Brendan Howlin said there was no indication that the Attorney General had expressed confidence that the rules were followed in the case of the hospital. It was not clear if the procuremen­t procedure complied with EU directives, he said. ‘The legal uncertaint­y this has created must be addressed,’ he added.

 ??  ?? Giant project: An artist’s impression of how the new National Children’s Hospital will look when it is completed
Giant project: An artist’s impression of how the new National Children’s Hospital will look when it is completed
 ??  ?? Outspoken: Leo Varadkar was highly critical of contractor­s
Outspoken: Leo Varadkar was highly critical of contractor­s

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