Rushing into projects without analysing their real value is a disservice to taxpayers, writes Tom Ferris

FEARGAL QUINN’S recent article – “The true cost of public infrastructure” – raises some very interesting issues, but it fails to acknowledge the existence of Government guidelines.

All public sector capital expenditure has to be evaluated under quite exacting guidelines, issued by the Department of Finance in February 2005. They also are subject to conditions imposed by the planning authorities.

The guidelines contain a variety of financial thresholds, including the requirement that projects over €30 million undergo a full cost/ benefit analysis (CBA). Economic CBA is a key method which evaluates the various direct and indirect costs and benefits of investment proposals.

Senator Quinn asks very pertinent questions about whether all relevant costs and benefits are included in public sector projects.

A CBA is designed to find, quantify and add up all the positive factors (these are the benefits). Then it identifies, quantifies, and subtracts all the negatives (the costs).

The difference between costs and benefits determines whether a planned public sector project is worthwhile. The real achievement is making sure that all the costs and all the benefits are included and quantified.

The delay in the opening of Ikea in Dublin, cited by Senator Quinn, raises costs wider than those normally taken into account.

Such costs arise from the condition laid-down by An Bord Pleanála, whereby the opening of Ikea can only happen after improvements to the Ballymun interchange have been completed to the satisfaction of the planning authority. This planning stipulation was introduced in order to avoid serious congestion and had the convenience and safety of road users in mind.

The management of public investment projects in Ireland has improved. The NRA announced, on January 28th, that it had completed all its projects on average approximately four months ahead of schedule in 2008.

Further improvements are required to provide the capability, flexibility and capacity to deliver investments, particularly as we respond to a dramatic downturn.

There is, of course, still the issue raised by Senator Quinn about getting projects delivered quicker by getting construction done at night and at weekends.

Obviously such accelerated construction is more expensive, but that is all the more reason to have full-blown CBAs carried out. Such appraisals allow the decision makers to make their decisions, based on full appraisal of the costs and benefits, in order to determine whether construction should be “normal” or “accelerated”.

There should also be transparency as to the results of CBAs carried out on major projects.

The public should be made aware of the costs and benefits of projects which are funded by borrowings from the Exchequer. There is little evidence of the results of such analyses being published by the public sector. One notable exception is the Commission for Aviation Regulation, which has published CBAs on its website.

The importance of publishing CBA results is because public investment is a form of “bond” between the State and taxpayers.

It is essential for the State and its agencies to deliver cost-effective projects that will benefit its citizens and facilitate socio-economic growth and development. That information needs to be shared with the public.