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Sat April 13 2024

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Contractors blame clients as Northern Ireland cost overruns exposed

27 Feb Northern Ireland’s major infrastructure programme will cost 44% more than planned, auditors have warned.

Belfast Transport Hub is set to cost £340m, £131m over the original estimate, and is running two years late
Belfast Transport Hub is set to cost £340m, £131m over the original estimate, and is running two years late

The Northern Ireland Audit Office (NIAO) has completed a follow-up to its 2019 report into major capital projects and found that what was a £700m overrun on 11 projects five years ago is now a £2.45bn overrun.

They were originally estimated to cost £5.63bn but that has increased by 44% to 8.08bn.

Construction employers said it was the fault of their clients, and that their proposed solutions were being ignored.

Only one of the NI executive’s flagship projects announced in 2015 has been fully completed, the Belfast Rapid Transit project.

Among the most delayed projects are:

  • The A5 upgrade to improve links between Londonderry, Strabane, Omagh and Aughnacloy, and with the Republic of Ireland, continues to be delayed following a third public inquiry. This project was originally planned to be completed in 2018 at a cost of £799m. Subject to the outcome of the Planning Appeals Commission inquiry, the Department for Infrastructure’s latest estimate is for completion in 2028 at a cost of £1,700m.
  • The Belfast Transport Hub, an integrated bus and rail concourse with eight new rail platforms, has seen costs rise from £209m to £340m and completion has slipped by two years to the end of 2025.
  • The Maternity and Children’s Hospital, which comprises the build of a new regional children’s hospital and a new maternity hospital both on the Royal Hospitals site in Belfast, is also late and over budget. The new maternity hospital was originally expected to be completed by the end of 2015. It has been substantively built but is not operational. The latest estimated date for completion of the final phase of the Maternity Hospital is June 2025, almost 10 years late. The original cost estimate was £57m; costs are now expected to be £97m. The Children’s Hospital was originally planned to be completed and opened in July 2020 at a cost of £223m. However, enabling works were only completed in January 2023 and it is now expected to be completed by February 2029 at a cost of £590m.

Auditor general Dorinnia Carville said that, although the impact of the Covid-19 pandemic and inflation had been "significant external factors",  it was "extremely concerning" that there was little evidence of any improvement in project management. Shed identified weaknesses in procurement and accountability.

The auditor general said: “Major capital projects are inherently complex, and the reasons for delays and increased costs can, in some cases, be attributed in part to significant external factors, including the impact of the pandemic, inflation and global political factors.

“Even so, it remains extremely concerning that, more than four years after my office’s last report on this issue, there is little evidence of improvement or past lessons learned being applied to new projects. Even among the flagship projects, identified as the Northern Ireland Executive’s highest priority, progress has been very limited. It is clear that departments are not achieving value for money in the delivery of these major capital projects”

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She added: “Failure to make fundamental reforms to the way major capital projects are commissioned and delivered is a significant contributing factor in the substantial cost and time overruns identified in this report.

“A comprehensive transformation project must be established to overhaul the system for commissioning major capital projects and ensuring stronger accountability for how these projects are delivered.”

The Construction Employers Federation (CEF) said the audit office report showed the need for the procurement reforms that its has been demanding for years.

CEF chief executive Mark Spence said: “The NIAO follow-up report is a stark reminder to the returning executive of the need for immediate focus on how the public sector seeks to commission, procure and deliver major capital projects.

“While the period since the previous report’s last publication has, unquestionably, been one of major challenge in this space given the pandemic, the unprecedented period of inflation and material shortages and the lack of an executive, it remains the case that much still needs to be done to ensure value for public money and enable greater confidence within the construction industry as to the pipeline and deliverability of major schemes.

“Many of the concerns and frustrations we identified in evidence to the NIAO in 2019…remain. However, in working collaboratively with the construction industry, we believe there are clear and deliverable solutions.

 “These must include:

  • the agreement of multi-year capital budgets to give funding certainty to both government departments and the construction industry
  • the publication of a funded pipeline of works, which flows from a multi-year financial settlement
  • utilisation of a broader range of procurement approaches and forms of public contract that seek to incentivise contractors rather than penalise them
  • fundamental reform to a planning system which, at this stage, the industry has little confidence in, and
  • establishment of an independent Infrastructure Commission for NI which, in part, can look to how we seek to end this never-ending cycle of wholly avoidable mistakes.

“These solutions are even more urgent given that, as we approach the beginning of the 2024/25 financial year, the executive’s capital budget of £1.8bn is the same in cash terms as it was some 17 years ago. Notwithstanding welcome recent announcements related to additional funding from several City and Growth Deals and the Irish government, ministers need to speedily address how they can grow the capital budget as that will be fundamental to the delivery of many of the key projects and infrastructure plans which are likely to form part of any programme for government.”

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