Press Release - Delivery of Capital Projects in the Higher Education Sector
29 May 2019
A report of the Comptroller and Auditor General in relation to the delivery of capital projects in the higher education sector was presented to the Houses of the Oireachtas today.
The report focuses on the capacity of higher education institutions to plan, manage and deliver large construction projects on schedule, within budget and to the required quality. The review examined ten completed construction projects that had incurred significant time and cost overruns with a view to identifying lessons that could improve the future management of projects. The final construction cost for the ten projects was €350 million, including cost overruns that totalled €67 million.
The projects were carried out in the context of a framework overseen by the Department of Public Expenditure and Reform designed to address the risks associated with large publicly-funded capital projects. This included the 2007 Construction Procurement Reform Initiative, which introduced standard-form fixed price contracts and set maximum targets for cost and time overruns. Detailed procedures for project appraisal, planning, implementation and post project review are set out in the Public Spending Code.
Tender evaluation was the most common weakness at the pre contract phase. Six projects had cost as the sole criterion at the contract award stage. These projects had combined cost variances of over €20 million.
Three projects had to be re-tendered due to the financial failure of the selected contractor.
Seven projects were constructed under the Reform Initiative framework. For these projects, the objective of optimally transferring risks does not appear to have been achieved. All seven projects were delivered with overruns that exceeded the Reform Initiative maximum cost increase target of 2%.
Contract execution phase
The most common issue during contract execution was changes to the contracted project scope. In some cases, ambiguous and incomplete project documents contributed to disputes between the institutions and the main contractor. In several others, a significant number of change orders were issued by the institutions or their agents. These should only be issued for essential requirements that were unforeseeable prior to tender.
Nine of the ten projects ended up in a dispute resolution process. Such processes can be expensive with significant legal and professional fees being incurred. In one instance, an institute incurred legal and other professional fees of €3.3 million in relation to resolving contractual disputes.
Post construction phase
In most instances, HEIs identified learning outcomes that could be used on future projects. However, it is unclear if these learning outcomes are shared across the sector.
Overall, there may be a lack of capacity within the higher education sector to manage large scale capital projects. A rigorous risk assessment should take place at the outset with the objective of ensuring that qualitative factors are more explicitly considered at tender evaluation; detailed works requirements are put in place; and change orders are limited.
There may also be a lack of capacity within the higher education sector to deal with disputes once they enter a formal conciliation/arbitration process.
Notes for Editors
The full text of the report is available here.
The Comptroller and Auditor General is an independent constitutional officer with responsibility for the audit of public funds. He reports to Dáil Éireann.
The sole and exclusive focus of the report is on public bodies, and not on staff members of those bodies or on any third parties. For the avoidance of doubt, the report does not make any criticism or comment or present any view, whether express or implied, with respect to staff members of public bodies or third parties, and should not be understood as doing so.
Enquiries about the report should be directed to Mary Henry at (01) 863 8665 or at email@example.com