Special Report 107 - Delivery of Capital Projects in the Higher Education Sector
Published on 29 May 2019
The National Development Plan 2018 – 2027 provides for investment of €5.1 billion in the higher/further education sector over the next 10 years (€3.1 billion exchequer investment and €2 billion non-exchequer investment) with an additional provision for public private partnerships. Oversight of capital investment rests with the Higher Education Authority.
This report focuses on the capacity of the higher education institutions (HEIs) to plan, manage and deliver large-scale construction projects on schedule, within budget and to the required quality. The review examined ten completed construction projects in the higher education sector. These projects were selected because they incurred significant time and cost overruns and so offered the prospect of yielding lessons for the management of future projects. The report also examines, in relation to the selected projects, the effectiveness and impact of the 2004 Construction Procurement Reform Initiative, which sought to introduce fixed-price lump sum standard forms of contract and new conditions of engagement for construction-related consultants, and was supported by a suite of supporting guidance notes.
Figure 1 provides a summary of the ten projects that were subject to review. For the purposes of this examination, a project cost overrun is the additional cost incurred when measured against the contract sum.
The following key findings emerge from the review.
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 Construction Procurement Reform Initiative. For these projects, the Reform Initiative objective of optimally transferring risks does not appear to have been achieved. In addition, none of these seven projects were delivered within the Reform Initiative maximum cost increase target of less than 2%.
Contract execution phase
The most common issue during contract execution was changes to the project scope. In some cases, ambiguous and incomplete documents contributed to disputes between the contracting authority and the main contractor. In several others, there was a significant number of change orders, even though 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. Dispute resolution 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 work requirements are 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.