I welcome this opportunity to address the committee and to apprise members of the current status of the national roads programme. The authority's activities have been the focus of considerable attention recently in the media and elsewhere. In particular, attention has focused on our management of the programme and cost control issues.
Our management performance was the subject of a recent comprehensive report entitled Evaluation of Investment in the Road Network, prepared by consultants, Fitzpatricks Associates, on behalf of the NDP-CSF evaluation unit of the Department of Finance. It would be informative to quote from the conclusions of this report which state:
The 2000-06 national roads programme represents a historic increase in the level of infrastructural investment. Getting this programme up and running and operating effectively on the ground has been a major achievement in Irish public administration terms. The contribution of the relevant Departments, the National Roads Authority, the local authorities and the construction industry must be acknowledged.
The NRA has a strong project management focus, and this emphasis was derived from an earlier consultancy report on its management and procedures.
Factors which are in the direct control of the NRA would appear to be largely well managed, and most difficulties have arisen from external factors and difficulties in managing these.
In the case of programme expenditure, the comments suggest that the authority has overspent by a substantial amount, possibly more than €6 billion if some commentators are to be believed. The reality is significantly different. In the course of the first three years of the current national development plan, the authority's expenditure on the national roads programme totalled €2.75 billion. We are satisfied, and hope the committee and the public are satisfied, that this has been used to good effect and that the authority has sought value for money while operating within the framework of legislation, agreements and the form of contract prescribed for use on national road schemes by the Government contracts committee.
It might be noted that the Fitzpatrick report, already mentioned, concluded that cost control procedures appear adequate at the level of individual projects and in respect of matters within the direct control of the authority's project managers. However, it went on to say that the cumulative effects of external factors, including construction inflation, increased scope of projects and unanticipated physical and construction difficulties mean overall programme costs are now far in excess of initial estimates.
The authority is acutely conscious of the need to maximise value for money and will continue to review its practices and procedures in this regard. We have taken a range of measures to moderate cost increases within the authority's area of direct control and influence. These include the appointment of a cost estimation specialist who reviews all scheme estimates, the publication of a new specification for road works and a design manual for roads and bridges for the purpose of establishing design and construction standards, greater use of design and build contracts, which offer greater certainty of outturn cost, the adoption of revised road cross-section layout offering cost savings, standardised design for high cost items such as bridges and other structures, securing greater interest by foreign contractors, thereby stimulating more competitive tendering, PV clause and risk buy-out, where this gives good value to the authority, and giving further attention to improving the quality of site investigations.
Another source of recent interest concerns are what are referred to as cost overruns on individual road schemes. There is usually an implication that the authority is failing in its duty to contain costs. Again, the reality is significantly different as evidenced by the conclusions of the Fitzpatrick report and as illustrated by an awareness of the contractual arrangements within which the authority is obliged to operate. The standard form of contract for public civil engineering works, including national road schemes, as prescribed by the Government contracts committee, is the Institution of Engineers of Ireland Conditions of Contract, Third Edition. Unilateral deviations from the prescribed form are prohibited by the Department of Finance. This form of contract sets out the rules of engagement and identifies the risks to be borne by either party. The principle that the party best able to manage the risk should carry the risk is usually adopted. Typically the major risks inherent in a road construction contract would include unforeseen ground conditions; exceptional weather conditions; changes in quantities of work to be done, omissions and additions; design changes risks associated with statutory undertakers and archaeology; changes in legislation and price fluctuation.
All these elements can have a significant effect on the final price of a road scheme. For example, if in the course of the work the contractor encounters more extensive unsuitable ground conditions than had been envisaged when the bill of quantities for the scheme was prepared he is entitled, under the prescribed form of contract, to be paid for the additional material required to replace poor material. Similarly, additional costs are allowable under the price variation clause to reflect movements in prices generally. These can be significant, particularly as periods of up to three years or more can be involved in completing road contracts.
If contractors had to price for all the risk items already mentioned, tender prices would be higher. A contractor who fails to price for these risks would face severe financial losses should the risks materialise. Hence, in conventional remeasurement contracts for public civil engineering works, mechanisms are built into the contract to allow for adjustments when these risks are encountered. Inherent in such contracts is the probability of tender prices increasing as some of the risks materialise.
Typically, the overrun on traditional remeasurement contracts would amount to 25% to 30% with inflation in recent years adding up to 20% to a typical project. In recent years and against this background, the authority has pioneered a move in the direction of design and build contracts as an alternative method of procurement. Potential advantages include improved efficiency by giving contractors influence over the ability to build, greater certainty of outturn costs by passing more risk to contractors and a less adversarial contract with more emphasis on partnering and co-operation in construction.
We have been encouraged by our experience in piloting the design and build approach and the authority is now in the process of adopting this form of contract on a more general basis. We are assisting the work of the sub-group of the Cabinet sub-committee on infrastructure and housing currently investigating programme cost issues, including procurement and form of contract issues. We are also co-operating actively with the Office of the Comptroller and Auditor General which is examining the area of programme costs, cost estimation and control arrangements. We look forward to the findings of this work and will have regard to them in our ongoing efforts to strengthen management practices.
The authority is greatly encouraged by the value for money aspect of the Kilcock-Kinnegad PPP contract which will shortly be concluded. This augurs well for three other PPP schemes which are currently at tender stage; the M1 Dundalk western bypass, the N8 Fermoy bypass and the N25 Waterford city bypass. We are currently awaiting An Bord Pleanála's decision following the oral hearing into the Clonee-Kells scheme. Work is progressing well on preparing statutory documentation for the other schemes in our PPP programme.
PPPs will play an important role in the accelerated delivery of road infrastructure by harnessing the skills and finances of the private sector. The national roads investment programme outlined in the NDP sets a target for the NRA to secure €1.27 billion of private finance, through public private partnerships, towards overall planned national roads investment. The strategy being pursued by the authority envisages that such private investment will be repaid from tolls supplemented, as appropriate, by an Exchequer subsidy in the case of particularly large and costly road schemes. The authority must ensure that PPP projects are implemented successfully as they are integral to the delivery of the targets set for improvement of the national road network.
The authority recently announced details of allocations to local authorities for 2003 based on the record Exchequer provision of €1.263 billion, an increase of 11.4% on the expenditure outturn in 2002. This level of funding represents a major boost for the construction industry with the planned commencement of at least seven national road schemes this year. The schemes, which have a combined estimated cost of €1.138 billion, are the N1 Dundalk western bypass, the N2 Carrickmacross bypass, the N4 Kilcock-Kinnegad bypass, the M7 Monasterevin bypass, the N7 Naas Road, Kingswood interchange, the N8 Cashel bypass and the N25 Waterford city bypass. The number of schemes proceeding to construction may increase further depending on the overall rate of progress of the roads programme and financial commitments arising during the year. Priority schemes in this regard are the N4 Boyle-Carrick-on-Shannon and the N26 Ballina-Bohola, phase 1, schemes. The tender process for these two schemes is to commence immediately.
The authority has determined scheme allocations taking account of the policy objectives of the National Development Plan, 2000-2006, and the Minister for Transport's request to prioritise schemes on the major inter-urban routes, PPP schemes and schemes in the BMW region. The current imbalance in expenditure in favour of the southern and eastern region largely reflects the scheme content of the roads programme on publication of the national development plan in November 1999 and the time required to advance schemes through planning and statutory approval procedures. The authority is actively taking steps to redress the situation and these efforts are now producing results through the advancement of BMW region schemes such as the NI Dundalk western bypass, the N2 Carrickmacross bypass, the N4 Boyle-Carrick-on-Shannon, the M4 Kilcock-Kinnegad, the M7 Monasterevin bypass and the N26 Ballina-Bohola schemes.
This year's allocations make significant provision for property acquisition payments in respect of schemes which have already secured the necessary statutory approvals. Funding is also being made available for advance archaeological work on schemes such as the N18 Ennis bypass and the N4 Sligo inner relief road. The archaeological aspects of these schemes will be resolved in accordance with best practice, clearing theway for tendering for road construction to proceed.
In total, almost €150 million is being allocated for projects at planning and design stage. This will make it possible to make statutory orders and complete environmental impact statements for schemes, as well as advancing other schemes through various stages of planning. Planning and design work for major schemes on national secondary routes, including compensation payments for land for schemes which have obtained compulsory purchase order approvals, will benefit from a provision of €12.44 million.
The authority plans to spend €69 million this year on road pavement improvements. This work is intended to maintain the road network in good structural order, taking account of the higher axle loads permitted in recent years and to provide safe and comfortable driving conditions for road users. Expenditure will be targeted using road condition survey data and will have regard to the timetable for construction of new sections of road.
A sum of €43.2 million of the overall pavement provision will be allocated to a five year pavement restoration programme for national secondary roads launched by the authority last year. It is allocating over €9 million to local authorities for road safety measures this year. This will allow for accident reduction measures at 80 locations as well as 20 traffic calming schemes on the network. The authority will separately spend a further €5.6 million on road safety measures for which we are directly responsible. These concern our centralised signing and lining programme, intelligent transport system initiatives and our continued operation of the recently launched web based services which provide weather and road surface conditions information as an aid to road users in journey planning.
Further details concerning the status of the various schemes involved in the authority's programme are set out in the appendices I am circulating with this statement. I am especially pleased about the invitation extended to the Northern Ireland Roads Service to attend today's meeting. The authority and the Roads Service share many common objectives as regards the quality and safety of our respective road networks. We also have a good track record of co-operation on cross-Border road schemes of mutual interest. In this connection, we have recently commenced the statutory process for the Dundalk to Newry scheme and proposals are advancing to upgrade the N14-N15 from Lifford in County Donegal and the A5 to Strabane in Northern Ireland. We are also working together on two intelligent transport systems, ITS, projects, INSTANT and STREETWISE, which respectively look at traffic information for users of the M1 corridor and broader trans-European network-transport, TEN-T.
The authority's current programme includes a number of projects of cross-Border interest, such as planned bypasses of Carrickmacross, Castleblayney and Monaghan on the N2 Dublin to Derry Road. Last year, a strategic study was carried out on the development of an east-west route from Sligo to Dundalk as part of a commitment in the NDP to investigate potential new routes. The M1 Dublin-Belfast corridor has long been regarded as a key communications route and economic driver in the all-Ireland context. Under the NDP, the M1 is to be developed to motorway standard to north of Dundalk. Projects under construction such as the Drogheda bypass, Cloghran-Lissenhall and Lissenhall-Balbriggan, have a combined estimated cost in excess of €450 million. We anticipate that these three sections will be completed by mid-year. It will then be possible to travel on continuous motorway from Dublin to south of Dundalk, a distance of 72 kilometres. The journey should take less than 50 minutes, a practical example of the benefits we are working to achieve throughout the country in upgrading the network of national roads in line with the policy set out in the NDP.