John Deasy
Question:128 Mr. Deasy asked the Minister for Finance the procedures for re-evaluating the cost benefit of capital projects in instances where significant overruns on original costings are identified. [14411/02]
Written Answers. - Departmental Expenditure.
In accordance with the principles underlying the strategic management initiative, my Department has been for some time pursuing an active policy of maximum delegation to Departments. In relation to large capital programmes therefore, responsibility for individual projects is generally delegated to the relevant Department.
The role of my Department is to set out a clear framework in relation to the management of capital investment. In managing capital projects, Departments are required to comply with my Department's guidelines for the appraisal and management of capital expenditure proposals in the public sector.
These guidelines set out four main stages of project appraisal and management:
1. The appraisal stage aims to provide a basis for a decision on whether to approve a project in principle. This stage includes an assessment of uncertainty and risk.
2. The planning stage involves the establishment of a project management structure, preparation of a design brief, detailed planning and design of the project and a review of costings.
If changes are proposed to the project in the course of the planning stage the guidelines make it clear that the cost implications should be fully appraised and the approval of the sanctioning authority sought before proceeding.
On receipt of a tender price and other relevant information, the case for proceeding with the proposal is again subject to review. Where it is proposed, following such reappraisal, to go ahead with a project at a price higher than that originally proposed, a decision will again be required by the sanctioning authority to proceed.
3. The implementation stage begins once the final approval for the award of a contract has been secured.
If adverse developments occur, including unforeseen costs increases, which call into question the desirability or viability of the project, the sponsoring agency should consider necessary measures to rectify the situation. Where despite these measures increased costs are likely to arise, the approval of the sanctioning authority for the extra expenditure has to be obtained before any commitment is made to accept cost increases. The viability of the project given the changed circumstances should also be reported on.
4. Following the completion of a project, the final stage is post project review. Such a review is recommended to evaluate both the project outturn and the effectiveness of appraisal and management procedures.
I am confident that the steps outlined in the guidelines provide sufficient guidance for the re- evaluation of projects at key points in the decision making process.