Interesting? From Sunday Indo, 23/03/03
Two port tunnels is still a cheaper option than a metro system
THE shocking thing about the cost of large infrastructural projects in Ireland is that the public isn't shocked anymore.
No one seems to want to call a halt to the dramatic and steady escalation in project prices that has left the biggest and most essential pieces of national infrastructure at the mercy of developers and construction consultants, and unprotected from exploitation by plainly opportunist property owners who are determined to squeeze the last million every chance they get.
The trend has been pretty obvious in Dublin's Luas light rail system, which, at the start, was expected to cost a relatively modest â‚¬400m, but, by the time it's due to be finished, will set the taxpayer back more than double the amount originally thought.
Rather than deal with the problem head-on, the city's newest project, the proposed half-underground metro that will link Dublin city centre to Dublin airport, has opted instead to turn the policy of project underestimation on its head.
Its promoters, the Rail Procurement Agency (RPA), headed by ex-IDA boss Padraic White, appear to have taken the Luas experience to heart and have pitched estimated costs so high so that if and when the project ever gets finished, it won't - or shouldn't - disappoint.
If there is any logic to this position, it reflects the quite bizarre unpredictability of large-scale construction in Dublin. Mr White told his story to Pat Kenny on an RTE radio programme and it bears
repetition. Setting out his position, Padraic White identified the "big difference" between a large project in Dublin and elsewhere in the world is "the property costs and the huge uncertainty".
If you are going to estimate costs in Dublin, he argued, you have to take on board the fact everything will be more expensive than you think.
He also claimed that in other places around the world it "suits" many cities to underprice a project.
"We did the opposite," he declared. Mr White and his RPA colleagues presented the projected 'cost' of the metro a month or so back to a Cabinet transport sub-committee chaired by the Taoiseach himself. Mr Ahern and the other sub-committee members were given a price of â‚¬4.8bn.
What's not generally known is whether the Taoiseach was told the detail that Pat Kenny was? If he was, it must have been a fascinating meeting because the construction costs of the metro, we now discover, were not â‚¬4.8bn, they are nearer â‚¬1.7bn.
And this latter figure even includes property acquisition as well as design and management and project management fees.
The balance of â‚¬3.1bn - two-thirds the total project cost - are accounted for by "insurance and risk costs and VAT", Mr White told RTE. Insurance and prudential risk, he reckoned, accounts for a staggering â‚¬1bn of the total costs.
"Construction in Ireland is more expensive," the chairman of the RPA said.
But it's clearly nothing like as expensive as the cost of insurance for a venture that will take up to nine years to build, and during which time, only four or five years will be spent actually building or tunnelling.
Insisting that the "record of major urban transport projects is that they come in at twice the original cost", Padraic White went on to say that the â‚¬4.8bn figure which he showed the Taoiseach includes massive cost escalation. If the metro was being paid for today it would cost only â‚¬3.3bn.
That being so, the escalation costs alone of the metro project are an astonishing â‚¬1.5bn - which seems hard to justify.
So it would appear that the real beneficiaries of the metro will be the construction consultants (who, contrary to international experience, are going to be employed several years before actual work gets under way) and the companies who carry the insurance risk. Moreover, if Padraic White's estimate of â‚¬1.7bn for the cost of actually building the system is close to the mark, it bears unflattering comparison with the cost of the Port Tunnel which is now nearing completion and, even escalated as it is, is only costing â‚¬625m.
In other words it would be possible to build two port tunnels for less than it would cost to build the metro. And the cost of the port tunnel comes with the 'risk' costs attached.