BAM Subsidiary to Get Major State Building Contract Despite Value-for-Money Concerns
Government Set to award Major Construction Contract Despite Value-for-Money Concerns
Dublin, Ireland – The Irish government is poised to award a meaningful construction contract to a company partially owned by BAM, the firm behind the beleaguered National Children’s Hospital, despite concerns over its value for money.
Ministers will meet Wednesday to consider a proposal to proceed with the tender for Invesis, formerly known as BAM PPP.This joint venture between the Dutch construction giant BAM and a pension fund is set to build new facilities at several technological universities across Ireland.
The project encompasses new buildings at the Atlantic Technological University in Galway and Letterkenny, the South-East Technological University in Carlow and Waterford, and the Technological University of the Shannon.
while a final cost/benefit analysis conducted by the State concluded that the economic benefits ”clearly outweigh” the costs, it also revealed that the tender price exceeded the upper limit of a public sector benchmark used for value-for-money comparisons.
Professor Eoin Reeves, an expert on Public-Private Partnerships (PPPs) from the University of Limerick, highlighted the importance of the value-for-money test.”Guidelines governing these deals require a project to pass this test to ensure that the PPP costs less than using traditional procurement methods,” he explained.
The public sector benchmark serves as an estimate of the project cost using traditional procurement. If the PPP cost exceeds this benchmark, the project typically wouldn’t proceed as a PPP.
While guidelines allow for exceptions, they require government approval if the PPP cost surpasses the benchmark. The government’s rationale for potentially proceeding with the Invesis contract centers on the belief that the building projects will stimulate regional economic growth, with the State expecting a return of €1.60 for every €1 invested.
The tender received initial approval from the Cabinet in july, but Minister for Higher Education Patrick O’Donovan requested a further cost/benefit analysis before giving the final green light.
Sources indicate that the State’s analysis suggests that delaying the project or retendering would result in significant setbacks. the Department of Public Expenditure reportedly supports awarding the contract to Invesis.
However, the decision ultimately rests on more than just the value-for-money test, according to the guidelines.
BAM declined to comment on the matter.
This growth comes amidst ongoing scrutiny of the government’s handling of major construction projects,notably the National Children’s Hospital. BAM, the main contractor for this project, has been embroiled in legal disputes with the hospital’s board over cost overruns and additional fees.
The National Children’s Hospital project has faced years of criticism for its ballooning costs and delays, becoming a political flashpoint in recent years.
Value Concerns Overlook Cost Benefits: Expert Weighs in on €1 Billion Construction Deal
Dublin, Ireland – With a final decision looming, the government’s planned €1 billion construction contract for new university facilities has sparked debate. While a cost/benefit analysis suggests notable economic returns, concerns remain over the tender exceeding expected benchmark costs.
Professor Eoin Reeves, a Public-Private partnerships (PPPs) specialist from the University of Limerick, emphasizes the importance of value-for-money assessment in such deals.
“Guidelines governing these deals require a project to pass this test to ensure that the PPP costs less than using traditional procurement methods,” Professor Reeves explains.
The tender, submitted by Invesis, a joint venture between Dutch construction giant BAM and a pension fund, proposes developing facilities at several technological universities nationwide. Though a state analysis concluded the economic benefits outweigh the costs, the tender price exceeded the public sector benchmark used for cost comparisons,raising questions about the value-for-money proposition.
While guidelines allow exceptions to this benchmark, they mandate government approval for any PPP exceeding it. The government’s rationale centers on projected regional economic growth,anticipating a €1.60 return for every €1 invested.
Despite initial Cabinet approval in July, Minister for Higher Education Patrick O’donovan requested further cost-benefit analysis before granting final clearance. While delaying or retendering the project could lead to setbacks, the potential overspend remains a point of contention.
This situation unfolds amidst ongoing scrutiny of BAM’s involvement in major construction projects, notably the National Children’s Hospital. BAM, also the main contractor for this project, faces legal disputes over cost overruns and additional fees. This history adds further complexity to the decision facing the government.
The Department of Public Expenditure reportedly supports awarding the contract to Invesis, but the final decision hinges on more than just the value-for-money test, according to guidelines.
BAM declined to comment on the matter.