26 minute read
Transport and the NDP
Transport and the National Development Plan
Transport is the sector that will receive the second highest amount of gross voted capital allocation over the first five years of the newly revised National Development Plan (NDP), receiving €13 billion from 2021 to 2025. eolas examines the projects that this central finance will fund.
Of the five projects within the newly revised NDP stated as having an estimated cost category of F (over €1 billion), two fall within the transport sector: the programme for regional and local road protection and renewal and the delivery of the MetroLink mass rapid transit rail line.
The renewal and protection of regional and local roads is an annual programme of works whose estimated cost category of over €1 billion is given for the period 2021-2025. The NDP states that the highest priority for this investment is to “maintain the asset through the protection and renewal of the network of some 96,000km”. The investment is to be delivered through targeted Department of Transport funding to local authorities covering areas such as: restoration maintenance; restoration improvement; discretionary works such as repairs and routine maintenance; drainage works; climate adaptation and resilience works; safety related works; training; and winter maintenance.
In addition to maintenance works, the improvement of the local and regional road network is also said to be a priority of the NDP, with projects completed thus far including the Sallins Bypass, the Bettystown to Laytown regional road, the Portlaoise Southern Distributor Road and the Daingean Uí Chúis Relief Road. The Carrigaline Western Relief Road and the Coonagh to Knockalisheen project are currently under construction, while construction is due to begin on a number of projects such as the Tralee Northern Relief Road, the Shannon Crossing/Killaloe Bypass and the Athy Southern Distributor Road.
The National Roads Programme contains 39 road-building projects, some of which are currently under construction, some still awaiting further approvals. These include projects the length and width of the State such as the N56 from An Clochán Liath to Glenties, the N22 from Baile Bhúirne to Macroom, the M20 Cork to Limerick, the N6 Galway City Ring Road, the N4 Mullingar to Longford, the M4 Leixlip to Maynooth, the M11 capacity enhancement and the N11/N25 Oilgate to Rosslare Harbour.
The second of the category F transport projects, the MetroLink, is less clear in the plans included in the NDP. Its current status is given as being in the
preliminary business case, with an estimated completion date simply left as TBC, meaning that its completion before 2030 seemed unlikely upon the publication of the new NDP, a feeling that was then confirmed by the publication of the National Transport Authority’s (NTA) draft strategy in November 2021. The project, whose cost estimates are now as high as €10 billion, is not set to be complete until at least 2035 “at best” according to Fianna Fáil TD Paul McAuliffe.
The NDP states that once completed, the MetroLink “will provide a sustainable, safe, efficient, integrated and accessible public transport service between Swords, Dublin Airport and Dublin City Centre” and that the project will “support approximately 8,000 direct construction jobs” and “carry around 53 million passengers in its opening year and create new connections between 127 schools, three third-level institutions and five hospitals”.
In related commuter rail plans, the plan’s investment in public transport
includes the Cork Commuter Rail Programme, which will run from Mallow to Midleton and Cobh, targeting a 10minute all-day frequency on electrified rail services. Phase one of the project is due to be completed in 2026 and is due to cost €185 million to “address the existing bottleneck in the city centre by enabling the creating of a suburban rail network”. Phase two of the programme is due to commence this year with early development, with delivery scheduled for the “latter period” of the NDP, i.e., post-2026.
Further regional city commuter rail programmes are planned for Galway and Limerick, with “significant track and station works proposed for Oranmore and Athenry as well as the development of a new Limerick commuter rail network”. Major upgrade works over the lifetime of the NDP will also take place in Ceannt and Colbert stations, along with the building of a new train station and transport hub in Waterford.
From a sustainability point of view, one of the more notable transport projects within the NDP is the ongoing implementation of greener and cleaner bus fleets, which began rollout in 2021 and is due to last until 2025, with an estimate cost of €500 million-€1 billion. The NDP states that the NTA has “commenced the transition of the urban PSO bus fleet from diesel only vehicles to lower emission vehicles”.
Actions taken since July 2021 include: ordering 280 hybrid electric buses, 89 of which were in service at the time of the NDP’s publication; procurement of a framework for the delivery of up to 200 single deck electric buses with the intention of converting Athlone’s entire urban bus fleet to electric by Q2 2022; the delivery of a framework for up to 800 double deck electric buses, which
are to enter operation in 2023; and the procurement of three hydrogen fuel cell double deck buses to be used in a hydrogen pilot. By 2025, it is “expected that over 50 per cent of the urban PSO bus fleet will be converted from diesel to low and zero emission vehicles, with 30 per cent of the bus fleet being zero emission”.
Indeed, the transport plans within the NDP will play a significant role in Ireland’s decarbonisation, with every major programme other than the National Roads Programme (given a C) given a climate and environmental assessment grade of A, meaning that they are “likely to have, on balance, a favourable impact on climate and environmental outcomes”.
MetroLink, the cost estimates of which are now as high as €10 billion is not set to be complete until at least 2035.
Price volatility in construction contracts: No topping out in sight
As 2022 unfolds, there is cautious optimism in the construction industry that the resilience displayed over the last two years will manifest in a strong recovery, with output projected by AECOM to grow by 18.5 per cent this year, from €27 billion to €32 billion.
Despite falling to an eight-month low of 53.7 in December 2021, the Ulster Bank Construction PMI still indicates growth, albeit at a much slower rate. A more balanced increase this year is welcome, to prevent marginal projects from becoming unviable.
Optimism is tempered by increased demands on the industry to expand and deliver on the ambitious targets set out in the National Development Plan while battling the pre-pandemic pressure points exacerbated by Covid-19 and Brexit: • the significant increase in the cost of materials;
• supply chain constraints;
• lack of skilled labour; and
• a fall in registrations for apprenticeships.
From 1 February 2022, new minimum rates of pay will come into force under SEO 703/2021 (Electrical Contracting Sector) and SEO 598/2021 (amending SEO 234/2019) (Construction Sector). Industry analysts have predicted that these factors will lead to some of the highest ever levels of tender prices. AECOM (Ireland Annual Review 2022) expects an average tender inflation price of 5 per cent for 2022, while Deloitte (Q2 Industry Review 2021) states that the uncertainty of costs is making it increasingly harder for the industry to forecast developments.
While the recent increases in the cost of materials have been “unprecedented”, managing price fluctuations in a contractual context is not a new concept. To mitigate these challenges in public works contracts, the Office of Government Procurement has recently published an interim suite of amendments, including:
• an indexation mechanism for PW-
CF1 to PW-CF6; and
• amendments to the price variation clauses in PW-CF1 to PW-CF5 to reduce the Base Date from 30 to 24 months and to adjust the threshold for exceptional material price increases from 50 per cent to 15 per cent.
In the private sector, collaboration remains key.
Our key takeaways for projects already underway are for parties to maintain an open dialogue and to have a thorough understanding of your existing contract to proactively mitigate the impact of material price increases. We are seeing more negotiation in the industry around price volatility clauses and the building of long lead orders into the contract structure. In the pre-contract stage, parties should clarify how long and to what extent a contractor’s tender should be considered binding.
For further information or advice, please contact Matheson’s Construction and Engineering team: www.matheson.com/services/construc tion-and-engineering
NDP: Capital expenditure
Published in October 2021, the new National Development Plan (NDP) is heralded as proof of the Government’s commitment to Ireland’s mediumterm infrastructure and investment requirements.
Review to Renew, a review of the NDP was undertaken with the aim of ensuring optimal alignment with the new Programme for Government, the new Climate Action Plan, and the National Planning Framework (NPF).
As a component of Project Ireland 2040, the NDP outlines €165 billion in capital expenditure for the next decade, seeking to match the demand for public investment across all sectors, particularly in terms of enhanced delivery of infrastructure projects in housing, health, and the environment and climate. In parallel, the NPF establishes the national spatial strategy for the next two decades.
Overall, there will be a 14 per cent increase (€1.3 billion) on voted capital expenditure in 2022, including €0.2 billion for National Recovery and Resilience Plan (NRRP) projects, when compared with 2021. In total, Budget 2022 indicates that it will make available €11.1 billion through the NDP, alongside additional non-Exchequer investment.
As such, budgeted capital expenditure is set to more than double in 2022 when compared with the €4.6 billion pre-NDP position in 2017. Annual capital expenditure is projected to exceed €16 billion by 2030 and from 2021 to 2030, total Exchequer investment through the NDP will be €136 billion.
Initiating an increase in voted capital expenditure to 5 per cent of GNI* by 2025, core capital expenditure in 2022 will increase by 11.1 per cent (€1.1 billion) on the 2021 allocation (€9.8 billion) as outlined in the July 2021 MidYear Expenditure Report.
Previously, in 2021, 75 per cent of the €10.8 billion capital allocation was concentrated in four sectors: • 27.4 per cent (€2,766 million) in housing;
• 25.1 per cent (€2,528 million) in transport;
• 12.3 per cent (€1,241 million) in education; and
• 10.4 per cent (€1,048 million) in health.
The Shared Island Initiative will also receive capital funding totalling €500 million over five years. This allocation is intended to “foster new investment and development opportunities on a North/South basis” and deliver crossborder objectives included in the Programme for Government. As such, in 2022, €50 million will be allocated to departments and agencies to facilitate cross-border projects. Meanwhile, capital allocations for 2022 also include €206 million via the NRRP.
Minister for Public Expenditure and Reform, Michael McGrath TD Sinn Féin spokesperson on Public Expenditure and Reform, Mairéad Farrell TD
The ESRI’s COre Structural MOdel of the Irish economy (COSMO) projects that the planned increase in capital expenditure from 2021 onwards, as contained in the NDP, will result in GDP increasing by 1.6 per cent by 2030, employment increasing by 3.0 per cent by 2030, and wages to increase by 3.1 per cent.
Launching the NDP, Public Expenditure and Reform Minister Michael McGrath TD asserted: “The revised NDP will deliver the largest and greenest capital investment plan in the history of the State,” adding: “An employment impact analysis, carried out by my department estimates that an annual average of up to 81,000 direct and indirect construction jobs will be sustained as a result of the public investment in this NDP over the next decade.”
Meanwhile, Sinn Féin’s spokesperson on Public Expenditure and Reform, Mairéad Farrell TD, warned: “The new NDP is somewhat hard to distinguish from the old one. Yes, there are the increased departmental capital ceilings, arising from the increase in the total amount of funding that will come from the exchequer, but there is a distinct lack of details on costs, timelines and completion dates for the projects outlined therein.”
Departmental allocations in 2022
Education:
Capital expenditure provision for Education will increase by 7 per cent (€52 million) on the 2021 allocation to a total of €792 million, with the goal of ensuring that the Department can deliver new buildings and equipment, as well as furnishing primary and post-primary schools. Of the 200 school building projects currently under construction, the majority will be completed in 2022, ultimately delivering 30,000 additional and replacement school places.
Housing:
The Department of Housing, Local Government, and Heritage will receive the highest capital expenditure allocation of all departments, totalling €3.4 billion. Increasing by 23 per cent (€634 million) when compared with 2021, this additional support is intended to support the delivery of Housing for All. For instance, of €1.7 billion and €224 million will be allocated to the provision of 9,000 social housing units and 4,100 affordable housing units in 2022.
Environment, Climate, and Communications:
Capital funding for the Department of the Environment, Climate, and Communications will increase by 21 per cent (€121 million) above the 2021 allocation, totalling €700 million in 2022. It is intended that this additional investment will help meet the objectives of Climate Action Plan 2021, as well as the continued roll out of the National Broadband Plan. The allocation for 2022 will mark the beginning of enhanced direct capital investment by the Department, amounting to €12.9 billion over the lifetime of the NDP.
Transport:
Totalling €2.6 billion, the Department of Transport will receive the second highest capital allocation of any department. These resources are proposed to deliver the maintenance, active travel, public transports, and road priorities contained within the new NDP. For example, this includes the delivery of 41 additional InterCity Railcar carriages in 2022, and progress on BusConnects, MetroLink, and DART+.
Health:
Capital funding for the Department of Health in will total €1,010 million in 2022, representing a 12 per cent (€105 million) increase on the revised 2021 allocation. Additional expenditure is earmarked for the delivery of the National Children’s Hospital at St James’s, as well as priority projects in primary care, community nursing units, ambulance bases, mental health, and acute services.
Building a limitless Ireland
TJ Malone, head of the build programme for the National Broadband Plan and Chief Executive Officer of National Broadband Ireland Deployment, discusses progress on the State’s “biggest investment in rural Ireland ever”.
Connectivity has quickly become a vital part of our lives. For work, education, entertainment, and even socialising, we all have a growing demand for reliable, high speed broadband services. In most urban areas, this is taken for granted, but for over 1.1 million people living in more rural parts of Ireland – myself included – it can be an everyday struggle.
We’re not alone. Indeed, across Europe the European Commission is on a mission to ensure every household has gigabit connectivity by 2030. It’s a bold and transformational move, but one that will propel every nation in the right direction to take on everything the future holds.
Ireland’s National Broadband Plan is the Government’s ambitious policy to meet this European-wide goal, and it sets us on a path to be the leading country in the provision of high-speed broadband to 100 per cent of the population, providing equal access and equal opportunity to every home, farm, school, and business. Government to deliver this highly anticipated plan. Recognised as one of the biggest and most ambitious telecoms infrastructure projects of its kind globally, it has been heralded as “the biggest investment in rural Ireland ever”.
Fast-forward to today and the Covid-19 pandemic has underlined the criticality of reliable, high-speed connectivity, which has become essential for so many aspects of our lives. Such is the demand for bandwidth, that internet usage has grown by over 40 per cent compared with pre-pandemic levels.
A project like no other
Taking on the challenge, our team at NBI is deploying fibre on approximately 1.5 million poles; many of them new, over 15,000km of underground ducts, using up to 142,000km of new fibre cable, and will run along almost 100,000km of the road network.
Conveying the size, scale, and complexity of an infrastructure project of this nature can be challenging to articulate. It can only be likened to rural
electrification, but with arguably far more complexities.
Stretching across 96 per cent of the country’s land mass, we’re laying enough fibre to go around the world nearly four times. This is about radically changing the broadband landscape across the country to ensure every single person has access to high-speed broadband, no matter where they live or work.
In two years, our team has grown to have over 1,200 people working on the rollout of the National Broadband Plan, either directly with NBI or through our network of specialist contractors. We have the best team in the world working to deliver this complex project, with experience of financing, building, and operating some of the biggest infrastructure assets in the world.
Rolling out the National Broadband Plan, we’re not alone. Collaboration is one of the most important aspects of the project, with a vast amount of specialist subcontractors providing support across every county in the country, and vitally, local authorities providing critical support with licences that are required, such as for the erection of new telegraph poles and road opening licences.
A huge amount of credit must be given to these local authorities and the national agencies, particularly the Local Government Management Agency(LGMA), the County and City Management Association(CCMA), and the Road Management Office(RMO), for their roles in supporting NBI and the introduction of a new national framework that was introduced in May last year to provide centrally agreed mechanisms for the application of licences that will support the effective rollout of the National Broadband Plan. With over 1.5 million poles in our build programme, the size of the task for local authorities cannot be understated and the agility to create a new national framework is testament to all parties collaborating and innovating in the national interest.
Rollout progress
The solution is well underway. Work on the National Broadband Plan continues apace with our teams working in every county across Ireland. Over 293,000 premises have now been surveyed nationwide, which involves NBI crews physically walking the routes where fibre will be laid. Over 252,000 of these premises are already designed or progressing through detailed design work. Collectively, these are critical components which pave the way for fast and effective construction work.
As of today, construction work is underway for over 150,000 premises across the country and over 55,000 premises are now able to order services via retail service providers (RSPs), with minimum speeds of 500 megabits per second on offer. With around 50 RSPs ready to sell services on the NBI network, this is going to be gamechanger, bringing significant benefits directly to consumers and businesses where competition between RSPs will ensure quality bundled packages offer choice around voice, broadband, TV, and mobile at competitive prices.
Visit www.nbi.ie for more information, including to find out if you’re in the intervention area and to receive Eircode specific updates on the rollout progress.
Building the shared island
Taoiseach Micheál Martin marked one year of the Shared Island Initiative in December 2021 with a week of events surveying the work that has been done and is to be done on government investment in a more connected Ireland.
Key to the building of a more connected Ireland are the infrastructure projects being undertaken with funding from the Government’s Shared Island Fund and other sources. Allisland investment was one of the more notable revisions within the revised National Development Plan (NDP) published in October 2021, where a commitment to allocating ring-fenced capital resourcing for all-Ireland investment to 2030 “at least at the current level of the Shared Island Fund”.
Shared island investment priorities in the NDP include: the creation of an Ireland-wide greenway network; the enhancement of rail connectivity; coordinated investment in the rollout of electric vehicle charging networks; funding allisland climate actions; enhancing support for all-Ireland enterprise development; the creation of new all-island research centres; the further development of third-level education infrastructure in the north west; and new cross-border infrastructure built and natural heritage initiatives.
Thus far, the Shared Island Fund has been allocated to numerous infrastructure projects, chief among them the revitalisation of the Ulster Canal, which runs through counties Armagh, Fermanagh, Monaghan, and Tyrone. More than €12 million was allocated to the project in April 2021 from the Shared Island Fund and the rural Regeneration Fund for phase two of the project, and a further €1 million from the Shared Island Fund for phase three. The project is due for completion in 2023.
Also funded is the Narrow Water Bridge project, brought to tender by a July 2021 allocation of €3 million from the Shared Island Fund. The Taoiseach has committed to providing further funding once final costs for the project are determined.
One of the more significant allocations from the Shared Island Fund has been the €40 million pledged to the North-South Research Programme in July 2021. The programme will “support the deepening of links between higher education institutions, researchers, and research communities on the island of Ireland, delivering all-island approaches to research and innovation, and open to all disciplines and research areas”. This comprehensive approach to research has already borne fruit with the National Economic and Social Council (NESC) having published a series of secretariat papers on the shared island concept as well as a report on collaboration on climate and biodiversity; the Economic and Social Research Institute (ESRI) has also published research on increasing cooperation, cross-border trade in services and foreign direct investment on both sides of the border. The NESC and ESRI plan to publish a comprehensive report to government on the Shared Island initiative and a report on education and healthcare respectively in 2022.
I don’t want to seem overly pessimistic, writes Colm McGrath, Managing Director of Surety Bonds. A number of multinational IT and fund management companies continue to see Ireland as a hub for their European operations and have invested accordingly, but the missing piece is investment in infrastructure.
To add to this positivity, the construction industry is continuing to expand due to expenditure on foreign direct investment projects and by continued activity in the commercial office sector. The residential sector is catching up, the required volume of 36,000 units per annum are far from being met with around 24,000 units to be completed in 2022, there is still massive scope for growth. The missing piece of the jigsaw is investment in infrastructure, there is huge scope for projects in civil engineering, which is currently posting the weakest activity of all construction sectors.
The Irish Government is completely in control of its own investment decisions and is at fault when it comes to the lack of investment in infrastructure in Ireland. To support Ireland’s, not just Dublin’s, long-term growth lies firmly on the shoulders of this government.
The National Planning Framework 2040, with a potential spend of €116 billion, and the newly unveiled plans to pump €165 billion into infrastructure by 2030 should put some certainty back into the construction and the civil engineering market for the long-term but it won’t due to the boom-and-bust cyclical nature of our governmental policies which are clearly outlined in this wish list, it’s certainly not a defined plan that would give me long-term comfort. From a governmental point of view investment in infrastructure has a high rate of return, Ibec estimates that all road improvements carried out between 2006 and 2010 led to an annual beneficial contribution in GDP of €525 million and, in present value terms, over a 30-year period this would equate to €9.5 billion. If the Government was to address many of the road projects listed in the 2040 NPF, then not only would that alleviate congestion, but it would encourage investment in other regions and give the State a decent return on that investment over a 10-to-20-year period.
Infrastructure lasts lifetimes and while interest rates on government borrowing are at an all-time low it seems like a no brainer to make a decision to invest in Ireland’s future now, not continuously kick the can down the road as successive governments have done.
T: +353 868 189 702 E: colm@suretybonds.ie W: www.suretybonds.ie
Enhanced major capital investment scrutiny
Major capital investment projects are now subject to a new External Assurance Process, undertaken by independent external experts, for review and scrutiny. At the same time, to support the Department of Public Expenditure and Reform (DPER) in undertaking this role, a new four-member Major Projects Advisory Group (MPAG) has been established.
Published in October 2021, the new €65 billion National Development Plan (NDP) committed to restructuring oversight and implementation of capital projects, as well as enhanced scrutiny of major public investment proposals.
As such, to strengthen the assurance process for major public investment, two new elements have been introduced:
1. an External Assurance Process; and
2. the establishment of a Major Projects Advisory Group.
External Assurances Process
Implemented by DPER, the External Assurances Process is intended to provide independent project scrutiny and key decision gates. Ultimately, the process is aimed at delivering better value for taxpayers’ money through independent expert insight into project risk and delivery feasibility, alongside robust costings, governance, and procurement.
While NDP investment projects are required to adhere to the Public Spending Code (PSC), which requires the employment of best practice at all stages of the
Major Projects Advisory Group:
Michael Nolan
• Chair of the Major Projects Advisory
Group. • Previously appointed the first chief executive of Transport Infrastructure Ireland (TII) upon the merger of the National Roads Authority (NRA) and Railway Procurement Agency, retiring in 2020. • Prior to this, held the head of major projects position in the NRA between 2007 and 2015. • Chartered engineer and a fellow of Engineers Ireland. • Currently chairs the Western Development
Commission’s Project Working Group to develop a
Rural Town Mobility Index and is an external member of the NTA’s BusConnects programme board.
Jerry Grant
• Background in engineering and law. • Over 25 years of experience at director and executive advisor level in the utilities and construction sectors. • Held roles as managing director, head of asset management, and specialist advisor with Irish
Water between 2013 and late 2018. • Currently chairs Dublin Port Company and holds active leadership roles in State sectors engaged in infrastructure services and investment.
Alison Hardiman
• A planning and development law expert with extensive experience in the development of strategic infrastructure projects in both the public and private sectors. • Experience in Irish procurement law and processes as a tendering consultant. • Previously worked as the in-housing planning lawyer of the Railway Procurement Agency, working on projects and proposals including Metro
North PPP, Luas Cross City, and Citywest, between 2006 and 2011. • Currently a PhD candidate, in association with
EirGrid plc, undertaking research into the gaps in law and policy inhibiting delivery of regally required renewable energy infrastructure projects.
Barry O’Driscoll
• A chartered civil engineer with more than 25 years of experience in the national roads and public transport sectors. • Extensive experience in senior positions in the planning, managing, and delivery of major public investment projects, including as director for WSP, director for Highways England’s Smart Motorway
Programme, and project director for a series of major projects, most recently including the M4 smart motorway. • Currently a member of the Independent
Investment Programme Advisory Group (IIPAG) which provides assurance and advice to the Mayor of London for major Transport for London projects. expenditure lifecycle, DPER has indicated that the new process “goes one step further” in ensuring timely and on-budget project delivery.
Applicable to projects exceeding €100 million in cost, the mandatory External Assurances Process will consider cost, risk, and delivery during both the approval in principle and the pre-tender approval stages of the project lifecycle. Currently, there are at least 50 major public investment proposals in the Exchequer-funded component of the NDP. Any delays and cost overruns can have a negative knock-on effect on the entire capital programme.
Through better analysis of cost and risk in the initial stage, projects should receive more considered decisions and better outcomes. Likewise, external review can ensure better project and investment governance. As such, the External Assurance Process should furnish government with comprehensive information on cost, risk, governance, and delivery feasibility before a decision to proceed is taken.
MPAG
Currently, DPER undertakes the scrutiny and challenge role on major public investment proposals in advance of government consideration. This includes technical reviews of business cases, with regard to the PSC, as well as a focus on strategic alignment with core government policies and the quality and rigor of the economic appraisal.
Supported by a secretariat supplied by DPER’S National Investment Office (NIO), the newly established Major Projects Advisory Group (MPAG) will assist DPER in its
project assurance role and advise the Minister for Public Expenditure and Reform. The MPAG will scrutinise project proposals and external reviews in advance of government consideration, supporting DPER’s role in in quality assuring the new External Assurances Process. It is expected that the MPAG will also advise on future reforms to the PSC.
Combined, these developments ensure that Ireland is aligned with international exemplars and fulfils a recommendation made by the IMF’s Public Investment Management Assessment of Ireland.
Announcing the introduction of the new process and the establishment of the MPAG, Minister for Public Expenditure and Reform Michael McGrath TD stated: “The implementation of the External Assurance Process and the establishment of Major Projects Advisory Group will help deliver on our commitment in the National Development Plan to reform the oversight and implementation of public infrastructure projects to achieve better value for money.”
