OPW and projected cost of 442K for Modular Homes

Absolute disgrace, but nobody will be held accountable as usual. The OPW bypassed normal procurement procedures as Mr ROG's department had a timeframe for delivery 😂😂. Why can the Department of Integration ignore the rules, cost hundreds of millions in tax money, and RO'G keeps hiding any time there's a problem. Wasn't around to answer any questions when people were protesting or before the referendum. He'll be missing this time too. As for the OPW - someone in that department thinks they're playing monopoly and needs to be fired.

https://www.thejournal.ie/cost-of-modular-homes-for-ukrainian-refugees-more-than-double-as-some-deadlines-missed-by-years-6500701-Sep2024/

What it's largely down to is public procurement rules being set up to more or less guarantee cost overruns in public projects.

The problem is this. In an attempt to prevent cronyism, favouritism, etc, public procurement law, both in Ireland and elsewhere, typically requires the state to accept the lowest tender, or offer clear, objectively demonstrable reasons for preferring a higher tender.

This means that, to get the contract, you have to bid the lowest tender price. It is not worth your while participating in the tender process unless you are aiming to do that.

How do you get your price down as low as possible? With conditions and contingencies.

In principle it's acceptable to make your tender subject to conditions about future events that you can't control or manage. Let's say you're bidding now to, say, install and erectmodular houses over the course of 2025. You're going to have to pay whatever the going rate for labour is over the course of 2025. You're going to have to pay the market price for all your inputs, most of which are imported. Etc, etc. So, to price your bid, you have to make assumptions about what pay rates in the construction trade will be next year, what the exchange rate of the euro against the dollar and the yuan will be over the course of 2025, and so forth. Plus there may be aspects of the design of the project that are not yet finalised; you have to make assumptions about how they will be finalised. Etc, etc. And your tender specifies that, for each assumption which is not borne out in practice, the contract price will be adjusted.

So, you make (and state) a series of aggressively optimistic assumptions about pay inflation, price inflation, exchange rate movements, supply chain issues, relevant weather conditions, design decisions, etc, etc. Individually, each assumption is defendable, if optimistic. But, collectively, they are fairly improbable; it's possible that every single one of your very optimistic assumptions will prove to be exactly right, but it's freakishly unlikely. Therefore signficant contract price adjustments are, in practice, inevitable.

Of course the customer reviews the assumptions and can see that they are, in aggregate, wildly optimistic. But so what? This is not an objectively defensible basis for preferring one of the other tenders, since all the tenders are price on the basis of a similar wild optimism.

This, basically, is why public procurement projects always, always, always, experience signficant cost overruns. Of course other factors can come into play that mean even more cost overruns; I am not suggesting that this is a complete explanation of every cost overrun. But it does provide a solid foundation of virtually guaranteed cost overruns on on public procument projects.

Something has to be done here the current system of politicians short term goals to be re-elected which means their eye is firmly off the ball with regards to the day to day running of the country and the fact that for decades now our perm-government, semi-states, government depts and our civil/public servants have been reckless with regards to spending our cash and can no longer be trusted to spend our tax take. There needs to be some kind of publicly viewable road map with the main point/focus being full transparency and a full view of the costs and contracts at a timely fashion for people to comment/advise/criticize what our money is being spent on. The road map needs to happen before the likes of the OPW are allowed spend like drunks in a strip club again. There is as much if not more expertise out there in the general public with regards to budgets, tendering and spending then there is in these closed off institutions where there is zero accountability.

The other side of this is tomorrow we have a budget and its all smoke and mirrors will FF/FG/Greenie try to buy your vote remember its your money they are buying it with in the first place. These knobs will throw a big can of kerosene on an already on fire economy with the likes of the apple tax, AIB share sales meaning we have a huge suplus but the fact is taking these ones off monies coming in and our corpo tax out of the equation currently we have a deficit of over 4billion. It will be interesting how much larger this deficit will be after tomorrow as the current govenment are not listening to advice on paying current expenditure from one offs or a burgeoning tax take from one sector as in corpo tax. I mean this played out back in 2007/8 when we based our current expenditure on the stamp duty receipts thinking this would be forever more so its not like they have not seen it before. If Trump gets in and gives the top 10 companies who pay the majority of corpo tax in this country any kind of a deal the country could be in schitz creek again.

If someone could get hold of the spec. for one modular home. Then find a quantity surveyor to price it, then we'd know what the true price of building one should be, whether lower or not. The figure would have to show a separate cost for labour building it, and also the purchase of the land to build it on. According to https://www.rte.ie/brainstorm/2024/0905/1427931-ireland-building-costs-new-houses/ a 3-bed in greater Dublin costs €461,000. How do these modular homes compare with a 3-bed house? Would they have the same space, facilities etc? Would be interesting to know.

Just look at footnote b in post # 15 above. The expenditure was approved by Rodders O'Gormless who knows about as much about construction costs as I know about playing blow football with my backside.

Is it possible though for the ordinary person to get planning permission for one?

Yes, there's loads of modular homes that are fully compliant with planning and building regulations.

Because tenderers won't bid for a contract of any size or duration on the basis of a fixed price, with no contingencies in which it can be increased. They'd be mad to; they'd be running the risk of bankruptcy every time they accepted a public contract.

Private commercial building contracts also include contingency provisions under which the price may (and does) increase. This is absolutely standard in commercial construction contracting.

The difference, as already pointed out, is that in the public procurement system tenderers are encouraged — required, even — to load as much as possible into the contingency provisions in order to have the lowest possible headline price on the tender.

Construction contracts always have contingency provisions. That's just the global market practice, and there's nothing the Irish government can do about it. And on the face of it it's not unreasonable; why would you expect a building company to insure you against the financial consequences of a pandemic in China or a blockage of the Suez Canal?

In the example you give the construction firm lost out because they didn't have the right contingency clause for the event which occurred. That was their stuff-up, which is why the senior management had to resign. There is nothing the Irish government can do to force tenderers to stuff up in that fashion.

What governments could do is take a tougher line on negotiating contingency clauses — e.g. "we won't agree to a contingency clause that lets you put up the price if labour costs rise by more than 3%; you have to bear the risk of wage inflation up to 10%". And then a tough negotiation follows. And similarly with contingencies about the price of other inputs, etc.

Note that this would result in less cost overruns (or, at least, cost overruns of smaller amounts) but it wouldn't necessarily mean cheaper buildings — the tender price will be higher to start with if the tenderer has to carry more risk. If he has to stick to the contract price if his costs rise by 10%, then he's going to set a contract price that will still give him an acceptable profit if costs rise by 10%.

The sordid truth is that politicians prefer tenders with low headline prices at the expense of large cost overruns; when you want to announce the project, or budget for it, it helps to be able to quote the low, low price that you have negotiated. So they have no particular incentive to change the system.

I've used a contract like that myself. Contingencies are real and often result in some level of increased cost. But, what you are describing is different.

You're saying that the client (ie public servants, and their political bosses) are conspiring with contractors to rip off the tax payer by deliberately underestimating the headline price, at the cost of seriously unpredictable contingency. If you have evidence of this, why don't you send it to The Ditch, or someone else in the media?

I can understand a contractor wanting to do it, but no rational client spending their own money would want it. The client is going to want as much of the project covered by a fixed price, and as little as possible as contingency.

Thats not really the kind of question to be answered we all know its the perma gov doing this not the people elected and something has to change. Going forward the OPW, HSE and other state dept and semi states that are in control of public monies need to be held accountable the best way to do that is by changing the law that if the minister who is directly in charge of this spend (and there is one who is supposed to be looking over different pots of public monies) would lose their pensions up to the amount of monies wasted we would see a drastic change in attituded same goes with the employee within these un-elected bodies if their pension and job for life were someway in peril if it was found they recklessly spent without any care for value for money it would put some manners on them.

I doubt they have their fingers on the pulse for day to day their main objective is to be re-elected not the day to day. This I believe is part of the issue. The minister blames the perma gov and the perma gov blame the minister both have plausible deniability and blame cannot be squarely put on either party. There needs to be a firming up of the process with the line minister who is in charge of their spend signing off on all expenditure and if they don't bother looking at it and it turns out say the OPW pay 2 million for a clothes line (you never know they might pay 3 million for it) then their pension is up for grabs. This would leave the minister on the hook responsible and financially at a loss if they don't do their job correctly.