Cost overrun is not an uncommon phenomenon in construction projects. It is one of the most significant challenges in the construction industry that invariably leads to overstretched budgets and often directly affects the effectiveness of public spending for infrastructure projects.
Still, some project overruns are so significant that serious doubts arise about the effectiveness of project management processes in the public sector.
The National Audit Office has remarked that the major infrastructural project on the arterial road from Nadur to Għajnsielem in Gozo cost €10.5 million more than initially estimated, an expenditure overrun of 131%.
Times of Malta also revealed that since 2018, fewer than 100 roads in Gozo were fixed. The electoral pledge of the Labour Party in 2027 was to repave all of Malta and Gozo’s roads. Sadly, our roads are increasingly being paved with cost overruns.
The NAO attributes cost overruns in road projects to “inadequate planning”. This is a catch-all phrase that needs further clarification to help understand the root causes of such a waste of public money.
The main factors causing cost overruns in public construction projects are inaccurate estimates, design modifications, quantity changes, variation orders, political interference, inflation, specification changes, and changes in the scope of work.
Sometimes, combining these factors leads to excessive cost overruns on the scale evidenced in the Nadur to Għajnsielem road project.
The Gozo minister has failed to give convincing explanations on what led to this waste of taxpayers’ money.
An in-depth investigation that goes beyond the findings of the NAO is required to prioritise what needs to be addressed to avoid the normalisation of massive cost overruns in public construction projects.
Put simply, the public has a right to know the root causes, resulting in so much waste of financial resources and inadequate infrastructure improvement.
For instance, it must be established whether the selection and management process of consultants and contractors is based on best practices in the construction industry.
An independent post-implementation project review must answer the question: is the consultant/contractor selection system used by the public sector weighted for potential performance predictors, tangible deterrents or non-compliance, credits for good performance to ensure the best team to deliver according to budget, on time, and required quality standards?
If it is, do the different ministries commissioning public construction projects adhere strictly to this golden rule?
Is political expediency interfering with the governance of public construction projects? Are public sector project managers sufficiently qualified and experienced to lead multi-million complex construction projects?
Identifying system shortcomings requires systemic solutions that address root causes. An independent project management audit will probably indicate a need for both hard and soft system revamp. For instance, it could prioritise a culture shift that embeds imperatives and evokes commitment to comprehensive planning and rigorous controls to minimise cost overruns.
The governance of public sector projects must always be characterised by a strong oversight on the contracting partners to ensure that demarcation of responsibilities for designs, design reviews, working drawings approvals and cost increase approvals are clear.
Contractual agreements must also avoid misinterpretation and misuse of quality assurance and control expectations to ensure the public gets the best value for money.
When a lack of post-implementation scrutiny normalises failed public sector projects, the principle of accountability is discarded. Some understandably suspect that public contracts are invariably tainted with abuse of power and endemic financial waste. Only a strong political commitment can address this fatalistic mindset to ensure that public money is always spent judiciously.
We can no longer afford roads paved with substantial cost overruns.