Significant changes were recently announced for the Public Spending Code. And more changes are on the way. Minister Pascal Donohue shared this information in a recent Press Release. More detailed information appeared on an official circular from his department. That department has now been given the enhanced title of the ‘Department of Public Expenditure, National Development Plan Delivery and Reform.’ This is primarily to give due emphasis to the importance of the National Development Plan in the development of the Irish Economy. When all the changes planned by Minister Donohue have been made, the approval and roll-out of Public Investment projects will be made under a new set of Infrastructure Guidelines and not under the existing Public Spending Code. https://www.gov.ie/en/publication/public-spending-code/.
What is the Public Spending Code?
The Public Spending Code was first published in 2013. It set out the roles, procedures, and guidelines to ensure value for money in public expenditure, across the Irish Public Service. The Code brought together in one place all the elements of the value-for-money framework that had been in force, updated and reformed in some respects. The Code applies to all organisations that spend public money. If applied rigorously the Code should indeed support public bodies in improving the accuracy of cost estimation and forecasting, and timely delivery of projects. It should also ensure that risk identification and risk management are strengthened.
Box A lists the occasions when the Code was revised during the past decade.
Box A: Revisions to Public Spending Code
Context for the Code:
All Irish public bodies are obliged to treat public funds with care, and to ensure that the best possible value for money is obtained whenever public money is being spent or invested. The Public Spending Code is the set of rules and procedures that ensure that these standards are upheld across the Irish public service.
Main changes to the Code:
- September 2013: departments and agencies notified by circular that the Code was in effect.
- July 2019: The central technical references and economic appraisal parameters in the Code updated.
- December 2019: The Code updated, inter alia, to provide greater clarity on roles and responsibilities, and to revise the project lifecycle to reflect the realities of project delivery.
- November 2021, the Code was updated as it applies to guidelines for the External Assurance Process for Major Public Investment Projects.
- March 2023: Announcement of changes to the capital appraisal guidelines as part of package of significant actions aimed at enhancing delivery of the National Development Plan.
Why revisit the Public Spending Code?
There are several reasons why the Public Spending Code needed to be revisited. The world in which the Code operated changed dramatically over the course of the past three years. In particular, the delivery of projects under the National Development Plan has been badly affected by COVID-related pauses in the construction sector. Then there have been the inflationary impacts from both COVID-19 public health measures and the war in Ukraine. These developments had adverse effects on the supply chain for construction materials. In the light of these developments, key support structures available across Government were reviewed with the objective of maximising delivery of infrastructure.
On foot of the review, the Minister Donohoe, announced significant changes on 29 March 2023. Specifically, he announced that – “The actions which I am announcing today underline my department’s renewed focus on securing the delivery of better outcomes for the people of this country. We are removing administrative barriers, reforming our own processes, and ensuring that the departments responsible for the delivery of capital projects are provided with the resources they need.” https://www.gov.ie/en/publication/public-spending-code/.
What are the new Actions?
A number on new actions have been announced by the Minister Donohue. The
Actions are directed at reducing administrative burdens while, at the same time, improving on assurance capabilities when delivering major capital projects. The number of stages for pre-approval for projects has been reduced from five to three. This should help to significantly speed up the appraisal and approval process. They first three stages now are: –
- Preliminary Business Case
- Pre-tender stage, and
- Final Business Case
The actions agreed by Government are summarised in Box B.
Box B: Actions for Improving Public Projects’ Delivery, as agreed by Government.
- Action 1: The Code to be replaced by a set of Infrastructure Guidelines, with major projects’ levels raised from €100 million to €200 million (later will be subject to review by Minister Donohue’s Department and the Major Projects Advisory Group (MPAG) at the Preliminary Business Case stage only).
- Action 2: Capital Works Management Framework (CWMF) will continue to work on rebalancing risk in the Public Works Contract while maintaining expenditure control. The reforms are also targeted at rebalancing some of the risks borne by the contractors/consultants on public works projects through capping the liability and amending indemnity insurance requirements.
- Action 3: The Project Ireland 2040 Delivery Board will be reconstituted and will now be chaired by the Minister Donohue and comprise the existing independent members and key Secretaries General.
- Action 4: Review of capacity in major departments and agencies to deliver on NDP priorities with particular focus on significant capital projects to ensure appropriate resourcing to assist delivery.
- Action 5: An independent mid-term evaluation of investment priorities and capacity of the NDP, focussing on the capacity to deliver current government priorities, to use sectoral capital allocations and to estimate the impact of the NDP on key economic indicators.
- Action 6: Reporting to the government on NDP delivery throughout 2023 and 2024 will take place on a quarterly basis.
It is interesting to note that under the new arrangements, Minister Donohoe will now take a direct role in overseeing delivery of the National Development Plan (NDP) by chairing the Project Ireland 2040 Delivery Board, which will meet on a quarterly basis. https://www.gov.ie/en/publication/774e2-national-development-plan-2021-2030/ Another interesting innovation to note is that ‘capacity reviews’ of departments and agencies, with significant delivery programmes, will be conducted, where appropriate, to ensure that adequate resources for project delivery are in place. Direct reporting to Government on NDP delivery on a quarterly basis throughout 2023 and 2024 will now also take place. Finally, the Press Release from Minister Donohue announced that an independent evaluation of NDP priorities and capacity is being provided for, which will be conducted over the coming months.
Will there be further reviews?
The recent announcements by Minister Donohue make a lot of sense. If the existing arrangements, under the Public Spending Code, were not ensuring timely delivery of public sector projects, then it is time for change. It does not matter what the process is called, provided it does the fundamental job of ensuring projects are delivered on time and within budget. In that regard it will be interesting to see what checks and balances will be included in the new set of Infrastructure Guidelines promised by Minister Donohue. One should not expect those guidelines to be a panacea. New guidelines are a necessary but not a sufficient step in the process. There is a responsibility on Departments and Agencies to fully apply the new guidelines, when they are published, in the course of their work of rolling-out public sector projects. There is also a necessity to have regular reports published to demonstrate that the requirements of the new guidelines are fully implemented by Departments and Agencies. Only in this way can Irish taxpayers be assured that they are getting real value for money from public expenditure.
Tom Ferris, Consultant Economist.
Tom Ferris is a Consultant Economist specialising in Better Regulation. He lectures on a number of PAI courses and blogs regularly for PAI. He was formerly the Senior Economist at the Department of Transport, Ireland.