REVISED on 8 October 2020
An updated version of the Public Spending Code was published by the Department of Public Expenditure and Reform last December. It has been designed to strengthen the previous Code to better reflect the realities of project delivery, with a particular focus on financial appraisal, cost estimation and risk management. The Department points on its website that – “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”.
What is the Public Spending Code?
The Public Spending Code was first published in 2013. The roles, procedures and guidelines have now been updated to ensure value for money in public expenditure across the Irish Public Service. The Code applies to all organisations that spend public money.
The updated Code is designed specifically to:
• Support public bodies in delivering greater value for money
• Provide greater clarity on roles and responsibilities;
• Revise the project lifecycle to reflect the realities of project delivery;
• Strengthen guidance, and
• Increase transparency through publication of business cases and evaluation reports.
If applied rigorously the updated Code should indeed support public bodies in improving the accuracy of cost estimation and forecasting. It should also ensure that risk identification and risk management are strengthened.
It should be pointed out that some parts of the previous Code have not been changed. The updated Code came into effect on 1 January 2020.
Why focus on capital projects?
The revised Code places particular emphasis on capital projects. This is hardly surprising having regard to cost overruns on major capital projects such as the National Children’s Hospital. For that reason, a number of additional checks have been added to the process. In particular, the revised Code will be supplemented by a new governance and assurance process for major projects (those with an estimated cost of more than €100 million). This new process will involve an independent, external review of major projects at key stages in the project lifecycle. Where as previously there were four stages, this number will now be six. Table 1 summarises the stages under the ‘old’ and the ‘new’ codes.
A common cause of problems in projects in Ireland and internationally is a failure to clearly specify objectives and desired outcomes at the outset. For that reason the revised Code has introduced a new assessment stage to ensure early engagement with, and scrutiny of, potential public investment projects and programmes. In particular, this stage will examine the rationale for potential policy interventions and ensure the strategic fit of potential projects and programmes with other relevant government policies.
It is clear from a reply to Parliamentary Questions that the Public Spending Code had been endorsed by the new Government. For example, the Minister for Health, Stephen Donnelly, T.D., in reply to a Parliamentary Question, on 29 September 2020, pointed out that – “It is important to recognise that all capital development proposals must progress through a number of approval stages, in line with the Public Spending Code, including detailed appraisal, planning, design and procurement before a firm timeline or funding requirement can be established”.
What changes for Public Private Partnerships?
As part of the revised Code, new guidelines have been introduced for Public Private Partnerships (PPP). The new guidelines update and replace those published by the Department of Finance in July 2006. They also reflect changes in policy on PPP Procurement, in the light of practical experience gained in delivering PPP projects and other relevant developments. The revised Code sets out the major stages that must be undertaken for the evaluation and procurement of all public infrastructure projects. However, some of the steps followed in PPP procurement, differ from those set out in the Public Spending Code – see Figure 1.
Will there be more updating?
The Public Spending Code will continue to be updated. Already Department of Public Expenditure and Reform has signaled that more technical guidance will be provided this year. In particular, the Department is developing a new governance and assurance process for major projects with an estimated cost of over €100 million. This new process is being informed by international best practice. It will involve an independent external review of major projects at key stages.
The Public Spending Code will continue to be a key document with wide-ranging relevance for the Public Sector. It is important that it continues to encourage a thorough, long-term and analytically approach by Public Bodies in the planning, appraisal, evaluation and monitoring of public expenditure. It is also important that the Code is regularly updated to ensure that it contains procedures and processes that are in line with best international practice.
The Code of itself is not a panacea. There is a responsibility on Departments and State Bodies to apply the Code in the course of their work of rolling-out public expenditure. There is also a necessity to have regular reports published to demonstrate that the Code is being fully implemented. Only in this way can Irish taxpayers be assured that they are getting real value for money from public expenditure.
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.