OPW and projected cost of 442K for Modular Homes

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.

Sure. I'm not saying that there are no problems in the Irish public procurement process. Just that (a) the public procurement process is pretty much engineered to ensure that there will be cost overruns; and (b) it isn't realistic to think of solving this problem by insisting on fixed-price tenders.

We don't know, SFAIK, to what extent the blowouts in the children's hospital or in this modular home contract are a product of this design feature, and to what extent they are attributable to other factors. We also don't know to what extent they are or are not itemised. Most of the public discourse concentrates on the aggregate amount of the blowout and there is little or no discussion of how it has been caused. This may be because polticians/the public service think that such an analysis would embarrass them, or because critics are more interested in generating outrage than in understanding and addressing the problem, or it could be a bit of both.

Sure. I'm not defending anyone's performance on the hospital contract. But on a very large project like that, that will take years to execute, especially in a high-tech area, design changes along the way are pretty much inevitable — e.g. as a response to developments in medical technology, or changes in medical practice, or even demographic or epidemiological changes in the population to be served, resulting in a change to the needs that the hospital will have to meet.

Hospitals are always tricky because even a very basic, functional, non-fancy design of a hospital is full of non-standard features — e.g. standard-sized doors just don't work in a hospital; you need doors that can accommodate the movement of hospital beds plus associated equipment. The diagnostic imaging suite needs floors capable of bearing the weight of the lead shielding involved. Negative pressure rooms, which all hospitals will need, are a nightmare to design. A piped oxygen supply requires all kinds of structural modifications for fire safety reasons. Etc, etc. And, since the project takes years to execute, even if you have planned and costed all this correctly at the outset you will need to make changes along the way, as new requirements are identified.

None of that is to say that there aren't serious problems on this particular project. But I wouldn't take this particular project as emblematic of general problems with public construction contracts in Ireland. Hospital construction is a world of its own.