Business New “spending squad” should oversee all large public investment projects

15-04-2014 15:08 | Daniela Lazarová

Squandering of public funds in ill-conceived investment projects has always been a big problem for Czech state administrations. Now the centre-left government is setting up a watchdog body which should assess the necessity for major investments and make sure that the money is spent according to plan.

Photo: Filip JandourekPhoto: Filip Jandourek Two billion crowns of state funds invested into the Liberec winter cross-skiing championship or the vastly overpriced judicial palace in Brno are just two examples of over-generous public spending that, with hindsight, elicited criticism both from political circles and the public. Every past government in office has thrown money down a black hole and the present administration which has emphasized the need to improve control over public spending, is setting up what is jokingly referred to as the “spending squad”, a watchdog body that should bring an end to this practice.

The spending squad will oversee all big public investment projects from start to finish –for instance assess the construction of a new road or building, judge the real need for them, consider other technical and financial alternatives, and once approved supervise the project through to its conclusion to make sure that the concept does not change half-way through and the money is used according to plan. An independent expert appraisal from this body should also prevent problems such as that which occurred during the reconstruction of the D1 motorway last year when the investor underestimated the extent of repair-work that needed to be undertaken and the costs unexpectedly soared, bringing repair work to a halt for weeks as the two sides argued over pricing.

The spending supervision should cover all public investment projects over a certain sum, which has yet to be set. Among the proposed thresholds on the table is for any sum over 300 million crowns, but the final decision rests with the governing coalition. The rules regarding the status, rights and duties of this supervisory body are now being drafted jointly by the Ministry of Trade and Industry and the Ministry for Regional Development. Originally the idea was to tighten supervision over large construction projects which have proved the most problematic in recent years, but in view of problems in all investment areas the government wants across-the-board supervision of public spending.

Parliament has long called for tighter supervision on public spending and the idea has won strong backing from the Union of Entrepreneurs in the Construction Industry who claim that ill-conceived government projects frequently result in additional costs and court disputes. Once a project has been approved by the government on the recommendation of the said supervisory body any price increase will have to be consulted with the “spending squad” which –if not satisfied with the arguments presented – may order an audit into the project. While smaller investment projects may be approved by individual ministers, large investments involving hundreds of millions of crowns will have to be approved by the whole cabinet.

The “spending squad” should not only prevent public funds being spent on nonsensical or overblown projects but in cutting the cost of realized projects it should save money from state coffers and help the finance minister balance the books.

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