As of 1 September 1999, the renovation of the Royal Palace in Oslo (the Directorate of Public Construction and Property’s project no. 93053) had cost NOK 355.1 million. This represents a cost overrun of NOK 184.4 million in relation to the original estimate. The Office of the Auditor General’s investigation also showed that work that was calculated to cost NOK 156.8 million had been removed from the project. The total financial discrepancy for the refurbishment of the Royal Palace was thus NOK 341.2 million, which is 200 % of the NOK 170.7 million budget that was originally allocated for the project. The renovation work on the Government Guest House in Oslo (Parkveien 45) incurred an overrun of NOK 8.8 million (52 %) in relation to the original cost framework. It was not possible to determine whether the renovation work performed on the royal residence Stiftsgården in Trondheim overran the budget or not.
The refurbishment of the Royal Palace in Oslo was a very unusual project. It entailed work with a high degree of technical, constructional and artistic complexity, many heritage considerations and a strong element of user participation. The Office of the Auditor General’s investigation revealed that the Ministry of Finance, which was the contracting Ministry for the project, and the Directorate of Public Construction and Property were aware of these factors at the planning stage of the project. The audit also revealed that many of the cost overruns in the project were due to the fact that the Ministry of Finance, the Ministry of Labour and Government Administration and the Directorate of Public Construction and Property underestimated the uncertainty in the project and organised the project in such a way that there was often a great deal of parallelism in the design, engineering and building phases. The Office of the Auditor General finds reason to criticise the fact that the uncertainty inherent in the project was not adequately taken into account in connection with the budgeting, organisation and the Ministries’ management of the project.
The audit demonstrated that the Directorate of Public Construction and Property also underestimated the complexity of the refurbishment project for the Government Guest House (Parkveien 45, Oslo) as well as the magnitude of the quality requirements, heritage considerations and increases in prices.
In its response to the audit report, the Ministry of Labour and Government Administration stated that it assumed that the ordinary conditions for financial management and project management in the central government would apply to the Palace refurbishment project. The Ministry of Finance stated that, as the contracting Ministry, it based its calculations on the Directorate of Public Construction and Property’s professional assessments and cost estimates.
This report is available in Norwegian on the Office of the Auditor General’s website – www.riksrevisjonen.no – or can be ordered from the University bookshop Akademika, tel. +47 22 11 67 70.
The Report will be closed on 14th February, 2001 at 12.00pm.