The National Roads Authority has warned the Government of serious cost increases on road projects in the National Development Plan.

Projects estimated at £8.5 billion (€10.8 billion) at the end of last year were estimated at £6.44 billion in early 1999, the authority warned.

In a presentation last December to the Cabinet sub-committee monitoring implementation of the development plan, it said more funding would be needed to complete the road network or projects would have to be prioritised.

Key road projects include major routes linking Dublin with Limerick, Cork, Galway, Waterford and the Border.

Released under the Freedom of Information Act, the road authority's briefing document said a specialist study of major schemes identified inflation rates of 14-15 per cent in road construction prices between June 1999 and March 2000.

Such rates were far above the national annual inflation rate in March last year of 4.6 per cent. Only last Wednesday the European Commission told the Government to postpone some infrastructure projects in its development plan to avoid fuelling inflation.

The entire roads element of the development was estimated to cost £5.48 billion at early 1999 prices, but the authority said upgrades to plans for the Dublin-Waterford route and rising land prices in Dublin brought that to £6.44 billion.

The authority, which plans and monitors all road developments in the State, said project expenditure was being monitored by a cost estimation specialist. That person's estimates would be updated at six monthly intervals, it said.

The road authority head of corporate affairs, Mr Michael Egan, yesterday said the Government had indicated to it that applications for further funding would receive a positive hearing.

Among the measures it recommended to contain inflation were the standardisation of contract documentation, larger contracts and the standardisation of procurement procedures.

It also said the increased competition from contractors outside Ireland should be encouraged.

This is the strategy being pursued by the Government and was also recommended by the National Competitiveness Council in a paper last February.

Chaired by Mr Brian Patterson, the council said labour and skills shortages in the construction industry were a "major obstacle" to the successful realisation of the plan.

It said: "In view of the scale of capacity constraints that the planned volume of infrastructure spending under the development plan will induce in the domestic civil engineering/construction industry, it is vital that companies in other EU countries and further afield be encouraged to tender for projects."

However, other Government correspondence released under the Freedom of Information Act reveals that the Construction Industry Federation argued strongly for the use of Irish contractors.

In a letter last April to the Department of the Taoiseach, the federation's director general Mr Liam Kelleher said he was under pressure from small and medium-sized civil engineering contractors who indicated their order books were about "half the size" they were a year earlier.

In an earlier letter to the Department, Mr Kelleher said there were constraints on any sector's ability to expand further and rapidly.

He wrote: "I don't want to minimise the capacity issues involved. What I want to stress is the extent to which major contracts in recent years are already being implemented by a combination of Irish, Northern Irish, UK and continental contractors.

"The number of Irish contractors working or prepared to work this way is increasing . . . This is the way I would see the industry continuing to expand."

He added: "Attracting foreign contractors on their own will be counter-productive if they act as management contractors and are competing within Ireland for the same pool of contractors."