The documentation before the committee - the Campus and Stadium Ireland report and the submission by the Office of Public Works - has only been furnished within the last hour to the members, some of whom have not yet seen it. In view of this, members consider that the sitting should be suspended until 4 p.m. They also request that officials attending the committee be given copies of the documentation. I presume the witnesses have all received a copy of the Attorney General's report.
2000 Annual Report of the Comptroller and Auditor General and Appropriation Accounts:
Vote 35 - Department of Tourism, Sport and Recreation.
Vote 3 - Department of the Taoiseach.
Vote 10 - Office of Public Works (Resumed).
Ms M. Hayes (Secretary General, Department of Tourism, Sport and Recreation), Mr. D. McCarthy (Secretary General, Department of the Taoiseach), Mr. B. Murphy (Chairman, Office of Public Works) and Mr. P. Teahon (Executive Chairman, Campus and Stadium Ireland Development Limited) called and examined.
Mr. Murphy
We have not, Chairman.
We have some spare copies which we will make available.
What about the papers from the Office of Public Works?
The papers from the Office of Public Works will be furnished to the other witnesses. Obviously, Mr. Murphy has them but the Department of the Taoiseach, the Department of Finance and Mr. Teahon may not.
Chairman, I respectfully suggest that you ask each of the witnesses whether they have the documents with which you propose to deal, so that there is a fair and equitable opportunity for everybody to have what you would wish them to have, that is, fair access to everything that may form the basis of questioning.
Attending are Mr. Teahon of Campus Stadium Ireland and representatives of the Departments of Finance and Tourism, Sport and Recreation and the Office of Public Works. I ask them to ensure that they receive from the clerk a copy of the submission from the Office of Public Works and a copy of the Attorney General's report. If they do not have them, they should ensure they obtain them from the clerk. We will suspend the meeting and resume at 4 p.m. in order to give witnesses a chance to deliberate on the contents of these documents.
In the interests of clarity, we should inquire as to who has the documentation already.
I felt that if witnesses did not have the documentation, they could request it.
My expectation, Chairman, was that they would be asked if they had it.
All right. Mr. Teahon, have you copies of the submission from the Office of Public Works?
Mr. Teahon
I do not have a copy of the Office of Public Works document. I have just received a copy of the Attorney General's report and have not had the opportunity of reading it.
Okay. Margaret Hayes?
Ms Hayes
Chairman, I have a copy of both reports.
What about the Department of the Taoiseach?
To follow up - I asked this question the last day - will it be possible for the witnesses to answer questions on the information available to them from those reports?
Ms Hayes
You need to be aware of the reports, yes.
I asked that question the last day, Chairman.
What about the representatives of the Department of the Taoiseach?
Mr. McCarthy
We have both documents. I have not had a chance to read the Office of Public Works material.
Mr. Murphy, do you require the Attorney General's report?
Mr. Murphy
Yes.
That will be furnished to you. What about the Department of Finance?
We have just received a copy of both reports in the last hour but we need to study them.
Is it acceptable to the witnesses for the committee to resume at 4 p.m.? That is agreed. Thank you. The sitting is suspended.
Sitting suspended at 2.45 p.m. and resumed at 4.35 p.m.
Witnesses should be made aware that they do not enjoy absolute privilege. Members and witnesses' attention is drawn to the fact that, as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, grants certain rights to persons identified in the course of the committee's proceedings. Notwithstanding this provision in the legislation, I remind members of the long-standing parliamentary practice to the effect that they shall not comment on, criticise or make charges against a person outside the House or an official, either by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions within Standing Order 149 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policy or policies.
Members should note that the committee is concerned with the accounts specifically listed for examination and the administrative and operational control aspects related to same which are within the knowledge and competence of the witness being examined.
I call Deputy Durkan to resume questions.
First, can I ask as I did on Friday whether any of the witnesses have any objection to any questions being raised in any particular form?
Would the Chairman like to ask the witnesses, in the first instance, if they had time to read all the documentation to their satisfaction?
Chairman, I want to restate my position. When I opened questioning last Friday I asked a question in relation to, for example, the Attorney General's report and whether it was possible for witnesses to answer questions. Mr. Teahon mentioned at the time that that would be unfair to the Secretary General of the Department of Tourism, Sport and Recreation. From memory, that was the reply. Are there any questions arising from the Attorney General's report or the papers made available from the Office of Public Works about which any of the witnesses are concerned? In other words, are the witnesses happy to answer questions emanating from the discussions which took place on Thursday and Friday of last week and the subsequent reports they have compiled since then?
Mr. Murphy
In response to that, the papers on the Office of Public Works file are part of the deliberative process connected with seeking tenders for the stadium part of the Campus Stadium Ireland project. That process has not ended. It would be preferable, if there are any questions relating to companies in the tendering process, that the names of the companies would not be referred to.
We are in public session and I would like to have prior warning as to the companies about which witnesses do not wish to have questions raised, if that is possible.
Mr. Murphy
There are only three companies at most mentioned on the Office of Public Works papers and I would not wish the names of any of the three to be mentioned in connection with questions. It will still be possible to ask questions without naming the companies.
Excellent. I want to ask one other question before we move into the subject matter. Do any of the witnesses likely to be questioned have any concerns about opinions expressed by members of the committee, within or outside of the committee or in the public arena and, if so, on what basis?
Mr. Teahon
To clarify that, I had a concern during the earlier questioning but fully accept what Deputy Rabbitte said in response to it. I misunderstood what he was talking about when he referred to boxes of documents. Deputy Rabbitte clarified it and I accept that he was referring to a disappointed bidder rather than the successful bidder.
Fair enough. Has any other witness any concerns about the opinions expressed by any member of the committee in the public arena or in the committee?
Chairman, I am not a witness here. I have the role of putting questions but it would be as serious for the members of the committee——
No, no, Chairman.
——to express opinions outside the committee or within it when making inquiries. Opinions are the very matters we should avoid. I am not speaking on behalf of the witnesses before us but I would be surprised if they did not feel there were serious risks potentially to the reputation of any one or all of them in the context of any opinions given.
We will move on to questions.
I thank my colleague for that assistance. I know I can rely upon him at any time.
Do not send for me in three weeks.
Have there been any developments since the last meeting of the committee which any witness wishes to bring to our attention before we commence questions? No.
I will return to the matter we discussed on the last occasion. Mr. Teahon mentioned initially - and again I am quoting from memory - with regard to the appointment of the tendering process and the advice from PricewaterhouseCoopers, that a particular company was a shelf company. That information was made available to him. He conveyed that information according to evidence previously submitted to the board but not to the Government or to the Department of the Taoiseach by whom he was appointed. By what form did he convey the information he had received to the member of the board? Was it advice by way of letter or some other form?
Mr. Teahon
I am not sure we are talking about the same issue but what I said in my statement was that there were three cases in point - the assessment panel, the board and the Department or Government. At the assessment panel I said - and it is reported in the documents before the committee - that there were funding issues, meaning the issue in relation to the Waterworld consortium, which needed to be dealt with. That was the assessment panel. I did not use the word "dormant" on that occasion. In relation to the board, I did not tell the board or the Department. They are the three situations.
You gave the reasons for not telling the assessment panel the information that you had on the last occasion. You felt that it was not relevant, that by virtue of delegated responsibility it was not necessary and that there was not sufficient time to further investigate any outstanding matters. Is that correct?
Mr. Teahon
That was what I said in relation to the different occasions. I saw myself acting on the basis of delegated authority from the board to implement a process that the board had agreed.
How was the information conveyed to you with regard to the status of the company which was referred to as a dormant company by you and PricewaterhouseCoopers?
Mr. Teahon
By way of a document produced by PricewaterhouseCoopers.
Have you a copy of the document?
Mr. Teahon
Yes.
Can you——
Mr. Teahon
Have I got it with me?
Yes.
Mr. Teahon
No.
I hope that at some stage the Committee might have sight of that document if you have no objection.
Mr. Teahon
No, I have none.
With regard to the document from Pricewaterhouse which advised you regarding the status of the company - again I am careful here - I suggested, perhaps wrongly so, that you had withheld information from the assessment group or from the board. You said the information was not given, which was somewhat different. However, we will not get into debate on that issue. In any event the information which was relayed to you by way of the document from Pricewaterhouse regarding the status of the company was not conveyed to the assessment group which subsequently would have to make a decision. Is that true?
Mr. Teahon
No, the assessment panel did not have the document but the assessment panel was not making a decision in relation to the economic and financial standing of the consortia. In other words, the decision of the assessment panel was a decision on who or which consortium would become the preferred bidder, i.e. the most economically advantageous project.
Who, in your opinion, should have that document or the information contained in that document from Pricewaterhouse since it would appear to be germane to the group?
Mr. Teahon
I recognised when I saw the document that there was a clear issue in relation to the economic and financial standing of the consortium of which Waterworld UK was a member. Therefore, there was an issue which had to be dealt with. In effect I said to the assessment panel that there was a funding issue which had to be dealt with. Then I put in place, working with PricewaterhouseCoopers on the financial side and McCann Fitzgerald, a process whereby a letter issued on 19 December to the consortium which said we were prepared to make them the preferred bidder provided they could answer to our satisfaction a number of items. That letter was issued on 19 December.
Surely those items should have been answered prior to that. Those items would have been of normal concern in respect of a tender for any project, whether it be an outline or a full tender. I presume these guidelines and EU rules apply to the procurement process for State contracts? Is that true?
Mr. Teahon
Exactly. The EC rules were followed at the three stages. Firstly, there was an expression of interest stage where the consortia put forward evidence to us. At that stage the assessment panel adjudged that the consortia that had put forward adequate evidence were the ones that went to the next stage, the outline bid stage. The outline bid stage did not involve questions on the economic and financial standing. Nor did the detailed bid stage involve such questions.
Under EU rules is it not a prerequisite before proceeding in that fashion that the relevant directive be referred to?
Mr. Teahon
Yes.
What is the directive?
Mr. Teahon
The issue is one of what you are entitled to judge at different stages. Our legal advice was that at the first stage you have to make a judgment and that was done.
Our legal advice was that at the outline bid stage and the detailed bid stage you were not entitled to make a further judgment on the economic and financial standing. That judgment then fell to be made in relation to taking the preferred bidder forward to heads of agreement and eventually to what is called a project agreement or a contract. What we did with Pricewaterhouse was we put in place a process such that we could make the judgment on economic and financial standing in pursuit of signing a contract.
But you could only make that on the basis of continued dialogue with one or all of those who submitted tenders.
Mr. Teahon
That is correct.
Dialogue was established with all of the people who submitted tenders and kept——
Mr. Teahon
At the detailed bid stage we informed the consortium that the assessment panel judged it to be the most economically advantageous, that we were to make them the preferred bidder, subject to their satisfying us on the issues we raised with them. We notified the other two bidders that we would ask them to keep their bids open. We did that because it was possible that the dialogue or negotiation with the consortium that would become the preferred bidder would not be satisfactory in which case we would have turned to the next bid.
But surely that would imply assisting a bidder. Why not assist all three bidders together?
Mr. Teahon
No, it did not imply assisting anybody. It implied or it was a fact that the assessment panel judged that, for shorthand, the Waterworld consortium was the one that was clearly the best. Therefore, appropriately that consortium would become the preferred bidder provided they were able to satisfy the questions that arose. That is what happened. That is what took place over a series of months.
I must refer Mr. Teahon to EU Council Directive 93/37/EEC, Chapter 2, Articles 24 to 27, inclusive. I presume this particular directive must have been referred in the context of a tender of this size.
Mr. Teahon
I do not have the directive that you are speaking about, but I take it that was the directive to which our legal advice related.
There is a whole series of qualifications. Article 25 in particular says:
Any contractor wishing to take part in a public works contract may be requested to prove his enrolment in the professional or trade register under the conditions laid down by the laws of the member state in which he is established [which is normal practice].
In the United Kingdom and Ireland, the contractor may be requested to provide a certificate from the Registrar of Companies or the Registrar of Friendly Societies or, if this is not the case, a certificate stating that the person concerned has declared on oath that he is engaged in the profession in question in the country in which he is established, in a specific place and under a given business name.
I presume this section was run past those involved in the assessment process or in any part of the process that involved recommendation or a decision being taken.
Mr. Teahon
I am happy to pursue the issue further if you want me to, but at every stage of the process we took appropriate legal advice. I am not an expert on EU procurement law in terms of the type of detail to which you are referring. If you give me the document I will check with our legal adviser and say I was asked if reference was made to it.
I would be happy to furnish the relevant document and hopefully copies can be made available to you before the end of this discussion.
Can I ask another witness a question?
Yes.
Can I ask the Secretary General of the Taoiseach's Department the procedure normally followed in regard to a project of considerable volume, scope and importance coming before Cabinet?
Mr. McCarthy
It would be covered by the general guidelines of the Cabinet handbook. In other words, there would be an expectation that the decision sought of Government would be made clear, that the background to that decision would be set out, that the financial implications would be made clear and that the issues which the Government should take into account would be made clear. Those would be the norms within which a proposal coming before Government on such a project, or any other project, would be expected to be formulated. The question of the precise format in which it would come before Government depends clearly on the context and circumstances.
Your Department was the sponsoring one in this situation. Did you prepare any memoir for Cabinet on this subject?
Mr. McCarthy
There was a memorandum prepared, based on material which was received from Campus & Stadium Ireland. It was prepared on 19 December and submitted to the Government meeting of the same date. It was prepared in the context of a meeting of the project steering group for having taken place the previous week at which it was reported that the appraisal process was coming towards a conclusion and would be finalised with a view to coming to the Government meeting of 19 December and that it would not therefore be possible to circulate the final text in advance of the meeting because of the requirement for planning permission to be sought by 22 December.
How big a document was the one which came from Stadium Ireland?
Mr. McCarthy
It was effectively of the scale of the actual memorandum submitted to the Government, which is appended to the Attorney General's report before the Committee.
Another five minutes.
I know Chairman. I will do my best. May I just move it forward slightly? Did you put your imprimatur on, or did you have sufficient time to study the documentation which came to the Taoiseach's Department before submitting it to Cabinet?
Mr. McCarthy
The material was read, studied, clarified with CSID, prepared for discussion with the Taoiseach and subsequently for submission to the meeting.
Who read and studied it with CSID?
Mr. McCarthy
My colleague, Mr. Ryan.
He read and studied the document produced by CSID in preparation for Cabinet.
Mr. McCarthy
That is correct.
Was the question that arose previously about the status of a particular company mentioned in that brief at that stage?
Mr. McCarthy
No, it was not.
Are you quite certain of that?
Mr. McCarthy
Yes.
If it was, would the reference from Pricewaterhouse to the effect that a dormant company was involved have affected the summation you would have sent to Cabinet?
Mr. McCarthy
It is difficult to speculate on a counter-factual issue. I think it would certainly have been regarded as a relevant matter to draw to the attention of Government, had it then been made known to the Department. I should indicate that the material did indicate that the matter of the recommendation from CSID was based on a clear assessment that this was the best of the three proposals considered under all of the relevant headings and that it was the lowest cost in terms of the Exchequer capital requirement. If, in addition, there had been a question raised in relation to further matters to be confirmed before heads of agreement were signed I am sure that would have been drawn to the Government's attention. In the event, the decision which emerged was for heads of agreement to be signed, but on the basis that some further negotiations would take place regarding a capital contribution and the provision of free swimming hours, which was——
If you were now - this is not necessarily a hypothetical question - preparing a brief for Cabinet would you include the information regarding the status of the company?
Mr. McCarthy
I believe that if I had such information I would include it.
Okay. One last question which my colleague, Deputy Rabbitte, raised on Friday. What is the valuation of the Abbotstown complex site? I know what the valuation was but I want confirmation from the relevant authority, be it Office of Public Works or whoever.
Mr. Murphy
The Office of Public Works has not put a valuation on that site. There was a valuation put on it by Pricewaterhouse in its feasibility study.
Was a valuation done at any stage of the site at Abbotstown as it stood?
Mr. Murphy
When you are doing that kind of valuation it depends what the site is going to be used for. There may be a number of valuations. The fact remains that the Office of Public Works did not do a valuation under any heading.
Was a valuation done by anybody else? The value of the site could vary from its unchanged state, prior to any development, to its potential after development, in the course of development or after initial development. Could there be a vast difference between the valuations?
Mr. Murphy
Yes, they would be vastly different.
Is it correct that there would be 500 acres of potential development land after the initial development proposal?
Mr Murphy
I am not quite sure that you can take 500 acres and multiply it by the value of intensively developed land. In that kind of area and with that size of site there are going to be tracts of it that will either not be capable of being put to full intensive development or tracts that will be retained as open space in parks and so on. I am not sure that it is quite a simple measure. The measure was not made, that is really the key element.
I realise that I have run out of time. I have a number of other questions which I hope to raise again.
Is Mr. Teahon aware that the Government statement in relation to his position with CSID has been issued and handed to me a few minutes ago?
Mr. Teahon
Yes, I am.
Are the contents agreed? Do you have a response to that statement?
Mr. Teahon
The Government asked Mr. Dermot McCarthy, Secretary to the Government, to contact me this morning. He put the terms of the statement to me. I responded to him, after thinking about it, that I agreed, in the interests of the project. I have stated that publicly.
In net terms, you have agreed to this position put to you by Mr. Dermot McCarthy on behalf of the Government?
Mr. Teahon
Yes.
You have agreed to step down as chairman and chief executive?
Mr. Teahon
I have agreed to the terms of the statement.
The terms seem to indicate, as far as I read them, that you are no longer the chairman or chief executive of the project.
Mr. Teahon
That is correct.
Do you have any response to that, in the round, in terms of what you said earlier about not being prepared to resign because you feel you have done nothing wrong?
Mr. Teahon
I remain of the view that I have done nothing wrong. The Government put a proposition to me and I said that I agreed, in the interests of the project. I stated publicly before coming here for the 2 o'clock meeting that when I said "the interests of the project" I believe that the pool for the Special Olympics and the entire sports campus is a development - and I think that it is referred to in the statement - of which Irish people will be proud when completed. It was in that interest that I agreed to the statement. I also said at that time that I have received what were for me a most surprising number of calls and letters of support and I said that I was most grateful to all of the people who gave me support.
On that point, there have been statements in recent days that this project, namely the aquatic project for the Special Olympics, cannot be delivered on time if you are not part of the management team or if the management team is disrupted. Is it your view now that it can be delivered and if it cannot be delivered what are the consequences, financial or otherwise?
Mr. Teahon
The project, the pool at Abbotstown, will be delivered on time and in budget. I believe that to be the position post the Government statement.
So you believe it can be delivered on time. Rather than pondering or delaying on the negative, what is the Exchequer liability if this is not delivered on time, if the Special Olympics do not have a pool? What are the consequences? Presumably we have also contracted with them.
Mr. Teahon
I am not aware of the terms of the contract to which Denis O'Brien referred the other day between the Government and the Special Olympics.
Perhaps someone else here can tell us the terms of the contract with the Special Olympics. This is germane, because clearly now the priority for everyone on the official side around this table must be to deliver on the project. If there is a delay, a problem or a financial cost to not delivering on time we ought to know it now as a committee rather than be asking why down the line. Who is from the sponsoring Department, Ms Hayes?
Ms Hayes
We would be advising, in a worst case scenario, that the games organising committee look at the availability of perhaps a 25 metre pool. The commitment entered into by the organising committee when it made its bid for the games was that it would provide a 50 metre pool within 30 kilometres of Dublin. If that was not provided, the international committee had indicated that perhaps a 25 metre pool would be acceptable. We would have to look at the availability of a 25 metre pool. It would also be a great inconvenience to the participants. There is, as the committee is aware, a 50 metre pool in Limerick. It does not have the same level of spectator capacity and it is more than 30 kilometres from Dublin, which would defeat the purpose of the organising committee to provide a strong, family-campus style games in Dublin in 2003.
What is the contingency plan in relation to a 25 metre pool or campus? What other venues are being looked at there?
Ms Hayes
As of now the games organising committee does not have a contingency plan although I suggested to the chairman of the games organising committee in 1998 that it would be prudent to have a contingency plan. He was confident that a 50 metre pool would be provided so he did not look at that contingency.
So there is no provision but there is no contractual financial liability to the State if this goes wrong, if we do not develop it? Many people around this table and outside this room have expressed concern about the management of this project. We should clear ourselves in advance and make sure that nothing else goes wrong.
Ms Hayes
To clarify, this is a commitment given by the games organising committee. It would be incumbent on the organising committee to look at an alternative if a 50 metre pool was not delivered on time.
So it is incumbent on it and there is no cost. Are you saying that there is no cost to the State if this new chairman and chief executive do not deliver?
Ms Hayes
My understanding is that there is not. However, there is the issue of image and we certainly would not like to fail to deliver on the promise that Ireland has held out for the games in 2003.
So there is no financial contractual obligation?
Ms Hayes
No. We would have to look at the contract again, but not that I am aware of, on the face of it.
The 25 metre option is one not for you but for the organising committee of the Special Olympics?
Ms Hayes
Yes.
So you have no responsibility in that regard. That is good news, I suppose, out of it all. Back to Mr. Teahon in relation to the issues raised by the Attorney General's analysis. Did you provide any information to rebut the Attorney General's analysis of the sequence of events in relation to this matter? It is pages 29 to 43 of his report to the Government.
Mr. Teahon
I wrote to the Taoiseach in relation to the analysis in the draft report. I have only just seen the analysis in the finalised report.
Have you had time to fully consider the analysis in the final report?
Mr. Teahon
No.
Have any immediate changes leapt out to you as you scan this or glance through the draft, between the draft and the final report.
Mr. Teahon
It seemed to me in reading the report which I have done just once, although in some respects it is similar to the draft report, that the chronology, the facts set out in it are the facts as I know them to be. I have no issue with the facts. I felt, in relation to the draft report, I could not agree with some of the analysis.
Are you satisfied now that the changes which have been made from the draft to the final form make you happy with the analysis?
Mr. Teahon
I would now be comfortable with the vast majority of the analysis, but because I have not had the opportunity of studying it in detail and referring back to issues which were raised, not just by me but by others who responded to the draft report I am not really in a position to say at this time that there is nothing in the analysis with which I would not take some issue.
Yes.
Mr. Teahon
For the vast majority I would not have an issue.
Is there anything which strikes you from the small minority of things which you might dissent from or find a problem with? Can you identify anything immediately that springs to mind in relation to the analysis which might strike you as not being in accordance with your analysis or your view?
Mr. Teahon
On the positive side of this my judgment would be that the analysis essentially sets out what the board reported to the Minister, namely that EU procurement law was followed in full. To the extent that is the case I have no problem with it. The analysis also sets down that the consortium which was successful was clearly the consortium which should be preferred. I have no problem with that. Given that I have not had the opportunity to take what is now in the analysis section and cross-check it against the points that I and others made, I would prefer to wait until such time as I had done that to say that there was a piece of analysis with which I did not agree.
You might communicate with us directly in relation to that if there are substantive issues which you question. Let me draw your attention to pages 41 and 42 of that analysis, which I regard as containing the most important conclusions. The statement on page 41 - and I am breaking the paragraph in two in a sense - starts with the statement "However embarrassing the failure of Waterworld UK Ltd as a contracting party may have been, . . . ". The second sentence reads "Failure to alert those politically accountable to the true situation seems to seriously call into question the existence of a proper relationship between the executive and the board and between the board and its State shareholders.". Does that strike you as being relatively accurate, given your statement that maybe you should have told? Is that something you can live with?
Mr. Teahon
One of the problems I had with the analysis in the original draft report - and as I said, I still have not found it in the finalised report - was that in answer to a questionnaire circulated by the office of the Attorney General to board members and assessment panel members I said that I was operating and saw myself operating on the basis of delegated authority from the board. I have not seen this in the analysis section, and I would have expected to see it in the analysis section because it seems a material consideration. In so far as there is in effect a criticism in the sentence "Failure to alert those politically accountable . . . seems to seriously call into question the existence of a proper relationship between the executive and the board and between the board and its State shareholders", I would have thought it would have been in order to set down what the board said to the Minister in its report of 8 March, which was referred to not just by me but by a series of board members in their response to the Attorney General's questionnaire.
A series of board members?
Mr. Teahon
Regarding the answers that board members gave to the questionnaire, I think virtually everybody referred to the fact that the board had sent to the Minister for Tourism, Sport and Recreation a statement, after the board meeting of 8 March, which set down very clearly that the board had put a process in place with which the board was satisfied, and that the board had delegated to the executive the implementation of that process. I would have expected in an analysis section, and given that this was one of the questions in the questionnaire, that in making the statement that failure to alert seems to call seriously into question the existence of a proper relationship between the executive and the board - just taking that piece of it——
That is the key point.
Mr. Teahon
Yes.
Apart from the relationship with the State, it seems - if I am not reading too much into it, and please correct me if I am, Mr. Teahon - that you had an improper relationship with your own board.
Mr. Teahon
This analysis is, I take it, an analysis by the Attorney General, so I am not the person who should answer, in some senses.
To clarify, you are happy that you have had a proper relationship with your board and you cite the 8 March statements by your board members in response to the questionnaire as proof of that.
Mr. Teahon
I would have expected, and said in response to the original draft report, that that would be conveyed. For the information of the committee, I have received a letter from Margaret Hayes, Secretary General of the Department, informing me that at the time the original draft report was given to the Government, the Government also had from the Minister for Tourism, Sport and Recreation and apparently noted, the report from the board. I have a letter to that effect from Margaret Hayes.
What is the significance of having that?
Mr. Teahon
I am simply trying to be as open as possible. I did raise this as a concern on my part and I have a response from Margaret Hayes in relation to raising that concern.
What is that response in effect, Ms Hayes?
Ms Hayes
Mr. Teahon's concern related to the issue of the delegated framework set out by the board for the procurement process, which delegated certain authorities to the executive chairperson and his executive team and was confirmed by the board in its report of 8 March to the Minister. Mr. Teahon was concerned that that fact might not have been brought to the attention of the Government. I simply confirmed that the Minister, Deputy McDaid, had included the full report from the board to him of 8 March, including that fact, and that it had been noted by Government for the record.
On what occasion was it noted?
Ms Hayes
When Government considered the draft report from the Attorney General last week.
The Government has noted——
Ms Hayes
——the full content of the report from the board of CSID to the Minister for Tourism, Sport and Recreation, which contains the statement that the board had established parameters for a process in relation to the award of the contract for the aquatic centre and had delegated the implementation of that process to the executive. The board is satisfied that the process established was appropriate.
The board has established it.
Ms Hayes
Yes.
What I am trying to get at here is that the Government, if I hear you correctly, has noted that the delegated authority under which Mr. Teahon acted was appropriate and correct and right. Is it usual for the Government to draw attention to this?
Ms Hayes
He has noted the board's statement that it had established parameters for the process. I think Mr. Teahon's comment relates to the Attorney General's reference.
Is it usual for the Government to note that somebody had acted in accordance with their delegated authority? Is that normal?
Ms Hayes
If a Minister presented or included in a submission to Government a particular report, it would be normal for the Minister to ask that Government note the report included in his memorandum, and that would be recorded.
The significance of noting, meaning that it is now acknowledged by the Government that whatever Mr. Teahon did in relation to his conduct of these matters——
Ms Hayes
No, that the board made a clear statement to him that it had established parameters for a process etc.
There is no question, from the Government's point of view, that he was outside his parameters of delegated authority.
Ms Hayes
It has not disagreed with the board's statement because it has no grounds for disagreeing. The board has assured the Minister that it set out parameters.
What I am trying to get to grips with here is that there is no question as far as you are concerned and the as far as the Government is concerned that he was outside the parameters set by his own board in relation to delegated authority. That is important because in our private session the issue of people's reputations was raised. It seems to be a very germane fact that in effect, in terms of the delegated authority under which he acted in relation to this competition, he was within the board's framework.
Ms Hayes
Yes.
The Government's objective then is to get the framework set out?
Ms Hayes
The Government made no further comment. It simply noted the content of the board's report to the Minister for Tourism, Sport and Recreation.
Mr. Teahon might provide clarity on that. Is it your understanding, therefore, that the Government has noted the fact that your company did set out an adequate framework of delegated authority for you?
Mr. Teahon
That is my understanding of what happened. The board had a board meeting, discussed all the issues, produced a statement which all the board members that attended accepted and agreed to on 8 March and sent that to the Minister. The Minister gave it to Government and Government noted it.
As you understand it, that was the go-ahead for the framework or manner in which you conducted all of this?
Mr. Teahon
It was the Government noting a statement by the board of the company that it had put in place a process with which it, the board, in retrospect, having looked at it again, was satisfied, that the board had delegated to the executive the implementation of that. I saw myself, and said so to the board, as acting on the basis of that delegated authority. I should say, because I do not want to be partial in this, that in relation to the other issue I said in my statement to the committee on day one that my communication on the matter was inadequate. I am not trying to have it both ways.
No. When you say your communication was not as good as it could have been, are you saying that you were outside the framework laid down and noted by the Government?
Mr. Teahon
No. When I said the communication was inadequate I said that I would not accept any suggestion from any source that my actions were designed with any dishonest or improper motivation in mind. In other words, I am very clear. I did nothing wrong. I acted on the basis of delegated authority and my communication was inadequate.
Yes, but you definitively were not outside the framework of delegated authority, as you saw it,——
Mr. Teahon
That is very clear in the board's statement.
As you understand it, does the sequence of delegated authority go from the Taoiseach to the Government to the company to the board?
Mr. Teahon
The company is what is known under EU procurement law as the awarding authority. Therefore it is the board of the company that has the entitlement to put a process in place. The board did that and I acted on the basis of that delegated authority.
To return to the proper executive relationship, you have slight concerns about the reference in the Attorney General's report about the relationship between the company's executive and the board which presumably you will flesh out in detail at a later stage.
Mr. Teahon
Yes. If somebody was reading it without complete knowledge of all the different events, that page could benefit if it stated that the board had put the process in place as set down in its report. I feel that the sentence, "Failure to alert those politically accountable seems to call seriously into question the existence of a proper relationship between the executive and the board . . .", would benefit from saying that theboard had put this process in place and had delegated authority. The existence of a proper relationship between the board and its State shareholder seems to me to be a different issue.
Yes.
Ms Margaret Hayes, do you have an observation on that?
Ms Hayes
I would ask the Deputy to note that on page 40 of the Attorney General's report, under "Corporate governance", the Attorney General acknowledges that:
The board of CSID delegated to the Assessment Panel the function of deciding on the preferred bidder for the . . . .
Therefore there is an acknowledgement.
Yes, there is an acknowledgement but that is in relation to the assessment, not to the delegated authority. Mr. Teahon was not party to the assessment as such, is that not correct?
Mr. Teahon
I was part of the assessment
Party - part of it.
Mr. Teahon
It is a part issue. There is a wider issue which seems to be dealt with in the sentence, "Failure to alert . . . call . . . into question the existence of a proper relationship . . .", in other words, the relationship between the executive and the board is a broader issue than the issue of the board delegating "to the Assessment Panel the function of deciding on the preferred bidder . . .".
On page 41, the last paragraph——
Mr. Murphy wants to contribute.
Mr. Murphy
On a pure technicality, the board of CSID delegated these powers to Mr. Teahon, not to the assessment panel. The assessment panel were not delegated the power. That is mentioned on page 40. It is the executive that actually was delegated that power. The assessment panel was not delegated power.
Therefore is Mr. Murphy saying the Attorney General's report is inaccurate as far as he is concerned?
Mr. Murphy
Yes, we have one or two small inaccuracies to note.
Let us read this back because it is important that we clarify this: "The board of CSID delegated——
Sorry, Deputy.
This is very important.
When we are referring to pages, etc., in order to help the other people here I want to publish it each time because it is not coming up on the screens on the far side of the committee. In future, we will publish it automatically.
I apologise, Chairman. Mr. Murphy from the Office of Public Works is referring to the section headed "Corporate governance" on page 40. This is the statement, in order that we get it absolutely correct:
The board of CSID delegated to the Assessment Panel the function of deciding on the preferred bidder for the Aquatic and Leisure Centre.
It is the first statement under the section "Corporate governance". If I heard Mr. Murphy correctly, he is saying that that statement by the Attorney General is inaccurate,——
Mr. Murphy
Yes.
——that the assessment panel did not enjoy "the function of deciding on the preferred bidder for the Aquatic and Leisure Centre.". Is that correct?
Mr. Murphy
Yes. Chairman, I am saying that if you look at the very last printed page of the report, you will see there——
Can Mr. Murphy give us the page reference?
Mr. Murphy
There is no page number on it, I am afraid, but it is the very last printed page of the whole report, just before the hand-written notes. The committee will see it is headed "Report from the Board of CSID to the Minister for Tourism, Sport and Recreation". Paragraph three states:
The Board had established parameters . . . [etc.] and had delegated the implementation of that process to the Executive.
not to the assessment panel.
It states: "delegated the implementation of that process". Perhaps I am confused but I understand the words to mean that the executive is in charge of a process but that the assessment panel is in charge of the function of deciding on the preferred bidder. Maybe that is a silly distinction. If Mr. Murphy can clarify that, we would be a long way forward on that. It states "delegated the implementation of that process", that is, the award of the contract.
Mr. Murphy
It states "to the Executive" and all the assessment panel does is make a recommendation on which the executive acts.
Deputy, you have two minutes left.
I want to clarify that from Mr. Teahon's point of view because it is quite germane to other issues raised by the Attorney General in his report if we are not clear here who has made the decision. Is that in accordance with Mr. Teahon's view? Was it he, not the assessment panel, who made the decision in relation to the preferred bidder? Was it that he had delegated authority to make that decision?
Mr. Teahon
I would say that one of the parameters that are referred to in the report of 8 March is that the assessment panel would have the function of making a recommendation, in other words, the assessment panel, in my opinion, was not making the decision as such; the assessment panel was reaching a judgment, and that that was one of the parameters.
To the extent that the Attorney General has stated in his first sentence on page 40, under "Corporate governance", that the function of deciding on the preferred bidder was that of the assessment panel, would Mr. Teahon think, as Mr. Murphy does, that that is inaccurate? The panel does not make the decision.
Mr. Teahon
We are getting into issues that are not that material. In other words, I would not see myself, as the executive chairperson, under any circumstance refusing to accept a judgment of the assessment panel. In other words, everybody saw the assessment panel as making the judgment. Nobody would come along and say, "We have the recommendation from the assessment panel but we are not going to accept it". Therefore we are getting into an issue where if anybody said "We will not accept the assessment panel's view on this", I would think they are seriously wrong.
Deputy, your time is up but I want to exhaust this avenue.
I had one final question, Chairman.
I kept the other Deputies to 30 minutes as agreed.
I have one final question.
There is always one final question, Deputy. Mr. Murphy, did you want to say something?
Mr. Murphy
On a point of clarification, I would hope that an assessment panel recommendation normally would be well made but the assessment panel normally only deals with certain elements. In other words, the decision on the overall matter, in this case, would be for the chief executive and it would take into account more than just the recommendation of the assessment panel.
Deputy I will allow you one final short question.
The final question relates to Annex I, Annex J and Annex K in the Attorney General's report, which are principally memos from an Aidan Walsh, who, I presume, is employed by PricewaterhouseCoopers. This includes statements to the effect that Laura Magahy of Magahy and Company raised issues about the lack of clarity in what was being proposed by Waterworld. It also says that this Mr. Walsh highlighted to an Una Carmody the view that the Waterworld and Dial proposals were very thin on the operating side as they did not have P & L and cash flow projections for the length of the concession contract and they did not say how they would finance the operating part of the business. They also point out inter alia that Waterworld UK Limited is a £2 company which has not commenced trading according to its latest annual return. Has Mr. Teahon any problem with that memo from Mr. Walsh, particularly his view that the Waterworld submission was thin on the operating side? We have heard Mr. Teahon's concerns about the financial standing of this consortium but it seems Mr. Walsh of PricewaterhouseCoopers was calling into question the Waterworld and Dial proposals on the operating side which I assume to mean either what they were proposing in operating terms to manage this facility or the personnel involved. I am not clear what he is referring to and Mr. Teahon may have a better view on that.
Mr. Teahon
I would have to say that is one sentence that I do not identify with for two reasons. First, the advice to the assessment panel on the operating issue if we look at the previous paragraph on the third sentence reads "The operating proposals were being reviewed by Kit Campbell". Kit Campbell has expert knowledge in relation to the aquatic centres and if I were making a judgment as I was as a member of the assessment panel on the operating proposals I would have been influenced virtually entirely by the Kit Campbell review. This review was clear minded because the judgment he made was a relative assessment of three proposals. In other words, we had operating proposals from each of the three consortia and Kit Campbell was clear that, by a significant margin, the operating proposals from the Waterworld consortium were significantly the best. I am not sure what Aidan Walsh means by saying the Waterworld proposals were thin on the operating side because, in my opinion, the judgment the assessment panel would rightly rely on was that of Kit Campbell.
For the chairman's own information, I refer to page 2 of the PricewaterhouseCoopers memo from Aidan Walsh in annex 1. It refers to a Keith Neilson from the Office of Public Works who also reviewed the proposals from an operating perspective and concluded that the Waterworld proposal was the most developed and robust. I am trying to find out if the Office of Public Works was involved at some level of review or assessment of the case.
Mr. Murphy
To clarify that matter "operating in this situation" refers to the maintenance of the plant. Keith Milson, who is mentioned here, has nothing to do with operating swimming pools or anything like it - he is a mechanical and electrical engineer in the Office of Public Works and the thing has been mis-stated here. The term "operating" in this context means physically operating.
I ask Mr. Teahon to focus on the critical week of 15 December to 22 December 2000. The Attorney General has set out a road map on page 6. The closing date for the bids was 15 December. On 18 December the board had the PricewaterhouseCoopers due diligence report. On 19 December the consortium was selected as preferred bidder status. On 19 December the Cabinet agreed. On 21 December the board had the completed PWC report and 22 December was set as the date for the planning applications to be lodged.
Mr. Teahon had a very busy week in that period. I am not saying that sarcastically but I do not know how he packed that much into the week. Since the Special Olympics are not until 2003, why was it necessary to impose the 22 December deadline for planning because that seems to be the cause of virtually everything that has happened.
Mr. Teahon
We have - and it may be useful to produce it which I am happy to do - a time path backwards from the date on which the pool will be required for the Special Olympics. There were people who said that even getting it in for planning permission for 22 December might miss the Special Olympics but we were satisfied that once it was in and, allowing for all eventualities in terms of objections which did not materialise that was the date we needed to hit.
The project was granted panning permission in March. It put Mr. Teahon into a situation. He had the preliminary PWC conclusions before he went to Cabinet——
Mr. Teahon
Yes.
——and yet he allowed the Cabinet make the decision to contract the consortium that was not what it represented itself to be which we now know from the Attorney General's report. Its financial capacity was much less than anything else that had been represented and its international reputation in terms of running the water park industry was not what it appeared. Mr. Teahon had time to say "steady up" and refer to the preliminary report indicating these difficulties but instead he let the Cabinet go ahead.
Mr. Teahon
In fairness to myself, I would have to say that one piece which is missing from this chronology is the letter we sent out on the afternoon of 19 December. There was not just a letter on 21 December which is referred to here.
To whom?
Mr. Teahon
To the consortium. The letters that went out on 21 December were letters to each of the three consortia. There was a letter to the consortium on 19 December and there was a reply from the consortium on 20 December.
What did the letter of 19 December say?
Mr. Teahon
It set down the conditions which are spelt out, as I recall, more fully in the letter of 21 December.
Mr. Teahon was in charge of a very prestigious project and was he not alarmed when he saw the preliminary PWC conclusions? Presumably he took the representation of Waterworld UK on its own terms. This company S&P turns out not to be substantial and then NGBS as represented as the company which had the expertise in running the water leisure industry. Alarm bells must have gone off in his head when he saw it.
Mr. Teahon
We are into words here I would think in terms of alarm. I identified that there is an issue. How does one deal with that issue? What the Deputy said is that we allowed the Government to contract. I did not see the situation as being one in which there would be a contract irrespective. I saw that there was an issue in regard to the economic and financial standing of this consortium but it was one that could be relatively readily dealt with. Admittedly, in the fullness of time, it was not dealt with on the basis I would have foreseen on that day or the following day, because the answer that came back on 20 December was that a parent company, or parent company type guarantee would be provided by NGBS International. As far as we were concerned on 20 and 21 December, we were dealing with a consortium that could be adequately dealt with on economic and financial standing.
Remind me when you left the Department.
Mr. Teahon
When did I cease being secretary general?
Yes.
Mr. Teahon
Early May 2000.
Therefore, in your capacity as executive chairman, did you function initially out of the Department of the Taoiseach?
Mr. Teahon
I was involved from the feasibility study, the first thing that happened.
When did you physically relocate to Blanchardstown?
Mr. Teahon
June or July.
It was that early?
Mr. Teahon
In other words, we did not have the building at the very earliest stage.
The Attorney General refers to the memo being faxed from the offices of CSID. Did you, Mr. McCarthy, or anyone in your Department, make substantial changes to that memo?
Mr. McCarthy
No, Chairman.
Are you telling us that someone who is no longer a civil servant, who is a business man, was writing memos for the Taoiseach?
Mr. McCarthy
Chairman, the position was that the material for submission to the Government was submitted by CSID in the format of a memorandum and, presumably, that reflected the past experience of the people involved as to what would be required. That material was incorporated then into what was substantively a memorandum for the Government.
I suggest. Mr. McCarthy, that means the same thing. The real drafter of the memorandum is Mr. Teahon, not you or any assistant secretary in your Department.
Mr. McCarthy
It was drafted as you suggest, Deputy, and then submitted by the Department to the Taoiseach as a memorandum which he might then bring to the Government.
Were you on hand Mr. Teahon to answer questions if the Cabinet raised questions about it?
Mr. Teahon
Yes.
You were physically present in the Cabinet room?
Mr. Teahon
Yes.
Can we go to the Attorney General's riposte to the response of CSID? I am referring to the two pages before annex x headed "Comment by Attorney General on CSID Response". Your feeling was that what was revealed by either PricewaterhouseCoopers's preliminary or complete reports could be put right. The Attorney General refuses to give an opinion on whether the award was in accordance with EU procurement procedures. We do not want to dwell unnecessarily on this for the same reasons he gives, but is it not safe to presume that the reason he does not want to give an opinion is that it might accord with the opinion that legal advisers gave you and that we have been given?
Mr. Teahon
I have no information on that question.
However, the Attorney General would be reasonably expected to concur, if he does concur? If he agreed that EU procurement procedures were complied with he ought to have stated that here.
Mr. Teahon
That is a question for the Attorney General to answer.
He then makes the point that the comments on the adequacy of the pre-qualification and assessment process in his report stand. They are very critical. He summarises that no adequate consideration was given to the financial standing or capacity, actual or potential, of the proposed operator company at any time prior to the decision by the Government to accept Waterworld as the preferred bidder. That is a very serious matter, Mr Teahon, is it not?
Mr. Teahon
In fairness, it is not the material point. Financial standing or capacity, at the expression of interest stage, relate to the consortium, not to the operator company. That was the basis on which the judgment at the expression of interest stage was made.
The construction work commenced without any concluded agreement on the financial backing required for the operator. The Attorney General is saying that work commenced anyway, the limited financial guarantees eventually negotiated with Dublin Waterworld Limited would largely self-extinguish after five years and were far removed from joint and several consortium liability in the DBFOM contract originally envisaged.
Mr. Teahon
The concluded agreement to which the Attorney General is referring is known as the project agreement or contract, which was signed in February of this year. He is correct in saying that it concluded the construction work prior to that. That project agreement was put to Government for approval. The financial guarantees negotiated apply over the five year period. I am not clear what the Attorney General means when he says they are far removed from joint and several consortium liability in the DBFOM contract originally envisaged. The issue of whether it should be joint and several liability arose and the legal advice we had was that we did not have to insist on it. The Department considered that legal advice and said to us that we should have joint and several liability and, in fact, there is joint and several liability of——
From memory, the Attorney General referred to it in the report as a measure of joint and several liability. Is that not right?
Mr. Teahon
He may well do but it is joint and several liability which involves Rohcon.
Right. Have you accepted point d about the failure to notify the board and Government?
Mr. Teahon
I would take issue with the use of the words "grave doubts". There was an issue that had to be dealt with but I did not have any grave doubts that it could be. I did not believe this was likely to give us the wrong result. I saw that, with the proper pursuit, it would give us the right result.
You will be glad to hear, Mr. Teahon, that Denis O'Brien is not alone in admiring your confidence in correcting problems. I respect that view and I believe you held it but, nonetheless, the Attorney General is saying that there were grave doubts about the financial capacity and status of this group to do the business. That seems to me to go the heart of what you were contracting to do. What other conceivable deficiencies could there be greater than track record and financial?
Mr. Teahon
Leaving aside the communication issue and just dealing with the issue that arose, the question was whether it was reasonable to conclude on the basis of the information we had that it would be possible for the consortium - we were still talking about the consortium - to satisfy us in the context of signing a contract that it had the economic and financial standing required, in my judgment - and I remain of that view - it was reasonable to conclude that would be the case.
The consortium was a moving statue.
Mr. Teahon
No, to the extent that it was moving it had ceased to move at that time.
It had stabilised, had it?
Mr. Teahon
Yes, and the point needs to be made, because I think it has been missed in some comments, that at the time of the detailed bid, the judgment that Kit Campbell, who was the expert on the issue, had made was in relation to the capacity of the two people from Tralee who were going to run the——
Yes, but somewhere in that report, Kit Campbell made the point that he could not find any information on NBGS.
Mr. Teahon
My comment is purely in relation to the observation and capacity.
Mr. Teahon is talking about after NBGS fell out.
Mr. Teahon
No, at the point that Waterworld UK, prior to Dublin Waterworld, in the context of the detailed bid, said it would put in place a company and Messrs Ruttledge and Bohan would be the key people. The judgment that Kit Campbell made was essentially a judgment in relation to his understanding of their capacity. So that piece did not change subsequently.
Does Mr. Murphy think it is normal to assign interest to essentially a third party - it only had a 5% residual stake? Can it be assigned to a third party like that?
Mr. Murphy
Generally speaking, no. It is not an impossibility, but let us consider the kind of contract we operate that is closest to this one, that is a design build finance. The assignment has to be done with the agreement of certain parties and most importantly the funding agency. It always comes back to money somewhere. If the bankers who are involved are not prepared to have an assignment, then the thing will fail.
Mr. Teahon
Could I just make one point? The issue I am referring to is not a question of assigning anything. The issue was that Waterworld UK said, in submitting its final bid, that it would put, if you like, a management in place. I think that was the word that Kit Campbell used. He said the management of the centre would be carried out by Messrs Ruttledge and Bohan. It is not a question of assigning. Assigning is a separate issue, which ultimately went to John Moriarty.
Going back to the earlier misunderstanding between us about the Kerry connection, yesterday I met a man on the street who wanted to know why the three Kerry men did not set up a company called Kerry Waterworld Limited and apply for this themselves?
Mr. Teahon
As I read what happened, S&P was the firm of architects for the Aquadome in Tralee. It was aware of Messrs Ruttledge and Bohan from that connection. I would assume that what happened was that they approached them and said that Waterworld UK would have to put a management in place and asked if they were interested. Then there was contact with Waterworld UK and, in the context of the detailed bid, Waterworld UK said it would put this company in place.
I also refer back to what I said in the earlier meeting. It is my judgment - it is a personal judgment, because it was never considered by the assessment panel - that if Dublin Waterworld, regardless of any involvement by Waterworld UK Limited, which now was only 5% anyway, had presented itself originally, it would have been the preferred bidder.
According to the report of the Attorney General: "The claims made for the experience and success of Waterworld UK Limited appear to be unfounded and unchecked. The response questions the basis for my conclusion that an attempt was made to foster in the mind of CSID the impression that the company was itself a leading water park operator with approximately 20 years experience. That claim was made on behalf of the consortium by MDC in its initial letter on 23 August as pointed out at page 28 of the report".
Mr. Teahon
Although I share it on some level, people had more of a problem than I had with this attempt to foster in the mind the impression that the company was a leading park operator. I had a problem with it in two senses. When we came to making the detailed bid assessment, we were not in any sense primarily making a judgment on the two people Palmer and Currie that came from Waterworld UK Limited. We were not making that judgment, we were primarily making a judgment - or Kit Campbell was giving us advice in the making of a judgment - on the competence of Messrs Ruttledge and Bohan to run an aquatic centre. That was primarily the judgment, as I would see it.
However, Waterworld UK was the lead company, was it not? Surely some kind of assessment of its background and credentials would have been prudent.
Mr. Teahon
No, no, they were not. At the expression of interest stage the lead company was MDC, the Dutch company. That was why I stressed at an earlier stage today that we were making a judgment in relation to a consortium and MDC was the lead in the consortium and was a company of very significant financial resource.
Who did not proceed.
Mr. Teahon
Who did not proceed. It was replaced by Rohcon, which would not have been quite as financially strong but is very financially strong.
The next point in the Attorney General's report is that Waterworld UK represented itself as having a close relationship with Schlitterbahn and NBGS. The report says that appears tenuous.
Mr. Teahon
Again I am not clear why he says that because the reality was that when we sent the letter to the consortium in December, the answer we got back was that it would put in place a parent company type guarantee from NBGS. There are issues in relation to whether parent company is the right phrase to use in relation to NBGS and Waterworld UK, but the reality was that for quite a number of weeks - and that included contact with NBGS - we believed that a parent company guarantee would be put in place. That is why I do not quite understand what he means when he uses the remark "appears tenuous".
The next question will have to be your final one, Deputy.
How about a final answer?
As Deputy Durkan remarked, there are many additional matters that need to be questioned. Accepting that guillotine, can I ask Mr. Teahon if he has any understanding of the difficulty on this side of the table in someone like me understanding why a respected former most senior civil servant would take the apparent risks that are highlighted in the Attorney General's report in terms of pressing ahead, however admirable showing such urgency might be, unless he had some kind of political cover? He must have told someone about this. Somebody with Mr. Teahon's training would never have proceeded in this fashion without political cover.
Mr. Teahon
I will come back again to the issue. I feel, quite genuinely, that the issue of a dormant company has been significantly exaggerated in recent times. One would think——
Before Mr. Teahon answers, it is not, in fairness, just a question of dormancy. It is a question of lack of financial capacity, lack of track record in the water park industry, pieces of the jigsaw falling out and having to be replaced on the basis of Mr. Teahon's ingenuity and then, having got in replacements, of having alternative finance put in place by Allied Irish Bank and so on. To focus on dormancy alone does not convey the breadth of the criticisms in the report of the Attorney General. I find it very difficult to understand that somebody with a track record like Mr. Teahon's and a history of complying with Cabinet procedures in accordance with the Government handbook issued to all Ministers - which were clearly breached in this instance - would take such action without sanction. I do not believe Mr. Teahon would do so.
Mr. Teahon
If the Deputy is asking, by implication, whether I discussed this matter with the Taoiseach in a detailed way, the answer is "No".
Thank you, Mr. Teahon.
Before I hand over to Deputy Batt O'Keeffe, I have a question in relation to the assessment of the final bids. Were the final bids all submitted on 15 December?
Mr. Teahon
Yes.
This was a €63 million project for the largest ever aquatic centre, on which a massive amount of information was furnished to CSID on 15 December and the contract was provisionally announced on 19 December. We can assume that, over that weekend and on Monday 19th, all of that documentation was furnished to the assessment panel who must have spent the entire weekend going through the material. Who was on that assessment panel?
Mr. Teahon
The membership is listed in the document.
How many members were on the panel?
Mr. Teahon
Six or seven, I believe.
Six or seven. Were they people with experience in relation to construction?
Mr. Teahon
Well, the membership is there. You know who the members are, Chairman.
In relation to the board of directors, I am asking what construction experience there was. There was massive documentation involved, containing a variety of information on a massive project.
Mr. Teahon
I refer to page 80. The answer to your question, Chairman, is that, between the members of the panel and the advisers referred to, there was significant construction experience.
Were you satisfied that the evaluation of the final bids for this major project could be done over a weekend?
Mr. Teahon
If I may refer back, this matter was discussed in answer to Deputy Rabbitte's questions at the last meeting and I believe Mr. Barry Murphy pointed out that, in fact, there had been significant discussions with all three consortia in the run in to December 15. It was not a situation where the information provided on that date came as a complete surprise. We had had discussions with the three consortia over a number of weeks before that and, therefore, the information had already been discussed, in different ways, with the consortia. Accordingly, what we were doing between December 15 and 19 was to ensure the information was in accordance with our expectation of what it would be and the advisers were making recommendations in relation to the different elements of design, build, finance, operate and maintain- - sorry, in relation to design, build, operate and maintain, not finance.
S&P Architects have been referred to several times. There is a description of a UK company as one of the world's leading water park operators, with about 20 years experience of operating and managing some of the most popular and successful resorts.
Mr. Teahon
Where is that description?
I will find it in a moment. I took note of it earlier on.
Mr. Teahon
S&P are the architects, they are not operators.
Yes, but they described UK Waterworld as one of the world's leading water park operators, with approximately 20 years experience of operating and managing some of the most popular and successful resorts.
Mr. Teahon
I am not clear what point is being made.
I am suggesting it would not appear to have been a very honest response from S&P Architects, on the basis that UK Waterworld did not have 20 years operating experience, having been in operation only since 1997. I do not regard S&P Architects as having been very honest in their comment.
Mr. Teahon
I do not know which area of the report the Chairman is referring to.
It is on page 30.
Mr. Teahon
Without looking at the particular remark, with regard to the operational issue - I come back to this point again - when we came to the detailed bid, what we were looking at and what Kit Campbell made his judgment on, in the context of operation, was the proposal by the consortium that there would be, in effect, a local management company to run the aquatic centre and that the two key people in it were Messrs. Ruttledge and Bohan. That was the judgment——
I am not disputing that at all. I am just referring to the comment of S&P Architects in relation to UK Waterworld having a track record over 20 years, whereas we now know it had no track record whatsoever. That is my point.
Mr. Teahon
In fairness to them - and this is just on the basis of a quick reading - the statement was that "the UK company of one of the world's leading water park. . . . .". As I understand it, "one of the world's leading water park operators" was the combination of NBGS and Schlitterbahn. On that basis, one could speak of two companies which had 20 years experience of operating and managing. The problem to which the Chairman may be rightly referring is that, in the event, this apparent company guarantee from NBGS did not come to pass. However, in fairness to S&P and what they meant by the comment, I believe they were saying that Waterworld UK is the UK company of the other people who, I think, would accurately be described as water park operators with approximately 20 years experience.
On the basis of what is written here, one could probably dispute that, but perhaps we will not develop that argument.
I will be very brief, Chairman. Mr. Teahon, having been in the public service for so many years and having aspired to the highest level, is it not reasonable to expect that all the experience of the public service and the cautious approach to contracts would have been reflected in your subsequent involvement in the private sector? Looking back on what has transpired, are there many issues on which you would now say you would have acted differently and would not have left yourself open to a charge that what you were involved in was a design and build project with very little effective obligation? Was it a situation where the Department of Finance code should be applied but was not applied and that the normal approval of terms of major contracts should have been adhered to, as appeared on page 42? What would be your approach if you had your time over again? Would you consider that your general alacrity, the short time frame available to you and the absolute necessity of getting on with the job may have destined that you would depart from some of your Civil Service training?
Mr. Teahon
My honest answer is that, in my view, if all the information now available was available at the time decisions were being taken, the decisions would have been exactly the same. As I said when I made the statement to the committee on the first day, I accept without reservation that my communication on the matter was inadequate and I have accepted that I made a misjudgment in not giving fuller reports and information. However, if asked whether I believe looking back on it that we have a company, Rohcon Limited, that will construct a really great aquatic centre, I would answer "Yes". If I am asked if I believe we have a company that will operate the centre really well, the answer will be "Yes".
Last week Mr. Teahon stated "No, I will not resign because there is absolutely no reason for my resignation". Does he feel let down today at having been, effectively, removed as chairman of the group and having his role as chief executive taken from him? Does he feel that his integrity has been impugned or does he feel that, given the shortcomings in the Attorney General's report, the Government had no option but to ask him to vacate those positions, while indicating it believed Mr. Teahon to be very much above board by keeping him on as a director of the company?
Mr. Teahon
There had been a conversation with me many months ago relating to the division of roles between chair and chief executive and, in the light of my experience, it is my strong belief that those roles should not be combined. I had no problem with that. When the board came to make its recommendation to the Minister on 8 March it said that there should be a full-time chief executive and I was part of the board in making that recommendation. On that occasion, I made it clear to the board that I would not wish to be a full-time chief executive. I could not see myself having the time to carry out that role. As I said earlier, the Government asked Dermot McCarthy to contact me today to put the Government's subsequently issued proposal as a statement to me. He asked me for a response and I agreed it in the interests of the project. The Government clearly felt that in the interests of the project this should happen and I agreed. I did not say this to Dermot, but I very much welcome and appreciate what the Government said about me in the statement as regards my integrity.
Full planning permission was applied for on 22 December and granted on 28 March, which indicates that the decision to grant was made about 28 February, within two months of the application being made. That is how I read it from the Comptroller and Auditor General's report and if that is the case, I compliment Fingal County Council for working so well. You would not get permission for a bungalow in County Galway in two months, never mind a project like this. Is it the case that the decision to grant was taken about 24 or 25 February?
Mr. Teahon
That is correct.
The Cabinet decision was made on 19 December. Given public notice and everything else that has to be done during a planning application, was it anticipated that the Cabinet would give the go-ahead to the project? How was an application ready to be lodged within two days of the Cabinet decision to go ahead? Was it not prejudging the matter to have that ready?
Mr. Teahon
We had identified 22 December as the final date in the time path I mentioned earlier. Therefore, when the decision was made on 19 December, we wrote to S&P Architects and asked it to agree that its design could be used, which it did. The planning application was made by CSID with the agreement of the architect.
CSID could not have been ready to lodge a planning application. There is no way one would have a planning application of that magnitude ready to lodge within two days of a decision being taken, given the need to provide a paper public notice with the planning application on it.
Mr. Teahon
I am sorry, but that is not the case. I am happy to provide the specifics.
What is not the case?
Mr. Teahon
What the Deputy said is not the case because we did it.
It was done because there was a clear understanding from somebody that the project was going to get the go-ahead. Otherwise it could not have been done in two days. Quite obviously it was ready before the Cabinet decision on 19 December. It is quite obvious to me anyway. It must have been quite clear to somebody in advance, be it CSID, Mr. Teahon or whoever was dealing with this matter, that the go-ahead was going to be given by Cabinet on 19 December.
Mr. Teahon
I do not agree with the Deputy. If he is suggesting that we somehow made a judgment before the nineteenth as to who would be the successful bidder, he is wrong as that is not the case.
I am talking about the planning aspect of the matter. I am not saying a judgment was made. CSID would have to have been very confident that the project was going to get the go-ahead to have its planning application ready to go in on 22 December. That is obvious.
Mr. Teahon
It was clear to us that the planning application had to be in on 22 December. In the event that the Government had not taken its decision on 19 December, we would not have submitted a planning application.
On 18 December the preliminary report was received by CSID. Was it not thought necessary in presenting the brief to the Taoiseach, who was the Minister pursuing this project at Cabinet, to alert him to the information in that report?
Mr. Teahon
As I have said in answer to Deputy Rabbitte, the answer to that is "No".
Pardon?
Mr. Teahon
"No" is the answer to that. I have already answered that question for Deputy Rabbitte.
Mr. Teahon has, but he said a few things to Deputy Rabbitte that I would like to come back to. He said he did not discuss the report with the Taoiseach in any detail. Did he discuss it with him at all?
Mr. Teahon
The answer I gave was to Deputy Rabbitte, who said he found it very hard to believe. I said, "If you are asking me the question, did I discuss this in any detail with the Taoiseach, the answer is "No".
Did Mr. Teahon discuss this with the Taoiseach at all? That is the question I am asking.
Mr. Teahon
I did not discuss that we had received a report from PricewaterhouseCoopers which said there was an issue in relation to the economic and financial standing of the project.
What kind of discussion did Mr. Teahon have with the Taoiseach before this? Did I hear that Mr. Teahon was at the Cabinet meeting on the matter?
Mr. Teahon
Yes, I was.
I do not know much about Cabinet meetings and I do not want to breach the confidentiality of them. Did things not arise at Cabinet? If Mr. Teahon cannot answer the question I will understand. I am sure everybody did not just give the nod to the project, saying "That is grand. The Taoiseach has presented the report and we will all accept it. We are all for it." Did questions not arise which obliged Mr. Teahon, who was attending in an advisory capacity, to clarify matters? Did questions not arise that might have obliged Mr. Teahon, who was there in an advisory capacity, to be called on to give clarification on matters? Did questions not arise in respect of which he felt it was necessary to give the information which, apparently, he withheld from the Taoiseach?
Mr. McCarthy
With respect, Chairman, I do not think Mr. Teahon or any of us is in a position to answer the question.
Okay, I accept that. The Tánaiste in her statements yesterday expressed her concern. She differs with Mr. Teahon. He said he believes that if all the information was available, the decision would have been the same. The Tánaiste does not believe that according to her statement yesterday. She was very careful in the way she chose her words. She says that full information was not made available to the Cabinet. She did not say full information was not available to the Taoiseach. I do not know why she chose that form of words. She said that if full information had been available to the Cabinet, there might have been a different decision. Does that not indicate that it might not have got the go-ahead if that information was available to the Cabinet?
Mr. Teahon
The Tánaiste is obviously entitled to say what she said. I looked at the information and asked if the same decision would have been reached if all the information was available. My answer is that it would have been.
So Mr. Teahon and the Tánaiste disagree on that matter.
Mr. Teahon
The Deputy should not put words into my mouth.
Mr. Teahon is telling me the opposite of what she said yesterday.
Mr. Teahon
No, I do not believe I am. She is saying it might have been a different answer. I am saying that, having considered the issue, I do not believe it would. That is not disagreeing.
Mr. Teahon and I will disagree on whether that is disagreeing. On page ten, it says the outline bid in respect of the consortium, which now includes Rohcon made it clear that Waterworld (UK) Limited was closely linked with NBGS International, a US company with many years of design, manufacturing and consulting in the waterpark industry. Why is the Attorney General referring to that in his report?
Mr. Teahon
I do not honestly know.
It also says "In addition, details were provided on the associate company Schlitterbahn, which is owned by NBGS and their waterpark operation." Why is that being referred to by the Attorney General?
Mr. Teahon
I think the heading is "Chronology". As I see it, the Attorney General is describing a chronology and that statement is part of the chronology.
On page 12, it says:
On 7 March 2002, the Executive Chairman informed his Board that he did not believe it necessary to inform them or the Assessment Panel at that time of the information received about the status of Waterworld (UK), or of his judgment in this regard.
Why did Mr. Teahon believe that at that time?
Mr. Teahon
I believed so because I believed I was acting on the basis of delegated authority.
On page four, the Attorney General says:
Failure to alert those politically accountable to the true situation seems to seriously call into question the existence of a proper relationship between the executive and the board and between the board and its State shareholders.
Does Mr. Teahon accept that?
Mr. Teahon
I have already answered that question earlier. I said I believed that the material around that sentence should have referred to the fact that I was operating on the basis of delegated authority.
Mr. Teahon seemed to stress a few times today that he did nothing wrong. That is his view. Why did the Government stand him down today from the position of chairperson and chief executive? Am I, the Government or Mr. Teahon missing something?
Mr. Teahon
When I say I did nothing wrong, I am referring to all the actions which I took to have a company construct what I believe to be a really good aquatic centre and have an operating company that will run it well. I recognised - it is in my statement to the committee - that my communication on the matter was inadequate. I have accepted that I made a misjudgment in not giving fuller reports and information. The decision the Government took was its own, not mine.
There seems to be some misunderstanding outside this body about the functions of this committee. I was listening to somebody on the radio this morning who was expressing that he would regret very much if any actions delayed the project. None of us is trying to delay the project in any way - the project is going ahead. Our duty and function on the Committee of Public Accounts is to ensure that there is value for money. As distasteful as that is, sometimes we have to ask hard questions. For anybody outside to be given the impression that this committee would wish to hold up the project or in any way delay it is false. That is not our function at all. Our function and duty is to ensure that we query cases where public money - £63 million - is involved and where that money could be put at risk by decisions taken.
Let us return to the issue of planning. When the planning application was lodged on 22 December to Fingal County Council, were there prior discussions with the council about the project or with the planners in Fingal County Council? Were there preliminary discussions with the planning authority before the planning application was lodged?
Mr. Teahon
Yes, there were.
Was there any time, during the initial two months in which a decision was made, in which further information was sought or where any clarifications of matters concerning the planning application were dealt with in conjunction with Fingal County Council?
Mr. Teahon
I believe there was, yes.
In the normal course of events, when further information is sought, it usually takes two months to deal with an application from the time that a reply is submitted in respect of further information. However, in this case, that did not happen because it is quite obvious that the decision to grant planning permission was issued within two months of the date of the planning being lodged. Why would that be so?
Mr. Teahon
I will have to check that and will be happy to do so.
Okay.
I agree with Deputy McCormack. Our role is to ensure value for money at all times. Things can get confusing when trying to ascertain if we are getting value for money. This issue has become particularly confusing, probably because, at one session last week, we were kicking footballs around Croke Park and around the new pitch and things like that.
Consider the dormant company and its involvement in this matter. The dormant company is referred to by Mr. McDowell as a shelf company and I am wondering if it is the same thing. I am not an accountant but, for the purpose of clarification, how does Mr. Teahon define a dormant company?
Mr. Teahon
As I understand it, a dormant company is one which has not traded. A shelf company would generally be a company which has just been formed and is transformed, for the purposes of making a bid, into another company.
I mentioned the other day how well Mr. Teahon had done in driving the project along. The planning permission was granted in March but, given the level of objections generally, did he fear any objections to the project?
Mr. Teahon
We included the possibility of an objection in the time path that I described earlier.
I return to the question of dormant companies because I feel that is the key point. There is comment that the entire board seems to have discussed this question at some point and the difficulties arising from it. When the board received its letter of comfort from Anglo-Irish Bank on 7 February, did Mr. Teahon see it covering any financial contingencies or difficulties that might arise?
Mr. Teahon
Yes. At the end of December and through January we believed that the consortium would provide a parent company guarantee from MBGS. However, MBGS indicated it was not prepared to give such parent company guarantee. There was then a proposal, not from us but I believe Kieran Ruttledge, that we should accept this Anglo-Irish Bank letter. We checked with our financial and legal advisers and on that basis accepted it.
We are out of chronological order because this is the way this report is written. I refer to 18 December and a quote from page 17 of the report:
The information revealed that Waterworld UK was a dormant company and that the lack of material information on the enterprise had resulted in searches to determine if the directors of the company held directorships in other companies.
The business report showed that Mr. Roger Currie held directorships in Waterworld UK and Royson Limited and that Keith Palmer had a directorship in Waterworld UK. Was that information available to everybody else at that stage or just to Mr. Teahon?
Mr. Teahon
In terms of the board - just to myself.
The business report indicates on page 18 that "It is inadvisable to proceed with unsecured dealings without prior referral to the parent company". Would the £3 million letter of comfort guarantee have covered that aspect of that in the context of that advice?
Mr. Teahon
The letter of comfort was not a parent company guarantee - it flowed from legal advice that a third party guarantee could apply and, in that sense, it was a third party rather than parent company guarantee.
The purpose of that is to lock away any liability the State might have if a company folded. There are suggestions that money might have been lost in this and that we might have chosen the wrong people, and page 19 states "Paddy Teahon commented during the course of the meeting that the Waterworld proposal was not the best funded and that there were issues to be resolved, particularly in this area, with them." Who would Mr. Teahon have been stating that to?
Mr. Teahon
To the assessment panel at the detailed bid stage.
Were there three or five?
Mr. Teahon
They are at the end of page 18.
The advisers are Keith Milson, Una Carmody, Kit Campbell and Seán Boyle——
Mr. Teahon
No, the panel is described first as myself, Laura Magahy, David O'Connor, Seán Benton, Seán Treacy and Pat Duffy.
In the comment at that meeting he was signalling to them that they were not the best funded. That could be interpreted in a number of ways. I am amazed that nobody seems to know anything and can go through life in this manner. I will refer back to the Attorney General being incorrect about who was involved.
Mr. Teahon signalled that Waterworld UK was not the best funded and that there were issues to be resolved, particularly in this area, and if I was a director or an assessor I would be asking what was wrong without waiting for Mr. Teahon to point it out.
The report further states that Mr. Teahon said that Waterworld appeared favourable but that the board would revert to the other bidders to keep their bids open. This was presumably a strategy in order to keep Waterworld on board without shutting the door. I assume SB is Seán Benton who is quoted as saying that they would lose interest. In other words, if they were knocked out at the first stage they were not going to stay with it. Paddy Teahon is recorded as having "nervousness or slight concern about the Waterworld-Rohcon backing and their ability to have deep pockets". I presume that refers to their coming up with enough cash although it is an unusual term.
There is a suggestion that nobody was really aware of anything other than Mr. Teahon and I am concerned if that is the case, but can I take it that Mr. Teahon was, at this point, signalling concern about the Waterworld-Rohcon grouping financially?
Mr. Murphy
This point has caused us some concern too. We wrote to the Attorney General on the matter when he was preparing his report. It is not included in his report but he refers to it and I suspect the omission of the letter itself is simply an omission on his part. The key part to this letter is that Seán Benton told Mr. Teahon that he had no record or recollection of Mr. Teahon making the comments that have been referred to by Deputy Dennehy and that Mr. Teahon himself had acknowledged he had no recollection of making these comments. Seán Benton checked out the position with the other Office of Public Works officials who were present at the meeting of the assessment panel - Kevin Connolly, Kieran McGahen and Keith Milson - none of whom has any recollection of the comments being made. Further, CSID's own report of the assessment panel meeting contains no reference to a contribution of this nature by Mr. Teahon. Finally, we pointed out to the Attorney General that it is a matter of particular significance that the PWC note does not record that anybody from PWC raised concerns at the assessment panel meeting about Waterworld UK.
There is a memo compiled by Aidan Walsh which stated that, so he must have got it wrong as well.
I expressed grave concerns about trying to speed read 480 pages of text. There is nobody in the country who can do it in time. If I am now being told that there are regular mistakes and misquotes by the Attorney General, we are really in trouble. Not alone must I speed read 480 pages in half an hour this evening, but I must also anticipate the mistakes and errors. I make the point, which I made last week, that I am not happy with the way we are proceeding. Perhaps someone will mark the errors as we proceed because it is only when we ask questions we find——
We will be adjourning at 7 p.m.
This is a critical issue.
I know, but we will be resuming at 11.30 a.m. tomorrow and members will have another chance to assess the documentation before then.
In the context of value for money and some suggestions that have been made, it is stated on page 32:
It is important to emphasise that this analysis is not suggesting that the decision of the Assessment Panel to select Rohcon/Waterworld in preference to the other two bidders who submitted detailed bids was unreasonable. For reasons concerned with price and design, the preferred bid was obviously clearly ahead of the other contenders.
I also worry about value for money and we may have had an incorrect message but we now know that the bid in question was the best of the three.
There is another philosophical argument developing between Departments about the merits of design, build, finance, operate and maintain contracts. One Department might wish that others did not have all this but it seems to be a trend and I am concerned about it. I am concerned about what we might call internal departmental dynamics - if we were talking about politics it would be called internal dynamics - but it seems to be inherent in the debate. I am also worried about our picking up the wrong messages. If there are other corrections or revisits, I would appreciate if Mr. Murphy had prepared them in time for the next meeting so that I do not raise things, presuming that our Attorney General is correct, only to find out that he is wrong. I do not want to get into an argument with Mr. Murphy or to appear to be contradicting or obstructing him.
Mr. Murphy
I have no problem whatsoever with that and we will have it done prior to tomorrow's session.
The important thing is that guarantees were put in place for the future of the State and to cover ourselves financially when the weakness was found. We will need to decide whether these eventual guarantees were adequate. The weakness, a dormant company - I nearly called it a shelf company - got all the headlines. The other two companies, who were major players as the first only accounted for 5%, have never been mentioned in the media. Would the guarantees received have covered any potential loss? Should we have gone for a design, build, finance, operate and maintain contract? The decision was made. It has been criticised; other people might not have made the same decision. However, it was made, probably with the target date of the Special Olympics in mind. I like to see people being innovative when trying to get things done for the State and I agree with that approach if it is done correctly with guarantees in place. Guarantees were sought and, as far as I can see, they were provided.
I know the Chairman is concerned about time but on page 24 it is stated that "critical issues which remain to be resolved" were referred to again in a letter dated 2 March. My point is that this was not something that was hidden until recently. The Comptroller and Auditor General referred to a number of concerns he had and they were covered earlier on. There were concerns about the performance bond and about financing and guarantees. The £5 available would not have gone far, even though it was sterling. It appears that these concerns were dealt with. If they were not, I would like to hear about it but the points I would have raised appear to have been covered. It is important to get across the message that the assessment committee and its members were unbiased, professional and knowledgeable and that they selected what they saw as the cheapest bid - the one which involved not only the lowest cost but also the least potential for leaving us open to further costs down the line. The essential message is that the process was carried out honestly and fairly.
Public perception has been mentioned. I am afraid people may misinterpret the situation and infer that there was some hokey-pokey. I have no problem with returning later to discuss the philosophy of integrated schemes including funding, organisation and management. We should be using these schemes a lot more and we will do so. Some people may have concerns and we can discuss them, but we should be cutting the State's exposure to financial outlay. I take the AG's point that once the strategy was set out in this case the tendering procedure became a straitjacket. They were tied to it as soon it went into the EU Journal.
I have a letter from the board of CSID to the Minister for Tourism, Sport and Recreation and I hope that what is stated is accurate. I think it is dated March but the print is unclear. The letter states that the board is satisfied, having considered the position and on the basis of advice from its legal advisers, that these issues do not impact on the integrity and validity of the award of the contract and is satisfied that EU procurement procedures were properly implemented and applied in carrying through the process. Was this letter indicative of unanimous support?
Mr. Teahon
Yes, it was.
It has been suggested, Chairman, by at least two questioners that there may have been a difficulty with the EU procurement procedures. The board states unanimously that its members were satisfied that the EU procedures were properly implemented and applied. We need to make this very clear.
What Deputy Dennehy mentioned has been suggested by the Attorney General, not by us.
It was only suggested by us prior to our obtaining the information which has now emerged.
One annex in this document is of huge significance and I suspect that the Attorney General may have included it by accident rather than by design. Perhaps we require more time to investigate the issue. Annex D included in the AG's report happens to be the exact memorandum brought by the Minister for Tourism, Sport and Recreation, Deputy McDaid, to the Cabinet on 18 December 2001. I understand these memorandums are normally confidential and restricted in their content and in their release. In the penultimate paragraph it is stated that:
While acknowledging the concerns of the Tánaiste, the Minister remains convinced, taking the advice of the AG's Office into account, that the option of concluding the present contract represents the least risk among the options now open to the State and is also the only way in which appropriate swimming facilities can be put in place in time for the Special Olympics Summer Games in 2003.
This is an actual Cabinet memorandum which Mr. McCarthy signed and notified to the Minister's office, indicating that the Cabinet had signed off on it. This acknowledges that in fact the Tánaiste's concerns, and indeed many of the concerns we have been discussing for the last few days, were aired openly by the Cabinet in its discussions of the memorandum formulated on 18 December by the Minister. In effect, all of the concerns have been addressed and acknowledged and could vindicate——
On a point of order, is the Chairman running the same questioning order as he has been until now? I assumed I was to be ahead of Deputy Lenihan.
Deputy Lenihan may make one final point.
It underlines that if the information had been released initially——
Deputy Lenihan——
The Cabinet clearly discussed and clarified all of the issues, including dormancy, and decided to proceed with the decision.
Ms Hayes
I should clarify two points. First, as a matter of procedure, any comments by the chairman of the Office of Public Works regarding factual inaccuracies in the Attorney General's report should be directed first and foremost to the Attorney General, as matter of courtesy. Second, the Minister for Tourism, Sport and Recreation's memorandum was dated December 2001 and was not considered by the Cabinet until January 2002, and the issue of dormancy was not addressed because the Minister was not aware of the issue at the time.
It would be unfair to the Minister for Tourism, Sport and Recreation to imply that was the case.
It ought to be made patently clear that we are not talking about December 2000 but about December 2001.
Ms Hayes
The concerns are set out elsewhere in the memorandum to which that comment refers.
I merely wanted to request some clarification on one point regarding the Cabinet meeting that took place in December 2000, at which the presentation was made by the retired Secretary General of the Department in regard to the whole project. I presume it is common practice for consortia of this nature to make proposals directly to Cabinet.
Mr. McCarthy
First, the proposal emanated from the Taoiseach. In so far as Mr. Teahon was in attendance, it was to facilitate discussion of the Taoiseach's proposal.
But Mr. McCarthy was the Secretary General of that Department. Would he not have been in as good a position as anybody to examine the issues prior to the presentation to Cabinet? Would this responsibility not fall within the remit of the Department itself, as opposed to coming from outside consultancies?
Mr. McCarthy
I shall make my second point regarding Mr. Durkan's original question. It is not common, but it is equally not unusual, for non-officials or members of Government to attend Cabinet meetings to facilitate the discussion of certain issues. Regarding the circumstances of 19 December, I was not in fact the Secretary General of the Department at the time. Nonetheless, in the particular circumstances, where the material was being submitted to the Government at short notice as a matter of urgency, I presume the Taoiseach considered it appropriate to facilitate consideration of the matter by the Government and that Mr. Teahon would be available for the meeting.
My apologies, Mr. McCarthy was not Secretary General at the time. His colleague was Secretary General at the time, and Mr. McCarthy mentioned that he had assessed the proposal. I presume the Taoiseach himself did not conduct the assessment or draft the note prepared for Cabinet discussion. Somebody else must have drawn up some kind of documentation and I am asking who that was.
Mr. McCarthy
Briefing material was provided from within the Department, as well as the text of the——
From whence within the Department?
Mr. McCarthy
The material that was provided was based upon that material which had also been supplied directly by CSID.
So it was a circular exercise. CSID was actually supplying the briefing material, the basic information on the assessment and appraisal of the proposed contractors and so on, and at the same time it was acting as judge and jury of the entire process. Mr. McCarthy, is that not true?
Mr. McCarthy
What happened was that the outcome of the assessment was reported by CSID, but there had been a clear recommendation in favour of one of the three consortia, which had attained the highest marks under all the relevant assessment criteria and the lowest cost implication. On that basis, it was recommended that CSID should be authorised to conclude heads of agreement with the particular bidder, and that proposition was put to Government on that basis for approval.
I presume the Attorney General was consulted at some stage in the matter. I am not sure whether I am entitled to know whether he attended Cabinet meetings at the time, but I am sure that somebody will make this inquiry and that it is pertinent to this discussion. My understanding is that at the time the proposal went to Cabinet there were certain reservations about some aspects of it, or the status of some of the companies involved, and that the proposal could only proceed with the recommendation that it be subject to certain conditions being fulfilled. Will Mr. McCarthy say if this is correct?
Mr. McCarthy
The approval that was sought from the Government was to authorise CSID to conclude heads of agreement with the preferred bidder. As part of that decision, as is clear from the documentation, there was also a decision taken that some agreement would be reached with the preferred bidder regarding the capital contribution to be made and the value of the free swimming hours, which have already been mentioned to the committee. These elements, together with the fact that the recommendation was in respect of heads of agreement, had a degree of conditionality implicit in them. In other words, the heads of agreement would proceed if those conditions were met, and contracts would be signed at a later stage on the assumption that all the other technical requirements of moving from heads of agreement to contract status——
That can only be done on the basis of the information presented to Cabinet at the time the decision of approval was made, not on the basis of further investigations that could take place or further developments that could have taken place with regard to the merging or changing of ownership of various companies. The only decision that could have been taken at that stage was on the basis of the information actually submitted to Cabinet on the day, and I assume the Attorney General was present at such a discussion.
Mr. McCarthy
In reply to an earlier question, I indicated that had that information the Deputy mentioned about the queries raised on the financial standing of some of the companies been known, it would have been regarded as a relevant matter to bring to the attention of the Government.
By whom?
Mr. McCarthy
By the Department and presumably by the Taoiseach.
I will refrain from asking further questions: there will be an opportunity to take the matter up again.
In the interests of clarity on Mr. McCarthy's point about what is usual or unusual at Cabinet meetings, would he not agree that it is exceptional for a non-civil servant to present at Cabinet?
Mr. McCarthy
Non-civil servants do not generally present at Cabinet. They may make a presentation, but items are always presented to Government by a sponsoring Minister. In so far as officials or non-officials are in attendance, it is to facilitate the Government's consideration of the proposition from the sponsoring Minister.
I accept that entirely. My point is that it is extremely unusual, for a non-civil servant to be in the Cabinet room at all. From my own memory, I never saw it. I saw civil servants from various Departments brought in to make submissions, but I never saw a non-civil servant in the Cabinet room.
Mr. McCarthy
It is by no means common, but it has happened on a number of occasions in my time as Secretary General to the Government.
Mr. Purcell
In recognition of the late hour, I am not going to rehearse old arguments. One of the issues some Deputies raised was the role of the Committee in this matter, and that is for the Committee itself to determine, but I suggest it is very much in line with my own role, to ensure that proper procedures are in place for the spending of public moneys and that due regard is had for the achievement of value for money for taxpayers. These are my sole concerns in this matter.
On the first day of these hearings I referred to corporate governance, and it seems to me that some of what has happened here was down to what could be regarded as, and is now accepted as, an inadequate corporate governance framework. There was a corporate governance framework in place, but the adequacy of that framework must be called into question. There is a tacit recognition of this in the arrangements put in place by the Government today.
In terms of value for money, the issue here is whether the company should have gone with a design/build option and then gone for an operations/maintenance agreement, and separate those, or else have gone with what was chosen by the company, the design/build/operate and maintain option. I appreciate that given the tight timeframe within which the company was expected to deliver this project, it was very difficult to go with what I believe would have been the most economic option, a design/build and then operations/maintenance agreement. The position regarding value for money is not quite as bleak as I might have indicated in the earlier meetings because I have received information and documentation from various sources in the last few days which suggest that the State is at least getting something from this operational arrangement and lease. It is getting a share of any profits from this arrangement over the 30 years.
There are 1,300 free swimming hours each year for our elite swimmers and the national squad, and the monetary value of this has been quantified at £13 million. That is a maximum figure and I can certainly explain this view in detail tomorrow. It certainly would not be worth that sum to the operator. To be worth that to the Exchequer, it would have to be assumed that the Government of the day would be prepared to give about £450,000 per annum to Swim Ireland to make these arrangements. If you make that assumption, you then have to ask if Swim Ireland would have to pay £350 per hour for off-peak hours for what is less than exclusive use of a facility. However, while this sounds a little begrudging, and there is certainly value in this provision, it has to be entered into the equation.
Arising out of the discussion today was the danger of any potential liability on the State as a result of the way these particular arrangements were implemented. It is better to stay silent on that but also to recognise it as a potential cost. That is all it would be wise to say on that matter. Hopefully, this will not arise, and on the basis of legal advice it will not. However, legal advice is a very moveable feast depending upon who is looking for it.
I thank Mr. Teahon in particular for his patience over the last few days. I know it has not been easy for him. At least the committee has provided a mechanism for him to put forward his side of the issue, which he did persuasively, and we respect that.
The witnesses withdraw.
The Committee adjourned at 7.15 p.m. until Wednesday, 27 March 2002 at 11.30 a.m.