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COMMITTEE of PUBLIC ACCOUNTS debate -
Wednesday, 27 Mar 2002

Vol. 4 No. 12

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.

Witnesses should be made aware that they do not enjoy absolute privilege and be apprised as follows: 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 Michael Ahern.

I have a few short questions. One relates to the executive services contract. I would be grateful if somebody could tell me its current standing. We have heard that it is on hold and that it is being reviewed by an audit sub-committee. I would be grateful if somebody, perhaps Mr. Teahon, could bring us up to date on it.

Mr. Teahon

The position is that the contract is the contract that has been referred to and which we gave to the committee. In other words, the contract is the contract that provides for the 1.8%. We also provided for the committee two proposals that have been presented on a voluntary basis by the executive services team. The first proposal, which was presented some time ago, would effectively replace the 1.8% by a series of people with the amounts of time they would apply to the project and what are referred to as charge-out rates, in other words amounts of money per person. The second proposal is one that would apply in the current circumstances, which would be 75% of that first voluntary proposal. They have been considered by the finance and audit committee of the board of Campus & Stadium Ireland Development Limited and will now be considered by the board of Campus & Stadium Ireland. That is the current position.

That clarifies the position because, reading some of the newspapers and listening to some media last night and today, one would get the impression that everything was as it started on the first day, which it is not.

Second, with regard to the aquatic and leisure centre, am I correct in saying that was not part of the original plan of Campus & Stadium Ireland?

Mr. Teahon

In regard to the project, in the first instance there was a feasibility study for a stadium, which was the original proposal. The issue of whether to have a stadium on its own arose and the consultants suggested in their feasibility report that a campus should be considered. They put forward a number of suggestions for a campus which did not include an aquatic centre. The Government then decided, on foot of the feasibility study, that a campus should be proceeded with, with a stadium as the centre-point. Subsequently the Government took the decision that an aquatic centre should be provided for the Special Olympics.

Where did that idea come from? What was the source of the idea for the aquatic centre?

Mr. Teahon

I believe it was the fact that the Special Olympics are being held in 2003 and that a 50 metre pool would be required.

Would it have been people involved with the Special Olympics who brought this idea forward?

Mr. Teahon

Yes.

To anybody who wishes to answer it, the question of law suits is being highlighted in some of the media. I was listening to Mr. Irwin on the radio this morning and he does not seem to want to go down that road. Hopefully, the others feel similarly. Basically he raised the question of the payment of the costs of the other tenderers. What is the position regarding what he mentioned this morning?

Mr. Teahon

Ms Margaret Hayes may want to add to this. The bidders raised with us in the course of the bidding process the issue of some of their expenses being met. Arising from that, I judged that it was reasonable that a small proportion of their expenses would be met and I wrote and said to them that I was prepared to meet £20,000 for each of the three bidders.

Ms Hayes

We became aware of this some time last year and we asked the Department of Finance for sanction to pay. We had not given approval because we were not aware, prior to the commitment being made, of the existence of the intention to make such a commitment. We referred the matter to the Department of Finance which said it was not policy, in relation to Government contracts or bidding processes, for Government contracts to cover the costs of bids. Perhaps the Department of Finance could elaborate further.

The long-standing policy in the Department of Finance is that the bid costs should not be recouped. That policy is still the current policy. I would not like to comment on the legal position in this particular instance because I am not aware of all the details. It would be a matter for legal advisers to deal with the particular instance, but the policy of the Department is, as it has been for quite some time, that we do not recoup bid costs.

Mr. Teahon

May I add one point to that?

Yes, Mr. Teahon.

Mr. Teahon

It is normal in a series of bids that I would be aware of in different countries around the world for some, but not all, of the bid costs to be met.

Mr. McCarthy, in the executive services contract I am sure you have seen the legal advice which was offered to Campus and Stadium Ireland vis-à-vis executive services and the non-necessity to advertise in the EU Journal. Are you happy with that legal advice?

Mr. McCarthy

The Department, when it had sight of that advice which it sought, was satisfied that the board had acted on the basis of legal advice and that was the requirement under the corporate governance guidelines of 1992 of the Department of Finance. Therefore, at that point no further confirmation or assessment of the legal advice was undertaken.

Would the Attorney General have had sight of that advice?

Mr. McCarthy

No, not at that point.

Is it that it was not considered necessary?

Mr. McCarthy

That is so. As I said, what the Department sought to verify was that the board, in approving the contract for the executive services team, had satisfied itself that it was operating within procurement guidelines, including the EU dimension. That was what was required of the parent Department in the context of the 1992 guidelines, as we understood them. The advice was produced. It was, as I said on a previous occasion to the committee, from a reputable source which had advised other Departments on procurement issues, and we left it at that.

At the time you mentioned it was not necessary, even as a further safeguard, for it to go to the Government contracts committee, is that correct?

Mr. McCarthy

That is correct.

I want to ask you about one of the criteria that was adopted vis-à-vis Executive Services here because in Digital Media Development Limited - the digital hub which is another project - the same executive services company is involved. Can you reconcile for me why retrospective approval for the arrangements of the contract was sought from the Government contracts committee in December 2000? Why was it necessary for Executive Services to get retrospective approval from the Government contracts committee for the digital hub, yet it was not necessary to get it for Campus Stadium Ireland?

Mr. McCarthy

In the digital hub case, the view taken was that while it was not necessary in the context of the procurement guidelines, it was considered desirable given that this was, as you say, the second occasion on which such a form of contract had been presented and the Government contracts committee, as you may be aware, in that instance approved the contract subject to the Department being satisfied that the matter complied with procurement law, including the EU dimension. At that point, the views of the Attorney General were sought in respect of the Executive Services contract for the digital hub project and there was, subsequent to that, a series of correspondence and discussions involving the Attorney General's office and the legal advisers to the digital media development company. In the event, the contract was executed and the Attorney General took the view that in that context it was a moot point as to whether the matter should be brought to finality by his office.

Therefore the Attorney General would have seen the advice in that case, would he?

Mr. McCarthy

Yes.

But he would not have seen it in the other case.

Mr. McCarthy

Quite so.

As you have pointed out, it was the second time Executive Services had come up. Therefore you were not totally happy and referred it to the Government contracts committee on the second occasion.

Mr. McCarthy

We considered that it was prudent to do so. While acknowledging that it was within the remit of the board of DMDL to approve such a contract and that it was for the board to satisfy itself, in the circumstances we considered it desirable to have, in the first instance, the approval of the Government contracts committee, which, as I say, was conditionally received.

However, the Department of Finance wrote a letter in January 2001 to the Taoiseach's Department expressing your concern about a fixed fee arrangement which might operate in the case of the digital hub. Is that correct?

Mr. McCarthy

Yes.

Perhaps the Department of Finance would like to comment on that.

The Government contracts committee would apply to central Government, Departments and bodies like the Garda, etc. State bodies would not normally come before the GCC - in fact, they are not obliged to do so - but of course if the Government contracts committee is asked for its views on a particular contract, it would obviously try to assist and give those views, which is what I understand happened in the case of DMDL. As Mr. McCarthy has said, in that instance the GCC, I understand, asked the Department of the Taoiseach to satisfy itself, if it wished to do so, that the legal authority was there to enter into the contract.

The other point to mention is that Mr. McCarthy is also correct in saying that the corporate governance guidelines, which are issued by the Department of Finance, would in this instance have been the 1992 guidelines which have since been updated. They say that it is the specific responsibility of the board to satisfy itself that procurement procedures are followed properly. Therefore, it is the responsibility of the board but, again, it is open to another body like a Department, if they so wish, to go further than that.

I call Deputy Rabbitte.

I understand the Dáil reporting staff are under considerable pressure at the moment, with a number of committees as well as the House itself in session, with the result that it is not possible to obtain the transcripts for this committee's proceedings. I hope some measures are put in place, perhaps over the Easter break, to bring us up to date with the valuable and complex evidence that has been given here.

On the question of the bid costs not being recouped, may I ask the representatives from the Department of Finance whether Mr. Teahon is correct in saying that according to international practice, some of the bid costs can be recouped? Is it the position of the Department of Finance that under no circumstances can any of the under-bidders be recouped for any costs?

I would not be familiar with what happens in every single other country and we must decide what is right in the Irish context. I am aware that there are other countries that, as a rule, do not recoup costs as well, so there are different practices. Clearly some countries do. In the Irish context, and as I said before this is something which has been our policy for quite some time, people enter into a competition and do not always win. As part of the discipline of making sure that good bids are coming in, if the system was that bid costs could be recouped, that could negate the quality of the bids that would be received. The question arising then is whether we should recoup part of the bid costs. As I was saying earlier, our policy, having considered that, is that it would not be appropriate. If a case is made or someone wishes to put a case to us that for certain reasons those bid costs or part of them should be recouped, we are open to considering that, but our policy to date is that we do not do so. We would have to consider such a case before coming to a conclusion.

Could Mr. Teahon tell me whether undertakings were given, in respect of the under-bidders here, that part of the costs would be recouped?

Mr. Teahon

Yes, it applied to all three.

It applied equally to all three?

Mr. Teahon

Yes.

Presumably, that will take its course. It has been suggested that the reason the Office of Public Works really fell out of managing this project was that it was too slow, cumbersome and bureaucratic and that the pool would not have been completed in time for the Olympics after this one if the Office of Public Works was involved. What does Mr. Murphy say to that?

Mr. Murphy

That simply is not true and the proof is that the Backweston element of the project, worth €200 million, is ready for signing. We can point to any number of projects that are being or have been completed as quickly as the private sector and often faster. To refer to the Deputy's previous question, we actually do not pay bidders either. We take a very pragmatic view - we assume that all well-organised contracting firms will have factored into their prices the ongoing cost of bidding in various projects. It is not that they are doing it on a charity basis.

I am still not entirely clear on why the Office of Public Works dropped out of the project. The Office of Public Works submission is an interesting book of documents. For example, the last letter here is a letter from Mr. Seán Benton, commissioner, to Mr. Donagh Morgan of Sports Campus Ireland on 24 April 2001 in which he highlights a theme that runs through the book - and I have only had a glance at it so far. He writes of a conflict of interest. What exactly was the concern——

Mr. Murphy

I will answer the question by harking back to last Thursday and Friday, when we debated this business of why the Office of Public Works backed out of the scheme. On Thursday we covered the point that having an agreement with a client in a formal way was perfectly normal and usual and we looked for that in any project we were carrying out with a Department, in some cases, or with some other body. That was one element of it. The second element, which I think was Friday's work, was the fact that we felt that some of the things being done in the procurement process for the aquatic centre were not being done as we normally do them. I mentioned the clear proviso that all of the actions were covered by legal advice and the AG has given his view on the legal advice. We were not comfortable with things that were happening.

There was a third element which ran through everything, which is that we were in an odd position. We were giving advice to CSID, that advice was not being accepted and consequences were following. An example was the DBFOM methodology which we said was unlikely to work because there was unlikely to be private money for the project. This turned out to be the case. There were other instances of our advice not being followed. Deputy Rabbitte has raised a fourth issue which is one of conflict of interest. That was also a factor, one of a range of factors. The then executive chairman of CSID, Mr. Teahon, told us - as can be seen from the papers - on 11 January 2001 that he had a possible conflict of interest with one of the bidders, whom I shall not name for the reasons I mentioned yesterday, as he had provided consultation services to a member of the consortium. This rang alarm bells with us, I must say, and we asked Mr. Teahon to take legal advice on that. The legal advice at that stage was that he should withdraw from the assessment process for the preliminary expressions of interest for the stadium project.

The later letter referred to by Deputy Rabbitte was ensuring that going forward, there would be absolute clarity on matters of conflict of interest. As I understand it, when bids were sought for the stadium project, there was a very clear, explicit and detailed section on conflicts of interest.

Is Mr. Murphy saying that Mr. Teahon did take legal advice which was that he should absent himself from involvement in the assessment panel?

Mr. Murphy

Yes.

Mr. Teahon has an observation.

Mr. Teahon

I want to make two comments. One was that as has been said, there were issues in relation to conflict of interest. In CSID we did in fact take legal advice and there was a special board meeting to consider all issues of conflict of interest and what the policy should be in relation to that. The board decided that the conflict of interest issues had been dealt with on foot of the legal advice and an explanation by those involved of their positions. Those papers can be made available to the committee.

When did that meeting take place?

Mr. Teahon

On 8 February 2001. There is an impression that I played a role in the participation of the Office of Public Works. I direct the attention of the committee to pages 124 and 125 of the document received from the Office of Public Works, a note of a meeting to which I referred previously.

We will publish this as well. It is fair to assume that we will publish everything.

Mr. Teahon

This is a report of a meeting chaired by the Minister for Finance where the issue arose of the reporting arrangement that would apply to the Office of Public Works personnel involved. I am recorded as saying that the Office of Public Works personnel should be seconded to CSID to carry out the project management task - in other words, I was perfectly satisfied. We had an extremely good relationship with Seán Benton and his colleagues up to that point and I was anxious that the reporting relationship should be clear, that it be a reporting relationship to CSID. The report of the meeting notes that the chairman of the Office of Public Works was not prepared to report directly to Magahy and Company - one possibility - and was concerned that my alternative proposal did not fit with his role as accounting officer.

Mr. Murphy

Seconding staff from the Office of Public Works made no sense. There would be no direct accounting relationships to the Committee of Public Accounts under such an arrangement. The newspaper reports that I was not prepared to report directly to Magahy and Company are accurate but one should look at the file generally. The Office of Public Works's role as project manager was to the company, CSID; executive services were parallel. There was no question of the Office of Public Works reporting to executive services, we were reporting to the board. While the sentence is accurate it must be viewed in context. I hope Deputy Rabbitte does not assume we are glossing over other items within these papers, I am simply trying to give an answer that makes sense. Other elements and other conflicts of interest are referred to.

It is an area we must reflect on because there are other references and documents. What prompted that meeting chaired by the Minister for Finance? Were there internal disputes between Departments and between Departments and CSID?

Ms Hayes

The Department of Tourism, Sport and Recreation wanted to have technical support available to monitor independently the progress of the pool contract and the wider project. We put a proposal to the Department of Finance the previous January for either additional resources to go to market and recruit technical support or the independent services of a group such as the Office of Public Works. We recognised, however, that Office of Public Works continuing as project managers to CSID and acting as technical adviser to the Department would constitute a conflict because we wanted independent advice on progress on the project at Abbottstown.

If the consultants are correct, the costs of the 1.8% structure of the contract have doubled, although Mr. Teahon contests that is not the case. If it is the case, are the elements that make up the Magahy and Company consortium benefiting equally from this explosion or are they being priced out on the basis of hourly costs?

Ms Hayes

As the contract is written as a contract with Magahy and Company, the arrangements the company would have with the individual subcontractors to the company would be a matter for it. On the resource plan proposal that has been put forward, my recollection is that there is provision for hourly charge out rates for named providers. Costs would total £100,000 per month but they are specified for each element.

So the charge out costs remain the same?

Ms Hayes

For each element, yes.

Even if the total take is far higher than we thought?

Ms Hayes

The charge out rates are fixed. They are not related now, as under the proposal from Magahy and Company, to the total costs of the project, they are related to the hourly input by each of the elements.

What role did you have in the revision of the contract that Deputy Ahern was talking about? Did you prompt that or did Ms Magahy come in and say that she wanted to cap it?

Ms Hayes

We would have raised the issue of the contract, particularly value for money and transparency, in April 2001. We had some discussions and there was also media comment about the percentage basis for the contract. To be fair to Ms Magahy, she shared our concern about perceptions that there might be an in-built incentive for her company to encourage the growth and cost of the project. She made it clear that was not her intention when she agreed the contract. When she returned with the revised fee proposal it was to address concerns that had been expressed in the media and by other parties.

Mr. Purcell

I understand why the board was reluctant to go for the revised proposal. No one wanted to go from the frying pan into the fire. As Ms Hayes said, charge out fees to tie in with a schedule were proposed. The proposed cap on the fees, however, amounted to £9.625 million because it envisaged much higher fees in the latter years. We were going from a situation where there was a putative cap of £6 million. I am not sure how both of these can be reconciled, but I can certainly understand the board's reluctance to adopt the new fees regime. In the light of events yesterday and the imminent appointment of a full time chief executive officer, and an earlier board decision that there should be a full-time finance director, it may well be that the basis for negotiation of the contract has changed, also taking into account the lower level of activity which is taking place in the interregnum between a decision to go for a stadium only or one with campus facilities, etc. In many ways the circumstances are totally different to those that pertained when the original executive services contract was agreed.

I would like to clarify a point with Mr. Brian Murphy. The last letter is dated 24 April and there is no further correspondence on the basis that the Office of Public Works opted out at that stage. Did Mr. Murphy attend any further meeting of Department heads or any other meeting in relation to this project? Was there a meeting in May that he attended with other heads of Departments and other interested bodies and are there any minutes or notes from that meeting?

Mr. Murphy

I do not recall a further meeting. When the chairman wrote to me asking for papers, this is the file I sent back. I would guess we have 50 files between the aquatic centre and the stadium proper. To answer the question, I have no direct recollection unless Margaret Hayes——

Does Ms Hayes have a recollection of a further meeting?

Ms Hayes

I wonder if the Deputy is referring to the presentation by the executive chairperson of the project to a number of Ministers.

Mr. Murphy

That is possible. That is not recorded on this file. It may be recorded on one of our other files. Not only have I not met anybody, I have not read this file in the past year, as it has only come up now.

At that presentation, were any reservations raised by the Office of Public Works and other parties about the whole concept?

Ms Hayes

There was a discussion. I am afraid I do not have a minute of the meeting. I cannot recall even the nature of the individual contributions that were made or who made them, but there was a discussion around the project.

There was a discussion around the project. Does Ms Hayes recall any major reservations expressed by the Office of Public Works or anyone else at that meeting?

Ms Hayes

Well maybe——

Mr. Murphy

As the Deputy mentions it and as Ms Hayes describes the meeting, I remember just one element of it. It was partly about this project and partly about the digital hub as far as I can recall. I remember the Office of Public Works was quoted as being one of the project managers, I think connected with the digital hub end of it. Apart from purchasing property in that part of Dublin, we have no other function on the digital hub side.

I was aware of the main meeting and Mr. Murphy's presence at it. Mr. Murphy is so meticulous in terms of the information given here, I thought it rather odd that having got all the other documentation, we did not get the minute of that meeting.

Mr. Murphy

Let me check on the next volume and I will see if——

He will make it available to the committee.

Mr. Teahon

Given that I am somewhat removed from him on the table, it would be useful if Mr. Dermot McCarthy . . . It is not that I have any problem with any of the information in question becoming available, but I think that meeting may have been a meeting of a Cabinet sub-committee and I think there may be issues that arise because it would . . . I am not 100% sure, but I think it is only right the committee would hear from Mr. McCarthy whether the information could be made available in the way we are talking about.

Mr. McCarthy

The meeting in question, which as I recall was on 2 March 2001, was in the nature of a Cabinet committee where two presentations were made in the presence of officials. My recollection of the discussions was that it was primarily in the nature of questions of the presenters. There was not a substantive policy discussion on the day in question as I recall, but, in so far as it was a meeting of substance, I think it was formally a meeting of members of the Government in committee.

I have one question for Mr. Murphy and one for Mr. Teahon. In view of the minutes on pages 124 to 127 of Mr. Murphy's report, can he indicate to the committee when he was told the Office of Public Works would not be given charge and responsibility for this major project even though it had carried out major projects including some in my area over the years? It certainly had the organisational ability to do that. Obviously it would have needed to bring in other professionals to advise and help on the project. On the minutes of the meeting of 2 March 2001——

What page is that?

It is page 127 of the minutes. After the departure of the Secretary General of the Department of Tourism, Sport and Recreation, Ms Hayes, for a telephone call, it was decided by the three remaining people that the Office of Public Works would act as advisers. Was that the stage at which Mr. Murphy was told the Office of Public Works would not be responsible for organising it or was he told by somebody else?

Mr. Murphy

It happened differently. As can be seen from the papers here, we were making every conceivable effort to carry out our duties as project managers. We had been appointed to be project managers for the stadium project. Given the elements detailed on file that we have just discussed now, we needed some form of formal agreement with the board of CSID as to what our formal relationship and clear duties were. As can be seen from the papers here, we did not succeed in reaching that point so we were left with three options. One option was that we would bid for the project management services in a public competition with any private sector companies that were bidding and in that way get a formal agreement. Alternatively, we could withdraw totally or, because Ms Hayes was looking for somebody to advise her Department and was about to hire somebody; we had that option also. It was our choice at that point whether we bid, withdrew or acted as advisers. We chose to act as advisers to the Minister for Tourism, Sport and Recreation.

Is Mr. Murphy saying the Office of Public Works was not in a position to take on and carry out this contract?

Mr. Murphy

We were not able to get an agreement with CSID.

That is different from what I am saying. Regardless of whether it was capable of doing it, I am trying to establish whether the Office of Public Works was telling the Departments involved it was capable of doing the job and completing it on time. That is a straightforward question and I would like a straightforward answer.

Mr. Murphy

The straightforward answer is that the elements we were hired for, so to speak, in March 2000 were the design, build and maintain elements of the contract for the stadium. There were other elements because the company was going the design, build, finance, operate and maintain route and we needed absolute clarity on our role and theirs. We could not get that clarity and we had to make our own choices at that point.

Are you saying you volunteered to step down from the total project and to act only in part of it?

Mr. Murphy

We withdrew because we could not get an agreement.

Does Mr. Teahon wish to comment?

Mr. Teahon

This is a very important issue. I wish to underline that I wished the Office of Public Works to continue as project managers - that was my position. I also believed that, for proper reporting relationships, the Office of Public Works involvement should be on the basis of the people involved being seconded to the company. I remain of the view that there is no reason that could not have been done. Had there been people in CSID responsible to me, as executive chairman, and other people also working in the project and responsible to the chairman of Office of Public Works, that would have been a clear case of divided responsibility. I would also point to the fact that, in page 25, the second last sentence of paragraph three, the Minister for Finance summarised the issue by saying it was up to Office of Public Works to decide if it was interested in performing that role - that role being that of project manager. It is a clear fact that the Office of Public Works made its decision on the basis that it was not prepared to second the people in question to the company. In the end, as I see it, that is the basis on which the decision was taken. It was not taken because I, as executive chair, did not want the Office of Public Works. I did want the Office of Public Works to be involved.

If Office of Public Works had taken the contract - and Mr. Teahon has said he would have welcomed that - then we would not be faced with the present problem. Is that not so?

Mr. Teahon

We need to bear in mind that we are discussing the situation as at March 2001. The Office of Public Works had been involved as project managers for most of the period in relation to the problem we are discussing. What we would have had was the involvement of Office of Public Works as project managers throughout the whole project and I would have welcomed that.

That is fine. I refer to questions on the Order of Business in the Dáil today - it is on the public record and I am just quoting my interpretation of the Tánaiste's reply to the party leaders. She indicated that if it had been known - in other words, if Mr. Teahon had disclosed this - there was a dormant company involved, the scene would have been different. In other words, the contract would have gone elsewhere. Does Mr. Teahon agree or disagree with those sentiments?

Mr. Teahon

I am concerned, as I said yesterday, that it should not appear that, somehow, there is some complete conflict between the Tánaiste and me.

There is. On the basis of what Mr. Teahon said this morning, there is, very definitely, a conflict between him and the Tánaiste, with due respect.

Mr. Teahon

I said yesterday, and I remain of the view, that, if I had given all the information I had in my possession to the Government at different stages, the decision would be exactly the same. That is my position.

Well, that is not the opinion of the Deputy Prime Minister of the State in Dáil Éireann this morning. I rest my questions on that because that is the nub of the whole issue.

Has Mr. Murphy any further points to make on that issue?

Mr. Murphy

I do not think so. I believe the papers the committee has before it show clearly why we were so anxious and so concerned to get a formal statement of what our position was. I believe I said, at the previous meeting on the aquatic centre, that the steps taken and the things done were not in accordance with our normal practice. We needed to go forward in control of what we did, so that we could carry out the work in a way that accorded with Office of Public Works best practice. We could not get that agreement from CSID.

In that respect, it might be helpful to publish that document, starting at page 67 which is, effectively, a memo to the Minister in charge of the Office of Public Works.

Publish.

Mr. Murphy

There will be names of companies in this and there is a deliberative process which is ongoing.

On precedent, steps can be taken to remove any names, as may be appropriate, before publication.

It is not technically possible to do that immediately. I note what Mr. Murphy has said.

Is Mr. Murphy saying it should not be published?

No. Mr. Murphy has drawn attention to the fact there are companies named in this document and, on the basis of earlier discussions, we do not wish to have those names mentioned here.

Is he saying the document should not go into the public domain?

Mr. Murphy

No, I am quite happy to have the document go into the public domain but I would not be happy that companies' names should be included, simply because there is a bidding process that, according to the Attorney General, has not yet finished.

Why can we not remove those names when publishing?

I will ask our legal adviser to comment on that.

Ms L. O’Hegarty, Legal Adviser to the Houses of the Oireachtas

On that point, I understand that everybody present has a copy of the document. Perhaps the simplest way to deal with it, to avoid technical difficulties, would be for everybody to consult their own copies, rather than displaying it on screen, as I understand the electronic system feeds into the external broadcasting system. Names of companies need not be mentioned when people refer to the document.

Thank you. Does Deputy Rabbitte wish to discuss the reference at page 67?

No, I was merely drawing attention to this document in the context of your question, Chairman, to Mr. Murphy. This document explains a good deal of the background and the process. Mr. Teahon may wish to comment on it and it should be brought into the public domain. I do not understand why we cannot display it with the names of the companies blanked out, if that is appropriate.

What is the total area of the site for Campus and Stadium Ireland?

Mr. Teahon

Approximately 500 acres.

Is the site for the aquatic and leisure centre part of that 500 acres or is it a separate site?

Mr. Teahon

It is part of the 500 acre site. It is on the north-west, or, perhaps more correctly, the centre-west of the site.

Who are the current owners of the 500 acre site?

Mr. Teahon

It is owned by the Minister for Agriculture, Food and Rural Development.

In the application for planning permission for the aquatic and leisure centre, on 22 October 2000, was there a letter of confirmation from the owner to enable the planning permission to be sought?

Mr. Teahon

There was. The Deputy asked me a number of questions yesterday about the planning permission and I have checked the position. If he wishes at any stage, I can spell it out.

Perhaps Mr. Teahon will spell that out before I proceed.

Mr. Teahon

The position was that we made it clear in the request for detailed proposals and in the discussions surrounding it that we wished to have from each of the three bidders drawings at planning permission level. Each of the three bidders gave us drawings that could have been lodged with planning applications. When the assessment panel made its judgment, we contacted S&P Architects and asked for a licence to use its drawings for CSID to make a planning application. That was agreed. The application for planning permission was lodged with Fingal County Council on 22 December. In light of what the Deputy said yesterday, it is important to say that it followed an extensive period of pre-application discussion with the relevant officers of the planning, engineering and architect departments of the county council, such that they had a full appreciation of the nature and extent of the proposal. This process of pre-application meetings between an applicant and the relevant officers of the local authorities is a standard practice. The application was lodged in accordance with the provisions of the Local Government (Planning and Development) Regulations, 1994. Under Article 39 of the regulations, the planning authority cannot make a decision on the application until the expiry of 14 days, beginning with the date of receipt of the application. Furthermore, under the Local Government (Planning and Development) Act, 1963, the maximum period for the determination is two months form the date of application, which in this case was 22 December. Contrary to any impression I may have given yesterday, there was no request for further information.

I am quite familiar with planning regulations because of my membership for almost 30 years of a local authority. I complimented Fingal County Council on making a decision within the statutory period of two months from date of application, without, as I have now found, recourse to additional information. It is a great achievement. Permission for a house extension in Galway would not be obtained in two months, because further information would surely be required. The application for this project was much more than a simple one for a house. Fingal County Council is to be complimented on its speed and efficiency in this case. It is extraordinary and I wish other local authorities would follow its example.

I thank Mr. Teahon for the additional information he has been able to supply this morning. I wondered if additional information had been sought, but the authority seems to have been quite satisfied with the application from the beginning. I queried the ownership of the entire site resting with the Department of Agriculture, Food and Rural Development. It is the owner of the aquatic and leisure centre site, which we are dealing with in this part of our investigation. Does the Department have full and correct title to this site?

Mr. Teahon

As I understand it, it has.

Is it in a position to transfer ownership if the overall project becomes a reality?

Mr. Teahon

Yes.

Have any steps to do that been taken yet? The aquatic and leisure centre will become a reality and no one on this committee objects to that. We are anxious to see it done, but we are also anxious to ensure that we get value for money in the expenditure of State funds. Has that part of the site been transferred to whichever company will own the centre?

Mr. Teahon

There have been discussions. There is, as members of the committee will be aware, a proposal for legislation. Margaret Hayes may wish to spell that out. The intent is to invest ownership in the authority put in place under legislation.

Has any research been carried out into the title of the site as held by the Department of Agriculture, Food and Rural Development?

Mr. Teahon

Not that I am aware of.

At what stage might that arise? If I were building a property, I or my legal advisers would ensure that I was able to obtain correct title for the site before I spent any money or erected a building.

Mr. Teahon

Perhaps it is best if I undertake to check with the Secretary General of the Department of Agriculture, Food and Rural Development. It may well be that in the context of providing us with the licence that they did. I do not know if they did. I am simply unaware, though I can certainly check.

I will raise that again on Thursday.

I am reluctant to initiate any questioning, if there is a shortage of time. I think we said we would stop at 1 p.m.

We said that originally, but I will allow you and Deputy Durkan to say a few words. If the Deputy wishes to leave it, that is fine.

I will leave it.

I will not delay the meeting as there is a quite an amount of stuff to go through.

How many were in the assessment group originally and eventually?

Mr. Teahon

At the expression of interest stage, there were three members, including myself, Laura Magahy and Seán Benton. I would have to check the papers. We were members of the different assessment panels.

There were three members at that time.

Mr. Teahon

There were three members when interest was initially expressed. There were additional members for each of the subsequent stages.

In respect of each segment of the proposal?

Mr. Teahon

There was an outline bid, which I can find if I go through the document, and there were some additional members. For the detailed bid there were a number of other additional members.

Is it that different stages were assessed by different people, not different segments of the contracts?

Mr. Teahon

There were three stages to this.

For which there were different assessment groups.

Mr. Teahon

There was an assessment panel for the expression of interest stage, an assessment panel for the outline bid stage and an assessment panel for the detailed bid stage. Three members, myself, Laura Magahy and Seán Benton were members of all the assessment panels.

There were three members providing the required continuity.

Mr. Teahon

I am looking at the outline bid stage and the assessment group was made up of we three. That is on page 9.

The assessment group advised the board, I presume, or apprised it.

Mr. Teahon

The assessment panel made a judgment.

How did the panel provide colleagues on the board with the information it had? Was it by way of formal meeting, letter or some other means and were all board members informed?

Mr. Teahon

There are minutes of the meetings of the assessment panel and decisions were made on foot of those. In the case of the detailed bid, I made the decision acting, as I said previously, on what I saw and still see as delegated authority from the board. In other words, the board had put a process in place. The board was aware and had signed off on the process. In other words, there is a tender, there will be bid stages, there are assessment panels and there are decisions that fall to be made.

Did the board formally delegate that authority to Mr. Teahon or did he assume that authority on the basis of a board meeting?

Mr. Teahon

At the meeting that took place on 7 March or 8 March 2002, the board said in its report to the Minister that it had put a process in place and that it had delegated authority to the executive to implement that process. Therefore, the board is clearly of the view that it had put a process in place and that it had delegated the authority to the executive. The board did say in that report that it believed I should have informed it of the decisions before——

That is what I was coming to. The meeting in March 2002 confirms that authority was delegated either formally or informally and that Mr. Teahon had that authority. However, at that meeting in March 2002, it would appear that that delegated authority had gone by virtue of certain information not being made available to the rest of the board. Is that not true?

Mr. Teahon

Not in my opinion.

Is that not what the most recent correspondence from the board is saying? It says that it believed Mr. Teahon had authority delegated to him by it by virtue of the role he played, but it is also saying in the same breath that information available to Mr. Teahon was not made available to all members of the board. As a result, that calls into question the issue of delegated authority.

I asked yesterday for the advice or formal notification from PricewaterhouseCoopers in regard to the status of the company in question - Waterworld UK.

Mr. Teahon

We have that document and we can make it available to the committee.

I would like that available as soon as possible.

I am conscious of the pressure of time. Mr. Teahon assumed the three main competing bidders were entitled to expenses of £20,000 each.

Mr. Teahon

The three bidders that had got to the detailed bid stage.

Correct. Is that figure of £20,000 based on Mr. Teahon's information and experience in dealing with them by way of contracts internationally and through the EU procuring process? Arising from questions raised by Deputy Rabbitte, how familiar is Mr. Teahon with that procedure? I know he mentioned earlier that different countries have different rules and regulations, of which we are aware. Could Mr. Teahon repeat exactly what the response of the Department of Finance is in those circumstances and to what extent the three bidders in question received their compensation or to what extent they have refunded any compensation received?

Mr. Teahon

On the last point, I am not familiar with the particular instance of these bidders. All I can comment on is the policy as set out by the Department of Finance and the fact that there was a request from the Department of Tourism, Sport and Recreation to our Department seeking sanctions for payment of the amounts. We did not give that sanction. We did not give it because our policy is that we do not favour the recruitment of bid costs.

Does Mr. Teahon know if the amounts were paid?

Mr. Teahon

I am not aware.

Is anybody? Were the amounts in question paid?

Mr. Teahon

The £20,000?

Mr. Teahon

No.

Deputy McCormack raised the question about the title clearance in respect of the lands on which the project is progressing at present and the extent to which progress has been achieved in that area. I understand Mr. Teahon will make the information available to the committee. When did work start on the project?

Mr. Teahon

It started in May 2001.

In 2001, almost a year ago.

Mr. Teahon

Yes. Could I add another point for the committee's information which I should have mentioned in answer to Deputy McCormack. I made it clear to the Deputy yesterday why CSID made the planning application rather than the consortium. It demonstrates that we had not made the consortium the preferred bidder. By getting the right to put in the planning application ourselves, in the event that we had not concluded with that consortium and made it the preferred bidder, as we did, we could have had either of the two bidders, if they were prepared to do so, build what was clearly the best designed aquatic centre.

We learned yesterday that Mr. Teahon made a presentation at Cabinet.

Mr. Teahon

Yes, I think Dermot McCarthy was more accurate. The presentation at Cabinet is made by the responsible Minister. I was present at the Cabinet meeting to facilitate the discussion.

Did Mr. Teahon address any of the issues raised?

Mr. Teahon

I answered some questions, yes.

Were some questions raised?

Mr. Teahon

Yes, there were.

Did Mr. Teahon clarify them to the best of his ability?

Mr. Teahon

Yes, I did.

Mr. Teahon had information which he said he did not divulge previously in respect of the advice from PwC.

Mr. Teahon

That is correct.

Was Mr. Teahon not asked about that question at the time——

Mr. Teahon

No.

——because none of the Ministers or the Taoiseach was aware of the existence of that advice.

Mr. Teahon

Correct.

Was the Attorney General——

Mr. McCarthy

I do not wish to be unhelpful to the Deputy or the committee, but I think it would be difficult for Mr. Teahon or any of us to answer questions about the nature of a discussion at a Government meeting.

I appreciate that and I agree with Mr. McCarthy. However, as clarified last evening, while members of the public, proposers or business people do not normally attend Cabinet meetings, one would assume that the confidentiality that applies to Cabinet Ministers and Cabinet meetings would scarcely apply to a member of the public attending in that capacity. I am not aware that a member of the public is bound by the same regulation, but I will be happy to hear clarification on that. My own belief and advice is that that rule does not apply.

Mr. McCarthy

I hesitate to disagree with the Deputy but my view is that it does under the Constitution.

All right. I also presume that rules apply in respect of who shall attend Cabinet meetings, governed by the same regulations.

Mr. McCarthy

The Constitution regulates who shall be a member of the Government, not who shall attend. I do not want to restrict the Deputy's right to pursue matters, but we have certain constraints.

A critical matter arises in this regard. I am presuming the Attorney General was present at that Cabinet meeting. I am not seeking confirmation, but I am presuming he was present, as were a number of Ministers and the Taoiseach.

Mr. McCarthy

Again, there is a difficulty in giving any response to the question. The Deputy has made an assumption on which I do not think I am in a position to comment.

For the benefit of the innocent, of whom I am one, my presumption is that the Cabinet meeting was attended by the usual attendants at Cabinet meetings and that a decision was made. All such decisions are subject to advice to the Government. Presumably, advice was given to the Government on the basis of a proposal being put before Cabinet at that time. One of the people who made a presentation in respect of that Cabinet meeting had prior information which clearly would create problems for the Attorney General if he was privy to it. I am not asking for confirmation of that; I am volunteering that information. I will return to that.

We received a series of fax messages yesterday, signed by Donagh Morgan, from Sports Campus Ireland. The fax refers to legal advice sought in response to animated discussions which took place in October 2000 and on 4 and 5 April 2000. These are referred to further in the report prepared by the Office of Public Works. The letter dated 31 October refers to Executive Services, Government contracts committee. It says:

Dear Donagh,

I refer to the above matter and to previous discussions.

You have asked for my opinion as to whether or not the approval of the Government Contracts Committee ("GCC") is required in relation to the appointment of Magahy & Company Limited for the provision of Executive Services to Campus & Stadium Ireland Development Limited ("CSID").

He continues: "In my opinion, the consent of the GCC is not required..". He then sets out the reasons for this view. He goes on to qualify various aspects of it and goes on to conclude that the daily fee to be agreed in advance should be determined by reference to a schedule of fees included as an appendix to the administrative budget, etc. "Having regard to the nature of the executive services being obtained, it is not considered appropriate to set daily fees". He goes on to qualify that and I intend to refer to this again.

Here is a Government sponsored project which has obviously generated an amount of discussion between the legal advisers to Sports Campus Ireland and the board or the executive. It would appear to me that a simple way to find out what was required was to simply ask the Government's legal adviser. After all, the senior Department is sponsoring this proposal yet there is a series of legal documents, transmitted back and forth, just to clarify that it was possible to proceed in a particular fashion. Why was it necessary to seek such clarification to proceed when, quite simply, it was a matter of ringing up the Attorney General and asking him if this was or was not the way to proceed? After all, the Government was the sponsoring body and it was the body most likely to be affected. Why was that not done?

Mr. Teahon

It begs the question of what a company, any public company and not just CSID, should do in relation to legal advice. We have a series of public bodies in Ireland today. It seems to me that if each of those public bodies, when they have a legal issue, were to contact the Attorney General's office, it would be impossible. All the legal advice——

It is a potential billion pound project.

Mr. Teahon

Is the Deputy suggesting that every public body in Ireland that has a public procurement issue should contact the Attorney General's office to check the legal position?

Every public body does not have a potential billion pound project. This is the important thing. The Tánaiste said this morning it was a £700 million project, excluding the cost of the lands in the ownership of the Department of Agriculture, Food and Rural Development. This is a bigger project than a Government would normally have to approve. It was also a project that had to go to Government for particular approval. That does not happen with a local authority project; it goes through normal procedures.

Mr. Teahon

We are talking about two different situations. When the contract for the aquatic centre fell to be approved that contract went to Government, as is spelt out in the appendix to the Attorney General's report. When it was a contract, the contract went to Government for approval and the Government approved the contract. The memorandum that went to the Government and all the issues are in the Attorney General's report.

Why did you not get legal advice from the Government?

Mr. Teahon

The Government did have legal advice from the Attorney General, as is spelt out in that memorandum.

However, the Attorney General was not aware of all the circumstances surrounding the case. There was particular information of which the Attorney General was not aware. I presume your legal advisers were aware of that. CSID's legal advisers were aware of the information that had not been disclosed to the Government or to the assessment group. Is that true?

Mr. Teahon

The Deputy is talking about two different situations. We had a situation in December 2000 in which one decision was taken. We then had a situation in December 2001 and thereafter, which is the memorandum Deputy Lenihan referred to yesterday. They were two different situations. What the Deputy is now referring to is legal advice which we sought, I believe correctly, in relation to whether the executive services contract should be put to the Government Contracts Committee.

The advice you got was that it did not need to be put to the committee.

Mr. Teahon

Yes. However, we are talking about two situations that are completely different in terms of their significance.

I want to return to this again, Chairman. I will be happy to return to it again when appropriate.

The Comptroller and Auditor General would probably like to assist in that.

Are you free to publish that document, Chairman?

We can agree to it because the company names have been blacked out.

I wish to put one point to Ms Hayes. When she expressed her disquiet to Ms Magahy about the 1.8%, did she say that her concern about it was perception?

Ms Hayes

I said that Ms Magahy took on board our concerns because she, too, was worried about the perception being reported in the media.

Does that imply, Ms Hayes, that you were only worried about perception?

Ms Hayes

No. Naturally enough, I was worried that 1.8% would continue over a five year period. While there was a certain estimate in place, one never knows what happens with estimates and it was linked to that figure. I was looking for more certainty and transparency.

Mr. Teahon

Could I make one point which perhaps I should have done at the outset? It is not something that has been spoken about today. I am very concerned at the way in which this has been reported in the media; it concerns the discussion you and I had yesterday. I believe that, in fairness, this reference to 20 years experience should be clarified by the media. The reference was made in the letter from S&P Architects which is at annexe F. It states clearly, and one can agree or disagree with it, that Waterworld UK was the UK company of one of the world's leading water park operators with approximately 20 years experience. The media has virtually unanimously carried this, as it was said that Waterworld UK Limited had 20 years' experience. In fairness to all the companies involved in this, that point should be clarified.

I thank Mr. Teahon for the clarification on that. Waterworld was incorporated in 1997 and, therefore, it would have only had five years in operation.

Mr. Teahon

Exactly.

Mr. Purcell

This is an observation which might help in regard to the matter of the executive services contract and the role of the GCC. I think I heard the Department of Finance representative say earlier in connection with the digital hub executive services contract - it would be my view also - that the GCC's remit would not cover the semi-State bodies such as Campus and Stadium Ireland. It was only because of a concern by the Department of the Taoiseach in the digital hub case, where it was felt it might be desirable to go to the GCC, but there would have been nothing within the remit of the GCC which would have covered that and it was seen as something that was desirable. In my opinion, legal advice did not have to be obtained as to whether this particular services contract in the case of Campus and Stadium Ireland required GCC approval. It did not require it although it may have been desirable to do it.

Why was it sought?

Mr. Purcell

I do not know. I suspect it is a belt and braces idea.

We will leave it on that note. I want to remind members that the aquatic and leisure centre bidding company information they have received is confidential and I ask them to treat it with discretion.

In the interests of justice, as a person who has been referred to in the proceedings of the committee, it is proposed that Ms Laura Magahy of Executive Services be invited to appear before this committee at its meeting on Thursday, 4 April 2002.

The witnesses withdrew.

The committee adjourned at 1.35 p.m. until2 p.m. on Thursday, 4 April 2002.
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