COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 27 May 2004

Vote 44 — Flood Relief.

Mr. Sean Benton (Chairman, Office of Public Works) called and examined.

Chairman

We are dealing with Chapters 3.1 and 3.2 of the Report of the Comptroller and Auditor General and Vote 44 — Flood Relief.

Witnesses should be made aware that they do not enjoy absolute privilege. Members' and witnesses' attention is drawn to the fact that 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 who are identified in the course of the committee's proceedings. These include the right to give evidence; the right to produce or send documents to the committee; the right to appear before the committee, either in person or through a representative; the right to make a written and oral submission; the right to request the committee to direct the attendance of witnesses and the production of documents; and the right to cross-examine witnesses. For the most part, these rights may only be exercised with the consent of the committee. Persons invited to appear before the committee are made aware of these rights and any persons identified in the course of proceedings who are not present may have to be made aware of these rights and provided with the transcript of the relevant part of the proceedings that the committee considers appropriate in the interests of justice.

Notwithstanding this provision in legislation, I remind members of the long-standing parliamentary practice to the effect that they should 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. They are also reminded of the provision in Standing Order 156 that the committee should 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.

I ask Mr. Benton to introduce his officials.

Mr. Seán Benton

With me are commissioner David Byers, who looks after our property portfolio, and commissioner Clare McGrath, who looks after the projects. Mr. Joe Farrell, our accountant, Mr. Tony Smyth, the principal engineer and officials from the Department of Finance are also with me.

Mr. David Hurley

I am a principal officer in the organisation management and training division. I deal with the board's administrative budget. My colleague, Mr. Dermot Quigley, is a principal officer in the public expenditure division. He deals with the programme expenditure for the OPW.

Paragraph 3.1 of the report of the Comptroller and Auditor General reads:

Chapter 3

Office of Public Works

3.1 Provision of Accommodation for Probation and Welfare Service

It was noted in the course of audit that the Office of Public Works (OPW) leased the properties as shown on Table 3.1 to provide office accommodation for the Probation and Welfare Service (PWS).

Table 3.1 Properties Leased

Property	Location	Rent Commenced On	Term Years	Lease Signed	Annual Rent Payable €	Annual Service Charge €	Square Feet	Cost of Fit-out €	Date of Completion of Fit-out	Date of Occupation
A	Dublin	1 / 6 / 01*	10	Not Signed	152,368	49,460	7,500	1,530,000	Ongoing	October 2003
B	Dublin	1 / 5 / 00	10	Not Signed	45,802	—	3,000	360,000	August 2003	August 2003
C	Midlands	1 / 2 / 00	20	Not Signed	26,664	3,631	2,100	110,599	25 / 9 / 00	February 2001
D	South East	14 / 2 / 00	20	Not Signed	19,046	—	2,000	87,106	28 / 1 / 00	June 2000
E	North East	17 / 9 / 00	9	Not Signed	48,885	—	2,806	**	**	July 2001

*Lease commenced 1/6/00, first year free. Service charges commenced 1/6/00.

**Fit-out carried out by the Department of Justice. Details not available.

An examination of the files relating to the leasing of the properties revealed the following:

Delays in signing lease agreements

At the time of audit in June 2003, lease agreements had not been signed in respect of any of the properties, even though lease payments had begun from as early as February 2000.

As I was concerned that delays in the signing of the lease agreements may have given rise to the State not having the protection against risks which it would normally have in a signed agreement, I enquired from the Accounting Officer as to the reason for the inordinate delay in signing the lease agreements subsequent to the commencement of lease payments, and whether he thought the delays were justified.

The Accounting Officer stated that the process of completing the formal legalities associated with the signing of lease agreements could at times be somewhat protracted. Invariably detailed issues relating to such matters as insurance, repairs and maintenance, rent reviews, service charges, etc, arose which required clarification, discussion and negotiation. All of this could result in extensive correspondence and consultation before agreement was reached.

Notwithstanding this, he accepted that the completion of the legal process had taken longer than it normally would. He attributed this in part to discontinuities in work-flow which occurred following the re-organisation of the work in the Property Management Services area of the Office and also, in the case of property A, to uncertainties surrounding the project's future following objections from local traders and residents to the location of a Probation and Welfare Service unit within their locality. He stated that leases for properties B, C, D, and E would soon be signed and that the Chief State Solicitor was continuing to pursue all outstanding issues in relation to property A with a view to finalising matters as soon as possible.

Fitting Out

Cost of Fitting Out

The cost of fit out of property A was estimated to be between €127,000 and €152,000 at the time the building was being initially assessed as to its suitability in May 2000. However in June 2001 the OPW consultant architect estimated that the cost of the fit out would be €1.2m, (excluding design fees) and in August 2002 expressed concern that some of the work included in the proposed fit out would not normally be included in a fit out project. Her concern centred on proposed work on the boiler room, plant room, replacement windows, insulation to external walls, mechanical and engineering services, new felt on roof, access ladders, fireproofing, fire alarms and emergency lighting. The actual cost of fit out, work on which was commenced in April 2003, is expected to be about €1.53m.

I asked the Accounting Officer if he was satisfied that all of the works carried out were properly the responsibility of and should be paid for by the OPW rather than the landlord, particularly in the light of the reservations expressed by the consultant architect, and that they will not be used by the landlord at rent review stage to increase the rent.

I also sought information from him on the huge disparity between the estimated and actual fit out costs, and the wisdom of carrying out such major works without a lease agreement being in place.

The Accounting Officer stated that the landlord was carrying out all works proper to his remit and that there were no works being carried out by OPW that were the responsibility of the landlord.

He also stated that in these situations OPW always insisted that any fit out works carried out by OPW were excluded at rent review, and that although the lease had yet to be signed, the Chief State Solicitor had made it clear to the landlord's solicitor that OPW would not agree to any rent review clause which did not except the OPW fit out from the rent review.

The original estimate of €150,000 was a preliminary estimate based on a walk through inspection. This estimate did not take into account the final brief of requirements. It also did not include mechanical and electrical costs, structural partitioning works, air conditioning and the costings were not based on any detailed sketch design drawings. The final cost of €1.53m was in line with current OPW cost norms.

He went on to state that in situations where a customer Department had a priority need to gain access to a premises, a judgment had to be made by the OPW between the obligation to satisfy the customer Department's requirements on the one hand and the practicalities of completing the legal formalities on the other hand. Bearing in mind the fact that the detailed legal formalities could take some considerable time to complete, the decision had been taken that the fit out works should commence prior to the finalisation of the lease so as to facilitate occupation of the premises by the PWS.

Delays in Completing Fit-Out

Even though lease payments had begun on properties A and B in June 2001 and May 2000 respectively, the fit out work will not have been completed by OPW in the case of property A until October 2003, and in the case of property B was not completed until August 2003.

I enquired from the Accounting Officer as to the reasons for the inordinate delay in having the fit out works completed and bringing the buildings into productive use, subsequent to the commencement of lease payments, and whether he thought that the delays were justified.

The Accounting Officer informed me that the main reason for the delay in completing the fit out works for property A was the fact that local traders and residents had been uneasy about the proposed use of the premises. Furthermore, various works had to be completed by the landlord before the premises were deemed suitable for the PWS, such as replacement of stairs, installation of fire doors and installation of a lift.

In relation to property B he stated that the OPW fit out could not be progressed until necessary remedial works had been carried out by the landlord, and that as soon as the landlord's works had been satisfactorily completed, OPW had commenced the fit out and the premises had been occupied by the PWS in August 2003.

Delays by Landlord in carrying out Repairs

In October 2001 the consultant architect for OPW raised concerns over the condition of the brickwork, roof and drains in relation to property B, and indicated that there were no drainage or water services provided for the unit. In May 2002 he produced a further report containing details of matters to be completed before the fit out could go ahead, including water and drainage. Despite writing to and meeting the Landlord in July 2002, it seemed from documents on file that the repairs had still not been satisfactorily completed by November 2002, when the Fitting Out was in progress.

I asked the Accounting Officer if the building had been inspected prior to the commencement of lease payments, and if so the reasons why the structural repairs needing to be carried out by the Landlord, which had still not been completed by November 2002, had not been identified and completed before any rent was paid.

The Accounting Officer stated that the building had been inspected prior to the commencement of lease payments, but that this acquisition must be viewed in the context of the prevailing market conditions at the time, when there was a scarcity of suitable accommodation available and conditions were advantageous generally to landlords. Because of the priority requirement of the PWS it had been decided to secure the premises as quickly as possible. At all times discussions had been ongoing with the landlord, regarding the works to be completed by him prior to the commencement of the OPW fit out. A consultant architect had been appointed by OPW to oversee the project and the landlord's works had been clearly identified. The consultant Architect involved had clearly certified that all necessary landlord works had been satisfactorily completed prior to the commencement of the OPW fit out in late 2002.

Rent Levels

The OPW valuer estimated that the rent payable for property A should have been €11.50 per square foot.

Rent at the rate of €20.31 was subsequently agreed. The lease term was 10 years, the rent would be payable in advance and the first year would be free. A rent review would take place after five years to open market value.

I asked the Accounting Officer if he was satisfied that the rent agreed, which was almost twice the going rate in the area as estimated by the OPW valuer, was justified in the particular circumstances.

The Accounting Officer stated that while the rent agreed was €20.31 per square foot, per annum, the fact that the first year was rent free had effectively reduced this to €16.25 per square foot. This was practically half the initial asking price of €29.20 and compared extremely favourably with rents being paid by other tenants in the shopping centre. This level had been achieved despite the urgency of the requirement and the lack of suitable alternatives, and it was the professional advice of the OPW Valuer that these were the best terms achievable.

He informed me that the leasing of property A should be viewed in the context of the extremely location specific requirements of the PWS particularly in the greater Dublin area. The general policy was to relocate from central city locations to local communities and the availability of suitable accommodation in such circumstances was often problematic.

OPW Management Processes

As the audit findings seemed to raise serious questions as to the adequacy of OPW's procedures in relation to the renting of property, I put it to the Accounting Officer that there needed to be a greater emphasis by OPW on bringing properties into productive use within a much shorter timeframe following the commencement of lease payments, clearer rules needed to be determined in relation to the expenditure which would come within the definition of fit out costs, and procedures needed to be streamlined so that there was no undue delay in signing lease agreements once the terms had been agreed, to ensure that the State's interests were adequately protected.

The Accounting Officer stated that in the past year a full set of business procedures had been prepared and approved to clarify the administrative process in the property management area of the OPW. These procedures had recently been endorsed by the National Standards Authority of Ireland (NSAI) and had been accepted by the Authority as being in compliance with I.S.O. requirements. The application of these procedures was being regularly monitored both internally by the OPW Quality/Compliance Manager, and externally by periodic NSAI audits. It was expected that this would lead to a more consistent and effective operation of the OPW property business unit. The Commissioners further expected that the consistent application of the new business procedures would result in property acquisitions, particularly leases, being completed in a timely manner. This was dependent on the cooperation of the landlord, as some matters such as structural works were issues which necessarily had to be agreed between OPW and the landlord. Notwithstanding the foregoing, there would, in exceptional circumstances, be instances where all of the agreed procedures could not be followed to the letter.

Mr. John Purcell

This chapter records the results of an examination into the provision of accommodation for the probation and welfare service. Consequent on a major review of its operation, completed in 1999, the probation and welfare service localised some of its work, including the management of offenders in their communities. This created a need for office accommodation in the immediate localities and the OPW, as part of the property service it provides to Departments undertook the task of sourcing premises and making them suitable for the purpose intended.

The report lists five properties leased by the OPW in 2000 to meet the needs of the service. In all five cases no lease had been signed at the date of my report three years on and I was concerned that the State's interests, including the expenditure incurred in fitting out the premises, were not adequately protected. The Accounting Officer outlined the general type of factors that contributed to the delays in signing leases but acknowledged that administrative difficulties within the property management services division of OPW did not help the situation.

I was also concerned about the lack of progress in occupying the premises in two cases — property A, which is in the Donaghmede shopping centre and property B in Parnell Street in Dublin city centre. In both cases, more than three years had elapsed before the premises came into use. In the interim, rental and service charges, as indicated in the table, had to be met — approximately €500,000. The committee will note that the most expensive property was the Donaghmede office, which cost more than €1.5 million to fit out and incurs annual rental and service charges totalling €200,000. Both the fit-out and rental costs are far in excess of what was originally envisaged but the Accounting Officer informed me they were in line with current OPW cost norms.

The examination emphasised the importance of bringing properties into productive use more quickly, the need for clear guidance as to what constitutes the State's obligations in the fitting out of leased premises and the need for a mechanism to protect the State's interests where finalising of the lease arrangements is unduly delayed. The committee will see in the final paragraph that the Accounting Officer refers to internal changes in OPW procedures, which should result in a more consistent and effective operation of the property management function and this, in turn, should lead to improvements in the areas that were the subject of my concern.

Chairman

Mr. Benton does not wish to make an opening statement. With regard to the Comptroller and Auditor General's comment on properties A and B, it is extraordinary——

Deputy B. O’Keeffe

Why is Mr. Benton not making an opening statement in response to serious issues raised regarding buildings that lay idle for a number of years having been fitted out at a cost of millions? The Accounting Officer should make a response rather than allowing us to go straight into questions. This has not happened previously and I wonder why.

Chairman

It has happened previously.

Mr. Benton

There may be a misunderstanding. I am happy to address the issues and I was going to do it by way of fairly detailed reply to questions.

Deputy B. O’Keeffe

Millions of euros of taxpayers money has been spent on property, which has not been utilised. If Mr. Benton had provided a response, that might have necessitated more in-depth questions. It would have been more appropriate if a response to the Comptroller and Auditor General's report had been furnished rather than allowing the Comptroller and Auditor General to make a statement while Mr. Benton sat waiting for members to ask questions. It is not appropriate.

Mr. Benton

Perhaps there is some confusion. The office gave a comprehensive response to the Comptroller and Auditor General when he raised the question. I do not see the value in simply repeating that response and, if elements of that need clarification and more detail is sought, I would be more than happy to provide it.

Deputy B. O’Keeffe

This is the first time during this Dáil that there has not been a response to what the Comptroller and Auditor General said at a meeting. It merits a response.

Chairman

I sincerely hope the response will become evident during the questioning that will follow.

Mr. Benton

That is the intention.

Chairman

I acknowledge Deputy Batt O'Keeffe's comment. It would be advisable that a statement be made in future.

I refer to the Comptroller and Auditor General's comment on properties A and B. There were no leases but rent was paid. It was originally estimated the massive refurbishment of property A would cost €154,000 but it ended up costing €1.5 million. Will Mr. Benton explain this?

Mr. Benton

As I said in reply to the Comptroller and Auditor General's audit query, a number of factors are involved. First, we have been reviewing and updating our procedures on the property acquisition front and improved procedures, which have been certified by the NSAI — our property services people have since been awarded ISO accreditation — and referred to in the report are in place. I am confident the kind of events referred to in the report will not occur again.

Chairman

We are dealing with the Comptroller and Auditor General's report. That is like someone going into the court saying, "I offended, it won't happen again." In this case a property was rented on 1 June 2001 and it was still vacant in October 2003. The landlord received €200,000 per annum in rent and he also received a capital allowance on investment in his property. Will the capital investment by OPW encourage increases during future rent reviews?

Mr. Benton

With regard to the delays, they were caused mainly because of very significant changes required by the client, the probation and welfare service. The original request to the OPW was for accommodation of approximately 2,800 sq. ft. As the requirement was examined in more detail, that increased to more than 7,000 sq. ft. That required a fundamental rethink of the project.

Another factor causing the delay was objections by local traders and residents in the area to the location of a probation and welfare function in the Donaghmede shopping centre.

Sitting suspended at 11.39 a.m. and resumed at 11.41 a.m.

Mr. Benton

There were two main reasons for the delay in occupying the building. There was a very significant change in the requirements of the client, almost a tripling of the requirements. Initially it was being dealt with as a minor project in the OPW but as the client's requirements increased we realised there would be significantly more expenditure in fitting out the office to the required standard. We elevated this to a major project, which requires different procedures.

A delay was also caused by the objection of local residents and traders in the area, which are well documented.

Chairman

Why was the lease not signed? One would imagine in any business arrangement that when meeting one's landlord one would discuss any caveats with the deal and that there would be a contractual document. It seems quite extraordinary that work would commence on a property without a lease being signed.

Mr. Benton

It would certainly have been preferable to have had a lease signed——

Chairman

Would it not be essential?

Mr. Benton

It has not always been the case but new procedures specifically prohibit the payment of rent and service charges until all the legal formalities have been carried out. With this property rent was withheld until the lease was signed. Initially we entered the premises on the basis of an exchange of letters. It can be a protracted exercise to complete a lease and there may be urgent demands on an office to move in. While it is preferable to have those issues sorted out, there will be cases where the urgency of the situation demands we move in on the understanding that we have exchanged letters of agreement. The formalities in some cases take an excessively long time and it is not always the fault of civil servants. One can wait up to nine months for responses between the Chief State Solicitor's office and private solicitors. That is a fact of life and we cannot always wait for that process to be completed to our satisfaction. We make judgments based on experience and our revised procedures are now in place. Ideally we will not enter premises in future unless all the legalities are formalised. I do not want to say "never", as there will be situations when urgency requires us to dispense with some of the formalities, but we always satisfy ourselves that we have security of tenure.

Chairman

Your architectural team was totally unhappy. You are also paying considerably more per square foot than recommended, up to €16.50 on an area basis.

Mr. Benton

To answer the first question, it is not true that the architectural team is entirely happy.

Chairman

It had huge reservations, is that correct?

Mr. Benton

I am not sure to what specifically the Chairman is referring but when the architectural team goes into a building, by its nature it will have some reservations and some works will need to be done. In this case we had some site-specific requirements. If we had the flexibility to pick sites in any of the neighbouring areas that would be to our advantage, and we would prefer that, but in this case for operational reasons the service was insistent that the shopping centre was where it wanted to be located to deliver services.

Chairman

The OPW has invested €1.5 million. Will you get allowances on the rent review or will there be penalties for future rent increases?

Mr. Benton

The improvements carried out by OPW are specifically excluded from any consideration and that is part of the agreement.

Chairman

That is signed in?

Mr. Benton

That is signed into the agreement.

Deputy J. Higgins

Right around the country we see magnificent work by the OPW, particularly on heritage sites and the like, though one of my bitterest regrets is that the Shackleton Gardens in 60 acres was not purchased for £800,000 in the 1990s. I urged that that be done and now the gardens are of incalculable worth. Precisely because the OPW has such a range of properties and obligations around the country it is crucial from the point of view of public funds that it gets it right on all occasions. Procedures for dealing with property owners and landlords must be watertight to protect taxpayers' funds. Perhaps Mr. Benton could comment on whether landlords see the OPW as a softer option than a private client? That is probably not Mr. Benton's attitude but is it a factor with property A, where the rent is excessively greater than what was estimated as the going rent at the time.

There seems to be a difficulty in having clear lines of communication between the OPW and clients. That perception was reinforced for me by something I heard on RTE this morning about properties which are to be refurbished. If I am right, with property A the clients seem to have had an a la carte approach to what they wanted done. First it was just building but then there were a number of demands about what they wanted done. This morning I heard an extraordinary exchange about the acquisition of a property in Roscrea where the OPW did not deal directly with the client, the Civil Defence. Is that not a major problem? Surely the OPW and clients should sit down and have a clear understanding of requirements so that from the first effort to get a property they know what they are looking for and do not have to add on afterwards?

Mr. Benton

I will deal with these issues and with a point the Chairman made about rent. I would like to dispel the notion that we paid an excessive rent. We did not. The professional evaluations carried out confirm that and those are well documented. There was an initial, incomplete comment on file on evaluations in the area and the person who gave that advice was wrong. When the detailed evaluation was carried out it confirmed that the process we had gone through was correct and that the rent was reasonable, given our particular requirements and the market in the area.

Chairman

Per square foot?

Mr. Benton

Per square foot.

Chairman

How much is that now?

Mr. Benton

It is working out at €16.25 per square foot.

Chairman

Was a figure of €11.50 mentioned?

Mr. Benton

No, there was a comment made when the question was raised of how much someone would pay for a property in that area and a comment was made by someone off the top of his head. When the detailed assessment of the issue was carried out it was confirmed that what we were paying was appropriate. It was the same valuer who carried out the exercise. When he had carried out the detailed assessment, he confirmed that what we were paying was the correct amount.

Chairman

That was €16.50?

Mr. Benton

Yes, €16.25.

Mr. Purcell

What is being paid is €20.31. One can compute it at €16.25 if one takes account of the fact that the first year was rent free when it was not occupied. To use €16.25 is not correct because the probation and welfare service intends to remain there beyond the five years. The actual rent is €20.31.

Mr. Benton

That is correct. The initial asking price was in excess of €29.

Chairman

I would not call the first year free; it was a gravy train. Some €1.5 million was being spent on a property, and they were being paid €200,000. I would not like people to think that a discount was allowed. The premises was not occupied for three years and IR£20 plus was being paid for rent.

Mr. Benton

Following a detailed valuation, the valuer and chief valuer concluded that the rent being paid represented good value for money, given the market in the area.

Chairman

That is €20, not €16.

Mr. Benton

No, I apologise; I was misleading the committee in that regard.

Chairman

That should not happen either. Mr. Benton should have indicated that the figure was €20, not €16.

Deputy J. Higgins

The asking price is irrelevant. A landlord can ask anything he or she wishes. They can ask for the sun, moon and stars. It relates to the going rate in the area. Can Mr. Benton clarify this? I asked a substantial question, which is vital, about getting specification from clients before one embarks on hunting for premises.

Mr. Benton

To repeat for the second time, the detailed valuation exercise carried out concluded that the rent of €20.31 was good value for money, given the market in the area. I do not know if I can be any clearer.

The point made on communication with clients is correct. In my experience, where that communication is not well managed, one can have project creep, so to speak. Roscrea was referred to. The Department of Defence is our client in that instance. We have very clear instructions from the Department on the accommodation requirements, which we are providing.

Deputy J. Higgins

One of the problems referred to by the Comptroller and Auditor General was the long period during which buildings were vacant. Is this a general thing? Are substantial properties currently lying idle for considerable periods in the country as a whole, and particularly in Dublin, or is this an exceptional case?

Mr. Benton

It is exceptional. There may be properties that are vacant from time to time because of the movement of people. In general, we have little or no vacant space in Dublin. I am concerned that this is not the most efficient way to manage a very large property portfolio. Because of the absence of surplus space, when urgent demands are made, one is at the mercy of the market. To get back to an earlier point that the OPW may be perceived as a soft touch, I would not like to think this is the case. However, I am a realist and, where something is signalled by way of Government decision, the fact that the State is a single purchaser with a specific requirement makes negotiations more difficult than if one had several sites and could organise better competition. This aspect is factored into valuations.

Deputy J. Higgins

One of the responsibilities of the Committee of Public Accounts is to look forward in respect of contingencies that might arise regarding demands on taxpayers and public funds. The Government recently announced a major programme of decentralisation of the Civil Service throughout the country. Is it correct to assume the Office of Public Works will have a major role to play in acquiring premises for decentralised Civil Services entities? Have you been approached by the Government in this regard? Have extensive discussions taken place? The Government appears to be intent on pushing forward with this enormous task but whether it will find the people to fill the buildings in the decentralised locations is another question. What is the position in regard to decentralisation plans?

Mr. Benton

I confirm that the Office of Public Works has the central role in the acquisition of buildings and sites to facilitate the roll-out of the decentralisation programme. The Deputy is probably aware there is a national implementation committee, chaired by Mr. Phil Flynn, which is overseeing and steering the whole project. However, site acquisition and project development is the OPW's responsibility. We have been very active in this regard since the Government's announcement.

Deputy J. Higgins

Can Mr. Benton be more specific on how he has been active?

Mr. Benton

Immediately following the Government's decision, there was extensive advertising in the national press for offers of suitable sites at the 53 locations identified in the Government decentralisation decision. That resulted in almost 700 offers of property, ranging from three or four in one or two areas to generally a dozen or more properties in each of the 53 specified locations. When these were assessed, some locations turned out to be more suitable than others. The intention at that stage was to identify initially the best three or four options in each case. We were subsequently in communication with the owners of the properties to obtain more specific information on title, planning status, ownership and the price at which they were prepared to deal. This was an enormous amount of work and managing it takes a little bit of time. This is progressing satisfactorily. We have already agreed in principle on two sites. Another 22 sites are at a very advanced stage and the remainder are in the pipeline. Given the rate of progress to date, I am confident that during the summer more than half the total number will be agreed, with the balance coming on stream very quickly or certainly before the end of the year.

Deputy J. Higgins

Is this to purchase properties, rent and lease them or a combination of both?

Mr. Benton

We examined all the solutions to the property requirement. Obviously we examined closely existing buildings that matched our requirements. We were keen to consider buildings under construction, with the appropriate planning permission, for the purposes of speed. In the other cases, we looked at sites that had the appropriate planning zoning. The reality is that there were very few suitable buildings that matched our requirements. By and large, the acquisition of sites for the purposes of procuring accommodation will depend on design, build, finance and maintenance.

Deputy J. Higgins

I have great fears that the decentralisation programme will lead to an absolute bonanza for landlord, landowners and speculators. It is incumbent on the Office of Public Works to ensure that the type of profiteering we have seen in the housing market in the past seven years is not repeated in the decentralisation programme.

In all the targeted locations, has the OPW recorded the going rate for land and rents to ensure that taxpayers will pay at those rates, since the Government, unfortunately, is not bringing forward legislation to control the price of building land?

Mr. Benton

The process we have embarked on is a transparent one. We have already published the criteria for the type of buildings we want. We are developing a generic contract with generic specifications.

How can we be confident that we are getting value for money and are not being asked a ransom price? We have our own team of valuers but we have also employed an outside firm of valuers to guide us on what the market rate in the particular area should be. It can vary greatly from one part of the country to another. We are looking at that in great detail and price will be an important factor in any deals we do.

Deputy J. Higgins

Is that the market rate prior to the announcement of decentralisation?

Mr. Benton

Yes, that will be part of the consideration.

Deputy B. O’Keeffe

When the Office of Public Works got properties A and B, did it strike the office that permission for change of use might be required? Payment of rent for property A commenced on 1 June 2001 and on 1 May 2000 for property B. When did it become apparent that planning permission might be required and that a change of use was taking place? The premises in the Donaghmede Shopping Centre, for example, was a retail outlet which was being transposed into a centre for the probation service. When did people within the OPW realise that planning permission might be required?

Mr. Benton

That is a fair question. The consultant architect initially raised the question as to whether we were satisfied that the planning status was suitable. There were sufficient doubts about that——

Deputy B. O’Keeffe

What does Mr. Benton mean when he asks if planning status was suitable?

Mr. Benton

I mean we could carry out a public office function in the premises. In order to eliminate any doubt in that respect we applied for a Part 9 planning permission for the works we were carrying out. Part 9 is the provision which relates to the properties of the Department of Justice, Equality and Law Reform.

Deputy B. O’Keeffe

Part 9 planning permission means the Department does not have to go through the rigours of the planning process.

Mr. Benton

The conditions of Part 9 are that the OPW notifies the relevant people and issues a public notice to the effect that work is being carried out. There is then a six week period within which people may object. The Commissioners of Public Works then make a decision, having considered the objections.

Deputy B. O’Keeffe

The OPW had rented property A from 1 June 2001. When did the OPW involve itself in the Part 9 planning process?

Mr. Benton

Subject to checking, which we are doing now, it was around August or September 2002. I will check that.

Deputy B. O’Keeffe

It took almost a year and a half before someone decided to look at the planning process.

Mr. Benton

May I go back to some of my earlier comments, Chairman? When we were initially approached with a brief of requirements the specific area was 2,280 square metres. That brief crept along and the area emerged at approximately 7,000 square metres. Significant changes were required which would not have been required for the initial project, which was a minor one.

Deputy B. O’Keeffe

Did it not strike the OPW as extraordinary to start to pay rent on a property on 1 June 2001 and that no one questioned whether or not the premises were suitable? Property A was part of a retailing outlet. I have been a member of local authorities for many years. The first thing which would have struck me, and should have struck any architect working in the business, was that a retail entity cannot be transferred to a different use without some involvement with the planning process. For the OPW to begin to pay rent on 1 June 2001, not look for Part 9 planning permission until August 2002 and in the interim pay rent on a property which may or may not be suitable and may have difficulties with Part 9 because of objections from local residents, seems irresponsible.

Mr. Benton

As I acknowledged at the start, I do not think anyone is happy with the process we engaged in here. It took too long and there were issues in relation to project creep about which I am not happy. We have certainly changed our procedures, not only because of this but it is a good example of what we intend to eliminate in the future.

There is a context which needs to be explained. First, the office had planning permission for office use. The issue was whether using it as a public office would have contravened that planning use. There was an argument about that. To be absolutely sure, we engaged in the Part 9 process.

The other point is relevant. The project which we understood was a minor project developed into a very significant project. What was being required in the initial case almost trebled. That partly explains the delay and partly explains the reason for the planning permission. However, I cannot say I was happy with the whole process.

Deputy B. O’Keeffe

The original estimate for fitting out property B was approximately €150,000. The OPW reports state that this was based on a walk-through inspection. The fitting out eventually cost €1.53 million. I am not arguing that the final cost is not correct or that money could have been saved. However, while the initial walk-through inspection came up with an estimate of €150,000, the taxpayer received a bill for €1.53 million when a thorough inspection was carried out. Does this not leave much to be desired?

When an inspection was carried out on property B, massive inadequacies were discovered. The block work, sewerage and drainage systems were found to be inadequate. It was the responsibility of the landlord to carry out this work yet during all of this time the OPW paid rent on a property which the landlord had not made good for more than a year. Is this not extraordinary and irresponsible?

Mr. Benton

I am not entirely happy with the process.

Deputy B. O’Keeffe

Members of the committee are astonished at what we are hearing today. The OPW is paying rent on a property on which the landlord should make good in terms of fitting it out and ensuring the structure is safe. Why should it continue to pay rent on a property on which the landlord has not, for a year and a half, made good. A lease has not yet been signed on the property but the OPW believes we should continue to pay rent without it being made suitable for the purposes for which it is being rented.

Mr. Benton

The Deputy is switching between property A and B. I am not clear which comments——

Deputy B. O’Keeffe

We are talking at this stage about property B. I am quite clear in my mind about what is happening in regard to that property.

Mr. Benton

My colleague has clarified that in the case of property B the remedial works, which were the responsibility of the landlord, had to be carried out before we could commence the fit-out works. I accept the Deputy's point that there was an undue delay.

Deputy B. O’Keeffe

Will OPW claim that money back?

Mr. Benton

I do not think we can.

Deputy B. O’Keeffe

Why not? The property is not suitable for the purposes for which it was rented. The OPW is continuing to pay the rent, the landlord has failed to make good on it and yet we are now told OPW cannot claim any relief on the rent paid during that period.

Mr. Benton

My colleague, who is more familiar with the details of the case, will comment on that.

Mr. David Byers

We agree that these projects do not advertise the best aspects of OPW. I will first explain the situation regarding property A. The initial project was small in that we required only 2,000 plus square feet of space. A decision was later made to increase the office size to approximately 7,000 square feet. The lay-out of the office included many internal rooms and was acceptable because they were conference rooms. The work we did to the building at that point, at a cost of €1.2 million, included the installation of air-conditioning and the beefing up of partitions to hold it up.

Once the decision was taken to expand the project, we were committed to undertake such work to ensure the 7,500 square feet of space was useable. We did not, in that instance, undertake works to the fabric of the building per se but only completed structural works to support the air-conditioning and to make the internal rooms work. The view was taken at the time that it was not wise, as the project had been increased to 7,500 square feet, to seek out other property in the area. The probation and welfare service was extremely clear it wished to be located in this property. We agreed the issues in that regard.

On property B, the landlord had to undertake remedial works to the building. In a perfect world, it would be better for us as property people, if we did not have to factor in a particular Department's location demands and could suggest other properties. As regards property B, which is located in the Parnell Street area, the property selected was the best we could find in terms of the raging tiger at the time. The landlord needed to do remedial works and we could not do the fit-out until they were completed. There is a difference between the two projects. I accept the explanation is not the best but I am trying to be as honest as I can.

Deputy B. O’Keeffe

When did occupation of both properties take place? Rent for property A commenced on 1 June 2001. When did occupation of that property commence?

Mr. Byers

In the case of property A, occupation took place in October 2003 and for property B, it was August 2003.

Deputy B. O’Keeffe

That is a long lead-in time.

Mr. Byers

Yes, too long.

Deputy B. O’Keeffe

Is this par for the course?

Mr. Benton

No, it is quite exceptional. We rent many properties. These experiences were exceptional.

Deputy B. O’Keeffe

How many more properties has OPW rented without signing leases? Are these the only cases identified by the Comptroller and Auditor General or are there others?

Mr. Benton

We have experienced similar problems in the past. I do not have the exact information available to me now. I will be happy to obtain it for the Deputy. Going forward with the revised procedures, this will not be an issue.

Deputy B. O’Keeffe

When leasing properties, must OPW be satisfied that the people from who it is leasing are tax compliant?

Mr. Benton

Yes.

Deputy Connaughton

I find incredible some of the things I have heard hear today. This committee previously discussed the debacle of the Cork courthouse. Was OPW involved in that case?

Mr. Benton

I am not sure what the debacle was about. It is unlikely OPW was involved at that stage in that we have only recently become involved with the Courts Services on projects outside Dublin.

Deputy Connaughton

The cases described today are almost a carbon copy of that situation. For what purpose did the probation and welfare service want to rent property A?

Mr. Benton

They wanted to rent it for the purposes of dealing with clients from that area.

Deputy Connaughton

I presume they would have been dealing with offenders.

Mr. Benton

And victims.

Deputy Connaughton

They initially sought to rent a 2,700 square foot property in Donaghmede Shopping Centre. Who owns Donaghmede Shopping Centre? With whom did OPW deal in that regard?

Mr. Benton

Our dealings were with Harcourt Holdings.

Deputy Connaughton

Had OPW had dealings with Harcourt Holdings before?

Mr. Benton

Nothing significant comes to mind but I will check that matter for the Deputy.

Deputy Connaughton

This case involves a specific arm of government wishing to rent premises in a specific place. I know nothing about Donaghmede Shopping Centre and have no connection with it. The OPW in this instance was acting as agent for the probation and welfare service. Is that not an unusual place to locate such a service?

Mr. Benton

Operational requirements are a matter for the service. OPW is not in a position to dictate from where it should operate. It is essentially their call.

Deputy Connaughton

The Comptroller and Auditor General mentioned there were local objections to the location of the service in that area. What effect, if any, did those objections have in terms of the delay experienced by OPW in this regard? Looking at it from where I am, one would get the impression that many local people did not wish the service to be located in that area. Is that true? Were there objections to the location of the service in that area?

Mr. Benton

There was local opposition to the project which, in turn, resulted in a delay of approximately nine months in advancing the project.

Deputy Connaughton

In what way did it contribute to the delay? Who decided the project should be delayed because local people were entitled to make objections? What had that got to do with the deal between the OPW and the landlord?

Mr. Benton

My recollection at the time, and it is subject to checking, is that the Probation and Welfare Service was anxious to resolve the local issues before we advanced the project.

Deputy Connaughton

What was in the two properties, A and B, at the time they were identified as the preferred choice for the probation service?

Mr. Benton

I do not know.

Deputy Connaughton

Were they being used commercially or lying dormant?

Mr. Benton

The Donaghmede property may have been empty for some time.

Deputy Connaughton

For how long?

Mr. Benton

I do not know, I would have to check that out.

Deputy Connaughton

Would that not be useful information for this committee? For example, if a property in a place like Donaghmede was idle for two or three years, would one not ask, from a commercial point of view, how it could command the sort of money pumped into it by the OPW? Would that not be relative to what was spent or are we talking about a turf shed?

Mr. Benton

I can only repeat what I said earlier. All the relevant market details were examined at length. The view was that what we were paying was good value in the area.

Deputy Connaughton

I am not an engineer so I must take what I hear at face value or to the degree I see it as filtered through the Comptroller and Auditor General's report. As a matter of interest, does the OPW agree with the views and observations of his report?

Mr. Benton

In what respect?

Deputy Connaughton

In respect of the report here before us.

Mr. Benton

I have already acknowledged that these are not projects the Office of Public Works would parade as exemplars of how we do our business. They are quite exceptional. The delay was exceptional but there was a context, which I have tried to explain. I accept it is not a satisfactory explanation. We have resolved to address some of the lessons that were learned through those two projects and we have changed our procedures on property acquisition.

Deputy Connaughton

When the size of the project at Donaghmede was increased from 2,700 square feet to 7,000 square feet, almost a trebling of the area, we were still not talking about a place the size of an aerodrome. A 7,000 square foot building is little more than the size of two medium sized houses, not a huge area. How then could the fit-out costs change from €152,000 to €1.5 million?

Let me put it another way. When people moved into the building of 2,700 square feet, it had no air conditioning. Mr. Byers said the essential fault with the building was that it needed air conditioning, and we accept that. Some sort of budget must have been factored in at that stage. However, instead of the cost for the fit out of the 7,000 square feet being approximately three times more expensive, we find it was ten times more costly. Can Mr. Benton explain that to me.

Mr. Benton

The initial estimate, even for the smaller scheme, grossly understated what was required.

Deputy Connaughton

Who carried out the assessment? Will some named person accept responsibility for that?

Mr. Benton

Yes.

Deputy Connaughton

What happened to that person? Was he or she promoted?

Mr. Benton

I do not know the circumstances but that person is no longer in the employ of the Office of Public Works.

Deputy Connaughton

I do not want to personalise the issue, but for what reason is he or she no longer in the employ of the OPW? Is it because of what happened?

Mr. Benton

The person pursued other career opportunities.

Deputy Connaughton

In other words, there was no discredit on the person as a result of what happened.

Mr. Benton

The issue has been well aired here and previously. It is common knowledge who and what was involved.

Deputy Connaughton

I do not know that. This committee is basically concerned with accountability. It is one thing to say to us a sin has been committed and that it will not happen again. However the committee hears such stories every week. I must be forgiven for believing we will be back here in two or three years' time and will see more cases of leases that were entered into but not signed by the OPW.

Deputy Joe Higgins mentioned that it appears to us that when property must be leased by a Government agency — I accept the OPW is only an agent and that it was asked to do a certain job — it raises the flag and gives the signal for everybody to have a go. It appears to me that the OPW has allowed itself to become a soft touch. If this trend continues for the entire decentralisation scheme, it will be very costly.

Mr. Benton

I will address some of the points made by the Deputy. We carry out hundreds of projects every year. I will not come here and pretend that each of them is an exemplar for project management. However, I can say that an analysis of the large projects in which we have been involved over the past seven years — almost 1,000 projects costing in excess of €1 million each, approximately €1 billion expenditure — shows that cost overruns were 0.0003%. I am proud of that record. I would not like to go from here today allowing anybody to suggest, on the basis of the experience of these two projects, that there is a serious issue about the overall management of property acquisitions and projects within the OPW. The record shows the opposite.

However, we have to learn from our mistakes. Mistakes were made in this case. First, the estimate grossly understated what was required. It should have been more detailed. When that detailed estimate was carried out, the project was carried out, at that stage, within budget. There were significant omissions in the original estimate.

Deputy Connaughton

Everybody will be delighted to hear Mr. Benton's defence because he has an important role in ensuring value for money. However, given what the Comptroller and Auditor General has said and that the only case files in front of us are ones that do not make good reading, does he agree that if he was on this side of the table he would expect us to be suspicious? Does he agree that the public looking at this would like to be reassured that what the OPW does in the future will be far removed from the examples in the files in front of us today.

Mr. Benton

I accept what the Deputy says and agree there are valid criticisms of the way we managed these two projects. I also think any objective person would acknowledge that the bulk of what we do is well managed. The facts show that. Unfortunately, the committee will not get the thousand files that were exemplary but files of the one or two cases that did not go as well as we would have hoped. We are not proud of what happened and can certainly learn lessons from it, as we have. I would not like the impression to go out that in our handling of massive amounts of public money we are anything but diligent. We seek at all times to secure best value for money.

Something which I think is exceptional is that the Office of Public Works, for many of its business functions, has now achieved ISO accreditation. This was the first in the Civil Service. Our processes and protocols are published and followed diligently. They are subject to internal audit, to audit from the Comptroller and Auditor Genera, and to audit from the NSAI. Slip-ups happen occasionally. These are two but they are just two in the context of many hundreds of projects.

Deputy Connaughton

In the commercial world when a lease is being hammered out between the bodies involved is it not normal practice that the leases are signed before the business commences? While I am not involved in that area, I know a number of people who are. Is it not reasonable to assume that before a blow is struck in any business the lease would be expected to be agreed and signed by the parties involved? Would that not be a normal principle of business in the leasing world?

Mr. Benton

It is the desirable approach, I agree. However, what is quite common is an agreement to lease that gives sufficient comfort and protection to go into the building because finalising the details can often take time. So it is not unique to the Office of Public Works.

Deputy Connaughton

Is it unique to the commercial world?

Mr. Benton

I do not believe it is unique to the commercial world either.

Deputy Connaughton

My understanding is that it would be unique.

Mr. Benton

The agreement to lease gives everyone sufficient protection. Where there is an urgency in occupying a building that is often the basis on which people operate.

Deputy Curran

I want to continue to discuss Property A, Donaghmede. Having listened to the questions and answers, I accept it is a bad example from the point of view of the OPW. I want to tease out some of the practices involved to get an overview of how business is done. Who identified the site at Donaghmede, the OPW or the probation and welfare service?

Mr. Benton

Subject to checking, it may have been identified for us by the service as a preferred location.

Deputy Curran

The probation and welfare service had advised the OPW it needed a property of 2,500 or 3,000 sq. ft., which the OPW was in the process of seeking. The probation and welfare service itself identified this larger one and suggested to the OPW that it might suit its needs and requested that the OPW acquire it. Is that more or less how it happened?

Mr. Benton

It would have identified the shopping centre rather than a specific property and initially it would have advised us that the requirement was for 2,800 sq. ft., or whatever.

Deputy Curran

As the OPW had the initial specification, was it not concerned when it discovered the property at this shopping centre was three times the size required?

Mr. Benton

No, it would have been quite feasible to take the 2,800 sq. ft. and have a discrete service operating within that and it would have been the landlord's responsibility to rent the other part of it. We would have been quite happy to take a portion. It was not simply a question of expanding to fill the space.

Deputy Curran

It appears to me that the Probation and Welfare Service saw the unit, decided it would to take it and put in a service to occupy the space. I do not hold the OPW responsible for that as it had its brief. Is it correct that the OPW started paying rent on 1 June 2001?

Mr. Benton

That is correct.

Deputy Curran

Mr. Benton mentioned that at that point and even to this day no lease was in place. Is that correct?

Mr. Benton

The lease agreement was signed — I will be absolutely honest — yesterday.

Deputy Noonan

Lovely.

Deputy Curran

Talk about timing. It was signed yesterday.

Chairman

The Committee of Public Accounts has an impact.

Deputy Curran

I would like to go back one step. I noted that the OPW placed considerable trust and confidence in what Mr. Benton referred to as "a letter of agreement" to allow access etc. I am curious as to the contents of that letter of agreement. Ultimately the OPW would have to negotiate a lease. Mr. Benton referred to why it did not have a lease, as the details would have to be negotiated etc. If those details could not have been negotiated, did the letter of agreement give the OPW or the landlord an out?

Mr. Benton

It gave us the comfort we needed and it would have given the landlord the security he wanted.

Deputy Curran

If a lease could not have been agreed, did it give the OPW the opportunity to get out of the contract?

Mr. Benton

Subject to legal advice on it, I do not believe we could have walked away unless the general conditions changed radically.

Deputy Curran

From 1 June 2001 the OPW was tied in. Does that not leave it in what I would regard as a very weak position in negotiating a lease?

Mr. Benton

It does leave us in a weak position, but the principal elements of the lease, like the rent, would have been agreed.

Deputy Curran

Would Mr. Purcell or officials in his office have seen contents of those letters of agreement?

Mr. Purcell

My staff would have seen them in looking through files of the OPW in this case.

Deputy Curran

Were they effectively the basis of the lease?

Mr. Purcell

Yes, they would have been. Matters like agreement on rent, service charges etc. would be agreed in outline as I understand it and working from recollection. While I have not seen the papers, I would have felt there was not the full protection for both sides that would exist with a legally signed lease. In a sense incurring that kind of expenditure without having legal security is what this is all about. I suppose it might well have to be tested in the courts if it came to an impasse. I have seen such cases going through the courts.

Mr. Benton

It is not the best way of doing business. However, demands can be made from time to time on the office and it is often the only way. However, in so far as possible, we will certainly try to eliminate it going forward.

Deputy Curran

When did the fit-out begin? My notes indicate this is still ongoing. Is that correct?

Mr. Benton

No, the fit-out is completed and the office is occupied. My recollection is that this took place from around spring 2003 until the end of August 2003.

Deputy Curran

I will outline bluntly how this appears to me. The Probation and Welfare Service identified this unit. It approached the OPW, which entered into an agreement for it. I suspect shortly afterwards there was local opposition and it took a year to decide what to do with planning. It was not until all of those matters were resolved that the OPW embarked on fitting out etc. Should not those planning and other matters have been addressed at the start with the letter of agreement? Had there been no local opposition, would it have ever reached part 9?

Mr. Benton

Planning, while it is an issue, was not the major factor in the delay.

Deputy Curran

What caused the delay in fit-out between 1 June 2001 and spring 2003?

Mr. Benton

The delay was caused because the project moved from what seemed initially to be minor work to a very significant project that required a full design team and full procurement processes.

Deputy Curran

That took almost two years, which seems an inordinate amount of time.

Mr. Benton

In the course of that time the project was stalled because of the opposition of the local people.

Deputy Curran

If their opposition had been successful, the OPW would effectively have been left with a white elephant. Is that correct? These appear to be issues that should have been addressed at the start of the project before entering a binding agreement.

Mr. Benton

Ideally that should have happened.

Deputy Curran

Mr. Benton mentioned that since entering into the agreement, there was a detailed assessment of rent in the area which suggested that the OPW is paying the going rent. Is that correct?

Mr. Benton

Yes.

Deputy Curran

Was that not done before entering the agreement?

Mr. Benton

Absolutely. The assessment for the actual rent we pay was carried out by the valuer, who initially and misleadingly thought it was significantly less. When he did his own research on market rates in the area, he was satisfied that the figure of approximately €20 represented good value for money, especially when one considers that there was a rent-free period.

Deputy Curran

I will make a general remark before I conclude, in response to something Mr. Benton said earlier. When he spoke about the delay in doing the leases, he said it is not unusual for it to take between six and nine months for the Office of the Chief State Solicitor to receive a response to its correspondence from private solicitors. His remark led to me to reflect on the lack of urgency. Perhaps the process would be hastened if payments depended on a lease being signed. If the money has been paid, there is no incentive for anybody to deliver. It was an extraordinary comment to make because it suggests that the cart is being put before the horse.

Mr. Benton

I mentioned that we withhold rents when such delays occur. If there is an inordinate delay on the part of the landlord in completing a lease, we withhold rent. That is the only lever we have at this stage.

Deputy Curran

It would be preferable to have the lease before one starts paying rent.

Mr. Benton

I agree.

Deputy Noonan

In light of the debacle that is being illustrated here, particularly in respect of property A, we should not forget that the Office of Public Works has a good record of quality and effectiveness in managing projects. The facts speak for themselves. My colleagues have done a quite effective job in exploring them. I would like to discuss the second issue mentioned in the report, which is the use of limited liability companies.

Chairman

The matter has to be introduced by Mr. Purcell. I will allow Deputy Boyle to speak on Paragraph 3.1 before I call Deputy Noonan on the use of limited liability companies.

Deputy Noonan

I will wait.

Chairman

Thank you.

Deputy Boyle

I will ask a brief question on Paragraph 3.1. I will have questions on Paragraph 3.2 and other sections. On the work the OPW does specifically for the Department of Justice, Equality and Law Reform, it seems that its accommodation needs cause greater problems than those of other Departments. Are there any reasons that is the case?

Mr. Benton

It is probably unfair to suggest that the Department of Justice, Equality and Law Reform, which is one of our biggest clients, causes greater problems than other Departments. The Department's properties include Garda stations, prisons, etc. It is a significant client with a substantial accommodation requirement. We do not have more difficulties with the Department, proportionately, than with other Departments. It is probably unfortunate that the Department of Justice, Equality and Law Reform encountered problems in respect of one or two of its large number of projects, but I do not suggest the Department is particularly difficult to deal with.

Deputy Boyle

This is the OPW's second visit to this committee in the past 12 months. Am I correct in saying that its last visit related to the activities of the Department of Justice, Equality and Law Reform?

Mr. Benton

Yes, that is correct.

Deputy Boyle

Are the properties that were vacant then still vacant? Has the OPW found alternative uses for such properties?

Mr. Benton

Is the Deputy referring to properties acquired for asylum seekers?

Deputy Boyle

Yes.

Mr. Benton

The properties were the subject of judicial review. In one case, the courts have ruled in recent weeks that the property in question is available for use. We are awaiting instructions from the Department of Justice, Equality and Law Reform in that regard. Legal proceedings are ongoing in the other cases.

Deputy Boyle

Deputy Joe Higgins asked earlier about the decentralisation and office relocation programme. Does Mr. Benton know if any of the properties to which we have referred have been identified as suitable to be occupied and used by Departments?

Chairman

That matter has been explored by Deputy Higgins.

Deputy Boyle

I do not think the Deputy asked a specific question about the vacant properties.

Chairman

We can discuss the matter later, when the Vote opens. I would like to move on to Mr. Purcell, to open up the next——

Deputy Boyle

I have a specific question about Lynch's hostel in Macroom.

Chairman

That will be referred to in the Vote. I would prefer if we could discuss it then.

Deputy Boyle

We will move on to the other question.

Chairman

Would Mr. Purcell like to make a comment before we conclude our consideration of this matter?

Mr. Purcell

On the origin of Paragraph 3.1 of the report, I received correspondence from a member of the public, as I do in many instances, and from a Deputy about the manner in which a property in Donaghmede shopping centre was being handled. I requisitioned the file, as I have a duty to do when a serious issue is raised. Having seen the file, I felt that serious questions of public accountability were raised. I am aware that the Probation and Welfare Service is expanding, so I asked my staff to ascertain whether something similar happened in other cases. We came across the case of property B in the Parnell business centre as a result of that process. It is as bad a case as property A in some ways. I do not intend to sully the OPW's good reputation, which it has earned in recent years because of its professionalism, etc. The accounting officer has come in this morning to put his hands up and I do not want to kick somebody in such circumstances. I might do so on a football field, but I will not do so here. Perhaps we will leave it like that.

Chairman

Is it agreed that we dispose of Paragraph 3.1? Agreed.

Paragraph 3.2 of the Comptroller and Auditor General reads:

3.2 Use of Limited Liability Companies

In my Annual Report for 2000, I referred to the acquisition by OPW of land which is thought to include a significant part of the lands on which the Battle of the Boyne was fought. The acquisition was effected in August 2000 through the purchase for €9.4 million of the share capital of a company, Deepriver Limited, which owned most of the site and the direct purchase of the rest from another company for €570,000. The shareholders of Deepriver Limited insisted that the sale of the main portion of the site should be through the purchase of the company for tax purposes.

An examination of correspondence between OPW and the Department of Finance subsequent to the acquisition of the company revealed that the Department strongly advised that the company should be liquidated as soon as possible. However, I noted at the date of audit in June 2003 that the company was still in existence under another name and incurring expenses associated with its status as a company.

Since its acquisition in August 2000 company related expenses of €55,000 were paid to cover tax advice and audit services, legal advice and insurance. I also noted that during that period, the activities of the company were confined to matters such as grazing and fishery rights and the provision of security at the site — matters that would otherwise in the normal course be dealt with directly by OPW. In view of what appeared to me to be unnecessary expenditure, I sought the Accounting Officer's justification for the company's continued existence.

He informed me that, having acquired the company, the question arose as to whether it should be liquidated. In considering the matter, the Commissioners for Public Works were conscious of their strategic responsibility to develop innovative and commercially minded approaches for the provision and development of State property. Concepts such as public private partnerships and collaborations were being actively considered. At the time there was no clear structure, legal or otherwise, or precedents in place to allow Government Departments undertake such activities. In that context it was thought that the coincidence of the availability of a limited company — Deepriver Limited — might perhaps provide an opportunity or vehicle to pursue non-traditional approaches. It was decided therefore to take no immediate steps to liquidate the company. He stated that the name of the company was changed to Public Property Development Limited to demonstrate a clear break with its previous private sector existence and because it was considered desirable to reflect in its title the fact that the company and its assets were now publicly owned.

The Accounting Officer also informed me that by June 2003 precedents had been established and the National Development Finance Agency had been created to deal with non-national funding of State capital projects. The Commissioners were therefore satisfied that the intended use for which the company was retained was no longer relevant and they as directors resolved to wind up the company. The necessary steps have been put in place and the estimated timescale is six months.

As regards the property itself, he stated that preliminary plans had been drawn up by OPW to deal with how the site and buildings could be developed. The indicative cost of development was €40 million but at this stage funding is not available to undertake the work. To date, only minor work such as surveys of the house and grounds have been carried out to the value of €212,000.

Acquisition of a limited company was also used to purchase an office building in Dublin in September 2000. I noted that this company, Colmstock Properties Limited was also still in existence at the date of audit to no apparent purpose and that €59,000 had been paid out in the period since then to cover company related expenses. The Accounting Officer informed me that the process of winding up Colmstock Properties Limited was underway and it was expected to be concluded by the end of 2003. The estimated cost of the winding up is €36,000.

Mr. Purcell

In Paragraph 3.2 of my report, I draw attention to the continued existence of two companies which were acquired by the OPW in 2000 as a means of purchasing properties. The properties in question are the land on which the Battle of the Boyne is said to have been fought and the headquarters of the Department of Justice, Equality and Law Reform in St. Stephen's Green. Both properties were acquired in this fashion, at the insistence of the vendors, for tax purposes. I expected both companies to be wound up as soon as possible thereafter, but that was not the case. Expenses are being incurred as a consequence, such as the cost of obtaining taxation and legal advice and accounting and auditing services, compliance costs and other minor costs associated with maintaining company status. The amounts involved will not break the Exchequer, but they could accumulate to a six-figure sum in each case. Such expenditure is totally wasteful, as the State is getting no real value from it.

Members of the committee will note that the Accounting Officer offers a justification in the report for the past retention of the former Deepriver Limited, on the basis that the OPW could have used such a company to facilitate alternative approaches for the provision and development of State property. That would have raised a serious issue, however, about the possibility of the OPW going outside its statutory remit without reverting to the Oireachtas for covering legislative authority. The decision to wind up the companies without further delay means that we will not visit that dangerous territory on this occasion, Deo gratias.

Deputy Noonan

Does the OPW own any other battlefields?

Mr. Benton

No. Mr. Purcell mentioned the two properties we acquired. I do not think the OPW owns any other battlefields, unless there is something back in the annals of time.

Deputy Noonan

Does the OPW plan to buy the site of the battles of Aughrim, Kinsale or Clontarf?

Mr. Benton

The OPW operates on the basis of Government decisions.

Deputy Noonan

Mr. Benton mentioned earlier that the OPW usually acts for clients such as agencies or Departments. Who was the client in this instance?

Mr. Benton

It would have been the Department at that time. The Government made the decision, but the principal client was the then Department of Arts, Heritage, Gaeltacht and the Islands. Deputy Noonan is aware that the Department's functions subsequently changed.

Deputy Noonan

The site is mostly land.

Mr. Benton

Yes. Oldbridge House on the land is in a sorry state of repair.

Deputy Noonan

How is the land zoned?

Mr. Benton

It is zoned as agricultural land. I understand that planning permission was granted for a hotel and a golf course, but it lapsed because it was not activated.

Deputy Noonan

How many acres?

Mr. Benton

Approximately 450.

Deputy Noonan

Was the total cost €10 million in August 2000?

Mr. Benton

It was £7.4 million and there was an additional 50 acres involved which cost approximately £450,000.

Deputy Noonan

The normal procedure would have been to purchase the land from the company. Instead of doing that, the OPW purchased the company. Can that decision be explained?

Mr. Benton

The only thing that was for sale was the company.

Deputy Noonan

Does that mean this did not enter the negotiations late in the day but was the position from the start?

Mr. Benton

Yes.

Deputy Noonan

Obviously, it was done for tax purposes. Can Mr. Benton explain the tax advantage to the owners of the company that the deal proceeded in this way?

Mr. Benton

While I am not an expert on the tax regime, I understand this approach was adopted to avoid double taxation as they perceived it. It implied significant tax savings for the owners.

Deputy Noonan

Did the OPW require the permission of the Department of Finance to proceed in this way?

Mr. Benton

That was obtained.

Deputy Noonan

Can Mr. Quigley outline the view of the Department of Finance?

Mr. Dermot Quigley

The Department took the view that the deal was normal commercial practice and quite in order from the prospective of its budget and economic division. It was not in any way improper or inappropriate.

Deputy Noonan

Can Mr. Quigley explain the tax advantage?

Mr. Quigley

As per normal commercial practice, it benefited the vendors who incurred capital gains tax only on the profit from the sale of shares in the company as opposed to selling the assets first which would attract capital gains tax and liquidating the company later which would incur capital gains tax again on any profits on the proceeds of the sale of the assets. The approach was a way of avoiding double taxation. Usually, capital gains tax would be incurred on the sale of a company's assets and subsequently on the sale of its shares. The Office of the Attorney General and the budget and economic division of the Department of Finance were of the opinion that there was nothing inappropriate about the terms of the sale which were in line with commercial practice. As the Accounting Officer has pointed out, the Department was conscious that the procedure was the only one available as the company had to be acquired to acquire the lands.

Deputy Noonan

Did the Department consult the Revenue Commissioners at the time?

Mr. Quigley

In keeping with normal practice, I understand the relevant division of the Department of Finance consulted the Revenue Commissioners.

Deputy Noonan

Is it the case that the OPW ended up with a company which it acquired, in effect, by accident?

Mr. Benton

It was not acquired by accident. We knew we would acquire a company as we had no option if we wished to obtain the land.

Deputy Noonan

It was the land the OPW wanted, not the company.

Mr. Benton

Indeed.

Deputy Noonan

It is not clear why it was considered advantageous not to liquidate the company immediately.

Mr. Benton

In 1996 we published our first strategy statement according to which we sought to maximise the value to the State of the property portfolio. It was considered that there would be opportunities where engaging in development projects with private parties might be to the State's advantage. It was not obvious to us initially that there was any vehicle through which we could accomplish that. When we read the articles of this company it was clear that it could constitute such a vehicle. We decided to fold the company because the National Development Finance Agency was established in the meantime. The vehicle we required to exploit any partnership opportunities was created in the NDFA with the result that the company was of no particular value to us.

Deputy Noonan

Is the OPW receiving an income from the lands?

Mr. Benton

We receive a small income from fishing licences and grazing rights which covers the operational costs of the company.

Deputy Noonan

How are the grazing rights organised? Are they publicly auctioned every year?

Mr. Benton

We have an agent who lets them. I am not sure he does so on an annual basis. They are let competitively.

Deputy Noonan

Are they let to persons who were principals of the company formerly?

Mr. Benton

I am not aware of that, but I will check it. I do not believe so.

Deputy Noonan

The OPW has a development plan for the site at a projected tab of €40 million.

Mr. Benton

Initially, the plan was formulated by Dúchas. The function has recently transferred to the OPW. Dúchas had a scheme for the Battle of the Boyne site and our estimate of its total cost is of the order of €40 million.

Deputy Noonan

Is there any Vote which covers even a nominal sum for this?

Mr. Benton

Our Vote covered the planning costs and the examination process involved in developing a project. We have not proceeded with it as we do not have Government approval or funding. We have general funds to carry out many preliminary feasibility studies.

Deputy Noonan

In effect, the OPW is left with 450 acres of land it does not need on the site of the Battle of the Boyne. There does not seem to be any purpose to it.

Mr. Benton

We are certainly not in a position to develop the site in the way the heritage services anticipated. However, we acquired the land on foot of a Government decision. The speed at which it can be developed to provide the kind of facilities envisaged will depend on funding.

Deputy Noonan

Did the nature of the deal to purchase office space from the second company, Colmstock Properties Limited, reflect tax issues also?

Mr. Benton

Presumably.Again, we proceeded on the only basis on which we could deal. The OPW was in occupation of the accommodation at Nos. 70 to 76 St. Stephen's Green at the time. In fact, Deputy Noonan may have been a former occupant of it himself. We were paying significant rent and the building was well past the point at which significant refurbishment was required. We took the commercial view that if we planned to invest between €15 million and €20 million in a major refurbishment while paying an annual rent of £1.15 million, it would make sense to get to purchase the property. The only deal on offer at that stage involved the purchase of the company. Notwithstanding that, it made commercial sense given the rental figures involved to take advantage of any opportunity to acquire the property before embarking on a major refurbishment. We proceeded on that basis with the sanction of the Department of Finance.

Deputy Noonan

In either case, did the OPW receive any discount on the purchase price on the basis of assisting the vendor to avoid tax?

Mr. Benton

One can argue the case either way. Arguably, we would have been charged more if the vendors did not have the advantage of the taxation arrangements. We did the best deal we could with the vendors given the circumstances at the time.

Deputy Noonan

I understand the OPW must act in the commercial world as that is the nature of its role in the property market. However, I find it peculiar that an agency of the State should assist in tax avoidance. In effect, that is what happened in both cases. While the transactions did not involve tax evasion, it does not seem right that the Office of Public Works should enter into arrangements involving the avoidance of tax. I am choosing my words. It was not illegal or improper, but it was, at least, peculiar. Many citizens would find it a little strange.

Chairman

I have a question about tax savings. How much tax would the vendor have saved through selling the property as a limited company? Did the Department calculate the figures?

Mr. Quigley

I am not aware of the figures involved but can get the required information and send it to the committee.

Chairman

Thank you, Mr. Quigley; please do so.

Deputy Boyle

I have a few questions on chapter 3.2. No attempt was made to change the name of the second company, Colmstock Properties Limited, purchased in September 2000 after the purchase of the Battle of the Boyne site. Was there a reason for this?

Mr. Benton

No, we did not have any requirement to retain that company and it is simply going through the winding up process. The only reason we held the other company was that we thought it could have been useful to us, as I said, in developing joint ventures. As it transpired, with the establishment of the NDFA, we were no longer required to hold on to Public Property Development Limited either. For that reason the board took a decision to wind it up also.

Deputy Boyle

The two transactions occurred within a short period, that is, August and September 2000. Was the Office of Public Works approached before or after that period with regard to this mechanism of acquiring property through purchasing a company?

Mr. Benton

In my experience in the Office of Public Works, I cannot recall any occasion prior to the first purchase. I am certain we have not been involved in any similar acquisition since.

Deputy Boyle

Does Mr. Benton regard it as likely that the mechanism will be used in future?

Mr. Benton

Again, it depends on our requirement and what is available in the market. We certainly do not have a requirement to hold onto the company once we have acquired its assets because the flexibility we need in that regard is already provided for us but I would not like to say "never". It may well be that a property required for specific purposes in future will only be available to us on that basis. I would not like to try to anticipate matters or look into a crystal ball and would certainly not like to say we would never do it again.

Deputy Boyle

Is there a fear that a precedent has been established and that the OPW is likely to conduct future business with those who own property through company structures?

Mr. Benton

We deal in the market and do not create the rules. I do not see how I could say at this stage that this will never happen again if we have a specific requirement, the property in question, however required, meets our purpose and we are dealing legitimately with a vendor.

Deputy Boyle

The likelihood is that the OPW will be made offers of this type in the future and could acquire other companies.

Mr. Benton

The reality is that none has been offered on that basis since but, again, I would not like to speculate at this stage as to what might happen in the future.

Deputy Boyle

What are the future plans for the St. Stephen's Green property bought in September 2000? Will it be maintained in full-time use? Will those currently working in it be moved to other premises? Is it envisaged that the property will be sold in the near future?

Mr. Benton

As it happens, the building is vacant. We were about to embark on a major refurbishment at the time of the announcement on decentralisation and thought it prudent to put the refurbishment on hold. We are conducting a major exercise on the overall property scene in Dublin and the rationalisation that will have to take place in the context of decentralisation. The Deputy will probably have seen that the OPW has undertaken some property disposals in recent months. The property in question is certainly one that will have to be examined in the context of the properties we will require to retain in Dublin post-decentralisation.

Chairman

Does the Comptroller and Auditor General wish to comment before we dispose of chapter 3.2 and open discussion on the Vote?

Mr. Purcell

I will reiterate a comment I made in my opening remarks. If any more companies come into the possession of either the OPW or any Department or Office, it might be wise to check the desirability and legality of using the articles of association and memorandum of a private company, a shelf company, in order to give a Department or Office powers to operate in a manner for which it does not have statutory authority. As I stated, we did not get to that stage but that premise, both in terms of legality and public accountability, would be a serious development. I add that cautionary note.

Chairman

As regards the Vote, Deputy Boyle wishes to ask the officials questions about Brock House. I am aware that a legal case has been won with regard to its use. Did the property not cost the taxpayer more than €8 million?

Mr. Benton

Yes, that was the purchase price.

Chairman

I understand it has been reported that the property may be sold with a likely loss to the Exchequer.

Mr. Benton

I am not aware of the source of the Chairman's information. We acquired the property for a particular purpose. The court has cleared the way for its use and we await the instructions of the Department. I wish to comment on the point made about a likely loss. Again, this is a factor of the market. We were acquiring property at a time when the market was very hot and matters depend on when one disposes of it. In the same way the Chairman heard a report, I have heard that a sale of the property would make a significant profit. The only way of testing it would be through the market.

Chairman

How many years has the property been on the books of the OPW?

Mr. Benton

Since June 2000.

Chairman

Is it still vacant?

Mr. Benton

Yes.

Chairman

Has the OPW made an estimate of the cost of refurbishing the building for use for its original purpose?

Mr. Benton

Given our discussion concerning the property in Donaghmede, I am reluctant to hazard a guess. It would require a detailed analysis before I would offer a figure.

Chairman

I ask Mr. Benton to keep the committee advised on the matter.

Deputy Boyle

I have a question concerning the three or four properties we discussed at our previous meeting. The second most expensive in terms of cost was Lynch's Inn Hotel in Macroom which cost €5.5 million in respect of acquisition and ongoing security costs. May I assume from Mr. Benton's answer that the property is still the subject of a judicial process and cannot be used?

Mr. Benton

That is correct.

Deputy Boyle

There have been reports that the property would possibly be used as part of the decentralisation programme but cannot be acted upon.

Mr. Benton

We have examined properties as we try to anticipate what may happen. Given its nature, the building in question may have uses. We are examining the matter but the Department of Justice, Equality and Law Reform may still have a requirement. We will await its instructions.

Deputy Boyle

No instructions have been forthcoming. Macroom has been mentioned as a location for the Department of Agriculture and Food. Have discussions taken place between the relevant Departments and the Office of Public Works on the issue?

Mr. Benton

We have had discussions. We would have to carefully examine the nature of a Department's particular requirements to determine whether it could be accommodated in the building, which is a hotel.

Deputy Boyle

In the event of that happening, I presume there would be an interregnum until the property was redeveloped. I, too, do not want to get into a discussion similar to that about the property in Donaghmede but who would take responsibility in those circumstances? Would the OPW continue to bear the costs or would they transfer from the Department of Justice, Equality and Law Reform to the Department of Agriculture and Food?

Mr. Benton

Responsibility will remain with us until we find an alternative use for the property if it is not required for the purposes for which it was originally intended. I cannot anticipate what that might be.

Deputy Boyle

Regarding Vote 44, the period in question was serious in terms of flooding in Dublin, Cork and Galway but the following year did not prove as serious. Has the OPW learned lessons that have since been put into practice?

Mr. Benton

I am not sure if it has learned particular lessons. Unfortunately, we cannot control the weather; it was a particularly bad year and we have been more fortunate since. One of the things we did do was conduct a major review of the whole issue of flooding and where appropriate responsibility lay. With the involvement of various stakeholders and the local authorities, we produced a report and made recommendations. The report is now before the Government.

Deputy Boyle

Will it be made public?

Mr. Benton

Yes; once it is accepted, it will be published.

Deputy Curran

I have a general question for Mr. Benton based on a specific example. A year or so ago, the OPW, acting on behalf of the Department of Justice, Equality and Law Reform, paid €250,000 for an option to acquire land on the Naas Road for a juvenile detention centre. In due course the Department examined the site and consulted the NRA, the local authority and so forth and the site was deemed unsuitable from the Department's point of view. Some time later I noticed in a newspaper that the OPW was trying to sell the land. How could it sell the site when it had not bought it; it only had an option on it? Does Mr. Benton have information on that project?

Mr. Benton

The information I have is that we were not involved in purchasing an option on the site. That was done by the Prisons Service.

Deputy Curran

Directly.

Mr. Benton

Yes.

Deputy Curran

I thought the OPW was disposing of it when I saw the advertisement in the newspaper.

Mr. Benton

It would be usual for an agency such as the Prisons Service to ask us to manage disposals on its behalf. I am not aware it has done that yet. We were not involved in the original purchase of an option.

Deputy Curran

That was the general point I wanted to make. Is the whole concept of entering into an option rather than an agreement or lease frequently pursued with the OPW?

Mr. Benton

It is not usual, although it is very common in the private sector.

Deputy Curran

As a matter of interest, why not?

Mr. Benton

In a sense, we are not speculators.

Deputy Curran

I beg to differ. When I look at what we spoke about, case A in Donaghmede, the OPW is very much a speculator from the point of view of where it tried to get in the end game. It was not sure that what it set out to do could be delivered due to planning and so on.

Mr. Benton

Property speculation is not our business but we try to get the best value we can from the properties we have. In all cases we try to minimise the cost of development where that is required but as a general rule, we will only purchase a property where we have a specific requirement.

Chairman

I have a few questions on subhead F3 regarding rents and rates. A sum of €81 million was budgeted for but €98 million was spent, 20% above the original estimate. Will Mr. Benton explain this?

Mr. Benton

The excess arose from the increases following rent reviews and also the requirement to acquire additional accommodation for specific clients.

Chairman

Is 20% not very high from the point of view of business planning projection? The sum of €17 million represents a considerable increase.

Mr. Benton

It is a significant increase. In an ideal world, if we were to anticipate through forward planning what might come out of rent reviews and that sum was allocated to us, perhaps there would not be the same discrepancy. In the real world one negotiates rents from year to year on the basis of the existing rent bill rather than the one that is anticipated.

Chairman

Would building an index-linked increase into a fixed contract not be the best way of ensuring that rate of inflation would not occur?

Mr. Benton

The way the allocation process works is that we have a rent roll, the costs of which are met upfront. We would not always get the full costs sought for anticipated increases following rent reviews nor would we necessarily be aware of new requirements that would fall due in that year for whatever purpose.

Chairman

Difficulties would arise in banking terms for a businessman who was out in his calculations by €17 million. From an accountancy point of view, one would imagine that it would be tighter.

Mr. Benton

I suspect that our original demand would have been significantly closer to the outturn figure than what was actually allocated.

Chairman

To date, Media Lab and the Digital Hub have cost €73 million. An additional €21 million was spent under subhead E.

Mr. Benton

I will ask my colleague, Mr. Byers, to respond to that question.

Mr. Byers

The top figure referred to was for the total number of properties bought in the Thomas Street area for both Media Lab and Digital Hub. Since Digital Hub has turned into the Digital Media Development Agency, approximately €44 million worth of property, subject to checking the figures, has been transferred to it by statute. The remaining property is held by us as Government property with Media Lab as the tenant.

Chairman

The sum of €73 million spent is a significant amount, in addition to the sum of €21 million.

Mr. Byers

I do not follow. What I am saying is that part of the property was transferred but the remainder is still held by us with Media Lab as the tenant.

Chairman

Is there much benefit to the State from this?

Mr. Byers

The OPW, as agent of the State, bought all the property. The property transferred to Digital Hub was transferred without payment to us.

Chairman

Has an assessment been made of the actual investment?

Mr. Byers

The situation is that the Digital Media Development Agency, as it is now known, is to make a submission, following a long process of acquiring a development partner, to the Department of Communications, Marine and Natural Resources on how it proposes to use the property to develop a digital hub. That submission has not yet been made.

Chairman

Is Mr. Byers not disappointed, in the light of the significant amount of taxpayer's money invested, that the plan is not on the desk at this stage, given the considerable value of such a benefit-in-kind?

Mr. Byers

It does not come to us but to the Department of Communications, Marine and Natural Resources. It has taken much longer than anybody anticipated, which is disappointing.

Chairman

What is the OPW's involvement?

Mr. Byers

It is not our responsibility. We were merely to act as an agent to procure the property and perfect the title also. The statute under which the agency was set up only required us to transfer the named properties to the agency which is responsible to the Department of Communications, Marine and Natural Resources.

Chairman

Bearing in mind the question on the title of properties which covers a considerable area, is Mr. Byers totally satisfied that full title has been obtained on all of the properties acquired by the State?

Mr. Byers

Yes.

Chairman

Will the Department of Finance comment on this issue in the light of the fact that there is a substantial investment on behalf of the Exchequer of €73 million? Is the Department not disappointed that it is not receiving an action plan?

Mr. Quigley

As Mr. Byers pointed out, responsibility to come forward with a plan lies with the Department of Communications, Marine and Natural Resources. It certainly is disappointing for the Department not to have received a plan. The plan has not been completed to date.

Chairman

Has the Department of Finance not inquired into the reason it has taken so long, given that it signed off on the amount of money involved?

Mr. Quigley

I am informed that my Department has been in contact with the Department of Communications, Marine and Natural Resources on a continuous basis but to date it has not obtained the plan.

Chairman

Perhaps after today's meeting Mr. Quigley might say the Committee of Public Accounts is very concerned that something has not happened in the light of the substantial investment made on behalf of the taxpayer.

Mr. Quigley

Certainly.

Chairman

On Vote 10, I note that the OPW was fined €13,000 in 2002 under the Prompt Payment of Accounts Act. Coming from a business background, I know cash flow is the lifeblood of any business. Why was the OPW fined €13,000 for the non-payment of suppliers?

Mr. Benton

I certainly agree with the Chairman that it is disappointing and it is not an excuse to say it is probably a very small amount within the context of hundreds of millions. It is not satisfactory. We strive to make all of our payments on time and have a very good record for paying suppliers. Occasionally, things can go wrong but there are thousands of payments annually — 50,000, I understand — and it would certainly be my objective to ensure there are no penalties for late payments. I believe our suppliers would agree we are very prompt in making payments.

Chairman

Is the normal term 60 days or 30 days?

Mr. Benton

It is 15 days for the major cases and 30 days in all other cases.

Chairman

Is it by calendar month or days from the date of invoice?

Mr. Benton

It is usually dated according to the invoice. A certificate in the case of——

Chairman

Is payment made the following month?

Mr. Benton

In those cases, we operate within 15 days.

Chairman

I note a considerable increase pertaining to minor new works and other projects. In the Estimates there was approximately €7 million for minor new works and approximately €3 million for other projects, yet approximately €16 million was spent on minor new works and approximately €13 million on other projects.

Mr. Benton

As a working practice, we draw a line at €500,000 for minor works but there are ongoing works in the National Museum, the Department of Education and Science and the Central Statistics Office. Leinster House usually has a number of small projects which we try to accommodate when we have the resources. Likewise, one receives urgent requests, perhaps for the setting up of the Morris tribunal or issues regarding accommodation for the Flood tribunal, to which we have to respond. There is a whole range of projects. They are small individually but large cumulatively. Some are often required to be completed urgently. As a general rule, they involve sums of less than €500,000. They regularly cost €100,000, €150,000, €200,000 or €300,000.

Chairman

There was an overspend of approximately €20 million on minor new works and other projects.

Mr. Benton

No.

Chairman

The estimated provision for minor new works was approximately €7 million but the outturn was approximately €16 million. The estimated provision for other projects was approximately €3 million but the outturn was approximately €13 million.

Mr. Benton

It is not an overspend but an excess.

Chairman

Yes. Is the sum of €20 million in excess of the original estimated figure?

Mr. Benton

Yes.

Chairman

Can we note Votes 10 and 44? Agreed. I thank the witnesses for a very effective meeting.

The witnesses withdrew.

Chairman

Our next meeting will be held on 17 June, at which we will deal with value-for-money report No. 46 on the probation and welfare service.

The committee adjourned at 1.25 p.m. until11 a.m. on Thursday, 17 June 2004.