I welcome the commissioner, his staff and officials from the Department of Finance. I call on Mr. Benton to introduce his colleagues.
Office of Public Works.
Chapter 4.1 — River Nore (Kilkenny City) Drainage Schemes.
Chapter 4.2 — Flood Relief — Grants to the Irish Red Cross.
Mr. S. Benton (Chairman, Office of Public Works) called and examined.
Mr. Séan Benton
I am accompanied by Commissioner Claire McGrath, Mr. Jim Blighe, principal officer, and Mr. Tony Smyth, director of engineering services.
Mr. Dermot Quigley
I am a principal officer in the public expenditure division of the Department of Finance and I am accompanied by my colleague Mr. Jim Deane, assistant principal from the procurement unit.
I remind witnesses that they do not enjoy absolute privilege. The attention of Members and witnesses is drawn to the fact that as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act 1997 grants certain rights to persons who are identified in the course of the committee's proceedings.
Notwithstanding this provision in legislation I remind members of the longstanding parliamentary practice to the effect that Members should not comment or criticise or make charges against a person outside the House an official either by name or in such a way as to make him or her identifiable. I call on Mr. Purcell to introduce the Vote.
Paragraph 4.1 of the report of the Comptroller and Auditor General reads:
River Nore (Kilkenny City) Drainage Scheme
Background
Very severe flooding occurred in many parts of the country in 1994 and 1995 with considerable damage to homes, businesses, and infrastructure. The Office of Public Works (OPW) was required by Government Decision of 7 March 1995 to take the lead role in responding to this. The Arterial Drainage (Amendment) Act was passed in 1995. The OPW drew up a list of over 200 locations around the country where there was a known flood risk. A Government Decision of 14 March 1995 approved a list of nine areas which should receive priority in terms of flood relief works. Kilkenny City was one of these.
Kilkenny City has a history of flooding associated with the high water levels in the River Nore and its tributary the Bregagh that joins the Nore at Kilkenny City. Flooding occurs most years and significant floods were experienced in 1990, 1995 and 2000. Following representations from Kilkenny Corporation and Kilkenny County Council, OPW commissioned a firm to undertake a study in 1995 on the urban flooding in the Kilkenny Cityarea. The study included the re-examination of a preliminary report that the same firm had carried out for the county council in 1986. The consultants were also asked to draw up preliminary design options to alleviate the problems identified.
A separate company was also appointed in 1995 to carry out site investigations. It was evident early on in the scheme that numeric (computer) modelling was an inadequate method of dealing with the complexities of the river in Kilkenny, due to the interaction of the bridges and weirs in the City. In order to increase the accuracy of the design, it was decided to commission a physical model of the river stretch through the City. This was carried out in 1996 by a UK company.
Initial Scheme (€13.08 million)
A number of potential solutions were identified and were presented to the local authorities and the preferred option was chosen in July 1998. This consisted of a combination of river widening and deepening, flood walls, embankments, and associated drainage works. The proposed scheme met the relevant economic and environmental criteria. The scheme was designed to provide protection against the 1 in 100 year flood — in other words a flood of such extent that it has a 1% probability of occurrence in any year. This is the OPW standard for schemes in urban areas and is the standard applied in many other countries also.
With the approval of the Department of Finance the scheme was placed on Public Exhibition in July 1999 and unanimously approved by Kilkenny County Council and Kilkenny Corporation. Sanction was obtained from the Department of Finance in December 1999 to proceed with the scheme following the Exhibition at an estimated cost of €13.08 million.
Given the estimated cost of the scheme at this stage it was clear that the engineering consultants' fees would exceed the relevant EU threshold. As well as that, the first consultants appointed had been given a limited commission in the first place. A tender competition was held in accordance with the EU Directives and as a result of this a new firm of consultants was appointed in December 1999 to review the existing Outline Design, prepare Detailed Design tender documents for appointment of a contractor, and supervise the contract on site.
Detailed Design Estimate (€41.9 million)
The consultants completed a detailed appraisal based on the original specifications. The revised estimate put the cost of the project at €41.9 million in August 2000.
OPW was not prepared to accept the revised cost as it was a significant increase on theapproved project budget. The consultants were instructed to prepare a report on alternative forms of construction with the objective of bringing the estimated project cost closer to the original project budget (€13.08 million). In particular, alternative types of retaining structures were to be considered for all areas of the works.
Revised Design Estimate (€24.38 million)
In November 2000 a revised project specification was submitted and sanction was received from the Department of Finance to proceed with the revised scheme for a maximum project budget expenditure of €24.38 million.
New Estimate (€34.8 million)
Tenders were invited from five companies in March 2001 to carry out the construction contract works. The five firms had previously been short listed from a list of eleven firms who had replied to an EU wide advertisement for the project. The accepted tender was approximately 25% above the revised specification costs approved in November 2000. The project was submitted to the Department of Finance at a cost of €34.8 million and approved in June 2001. The main contractor was appointed on 17 July 2001 and work commenced in August 2001.
Table 27 analyses the changes in the cost constituents as the project progressed.
|
€m |
€m |
€m |
€m |
|
|
Construction |
10.3 |
37.0 |
18.07 |
22.5 |
|
Design team fees |
1.2 |
4.1 |
2.07 |
3.1 |
|
Archaeology |
0.63 |
— |
0.65 |
5.1 |
|
Compensation |
— |
— |
0.77 |
1.3 |
|
Other items |
0.95 |
0.8 |
2.82 |
2.8 |
|
Total |
13.08 |
41.9 |
24.38 |
34.8 |
Current Estimate of Completion
(€47.8 million)
In August 2003 following a review of the project, a revised estimate was submitted for approval which put the cost of completion at almost €48 million. The increase in the final estimated cost was attributed to
Payments to the main contractor for delays and down-time
Price Variation Clause buyout
Provision for compensation claims
Costs associated with the removal of contaminated soil
Additional professional fees
Costs of ancillary remedial and stabilisation works.
As I was concerned at the significant cost and time overruns of the scheme I posed a series of questions to the Accounting Officer.
Accounting Officer's Response
Why did the initial estimate turn out to be so unrealistic?
OPW recognises that it is not acceptable that the cost of a scheme can increase at the rate that it has in this case. It should be pointed out that Kilkenny is the first large urban flood relief scheme carried out in this country and, as such, there was no precedent to have regard towhen assessing risks. The contract was complex in that it had to be framed around very stringent environmental considerations — archaeology and fisheries in particular. The practical effects of this on the ground are difficult to predict until work is in progress. Environmental considerations meant that work could only take place in the riverbed between the months of July and October. Weather conditions occasionally shortened this period even more.
As well as the difficulties posed by these factors the following specific issues have contributed to the cost increase
Inadequacies in the initial design of structures and consequent post-contract changes and modifications to these designs resulting in delays and additional costs
Unfavourable ground conditions that could not have been anticipated; the presence of rock in the riverbed at levels that had not been anticipated
Delays and down-time due to noise interference and damage to properties and infrastructure, the extent of which could not have been anticipated
Delays and additional costs arising from the contamination of the riverbed with PCBs (chlorinated compounds)
The higher than expected costs arising from archaeology and the delays and additional costs incurred by the contractor as a result
Costs arising from the diversion of services that had not been mapped and consequently not provided for in the scheme.
What was the basis of the downward revision of the estimated cost of the scheme in November 2000?
The initial meeting of the Cost Control committee for the project took place in July 2000. It was emphasised at this meeting that any adverse developments leading to unforeseen cost increases should be reported to the Committee as early as possible. OPW's consultant engineers were represented at this meeting and they pointed out that the findings of the detailed site investigations proceeding at this time were indicating findings different and more complex to those indicated by the information that was available at outline design stage. The consultants were asked to prepare a report on these findings, outlining the impact on costs. This report was received by OPW in August 2000 and its main findings related to the type of structures proposed at outline design stage for the construction of flood walls.
In October 2000, on OPW instructions, the consultants presented a report on the alternative types of structures. Each area of the works had been considered and an alternative design comprising a combination of structures was proposed. This is the design now under construction in Kilkenny.
The downward revision of the estimated cost of the scheme was initiated by OPW in response to its concerns over the estimated costs of the scheme following revisions to the design brought about by technical concerns.
Why did the €24.38 million estimate increase to €34.8 million?
The increase was due mainly to the need to extend the works to three years to facilitate a substantially increased archaeological work requirement, thus incurring continuing overhead costs over an extended period and a general rise in the annual movement of construction costs and tender costs (estimated at 10% and 12% per annum respectively).
What factors gave rise to the increase in construction costs?
In engaging a contractor to carry out the construction stage of the River Nore (Kilkenny City) Drainage Scheme, OPW used the Institution of Engineers of Ireland (IEI) Standard Form of Construction Contract.
The standard IEI contract is conducted on a measure and value basis. Unknowns or risks such as ground conditions, bad weather, project design revisions, quantity change/increases and delays are measured and valued during the contract and added to the final contract cost.
The use of this contract for civil engineering works by State bodies was Government policy at the time, as agreed with the construction industry. Variations on this contract are also on a measure and value basis.
It is highly unlikely, at the time of going to tender, that any contractor would have negotiated a fixed price on a contract of three years duration. The Construction Industry Federation (CIF) strenuously objects to fixing prices at tender stage for contracts in excess of 12 months. Nor are there any procedures in place at present for quantifying the many risks associated with a civil engineering contract of this nature.
OPW paid €2.9 million to the contractor for a Price Variation Clause (PVC) buy out. The contract itself provides for a lump sum buy-out post tender of price increases in labour and materials arising during construction. If this option is not exercised then increases are paid for as they arise during the course of the contract. Where OPW considers that the price negotiated with the contractor for the buy-out of the PVC is reasonable, it is the practice to proceed in this way. The benefit to the contracting authority of a PVC buy-out is the removal of a risk from the contract, with the potential for a saving on the overall contract amount depending on subsequent rates of inflation.
In this case, the initial approach in relation to PVC buy-out was made by the contractor. The OPW's consultants carried out an estimation of the total final payment that might be due to the contractor under the Conditions of Contract. Their estimate indicated that the contractor's offer of €2.9 million plus VAT for PVC buy-out was reasonable given the prevailing and predicted economic conditions in the construction industry.
It is relevant to note that Government policy in this area has now changed. In May 2004, the Government approved in principle, the introduction of lump sum fixed price contracts tendered on a competitive basis as the norm, along with appropriate arrangements to eliminate undefined design details covered by provisional sums and provisional quantities in tender documents on all types of contracts. It is, however, not yet certain when these new arrangements will come into force as they are subject to discussion between the Department of Finance and the construction industry.
How were the additional professional fees incurred?
In procuring the required consultancy services OPW was fully in accordance with public procurement guidelines and regulations. The agreements in place between the State and the professional bodies at that time included the use of a percentage fee.
It should be noted that increases in cost in this form of contract are substantially due to the measure and value provisions rather than a failure to control costs i.e. the volume of work comprehended by the contract turns out to be greater than estimated for reasons that could not have been anticipated or in circumstances that could not have been measured in advance. As the works comprehended in the contract increase in this way, so the legal obligation on the consultant to supervise the works increases. In this way the consultant undertakes additional work for which payment is due.
In May 2004, the Government approved in principle, the introduction of competitive tendering on a fixed price lump sum basis as the norm for procuring construction consultancy services. Also approved was the introduction of Standard Conditions of Engagement for construction consultants with specific provisions to carry more risk and to discourage design mistakes through the introduction of penalties.
It is not clear, however, when these changes will be implemented as they are subject to discussion between the Department of Finance and the relevant professional bodies.
Why were compensation and archaeological costs so badly underestimated?
Compensation
A sum of €1,269,738 was included in the budget at Tender Stage for compensation. This figure was a best estimate, based on experience garnered on previous schemes. Once work commenced on site, however, it became apparent that this figure was likely to be inadequate. The number of third parties affected by the scheme, with associated property issues; the difficulties and disruption caused by the works to individuals and businesses alike are significantly higher than anything experienced on previous schemes and are a reflection of the fact that this is the first scheme to be carried out in a large urban/city centre area.
The information available subsequent to the commencement of site work indicated that it would be prudent to increase the provision for compensation. It must be emphasised, however, that the increased provision merely reflects the best estimate that can be made at this point in time. Matters may arise in the final stages of the contract that give cause to review this estimate. OPW typically does not begin to accept claims until a scheme has been completed and in the normal course, claims can often take several years to resolve. It is likely, therefore, that the final cost of compensation will not be known for several years and it could be up to 12 months after work has been completed before any extrapolation can be made based on actual claims received.
The estimation of compensation in this case is intuitive rather than scientific. However, agreement and settlement of compensation payments is based on standard practice in valuation and assessment of compensation. There is provision for Arbitration as is the norm in this area. Legislation also provides that the benefit to be accrued from the scheme can be offset against any claim for damages. In a number of instances in Kilkenny where it is known that substantial claims will be submitted (one has been received to date) OPW has already begun the process of assembling information on disturbance and interference in order to be in a position to address the claims.
Archaeology
A sum of €630,000 was included in the original project budget for archaeology. This represented 6% of the construction cost element of the budget as estimated at that time. The budget for archaeology on previous flood relief and Arterial Drainage projects was between 5% to 10% of the construction costs. In estimating for archaeology, OPW also considered the number of sites identified in the Environmental Impact Statement and felt that it would be prudent to provide 6%.
There was no information available that pointed to the level of finds and significant archaeological structures that subsequently emerged as the scheme progressed. Water levels were artificially lowered, and the riverbed, bridges, and weirs were revealed for detailed examination by archaeologists for the first time.
As the project progressed, it became obvious that the number of archaeological finds was much greater than had been estimated as was the extent of the monitoring required. The long history of settlement in Kilkenny and the central position of the River Nore in the city has resulted in a very high number of finds of artefacts and significant structures in the river.
Underwater archaeology has also been more extensive than was anticipated at the outset of the scheme due to the number of structures of interest which had to be examined in-situ, before their removal. All of this had a consequential effect on the contract in that the contract period was extended to allow for increased monitoring and investigation and claims for delays and disruption have arisen from unanticipated finds of artefacts and structures.
The updated project budget contains an estimated figure of €4.82 million for Archaeology. The majority of high risk areas have already been excavated, although one area of potential sensitivity is scheduled for works in the summer of 2004. OPW's archaeological consultants state that the risk of a major discovery in the remaining areas of the scheme is low.
In light of the experience in Kilkenny have changes been made to OPW's approach to flood relief work?
The scheme has remained extremely cost beneficial and OPW has obtained approval from the Department of Finance at all relevant stages. However, OPW recognised some time ago that this situation is not sustainable. There are 14 other schemes in urban areas throughout the country at various stages of planning that have a combined estimated cost of approximately €300 million. It would be completely unacceptable that the cost of these schemes could increase at a rate similar to Kilkenny. In April 2003, OPW carried out a review of the approach to these schemes. This resulted in the approval of a revised approach in September 2003.
In future, OPW will adopt a risk management approach to flood relief schemes. This approach includes consideration of the feasibility of a phased implementation of schemes i.e. schemes will be broken down into smaller, more manageable phases and each phase carried out separately. In some cases this may facilitate work being done directly by OPW and/or the relevant local authority and the local authority will be expected to take a much greater role in managing schemes. This methodology has worked extremely well in carrying out work on the Tolka River in Dublin and Meath in the last two years. In addition, use will be made of innovative new technologies and steps will be taken to reduce or eliminate cost risks in relation to dredging, archaeological, and environmental mitigation measures. Issues such as the potential of flood warning systems, flood hazard mapping, and enhanced maintenance programmes, all of which can reduce the need for structural works, will be considered.
This new approach is entirely consistent with methodologies now being developed and applied in the UK and mainland Europe. Since October 2003, OPW began to apply this methodology in the case of the three schemes in the Flood Relief Work Programme that are most advanced in planning — Carlow Town, Clonmel, and Waterford City, and these are now being progressed on this basis. This changed approach has been adopted in recognition of the need to take action swiftly while continuing to make progress in planning the schemes.
A Flood Policy Review Group was established by the Minister of State with responsibility for OPW in November 2002. The experience with the Kilkenny scheme as well as a recognition of the need to review the OPW flood relief work programme in the context of an overall State policy were factors in this decision. The Review Group completed its work in December 2003 and its Report is now with the Department of Finance awaiting submission to Government. The Report recommends an overall policy on flood management and sets a context for OPW's work. While not wishing to anticipate Government approval for the Report, the Accounting Officer is satisfied that OPW's revised approach to flood relief schemes is consistent with the Report's recommendations.
Mr. John Purcell
The committee is dealing first with Chapter 4.1 which sets out the circumstances in which the estimated cost of flood relief works in Kilkenny city escalated from €13 million at outline design stage in December 1999 to almost €48 million less than four years later. The initial hike came in August 2000 when consultants completed a detailed design based on the original specification and costed it at approximately €42 million. The OPW was not prepared to accept the revised cost and instructed the consultants to come up with proposals for alternatives and more economic forms of construction while still meeting the objectives of the scheme.
In November 2000, a revised project specification was submitted and approved with a maximum budget of €24.4 million. However, when tenders to carry out the construction work were received in early 2001, the overall estimated cost of the project had risen to €34.8 million. In August 2003, following a review of the project, a revised estimate which put the cost of completion at almost €48 million was submitted for approval. The contributory factors for the increase in the estimated cost are listed at the bottom of page 37 of my report.
The OPW has informed me that the main scheme works are due for completion before the end of the year. Landscaping work will extend into next year but the OPW expects that the scheme will be completed within the current project budget of €47.8 million. My review of the files suggested a lack of realism in the earlier estimates particularly in regard to the potential cost of archaeology and compensation bearing in mind that the work was taking place in a recognised architecturally rich location, being a medieval town and city and in a concentrated urban environment. From the Accounting Officer's reply, there is tacit acceptance that this was the case. More important, the cost escalation brought into question the appropriateness of the whole approach to this project, the first large urban flood relief scheme carried out in this country.
With other flood relief projects earmarked for a number of urban centres, it became clear that the approach adopted for Kilkenny would not be sustainable across the board. To the OPW's credit it reviewed the position in 2003 and came up with a revised approach which involves applying risk management techniques to flood relief schemes. This approach includes consideration of the feasibility of breaking down schemes into smaller more manageable phases with each phase being carried out separately. Early indications are that this new approach is working well.
In the broader context, since the date of my report, the Government has endorsed the recommendations of a flood policy review group for adopting a more strategic flood management approach in the future. The key change underlying the recommendations is that a proactive approach that places greater emphasis on managing flood risk rather than relying on the traditional reaction of building more flood defences be adopted. This change is in line with what is happening elsewhere in Europe.
Again in the broader context, the committee will note that in May 2004, Government policy in regard to the so-called measure and value contracts and the percentage basis for professional fees changed. The Department of Finance is due to enter discussions with the construction industry and the relevant professional bodies on bringing the new policy into effect. Members will recall a reference to this initiative designed to reduce the scale and scope of cost overruns when the committee considered my special report on the roads programme.
The Kilkenny flood relief scheme has been an expensive lesson but it has helped to bring about fundamental change for the better in the way such schemes are approached in the future.
Mr. Benton
I thank members of the committee for giving me an early opportunity to discuss the Kilkenny flood relief scheme and the humanitarian aid scheme, to which we will later come. There are a number of points on both schemes which need to be highlighted. First, the Kilkenny flood relief scheme which will be completed in a few weeks time will provide the city with a 100 year protection level against flooding. The second point which deserves to be highlighted is that the scheme represents value for money. I say this because it has been subjected to very rigorous cost benefit analyses at a number of points in its process and the outcome of those studies is extremely positive. The economic benefit is valued at well in excess of €100 million.
At every stage the project has complied with Department of Finance criteria for appraising capital expenditure. A preliminary feasibility study was undertaken while the outline design was subject to a cost benefit analysis. An environmental impact study was also carried out. The scheme was subsequently placed on public exhibition and confirmed by the Minister for Finance. It then underwent a process of detailed design by engineering consultants appointed following an EU competition. The contractors began construction work in 2001, again following an EU-wide tendering process.
At every stage the project was tested against strict cost benefit requirements and sanction to proceed was received from the Department of Finance. We only proceed with schemes where the cost benefit is positive. At every stage in the process the Kilkenny flood relief scheme — even with increasing costs — was demonstrated to be extremely cost beneficial.
There are a number of aspects of the scheme I want to highlight. It is very different from the more traditional building construction projects, with which the OPW is familiar. The design of flood protection schemes includes a significant element of in-river works and carries an inherent degree of risk that is impossible to eliminate. This is because of the practical difficulty, and often the impossibility, of carrying out the degree of site investigation work that might be considered ideal. For example, water levels in the city of Kilkenny could only be lowered to allow detailed investigation by breaching the weirs. However, this was such a substantial step that it could only be contemplated as part of the actual scheme.
The position differs from that on other types of civil engineering contract where there are, typically, fewer impediments to site investigation. For example, underwater archaeology which is highly expensive has also been more extensive than anticipated at the outset of the scheme due to the number of structures of interest which had to be examined in situ before their removal.
As the Comptroller and Auditor General said, the Kilkenny flood relief scheme is the first large urban scheme carried out in this country and, as such, there was no precedent to which to have regard when assessing risks. The contract was complex in that it had to be framed around stringent environmental conditions, in respect of archaeology and fisheries, in particular. The practical effects of this are difficult to predict until work is in progress. Environmental considerations meant that work could only take place on the river bed between the months of July and October. Weather conditions occasionally shortened this period even more. In the case of flood relief projects it is only when tenders have been received following detailed design stage that a true approximation of the cost of the scheme emerges. Even then, as mentioned, river conditions can make it extremely difficult to accurately forecast costs.
As well as the difficulties posed by these factors, the following specific issues have contributed to the cost increases in the case of the Kilkenny flood relief scheme. There were necessary post-contract modifications to designs resulting in delays and additional costs. I will be happy to explain the background to these post-contract modifications at a later stage if members of the committee so wish. There were unfavourable ground conditions that could not have been anticipated. The presence of rock in the river bed at levels that had not been anticipated was also discovered. There were delays and downtime due to noise interference and damage to properties and infrastructure, the extent of which could not have been anticipated. Delays and additional costs arose from the contamination of the river bed with PCBs, poly-chlorinated-biphenyls. The higher than expected costs arising from archaeology and the delays and additional costs incurred by the contractor arising from the diversion of services that had not been known about or accurately mapped also had to be provided for.
A further significant difference with flood relief schemes is that the State does not own much of the property on which it had to enter. Private property is temporarily occupied while work is in progress and then handed back to the owner. As members probably know, the Kilkenny flood relief scheme was located right in the heart of the city and involved impacts on a wide variety of private properties, including residences, shops, pubs, traders and businesses, including one major hotel. A total of 115 different property owners were affected.
I want to briefly mention the cost benefit analysis methodology employed on the scheme. As I said, it has been subjected to very rigorous cost benefit analyses at a number of points in its development. The accepted methodology for the cost benefit analysis of flood relief schemes is based on the findings of research carried out in the United Kingdom by Middlesex University and published in a series of reports known as the flood loss assessment information reports, commonly called FLAIR. The use of FLAIR as the basis for flood damage estimation in Ireland has been validated by Goodbody Economic Consultants. It is also noteworthy that FLAIR 2003 has also been accepted for use by the Department for Environment, Food and Rural Affairs in the United Kingdom, the parent Department of the Environment Agency. Application of the FLAIR methodology for cost benefit analysis suggests that the economic benefit to Kilkenny is well in excess of €100 million.
I now want to turn to the humanitarian aid scheme as part of my opening statement.
We will deal with the two schemes separately. The statement should be structured in such a way that the second scheme can be left until later.
Mr. Benton
Fine.
Mr. Benton can present again before we deal with the second scheme. I take it the statement can be published.
Mr. Benton
Yes.
I have a few questions after which I will call Deputies Deasy and Dennehy.
The cost has gone from an estimated figure of €13 million to almost €48 million. One of the Deputies present remarked that in the private sector if a project estimated to cost €13 million turned out to cost €48 million, the door would be locked at this stage and the company would be out of business. It is from that perspective that the taxpayer is now looking at public expenditure. I cannot understand how over a four year period voted moneys of €13 million can increase to €48 million.
The second adverse reaction from the public is that the Cabinet obviously made a decision on the basis of a figure of €13 million when it gave the go-ahead for the project. The local authority in Kilkenny also gave the go-ahead on the basis of such a figure. Is the sum of €48 million now the full and final figure or will other items of expenditure be added to it?
Mr. Benton
It is difficult to give a definitive response to the last question. There are two elements that have not been finalised. One is compensation to landowners.
There are 115 property owners.
Mr. Benton
That is correct. The other is the extent to which we will be dealing with the contractor in respect of delays and additions. Again, for commercial reasons, I would not like to reveal what the figure is at this stage but provision has been made for it. I am hopeful this is the final figure. We believe the provision is generous and it may or may not all be spent. However, I cannot give a definitive response, particularly because the issue of compensation could drag on for a few years.
We are at a figure of €47.8 million. Without separating them, can Mr. Benton give a ballpark figure for the two items mentioned?
Mr. Benton
I would prefer not to at this stage.
Are we looking at a figure of €60 million?
Mr. Benton
No. I am hopeful we have capped expenditure at this stage. The Chairman asked me for a definitive response, but I cannot give it to him at this stage because the project has not yet been completed. We have yet to agree the final accounts and sort out the compensation elements.
None of the 115 property owners has yet been compensated. Is that correct?
Mr. Benton
That is correct.
They are still in negotiations with the contractor.
Mr. Benton
That will continue.
What are the negotiations about?
Mr. Benton
Businesses may feel they suffered disruption, for example.
I know and understand that but I am asking about the contractor.
Mr. Benton
The contractor will submit normal claims in respect of the delays, additional work, downtime and extensions of the duration of the contract. Negotiations have to take place on such issues. Provision was made in the overall figure to cover such claims. I would prefer at this stage not to give the precise additional figure within the overall €47.8 million figure.
I wish to return to a point made earlier. The Chairman mentioned that the cost of the scheme had increased from €13 million to €48 million. He said that if such a cost increase occurred in the commercial world, the doors of the organisation would be closed. I emphasise my belief that such a decision in the commercial world would have been taken on value for money grounds. If someone had been able to demonstrate at every stage in the scheme that it made economic sense, I do not imagine that the commercial sector would have turned against it.
The tender was €34.8 million. That was the actual value of the contract handed out in March 2001.
Mr. Benton
No. The total project budget at tender stage was €34.8 million. That included the costs of the myriad aspects of the project such as design fees, archaeology and compensation. As far as I recall, the construction contract was valued at €22.5 million at that stage.
Yes, but the total cost was €34.8 million.
Mr. Benton
The total budget cost, on which we tend to operate, was €34.8 million.
I notice that the contract gave the OPW the option of buying out overruns on labour and material on the part of the contractor. The OPW exercised this option when it bought out overruns on labour and material of €2.9 million, plus VAT. How did the extra costs arise thereafter? If the OPW bought out the labour and material additions in line with the terms of the contract, how can it explain the further jump of €10 million or €11 million?
Mr. Benton
The original contract provided for price inflation. We were buying out the price inflation which I think cost us €1.3 million more than what had been provided for at contract stage. The price variation cost does not cover the additional works or the downtime, but the increase in prices.
Therefore, a number of additional bills which were presented by the contractor were not covered by the buy-out option which was taken up at a cost of €2.9 million, plus VAT.
Mr. Benton
The contractor would have to be compensated for all additional works not covered by the price variation costs. This covers inflation in the industry.
Later in the meeting I will discuss with officials from the Department of Finance the contracts which seem to have a built-in incentive bonus for everybody involved, including professional advisers who are paid a percentage of the final sum, to inflate the figures as they go along. The committee once received a commitment that the OPW would move from such contracts to fixed contracts which would be given out on a tender basis for consultants. If one examines the way this project developed, one will see that the contractor, the sub-contractors and all the consultants along the line had vested financial interests in the biggest possible outturn. It seems that when one engages in such a contract, one will get raped every time one deals with contractors.
I would like to refer to the archaeology involved in this case, to which Mr. Benton made several references in his opening statement. In this instance the cost of archaeology was originally estimated as €600,000 in July 1999 but had increased by eight or nine times to €5.1 million by June 2001. Can Mr. Benton tell me what the figure is now?
Mr. Benton
I expect the figure will have decreased to approximately €4.8 million.
On what was the OPW's original costing of €600,000 based?
Mr. Benton
It is important to emphasise that the figure was determined at the initial stages. The OPW's experience of such projects suggests that 5% or 10% would be a reasonable provision for archaeology. In this case the relevant percentage was initially set at 6%, when the preliminary estimate was produced. As the contract documentation developed and the archaeologists came on board, it became clear that there were substantial finds on the river bed. On the basis of this information, we increased the provision to €5.1 million at the contract stage.
The Comptroller and Auditor General has mentioned that Kilkenny is a medieval town, but anybody with a reasonable knowledge of history knows it is older than this. It is a 6th century town founded by St. Canice. There is still a round tower there. Strongbow built what is now Kilkenny Castle in the 12th or 13th century, but the town predates the castle by about six centuries. Did the OPW take this into consideration when it made its initial estimate?
Mr. Benton
It probably just applied the standard contingency provision in respect of archaeology at the initial stage. A lesson has been learned in that regard, picking up on the Comptroller and Auditor General's point. We have learned that archaeologists should be brought on board much earlier in projects in order that more detailed estimates can be acquired.
Therefore, a formula is used, as opposed to the specific situation in hand.
Mr. Benton
At the initial stages the estimate of €13.8 million was based on the standard provisions. The consultants making the estimation did not have access to the geotechnical information or the detailed design at that stage. They were very much operating on the norm.
If the OPW could not make a realistic estimate of the cost of archaeology, why did it bother to come up with a number at all? It based the estimate on a formula, rather than dealing with the specific site or situation in hand. What was the point in coming up with a number at all?
I wish to return to something the Chairman mentioned. Mr. Benton said value for money was provided, regardless of the price. If one is given erroneous and unbelievably low figures, how can one make a decision on whether value for money is provided? For example, how can the Cabinet base a judgment to proceed with a project on initial numbers which are totally wide of the mark?
Mr. Benton
I will respond to both of the Deputy's points. The provision for archaeology at the contract stage was very accurate. We had provided for a figure of €5.1 million before we signed any contract and committed ourselves to it. The cost subsequently turned out to be approximately €4.8 million. The assessment we made before we entered into any contract was very accurate by any measure.
My recollection is that a number of problem areas were identified in the Cabinet decision. Kilkenny was one of the top priorities because it has been vulnerable to flooding during the centuries. The project was submitted for approval to the Department for Finance subsequent to this and at every stage of the process. It could have been aborted at contract stage if it was not demonstrated to be providing value for money. At the point at which we placed the contract it was clearly giving good value for money.
To go back to archaeology, who was involved in devising the initial figure within the Office of Public Works?
Mr. Benton
I think it was the engineers.
Was anyone at local level involved?
Mr. Benton
A preliminary environmental impact study was carried out and the figure was based on the advice contained therein.
Who gave advice?
Mr. Benton
The consultants were MC O'Sullivan Engineering Consultants.
From where?
Mr. Benton
Their head office is located in Cork.
Was anyone local used? Were historians or anyone else with a knowledge of archaeology brought in to help come up with a figure?
Mr. Benton
It was very much a preliminary estimate. Before we placed the contract, the investigation and analysis to which the Deputy is referring were carried out. The figure provided for in the contract was €5.1 million.
If one looks at Table 27, it appears the figure was not just an initial estimate. The figure of €650,000 was maintained right up to detailed design stage as outlined in the third column of the table. It was not simply an initial shot. It was only at final contract stage that a realistic figure was devised.
Mr. Benton
That is correct, pre-contract.
According to Mr. Benton's presentation, within the €13 million estimate a preliminary consideration of historical data suggested a sum of €650,000 would be needed for archaeological investigations but that is not the full picture. The figure was still being brought forward at detailed design stage, which is different. That casts a different light on the matter.
Mr. Benton
In the meantime we had taken professional advice to the effect that we should be providing in the order of €5.1 million, which figure was included at pre-contract stage.
Is that to say the OPW did not have professional advice at detailed design stage?
Mr. Benton
We did. Is the Chairman looking at the details in the document?
There are four columns in Table 27. In the first column the figure for archaeology is €630,000. There is no figure in the second column while the figure in the third, detailed design stage, is €650,000.
Mr. Benton
As the tender documentation was being developed, the exercise in archaeology was being carried out in parallel, the results of which demonstrated that we needed to provide substantially more money.
It appears a formula was used and that there was no extensive report. The environmental impact study was inadequate for anyone to use it as the basis for a realistic figure. To come back to what the Chairman said, how can anyone decide to proceed with a project if the numbers are completely wide of the mark?
I have a broad question on the measure and value basis for Mr. Benton and the officials from the Department of Finance. Were there any internal discussions on this system? Were there any worries that while the project was proceeding, the system could give rise to massive overruns and significant inflation? Did Mr. Benton ever speak to anyone in the Department of Finance to say the system was ridiculous and allowed for a massive increase in costs on initial estimates?
The initial estimate was €13 million but the final figure was €47 million. While it is no wonder there is a new risk management approach considering the estimate was wide of the mark by €34 million, it took Mr. Benton nine years to put it in place. He was appointed to the project in 1995. Did it take him that long to realise the structures in place were faulty? Did he at any point contact the Department of Finance to say there was a serious problem?
Mr. Benton
I do not accept there were overruns of the type about which the Deputy is talking. I define the overruns as occurring post-contract. On the increasing estimates for the scheme to provide the 100 year protection we sought, the initial approval from the Department of Finance only related to moving to the next stage. One was not committing to some unknown figure, one was simply obtaining permission to move on. As the tenders came in and the overall project budget crystallised, one still required approval to go to tender. There was no question of underselling the project in terms of the cost.
I will ask the question again. Did Mr. Benton ever speak to the Department of Finance about this? Did alarm bells ever go off in his head? Did he accept this estimate throughout the entire process as being reasonable?
Mr. Benton
I mentioned in the course of my statement that we were in communication with the Department of Finance at all stages. We advised it of the price increases and received approval to proceed. We received it because at all stages the project was demonstrated to provide value for money.
Mr. Benton has tacitly accepted in the light of his new management system that the process involved was incorrect. How did he come to this conclusion and why has he changed the management process?
Mr. Benton
The process was not incorrect. Due to our experience, the scale of investment required and considering the task nationally at a number of other sites, we examined other ways to advance projects which would yield the same level of flood protection while avoiding the tying up of all our resources in any one project at any one time. The new incremental approach allows us to proceed on that basis.
All the risk appears to be borne by the purchaser rather than the contractor. When did Mr. Benton realise this was dangerous to the public finances?
Mr. Benton
As I explained, we are tied into a measure and value form of contract — the civil engineering form of contract. The officials from the Department of Finance have explained what is happening in that regard. We proceeded from one stage to the next with our eyes wide open. We knew there were increases on the way and satisfied ourselves at every stage that despite the increases, the project continued to provide value for money.
I do not know what the protocol is, Chairman, but can I ask the officials from the Department of Finance the same question?
Yes.
Was the Department of Finance concerned at any point about the numbers involved in the initial estimate and did it have conversations with the Office of Public Works?
Mr. Quigley
I confirm what the chairman of the Office of Public Works has said about this specific project. Documentation was placed before us and the circumstances of each change were outlined. There were discussions between the Department and the Office of Public Works.
Was the Department happy throughout the process?
Mr. Quigley
On the basis of the information before us, we were satisfied about the steps being taken on the specific project in question.
Did the Department not have concerns, given the increase in the initial figure of €13 million to €47 million?
Mr. Quigley
While we did, it is important to emphasis that the Deputy is not comparing like with like. As the Chairman pointed out, initial sanction was given in 1999 to go ahead with the outlining of a scheme with a view to publicly exhibiting it. After this, a detailed design estimate had to be provided, on foot of which the alarm bells started to ring. As the Chairman pointed out, the initial action of the Department of Finance was to provide sanction in principle for a scheme which would have to undergo the rigours of drawing up of scheme documentation, public exhibition of documents and input from the local authority and local interests generally.
Is it not true that the measuring value basis scheme has been shelved largely because of what has happened in this project?
Mr. Quigley
I will ask Mr. Deane to talk about procurement procedures in general. It would not be fair to say the changes which are in the process of being implemented were as a direct result of this project. This was only one of many construction projects that——
It is a good example.
Mr. Quigley
Yes, but there were many other factors in the change in procedure taking place.
Mr. Jim Deane
I cannot comment on the specific project. I work in the procurement area in the Department. We have a concern about cost overruns, as has the Government. In May this year, the Government introduced significant changes to the way we procure construction projects. This involves the introduction of fixed price, lump sum public sector contracts, which is, I believe, the issue to which the Deputy is referring.
At present, the public sector bears many of the risks. These are paid for at the end of the contract, which is one of the reasons there is a difference between the initial estimate and the outturn price. Under our new approach, we ask contractors to bid on a competitive basis. The bid will include a number of identified risks. Contractors will, therefore, bid against each other on this basis and will have to bear the costs if any of the risks materialise. We are moving towards a lump sum, fixed price basis.
What is the position regarding this change?
Mr. Deane
The Government decision was taken in May. Since then, we have been seeking expert advice. We have to consult other members in the public service on what will work and how to implement it properly. Then, under Sustaining Progress and social partnership, we need to consult the Construction Industry Federation and the professional bodies involved. Once this process has concluded, we hope to introduce new standard forms of contract for construction projects.
Mr. Benton
The cost of the project did not increase from €13 million to €48 million under the contract. The project cost at contract stage was €34.8 million. While this still constitutes a significant increase, no one should be misled into believing the nature of the measure and value elements of the contract caused the cost to increase from €13 million to €48 million. That is not the case.
Mr. Benton stated initially that value for money was provided at all times. One cannot make a decision in that regard and no one can base a judgment on the initial figure because it was obviously erroneous and an underestimate. One cannot make a decision on whether a project is value for money when the decision is taken on the basis of a false figure.
Mr. Benton
I do not agree with the Deputy. One makes a decision on the basis of known facts. At that point in the process, the project was demonstrated to be providing value for money. As the facts changed, the cost benefit analysis was revisited and again demonstrated that, despite the increases, it continued to come out positive in the results.
Mr. Benton referred to "known facts". With regard to the archaeology, there were few known facts when the initial estimate for archaeology was made.
Mr. Benton
Correct.
It is, therefore, at minimum an exaggeration. It is important the figures are reasonably accurate, which is not the case.
Mr. Benton
I have already acknowledged there are lessons to be learned regarding the time at which one brings in professional archaeologists to help do a detailed analysis. In a sense, however, that misses the point. At all stages, the scheme was measured against what we believed were the costs.
Has a date been set for moving to fixed contracts, lump sums and the transfer of risk to contractors?
Mr. Deane
It is difficult to set a date because we must take the matter through the public service, after which we must take it to the construction industry. We are working on guidance notes, specific conditions of engagement in relation to professionals, to try to introduce competitive tendering for professional services. We are also considering amendments to some aspects of standard forms of contracts. In other words, this is the first phase of moving to fixed price contracts. We hope to have some work available to take to the construction industry in November but this depends on processing the matter first in the public service.
We have also commenced work on new standard conditions of contract but are in the early phase of the process. This is a highly technical area involving many contracts, conditions and clauses. We hope to have specific proposals finalised by the spring or summer of next year for consultation with the industry at that stage.
Are you meeting significant resistance?
Mr. Deane
There are many issues involved. We have not yet brought specific proposals to the industry but it has indicated it wants to engage with us in the process and contribute towards its implementation.
This committee produced a report on public private partnerships outlining steps which should be taken. Critical in this regard were the issues of responsibility and risk. Does Mr. Deane have the report? Is he using it and, if so, is it beneficial?
Mr. Deane
Yes. Under procurement in the Department we have construction procurement, e-procurement and general procurement. It also covers public private partnerships. Much of the work we are doing on the construction side overlaps with the PPP process. The experience of risks in the early PPP projects is feeding into our thinking on how we will move forward in this regard.
The committee has a difficulty with a project, the cost of which increased to €47.8 million from the original estimated cost of €13 million. I appreciate that three different processes, estimates, tenders and contract price, are involved. One of the difficulties is that the initial Government sanction is nearly always given on the basis of the estimate. We are trying to monitor how sanction is given. In many cases, the value for money argument is used to justify changes in prices. I cited the case of Cork city courthouse. My argument is that the initial estimates are produced by people who do not have expertise in a particular area. Does Mr. Benton accept this is the case?
Mr. Benton
Not necessarily. I am sorry to disagree with the Deputy on this matter but it is important to explain the context. The Government decision was a decision in principle. My recollection is that it was not based on the cost of an actual project for Kilkenny but on the knowledge that historically Kilkenny has been vulnerable to flooding. The initial stage for a project like this was to bring in a firm of consultants with a limited brief because at that stage we were trying to establish whether a flood relief scheme was technically feasible, environmentally acceptable and economically viable. This allowed us to bring the project to the point at which we could make a presentation to the public. Subsequently, even at the lower cost scheme, it became clear we would have to commission a full design team under EU procurement rules to advance the project to more detailed design. At that point, a second group of consultants came on board. They looked at the situation and felt the design solution in respect of the retaining structures along the banks needed to be significantly modified. Subject to what the engineers had to say, they suggested a Rolls-Royce version for about 2.6 km of the river-bank. The Office of Public Works was concerned about the massive increase in costs and looked at ways of coming up with appropriate design solutions for the different sections of the river. What we ended up with was a combination of solutions, from the Rolls-Royce version in sensitive areas to acceptable designs that would still give the necessary level of protection.
As a result of this intervention, the estimated cost was significantly reduced. We managed to get a scheme costed at about €41.9 million, not including archaeology or compensation costs. The cost would have been significantly more if one had included both of these items. We managed to get it back to a figure of about €24 million, which included an inadequate provision at that point for archaeology because we did not have the necessary information to make a detailed estimate. The project then moved to tender stage when the market suggested the figure should be €34 million, but included in this was a very significant increase for archaeology.
The Comptroller and Auditor General stated there was a lack of realism in the original estimate. Two teams of consultants were employed. Evidently, therefore, the second team must have been better or dearer or had more expertise. If it had been employed in the first instance, would the original estimate of €13 million have been nearer to the actual cost of the job?
Mr. Benton stated no expertise in archaeology was available in the first instance. Was there also a lack of expertise in other areas? I appreciate it has to be bought in but if the second team of consultants which came on board in 1998 or 1999 had been employed before the case was made to the Government, would there have been a more realistic estimate?
Mr. Benton
The initial commission was limited. The team was asked to carry out a number of tasks for us, but it did not have the advantage of the detailed site analysis which was not part of the scheme at that stage. It suggested a solution which was probably the least expensive intervention of the various methodologies used on such schemes. When the site conditions were subsequently known, our advice was that more expensive design solutions were required.
Mr. Benton's comment was that there was no precedent for this kind of work. Should he not have gone for people who were more qualified or acquainted with this work? A problem which the committee repeatedly sees is that a project is sanctioned on the basis of an estimate or guesstimate, as was the case with archaeology costs. The Government sanctions projects and then we read three or five years later the price has trebled. Bearing in mind that there was no precedent, should Mr. Benton not have gone for better or more knowledgeable consultants at stage one?
Mr. Benton
The consultants we initially employed were very professional but had a limited brief. I suppose the lesson to be learned from all of this is that when we ask someone for a preliminary estimate drawn up on the basis of their best understanding of similar solutions elsewhere, without the advantage of a detailed site investigation analysis, we should attach a very serious health warning to it. We have been caught out in the past on this. Perhaps we need to emphasise at the start of a project that estimates are preliminary and subject to a list of provisos.
I hope this point will be taken from the committee. I do not blame builders or anybody doing the work for what happened with Cork courthouse; I blame it on the lack of expertise at the outset. This is happening throughout the country. Local authorities are always being asked what they need. The Office of Public Works gives an estimate for the work but suddenly the cost is three times the original amount and the public gets to hear of it. I hope the lesson will be learned.
Many detailed questions arise in regard to compensation, an area in which I am aware Deputy McGuinness is particularly interested. I have a worry that people are being employed who do not have expertise in the area of finance, costings, engineering and a range of other matters. Political pressure may be applied locally in some cases to get things done, which can give rise to the situation with which we are dealing. That is not good enough. It is not good for the OPW that such matters are on the record. Obviously, we are concerned about this but something can be gained if lessons are learned along the way. Deputy Deasy made a point about archaeologists but there is a range of other specialties. We need to get the right ones at the outset rather than let matters get out of hand.
What other options were available and what other proposals did the consultants make? Several options were given in other towns that were looked at. Would Mr. Benton outline some of the options for the committee?
Mr. Benton
I am not clear as to what information the Deputy is seeking. The scheme had a particular design solution which was one of the least expensive options.
Obviously, the amount of rock in the river bed gave rise to some of the extra costs. Were there other ways of alleviating flooding?
Mr. Benton
When the detailed information on site conditions was known, we were able to look at a range of options. In the process we identified a range of solutions for different points on the river, depending on conditions, from expensive to less costly interventions. That is how the OPW managed to bring down the second estimate so significantly.
My colleague, Mr. Smyth, will deal with the specifics on the engineering side.
Mr. Tony Smyth
In general, one would look at containing the river completely within walls but we found in Kilkenny that the wall height, particularly along the John's Quay area, would have gone up to about 2.6 metres. That was not acceptable locally because it would have cut off the river completely from the town and was ruled out at an early stage. Looking at upstream storage, the size of the river would generally have ruled it out, as would the land take necessary, even if one had a valley or an area available upstream. These factors would have ruled it out at an early stage in which case, as Mr. Benton said, one was faced with a dredging solution — working on the river with lower walls and striking a balance between the amount of dredging required and the height of the walls along the quays.
Given the amount of money spent on it, would it have been better spent upstream? I would like the witnesses to elaborate on this? The flow of water into the city could have been held back. Surely the consultants came up with a plan that would have been a lot less costly than the project with which the OPW went ahead.
Mr. Smyth
No. The river is very substantial and the amount of storage and volume required to hold back a significant flood would have ruled out these solutions from an early stage. Furthermore, one would have to contain the flow upstream which would involve an unfeasible level of land-take. The solutions would also have been ruled out if embankments had to be built because there was not a natural valley in which to contain the water. They would have been ruled out on these general feasibility grounds at an early stage of the design process.
In other words, the OPW did not actually cost the project in detail.
Mr. Smyth
I cannot recall a detailed costing. They would have been ruled out on technical grounds.
Therefore, there are huge question marks over the project.
There has been much talk about archaeology in regard to this project. In the city it would have been uppermost in people's minds from the beginning. The original estimates, at 6%, were based on existing figures normally used by the OPW in areas in which the dogs on the street would know do not have the archae-ological significance of Kilkenny city.
Will Mr. Benton state if the area in question is a special area of conservation or a national heritage area?
Mr. Benton
Subsequent to the placing of the contract, it was designated a special area of conservation.
After the work began, somebody at Government level decided it was an area worth conserving. There was no reference to this in the witnesses' opening statements.
Mr. Benton
Designation did not add significantly to the cost. My recollection is that it required us to undertake a study of the lamprey and fisheries at a cost of £83,000. That was probably the only direct impact on the project of designating the area as a special area of conservation.
What role did Dúchas have in the project? I see no reference to it in the report.
Mr. Benton
It would have been consulted on the environmental impact study.
Was it happy with the works at all stages?
Mr. Benton
Yes.
I find that extraordinary because farmers cannot take a load of silt from the River Nore upstream from Kilkenny city without Dúchas admonishing them. I am amazed that it did not have a greater role to play.
Did wildlife and fishing stock considerations and the need for salmon to get upriver to spawn delay the work? I suspect that they did.
Mr. Benton
That was a significant issue which had to be borne in mind at all stages of the work. The fisheries authorities would have been represented on the steering committee overseeing the project.
Did consideration of the fisheries and wildlife aspects lead to any extensions of the timeframe for the project?
Mr. Benton
Again, subject to what my professional colleagues say, it resulted in confined periods within which work could be carried out.
Over what period was the work to be completed?
Mr. Benton
Over a period of 30 months.
What was the full period of the contract? I see from the report that work was being carried out in the summer of 2004.
Mr. Benton
I am confident that the construction work will finish within two to three weeks.
How many months does that make overall?
Mr. Benton
Approximately 37 months.
There are many references in the various reports to the time extension adding to inflation. A seven month delay over a three year period does not seem too extensive. Therefore, inflation should not have been great. It would not have been a major factor.
Mr. Benton
It is something on which we must agree with the contractor, but we have made provision for it in the overall figures.
I see on page 40 of the Comptroller and Auditor General's report that the "estimation of compensation in this case is intuitive rather than scientific". That is no way to plan anything. The report suggests that this is the first time the OPW has carried out a scheme in an urban area of such archaeological significance. There is no history upon which to base one's intuition.
Mr. Benton
We have experience of other river projects, not necessarily in the centre of a medieval city. The only way to make an accurate estimate is to wait until the project is finished and then get submissions from the various people involved. However, that is not a prudent way of proceeding either. Therefore, one must make a guess. As the design aspects were detailed, we actually increased the provision for compensation.
I also noted in the same paragraph that the "OPW has already begun the process of assembling information on disturbance and interference in order to be in a position to address the claims." When did it begin to do this?
Mr. Benton
That is an ongoing part of the project.
Did the OPW do much of this work before the contract work commenced?
Mr. Benton
We estimated the extent of the disturbance but, clearly, we then revised our view of this in the light of the work undertaken.
That is my worry about compensation. I am beginning to believe that as the project progressed, the OPW was reviewing its progress regarding the cost that might have to be met in compensation, not just for disturbance but for possible damage to some of the properties involved. If one does not have everything mapped before one starts, the property owners will have one over a barrel when it comes to negotiating for damage to their property. The best way for the OPW to protect itself against having to pay compensation to property owners is to map and photograph the relevant properties adequately. The OPW is now stating it is only beginning to step up its estimate as the work proceeds.
Mr. Benton
We would have undertaken many conditional surveys of the properties affected.
Is Mr. Benton happy with this?
Mr. Benton
The surveys represented a record of the condition of premises that would be affected. To that extent I am happy with them.
Given that this was the first large urban flood-relief scheme undertaken by the OPW, the only obvious thing I would have recommended was that it draw on international experience, considering that nobody in Ireland had ever worked on such a project before. Who were the international consultants and what experience did they have?
Mr. Benton
We engaged international consultants who have experience of such projects.
MC O'Sullivan.
Mr. Benton
Yes, and Mott McDonald EPO Limited.
On what cities and other large urban flood relief projects did they base their reports?
Mr. Benton
I do not have the details to hand but believe they were involved in very large projects in the United Kingdom.
Mr. Benton is stating strongly that there was a good job done throughout and that the benefits of the project significantly outweigh the costs. Is he satisfied that, despite the increase in costs over the full period, the project will stack up on a cost-benefit analysis from the taxpayer's point of view?
Mr. Benton
Absolutely.
Can Mr. Purcell confirm Mr. Benton's claim because it is a very strong statement?
Mr. Benton
It is a strong conviction.
If the Comptroller and Auditor General is satisfied to confirm it, it would be a very important statement, as it would if he did not.
Mr. Purcell
I did not state anything to the contrary in the report. I put that question to the Accounting Officer by way of an audit query. This issue involves exact science and intuition. The calculation of hard figures to measure the benefits to a city of not being flooded once every ten, 25 or 100 years is difficult. When the OPW carried out this exercise and the outline design was being finalised, the projected cost was €13 million. The economic benefit at the time was calculated at a figure of €22.4 million. When the projected cost was calculated at €24.4 million, the economic benefit was set at €34.1 million and when the projected cost was calculated at €34.8 million, the economic benefit was set at €43.5 million. I am not technically equipped to argue the point but I make it to illustrate that the figure for economic benefit seems to be a moveable feast. This morning the Accounting Officer has stated the economic benefit is now set in excess of €100 million at least, which information comes from the flood hazard research centre at Middlesex University. I have no doubt that the project will be of huge benefit to the people and businesses of Kilkenny.
There are also intangible benefits which are reckoned to be as great as the tangible benefits in such calculations. I have experience of IT schemes in respect of which the intangible benefits were calculated but this is in the stratosphere. We do not know, but I have no reason to doubt that the best information and academic research available suggest there is a clear benefit. Therefore, one can state the scheme is worth executing, with which I have no problem. However, it is very difficult to calculate the precise benefit because that is a condition of two factors. If one can get something for €25 million and end up paying €50 million, the benefit is lessened. In this case the benefit was originally estimated at €22 million and within a few years had increased to €122 million. I will not argue or take issue with the experts at Middlesex University or the technical staff in the OPW. However, a health warning should be applied to figures for economic benefit.
The Chairman can see now why I raised this point. I had no idea what would emerge when I asked the question which was more difficult than I thought.
I thought it was a double-edged sword but there were four edges to it.
Actually there were eight. There were four estimates of the cost and four estimates of the economic benefit, about which I am intrigued, to put it mildly. When the projected cost was calculated at €13 million, the economic benefit was set at €24 million. This morning we have been told the scheme will cost €48 million and that the economic benefit is set at €100 million. Therefore, there is an intangible benefit of €52 million. I take all these figures with a health warning but the UK model must have formed a basis in calculating the figures.
The committee should be sent the details of how the OPW undertook the cost-benefit analysis and why, when costs were increasing, co-incidentally and miraculously the economic benefit also increased. I do not see the logical reason the economic benefit increased just because the cost increased — the two should not necessarily be connected. I am surprised at the coincidence and amazed at the increase in the value of the economic benefit to the figure of €100 million announced this morning from a level of €24 million a few years ago. Will Mr. Benton comment on the matter?
Mr. Benton
I am happy to do so. While I announced this morning that the economic benefit was set in excess €100 million, in my response to the Comptroller and Auditor General some months ago I notified him that this was the outcome of the application of the revised measurements adopted in the 2003 report.
We cannot pursue these figures in detail today and cannot close on this topic, as often happens in meetings of the Committee of Public Accounts. It is very easy to analyse the costs because they are measured by cheques paid out and liabilities incurred but the committee wants to see value for money achieved and to be made aware of the benefits, on which we have not had an elucidation. It would help our consideration to examine the reports which have been prepared. Perhaps they are excellent, carry health warnings or are all airy-fairy, but we need to examine them before we can conclude our examination.
Mr. Benton will send the reports to us.
Mr. Benton
I am happy to share them with the Deputy or anyone else who is interested. We commissioned A & L Goodbody to examine the applicability of the methodology used to the Irish situation and it confirmed that it was an appropriate method which has been adopted by the principal Department in the United Kingdom as the standard method in undertaking a cost-benefit analysis of flood relief schemes.
I am happy to hear that but the committee would benefit from seeing the reports.
I will address my question to Mr. Smyth. The Comptroller and Auditor General's report states: "A number of potential solutions were identified and were presented to the local authorities and the preferred option was chosen in July 1998". When Mr. Smyth responded to Deputy Hayes, he referred to a valley upriver and an attenuation pond. Will he address the perception that the OPW dropped these other options very quickly?
Mr. Smyth
I cannot go into detail involved in upstream storage but one could rule it out quickly because of the substantial volume of water flowing down the River Nore at approximately 400 cubic metres per second.
It would have been a very expensive project.
Mr. Smyth
If there was no natural valley within which to contain or store that volume of water, one would have to provide for storage in the form of embankments upstream which would have resulted in a great deal of land being flooded.
Would the cost have been prohibitive?
Mr. Smyth
It would have been ruled out as an option at an early stage. Technically, one would not have included it. It was not one of the options presented to the local authority. Three or four other options were proposed which involved excavation at different depths and widths of the river, some of which would have involved removing areas of land along John's Quay and on the other side of the river as well as widening or deepening the river bed.
Were estimates attached to those options?
Mr. Smyth
There were broad stroke estimates.
Mr. Smyth has stated three or four options were proposed. Where did the final option and the estimated cost come in the overall scheme of things? Was it the most expensive or cheapest option?
Mr. Smyth
I am afraid I cannot give that detail off the top of my head.
Was cost a consideration when the preferred option was chosen in 1998?
Mr. Smyth
Yes, the cost involved formed part of the package. At that stage we were testing with the local authority. One of the bigger issues was the height of a wall which would have been acceptable locally and the height of containment of the river. The higher one can build a wall to contain the river, the less excavation work one will have to do at the bottom of the river. This option would have brought down the cost but was not acceptable at local level because walls two metres in height would have had to be built along stretches of the river.
I am somewhat concerned. Mr. Benton said the initial consultants had a limited brief. Looking back, it is not that the project cost €50 million, it is the fact it was based on flawed information. I seriously question the benefit of the initial work. Having listened to Deputy Fleming talking about the project's benefit, had a thorough investigation been done at the initial stages and the costs been known, it is possible the project would not have continued or alternatives might have been sought. The only reason the OPW continued was that the first estimate was for €13 million with benefits of €24 million. That first estimate, however, bore no relation to reality.
Mr. Benton
The initial exercise established if there was a scheme that was technically feasible.
There were four such schemes.
Mr. Benton
I will come back to that. It also had to be environmentally acceptable and economically viable. When we satisfied ourselves on those criteria, it allowed us to examine the scheme in more detail. Had the detailed design demonstrated the costs were prohibitive and exceeded the value, we would not have proceeded with the scheme. That is the standard benchmark for all flood relief schemes. The cost benefit must be positive. We applied that analysis before we proceeded to each stage. The project is not tied in from day one, it can be aborted at any stage.
I appreciate that but is it not fair to say the initial scheme, as designed and presented, was based on limited research and was fundamentally flawed? The OPW could not deliver what it designed.
Mr. Benton
The scheme was based on inadequate information. That is the nature of those schemes. Seeing if it is worth pursuing is like dipping a toe in the water before there is significant expense.
The Government made a decision that this issue should be tackled. The first toe in the water with this project was rubbish, it bore no relation to reality. There were three or four other possibilities and we have not even looked at them. The outcome of the project that was pursued bore no relation to the reality that turned out.
There were other ways to deal with this. The committee does not know what they are but I am concerned that they were not fully investigated. They may have been looked at in a different light if it had been known this project would cost €50 million. We have spoken about the initial toe in the water before. The information was fundamentally flawed and, if anything, it may have been to the detriment of the project and may have cost us money because other solutions might have been more suitable.
On the cost-benefit analysis, I would ask if this option offered the best value for money. We never evaluated the other schemes because we were working on a flawed premise from day one.
Mr. Benton
I do not accept that. I believe this was the best solution to offer 100 years of protection to Kilkenny against flooding.
Were there other ways to do that? Mr. Smyth said there were three or four options.
Mr. Smyth
The options were to deepen the river by another half a metre to lower the walls further or to widen the river, which would have involved work on the River Court Hotel. That can be quickly ruled out. The height of the walls was addressed by the public, who did not want a two and half metre high wall.
Was this the only option that would work in technical and engineering terms?
Mr. Smyth
No, the river could be deepened further and the walls removed entirely but that would add to the costs and environmental problems. A cheaper solution may have been not to excavate the river and build much higher walls with greater containment but we had to strike a balance between the public acceptability of the height of the walls and the depth of the river.
If it was to be done again, would the OPW seek a more detailed survey from day one?
Mr. Benton
With the benefit of the information on Kilkenny, which was the first project of its kind, I would attach health warnings to any estimates. If this work was to be carried out in a city centre I would increase the contingency provisions in the estimates but part of the exercise is to establish if there is any case for going forward before committing to expensive fees for consultants.
Turning that around, before entering a commitment, a project was embarked upon that was initially estimated to cost €13 million that eventually cost €50 million. If the project is worth doing, the initial work must be much more detailed and scientific and the problems that were encountered along the way should have been recognised. Deputy Deasy spoke about the archaeological aspect but the initial analysis was so flawed that it is extremely weak.
Mr. Benton
At all stages, we followed the procedures set out by the Department of Finance for capital appraisal. Those procedures require us to carry out a feasibility study before we get into heavy expense. That is what we did in this case.
How would heavy expense be defined? When the project was presented, what would have been a reasonable expense to incur for preparatory work and a design.
Mr. Benton
We probably incurred expenses of €2 million. It would cost significantly more to get documentation to tender stage and identify all these issues. That is what is required to eliminate risks. We must work through the detailed design taking on board all of the site investigations that were carried out subsequent to the estimate. There is significant expense of several million euro before it would be possible to provide an accurate picture like that the Deputy requires.
Did the OPW spend €2 million on the preparatory work for this?
Mr. Benton
Yes, we spent €1.7 million.
How far along did that bring the project?
Mr. Benton
It covered the cost of some site preparations. The significant portion was needed to design and model the river before the engineers could come up with final design solutions.
Was that the first or second consultant?
Mr. Benton
It was at the initial stages.
Before the consultant who eventually did the job came on board, €1.7 had been spent?
Mr. Benton
Correct.
Having spent €1.7 million designing a project, with a first estimate of €13 million, we are out by a factor of four. The first €1.7 million spent on the design and modelling stage does not seem to have been well spent but that might be another issue. Mr. Benton said repeatedly if he was doing it again he might put a serious health warning on the estimate. That is not good enough. We hear this time and again, the margin of error shows that the first estimate was not worth the paper on which it was written and certainly was not worth the €1.7 million spent on design. It would have been much better to double that amount or whatever it took to come up with a realistic figure and a proper working project.
Mr. Benton
We did not commit ourselves to the expenditure at that point. We developed the scheme a little further. That is all we tried to achieve, to arrive at a point where we could decide if it made sense to move this along.
It made sense because you were working, according to yourself, on a flawed basis. At that time the cost-benefit analysis was positive and there was a net benefit. The only reason for that was that the cost was in doubt at €13 million and the benefit at €24 million. Had the real cost been known the situation would have been different.
Mr. Benton
We carried out a cost-benefit analysis at contract stage.
That goes back to the same point. Every time the OPW carried out a cost-benefit analysis the cost went up and so did the benefit. That raised some issues.
Mr. Benton
We adopted the methodology I mentioned earlier which is an accepted and proven one. It was independently verified as appropriate in the Irish context. The results are positive. Nobody is fooling around with the figures. We do not proceed if the results are not positive. In this case they were.
When the new consultants came in they worked off the original specifications and in August 2000 they submitted a project cost of €41.9 million which the OPW dismissed, requesting a lower figure which they provided. What was the cost-benefit analysis at €41.9 million?
Mr. Benton
That figure did not include any provision for archaeology or compensation. We did not carry out a cost-benefit analysis at that stage because we were not happy with the design solutions proposed. We felt that it would be possible to achieve economies by adopting a range of solutions along the river bank. That exercise reduced the estimate by approximately €20 million.
Mr. Benton has insisted at all stages that the initial estimate of €13.08 million was for a project agreement in principle and that effectively he got permission to move to the next stage but could have pulled out at any stage. He said the OPW would have pulled out if the benefit was less than the cost. The Comptroller and Auditor General's report states:
With the approval of the Department of Finance the scheme was placed on Public Exhibition in July 1999 and unanimously approved by Kilkenny County Council and Kilkenny Corporation. Sanction was obtained from the Department of Finance in December 1999 to proceed with the scheme following the Exhibition at an estimated cost of €13.8 million.
I do not know what happens in the OPW's world but in our world if something is on public exhibition in Kilkenny, if Kilkenny County Council and Kilkenny Corporation approve it and the Department of Finance sanctions it, the project is done and dusted and must go ahead. That is the political reality.
Either that or the process is meaningless.
The OPW could not, as it argues, pull the plug on it because the decisions were taken at all relevant political levels and the public was involved because it was exhibited in Kilkenny. Deputy Curran is right. The first estimate of €13.08 million is crucial because as long as it goes to public exhibition and is sanctioned by local authorities it must go. That is why at every stage even if the costs go up it must go ahead. I do not accept that the OPW could have pulled out. Deputy McGuinness is the local Deputy and knows a great deal about this.
Mr. Benton
The sanction we received from the Department of Finance was to proceed to detailed design. That was all.
This project, in the manner of its presentation, and the response today from the OPW and the Department of Finance, exemplifies our fears about cost-effectiveness and value for money, and all that we discussed in private session. It is worth examining for reasons other than the project itself. We went to Punchestown. We should also go to Kilkenny. The Fine Gael Party was there and I am sure it was mightily impressed. It was great to see the visitors there. They came back full of energy and direction.
We should go to see this because it is an incredible project by any standard. The outcome in terms of the construction, the view of the river and how it is accepted in Kilkenny must be seen to be believed. I never thought in my time as a member of the borough council and the county council that I would see the day when the 40 foot trucks I drove as a business, travelled up and down the bed of the River Nore. From an engineering point of view it was an incredible scene, one of which many people in Kilkenny will have great memories because like the 1932 flood it was an event that does not happen very often. Things happened on the river that none of us could have envisaged. I compliment all the people who worked at that level on the site. It was an incredible achievement in an urban centre of which they had no experience. I corrected the Minister for Communications, Marine and Local Government, Deputy Dempsey, about the status of Kilkenny city and now I must correct Deputy Deasy on the same point. It is a city, not a town.
The OPW has been here before and this case highlights the staggering gaps in its management. What are the qualifications of the people there and what qualifications are not represented, particularly in the area of finance? This applies to many schemes about which I have expressed concern. I do not mean any personal disrespect to anyone in the OPW but there are significant gaps in management and qualifications. While Mr. Benton is answering our questions I note the silence of the Department of Finance which was given the reports, read them, saw that on paper the figures balanced, and moved on. I thought it had a greater responsibility and obligation in its position to forensically examine the figures, and the direction of the project. It failed to do this, yet when we submit application forms for schemes for various communities, we must do endless paperwork for even the smallest grant to prove that we have spent €1,000 or €10,000.
We complain about bureaucracy all the time, yet the Chairman is right in saying the important point with this scheme, which the witnesses saw increase from €13 million, was that it was accepted publicly by local public representatives as being worth €13.8 million. The Department of Finance watched it grow from that figure to approximately €50 million, since the compensation payments are not given here at all. Let us be clear. As the scheme was rolled out, it was the best that I had ever seen but its management by the Department of Finance was the worst that I had ever seen. The OPW management is beyond belief. I cannot understand how anyone could have allowed this to happen.
Having said that, I link it to the many other questions that I have put to Mr. Benton when he appeared before this committee regarding schemes which are minor in comparison. The management has been lacking. Mr. Benton based his figures and the answers given to the public representatives, members of this very important Committee of Public Accounts, on the analysis that he conducted there. I do not know anyone who drives into Kilkenny city without seeing on the way in the large sign "Medieval City".
For those members who do not know, the Department carried out this work in the shadow of Kilkenny Castle on three weirs in the centre of a medieval city and under two bridges of great architectural importance. It allocated €600,000 to cover the archaeological side, though I concede that the figure rose to €5.1 million. Let us not forget that the Department has the expertise in the field. That is its job. Mr. Benton says that he put his toe in the water. I am in business, and I would not give him 50 cent to do so without an explanation, yet it has cost the Department €50 million.
From a management point of view, the Department seriously underestimated the archaeology. It has a local office in Kilkenny and knows the history of the city, on which Deputy Deasy touched this morning. It totally overlooked that. Mr. Benton says that costs arising from the diversion of services, where they were not adequately marked out, were a factor. I was a member of the corporation and the county council at the time, and the Department was told that the biggest problem that we had in the city was the fact that raw sewage was entering the river along John's Quay. Mr. Smith was aware of the quay, so the Department was told about that. To this day, the Department is working on a weir nearby, and raw sewage is being pumped into the river from the local station. The Department was aware of it.
It is not right to say to the committee that those matters had not been covered when the scheme was rolled out. They were obvious things. They were plain and explained to the Department by members of the borough council, or corporation as it was, as well as the county council. Deputy Curran is right to say that all the information used was flawed in some way or other. M. C. O'Sullivan should have been more than familiar with it, since its employees had been there on site on several occasions in the run-up to work on the flood relief scheme. They were aware of it.
The issue regarding the PCBs — the toxic spillage from the local brewery — was well documented, publicised and debated in the local authorities in the region. The Department too was aware of it, but it is listed as a factor for the increase in costs. It knew before it went in and before its toe even tipped the water what was there. I understand that those PCBs remained in the water for years. An issue raised in the course of the scheme was that the Department spread soil and other material from the bed of the river on Dukes Meadows. That was a key question. The Department had to get it analysed abroad. However, it knew that it was there before it touched it.
As for the interference with properties, that is not something for which one must dig deep. I recall a headline in the local newspaper about ten or so houses slipping into the river after the Department had begun its pile-driving and digging at a location on John's Quay. The hotel was right beside the river, something one can see. It was a brand new structure, and the Department should have known that it would cause it trouble and add to its costs. All that local information, common knowledge and those obvious issues that a layman would have seen were overlooked. They were not factored into the costs — or, at least, that is the excuse given here for the increase. There is no excuse for that. One need not have a qualified person to consider it. There is a great deal in what I have said, but I have to——
Perhaps we might allow Mr. Benton to come in now, with the Deputy continuing later.
Mr. Benton
The Deputy has made several points, and I thank him for his complimentary remarks about the finished product in Kilkenny.
I referred to the people who worked on the river — I draw the line there.
Mr. Benton
The Deputy suggested that the committee might like to visit the city and see the work. I would be happy to facilitate that, since it is an exceptional scheme, which has greatly enhanced the environment and amenity value of the centre of the city.
The Deputy went on to have a major swipe at the OPW and everybody in it. I resent that——
Not everyone in it — management and planning.
Mr. Benton
——and I reject it. The Deputy implied that there was mismanagement on a wide scale across a multitude of projects. That is not the case, and the record demonstrates it. I believe that I had already advised the Deputy that an analysis of our management of construction projects over the last seven years will show that cost increases were 0.03% on a budgeted figure of over €1,000 million. I want to put that on the record again.
The Deputy raised several issues regarding Kilkenny itself. We accept that we underestimated the value of the archaeology. However, we did not do that at the point of contract. We had a detailed estimate before we entered any contractual commitments, which provided €5.1 million for archaeology. That has proven a very accurate estimate. The Deputy mentioned services and what was known. The estimate took on board everything that was known. In my statement I suggested that there were other services which were not known to anyone and others which were wrongly mapped, giving rise to additional costs on the contract.
The Deputy mentioned the PCBs. I think that he would also acknowledge that it was because of the OPW's concern about the known presence of PCBs that a scheme to clean up the river was put in place before we ever went in. That scheme was managed by Guinness or Diageo. It involved the local authorities, the fisheries people and the Environmental Protection Agency. We were the instigators behind ensuring that the work was carried out before we ran the risk. Thereafter, all the agencies were satisfied that the river had been cleaned to an acceptable standard. Subsequently, there was some concern about traces of PCBs. The Kilkenny people were anxious that it be monitored on an ongoing basis. We have done that. The cost of monitoring it that has added to the overall cost. It is unfair to imply that we ignored risks. It is precisely because of our concern that the work was carried out.
Our very effective secretariat has pulled up photographs from the Internet of work in progress on the drainage scheme. I think they are originally OPW photographs. We will show them for two or three minutes.
I think that is where Deputy McGuinness refers to filling in.
That is one of the different methods of dealing with the various parts of the river. That is down-river. The next one is down-river as well.
That is it. It enables us to move from a consideration of the theory to see the work undertaken.
At the beginning of this project, I argued for it to be done like this, with photographs of it in different stages because I considered it to be so important. Is that finished? A lot of time has been spent arguing the cost. It was nickels and dimes by comparison to the final outturn of the cost of this project.
Mr. Benton
As the Deputy knows, this scheme is nearing completion. The actual recording of the process is still in progress. We will have it completed.
In his answer, Mr. Benton spoke about the PCBs. It was a huge issue at the time. The soil from the river was spread through its meadows and that is what caused it. If I was dealing with the PCBs, I would probably not have spread the soil from that part of the river around the brewery at that location. That was my point; people knew about it.
Mr. Benton also spoke about the other services. By way of a note, he might let us know what were those services. He also mentioned the figure on compensation. During the course of the construction, some people's properties were going to be affected. Has there been any claim for compensation? There is a figure for compensation included in the €49 million. Is that not the case? Does Mr. Benton think that the figure will deal with the level of compensation that will be demanded? Or has he now got an indication for applications that are before him so he can get a more accurate figure?
Mr. Benton
I am here trying to defend an increase in the project costs and the Deputy has added a few million euro to it since we started this conversation.
I want to know exactly what Mr. Benton proposes in terms of the compensation, in order that when he comes before us again, we will be able to point to what he said here.
Mr. Benton
I would like to see the record reflect what we believe to be the outcome, which is €47.8 million. That includes the provision for compensation.
That figure has been a little conjured up. Is it based on something? Has the OPW already got an application for compensation before it? Does that give Mr. Benton the figure he has in the report?
Mr. Benton
I am aware of only one claim to date.
However, he knows that others are pending. Is that not the case?
Mr. Benton
I am sure others will emerge, but I do not want to be definitive about the outcome of that.
The landscaping afterwards is also an issue about which people are concerned. The landscape is included in that figure. When will it be completed?
Mr. Benton
Due to the nature of that work, it will spread into the spring of next year, but the figure is included in that overall figure.
I also want to ask about the safety aspects along that river, because of the fact that high walls have been constructed from the river bed upwards. There is a concern about ladders and lifebelts along John's Quay in particular, and around the centre of the city.
Mr. Benton
I gather there have been a number of interventions in that regard planned over the next few weeks to provide a safe environment.
Where are the first consultants now? Have they done any more work for the OPW since? Have they done any work for anyone that the OPW is dealing with in other projects? Would Mr. Benton have lost a bit of confidence in employing them again?
Mr. Benton
No.
Why was their first assessment so vastly different from that of the second set of consultants?
Mr. Benton
One has to have regard to the commission they had, which was to provide preliminary figures. They would not have had the benefit of the detailed site conditions.
What does Mr. Benton mean by commission? Does he mean money or the terms of reference?
Mr. Benton
The contracts, their terms of reference.
He is saying the design brief was wrong.
Mr. Benton
No. We were just looking for initial information.
Have any major schemes like these gone past the outlying design and on public display and not been proceeded with due to cost overruns? When something gets to that stage, there is some inevitability that it will eventually proceed. It is hard to stop something after it has gone so far. Has this ever happened?
Mr. Benton
I am not aware of any.
Once it gets out of the traps and on public display, it is very hard to tell the public two years later that it is not being proceeded with as the cost has gone up.
Mr. Benton
This was the first of its kind.
Mr. Benton can understand why so much care is needed. If the costs are so out of line, it is very hard to put the horse back in the stable at that stage.
Mr. Benton
I think we have acknowledged in our response to the Comptroller and Auditor General that, with a view to ensuring that we can make progress across a range of vulnerable areas, we are looking at breaking down the projects into manageable chunks. That will help eliminate many of the risks. We are also looking at innovative solutions which would avoid us going into the river bed where all the risk is located. We have ideas for some rivers which will involve demountable walls. It will not impact on the river at all. It is much easier to estimate accurately the costs that will be involved. These are protections that would be erected in advance of a flood. We would have flood warning systems in place as well as flood mapping and much non-structural approaches. The idea is that the walls could be erected in advance of the flood, taken down immediately afterwards and the amenity value of the area not destroyed.
In reply to Deputy Fleming's question, Mr. Benton stated he did not have confidence in the consultants. Has he employed the same consultants since the initial report and, if so, how many times?
Mr. Benton
Did the Deputy quote me as stating I did not have confidence in the consultants?
Yes.
Mr. Benton
That is not what I said.
Would Mr. Benton employ them again?
Mr. Benton
Yes.
How many other schemes or towns does the OPW need to visit with this type of project?
Mr. Benton
The Deputy may be aware we have just completed a major review of flood policy. The purpose of this was to bring overall clarity to roles and responsibilities in regard to flooding because there has been considerable confusion with this. That report has been accepted by Government and is about to be published. The findings of the report suggest that the OPW should have lead responsibility in the area of flood management. We would designate problem rivers and take responsibility for them while non-designated rivers would remain the responsibility of the local authorities.
The review focused heavily on the value of non-structural solutions, namely, the early flood warning systems and flood hazard mapping. The OPW has already commenced work on this. Going forward, there will be a range of approaches in regard to non-structural as well as structural measures. However, to answer the question directly, in the course of identifying rivers which have problems, we will have to identify solutions. We have enough information at this stage to know that a number of areas have particular problems which will have to be addressed. We have been very busy in the area of Clonmel, Waterford, Carlow, Mallow and Fermoy. It can be assumed they will feature in the overall designated areas.
What timespan is Mr. Benton considering in this regard?
Mr. Benton
That is subject to the availability of funding at different stages for different rivers. The projects at Clonmel, Carlow and Waterford are probably more advanced than the others.
The Comptroller and Auditor General will always accept an analysis of expenditure but there comes a point when one is wasting money. To refer back to what I described as consultants one and two, would Mr. Benton accept there has been difficulty with some projects? The expertise is not in place in local authorities and I referred to the Cork courthouse saga to support this. When the professional courts staff came on board, they were able to point out that the facilities were only half of what was needed, and, therefore, the cost of the project doubled.
That example illustrates my point. Would Mr. Benton agree there is a lack of expertise and knowledge in the local authorities and that what is needed at the beginning of a project is often not understood? Expenditure is incurred before it is understood the project is a "must have" project, and, therefore, the cost rises. I take the point that the OPW did not want to spend more than €2 million at the outset. Would it have been better to have fully expert staff from day one? I say this having considered how far the estimate of €13.5 million went. It went a long way, although I did not know the matter had been adopted by Kilkenny County Council. Are we falling into a trap? Should the OPW have a different approach so as to fully evaluate projects from the outset?
Mr. Benton
The OPW has taken over responsibility for the Cork courthouse project. We are delighted to report excellent progress. It is a case where the OPW joined the project after the particular problems had emerged.
I hope Mr. Benton does not take me up wrong. I have already praised the project as a marvellous job. However, the city engineer and architect originally involved in the early 1990s stated that four courts were needed in the city, and that they would tear down the roof and make some alterations. The OPW came to the project later. My point is that whoever began the project, the expertise was not there. When the work began and the real experts joined the project — I will call them consultants two — different problems were discovered.
Mr. Benton
For routine construction projects, our record on estimating is very good. This was a unique project. We will hold a thorough post-project review. The issues raised today are pertinent and we must give much thought to how we approach the initial phase in determining the feasibility of a project.
Will the OPW use the same people in Carlow, Clonmel and Waterford city? Will it use the expertise it has gained or the personnel brought on board in those cases?
Mr. Benton
Not necessarily. These projects would all be subject to EU procurement rules.
A number of issues arise. Deputy Fleming suggested we would not close the Vote today and I gather that is the view of the committee. I agree. Deputy McGuinness has invited us to Kilkenny. We will discuss that in private session next week under matters arising.
That is fine.
Deputy Fleming and others made a request of Mr. Benton for additional information. Mr. Benton agreed to send the cost-benefit analysis which he got from the United Kingdom. In light of what was said by the Comptroller and Auditor General, we would also need the three previous cost-benefit analyses. We would also need the evaluation by Goodbody Stockbrokers on the cost-benefit analysis, if Mr. Benton could post that in.
We would also need the environmental impact study.
That should also be submitted. We have much work to do in the second half, as they say in Croke Park. We will deal with the grants to the Irish Red Cross and flood relief, etc.
I wish to ask Mr. Benton a further question. I do not want to rewrite the decentralisation programme but wish to ask on the possible decentralisation from Cork city to Kanturk of ten staff who maintain the 18 public service buildings in Cork city. They would have to travel 30 miles to clock in in the morning and again to clock out in the evening. Is that a ridiculous rumour?
Mr. Benton
I would be happy to report back to the Deputy. It is no secret the OPW must consider its organisational structure and how best to locate itself throughout the country in light of the decision to decentralise.
I hope common sense will be used. The ten staff maintain buildings in Cork city. We should get the overall picture right but should also consider the small details. Listening to local knowledge might save money and save revisiting the issue in some years time.
For the information of members, would Mr Quigley provide a written report on how the Department dealt with the flood relief scheme in Kilkenny, the meetings that took place, how the Department analysed the scheme, its concerns as the scheme was rolled out, etc? He did not get the opportunity to answer the questions put to him.
The committee will now take a short break.
Sitting suspended at 1.55 p.m. and resumed at 2.05 p.m.
We will now resume on Chapter 4.2 of the 2003 annual report of the Comptroller and Auditor General, dealing with flood relief — grants to the Irish Red Cross.
Paragraph 4.2 of the report of the Comptroller and Auditor General reads:
Flood Relief — Grants to the Irish Red Cross
Flood damage
An extremely high spring tide and accompanying adverse weather conditions on 1 and 2 February 2002 caused extensive coastal flooding. Among the worst affected areas were the East Wall/Ringsend/Irishtown areas of Dublin City, the centre of Cork City, Baltray in County Louth and Mornington in County Meath. In November 2002 prolonged and heavy rainfall during the month affected Athlone, Drumcondra and Glasnevin in Dublin, Meath, Cork City and parts of Kilkenny and Wexford.
Government Action
In response to the February 2002 flooding the Government decided to initiate an ex-gratia scheme of humanitarian assistance. The Office of Public Works (OPW) were to formally request the Irish Red Cross (IRC) to implement the scheme. It was to be emphasised to the IRC that the Government was providing humanitarian assistance to relieve hardship and not compensation. The scheme would include agricultural hardship and business losses if no other allocation was made for them but in that context only exceptional cases would qualify.
The Government approved an ex-gratia scheme of humanitarian assistance to relieve hardship arising from the November floods on 19 November 2002. Further extensive flooding resulted in the Government extending the scheme on 12 December 2002 to give humanitarian assistance to other parts of the country, particularly to areas of Cork. The Government decision for this scheme also specified that it be emphasised to the IRC that the Government was providing humanitarian assistance to relieve hardship and not to compensate for losses.
Administration of the Schemes
Role of the Irish Red Cross
The procedure for the operation of the Humanitarian Aid schemes is that OPW formally requests the IRC to implement such a scheme. The statutory basis for the OPW role is Sections 2 and 3 of the Commissioners of Public Works (Functions and Powers) Act 1996. OPW was given power under this Act to make arrangements to assist persons who suffer undue hardship or personal injury, or loss of or damage to land or other property, by reason of flooding subject to the consent of the Minister for Finance. The IRC was given the sole responsibility of administering the schemes and in determining the levels of humanitarian aid allocated to those affected.
The IRC had previously administered humanitarian assistance to victims of flooding in the Mid -West in 1996, in Limerick City in 1999 and parts of Cork, Tipperary, Carlow and Wexford in 2000.
Administration by the Irish Red Cross
A team of three independent assessors was commissioned on behalf of the IRC to assess each application and recommend allocation of humanitarian aid. These assessors had previously worked on the 1999/2000 flood relief schemes. An administration section was created within the IRC to help in the organisation and processing of applicants and the paying of claims. Those affected could claim eligibility for humanitarian aid under the following criteria in the February scheme
Death
Serious injury
Damage to home
Homelessness
Loss of income
Extreme hardship
The ‘loss of income' criterion, which could include businesses, was subsequently dropped from the eligibility criteria for the November 2002 scheme. This was in order to target the aid specifically towards people whose homes had been affected.
The IRC decided, following guidelines from previous schemes, that no inflexible rules would apply. Each applicant would be assessed on an individual basis. However, humanitarian aid was generally assessed on the person's need, their personal losses, stress, the value of their belongings destroyed, and their capacity to recover from their losses. The schemes were not restricted to householders but were open to all who had been affected.
Cost of the Schemes
Payments totalling €13.5 million were paid by the OPW to the IRC for the two schemes. The initial provision for the February 2002 scheme was €5 million which was increased to €8.5 million when the extent of the damage was realised. The full amount of €8.5 million was paid to the IRC in 2002. The Government approved €5 million for the November 2002 flood relief and this amount was lodged to the IRC special bank account on 12 December 2002 with the majority of payments being made by the IRC in 2003.
Payments totalling €7,952,807 were made for the February scheme to 725 claimants giving an average award of €10,969. Payments to 27 businesses amounted to €1.3 million. The average award excluding payments to businesses was €9,531.
Payments totalling €4,784,810 were made for the November scheme to 666 claimants giving an average award of €7,184. The November scheme did not accept claims from businesses.
The IRC received €478,078 for the administration costs of the schemes: this is 3.75% of grant expenditure. An additional amount of €221,732 was spent on advertising the two schemes.
Statistics
Table 28 summarises the main statistics in relation to the schemes
|
Description |
February 2002 |
November 2002 |
|
Number Of Applicants |
725 |
666 |
|
Total Expenditure |
€7,952,807 |
€4,784,810 |
|
Average Payments |
€10,969 |
€7,184 |
|
% Insured |
58% |
54%* |
|
% Uninsured |
42% |
46%* |
|
Average Insured Payment |
€8,746 |
€6,787* |
|
Average Uninsured Payments |
€13,922 |
€6,244* |
|
Average Age |
53 |
40* |
|
% Tenants |
23% |
33%* |
|
% Owners |
65% |
57%* |
|
% Other |
12% |
10%* |
*The November 2002 statistics are based on a sample of 100 applicants.
Audit Findings
No written agreement was made by the OPW with the IRC for the administration of the scheme.
The February scheme did not make it a condition for applicants with insurance cover that they give the IRC permission to make enquiries of insurance companies so as to ensure that applicants would not be paid on the double for a loss claimed under the scheme. Payments for the February scheme were €7,952,807 of which 58% (4,612,628) was paid to insured claimants.
The November scheme allowed the IRC make enquiries of insurance companies but only limited follow up action was taken. Payments for the November scheme were €4,784,810 of which a sample surveyed found that 54% (2,583,797) was paid to insured claimants.
No formal procedures were established to check the accuracy of applicants' claims that they had no insurance cover.
OPW did not complete, or have completed on its behalf, an assessment or audit of the administration of the scheme by the IRC.
OPW did not supply to the IRC, or request from the IRC for approval, guidelines for the administration, monitoring and control of the schemes.
No agreement was reached with the IRC before the start of the schemes for the administration charge or fee to be paid to the IRC.
OPW did not provide guidance to the IRC on means testing and the relevant support documentation required to assess means.
As the amount allocated in 2002 for humanitarian aid to victims of severe flooding in Ireland totalled 13.5 million — far in excess of anything that had gone before — I asked the Accounting Officer if he was satisfied with the appropriateness of the control and governance arrangements put in place to administer the scheme.
Accounting Officer's Response
Role of the IRC
The practice of delegating the operation of the schemes to the IRC had its origins in the earlier disbursement of European Union (EU) humanitarian aid in 1995 to victims of the severe flooding which occurred in late 1994/early 1995 throughout Ireland. EU aid is channelled to victims through the local organisation of the International Red Cross, in this case the IRC. The International Red Cross is recognised as one of the world's largest humanitarian organisations and is a voluntary relief movement. The IRC has an established record of administering emergency aid to victims of disasters inIreland. All applications for humanitarian aid are dealt with on a strictly confidential basis in accordance with the International Red Cross fundamental principles of impartiality, humanity, independence, neutrality and voluntary service and its wide experience in disaster relief both nationally and internationally.
When Government approval is received for OPW to set up a humanitarian relief scheme in response to serious flooding, the OPW immediately calls in the IRC to brief them. The criteria for eligibility of applicants for aid and the size of the overall aid fund available (which is normally determined on the basis of experience of previous such schemes) are also communicated to the IRC at the briefing. The IRC is then given sole responsibility for administering the scheme and determining the levels of humanitarian aid allocated to the individuals affected. A special bank account is set up by the IRC to receive and distribute the aid. The IRC publicises the aid scheme in the media and also attends local public meetings in the affected communities. Independent expert assessors are commissioned by the IRC to assess each application and recommend allocation of aid to each individual depending on their differing levels of need. The IRC regards the precise details of individual claims as confidential between them and the applicants. An administration section is also created by the IRC to help in the organisation and processing of applications. The IRC reports to OPW on a regular basis regarding progress of the scheme e.g. number of applications received to date, number assessed, geographical breakdown of applications etc.
The aid was intended to help victims overcome the immediate hardship caused by flooding by providing some relief that would assist the victims in restoring their lives to some semblance of normality. The schemes were not compensatory but were governed by a humanitarian ethos. The aid was not designed to put victims in the position they were in before the flooding but to alleviate extreme hardship. The schemes were essentially dealing with disaster and crisis situations that could in their immediate aftermath result in serious hardship for people, irrespective of their means. The schemes could be more correctly described as disaster relief.
OPW Management of the Scheme
The drafting of a formal written agreement between OPW and the IRC before the commencement of schemes was not considered necessary largely because of the reputation, professional expertise and proven track record of the IRC as the recognised independent intermediary body responsible for distribution of EU and State disaster funds for flood victims.
Subject to the main criteria for eligibility the IRC was instructed to administer the schemes based on its own expertise and experience. OPW would, in fact, be concerned that a detailed written agreement may have restricted the IRC in its response to individual applicants and may also have added to administration costs.
One of the fundamental principles under which the IRC operates is that it is a voluntary relief movement not prompted in any manner by desire for gain. The IRC is driven by a humanitarian ethos and it has an established record in dealing compassionately, impartially, effectively and in a timely fashion with the disbursement of humanitarian funds. OPW has absolute confidence in the IRC's role in administering the schemes and in the IRC's determination to keep administration costs as low as possible so that the maximum amount of aid is distributed to applicants.
The OPW did not consider it necessary to complete, or have completed, an independent audit of the administration of the schemes by the IRC. At the conclusion of a scheme, the IRC submits a comprehensive report on the scheme to the Minister for Finance and copies of such reports are placed in the Oireachtas Library. During a scheme the OPW and IRC maintain regular contact, often on a daily basis. The IRC produces regular updates regarding the progress of the scheme, keeps records of all its activities, and also has its own independent auditors.
The relationship between OPW and IRC is one based on trust, founded on the undoubted integrity and ethos of the Red Cross organisation. In the circumstances, and given the close contact and open communication maintained between both organisations at all times during a scheme, OPW does not consider that an independent audit of the administration of the schemes is warranted.
Payment to insured claimants
Provision for information in relation to insurance cover was first introduced to the application forms in 2002. This was done on the basis of the experience learned from previous schemes since 1996. It does not follow that the question of insurance was not taken into account in assessing applications under the February scheme. This would have been considered by the IRC assessors and explored in their meetings with applicants. When the OPW and IRC met to commence work on the November scheme it was agreed that it would assist the assessors and save time in examining applications if the issue of insurance was explicitly dealt with in the application form. The IRC is satisfied that it had appropriate procedures in place to check people's insurance details and also that the appropriate level of follow-up action was taken.
The IRC has also confirmed that it is satisfied that no "double" payments were made to people with insurance. While family income and insurance provision were taken into consideration by the IRC in assessing a person's ability to cope with and recover from the flooding and in determining the level of aid in individual cases, they did not per se exclude humanitarian aid. It has to be stressed that insurance was only one aspect in the overall consideration of a claim for relief. Some applicants were only insured for structures and not contents and in a flooding situation a considerable amount of contents would be destroyed or damaged beyond repair.
Means Test
The schemes were not in the same category as social assistance / social insurance schemes, grants, nor schemes to compensate for losses, where a means test would not be untypical. The schemes were essentially dealing with disaster and crisis situations that could in their immediate aftermath result in serious hardship for people, irrespective of their means. While family income and means may not have been explicitly provided for in the applications process they were certainly taken into account by the IRC assessors in making a judgment on a person's ability to cope with and recover from the flooding and in determining the level of aid in individual cases. Income and means did not per se exclude an applicant — the individual circumstances, losses, trauma suffered, and ability to recover were all crucial factors.
There is no evidence to suggest that applicants with significant means and who were undeserving of payments from the schemes, actually received payments.
Policy Review
On 27 November 2002 the Minister of State at the Department of Finance with special responsibility for OPW announced a review of national flood policy and established a Group to carry it out. Among the terms of Reference for the Review were "Establish criteria for the initiation of any future Humanitarian Aid Schemes". The Report of the Review Group is currently with the Department of Finance awaiting presentation to Cabinet. The Report contains important recommendations as to the administration of any Humanitarian Aid schemes in the future.
Mr. Purcell
Chapter 4.2 sets out the results of my examination of the administration and outcome of two grant schemes designed to alleviate hardship arising from flooding caused by adverse weather conditions in February and November 2002. The initial provision for the February scheme was €5 million, but this was increased to €8.5 million when the extent of the damage was realised. The Government allocated €5 million for the November scheme, bringing the total provision for both schemes to €13.5 million.
The OPW, which has statutory responsibility for flood relief measures, assigned the task of administering the schemes to the Irish Red Cross, in line with similar arrangements made in previous years back to 1996. This arrangement appeared to be primarily based on trust. I am not suggesting that trust was misplaced. However, handling the disbursement of €13.5 million of taxpayers' money demanded a more systematic approach from a control point of view. The amounts previously administered by the Irish Red Cross from flood relief grants were modest in comparison, and while it could be argued that an ad hoc approach was appropriate then, the case hardly stands up when the amounts involved are of greater magnitude. That is my main concern.
There were two important differences between the February and November schemes. Under the earlier scheme, businesses could qualify for grants covering loss of income, and payments totalling €1.3 million were made to 27 businesses in this category. The later scheme precluded businesses from benefiting.
The earlier scheme did not make it a condition for applicants with insurance cover to grant permission for inquiries to be made of their insurance companies. A sum of €4.6 million was paid to insured claimants under the February scheme, representing 58% of all payments. A potential loophole was closed for the November scheme.
The review group mentioned earlier by the Accounting Officer, when discussing the Kilkenny flood scheme, also had the task of establishing criteria for the initiation of any future humanitarian aid schemes arising from flood disasters. Its recommendations have been accepted by the Government, and the proposed revised organisational arrangements for the disbursement of humanitarian aid should address the nub of my concern. The proposed arrangements involve the taking into account of community welfare officers and the existing structure for assessing need.
Mr. Benton
The OPW is satisfied, and was satisfied at all times, with the administration of these schemes by the Irish Red Cross. The purpose of the schemes was to provide financial assistance to people who had suffered as a result of flooding. The schemes were introduced as a response to an emergency, and the purpose was to provide aid on a humanitarian basis, not to compensate individuals for losses.
The issue of insurance was raised in the Comptroller and Auditor General's report. Each application was assessed on its own merits by the Irish Red Cross. The fact that an applicant may be insured does not mean they are immune to stress and financial loss. The Red Cross assessors made a judgment based on the particular circumstances of each individual. I have absolute confidence in the integrity and fairness of the process.
The OPW has always been satisfied with the schemes. Our concern from the start was that there would be speedy response to people in hardship. We were careful not to over-complicate the operation of the schemes by applying detailed application and verification procedures which might delay the delivery of much-needed aid.
I commend the staff of the Office of Public Works for the manner in which they reacted during the events, particularly those responsible for humanitarian aid. I also applaud the Irish Red Cross for the manner and speed with which they administered the scheme. It is as a result of the combined efforts of the OPW and Irish Red Cross that much-needed aid was given to people in extreme hardship, which allowed them restore some semblance of normality to their lives.
Can we publish the OPW statement?
Mr. Benton
Yes.
It is significant there was no evidence to suggest applicants with substantial means, and undeserving of payments from the schemes, received money. It places the issue in context. Why were no written agreements made by the OPW and the Irish Red Cross regarding the administration of the scheme?
Mr. Benton
There was an agreement with the Red Cross to administer the scheme, and they were notified of the criteria to apply. They administered it on that basis.
There was no written agreement.
Mr. Benton
There was an exchange of letters, however there was no contractual, detailed written agreement, other than their agreement to administer the scheme on our behalf.
The point was borne out in the Comptroller and Auditor General's report that there was no written agreement. Is that normal operating procedure?
Mr. Benton
The situations were not normal. They were major disasters which had to be responded to immediately. It had been normal practice in the past to use the Irish Red Cross, and we were following a precedent set by the EU in disbursing aid in 1995.
The February scheme did not make it a condition for applicants with insurance cover to give the Irish Red Cross permission to make inquiries of their insurance company to ensure they were not doubly paid for a loss claimed under the scheme. Within the February scheme, €4.6 million was paid to insured claimants, representing 58% of payments. This was changed for the November scheme, but according to the Comptroller and Auditor General's report, only limited follow-up was carried out. In that scheme, €2.5 million was paid to insured claimants, representing 54% of payments. Can Mr. Benton comment on this?
Mr. Benton
The fact that people might have had insurance may or may not have been relevant. People with insurance could have, in circumstances, been suffering extreme hardship. Much of the insurance may have been inadequate. It may have covered structure but not contents. Irish Red Cross assessors gauged the ability of each individual to manage their situation.
How many applicants had insurance cover but claimed not to?
Mr. Benton
I am not aware of any figures in that regard.
Is Mr. Benton aware of any people who did?
Mr. Benton
No, I am not aware of any.
Has the OPW completed an assessment of the administration of the scheme by the Irish Red Cross, or is it going to do so?
Mr. Benton
I will explain how the relationship works. We had ongoing contact with the Irish Red Cross during the course of the administration of the scheme. We had regular reports and updates from it on its progress in addressing the hardship problems. We had a very detailed final report from it on the overall administration of the scheme. We discussed that and presented the report to the Minister for Finance.
In the Comptroller and Auditor General's report it is claimed the OPW provided no guidance to the Irish Red Cross on means testing or relevant support documents required to assess means. Will Mr. Benton comment on that?
Mr. Benton
This was never intended to be a means tested scheme. This was a disaster relief scheme and we were relying on the professionalism and experience of the Irish Red Cross to get aid to the people who deserved it to address the immediate hardship problems.
The drafting of a formal written agreement between the OPW and the Irish Red Cross was not considered necessary. Does Mr. Benton believe that was a mistake considering so much was paid out in insurance?
Mr. Benton
No, I do not believe it was a mistake. The reputation of the Irish Red Cross, not only in Ireland but throughout the world, is such that we could have absolute comfort in dealing with it in administering a scheme like this.
That implies it would not have been required. It is an administrative function from the OPW's standpoint about which I am asking.
Mr. Benton
From an OPW standpoint, we are absolutely satisfied with the manner in which this scheme was administered and we take confidence from the ongoing relationship we had with the organisation during its administration.
From the Accounting Officer's response, it appears there were two sets of criteria. The OPW would have informed the Irish Red Cross of the criteria for an applicant's eligibility for aid and the funding available. That was a function of Mr. Benton's office. However, all applications for aid were dealt with in accordance with the fundamental principles of impartiality, humanity, independence and neutrality of the Irish Red Cross.
Mr. Benton
No, I cannot agree with the Deputy. We had set out the criteria. The qualities to which the Deputy has referred would have underpinned the organisation's administration of the scheme using that criteria.
So there was a mix of both.
Mr. Benton
Indeed.
The first took precedence over the second.
Mr. Benton
The fundamental principles of the Irish Red Cross underpin everything it does.
I compliment three groups on dealing with this issue. First and foremost, we must compliment the Irish Red Cross and should ensure questions that might be raised do not cast aspersions on it. It did a great job and it is a great organisation. The second group is the OPW. It acted quickly for a change having regard to the bureaucracy involved. I accept there was confusion at the outset. Third, there is the Government. Modest sums have been granted in the past, however, €13.5 million was a substantial grant to award almost over night.
To take account of all the money we issue, a proper scheme must be in place. I have no difficulty in arguing that point. However, in this case to suggest a means test should have applied or that money would have been withheld because a person may have had insurance cover is scandalous. We all draw from experience. When there was flooding in a housing estate near to my parish in Togher in Cork, I recall a rowboat being used to help people whose homes were under three or four feet of water. To suggest I should have told those people the following day or week they would have to be means tested before we could grant them humanitarian assistance would have been ludicrous. I argued at the time against questioning the payment of assistance to insured claimants. If we argue that point, we would punish those who were prudent and took out insurance. In such circumstances, it is a sorry person who would not have bothered to take out insurance. It should not be the case that we would give such a person a few thousand euro in assistance and not give assistance to an insured applicant, irrespective of how long he or she might have to wait for payment or whether he or she gets the full amount sought or has to pay a higher premium in future.
The scheme was well handled. While I appreciate the need for the Comptroller and Auditor General to draw attention to certain issues, I am sure his heart is not in criticising the scheme in terms of the audit findings in respect of it.
According to weather forecasts, we will experience difficulties in the future due to flooding because of the physical infrastructure that has been put in place throughout the country and because of climate change. Is there a system in place whereby we can react to such events almost instantaneously? At the time of the flooding in my area, there was confusion at the outset. Cork County Council was partially to blame for the difficulty. It was stated the area in question was Cork city, but it was 100 yards beyond the city boundary.
There was also the question of who would deal with the problem and for a week or two I was the person with my head on the block, as the people affected wanted to know what would happen. Is there provision for a scheme to be activated instantaneously following such an event? At a time of crisis action is needed within two or three days. Is the OPW geared up for that?
Mr. Benton
Part of the review on the flood relief policy was to examine how best to distribute aid. The Deputy is correct in saying there will be flooding problems in the future. We examined what would be the most appropriate network nationally to distribute aid to people quickly and it was the group's view that the network of community welfare officers was perhaps the best method through which to distribute aid. However, if such a crisis occurred in the morning we might still have to use the services of the Irish Red Cross. We are in discussions with the Department of Social and Family Affairs with a view to structuring such provision for the future and ensuring people have the necessary training and development. The plan for the future is to use community welfare officers.
I agree with the idea of using community welfare officers. However, while they do this type of work every day of the week, to a large extent, such work would extend beyond their existing brief. That is the only difficulty. They are used to dealing with people who do not have much going for them and who can be easily assessed. However, just because a person happens to have an O4 car in his or her driveway he or she is wealthy. Community welfare officers have the necessary expertise. A combination of use of such officers and the Irish Red Cross to do such work is the way to go. The Irish Red Cross operates throughout the country and it has a commitment to a humanitarian approach.
Mr. Benton
The critical issue is speed of response, given we are talking about a disaster. If in the future it is necessary to call on the Irish Red Cross as an additional source we would certainly consider doing that.
Somebody will have to grasp the nettle and deal with the issue of insurance. In the most recent cases 58% of those affected were insured and some 42% were not. Some people would argue that assistance should not be given to people who do not bother to take out insurance, but they may not be able to afford to do so. Others would argue the insurance companies should pay the bill. That issue needs to be examined and guidelines are needed to ensure we are not merely reacting and wondering whether people should be given assistance.
I believe that in the circumstances that arose everybody affected had to get assistance immediately. That should be the main priority. A questionnaire inquiring if an applicant has insurance cover delays matters. Underlying that, the OPW needs to decide on the percentage to be given because the immediate need is to assist those affected.
There was a quick response to this issue by the OPW, on which I compliment the delegation. There was also a quick response from the Irish Red Cross. I have two questions before Deputy Fleming asks his questions. Do you, Mr. Benton, have information that people got both ex gratia payments from the Irish Red Cross and insurance claim payments for the same damage?
Mr. Benton
We do not. The nature of the relationship between the individuals and the Irish Red Cross is confidential and we did not look at individual cases after the scheme.
Do you have information that this did not happen?
Mr. Benton
No.
Have you information that, because the Irish Red Cross gave extra ex gratia payments to victims of the flood, insurance companies refused to honour policies on the grounds that people had already been paid for the damage?
Mr. Benton
I am unaware of any complaints of that nature and we probably would have heard if that was happening.
There were 725 applicants in February 2002 and 666 applicants in November of that year. Was each applicant met individually or was there just an application form?
Mr. Benton
There was an application form and then the applicants were met. The assessor would have regard to their individual circumstances.
Has the Irish Red Cross many staff or did volunteers do the work? What people did the interviews with the 1,300 people?
Mr. Benton
I understand the Irish Red Cross commissioned assessors in the regions to deal with the individual cases.
What does "commissioned assessors" mean?
Mr. Benton
I believe it has an ongoing relationship with assessors——
Are they from private insurance companies?
Mr. Benton
I have checked with my colleague. It was a combination of its staff and volunteers.
There were volunteers involved.
Mr. Benton
Yes.
Did many people apply for relief but were refused because the Irish Red Cross personnel believed they were not valid claims? Did everybody who sent in a form get something?
Mr. Benton
No, not everybody. I do not have figures for the number that were refused. However, not all applications were accepted.
On what type of grounds?
Mr. Benton
I am aware of one case where two people were claiming the same loss. Clearly, both were not paid. It became a celebrated case.
That is what I wished to confirm. It would be wrong if everybody who sent in a sheet of paper automatically got a cheque in return without some verification. I am happy with that reply.
Mr. Purcell
In the course of this examination we had access to one of the people who carried out the assessments. It was useful and informative. There were attempts to make fraudulent claims. I will stay within the bounds of confidentiality on this but there was an illustrative case in which a claim for €85,000 was made. The claimant stated they had no insurance. In that case there were some marriage difficulties and one of the spouses sent in copies of documents from the insurance companies showing they were also making an insurance claim. That did happen. We also tried to get a feel from the assessors of how they examined these matters. Basically, if they were unsure an applicant was telling the truth, they tended to give him or her the benefit of the doubt. In rough figures, the assessor reckoned that 90% of people were telling the truth. That gives a sense of what it was like on the ground, when the water went down as it were. There was a small number of refusals but practically all applicants got something out of it. In the broader context, before we had finalised our work in this area the OPW was good enough to give us access to the final draft report of the flood policy review group. I feel vindicated because the group dealt with the types of concerns we had. There is a Government commitment to implement the group's recommendations. The group reported within a short time and it was a good body of work. Everybody should look forward to the publication of that document. The group addressed the types of issues mentioned by Deputy Dennehy and the chairman, namely, people's responsibility with regard to insurance. Clearly, however, there are some people, such as the old and the poor, for whom insurance is just an option and not something they should acquire. In those cases, there must be a different approach and the imposition of a simple means test when the sums involved in ex gratia payments are approaching four figures. As I said earlier, we have no problem with the job done by the Irish Red Cross. It is all part of a more structured approach to flooding and its consequences.
Can we dispose of Chapter 4.2? Agreed. Next week we will deal with the Garda Síochána, Chapter 7.1, fixed charge notices and penalty points.
The committee adjourned at 2.30 p.m. until11 a.m. on Thursday, 28 October 2004.