COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 15 Dec 2005

Value for Money Report No. 51 — Development of Human Resources Management Systems for the Health Services, PPARS.

Mr. M. Scanlan (Secretary General, Department of Health and Children) and Professor B. Drumm (Chief Executive Officer, Health Service Executive) called and examined.

Chairman

Item No. 6 on our agenda is value for money report No. 51, development of human resources management systems for the health services, PPARS. There is no relevant correspondence on this matter.

Witnesses should be aware that they do not enjoy absolute privilege before the committee. 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. These rights include the right to give evidence; the right to produce or send documents to the committee, the right to appear before the committee, either in person or through a representative, the right to make a written and oral submission, the right to request the committee to direct the attendance of witnesses and the production of documents and the right to cross-examine witnesses.

For the most part, these rights may be exercised only with the consent of the committee. Persons being invited before the committee are made aware of these rights and any persons identified in the course of the proceedings who are not present may have to be made aware of these rights and provided with a transcript of the relevant part of the committee's proceedings if the committee considers it appropriate in the interests of justice.

Members are also reminded of long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions of Standing Order 156, that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

I invite Mr. Scanlan to introduce his officials and the officials from the Department of Finance to introduce themselves.

Mr. Michael Scanlan

I am accompanied today by Mr. Frank Ahern, assistant secretary in the Department of Health and Children, Mr. Dermot Magan, principal officer in the finance unit of the Department of Health and Children, and Dr. Richard Nolan, principal officer in the Department of Health and Children.

Professor Brendan Drumm

I am accompanied by Mr. John Magner of the HSE human resources directorate, who was acting head of human resources until recently, and Mr. Seán Hurley, director of ICT at the HSE.

Mr. Joe Mooney

I work in the public expenditure division of the Department of Finance and I am accompanied by Mr. Dave Ring from CMOD.

Mr. John Purcell

Last April, during the course of the committee's consideration of a special report on health sector audits, I indicated that I was carrying out an investigation of the PPARS system in light of the large amount of resources invested in it. The examination built on earlier work that had been undertaken as part of the financial audit of the health boards. The report presented to the Oireachtas two days ago, which is before the committee today, is the culmination of that work. This task was not easy because of the nationwide dimension and the dispersal of top health sector management in the wake of the establishment of the HSE. The uncertainty for staff that attaches to a climate of fundamental organisational change was also a factor contributing to particular circumstances that we would not have encountered in other investigations. The key involvement of third parties, particularly consultants, also had to be factored into our work. In preparing this report, we engaged with all the major players and I appreciate their co-operation.

A quick potted history might help to put the committee's consideration of the report in context. The origin of PPARS dates back to 1995, when the concept of an integrated human resource management and payroll system that would transform the way personnel in health boards and agencies were managed was first mooted. Procurement of the system commenced approximately in early 1997 and involved five health boards and St. James's Hospital in Dublin. The initial estimate made in 1998 of implementing the full system in these six organisations was in the region of €9 million. A fixed price contract for implementing the chosen application software, SAP, was entered into with Bull Information Systems Limited in July 1998, with a two-year completion timeframe. It soon became clear that achieving this objective would be impossible.

After negotiations, agreement was reached that only the personnel element of the system would be implemented. When this was achieved in September 2000, the contract with Bull Information Systems Limited was terminated. At that stage, each of the six organisations had a personnel system that was based on SAP software and specifically tailored to their requirements. Following an internal review of the project around that time, a decision was taken to proceed with the system as originally planned. SAP was contracted to develop blueprints for the design of the system. In December 2000, an advertisement was placed in the Official Journal of the EU for consultancy support services.

The realisation that the cost of implementation would be far greater than envisaged on foot of an external investment appraisal caused a delay in the procurement of consultancy support. In the meantime, however, technical personnel were engaged through a number of agencies to work on configuring the system.

In May 2002 the scope of the project was extended to all health boards, as well as to the Dublin academic teaching hospitals and voluntary agencies in the community care area, with a then estimated cost of €109 million. Eventually, in October 2002, the procurement process for consultancy support bore fruit. Deloitte Consulting Limited was engaged to assess the status of the project and to define the scope. A few months later it was engaged as a project support adviser on a rolling contract basis, commonly known as a time and material basis. It continued to work on the project until October 2005 when the HSE decided to suspend work on the project, pending a comprehensive review. At that stage, more than €130 million had been spent on the project and the estimate for completing the implementation of the system in what were now the eight HSE areas and St James's Hospital by the end of 2006 had increased to €195 million.

The cost of €131 million includes full implementation of the personnel and payroll systems in three HSE areas and St. James's Hospital, plus three of the initial tailored personnel modules in three other areas. These must be replaced when the new systems come on stream. Substantial progress has been made towards implementation of the new systems in those three areas and the remaining two HSE areas and it is important to acknowledge that. We are now discussing four full implementations, five others are at various stages some of which are close to implementation if additional work is carried out. The planned extension to the Dublin academic teaching hospitals and the voluntary agencies has been deferred.

That is as potted a history as I can provide. It is important to state, at the outset of my observations, that while the aspiration was laudable, the project as envisaged represented a daunting challenge in the environment that obtained at the time. The multiplicity of agencies, each of which was autonomous, and the various processes and practices, even within the agencies, gave rise to a level of complexity that made the project high-risk. I do not think the level of difficulty was fully appreciated until well into the project and this probably contributed to a failure to put appropriate risk management procedures in place.

This, allied to the perception that technology would act as the driver of change management in the health sector, meant that those in charge never got hold of the project in a real sense. This manifested itself in poor planning, project management and cost control, leading to the less than satisfactory outcome with which we are now faced. Specifically, estimates of the cost and timeliness were consistently wide of the mark, review commissioned did not have any meaningful impact, tactical implementation mistakes were made along the way and procurement arrangements did not protect the State's financial interests. In the end, effective control of the project shifted to consultants.

The upshot of the shortcomings in governance was that many of the anticipated benefits have yet to be realised and there is no evidence that anticipated savings have materialised to date. There have, of course, been benefits but one could say that is only to be expected when one spends more than €130 million. The fact that personnel records are now computerised within the bones of a single system, that corporate expertise and knowledge has been acquired during the years of the project and that variances across the former health board areas have been codified means there is something on which to build. Whether that will be in the context of the further development of PPARS remains to be seen. The advent of a unitary organisation to deliver health services at least means there is a sound organisational platform on which to build.

I am aware that the committee is anxious that lessons learned from episodes such as this are applied to the broader area of major ICT development projects in the public sector. To that end, in chapter 8 of the report, I outlined core principles for good practice in this regard, which hopefully will help to reduce the risk of similar occurrences in the future. That is all I wish to say for now. I thank the Chairman.

Chairman

I thank Mr. Purcell. Does Mr. Scanlan wish to make an opening statement?

Mr. Scanlan

As the committee is aware, the views of the Department are outlined in paragraphs 9.2 to 9.16 of the report. I propose, therefore, to confine my comments to a number of key points.

Clearly, substantial sums of money have been invested in the PPARS project during the past eight years. The project also generated a great deal of public comment and debate in recent months. I regard this as a measured and balanced report on the project. It provides a good, sound basis for an objective evaluation of the PPARS project. As the Comptroller and Auditor General described, it outlines how and why the project started, how it progressed, what mistakes were made, what benefits are currently available from the system, what lessons can be learned by the health services and the wider public sector in managing similar projects and what steps might now be taken to secure the maximum benefit from the system.

I wish to outline the Department's perspective on some of these issues. The Department's decision to support PPARS was based on its concern to get and maintain robust national data on the numbers and cost of staff employed in the health services. In addition, it was also anxious to ensure that the health boards had the management information they needed to manage their human resources better. I am afraid that at times there is a tendency in some quarters, perhaps understandable, to see this as a focus on administration or bureaucracy rather than services. Therefore, it is important to emphasise, as the committee is aware, that health services, by their nature, are labour intensive and pay costs account for approximately 70% of all health expenditure. Therefore, I believe that any attempt to evaluate the cost-effectiveness of health investment must address the issue of pay costs and human resource management.

The absence of national data is illustrated by the difficulties that arose in dealing with pay claims over the years. I had personal experience of these difficulties when I dealt with pay policy in the health sector in the Department of Finance. I regularly found that I was advising the Minister that the true cost of a particular deal was in fact higher than the estimated cost he was given at the time he was considering possible settlement options. Apart from the difficulty that would arise when seeking extra funding, because funding is usually planned, the core issue is that it is unfair and wrong that Ministers and Government are sometimes obliged to make decisions on the basis of incomplete and misleading information. My understanding is that both sets of costs, when this happened, were provided by the health system to the Department. This clearly demonstrates that there was something seriously wrong with the human resource information system in the health service.

One of the main reasons the Department supported PPARS was its concern in bringing a much stronger discipline to the management of numbers, pay costs and attendant systems by providing better quality management information at national and health board level. These aims were correct and valid. Looking back, it is reasonable to ask whether PPARS should have been seen as a reasonable way of achieving these aims. Based on its experience over the years, the Department could see no viable alternative, and accordingly it viewed the approach from the health boards about a conjoint approach to HR management as the best available opportunity to achieve its policy objectives.

In addition, the Department's understanding was, and remains, that enterprise systems such as SAP can provide an appropriate solution to standard requirements such as human resources, payroll etc. I am advised that the SAP system is an internationally accepted system of high quality in terms of the software to be provided for an integrated HR system. I know that prior to the system being purchased it was reviewed in the Canadian health service, and the report also mentions it as working in the Queensland health service.

I will now turn to the implementation and management of the project. As the report states, the Department was the funding authority and it had a responsibility to ensure that funds provided were used to best effect. I had planned to refer to a number of key dates and events, but as the Comptroller and Auditor General has outlined a potted history, I will not waste people's time by going over it at length.

The PPARS system dates back to 1995 and there was a proposal on it in 1998. At that stage the Department agreed to support the project with funding of nearly €10 million. By the end of 2000 the Department had provided a total of €12 million in funding for PPARS. Funding totalling almost a further €9 million was provided in 2001. In late 2000, following the submission of new cost projections to the Department, it was decided that the health boards should commission a further investment appraisal. This appraisal was undertaken by Hay Management Consultants. In early 2002, the Department was provided with revised cost projections based on the Hay investment appraisal, amounting to an extra €92.5 million over the period. The Comptroller and Auditor General's figure of approximately €109 million takes into account €17 million being spent already. There is some slight difference in the figures but they are mainly the same.

Funding of €13 million was provided in 2002, and it was in 2003 and 2004 that the funding began to increase, with an amount totalling €31 million in 2003 and €47 million in 2004. In July 2004, following concerns expressed by the Department about cost escalation, Gartner was commissioned by the health boards to evaluate the value for money aspects of PPARS. In August 2004, in the context of special report No. 7 referred to by the Comptroller and Auditor General, the Secretary General of the time advised the Comptroller and Auditor General that PPARS was expected to cost €130 million for the health boards and St. James's Hospital, and that rolling it out to the rest of the health sector would cost about a further €100 million.

By the end of 2004, the Department had provided cumulative total funding of €112 million but about €12 million of this had not been spent. In January 2005, the HSE was established and the Department continued to pursue its concerns about the scale of spending on PPARS. There were a number of meetings and discussions with HSE personnel.

In July this year, following discussions with the Department of Finance, I met the HSE directors of ICT and HR to discuss the PPARS project. I asked the HSE to undertake an urgent review of the project and report back to the Department after the summer. I had particular concerns at the time about the number of staff involved in the project and the employment ceiling which was part of Government policy. I made it clear that no extra staff should be assigned to the project in the interim, and it was agreed that the HSE would also examine ways of immediately minimising the consultancy-related costs. In October, the HSE board decided to suspend any further roll-out of the project pending further examination. In the same month, I met the CEO and others in the HSE, and I subsequently wrote to the HSE emphasising the need to put in place as a matter of urgency a single, clear and widely understood governance structure for the management and operation of its ICT resources.

The report raises serious questions about how the project was implemented. It seems the governance of the project was, in effect, hampered by the very same factor that underpinned the absence of a sound national HR approach in the first place, that is, the project's implementation by separate independent bodies. I also believe the extent of the variations in pay and conditions only emerged as the project progressed and undoubtedly accounted for a significant element of the cost escalation.

An objective evaluation of the systems must look at what has been accomplished as well as mistakes that have been made. I accept the Comptroller and Auditor General's comments that there are benefits. I hope that some benefits are evident having spent this amount of money. Some media comments might lead one to believe that there have been no benefits.

I understand the system is now working well in the areas where it is operational. It is paying more than 36,000 people regularly and so far in 2005 it has made over 600,000 actual payments amounting in total to nearly €1 billion. In addition, as the report points out: "For the first time personnel records have been computerised in six former health boards and in one of the largest hospitals in the country, St. James's Hospital." The report also states: "the immense effort that was applied to the standardisation process and the rigour required by SAP has meant that a large number of anomalies in terms and conditions were brought to the surface".

Looking forward, the report states: "the HSE now has a single system capable of generating payroll for a large proportion of its staff and, subject to its review and cost justification, capable of extension to the remainder". I fully support the decision of the HSE board to review the further roll-out of the system. My Department and the Department of Finance are represented on the review group and a decision on the matter is expected early next year.

Chairman

I thank the witness. May we publish the opening statement?

Mr. Scanlan

Yes.

Professor Drumm

I commend the Comptroller and Auditor General for the preparation of the report on the PPARS project. It is fair, balanced and will serve as a very useful resource and guide to what should and should not be done for future major projects that are dependent on ICT for their success. Given that 70% of all health care expenditure goes on payroll costs, it has been obvious for a long time that we need more consistent and accurate human resources management systems.

The need for a project such as PPARS was identified 11 years ago following publication of the report, Health Strategy — Shaping a Healthier Future. It was recognised that to deliver more accurate national data, agencies would need to work more closely together and adopt a unified approach to human resources management. Initial development work on PPARS was initiated by the chief executive officers of the former health boards and the Department of Health and Children. These CEOs formed the PPARS steering group. In 1998, this group formally outlined in a report to the Department of Health and Children the need for information systems to manage the human resources employed within the different health services. The report estimated the cost of the project would be €9.14 million with an estimated time of two years.

This was supported by an investment appraisal carried out by the National Institute for Management Technology, which stated the system would support many of the key requirements of the health strategy. Given the way the project has grown and the difficulties it faced in terms of complexity, data quality, variations and governance, these estimates, while prepared based on the information considered relevant at the time, bear little resemblance to the amount spent to date.

When looking historically at PPARS, it is important to remember the environment at the time. Each health board and agency had statutory authority and answered only to the Department of Health and Children. They used a multiplicity of different payroll systems, processes and platforms and there was great variation on pay and conditions between the agencies. For example, more than 2,500 variations of national pay and conditions rules were applied locally. As a result, information on people and pay was fragmented and inconsistent. It made robust national decision-making difficult.

Due to this fragmentation and the Department's need for accurate and timely national data, the need for the benefits the PPARS project aspires to deliver was obvious. The Comptroller and Auditor General's report recognises this need. In the HSE environment, this need for national data and common processes is now really urgent and it is imperative that we get this type of data.

From a governance perspective, the report states that the decision to implement a national single system in a non-standardised, regionalised operating environment had a key bearing on the project, as did the decision to press ahead with implementation in the absence of full pilot site commissioning. Why these decisions were made is not for me to judge at this point. However, any balanced and fair analysis or review of PPARS should consider the governance arrangements that existed among participants.

The priorities and cultures of participating organisations were different. Due to the statutory autonomy of the participating health boards and agencies, decisions were made on the basis of consensus. This consensus approach came at a price in terms of funding, time scales, effort and commitment. Decisions and plans agreed nationally were often difficult to apply at local level in common approaches, implementation of national standards, etc.

The people responsible for implementing the project had no authority to make and enforce decisions locally. The result was that individual agencies could decide when and how PPARS would be implemented locally. There was also no direct reporting relationship between the national team and local teams. In addition, priorities of local agencies differed from time to time. As the committee will appreciate, this was not the ideal platform upon which to build a single unified common system.

It would appear that the planning, management and implementation of the project was not equipped to deal with this complex and unwieldy governance structure that emerged as the project developed. Trying to replace a multiplicity of complex systems with a common single system requires clear focus, responsibility and leadership. However, the PPARS project team was trying to achieve this in an environment where participants were working independently, in accordance with their own priorities and at their own pace. Those responsible lacked authority and the project, therefore, lacked leadership.

When I joined the HSE in August and became its Accounting Officer and, therefore, assumed personal responsibility for the organisation's budget, I recognised, following discussions with many involved, including the Department of Health and Children, that the PPARS project was experiencing development difficulties. Following a report from an executive team, I instructed that further roll-out of the project be paused until we can evaluate whether it can operate effectively in this new HSE environment and, if it can do so, determine the direction it must take. This pause relates to all future roll-out and expansion of PPARS to the former health board areas where it is not available but does not affect the areas where it is live. The latter will remain active and intact for the foreseeable future.

During this pause, work is ongoing on report development, priority system issues and a review of how the system is implemented on the ground. This will also include an examination of how the staffing requirements for PPARS can be optimised. As part of that pause, 160 staff have been reassigned off the programme.

In terms of lessons for the future, I am keen to ensure that the difficulties the PPARS project encountered will not lead to an overly cautious approach where future initiative and enterprise is required. This is important. While robust analysis and questioning are essential, care must be taken to foster the good ideas that often involve an element of risk. Equally, I want to focus on learning from PPARS to ensure that as we move forward, we build on the experience from this project and, more importantly, ensure that the health system does not find itself in a similar position in the future. In that context, in October the director of ICT and I had a meeting with both the Department of Health and Children and the Department of Finance. We agreed a series of robust governance and technical principles which would inform the development of the new unified ICT directorate within the HSE. This will obviously be a national ICT directorate and will be responsible and accountable for all ICT matters throughout the system, which is quite a difference to what would have been experienced by the PPARS project team.

The Government has established a peer review process for major ICT enabled projects and the ICT director from the HSE has been working with the Department of Finance to bring the HSE's existing projects through this process. This process covers many of the recommendations set out in the conclusions of the Comptroller and Auditor General's report.

The director of ICT is currently developing a comprehensive change framework that will guide the effective integration of ICT and organisational change throughout the health system. This framework will ensure that all major change initiatives will be progressed in a manner which ensures that the organisation has both the capability and capacity to deliver the change as envisaged. Once developed, the application of the framework must be mandatory for all major change initiatives. In the context of a unified Health Service Executive, this is something we can achieve.

While noting the issues raised with respect to PPARS, the achievements of the project should not be understated. I would particularly like to recognise the work that the many people around the country have been doing on this project. Its exposure in the media, which we do not challenge because it is only right and fair, has presented personal challenges for many people who work within the HSE structures. I stress that the difficulties the project experienced are in no way a reflection of the value of these people to the organisation.

PPARS is Ireland's largest and most complex human resources information management system. Some would say it is one of the largest in Europe. Where it is live, and serving 36,000 staff and pensioners, it has introduced standardisation to a fragmented environment. It is also bringing to the surface HR management issues which, prior to its implementation, remained undetected across the system.

Prior to it being paused, PPARS was capable of being rolled out to the remainder of the organisation. The challenge facing us now is to determine if and how we do this and to ensure that all further expenditure delivers the levels of accountability and value for money that, we agree, the community expects. I am personally committed to achieving this and ensure that, going forward, all our enterprise projects are executed with the highest professional standards and within agreed expenditure limits. I thank the committee for the opportunity to make this statement.

Chairman

I thank Professor Drumm. May we publish his statement?

Professor Drumm

Yes.

Chairman

On today's rota, Deputy Boyle is the first questioner and he has 20 minutes.

Deputy Boyle

I am required in the House within 25 minutes and I will try to be staccato-like in my questioning. The difficulty here is knowing who to ask and where to start. There have been enormous changes in the health service and some of the personnel involved have moved from both the Department of Health and Children and the then health board structure. As we further investigate this at future meetings, I hope we will obtain responses from people who might have a more personal knowledge of the situations involved.

I wish to ask some questions to fill in the gaps of chronology about the decision-making. From the floating of the idea behind PPARS in 1995 up until the formation of the steering group in 1998, was it driven by a particular person or health board and how did the decisions come to be made on who should chair, and on what basis, the steering group for PPARS? I presume the Secretary General would be the best person to answer that.

Mr. Scanlan

My understanding is that the project was originally initiated and developed by a group of CEOs within the health boards, although it was not until 1998 that the Department received a formal proposal seeking support for funding. The Department had been aware of it. I have seen reference in the files to it having been discussed at what we called the MAC-CEO meetings at which we met CEOs. My sense is that the Department was certainly supportive of it but my understanding is that it was being developed by the CEOs of the health boards. I am not sure that I know who the lead CEO was at that stage. I assume, however, that the selection of the lead CEO was done by the health boards. Certainly, it was not done by the Department.

Deputy Boyle

When the original decision for funding was made in 1998, it was done on the basis that someone in the Department made that decision and gave that sanction. Did the Secretary General or the Minister sanction the original funding?

Mr. Scanlan

The Secretary General.

Deputy Boyle

Was £10 million the amount?

Mr. Scanlan

It was approximately £9 million. The funding of the health system at the time was completely different. That amount was huge and it was extremely difficult for the health service to find it. The way it was put was the Department would support the project to the tune of this amount.

Deputy Boyle

Was the first of the difficulties sanctioning an initial sum? Not enough emphasis was put on why the money was allocated and whether it would be used effectively or for a long-term purpose. An idea was being piloted that was still half formed.

Mr. Scanlan

There was an element of that. What I have seen suggests that even then the Department knew it was not looking at a firm, overall proposal. It was not looking at a proposal for a national system, for instance. It was still only a limited number of health boards but, at the same time, the Department saw this as an approach to support the idea of starting to pull together individual health boards. Its approach was to support that with funding.

Deputy Boyle

The first major expenditure was the appointment of Bull Information Systems, which tendered a contract of €9.14 million and subsequently decided the tender would not cover the costs involved in the project. The company removed itself from the project and was paid a settlement of €3.3 million on the basis of 2,000 hours worked, which equates to €1,500 an hour. Will Mr. Scanlan describe the circumstances in which the settlement was made? How much work had been done in furthering the PPARS project?

Mr. Scanlan

This is where it starts to move from the Department as funder. This was an implementation issue and my knowledge of that is based on what is in the Comptroller and Auditor General's report. The Department was not involved in dealing with Bull——

Deputy Boyle

Is it up to the Health Service Executive to answer such a question?

Mr. John Magner

The Comptroller and Auditor General's report refers to the termination of the BISL health contract and he presents what functionality was provided through that investment. Page 27 sets out that the personnel and attendance monitoring modules had been delivered but the modules relating to rostering, pay, recruitment and superannuation had not been delivered. The fee paid to BISL was decided on the basis of negotiation following legal advice the board took on how to terminate the contract. BISL had indicated it had a time and materials contract whereas the agencies had indicated it was a fixed price contract. Legal advice was taken and it was agreed to try to terminate the contract on the basis of negotiation. The hours worked as part of that negotiation were at the standard rate for the contract in place at that time.

Deputy Boyle

Did BISL leave in early 1999?

Mr. Magner

Late 1999, early 2000.

Deputy Boyle

At that stage, people involved in the project realised there was a difficulty with time and materials contracts with consultants.

Mr. Magner

The key issue with BISL was the total underestimation of the complexity of the contract and the system being put in, particularly in regard to the capacity of BISL to undertake——

Deputy Boyle

I will return to that later. Despite the difficulties in hiring a consultant, the consultants withdrawing and the project not advancing, it was still decided in 2000 that other health boards should become part of this project. Why was there confidence this project was working when evidently it was not?

Mr. Scanlan

I am unsure whether it was not working. It is difficult at any stage to find a cost estimate of this project which was fixed in time and said this is what we are costing and we have included everything.

Deputy Boyle

Was that the nature of the problem? Why was the Department not involved in that process, defining it and ensuring a fixed cost and time so that it would be implemented by a set date?

Mr. Scanlan

I have never been fully clear what exactly was costed in what is known as phase 1. Approximately €10 million was provided but a few years later Hay arrived and costed it at a multiple of that. Whether it was completely underestimated or the same project was considered then as now, I am not sure which is true. The project has evolved and one of the key issues, which was mentioned in the Comptroller and Auditor General's report, was the delegation of the personnel function. I am not sure whether that was part of a vision at the beginning which was not costed. It is not fair to say the Department somehow decided or should have known in 2000 that clearly this project had failed. The key aim as far as the Department was concerned in extending it was to get national data. Initially a group of health boards said they were willing to work together on this. The Department seized the opportunity and it grafted on to that its demand to extend it nationally.

Deputy Boyle

I refer to the structure of the implementation, which was flawed. There were three tiers. A PPARS project board comprised the chief executive officers of the various health boards, a project management team comprised technical officials, a number of whom sat on the project board, and the delivery element concerned five health boards and St. James's Hospital. There was no direct line between the first and third tiers other than through the CEOs. The two-way communication with the project management caused more confusion than it provided illumination. Is it not a rich irony that a board of CEOs found it difficult to implement the PPARS project in the agencies for which they were responsible? Why did the Department not ask questions about this?

Mr. Scanlan

The implementation was managed by the health boards rather than the Department and the report acknowledges this. The Department sat on the sponsorship group and its understanding of the position at the time and throughout the project was that it had the full support of all the CEOs. That is one of the reasons the Department welcomed it. The report highlights that the reality when people appeared on the ground may have been different. It is not fair of me to say whether that is true. Perhaps that is what the Deputy's question is getting it.

Deputy Boyle

The Department of Health and Children was responsible for allocating money to the health boards every year for the project. A review process should have been ongoing, questions should have been asked about whether the money was being spent effectively and the effectiveness of the process involved in spending the money should have been examined but the Department did not do that.

Mr. Scanlan

I accept that and the Deputy has summed up the role of the Department correctly. However, I do not accept the Department did not do any of that. The Department was responsible for and allocated funding to different health boards under different programme headings. It has an information and communications technology programme heading under which money was allocated. Within that, it agreed certain priorities with the health boards. It was supportive of PPARS and it supported other national systems. That was the overall strategy approach of the Department. It had a responsibility to try, as the Deputy said, to confirm that the money was being managed correctly and value for money was being achieved. It was for that reason I set out the key dates in my opening contribution to show that at various points in the system, the Department said it had a concern. By 2001 we all had concerns about how much this would cost. It was on foot of those concerns that Hay was brought in and, subsequently, the Department had more concerns. It was on foot of those concerns that the PPARS project board engaged Gartner. Even then, the Department was not entirely satisfied with the answers it was receiving. It was pursuing the cost concerns but it was not managing the project and that is the distinction I would make.

Deputy Boyle

That is the central part of the problem. I want to deal with the issue of the biggest consultancy contract and its cost. Will the Department of Finance officials explain the role of CMOD with regard to information technology. What role did CMOD play in this project?

Mr. Dave Ring

It was only when the Department got a Vote this year that CMOD began to play a role. Prior to that, the role would have been played by the Department of Health and Children.

Deputy Boyle

So, there was no internal governance——

Mr. Ring

There was no active role by CMOD.

Deputy Boyle

Was there any internal governance by CMOD at any time in this process other than this year?

Mr. Ring

CMOD did not have an active role prior to this year.

Deputy Boyle

Has CMOD not got a role, in terms of the public service in general, in providing such expertise?

Mr. Ring

CMOD did not have a role in the health area until this year because it did not come in under a Vote. Typically, we look after the delegated sanction regime for Departments and Government offices that have a Vote.

Deputy Boyle

I will move on to the larger sums involved in the expenditure to date. At the end of 2000 an advertisement for consultancy support was published in the Official Journal of the EU. The projected cost was €33 million. Hay Management Consultants were brought in and eventually estimated by February 2002 that the cost of the project would rise to €105 million. In October 2002, Deloitte Consulting was engaged as project support adviser and it is from here that most of the confusion and expenditure occurred.

The understanding of the implementation team is that Deloitte Consulting was being taken on board as implementer but Deloitte Consulting seems to indicate that it saw itself as adviser. The nature of the contract given was a time and materials contract rather than a fixed price contract. Another consultancy, Integrity Consulting, was also involved and it advised that it would be best to consider carefully the nature of the contract to be given to Deloitte Consulting as to whether it should be a time and materials or fixed cost contract. It appeared to lean towards a fixed cost but a decision was made to ignore that advice. The difficulty with regard to the time and materials contract Deloitte Consulting was given and the fact that it saw itself as adviser seems to relate to what particular materials advisers need if not involved with the implementation of a project.

Professor Drumm

I will return quickly to the previous question before getting to that. I think the Deputy has hit the point about which we are all concerned, namely, how the project was managed and if we were to start again, would we manage it better. He is correct. We have significant concerns because there was a committee approach to management and there was a lack of a line management structure, with control vested in someone, at the health services end to insist on how the money would be spent and monitored. Control was not vested in a single individual and the project was overseen by a committee of health board chief executives. It was not line managed from the project team downwards. We accept that there was not a strong business or management process in place to supervise a process of this enormity. The Comptroller and Auditor General has identified that.

With regard to the working arrangements with Deloitte Consulting, there is a difference of opinion with regard to its role. I will ask Mr. Magner to comment on that from the point of view of the implementation from our perspective.

Mr. Magner

It is our view that Deloitte Consulting was the project implementation partner and my engagement with this project in recent months confirms that. While there were some changes to a project advisory role, I know from recent discussions with Deloitte Consulting that my clear understanding is that its role and purpose relate to the delivery of this programme.

As people are aware, we had a contract with Deloitte Consulting. We had letters of engagement and, following those, we had work programmes and work plans with the company and these were reviewed on a weekly and monthly basis. The company's role was clearly specified. In terms of the publication of the report, it was not until quite recently that I became aware there was an issue of difference in terms of the role of implementation partner and project adviser. My understanding is that there was no misunderstanding with regard to the role but that the issue has arisen in respect of title. I understand both parties clearly understood the role.

Deputy Boyle

I asked earlier about the time and materials contract agreed. There was a difficulty with such a contract for full information systems. Why was the lesson not learned, particularly when the implementation team was given advice to be very cautious about awarding a contract that involved time and materials? This seems to have been the major expense to date — the expense of paying a set of consultants in respect of an area where the work programme is a matter of disagreement and has been ill-defined.

Mr. Magner

I understand that, at the time — I can confirm this later — the Integrity advice related to the appropriateness of Deloitte Consulting continuing with the preparation document and not to the contract type. Looking back on the records, at the time consideration was given to which route — a time and materials or fixed price contract — we should take. Prices were given for both types of contract under the procurement procedure. A decision was made not to go on the basis of a fixed price contract because of particular uncertainties, namely, that the former health boards could not deliver with regard to engaging in such a contract. The fixed price contract placed certain prerequisites on the agencies at the time with regard to clarifications on variances, resources, commitment to change and employer relations. The agencies did not have the confidence at the time to commit to meeting those within a fixed price contract and, therefore, did not engage in a fixed price contract at that time.

Deputy Boyle

I have two brief questions on future costings that I would like to pose when Mr. Purcell has contributed.

Mr. Purcell

I want to pick up on what Mr. Magner said with regard to fixed price versus a time and materials contract. Deloitte Consulting was engaged to carry out a project scope to decide what needed to be done and was paid €400,000 to carry out that phase. It was not unreasonable to expect that having completed that work, it would be in a position to price what had to be done. I understand why the health boards at the time or the PPARS team would have had concerns, particularly if the consultancy employed to scope the work said there were too many uncertainties about the scope of the work to give a fixed price. There seems to be a contradiction in terms in this regard.

Deputy Boyle

I have two brief questions about future costs. If the decision is made to complete the implementation of PPARS to the eight former health boards and St. James's Hospital, it is estimated that this will cost an extra €65 million by the end of 2006. How much of that €65 million is expected to go to Deloitte Consulting as a result of its contract?

Professor Drumm

Mr. Hurley is studying the issue of how we go forward and perhaps he will comment on that.

Deputy Boyle

Perhaps he will also deal with my second question, which is related. The long-term plan of the Department of Health and Children is to extend the programme into Dublin academic teaching hospitals and voluntary agencies, which would be a cost over and above €195 million again. Has a costing been made of what the total cost of PPARS would be if the system was rolled out that far?

Mr. Seán Hurley

The current review is examining the issues the Deputy raised. We want to research baseline costs for the future rolling out to the remaining former health boards and the Dublin academic teaching hospitals. We need to establish the baseline. The next question for us will be to examine what kind of a return we will get on that investment and whether it makes good sense to continue with it. We do not have those costs yet. As already stated, it will be some time in January before we will have completed the review mentioned and flagged by the Comptroller and Auditor General.

Deputy Boyle

Are we operating within parameters and will we say that it will be feasible if, for example, there is an additional 20% cost?

Mr. Hurley

We do not know what the costs are, so the first thing is to establish them. Then we must look at whether it represents good value for money if we are to pump the extra amount of money into it. We must also consider the capacity we will have in the HSE to deliver on time and within budget. The last thing we will have to examine is whether it will fit into and support the strategic management contained in the HR directive. The role of any technology system is to support the business side; it is not the case that the technology must drive the HR agenda. We are examining a couple of key issues. We do not know the costs yet nor what will be included. We cannot say definitively if any consultancy will be required at this stage.

Deputy Boyle

I presume there are rules of thumb. We know that X number of people are working in these institutions and that X number of people are working in the health system so simple rule of thumb figures can be extrapolated.

Mr. Hurley

We will have a different model in the next phase. As has been outlined to the committee, one of the key difficulties that this project encountered was that there was not a pause after the pilot study. We plan to develop an operating model for the next stage and install it in its entirety in one of the areas and then perhaps roll it out. Whatever is the option, it will be nothing like the costs that have been incurred to date. It will be a totally different model and there will be a different approach and cost base.

Deputy Boyle

What about the second element, the case of the €65 million and Deloitte & Touche? Deloitte & Touche is responsible for upwards of 30% of the current expenditure on PPARS. Will the ratio be similar for the €65 million or will it be significantly scaled down?

Mr. Hurley

No. There will need to be a totally different approach for the future implementation of this. We will develop the operating model, install it fully in one board and then roll it out. It will be phased out on a more extended timeframe rather than the way it has currently operated. While it will extend the timeframe, we can achieve significant efficiencies and reduce the costs in doing it on that basis, by having the expertise and using it from area to area.

Deputy Boyle

Would it be unfair to suggest that the total amount Deloitte might receive on the full implementation of PPARS would be in the region of €50 million?

Mr. Hurley

I cannot answer that question because I do not know whether there will be any role in moving forward, whatever the solution is, for any permanent consultancy.

Deputy Boyle

Perhaps some of those figures will be available to the delegation for the next meeting.

Chairman

I do not wish to upset the Department of Finance, but will Mr. Mooney say whether the Department had any notion of what was going on?

Mr. Mooney

There was no specific approach from the Department of Health and Children in respect of the PPARS project. From my recollection and from the papers that I have seen, there was no proposal from the Department in respect of a plan of spending in this area. The Department of Finance was conscious of the need for better information on personnel employment details and financial management and control details. We were aware that expenditure was taking place in developing systems but we were not asked specifically about funding for a particular project. We gave funding at an aggregate level for expenditure on the capital side. The capital side contained a sub-head regarding information and communications technology but this formed a very small element of the capital budget from 1997 onwards. The Department of Finance was spending a total of €17 million in capital expenditure on ICT models within a total budget, as I recall, of approximately €200 million, so it was relatively small.

In my recollection and from discussions with colleagues, the issue was never specifically raised in the normal Estimates budgets context with the Department of Finance. Those discussions tended to focus on acute hospitals, primary care, medical cards and no specific proposal was put to us about the PPARS project. As my colleague, Mr. Ring stated, we were not directly involved in the issue at all until this year, 2005, when the HSE was set up with a separate Vote. This brought the HSE within the ambit of circular No. 16 of 1997 which sets out the obligations and requirements governing delegated sanction for spending in the computer area.

Chairman

Mr. Mooney will have heard Mr. Scanlan state that some time in 1998, the then Secretary General at the Department of Health and Children, sanctioned approximately £9 million for PPARS and that this was the first allocation. Is Mr. Mooney saying the Department of Finance was not aware of this?

Mr. Mooney

I am not sure if there was a specific proposal labelled as PPARS ever submitted to the Department of Finance. The Department of Finance would have signed off on the Estimates as agreed by Government and in discussions. The subhead for the Department of Health and Children on the capital side would have included a line for ICT but we would have dealt with it at an aggregate rather than at a project-specific level.

Chairman

I presume there was then, as there is now, an official in the Department of Finance with specific responsibility for the health Vote and who would be engaged constantly at official level bilaterals with the Department of Health and Children and discussing its expenditure on a line by line basis? Is Mr. Mooney saying that did not happen in this case?

Mr. Mooney

It is probably not quite correct to say it takes place on a line by line basis. The health Vote is so complex and large that the focus tends to be on particular areas which are of concern to the Department of Health and Children. It would come to us with proposals to do with particular areas and we would discuss those. We would not automatically go through the proposals line by line and within the ICT area we were not involved on a project by project level.

Chairman

The file seems to indicate that the Department of Finance would not have known that the health boards CEOs around the country were planning this major initiative.

Mr. Mooney

To my knowledge, the Department would not have known but I am open to correction. We have looked through the files but we have not been able to find any specific approach about the PPARS project but we would have been aware from our discussions with the Department of Health and Children. My involvement with the health Votes commenced in about 2001. In that time, the PPARS project was mentioned in the context of the Department of Finance trying to find quality information relating to the numbers employed in health boards and in hospitals and trying to link that information to the pay bill. We were aware of the existence of the PPARS project. We were informed by the Department of Health and Children that this was an important project which was capable of generating the kind of information that we all knew was essential for the control and monitoring of the pay costs in the health area. As the Secretary General stated, one of the aggravating aspects was the constant problem of trying to estimate pay costs arising from pay deals.

I agree the Department of Finance was aware that a project was taking place but I do not think we were aware of the specific bones of the project.

Chairman

Mr. Scanlan stated in his opening statement that the Department of Health and Children's role was simply a funding authority. While he acknowledged responsibility for the expenditure of public moneys, he in effect stated that the Department of Health and Children at the time had no role, either in governance or implementation and that this was solely the responsibility of the individual health board and agencies and in particular the responsibility of the then CEOs of the health boards. Is Mr. Scanlan maintaining that position before the committee? Members of this committee served on health boards where it was impossible to get €30,000 for a community hall without a letter of sanction from the Department of Health and Children. Is this the position Mr. Scanlan is maintaining because we know how it works on the ground?

Mr. Scanlan

I refer to the Comptroller and Auditor General's report, which states on page 20 that the Department of Health and Children was the funding agency and on page 66 refers to the role of the health boards in implementing it. In terms of the respective roles of the health boards, the Department and the Department of Finance, and to bear out what Mr. Mooney has said, the letter of sanction issued from the Department of Health and Children confirms that the arrangements and discussions with the Department of Finance were at an aggregate level and, as Mr. Mooney stated, this is not unusual. One of the difficulties experienced by the Department of Health and Children in 1998 was that by the time it had received the proposal it had agreed its capital allocation from the Exchequer. I acknowledge there would not have been much point in going back to reopen this with the Department of Finance. The Department was therefore faced with trying to make whatever space it could within that overall capital allocation to support this project.

In terms of the respective roles of the health boards and the Department, there is clearly a difference of view on this. I understand what the Chairman is saying. He seems to believes that members of health boards felt they had no power or authority without obtaining sanction. I can say with certainty that the view at Department level was that health boards were independent bodies and that, from time to time — I do not know how regularly — it was very difficult to obtain information from them.

My understanding of the health system, and I acknowledge that I am not long in my job, was that we had individual, statutorily independent health boards which delivered the health services. The Department of Health and Children did not deliver those services. The big change between the system then and now is that we currently have a national system, whereas in the past there was no single national centre.

The Department's role went beyond funding this project. I repeat that the Department had a reason for funding the project. It had a view, at broad policy level, that information system development should be supported in the health system, that capital money should not be spent solely on hospitals or community care areas, important as they are, and that the need to support information development systems should be recognised. The Department also had a policy view that these systems should be national because it was grappling with national problems, not just in the IR area but also in service areas and in the financial area in terms of trying to pull together, year in year out, estimate bids and annual financial reports from health boards. It was, therefore, looking at a national HR system, a national finance system and, subsequently, as Deputies will have heard, a national hospitals system. In that context, it had a clear policy view on all these matters. It was not responsible for implementing the system any more than it was responsible for delivering care in a particular hospital.

Chairman

I understand the reason my colleagues are amused and I want to allow Deputy Fleming to contribute. The position has always been that while the Department may not be responsible for implementing the system or for the quality of health care in an individual hospital, it was held accountable in the Dáil for its responsibility to ensure that those who were responsible for such matters met their responsibilities. That is the point. The Department was responsible for governance in that sense. It was responsible for ensuring that when public moneys were being spent on a particular project, the project was delivered. It had overall responsibility.

As I do not wish to be unfair to Deputy Fleming, I will ask just one more question. A form of hand-washing is taking place. With the health boards gone, it is easy to attach blame to people who no longer exist in their corporate entities. If, in 1998, a Deputy had tabled a parliamentary question about the amount of money being spent on PPARS, it would have been ruled in order and answered by the Minister. This indicates where the overall responsibility lay. It is not fact to state that this would be devolved to the health board and was basically a matter for the chief executive officers of the health boards and had nothing to do with the Minister or the Department. Those are not the facts of the case. If a question had been tabled, the Minister would have been obliged to answer it. I am not imputing responsibility to the Minister and Mr. Scanlan has already indicated that the decision on the allocation of funds was taken at Secretary General rather than ministerial level. However, given how things work, overall responsibility would have rested with the Minister and the Department. It should be accepted that while the day-to-day implementation would be a matter for the health boards, overall responsibility for implementation and governance would be a matter for the Department.

Mr. Scanlan

There may not be much difference between us. I was simply making the point, which I believe the Chairman is accepting, that the day-to-day implementation was not a matter for the Department. I fully accept that it was not a case of simply sending out the money and forgetting about it or hoping to God the project worked.

It is fair to ask what obligations this imposes on the Department and the extent to which it met those obligations. The Department participated in some of the governance structures and was on the sponsorship group. It also raised issues but it is legitimate to ask whether it went far enough or achieved results. I do not believe there is a difference between us when we put it in those terms.

Chairman

I will return to the issue later or at our next meeting.

Deputy Fleming

I compliment the Comptroller and Auditor General on a good report. We have often had value for money reports but this is the best report I have seen emanate from the Office of the Comptroller and Auditor General. In addition to outlining the details and history of the cost, the Comptroller and Auditor General has done more than in previous reports by outlining some of the benefits that have accrued, made a firm set of conclusions and, more importantly, provided a full chapter on recommendations for the future. The issue at hand is where do we go from here. We can go over the entrails until as far back as 1990 if we wish but somewhere along the line we must move forward and learn lessons. As regards learning lessons, how many of the seven officials opposite were involved in the PPARS project from the 1990s until more recent years?

Mr. Dermot Magan

I was involved in the project at a national group level from 1998 onwards.

Deputy Fleming

The Department was involved in the PPARS project at national level.

Mr. Frank Ahern

I was involved on the HR side in the late 1990s and I continued to be involved in the project when I moved over to the corporate side.

Deputy Fleming

Is the former Secretary General present? The project leaders from the health board CEOs were unable to attend today. Is that correct?

Chairman

They cannot attend today.

Deputy Fleming

I want to move to the gentleman from the Department of Finance because this is a matter of value for money for the taxpayer. While we are dealing with the Department of Health and Children today, the issue of value for money rests with the Department of Finance in the first instance. Paragraph 8.26 on page 90 of the Comptroller and Auditor General's report states:

However, although staff with experience in the successful development of computer projects exist in some sectors of government there has as yet been no attempt to consolidate this knowledge for the benefit of agencies for whom ICT development is a new or challenging undertaking.

If this expertise is in Government, why has it not been brought together until now in a co-ordinated manner to assist in projects such as PPARS?

Mr. Ring

ICT control in the Department of Finance operates a delegated sanction. In that process, we meet each individual Department in bilateral meetings every year and discuss with them various issues they might have. We also share experiences on a one-to-one basis with others. We also have the ICT managers network. This is a network of ICT managers in the civil and public service and its members attend meetings, arranged by our unit in CMOD in the Department of Finance, on a regular basis. During these meetings, we share experiences, talk about issues that have been raised and provide ideas on implementation. We also have a consultancy database in the Department of Finance in which we keep information on consultancies and some life experiences.

I agree, however, that there should be a bigger process in place. Since January this year, we have been looking at the gateway process implemented in the United Kingdom by the Office of Government Commerce. As a result of this, we have been implementing the peer review process on which we have been working in recent months. As part of this process, we intend to widen the net and put the experienced people we have in the Civil Service, as well as those who have perhaps retired and moved on, into a forum and a process where they will be able to help each other.

I also acknowledge that we must have a knowledge management exercise in which we develop a more formal forum, perhaps a network of ICT managers in the Civil Service, and another network in which we can share experiences, perhaps on an intranet.

Deputy Fleming

Professor Drumm referred to the peer review process in his opening statement. Why did it take until 2005 for somebody to realise the problem that existed? We have been saying this at this committee for the past three or four years. There have been umpteen instances, across a range of Departments, of ICT projects costing 100%, 200% or 300% more than was originally quoted. That has been happening for several years and this is not the first time it has happened, even though it may be the most significant example. Why did somebody not pick up on the previous mistakes and put the peer review process in place before now?

Mr. Ring

The peer review process is a new idea which developed from the Gershon report in the United Kingdom. Over recent years, we have been developing guidelines, rules and procedures regarding a number of issues. It is fair to say a large number of very successful projects have been rolled out in the Civil Service and public service. Perhaps we do not blow our trumpet over these.

We have been developing the guidelines. Last year, for example, we reissued the capital appraisal guidelines. The guidelines for the engagement of consultancies were issued in 1999, and guidelines for the development of systems were developed in the mid-1990s. We implemented, on a wide scale, best practice in terms of system methodologies and project management methodologies. We follow a methodology. We have been developing training courses in this area and we have a process in place to allow people to attend them. We operate through the ICT managers forum.

It is not as if we have just started, it is a journey. The journey is developing and over recent years we have been adopting new ideas on foot of research. We intended to implement the project in question this year. It got a kick-start this year.

Deputy Fleming

The reason I am dealing with that issue is because I want to refer to the next page of the Comptroller and Auditor General's report, that is, page 91, paragraph 8.34. It is a very short paragraph but it set the alarm bells ringing in my head. It states:

The health service has identified a programme of ICT development which is designed to modernise its information infrastructure. The indicative cost amounts to billions of euro and PPARS is just one component of that programme.

Given that we are spending €100 million to €200 million and that the aforementioned problem exists, it is clearly the intention that billions will be spent in this area in years to come.

No member of the public would have confidence in the systems that were in place under PPARS if they were remotely involved with a system that will involve the spending of billions of euro on ICT technology in the years ahead. If we are to spend this much in the next decade, it will obviously be bonanza time for the ICT consultants. If we are to spend so much just in respect of staff, the mind boggles at the amount required to computerise the system in respect of patients. I am sure the number of patients that will go through the health service will amount to millions.

Let me refer to a practical example which we all know will feature in the months ahead. On the nursing home charges refund issue, I gather Professor Drumm is hiring a firm of international consultants to manage the project for him. What lessons has he learned from the issue that will ensure the problem does not recur. By going the route he is going, is he saying he does not have confidence in the peer group review process and all the processes the Department of Finance has outlined. Has the public service the management ability to deliver the next ICT project? Will Professor Drumm comment on this?

Professor Drumm

The issue of future expenditure on ICT in the health service is huge. There is no doubt that, at a patient care level, ICT will be central to much of what happens over the next ten to 15 years. If we are to bring the service up to world-class level, demands will be made in terms of how the system informs itself at community care and general practitioner levels. There is no way we can continue to progress if our prescriptions are not issued electronically. Monitoring this at a value-for-money level alone is impossible without a very significant ICT infrastructure. We spend €1.3 billion on drugs, for instance, and practically all the prescriptions in this regard are issued as hand-written paper scripts. They are given to the pharmacies and they send us back others.

There is need for investment in this area if we are to monitor what we do. It is not just a matter of personnel control. There is no doubt that we need an implementation structure with far more expertise than we probably had available to us across ten or 11 health boards. We are establishing our own ICT directorate to deal with the issue and are engaging with Mr. Ring and the people in the Departments of Finance and Health and Children with the peer review group. This will add great strength to the process, at least in terms of monitoring and perhaps in terms of offering advice to us to stop at a certain time.

It is important to raise the nursing home charges issue, as raised by Deputy Fleming, because it is a good example of where a lesson could be learned. The main lesson I have learned is that we should stick as much as we can to our core business. While there may be a lot of criticism of how we have used consultancies in the past, we must be aware that we will not regard many of these processes as core business. The nursing home charges issue is an example. Having said that, it has proved challenging in terms of getting people to get going on that task.

We hope our ICT will be developed much more carefully and that issues such as the nursing home charges issue can be dealt with by bringing expertise we do not have to the table.

Mr. Scanlan

I am not entirely sure of the basis for the figures. It may be a document called the National Health Information Strategy, which was published and which set out an overall strategy for information. I am subject to correction but I believe the figure was based on looking at the share of total health spending across countries and determining the result if the same amount were spent here. A lot more work needs to be done before one can spend this amount.

The establishment of the Health Service Executive shows that here, as well as elsewhere, we did not have the information that showed what we were spending. I am not sure, even today, if we could say what the health service spent and is spending on ICT. One needs to know the base before one even starts. I have some questions on whether we are comparing like with like but they are at that very high level in terms of the indicative figure. I am subject to correction.

Mr. Purcell

I understand the figures came from the National Health Information Strategy, which refers to a fairly long timeframe. The financial information system is considerable. The hospital information system relates to patient care, as alluded to by Professor Drumm. Technology in all its aspects will feature very much in the future of a health service.

I believe a figure of X billion euro was quoted but it looked a bit high to me and therefore I decided to be conservative and just speak of billions. It was very hard to use the figure used in the health document.

Deputy Fleming

I want to ask Mr. Scanlan some questions. Paragraph 9.7 of the report of the Comptroller and Auditor General implies the Department of Health and Children knew there were many differences in the system. It states: "The Department saw the selected technology as being appropriate to bring the required discipline to this entire area." In this regard, the Department completely misunderstands the purpose of an ICT system. If there are 2,590 different payroll variations in the system, it is a management issue rather than a computerisation issue. Attempting to computerise what was an administrative mess does not bring discipline but just adds more money to the system. Somebody in the Department of Health and Children decided there was a mess and computerisation was the best way to sort it out but the Department did not tackle the problem. We can see no good reason the basic issue of variations is not being dealt with, although it might cost money to rectify some of the local anomalies. I am aware that there is a queue in County Laois when the payroll comes through due to items not being factored into the system. This is causing teething problems. The PPARS system would be better if one attempted to solve the underlying problems, rather than computerising.

Mr. Scanlan said it was not possible to provide for a single line of command under the PPARS because there were so many health boards and independent legal authorities. The Department was wrong to try to install a one size fits all computer system if it was not possible to provide for a single line of command. That was a policy failure. I understand the need for central information but the 11 health boards could have provided this by producing it in a relatively consistent format for transmission. Developing one system to fit 100,000 employees may have been a policy mistake from day one.

This feeds into our discussion about why there was a fixed instead of a variable contract price when the consultants were appointed. The Department did not know the job specification in sufficient detail to allow people to give a fixed price and feared that if the price was fixed, it would have to change if it was later demonstrated that the parameters set did not hold. This should have rung alarm bells for management which should not have proceeded with the ICT project. Will Mr. Scanlan respond to the view that most hold on this point?

Mr. Scanlan

I agree with much of what the Deputy says but while it is not possible to computerise a mess and hope to solve the problem in that way, this was not just an ICT project. It was also regarded as a major change management project. Both aims had to be achieved. One could ask why the system did not address the variants by buying them out. Neither we nor the health boards knew how many variants there were.

Deputy Fleming

Am I right in saying the Department was premature in proceeding with the project without basic information on what it was trying to do?

Mr. Scanlan

It was not necessarily premature to proceed with the project. It all depends on how it was viewed. That may simply be my assessment but I understood there was a clear view in the Department that it was not just a matter of computerising the payroll. It was also necessary to deal with change management issues. We had to go through the process outlined in the report, whereby the Health Service Employers Agency produced a rule book which was distributed throughout the country for agreement. That was one change. There was another issue about delegating authority and so on.

It is fair to ask whether and to what extent the change management agenda was driven and the ICT element took over. I understand from the report that there is a perception that as the project progressed, the technology, rather than change management, became the focus.

Deputy Fleming

I think I am running out of time but I would like to ask——

Deputy Deasy

Questioning started at 12.05 p.m. and there have been only two other speakers. The allocations are 20 minutes and 15 minutes.

Chairman

The Chair has discretion. When answers are long and detailed, I like to give members the opportunity to ask further questions. Deputy Fleming did not ask many. This is his final question.

Deputy Fleming

I understand the point made. The presentation started well over an hour ago with the making of an opening statement. We sat here for over an hour without any chance to comment. Deputy Deasy has raised a valid point. Perhaps this is not the best way for the committee to do its business.

Professor Drumm said the review of PPARS would be completed in early 2006. Will he tell us the expected date?

Professor Drumm

Mr. Hurley knows more about that issue than I do.

Mr. Hurley

We do not have a specific date because the key people working on the review have been finalising this report, assisting the Comptroller and Auditor General and preparing for today's meeting. We had hoped to have the review completed by now but the board of the HSE is pressing us because it wants to see a blueprint of how we will proceed.

Chairman

I will call Deputies Deasy, Curran and Burton in that order. Because of his intervention Deputy Deasy must confine himself to exactly ten minutes.

Deputy Deasy

I will have no difficulty whatsoever in doing so.

Mr. Scanlan has made a point that goes to the kernel of the issue, namely, that he did not have the information to know on what the money was being spent. What process did the Department use in deciding on the annual allocation?

Mr. Scanlan

This is not the first time I have said this to the committee. The first day I was here I said one of the items at the top of my agenda was to find out exactly what was being delivered for the money being put into the health service.

Deputy Deasy

That is not my question. Mr. Scanlan says he did not have the information but how does the Department decide on the annual allocation for a system such as this if it does not have the required information? Does it simply sign off on a figure every year?

Mr. Scanlan

We decide on the best information available, which is based on how money was spent last year, the rate of inflation under the different headings, population trends and service development priorities.

Deputy Deasy

That is a divergence. The Chairman said the Department might as well have been sending letters to the National Health Service in Britain as to the health boards because the information was not coming back. Mr. Scanlan is now saying he did have the information. How did the Department figure out allocations every year if it had no information?

Mr. Scanlan

I said one decided on the best information available. Does the Deputy doubt that the extent of the variations in pay and conditions that emerged in the course of the project surprised not only the Department but also the individual health boards? Having read the report, I have no doubt about this. Does the Deputy think I misunderstood the point?

Deputy Deasy

Did the project team provide a progress report for the Department? Two of the witnesses said they had been involved. Were they in communication with the health boards?

Mr. Scanlan

Mr. Frank Ahern was a member of the sponsorship group. The Department was represented on the various groups.

Mr. Ahern

Mr. Magan and I served on various groups. As the Comptroller and Auditor General indicated, the information coming to the Department at the time was that the project was going well. We have a copy of the feedback received from PPARS in Deloitte. Some of the difficulties highlighted in the Comptroller and Auditor General's report did not surface at the sponsorship group. Reports were received but they did not refer to the major difficulties being experienced in the project.

Deputy Deasy

Why is that?

Mr. Magan

I was a member of the national group. The reports from the various representatives of individual health board implementation teams and the national team were always dealing with particular issues in each area on day-to-day difficulties. There was never any indication that these difficulties would ever stop the project or require it to be substantially reviewed. These were issues that were being dealt with by local teams and this was the message given to the Department. We have to accept that message. We are not in a position to go down——

Deputy Deasy

One must have asked why that was the case.

Mr. Magan

We did ask that question.

Deputy Deasy

It was not asked.

Mr. Magan

The very issues——

Deputy Deasy

It must have been only thought about. How could that be the case?

Mr. Magan

What would be the case?

Deputy Deasy

Why was it so rosy? Why were there no indications at the time?

Mr. Magan

It was reported that there were difficulties but that they were manageable. I am not in a position to personally review the process. My job is to report on the progress made.

Deputy Deasy

Paragraph 4.6 refers to shortcomings of the budgetary oversight exercises conducted by the Department. Does Mr. Scanlan accept this criticism?

Mr. Scanlan

At the start of the year an allocation would have been made to the health boards under different headings. During the course of the year, however, we were approached for further funding for PPARS. As is normal, early in the year the answer was probably that it would cause us terrible difficulties. As it emerged that we were able to make further funding available for PPARS, the money was then provided for the health board system. In reality, it turned out the PPARS project was experiencing difficulties in hiring staff and it was not, therefore, able to spend the money. The normal process in the health board system was that such moneys could be carried forward, while they were still shown in the accounts. With the establishment of the Health Service Executive and the creation of a Vote, this all ceased and such funds have to be surrendered to the Exchequer. We have transferred to an annual cash allocation by the Oireachtas.

Deputy Deasy

Mr. Scanlan is not really answering the question. Paragraph 4.5 indicates an additional €7 million was made available in December 2004 for PPARS. Who made that decision? At what level in the Department was it signed off?

Mr. Scanlan

Probably at assistant secretary level — senior management level.

Deputy Deasy

If that was the case, was the Minister aware of the decision? At the time there were concerns raised in the Department because of the Gartner report in October 2004.

Mr. Scanlan

No. To the best of my knowledge, it did not go to ministerial level.

Deputy Deasy

Who signed off on the extra €7 million at the same time when concerns were raised by the Gartner report?

Mr. Scanlan

An assistant secretary in the Department signed off on the extra €7 million.

Deputy Deasy

Is it normal to make such a decision at that level?

Mr. Scanlan

Yes. It might have been discussed at the MAC. I have not asked the individual concerned.

Deputy Deasy

It is important with a figure of €7 million. Was the Minister aware of the decision?

Mr. Scanlan

To the best of my knowledge, it was not brought to the attention of a Minister.

Deputy Deasy

An extra €7 million.

Mr. Scanlan

When the Deputy uses the word "extra", it was €7 million of the total allocation. It was not that there was an extra €7 million going to the health system.

Deputy Deasy

It was an additional €7 million.

Mr. Scanlan

It was an additional €7 million for PPARS out of the total allocation to the health system.

Deputy Deasy

The decision was made by an assistant secretary and the Minister knew nothing about it, as far as Mr. Scanlan is aware.

Mr. Scanlan

As far as I am aware.

Deputy Deasy

Paragraph 3.2 states the contract for the supply of personnel was entered into with several companies, including Blackmore Group Assets Limited. In a recent statement the Tánaiste and Minister for Health and Children stated there were no general or overall contracts with Blackmore Group Assets Limited. Will Mr. Scanlan explain this divergence?

Mr. Scanlan

As the contracts for Blackmore Group Assets Limited were entered into by the health boards, it is really a matter for the Health Service Executive.

Mr. Magner

The termination of the BISL contract and the delay in selecting the replacement consultants led to the need to employ additional contractors who were employed following cold calls from agencies supplying specialist staff to projects such as this in Europe and around the world. When it was realised there was going to be a significant delay in engaging the second implementation partner, a decision was made to go for EU procurement in the contracting of these contractors. Blackmore was one of the groups which tendered and was recommended. Staff were then taken from that company to work on the project. The selection did not provide for a general contract with Blackmore. The selection was primarily based on the technical skills of the recommended staff, their knowledge of the sector and availability. No general contract was established with Blackmore Group Assets Limited.

Deputy Deasy

What Mr. Magner is saying is that the report is incorrect.

Mr. Magner

My understanding is that there was no general contract.

Mr. Purcell

I do not believe there is a conflict. Originally, as Mr. Magner said, contractors were hired on the basis of cold-calling, from among other methods. It was also a case of one individual consultant saying Mr. X or Ms Y should be contacted because he or she was good in this area. It was that informal at the beginning. This is a problem being examined by the Health Service Executive, as I stated in my report, as it would not represent proper public service procurement procedures. This is particularly so with the scale of moneys paid out to agencies representing these contractors. When it was decided to regularise the position, there was a tender competition. As Mr. Magner said, the selection was based more on the individual consultants being provided by the various agencies with the particular technical skills required. The contract for each individual was with the company. In the case of Blackmore Group Assets Limited, it was for each individual consultant. I hope I have not muddied the waters.

Deputy Deasy

There is an issue that it was represented as a UK-based company when it was not. Is Professor Drumm happy that misrepresentation did not take place with regard to the registration of Blackmore Group Assets Limited? Where did this information come from initially?

Professor Drumm

The fairest thing to say is we have concerns. We have been able to identify who worked for Blackmore Group Assets Limited. We are happy they worked on the contract and were paid appropriately. As the Comptroller and Auditor General said, the issue is how people were brought to work for us at that level and the registration of the company. It was believed to be a UK registered company. No one had noted it was a Guernsey-based company. No one like myself quite understood that Guernsey was different from the United Kingdom. We have given this information to our internal auditor who will take on the investigation of whether this was above aboard. The Revenue Commissioners are clearly also interested in the taxation issues involved, such as that we did not——

Deputy Deasy

Was there a tax clearance certificate?

Professor Drumm

No, and that is among the issues that we must address.

Chairman

I have a follow-up question for Mr. Magner. In paragraph 4.31, it states that up to 2004, work was supervised by one of the contractors, who reported in turn to the assistant project director. Which contractor was appointed as the supervisory contractor?

Mr. Magner

I will have to look at the page.

Chairman

It is on page 50. There was no advertising of requirements during that initial procurement round and the national team informed us that most contractors were sourced from agencies that would offer staff. The remainder were sourced from recommendations from existing consultants. Individuals proposed were vetted by the project team. It goes on to say that one of the contractors acted as the supervisory contractor. I am trying to identify that person.

Mr. Magner

One of the contractors engaged was a company called MSB, which was among those recommended following procurement. It was appointed to a lead role that included supervisory duties regarding some of the other contractors.

Deputy Curran

I will direct my first question to Mr. Scanlan. Having listened to the origins of this, I suppose that PPARS was an idea in 1995. By 1997 it had been decided, and procurement of the system commenced in January. In July 1998 the contract was entered into, with full information for the €9 million. As Mr. Scanlan said, €9 million today is a great deal, but in 1998 it was even more. While it was being spent on projects managed by the various health boards, funding was obviously directly from the Department. There was a national project board and a national project team. Were officials from the Department of Health and Children directly involved in either of those?

Mr. Scanlan

Yes.

Deputy Curran

What was the actual reporting mechanism between the board and the Department? It was obviously a significant sum.

Mr. Magan

The relationship was that the project director and assistant director reported to the national project board regarding the project itself, progress made and issues arising. They were laid out to those on the group. On some occasions, the group had to make certain decisions or consult the national directorates on them. It was a reporting mechanism on the progress of the project. It was reported back to the sponsorship group in the Department. If there were particular issues that——

Deputy Curran

Were there particular issues?

Mr. Magan

Yes, two issues quite early concerned the emergence of significant differences. We naturally put in train a process in each board with the help of the HSEA to examine and chart those differences. The other issue that arose was the rule book. It was very clear to people in the Department that what we considered the terms and conditions of employment were delivered in a very different manner across the boards and perhaps even within them. It was clear to me and people around the table that we needed a clear restatement of pay and conditions, and the HSEA did that. It turned out to be major work since, in the intervening period from 1999 and vis-à-vis the original rule book, there had been great changes in people’s grades and the people who were analogous to them because they were in specific areas.

Deputy Curran

Those issues were discovered during the first €9 million of expenditure. The Department recognised that since it was no longer a matter purely for the various health boards. The Department was fully aware of what was going on because of the reporting mechanism that was in place.

Mr. Magan

Yes.

Deputy Curran

Before embarking on rolling out the project on a larger scale, was an effort made to do what Mr. Magan says, namely, to reorganise the various practices, grades and so forth?

Mr. Magan

Not really.

Deputy Curran

The Department recognised that there was a problem.

Mr. Magan

Yes.

Deputy Curran

What I am saying is that it knew that PPARS could not address that problem. Before the Department invested in PPARS, it knew what the problem was. What did it do about it?

Mr. Magan

It was considered whether a job should be done to smooth those differences. However, it was also recognised that differences existed across so many grades that it would have been impossible to achieve agreement without very substantial cost. It was then decided to progress with implementation on the basis that we could work around those issues. It was considered by those who were technically minded and those who advised the group that we could work around those issues. Subsequently, that was found very difficult.

Deputy Curran

It was found not to be possible.

Mr. Magan

I would not say that. It was found very difficult.

Deputy Curran

I appreciate that it is working.

Mr. Magan

We have worked around those difficulties. It may very well be that there is a great effort to do so, but the current sites that are operational, such as those at St. James's and the North Western Health Board, work around those differences. I agree entirely with the Deputy that it is a very big job. However, it is a matter of paying people and working around problems in a specific manner. It is not what was originally envisaged.

Deputy Curran

It may not be the most direct way to introduce the system.

Mr. Ahern

No. Two of us were involved so my perception is very much driven by HR. I was the person trying to find out what it would cost nationally. Before I went to the Department of Finance to get the Minister to agree that 5% or 8% would go to whatever group, I found out very quickly that it was not a simple calculation. One of the things that I sought and got confirmation of at the sponsorship group was that there is now a link between hiring someone and paying that person. It seemed that the link in question was not always there. A local manager could hire someone and get that person on the payroll, but the HR department might not always have known that the person was there. PPARS gave me the chance to link that so that when I asked how many people someone had and on what precise terms and conditions, we could perform a calculation for that group and say that it would cost so many million. Regarding what we did on the group, I was getting confirmation. It is happening in four of the boards.

Deputy Curran

I appreciate that.

Mr. Ahern

However, they cannot hire and pay at different stages.

Deputy Curran

I want now to return to a specific point in both the summary and report to do with the competition for the procurement of technical configuration and support contractors, which was held in November 2002, one year after the PPARS national project team had begun to engage personnel on an ad hoc basis. Notwithstanding the competition’s result, there does not appear to have been any change in the companies engaged in the work. That is very unusual. I say this from the perspective of a member of the Public Accounts Committee. Ordinarily, if somebody qualifies on merit to do a job, price is normally a major consideration. I do not know the variation in price and I do not necessarily know the number of companies involved. Will someone comment on that particular aspect?

Mr. Magner

My understanding is that at the time of procurement, approximately 20 companies expressed an interest. A selection process, based on technical skills, knowledge of the sector and availability, was undertaken. From that, eight companies were selected. Those were eight companies that heretofore were working on the programme. It is also my understanding that, at a later stage, some offers of work were made available. Minor work was certainly made available to some of the other companies but, for whatever reason, they did not take it. The major work was offered to the eight companies selected from that procurement process in the first instance, based on the three criteria, namely, technical knowledge, availability and price.

Mr. Purcell

There is some confusion around this whole area. We found that a set of consultants, Integrity, basically qualified particular firms and the consultants it was offering for work in this area. Our view was that if it had qualified firms, then it came down to price. Some of these firms, which had quoted lower prices, did not seem to have been offered any of the work. There is little or no documentation on this. I cannot accept as evidence someone's recollection to the effect that the people they were offering were in SAP financials rather than SAP HR. I would have expected the consultants who were appointed to vet these companies in the first instance and to qualify them to have done that job. If their services were being offered at a particular price I am stating as a fact that some of those companies were not offered the work. It may well have been done on the basis of phone calls, as much of this was not documented. When the person responsible within the PPARS team rang those agencies, it may have been intimated that the consultants offered would not be available for work in a particular discipline at different times. However, there is little or no evidence. I would expect that the work that has been undertaken by the internal audit within the HSE in respect of this entire area will hopefully bring some of this to light. I did not want to delay the report, however, in attempting to nail this down absolutely.

Deputy Curran

I will not delay but I want to make the observation, from the viewpoint of the Committee of Public Accounts, which considers accountability, transparency in respect of procedures, etc., that this is a very poor reflection. The comments of the Comptroller and Auditor General are worrying. This is not something we would like to see. I take it that there are all types of explanations for this. I presume these will come to light, in due course, in the review. However, this is an area in which one would like to see transparency, particularly in terms of consultants being engaged for various projects and so forth. It must be seen to be equal and transparent and, from the Comptroller and Auditor's findings to date, that does not appear to be the case. I suppose we must leave it as an open chapter for the moment because I believe that we will get some response to it in due course.

Deputy Burton

I want to ask some general questions. In 1997, the Government made a decision to institute an oversight management process called the expenditure review initiative. In 2001, I believe, the Comptroller and Auditor General had a report looking at the expenditure review initiative process, which was spearheaded and led by the Department of Finance. The findings of the Comptroller and Auditor General were rather critical at the time to the effect that there was not a comprehensive strategy as regards the expenditure review initiative, which was meant to concentrate on the outputs from the spending of public money. This was in contrast to the traditional norm described earlier, where inputs were examined, that is, the extra percentage that might be given or extra numbers of people employed. My understanding is that this was to be concerned with the output from taxpayers' money, as opposed to reviewing matters in terms of inputs.

The Comptroller and Auditor General suggested that there was a need for strong support mechanisms, central guidance, etc., and that there should be a formal process for monitoring review impacts. He said that there should be a set of principles, enabling areas of expenditure to be prioritised, and that regular review reports should be published. I want to ask whether the then Minister, in 2001, would have received a copy of the Comptroller and Auditor General's report. The then Minister used to routinely describe spending money on the health service as equivalent to putting it into a black hole. He had no idea what happened to it.

If this process as regards expenditure review went through the Committee of Public Accounts, I presume the report was posted to the various Departments and also to Ministers. What response was there within the Department of Health and Children, at ministerial and senior official level, towards taking on board what the Comptroller and Auditor General had identified as regards agreed Government policy that the expenditure review initiative was the way to proceed?

Chairman

We might be straying into policy issues. If Mr. Scanlan stays away from the policy area, that will be fine.

Mr. Scanlan

I am not to mention black holes. In fairness to the Deputy, perhaps I have given the wrong impression. I did not mean to suggest that I was focusing solely on inputs. We should primarily be looking at outcomes. My concern about this, however, is that it takes time to measure outcomes. I have told the committee before that we should, therefore, start by looking at outputs and the quality aspect that accompanies this, as well as the effectiveness aspect, in order to reach outcomes. However, I must emphasise that we had a system under which we have been unable to track either inputs or outputs. It is a peculiarity of the health service that, in so many areas, service improvement means people delivered. It is a question of more doctors, nurses, therapists, etc. I say this to emphasise that the focus is not just on inputs and I agree with the Deputy on that.

On the expenditure review initiative question, I cannot say what happened exactly in 2001 or 2002 when the Comptroller and Auditor General's report emerged. I can say, however, that a series of reviews had been undertaken within the health sector, some of which I have listed here. The expenditure review initiative has been re-examined more recently in the Department of Finance. I was obliged to appear before that Department's central steering committee and outline what the health sector was doing and intended to do. I have had discussions with Professor Drumm about this matter since the two of us took up our respective appointments. I believe that in the past couple of years, the health sector was granted a moratorium as regards having to carry out formal expenditure reviews, because——

Deputy Burton

Was this a formal moratorium sanctioned by the Minister?

Mr. Scanlan

My recollection is that this was agreed with the Department of Finance. My colleagues can confirm that. I am not sure if it went to ministerial level, but my recollection is that it was certainly agreed between both Departments and the Ministers may well have been aware of it. The health sector is now required——

Deputy Burton

Will Mr. Scanlan explain the implications of this moratorium regarding the expenditure review initiative and the decision made by the Department of Finance to grant this moratorium? What was the implication of that?

Mr. Scanlan

There was a recognition that given the rate of change through which the health sector was going, with the abolition of the health boards, the introduction of the HSE and all that was going on, it was simply not realistic to look for the review at that stage. It was not practical. The implications of the decision are that there were areas of spending that would otherwise have been reviewed but have not been reviewed as a result.

We have agreed to set up a joint HSE and Department team that would be chaired by someone from the Department, but would involve the HSE and the health information and quality authority, which was set up on an interim basis. We would then have to produce a planned programme of reviews for the Department of Finance and undertake those reviews.

Deputy Burton

I refer Mr. Scanlan to a report that appeared in The Irish Times recently, in which a very critical letter by Mr. Scanlan was published regarding remarks which were attributed to Professor Drumm on staffing in the HSE. Mr. Scanlan appeared to make the point that the HSE still has no control over numbers and he seemed to suggest that there was an abandonment of Government policy on the cap on numbers. Does that correspondence indicate that it is his opinion that this expenditure review initiative still does not apply? Is he entirely focused on inputs as opposed to patient outcomes, which is what most people focus on?

Chairman

We have not opened the Vote and we only have the value for money report before us so Mr. Scanlan does not have to answer.

Mr. Scanlan

I would rather not go into what was in the letter. It was released under FOI and I obviously stand over it. Is the Deputy asking me if I am too focused on inputs? I hope not. It is part of my job to try to have Government policy implemented, which is what I was saying in the letter.

Deputy Burton

I am trying to follow through from a report published by the Comptroller and Auditor General in 2001 which suggested that there ought to be a strong focus on an expenditure review initiative, which was the child of the Department of Finance. Where is the evidence? Mr. Scanlan has just told us that a moratorium was given to the Department of Health and Children. I did not appreciate the idea of abandoning expenditure review for the Department of Health and Children. That seems extraordinary.

The ICT section in the Department of Finance is divided into five separate sections. It is headed by people at principal officer level, perhaps an assistant secretary as well.

Mr. Ring

CMOD is not just an ICT unit, it comprises a number of units. It comprises the ICT unit for the Department of Finance, the Civil Service training and development centre and an organisation development unit. We look after common systems such as payrolls and HR in the Civil Service. The ICT control function contains about three or four staff, while the research function, e-government function and telecommunications function contain four or five staff.

Deputy Burton

If CMOD has all these oversight functions for ICT in the Department of Finance as well as the wider Civil Service, how does the Department of Finance stand back from the expenditure review initiative? How does CMOD have oversight on such a complex series of projects?

Mr. Ring

CMOD was only assigned responsibility for this from the middle of this year.

Deputy Burton

However, its role always was to have general oversight. The Department of Finance has an oversight role on the spending of each Department. From what I have read about CMOD, it has an oversight role on ICT projects and developments throughout the public service.

Mr. Ring

We do not have a role for the general public service. For example, we do not have a role in local authorities or in education. As the health service entered a Vote accounting arrangement this year, we obtained a role in that service. Prior to that, CMOD did not have a role. We have a role in the general Civil Service in developing guidelines and so on, which I outlined earlier. At the moment, we have a role in reviewing guidelines, developing training and implementing the peer review process. Prior to this year, we did not have a role for the health sector.

Mr. Scanlan

In case I misled the Deputy, I said that we got a moratorium, but that expenditure reviews had been done before. The moratorium was just a one or two year gap. Reviews had been done on large areas of expenditure on health. One that I can remember was a major review of the GMS. Having introduced this major structural change programme, there was a moratorium, but we are now continuing with the reviews.

Deputy Burton

Has there been an investigation of any right of recourse on a legal or insurance basis by the Department in respect of the performance of consultants and contractors?

Mr. Scanlan

No, we did not have the contract, but I am not aware of investigating anything like that for this project.

Mr. Magner

We have no claim on any of the contracts that have been in place for this process.

Deputy Hayes

A key part of the work of this committee is to identify things that have gone wrong and to learn lessons for the future. The new system to which the witnesses refer has got much publicity lately and that is the hospital information system. What is the cost of that? I read a report a few weeks ago where a contract for that system was signed on a Saturday. Why was it signed on a Saturday?

Mr. Hurley

That specific contract was with a firm called iSOFT. The firm provided us with a software development package to enable us to put in a common system across all our hospitals and into the community care settings. The contract was for €56 million. It was a long procurement process. It started in 2000, and in 2003 iSOFT was declared the preferred supplier. The interim Health Service Executive decided at the end of last year that it had no role in this regard. When it was formally established in January of this year, it approved the project. The contract signed is for €56 million over a ten-year period.

There was a reason it was signed on a Saturday. The negotiations took place over a number of years and a delay occurred for a period. When the board of the Health Service Executive formally approved the project in the middle of February 2005, it was necessary to renegotiate with iSOFT. We succeeded in getting the company to hold the prices that had been agreed two and half years previously when substantial discounts had been negotiated. As a quid pro quo, the company wanted the contract signed before the end of April this year and we felt this was a reasonable timeframe from our perspective.

Subsequently, the Departments of Finance and Health and Children felt that the Attorney General's office should consider the matter of procurement because it had gone on for so long, but the Attorney General's office did not come back with final authorisation to the Department of Finance until late that week. We were then able to sign on the Saturday. If we had not done so — I informed the HSE board of this — iSOFT would have walked away and we would have had to commence a new procurement process, which would have taken a minimum of 18 months. If that happened, I have no doubt that the end-game cost would have been a multiple of the good deal we got at the earlier stage. It was imperative that we signed within the timeframe. If that was on a Saturday or Sunday, so be it. We had no problem with that.

Deputy Hayes

I accept that. We have established that a major problem with PPARS was the lack of accountability. The witnesses have stated that a second Secretary General and chief executive officers were involved. Who will be responsible for the system?

Professor Drumm

If we are to go forward with PPARS, it will be my responsibility as chief executive officer of the HSE. The first issue for the HSE is to carry out a review, which we are undertaking, to find how we can take the process forward. Ultimately, it is the responsibility of the HSE to ensure that the system is delivered on budget and that it provides the required outputs. We are considering whether this can be achieved.

Deputy Hayes

What input will the Departments of Health and Children and Finance have in this process?

Professor Drumm

A peer group has been established across Government, including the Departments of Finance and Health and Children, for all information technology projects, which is a result of the lessons we have learned. We will not be able to proceed without this transdepartmental group and CMOD agreeing that our decision is a correct one from an IT perspective.

Mr. Scanlan

More generally, the Department of Finance circular 16/97 applies. A structured arrangement now exists whereby the HSE would have to submit proposals to the Department of Health and Children and, having evaluated them, would have to send them to the Department of Finance to comply with the terms of that circular. This is to ensure there is an overall information and technical strategy and that what is done is in compliance with that strategy. The HSE would have to be able to reassure the Department of Finance that certain actions were happening.

Deputy Hayes

Is the process still going from the HSE to the Department of Health and Children? Who can blow the whistle if at some stage in the development it is found that something is going wrong? Who is the single person responsible? If something goes wrong in any private company, a person can be pinpointed. An individual is responsible to his or her bank manager. Who can blow the whistle if a problem arises in this regard?

Professor Drumm

When we have a plan and have obtained the funding and sanction for proceeding with the process, the responsibility will rest with me. One of the main reasons the HSE was established was to take that level of responsibility at a central level within the health services. We must accept that responsibility.

Deputy Hayes

Is the Department of Finance happy that problems will not recur if that structure is put in place?

Mr. Ring

A number of measures have been put in place. For example, as Mr. Scanlan stated, the circular 16/97 process, which is a delegated sanction regime, is in place. Part of the process is that for every new project we must have a succinct impact statement and details on the benefits. The project must be sustainable and comply with standards and cannot simply go off on a tangent. In line with that, every year as the project is being developed we would get details on proposed spending for the following year and have a partnership discussion on various aspects that might not be clear to us. We would cover items such as hardware, software, telecoms and training and everything around the project, not just the IT development.

The second measure will be to implement the peer process whereby each project implemented in that process will be tested to ascertain whether the project has a sound business case and sound objectives, the correct governance is in place and the correct business system option has been taken. In other words, we are not putting in a Rolls Royce but what is suitable for the job. We will question whether the project should be undertaken on a phased basis and is using staff correctly and so on. That is the point of the peer process. It will be carried out independently of the project by staff — we will have a set of peer reviewers — who will get documentation pro forma. We will implement these measures for all major projects in the coming years.

I am satisfied with the measures in place. The process will allow us to bring out the complexity of the project at an early stage and know at an early stage what issues arise. The experience we gain by using other staff will bring business matters and outside influences to the surface and make greater use of the expertise in the Civil Service. We will review the process as it develops. We will not simply implement it and sit back but will keep a careful eye on what is happening in other countries. I am confident that with those measures in place and greater partnership, we will have a satisfactory process in place.

Deputy Burton

On a point of clarification——

Chairman

I call Deputy Ardagh.

Deputy Ardagh

This is a difficult issue. I recognise that a number of expensive computer systems in the State work well, such as the systems in the Revenue Commissioners and the Department of Social and Family Affairs, and the OASIS system in Comhairle. The PPARS system has had a serious blip. When I heard today of the chickens on the road in Cavan, I thought of a big blunderbuss and of PPARS. I mention the chickens but the real analogy is that we should have all our ducks lined up in a row and in the right line, as Professor Drumm stated in his presentation. The basics should be in place before a system of computerisation by consultants, who are there to make money and create jobs for themselves, is put in place to lay something onto a skewed base.

There was no uniformity in this case. Different systems were in place in every health board. No effort was made to get basic governance and basic management systems in place which do not need computers but good managers. This appears to be a Harvard business case that one could take, analyse in great depth and give out to all Government bodies to teach them how not to do it.

Professor Drumm has been immersed in this issue to a great extent — more than he would like to be as he wants to get on with delivering a health service. What has he learned and how will he change matters to ensure that the PPARS system is put in place? How will he change the basic organisations, structures, governance and the type of management that is in place to allow the PPARS system, or a similar type of computerised management system, to operate effectively within the overall health system?

Professor Drumm

We must accept fully that the business case cannot now be defended as having been robust. The health service has learned what the obstacles along the way were in terms of the quantity of matters which had to be configured. The Deputy is correct in that we should have been aware of this at a much earlier stage. As I have read the term "blueprinting", I will use it. The blueprinting, in terms of the configuration of the service should have been carried out at a much more detailed level. The Deputy is correct to state that this is a business management issue, rather than an information technology issue. Undoubtedly, with hindsight, it is difficult for us to defend how it was done and I will not try to do so. This returns to the point that we operated with a committee of chief executive officers from across the system, on a system implementation that depended on consensus. Moreover, the project team that tried to implement the project did not have direct line managerial control. It is extraordinarily difficult, as the project team found, when implementing something of this complexity while depending on consensus and the agreement of people who are not in one's direct line of management, to achieve a rational approach or success on the ground.

What is to be learned? First, the creation of the HSE is justified to some degree by this kind of issue alone. We are now in a position where we must be accountable as a single entity. We cannot hide under the umbrella of a committee of people, with equal status, sharing accountability. From the perspective of the Departments of Finance and Health and Children, we are clearly in the firing line and it is easier for them to monitor us.

Second, given that accountability, no process like this can be undertaken again without a robust business case. I guarantee the committee that we are now trying to determine whether there is a business case or justification for expanding this further and, if so, to establish how it will be done within budget. Hence, the basic lesson is that, as an organisation, there must be lines of responsibility and management control that do not get lost as we develop the system. I hope we can guarantee that this will be the case in future.

Deputy Ardagh

I apologise for my late arrival. The Chair should let me know if I ask any question that has already been covered and I will not proceed with it. In respect of the report, the Comptroller and Auditor General states, on page 9, "the project experienced considerable time slippage and cost escalation". He goes on to state, "particular features of the project had a significant bearing on the outcome". The latter included "a failure to develop a clear vision of what strategic human resource management actually meant for the health service as a whole and for its individual operational units" and "an urgent need in the Department of Health and Children for accurate information on health employees pay costings and a consequent desire to see the system implemented as speedily as possible".

There have been a series of Secretaries General in the Department of Health and Children, all of whom have been highly trained, with much experience behind them, and well paid. How could the Secretaries General, who had ultimate responsibility on a line managerial basis, fail to develop a clear vision of what strategic human resource management meant for the health service? Why did it push this project along at such a speed to achieve the results that it definitely and reasonably wanted to achieve? Why was greater analysis not undertaken? Why was it not thought out better at senior management level at the Department of Health and Children?

Mr. Scanlan

In terms of the second point regarding an urgent need, I discussed our reasons for pressing for this earlier. However, it is still a fair question. I understand that the Deputy is concerned about the speed of the project. The extant need drove the Department to support this project from an early stage. As the report has noted, for whatever reason, the timescale slipped continually. I acknowledge that the Department exerted pressure to ascertain when it would see some results from the project. When I read the report, I was struck by the fact that the need for speed and the pressure which was brought to bear appears to have been received within the implementation team to mean that the system should be moved out of pilot sites before being ready to so do and that they should do things in a non-ideal manner. The Department was never aware of this.

At one level, I can understand that. While the Department had a perception that it was exerting pressure, perhaps the perception, or received wisdom at the other end was that consequently, they should do X, Y or Z. That was never understood in the Department. It never received feedback to the effect that its pressure was taken to mean that a certain course of action should be taken. While I do not know whether this was caused by a gap in communications, a misunderstanding or whatever, it was certainly never our intention to, for example push people to move out of the pilot sites. One of the key decision points mentioned in the Comptroller and Auditor General's report is that we left pilot sites and moved on to wider implementation. The Department never understood that its anxiety to get the project implemented quickly was causing this to happen.

As for Deputy Ardagh's first question, the development of the strategic human resources vision was something which the chief executive officers tried to develop. This is not an attempt to engage in hand-washing. As I understand it, the Department was supportive of their efforts. Mr. Ahern can provide the committee with some detail concerning the people management issues. At issue was the development of a vision for eight organisations, whereas the HSE is now a single organisation. While those organisations were obliged to develop the vision, I understand that we worked with them in that respect.

Mr. Ahern

During the period from 2000 to 2001, approaching the launch of the health strategy, Quality and Fairness, a segment in the strategy was concerned with strategic human resources. Consequently, the Department, together with the various stakeholders, including the trade unions, drew up a document entitled An Action Plan for People Management. As an example, one can take someone in charge of a hospital ward. Usually, such people are selected for their clinical skills and excellence. When such individuals are appointed to be clinical nurse managers, they usually lack skills on the human resources interpersonal side of management. It addressed that kind of issue.

Deputy Ardagh

I cannot go into such detail because, unfortunately, we do not have time. I know it is very important.

However, I wish to turn to another point. Deloitte Consulting's recent press release stated "in the three years to October 2005, Deloitte deployed an appropriate and agreed level of resource in response to the client's requirements and also advised the client on optimising the use of its internal resources". Does Mr. Scanlan agree with that?

Mr. Scanlan

Mr. Magner is the best person to answer that.

Deputy Ardagh

It is a general point rather than a specific point. Perhaps Professor Drumm would care to comment?

Professor Drumm

This point was discussed earlier. There is a difference of opinion between ourselves and Deloitte Consulting as to whether it was an implementation partner, rather than simply an adviser on the project. We felt that it was an implementation partner with the health executives on the process. Deloitte Consulting has made it clear to the Comptroller and Auditor General that it acted in an advisory capacity on the project.

Deputy Ardagh

Hence, there is a discrepancy or slight disagreement as to what was, or should have been, Deloitte Consulting's role. Is that correct?

Professor Drumm

Yes.

Deputy Ardagh

I may be going over old ground here, but at the bottom of page 10, it states that Deloitte Consulting received €400,000 for a scoping exercise. Following this exercise, Deloitte Consulting was engaged on a time and materials basis.

Chairman

Perhaps Mr. Purcell might repeat his comments on the matter.

Deputy Ardagh

There is no need to repeat them. I will not press the matter if Mr. Purcell has already dealt with it. According to reviews of the project on page 13:

The project was reviewed by external consultants on five occasions. None of the reviews provided a meaningful challenge to the case for continuing with the project. In fact, the reviews tended to justify the continuation of the project although a wider review scope might have focused attention on the escalating cost, reduced scope and the risks to timeliness and coherence.

However, this did not happen. Did these consultants participate simply to feather their own nest and create work for themselves? Does Mr. Scanlan believe they had the good of the Department of Health and Children, the project and the client at heart?

Mr. Scanlan

This goes to the heart of our earlier discussion about the role of the Department of Health and Children and the role of the delivery system. We stated earlier that the Department provides the funding and I agreed with the Chairman that the Department cannot simply send out money and forget about it. It must find some way of checking what is happening. Everyone agrees that it cannot implement it. The question arises as to whether the Department retains the capacity in terms of skills and numbers of staff to carry out spot checks or audits and whether it should engage outsiders to carry out these checks.

The Department raised the issue. It did not engage the consultants, who were engaged by the PPARS project. With the benefit of hindsight, one would ask who pays the piper? It is not clear whether there would have been clearer terms of reference, a clearer focus or the achievement of the result mentioned by the Comptroller and Auditor General if the Department had engaged the consultants.

Deputy Ardagh has raised the fundamental question of whether one can ever trust consultants. I like to think that, managed correctly, one would be able to trust them but it has proved difficult to manage them at times. There is no easy answer to the question of how a Department, which should ask the kind of questions we spoke about earlier, asks these questions in a robust fashion and gets answers it can stand over. The Department believed it was asking the right questions and got the answer that consultants, such as Gartner, believed that the costs were in line. According to the retrospective examination by the Comptroller and Auditor General, the Department possibly did not ask the right questions.

Deputy Ardagh

Quality assurance and the output management of procurement are addressed on page 12 of the report. The third paragraph states: "In the case of the subsequent contractual arrangements the health service was advised that an external party should quality assure the output from an initial project preparation review by Deloitte". The question arises as to which party advised the health service that an external party should quality assure the output from the initial project preparation review by Deloitte Consulting. Did Deloitte Consulting advise the Department that it should quality assure the output?

Professor Drumm

Integrity Consulting examined this entire process. The issue was whether Deloitte Consulting could be regarded as competitors for implementation if it was also scoping the issue. The Department was advised that this would be acceptable provided an independent review of Deloitte Consulting's move to the second stage was carried out. The answer to Deputy Ardagh's question is that it was not carried out.

Deputy Ardagh

Why was it not carried out?

Professor Drumm

I do not know. It was a significant omission.

Deputy Ardagh

On page 50 of the report in chapter 4, it states that contracts for the supply of personnel were entered into with a range of principal companies, among them Divine Solutions. Was there no divine inspiration to be found?

Mr. Purcell

There are many points I could address but they will undoubtedly be revisited in the future. I will clarify a number of points. It has been mistakenly stated that the contract with Bull Information Systems was worth €9 million. The company dealt with implementation support and some of the cost of the licences. It was envisaged that the figure would be approximately €4 million but, ultimately, Bull Information Systems was paid €3.3 million.

Deloitte Consulting informed us that the personnel modules produced by Bull Information Systems needed to be built up again from scratch. Staffing has been extensively discussed here today. The committee is aware from my reports on unauthorised staff numbers that staffing has been a perennial problem. The Department could never get to grips with staffing for the reasons outlined by the Accounting Officer. I raised this issue in reports on individual health boards over many years and as a general item in the special report on the health sector in August 2004.

Professor Drumm has stated that the scale of computerisation which needs to be undertaken in the health sector necessitates some kind of central expertise. Deputy Ardagh commented that Revenue appears to operate its system successfully. Revenue has a considerable degree of input from consultants but it also has a core group of experienced people with IT expertise. This group is able to control the implementation of large systems. Professor Drumm pointed out that the HSE is attempting to do the same thing, which will be justified in the context of the amount of expenditure it is putting in.

I appreciate the comments by Mr. Ring about developments in the public sector last year. Mr. Ring and I have some experience of CDPS, the overarching body which was of assistance in the early days of computerisation. One could make an analogy with public-private partnerships, where there was considerable dependency on consultants. I am not knocking consultants as we used a consultant to help us with certain aspects of this examination. However, the National Development Finance Agency has been set up to ensure the existence of a core of expertise in very complex issues. One needs specialised expertise if one is dealing with a specialised area to ensure one does not rely excessively on consultants.

As the Accounting Officer noted, the two pilot schemes in the north west and St. James's Hospital in Dublin were possibly affected by a lack of communication and frustration that matters were not being implemented within a two-year timeframe and the lack of apparent progress afterwards. If these pilot schemes had been seen through to the end, there might have been a better implementation strategy. It is easy to be wise in hindsight and there is no guarantee that it would have succeeded. However, there would have been a better chance of success if this route had been taken.

Deputy Curran referred to the employment of technical consultants before the involvement of Deloitte Consulting. Our problem with this area was that we received different responses at different times about why these consultants were dealt with in a particular way and how the same companies seemed to be supplying the consultants before and after the tender.

At one stage it was said that the PPARS team was happy with the existing contract staff those who were in place on an informal basis. The publication in the Official Journal of the European Union and the holding of a tender competition could have been seen as a veneer but it may or may not have been such. We were later told that some of the others who had tendered were unavailable or were not engaged in the specialty wanted and so on. The issue must be addressed and is being dealt with.

Deputy Burton mentioned the expenditure review initiative and what happened as a result. We spoke about the need to tighten up. However, at the time the report was produced we would have recognised that the whole thrust of the initiative was to try to introduce an evaluation capacity, experience and expertise to the public service that had not been available previously. We examined a number of particular reviews and, obviously, there were variations in quality between Departments.

We made certain recommendations on how to strengthen the steering committee. The Accounting Officer said he appeared before the central steering committee. It seemed to us that the committee was merely a rubber stamp, rather than presenting a real challenge to the quality of the reviews. The expenditure review initiative was very ambitious at the beginning. Initially, it was supposed to cover expenditure over a three year period, which was challenging and daunting, to use the word I used earlier.

Regarding the summary from which Deputy Ardagh raised the issue of the failure to develop a clear vision, I was not focusing on the Department in that regard. The issue arose among the body of the health service which was represented by the CEOs' group.

There are several other issues but I understand from the Chairman that the committee intends to return to this matter. We may have a second reflective go at it.

Chairman

I thank Mr. Purcell. The report is not to be disposed of today but will be revisited on 19 January 2006, together with Vote 33 — Department of Health and Children. Is that agreed? Agreed.

I thank Mr. Scanlan and his officials, Professor Drumm and his officials, Mr. Ring and Mr. Mooney from the Department of Finance for appearing before the committee today. I wish the witnesses, committee members, Mr. Purcell and his staff, the secretariat and the members of the media who cover our proceedings on a weekly basis a happy Christmas.

The witnesses withdrew.

The committee adjourned at 2.25 p.m. until 11.30 a.m. on Thursday, 19 January 2006.