COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 3 Jul 2008

Special Report No. 59 of the Comptroller and Auditor General: Management and Information Systems in the Institute of Technology Sector.

Dr. Brendan J. Murphy (Chairman, An Chéim Computer Services) called and examined.

Chairman

The committee is examining special report No. 59, management and information systems in the institute of technology sector.

I wish to make witnesses aware that they do not enjoy absolute privilege and I draw their attention to the fact that, as and from 2 August 1998, section 10 of the Committees 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; to produce or send documents to the committee; to appear before the committee either in person or through a representative; to make a written and oral submission; to request the committee to direct the attendance of witnesses and the production of documents; and the right to cross-examine witnesses. For the most part, these rights may only be exercised with the consent of the committee. Persons invited before the committee are made aware of these rights and any persons identified in the course of proceedings who are not present may have to be made aware of these rights and provided with a transcript of the relevant part of the committee's proceedings if the committee considers it appropriate in the interests of justice.

Notwithstanding this provision in the legislation, I remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official, by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions within Standing Order 158 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or of a Minister, or the merits of the objectives of such policies.

I welcome Dr. Brendan J. Murphy, chairman of An Chéim. Will he introduce his delegation?

Dr. Brendan J. Murphy

I am chairman and director of An Chéim Computer Services Limited and I am accompanied by Mr. Derek Feeney, chief executive officer of An Chéim.

Chairman

Will the Department of Education and Science officials identify themselves?

Ms Anne Forde

I am principal officer in the higher education sector.

Mr. Brian Duggan

I am from the finance unit in the Department.

Ms Bláithín Dowling

I am also from the finance unit in the Department.

Chairman

Will Mr. Buckley introduce the special report?

Mr. John Buckley

Over the period 1999 to 2005, a joint project to implement information systems in the institute of technology was carried out. The project was designed to equip the institutes with technology to support student administration, financial management, payroll, personnel and library administration. The initial emphasis was on purchasing a family of products from the same supplier, which would integrate the management of the institutes. As a result, a contract was concluded by DIT in 1998 on behalf of itself and the institutes to acquire modules covering all requirements, except those for payroll and library administration. The value of the contact was €9.3 million, excluding VAT and expenses. A separate library administration system was contracted for in 1999 and a payroll system in 2003.

It was concluded in 2001 that the finance module purchased was not fit for purpose and, by 2002, it was realised that the human resource element, which was integrated with this module, would only meet 18% of the institutes' needs once the finance module was removed. However, the student administration module was still considered to be satisfactory and the first pilot installation took place at Tralee IT in September 2001. At that point, the institutes were locked into a contract and much of the consideration had been discharged due to the structure of the contract payments, which was instalment-based. Apart from the maintenance fee element, they were payable over three to four years commencing in 1999.

Rather than engage in litigation, a settlement was concluded with the supplier under which replacement software would be substituted in the areas of finance and human resource management at a cost of €4.2 million. However, some credits would be allowed against the original contract sum and these amounted to €1.39 million. Approximately 91% of these were recovered. It is difficult to quantify the amount of non-effective expenditure since no separate costs were negotiated for each of the project elements. However, the credits negotiated only represented 15% of the original outlay.

I refer to the management of the project. In its initial stages, it was not handled very well. A multi-agency project would have required much more defined roles and responsibilities. While the State was contractually committed from 1998, the institutes were slow to buy in and only started to do so after 2001. The trigger for that was the appointment of a consortium board with an independent chairman to manage the project. A risk review was also carried out in 2001, which resulted in an improved structure and project plan. At this point, a cost estimate of €44.5 million was put on the centrally delivered work and a further €8.2 million was to be incurred locally and on central services, bringing the overall budget to approximately €53 million. Contractual arrangements for the replacement of most of the software were agreed by 2003 and implementation followed. The ultimate cost of the project was €58.4 million.

Many projects do not succeed, due to a failure to readjust when the original concept does not meet the business needs in practice. While we recognise that non-effective expenditure was incurred on the original procurement, we concluded that the management was correct to cut its losses and restructure the project with an eye to achieving the business objectives at the institutes. As a result of the mid-course readjustment, the institutes, with the exception of DIT, now function with common systems configured to a common design. The systems are centrally hosted and are upgraded from time to time, as developments in software occur. DIT, which had proceeded with a separate implementation in advance of the institutes, does not share this common standard design and is not part of the central hosting arrangements.

The principal challenges for the future are to link effectively the various packages so as to share efficiently information captured on any of them; to ensure that relevant reports of use to managers are designed and are capable of being extracted from systems, to adjust to the changing business needs of the institutes as they move towards semesterisation and modularisation and to connect users to the system using web-enabled technology. The chairman of An Chéim will be in a position to add further detail on this.

Dr. Brendan J. Murphy

An Chéim Computer Services is a not-for-profit company that came into being in late 2005. It is the successor to the project steering group established in 1996 and the consortium board established in 2000. It is a wholly owned company of DIT, as the RTC Acts of 1992 and 1994 did not allow for institutes of technology to be minority shareholders in companies. The current An Chéim board is made up as follows: two directors nominated by DIT, three directors nominated by the other 13 institutes of technology - currently from Galway-Mayo IT, IT Tralee and Letterkenny Institute of Technology - one director nominated by the Department of Education and Science and one director nominated by the Higher Education Authority, the HEA. The company is funded by the Department of Education and Science, via the HEA for recurrent funding, and the funds are challenged through DIT. The company has a complement of 16 staff.

Today An Chéim, the company, centrally procures, manages and develops, on behalf of the 14 institutes of technology and the Tipperary Institute, the following: student registration, admissions and examination system - the product is usually referred to as the "Banner" student system - and caters for some 71,000 students currently in the institutes; the staff payroll and HR records - described as Core, for some 7,500 staff; the finance system, Agresso, which applies to all 15 institutes; and the library system, Millennium, for all 15 institutes. These four vital systems form the centrally hosted management information systems for all 15 autonomous institutions and are provided on a 24-hour, 7-day basis with stringent performance levels. There is today a high level of satisfaction in all 15 institutions with what An Chéim provides on their behalf and for their benefit.

Turning to the report of the Comptroller and Auditor General, from my reading of the report and from discussions with the members of the An Chéim board who were involved in the project from an early stage, I would summarise the project as follows: from 1993 to 1998, feasibility and scoping of project, with the PwC report of 1995 indicating that an integrated student, finance and personnel system be procured and installed in each institution as well as a library system; from 1998 to 1999, procurement, tender evaluation and contracts signed; in 2000, the consortium board was established to replace project steering group, an independent chair was appointed and additional project management capacity deployed; from 2001 to 2002, difficulties with the finance elements of the Banner integrated system identified, superior alternatives sourced and contracts renegotiated - staffing problems were resolved; from 2002 to 2005, the project was fully implemented with 96%, 57 of the implementations, completed on time by the end of 2004 and the two remaining completed in 2005.

On the costs of the project, even if we allow for the costs incurred locally by institutions, which were not within the control of An Chéim, the project went less than 11% over budget and essentially came in on time. This complex project was successfully implemented by 15 autonomous higher education institutions. It is now centrally hosted, managed and developed by An Chéim on their behalf and is in everyday use for their benefit.

The An Chéim company is today governed and managed in full compliance with the code of governance of DIT. As well as its board of directors, it has a finance and audit committee and An Chéim comes within the ambit of DIT's internal audit. The board of directors meets regularly, some six to eight times per year. It deals with strategy, policy, customer satisfaction, service levels and performance, procurement and budget-finance. It reviews all major projects in a systematic fashion and decides on new projects. The An Chéim company itself uses an industry standard project evaluation and tracking system. Its statutory accounts are up to date and it is tax compliant.

I would like to inform the committee that the An Chéim board has addressed all the recommendations made on page 55 of the project achievements section of the Comptroller and Auditor General's report, and had begun to address these as early as 2006.

Chairman

May we publish that statement?

Dr. Brendan J. Murphy

Yes.

Deputy Jim O’Keeffe

I thank Dr. Murphy for his comments. He is chairman of an organisation that has been in existence for the past couple of years. My questions do not arise from the operations of his computer service but go back to the beginning of the contract where serious issues arise, to the original tendering situation with the US company, SCT. Can Dr. Murphy tell us more about that tendering process? What other companies were involved in the tender situation and which company put in the lowest tender? Why was the particular company, which apparently had little expertise in the European market, selected?

Dr. Brendan J. Murphy

I may ask the CEO to comment on this also. The purpose of the tender was to find an integrated system, a system that would integrate the student, finance and HR systems. The particular company selected, chosen through competitive tender, would have been one of the world leaders in such integrated software. The Deputy is correct in saying that its experience was mainly in America and, probably, Australia, but it would have had a number of implementations in the United Kingdom. Perhaps the CEO might have something further to add on this.

Mr. Derek Feeney

On the tendering process, it was intended to buy an integrated suite and this was based on the advice from the PWC report of 1995 and so we went to market. I do not have the full tendering details of the highest and lowest with me today, but I can supply that information to the committee.

We followed a European procurement process and indeed a worldwide process brought in through arrangements with the GATT or the trade organisations. SCT won that tendering process. We bought packaged application software which it is accepted will always have some gaps. One accepts those and moves forward, based on the best functional fit. It had a good functional fit to the requirements. We were aware of some issues to do with the finance piece. The company was the market leader in the United States and in Canada and has a presence in Hong Kong, Australia and the United Kingdom. For example, UCD purchased and implemented the system here in Ireland in 1996. This company was therefore in the global higher education space.

Deputy Jim O’Keeffe

Were there somewhat conflicting reports at the time about their operations in the University of Greenwich? With regard to the integration site, it did not seem to work at all, in that as mentioned by the Comptroller and Auditor General, one financial aspect did not work and on the HR side, it was only 18% successful or operational. There was also a suggestion they were going to strengthen their European arm by establishing a facility in Europe but this did not happen although this suggestion was the reason they were considered at the time.

Mr. Derek Feeney

Yes. Issues about the finance system and the functionality emerged and I will return to that point in a few minutes. They established a European base in the United Kingdom. The company's intention at the time was to enter the European theatre with its finance system. It emerged there were difficulties associated with the integration and the finance system in 2000 and 2001 when we went to move forward with the implementation of the finance system. Our initial focus had been on the student element and when we turned to the finance function, difficulties emerged. The company discovered that Europe had different financial and regulatory climates in each country as opposed to the harmonised set-up in the United States. This meant it was not viable for the company to make the adjustments to their finance system and to adapt it to a European-wide basis. The company then decided to exit the European theatre of operations with regard to its finance system. This was its decision. We were presented with this situation and we had to change course.

The withdrawal of the finance system had an adverse, knock-on impact on the functional fit of the human resource system, reducing it to approximately 18%. Once the finance element was taken out of the integrated suite, it brought that down by default. We were presented with this situation. At the time, the reaction could have been to sue them or to pursue it through the courts and this was considered. We took legal advice and the considered legal view was that going to court would have meant going to the High Court, which would be very costly and would consume a lot of management time. It was considered the result would be uncertain, as in any litigation, although we were considered to have a strong case. Critically, it would have delayed the project and pushed out the schedule for delivering a suitable finance software system to the institutes. On balance, it was decided to seek a negotiated settlement with the supplier for substitution software--

Deputy Jim O’Keeffe

For which An Chéim paid.

Mr. Derek Feeney

Yes, we paid for it. The replacement system was the Agresso financial management system which is widely used in the public service, in local government, in the Courts Service and in other public--

Deputy Jim O’Keeffe

But An Chéim was actually paying them more money.

Mr. Derek Feeney

We paid directly for the Agresso system and the cost of the licence fee was almost €1 million. The negotiated settlement with SCT was that we were to achieve a budget-neutral position for swapping or substituting the software. There were definite cash-flow implications. We had to pay out almost €1 million for the Agresso software licence fee as a replacement for Banner. On the other hand, we negotiated credits to the value of approximately €1.3 million. This was the trade-off.

Deputy Jim O’Keeffe

This leads to the question, particularly as An Chéim did not go to court, that there were clear breaches of what had been promised by the supplier.

Mr. Derek Feeney

That is correct.

Deputy Jim O’ Keeffe

Was the type of contract entered into a general contract? Are contracts for this kind of material sufficiently watertight to ensure that when one is dealing with a supplier who is not delivering the goods as ordered, that one is safe in going to court?

Mr. Derek Feeney

The contract was a good contract.

Deputy Jim O’Keeffe

Was it a standard public service-type contract?

Mr. Derek Feeney

It was a contract negotiated with our legal advisers for the purchase of this software for some services and for ongoing maintenance and support. It was covered by the jurisdiction of the Irish courts. The view was that we had a good case, that there had been a breach of contract and going to court was an option open to us. On a business level, in terms of the financial implications, the risk and the timing, the considered view taken by the business was that we would not pursue the matter through the courts. The contract was deemed to be sufficient and we had a good case. The contract was sufficiently robust to allow us negotiate the settlement agreement and the release, change and substitution in the software. It provided a level of a platform to allow us do our business and move forward.

Deputy Jim O’Keeffe

It ultimately provided some modest comfort, but no more, for what seemed to have been a major cost to the taxpayer. The original contract began with the core contract for the three elements of €9.3 million and we end up with €58 million. The report in the Irish Independent of 9 December 2007 stated that the third-level computer system was a €58 million flop. Is this headline an accurate characterisation of the situation?

Dr. Brendan J. Murphy

I will deal with that question. I would not describe something that every institute of technology in the country uses today as being a flop. A flop is something that does not work, in my terminology.

Deputy Jim O’Keeffe

It seems to me the headline might have been a bit over the top but it still begs the question. The basic contract of €9.3 million - which An Chéim did not feel confident to bring to court - ended up at €58 million. This was the ultimate cost to the taxpayer.

Dr. Brendan J. Murphy

The amount of €9.3 million is the cost of the software.

Deputy Jim O’Keeffe

Was that the three-part integrated component? Was the library software to be extra?

Dr. Brendan J. Murphy

I refer to figure 3.2 on page 39 in the Comptroller and Auditor General's report. It lays out where that sum includes the library system and it includes costs for implementation, consultation and training. It includes the costs of the hardware, maintenance, office accommodation and consultancy fees. The Deputy will see from the table the build-up into €44.52 million. If the staff costs from the institutions are added, that is where the total arises. The €9.3 million is specifically software related. It is part of that list.

Deputy Jim O’Keeffe

Does Dr. Murphy believe the taxpayer got good value for money from this contract?

Dr. Brendan J. Murphy

I do. If members remember back in 2000 the institutions were growing enormously, even to today with those HEA figures of 71,000 students in them. There was an enormous growth in the student numbers, in the complexity and in staff numbers. Without those systems we would not be able to operate today. They have also formed a very good basis for each institution providing what one would describe as education in terms of the future, things like education for those in employment and education over the web. Without those systems we would not be able to go there.

Deputy Jim O’Keeffe

Steadily An Chéim has worked its way out of the difficulties that have emerged. I revert to the SCT contract. Of that €9.3 million, how much was it paid?

Mr. Derek Feeney

I do not have that figure off the top of my head. However, it would have been paid whatever was due under the contract in terms of the licence fee or whatever. I can supply that information.

Deputy Jim O’Keeffe

I would like to know the total amount it was paid based on the original contract. I would not mind seeing that contract because I am concerned about public bodies spending taxpayers' money based on contracts which then, when trouble arises, are not considered sufficiently robust to prosecute in court. Did SCT arrange to provide for a continuing payment to itself from the point of view of maintenance or otherwise on an annual or other basis under that contract?

Mr. Derek Feeney

The original contract provided for an ongoing maintenance and support payment to SCT. We continued to make ongoing maintenance and support payments to SCT for those parts of its software that would continue to run to support the 71,000 students in the system.

Deputy Jim O’Keeffe

Of what order are those payments?

Mr. Derek Feeney

It is of the order of $200,000 per annum.

Deputy Jim O’Keeffe

Based on the original contract An Chéim was locked into that company if not saecula saeculorum certainly for the--

Dr. Brendan J. Murphy

That is the nature of buying any software. It is the nature of buying Microsoft software. One is locked into the software provider. That applies to all systems unless one buys what is known as a free system or a shareware system. It is in the nature of the purchasing of software. I do not know what system is used here to supply the computer systems. However, members will find it will carry a maintenance contract and will be related to whatever is the software. Through the original tendering process is how one tries to ensure one gets the best value. Once one has purchased a particular set of software there is the continued recurrent cost of maintenance to the particular provider.

Deputy Jim O’Keeffe

Does Dr. Murphy accept that while there may be advantages in such an approach where one develops a very good relationship with one's supplier, there are considerable downsides where it transpires that the supplier is not delivering what was originally contracted for?

Dr. Brendan J. Murphy

I think what the Deputy is saying is inherent in all software purchase. So it is incumbent on the people who purchase it to make sure that if there is an ongoing maintenance agreement, that whatever is in the maintenance agreement is actually delivered to the level and satisfaction of the purchaser.

Deputy Jim O’Keeffe

Did Dr. Murphy say that this contract was specifically and separately drawn up by its lawyers to suit An Chéim at the time? Is he implying that there are standard such contracts when one is dealing with the purchase of such equipment and software?

Dr. Brendan J. Murphy

In this specific instance, my understanding from the CEO and the former members of the consortium is that the contract was specifically designed. The Deputy should remember we were dealing basically with an American-based company, so it would also need to deal with terms of jurisdiction and which jurisdiction would be relevant.

Deputy Jim O’Keeffe

Yes, I know.

Dr. Brendan J. Murphy

It was designed in that sense. The Deputy would find that if he went to other software companies the norm is that they would produce a contract, he would take that contract to his legal advisers and get them to go through it and see what were the particular hazards they might identify that might be--

Deputy Jim O’Keeffe

Given that An Chéim was in the market seeking tenders, surely it should state it is seeking tenders based on a certain contractual approach as opposed to accepting whatever contract would be provided by the supplier.

Dr. Brendan J. Murphy

No. The contract would specify what was in the tender document. It would state that one wanted particular features to specified levels. They usually form annexes to the contract as such. The contracts tend to be commercial contracts with annexes specific to the particular tender.

Deputy Jim O’Keeffe

Does Dr. Murphy accept that either because of how the contract was drawn up or otherwise when difficulties arose An Chéim was not completely able to vindicate its rights and in fact it was forced to accept what appears to have been a settlement that was less than full compensation for the--

Dr. Brendan J. Murphy

The key fact in that balance is that if one had taken the litigation route even though one had a strong case, it was going to take time. Time in that sort of litigation in the High Court could well run into two or three years. This was two or three years lost in terms of introducing the systems into the institutions. That was where the balance was actually struck.

Deputy Jim O’Keeffe

Is Dr. Murphy suggesting An Chéim was prepared to suffer a loss to ensure it did not lose that time?

Dr. Brendan J. Murphy

In some ways I would say it was the right decision to go with in retrospect because not only did one not lose time, one then actually put in superior systems that did work. The original thing was that there was to be a whole integrated system. Given that we are academic organisations, the emphasis was on systems that would allow us to operate the student admissions, exams and registration, but then one must have appropriate finance and HR elements to tie on to that. It was important that those elements were also strong.

Chairman

Did the Department of Education and Science raise any concerns when the budget went from €7.8 million in August 1998 to €44 million in September 2001? What level of communication took place involving the Department of Education and Science? What was the role of the Department of Finance, which is not represented at this meeting? Did it express concerns? The Department of Education and Science would have had the expertise available to it from CMOD.

Ms Anne Forde

In terms of the overall project from the outset the Department would have been involved in overseeing all elements of it. The Department was certainly satisfied in relation to the processes that were undertaken at all stages of the project that they were the correct ones in terms of the appropriate procurement procedures being used. At times as the president mentioned where there were difficulties with the contract, appropriate advice and legal advice were secured. Obviously it would have been a matter of judgment of the people concerned to go whichever route they would have had. All elements of the budget would have been submitted to the Department at the relevant stages for approval. As the president said the initial €7 million or €9 million in the contract only related to the software part of it. The scope of the project also changed from the initial stages in that originally 11 institutes were signed up to engage in it.

Over the years - I do not have the precise details but I believe it was from 1998 onwards - the other institutes subsequently joined the project and its scope changed. At the relevant times, however, through our role, originally on the project steering group and subsequently as part of the consortium board that referred all matters on to the Department, we would have written to the Department of Finance and sought the appropriate sanctions for the expenditure at the different stages in the project. We were satisfied on the basis of the review of the files at the different stages that the plans being proposed and the requests for additional funding were correct and I believe they were sanctioned in all cases by the Department of Finance.

Chairman

What technical feasibility studies were undertaken on behalf of the Department?

Ms Anne Forde

I understand the initial feasibility study was carried out by PWC, originally for the design of the system. PWC would have been selected through an appropriate tendering process. It was that system design that originally formed the basis of the contract with SCT.

Chairman

This may be a stupid question but if I want to buy a television, I will seek to ensure it is compatible with the system we use in Europe. Was the question of compatibility addressed in this case?

Ms Anne Forde

Is the Chairman referring to assessing SCT as a supplier?

Chairman

Yes.

Ms. Anne Forde

The Chairman may be able to give more details on the matter, but I assume the people who made the decision - those examining the tenders - would have addressed all of those issues. I cannot give the Chairman the exact detail but perhaps the CEO will do so.

Mr. Derek Feeney

In terms of compatibility, the systems are built on global technologies that are widely used and the system is compatible. The only area that eventually lacked compatibility was finance where the company changed strategy and withdrew from Europe on the basis that there were different regulatory regimes within each country and it did not prove viable, in its eyes, to roll out a generic finance software from the United States right across Europe. It was those regulatory, legal, financial and tax elements that proved difficult. Apart from that, the system is widely compatible and is based on global database standards. All of the systems we now have for the student finance and library areas are interfaced, integrated and talk together. They are compatible and interoperate and that compatibility works every day.

Dr. Brendan J. Murphy

Litigation was to be undertaken on the basis that there was a failure to comply with a clause in the agreement that provided that SCT would make diligent and good faith efforts to adapt to changes in the institutes' environment, including conversion to the euro currency and other legislative changes. This was built in to the contract from the beginning and it was the failure to deliver on that element.

Chairman

I see.

Deputy Thomas P. Broughan

On the tendering process, were gaps in functionality between systems a factor or scoring method in determining that SCT was awarded the contract? Was the company the least out of sync with our systems or was it the best of the software providers available at the time in terms of having the least number of functionality gaps, an issue to which the Comptroller and Auditor General refers?

Dr. Brendan J. Murphy

We went to tender for an integrated package. The company was the best in terms of integrating the student system, finance and human resources. When it emerged that the finance element would not be adapted for Irish legislation and taxation, one started to ask about the knock-on effect on HR systems. If the tender documents started out looking for a completely integrated package, SCT was the best fit in that sense.

Deputy Thomas P. Broughan

The chief executive mentioned that UCD used the system. Is the Banner system still going strong in UCD?

Mr. Derek Feeney

Yes.

Deputy Thomas P. Broughan

How did UCD manage the efficiencies?

Dr. Brendan J. Murphy

It is used for the student system, not finance.

Deputy Thomas P. Broughan

Given that there were 14 or 15 institutes involved, some of which I would regard as universities, was any consideration given to treating them like UCD or Trinity College Dublin and allowing them do their own IT software suites and so forth? The Comptroller and Auditor General states that more than half the institutes were not satisfied with the level of web service available and refers to a whole range of areas, including employee self-service, integration with web CT, access to records, and so on, and upgrading the Agresso system which replaced the Banner system. Was any consideration give to this possibility given that the costs, which my colleague discussed in detail, appear to show that not all local costs were included? I believe the project cost much more than the actual figures in the report and local costs appear to be significantly out of sync. Surely additional local costs arose for the different institutes.

Should we have allowed the institutes, at least the larger ones such as the Waterford Institute of Technology, to do their own thing in this business? Was the decision to centralise a poor one which cost the Exchequer money? What is current position in terms of ongoing costs, particularly since 2005? Is it the case that the approach adopted continues to generate much more costs locally?

Dr. Brendan J. Murphy

I shall start at the beginning. Without centralisation the State would spend much more money on what probably would have ended up as 15 disparate systems and each institution would probably have four different varieties. A further efficiency, which has now happened, is that the original plan to have each institution host its own system is no longer in place and there is a central hosting. As a result, we have cut hardware costs in the institutions and made a saving of approximately 50%. We have undertaken a review to do that.

The other benefit of having a centralised system is its cost effect in terms of smaller institutions. Most institutions are now modularising and semesterising. If each of them had to source a supplier to do this, the costs would be much higher. There is clout in centralised purchasing and that is what is being delivered.

The Deputy's reference to the report appears to refer to a survey of satisfaction carried out by the Comptroller and Auditor General some time in 2006, which was just after the implementation. Human nature, being what it is, people moving from their own system to a centralised system will always see what is particularly wrong. They will say they used to always do something in a certain way or the new system cannot do it that way. That was a feature of the board when we started in 2005 and into 2006. We now have very few complaints about the systems. People have become much more familiar with them, see their potential and are demanding more of them.

Deputy Thomas P. Broughan

If one considers the example of the PPARS system in the health area, the record across the public service appears to show that local may be better and people may do things more cheaply when they are invigilating systems directly. The Comptroller and Auditor General also states the institutes of technology failed to take ownership of the whole project. What is the position now? Is the general belief among the institutes being served by An Chéim that this is now their project and is not being imposed from above?

Dr. Brendan J. Murphy

Very much so. We were mindful of that when the company was set up. We have two steering groups or user groups dealing with the software systems. Many institutions are represented on both. This is where we get the customer feedback and the suggestions for developments. We are very mindful that ours is a service organisation. I have said before that it is important to note that every institution now runs on the systems. It is not a PPARS. These are systems that do run and have potential.

As people begin to move from one institution to another in the higher education system, common systems facilitate the process, particularly if one is doing modules in one institution, has obtained credits therein and needs to transfer. People can now be transferred seamlessly and all their records can go with them.

Deputy Thomas P. Broughan

From 2005 to the end of 2007, did any further capital software costs arise in addition to the ongoing costs of maintenance and servicing? How has it panned out since the period that was invigilated?

Mr. Derek Feeney

There was additional capital expenditure in those years. As Dr. Murphy said, we have two steering or consultative committees that guide us on the requirements and needs they want us to address. We have addressed some additional software areas. One function we have implemented gives effect to the Bologna Declaration in terms of a European diploma or learner transcript of qualifications. It is securely stored, it is possible to authenticate it from an employer perspective and it promotes the movement of workers and learners throughout Europe. We have spent money on additional systems of this kind. In general, we have had a capital spend of €2 million per annum with a view to introducing new functionality and some additional hardware to run on that system.

Deputy Thomas P. Broughan

Is it ongoing?

Mr. Derek Feeney

There is ongoing investment and continuous benefit.

Dr. Brendan J. Murphy

Each year we would be within budget. We would submit our proposed budget to the Department and we would negotiate and arrive at an approved budget. We have always been within budget.

Deputy Deirdre Clune

I wish to return to the contract. In respect of the original PricewaterhouseCoopers report of 1995, consultants were engaged to advise on the best package. Were they involved in an advisory capacity in offering the contract to SCT?

Mr. Derek Feeney

No.

Deputy Deirdre Clune

I can understand why SCT was chosen because it was the best fit. Obviously the finance part failed afterwards. An attractive feature for the company was that it was to expand into Europe, but this did not work out. Bearing in mind that hindsight is great, one would think it would have been obvious that difficulties would have arisen given the many regulations across Europe and the different currencies. Was any European company involved with the contract? Did it strike anybody that it would be difficult? Was it an aspiration of the company to expand into Europe rather than a definite objective based on capacity?

Mr. Derek Feeney

It was its stated strategy at the time to go into Europe. The Deputy is quite right that, with the benefit of hindsight, one could say the matter could have been approached differently. With the onset of the common currency across the European Union, the euro, perhaps people from the United States believed it would be easier. Issues arose and perhaps questions could have been asked differently.

On the question of how we chose SCT, it was a Europe-wide procurement process. There was a tendering process and it was very structured and above board.

Deputy Deirdre Clune

Did An Chéim receive advice from consultants on it?

Mr. Derek Feeney

No, we did not. It was largely done under the auspices of the project steering group and the selection involved a very broad church of people from the institutes. PricewaterhouseCoopers had given the original advice in 1995 and had prepared the tender documentation according to the specified requirements. That is what we went to market with. The project steering group oversaw the procurement process and an evaluation team with broad experience was used. Eleven people were drawn from the sector. The company responded in writing to our tender.

Deputy Deirdre Clune

What was the experience of the 11 people? Were they from the institutes?

Mr. Derek Feeney

Yes, there was a variety of people from director level down to lecturer, including IT people, administrative people and administrative managers.

Deputy Deirdre Clune

Was there nobody to consult? An Chéim brought people together from different strands. Would anybody have had expertise in software contracts?

Dr. Brendan J. Murphy

The chairman of the project steering group, Dr. Columb Collins, was the director of Tallaght Institute of Technology. Dr. Collins's background was in computing and software so he would have had the expertise and, needless to say, would have been involved in his own institution. He was originally head of the school in Dundalk and would have been involved in the evaluation of software and hardware tenders.

Deputy Deirdre Clune

This was a major contract. I accept he had that experience but the contract involved was very broad and involved bringing together 15 institutes. Was legal advice sought?

Mr. Derek Feeney

Yes. Extensive legal advice was provided throughout the procurement. We had specific legal advice from an expert in European procurement and we had additional advice regarding the commercial contract and the negotiations.

Deputy Deirdre Clune

It is good see a line was drawn when it was realised things were going wrong. So often at this committee we encounter cases in which organisations continued in spite of problems, thereby making them worse.

Deputy Jim O’Keeffe

Throwing good money after bad.

Deputy Deirdre Clune

I believe Dr. Murphy addressed my next issue. In the report of the Comptroller and Auditor General, it states challenges still exist regarding integration, interfacing, reporting, modularisation, and so on. Have these been addressed?

Dr. Brendan J. Murphy

They have.

Deputy Deirdre Clune

There is satisfaction with the system.

Dr. Brendan J. Murphy

On the recommendations made in the Comptroller and Auditor General's report on page 55 in respect of project achievements, we addressed each of those specifically in an ongoing fashion. We did not just leave them. We ensured customer satisfaction. For instance, we ensured the smaller institutions that needed more help received more help. There is an ongoing programme of training. Even within that, there are user groups, which are particularly helpful to the smaller institutions that might not have the required staff or expertise. They draw on the experience of large institutions.

Deputy Deirdre Clune

Does An Chéim carry out surveys to ensure customer satisfaction?

Dr. Brendan J. Murphy

Yes, monthly.

Deputy Deirdre Clune

That is another layer.

Dr. Brendan J. Murphy

We also demand from our suppliers that they have service level agreements. They must meet those and, if they do not, penalties are imposed. If they meet them or exceed them, they are rewarded. We try to build this in for suppliers. We are conscious we have customers in each of the institutions and determine whether they are satisfied with us.

Deputy Deirdre Clune

I thank the witnesses.

Chairman

That is the end of questions. Has Mr. Buckley any comments?

Mr. John Buckley

I have a few brief comments, particularly on issues that arise at system level. There are some lessons to be learned from this, one of which was mentioned by Deputy Clune. It is heartening to see a lesson was learned from risk assessments; this is an example of good practice.

On the contracting, if elements had been priced separately, it would have been possible to figure out how much each element was worth and therefore to strike a better resettlement deal with the supplier, SCT. From the project management viewpoint, a project charter would have helped from an early stage to commit everybody to the project. When there is a multi-agency operation, having a charter in respect of which all the stakeholders know their roles and responsibilities is important.

On the technological aspect, the lesson in this case is that purchasing individual software packages fit for a particular function - the best in the breed - is at least as good as going for integration. Interfacing and data warehousing can connect the information at an organisation level, which is another lesson from this case. The report states that business benefits, efficiencies to be gained, an agreed implementation strategy and so forth need to be worked out in the beginning.

The problem with the payment was that it preceded performance. Payment should follow performance. The contract was structured in a way that three years into it the funds flowed. This left no bargaining power and no leverage. Lessons can be drawn by the wider system on contracts and so forth.

Deputy Thomas P. Broughan

This is one of several similar matters the committee has investigated. Is it necessary to have an elite group in the Civil Service and public service which is au fait with cutting edge technology? The Taoiseach had a head of IT in his Department. Is such a structure needed to protect the Exchequer?

Chairman

CMOD is the group which works on behalf of the public service.

Deputy Jim O’Keeffe

The issue of the contract fascinates me. The contract in this case, as stated by the Comptroller and Auditor General, was tipped in favour of the supplier. It may have a wider dimension, requiring the committee to examine contracts in the public sector. Recommendations could then be made on the general improvement of public service contracts of this kind.

Mr. John Buckley

One way of looking at this contract was that it was perhaps too effective. When the organisation realised what it had purchased, it wished to go back from that and substitute other products. The actual contract could not be faulted. It was watertight from both points of view. If the material purchase had been fit for purpose, it could have as easily been enforced by the purchaser as by the seller. The difficulty was that for the actual material purchased, the State needed to substitute other product. In that circumstance there was an issue.

The PPARS report suggested a need for central expertise in this area and that a gateway system could be established where at particular points in the development of a project experts from CMOD or from a wider field could be consulted. There are certain parts of the public sector with well developed IT capacity.

Deputy Deirdre Clune

The committee should follow up on that.

Chairman

Is it agreed that the committee disposes of special report 59, management information systems in the institutes of technology sector? Agreed.

The witnesses withdrew.

Sitting suspended at 1.15 p.m. and resumed at 1.25 p.m.