COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 23 Oct 2008

Chapter 5 — Irish Blood Transfusion Service.

Mr. Andrew Kelly (Chief Executive Officer, Irish Blood Transfusion Service) called and examined.

Chairman

I welcome everybody. We are examining chapter 5 of the Special Report No. 10 on the Irish Blood Transfusion Service and the Irish Blood Transfusion Service Financial Statements 2006. I draw witnesses' attention to the fact that they do not enjoy absolute privilege. Members and witnesses attention is drawn to the fact that, as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act 1997 grants certain rights to persons 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 need 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 Mr. Andrew Kelly, CEO of the Irish Blood Transfusion Service and ask him to introduce his delegation.

Mr. Andrew Kelly

I am accompaniedby Ms Sharon Bailey, director of finance, and Mr. Arthur Corrigan, IT manager.

Chairman

I ask Ms Mary Jackson of the Department of Health and Children to introduce herself.

Ms Mary Jackson

I am the principal officer in the blood policy division in the Department.

Chairman

I ask the delegates from the Department of Finance to introduce themselves.

Mr. Tim Duggan

I am Mr. Tim Duggan, principal officer, and I am accompanied by Mr. Billy Noone, assistant principal officer in charge of procurement, and Mr. Michael McCarthy, assistant principal officer in charge of IT sanction.

Chairman

I call Mr. Buckley to introduce Special Report 10, chapter 5.

Mr. John Buckley

The Irish Blood Transfusion Service, IBTS, uses an integrated computer system called Progesa to manage its blood banking activities. The current system dates from 2003 and it is reaching the end of its life. This is because the hardware is dated and support will become more expensive or unavailable. While upgrades were available over the years, the board chose not to implement them because of the level of validation these changes entail. Eventually, it decided in 2004 to move to an enhanced version of its existing system called eProgesa. This next-generation version differs fundamentally in design from the database version that it was already using. It set a budget of just over €3 million for the project. Ultimately, the move was not implemented successfully and costs of almost €1.9 million were incurred. The board concluded it could still get value for €1.2 million of this spend because the hardware and licensing can support the stabilisation of the existing product in any future upgrade. As as result, it wrote off €729,000.

Originally it was planned that the project would be finalised in late 2005 but it had to be suspended in April 2007. The IBTS has commissioned a review of how the project risks were managed. The resulting report is included in the correspondence for today's meeting. It sheds considerable light on the implementation difficulties. The concept itself was somewhat risky in that the IBTS was to become an early adopter of the new system. While it held out the prospect of delivering additional features, if successfully implemented, a number of key functionality requirements were not included in the initial scope of the eProgesa project.

Essentially, the project involved running risks associated with new technology without the short-term prospect of benefits in terms of improved business process. There was a limited consideration of other options but, admittedly, the base product seems to be the leader in the field. Consequently, there was no competitive tendering for a system that would have cost in excess of the EU procurement limits.

The main contributory factors that the review found led to the failed implementation included the lack of a long-term strategic plan for IT in the IBTS — the risk this poses is that sufficient thought may not be given to how IT will support current and future business activities; the absence of a formal signed contract to define the scope of the project; lack of clarity on the roles and responsibilities of each of the parties to the arrangement; and the use of a hardware platform on which the developer software had not yet been validated.

The post-project review also found that the project was not managed within an overall project plan that integrated the tasks of both the developer and the IBTS and there was no formal process for the management of changes in scope, delivery times and other requirements. On the other side of the coin, the review noted some positive features of the management of the project. There was reasonable budgetary control over the project. The business case for the development was documented at the outset. There were stringent quality standards and validation at IBTS level.

It is clear that the project could have been managed better but this must be balanced against the fact that not all IT development proceeds as originally envisaged. In cases where it does not, the correct decision is to cut one's losses and rethink the project. The IBTS must get credit on that score, and also for the exacting testing standards that led to the suspension of the project. Reflecting on its previous experience, it is preferable to ensure that systems are effective rather than risk proceeding with versions that will not deliver the required functionality in a safe way. The service still faces the need to replace its current systems and the CEO will no doubt be in a position to update the committee on the service's plans in this respect.

Turning briefly to the accounts, the IBTS spent around €100 million in 2006, which rose to €107 by 2007. Overall, about half of its outgoings are spent on the processing of blood products. Since it sells those products, its cumulative profits allowed it to build up a reserve of approximately €13.5 million by the end of 2007.

Chairman

Will Mr. Kelly make his opening statement?

Mr. Andrew Kelly

I will read the most salient points for the members of the committee, who all have a copy. There is a typographical error in my submission on page 8 in that "March 2008" should read "March 2007". I am sorry about that.

I welcome the opportunity afforded by this meeting to respond to the issues raised in chapter 5 of Special Report 10 of the Comptroller and Auditor General. It is important to set the context within which the Irish Blood Transfusion Service. Blood transfusion is an essential part of modern health care. Much of modern medicine could not happen without the availability of a safe and consistent blood supply. Used correctly, it can save lives and improve health. It is expensive and uses a scarce human resource.

It is generally accepted that blood collected, processed and tested by the IBTS and available for patients in this country has never been safer with respect to the risk of transmission of infectious diseases. The IBTS collects approximately 150,000 units of blood per annum and issues them to hospitals throughout the country for the essential care of patients. This is vital work for the health care system and I believe we have a blood transfusion service in this country for which we can be justly proud.

I would like to deal with the issues raised in the report under five headings: rationale for upgrading the blood bank control system, that is, Progesa; the decision to stop any further work on the project in March 2007; analysis of the budgetary issues; recommendations in the KPMG report; and the current proposals to upgrade the blood bank control system. It is important to contextualise why it was necessary to upgrade the current version of Progesa 4.4d/e, which had been implemented in March and June 2003 in Cork and Dublin, respectively. This project commenced in 1998 but due to a significant number of problems was not implemented until 2003.

However, Progesa is a very robust blood bank control system. This technology has a flat-file structure which makes it very difficult to extract effective management information in a timely manner. Therefore, when a version based on an Oracle relational database became available, it was in keeping with the IBTS software policy of implementing Oracle as the proprietary software. In addition, because of the length of time taken to implement Progesa, the IBTS was left in a situation where the hardware on which it was operating had reached the end of its life and needed to be replaced. It made good economic sense to upgrade the current blood bank control system at the same time.

A project definition document was written by IT outlining the various options available to IBTS at the time and also dealt with the various requirements for the implementation of eProgesa in the IBTS. It also gave justifications for moving to eProgesa. They are self-explanatory but I will highlight one or two. The platform to which I referred was reaching the end of its life. eProgesa offered the ability of real-time recovery tools. At the time in question, if Progesa crashed during the middle-of-day processing, the only option for the IBTS was to return the system to the previous day's backup. This was important for us. It was contended that eProgesa would allow the IBTS the opportunity to become a world leader in blood transfusion technology, and that additional functionality would allow for a more efficient blood transfusion service.

On the question of governance and oversight, information on the structure is contained in Appendix 1 to my submission. The project was not just about upgrading the software and hardware but also merging the two donor and patient file systems that existed at the time in question. This was important because we needed to have the two files on one database. It was decided to merge these files on our current system because that was the experience that MAK had. It was successfully achieved in August 2005.

Consider the significant milestones in the project. In October 2004, MAK sent an official proposal for the eProgesa project to the IBTS which was accepted by the executive steering group. In May 2005, the eProgesa project manager resigned from the Irish Blood Transfusion Service. The IT manager was appointed project manager. Certain project time lines were drawn up and a "go live" date was set for 28 October 2005. Since then, two further "go live" dates were missed due to issues and bugs not being resolved.

From this time the testing of the system showed a continuous flow of issues and bugs. It proved extremely difficult to have these issues resolved despite constant telephone conferences, letters to MAK-System, the board writing to MAK-System and visits to Paris by Irish Blood Transfusion Service personnel and return visits by MAK-System personnel to Dublin. Despite all these initiatives, in September 2006 the executive steering group had become very concerned that no definite "go live" date could be identified and requested the IT manager to develop an options appraisal document setting out the options available to the organisation.

The executive steering group examined the options and decided, due primarily to the lack of viable alternatives, that the Irish Blood Transfusion Service should proceed with the implementation of eProgesa. However, it was also agreed that investment would be made on the printers and maintenance of the alpha servers as these were critical to the continued operation of the current system.

On 20 March 2007 the executive steering group met to discuss the project. The IT manager reported the system was unstable and the super-users had lost confidence in it; a fix to one issue was causing problems in an unrelated area which would indicate that the patch was not being tested properly before being shipped to the Irish Blood Transfusion Service; the number of issues outstanding was not reducing with no indication from MAK-System when they would be resolved; and other countries who were implementing eProgesa had lost time.

Consequently, the executive steering group requested the project manager to examine the option of stabilising our current system and also how the Irish Blood Transfusion Service might move to version 4.4G and set aside eProgesa for the foreseeable future. It was agreed the executive steering group would meet again on 26 March to make the final decision on the future direction of this project. The other factor to be considered was the impact not implementing eProgesa was having on other projects.

The executive steering group decided to defer the eProgesa project and not return to it until the system had been implemented in other countries. It decided to stabilise the current system and examine the feasibility of including improvements to facilitate the streamlining of work in the components laboratory.

This decision was taken because of the need to secure the current system to ensure continued service delivery. The response from MAK-System was inconsistent and could not be relied upon. Super-users did not have confidence in the system as solutions to fixes were impacting in an area that was separate from the fix being implemented. Performance of system in one blood service centre was still slow and the level of performance would not be acceptable to the Irish Blood Transfusion Service. There were two versions of eProgesa in development and this was never intended. The Irish Blood Transfusion Service had been unable to get below 30 issues or bugs outstanding despite extensive testing and follow-up. There was constant disagreement by MAK-System on the number of issues and bugs outstanding and whose responsibility it was to fix them. This was still the case on 26 March 2007 when the decision was made to stop work on the project.

When the implementation of eProgesa was discontinued, the project was within budget. The total budget allocated to the project in 2004 was €3.13 million. The amount spent to March 2007 was €1,887,625. However, a significant amount of this expenditure has been utilised with much of the hardware purchased being used. The laptops, printers and wireless equipment purchased for eProgesa are in use on our mobile collection clinics. Professional fees on server set-up of €5,644 was capitalised as a legitimate part of server costs. Regarding the cost of €465,787 for Oracle licences, these have been used in several projects that were planned and require Oracle licences such as electronic quality management system, BOSS, e-financials, rondo, electronic management of accounts payable and the upgrade of CORE, the human resources system. The amount to be written off comes to €729,336.

In accordance with FRS 15, the Irish Blood Transfusion Service charge staff costs directly attributable to bringing the asset into working condition for its intended use, up to the point of the system going live. That cost is then capitalised once the equipment or software system is live and delivering value for the organisation. This practice was followed for the eProgesa project and hence the write-off as the project was discontinued. It is important to point out that the staff costs would have been incurred in any event but there was an opportunity cost.

When the Irish Blood Transfusion Service discontinued work on this project, it decided an external review of the project should be undertaken and quotations were sought from three companies. KPMG was appointed to undertake this review. The report made four key recommendations on IT strategy and planning, information systems environment and supporting technology, dependence on MAK-System and project management.

The Irish Blood Transfusion Service's strategic plan 2005 — 2009 sets out the direction that the organisation is taking. The plan is based on four pillars — adapting to changing business environment; quality; technology and research and organisation development. While IT developments are dealt with under the third pillar, there is not a specific IT strategy. However, since this report was finalised, an ICT council has been established with defined terms of reference and membership. It is in the process of developing an ICT strategy, scheduled to be completed by the first quarter of 2009.

MAK-System is the foremost supplier of blood bank control systems to transfusion services across the world. The Progesa system is in operation in Europe, USA, Canada, Australia, New Zealand and Asia. When the Irish Blood Transfusion Service initially purchased Progesa it followed a full tender process and there was only one other supplier short-listed for consideration. Senior staff of the Irish Blood Transfusion Service regularly attend conferences and scientific meetings where suppliers of all major systems and equipment for use in blood transfusion services exhibit. In addition, the national blood services in Europe have formed an association that meets biannually where all areas of activity are discussed.

There was no evidence at either of these fora that an appropriate alternative system to Progesa had come to market. Therefore, it was a reasonable course of action not to go through a formal tender process when the decision was taken to upgrade to eProgesa. In fact during this time one European blood service had carried out a benchmarking exercise to examine all possible systems available or that could be customised to provide a blood bank control system and decided to purchase eProgesa.

When the Irish Blood Transfusion Service cancelled the eProgesa project, it evaluated the only other major supplier on the market and concluded, following a presentation and site visit, that the system on offer was not as robust as the version of Progesa operated by the Irish Blood Transfusion Service. It was estimated that it would be approximately three years before that company would have a system that would be worth considering. Consequently, it is unclear if any benefit would have been gained from a full tendering process and subsequent events have borne this out.

The Irish Blood Transfusion Service accepts that there was not an off-the-shelf project management methodology in use for the eProgesa project. However, there was a governance structure in place which operates for each project. The Irish Blood Transfusion Service is a learning organisation. When the Progesa stabilisation project commenced, the PRINCE 2 methodology was used pending the development of an appropriate methodology. The Irish Blood Transfusion Service has developed a project management framework and work is ongoing to develop a set of tools to underpin this framework. Once completed, this will be the project management methodology used for all projects in the Irish Blood Transfusion Service.

The Irish Blood Transfusion Service has stabilised the current version of Progesa on new hardware and there has been a significant improvement in the operation of the system. However, the need to upgrade still exists and the Irish Blood Transfusion Service has decided to carry out a feasibility study of all the options available prior to proceeding to a full tender process. This exercise will be undertaken in 2009. A decision will then be taken on the appropriate system to deliver enhanced functionality while losing none of the robustness and security of the current system.

The Irish Blood Transfusion Service is very conscious of the important role it plays in delivering health care here. This is only achieved through the loyal support of our donors and the professionalism of our staff. As we enter a difficult period for collecting donations I ask that donors and members of the public come forward and support the Irish Blood Transfusion Service so we can ensure patients in hospitals will have blood available for them over the coming months.

With regard to chapter 5 of the Comptroller and Auditor General's report, I assure the committee that the Irish Blood Transfusion Service is very conscious of the need to provide value for money for the funds provided by the State. The organisation is currently implementing a major change programme designed to deliver improved services to our patients and donors in a more cost effective manner. Substantial progress has already been made in this programme. The Irish Blood Transfusion Service operates in a very uncertain environment where emerging threats are ever present. The Irish Blood Transfusion Service must be in a position to respond to these threats by having the appropriate resources and skill sets. The public would expect nothing less.

Chairman

May we publish Mr. Kelly's statement?

Mr. Andrew Kelly

Yes.

Deputy Brendan Kenneally

I welcome Mr. Kelly and his colleagues here this afternoon. How does it happen that virtually every public body, whether it is a Department, State agency or whatever, that comes before this committee has a problem with IT? It seems to be universal, right throughout the entire system. I do not know whether we will ever get it right. There is probably not a good deal in this other than the eProgesa system. However, there are one or two questions I want to ask first, about the accounts.

Does the Irish Blood Transfusion Service sell or purchase any blood products abroad, or is everything generated within the Twenty-six Counties.

Mr. Andrew Kelly

I thank Deputy Kenneally. I should distinguish between blood products and blood components. Blood products are used for persons with haemophilia, factors 7, 8 and 9 and they are made by pharmaceutical companies. We tender for those every two years and companies get contracts to supply those products.

Blood components comprise the blood people in this country donate, and patients receive, as required, for trauma, surgery and so on. We get all our blood from donations in Ireland, except for very rare blood groups not to be found in the Irish population. We import those in a frozen state from either Birmingham or Amsterdam, which have larger populations to draw from in terms of specific blood types. We do not sell our products outside the Twenty-six Counties.

Deputy Brendan Kenneally

The IBTS gets rare blood types from abroad, but from time to time it calls for blood donors when it is running low on blood or whatever. Is there a mechanism whereby it can buy the normal blood, as it were, from abroad if it should be more plentiful in other jurisdictions?

Mr. Andrew Kelly

In theory it is possible. We need a licence to import from the Irish Medicines Board.

Deputy Brendan Kenneally

Does the IBTS have such a licence?

Mr. Andrew Kelly

No, because we do not intend to import blood. We want to be self-sufficient and believe the Irish people would want us to be so. They have always responded when we call for donations, as we are doing at the moment. We have not imported blood for many years.

Deputy Brendan Kenneally

As I understand it, the IBTS's customers, by and large, are the various hospitals around Ireland. The notes to the accounts indicate a 2% provision for bad debts. I should have thought, given the type of customers it deals with, there should be no bad debts.

Mr. Andrew Kelly

I shall confer with the director of finance.

Ms Sharon Bailey

Most of our products are sold to hospitals, but they are not all State hospitals. Some are private, so there is a slight risk involved. In addition, we provide a number of tests for GPs, as requested, so that again there is a very slight risk that we might not be paid. That provision has been in the accounts for many years, and it is a general provision, not specific to customers. In terms of how the accounts move year on year, there is very little movement as regards the bad debts provision.

Deputy Brendan Kenneally

In Ms Bailey's experience what percentage of bad debts are encountered?

Ms Sharon Bailey

Hardly any at all. It is very small.

Deputy Brendan Kenneally

We looked at the 2006 accounts. I note that in the period 2005-06 the turnover was more or less static, but the number of employees went up by 20. Why was that?

Mr. Andrew Kelly

In 2006 we did not get a price increase for our products, relative to our income. Income is generated by virtue of the price being charged for our products and the amount being used. We normally only approve new products or services being provided to the hospitals. In some cases, this might relate to a new test being introduced. We have seen significant growth in the area of platelets, a product used in particular in the treatment of cancer, where patients cannot generate their own platelets. We have seen a 6% increase in the use of those products over the past five years. There are two methods of collection. In one a person will come in as a donor and the platelets will be transferred via a machine to the particular unit. In the other, products are pooled together from donations and the platelets are made in that manner. Our preferred way is to have a person coming in because it is a question of one donor to one patient and it is a safer product. As we have seen an enormous increase in the use of that product more people have had to be employed to deliver the service, and ensure we meet demand. The product lasts just five days — in some cases, seven — so that it is a major problem in terms of maintaining the supply of that product. Generally speaking, where staff numbers have increased, it is to provide a new service, a new product or new testing systems.

Deputy Brendan Kenneally

If IBTS is providing a new product, that is a new revenue stream, so why has the revenue not gone up?

Mr. Andrew Kelly

We did not get any price increase for that year, and neither did we seek any, because we reckoned that——

Deputy Brendan Kenneally

Fair enough, if there is no price increase one is comparing like with like and saying, in effect, that the level of activity in 2006 was the same as in 2005. The IBTS, nonetheless, employed 20 more people and Mr. Kelly said another product was introduced, so that the turnover should have gone up.

Mr. Andrew Kelly

Not necessarily — increased revenue comes from two sources. It would come from an increase in price and an increase in usage. If there is no increase in price, usage might go up, but because it is the same price as in the previous year significant additional revenue is not being brought in.

Deputy Brendan Kenneally

If the usage was the same and the price was the same——

Mr. Andrew Kelly

Nothing changes.

Deputy Brendan Kenneally

Nothing changes, but that is the same level of activity.

Mr. Andrew Kelly

Yes, but the usage of platelets in particular, ramped up significantly in the last few years. To provide that service, because the product lasts just five days, we have to increase its production. On one level it is from a donor and on another, it is a secondary product.

Deputy Brendan Kenneally

If production of the product is increased it means that more of it is being sold.

Mr. Andrew Kelly

That is true, but the revenue increased that year, for blood components. It went from €16,980,000 to €17,805,000. As far as blood products are concerned, we buy in and sell on We do not do anything with them.

Deputy Brendan Kenneally

Blood components went down between 2005-06. I am sorry, I am looking at the wrong figure. It went up by €900,000.

Mr. Andrew Kelly

That reflects increased volume.

Deputy Brendan Kenneally

For others then there must have been a decreased volume if there was no increase in price.

Ms Sharon Bailey

If Deputy Keneally looks at where the accounts are broken down between sales and tests, the one referred to by Mr. Kelly was where the platelets come in, and there was an increase of more than €800,000 in income driven purely by increased demand for those products, but the price stayed the same. In the second line, blood products, the Deputy will note that income went down by more than €700,000 that year. That is because they are the products we buy in. We tender for them and we actually would have realised savings on that. We bought them at a lower price, but we sell them on at a lower price as well. Even though there was a huge increase in demand for those blood products, their price actually went down. Overall, our income did not move significantly, but those two line items did.

Deputy Brendan Kenneally

The price went down very little, if one looks at note 4 in the accounts.

Ms Sharon Bailey

The purchase of blood products, yes.

Deputy Brendan Kenneally

Ms Bailey is saying it went down, but only marginally.

Ms Sharon Bailey

It went down, though, and we would have passed on more of those savings to our customers as well.

Deputy Brendan Kenneally

I still would have thought that, with savings in other areas, staff could have been transferred into that area, but I shall not dwell on it further.

Moving on to eProgesa, some of this stuff is very technical and I do not have any real expertise in that area. However, Java is referred to, which is a computer language, that I understand is being phased out and is not being used extensively because it is fairly restricted in what it can do. I do not know whether that is part of the reason the IBTS is having some problems with eProgesa. However, Mr. Kelly said the IBTS could not find any other type of system on the market it could use. What is used in Britain or in Norther Ireland? Is it the same software as the IBTS uses?

Mr. Andrew Kelly

No, they are using a system developed internally, in house, and are seeking to upgrade significantly because the system is quite old. That is what is done in England, Wales and in Northern Ireland. In Scotland and in a number of European countries they use Progesaas we do. Many blood transfusion services use it in the US, Australia, Canada and Asia. It is the most used system around the world. We recently made inquiries about the progress made by competitors, but they are still two years away from putting their product on the market. Therefore, there is currently little or no alternative in the marketplace. From our perspective, Progesa controls all our collections, processing, testing and issuing of the product to hospitals. Without this system, we could not operate.

Deputy Brendan Kenneally

As Mr. Kelly sees it, there is no alternative.

Mr. Andrew Kelly

Unfortunately, no.

Deputy Brendan Kenneally

Mr. Kelly stated in his presentation that the eProgesa project manager resigned from the IBTS. Was there any particular reason for that? Was he forced out? Was there anything sinister?

Mr. Andrew Kelly

No, there was nothing. He went to a different position in another company.

Deputy Brendan Kenneally

It is just that we seem to have found in many other areas that there are issues involved when people are moving on.

Mr. Andrew Kelly

No, absolutely not.

Deputy Brendan Kenneally

That is fair enough. The IBTS will obviously continue with the Progesa project. Does he think that there are significant risks in progressing with it, bearing in mind all the problems that have been there up to now?

Mr. Andrew Kelly

One of the issues with the project was our relationship with the supplier in advance. If, having followed a feasibility study and tendering process, we go down the road of obtaining another version of the system from that same company, we will have to have a much better working relationship with them. Otherwise, we will end up back in the same situation we were in before. We will then have difficulties resolving issues with that company. They recognise at this stage that there is a need to build a better relationship with their customers. If we go down that road, we will have to have a different relationship and ensure that the lessons we take from this project are borne out in the future.

Deputy Brendan Kenneally

The report of the Comptroller and Auditor General stated that the changeover to Progesa hardware was not fully implemented by March 2008. That obviously has not happened since.

Mr. Andrew Kelly

It happened two weeks later. We are using the new hardware.

Deputy Brendan Kenneally

All the new hardware purchased for eProgesa is being used.

Mr. Andrew Kelly

Every piece of it is being used.

Deputy Brendan Kenneally

Going back to his contribution, Mr. Kelly speaks of the need to upgrade and he is carrying out a feasibility study on the board's options, prior to going to a full tender process, which is to be undertaken in 2009. Is that correct?

Mr. Andrew Kelly

That is correct. It will be for a new blood bank control system and it will be either a different version of Progesa or a different system altogether.

Deputy Brendan Kenneally

Mr. Kelly said that there is no other system out there.

Mr. Andrew Kelly

We need to test the market. A study was done recently by the Canadian blood service for a number of other countries, where they looked at all the options. There has been a development in the past few months where a company in the US bought a French company that has a blood bank control system in two European countries. We assume the reason for that purchase is to give the American company a foothold in Europe and to merge both systems into a better system. Only time will tell whether that happens. We need to find out if that is the company's intention and the progress it has made in that purchase, and if it will bring a different version of software to the market that will be worth examining.

Deputy Brendan Kenneally

It is obviously laudable that the IBTS is going to the market for a full tender process. Why did it not do that when it was progressing from Progesa to eProgesa?

Mr. Andrew Kelly

When we made the decision in 2004, there was no other company in the market. The other company that was short-listed in 1998 for the first version of Progesa still had not progressed beyond the US and had not an integrated system. They had two different software packages to manage, the donor side and the production side. We wanted an integrated system to manage all of it, but the company had not progressed beyond that point in 2004. Therefore, there was little point in us going to the market.

Going through a tendering process is obviously a very expensive business. There is a learning curve for staff if a new system is bought in. In our business, we have to have proven technology. We cannot put a system in that may not work because it is just not acceptable. The proven technology at that time was the Progesa system. The intention of the company was that the eProgesa version would have all the enhancements of versions 4.4G and below. However, that did not materialise and the countries that had implemented eProgesa in Europe have different versions of the system to the one we had. The company has converted each country's current version of Progesa into an Oracle related database version, rather than giving out one standard version of an eProgesa model.

Deputy Brendan Kenneally

Are some of these countries having the same problems as the IBTS?

Mr. Andrew Kelly

The two countries in Europe that implemented it were well behind schedule and one of them is still experiencing difficulties.

Deputy Brendan Kenneally

Bearing in mind the difficulties experienced with the supplier, does the IBTS intend to enter into negotiations for a refund, due to the problems with successfully implementing eProgesa?

Mr. Andrew Kelly

We considered it. We did not pursue it because it would be under French law, and the company's headquarters are in Skopje. We reckoned we could be involved in a long legal battle that would have cost us a lot more money. The chances of getting money back were slim and, therefore, we decided against it.

Deputy Brendan Kenneally

It would not be cost effective to do it.

Mr. Andrew Kelly

Not really.

Deputy Brendan Kenneally

Mr. Kelly spoke about merging operations. Has the IBTS been able to merge successfully the Dublin and Cork files?

Mr. Andrew Kelly

Yes.

Deputy Brendan Kenneally

I know that there are one or two anti-D cases still overhanging. Is there any contingent liability in the accounts of the IBTS for that?

Mr. Andrew Kelly

No.

Deputy Brendan Kenneally

Would it be prudent?

Mr. Andrew Kelly

When there have been settlements in these cases, the Department paid the cost, except in recent times when we had surpluses in our accounts and we were asked to pay the bill from those surpluses. There is currently one significant case outstanding. It is in abeyance between the tribunal and the courts at the moment. If it comes to court and to a settlement, the pay-out will be significant. Until now, we have not made contingencies for that in our accounts. We do not have surpluses when the money is paid by the Department.

Deputy Brendan Kenneally

I noticed that in the 2006 accounts, there is a capital reserve of €5 million. I understand from what the Comptroller and Auditor General said that there is a current reserve in excess of €13 million. I believe the IBTS had plans to develop the centre in Cork. What is happening with that, bearing in mind that the IBTS seems to have the revenue to do it?

Mr. Andrew Kelly

A sum of €5 million is set aside for a new centre in Cork and this money is ring-fenced. We are still in discussion with the Department of Health and Children for that centre and we are still pursuing it as one of our top priorities. The centre in Cork must be replaced. It cannot go on indefinitely. The €5 million set aside for Cork leaves €8.5 million from the current reserve. We have recently undergone a major restructuring of our laboratories, where we have implemented a 7 a.m. to 7 p.m. working day. We bought out all the overtime that was being worked in those laboratories in the recent past. That has been paid out this week, and it is a considerable amount of money.

Deputy Brendan Kenneally

How much was it?

Mr. Andrew Kelly

At present, it stands at about €3 million. We have not dealt with the staffing arrangements in the Cork centre yet. When it is all bought out, it will cost approximately €4 million. We have paid out 90% to date and the remaining 10% will be paid out next year, depending on what is worked out between now and then. We have eliminated unnecessary overtime in our laboratories and the working day is now 7 a.m. to 7 p.m. The rosters reflect that.

We have capital projects of one type or another. Much of it replaces existing equipment worth about €4 million to €5 million. We will obviously have to fund those. Those funds are committed over this year and next year. There is very little additional money available to put towards any new centre, but €5 million is ring-fenced and we would certainly want that centre built in Cork.

Deputy Brendan Kenneally

On the buy-out of overtime, was there an expectation on the part of IBTS employees or a guarantee that there would be a certain amount of overtime? Other than that, I cannot see a reason it would have to be bought out.

Mr. Andrew Kelly

The practices were restrictive and had been in place for approximately 25 years. Some were getting it every week in their earnings. The rates being paid were exorbitant and, what was worse, there were restrictive practices which were not allowing us to deliver the most efficient service. We restructured the laboratories, provided better on-call services for hospitals and eliminated overtime in the working day. Staff now work from 7 a.m. to 7 p.m. if the laboratory requires them to work those hours. We have a shift system to provide night-time and weekend cover.

Deputy Brendan Kenneally

These were agreements with the workers for many years.

Mr. Andrew Kelly

Yes.

Chairman

In respect of the merging of data, will Mr. Kelly set out the working relationship or the arrangement between the Cork and Dublin centres? The IBTS had problems with the Irish Medicines Board, IMB, in regard to the quality of buildings in Cork. Have these problems been overcome?

Will Mr. Kelly flesh out in more detail how this could take from 1998 to the present to complete? The announcement on the Cork centre was made in 1998 but ten years on €5 million is ring-fenced for a project which was necessitated because of the criticisms made by the IMB which threatened to withdraw accreditation from the Cork centre. Why has there been no progress made between the IBTS and the HSE — formerly the Southern Health Board — with regard to the site and the development of activities of that centre? What is the current estimated cost of the centre?

Mr. Andrew Kelly

The Irish Medicines Board is on record in its annual report as stating the only solution is a purpose-built facility in Cork. The current centre is compliant. In 2004-05 we invested €3 million in upgrading the facilities at the centre to bring it to a level which was appropriate from the IMB's perspective.

Chairman

With prefabs.

Mr. Andrew Kelly

Yes. With regard to the period of ten years, the IBTS has tried many times to have the building constructed. The current position is that we have provided information for the Department which is working on the options available. If one were to build a full centre as envisaged in the case of the 2003 development, it would cost in the order of €30 million at today's figures. Depending on the activities carried out, the figure might be less than €30 million but that was the cost of the development plan submitted in 2003. We are hopeful a decision will be taken shortly on the future of the centre. As I said, this is absolutely required and we will certainly be pursuing it with the Department. We work very closely with it in developing the required numbers, statistics, costings and so on to ensure they can be provided for the Minister to get a decision on the issue.

Chairman

I ask the Department of Health and Children how it could take ten years for a project which was badly needed but which subsequently was condemned by the Irish Medicines Board to move from an announcement to the current situation where we are still at an initial planing stage, with €5 million ring-fenced for a project that could cost up to €30 million. What effect is this having on the delivery of a national service? At a time when the focus is on decentralisation we have seen a drift towards centralisation in this case.

Ms Mary Jackson

It was not condemned by the Irish Medicines Board. As Mr. Kelly said, in its annual report the IMB noted that the centre was compliant——

Chairman

There was a threat to withdraw accreditation——-

Ms Mary Jackson

If it was not in compliance with the strict requirements——

Chairman

If improvements were not made to meet standards set by the IMB, it threatened to withdraw accreditation.

Ms Mary Jackson

That is correct. The IMB always stated that if it did not meet the very strict general manufacturing standards required for a blood transfusion service, it would withdraw the licence from the centre. However, to date it has met these requirements each year. In fact, the IMB inspects the centre twice a year and produces an annual report for the Minister. We are aware that there were interim refurbishments. The end life of the building was clearly signalled when those interim refurbishments were made. We have been working closely with the IBTS to put the criteria together to allow the Minister bring a memorandum to the Government on this development, which she intends to do very shortly.

Chairman

There was a sticking plaster solution to the problems the IMB had detected. I am correct in saying there was a threat to withdraw services. It was only because of the sticking plaster approach by the Department which allocated certain moneys to upgrade prefab buildings at a time when there was great sensitivity about the quality of the transfusion service that the IMB did not go ahead with its threat to withdraw accreditation. Is that correct?

Ms Mary Jackson

The refurbishment costs were actually met by the IBTS from its own funding. The threat of the IMB is always real in regard to any agency it inspects. This has been taken very seriously by all parties, including the Department.

Chairman

Seriously, but not urgently. We are ten years down the line and no decision has yet been made, even on design. For example, has a decision been made about the location?

Ms Mary Jackson

There is a suggested location but until the decision is made to move forward with the project and we get agreement——

Chairman

That is very vague. What does Ms Jackson mean by a "suggested" location?

Ms Mary Jackson

In the original design, Cork University Hospital, CUH, was suggested as a location for the centre.

Chairman

That is no longer feasible because a co-located hospital is being located there. It is accepted by everybody who knows anything about the delivery of the health services in the southern region that the CUH campus is full. The suggested location is out the window. Is that not the case?

Ms Mary Jackson

As soon as we have a decision to build the centre, the location can be decided upon. No alternative has been suggested.

Chairman

There is a suggested location but it is impractical. Does Mr. Kelly agree?

Mr. Andrew Kelly

From the most recent conversations we have had with the HSE about this development, there is a site at CUH for the IBTS if approval is given to build the centre. One of the things we want to try to develop is synergy between the IBTS, CUH and UCC in transfusion medicine. There is a site available at CUH, unless there is other news, of which I am not aware.

Chairman

I thank Mr. Kelly.

Deputy Darragh O’Brien

I would like to receive an update on the pension scheme at the IBTS. From the pensions information the IBTS has highlighted, the last actuarial report was carried out in May 2005. Up to 31 December 2006 it appears the scheme was underfunded and the IBTS increased the contribution rate to 14% of pensionable salary. What is the current position on the funding of the scheme as per the IBTS's last actuarial statement?

Mr. Andrew Kelly

Our most recent actuarial evaluation was carried out as of April this year. The draft report presented to the trustees indicates that the situation has worsened. The deficit for past service is now of the order of €16 million, as opposed to €8.7 million in 2005.

Deputy Darragh O’Brien

That is the shortfall.

Mr. Andrew Kelly

Yes. With the way the markets have gone since, I am sure the situation has worsened.

Deputy Darragh O’Brien

Has the IBTS increased the contribution rate again?

Mr. Andrew Kelly

It is still at 14%.

Deputy Darragh O’Brien

Is that split between the IBTS and the employee?

Mr. Andrew Kelly

The employer pays 14% and the employee pays 6.5%, which comprises 5% for the pension and 1.5% for spouse and children.

Deputy Darragh O’Brien

At what price is the fund currently valued? It was valued at €43 million some years ago.

Mr. Andrew Kelly

The most recent valuation, in April, puts the net valuation at €64 million.

Deputy Darragh O’Brien

What percentage of that is to cover benefits accrued? I understand the percentage was 83% in 2005.

Mr. Andrew Kelly

I do not have that figure on hand, but I can convey the information to the committee.

Ms Sharon Bailey

It is approximately 79% or 80%.

Deputy Darragh O’Brien

We are talking about a substantial defined benefit pension scheme. We are all aware that in the current climate the costs will accelerate even further to ensure the scheme can meet its liabilities. How many fund managers are involved in the management of the pension scheme?

Mr. Andrew Kelly

There are four fund managers.

Deputy Darragh O’Brien

Is their performance reviewed regularly?

Mr. Andrew Kelly

The trustees meet regularly. The actuary produces a report for each trustee meeting on the state of the fund and the returns from each fund manager in the last quarter, six months, a year and so on. This means there is a regular review of the performance of each fund manager. The trustees move funds as they deem appropriate, depending on the performance of individual fund managers.

Deputy Darragh O’Brien

Is that done regularly?

Mr. Andrew Kelly

Yes.

Deputy Darragh O’Brien

Does Mr. Kelly have any concerns regarding the pension scheme?

Mr. Andrew Kelly

It is clearly a cause for concern because a significant deficit has opened up in recent years. We are in negotiations with staff to amend the scheme. It is our objective to implement the model Civil Service scheme, which differs slightly from our own.

Deputy Darragh O’Brien

What is the difference?

Mr. Andrew Kelly

Our scheme does not provide any integration with social welfare benefits.

Deputy Darragh O’Brien

Does the scheme provide for two thirds of final salary?

Mr. Andrew Kelly

No, we are funding for half of final salary.

Deputy Darragh O’Brien

Are social welfare entitlements additional to that?

Mr. Andrew Kelly

Yes.

Deputy Darragh O’Brien

Has the Irish Blood Transfusion Service made any moves towards placing future employees on a defined contribution basis only?

Mr. Andrew Kelly

No.

Deputy Darragh O’Brien

In other words, new members are allowed into the scheme.

Mr. Andrew Kelly

Yes. However, we intend to amend the scheme to include integration. That will make it much less expensive and help us to pay off some of the deficit in terms of contribution rate.

Deputy Darragh O’Brien

Is it the intention to bring in the social welfare deduction?

Mr. Andrew Kelly

Yes.

Deputy Darragh O’Brien

When will that change be implemented?

Mr. Andrew Kelly

We are currently in negotiation with the unions. We hope to introduce it shortly.

Deputy Darragh O’Brien

This is something that struck me even in the figures for 2006. The situation has deteriorated greatly since then. I am pleased to hear the Irish Blood Transfusion Service is making these changes.

Chairman

I understand 1% of the Irish Blood Transfusion Service's core income goes to research and development.

Mr. Andrew Kelly

That is correct.

Chairman

Is this research and development conducted in-house or is it done in conjunction with universities and other bodies?

Mr. Andrew Kelly

The moneys that have been set aside have been used for two purposes. One is research and the other is product development. The latter refers to testing of new technologies. For example, there is a technology available for pathogen in activating platelets, which involves putting a chemical in them and cleaning it through the system to derive an end product which cannot be infected by any pathogen. We test these types of technologies in our product development laboratory before bringing them into service. This allows us to introduce new technologies much faster than would be the case through our normal funding mechanisms.

In terms of research, we work in conjunction with universities, including University College Dublin and Trinity College. We hope to expand that collaboration to include all universities as well as pharmaceutical companies, where the need arises and where benefits can accrue to the health system. Any research we do must have a value and application within the health system. Otherwise, it is of no value to us. It is a new system.

Chairman

Is the research done by the Irish Blood Transfusion Service undertaken in both centres?

Mr. Andrew Kelly

It is predominantly done in Dublin. However, our product development committee, which meets regularly, includes representatives from both centres.

Chairman

I thank Mr. Kelly for his assistance. Does Mr. Buckley wish to make any comments?

Mr. John Buckley

The amounts involved are relatively small. However, the important point is that information technology systems are critical to the operation of the blood service and various other businesses. We heard about two of them this morning. Deputy Kenneally asked why so many information technology projects fail. I made some remarks on this issue at the previous session which I will not repeat. The Deputy asked a valid question.

Academic research indicates that a good proportion of information technology projects across the entire spectrum fail. The crucial issue is what action is taken when a project starts to go wrong. The Irish Blood Transfusion Service clearly had exacting standards in testing and it should probably take credit for the fact that it stopped and reconsidered the project. That is a crucial lesson. The discipline of stopping is important throughout the sector, regardless of which organisation is involved.

Clearly there is much additional learning to be done at ground level in terms of how one ensures a project is good to begin with. I spoke earlier about involving users, assessing senior management needs, ensuring there is an information technology strategy and securing a contract that is enforceable and that sets out the scope of the project. Many of the learnings are set out in the risk report commissioned by IBTS and I will not go over that. However, a reading of that report would repay careful study on the part of the Irish Blood Transfusion Service and the system generally.

Chairman

I thank Mr. Buckley. Is it agreed that chapter 5 be disposed of and that we note the financial statements for 2006? Agreed. The agenda for the next meeting is the Annual Report of the Comptroller and Auditor General and Appropriation Accounts, Vote 36 — Department of Defence; Vote 37 — Army pensions; and chapter 11.1 — Border duty allowances.

The witnesses withdrew.

The committee adjourned at 1.15 p.m. until 10 a.m. on Thursday, 30 October 2008.