COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 5 Mar 2009

Chapter 4.2 — Flood Relief Projects.

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

Vice Chairman

The committee is in public session. Today we will examine the 2007 Annual Report of the Comptroller and Auditor General and Appropriation Accounts dealing with the Office of Public Works, and we will examine chapter 4.1, property management issues, and chapter 4.2, flood relief projects. Witnesses 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 identified in the course of the committee's proceedings. These rights include: the right to give evidence; the right to produce or send documents to the committee; the right to appear before the committee, either in person or through a representative; the right to make written and oral submissions; the right to request the committee to direct the attendance of witnesses and the production of documents; and the right to cross-examine witnesses. For the most part, these rights may be exercised only with the consent of the committee. Persons 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 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. Seán Benton and I ask him to introduce his officials.

Mr. Seán Benton

I am joined by the following: Mr. Tony Smyth, director of engineering services; Ms Clare McGrath, commissioner with responsibility for property and heritage services; and Mr. Joe Farrell, accountant for the Office of Public Works. I apologise for the absence of Mr. John McMahon, commissioner, who is hospitalised at the moment.

Vice Chairman

Will the Department of Finance officials introduce themselves?

Mr. Dermot Quigley

I am joined by Mr. Dermot Keane and Mr. Frank Griffin. Both work in the sectoral policy division.

Vice Chairman

Before I call on the comptroller to introduce Vote 10, on behalf of the committee I inform the delegation that on a previous occasion the former commissioner, Mr. David Byers, attended the PAC. His untimely death has robbed the OPW of a good colleague and I put on record our sympathies to the OPW staff and to the family of Mr. David Byers.

Mr. Seán Benton

I thank the Chairman and I will pass on those remarks to David's wife.

Vice Chairman

Thank you very much. I call on Mr. Buckley to introduce Vote 10 — Office of Public Works. The full text of chapter 4 can be found in the annual report of the Comptroller and Auditor General or on the website of the Comptroller and Auditor General at www.audgen.gov.ie.

Mr. John Buckley

The Appropriation Account of the Office of Public Works records spending of €630 million in 2007 and recoveries of €26 million by way of appropriations-in-aid. It spends this money on four major programmes, namely, property management, project management, flood relief and heritage property services. In addition, it manages works funded by other Votes estimated at €131 million in 2007 and contracts on behalf of other State agencies that have an estimated gross value of approximately €200 million.

Its principal competencies are in the delivery of architectural, engineering, property management and project management services both for its own projects and those of other State agencies. The major expenditure from its Vote in 2007 was on new works, alterations and additions which cost €231 million, the purchase of sites which cost €73 million, and the payment of rent and rates on leased properties amounting to €124 million in that year. It manages a large property portfolio, consisting of freehold and long leased property with a value of €2.7 billion, and properties on short leases, and allocates the space in these properties to Departments on the basis of preset norms.

There were two chapters in the annual report on its activities. The first dealt with the management of vacant space and lease charges. While overall unoccupied space is less than 1% of the total property portfolio of the OPW and that portfolio has been rationalised in recent years, our concern was that there needed to be a clear distinction between those properties being held as a reserve for future use, in respect of which clear target levels should be set, and those properties which were earmarked for disposal.

Regarding the management of vacant space, there were concerns that forward planning was not helped by the fact there were delays in recording properties about to become vacant on the vacant space reports which the office uses to monitor and manage occupancy. There appeared to be considerable delay in surrendering some surplus properties.

Another property management issue related to the accounting for lease charges. The background here is that some rentals paid by the OPW are, in turn, recoverable from other State agencies. The payments and receipts for these transactions were inadequately linked in the accounts, recovery was delayed or not sought in some cases and some rentals that were recoverable from agencies ended up as a charge on the Vote for OPW. This amounted to €882,000. On the other hand, payments totalling €1.3 million were carried in a suspense account, but most of these should have been charged to the Vote.

While the net amount involved is not especially material in the context of the overall expenditure borne on the account, it is important that the recording of receipts and payments associated with property transactions be complete and accurate in all cases to avoid a mischarge to the Vote. The Accounting Officer has assured us he has taken remedial steps and will be in a position to update the committee in that regard.

A second chapter concerned flood relief payments and, in particular, the advancing of money to local authorities to pay for remedial works. From a Government accounting viewpoint the position is that, in general, sums should only be charged to a Vote where they have matured for payment. In the case of approximately €9 million charged to the Vote in 2007, very limited work had been done on the ground and a need for the funds will not arise until 2009 or later.

While it is recognised that the funding movements are between two layers of government, central and local, and in practice in the normal course State agencies and local authorities that receive moneys from central government record the income in their accounts on a receipts basis, in this instance the cash resources of the State would have been better managed if the payments to the local authorities had been made when the underlying contractual commitments had matured for payment. In current economic circumstances, it is important that funding of agencies and local authorities be in line with their cash requirements to minimise the central government borrowing requirement.

Vice Chairman

I ask Mr. Benton to make his opening statement.

Mr. Seán Benton

I am pleased to appear before the committee to talk about the appropriation account for the Office of Public Works for 2007. I would like to deal with the four items listed on today's agenda, which are chapter 4.1 on property management issues, chapter 4.2 on flood relief projects, the operation of the internal audit and the development of risk assessment and management in the office.

The Comptroller and Auditor General in his report commented on the management of vacant space and the operation of the sundry rent account. I would like to update the committee on the management of the State property portfolio, including the issue of vacant space. The OPW manages on behalf of Departments and agencies some 1.16 million sq. m of commercial property, mainly offices, with small amounts of storage, industrial and other specialist workspaces. Of this, approximately 46% is State owned and the remainder is leasehold, mainly long-term leases. In 2009 the estimate for rental and associated payments is approximately €131 million.

We actively manage the portfolio to ensure the State gets the best value for money while meeting the accommodation needs of client Departments in a manner that enables them to discharge their functions and provide a service to the public. This active management includes regular maintenance, periodic major refurbishment, disposal of property no longer suitable for current needs, acquisition of new space and consolidation of departmental staff or Government services in a particular location.

The OPW has procedures in place to ensure the property portfolio is managed as efficiently as possible and that vacancy rates are kept to a minimum, consistent with the prudent management of the portfolio. Office space becomes available for a variety of reasons, including routine maintenance and major refurbishment of outdated buildings. There are cases where the accommodation is no longer suitable for modern requirements and must be vacated and there are instances where, following a Government policy such as decentralisation, there is a requirement to vacate space.

As a result, it will always be the case that at any one time a certain percentage of the space in the State property portfolio will be unoccupied. This facilitates the management of the property portfolio in so far as it is essential to have space available to meet urgent and unanticipated needs such as the provision of space at short notice to house newly established operations, and it also facilitates urgent maintenance and refurbishment of accommodation where necessary.

The availability of a certain amount of vacant space also enables a more cost efficient management of the property portfolio. It not only allows flexibility in meeting short-term urgent needs but also ensures the OPW is not being placed in a weak bargaining position when urgent or unanticipated demands for space arise. Based on the latest information we have, the vacancy rate of OPW office space is marginally less than 1%, which is considered quite low when benchmarked against organisations with large property portfolios or international bodies similar to our own which manage state portfolios.

As part of the ongoing management of the portfolio, each year the office identifies properties which can be disposed of through sales or surrender. In recent years we have been very successful in disposing of surplus vacant freehold elements in our portfolio. The disposal programme has yielded in excess of €575 million over the past four years. Within the next 12 months, it is planned to surrender more than 10,500 sq. m of leased space which will save in excess of €4 million on annual rentals.

Regarding the management of space, I reiterate that the OPW keeps the level of vacant space within its portfolio under regular review and in the light of changing circumstances and bearing in mind the need to keep vacant space to a minimum, decides on the best balance between the element held to meet unforeseen demands and that earmarked for disposal or surrender.

The Comptroller and Auditor General also commented on the management of rental payments on behalf of and receipts from clients who have their own budgets. He was concerned that there may be a risk to the overall integrity of the financial records and that amounts due from agencies were not identified and recouped in a timely manner. A full review of the accounts system or sundry rent accounts used to record, control and account for expenditure recoverable from State agencies was carried out over the summer of 2008. All issues raised by the Comptroller and Auditor General have been resolved. Improved processes are in place to ensure invoices are issued on a timely basis.

Improved accounting and invoicing systems are also in place. These include a more efficient invoicing and reconciliation procedure which will avoid the accumulation of balances on the accounts and the prompt identification of bodies which fall behind on payments. Following reconciliation of all sundry rent accounts during 2008, statements of account now issue to account holders regularly, including a statement showing each body's balance at the end of the year.

The integration of the manual ledger system of recording rents receivable into the computerised OPW property system is at an advanced stage. This will include a facility to process invoicing electronically, provide a record of payments received and track outstanding payments. The new system is ready for live testing and will be operational this year. I am happy to say that all invoicing for the family support agency in particular is now up to date and all arrears of rent and service charges due have been paid up in full to the end to 2008.

At the end of 2007 there was a debit balance of €2.025 million on the sundry rent accounts. During 2008 rental and associated payments totalling €16.1 million were charged to the sundry rent accounts. Owing to the implementation of the improved systems during the year, and the recoupment of arrears on accumulated balances, a total of €18.5 million was credited to the suspense accounts. This left the overall sundry rent accounts in a credit balance of €360,000 at the end of 2008. Overall, I am satisfied that the changes and improvements in the management of the sundry rent accounts will result in their being kept up to date, thereby avoiding the accumulation of significant debit balances.

The Comptroller and Auditor General commented on the levels of advances made to local authorities and the slow progress in some cases on the part of the local authorities in commencing the related works. The advances in question were based on commitments entered into by the OPW with local authorities. They were in respect of works and schemes to be carried out to standards and designs prescribed by the OPW. It was the practice, where the OPW was satisfied that plans for works were approved or in place, to place the authority in funds to enable contractual obligations to be met promptly.

Certain difficulties arose with individual projects in Carlow, Waterford, Fingal and Dublin City Council, which led to approximately €9 million of the contributions made by the OPW in 2007 not being expended by the local authorities concerned by the end of the year. The OPW has continued to monitor progress in each of these cases and is satisfied that €7 million will be spent during 2009 with the balance of €2 million being expended in 2010. We are also satisfied that there was good reason for the delay in each case which could not have been foreseen when the advances were being made.

Following the concern expressed by the Comptroller and Auditor General, the OPW reviewed its position regarding the making of these contributions to local authorities. In 2008 the only advance payment made was to Westmeath County Council for work being carried out in Mullingar for which a contractor had been appointed. We made the contribution in this case because a definite contract and work plan existed. In fact the project will be completed in the next few months.

Having considered and reflected on the points made by the Comptroller and Auditor General, I have decided that in future, rather than advancing funds, we will issue binding guarantees to local authorities to pay them agreed interim and final payments following completion of work. We will do this in sufficient time to enable interim and final payments to contractors to be made speedily without the local authority having to resort to borrowing.

The audit committee and the OPW management advisory committee agreed the 2007 and 2008 internal audit unit business plans. The progress in implementing the plans was monitored by both committees. The internal audit unit carried out an extensive body of audit work in 2007 and 2008. Six audits were completed in 2007, of which five had commenced in 2006, and nine audits were completed in 2008.

The OPW follows general policy on the operation of the audit function, in particular through the operation of an internal audit committee with independent membership, including an external chair. The audit work programme seeks to strike an appropriate balance between the traditional compliance audits, which are vital, and risk identification, assessment and management in business units.

The OPW will continue to need an ongoing programme of compliance and risk audits. Management has done much work to develop an OPW appropriate risk management regime and considerable progress has been made across the office. While I am satisfied with overall progress and that our approach is correct, I acknowledge that, as in any organisation undergoing change, risk management will require constant attention.

I thank members for their attention and will do my best to answer any questions they may wish to raise on the 2007 accounts and report.

Vice Chairman

I thank Mr. Benton. May we publish his statement?

Mr. Seán Benton

Yes.

Deputy Deirdre Clune

Approximately 54% of the OPW's property portfolio is leased or rented. There was probably a great deal of pressure on the OPW in 2007 with the creation of agencies that needed space. Times have changed, however, rents will drop and there is talk of agencies being amalgamated. Can the OPW sub-let space or renegotiate leases and rent levels?

Mr. Seán Benton

The OPW has taken out very few new leases in recent years. There was an opportunity to rationalise several things following the announcements connected with decentralisation, and that has been happening. Our performance in the rental market when benchmarked against the private sector is good. We pay significantly less per square metre in Dublin than other agencies for similar city centre locations. We can do that because of the value of our covenant. We would be significantly below the average market rent in Dublin.

We try to manage the vacant space as tightly as possible. My colleagues in other jurisdictions argue that to manage it effectively we would need to keep 3% to 4% of the space vacant to allow us to rotate. We do not do that. We manage on less than 1% vacancy. There were particular difficulties in respect of several buildings to which the Comptroller and Auditor General has drawn attention. In each case there is an explanation. When one is due to surrender within a couple of years property which might be sub-standard, not compliant with modern health and safety requirements and which it is difficult to get anyone else to take, one tries to negotiate one's way out, there and then, rather than sub-let. We have not traditionally opted for sub-letting because we have such little vacant space. We usually find a Government agency to fill it. It is an option for the future if it would help us reduce costs. It has not arisen because we have had so little space.

Deputy Deirdre Clune

Many of the properties are held on long-term leases. How long are they, 25 or 99 years?

Mr. Seán Benton

Long-term can be up to 35 years without a break and that may apply to some of the rents agreed in the 1970s but in the past decade a 20-year lease would have included five-year breaks after which one can end the lease. That gives one the flexibility to address the changing circumstances such as we are in now.

Deputy Deirdre Clune

Many people are interested in decentralisation. Last October the Government announced the postponement or review of 50 projects until 2011. Where did that leave the OPW? Had it made plans for those 50 agencies? Had it secured, bought or leased spaces for them?

Mr. Seán Benton

There were three phases in the decentralisation project. The first two have been completed or are under construction. At the end of the phase which continues, 6,000 places will have been created around the country. We had bought sites for a couple of the deferred projects. In a number of other cases we had reached agreement to purchase sites but we did not proceed because of the decision to postpone. There is no case where we actually bought a building or had a building under construction.

Deputy Deirdre Clune

Were there only two sites of those 50?

Mr. Seán Benton

There was certainly one and it may be two. I am familiar with the one in Waterford.

Deputy Deirdre Clune

Are there commitments anywhere for the other agencies?

Mr. Seán Benton

Yes, pending a review.

Vice Chairman

Can Mr. Benton clarify whether it is one or two and if it is two, which are they? It was mentioned to Deputy Clune that there was a number of properties where there was an agreement to purchase. Were there any penalties?

Mr. Seán Benton

No, but I will be happy to provide the other information.

Deputy Deirdre Clune

Is the OPW involved in the property that had to be acquired for asylum seekers?

Mr. Seán Benton

Yes, but our involvement has passed. We are not actively seeking accommodation for that purpose any longer. That was some years ago.

Deputy Deirdre Clune

The Accounting Officer mentioned in his presentation the manual ledger and the on-line register. Was the OPW still working with the manual ledger and why was that necessary? It has caused some confusion.

Mr. Seán Benton

It did and I have to acknowledge that. The Comptroller and Auditor General drew attention to issues we have since addressed. When the decentralisation programme was announced, the Office of Public Works took it on without any additional administrative support. There were some areas that did not get the attention that would have been applied in the past. That issue has since been addressed.

Deputy Deirdre Clune

Is the manual ledger still used?

Mr. Seán Benton

Yes, but the whole system will be computerised over the course of this year.

Deputy Deirdre Clune

Is that as a result of the report?

Mr. Seán Benton

The Comptroller and Auditor General drew attention to some areas where we needed to improve and we have done so.

Deputy Deirdre Clune

The procedures in place for flood relief were outlined. Could members get an update on those projects referred to in Waterford, Carlow and Dublin city?

Mr. Seán Benton

The OPW provided funding for flood relief works in Carlow and it was subsequently decided that should be included as part of a major drainage scheme that was being procured at the time. We would have been a small part of that overall scheme but there were significant advantages in being part of a bigger scheme, such as getting our work done at a marginal cost. In that case, the proposed award of a tender was appealed by the unsuccessful bidder and the resolution of that has taken longer than anyone expected. The placing of a contract is imminent but this is a larger project that is the responsibility of the Department of the Environment, Heritage and Local Government rather than ours. We were less than 10% of the overall contract. The fact that the award was challenged created the delay in that case.

In Waterford, there was a delay because after the severe rainfall in 2008, we reassessed the height of the defences that had been planned and we decided to change them. A second delay was caused by the Government decision to have all contracts on a fixed price basis. We had to revisit contract documents and re-tender on that basis. That work is under way.

Deputy Deirdre Clune

Tenders had to be opened again. Was there a charge for that?

Mr. Seán Benton

No, there was no penalty for the OPW. Some costs were involved in redesigning the scheme.

Vice Chairman

Fixed price contracts were introduced in 2005-06 before the money was allocated.

Mr. Seán Benton

Subject to correction, I think it was a lot later than 2005. The plans and design work were under way at that stage but fixed price tendering is must more recent.

Vice Chairman

I thought it was before that.

Deputy Deirdre Clune

What is happening with the 2008 fixed price tenders for Waterford?

Mr. Seán Benton

Work is now under way.

Deputy Deirdre Clune

Dublin City Council's unspent balance was €2.2 million. These three projects account for the €9 million that was not spent.

Mr. Seán Benton

The other two areas were in Fingal and Dublin City Council. In the case of Fingal, the payments were made for the Finglas-east Meath work and the replacement of the Mulhuddart bridge. Work will commence on the bridge soon and the other work has taken longer than originally anticipated but I am confident the money will be fully spent by mid-2009.

In Dublin City Council, the payments were spread over two projects that will not be completed until 2010. When I referred to the €2 million of the €9 million, I was talking about those projects.

Deputy Deirdre Clune

Is the money for Carlow and Waterford still with the local authorities?

Mr. Seán Benton

Yes.

Deputy Deirdre Clune

Even though the contracts are being negotiated.

Mr. Seán Benton

I expect the Carlow contract will be placed any day.

Deputy Deirdre Clune

Is that not unusual? Would a contractor not submit invoices at various stages of a contract rather than money being paid up front and money being needed by the local authority up front?

Mr. Seán Benton

The money is paid to the local authority and not to the contractor. It had been the practice in the OPW to give funds to local authorities so they could enter commitments with the confidence that the money was available. We might have been over-ambitious about the work that was being done and we are now sensitive to the delays that arise in these complex programmes. From planning issues to challenges to the award of a contract — works are getting bigger — we have decided to enter binding commitments with local authorities that will give them the comfort of knowing the money is contractually committed from OPW and they can then enter contracts. On notification from them that interim certificates have been received for the work, we will undertake as part of the legal agreement with them to give them the funds immediately. It meets the concerns of the Comptroller and Auditor General.

Deputy Deirdre Clune

That is a change of approach. We had the Department of the Environment, Heritage and Local Government before the committee to discuss a drainage scheme in Limerick. It was similar in that the money was not paid by the Department until the contractor submitted the certificates.

Mr. Seán Benton

That is the approach we will be following for the future.

Deputy Deirdre Clune

Will that work? Has there been any feedback on it?

Mr. Seán Benton

I think local authorities will take comfort from the fact that they have a binding agreement with OPW to put them in funds as necessary rather than just a promise. It will be an agreement that——-

Deputy Deirdre Clune

I can understand that from having been on the other side. On the question of the flood relief scheme throughout the country, how many projects are being advanced? I know of a particular one.

Mr. Seán Benton

There is a long list which I am happy to provide to the committee.

Deputy Deirdre Clune

Yes, perhaps Mr. Benton would supply that list. There are many concerns.

Mr. Seán Benton

There are several major projects. People will be familiar with the projects in Fermoy, Mallow, Clonmel and Ennis but there is a range of projects from a couple of hundred thousand euro to tens of millions of euro across the country.I am happy to provide the list to the committee.

Vice Chairman

That would be useful. Does the OPW have a prioritised list of flooding blackspots? Is there a set schedule of work of which projects need to be addressed sooner than others?

Mr. Seán Benton

There is. There are major studies taking place where the flood risk is being assessed across the country in different catchment areas. We have been addressing the priority areas but with your permission I will ask the director of engineering to comment on that issue.

Mr. Tony Smyth

We are developing criteria to look at how we will prioritise schemes across the country. Up to now we have had sufficient funds to deal with all the major projects as they arose and the delays have been in the processing of the projects and the design work. Obviously with the economic situation we will have to look at prioritising projects. We are conscious of that and are developing criteria which we hope to conclude in mid-year.

Vice Chairman

Does the OPW have a prioritised list?

Mr. Tony Smyth

No, but we have four major schemes on site and a number of others are out to exhibition in Templemore and Enniscorthy. We have further phases in Clonmel, Mallow and Fermoy. Phase 1 of those projects is on site at present and the design of the second phase is progressing well.

Vice Chairman

It would be helpful for the committee to have that list. I am glad to see from the Accounting Officer's opening statement that the process has changed completely and that a binding agreement is given that the money will be paid and that it does not sit with the local authority. Mr. Benton alluded to this in reply to one of the questions, particularly with regard to last year when there were two periods of very heavy rainfall and flooding in March and August. People will look at unspent moneys allocated to the local authority in 2007 and probably none of those projects has been completed or even started. Is it anticipated that the projects to which the Deputy referred in Carlow, Dublin city, Fingal and Waterford, will commence this year?

Mr. Seán Benton

In the case of Waterford the project has commenced, in the case of Carlow the signing of the contract is imminent. The Fingal and Dublin city project was for a group of works, some of which are under way, some have been completed but they will not all be finished until 2010.

Deputy Deirdre Clune

What are the four projects to which Mr. Smyth referred?

Mr. Tony Smyth

The four on site at present are Clonmel, Mallow, Fermoy and Ennis. In addition, we are on site at the Dodder in Sandymount and in Leixlip with Dublin City Council. We have another list of projects with Dublin City Council that we are progressing at various stages of design.

Deputy Deirdre Clune

I have heard anecdotally of flooding in areas where it did not happen ten years ago.

Mr. Tony Smyth

The past 15 years have been very wet and we have had several major flood events in that period, following a similar period when there were very few flood events. Certainly it has been a decade or more of challenging times.

Deputy Deirdre Clune

Is the OPW in the process of looking at those difficult——

Mr. Tony Smyth

We had a review of flood policy in 2004. That asked us to look not just at the construction of flood projects to defend against existing risk but at a process of non-structural measures including flood hazard mapping and planning and control measures with the planning guidelines issued with the Department of the Environment, Heritage and Local Government. We are looking at bringing out catchment flood management plans over the next five years.

Deputy Thomas P. Broughan

Is global warming factored into that?

Mr. Tony Smyth

Yes. The catchment flood management process will look at global warming and at planning and development pressures also.

Mr. Seán Benton

It is only since 2004, following on the review, that the decision was taken to give the Office of Public Works the lead role in addressing many of the matters referred to. We have been developing our expertise and other resources since then. We have a very detailed programme of work which I am happy to forward to the committee. It will show what we are doing not just in relation to the actual schemes but some of the other areas being addressed in terms of research and development, managing risks and so on.

Vice Chairman

Please send it on. It would be very helpful.

Deputy Deirdre Clune

In regard to the OPW Vote, subhead C.2, grants to the Irish College in Paris, the Pontifical College in Rome and Maynooth College for which there was an additional €2.4 million in 2007. Was that work tendered for or was it out of the ordinary?

Mr. Seán Benton

That would have been tendered for locally in France, Italy and Belgium and we would have appointed agents locally to manage the process on our behalf.

Deputy Deirdre Clune

Is the OPW responsible for properties overseas?

Mr. Seán Benton

It varies. When the Government takes a decision to grant aid a particular project the money comes through our Vote and we monitor the expenditure. In some cases we provide professional advice and guidance to the agencies. In other cases, they take more responsibility themselves but we actually oversee how the money is being managed.

Deputy Deirdre Clune

Thank you.

Deputy Michael McGrath

I welcome Mr. Benton, his colleagues and the officials from the Department of Finance. Following on from Deputy Clune's questions, I wish to raise a number of issues on which I seek clarification. On the issue of extra remuneration in the accounts, I note the extra remuneration is 24% of the total salaries, wages and allowances charge which appears to be a high percentage. Looking at the breakdown in the Vote for extra remuneration, overtime accounts for €7.9 million. According to the figures, 1,739 staff received overtime payments, 421 to the value of €6,350 or more, and one staff member received almost €61,000 in overtime. Will Mr. Benton explain how that occurs and what type of functions and duties the person receiving that level of overtime would have had during the period in question?

Mr. Seán Benton

Perhaps it would be helpful if I explained that there are two main categories of staff. In total there are in excess of 2,000 staff made up of approximately 700 administrative staff and professional and technical civil servants. There would also be a lot of industrial staff, guides at sites and a whole range of other people and skills.

For the 700 administrative and professional and technical staff the extra payments would be very small, amounting in total to approximately €300,000. The overtime is incurred mainly in the industrial grades, the trades, the guides and so on. Part of the explanation is that much of the work they do, particularly if it is in offices, can only be carried out in the evening or at weekends for the convenience of the people who occupy the offices. In other cases our facilities are open all weekend. In other cases, we make our facilities available, such as Dublin Castle, for major functions. We receive an income for those functions which is reflected in another part of our accounts. There is a requirement to have people available out of hours and that accounts for the main bulk of the overtime. In the past few years we focused on this area and managed to achieve significant reductions, and further reductions are being targeted for the year ahead.

Deputy Michael McGrath

A payment of €61,000 for one individual is an extraordinary amount of money.

Mr. Seán Benton

It was an extraordinary amount of money. That individual, and I am conscious of the Chairman's comments that I should not identify him in any way, has a particular expertise. He was required to supervise a number of maintenance works and events facilities that were taking place at the principal properties used by the Government. The amount was significant. He is a key person but given that the number of those functions are in decline, the overtime will have fallen proportionately. The year 2007 was a particularly busy year.

Deputy Michael McGrath

Is it an exceptional case that somebody would earn that amount or are there a number of other people who might earn €30,000, €40,000 or €50,000 a year in overtime?

Mr. Seán Benton

No. That was an exceptional case but there are people in key positions who earn significant sums but it is something we are reviewing all the time.

Deputy Michael McGrath

Is there a premium rate for overtime? Is it time and a half or the standard per hour rate?

Mr. Seán Benton

There are premium rates that apply at weekends particularly, depending on the time.

Deputy Michael McGrath

If it is seen that over a period of time that level of overtime is required, would it not be more cost efficient to bring in a new employee at a standard rate rather than continuing to pay somebody a premium rate for hours that consistently must be worked?

Mr. Seán Benton

As I said earlier, we have managed to reduce the overtime significantly and we are examining all of those options. However, in a few cases we have key people who are familiar with the buildings and all their operations and where there is a major State event, we look for the experienced person to supervise it.

Deputy Michael McGrath

On the grant for certain refurbishment works, I note the expenditure exceeded the provision by €2.4 million. It is noted that additional grants were paid to the Irish College in Paris and the Pontifical Irish College in Rome. To what extent are we supporting the maintenance of properties overseas? Mr. Benton might give us an indication of the level of funding or grants the Office of Public Works is providing for properties outside this jurisdiction and give us some examples other than those specifically identified here.

Mr. Seán Benton

The grants were made available by the Government for specific restoration projects. We do not support maintenance programmes on an ongoing basis. They are for specific projects approved by Government. It was the Irish College in Paris, the Pontifical Irish College in Rome and the Louvain Institute. Those are the three main ones.

Deputy Michael McGrath

Regarding rents the OPW pays in respect of Departments or State agencies using that property, I understand those rent charges remain within the OPW Vote. Is that correct? In the 2007 figures, therefore, rent, rates etc., amounted to €124 million. Does the OPW recoup that from the respective Department or agency?

Mr. Seán Benton

No. I will explain. For all Departments and most of the offices that are involved, we pay on their behalf. We do not recoup. What the comptroller drew attention to was a number of cases where we have been asked to take property on behalf of an agency that was sometimes in the course of being set up but the legislation may not have been passed and they were getting themselves organised. Quite a number of those created in the past few years are responsible for their own rent but we were asked to get them started.

Deputy Michael McGrath

Is it for historic reasons that the charge would remain with the OPW? From an accounting perspective, surely it would be better to have the charge in the accounts of the relevant Department or agency instead of mixed in with the OPW.

Mr. Seán Benton

There is a lot to be said for that approach. It is not something OPW would object to but there are advantages in making people realise what they are spending on their accommodation requirement.

Deputy Michael McGrath

Under appropriations-in-aid there was income of €4.2 million under rents and licence fees. To what would that have related?

Mr. Seán Benton

Some of them were rents that were tied to land. Others would have been rents and licences from Garda masts in terms of making them available to the various operators.

Deputy Michael McGrath

On the issue of——

Vice Chairman

Before moving on from the rents issue, I want to ask the Department of Finance about that because the Deputy has raised a valid point. In the running of any Department the rent should be part of its costs. Will the Department of Finance official indicate if there is any work ongoing in the Department to ensure that each Department's allocation for rent and costs for rent will be shown against its own Vote rather than have the OPW carry the can, so to speak?

Mr. Frank Griffin

There are advantages and disadvantages to that approach. The advantage is the transparency of showing the charge. The disadvantage would be that the accountability for it would be with the Department and it might erode the flexibility the Chairman would have to take space on behalf of the Departments. It is very important from the perspective of getting efficiency from the use of public funds to ensure that all of the Civil Service property is managed by the OPW.

Vice Chairman

That is understood. I do not disagree with that. It is better being managed in the OPW but on the transparency issue, it cannot be a disadvantage for a Department to be responsible for that element of cost against its own budget. The OPW agrees. It is the expert in this field. It should be managing the properties and it is able to gain efficiencies out of that but are there plans in the Department of Finance to show what the rent amount would be against each Department's own Vote?

Mr. Frank Griffin

The Revised Estimates Volume shows that kind of information but not as a charge to the Vote currently. It is an issue we have examined on a number of occasions. The last time it was examined in a major way we decided it would be best to leave the accounting function with the OPW. We are examining many issues regarding property and we might decide, bearing in mind the transparency issue, that that approach would be better but we have not reached a conclusion on that as yet.

Vice Chairman

How far away is the Department from reaching a conclusion?

Mr. Frank Griffin

In the next few weeks we will be in further discussions with the OPW on general property issues and later this year we will probably have a circular covering many property management issues which will arrive at a final position on that, among other things.

Vice Chairman

I thank Mr. Griffin. I know I cannot ask Mr. Benton his view on it but I am glad to hear that work is ongoing and for a Department to have responsibility for the rent amount. It is not to take away the function from the OPW to manage the property. Would that cause any difficulties for the OPW if that were the case?

Mr. Seán Benton

As the Department of Finance official said, there are advantages and disadvantages but going back many years I saw some advantage in making people aware of the full cost of their operations. I also thought there may be value in introducing incentives into it that would encourage them to reduce their take of space. There are complications, however. It is something about which we have been talking to the Department of Finance.

Deputy Thomas P. Broughan

What is the practice in other countries in that regard?

Mr. Seán Benton

It varies from country to country. In some countries, as is the case perhaps in the UK, individual Departments are significantly bigger being multiples the size of entire portfolios of the Office of Public Works. Individual Departments have a property function but in those cases they centralise that property function. In smaller countries it varies from the OPW practice to arrangements where the full cost of the accommodation they use is reflected in their accounts. It is not straightforward in that there are many State owned properties and the value of those must also be reflected. It is a matter how those two requirements are integrated.

Vice Chairman

We might return to this point raised by Deputy Broughan but Deputy Michael McGrath may continue now.

Deputy Michael McGrath

I agree very much with Mr. Benton on that point. The OPW should operate on a money-in-money-out basis in the accounting treatment of rent charges that directly relate to a Department or an agency. There will be some properties that do not fit neatly in any particular Department, but in respect of those that do, the system of reporting should be changed. Clearly, when we consider the Vote of a Department which has significant rental charges we are not getting the full picture because those charges are contained in the OPW Vote. It could be argued that this is a distortion of the figures in its Vote. The negotiation of the rent amounts and so forth would remain with the OPW but, from a transparency and an accounting point of view, it would be better to have the respective charges contained in the relevant Vote. I urge Mr. Benton to conclude his consideration of that matter.

Moving on to the issue of flood relief, which Deputy Clune also raised, and the level of funding that was advanced to local authorities for works that have not yet been undertaken, that seems an odd way to do business. Mr. Benton might explain historically why that was the case. Is it because in the past projects progressed at a quicker pace and there were fewer delays? To what extent does Mr. Benton have assurances that none of that funding is being subsumed into the current budget of the local authorities, which must be a great temptation for them to do in the current climate? To what extent is it ring-fenced for the purpose for which it is provided, monitored and tracked by the OPW? Clearly, there would be a lost interest income, if the OPW is advancing significant funds one, two or three years ahead of the works being done. Why has it taken so long to move to a drawdown basis similar to how other grants offered by Departments would have worked?

Mr. Seán Benton

I do not believe it has taken a particularly long time to get to the position we have arrived at now, which as I have explained is payment on demand. In all the cases covered in the report we were satisfied, on the basis of our contacts with the local authorities, that they were in a position to place a contract. I have explained the reasons in each case that did not happen and I am satisfied about that but there is ongoing regular contact with the local authorities. We are satisfied that the money has not been siphoned off. We are comfortable in the knowledge that as the projects progress through the planning and tendering stages the local authorities are in funds to complete the work for which we have funded them.

Deputy Michael McGrath

Regarding the internal audit function, Mr. Benton had previously provided the committee with details of the reports completed in the past few years. How many people work in internal audit and what type of issues arose in the various reports completed? Were significant issues identified that were then followed through? From a procedural point of view, who oversees the reports when they are concluded? Do they come before the commissioners? Mr. Benton might give us a flavour of the way the OPW administers the completion and implementation of the recommendations in the internal audit reports.

Mr. Seán Benton

There are three staff members who are dedicated to internal audit. We have been developing the function over the years. I believe the Office of Public Works is the first Civil Service office to have ISO accreditation for virtually all of its business functions. We have a systematic and organised approach to our processes and they are independently audited. That is one form of audit.

Our internal audit function has developed in line with Government policy in this area. The practice is they make their report, consult with the business units they are dealing with and draw attention to any issues about which they are concerned. Sometimes their concerns are addressed through explanation. On other occasions they make recommendations regarding where processes and procedures might be improved or changed. The head of the business unit undertakes to do that. The internal auditor reports to the audit committee. The audit committee is made up of an independent chair, an external chair and other independent membership. We follow the recommended rules in respect of governance in that regard. It is an area that has been given increasing attention, certainly in the past seven, eight or nine years. It is a sophisticated unit now and it has a significant work programme every year which is signed off by the audit committee, which is externally chaired.

Deputy Michael McGrath

I have two further questions. I understand the OPW has framework agreements whereby it puts together a list of qualified contractors to carry out certain works, for example, quantity surveying and consultancy services. Could Mr. Benton explain the number of such agreements the OPW has, how they work and how contractors will have the opportunity to get on that panel?

Mr. Seán Benton

We havea number of arrangements of that nature. In regard to consultants, for example, design consultancies, whether it be quantity surveyors, engineers or architects, we have arrangements in place whereby we invited people to express an interest, we evaluated them against set criteria and listed them, including geographic distribution. When we are placing a contract, we invite the people on that list to bid. Increasingly, projects exceed the European threshold. In the past we had to advertise on every occasion whereas with this arrangement, by having made one approach to the market, we have been in a position to respond much quicker and shorten the lead-in time for any project by virtue of having gone through the procurement process and meeting all the EU standards on it.

We have another arrangement in place for drawdown maintenance services in Dublin. We have one contractor supplying a maintenance service for the office portfolio in Dublin and that service is provided on the basis of agreed rates. That contractor competed for the service contract initially and supplies it according to agreed rates. There are a number of those arrangements in place. We find it is the most efficient way to do business rather than having to go to the market every time we have a requirement.

Deputy Michael McGrath

My final question is a parochial one and maybe it is unfair to ask it but Mr. Smyth might have the answer. The Lee catchment flood risk assessment and management study in Cork has been ongoing since 2006 and is due to be completed around now. Does Mr. Benton have any information on that? What progress has been made on it? Will it result in decisions being made relating to required capital works and the provision of funding, given that Cork city and the lower harbour in particular were badly hit in the floods in October 2004, the evidence of which is shown on the OPW's website? Works will be required there which I am sure the study will identify. Those involved have conducted their business professionally. They have sent a monthly newsletter and have held public exhibitions. I look forward to the study being published and hopefully works being carried out as a result of it. Perhaps Mr. Benton might have some information on that but, if not, I can contact him directly.

Mr. Seán Benton

The Deputy can contact me directly for any detailed information he wishes to have on this project. It is a major project. The study is being managed and funded by the Office of Public Works. We expect the project and study report to be available mid-year and some public information days are planned for April. However, if the Deputy wishes to get any detailed information relating to it, I would be happy to supply it.

Vice Chairman

Deputy Clune was interested in it as well. I am sure if the Chairman, Deputy Allen, was here, he would also be interested in it.

Deputy Deirdre Clune

Mr. Benton is going to submit information for all projects to the committee.

Mr. Seán Benton

There is a significant amount of detail relating to the River Lee flood study which might be of interest to some of the Deputies.

Vice Chairman

Perhaps you would submit them. It would save me asking about the Cuckoo stream in Balgriffin.

Deputy Michael McGrath

All politics are local, Chairman.

Deputy Seán Fleming

I thank Mr. Benton, his officials and the Department of Finance staff for their attendance today. There was a discussion about the €9 million the Office of Public Works advanced to local authorities that was unspent at the end of the year. I cannot but contrast that nice cosy relationship between the office and the local authorities with page 65 of the accounts, which shows that the office had to pay penalty interest payments amounting to €35,352 under the Prompt Payment of Accounts Act in respect of late payments. On the one hand the office is giving money to local authorities to sit in the bank, while on the other hand, the poor contractor must wait for payment. The office was in breach of the law regarding paying its contractors and had to pay that amount in penalty interest payments. That is difficult to reconcile.

Mr. Benton said the office has independent ISO accreditation for most of its activities. It does not say much for ISO accreditation if it can give accreditation for those two incidents of contrasting behaviour. Have there been further penalty payments since the end of 2007? Every day the Government is asking the banks and others to let the money flow. We said the same to the Revenue Commissioners about cashflow difficulties. Now we discover a big State agency is not paying its bills on time. Mr. Benton will tell us the amount is small but I am concerned it is there at all.

Mr. Seán Benton

As I am. This is a personal hobby-horse of mine. The Office of Public Works makes approximately 50,000 payments per year. The Deputy is correct that it is a small amount but, as far as I am concerned, it is too much. I get monthly statements on our performance on those payments. There can be reasons for things being delayed but it is not acceptable that there is any penalty incurred at all. However, the amount is in respect of 45,000 to 50,000 payments that we make annually, so it is a very small percentage. Nevertheless, we are striving all the time to eliminate it. Generally, our record of payment to contractors and suppliers is not just good but excellent, and most of them would confirm that. There have been a few cases where we did not manage to make the payment on time. We pursue each one and look for the reason. Sometimes it is acceptable and sometimes it is not but we aim to eliminate that in so far as it is humanly possible.

Deputy Seán Fleming

Has it continued since the end of 2007? Have there been any other late payment penalties?

Mr. Seán Benton

There have been a number. We constantly monitor performance and try to eliminate it.

Deputy Seán Fleming

It proves the need for this Act. If it was not in place, Government bodies might be even slower than they already are in paying. When Mr. Benton says it is acceptable, is he referring to somebody being on holidays? What is an acceptable or unacceptable reason for a late payment? The phrase "the cheque is in the post" is hackneyed and I hate to hear it from a State body.

Mr. Seán Benton

As I said, in the context of the volume of payments we make, the Deputy would acknowledge it is a very tiny percentage.

Deputy Seán Fleming

There should be none of these in any State body.

Mr. Seán Benton

We would aim to eliminate them. There can be problems with invoices, individuals who are not available and so forth, but it is something the commissioners have been emphasising, particularly at present. Generally, our record is excellent.

Deputy Seán Fleming

Would any of the staff who were identified as being responsible for the late payments have received bonuses for good performance in the course of the year? It is something of a rhetorical question. I suspect the answer is "Yes". Perhaps Mr. Benton does not know.

Mr. Seán Benton

The answer is "No" because the bonus system does not apply to anyone.

Deputy Seán Fleming

Will Mr. Benton explain that again? We regularly hear about bonuses.

Mr. Seán Benton

No, we do not have——

Deputy Seán Fleming

Is there a bonus system in the Office of Public Works?

Mr. Seán Benton

We do not have a system of bonuses to individuals at all.

Deputy Seán Fleming

I am pleased to hear that. The staff do their job and are paid their salaries. That should be followed in other Departments. It is the right way to do business. I thank Mr. Benton. I could not ignore that contrast in the accounts.

Mr. Seán Benton

I appreciate the Deputy's concern. It is a matter of which we are aware.

Deputy Seán Fleming

Politicians are attacked for the amount of money we spend on costs and so forth. I note a figure on page 66 of the accounts. There was an estimate to spend €1.5 million on Leinster House projects but the office spent €5.531 million, which is €4.031 million in excess of the estimate. It drives the public mad to hear that three times more than the original estimate has been spent on facilities in Dáil Éireann. What cost €5.531 million in 2007? I am aware there was an election that year.

Mr. Seán Benton

Around that time we became aware of serious structural deficiencies within the Leinster House building. That had not been provided for initially but a number of interventions were considered necessary. That accounts in large part for the increased funding.

Deputy Seán Fleming

My next question arises from an earlier meeting of the committee and relates to one of the bodies under the auspices of the Department. The Government Supplies Agency had a budget of approximately €1 million in the year in question and spent approximately €880,000. How many staff are in the agency? How have they been recruited? What are their grades and what is their external commercial experience? That agency does purchasing on behalf of State bodies. It is obviously not a large agency when it has a budget of only €1 million.

Mr. Seán Benton

There are about 20 staff involved. They are Civil Service grades and some technical people with particular expertise in the areas for which they are responsible. The office is responsible for general office supplies, uniforms, vehicles and other household office requirements.

Deputy Seán Fleming

What technical experience is there?

Mr. Seán Benton

There is a range of expertise. At senior level, there is an expertise in procurement, both national and international. At individual sector level, there is expertise in textiles, utilities——

Deputy Seán Fleming

There cannot be too many specialties if there are only 20 staff. Did the senior personnel with the qualification at national and international procurement obtain that qualification through the Civil Service?

Mr. Seán Benton

Yes.

Deputy Seán Fleming

So it would not have been through exposure to what I call the real world. It would have been in the public service, non-commercial world.

Mr. Seán Benton

I would be happy to argue that with the Deputy. They do operate in the real world. They go to the market.

Deputy Seán Fleming

In the commercial sector?

Mr. Seán Benton

Absolutely. They go to the market and negotiate good deals. The Deputy could benchmark their performance against the private sector and I believe he would be surprised at the result. I am happy to avail of the opportunity to debate this.

Deputy Seán Fleming

The reason I raise this is that I was at a meeting of this committee a few months ago when we dealt with a different chapter in the Comptroller and Auditor General's report relating to the purchase of 600 Garda cars. We were astonished to discover that more cars were purchased than could be fitted out so some of them were left in stock for up to 18 months. The Commissioner told us the Garda did not negotiate that contract arrangement but that it had been done by the Government Supplies Agency.

I decided to wait until the Government Supplies Agency was before the committee to discuss this. The essence of what he said to us that day was that the OPW had an agreement. This person with international procurement experience signed the contract for a set price and was not able to achieve any discount when he bought several hundred additional cars over and above what he had originally expected to buy. The Garda Síochána told us that the OPW had a fixed price with set suppliers even after the State spent millions on hundreds of extra cars. The Garda said there was a fixed-price arrangement and a set contract in place for an 18-month period, yet they were not able to achieve any commercial discount that anybody in the outside world would know could be achieved. Perhaps Mr. Benton could talk us through this matter because the Garda Commissioner lobbed it back into the OPW's court.

Mr. Seán Benton

That is fair enough. There was a contract that was managed by the Office of Public Works. We would have been supplying the vehicles specified by the Garda authorities to the number specified. We went to the market and negotiated the best price there. The contract was in place and the cars were supplied on the basis of that contract.

Deputy Seán Fleming

That is the first half of the matter, but we now turn to the second half — when the Garda Síochána realised it had an additional budget to purchase a large number of extra cars. We will want written details from the OPW on this because it is something we cannot let go. It has arisen under two sections in the Garda Síochána Vote. When the Garda Síochána informed the OPW it had additional funds to allow the OPW to procure extra cars towards the end of the year, even though the OPW was probably the biggest purchaser in the market place at that time, such a restrictive contract had been signed that it could not go elsewhere or negotiate a penny downwards. The OPW was stuck with the price it had struck for a smaller quantity of cars, and was unable to achieve any discount on a massive purchase later on in the year. That is what we were told.

Mr. Seán Benton

That may well be the case.

Deputy Seán Fleming

If that is the case, it is not good enough. If the Committee of Public Accounts is about anything, it is about value for money. The fact is the OPW went out and bought hundreds of cars, but did not get a penny discount. If the procurement procedures, backed up by the ISO accreditation, says that this is a good way of doing business, I would have nothing to with any of those procedures because they are a sham. It means one has a good paper trail to ensure that there is a good administrative system in place, but it does not look at the interests of the taxpayer in getting value for money. I could not achieve it with the Garda Commissioner on the previous occasion, so I now want details of how the additional car orders were paid, in view of the fact that no discount applied. I do not know the name of the company, but the cars could have been Ford Mondeos. Mr. Benton can understand how we are frustrated because not a penny's discount could be achieved in that massive purchase.

Mr. Seán Benton

We have already written to the committee explaining the background in some detail. We are totally at the mercy of the clients when they advise us as to the quantity of the product they will be procuring in the course of the year. Due to the nature of that contract and because it suited their purposes to acquire additional cars, we were tied into a contract. The Deputy has raised legitimate issues which we will certainly look at. We expect clients to be able to guide us accurately as to the quantity of any goods they want.

Deputy Seán Fleming

I agree with that. In this situation the Office of Public Works was the Government Supplies Agency. The Garda Síochána was not the procurement agency because the OPW had specialist knowledge. I do not think, however, that the Garda Síochána would have been entitled to assume that the OPW had such a tight contract with no flexibility, given that it asked the OPW to purchase however many cars were expected. Would the OPW not have known somewhere along the line to give itself some flexibility if it had additional purchases to make?

Mr. Seán Benton

The Deputy has raised valid points which we have to be very conscious of as regards any future contracts.

Deputy Seán Fleming

Perhaps I have covered that topic enough. I have made the point that we were dumbfounded with the Garda Commissioner on that matter.

I wish to raise a couple of other issues with Mr. Benton, including fixed-price contracts. Perhaps the Department of Finance representatives will have to come in on this. I also want to discuss the fact that the Department of Finance has issued — and the OPW would be one of the principal contracting bodies — the pre-qualification criteria for contracting bodies. In layman's language these are criteria that are issued to all contracting bodies, such as the OPW, that are entering into contracts on behalf of the State. It is a stringent set of criteria. The outcome of the new pre-qualification criteria is that small and medium-sized businesses, who have historically done work for the OPW and other Government bodies, are now excluded from even tendering for contracts on a scale they would have carried out on previous occasions. The new criteria include previous year's turnover, which in a time of recession varies from year to year. Is the Department of Finance aware of the damage the new criteria have done to the small and medium business sector resulting in much larger companies achieving a greater proportion of contracts? Meanwhile, many small and medium-sized companies, which have done these type of jobs before, are excluded. We all know of contractors who, for example, have built local authority houses. A smaller scheme can arise with the same local authority the following year, but the contractors are told that under these new criteria they are not eligible, even though they may have done bigger projects in the past for the same contracting body. I want to get a comment from the Department of Finance on that situation because it is damaging. Like everything else, the document may be ISO approved, but it is bad value for money for the Irish taxpayer.

Deputy Thomas P. Broughan

Is the Deputy not arguing against what he said earlier concerning the purchase of cars?

Deputy Seán Fleming

No.

Deputy Thomas P. Broughan

Surely he is arguing against it here.

Deputy Seán Fleming

No, I am not.

Deputy Thomas P. Broughan

We must be consistent as a committee.

Deputy Seán Fleming

I am absolutely consistent.

Deputy Thomas P. Broughan

I do not think he is.

Deputy Seán Fleming

The pre-qualification criteria are so rigid that they are eliminating competition from the tendering process.

Vice Chairman

The point has been well made. Perhaps the Department of Finance representatives can come in on this. Is Deputy Fleming putting a question to them?

Deputy Seán Fleming

Whichever.

Vice Chairman

Whoever wants to pick that one up.

Mr. Seán Benton

That is a matter of Government policy.

Deputy Seán Fleming

I am not asking about policy. I am asking whether any of the witnesses is aware that a limited, or smaller, number of people can now tender for jobs than heretofore. Would that information — that we would all see at first hand at ground level — have worked its way up to Mr. Quigley's level in the Department of Finance? Is he aware of it?

Mr. Dermot Quigley

The objective of fixed-price contracts was to get better value for money for the Exchequer. That has worked out and the performance to date has proved that point. It is, of course, also a fact that the economic downturn has adduced a great deal more competition, so prices have fallen substantially, particularly in the construction area. We are conscious that the pre-qualification criteria need to be interpreted and enforced flexibly by the contracting authorities. The forms involved are complex, but in many cases a lot of the details in them are optional for the contracting authorities to use. Depending on the size of the contract, the contracting authorities can require minimum rather than maximum information.

Another aspect is that the Government has decided that a national operations unit for public procurement will be set up in the OPW to deal with goods and services. The Government is conscious of the need, particularly in these times, for small and medium enterprises to be facilitated. One of the objectives of the new unit will be to bring in aggregated contracts in order to save the Exchequer money. However, it will also ensure that as regards timeframes, the detail required, feedback and unsuccessful bidding, and the needs of small and medium enterprises will be fully taken account of. It is envisaged that there will be a balance between ensuring the Exchequer gets value for money, while at the same time there is as level a playing field as possible for small enterprises. We are extremely conscious of the fact that a complete drive towards value for money and fixed practice contracts could lead to competition being snuffed out. When the national operations unit becomes active, it will be responsible for achieving a balance. One way of doing this will be to ensure that contracting authorities consider the pre-qualification criteria and only demand the information they need in respect of particular contracts.

Deputy Seán Fleming

Did Mr. Quigley state that a new Government supplies agency is to be established?

Mr. Dermot Quigley

The Government made a decision in this regard last year. This decision was confirmed in a statement entitled "Transforming Public Services" issued at the end of November. The object is to establish a new national operations unit within the Office of Public Works. The existing Government Supplies Agency will be expanded rather than just continuing to operate as it does now but under a new name. The idea is that initially it will be involved in contracts relating to Government Departments and agencies. However, over time and depending on the success it has in carrying out its work, it is intended that its activities would be expanded into the local authority and education sectors. The construction procurement reform policy will remain with the Department of Finance, but the national operations unit will assume responsibility for centralised contracting for goods and services, including through e-tenders and e-procurement.

Deputy Seán Fleming

In view of the additional work that will be allocated to the enhanced agency, what plans are in place to ensure that what happened with Garda cars — in respect of which Mr. Benton stated he did not receive proper notification from the relevant State body regarding the numbers supplied — will not occur on a larger scale in the future? What steps will be taken to ensure that the OPW, regardless of what other Government agencies state, will have flexibility to obtain better deals?

Mr. Seán Benton

As already acknowledged, we must learn from the experience of the past. I am pleased the Government has the confidence in the Office of Public Works to give it this enhanced role in the area of procurement. This confidence grew out of the experience of dealing with the office. A new staffing structure, with specialist skills in certain areas, will be required.

Deputy Seán Fleming

Will staff be recruited from the outside or will it be done internally?

Mr. Seán Benton

It depends on which staff will be available and who will be the best people for the job. This has literally happened in the past couple of days. We are actively examining the management and structure of this unit and we expect to have it up and running within the month.

Deputy Seán Fleming

Will the unit operate out of the OPW's offices in Trim?

Mr. Seán Benton

Yes, its headquarters will be in Trim.

Deputy Seán Fleming

So the office will be operated by the staff deployed to Trim.

Some €63 million was spent on decentralisation in the year under review. Were any PPP contracts signed in respect of the decentralisation programme which would give rise to spending that would be additional to the figure of €63 million? There is one project listed in respect of Mullingar and Carlow. This also relates to Portlaoise. The preferred bidder for that PPP was announced some time last year.

Mr. Seán Benton

As the Deputy will be aware, the approach to acquiring accommodation for decentralisation was multifaceted. In a small number of instances, leased accommodation was available and we availed of this. In other instances, we were able to purchase existing properties that met the needs involved. However, in most cases, the programme is being rolled out on a design-build basis. In respect of the decentralisation relating to the Departments of Agriculture, Fisheries and Food, Enterprise, Trade and Employment and Education and Science — the three largest projects — we bundled development in the form of a major PPP. The preferred bidder was announced some time ago and we are at the financial close stage. That is all I can say on the matter at present.

Deputy Seán Fleming

I thank Mr. Benton.

Deputy Thomas P. Broughan

I welcome Mr. Benton, his colleagues and the officials from the Department of Finance.

On note 15, new works, alterations and additions, the estimated provision for 2007 in respect of decentralisation was €135 million and the outturn was €63 million. In respect of minor works, the estimated provision was €20 million and the outturn was €34 million. As Deputy Fleming stated, the estimated provision for the Leinster House projects was €1.5 million while the outturn was €5.5 million. The estimated provision in respect of Ballymun Garda headquarters and an office for the Department of Social and Family Affairs was €8 million and the outturn was €16 million. I accept that the overall figures for estimated provision and outturn are quite close but why was there such a discrepancy with regard to the projects to which I refer?

Mr. Seán Benton

The first matter to which the Deputy referred was decentralisation. The position in this regard is explained, in the main, by virtue of the fact that opportunities arose to lease accommodation rather than to construct new accommodation. Some of the money relating to this is reflected under another subhead.

I already explained the background to the Leinster House projects.

Deputy Thomas P. Broughan

The OPW is not proceeding with its project in respect of the Seanad. A few years ago the committee was informed that the Seanad Chamber is a dangerous place. It would not bother most of the members present if it did collapse. However, the Seanad Chamber did appear to be in imminent danger of collapse and that is why it was proposed, probably correctly, that the Upper House would move to the Natural History Museum for a period. Unfortunately, it was then decided that the Seanad would remain at its current location.

Mr. Seán Benton

There was never any question as to the structural soundness of the Seanad Chamber. The difficulty arose in respect of the main building proper. To carry out work on the main building, it would have been necessary for the Seanad Chamber to be vacated. In view of budgetary constraints, we cannot proceed with the major scheme. However, we have addressed all the urgent health and safety issues. We are using our own human resources to strengthen, where necessary, the flooring in the main building. We were obliged to remove some of the staff of the Houses and their equipment from particular offices in order to reduce the load on some of the floors in the main building. There is no danger to anybody using the building but we must manage how it is used. It was necessary to put the major project on hold until such time as funds are available.

Deputy Thomas P. Broughan

Why did the Ballymun facility cost twice the estimated amount?

Mr. Seán Benton

It was not twice the cost; it was twice the amount projected for that year but it came within the overall cost. There was not an increase in the cost. I am aware that the Deputy is extremely familiar with both facilities, namely, the Garda headquarters and the office of the Department of Social and Family Affairs. The overall cost relating to the two was contained within the original budget. The actual expenditure was expedited during the course of the year in question.

Deputy Thomas P. Broughan

Under note 12, miscellaneous items, the figures for insurance claims relating to State properties and those in respect of OPW vehicles, etc., seem to be relatively low. Does the office make a particular effort to keep these costs under control?

Mr. Seán Benton

Yes. There are various programmes running throughout the office in respect of staff training and development, health and safety awareness, the need to avoid accidents, etc. A small number of claims were made. Bearing in mind the millions of people who visit our sites, the figures in this regard are quite low. Constant vigilance is required and staff are trained on a continual basis.

Deputy Thomas P. Broughan

Decentralisation is a major aspect of note 10, commitments, and is one of the OPW's strategic objectives. Does the OPW's major expenditure, therefore, relate to Trim, Claremorris and Kanturk?

Mr. Seán Benton

Yes.

Deputy Thomas P. Broughan

Will the bulk of the money be expended in Trim?

Mr. Seán Benton

Trim will be the headquarters, accommodating 330 of the headquarters staff. Claremorris will be a significant office, with in excess of 100 staff under phase 1, and Kanturk is on hold until 2011 when it will be reviewed by the Government.

Deputy Thomas P. Broughan

Nothing has happened then regarding Kanturk.

Mr. Seán Benton

There is no financial commitment relating to Kanturk. There has been a lot of interaction with the local authority in identifying suitable sites, joint ventures and so on but the bulk of our expenditure is in respect of Trim, which is in the process of being fitted out and it will be available for occupation by mid-year.

Deputy Thomas P. Broughan

Does Mr. Benton expect in the current circumstances there will be little movement on these projects in 2009 and 2010? Is he committed to the budget? The total estimated costs for subsequent years seem high. Is everything being re-evaluated, given the dire state of the national finances? Has Mr. Benton been asked to seriously examine the development of the decentralisation programme as it affects national finances?

Mr. Seán Benton

We are in the business of implementing Government decisions and policy.

Deputy Thomas P. Broughan

Must the OPW be directed that projects are not to proceed?

Mr. Seán Benton

Yes, and we behave accordingly.

Deputy Thomas P. Broughan

I refer to an issue I raised on the previous occasion Mr. Benton appeared before the committee when I was marine spokesperson for my party. What is the exact position on the decentralisation of BIM and marine functions to Clonakilty?

Mr. Seán Benton

The new accommodation is completed.

Ms Clare McGrath

It is being occupied at the moment.

Deputy Thomas P. Broughan

Is that on the industrial estate?

Ms Clare McGrath

No, the new building.

Mr. Seán Benton

Temporary accommodation was taken for the advanced part of the project.

Ms Clare McGrath

We are vacating the advance office accommodation. The seafood fisheries authority will move into the same accommodation. I cannot indicate the number of BIM people but the building is complete.

Deputy Thomas P. Broughan

It is an issue for the Department as it transfers its own staff.

Ms Clare McGrath

Department of Agriculture, Fisheries and Food staff have moved into the building as well.

Deputy Thomas P. Broughan

The Chairman referred to rents in note 2 and began an important discussion about accrual accounting and so on. How are the notional rents levied on Departments calculated? What process is involved? It is mentioned in note 1 on page 60.

Mr. Seán Benton

That relates to operating costs. The picture we are trying to paint is the extent of all of the OPW's activities. In the notes, the committee will see we manage many projects on behalf of other Departments but the money does not come through our Vote and, therefore, it is not reflected in the total for the OPW. Likewise, we manage all the owned estate. To give a true picture of what the OPW is doing, one must attach a notional rent in respect of those buildings. As I understand it, each Department attaches notional rents to its Vote.

Deputy Thomas P. Broughan

Will Mr. Benton elaborate on the risk management committee? Was it established in 2007?

Mr. Seán Benton

Yes.

Deputy Thomas P. Broughan

How does it operate? What can it do in the context of invigilation of accounts?

Mr. Seán Benton

The risk management process has been in operation for a number of years. Each business unit looks at its operation and identifies the key risk areas and the things they have to do to mitigate those risks. The audit committee reviews the risk management analysis for each business unit.

Deputy Thomas P. Broughan

Has that thrown up anything so far that Mr. Benton should be aware of?

Mr. Seán Benton

The advantage is it captures in great clarity what are the risks. Everybody claims to be conscious of the risks but when one sits down to analyse them and put them on paper, one can see some are of greater significance than others. One must satisfy oneself that one has arrangements in place to mitigate against those risks. The exercise is very valuable, particularly in a situation where there is a significant turnover of staff. Where one loses corporate memory, to have it all captured and documented is invaluable.

Deputy Thomas P. Broughan

Why would corporate memory be lost?

Mr. Seán Benton

Because under decentralisation, a significant number of our own administrative staff will not move to the decentralised locations. The turnover in administrative staff will be approximately 85% and we have had to plan for that.

Deputy Thomas P. Broughan

Is that not a shocking aspect of this programme?

Mr. Seán Benton

It is also an opportunity to review all the businesses processes. New blood and fresh thinking also brings advantages to an organisation.

Deputy Thomas P. Broughan

I refer to a number of facilities managed by the OPW, for example, Farmleigh House. How does the OPW evaluate whether such a facility is being utilised efficiently and to the best advantage?

Mr. Seán Benton

There are a number of aspects to the Farmleigh House service. At a high level, there are Heads of State functions and almost, by definition, they are limited to a small number annually. The next tier is high level meetings and conferences. The third tier, which is important, is the extent to which the public avails of and enjoys the experience. The number of overnights is often quoted but the 200,000 members of the public who visit are rarely mentioned or the hundreds of high level meetings.

Deputy Thomas P. Broughan

What is the latest figure for overnight occupancy?

Mr. Seán Benton

In 2007, there were 283 bed nights. We had visitors from Poland, the USA, Slovakia, Belgium and Finland. That year 113 high level meetings involving almost 5,000 people were held. Approximately 177,000 members of the public visited the accommodation.

Deputy Thomas P. Broughan

Was the house in use most weeks in 2007?

Mr. Seán Benton

Yes, every week.

Deputy Thomas P. Broughan

For a function or somebody staying?

Mr. Seán Benton

Yes.

Deputy Edward O’Keeffe

I refer to Vote 10. Will Mr. Benton explain the grant to the Zoological Society of Ireland?

Mr. Seán Benton

Some years ago, the Government took a decision to grant-aid the Zoological Society of Ireland for the specific purpose of upgrading its facilities. A development plan was prepared for the zoo and managed by the Office of Public Works. People will have seen new facilities being introduced on an ongoing basis in the gardens and will have seen a significant extension of the area covered by the zoo over the past two years. The Government took the decision on that programme some years ago and it is now coming to a conclusion.

Deputy Edward O’Keeffe

Has the OPW responsibility for it?

Mr. Seán Benton

No.

Deputy Edward O’Keeffe

What Department has responsibility for it?

Mr. Seán Benton

The zoological society is an independent body and generates its own funding, but the Government took the decision with regard to the construction projects it would grant aid.

Deputy Edward O’Keeffe

C3 of Vote 10 mentions a grant to the Louvain Institutein Belgium and a number of other institutes, including the Irish College in Paris. Are there joint ventures between us and them? What involvement has the OPW in these areas and what is the expenditure on them? Is there, or was there, a FÁS involvement in them?

Mr. Seán Benton

I understand that at the early stages there was FÁS involvement in Messines in Belgium. The grants in question are determined by the Government. As I explained earlier, in some cases we have had greater involvement than in others, but we monitored expenditure in all cases.

Deputy Edward O’Keeffe

What activity takes place in those colleges on behalf of our exiles?

Mr. Seán Benton

There has been refurbishment work, new buildings and restoration and conservation work on historic properties. Many functions of these institutes do not fall under the Office of Public Works, but they are often supported by the Departments of Arts, Sport and Tourism or Foreign Affairs.

Deputy Edward O’Keeffe

Has the OPW responsibility for their maintenance?

Mr. Seán Benton

No.

Deputy Edward O’Keeffe

Is involvement limited to the capital works that are carried out?

Mr. Seán Benton

Yes.

Deputy Edward O’Keeffe

I will move on to the flood relief projects in Fermoy and the controversy about the Fermoy weir. Under the new regulations coming from Europe and under the flora and fauna directive, levelling must take place where the weir is. This is causing upset in the town, which is an historical town and which also has a history of rowing on the river. What progress has been made between the OPW and the Department with responsibility for the marine in that regard? I understand the two groups are working hand-in-hand and, as Mr. Benton is aware, it is a controversial issue.

Mr. Seán Benton

I think the Deputy is generally familiar with the progress on the scheme. He mentioned the weir in particular. This is a project we were asked to take on by the Department of Communications, Energy and Natural Resources and to include it as part of the Fermoy flood relief scheme. We have attended meetings with the town council and other interest groups, including the Fermoy rowing club. I am aware we do not have total agreement on how we should proceed or the most appropriate solution. We have taken the view that it is a matter for the local authority, the community groups and the Department to settle on an agreed solution. Then we should become involved in delivering it as part of the overall scheme.

Deputy Edward O’Keeffe

The issue has been dragging on for far too long. The town is subject to flooding and if, as expected, we get increased flooding, much hardship will fall on the residents and business premises. What is the timeframe for the development? The issue has been dragging on for the past two years. Mallow has made progress on its scheme. It is upriver of Fermoy and its progress will send the floodwater downriver. If some activity does not take place, Fermoy will be washed away.

Mr. Seán Benton

First, the issue of the weir will not delay the commencement of the flood relief scheme, which I expect will start in April or May of this year.

Deputy Edward O’Keeffe

I am aware the funds have been allocated, but why was it delayed?

Mr. Seán Benton

It was necessary as there were a number of issues. One issue was we had to revise the tender documentation so it would go out on a fixed price basis.

Deputy Edward O’Keeffe

What does Mr. Benton mean by a fixed price basis?

Mr. Seán Benton

It means the work will be done at a fixed price.

Deputy Edward O’Keeffe

Is it definite the work will commence in April or May? Can I hold him to that?

Mr. Seán Benton

Yes. We have spoken privately about this. The money is there and the tenders are in. It is a question of placing the contract and we are determined it will go ahead in April or May. We will commence the detailed design on the remaining phases and this will be done over the course of the next 12 months. We hope to be in the position then, when phase 1 is completed, to roll on with the next phases. I am confident the funding is there to do that.

Deputy Edward O’Keeffe

Is it to be done in three phases?

Mr. Seán Benton

It was three phases, but they have been compressed into two. Phases 2 and 3 have been compressed together.

Deputy Edward O’Keeffe

I will take Mr. Benton at his word.

I want to ask about national monuments and visitor centres. Are these self-financing? I note the office realised €5 million, although it had targeted €4.7 million, from sales at national monuments and historic properties and visitor centres. I take it this money is earned from teas and sandwiches, etc.

Mr. Seán Benton

These are not directly self-financing as it costs more to provide the service than we generate in income. However, this ignores the downstream effect of investment in heritage properties. While we in Ireland do not have direct figures for investment in heritage, UK studies show that every £1 invested in a heritage property has a downstream benefit of £8. Therefore, there are significant downstream benefits from investment but these are not all reflected in income taken at the door. The downstream benefits come from the restaurants, bars and other facilities tourists enjoy.

Deputy Edward O’Keeffe

The OPW estimated a take of €500,000 from admission charges, but realised €2.3 million. Is that correct?

Mr. Seán Benton

No. I think we generated in excess of €5 million on admission charges.

Deputy Edward O’Keeffe

On appropriations-in-aid, the document mentions admission charges at national monuments and historic properties.

Mr. Seán Benton

That refers to the sales at the various retail outlets at those centres.

Deputy Edward O’Keeffe

How many visitor centres do we have?

Mr. Seán Benton

We have approximately 64 centres where we provide a guide service, but we have in excess of 700 national monuments.

Deputy Edward O’Keeffe

Mr. Benton is probably familiar with the famous St. Molaga facility at Kildorrery where there has been an ongoing problem because of an historical burial ground and access to it. I understand the national monument group, for which the OPW has responsibility, wants to get a roadway laid from the public road to the cemetery because the carrying of coffins in tractor loaders is no longer appropriate nor respectful.

Mr. Seán Benton

I am aware of the access issue, but I do not have up-to-date information in that regard.

Deputy Edward O’Keeffe

Is that issue the responsibility of the OPW?

Mr. Seán Benton

We have responsibility for the management and upkeep of approximately 700 national monuments. They are in our care.

Deputy Edward O’Keeffe

Is that particular one part of OPW's responsibility?

Mr. Seán Benton

I will check the detail. I was aware of the access issue, which leads me to assume it is in our care.

Ms Clare McGrath

We have national monuments where the monument is in our care, but the lands for access are not. The lands are privately owned and there must be negotiation for access.

Deputy Edward O’Keeffe

I do not want to bring the issue to the level of a local authority meeting. I understand the landowner has no objection and that the objections are being raised by the authorities and the national monuments service because of the historical nature of the ground.

Mr. Seán Benton

I will investigate the matter for the Deputy and send a note.

Deputy Edward O’Keeffe

I thank Mr. Benton.

Vice Chairman

When representatives of the National Museum of Ireland appeared before the committee in the last quarter of 2008, issues were raised about the storage of artefacts. They said they were in discussions with the OPW about providing additional storage facilities for some of them. Can Mr. Benton update the committee on the matter?

Mr. Seán Benton

We have identified a suitable premises which would meet the needs of the museum. We are in discussions about the nature of works that need to be carried out to facilitate its requirements.

Vice Chairman

What is the timeframe?

Mr. Seán Benton

If we can agree on a schedule of works, we should be in a position to start implementing it very quickly.

Vice Chairman

I refer to 51 St. Stephen's Green, the headquarters of the OPW. Based on the decentralisation programme, are there plans for the building or will it be completely vacated?

Mr. Seán Benton

It is planned to reoccupy the building with staff from another Civil Service Department and we, in turn, will dispose of the other property.

Vice Chairman

I thank Mr. Benton and his staff for their attendance. I ask Mr. Buckley to make some final remarks.

Mr. John Buckley

The Accounting Officer is committed to addressing all of the issues we dealt with in our report or he has already done so. We will keep these issues in view in the course of our 2008 audit.

I wish to comment on two matters arising from the discussion, one of which is related to contracting. The committee has signalled issues for us all — auditors, the OPW and itself. One is whether the OPW can position itself through better contract terms to achieve discounts for increased quantities drawn down under a contract and a second is how maximum competitive tension can be maintained while pursuing value through contract aggregation.

With regard to accounting for rental costs, the operational costs statement of each Vote records the notional rents paid in the accounts of Departments. This is to give the true cost of running the Department in a year. Moving to a situation where the actual rental costs which have to be paid were captured in the accounts might not give as good a result for the simple reason that under accounting standards, one could only capture actual payments. The Board of Works would have to charge a real rental cost to everyone and effectively make a profit on its heritage and other properties and surrender it to the State. This might be considered a circular movement of funds but, on the other hand, it would have the merit of charging to Departments the true cost of their activities. In any such change it is important that there be comparability, that Departments would not be penalised because one had a rental property and another might have a State-owned property. Around 50% of the properties are owned outright by the State. This is a complicated jigsaw and while it has to be dealt with, the question is whether we want the accounting to be very accurate and pristine or whether we want to drive behaviours to force Departments to move to cheaper accommodation in other parts of the capital city or other locations. The issue is quite complicated but it is one that has been signalled by the committee to be taken up with the Department of Finance and others.

Vice Chairman

Is it agreed that the committee should note Vote 10 — Office of Public Works and dispose of chapters 4.1 and 4.2? Agreed. I thank the representatives of the Office of Public Works and the Department of Finance for their attendance.

The witnesses withdrew.

Vice Chairman

At our next meeting on 12 March we will consider Vote 38 — Department of Social and Family Affairs; chapter 12.1 — overpayments; chapter 12.2 — prosecutions, and chapter 12. 3 — subvention to the Pensions Board and the social insurance fund 2007.

The committee adjourned at 12.25 p.m. until 10 a.m. on Thursday, 12 March 2009.