Skip to main content
Normal View

COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 8 Oct 2009

Vote 21 — Prisons.

Mr. Seán Aylward (Secretary General, Department of Justice, Equality and Law Reform) and Mr. Brian Purcell (Director General, Irish Prison Service) called and examined.

We are now looking at the annual report of the Comptroller and Auditor General, Vote 19 — Office of the Minister for Justice, Equality and Law Reform and Vote 21 — Prisons. We are specifically examining chapter 16, procurement in the Irish Prison Service.

I draw everyone's attention to the fact that while members of the committee enjoy absolute privilege, the same privilege does not apply to witnesses appearing before the committee which cannot guarantee any level of privilege to witnesses appearing before it. 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, either by name or in such a way as to make him or her identifiable. They 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 a Minister of the Government or the merits of the objectives of such policy or policies.

I welcome once again Mr. Aylward, Secretary General, Department of Justice, Equality and Law Reform. Perhaps he might introduce his officials.

Mr. Seán Aylward

I thank the Chairman. I am accompanied by Ms Barbara Heslin, director of finance, Irish Prison Service, Mr. John Conlon who directs the Thornton Hall project and has served in the capacity in which Ms Heslin now serves, and Mr. Brian Purcell, director general, Irish Prison Service. I am also accompanied by Mr. Noel Waters, assistant secretary who oversees financial and personnel matters in the Department, and Mr. Seamus Clifford, principal officer in the Department who looks after the Estimates process and helps to keep the numbers right and who is based in our Killarney office which provides a service for other Government agencies and Departments also. I shall allow the Department of Finance officials to introduce themselves.

Mr. David Denny

I am a member of staff in the sectoral policy division.

Ms Stephanie O’Donnell

I work on the justice group of Votes within the sectoral policy division.

Mr. Nicholas O’Loughlin

I am from the national public procurement policy unit.

Mr. Dermot Quigley

I am from the same unit.

With no disrespect to the witnesses, some members have to attend the Order of Business in the Dáil Chamber. We are left with the opening questioners; therefore, we shall get on with the business of the committee rather than suspend for a period of time. I call on Mr. Buckley to introduce Votes 19 and 21.

Mr. John Buckley

The Department of Justice, Equality and Law Reform co-ordinates the activities of the justice system, including policing, the courts, the prisons and the Property Registration Authority. Two elements of the system fall for consideration today, its core administration and that of the prison service. The Vote for the Department reflects expenditure on those activities that it directly administers, on which some €476 million was spent in 2008. Excluding its administrative costs of €62 million, this direct expenditure was applied as follows: €167 million was spent on dealing with asylum issues; €82 million was incurred in the provision of legal aid, broken down between criminal legal aid of €55 million and civil legal aid and the provision of advice administered through the Legal Aid Board of €27 million; the Probation Service cost €52 million; €44 million was spent on youth justice activities; while €17 million went on tribunals and commissions. In 2008 the Irish Prison Service accommodated an average of 3,544 prisoners and administered 14 prisons and places of detention. The total voted cost of the service in that year was €404 million, of which some €272 million or more than two thirds went on prison officer remuneration. The other major spend is on a capital programme which cost €70 million in 2008. The largest works projects paid for in that year were those at Wheatfield which cost €24 million, Castlerea which cost €16 million and Portlaoise Prison which cost €6.1 million.

Turning to the relevant chapter in the annual report, it examines arrangements operated by the Irish Prison Service in respect of the construction and enhancement of facilities at 15 locations. The set of procurements dealt with in the chapter was based on an accepted tender for the construction of an accommodation block at Loughan House. Ultimately, €97 million was spent on this round of procurements. The process kicked off with a tender notice in the Official Journal of the EU. The notice indicated that the procurement would take place under a framework agreement and that the Irish Prison Service might enter negotiations to extend the scope of the agreed contract to a number of other projects over a three-year period.

The audit reviewed whether the 2004 tender process had been sufficient for the award of the subsequent works without further competition and how the contracting and pricing for the subsequent works had been handled, the extent to which comparative value had been achieved for the outlay incurred and what lessons might be learned from the experience. As regards the tender process, the guiding principles of public procurement are openness, transparency and competition. The risk in this case was that the failure to indicate the potential value and scale of works meant that open and transparent procurement, sufficient to alert potential suppliers, did not apply. This, in turn, would work against the State in getting the benefit that should accrue from a more competitive process. The existence of a comprehensive contract covering all major items, including price, is a safeguard in the event of subsequent disputes. In the case of this series of projects, the prices in the generic tender were verbally accepted. Work commenced on the initial project in the series before completion of a contract and final agreement of price. Contracts were only put in place for work managed by external consultants in 23 of the 96 projects. These, of course, were the larger projects. The remaining works administered directly by the Irish Prison Service where no formal contract document was signed accounted for €32 million.

In order to effectively manage a framework contract the bulk of the work on an individual project should be covered by its pricing terms. In the case of three of the major projects reviewed, the upward cost variation ranged from 33% to 77% of the generic cost per square foot before taking account of inflation which was capped at 12%. This suggests the mix of work tendered for in the initial procurement was not indicative of the work subsequently procured. Where there is a large volume of non-call-off items in a project, the procurement of these elements effectively passes outside the public procurement process. In addition, projects such as an electric locking project had features that made them unsuitable for procurement under the framework. Where a framework agreement does not allow for a like-for-like comparison at a single point in time of its duration, it becomes difficult to gauge whether comparative value is being achieved. In future contracting it would be useful to structure agreements in order that value can be assessed on an ongoing basis. Possibilities might include using multiple operator agreements which could provide ongoing competitive assurance, or in instances where a single operator agreement is used, interim market testing could provide a benchmark. In addition, in future recourse to frameworks, duration would need to be carefully considered. The risk of failing to achieve value for money is likely to be increased where competition is reduced due to the exclusion of potential contractors from public works for too long a period.

A framework option should be used only in the case of projects where the work to be carried out is of like kind and quality to that originally priced. That said, the framework option is there to be used appropriately and sensibly. It can provide a cost and efficiency dividend to the State by reducing transaction costs. However, this gain needs to be balanced against the need to verify that value is being achieved by returning to the market at reasonable intervals.

Thank you. I call on Mr. Aylward to make his opening statement.

Mr. Seán Aylward

I suggest that the committee puts my statement into the record, so I will not detain the meeting too long.

Mr. Seán Aylward

I cannot argue with the very measured comments made by the Comptroller and Auditor General. There are points of detail and perspective that would come to bear. I made the point at the last meeting that our prison service and its leadership worked from what I described as a burning platform, which would have put them under much pressure to get spaces and draw down a contract that was in place. As to whether value was or was not derived from that approach, this is something that can be debated and discussed in the course of the meeting.

I welcome the opportunity to be here and to respond to questions. I would like to make my comments and stand back and give the committee space to put questions to us and give my colleagues in the Irish Prison Service an opportunity to respond on points of detail.

Thank you. We will publish the statement you presented to us. I call on Deputy Michael McGrath.

Thank you Chairman. I welcome Mr. Aylward, Mr. Purcell and all the officials from the Department of Finance. I thank Mr. Aylward for his brief introductory comments. We have read the statement in advance, and we welcome his initiative to make things more efficient.

On Chapter 16, the procurement issues within the prison service and the July 2004 advertisement to put a framework agreement together, why was a decision not taken for it to be a multi-supplier agreement, whereby further contracts that would follow from the Loughan House project could be competitively assessed among different contractors? Nine tenderers originally participated in response to the 2004 advertisement. That was short-listed down to four and the company concerned, Glenbeigh Construction, was the lowest tenderer at €2.37 million. The next lowest tender was for €2.53 million, so the difference was quite small at €160,000. Yet that difference meant the second lowest tenderer was excluded from what ultimately became contracts worth just under €100 million. Why was a decision not taken for it to be a multi-supplier framework agreement?

Mr. Seán Aylward

It would be dangerous for me to speculate too much on this, but it is reasonable to say that it was not anticipated by the prison service that there would be such an extensive draw down and that the pressure would be so great on prison spaces that there would be an urgent need to respond. There may also have been an issue as to whether it would have been legally valid to award the framework contract to a number of contractors. That said, I do not want to strain the realm of speculation and I will ask the director of prisons to go into more detail as to why the prospect of a panel or multiple suppliers did not happen, and why an option was not explored to widen the pool of suppliers at that juncture.

Mr. Brian Purcell

When we entered into the framework agreement in 2004 with Glenbeigh Construction, we were satisfied that we met every requirement of the public procurement legislation that was there at the time. To go back to the report of the Comptroller and Auditor General, we are satisfied that value for money was achieved under this framework. In that context, it is certainly worth noting that we contracted for building projects at 2004 prices. With a moderate inflation provision, those 2004 prices prevailed with all the work that we subsequently drew down from that contract until 2007 when the tenders ceased. When the individual projects ceased in 2007 within the three-year timeframe, they would have been priced for work that continued on until 2008 and even 2009. We effectively got 2004 prices at a time when the market in tender prices was rising exponentially. The Society of Chartered Surveyors noted a rise of 14.2% between 2004 and 2007, and a rise of 18.7% from 2007 to 2008. The CSO indices showed a similar rise of 17% between 2004 and 2007, and 22% for the same period. Effectively, we were getting work at a time where the tender prices for contracts of this nature were going through the roof. There is little doubt in my mind that if we had to tender for individual contracts, we would have ended up paying substantially more for the contracts as they were tendered, to say nothing about losing the flexibility that is there in the draw down contract. The framework agreement with Glenbeigh Construction gave us cost certainty at a time of exponentially rising prices. Within that, it gave us the flexibility to respond as quickly as we could to whatever needs were there in the system at the time.

As the Secretary General pointed out, we had to operate under a burning platform. During 2006 and 2007, the period in which many of these contracts were fulfilled, we were seeing a massive rise in the number of committals in the system. In 2004 and 2005, we saw what we thought was a blip in the statistics, but by 2006 and 2007 it had become clear that this was a trend and not just a blip in the statistics. It became obvious that this was happening because there had been a huge increase in the number of gardaí that had been assigned to the force and this was beginning to filter through in terms of the number of criminals apprehended and brought to trial. In addition, there was a considerable number of new judges appointed which resulted in an increased number of court sittings. We proceeded on the basis that there would be an ever-increasing trend. The framework gave us the flexibility to move quickly where we saw there was a need or that one would emerge in the near future.

In terms of the question the Deputy raised about multi-operator contracts, we moved on to that but, at the time, while I am not saying there was confusion, it was perhaps a little unclear as to how framework contracts would operate in the multi-operator context we now have. Our current contracts which are in place to deal with situations like this are the multi-operator contracts. Nonetheless, at this point in time, we will issue individual tenders while tender prices are going down. In that context, we are already seeing the benefits of having a multi-operator framework at a time when prices are dropping because the prices which are coming back now are even surprising us. However, that is a completely different market to the one that applied when we entered into the framework contract in 2004. The Deputy is correct to suggest this gives the opportunity to go out to the market each time, which is what we have at present. However, at the time, it was believed this framework contract we entered into operated in a manner similar to that which would have applied to other similar contracts. It gave us that cost certainty in a rising market with the flexibility involved.

On the issue of being tied exclusively to one company, was it Mr. Purcell's belief at the time that he did not have the opportunity for it to be a multi-supplier agreement? Was he not sure this was permitted under framework agreements at the time?

Mr. Brian Purcell

Our belief at the time was that, given the EU legislation in place, when one went into a framework contract, it was appropriate in the circumstances to engage with what we regarded as the most competitive bidder and to draw down on that contract. When we went in, because it was over a three-year period, we did not necessarily foresee the amount of work that would have been drawn down, although that is not to say it was done in any unplanned way. We were aware there would be projects during that period and we made it quite specific in the documentation that went out that it was a framework contract, that someone would get this contract and that we would then use that operator for the period. That was made quite specific to all the people who would have tendered at that time. In that context, we have fully complied with the issues of openness required under the guidelines in place at that time.

The benefits I mentioned in regard to the multi-operator contracts would not have been widely recognised at the time. It is only subsequently that clarity has come to the issue of multi-operator framework agreements. That is what we now have in place and its benefits are quite clear to us at a period when prices are going down. Even if we had that at the time, it would have resulted in less value for money for the Prison Service because we would have tendered individual contracts into a rising market. We got excellent value for money. The surveys we carried out on three of the projects, including the big project, where we compared it to a similar size project that we did tendered for, showed that we got better value for money than we got from the drawdown contract, even though the value for money in the tendered contract was still good in comparison to the prevailing market rates at the time.

The Prison Service had a relationship with Glenbeigh prior to the 2004 agreement. Is it correct there was an agreement in 2002?

Mr. Brian Purcell

That is correct.

There were 11 projects to the value of €15 million under that agreement. Was that the first agreement the Prison Service had with Glenbeigh?

Mr. Brian Purcell

As far as I am aware, it was. That was tendered and awarded as a result of a similar tender competition.

Looking at it from the outside, while the Prison Service cannot be criticised for not complying with the letter of the law in terms of the procurement requirements at the time, the question is whether it was good public procurement practice. The example I would give is the new remand wing and segregation unit at Castlerea Prison, which was the largest element of the €97 million of work Glenbeigh ultimately got arising from that framework agreement. That project alone was valued at €19 million, so it seems odd to use the framework agreement, which was essentially on the basis of a contract of €2 million, as the template for selecting the contractor for a €19 million project. Were they not entirely different projects where other contractors could have brought different skill sets, experience and perhaps a more competitive quotation?

Mr. Brian Purcell

That is an interesting point given the scale of the work in Castlerea. With regard to Loughan House, the generic building that we included in the tender related specifically to Loughan House but it was quite clear from the tender that we would use that framework agreement for other projects. It was framed in such a way that not alone did it look at the generic building that was put in the tender, but there were also several other elements that covered cells and various security features that would be commonplace in another prison buildings. That gave us a list of what would be described in the trade as the call-off elements of the contract, which were over and above what was included in regard to the generic building.

When the Castlerea project was tendered, the bidders would have bid on the basis of the prices agreed and the bills of quantity in the framework agreement but they would have then applied the rates to what I described as the call-off elements. It was in that context that the Castlerea project was tendered. It is worth mentioning that when we undertook a survey to compare the Castlerea remand block to a block in Wheatfield which we tendered for in 2006, the firm of quantity surveyors that examined this were of the view that the value for money we got in regard to the remand block in Castlerea was better than the price we got from a project for which we tendered.

On that critical issue of value for money, I refer to an extract from the Comptroller and Auditor General's report. He makes the point that the generic Loughan House tender produces a cost per sq. ft. of €210.39 whereas the actual cost per sq. ft. for the works carried out at Loughan House, which were for a 60-bed unit, and at Shelton Abbey, which were for a 44-bed unit, and the Castlerea remand wing showed upward variations on this from 33% to 77%. This is significant even after allowing for the impact of inflation on call-off items to a maximum of 12% — I know he had factored in 12% inflation on the call-off items. From his analysis, some of the projects were 33% to 77% higher than that, even allowing for the 12% inflation.

Mr. Brian Purcell

There were three main reasons that some of the prices were higher. One was the inflator, given that the contract had within it an inflator up to a maximum of 12%. The second was that there were additions to the project over and above what would have been in the generic building that was the subject of the initial tender. For example, in the Loughan House case, the initial tender would have been for 50 spaces but we actually put in 60. We had to provide enhanced security systems and we then had to comply with building sustainability and fire safety policies that had come in subsequent to the initial tender and which added to the cost. So, while the actual cost increased, it was due to certain factors. In regard to other projects — and the Shelton Abbey project is a good example of this — various issues arose that could not have been foreseen. For example, Shelton Abbey is a listed structure——

I remind Mr. Purcell of the point made by Deputy McGrath about the difference in cost per sq. ft. on the Loughan House tenders. The Prison Service was aware in advance that Shelton Abbey was a listed building, it was not an issue that subsequently emerged.

Mr. Brian Purcell

I accept that. However, we did not anticipate the full extent of the requirements in terms of how many conditions would be imposed on us to retain the structure of the original building. It is only when work commences on a listed building that one becomes aware of all the——

I would prefer if Mr. Purcell confined himself to the question put by Deputy McGrath.

Mr. Brian Purcell

Certainly. We do not agree that "cost drift" is an appropriate term to describe the increase in construction costs on these specific projects. It seems overly simplistic directly to compare the tender price for the generic building with what was delivered at least two years later and to refer to the increase as upward cost drift. I have already referred to the three valid reasons for the increase in cost. The first of these was the 12% inflator which was built into the price. Second, as I have explained, what we delivered included enhanced features, additional accommodation and construction to a higher specification to comply with policies that were in place by the time of construction. Third, certain site-specific issues were not anticipated in the original contract. Those are the reasons for the increase in price. The term "cost drift" suggests that we delivered exactly the same project as was originally envisaged in respect of which there was a sudden price increase. That is not what happened. We got more than what was envisaged in the generic building model that was the subject of the original tender.

Does that not prove the key point that every project is different and different contractors have different expertise and experience? Mr. Purcell has outlined the variety and complexity in the various projects, some of which involved listed buildings, yet the Prison Service allowed itself to be tied to one contractor based on the 2004 agreement without going to the market to examine the availability of other contractors with the required expertise for these projects. Part of Mr. Purcell's justification for the increased cost is that there was a listed building involved and certain specialised types of works had to be carried out. Perhaps Glenbeigh was not the best contractor to undertake that work.

Mr. Seán Aylward

I would construe the Comptroller and Auditor General's introductory remarks and the observations made by Deputy McGrath as fair comment. We accept the points raised and agree they are true. The most important question is where we go from here. We are not arguing about the facts as laid out but are saying it is not as bad as some people might construe. We are talking about the period when there was a hugely inflated and overheated property market in which we all experienced the pain in terms of getting hold of contractors to bid for work. However, we had the happy accident that value for money was extracted despite the local factors that inflated costs, although that is not a circumstance upon which one would ever want to rely. Important lessons have been learned for the future based on the observations of the Comptroller and Auditor General and of procurement experts.

Will Mr. Aylward outline the new regime?

Mr. Seán Aylward

I will ask my colleagues to touch on some of the lessons learned. The report is fair and the comments made by the Deputy are correct. Despite this, the taxpayer did not take a substantial hit on this; in fact, the opposite was the case. However, for the future, important lessons will be drawn from the work that has been done in examining these issues.

With respect, it is for the committee to make that call.

Mr. Seán Aylward

Of course. I merely wish to convey that the comments by the Comptroller and Auditor General are accurate and the points raised by the Deputy represent fair comment. I suggest that lessons have been learned for the future. I was asked to outline what those lessons are and I am happy to do so.

To clarify, I understand there were several bidders for the contract.

Mr. Seán Aylward

That is correct.

In other words, there was no shortage of contractors willing to do the job.

Mr. Seán Aylward

Yes.

Yet there was a 30% increase in the cost of the project. Mr. Purcell factored in inflation at 12%.

Mr. Seán Aylward

I will ask my colleagues to come in on these issues.

Mr. Brian Purcell

I will come in on that. There was a 12% inflator at a time when market rates were going much higher than that. At risk of repeating myself, I emphasise that the lessons we have learned from this relate to the flexibility provided by the multiple contractor framework. However, it must be pointed out that the advantages of that framework can best be seen at a time, such as now, when the markets are dropping. There is no doubt that if the multi-contractor framework had been in place during the period in question and we were tendering for individual projects, we could not have obtained any better value for money than we did.

As I have outlined, the cost increase described in the report as cost drift is not solely accounted for by the 12% inflator but by a combination of that inflator and enhanced structures that were subsequently delivered. In addition, there were site-specific issues that would have arisen regardless of whether Glenbeigh or another contractor was engaged. The purpose of the generic model was largely to set the costs that we would subsequently have to pay for any project we proceeded with. The survey we did shows that we obtained better value for money by doing that than if we had followed a multi-operator model. We sought tenders for a specific project from anybody who wanted to come in for it. We went with a particular firm, other than Glenbeigh, and it delivered a very good building model. However, when we compared the two bids the surveyors found that even though we got very good value in the second one, we got better value euro for euro——

Mr. Purcell is making our argument in outlining how the Prison Service based everything on a generic model which had no bearing on reality and how everything rolled on from that up to a cost of €100 million.

Mr. Brian Purcell

The nature of the procurement process for framework agreements is that one would put out a generic tender to set the prices. We made it clear in the tender documentation that this was a generic building, that bidders should set out various costs per item, bills of quantities and so on and that we would draw down on that for other projects over a period of three years, and that is what we did.

What lessons have been learned and what changes have been made? What is the current set-up in terms of procurement and how are projects of this nature now handled?

Mr. Brian Purcell

We have put the multi-contractor framework in place for construction projects. We are already in the process of drawing down off that. Now that we are in a market where tender prices are reducing, the real value of the multi-contractor framework is evident. However, it is somewhat ironic that at the time, when we went for the original contract, it would not have been so evident. There now is a much clearer understanding of the manner in which the EU directive applies in respect of the framework agreement. At the time, however, in 2004, we met all the formal requirements of the legislation that was in place. We are completely satisfied that what we did was in accordance with everything that was in place at the time. That comment pertains to construction contracts. We also are in the final stages of a tender for consultancy services, which again is on a multi-operator framework basis. This has arisen from guidelines that came out subsequently regarding the directive that was enacted in 2006. We have learned lessons from it.

That is fine. May I have a couple of minutes on Votes 19 and 21?

I have a couple of general questions. In respect of Vote 21 and the Irish Prison Service, the issue of overtime for prison officers has been much commented on in the media in recent years. What is the current position? What is the overtime bill likely to be this year and what was it last year? Mr. Purcell should give members some background in this regard.

Mr. Brian Purcell

The overtime issue bedevilled the Irish Prison Service over a long period. It was widely commented on and was a regular topic of newspaper headlines. At one point in 2002 or 2003, we hit €60 million in overtime payments. Bearing in mind this was five or six years ago, that was a considerable amount of money. It simply was unsustainable to have an ever-increasing level of overtime within our current spending. Consequently, after long and protracted negotiations with the Prison Officers Association, in late 2005 we introduced a new system to replace overtime based on an annualised hours system whereby overtime effectively was gone and the staff were contracted to work additional hours over and above their normal rostered hours. This replaced overtime and the principal aim in financial terms for doing so was to deliver savings equivalent to €30 million per annum. Following a protracted process, it went live in late 2005 and by mid-2006 was in place throughout the system. Since then, it has been operational. Obviously, a system involving such massive change took quite some time to bed down but even from the earliest days of its operation, despite a few teething problems, it has delivered the savings required and we have been getting the equivalent of €30 million per annum savings from our overtime budget ever since. We are satisfied that in the future, we will continue to maintain this level of savings.

Part of the new system's introduction was a review of the process because it was based on tasks, manning levels, etc. As part of the new system that was introduced, we stated that we would be obliged to review it because in a changing operational environment, one cannot necessarily cast in stone specific tasks or manning levels. Indeed, this was one of the problems that had bedevilled the system and had led to the massive amounts we were obliged to spend on overtime. The review now is under way and is being carried out in the context of the moratorium that has been put in place.

What is being reviewed?

Mr. Brian Purcell

I refer to a review of the new annualised hours arrangement. A review is being carried out on how it is operating, whether it is delivering what it is supposed to deliver for both management and staff, whether the prison system is operating as it should under the new arrangements and to examine the tasks and manning levels, which are its core elements. This review is under way at present and it is opportune that is happening now because in the future, in common with all Departments and agencies, we will be obliged to live within the terms of the moratorium that has been put in place by the Minister for Finance in respect of recruitment. On completion of this review, there may be some changes in the system but the core point is that it has been hugely successful in delivering the €30 million-plus savings that it was supposed to. We have hit our targets in that regard.

Given that four Deputies representing Cork are present, may I be parochial and ask about the Kilworth project and its current status? On the overcrowding in Cork Prison, how many prisoners are detained there at present? What is its capacity and when will work get under way at Kilworth? I am sure that my colleague, Deputy Ned O'Keeffe, in whose constituency the site is located, also might be interested in the reply.

Mr. Brian Purcell

As members will be aware, particularly Deputy Ned O'Keeffe and the other Cork Deputies, the Kilworth project is our hoped-for solution to the difficulties we have with Cork Prison. Members are aware that it is limited in respect of what can be done with it. Its current bed capacity is 272 and I believe there are 309 prisoners there today. In addition, the site's footprint is very small and there is little flexibility in respect of what one can do with such a site. Initially, we were considering Spike Island as the solution to this problem. In my view however, Spike Island was never going to work out for a number of reasons, not least of which is the fact that it is an island. We would have been obliged to build a bridge that could have cost in excess of €20 million and essentially all one would have got for such expenditure would have been a gate to a field.

Following negotiations with the Department of Defence and the Army, a portion of the Kilworth Range was made available to us on an excellent site of approximately 160 acres. We were very grateful for the co-operation of the Department of Defence and the Defence Forces. We have conducted the preliminary appraisal of the Kilworth site. We had intended that as soon as construction work began on Thornton Hall, we then would move along with the Kilworth project. As members are aware, the Thornton Hall project has been delayed because we were obliged to withdraw from negotiations with the preferred bidder. However, we still are moving on Kilworth and at present, we are going through a more detailed appraisal as to how we will bring forward the Kilworth project.

However, it is too early at this stage to state exactly when we will be able to go ahead with it. Nevertheless, we are fully cognisant of the difficulties within Cork Prison. The Minister for Justice, Equality and Law Reform, Deputy Dermot Ahern, is fully supportive of the need to alleviate this problem and to have modern accommodation on the site at Kilworth. I hope we will be able to make progress on this matter sooner rather than later. I certainly do not wish to be obliged to wait until we proceed with Thornton Hall before going ahead with the Kilworth project. However, we still are at an early stage and I cannot state exactly when we will be getting down to construction. Nevertheless, I hope we will be able to give positive news in this respect in the future.

Has ownership of the site been transferred from the Department of Defence to the Department of Justice, Equality and Law Reform?

Mr. Brian Purcell

It is in the process of being transferred.

Have design consultants been brought on board for the detailed appraisal?

Mr. Brian Purcell

We have carried out some preliminary surveys there and the appraisal that is under way will try to identify how we can proceed with this project as quickly as possible. We hope to do it in two phases, with the first phase comprising the preliminary work, while the second phase comprises the construction of the block. However, we are at an early stage in this regard.

May I ask one question on Vote 19?

Yes. Deputy Ned O'Keeffe will keep an eye on this issue for the committee.

What is the estimated cost of the Kilworth development? I apologise for interrupting.

Mr. Brian Purcell

We cannot say at this point because that would be commercially sensitive. There are Department of Finance guidelines on putting out what one might think will be the price before actually getting to a tender procedure. I am sure the Deputy can appreciate that.

What is the Irish Prison Service's timeframe of development?

Mr. Brian Purcell

As quickly as possible is the best I can say at this stage because we are acutely aware of the difficulties involved. I would like work to start on Kilworth immediately——

It could happen tomorrow.

Mr. Brian Purcell

——or even tomorrow.

Deputy McGrath is next.

Mr. Brian Purcell

We will need to wait and see how it goes.

I thank Mr. Purcell.

I have a final question on Vote 19, which relates to asylum seekers' accommodation. The figure of €91.5 million in 2008 is large and represents an increase of 16% on the 2006 figure. If asylum seeker numbers are declining, why is this cost increasing? Is the Department seeking reductions in rent from the properties' suppliers where, for example, leases have expired, given that rents are decreasing throughout the economy? Will Mr. Aylward comment on this matter?

Mr. Seán Aylward

I would be happy to do that. An analogy is often used by those who manage people in custody, although this is not a custodial situation, to distinguish between a stock of people and a flow. The flow of applicants has lessened in response to many factors on which I will not dwell, but the stock of people has continued to build as fresh asylum seekers have been added to the group of people going through the appeals process or trying new routes towards being given permission to stay in the country. They have moved beyond the asylum seeking process because it ran out for them and all of their appeals, up to and including judicial reviews, have taken their course. They then take route two, in which they seek humanitarian leave to remain and every conceivable form of appeal to review the process. This has led to the current stock.

On 21 October of the year under review, the Government agreed to a new round of value for money reviews up to 2011. The Department's asylum seeker accommodation unit was chosen to be the subject of the review of the Vote's expenditure programmes. The review is ongoing and its results will be presented to the Oireachtas upon completion. The steering committee is working on it.

Last year, the Department's refugee integration unit refunded the HSE the voucher cost of accommodating unaccompanied minors in the Dublin area, amounting to some €3.17 million. In 2009, some €3.5 million was transferred from Vote 19 to the HSE's Vote to remedy a situation in which we had financial, but not operational or contractual, responsibility for the accommodation of unaccompanied minors. We were a price taker rather than a price maker. During the years in which we had a problem with accommodating older asylum seekers and their families, we went to the market in a competitive process and got rates per night that were a fraction of what would have been charged in other circumstances, such as in bed and breakfast accommodation.

The Department of Justice, Equality and Law Reform has accepted responsibility on behalf of the State to house homeless people who have pitched up on our shores and over whose heads we have an obligation to put roofs. If they were taken into the conventional local authority housing system, for example, and houses were built for them, the cost would be in the stratosphere. As most of the claims have proven to be ill-founded, that would have been inappropriate spending. We are carrying that cross for the rest of the public administration. Traditionally, this would not have been our business. Rather, we housed people sent to us by the courts. However, we have accepted this responsibility as the people who can discharge it most efficiently because we have some control over the flow of people outwards.

Holding down costs and accelerating the system will be a continuous struggle, but our proposals to streamline the applications process, particularly where ill-founded applications are concerned, are before the Oireachtas. The legislation proposes a complete re-engineering whereby people who apply for asylum will need to put everything on the table immediately, that is, all conceivable grounds that they would ever wish to cite to be allowed to remain in Ireland. These would be dealt with simultaneously and immediately. Currently, the net effect is the stringing out of our process. People are exercising their rights under current law in an adept way. It is a matter of making applications at the last possible minute on the last possible day and frustrating the system. I do not want to be inflammatory, but I have previously cited before the House applications for stays and so forth being made on the steps of the aeroplane. This is the sort of thing with which we must contend. Many people have a vested interest in stringing out the process. Through our Minister, the Government has tabled legislation to tighten up the situation before the Oireachtas.

The courts are continually confronted with applications for review that prolong the stays of the people in those settings. Of the 7,000 people we are housing, approximately 1,500 have been in that accommodation for longer than three years. It is not the case that the Department has lost their files, they have not been processed or they have not been giving hearings. It is simply the case that they have repeatedly invoked new avenues of appeal. It is a long and difficult process and, when all lines of appeal are at an end and every court in the land has repeatedly rejected the cases, people must be expelled from the country if they will not return to their own countries voluntarily. This can be problematic with certain states.

Is the Accounting Officer saying that the cost has increased because the size of the stock of asylum seekers has increased?

Mr. Seán Aylward

The cost has primarily increased because of the increase in the aggregate number of people. It is a competitive process.

What about rent reductions?

Deputy Clune wants to speak.

Mr. Seán Aylward

We have been vigorous to the point of receiving many complaints from all of our landlords, including public servants in different offices and the landlords in this group, because we have unilaterally cut our payments to all of them by 8% or more in the teeth of considerable protests. We are acutely conscious of the need to contain costs.

I thank Mr. Aylward.

Good morning. I shall ask some questions on the framework document. Having listened to the responses to Deputy McGrath, I know what the responses to my points will probably be, but I wish to discuss the reason multiple suppliers and multiple tenders were not originally included. The committee received a letter from Mr. David Doyle dated May 2009 in response to our questions on the framework document at our March meeting. He stated that the 2004 EU procurement directives include provisions for frameworks whereby under clear and transparent rules, contracting authorities could put in place arrangements to award contracts for requirements to one or more qualified tenderers. Mr. Aylward wondered whether seeking more than one tender was legally valid, but it was.

The committee is reviewing matters. While I accept that the figures have undergone value for money reviews, something could have gone wrong. Of the four short-listed contractors, three did not have access to the work valued at €100 million that was available at the time. Our guests stated that Loughan House was quoted as a generic structure, but the advertisement in the European Journal stated that it was a 50-bed open prison, not a generic structure. I would not have considered an open prison to be generic in the Prison Service. Does it not have multi-bed rooms or dormitories?

Mr. Brian Purcell

No. The Deputy is correct in that, formally, the open centres had dormitory style accommodation. That is why we went along with building blocks in Loughan House and Shelton Abbey. The blocks we built provide single room accommodation.

Does Mr. Purcell consider Loughan House to be a generic structure?

Mr. Brian Purcell

It was in that the project was put out to tender. In addition to the generic building, the tender documentation included a bid for other elements such as the provision of gates, security and windows with specifications that would be required in a higher security setting. In 2004 we thought this would be the first one we should go for. It is not the case that the tender documentation included a generic building solely. It also covered other elements that we required in a medium security environment. That is what happened with the Castlerea project. This is what gives rise to the issue of call-off rates which does not relate solely to an appropriate structure in an open centre setting. The additional rates quoted by the tenderer were for a range of other options that one would need in a different custodial setting.

Does Mr. Purcell accept that the option of having multiple suppliers was available but he chose not to take it?

Mr. Brian Purcell

It was available.

Mr. Purcell chose not to take it, for whatever reason, even though the second tender was very close on price and would have allowed flexibility.

Mr. Brian Purcell

I accept that the option was open to me because reference was made to one or more, but we chose one because it was the lowest price. At the time there was a lack of clarity about multi-operator framework agreements. This became clear long after July 2004 when we tendered for this work. We believed — we were right in so far as we satisfied the formal requirements — under the framework agreement that it was appropriate to have one contractor.

There is a reference to a tenderer or tenderers. I do not dispute this, but from the point of view of Mr. Purcell, it is better to have options.

Mr. Brian Purcell

That is a valid question. Deputy McGrath raised the same issue. In the prevailing circumstances we believe we had achieved better value for money for the Irish Prison Service and the taxpayer than if we had chosen multi-operators. With the latter, we would have had to go to tender every time. We have that system in place and it is beneficial at a time when markets are tight or prices are falling. At the time it was obvious to everyone who had tendered that prices were on a sharp upward curve. This applied across the board from domestic dwellings to major projects such as this. We managed to secure cost certainty at a time when prices were rising. This delivered very good value for the taxpayer.

The Department of Finance commented on this issue in March and referred to it as a matter of concern.

Ms Stephanie O’Donnell

At the time I said that, on the face of it, there were concerns. The Comptroller and Auditor General has examined the matter. This was a choice made at the time by the Irish Prison Service and I am not in a position to say whether it should have used more operators. Accidentally, conditions at the time worked in favour of the taxpayer. My procurement colleagues may wish to comment on this.

I remind the witnesses of the comments of Mr. Noone. Is he present at this meeting?

Mr. Dermot Quigley

He is not.

I asked if there was an expert on procurement present at the meeting and Mr. Noone replied, "Yes," referring to himself. He stated:

The key consideration is that any arrangement put in place should be transparent and clearly specified in relation to the total value. The procedure for the order contract should reflect the total value, be transparent and adequately competitive. Frameworks can be put in place on that basis which can allow for draw down contracts or ongoing arrangements, but I am not sure that they applied in this particular case. Frameworks can be put in place that respect the principles of openness, transparency and open competition and from what I have heard I am not sure whether this arrangement would be in line with an open and transparent procedure.

Mr. Dermot Quigley

The position of the Department of Finance is still that as set out by Mr. Noone. In the letter of 8 May, the Secretary General pointed out that the issue of whether the potential scope of the work involved had been made sufficiently clear to meet transparency requirements and whether the selection of only one contractor had resulted in a lack of adequate competition or value for money was one that needed to be considered in the light of the examination to be undertaken by the Comptroller and Auditor General. The Department of Finance is in the hands of the committee in the sense of the reaction of the committee to the report of the Comptroller and Auditor General. In the Secretary General's letter we made it clear we would comment on recommendations made by the committee on foot of the report of the Comptroller and Auditor General. In paragraph 69 the Comptroller and Auditor General notes that transparency and openness are required and that tenderers should know the value of the estimated purchase and the scale of the intended procurement. The nature of the work should be clearly and comprehensively set out. While the relevant 2004 directive was not transposed into Irish law until 2006, the EU principles of transparency and openness are applicable under EU law, irrespective of the position of the directive which was brought in to clarify the position on works contracts and framework agreements but the general principles applied. Having examined the matter, if the Comptroller and Auditor General believes there was a lack of competitiveness and the committee agrees, we are open to implementing suggestions for improvements from the committee.

Mr. Doyle's letter to the committee refers to the directives published in 2004 which Mr. Quigley says were not transposed until 2006.

Mr. Dermot Quigley

That is the norm.

The previous directive referred only to acquired supplies and services such as office supplies, printing and advertising.

Mr. Dermot Quigley

Framework agreements were generally only reached in the goods and services and utilities areas. The directive published in 2004 and transposed in 2006 updated the position in respect of works.

The directive in operation at the time of the contract applied only to pencils, paper clips, office supplies and such items.

Mr. Nicholas O’Loughlin

There was no rule relating to works contracts prior to 2004. The earlier directive did not apply to framework agreements specifically.

The refined directive was not transposed until 2006.

Mr. Nicholas O’Loughlin

Yes, June 2006.

This contract dates from 2004.

Mr. Nicholas O’Loughlin

Yes.

Do you still agree with Mr. Noone's evidence to the committee?

Mr. Dermot Quigley

Yes.

So there was a breach of EU directives.

Mr. Nicholas O’Loughlin

The views expressed reflected the principles under the Treaty of Rome, which governs all procurement rules including directives and has done so here since 1972.

How can a directive relating to pencils and paper clips — not making light of it — and office supplies be linked to a €2.4 million contract which eventually rolled out to more than €100 million? The claim is being made that it complied with a new or refined directive which was not transposed into Irish law until 2006. Is this the reality?

Mr. Nicholas O’Loughlin

The 2004 directive is a consolidated directive which includes supplies, works and services. Prior to that there was a separate directive for each of those areas. When the 2004 directive was drafted it introduced the frameworks that existed in the previous directives. The directives were introduced at various times. As procurement policy developed in the Commission, information was added to the directives. In 2004, the three directives were consolidated into a single directive which allowed frameworks apply to all three areas.

The end line is that you still agree with Mr. Noone's assertion on the day.

Mr. Nicholas O’Loughlin

Yes.

Despite all that you have heard since.

Mr. Dermot Quigley

Yes. I emphasise that I recall that at the time — I was not at the meeting — Mr. Noone was asked to comment on certain information that came up that morning and of which he was not aware.

That is not correct. He was asked whether there was an expert on procurement present.

Mr. Dermot Quigley

Yes.

It is on the record of proceedings if anybody wants to read it. Questions were asked on whether the Department was aware of the contracts.

Mr. Dermot Quigley

The views in principle expressed by Mr. Noone are retained by the Department.

That is fine. I apologise again to Deputy Clune.

To answer Mr. Quigley's question, the committee will decide whether there was value for money and it will be difficult to decide that in the absence of a tendering process, in particular for major projects but that is what we are working with.

What percentage was the €97 million of the expenditure of the Irish Prison Service?

Mr. Brian Purcell

That was over a four year period.

Perhaps Mr. Purcell can obtain that information for us because it would be interesting to see what percentage of capital works were carried out for the Prison Service by Glenbeigh Construction.

Mr. Brian Purcell

I do not have the figures with me but I can get them for the Deputy.

Perhaps Mr. Purcell can break it down for each year.

Mr. Brian Purcell

Yes, I can do that.

With regard to the question about the letter from the Department of Finance I am not sure of the conclusion of the previous discussion but I want to make it clear that the Prison Service was not in breach——

No, my point was that the——

Mr. Brian Purcell

——of the requirements at the time. I do not state there was confusion but it was only when comprehensive guidelines were issued by the Department of Finance in 2007 that the requirements of the directive became clear to everyone. In case there is any misapprehension——

No, the point I wanted to make was that it was clear——

Mr. Brian Purcell

——by anybody, we were most certainly not in breach.

I do not state you were in breach but there was an option to have multiple suppliers and that was the point I wanted to make.

Mr. Brian Purcell

I accept the point made by the Deputy on that.

Perhaps there was a dispute over that in the beginning.

With regard to the individual contracts for the works completed which are listed in the Comptroller and Auditor General's report, Mr. Buckley stated that contracts were not awarded in all cases. A total of 23 of the 96 contracts were external and KMCS were involved in the contracts awarded in those cases. In the case of internal projects no contracts were awarded. Why?

Mr. Brian Purcell

The report pointed out that in 76% of cases there was a lack of individually signed contracts. They all referred to small contracts managed by the building services division in the Prison Service.

What do you mean by small? Please give me an idea of their value.

Mr. Brian Purcell

It might have been €10,000 or €20,000 or less than €10,000 in some cases. Despite the fact that numerically 70% of cases were without formal written contracts, formal written contracts were in place for 68% of the value expended during the period of time. That the framework agreement outlines precise costs for all of the call-off items that would be included in any project means a written contract is not necessary.

For instance, work in Castlerea was started in June 2006 and contracts were signed in March 2007 for a project to the value of €19 million.

Mr. Brian Purcell

There was a contract in place for Castlerea.

It was signed after the work had started.

Mr. Brian Purcell

I may be subject to correction but my recollection of the Castlerea situation is that it was done on a design and build basis and because the contractor had to submit the design the contract could not be put in place until such time as everything was in place and a contract was then in place for Castlerea. It is not unusual, that is the way framework agreements——

Were all of the contracts fixed price contracts?

Mr. Brian Purcell

The prices quoted with regard to the tender, which applied to specific rates for various elements, are fixed. Any project of this nature which involves a framework agreement includes elements of call-off rates, which are specified, and non-call-off rates. Non-call-off rates are not fixed. It is only when one proceeds with the project that one identifies the non-call-off rates. In the range of projects examined by the Comptroller and Auditor General these rates went from 9% to 29% at the highest level. These are in line with normal practice in framework construction contracts. The prices listed under the generic model and the additional elements within it are fixed. It is only when one proceeds with the project that the costs of the non-call-off rates become apparent. The ratio of call-off to non-call-off rates is well within the norm in the industry.

Is the Deputy happy with the answer? She asked a question about a contract that was signed on 30 March 2007.

That was the Castlerea contract.

The work commenced on 29 June 2006.

Mr. Brian Purcell

It is not unusual in construction projects that formal contracts are not executed until a later stage of the process. The initial discussions would have taken place on the agreed prices and Glenbeigh would then have been asked to review the outline schemes to ensure the proposed building could, for example, be accommodated within the available site. In the Castlerea contract, problems arose in respect of the site itself. That would have been a contributing factor to the higher prices we discussed earlier.

Glenbeigh was carrying out the construction of the Castlerea project and was on site in June 2006.

Mr. Brian Purcell

It had to complete the preliminary site work.

Was it paid for that preliminary work?

Mr. Brian Purcell

Yes.

Was that part of the contract signed in June 2007?

Mr. Brian Purcell

Yes.

Was advice sought internally to ensure value for money?

Mr. Brian Purcell

A bill of quantities was provided by Glenbeigh and our internal adviser, KMCS, would have examined it. The remand block in Castlerea was one of the projects we asked an outside surveyor to examine for value for money. As I said earlier, we did receive value for money.

We are lucky that nothing went wrong with these contracts but we have seen elsewhere how mistakes can be made.

Mr. Brian Purcell

I understand what the Deputy is saying but do not agree that it was a matter of luck. The purpose of the framework agreement is to set prices. I cannot emphasise enough that it provides cost certainty, which is central to achieving value for money. The agreement is the guarantee that the work will be provided at the quoted price. No issues or disputes arose and the fact that we achieved value for money was not solely due to luck.

Things can go wrong with contracts.

Mr. Brian Purcell

Things can go wrong everywhere.

It is particularly likely when one is dealing with heritage sites. Many experts in that area would attest to the impossibility of predicting costs in advance.

Mr. Brian Purcell

That is exactly the point I made earlier. We could not have predicted it.

Perhaps additional advice should have been sought in respect of buildings which needed a certain level of expertise.

Mr. Brian Purcell

The Deputy may be correct to some extent but some of the issues were site specific and would have arisen regardless of who was involved.

Contracting companies with expertise in this area could have given ballpark estimates very quickly, thereby providing more certainty over costs. While we are discussing services supply, was KMCS the adviser for all the projects?

Mr. Brian Purcell

The company certainly advised us on a substantial proportion.

Was it the only company used for advice?

Mr. Brian Purcell

We also used other companies but KMCS had a lot of experience with prison contracts, which are different in many respects to normal construction projects because they are often carried out in high security environments and include specific elements which would not apply elsewhere. It was also one of the largest firms at the time and was tendering for contracts worth between €50 million and €60 million.

What was the nature of the original 2004 contract with KMCS? Was it tendered?

Mr. Brian Purcell

It was not tendered because the company had worked for us previously and, as I noted, was experienced in prison construction.

Was it part of a previous roll-over contract?

Mr. Brian Purcell

No, it was not.

It was a case of starting afresh without tendering for a contract.

Mr. Brian Purcell

This was an issue we raised in 2007 in regard to circular 40/02.

To return to 2004, is Mr. Purcell saying that the original contract for KMCS, which was awarded 22 out of 96 projects, never went to tender? Why not?

Mr. Brian Purcell

KMCS began working on prisons in or around 2000.

Why did the 2004 project not go to tender?

Mr. Brian Purcell

It did not go to tender because we had previously engaged the company and were satisfied with the quality of service provided.

Could any other company in the country do this work? Was KMCS unique?

Mr. Brian Purcell

It was not unique.

Why did it not go to tender?

Mr. Brian Purcell

In hindsight, we certainly should have gone to tender. We pointed that out when we conducted our review of circular 40/02.

How in the name of goodness could the company be given a further 21 contracts having failed to go to tender in the first place?

Mr. Brian Purcell

It had extensive knowledge of framework agreements.

As had many other companies.

Mr. Brian Purcell

Few other companies would have had KMCS's expertise in prison settings.

Mr. Brian Purcell

We engaged other companies from time to time but KMCS had extensive experience of prison settings. The Chairman is correct, however. In hindsight, we would have tendered and that is what we now have in place.

I ask Mr. Quigley whether EU procurement laws were breached.

Mr. Dermot Quigley

On a prima facie basis it would be unusual for a tender to be issued without competition. It is fair to say the Department would be reluctant to come out with a definitive statement that such and such an action was in breach of EU law without examining the situation in detail. After all, it would be a serious matter to suggest that an action taken by officials was in breach of EU law.

In 2007, services worth €1.4 million were rendered by the company without a competitive process and the figure for 2008 was €1.1 million. I do not have the figures for previous years.

Mr. Dermot Quigley

It is certainly fair to say on a prima facie basis that questions should be asked about whether the approach taken was appropriate.

Did Mr. Quigley raise these questions?

Mr. Dermot Quigley

I am not quite certain it would be for the Department of Finance to raise questions. As has been pointed out, we await the recommendations of the committee on foot of the Comptroller and Auditor General's report.

When these contracts were being awarded without tendering, did the Department have any questions? Mr. Quigley stated questions would be asked but were they?

Mr. Dermot Quigley

Normally, the Department of Finance prepares and promulgates guidelines. It is the duty of Departments and agencies to adhere to these guidelines. The Department of Finance does not get involved with the details of individual contracts.

Mr. Quigley has said the Department issues guidelines but does not monitor whether they are being implemented.

Mr. Dermot Quigley

Departments submit returns under circular 40/02 setting out the numbers of contracts awarded on a non-competitive basis. These returns are examined. We monitor the process on a general level but do not engage with Departments on the specifics of individual contracts; under accounting rules, that would be the responsibility of a Department and its Accounting Officer.

The monitoring is clearly not working. For example, in 2007 information was received by the Department of Finance that contracts to a value of €1.4 million were being awarded without tendering. Was anything done about this?

Mr. Nicholas O’Loughlin

Circular 11/87, introduced in 1987, allowed for fees to be negotiated with individual firms of construction consultants. This was a concern of the Government in 2004 and these procedures were withdrawn by the Department of Finance and a new one put in place in January 2007. At the time circular 11/87 allowed negotiations with consultants on commissions.

What about 2008?

Mr. Nicholas O’Loughlin

A circular was issued by the Department of Finance in 2006, circular 33/06, which introduced the new regime which came into effect on 1 January 2007. After that date, competitive tendering should have been the basis for the award of all commissions for construction.

From 1 January 2007.

Mr. Nicholas O’Loughlin

Yes.

Therefore, the figures of €1.4 million in 2007 and €1.1 million in 2008 were in breach of that guideline.

Mr. Nicholas O’Loughlin

In the circular there was a transition provision which ended on 1 March 2008. It allowed transition arrangements where ongoing processes might be in place, rather than disturbing the delivery of a project or service which might interrupt a programme. I do not know if that was relevant to the Irish Prison Service.

Could we have more detail from the Department to see what was or was not done? It was indicated that there was a transition period up to March 2008.

Mr. Nicholas O’Loughlin

It ended on 1 March 2008.

When was the €1.1 million contract entered into?

Mr. Brian Purcell

We believed we were able to do this and engage consultants on that basis. Looking back, we would have gone to tender. We identified this as a weakness in our own system and it was not pointed out to us as a result of an audit or by anybody else. Proactively, we saw that we had a problem and although we believed we were acting in accordance with existing provisions, we saw that we would be better going with a tender process. We disclosed this ourselves and did not wait for anybody to point it out to us. That is an important point.

When was it disclosed?

Mr. Brian Purcell

In 2007.

To whom?

Mr. Brian Purcell

It was part of the returns under circular 40/02. We acted ourselves. Subsequent to this, we have the multi-operator framework.

My question relates to the €1.1 million contract. On what date was it signed?

Mr. Brian Purcell

It was in place in 2007.

When was the last contract entered into with the company?

Mr. Brian Purcell

I am told it was late 2007.

That is the very last one. The company is not working with the service any more.

Mr. Brian Purcell

Does the question relate to advisers?

We are talking about KMCS.

Mr. Seán Aylward

This is something we had better get right, rather than mislead the committee.

Mr. Purcell has the information.

Mr. Seán Aylward

If he has the information, I ask him to give it. If he is unsure, I do not want to mislead the committee and we should confirm what is to be said.

Mr. Brian Purcell

The company is still working with us on some projects but it was engaged in 2007. We are finishing some projects; we have only finished the Castlerea project which the Minister opened about one month ago. We are finishing contracts that would have been awarded in 2007.

Does Deputy Clune wish to talk about fees?

I covered KMCS.

With regard to the fees charged by KMCS, by agreement, there was a reduction made by the company for services. Was that an admission that the service had been overly generous in its fee structure?

Mr. Brian Purcell

No. It came about because of the volume of work it had done. We went to the company and negotiated a reduction in fees.

When did the reduction take place?

Mr. Brian Purcell

I will get the precise details for the Chairman, but I believe it was in September 2006.

Does Mr. Purcell admit that the 2004 contract was not regular?

Mr. Brian Purcell

It was negotiated.

No tendering was engaged in.

Mr. Brian Purcell

I accept that it was not put out to tender.

Mr. Seán Aylward

The Department of Finance has pointed out that there was a prevailing directive from it instructing Departments and agencies to negotiate on that basis.

It pointed out that there were guidelines in place, but they were not being monitored.

Mr. Seán Aylward

That is true. It should be noted that the Department of Finance pointed out, in response to a query from the Chairman, that there was an instruction at the time to speed up building work in the country. Departments and agencies were mandated and instructed to negotiate. This was an unusual instruction which would not prevail today, nor would it reflect best practice today. As a matter of honour for those involved in the Irish Prison Service, it should be noted that they were following the instructions and guidelines which prevailed at the time. Competition is the lifeblood of trade. We should encourage cut-throat competition, particularly in a falling market. I am in favour of transparency. There are many lessons to be learned from the Comptroller and Auditor General's report, but one that should not be drawn from it is that people behaved dishonourably or were in breach of guidelines or instructions, as they were not.

Nobody believes that they were. We are not asking if people acted dishonourably, but we are examining whether guidelines were adhered to by the Departments which had received them and whether the guidelines given by the Department of Finance are being monitored in their implementation. They were the questions and we received the answers, from which we will draw our conclusions.

Mr. Seán Aylward

I thank the Chairman.

I have a question on the framework document. Did the new framework specify the likely value of contracts?

Mr. Brian Purcell

It did.

We have moved on. I know Deputy McGrath has mentioned prison overcrowding and referred to the prison in Cork. In 2008 when we had Vote 21 the number of prisoners was 3,544. It was 3,310 in 2007. I assume the figure has increased for 2009.

Mr. Brian Purcell

It went up today. Yesterday we were one short of 4,000.

What is the official bed capacity?

Mr. Brian Purcell

The bed capacity is 3,947, but that does not include almost 400 additional spaces which are due to come on stream. The Minister opened a new block in Castlerea and we hope the new block in Portlaoise will open before the end of October. We expect to open a new block in Wheatfield early next year, if not by the end of this year. That will give us an additional 400 spaces. In addition, we are refurbishing the separation unit in Mountjoy Prison which will give us a further 50 places. These will alleviate the difficult conditions in that prison at the moment. We have spaces coming on stream and we intend also to build a block in the Midlands Prison to see us through until the arrival of Thornton Hall. As I said in response to Deputy McGrath's question, I hope we will be able to proceed with Kilworth at an earlier rather than a later stage, but we are still at a particular stage in appraising what must be done there.

Vote 21 states the OPW is doing a re-assessment of value of buildings. Is there a reason for this? Prison buildings are valued on a certain basis. The Vote states that because of volatility in property prices, the OPW valuation section is preparing a review of lands and buildings which is due to be completed before the end of 2009.

Mr. Seán Aylward

If I may put on my Accounting Officer's hat, valuations of State security buildings and prisons are very notional. If we were to discount the value of Mountjoy Prison, for example, it was built in 1850 and would probably yield a minus figure. One cannot put a price on viable prison spaces. Although this exercise is immensely valuable in terms of the State's wider property portfolio, it is not very significant in the context of prison buildings which have a utility that is not measurable by classic accounting or property price movements. Values of lands and other properties are difficult to judge. The Kilworth site is a firing range and would involve a major change of use which probably only the State could secure. Again, we are very much in notional territory. We may have got this wrong in answering the Deputy's query but would be happy to go further into this if required.

I was reading the notes on Vote 21 which prompted my query.

Mr. Brian Purcell

The OPW is carrying this out as part of what I would describe as an accountancy practice. It expects to complete it by the end of the year.

Mr. Seán Aylward

In our context it is a bit of a theoretical exercise but in the wider context it is probably very prudential and I am sure the Comptroller and Auditor General would support it. I said this survey related also to the security field and although I am not the Accounting Officer for the Garda, the OPW is also valuing Garda stations, or barracks, as we would call them, throughout the country. It will be an interesting exercise but I am not sure it will be decisive in terms of the future utilisation of those buildings. That is a wider decision.

I have one question on Thornton Hall where €10.3 million has been spent on preliminary site works. That seems to be a very large sum of money.

Mr. Brian Purcell

That figure breaks down between fees that were paid to technical and legal consultants but also covers the cost of various site surveys that had to be done and topographical surveys relating to the ground. It also covers the archaeological surveys we had to carry out, landscaping, trees——

Will Mr. Purcell give a breakdown?

Mr. Brian Purcell

Some €6.9 million was spent on legal, financial and technical services, €2.8 million on site preparation and various engineering surveys, €400,000 on landscaping, including a major planting programme involving 25,000 trees and shrubs, and €500,000 on security at the site. I have not added up the figures for the breakdown but that will probably amount to the figure the Deputy mentioned.

It was €10 million.

Mr. John Buckley

I will clarify one matter relating to circular 40/02. The details of non-competitive purchasing go not only to the Department of Finance but also to my office. I published a report last year in which we looked at and outlined the extent to which agencies deviated from the standard, and again this year there will be a chapter in our annual report which will afford the opportunity to the committee to look at the issue broadly and examine performance across all Departments in that respect. I do not have anything else to add to the discussion.

I thank Mr. Buckley. Have I the agreement of the committee to note Votes 19 and 21?

We can dispose of chapter 16 on procurement in the Irish Prison Service and will issue a report arising from these proceedings. Is that agreed?

I thank everybody who attended. They gave as much information as they could to the committee.

The witnesses withdrew.

If there is no other business we will agree an agenda for the next meeting, namely, special report No. 65 by the Comptroller and Auditor General on water services and chapter 19 of the 2008 annual report of the Comptroller and Auditor General, investment in carbon credits.

The committee adjourned at 12.30 p.m. until 10 a.m. on Thursday, 15 October 2009.
Top
Share