COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 3 Dec 2009

Vote 32 — Department of Transport.

National Roads Authority Accounts 2008.

Mr. Tom O’Mahony (Secretary General, Department of Transport) and Mr. Fred Barry (Chief Executive, National Roads Authority) called and examined.

Chairman

I welcome everyone. Apologies for the delayed start to the public session. Two votes took at least 25 minutes out of our time. We were doing an examination of the pay review group of the Comptroller and Auditor General's office in private session, hence the delay.

We are considering Vote 32, Transport, chapter 27, the West Link buy-out and the National Roads Authority 2008 accounts. 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 provision in 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 Mr. Tom O'Mahony, Secretary General, Department of Transport. I invite him to introduce his officials.

Mr. Tom O’Mahony

I am accompanied by Mr. Pat Mangan, assistant secretary, Mr. Jim Humphreys, principal officer, and Mr. Dan Commane, finance officer.

Chairman

I welcome Mr. Fred Barry, chief executive of the National Roads Authority and ask him to introduce his officials.

Mr. Fred Barry

I am accompanied by Mr. John Maher, head of finance and administration, and Mr. Michael Egan, head of corporate affairs and professional services.

Chairman

I now welcome the Department of Finance officials.

Ms Deirdre Hanlon

I am Deirdre Hanlon from the sectoral policy division in the Department and I am accompanied by my colleague, Mr. Kevin Warren, who deals with the administrative budget for the Department of Transport.

Chairman

I call Mr. Buckley.

Mr. John Buckley

The Department of Transport spent €3.7 billion in 2008, of which €2.3 billion was on roads, €1.2 billion on public transport and approximately €91 million on civil aviation and maritime development. The balance is mostly administrative costs.

Responsibility for non-national roads and vehicle licensing transferred from the Department of the Environment, Heritage and Local Government in 2008 together with associated income from the local government fund of €568 million. National roads development and maintenance is carried out by the National Roads Authority which expended €1.7 billion on that activity in 2008.

One element of the spend is on public private partnership and tolling costs which amounted to €315 million in 2008. Included in those costs are five months' payments relating to the buy-out of the West Link agreement. The new arrangements commenced in September 2008.

Chapter 27 of my annual report outlines the basis for the buy-out which, in short, resulted in the agreement by the State to meet annual payments of €50 million, index linked, until 2020 in order to extinguish the rights of National Toll Roads, NTR. A tax cost of €140 million also arose.

One of the problems in extricating the State from the arrangement was that the original agreement had no specific termination clauses. It did, however, have a clause that allowed the State to reduce tolls to zero. We compared the cost of doing this — which would have left NTR's rights intact but eliminated tolls — to the amount paid to extinguish its rights. Without taking account of the saving in administration costs that would accrue to NTR, a straight cash comparison between the two would suggest that the State paid a premium to induce NTR to terminate the agreement.

The apparent lessons are as follows. Agreements such as that should have clauses which are explicit about the basis of calculation of the compensation payable to the private sector partner on their termination; and those arrangements should attempt to ensure that the basis of the compensation approximates to the net revenue stream forgone by the private partner and not the gross.

Mr. Tom O’Mahony

I thank the Chairman for this opportunity to address the committee. This is my first appearance before the committee, as I was appointed to the Department of Transport in June of this year.

I will begin with a brief comment on the West Link buy-out, which will be addressed in detail in the statement of the chief executive of the NRA. In my role as Accounting Officer of the Department, I am fully satisfied that the deal concluded with National Toll Roads was a prudent and effective one from the State's perspective.

The Government decided that the implementation of its policy on barrier-free tolling of the M50 required that NTR's tolling and associated rights on the Westlink portion of the road had to be bought out. The other options of simply doing nothing or allowing NTR to stay in place and operate the barrier-free system were not viable. Doing nothing would have meant that chronic congestion would have continued. Allowing NTR to remain to operate the new system would have broken national and European procurement legislation. It was not open to the NRA to terminate the original 1987 agreement nor to effect a compulsory buy-out of NTR's tolling rights. That was confirmed in legal advice and was acknowledged at a hearing of this committee in May 2006.

Essentially, the NRA had two options, either that the State would invoke a zero-tolling clause and compensate NTR accordingly, which was possible under the terms of the contract, or to arrive at a negotiated agreement. The original agreement provided a basis for compensating NTR in circumstances where the State invoked a zero-tolling clause but that mechanism still provided that the tolling rights for the concession section remained with NTR. The State was not willing to forgo the revenue from tolling so that clause was not exercised. Those revenues were earmarked to contribute to the funding of M50 upgrade works and the cost of buying out NTR's rights. In effect, the negotiated agreement option became the only viable option open to the NRA. The cost of compensating NTR was a matter for determination between the NRA and NTR in line with the original agreement.

By removing NTR in 2008, as opposed to 2020, when the original agreement would have expired, the State, rather than NTR, will be the beneficiary of the increased toll revenue because of the increase in traffic volumes from the upgrade of the M50. That increase is continuing. Traffic on the M50 continues to rise despite the recent economic downturn. Average daily traffic exceeds 90,000 vehicles and it peaked recently at 107,000 vehicles per day.

The toll revenue is being used to fund the compensation to NTR as well as contributing towards the funding of phase two of the M50 upgrade and the cost of introducing barrier-free tolling. It is the road user, through the tolls, rather than the general taxpayer, who is paying for the cost of the upgrade.

Chapter 27 of the Comptroller and Auditor General's report goes in to some detail on the facts in this case and on the views expressed by the Department and the NRA so there is no need for me to repeat that detail. I must stress, however, that the Department of Finance, assisted by the NTMA, reviewed the proposed deal quite rigorously before it was accepted by the Government. Government was satisfied that the deal was a good one for the State, taking account of the policy objective of achieving significant improvement to traffic capacity and flow on the M50 and the underlying legal situation that prevailed regarding the original contract. The State did not pay over the odds as the benefits being delivered will outweigh the costs incurred. The overall result is that the deal represents good value for the taxpayer while the users of the M50 are now benefiting from a vastly improved service.

I will turn briefly to my Department's Vote. Expenditure on the Transport Vote is dominated by the Transport 21 programme. To date, more than two thirds of the major inter-urban roads programme, linking Dublin with Cork, Limerick, Galway, Waterford and the Border, has been completed and the remainder is under construction and on target for completion in 2010. The upgrade of the M50 motorway is also on target for completion in 2010. The committee will be aware of the regular pattern of road openings.

On public transport, new railway stations have opened on the Kildare line and Irish Rail has completely modernised its intercity rolling stock. The Midleton commuter rail line opened earlier this year. The Luas line to the docklands will open next week and phase one of the western rail corridor is scheduled to be completed by the end of the year. Construction continues on other projects such as the Luas lines to Cherrywood and Citywest, the first phase of the Navan rail line between Clonsilla and Pace, beyond Dunboyne, and the Kildare rail project.

In the first three years of Transport 21, Exchequer funding amounted to a total of approximately €6.8 billion with expenditure in 2008 coming in at €2.5 billion. Given the current difficult economic circumstances, it is unlikely that all of the projects originally identified in Transport 21 will be completed by 2015. However, no projects have been cancelled, planning work remains a priority and Transport 21 continues to provide the strategic framework for capital spending on transport infrastructure into the future.

The current side of the Vote totals approximately €733 million. Of this, national roads maintenance and work on regional and local roads accounted for €217 million. The Road Safety Authority was in receipt of €40 million to help reduce the driver testing backlog and to promote road safety awareness. The State support for its public service obligations on public transport came to €310 million. In 2008, the support for regional airports continued by way of public service obligation, operational support payments of €17 million and capital grants of €6 million for safety and security works. The total spend on the maritime sector amounted to €47 million, comprising €39 million current expenditure and €8 million capital. That reflects the ongoing commitment to modernise and develop the Irish Coast Guard and maritime administration. I am happy to answer any questions from members of the committee.

Chairman

May we publish the statement?

Mr. Tom O’Mahony

Yes.

Chairman

I now invite Mr. Barry to make his statement.

Mr. Fred Barry

I thank the Chairman and committee members for the opportunity to appear before them today.

The year 2008 was an extremely busy one for the National Roads Authority. Schemes that we have seen opening in recent times, such as the Waterford bypass, were under construction. Improvements such as the M50 upgrade had started, the barriers at West Link were removed and many improvements were under way all around the country. The Carlow bypass opened, as did the Kilbeggan to Athlone section of the Galway to Dublin route. The Cullahill to Cashel and Cashel to Mitchelstown sections on the Cork to Dublin route were examples of other openings that year.

We are pleased that our accounts for 2008, with approximately €1.8 billion Exchequer funding and a further approximate €500 million private sector funding, have passed audit with no adverse findings. Some committee members may recall the background to the West Link buy-out from our previous appearance to discuss the matter in 2006. The M50 is one of the most highly travelled stretches of motorway in Ireland. It was constructed in stages, with the first section, the western parkway, being completed in 1990. The western parkway section of the M50 was tolled, using a barrier toll system which was known as West Link. West Link Toll Bridge Limited was given the right to operate and collect those tolls under an agreement signed in 1987 by Dublin County Council, with the consent of the then Minister for the Environment.

It has been recognised since earlier this decade that the M50 needed to be upgraded to cope with increased traffic levels and An Bord Pleanála approval for the necessary works was received in 2005. We were aware that any upgrade would accommodate increased traffic, with the effect of essentially conferring an unearned benefit on National Toll Roads, NTR, through the increased revenue that it would collect. We also had significant concerns about the ability of the toll plaza to cope with the increased traffic, given the significant delays that were already being caused to traffic by the collection of tolls at that time. We were not happy with that situation but our ability to act was constrained by the terms of the original agreement which did not provide any meaningful rights to the State in this regard.

We could, in theory, have done nothing, but neither we, nor the Government could, in practice, have allowed an already unacceptable situation to deteriorate. The 1987 agreement with NTR provided that the tolls could be abolished, with compensation to be paid to NTR. In his annual report, the Comptroller and Auditor General explores some, but not all, of the compensation issues that would have arisen had tolls been abolished. In the event, the Government was against toll abolition in view of the large loss of revenue involved, the necessity for demand management on the M50 and the implications for other tolled schemes around the country.

We engaged with NTR to see whether the West Link arrangements could be restructured to facilitate freeflow. It was not possible to come to any agreement with NTR on this proposal without infringing national and EU procurement and competition law, nor could value for money be demonstrated. It became clear that the solution was to terminate the West Link agreement. However, there was no provision in that agreement allowing for termination and there was no basis for implying such a right into the agreement. Accordingly, the option of a forced termination was not open to us. If we wanted to terminate the West Link agreement, the only way open to do it was by negotiation.

The abolition of tolls clause was relevant to the negotiations because both sides were aware that, should negotiations fail, the State would eventually have no choice but to exercise this clause, however reluctantly. That set a floor price for NTR. The NRA and NTR ultimately agreed that the NRA would buy out NTR's contract for a series of €50 million annual payments, adjusted for inflation, between 2008 and 2020. The Department of Finance valued the payment stream as having a net present value in 2007 of approximately €440 million.

The Minister for Transport and the Government had been kept apprised of ongoing developments throughout. The final agreement was thoroughly reviewed by the Department of Transport and the Department of Finance, which were assisted by the National Treasury Management Agency, before the Government agreed to our signing the buy-out agreement in May 2007. I am pleased to advise the committee that the strategic objective of eliminating daily delay and congestion for hundreds of thousands of the public at the West Link has been achieved.

I agree completely with Mr. Buckley's conclusions on contracts in his introductory comments. I agree also with the recommendation that the contracts should have had a proper termination clause. That would have been perfectly valid. I further agree with his conclusions that the provisions within the contract for reimbursement or compensation or in the event of zero tolling were on the high side. When trying to operate West Link, the absence of a proper level of service provisions in the contract seriously hampered our ability to deal with the situation.

Chairman

May we publish the statement?

Mr. Fred Barry

Do, please.

Deputy Deirdre Clune

I wish to ask Mr. Barry about a decision yesterday by An Bord Pleanála regarding a park and ride facility at Dunkettle roundabout. An appeal was made to An Bord Pleanála by the National Roads Authority against a provision to provide a park and ride facility. I wish to ask Mr. Barry about the background to that case as I have not received the correspondence from An Bord Pleanála. I understand the NRA was the only appellant in that case.

Mr. Fred Barry

I was not aware of An Bord Pleanála's decision. We did appeal against permission to build a park and ride facility in a particular situation in Cork. Our opposition is not based on any opposition to park and rides. In fact, we are completely in favour of them, but the location chosen for the park and ride was part of the site that is needed to improve the Dunkettle roundabout, which itself is a huge problem in the Cork area. Our view was that a park and ride facility should be built along the corridor but not on the site of the Dunkettle roundabout. It was to be built on land that we had acquired already for the purpose of upgrading the Dunkettle roundabout.

Deputy Deirdre Clune

Was it on the same location?

Mr. Fred Barry

Yes.

Deputy Deirdre Clune

Is Mr. Barry aware of the fact that the Department of Transport has invested €75 million in the Cork to Midleton rail route?

Mr. Fred Barry

Indeed.

Deputy Deirdre Clune

There are plans——

Mr. Fred Barry

We are completely in favour of park and rides, but we are saying that the location of this one on a site that had been bought for the purpose of improving the Dunkettle roundabout was simply the wrong spot. If An Bord Pleanála has made a decision in our favour, then it must have agreed with us.

Deputy Deirdre Clune

What are the NRA's plans for that roundabout or does the NRA have any plans?

Mr. Fred Barry

We have indeed. We have produced conceptual plans which we are in the throes of agreeing with Cork County Council. They are pretty well agreed. We are advancing them over the next 12 months to submit them to An Bord Pleanála for compulsory purchase order and environmental impact statement approval. We have already laid the conceptual plans in front of An Bord Pleanála in regard to other planning applications.

Deputy Deirdre Clune

Okay.

Chairman

Is Mr. Barry telling us that Iarnród Éireann was the original applicant in terms of that application?

Mr. Fred Barry

Yes.

Chairman

Was that done in co-operation with Cork County Council and Cork City Council under the Cork area strategic plan?

Mr. Fred Barry

Yes.

Chairman

Was there no consultation with the NRA on the application before Iarnród Éireann made the application to the local authority? Is it the case that the application was approved by the local authority, that it went to An Bord Pleanála and then the NRA objected to it at local level?

Mr. Fred Barry

We objected. We had many discussions with the council on that application. Our issue is not with the provision of the park and ride — we favour that — but there is land right beside the Dunkettle roundabout that has been acquired using NRA funds——

Chairman

How could public bodies such as Iarnród Éireann in this case, the two local authorities and the NRA allow a major planning application, which was part of the Cork area strategic plan, to proceed all the way to An Bord Pleanála? Was someone working in ignorance or was it just gross mismanagement on someone's part? The matter went all the way to An Bord Pleanála and then following an inspector's report and a decision by An Bord Pleanála on the application it was accepted that the land was in the possession of the NRA, which had plans for it. How long was the land in the NRA's possession and where were the plans at the time of the initial application to Cork County Council?

Mr. Fred Barry

If the Chairman does not mind I will ask my colleague to respond to that.

Chairman

I am sorry, but I am not being parochial. A major issue of principle is at stake in regard to the role of the NRA.

Mr. Michael Egan

The position regarding the park and ride proposal is that there was very little consultation with us in the early stages of its development. Iarnród Éireann developed the proposal reflecting its role in regard to park and ride facilities. As Mr. Barry indicated, the vast bulk of the land concerned was acquired by the authority in the context of our national road improvements in the area.

Chairman

In what year?

Mr. Michael Egan

It goes back a considerable period to the original Dunkettle road construction.

Chairman

What year was that?

Mr. Michael Egan

I cannot give the Chairman an exact date. It goes back some time. We had residual land which gave us the capacity to upgrade the Dunkettle interchange in the future should the need arise. There is no doubt today that there is a need to upgrade that interchange. Traffic conditions are difficult. The interchange itself is vital in terms of the road infrastructure in the area and giving access to the Lee tunnel, the Cork southern ring road and to the N25 route linking Cork eastwards towards Waterford. It is a vital hub in our road transport strategy. In addition, the Chairman will be aware that the authority has been mandated by Government to develop the Atlantic road corridor. Again, Dunkettle will be a vital element in the context of that additional road infrastructure. We were not consulted in any detail on the proposals of Iarnród Éireann. We became aware that it was considering a number of site options.

Chairman

I am sorry but I must interrupt Mr. Egan. Was there a period of public consultation prior to the final draft of the Cork area strategic plan being drawn up?

Mr. Michael Egan

There was. We had an opportunity to participate in that.

Chairman

Did the authority make any views known?

Mr. Michael Egan

The point I would make about where that process had advanced at the time of consultation with us was that a specific location was not identified. My understanding is that the intention to provide the rail link had been incorporated in the plan. There may well have been an intention to provide a park and ride facility in the general area but the location had not been identified. One of the earliest involvements of the authority concerned a draft report on site options. A significant number of alternative sites were identified by Iarnród Éireann. We commented on those and indicated the difficulty in regard to our site. The final choice was to locate the park and ride facility in close proximity to the Dunkettle interchange and substantially on land that the authority had funded for road development purposes in the past, with a contingency provision anticipated for future upgrade. Once we became aware of that, the only option open to us was through the planning appeal mechanism to An Bord Pleanála. It is regrettable, but vital issues arise in regard to the investment already made in the Lee tunnel, the Cork southern ring road, connectivity through Dunkettle eastwards and in the future westwards along the Atlantic corridor. There is a great deal at stake.

Chairman

This seems to be an appalling mess between public bodies, namely, Iarnród Éireann, the NRA and two local authorities involving the Cork area strategic plan, of which the NRA was aware, yet no one seemed to be talking to anyone. We have not yet seen the findings of An Bord Pleanála or the inspector's report.

Mr. Michael Egan

We are not aware——

Chairman

This was a disaster. At first glance it appears that no one was talking to anyone else during the process of objections and appeals. It is appalling.

Deputy Deirdre Clune

I am aware a development plan was produced by Cork County Council recently. Did the NRA make a submission to the development plan? Did the NRA indicate its intentions re the land which it was intended to use for an upgrade of the Dunkettle roundabout?

Mr. Michael Egan

Again, we would have commented to Cork County Council on its development plan. I cannot give a definitive response on whether we commented specifically on the location but my expectation is that it had not been identified in the development plan. I accept the intention of providing a park and ride facility was identified but not the specific location.

To return to the point on general land use and transportation strategy for Cork, to my knowledge the development plan did not identify a specific location. The reference was to a broad objective and that fed into the process undertaken by Iarnród Éireann to examine a number of site options. We flagged the difficulty relating to the site close to Dunkettle and despite that, for whatever reason — we can only talk from our perspective as we were not party to all the considerations — that led ultimately to the selection of that site by other parties but we had indicated the difficulty in that regard from our perspective.

Chairman

The one party that would have had oversight of the intentions of all parties is the Department of Transport. It would have had oversight of all the agencies concerned. What was the Department's role in this mess?

Mr. Tom O’Mahony

The general principle of the Department is well known to all of our agencies and it generally works extremely well. We prefer all agencies within the transport family, if one likes, to be able to resolve disagreements and to arrive at compromises. However, we have to accept that it can sometimes happen that two agencies will each have strong priorities which might be in conflict with each other. The statutory position is clear, to the extent that the agencies are carrying out their statutory functions for which they have autonomy. While we can encourage agreement, we must respect where the situation arises that there remains an issue that it is not possible to agree other than by allowing the other statutory processes, which in this case was the planning process, to work through. That is not a frequent occurrence but we have to accept that it will occasionally happen.

Deputy Deirdre Clune

Cork County Council, Iarnród Éireann and the NRA employed senior counsel and a great deal of money and time in the process. Why could the bodies not work in the public interest together? They are all appointed to pursue the public interest, yet we had three State bodies engaging senior counsel to pitch against one another at an An Bord Pleanála hearing.

Mr. Tom O’Mahony

That is not what happens in most cases and it is what everyone tries to avoid. There may be an occasion where each agency, given its own statutory autonomy, regards its priority as taking precedence over that of the other. If that happens, the Department is not in a position to be the arbiter, because the agencies have statutory autonomy. Processes have been set up by the State, namely, the planning process and An Bord Pleanála, and if it has to come to that, which all agencies try to avoid, that is the ultimate arbiter.

Deputy Deirdre Clune

The tragedy of this is that the Midleton railway line has just started and there is no sign of a park and ride facility being provided, which is key to encouraging the use of that railway. Everything is up in the air.

Mr. Tom O’Mahony

We obviously would prefer that in all cases the agencies were able to identify a compromise before matters got to that stage but we must also respect their autonomy. We cannot make that happen.

Deputy Deirdre Clune

Is there no provision in place to have people sort out this matter around a table, rather than wasting time and public funds?

Mr. Tom O’Mahony

They would have sat around the table but the difficulty was that they were not able to come up with an agreed answer. I can only state the general principle and will have to defer to Mr. Barry and Mr. Egan in terms of the detail of what actually happened. The National Roads Authority would prefer if matters had not come to this stage but occasionally each agency strongly believes it is right. An Bord Pleanála has the ultimate statutory power — the NRA does not have it — to decide who is right.

Chairman

Do the terms of reference of the National Roads Authority extend to an ability to interfere with national policy? The Cork area strategic plan was part of an overall strategic plan.

Mr. Fred Barry

If I could go back to what I said, we are all in favour of the construction of park and ride facilities and such a facility in this corridor, consistent with the Cork area plan. The Cork area plan the Chairman mentioned did not identify that the park and ride facility would be located in this specific location. If it had done so, the NRA would have raised the matter at the time. When it is raised, however, I would not fancy sitting in front of this or any other Dáil committee in the future to explain the reason we could not sort out the problems of the Dunkettle roundabout because the land needed was gone and we had done nothing to try to preserve it. That would not be consistent with our statutory obligations.

Chairman

The committee is working in a vacuum in that we do not have sight of the inspector's report. While we have An Bord Pleanála's decision, the issue is more important than this. The committee will return to it because it is a classic example of three public bodies and a Department engaging in a "family at war" scenario resulting in substantial costs and delays. The National Roads Authority was sitting on land for a period which Mr. Barry is unable to specify. Suddenly, it came out of the woodwork and torpedoed a major part of the Cork area strategic plan.

Mr. Fred Barry

I reject the categorisation of the NRA as coming out of the woodwork and suddenly torpedoing part of the plan. That does not do justice to the facts.

Chairman

We will get to them eventually. I cannot obtain information on how long the NRA was sitting on the land.

Mr. Fred Barry

With respect, if we had known the matter was on the agenda, we would have brought all of the facts to the meeting.

Chairman

Perhaps Mr. Barry will make the information available before the meeting finishes.

Mr. Michael Egan

As I said, there are options. It is not a question of either the park and ride facilities or the upgrade of the Dunkettle interchange proceeding. There are alternative sites. I am giving our perspective. We believe it is possible for the park and ride facility to progress in a manner which would not restrict the capacity of the National Roads Authority and Cork County Council to upgrade the Dunkettle interchange. There is no need to sacrifice——

Chairman

Where is the alternative site in the Dunkettle area?

Mr. Michael Egan

A number of sites have been identified by Iarnród Éireann and assessed by its consultants in the immediate vicinity, including, from recollection, at least one on land already in the possession of Iarnród Éireann.

Deputy Deirdre Clune

I have a question on the buy-out of the West Link toll bridge which, as is clear in hindsight, was a bad deal for the State. Mr. Barry has acknowledged that the compensation paid was on the high side. The Comptroller and Auditor General stated compensation should not have been based on gross income. If a different approach had been taken, would the costs have been lower?

Mr. Fred Barry

Yes; I agree completely with the Comptroller and Auditor General's comment.

Deputy Deirdre Clune

I presume the position has changed and that if such circumstances were to arise again, a termination clause would be included.

Mr. Fred Barry

Yes, all contracts include much more specific provisions. However, even in the 1980s, contracts normally included termination provisions. It is not just a difference between the 1980s and now in terms of contract development. The typical contracts with which I was engaged in the 1980s all included better definitions of the level of service provisions and termination clauses. The original contact was simply not as good as it should have been. On some issues, particularly in relation to PPPs, we are much more sophisticated now and cover much more ground in contracts. However, the deficiencies in the original contract and the ones picked up by the Comptroller and Auditor General go beyond this.

Deputy Deirdre Clune

Who negotiated the agreement with National Toll Roads?

Mr. Fred Barry

Is the Deputy referring to the buy-out?

Deputy Deirdre Clune

Yes.

Mr. Fred Barry

The National Roads Authority negotiated with NTR. We were helped by KPMG and McCann FitzGerald. NTR had its own advisers.

Deputy Deirdre Clune

The compensation figure was €50 million per annum.

Mr. Fred Barry

Yes.

Deputy Deirdre Clune

Does Mr. Barry agree that considerable additional costs also arise? One has tolls forgone, VAT repayments, the costs of introducing barrier free tolling and so forth. I am aware that the toll has increased.

Mr. Fred Barry

On the financial analysis of the arrangement, toll revenue in the period from 2008 to 2020 will meet payments to NTR, operating costs and rates payments. The Exchequer will not fund the deal.

Deputy Deirdre Clune

Car users will fund it.

Mr. Fred Barry

I am still not saying it is a great deal for the taxpayer that this much had to paid to buy out the contract. That is not the NRA's position.

Deputy Deirdre Clune

What would have made the deal fair, as opposed to great for the taxpayer?

Mr. Fred Barry

If the original agreement had included a termination clause, one that covered the type of ground a termination clause normally covers, giving the State the right to terminate and setting out the basis on which the developer would be paid in the event of termination. It normally would have included the type of provision to which the Comptroller and Auditor General referred, whereby there would be a reference to gross revenue but there would also be an adjustment of the price to reflect operation costs.

Deputy Deirdre Clune

Was a cost benefit analysis carried out?

Mr. Fred Barry

There was a financial analysis which covered all expenditures, outflows and the moneys that would be received.

Deputy Deirdre Clune

Mr. Barry referred to the current income from tolls. What was the income in the first 12 months of operation?

Mr. Fred Barry

Toll income is around €85 million to €90 million. As I stated, it covers rates payments to Fingal and South Dublin County Councils and the payments to National Toll Roads. By the way, on the payments to NTR, the figure is a little below €50 million because of deflation this year. The payment is indexed downwards as well as upwards.

Deputy Deirdre Clune

For how long will tolling continue?

Mr. Fred Barry

That is a matter for the Government.

Deputy Deirdre Clune

Does the delegation from the Department of Transport have any comment to make?

Mr. Tom O’Mahony

That is a policy matter.

Deputy Deirdre Clune

While things have improved considerably, road users are fronting these payments. For a long time the M50 was the largest carpark in Europe and road users paid a heavy price in financial and competitiveness terms prior to the lifting of the barrier.

Mr. Fred Barry

I agree.

Deputy Deirdre Clune

On the termination clause, if the same issue had to be addressed today, the National Roads Authority would take a different approach.

Mr. Fred Barry

Yes. If the same thing were to happen today on one of our modern contracts, a termination clause in the contract would allow the State to terminate. The provisions on payment would relate to debt levels and various other matters but they are structured so as to avoid a windfall to the developer or PPP company, unlike in this agreement where we would all openly say there was certainly a windfall for NTR.

Deputy Deirdre Clune

I note the National Roads Authority receives €1.8 billion from the Exchequer.

Mr. Fred Barry

The figure refers to 2008.

Deputy Deirdre Clune

It also receives approximately €500 million from the private sector. Has income declined or interest from the private sector declined as a result of current economic conditions?

Mr. Fred Barry

We are limited in how much we can raise from the private sector. The Government authorises us to raise a certain amount of private sector revenue. The original PPP programme for the NRA allowed it to raise €2 billion in private revenue, much of which came through in investment in 2008, which is why the figure was so high. The original programme will finish in 2010. All the projects coming through under it will be completed in 2010.

We have been authorised to raise a further €1 billion and have started the tender process for a couple of PPP projects with a view to raising it. Thus far, there is private sector interest. The first of the deals will close at the end of 2010. Therefore, it is really only when we reach financial closure that we will know that the moneys are available and the terms on which the financial markets will make them available to us. However, from what people have said and the way they are behaving in the BIP process, there is still private sector interest in PPP funding but it is not as strong as it was a couple of years ago. The number of participating companies is much lower than it used to be.

Deputy Deirdre Clune

Did Mr. Barry say none of the national route projects for 2009 had been postponed?

Mr. Fred Barry

The position on national roads is that in 2009 we only started one project, the Castleisland bypass. It was a modest enough project in view of the funding available. We will wait to see in the budget next week what funding will be available next year. We are not anticipating starting very many projects next year but it will depend entirely on the funding available to us.

Deputy Thomas P. Broughan

Surely not; there is to be a lot of development next year.

Deputy Deirdre Clune

Are there no start-up projects planned for next year?

Mr. Fred Barry

We have two PPP projects at tender stage and expect they will be signed off at the end of the year. Construction will not commence until early in 2011. Beyond that, it depends entirely on the funding available to us next year.

Chairman

Where are they?

Mr. Fred Barry

One of the PPP projects is between Gort, south of Galway, and Tuam and includes the Tuam bypass. It continues the Atlantic corridor. The other project involves a couple of works under one heading. It includes, as part of a single project, work at Newlands Cross and a stretch of road between Arklow and Rathnew on the N11 — the coastal road. Both projects are at tender stage and to be signed off late next year, if the markets are willing, with work to commence in 2011. Beyond that, it will depend on the budget for next year. There are many schemes ready to be commenced but we all understand how they are affected by current financial circumstances.

Deputy Deirdre Clune

Are there schemes that will involve tolling? Is there a policy on the matter or is it considered from project to project?

Mr. Fred Barry

Neither of the schemes I mentioned involves tolling. They will be availability-based, which means the contractor will be paid almost on a mortgage payment basis but must take a certain risk as regards lane availability to have the financing off balance sheet. However, there will be no tolls associated with them. For the balance of the €1 billion we have been authorised to raise, our direction is that the other projects will not involve tolling either.

Deputy Deirdre Clune

Will there be no more tolls?

Mr. Fred Barry

It is a Government decision. As of today, we are not under direction to raise more revenue from tolls.

Deputy Deirdre Clune

Looking at the financial statement on toll income from the operation of the Dublin Port tunnel, revenue from 2007 to 2008 increased by approximately €4 million. Is that due to an increased volume of traffic? The toll is expensive.

Mr. Fred Barry

Yes. The Deputy may recall that heavy goods vehicles travel through the tunnel without incurring a charge, as do buses with more than 20 seats.

Deputy Deirdre Clune

Yes. There is a heavy charge on cars.

Mr. Fred Barry

Yes. When the tunnel was first opened, car usage was very light. As people got used to it, more began to use it and revenue has grown.

Deputy Deirdre Clune

Has the toll been adjusted to encourage further use?

Mr. Fred Barry

We made some adjustments. We recognised that traffic volumes were very light at the weekend and reduced the toll to €3 at these times. That led to an increase in usage at weekends. We will be examining the matter again at the end of the year as we consider next year's tolls and traffic volumes, including the volume that can be handled safely.

Deputy Deirdre Clune

Was the toll set by the NRA or the Government?

Mr. Fred Barry

No, the NRA set it, based mainly on the inspector's report and on foot of public hearings. We adopted the inspector's recommendations in their entirety in regard to the Dublin Port tunnel.

Deputy Deirdre Clune

Income in 2008 was €13.5 million.

Mr. Fred Barry

Yes.

Deputy Deirdre Clune

On what was the money spent? Is it spent on maintenance?

Mr. Fred Barry

It was spent on the tunnel. There are hundreds of people working there because it operates 24 hours a day, seven days a week. I refer to management and maintenance activity, etc. Toll revenue and costs are broadly in balance.

Deputy Deirdre Clune

NTR's stake in the West Link Bridge is being bought out.

Mr. Fred Barry

Yes.

Deputy Deirdre Clune

Was the bridge inspected? Was it of an acceptable standard?

Mr. Fred Barry

Yes, it was. A full inspection was carried out.

Deputy Deirdre Clune

How old is it now?

Mr. Fred Barry

The first side was built between 1987 and 1990. The second part was built in the early 1990s.

Deputy Deirdre Clune

Was the condition of the structure inspected?

Mr. Fred Barry

Yes. We went to an external engineering consultancy firm to have an independent review and inspection undertaken.

Deputy Deirdre Clune

Is there a maintenance cost?

Mr. Fred Barry

There will be an annual maintenance cost, as with all bridges.

Deputy Deirdre Clune

The West Link Bridge generated an income of €6.2 million in 2008. I refer to the five months since July.

Mr. Fred Barry

Yes, it is based on the August figure.

Deputy Deirdre Clune

Almost €24 million was generated through the eFlow system on the M50.

Mr. Fred Barry

Sorry, the figure of €6 million was for the month of August. For one month NTR operated the plaza on our behalf. That was in August when the €6 million was generated. The €23 million applies to the balance of the year.

Deputy Deirdre Clune

The of €6 million was for one month and the figure for four months——

Mr. Fred Barry

In the four-month period €23.8 million was generated.

Deputy Deirdre Clune

I want to ask the witnesses from the Department of Transport a question. Let us consider the 2009 figure for improvements and maintenance. In 2008 the fund was €2 billion. Does the Department envisage funding being reduced this year?

Mr. Tom O’Mahony

Is the Deputy referring to the figure for 2009?

Deputy Deirdre Clune

Does the Department have the figures for 2009? I could not find them.

Mr. Tom O’Mahony

In our estimate the figure was €1.9 billion. The figure for road improvements and maintenance was down by 16% in the estimate, from €2.286 billion — the provisional outturn for 2008 — to €1.917 million in 2009.

Deputy Deirdre Clune

I ask the question in the context of the recent flooding and the need for increased funding due to the damage caused by it. The maintenance budget was reduced this year but we face more difficult circumstances as a result of the weather in the past month.

Mr. Tom O’Mahony

It is to be based largely on demands in 2010 rather than 2009 given the stage of the year we have reached. The NRA and local authorities must assess the damage caused to national, regional and local roads and bridges. Initial surveys of roads and bridges have taken place and some repairs have been undertaken to restore essential links. In many areas the flood waters have not even subsided. Therefore, it will be some time before there is a proper assessment of much of the damage caused. We do not hold moneys in reserve in the Department to deal with contingencies such as flooding. We pay the full road grant allocations for a particular year to the NRA and the local authorities. Towards the end of every year, we send a circular to local authorities reminding them of the winter maintenance of roads and the importance of setting aside contingency funds themselves for when problems arise under expected severe weather conditions.

The type of damage that has arisen from recent weather conditions and flooding is extreme. Several options are available to local authorities to deal with this. They can transfer funds within their existing road grant allocation. In some circumstances, expenditure that they have to undertake in 2009 can be recouped in 2010, provided the local authority prioritises the scheme for funding in that year. If necessary, the Department would also be open to revision by the local authorities of their specific grant applications and their restoration improvement programmes for 2010 so that they can get essential works done. Reprioritisation within the overall amount of funding that is available can be done to deal with the emergency repairs and other repairs that will arise from the recent flooding.

Deputy Deirdre Clune

Is Mr. O'Mahony waiting for reports from local authorities?

Mr. Tom O’Mahony

Local authorities will already be carrying out structural work and where it is necessary to make roads passable. After that, local authorities, and the NRA in the case of national roads, will assess what needs to be done and reprioritise the programmes then. The Department is open to approving changes in the grant allocations to deal with that.

Deputy Deirdre Clune

How are the waiting lists for driving tests?

Mr. Tom O’Mahony

It is down to 11 weeks. The target was ten weeks but there was a severe spike in waiting lists some time ago. The Road Safety Authority has been gradually getting that backlog down. In mid-November, the last time it was collated, the average waiting time was down to 11 weeks. That is slightly above what we would want it to be.

Deputy Deirdre Clune

Are there geographical blips or is it 11 weeks everywhere?

Mr. Tom O’Mahony

It will never be consistent everywhere and there will be patterns. I can provide the Deputy with a note giving a geographical breakdown.

Deputy Deirdre Clune

Under subhead D2, the provision for regional airports in 2008 was €42 million but the outturn was €27 million. In 2007 the allocation was €21 million. Why was there an anticipated increase between 2007 and 2008? How come it was not utilised?

Mr. Tom O’Mahony

The difference in the 2008 outcome was due to a decision in July, following the Government's expenditure review, to confine payments for the rest of year to projects which were already contractually committed. There was a specific Government decision that for the rest of year further payments would only be made where there were already contractual commitments. There has been a series of fiscal adjustments by the Government over the past 12 months and this was one of the measures.

Deputy Deirdre Clune

Will Mr. O'Mahony give us an idea of what that money involved?

Mr. Tom O’Mahony

It was for safety and security projects. These are improvement projects that have been identified as necessary in the six regional airports.

Deputy Deirdre Clune

Are all contracts for road works fixed price?

Mr. Fred Barry

The more recent contracts are fixed price. The limited amount of work at tender has been mainly smaller works, maintenance and rehabilitation. We have seen lower prices this year than previously. Other than the Castleisland bypass, we have not tendered any significant works this year. We do not have any hard evidence that allows us to say prices are 10% or 20% lower.

Chairman

The subhead C3 deals with public transport agencies and expenses. In light of the fraud uncovered in Iarnród Éireann, has the Department changed its monitoring arrangements to deal with that issue? What effect has this fraud on European Union co-funding arrangements?

Mr. Tom O’Mahony

The Chairman is referring to the Baker Tilly report which Irish Rail commissioned and raised serious concerns about procurement practices. The Minister for Transport stated it represents a cause for considerable concern. Systemic deficiencies and weaknesses were identified including a lack of management supervision and direction, poor training, inadequate monitoring and controls and lack of adherence to procedures which did create the opportunity for some employees and suppliers to misappropriate funds and materials.

The Minister discussed the matter with the chairman of CIE in late October after it came to light. He expressed serious concern both about the weaknesses that had been identified and that the Department had not been informed about this until it became a matter of public record. The chairman told the Minister almost all of the recommendations in the report had been implemented, that certain staff members had lost their jobs and some cases had been referred to the Garda.

Nonetheless, the Minister asked the board of CIE for a full report on the circumstances giving rise to the Baker Tilly report, the extent to which progress had been made in implementing the report's recommendations and the measures being taken to ensure adequate controls in expenditure areas not covered by the report. The Minister has made it clear that when that report is available he will consider any necessary action on his part.

The report has not yet been received. My understanding is that it is imminent and we will have it inside next week. We received in advance of this meeting, confirmation from the chairman of CIE and the chief executives of each of the companies in CIE that the companies are fully adhering to CIE Group procurement policies and procedures, EU public procurement directives and Department of Finance guidelines on public procurement. The procurement activity is also subject to external and internal audit on a regular basis and the audits of the operating companies are reviewed by the respective audit review groups.

I understand the reason for the delay in receiving the report is that it is a comprehensive and complex report. It is being overseen by the audit committee of the board before it comes to us. When we have the report, we will be able to consider and advise the Minister whether there is any further action that needs to be taken on his part.

There is no impact on EU funding. Where an issue arises regarding a project, we exclude it from grant claims and substitute other eligible expenditure. In the case of the specific project identified in the Baker Tilly report, while there was a reduction of what was reimbursed for that project, there was no net loss for Ireland. We were still able to draw down the full amount available to Ireland, but substituted other projects.

Chairman

The chairman of the board of CIE was before this committee some time ago in his capacity as the former Director General of FÁS. Is Mr. O'Mahony happy that he performed his duties of accountability with regard to the findings of the report to maximum effectiveness?

Mr. Tom O’Mahony

We are awaiting the arrival of the report back from the board, which will enable the Minister to make a fuller assessment of that.

Chairman

We shall delay judgment on it. Will Mr. O'Mahony make the report available to the committee and the Department's role in it, as soon as it is received?

Mr. Tom O’Mahony

The report will be made available to the committee.

Chairman

With regard to the question I asked Mr. Barry, earlier, about the ownership of the land at Dunkettle, and how long it was in the possession of the National Roads Authority, what year was it acquired?

Mr. Michael Egan

When the Chairman put that question before, I was unable to answer it, directly. We have checked the position at the time and it turns out that the land concerned was purchased in the early 1990s, which would pre-date the establishment of the National Roads Authority. It was funded from the provision for national roads as voted by the Oireachtas, and the payment would have been made via the Department of the Environment. At the time the Department operated on the basis that if a local authority wished to dispose of surplus land acquired for national road network purposes, the prior approval of the Department was required.

When the authority was set up in 1994 we continued to operate that requirement and no such request was every made to the authority by the Cork local authorities, at any rate, as regards the land on which the planning application for which the park and ride facility relates.

Chairman

In regard to the NRA's role in planning applications, generally, I know the authority has a track record on sanitising land in advance of development, across stretches of the countryside. I am aware of situations in recent times on the proposed new Cork-Limerick route.

Does Mr. Barry believe the policy of sanitising land with regard to public planning applications is fair to the owners of the land involved? What is NRA policy in relation to land sanitisation?

Mr. Fred Barry

The fairest thing for the public is that when a road plan is being developed, those involved, including the NRA, local authorities and so on move beyond having several corridors under consideration and agree on a preferred route as soon as possible. That should be done and we try to get planning to that point at least, so that we do not have several corridors sanitised, as the Chairman says. If it is planned to build a road in a particular area, even if the authority cannot say definitively when it will be constructed because we do not know what the funding will be in future years, it is in the public interest, I believe, that the corridor be preserved. If it is not preserved, then it will either become extremely expensive to develop the road, or even impossible.

Chairman

Therefore, in regard to the land at Dunkettle, the NRA had a policy in place as regards sanitisation, let us say, as against planning applications. Were the local authorities and Iarnród Éireann informed by the NRA that the land was sanitised for future development?

Mr. Fred Barry

I would distinguish between lands in local authority hands, etc., and being preserved for a future corridor and land that has been purchased by the State for a particular purpose. Lands bought for a purpose do not have to be sanitised in planning terms. It simply belongs and is dedicated to whatever purpose it was bought for.

Chairman

In the case of private individuals who apply for planning permission, however, they are told early on that they cannot proceed because the NRA has that land sanitised for development.

Mr. Fred Barry

With respect, they can apply. If land is not preserved by the local authority in a development plan, then people are free to apply for planning permission.

Chairman

That is not correct. They may apply, but the NRA objects and so it effectively has a process of sanitisation is in place.

Mr. Fred Barry

We object sometimes if people are seeking to make new access points onto national roads, for example, which is probably the most frequent cause of ——

Chairman

No, the NRA sanitises in the case of individuals who have plans for the development of their own land. They are told they cannot proceed with their planning because of NRA sanitisation. I have documentation on this.

Mr. Fred Barry

We have no right of veto, as the Chairman seems to believe. We do not have such powers.

Chairman

I shall produce letters to that effect.

Deputy Thomas P. Broughan

On a point of information, last week the Oireachtas passed the Public Transport Regulation Bill, which establishes the national transport authority. My understanding is that, certainly in the greater Dublin region, it will not be possible from now on to have any type of transport development without integrated planning. I do not know why the Minister did not extend this to the whole country, which presumably would include the Cork region, but there should be a co-ordinating agency, shortly, which is responsible to this committee. That would ensure that this type of messing, or whatever happened at Dunkettle, does not occur again.

Chairman

Before Deputy Broughan comes in, what would the NRA legal costs have accrued to, say, in 2008?

Mr. Fred Barry

We are looking for the exact figure for 2008. Legal costs in any year, I would say, are in the order of €1 million to €2 million, typically. We would have legal costs in support of the general business and in particular when the NRA is dealing with contractors' construction claims and quite heavy legal costs with regard to PPP schemes.

Chairman

What might they have been for, say, the Dunkettle debacle?

Mr. Fred Barry

I do not have that figure with me.

Chairman Could we get it?

Mr. Fred Barry

We shall advise the committee in that regard.

Deputy Thomas P. Broughan

To return to the West Link, is it not fair to say that this has been one of the greatest financial scandals and examples of misappropriation of taxpayers' money in the history of the State? I am doing a rough calculation of the figures.

I welcome the Secretary General and the agency and commend them for the enormous work being done in developing a modern transport infrastructure at long last in this country, over the last ten or 15 years. Taking the issues before us through the State, through the aegis of this committee, is answerable for the people's money. Regardless of how one looks at the West Link buy-out, it was possibly the greatest sting in Irish history. Certainly, it was the greatest misappropriation of the people's money in the history of the State. Does the Secretary General know what the cost of building the West Link was, after 1987, and does he have a figure as regards how much NTR will have gained from it by 2020? What is the actual figure?

Mr. Tom O’Mahony

Rather than just throwing a figure at the Deputy, I would prefer to send him a note——

Deputy Thomas P. Broughan

I believe it was well under €30 million, if memory serves me. On the figures Mr. O'Mahony presented there this morning, we may be paying, with VAT forgone, the €50 million annual payments, plus cost of living, approximately €900 million in addition to the earnings NTR already had. Surely this was an incredible scandal, and it goes back to the 1987 agreement. Would it not be fair to say that the 1987 agreement was either grotesquely incompetent or else it was corrupt?

Mr. Tom O’Mahony

I would not use either of those terms to describe it. It turned out to be very bad value for the State. That is why the State extricated itself----

Deputy Thomas P. Broughan

It is not a question of bad value. It is mind boggling. We were covering the Limerick drainage scandal and a few other scandals in recent years in this committee, but this is incredible. Somebody estimated that NTR will have made about 2,000 times the amount of investment it had put into the project by 2020. That was a grotesque rip-off of the State.

Chairman

To put this in context, the original figure was £6 million, which is about €14 million today, but the overall cost will be €600 million.

Deputy Thomas P. Broughan

It will be more like €800 million or €900 million.

Mr. Tom O’Mahony

I am advised that the figure quoted by the Chairman may not be the full figure. It may not take into account the fact that there was a second bridge built as part of the project.

I do not want to defend the 1987 agreement, except to make the following point. It is reasonable to say that nobody in 1987 perceived the extent to which the traffic on the bridge would develop over the years.

Deputy Thomas P. Broughan

That is not true. One of my closest colleagues who worked for CIE as a transport engineer gave many talks to our party and probably to other parties. He said that the M50 would be a transforming transport development and that it would become the main street of the Dublin region. He was completely right, but everybody was saying that. This was a licence to print money for NTR.

Before the Department agreed to this buy-out deal, did officials check that this defective agreement, without a termination clause, estimates or cost benefit analysis, was so incompetent as to render it null and void from the point of view of our State? Did he check to see if perhaps it was corrupt, and that we should not be bound by it?

Mr. Tom O’Mahony

My understanding is that there was very intensive legal and financial scrutiny of the deal before it was concluded. It is clearly not my role to defend the 1987 agreement and I do not propose to do so. I accept that far-sighted engineers in 1987 would have perceived that the M50 would become hugely significant.

Deputy Thomas P. Broughan

Every major city has an equivalent to the M50, be it Paris, Moscow and we are all familiar with the M25 in London. Everybody knew this would be a licence to print money.

Mr. Tom O’Mahony

I accept that.

Deputy Thomas P. Broughan

Very few of those cities have a toll on the ring road. It is an amazing state of affairs. A ring road pulls traffic out of inner suburbs and all industry is built along it, as happened in our case with the airport and so on. The dogs on the street knew that this was an incredibly valuable potential money spinner for NTR.

Mr. Tom O’Mahony

What was not clearly foreseen in 1987 by any economist or anybody else was that the economy would grow by 350% between 1987 and 2007.

Deputy Thomas P. Broughan

That is not true either. Quite a few people felt that we were going to have a boom, for all kinds of reasons. I disagree with Mr. O'Mahony on this. Anyway, I am asking about the buy-out. Why did we not tell NTR to get lost? Why did we not take over the facility and use the moneys for transport services in this city and this nation? The whole nation practically uses the M50 if they come to the capital. We are looking at the buy-out. Were there not substantial grounds for the Department to claim that it could not stand over the agreement and to let the courts take their course? We could then have got our bridge back.

Mr. Fred Barry

Our unequivocal legal advice was that the contract was enforceable. It was not open to the State to say simply that we would not honour the contract.

Deputy Thomas P. Broughan

Were other jurisdictions examined? Was there any case elsewhere where a similar contract had to be bought out?

Mr. Fred Barry

The issue is under Irish law, so Irish law is relevant.

Deputy Thomas P. Broughan

What about common law jurisdictions?

Mr. Fred Barry

We took advice from both senior counsel and from solicitors on the contract, and it was declared to be enforceable.

Deputy Thomas P. Broughan

Did anybody investigate whether there was any possibility that the contract was corrupt?

Mr. Fred Barry

If there was evidence of corruption, then we would take legal advice and would work closely with the Attorney General on this on what measures the State could take on foot of that. We have no evidence of corruption.

Deputy Thomas P. Broughan

Was the possibility of corruption investigated?

Mr. Fred Barry

We spoke earlier about our infringing on people's right in respect of planning. We have no legal investigative powers——

Deputy Thomas P. Broughan

No, but there is a national bureau of fraud investigation. Mr. Barry spoke about planning. We have had two tribunals that were set up on the basis of complaints made to the fraud squad a few streets away. Did anybody ask the fraud squad to look at it?

Mr. Fred Barry

We talked to this committee about the contract three years ago and we talked about the enforceability of it at that time. Neither at that time nor since has anybody come forward with any evidence of corruption. There was nothing for us to act upon in respect of corruption.

Deputy Thomas P. Broughan

Did anybody think of doing a check?

Mr. Fred Barry

With respect, if the Deputy wants an investigation done on corruption, he should put this to the Garda Síochána, rather than us. It is not for us to do so.

Deputy Thomas P. Broughan

The officials today were in charge of negotiating a new contract.

Chairman

I think we have taken this as far as we can go.

Deputy Thomas P. Broughan

The Secretary General has been very sanguine about it. Road users are taxpayers and many of them who cross that toll every day are workers. They are earning their living and they are paying this tax back and forth. The NRA is using a very organised system to obtain tolls, and it chases those tolls and earns even more in penalties. It is quite a parasite on the back of enterprise, small businesses and workers. They are very interested to know if they paid for this thing twice or three times over through grotesque incompetence or through some form of corruption.

Mr. Tom O’Mahony

I would like to respond, and with the greatest possible respect, I would like the Deputy to let me make the point. We do not disagree that the company got a huge windfall gain out of this. The company benefitted immensely from the fact that the economy boomed, that there was a big increase in population and the number of cars on the road, and very significantly, that the M50 network was completed. When this deal was done in 1987, there was no guarantee that this would happen. The company took a degree of risk at the time. We can argue that the company was grossly overcompensated for the risk it took, but the fact remains that it took a risk. However, as the economy developed, there was far too high a windfall profit in this, hence the decision to buy out the deal.

Deputy Thomas P. Broughan

They were like people who bought a Lotto ticket knowing that they had the winning number.

Chairman

Mr. O'Mahony asked to be allowed to make his point.

Mr. Tom O’Mahony

I would not disagree that the impact was somewhat like winning the lotto.

Mr. Barry answered the question on why the State did not unilaterally terminate the contract and take its chances through the courts. The consequences that might have had on overall approach to PPPs, and the signal that it might have given to PPP consortia throughout the world that we want to attract to put money into various projects, could have been very significant. It would have been a very high risk strategy, even it were legally appropriate. However, as Mr. Barry pointed out, all the advice given was that it would not be legally appropriate. The argument would be that it was both legally and strategically the wrong thing to do.

Deputy Thomas P. Broughan

The other major issue in regard to protecting the people's money, which was raised by the Chairman, concerns the Baker Tilly report. I am also a member of the Joint Committee on Transport, which has begun to invigilate the report. There is a grey area in regard to the role of a commercial semi-State body, which has rights as a body that competes in the open market place in transport and will be competing more as the new law comes into operation.

With regard to the Baker Tilly report, the PSO moneys — in other words, the subsidy to Irish Rail — were over €300 million in the year in question, or approximately 42% of Irish Rail's revenue. That money comes directly from the Department of Transport and, therefore, as I understand it, is a responsibility of this committee. The point was well made by the Irish Rail officials at the Joint Committee on Transport that, before Transport 21, it had something like €16 million a year for maintenance but this then expanded to become €400 to €600 million as it began to rebuild the network, at long last get some decent carriages and so on. However, the Baker Tilly report seemed to show a grotesque incompetence in regard to procurement policy at Irish Rail. I understand the Minister told Deputy O'Dowd that information on the ten largest procurement projects for Irish Rail in Transport 21 would be made available to the Joint Committee on Transport and I presume to this committee. Has information on any of those ten major procurements been made available to the Department?

On another key point, the Department of Transport, year in, year out, disburses this roughly 42% subsidy to Irish Rail. What did the Department do to audit that money? Does it audit it as the money is being implemented on our behalf?

Mr. Tom O’Mahony

All of CIE's expenditure is audited.

Deputy Thomas P. Broughan

Specifically, did the Department of Transport know what happened to that €300 million?

Mr. Tom O’Mahony

The Baker Tilly report is about capital expenditure. For capital expenditure, there is extensive auditing and spot checking by my Department, the Department of Finance and the EU authorities in regard to any expenditure that is subject to EU aid. With regard to all capital expenditure, we require certification by the agencies that the expenditure was properly incurred and charged, including an independent role for the company internal auditor. As EU programmes wind down, we will replace the very comprehensive auditing that is associated with the EU programmes with national checks that will be done by the Department or agents acting on its behalf.

To go back specifically to the Baker Tilly report, as I explained earlier in my response to the Chairman, neither the Minister nor the Department is in any way downplaying the seriousness of what has emerged from that report. We are aware there have been sackings and Garda prosecutions on foot of it. However, as I said, we have sought a comprehensive report from the board, which is imminent, setting out the extent to which progress has been made in putting in place all of the recommendations in the report and, also, because the report only covers a specific category——

Deputy Thomas P. Broughan

Therefore, as we found at the Joint Committee on Transport, there are some similarities in the way the Department of Transport dealt with this matter and the way the Department of Enterprise, Trade and Employment dealt with some of the issues at FÁS. These matters came to attention at CIE through an internal audit committee and the consultant, Baker Tilly, was then brought on board. The question that arises is why the mother Department, the Department of Transport in this case, was not able to delve into either capital or current spending to ensure there was no wastage. The sum involved was €1.5 million to €2 million, a relatively small amount, and there was malfeasance and people selling old sleepers and so on. However, the concern is that there could have been procurement practices to which the normal rules of corporate governance did not apply but the Department of Transport was seemingly — I know it was before the Secretary General's time — in a relaxed and easy-going frame of mind rather than delving in and tracking that the capital and current spending was being spent to the best effect.

Mr. Tom O’Mahony

The Baker Tilly report is the outcome of the process that is in place to ensure——

Deputy Thomas P. Broughan

The company did that.

Mr. Tom O’Mahony

Yes, that is where the first responsibility rests. Under the corporate governance system that is in place, it is the company's responsibility to have in place proper processes, including audit processes. It is the company's responsibility to publish and submit the certifications for our scrutiny. In this case, through the processes that were in place in the company, a problem came to light. This comprehensive report was commissioned by the company. The Minister is on record as expressing his dissatisfaction with this. The Department should have been brought into the loop when this work was done, and it was not. That has been made——

Deputy Thomas P. Broughan

Was the Department surprised, given the key recommendations in the report? I have not seen a report involving any of the agencies we have invigilated at this committee or the Oireachtas Joint Committee on Transport where so many negative descriptive adjectives were used about the procurement system. There was repeated reference to a lack of points of responsibility, different parts of the organisation not talking to each other and so on. It was an incredibly worrying analysis of a very bad procurement system. Granted, there was nothing much to procure before 2000 or so, but systems did not seem to have been put in place. I find it extraordinary that the Department's auditors, the Secretary General's predecessor and his colleagues would not have noticed some of that in the years up to the Baker Tilly report.

Mr. Tom O’Mahony

The Deputy must remember that the report was specifically on procurement below a certain value, namely, projects of under €50,000. One is talking about a plethora of small-scale procurements rather than the major capital programmes under which much more rigorous processes would have been in place. Having said all of that, I do not for one moment disagree with the Deputy's point that the state of affairs that the report unveiled was very unsatisfactory. The issue now is what has the company done in order to ensure the various deficiencies that were identified have been corrected and, anywhere there was fraudulent activity, what sanctions have been put in place. I referred to sackings and Garda prosecutions which have taken place.

I have from CIE and from the heads of each of the companies a written assurance that all procurement policies are now fully in line with best practice but we await the comprehensive report on how the recommendations have been implemented. As I said to the Chairman, when that report is available, we will make it available to the committee so it can also be satisfied in this regard.

Deputy Thomas P. Broughan

Turning to some other points on transport spending, I prepared a paper for my party on the rural transport programme and Deputy Ring is preparing one for another committee. Both Opposition parties and many others believe it is a good programme which, throughout the country, is putting in the last link.

I hope that during his term, the Secretary General might develop a real national policy on rural transport, with linkages to the bigger providers, both public and private. In that context, one of the complaints I have received from the operators, such as OK Transport of Kerry, is that of the €11 million which is in these accounts for the programme for 2009 as direct spending from the Department of Transport, something like €1.5 million to €2 million somehow gets clogged up in Pobal, so the programme ends up getting only approximately €8.25 million to €8.5 million. It has been put to us that it is a small but very valuable programme facilitating senior citizens and young people in rural Ireland and that much of the money, perhaps one quarter of it, gets bogged down and spent on administration and non-frontline matters. Is this the case and if so is there a case for the Department to run the programme directly, provide the money to the companies which have a national network, provide frontline services and not waste money?

Mr. Tom O’Mahony

With regard to the programme and how it might develop, Deputy Broughan is aware that as with all recommendations of the special group on public service numbers and expenditure programmes, the future of the programme must be decided by the Government in the context of the budget.

Deputy Thomas P. Broughan

Yes.

Mr. Tom O’Mahony

The Deputy is also aware that in the recent renewed programme for Government there is a commitment to develop the programme further by examining the provision of a full-scale transport system in rural areas that would include the network expertise of Bus Éireann and the resources of the school and health transport systems. We have to await budgetary decisions.

Deputy Thomas P. Broughan

The complaint is that too much money is spent on administration in Dublin and not on the small buses or cars.

Mr. Tom O’Mahony

In response to that, as part of our general oversight of the programme we asked Pobal to ensure the administration costs associated with the programme are kept to the absolute minimum sufficient for the proper administration of the programme so that as much of the money as possible can be used for on the ground services. As a result of this, in 2008 we generated a saving of €1.1 million. We must also recognise that it is by its nature a scheme which involves bringing on board a huge number of transport providers throughout the country. It cannot administer itself; there must be a level of administration. In general, I do not agree with the idea that we take it back into the Department. Organisations such as Pobal deal with other issues. The Department sees its role as being——

Deputy Thomas P. Broughan

The interesting thing about this group is that 1,300 or 1,400 volunteers give of their time to drive people and run boards. I am very heavily involved in community development and I know what they are speaking about. It seems that the very least they could expect of an €11 million programme is that the €11 million would go to the companies. I will leave that with Mr. O'Mahony.

Mr. Tom O’Mahony

Okay.

Deputy Thomas P. Broughan

I shall ask a couple of questions about the NRA. Recently, there was an horrendous collision on the N17, which left the entire country reeling when a number of young women were tragically killed. One or two other similar horrendous events have also occurred. Our colleagues in the Road Safety Authority are battling away on this. A number of bereaved families have stated they will bring issues to the attention of the Road Safety Authority about terrible collisions on roads. I know it has been given some responsibility for funding primary and secondary roads. Does the Road Safety Authority have absolute priorities for roads such as the N17? Local people from Ballindine in Mayo have commented on this. I use the N72 and the N70, which are appalling. They are supposed to be "N" roads but they are appallingly dangerous in places. Does the Road Safety Authority have a strategic plan to deal with those roads which are supposed to be national primary roads or significant secondary roads but which have stretches that are death traps at the permitted speed limits? Is this of concern to the Road Safety Authority?

Mr. Fred Barry

In short, yes. The situation is that with the road improvements to be done by the end of next year under Transport 21 we will have improved many of the country's major roads. However, there will still be roads unimproved in modern times and that still follow the old paths as they developed years ago. We hope and expect that funding will allow us to continue to knock off — by which I mean improve — those roads and deal with safety issues as well as capacity issues. Committee members are aware that under Transport 21 we have a heavy ambition to get many roads beyond the interurban routes done by 2015. The extent to which we will be able to do so is governed by funding.

Apart from that, we receive accident data from the Garda and we work with local authorities to identify particularly bad spots or black spots. Every year as we identify those we have a funding programme for small interventions to be done throughout the country to try to deal with the worst of them. We get through many of these. However, this is not to suggest that this is a proper long-term solution because it is not. The long term solution is proper roads.

Deputy Thomas P. Broughan

In Kerry there were 12 or 13 deaths this year and this is completely unacceptable as are the figures for Mayo and Donegal.

Mr. Fred Barry

Yes.

Deputy Thomas P. Broughan

Some of the roads that have been highlighted are in north Munster and Connaught.

Mr. Fred Barry

Yes, and during the early years of Transport 21 the focus for national secondary routes, which Deputy Broughan mentioned, was on the major inter-urban routes such as those between Dublin and Cork and Dublin and Limerick. The back half of Transport 21 — and the timing may push out — was intended to include improvements to many national secondary routes. To support this we are conducting many investigation and condition surveys and analysis of the entire national secondary network so that as we work on them we can prioritise them. I would not like to understate the task because thousands of kilometres of road need improvement.

Deputy Thomas P. Broughan

I thank the chief executive. We spent a large part of a recent meeting of another forum discussing the next matter I wish to raise. My colleague, the Fine Gael spokesperson, is particularly concerned about safety in the Dublin Port tunnel. What is the budget for safety? Given the near disaster at Malahide Estuary, which we would have been discussing on the floor of the House for many months if the worst had happened, and that transport is a safety critical area, will Mr. Barry categorically state that the Dublin Port tunnel is safe on a daily basis and is invigilated in such a way that everybody in the room, including me, who uses it from time to time is safe?

Mr. Fred Barry

Yes. Since we last spoke at a meeting of the Joint Oireachtas Committee on Transport, I have spoken to Martin Kelly, the author of one of the reports which raised concerns. He is putting together a report in response to the committee's requirements.

Deputy Thomas P. Broughan

Is that for the Oireachtas Joint Committee on Transport?

Mr. Fred Barry

Yes.

Deputy Thomas P. Broughan

We will have information on its safety on a daily basis. Issues arose with regard to CIE as to whether Irish Rail had followed its own procedures. It seems it did not do a walk on the line in addition to using the machine. Will Mr. Barry state that the equivalent procedures for the Dublin Port tunnel are being carried out on a daily or hourly basis?

Mr. Fred Barry

As Deputy Broughan is aware, an independent NRA safety officer oversees the safety aspects of the tunnel. The tunnel management company has its own obligations and we have someone supervising it. There is quite an intensive oversight of——

Deputy Thomas P. Broughan

Earlier, my colleague, Deputy Clune, asked about the revenue drawn from the Dublin Port tunnel. Does the NRA have a figure in the 2008 accounts for the amount of money spent on the safety of the Dublin Port tunnel? It is one of the longest tunnels in urban Europe and is unique. At long last, we will have tunnels in Cork and Limerick. Obviously, safety has to be the watchword.

Mr. Fred Barry

The accounts for the tunnel would not include safety in a separate category. Ensuring that procedures are followed is a people issue.

Deputy Thomas P. Broughan

Can the chief executive provide a figure for safety in the port tunnel and other Irish tunnels?

Mr. Fred Barry

I can get a breakdown of the tunnels' operating costs but I would be making a judgment call if I categorised the time spent by the tunnel manager on specific safety issues.

Chairman

May I ask Mr. Barry a question on contracts for road developments?

Mr. Fred Barry

Yes.

Chairman

Cost overruns were a feature of early contracts but thankfully that is no longer the case because the risks are built into fixed price contracts. Has an analysis been done on the effectiveness of fixed cost contracts?

Mr. Fred Barry

We are in the very early days of the new contracts and only a few projects have been completed under them thus far. The final account figures on these projects are not far from the original prices and the new contracts are working well in terms of removing uncertainties. Some of the forms of contracts which we have used previously, such as performance-target based contracts, produced good results in terms of out-turn costs per kilometre. We will need more data before we can say for certain whether the new forms of contract are producing better end prices. I can already advise members that they are removing a great deal of aggravation from the system in that people have to provide for these costs from the outset as against beginning with a lower estimate and increasing costs through the claim mechanism. Claims continue to come through but contractors have much more trouble substantiating them under the new terms.

Chairman

Is there real competition in the tendering process?

Mr. Fred Barry

There is. Typically we go through a first stage of pre-qualification to short-list four or, sometimes, five companies to proceed to the next stage of competition. We almost always have more than five bidders competing on experience and financial capability to get on to the short-list. The competition among contractors is very keen at present.

Chairman

The Department of Finance has been quiet all day. What is its opinion of fixed price versus variable contracts? Has it conducted an analysis on a broader scale?

Ms Deirdre Hanlon

As Mr. Barry said, fixed price contracts are relatively recent and, therefore, sufficient time has probably not yet elapsed to allow a full post hoc analysis of them. It is fair to say, however, that the decision to move to fixed price contracting was based on the experience that variable price contracts allowed significant variations to emerge. It was felt that better cost control and value for money for the State and the taxpayer could be effected by means of fixed contracts. From the State’s point of view, such contracts require contracting parties, such as the NRA or local authorities in the case of roads, to be clear about what they want to purchase from the private sector party, which in turn must be clear about how much it intends to charge. The transparency provided in such a system should lead to better accountability and overall value for money. With experience we will be able to indicate its effectiveness as projects come to fruition.

Mr. Fred Barry

I concur with Ms Hanlon regarding the obligation on contracting authorities to decide what they want before signing contracts. That is a key benefit from the new form of contract.

Chairman

The committee has asked for responses on several outstanding issues. I hope we will receive these responses at the earliest opportunity.

Mr. Fred Barry

Yes.

Chairman

I now call Mr. Buckley.

Mr. John Buckley

The message from the debate is that unless agreements are comprehensive and include terms which address all foreseeable circumstances, including dissolution of arrangements, difficulties can arise where the State wishes to terminate an agreement. Clearly, the time to consider these matters is at the inception of the agreement so that the State's bargaining position is maintained and a fair balance is achieved between the property rights of the private sector partner and the freedom of the State to regulate public transport policy in changing circumstances.

On a separate issue which arises from the discussion, I advise the committee that I have recently finalised a special report on driver testing, which is conducted by the Road Safety Authority under the general superintendence of the Department of Transport. I sent this report to the Minister on 19 November 2009 and it will be discussed at a future meeting of the committee.

Chairman

I omitted to raise the question of integrated ticketing but, rather than pursuing the matter now, I ask the Department to supply a note on it.

Mr. Tom O’Mahony

Yes.

Chairman

New ticketing machines were introduced to Heuston station at enormous cost 12 months ago but they are not yet working.

Mr. Tom O’Mahony

The Chairman might find that they are working this week.

Chairman

They did not work on Tuesday.

Mr. Tom O’Mahony

They may not be working yet. We will send the committee a full note on the matter. The machines in question are going live this month.

Chairman

What was the problem?

Mr. Tom O’Mahony

The problem arose in the underlying computer systems rather than the machines themselves. These systems are still being developed but the single smart card will be fully rolled out by the end of 2010.

Deputy Thomas P. Broughan

Will we be waiting at bus stops which provide real time information with integrated tickets in our pockets?

Mr. Tom O’Mahony

Yes.

Deputy Thomas P. Broughan

When will that day be?

Mr. Tom O’Mahony

I think we will have real time passenger information in 2010.

Deputy Thomas P. Broughan

Will it be 2011?

Mr. Tom O’Mahony

Perhaps not at all stops but I hope this box will have been ticked when I appear before the committee this time next year.

If it is not out of order, I wish to note that my three colleagues will have retired when I appear before the committee again and express my appreciation for their work in ensuring that we provide adequate responses to the committee's questions.

Chairman

I hope it was not because of today's discussion.

Mr. Tom O’Mahony

No.

Chairman

I wish the gentlemen well. I thought Deputy Broughan was about to ask whether football results will be displayed at bus stops. I thank the witnesses for answering the hard questions we are duty bound to ask. Generally speaking, we received fairly decent answers.

I propose that we note Vote 32, National Roads Authority 2008 accounts, and dispose of chapter 27, West Link buy-out. Is that agreed? Agreed.

The witnesses withdrew.

Chairman

Next week we will discuss Vote 15, the Valuation Office, and chapter 14, valuation output and performance. We will hold a second session at noon to discuss Vote 30, the Department of Communications, Energy and Natural Resources, and chapter 23, metropolitan area networks.

The committee adjourned at 1.50 p.m. until 10 a.m. on Thursday, 10 December 2009.