I am pleased to come before the committee to talk to members about the appropriation account for the Office of Public Works for 2009. I would like to first deal with the other items listed on today's agenda, which are: Chapter 20 - the National Convention Centre and Chapter 21- Decentralisation.
In June 2003, the Department of Arts, Sport and Tourism, now the Department of Tourism, Culture and Sport, recommended to the Government that it should authorise the provision of a national conference centre, NCC, with a view to increasing Ireland's share of international conference tourism and securing the resultant economic benefits. The Government agreed, in principle, that a national conference centre should be constructed and the Office of Public Works was charged with managing the procurement of the project. A project team structure, whose work was overseen by a steering group, chaired by the Department of Arts, Sports and Tourism, combined representatives from the Department of Finance, Fáilte Ireland, the Office of Public Works, and was supplemented by the National Development Finance Agency along with technical, legal and financial advisers. An independent process auditor for the project was also appointed.
The NCC project was one of the most complex and challenging public private partnership, PPP, procurements carried out by a public body in recent times, as it combined procurement on a design, build, finance, operate and maintain basis. Furthermore, it also included provision for third party income.
The core objective of increasing Ireland's share of international conference tourism and securing the resultant economic benefits informed all the decisions taken from the outset of the procurement. The pre-qualification process, which commenced in November 2003, involved a detailed evaluation of the technical, financial and economic capacity of the consortia's capability for a project of this scale. Tender documents issued in December 2004 to three consortia, of which only two tendered for the project. The tender package incorporated three distinct elements - technical, legal and financial. Separate meetings were held with each of the consortia shortly after the tender documents issued. At these meetings a conceptual design was presented by each consortium to the OPW. Each design was subjected to a detailed analysis by the OPW and its technical advisers. Feedback on the concept design was subsequently given to the consortia. A further meeting was held prior to tenders being submitted. As well as technical matters, any legal or financial queries raised by the consortia were addressed during those meetings. Between meetings, information bulletins arising from queries raised by the consortia, issued every fortnight. I am wholly satisfied that ample opportunity was afforded to each consortium to raise any issues which required clarification and every effort was made to give each tenderer the maximum level of information required in assisting them in the preparation of their scheme. I am satisfied that the documentation was clear and I do not accept that there was scope for misinterpretation on the part of the tenderers.
As recognised in the report, exhaustive effort was put in by the OPW and the project's advisers in the composition of the marking scheme in advance of inviting tenders. The core objective of increasing Ireland's share of international conference tourism and securing the resultant economic benefits informed the structure of the marking scheme. The final marking arrangement, with all of the various sub-components, was devised with the purpose of procuring a facility with a management operation that could best deliver on this core objective. For example, the 40 marks allocated to design and construction, recognised the scale and likely order of cost of the building required which, in order to attract international business, needed to be of national importance, making a significant contribution to the architecture of Dublin. Moreover, the 30 marks allocated to operation and maintenance recognised the vital nature of a clear, efficiently managed marketing strategy as well as the optimum operation and maintenance of the facility. In proposing the marking scheme for the project, it was recognised that any weakness in the design or technical and operation and maintenance elements would ultimately impact on the financial sustainability over the longer term. As the project was being procured by means of a PPP, substantial risk was transferred to the private consortium, not only in design and construction but in the operate and maintain area, which extended over the 25-year contract period, which is a generation.
The marks awarded ultimately reflected the overall strength of the winning bid in comparison to the second placed bidder. Under the rules and scoring system for the competition, there was no doubt about this.
The Comptroller and Auditor General has highlighted in his report the disparity in tender costs between the two consortia. This disparity can be attributed primarily to the divergence in costs in the operate and maintain component of the tenders. The capital cost of the building was similar in both tenders. However, the key point is that the second bidder's estimates for operating the centre were substantially lower than the winning bid and their estimates for revenue were much higher. In this context, the technical assessment panel, which, incidentally, operated independently of the financial and legal assessment of the tender, highlighted significant weaknesses in the operate and maintain strategy of the second placed bidder. These weaknesses related to the plans proposed for price discounting which were considered to have the potential to devalue the overall proposition. The assessors were also concerned about the figures presented for conference revenues. They considered that there was over reliance on revenue generated by exhibitions, which would emanate from within the domestic Irish market and would be contrary to the project's aim of attracting international business visitors. In contrast, the winning consortium was regarded as having a more focused marketing strategy which targeted the international conference market and which also clearly identified where it expected to generate revenue. Lest there be any confusion on the point, I clearly state that the competition rules and the marking system were devised and set down before tenders were invited.
The conference centre, now known as the Convention Centre Dublin, CCD, officially opened in September this year and has already made a positive impact with many favourable comments received from domestic and foreign visitors on the design and facilities provided. The Spencer Dock consortium is actively and successfully promoting the CCD internationally with the assistance of Tourism Ireland, Fáilte Ireland and the Dublin Convention Bureau. To date, the company has exceeded the targets for international delegates for this year and predicts 82,000 international delegates will visit the centre over the next three years alone.
In regard to the second chapter, Chapter 21 - Decentralisation, as members will be aware, the OPW was charged with responsibility for the delivery of the property aspects of the programme for 53 locations nationwide. The Comptroller and Auditor General's analysis of the OPW's delivery of these property aspects of the programme was largely based on a benchmarking exercise carried out on the Comptroller and Auditor General's behalf by a property consultant. As the Comptroller and Auditor General has said, it was a desk based exercise, with no valuation or site visits, and as such, I suggest it has limitations. One of these arose where the property consultants classified towns into four categories in order to compare prices paid against benchmark values. These categories were: commuter town to Dublin city, provincial city, large provincial town and small towns. Sites were further classified for this exercise as: "EN" - located in the environs of a town or "TC" - located in a town centre.
While the choice of categories used is perfectly acceptable for such an exercise, the OPW does not accept its application to a number of locations. In particular, Newbridge, which is well known as a commuter town, is classified as a "large provincial town" and is not measured against the benchmark value range applied to "commuter town to Dublin city", where higher land values were the norm. If the price paid by the OPW to Kildare County Council is benchmarked against the "commuter town" category, the outcome is that the price per acre paid by the OPW falls well within the range for "commuter town to Dublin city", and I suggest there are other examples of this in the report. It is important to note that, when appropriately classified, the outcome is that all acquisitions highlighted by the property consultants as being above their benchmark range fall within the upper and lower benchmark range for that classification.
Regarding the measurement of leasehold acquisition performance, the OPW entered into 34 leases in various locations to house staff pending completion of permanent office accommodation. In measuring outcomes in terms of providing accommodation through leasing property, the key measure of performance is the level of rent, which is normally compared against market rents for similar properties and locations. Fit-out cost is also a major, yet independent, factor in any decision to rent a property and the cost per square metre is normally measured against the industry cost norms for various levels of fit-out.
The Comptroller and Auditor General in his analysis chose the unusual method of amortising the fit-out cost over the length of the lease term, adding this to the rental cost and measuring the combined figure against market rental values that did not include any fit-out cost. By combining rent and an amortised fit-out cost in this way, the Comptroller and Auditor General concludes that the OPW paid in excess of benchmark values, that is, the market rent, in most cases. This is misleading as almost all of the rental levels agreed by the OPW are well within market rental values and in all cases the fit-out cost per square metre fell below the cost norms for the category of fit-out provided. By comparing like with like, using the market rental benchmark values from the property consultants' report and the total annual rent paid by the OPW on the 34 leases analysed, the rental value achieved by the OPW is within the benchmark range, that is, between €5,982,395 to €7,958,472. The total annual rental value of OPW leases is approximately €6,300,000. In all property acquisitions and lettings for the decentralisation programme to date value for money was obtained.
I now take the opportunity to mention another important aspect of the work of the Office of Public Works, flood relief, which will be of interest to members. The OPW's role is to bring forward measures to reduce flood risk. In this context, over the past five years the Office of Public Works has spent approximately €115 million on capital flood relief activities, with a further €95 million spent on maintenance of arterial drainage schemes and the collection of hydrometric information. The mitigation and reduction of flooding remains a top priority for the OPW especially when one considers the devastation that floods wreaked on individuals, communities and businesses last winter.
Major flood relief schemes have been implemented in Kilkenny, parts of Mallow and Fermoy in County Cork, Waterford city, Ennis, Clonmel, Leixlip and in Dublin on the Rivers Tolka and Dodder. Major works are continuing in Mornington, County Meath, Johnstown, County Kildare, Carlow town, and further parts of Mallow, Clonmel, Fermoy and Ennis. While these works are ongoing, we have progressed the design of major schemes in Arklow and Bray, County Wicklow, Templemore, County Tipperary and Clontarf in Dublin where it is expected that works will commence in the next year or so. Some of these have been progressed in conjunction with the relevant local authorities. Studies have also commenced in Bandon, Skibbereen and the lower Lee area, all in County Cork, which will I hope lead to the development of viable flood relief schemes to be undertaken from 2012 onwards.
While major defence schemes tend to attract most public scrutiny and attention, there are many areas of the country that are afflicted by severe localised flooding events that fall outside of the remit of the major flood defence programme. It is important that these areas receive an appropriate response from the State. Towards this end, the OPW has prioritised a programme, first introduced in 2009, of minor or small-scale flood defence works in local areas which have been impacted by severe flooding. Under the programme, a total of €16 million has so far been approved for local authorities for works and studies this year, and further applications for funding are being received and assessed on an ongoing and rolling basis. In total, 160 small-scale projects in 23 counties have been allocated funding. In allocating the funds, my office continues to concentrate on areas where there is a substantial risk to human life, property and infrastructure.
Central to the OPW's approach to flood management is the programme for the production and completion of catchment flood risk management plans, CFRAMS, and associated flood mapping for all national catchments. Work had begun on catchment flood risk assessment and management studies on the Lee, Suir and Dodder catchments and in the Fingal east Meath area prior to the adoption of the requirements set down in the EU floods directive. The Lee CFRAM was the first to be published and it was followed by a consultation process. This established approach is being extended to all major catchments in Ireland.
The OPW considers effective stakeholder and public participation in the decision-making processes in flood risk management to be of vital importance. In the past we have not proceeded with works where there is strong local opposition. This approach is demonstrated in the transposition of the EU floods directive, where the requirements for public consultation that we have taken upon ourselves, and committed to, go significantly beyond the requirements of that directive.
The OPW has also commissioned a strategic review of flood forecasting and warning in Ireland to examine how best to progress flood forecasting capabilities in flood prone areas. This review is intended to identify and assess the options for delivery of such a service in Ireland. On the basis of this review, we will develop an appropriate and sustainable strategy, including consideration of the potential impacts of climate change, for flood forecasting and flood warning in Ireland. The results of the review are expected in 2011.
I thank the members of the committee for their attention. I and my officials will be glad to answer their questions.