Vote 10 - Office of Public Works

Ms Claire McGrath (Chairman, Office of Public Works) and Mr. Paul Bates (Assistant Secretary General, Department of Tourism, Culture and Sport) called and examined.

You are all welcome. I am glad to see a full turnout, despite the weather conditions.

Today, we will examine the 2009 Annual Report of the Comptroller and Auditor General, Appropriate Accounts, Vote 10 - Office of Public Works, Chapter 20 - National Convention Centre, and Chapter 21 - Decentralisation.

Before we commence I advise witnesses that they are protected by absolute privilege in respect of the evidence they give to this committee. If they are directed by the committee to cease giving evidence regarding a particular matter and they continue to do so they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against a Member of either House, a person outside the Houses, or an official by name or in such a way as to make him or her identifiable. Members are reminded of the provisions within Standing Order 158 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits of the objectives of such policies.

I welcome Ms Claire McGrath, Chairman, Office of Public Works, and invite her to introduce her officials.

Ms Claire McGrath

On my immediate right is Mr. John McMahon, commissioner. To his right is Mr. Michael Long, our accountant. Our director of engineering services is Mr. Tony Smyth. I apologise on behalf of my other colleague, Mr. John Sydenham, who has been delayed trying to get here. I hope he will join us.

That is understandable. I welcome Mr. Tony Bates, assistant secretary general of the Department of Tourism, Cultural and Sport.

Mr. Paul Bates

It is Paul Bates. Tony Bates is the psychologist. Perhaps I need him, Chairman.

We might all need him. Apologies, Mr. Bates. We are also joined by Mr. James Golden, senior financial analyst, and Mr. John Paul Corkery, senior financial analyst, National Development Finance Agency. We are also joined by representatives from the Department of Finance.

Ms Áine Stapleton

I am Áine Stapleton and I am here with Dermot Keane, Dermot Nolan and Frank Griffin.

I invite Mr. Buckley to introduce the business for today. The full text of chapters 20 and 21 can be found in the annual report of the Comptroller and Auditor General or on the website of the Comptroller and Auditor General at www.audgen.ie

Mr. John Buckley

The Office of Public Works spent €478 million in 2009. It recovered €31 million by way of appropriations-in-aid. It manages a large property portfolio with an estimated value of €3.2 billion.

The major expenditure from its Vote in 2009 went on the payment of rent and rates on leased properties which amounted to €149 million; new works, alterations and additions which cost €121 million; flood risk management and drainage maintenance which cost €54 million; maintenance and supplies which cost €40 million; and heritage services which cost €42 million. Most of the remainder of the charge to the Vote is accounted for by salaries and other administrative expenses. In addition, the OPW manages works funded by other Votes, estimated at €116 million in 2009. These included €20 million regarding maintenance works and €60 million regarding major capital projects.

As well as conducting the annual financial audit of the Vote, which was given a clear audit opinion, as well as issuing recommendations on areas of administration by way of management letter, two major elements of OPW's administration were examined in detail, namely, the acquisition of property under the decentralisation programme and the procurement of the National Convention Centre.

Under the decentralisation programme almost 11,000 civil and public servants were to decentralise from Dublin to locations throughout the country. However, a decision was taken to defer a significant portion of the decentralisation programme pending a review in 2011. At April 2010 when we reported, 3,148 staff had moved and the decentralisation of a further 1,191 was planned. Overall, the movement of approximately 6,600 staff from Dublin to locations across the country was deferred.

The report examines the management by OPW of the property requirements of the programme. The examination found that OPW purchased 22 sites at a cost of €70 million. Twelve sites costing €43.8 million were acquired in locations where the decentralisation programme is not currently being advanced. When the detailed acquisition arrangements were reviewed, it was found that six of 22 sites acquired were purchased at prices above a higher benchmark set by property consultants engaged by my office. On the other hand, eight sites were acquired below a lower benchmark; most of the sites acquired at low cost were already owned by local authorities and, in one case, by a State body. The OPW entered into 34 leases. In aggregate, the all-in cost of leased premises exceeded the higher benchmark cost set by the property consultants. On the other hand, the building work carried out for the purposes of the programme came in at less than OPW benchmark costs.

Caution is necessary in interpreting these comparisons. While benchmarks are useful to help form a preliminary view on whether the State got value in these transactions, they were desktop reviews by the property consultants and the outturn may also have been affected by the motivation of the vendors. For instance, local authorities may have pitched prices at levels that would attract jobs to their areas whereas private vendors with property in town centre locations would be able to demand a premium based on the need for OPW to implement the pre-announced decentralisation decision.

From a funding perspective, it was intended that the property costs of the programme would be funded from the proceeds of the disposal of Dublin property. Rationalisation of the State property portfolio has not occurred to the extent envisaged. OPW reports that space freed up is spread throughout the office portfolio in small pockets across a number of buildings. It stated that it would need a stronger more directive role if it was to drive effective rationalisation.

On the disposal side, the property environment has obviously altered making it unlikely that, in the medium term, OPW can surrender leasehold properties in advance of expiry or break dates.

On the National Convention Centre, in April 2007, the Office of Public Works awarded a public private partnership contract to Spencer Dock Convention Centre Limited to design, build, finance, operate and maintain a new national convention centre. The convention centre opened on 5 August 2010.

In December 2004, a benchmark had been developed that estimated that the cost of directly procuring the convention centre by the State would be of the order of €414 million in net present value terms. In January 2005, the Government set the affordability cap, which is the maximum amount it was willing to pay, at the level of this public sector benchmark. Around the same time, consultants were employed to conduct economic analysis and they estimated the cost of the project would be more than the economic benefits.

If the public sector benchmark is taken as an indication of the cost, the economic analysis indicated that while the project itself would generate net revenue from the wider economic perspective and taking account of the economic conditions then prevailing, which were full employment conditions, the State by investing €414 million would be laying out more than the economic benefit of the project to the economy, which was put by them at €236 million, that is assuming that 20,000 foreign delegates were attracted. That was the central assumption.

Taking account of all the available information, the Government decided that the project should be offered to the market and that the public sector benchmark would be used to assess the cost of the proposed bids. Two consortia tendered for the contract to provide the centre. A number of variant bids were proposed by each of the tenderers. Two bids provided by one of the consortia were for approximately €400 million, in net present value terms, as compared to bids in the region of €200 million to €220 million by the other bidder. While the capital costs of the bids were broadly similar, both bidders had made significantly different estimates of the costs associated with operating and marketing the centre.

One of the bids from the consortium with the most expensive proposal was ultimately selected. Its selection was based on an assessment that the design, construction, operation and maintenance solutions proposed more than outweighed the keener cost of the bids of the lower tenderer. The convention centre has been open since August 2010 and over the life of the contract the unitary payments, following post tender adjustments, will cost the State €416 million in net present value terms. The contract provides for annual payments of €47 million for the first five years of the contract reducing to €23 million for the next 20 years. It also provides that the convention centre will be handed back to the State after 25 years in a condition where the structure will have a subsequent life expectancy of 75 years. Should the company fail in its contract obligations, which will be monitored by the OPW, it would be subject to penalties and fines, the most severe of which would see it removed from the contract. An indication of this is that penalties of up to 80% of the unitary payment can be imposed for non-availability with further provisions to ensure performance across a range of factors. Penalties of up to 5% of the unitary payment can be deducted from the payment if required delegate numbers are not secured.

The extent to which the National Convention Centre will deliver value for money in the future will depend largely on its capacity to attract a sufficient number of international delegates and the realisation of expected increases in business tourism.

I invite Ms Claire McGrath to make her opening statement.

Ms Claire McGrath

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.

Can we publish your statement?

Ms Claire McGrath

Yes.

I will concentrate on the decentralisation chapter but I also wish to mention the flood chapter. My colleague, Deputy Collins, will concentrate on the National Convention Centre.

I thank Ms McGrath for her comprehensive statement. With regard to the flood risk management, I should declare an interest. Ms McGrath referred to Skibbereen and Bandon. As I am a native of Skibbereen and live in Bandon, she will understand my strong interest in the matter. In 2009, the expenditure on flood relief projects was €36.46 million. This was 15% less than the estimate for the year. Was there a reason for spending less than the estimate, given that we had dreadful problems in 2009? Were any projects of a major or minor nature deferred or delayed as a consequence of not spending the full estimate?

Ms Claire McGrath

Part of what might be called the underspending in 2009 related to having to re-tender on the Fermoy major capital flood risk project under the new forms of contract. It has not had an impact on the other projects that might have been proceeding. We would have made funding available in 2010 and nothing would have been displaced in that regard. We were not able to progress a major project because we had to re-tender it under the new forms of contract.

Ms McGrath referred to a number of schemes. With regard to Bandon, Skibbereen and the lower Lee area, the main complaint we get from our constituents is the horrendous delays that appear to be associated with such projects. If I were to sum up their view of the OPW generally, it is that it is dreadfully slow but eventually does a good job. Is there a reason for the long delays, particularly in the case of flood relief work?

Ms Claire McGrath

I am glad to have the opportunity to address this. It is important to make people aware that flood relief schemes are very complex. They involve us entering lands that are not a site, as would be the case in a construction project. It involves going on to other people's lands to effect works. A rigorous and detailed process has to be engaged in under the 1945 and 1995 legislation, with which we must comply. It also involves stakeholder consultation and planning. We exhibit schemes and have to take them to feasibility status. It might be useful if I set out these matters for the committee. I would like to convey to the public, via this committee, what is involved in bringing forward a flood relief scheme which may have a considerable impact in a town or locality

Could I relate that to a particular situation? In November 2009, we had horrendous flooding. Certain commitments have been made concerning Bandon, but the actual surveys do not seem to be under way as yet. We are now being told that any scheme will not get under way until 2012 at the earliest. In the meantime, the people who were flooded last year are asking what will happen in the meantime. Do they just say their prayers?

Ms Claire McGrath

This comes back to what I said earlier, as regards what is involved in a scheme. The first stage is a pre-feasibility report, which is carried out either in-house or through consultants. It is to identify the source of the flooding problem as well as identifying that potentially viable flood risk management measures exist. That can take up to 12 months depending on the nature and location where this arises. One can then post this. If it is not being conducted in-house, we must produce external consultants and there are rules relating to procurement with which we must comply.

How long does it take to comply with those rules?

Ms Claire McGrath

Depending on the value of the service we have to have EU procurement, which means advertising, defining the brief and going to the European journal for the consultants. That is a factor of what the value of the total scheme might be. If one is going to take them on, one will be looking to do so based on them progressing through the scheme.

Would that add on about six months?

Ms Claire McGrath

Of that order. If the pre-feasibility study, which is stage 2, indicates that a flood relief scheme would be viable, the decision is then taken to proceed with a full feasibility report. A steering committee is set up, including members of the local authority and consulting engineers where appropriate. A number of options are then considered, including "do nothing" potentially. When a preferred option is identified it is then presented to the council - the local authority - for its approval. A consultant may have to be engaged to carry out an environmental impact statement. A cost-benefit analysis would also have to be produced. The proposed flood relief scheme would then be at an outline design stage, giving an indication of what type of work is being proposed and along what stretches of rivers and roads. A preliminary site investigation test, hydrological investigations and computer-based physical modelling would also have been done.

One then proceeds to the next stage, which is the exhibition stage. That involves a property survey which needs to be organised in order to identify all land-owners who will be affected by the scheme's works. Under the arterial drainage legislation, each affected land-owner must receive an interference notice advising them of the dates that documents will be available for inspection in the public exhibition, as well as advising them of all proposed interference on their property. Large-scale maps and documents are produced by the consultants or the OPW engineers, as the case may be, showing the proposed works along the river. These can include widening, deepening, walls, embankments, bridge works, road works, cross and long sections benefiting lands. All of those will be shown. A schedule showing the works to be carried out, broken down by land-owner is also produced. The interference notices mentioned above are prepared for each land-owner affected. Following liaison with the local authority, venues for placing the documents on public exhibition are selected. This usually involves two venues and preferably one with late night opening hours. Documents are usually placed on exhibition for three to four weeks and venues are advertised in national and local newspapers. Arrangements are made for engineers to be in attendance for a number of dates to answer local and public questions. Affected parties have one month to submit observations.

Will Ms McGrath provide the committee with a copy of that information, because we will be worn out listening to it?

Ms Claire McGrath

Yes.

Ms McGrath has convinced me that there are lots of procedures, but may I make a suggestion? Local communities should be briefed on the proposals and the fact that all these procedures must be complied with under domestic law and EU regulations.

Ms Claire McGrath

I think we do so, but we will be happy to explain what is involved.

It would be helpful to do that. I urge Ms McGrath not to let the grass grow under her feet regarding these schemes. I wish to raise the question of decentralisation, turning first to the OPW's own situation. The OPW has an office in Trim. How has that worked out? How many staff are located in Dublin and in Trim?

Ms Claire McGrath

Decentralisation for the OPW involved three locations: Trim, for our headquarters, as well as Kanturk and Claremorris. Our headquarters have been relocated to Trim and we have an advance office in Claremorris. However, as the Comptroller and Auditor General said at the outset, pending the review of the decision in 2011, the decentralisation progression has been deferred. The full elements of decentralisation for the OPW have not been completed due to review pending in 2011. The building in Trim is not fully occupied at present but we are moving towards full occupation. Currently, there is a staff of 240 plus and by the end of the year there will be approximately 260. With time, we will be fully occupying the building.

How many people did the OPW have in its Dublin headquarters before decentralisation, and how many remain there now?

Ms Claire McGrath

The OPW is an organisation of 1,900 staff. The decentralisation decision meant that approximately 550 were to move out of Dublin. We would have had a cadre remaining in Dublin that would not have been all of the OPW staff in Dublin.

How effective has the operation been from Ms McGrath's point of view? I am interested in vacant space in the decentralised offices. I understand that occupancy is less than 70% in one or two of them. What has happened to the space that has been freed up by the OPW in Dublin?

Ms Claire McGrath

I am very pleased to report on that. The OPW occupied Nos. 50, 51 and 52 St. Stephen's Green. People may be familiar with No. 51, which was the substantial element. We vacated Nos. 50 and 51. We facilitated ourselves in releasing rental occupation elsewhere in Dublin, which was occupied by the Department of Justice and Law Reform. So we surrendered a lease with a saving of €1.6 million annually in rent. The Department of Justice and Law Reform moved in to Nos. 50 and 51 St. Stephen's Green. That saving, which is an accruing benefit, could not have occurred but for decentralisation.

I would prefer our headquarters in Trim to be fully occupied. I must take account, however, of the fact that we have a moratorium and people are taking early retirement. Not so long ago, the OPW's authorised numbers were over 2,200. We now have fewer than 1,800 staff. That has an impact on numbers in locations, which is impacting on our headquarters.

I wish to touch on one impact of what one might call the current cost of decentralisation. I presume there are many OPW staff travelling from Dublin to Trim, orvice versa, for meetings, or to the further reaches in Claremorris and Kanturk. How does this impact on cost and productivity? Is much time wasted in travelling or does the OPW use conferencing facilities?

Ms Claire McGrath

We use video-conferencing. I had a meeting the other day between Trim, Dublin and Kilkenny using video-conferencing, which is used substantially.

Is that unusual or normal?

Ms Claire McGrath

It is not unusual for the Office of Public Works. I would imagine that it is also the case for other Departments which are affected, and not just by decentralisation in this sense.

Most civil servants are now outside Dublin so video-conferencing would be a feature of most Departments' business.

Are there additional costs from the point of view of staff travel? Do they get expenses for travelling from one office to the other?

Ms Claire McGrath

Expenses do not arise because of decentralisation. They may arise because a person must travel to a site in a particular location from his or her headquarters, whether Dublin or Trim. There may be some element but we are not noticing a trend. If anything, I would say our travel outturn is reducing.

Is Ms McGrath reasonably satisfied, from the point of view of her own operation, that she has managed the decentralisation as effectively as possible?

Ms Claire McGrath

We are giving effect to the Government decision on decentralisation.

I know that. I am talking about Ms McGrath's situation.

Ms Claire McGrath

The Office of Public Works is giving effect to the decision to locate its headquarters in Trim and we will make it work.

I wish to get into the broader picture of decentralisation. There seems to be a somewhat different view between the OPW and the Comptroller and Auditor General on the question of value for money, which is the main issue here. I do not want to get into the policy decision on decentralisation and the rushed nature of it. It is not a matter for comment here but perhaps elsewhere.

The Comptroller and Auditor General's analysis raises issues in regard to value for money from the point of view of the sites purchased and the leasing arrangements. I suppose one could say Ms McGrath rather robustly defended the OPW's situation. Does she accept that in some instances, because of the way things were done, over the odds prices were paid?

Ms Claire McGrath

In regard to what the Office of Public Works engaged in to secure premises in the locations, because of its processes, I do not accept there was any additional pricing. I accept this was a public announcement so we did not have the facility to determine that we did not like a price in a location and choose to go somewhere else. We had to give effect to the Government decision in the locations.

Due to the Government decision, the OPW was forced to go to the locations, to a large degree, in a public way.

Ms Claire McGrath

Yes. One would have to accept that if one announces one is going to a location, that may have an impact on the market in that location.

A signal to lift the prices.

Ms Claire McGrath

It is a signal. It is then a question of how the market chooses to react. One would have to say that in certain locations, only a small number of sites would have been suitable for what was required. I have a different view from the Comptroller and Auditor General in regard to the leases.

We will deal with the sites first. Mullingar seemed to be a particular incidence of where the figure appeared to be way over the odds. Was the OPW manoeuvred into a position where it had no option but to pay a figure which seemed to be-----

Ms Claire McGrath

I would argue that Mullingar is a commuter town. If one takes the value, it is within the benchmark value of the Comptroller and Auditor General's property consultants.

How much did the OPW pay there?

Ms Claire McGrath

We paid €8.2 million.

I understand the project is stalled now.

Ms Claire McGrath

It is differed. The decision in regard to the actual use of the site for decentralisation has been differed pending review in 2011.

What would be a realistic valuation of that property today?

Ms Claire McGrath

I do not know. We have acquired a site for the purpose.

Would it be €3 million?

Ms Claire McGrath

We have acquired a site for the purpose and the decision on that is pending review in 2011.

As of now, there is no question of that project going ahead. The OPW may be faced with the disposal of that site.

Ms Claire McGrath

An overall policy decision has been made in regard to decentralisation.

Would Ms McGrath accept that the current value of the site is far less than the amount paid for it?

Ms Claire McGrath

Yes.

It would appear that purchases referred to as below benchmark relate mainly to the public sector - from local authorities or State bodies. Is that correct?

Ms Claire McGrath

Yes, largely.

According to the Comptroller and Auditor General, when the OPW was dealing with the private sector-----

Ms Claire McGrath

I refer to local authorities and other public sector bodies.

When the OPW was dealing with the private sector, it was pushed perhaps to beyond the top end in value.

Ms Claire McGrath

We were pushed by local authorities as well.

Of all the purchases made and which have not been proceeded with, does Ms McGrath believe that current values would be much less than what was paid?

Ms Claire McGrath

Is the Deputy referring to sites we have not purchased?

No. I refer to any purchases made. Would Ms McGrath say that current values are far less, no matter from what source they emanated?

Ms Claire McGrath

One must accept that markets have moved since the acquisitions.

Did the OPW get any advice? I presume it engaged consultants and paid them fairly big money. Did they give any indication of the possible collapse in property prices or any indication that property values would decline?

Ms Claire McGrath

We engaged property consultants and they did exercises in regard to the benchmarking. There was no indication of that. I do not believe anybody had an indication of where the market would move to.

Were these people, to whom the OPW was paying a lot of money, not the experts in terms of far-seeing advice?

Ms Claire McGrath

One was dealing with the market at the time. One was looking to acquire at the best value.

It was very much all go and getting the business done.

Ms Claire McGrath

It was about obtaining value based in the market at the time.

It was without any signal that those values might not be maintained.

Ms Claire McGrath

I am not sure who saw the slump coming. We were operating at a particular time in the market. The other side of it was reflected in some our disposals. We disposed of properties which might now have much reduced values. It was on the two sides.

I accept the point that many people are now telling us with hindsight that they knew about this all along. However, I do not remember them making a lot of noise at that stage. I am more concerned that people who were supposed to be experts and who were being paid accordingly - in many instances, quite substantial funds - did not appear to have any idea as to the way property values might go.

Ms Claire McGrath

The Comptroller and Auditor General's property consultants, in giving the benchmark figures - we dispute them in regard to the categorisation - was giving similar values in regard to those locations which we would have been getting in the market. There was not a subsequent look-back in terms of reducing them.

Has the OPW regular property consultants or does it employ consultants for different projects? Does the OPW keep consultants on a retainer?

Ms Claire McGrath

We would have a list. We would have gone to tender based on having different providers and we would draw off those lists on a particular basis for particular services.

Is the OPW using the same people it used at that time?

Ms Claire McGrath

Based on putting people on tender, one does so based on their experience. Yes, we would have some.

The OPW's experience has not been remarkably good.

Ms Claire McGrath

I would not hold that of the OPW as being no less or no great an experience than any property player in the market at the time.

May I touch on the leasing?

Deputy O'Keeffe's time is up but he may put a question on the leasing.

There are some differences of view between the OPW and the Comptroller and Auditor General on the leasing, and I might focus on one. On purchases and leasing generally, which is the OPW's job, there were a few organisations which, on their decentralisation proposals, seemed to have ignored the OPW, in particular, the committee's old friend FÁS. Why did FÁS not use the facilities of the OPW?

Ms Claire McGrath

The OPW is not the only property holder in the State on the public sector side. Certain organisations hold their own estate and do their own property management. FÁS would be one of those.

In virtually all of the decentralisation process, the OPW was central.

Ms Claire McGrath

It was identified at the outset that certain organisations which had a property function would engage on their own.

Is Ms McGrath aware of the property function of FÁS?

Ms Claire McGrath

I am aware from what the Comptroller and Auditor General's report. I would not have a view as such on the ones that were not OPW specific.

Is Ms McGrath aware of the details of the property arrangements of FÁS?

Ms Claire McGrath

In so far as what is in the report.

Looking to the future and bearing in mind the questions the committee has about FÁS operations in the property market, would it be sensible that the OPW should have a more central role at all times and should be involved, given the OPW's expertise in all State property of any consequence?

Ms Claire McGrath

That has arisen in a number of areas as a question going forward about a central authority. The McCarthy report contained a number of reflections on that in terms of our involvement. We would have the ability to provide that facility but we would have to grow a certain level of capacity to be able to provide that facility to other State bodies. We would not be averse to it but we would need to create additional capacity in the organisation to do that. It has been identified as something that should be considered. There is an element of a policy question as to who would have that remit but we would not be averse.

Despite the health difference of view between the Comptroller and Auditor General and Ms McGrath on some of those decentralisation transactions, is the correct approach the general idea of having the OPW as the central body and being the one that should be involved in any such issues?

Ms Claire McGrath

I understand it is mentioned in the four year plan as well, in one of the areas, that the OPW might assist other bodies in obtaining a reduction in their rent-roll over the period of the plan. I would not say that other organisations are not in this space. I would not like to hold out that the OPW has any greater insights into the market than maybe others but, certainly, in regard to our in-house capacity and our expertise, we are available to assist others in looking to achieve, and to share our experience of, what we are doing. We are very happy in that space.

I thank Ms McGrath.

Deputy Jim O'Keeffe mentioned FÁS. We heard mind-boggling details at our meeting last week. We heard about FÁS in Offaly where transactions took place for which there was no rational explanation. The owner of one property was asked to upgrade that property, and there were no tenders. It was a €1 million contract. Was there any attempt to involve the OPW on the part of FÁS-----

Ms Claire McGrath

In tenders?

-----in regard to the-----

Ms Claire McGrath

Building?

-----acquisition and upgrading of properties? Was there any attempt to get the OPW involved?

Ms Claire McGrath

I might distinguish between decentralisation and the ordinary business of FÁS.

This was decentralisation to Birr and to Tullamore. It is mentioned in the decentralisation report by the Comptroller and Auditor General. There were other bodies. Other than the OPW, there was FÁS, Pobal and the Health and Safety Authority. Ms McGrath seemed to defend FÁS by stating it had an expertise in property acquisition, leasing and upgrading. I do not think the other organisations, such as Pobal and the Health and Safety Authority, would have expertise. Indeed, I would not say that FÁS demonstrated any expertise whatsoever in the shenanigans in Offaly. The question is whether there was any attempt by any of those bodies to involve the OPW at any stage in what they were doing.

Ms Claire McGrath

I cannot answer that directly here. I can revert to the Chairman on it.

Does anybody here from OPW have any recollection of any approaches?

Ms Claire McGrath

The personnel have changed here in regard to the responsibilities that would have rested with OPW at the time.

It beggars belief that all of this would happen and the Department of Finance, the parent Department - the Department of Enterprise, Trade and Innovation - and the OPW all were kept out of the loop. There were only a few people in County Offaly who benefited from all that went on and someone must come to grips with this because what has been happening is disgraceful. Here, again, this morning we are being told that people have moved on and Ms McGrath does not have the answers.

Ms Claire McGrath

We were not involved in the property acquisition.

Why was the OPW not involved?

My question was whether there was any attempt made to involve the OPW. I ask the Department of Finance to outline its responsibilities in all of these transactions. Somebody must have sanctioned the transactions of FÁS in County Offaly. Somebody must have sanctioned the Pobal project. Somebody must have sanctioned the Health and Safety Authority project. My simple question is who sanctioned them. Was it the Department of Finance or was it the parent Departments concerned?

Mr. Dermot Keane

I can partially answer some of that question.

Did they do solo runs?

Mr. Dermot Keane

No. The management of the individual bodies would have been involved going forward in managing these projects. Presumably, in most cases they would have taken professional advice. My understanding is-----

My question was whether they took advice from the Department of Finance or whether they sought sanction from the Department, and what advice or what sanction did the Department give them outside of the professional advices, which are very costly?

Mr. Dermot Keane

On 23 March 2005 - this is on the record of the House already - the Department of Finance issued a formal letter to the then Department of Enterprise, Trade and Employment conveying sanction for the purchase of the site in Birr, County Offaly to provide a location for a new headquarters building for FÁS. The necessary funding of approximately €1.5 million to enable the purchase was to come, essentially, from the existing agreed capital allocation for the Department for the year. That was following an analysis and the presentation of a case for the purchase of the site.

I do not have within my own records at present access to any information on the purchase capital for the other sites. As I stated, I made searches on the FÁS aspect. That information was confirmed to the House in response to a parliamentary question on 13 December 2005.

I am aware that a business case would have been put to us for the acquisition of the site. I am not aware of the specific arrangements relating to what was done afterwards with that site, if, in fact, anything was done. Neither am I aware of the position regarding the lease or the fit-out arrangements relating to the advance office that was subsequently established in Birr. There is a great deal of other information-----

Does Mr. Keane have a view on the fact that a contract worth €1 million was awarded, in the absence of a tender, to the same person - a building contractor - who allegedly owned the site?

Mr. Dermot Keane

I would not, in my current capacity, have a specific view on that matter. I am not sure if we have a record of the process involved. Therefore-----

Has the Department inquired as to who has the records and who approved the contract?

Mr. Dermot Keane

We have initiated a search within the Department for some of the records relating to the FÁS transaction. As already stated, I was able to track down the fact that we sanctioned the capital payment.

When was the search initiated?

Mr. Dermot Keane

Recently, in the context of preparing for this meeting.

Was it in the past few days?

Mr. Dermot Keane

In the past week or two.

Last week, we asked Mr. O'Toole from FÁS to carry out a thorough examination of the various documents relating to the deal in question. Unfortunately, the Secretary General from the Department of Enterprise, Trade and Innovation could not attend last week's meeting. Is Mr. Keane stating that he has requested a search in respect of all of the papers relating to the deal?

Mr. Dermot Keane

I have initiated a search within my section and I have consulted colleagues in other sections as well. I deal with the central decentralisation unit.

Has Mr. Keane requested that the Department of Enterprise, Trade and Innovation provide to his section all documents relating to the deal?

Mr. Dermot Keane

Not yet. That would be a separate issue. If one assumes that there is a chain leading to the Department of Finance, one would then expect that the Department of Enterprise, Trade and Innovation would have written to us and enclosed some documentation from FÁS. That would be what I would normally expect in such a case. We should, therefore, have within our records whatever it was that we reacted to. On our file would be a letter from somebody, our reply and, presumably, some other information. If we have that - I cannot say at this stage whether we would or not - my first course of action would be to examine it. I have no specific authority to investigate files held within any other Department or body.

However, Mr. Keane could have asked another Department to carry out an investigation in order to satisfy its curiosity.

Mr. Dermot Keane

I could write to another Department and ask it to-----

This matter has been ongoing for quite some time and nobody was prompted to pursue the line of inquiry to which I refer.

Mr. Dermot Keane

The committee has already pursued FÁS extensively on the issue.

No, I am referring to the Department of Finance. Did the report of the Comptroller and Auditor General prompt anyone in the Department to ask questions with regard to how something of this nature could occur?

Mr. Dermot Keane

I read the report and I pursued the question relating to the acquisition of the site. I read the references to the FÁS documents-----

Our concern is that there must be a follow through in respect of this matter. There is no point in reports being published in circumstances where lessons will not be learned and where people will not suffer the consequences, particularly if problems arise. Since the report was published, has the Department of Finance, which is the primary Department involved, requested any information or taken any action in respect of what was happening?

Mr. Dermot Keane

Again, I have not gone through all of the history relating to this matter. However, I believe the committee will find, from the reports produced and published by the decentralisation implementation group, that as the decentralisation process evolved, so also did the management and financial controls and the project evaluation process. These mechanisms both evolved and improved to a large extent. Obviously, matters were easier in respect of some projects than was the case with others. Some 43 projects were delivered, either in whole or in part, so it is quite difficult to review them on an individual basis.

I accept what Mr. Keane is saying but-----

Mr. Dermot Keane

We are discussing something that took place in 2006.

-----specific issues were raised by the Comptroller and Auditor General in his report. The committee takes this matter seriously. Did the Department take it seriously enough to pose questions or to initiate investigations or examinations in respect of the issues raised in the Comptroller and Auditor General's report? There are those who say that reports are published and then left to gather dust. I am asking Mr. Keane to contradict that viewpoint by indicating that he has evidence which he can present to the committee and which shows that the Department took the report seriously and pursued the issues raised in it. I am also asking that he provide such evidence.

Mr. Dermot Keane

I have not specifically pursued any of the three examples to which the Chairman referred. As already stated, however, the published reports of the committee which oversees decentralisation show a consistent and ongoing monitoring of the processes. The matters reflected in the Comptroller and Auditor General's report date essentially date back to the beginning of the process.

With respect, the Comptroller and Auditor General's report shows that the Department's monitoring process and reviews are not worth much in circumstances where events such as those under discussion can occur. What we are trying to discover is what happens when issues are disclosed or unearthed. It seems that nothing happens. I am merely asking how three organisations - Pobal, the Health and Safety Authority and FÁS - could go on solo runs without anyone shouting "Stop". What we heard last week was quite disturbing. I am asking a simple question, namely, what action is the Department of Finance, which is the foremost Government Department, taking in respect of this matter? It appears that nothing is being done.

I wish to put a number of questions to the officials from the OPW. Will Ms McGrath provide an overview in respect of the number of sites and properties - former Garda stations, etc. - the office has for sale? Are all of the vacant and unused properties in the OPW's possession on the market or does the office consider matters on a case-by-case basis in light of any approaches which might be made? What is the OPW's policy in this regard?

Ms Claire McGrath

We consider properties on a case-by-case basis. Where a property is vacated - the Deputy provided the example of a Garda station in this regard - if we provide another site, we would confirm that there is not a use within our own client base or a public sector use for the property in question. Sometimes we receive requests in respect of community use of properties. We consider all of the factors involved and then make a decision as to whether we will dispose of a property. It is done on a case-by-case basis. The position may be different outside Dublin than is the case within the capital, but our policy would be to have a minimum of vacant space available in order to enable us to properly manage the overall portfolio.

Mr. Dermot Keane

Is a schedule relating to that portfolio available, perhaps on the OPW's website?

Ms Claire McGrath

It is not on the website. We have a property database and those properties that are vacant would be reviewed on a case-by-case basis. We would, however, be seeking to minimise the level of vacancies. At present, we are mindful of the fact that it is difficult to determine, in a disposal sense, what would be the nature of the market. We would also be conscious of what it costs to retain and maintain properties.

Would it not be prudent to have information relating to properties throughout the country that are for sale, etc., available at one location?

Ms Claire McGrath

If we are making property available, we advertise that fact. If we are disposing of properties, that would be publicly known. Is there another aspect of the matter about which the Deputy is curious?

I take from what Ms McGrath is saying that the OPW is open to approaches but it does not have a schedule of what is available. It would be proper to have a schedule of all vacant and available properties for people to express an interest in rather than waiting for people to seek the OPW out.

Ms Claire McGrath

We make details available via the media, representations or parliamentary questions if people have individuals requests on individual properties as to what the situation would be. If we were making disposals, it is not usual, barring neighbours, to dispose to a particular party who might express an interest because in terms of value for money, we would have to put it on the market to achieve the best value.

I accept that but the OPW is still coming at this from the wrong end.

Reference has been made to FÁS and other organisations and their property solutions. Does the OPW interact with the Department of Education and Skills in terms of sites for the provision of education at primary and secondary level?

Ms Claire McGrath

We do. We act as agent for the Department in particular - not all - site acquisitions where its officials request us in regard to particular locations to assist them in acquiring a site or a property for a solution they wish to have in that location. We act on their instruction in those instances.

I refer to the convention centre. I thank Ms McGrath for her opening statement which addressed this in detail. Why did the OPW go down the PPP route rather than the traditional procurement route whereby somebody is asked to build a facility before handing it over to be operated?

Ms Claire McGrath

In the instance where different procurement methodologies can be used, but, in particular, the instance where one is looking to transfer the risk in regard to operate and maintain, the PPP route is the more usual. To do the traditional, one would then have to engage the service providers and one would have to manage the marketing. It is about where one is looking to place the responsibility for the provision of the service to those best placed to deliver it. In this instance, with regard to the operate and maintain, the public sector does not have the expertise for the service provision relating to an international conference facility.

With regard to the development of the public sector benchmark, at the end where one would look and say if this was to be procured traditionally and what that would be, one would then ask if this allowed for the fact of the procurement to proceed on a PPP basis.

Three parties initially sought the tender documents and two entered the competition. A question has been raised about the scoring arrangement regarding why the financial element was weighted at 20% of the total weighting and why, for a project of such a significant size, the financial element was so small.

Ms Claire McGrath

The tender valuation was based on MEAT, the most economically advantageous tender, not necessarily the cheapest. This is a 25-year service provision. It is not about a building. The building element of the tenders was similar in pricing terms. What we are talking about here is the service arrangement. We need the building to be functionally capable of delivering international conference facilities but then one needs to know it will be marketed, operated and maintained for the duration of the 25 years. The factors surrounding providing a facility that would bring the economic benefits accruing from international delegates meant that we were looking at maintain, operate and construction, the technical elements, giving far greater weighting to that because all the best advice was that is what will make this work. This is why the breakdown of the marking was around that rather than necessarily price getting the highest figure.

Was the breakdown of the weighting known by the individual bidders during the process?

Ms Claire McGrath

Yes.

Is that normal?

Ms Claire McGrath

Yes, mostly.

Will Ms McGrath elaborate on how the business plan has performed to date? I acknowledge it has only been in operation since August. How many bookings are confirmed? Will she give the committee an insight into the profit-sharing arrangement with the State?

Ms Claire McGrath

Some colleagues will deal with the specifics. The facility is exceeding expectation in regard to bookings, for example, the European Transplant and Dialysis Nurses Conference, with 1,400 attendees; the European Conference of Geriatric Medicine, with 1,300 attendees; and the Globe Forum with 700. The numbers to date exceed the business case. They are identifying 82,000 delegates in the first three years, which is exceeding. There will be issues for the company if it does not reach 34,000 delegates by year five. That is the nature of it. It is incentivised to reach those targets and that level of international delegates bringing consequential economic benefits.

With regard to revenue sharing, schedule 15 of the payments mechanism financial model includes the projections for revenues in each payment year and there is a mechanism for sharing any revenue earned above those levels, which, subject to the provisions regarding certain liabilities, provides the authority with a share of such excess revenue in its incentivising PPP growth to maximise revenues. No revenue share is payable in any payment year if the actual revenue does not exceed the revenue bands extracted in a table that I can supply to the committee. In each year, the share is 45% to the authority and 55% to the PPP company and revenues in excess of 75% of the sponsor's projections are shared.

Ms McGrath will supply the table. I thank her for that.

I presume there is a safety valve in this contract if the operator defaults.

Ms Claire McGrath

Yes, the demand risk is with the operator and there is availability. The levels are particular and detailed. If they are not obtained, there are arrangements set out in the contract. Ultimately, the contract could be determined but a number of steps have to be gone through. That is set out in the documentation.

There was a query about the legal title to the site. Will Ms McGrath clarify this? Did the successful bidder have clear title to the site at the time of the tender process or was there a charge on it?

Ms Claire McGrath

No, under the terms of the contract, SDCCD was to provide a site as part of its proposal. The site arrangements are governed by a master development agreement between CIE, the owners of the site, and the Spencer Dock Development Company, SDCCD's related company. That is the arrangement. This obtains to a large extent in that area. CIE has entered into agreements with the consortia that has the contract relating to the site. Therefore, there is no issue with regard to the contract provision.

In a worst case scenario, such as default, would the State have legal title?

Ms Claire McGrath

In a sense, the service provision follows from the State giving a licence to the service provider at services commencement stage for 25 years. One could say it is the State that owns the site.

There was also an issue with regard to the sewerage plant. Was it highlighted at tender stage that there could be an issue in that regard or did it come to light late in the process? On the question of car parking, what is the position with regard to the ownership, operation and management of the car park? Is the car park part of the centre?

Ms Claire McGrath

No, it is not, for our purposes, part of the conference centre. There is a car park in the basement but it is owned by a subsidiary of SDCCD's parent company. It was funded separately and the conference centre did not subsidise any element of the car park. The OPW, as owner of the conference centre is entitled to access to the car park for the purpose of servicing plant equipment located there. The tender document only required that car parking facilities be provided in the vicinity of the conference centre, because it was considered that international delegates would fly into Dublin and would be transported to and from their hotels by coaches or taxis. Therefore, parking was not an element of the tender in the sense it needed to be included in the bid and provided.

On the pumping station, there was a development agreement between Dublin City Council and Treasury Holdings in April this year regarding the requirement for a pumping station which would serve Spencer Dock, an area far greater than the conference centre facility. Part of the agreement involved a compliance approval from the Dublin Docklands Development Authority concerning certain environmental issues pertaining to the pumping station. This approval was received on 12 November and construction is expected to start before Christmas and will be completed in 15 to 18 months time. Dublin City Council has extended the conference centre's temporary licence to discharge waste until the end of January and will grant a further extension. Therefore, there is no issue for the conference centre with regard to waste. As I mentioned earlier, if the facility became unavailable for any reason, there are step-in rights with regard to our positionvis-à-vis the conference centre providers. The pumping station is a separate issue and has nothing, as such, to do with the provision of the conference centre.

Ms McGrath outlined in her opening statement that the OPW had an independent process operator for the project. Who was that person?

Ms Claire McGrath

It was Mr. Noel Lindsay, former Secretary General of the Department of Education and Skills.

The payment schedule outlines payments the consortium will receive from the State. Is it correct that over the 25-year period these will amount to approximately €725 million?

Ms Claire McGrath

Yes, it is approximately that figure.

This next question is for the National Development Finance Agency. How many PPP projects are currently in construction?

Mr. James Golden

I will have to come back to the Deputy with the exact details on that. We have a number of contracts, primarily in the education sector, that are currently in construction. I will provide the Deputy with a written response showing the exact status of all our contracts.

Mr. Golden mentioned the education area. Recently we heard of a high profile business failure which had been involved in constructing two schools and some service stations. I understand that these projects were part of a partnership arrangement and that another element of the partnership has stepped in to complete the projects in Athboy and Kildare. Is that correct?

Mr. James Golden

I have not got the specific details on that, but would be happy to provide a written response. I do not work on the team or in the education area and do not know what exactly is going on there. There have been many challenges in the overall construction sector.

I am trying to get a handle on the situation with regard to a partnership or joint venture that has been awarded a PPP contract where one side of the partnership fails. If the other partner steps in, what is the position of the creditors of the partner who failed?

Mr. James Golden

Perhaps I should step back a bit and touch upon the overall Department of Finance guidance on this issue. Generally speaking, we make contracts with a ring-fenced stand alone fully financed special purpose company, and within the contract agreement, we lay out a set of step-in rights for various people to recover their moneys in sequence terms. We find we go back to the contract and through these steps in turn to find out who must step in and what they must do for a contract to remain live. Otherwise, the contract starts on the path towards termination.

To return to the convention centre, a question was raised with regard to the rates payable by the centre. Who pays the rates, the State or the operator.

Ms Claire McGrath

The rates are shared between them?

Was the rates cost overlooked in the initial process or was it factored in from the start?

Ms Claire McGrath

A determination could not be made at the outset as to whether rates would be applicable, so in that sense the issue was not overlooked. When the time came for a determination on the rates, the decision was made that they would be shared between them and that they would be paid from the revenue streams of both sides.

It is a significant figure, at €1.5 million per year. How come the rates were not determined at the planning stage?

Ms Claire McGrath

The determination of rates is done by the Valuation Office and it determines them based on an application for the specific instance.

Could an approximated rate not have been provided once the concept and design were put forward?

Ms Claire McGrath

There are two elements relating to rates, construction and the operation and maintenance. It is not until one sees the process, the tenders and what is being offered for development that one can judge what the rates might be.

Was a contingency figure for rates considered as part of the tender process?

Ms Claire McGrath

No.

Were there any approximate contingency figures?

Ms Claire McGrath

No, I answer advisedly. I do not think so.

It is quite a large amount, €1.5 million per year. It is too significant a figure for it not to have been part of the process.

Before I call Deputy Edward O'Keeffe, I have some questions arising from the questions asked by Deputy Collins. To return to the questions I asked of Mr. Nolan, would it be possible for the Department of Finance to co-ordinate an examination or investigation between it, the Department of Enterprise, Trade and Innovation and the Department of Education and Skills, into what has happened with regard to FÁS decentralisation and what we heard last week and this week? Somebody must take charge and provide answers. I ask the Department of Finance to co-ordinate an investigation between it and the other two Departments and FÁS into all of the circumstances related to what happened in Offaly and to report back to us on that as quickly as possible.

Mr. Dermot Nolan

Is that question addressed to me, Chairman?

Mr. Dermot Keane

This is a confusion of the two Dermots.

I apologise. The name plates are incorrectly placed.

Mr. Dermot Keane

In answer to the Chairman's question, subject to confirmation with my superiors in the Department, we will endeavour to put together a group to look into the issues raised by the committee at this and at last week's meeting. We will seek to have some answers in the matter.

This is a formal request from the committee. We would expect to have a report within a matter of weeks.

Mr. Dermot Keane

There are severe resource constraints on the Department at the moment.

I am asking the Department of Finance to act as co-ordinator between the parent Departments of Education and Skills and Enterprise, Trade and Innovation, in order to obtain answers for the committee.

Mr. Dermot Keane

Subject to the agreement of the management in my Department.

The committee is making a formal request.

Mr. Dermot Keane

I appreciate that and I am very anxious to accommodate the committee. Perhaps we could negotiate the timeframe when we see what we have to do and who is available to us.

Deputy Collins raised the issue of the car park. I am mystified why the car park was excluded from the development of the conference centre. I would have thought a car park would be the big money-spinner by providing an ongoing cash flow and that it would be a very profitable enterprise. Who made the decision to exclude the provision of a large car park for the conference centre?

Ms Claire McGrath

The decision would have been part of the specification of the conference centre; a car park was not a requirement because the focus of the conference centre is to attract international conferences and international delegates. Therefore, the car parking provision was not regarded as necessary. It was not a requirement-----

Is it the view that the underground car park is sufficient to meet the needs of the centre?

Ms Claire McGrath

Yes. The requirement was to have a facility such that there would be car parking but there is not an additional requirement.

Is there an adjacent car park which is run by another organisation?

Ms Claire McGrath

I cannot say because I do not know. There may be. The Luas line and other public transport is available to the facility.

It is a simple question. Is there a car park next to the conference centre?

Ms Claire McGrath

I do not know. I can come back to the Chairman with that information.

Does anybody know?

Mr. Paul Bates

I understand there is a substantial car park in Jury's hotel within walking distance of the conference centre.

I am trying to ascertain the reason the question of a car park to service the centre was excluded. That was the response given to Deputy Collins.

Mr. Paul Bates

To follow on from what the chairman of the Office of Public Works said, it is customary that people are brought to conference centres in buses as international delegates would not arrive in cars. This was the basis for the decision.

I refer to paragraph 20.35 of the report of the Comptroller and Auditor General. It relates to the steering group agreeing the allocation of 20% of overall marks to the financial elements of the bid. A comparable project in size and complexity referred to in the report is the Criminal Courts of Justice complex which had a mark of 27% available for the financial considerations of the bid. The Department of Finance expressed concern when the financial criteria was lowered from 25% to 20% and the design and construction weightings increased to 40%. I ask Mr. Nolan to explain the Department's concerns.

Mr. Frank Griffin

I will answer that question. We began with a certain distribution of marks. It was proposed that the distribution be altered slightly. We expressed a concern about cost. A detailed discussion took place at the project steering group and having listened to all the advices, the decision was that the move to 20% was acceptable to the steering group. It took account of the concern that, given the scale of the facility and its vital central role in the generation of the conference business, it was very important to get this right and it was also vital to get the front end of the operation right, in other words, the capacity of the operators to pre-market the facility to international conference organisers. When all these factors are right, the potential to generate the conference business and reap the economic benefit - which is the central rationale of the project - is clearly enhanced. The steering group concluded that overall, it could live with the marking scheme and I think the outcome has borne this out as being the correct conclusion.

We do not know that because we do not know what the other bidder would have done had he been given the opportunity.

Mr. Frank Griffin

If one were to inquire into the detail of the comparison of the technical assessments of both bids, one would see that the successful bidder was a far more developed bid. It is not surprising, seeing as those people had been involved in the preparation of a conference centre for quite a number of years before this particular conference competition. Anyone who was involved in the assessment is completely satisfied that the right outcome was achieved.

We need to be mindful of the fact that the difference is €180 million. One can do a lot of marketing and maintenance for €180 million.

Mr. Frank Griffin

The Chairman is correct.

The context is the figure of €180 million.

Mr. Frank Griffin

I will point out that the figure of €180 million was a figure put forward as a bid at a point in time. It was not a contracted figure. From what we know of the detail of the technical and operational development of the bid and from what we saw of the presentations, there is a very serious question. I can put it much stronger than that and my colleague on the NDFA, who is very familiar with the bid, might be able to comment. There is a very serious question as to whether that facility could have been delivered at the price and if so, whether it would have provided any value. There is very little point in the public sector procuring a facility which is simply not up to standard.

Who were the members of the steering group?

Mr. Frank Griffin

The chairman was Mr. Phil Furlong, the former Secretary General of the Department of Tourism, Culture and Sport. The members were Mr. Aidan Dunning of the Department of Finance, Mr. Seán Quinn, the chief executive officer of Fáilte Ireland and the then chairman of the Office of Public Works, Mr. Seán Benton.

The marking went from 25% to 20%. However, the percentage used in the Criminal Courts of Justice building project was 27%. Hypothetically, if the ratings had gone from 25% to 27%, who would have won the bid?

Mr. Frank Griffin

I cannot answer that question. The most important point regarding the distinction between those two projects is that there is no operational marketing, third-party revenue element in the Criminal Courts of Justice project. The conference centre is a-----

My question is that if the marking went to 27%, who would have been the successful bidder?

Mr. Frank Griffin

We can check that calculation.

Mr. James Golden

We would be happy to take that question away and write back to the committee setting out the basis of the calculations. In terms of our recollection, that was approximately where the cross-over was. In relation to that, it obviously makes a number of assumptions in terms of changing the weighting. The bidders would obviously have potentially responded differently. Second, they could have resubmitted the same bids. Third, in relation to where they want to go to it, they will have taken slightly different approaches.

I want to add to the earlier reply given to the committee on to the overall weighting of the financial marks, whose importance we were not fully aware of when speaking here as the financial adviser. We would obviously be very careful now in advising anybody on the importance of price and value for money for the taxpayer. The second and third components we now recognise are very important. First is the financial robustness and the financial strength of the entity, which I admit we did not fully understand at the time. I was also working on the criminal courts complex at the same time with the OPW. The third one, which has obviously picked up a lot of what we call the financial marks, is the whole area of commercial sustainability. When the NDFA wants to advise anybody on entering into a contract, we would obviously seek to ensure: it is good value for money; it is financially robust and can do what it is says it is meant to do; and it is financially sustainable and will last the length of the contract. Otherwise we just end up in a very difficult situation for my colleagues in the Department of Finance, given where they currently are in terms of other areas.

If some of the concerns related to operation and maintenance, why did the operation and maintenance marks remain at 30% rather than the design and construction?

Mr. Frank Griffin

Perhaps I can answer that question. We had an initial proposal, which was balanced in relation to where the major costs were expected to arise, which gave due weighting to the fact that the technical element was covering the design and construction of the facility. That was expected to cost in excess of €200 million. Therefore, that had to be given due weight. The operation and maintenance got fairly significant weighting in the marking scheme and a reasonable balance was achieved in the marking scheme, which was obviously available to the bidders when they bid.

My next question is for Mr. Dermot Nolan of the Department of Finance. What guidelines does the Department of Finance have on the treatment of public private contract proposals?

Mr. Dermot Nolan

There is a whole suite of guidelines issued by the Department of Finance with regard to public private partnerships. They were developed in a series over two or three years between 2004 and 2007. They cover the various aspects that would arise in public private partnerships: risk attribution; taxation issues; how one composes the public sector benchmark; and how one determines value for money - the various tests for value for money for that. It is fairly substantial; several hundred pages of documentation have been issued and the most recent version went out in 2007.

What guidelines were available at the time this decision was made?

Mr. Dermot Nolan

I do not think the final version we have at the moment would have been out because they would have gone out-----

Were guidelines in existence?

Mr. Dermot Nolan

There were guidelines. There have been various bits of guidance. The most comprehensive version went out in 2007 but there would have been guidelines out before that as well, but not to the same detail or-----

On what date was a decision made on this contract?

Mr. Frank Griffin

Was that the final Government decision to enter into the contract?

Let us say the recommendation by the steering group.

Mr. Frank Griffin

Does the Chairman mean the recommendation to the Government to enter into the contract?

Mr. Frank Griffin

February 2007.

Were the guidelines then available from the Department of Finance.

Mr. Dermot Nolan

I definitely think the bulk of the guidelines would have been available by then. Yes.

Mr. Nolan thinks they were.

Mr. Dermot Nolan

Three or four different suites of guidelines have gone out. The most comprehensive and detailed version went out, I think, sometime in 2007; I am not sure of the exact date.

Mr. James Golden

Perhaps I can answer that question for my colleagues in the Department of Finance. On the guidance, that was in issue at that time. Either in draft or in final form as I recall it, there was the February 2005 Capital Appraisal Guidelines as set out atwww.ppp.gov.ie. Second, there was the guidance on the discount rate and how that would be determined. There was guidance on the public sector benchmark. There was also in existence guidance in terms of value for money, test 1, 2, 3 and 4. I can give reassurance that we have followed all that guidance. It is set out in all the reports agreed, adopted and approved because that must happen before my organisation will allow the Accounting Officer to issue a letter signing off on the process and all those reports are available.

Is Mr. Golden telling us that he is happy that the guidelines in existence at the time of the contract were as robust as they are now?

Mr. James Golden

Absolutely, Chairman, and I can give you an undertaking that my colleague who runs this in the organisation, our deputy director, was absolutely assured that all the guidance was followed, step by step.

My final question is on development levies. What development levies were paid by the project?

Ms Claire McGrath

Perhaps I might come back to the committee on that. I do not know that I cannot find that information just now.

Were development levies paid?

Ms Claire McGrath

Apologies, I will revert to the committee on whether they were and what they were.

Is Ms McGrath not sure?

Ms Claire McGrath

No, I am not. I will revert to the committee with whether they had to be paid and what they were.

Fine. I call Deputy Edward O'Keeffe.

I welcome the delegations, especially the chairman of the Office of Public Works. I am glad to see Mr. Tony Smyth, with whom I had some arguments about flooding and such matters. I would appreciate help in the Blackwater valley in Mallow and Fermoy. I see that €95 million has been spent on maintenance and arterial drainage schemes. I ask for an update on the Mallow and Fermoy developments. I also compliment him on the way he has co-operated with the residents in the area. There have been very few hitches, other than perhaps looking for a bit of extra work to be done. The phrase is that we will cross the bridge when we come to it.

Ms Claire McGrath

The second phase at Mallow is under way and the second phase of Fermoy is due to go to tender after Christmas.

Has it not gone to tender yet?

Ms Claire McGrath

No.

What is the delay?

Ms Claire McGrath

I beg the Deputy's pardon. I will check that detail.

What about the phases in Mallow?

Ms Claire McGrath

Just one. In Mallow the construction is ongoing and in Fermoy the procurement of the contractors is under way.

When is it likely to be open to tenders?

Ms Claire McGrath

I would say the first quarter in 2011, but if the Deputy wants something more specific I will revert to him.

When will Mallow be finalised?

Ms Claire McGrath

Mallow is on site.

Is that the final phase?

Ms Claire McGrath

Yes.

When is completion expected?

Ms Claire McGrath

In about 18 months.

Could both schemes be completed by the middle of 2012?

Ms Claire McGrath

Yes.

Would I be safe in saying that would be a good target date?

Ms Claire McGrath

Yes, 2012.

Mr. Tony Smyth

They are on site with 18-month or two-year contracts.

Is the OPW happy with the progress?

Ms Claire McGrath

Yes.

The last page of chapter 21 of public works decentralisation states:

Following the deferral of elements of the decentralisation programme, pending a review in 2011, the movement of approximately 6,600 staff from Dublin to locations across the country has been deferred. 3,148 staff had moved by April 2010 and current arrangements allow for the decentralisation of a further 1,191 staff.

Therefore, the programme of decentralisation is not yet complete. Where will the approximately 1,100 staff be placed?

Ms Claire McGrath

Examples of the additional locations decided on after the Comptroller and Auditor General compiled his report are Roscommon, Wexford, Tipperary and Newbridge.

The number of people in question is approximately 1,100.

Ms Claire McGrath

They would be the places we would provide in those locations and in one or two others.

The OPW does not have any use for a number of sites. How does it propose to dispose of those sites?

Ms Claire McGrath

At the moment, the decision on decentralisation is that progress on permanent solutions at any of those locations has been deferred pending the 2011 review. We would not proceed to do something else with them. There is a Government decision on them. It is pending review in 2011.

Are caretakers or others employed to engage in the maintenance of those sites?

Ms Claire McGrath

We do that.

Would OPW hand them over to NAMA for disposal?

Ms Claire McGrath

No. The review of the Government decision that they are required for decentralisation has been deferred until 2011. We will not-----

I would like to ask a few detailed questions on the expenditure side. Page 127 of Vote 10, which relates to the OPW, states that the President's household staff, wages and allowances cost €941,000. How many staff does the President have?

Ms Claire McGrath

Funding for the President's household staff is provided through the Vote of the Office of the Public Works. That has always been the situation. Is the Deputy asking about the composition of the Vote?

Ms Claire McGrath

It comprises 26 people - a chef, catering and services staff, a cook, a cook's assistant, full-time and part-time household assistants and some on-call assistants who are needed for certain events.

That is fine. There is reference three lines down to grants for certain refurbishments costing €1.5 million. What were the refurbishments in question?

Ms Claire McGrath

In that year, the grants in question would have related to such projects as the Mariners Church in Dún Laoghaire, the Irish College in Paris, the Irish College in Rome and Glasnevin Cemetery.

There is a separate reference to a grant that was given to the Leuven Institute for Ireland in Europe. Is that in Belgium?

Ms Claire McGrath

Yes.

Why were these grants not rolled into one?

Ms Claire McGrath

That accounting treatment was identified when it was created within the Vote as an individual grant. They were subsequently grouped.

What is going ahead in Leuven at the present time?

Ms Claire McGrath

The institute there runs educational programmes that are funded on a North-South basis. The construction is complete. The job is finished. The Irish college there offers residential and training courses and other seminars in a European context.

Does the OPW have overall responsibility for the management of it?

Ms Claire McGrath

No.

How is it managed?

Ms Claire McGrath

The institute is an independent body. I will revert to the committee with the details. It is a trust.

Is it an Irish trust?

Ms Claire McGrath

Is the Deputy asking if it is registered in Ireland?

Ms Claire McGrath

I am not certain.

I would like to know.

Ms Claire McGrath

I will revert to the committee in that regard.

I would also like to ask about the reference to a drainage maintenance project that has cost €18 million.

Ms Claire McGrath

It involves the maintenance of 11,500 km of drainage channels and 650 flood defence embankments. The maintenance of structures, sluices, pump stations and bridges, and so on, forms part of the OPW's draining maintenance responsibilities. When we do capital works, we subsequently maintain those works.

Page 133 deals with prison projects. On what projects was the amount of money in question spent?

Ms Claire McGrath

The funds in question were not expended from the Vote of the Office of Public Works. The office acted as an agent for the Irish Prison Service and the Department of Justice and Law Reform in this regard. I will give the committee details of the locations in question. We would have been acting as agents for the Irish Prison Service.

Has the OPW made progress with the new proposed prison for Cork? Is it involved in that project?

Ms Claire McGrath

The question of what is happening is a matter for the Irish Prison Service in the first instance. We act as agents in procuring properties or arranging construction. Decisions on what might progress are matters for the Irish Prison Service.

Agreement on a site has been reached between the Departments of Defence and Justice and Law Reform. It is now a matter for the OPW to develop it as funding becomes available.

Ms Claire McGrath

I will revert to the Deputy on that because what he suggests in relation to our involvement might not yet be the situation.

Where was the €423,000 spent?

Ms Claire McGrath

This would have related to prisons such as that in Portlaoise. We were undertaking works on behalf of the Department in locations where it wished us to place contracts. I will revert to the committee with the specific details. I apologise. As this item is not borne on our own Vote, I do not have the specific details.

Ms McGrath must have some details about this figure.

Ms Claire McGrath

It relates to funding that came from the Department of Justice and Law Reform for the prisons. I suggest that it more than likely relates to block C in Portlaoise. That was largely where the funding was expended.

I note that €87,000 in compensation and associated legal and miscellaneous costs was paid in four cases of personal injury claims. What exactly does that refer to?

Ms Claire McGrath

I can give the committee the details.

Would that come under health and safety?

Ms Claire McGrath

Yes. In the event of injuries, the State Claims Agency acts on our behalf. If the instance occurred on OPW property, the funds needed in the case of a settlement come from our Vote. I can give the committee some examples if it wishes. To which note does the Deputy refer?

It is on page 139 of Vote 10, which relates to the OPW.

Ms Claire McGrath

Does the Deputy refer to a particular heading? If so, I can give him details.

I refer to compensation payments.

Ms Claire McGrath

Yes. Compensation payments totalling €87,000 were made in respect of four cases of personal injury by employees. I will give some examples. Somebody was injured in a lifting incident. One of our employees was involved in an incident with a digger. An employee slipped and was injured at one of our heritage sites. These are individual cases involving employees.

Does the OPW have any plans to put a coffee shop in place at Doneraile Park, which comes under its aegis? The park is very successful. Hundreds of people go there to walk. There is no facility there for refreshments.

Ms Claire McGrath

I would not say we have any such plans at present. Although we primarily have a heritage remit that focuses on the conservation and protection of our heritage properties, we are conscious at all times that we also have a tourism remit that involves the presentation of these sites. We are anxious to avail of whatever advantage that can be got from sites in the area of tourism. However, as we have funding restrictions, we will seek to prioritise as between-----

Could the OPW not secure a substantial payback from having facilities at sites? I receive complaints from people in Dublin and elsewhere who are unable to purchase refreshments, including simple things such as a cup of coffee, at heritage sites. These are ideal locations for selling souvenirs and a margin would be available. The Office of Public Works is a commercial as well as helping organisation. Is that not the case?

Ms Claire McGrath

Our remit is around the preservation and protection of the sites. However, we have done a playground and car park which have engendered demand. We are prioritising funding for facilities at heritage sites but there are competing and increasing demands. I take what the Deputy says.

I am trying to be helpful by suggesting ways for the OPW to secure extra revenue.

Ms Claire McGrath

If I thought I could get the advantage from the revenue into the Vote, I would be very happy.

If I am returned next year, I will come before the committee again to meet Ms McGrath.

I doubt there is much coffee at Doneraile Park today.

Perhaps there is hot chocolate.

I thank Ms McGrath and other officials for attending. I have a few questions on decentralisation. I ask Ms McGrath to talk me through the Comptroller and Auditor General's report which states that 3,148 staff were in place in the decentralised locations, of whom 2,403 were in locations where arrangements for permanent accommodation had been progressed. What does the word "progressed" mean in this context? Does it mean finalised or could it also mean that the arrangements are still at the initial stages? Of the 3,148 staff who have been decentralised, how many have moved into permanent accommodation?

Ms Claire McGrath

The Office of Public Works speaks from the point of view of the provision of places. The persons who occupy positions would be a matter for the parent Department of the decentralising location. We provide the places.

Which of the witnesses present can answer my question? Perhaps the Comptroller and Auditor General can answer it given that I cited his report or perhaps officials from the Department of Finance can reply. The report states that 2,403 of the decentralised staff are in locations where arrangements for permanent accommodation have been progressed. How many of this number are housed in what will be their final accommodation? Perhaps the Chairman will suggest which witness should reply.

Officials from the Department of Finance may be able to answer.

Mr. Dermot Keane

I cannot give the Deputy an exact answer but, from my recollection of providing draft figures at the time, it would be a mixture of those sites where, for argument's sake, the permanent accommodation was open and occupied at the time and a number of sites where the permanent accommodation would have been under construction. It would have included some advance parties, in other words, it would not be complete.

Of the 3,148 staff who have decentralised, how many have come from locations other than Dublin to the new locations? I understood decentralisation could also result in staff moving from Cork to Limerick and so forth. Did the programme include this?

Mr. Dermot Keane

The programme has included many things. As pointed out by the Deputy, people can move around the country. Ultimately, the policy is that if 3,000 people have moved to decentralised locations, the OPW's remit is that it will close 3,000 desks in Dublin. That would be a fair presentation of the position. Also, while I came into this in the later stages, quite often all of the posts would have moved from Dublin while the people who filled the posts may have moved from elsewhere. Ultimately, however, there would have been a vacancy left in Dublin.

I understood somebody could move from Cork back home to Killarney or Limerick under the decentralisation programme. If someone moves from Cork to Killarney or Limerick to Waterford, how would a vacancy arise in Dublin? Will Mr. Keane explain?

Mr. Dermot Keane

Yes, I can explain that very simply. For example, if my job was moved to Tullamore, as I do not want to move to Tullamore the job would be advertised Civil Service wide and somebody would volunteer to move to Tullamore. For argument's sake, let us say it is somebody from the Central Statistics Office in Cork. If I wanted to go to Cork, that would be fine and if I do not want to go to Cork, I would stay in the Department of Finance and we would find somebody else to go to Cork. Ultimately, the Department of Finance will either export me to a Department and I have seen-----

That is a virtual rather than real transfer.

Mr. Dermot Keane

The post and the work move and my job in Dublin is ultimately suppressed. Either I retire or I move, let us say for argument's sake to the Department of Transport which somebody else had left to take up another post. Sometimes it is a direct one-for-one replacement in that my job goes or somebody comes into my job in preparation for decentralisation and moves on. Other times, we have had chains of up to seven moves, resulting ultimately in a desk being left empty in Dublin.

It is a little like a game of musical chairs or spin the bottle in terms of where one ends up. In other words, as many as seven people may have to move to accommodate a single decentralised post. A person may move from Cork to Killarney, someone else may move from Killarney to Tralee, someone else from Cork to Waterford and so on to create one vacancy in Dublin. I am a bit lost.

Mr. Dermot Keane

Yes, ultimately that is the case but normally it is much simpler than that and one or two people are involved. If it were a new job and no one else was available, one could recruit for the post. In the days when we were recruiting if the numbers permitted one could have recruited for Portlaoise or Tullamore or whatever. As I stated, if there were people on the list waiting to go, they got first offer and someone who did not want to go moved across into their job if that job was staying in Dublin.

I am becoming more confused the longer the discussion continues. Is it correct that having the 3,148 people move from Dublin to decentralised positions may have conceivably involved 7,000 or 8,000 staff transfers? In other words, multiple staff may move to have one decentralised post filled in Athlone or elsewhere. How many people transferred to deliver 3,148 decentralised posts? From what I gather, one net transfer from Dublin to a decentralised location often involves up to seven staff moving. How does the public service cope with this level of movement?

Mr. Dermot Keane

There are two sets of statistics. About 50% are moving between regions.

Mr. Dermot Keane

Yes, that would be the initial filling of a job. In the last programme, an average of three moves were required to fill every job.

Mr. Dermot Keane

These things have operated on a very planned and risk managed approach. People who wanted to participate in decentralisation were moved into the Departments in Dublin in advance of decentralisation, trained up and moved out when office accommodation became available. In some cases, people were able to move directly to units that were in advance offices. The process moved in phases. As people were ready to go, they left and the staff turnover was managed. There is a normal staff turnover, even without decentralisation, through promotion and interdepartmental transfers.

To achieve 3,148 decentralised posts, approximately 9,500 staff moved. This means that, on average, three persons moved position for every decentralised post. That is the figure Mr. Keane used a moment ago.

Mr. Dermot Keane

That figure was based on the previous decentralisation programme which was a bit smaller. From what I can establish, the actual turnover would have been a little less.

Perhaps the Comptroller and Auditor General might be able to assist me on the matter. What did he mean when he wrote in his report that 2,430 of the staff were in locations where arrangements on permanent accommodation had been progressed? Nobody else seems to be able answer the question.

Mr. John Buckley

It is easier if one starts with the bullet point below that, which states that 718 staff have moved to locations where advance offices have been established but the full decentralisation programme has now been deferred. They are in offices where the decentralisation programme will not go ahead. Deputy Fleming should bear in mind that the 2,430 staff are in locations we were considering from the point of view of accommodation. They are in locations where the permanent accommodation is being put in place.

It is not yet in place.

Mr. John Buckley

It is either in place or it was in the course of being put in place.

For example, what is the position with the 300 staff who were decentralised to Portlaoise? They have moved, but they are all in temporary offices in 11 different leased locations around the town. Where do they fit into the situation?

Mr. John Buckley

They are in that, because-----

Mr. John Buckley

I think they are included in the figure of 2,430.

Ms Claire McGrath

That is in the advance office.

What is emerging is that 718 staff are in advance offices, not their final offices. Half of that entire tranche is in Portlaoise.

Ms Claire McGrath

Yes.

That is a significant figure. Half of the entire tranche of people decentralised are currently in temporary offices in Portlaoise. The witnesses will understand me inquiring about that.

Ms Claire McGrath

Yes.

Will the decentralisation programme in Portlaoise go ahead?

We are coming to that. I was leading up to that question. Before I deal with that issue, which is the one big PPP bundle that is in the system to which extensive reference is made, I wish to clear up a few points. What was the average price paid per acre in all those locations?

Ms Claire McGrath

I have that figure in the briefing material. I will locate it.

The average price per acre is a figure to which people can relate in terms of sites. Perhaps it is there and I missed it.

Page 295 refers to the value for money aspect under various different categories - satellite commuter town to Dublin city, provincial cities, large provincial towns and small towns. There are 34 locations. Which are the towns and cities in each of those locations? There is disagreement between the OPW and the Comptroller and Auditor General in that regard. The OPW considers Newbridge to be a commuter town but the Comptroller and Auditor General said the opposite. Why do two State bodies have different opinions on the matter?

Mr. John Buckley

We used property consultants. Clearly, they are professionals. They used a classification process on the lines that have just been described. Since I engaged them as experts I did not consider that I should second guess them. We went along with the advice of the property consultants on the classification of towns. I have no doubt that another property consultant might classify it somewhat differently but I do not have any reason to depart from the classification process as set out.

In terms of looking at the outcome of it, look-back exercises have been done by the OPW itself and in a small number of cases it has come up with situations where the outlay exceeded the benchmarks which its own people set. Many of them were more favourable. The results were similar. The case that was raised was of Newbridge. It is somewhat academic in the sense that the money was moving from the State to another arm of Government, namely, Kildare County Council. Even if it was somewhat over the odds, as long as it is applied by the council for good and useful purposes it is not necessarily money that is wasted. Our classification system was devised by property consultants so that we could bring in to the office the expertise we needed to get a benchmark for those purposes.

The classification determines the conclusions as to whether something provided value for money because it was based on whether it was a Dublin or provincial town issue. That is what happens in the committee every day. People draw conclusions. The taxpayer, through the office of the Comptroller and Auditor General, paid one property consultant to come up with a definition of town categories for this purpose and the OPW, through the taxpayer, has a different set of conclusions as to which towns should be in each category. Did the two organisations not agree they were talking about the same thing before drafting the reports?

I am impressed that the OPW is contradicting the Comptroller and Auditor General's point of view. I always give out about Secretaries General who lie down under the Comptroller and Auditor General. They come before the committee week after week and are afraid to upset him. I am always impressed when someone disagrees with him. I do not say the Comptroller and Auditor General is wrong but I admire people holding their ground if they believe what they are saying.

What are the two satellite commuter towns of Dublin city? What are the five provincial cities? What are the 15 provincial towns and what are the 12 small towns? I did not see that outlined in the appendix. Where does Portlaoise come in that system? There are 35 trains in and out of Portlaoise every day. One could almost call it a commuter town. Portarlington has probably 50 trains in and out per day. Some would call it a commuter town. The definition of the categories has a fundamental impact on the way the report was carried out in terms of value for money based on the original categorisation.

Mr. John Buckley

Portlaoise was classified by the consultants as a large provincial town.

Mr. Buckley should just tell us the top two. What are the two satellite commuter towns?

Mr. John Buckley

On balance it would be better for us to give the detail subsequently because it is quite involved and substantial.

Two locations are listed on the chart on page 114 as satellite commuter towns to Dublin city. That report is in front of me. The OPW disagrees with the definition. I just want to know the two locations in that category in the Comptroller and Auditor General's report. I did not write the report. I would like to know.

Mr. John Buckley

Drogheda is one.

How far is it from Dublin? Is it much further than Newbridge?

Ms Claire McGrath

In terms of distance-----

I do not have a "satnav".

Ms Claire McGrath

Neither do I.

If Drogheda is considered a satellite commuter town to Dublin and Newbridge is not it would suggest, at its mildest, that there is a very subjective basis to the report. I am just trying to understand what is in that category.

Ms Claire McGrath

Yes.

Mr. John Buckley

Drogheda and Navan are the two satellite towns.

The large provincial towns include Newbridge. It is as close to Dublin as Drogheda or Navan. I can sympathise with the OPW coming to a different view to that outlined in the Comptroller and Auditor General's report. A report will go out from this meeting suggesting that something was under the benchmark or provided value for money based on assumptions on whether a town should be considered a satellite town of Dublin or a large provincial town. I am probably labouring the point too much. I need to see the list of the 34 locations and how it was worked out because the OPW has picked one example and while I do not say it is right, I understand the point it is making. Drogheda and Navan are in one category for assessment by the Comptroller and Auditor General but Newbridge is not in that category. I am sure the Comptroller and Auditor General will forward a note on the matter to the committee.

Mr. John Buckley

We can certainly provide a note on the detail behind the actual figures in the report. However, I would stress-----

Does the Comptroller and Auditor General understand my line of questioning?

Mr. John Buckley

I understand from where the Deputy is coming. Normally when we carry out assessments, we operate on the basis of our own work. Here, however, we are dealing with an area of expertise that is outside our comfort zone. As a result, we employed consultants. Having received their report and discussed it with them, it would be wrong of me to second guess them because, as the Deputy correctly pointed out, my office, as part of the State, paid for the report. Why should I substitute my view for theirs subsequently? I would not have done that, I would have accepted their view.

Equally, the OPW would have had a similar benchmarking exercise carried out. What I would like to stress about this matter is that it is not an exact science. It is purely a set of professional opinions on both sides. The classification system that each would use would be crucial. Obviously, we could all have quibbles with regard to that classification system. However, if it is their professional judgment, I do not see how I could depart from it. What I set out is a yardstick, based on the opinion and professional advice I received from the consultants.

In such circumstances, the Comptroller and Auditor General will not object if I put to him the question we pose to witnesses each week, namely, which consultants carried out this exercise and how much were they paid? That is a fair question.

Mr. John Buckley

We will provide that information to the Deputy. I do not have it in my possession but I will include it with the note I have already committed to supply to the committee.

Would the Comptroller and Auditor General not have consulted the OPW in respect of its view on the definition rather than hiring external consultants?

Mr. John Buckley

The difficulty is that when one is examining the performance of the OPW, there is no point in using the way it operates as a yardstick to judge that performance. If there is going to be any meaningful challenge within the system, it must come from some professional who is outside that system. That is why we employed the consultants.

However, 90% of the audit work carried out by the Office of the Comptroller and Auditor General is reliant on information supplied by the organisation that is being audited. I do not understand-----

Mr. John Buckley

Obviously, there are independent judgments. The entire point of auditing is that one makes such judgments. The first point the Deputy made is that we rely on information supplied. However, we rely on it after engaging and challenging. In order, therefore, to do the latter, one must use the appropriate mechanism to discuss the issue and engage with the relevant organisation.

I am seeking to tease this matter out because I am of the view that there is a conflict. People tend to take what the Comptroller and Auditor General says as gospel. It is certainly printed as if that were the case. Now we have discovered that it is subjective in nature and that consultants are supplying opinions which may be in conflict with each other. The OPW is the organisation in the State which possesses the greatest level of knowledge relating to property and it has a different opinion. I cannot glean from what has been provided that this is just a subjective view.

The Deputy has made his point.

Okay. Will Ms McGrath provide information on the total cash outturn to date in respect of decentralisation, I am referring to the sale of offices in Dublin or wherever, the sale of land banks, etc., and on the total costs that have been incurred?

Ms Claire McGrath

To the end of November, the figure for expenditure is approximately €354 million. The figure for disposals is €356 million.

So we are at a break-even point at this stage.

Ms Claire McGrath

Yes, but to be clear-----

Will Ms McGrath indicate what she expects for the future?

Ms Claire McGrath

-----there are projects which have yet to be completed. We are completing the projects relating to Roscommon and Tipperary Town and there is a traditional procurement process relating to Portlaoise which must also be completed. These projects will give rise to a number of outgoings. The figures I provided largely relate to capital. I should reflect that, as a result of decentralisation, we have ongoing leases and these are reducing. We are surrendering certain leased properties as we provide permanent accommodation.

In the context of the portfolio in Dublin, earlier I provided the example of surrendering annual lease rent of €1.6 million in respect of one building. This was possible because, as a result of decentralisation, we were in a position to accommodate staff in an owned estate in Dublin. That process is continuing and we will be releasing and surrendering in respect of properties in Dublin that are leased. That is an overall factor. If one considers the position just in respect of capital, it is €354 million in costs against €356 million in disposals.

So the decentralisation process has not been a financial disaster to date.

Ms Claire McGrath

On the property side-----

Yes, that is the aspect to which I am referring.

Ms Claire McGrath

Yes.

Has Ms McGrath had any luck in obtaining information relating to the average price per acre or will she forward that at a later date?

Ms Claire McGrath

If the Deputy does not object, I will send the information on later.

That is fine.

The final issue to which I wish to refer is the extremely large public private partnership, PPP, bundle relating to the offices in Carlow, Portlaoise and Mullingar and the fact that there was a preferred tenderer involved. I have been in contact with Mr. McMahon in respect of this matter on a number of occasions. Work on the Carlow and Mullingar offices has been postponed and the Government has made a decision to the effect that the office for Portlaoise should proceed as a stand-alone project. I understand NAMA recently placed the preferred bidder into receivership or examinership. Would the OPW consider contacting NAMA to discover whether it can obtain the property rights from it at a good price, particularly in view of the fact that all of the work relating to design, planning, etc., has been completed? I suggest that, in the interests of taxpayers, the OPW should contact NAMA in respect of this matter.

I understand there has already been a write-off of €600,000 in fees in respect of this project. Will Ms McGrath indicate the costs to which this write-off relates? I am not referring to site costs in this regard because the site in Portlaoise is owned by IDA Ireland and, therefore, remains in the ownership of the State. In light of the fact that there is an opportunity to acquire the intellectual property rights relating to the planning work done in respect of a building the OPW wanted to construct there is - I hate to say this in these recessionary times - an outstanding opportunity for the taxpayer to obtain those rights at a very good price.

Ms Claire McGrath

To be clear, the preferred tenderer is not in NAMA. The preferred tenderer-----

The preferred tenderer went into examinership.

Ms Claire McGrath

No, the Deputy is referring to the construction element of the consortium which was to provide-----

I stand corrected. It is the construction company that is in examinership.

Ms Claire McGrath

Therefore, the intellectual property rights remain with the consortium as distinct from the construction element.

Ms Claire McGrath

The Deputy is correct in stating that a decision has been made to proceed with the project for Portlaoise on traditional procurement lines. The OPW is awaiting confirmation in respect of the overall numbers from the Department of Agriculture, Fisheries and Food and the decentralisation implementation group. This confirmation will enable us to have certainty with regard to what we are procuring. However, I take the Deputy's point. Should the building be what was originally intended-----

The detailed design has been done, planning permission has been acquired and the specifications relating to the construction tender work are in place. Why is Ms McGrath referring to the size of the office and the number of people who will work there? It is a matter of public record that the planning permission was granted. In such circumstances, is the OPW not in a position to acquire the rights to which I refer?

Ms Claire McGrath

In acquiring those rights, I need to have confirmed that the operational requirements which obtained when the planning permission was granted remain the same.

If the project had proceeded under the traditional method, the OPW would not be obliged to ask that question at this stage. Why is the question being posed now?

Ms Claire McGrath

No, the times have moved and changed for all Departments in respect of numbers, staffing and employment control frameworks. Departments are contracting-----

So the OPW has introduced a new element in respect of the remaining parts of the decentralisation programme, some of which have been deferred. With regard to the projects that are proceeding, it is going to try to discover whether what was being planned last year remains valid. That is a new aspect about which I have never heard before.

Ms Claire McGrath

This relates to proceeding to acquire the intellectual property rights and I need to receive confirmation that the office, as originally envisaged, is what is required to be built.

However, Ms McGrath knows-----

Ms Claire McGrath

In the event-----

Perhaps the Deputy might move on to another topic.

How many properties are leased temporarily? Out of the approximately 600 staff in Portlaoise, half are still in the old building. There are 11 different leases costing more than €1 million per annum.

Ms Claire McGrath

There are nine properties occupied.

There are 11 private leases. What is paid on these? The Comptroller and Auditor General's report states 718 staff moved to locations in advanced temporary offices, half of whom are in Portlaoise.

Ms Claire McGrath

The Deputy is correct. The leasing is in the order of upwards of €1 million. I understand it is nine buildings but it maybe 11 leases.

I call on Mr. Buckley.

Mr. John Buckley

We will supply the information we undertook to supply in the course of this meeting.

The issue of whether the all-in cost of accommodation is a fair way of assessing the Office of Public Work's outlay on leasehold premises was raised. I believe it is. It brings all the leasehold acquisitions to a common measure for annual accommodation costs and identifies the true rental paid for offices of a modern and immediate-use standard. It is also in line with the Office of Public Work's cost-per-job calculation which takes account of fit-out costs. It aligns with the accounting treatment for depreciating leasehold enhancements, as set out in the accounting standards. That amortises the cost over the useful life of the asset which in this case would be the term of the lease. I stress that the benchmark we set was in terms of provision of modern office accommodation and not just premises in which the shell or core had been constructed.

As the Accounting Officer said in her comments recorded within the report, a full spectrum of conditions applies when one rents a property. To put it in simple terms, it is like having two pockets, taking the rent out of one and the enhancement – fit-out costs – out of the other. One has to find a common yardstick by which one can merge the two to get the true all-in annual cost of accommodation. That was the perspective we used when we did these calculations.

Thank you, Mr. Buckley. Does the committee agree to note Vote 10 and dispose of chapters 20 and 21 of the Comptroller and Auditor General's 2009 annual report? Agreed.

I thank the witnesses for attending today's meeting.

The witnesses withdrew.

Next week's agenda is Vote 30, the Department of Communications, Energy and Natural Resources, and chapter 26 of the Comptroller and Auditor General's 2009 annual report on energy programmes.

The committee adjourned at 1.05 p.m. until 10 a.m. on Thursday, 9 December 2010.