(Chairman, Office of Public Works) called and examined.
Chapter 9 - Public Procurement
Ms Clare McGrath
We are now dealing with No. 7, the 2010 annual report of the Comptroller and Auditor General, Vote 10, chapter 9 - public procurement. Before we begin proceedings I remind members, witnesses and those in the public gallery to switch off their mobile telephones because the interference from telephones affects the sound quality and transmission of the meeting.
I advise witnesses that they are protected by absolute privilege in respect of the evidence they are to give the committee. If they are directed by the committee to cease giving evidence in relation to 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 House nor an official by name or in such way as to make him or her identifiable. Members are reminded of the provisions of Standing Order 158 that the committee should also refrain from inquiry 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 Clare McGrath, chairman of the Office of Public Works, and I ask her to introduce her officials.
Ms Clare McGrath
With me are the following: Mr. Tony Smyth, director of engineering services; Mr. John Sydenham, commissioner with responsibility for property and heritage; Mr. John McMahon, commissioner in charge of property maintenance and projects; Mr. Vincent Campbell, director of the National Procurement Service, NPS; and Mr. Michael Long, the Office of Public Works accountant.
We also have witnesses from the Department of Public Expenditure and Reform.
Mr. Dermot Quigley
I am a principal officer in the section of policy division dealing with the Office of Public Works Vote. I am joined by my colleague, Mr. Frank Griffin, who also works in the area.
Mr. John Burke
I am also a principal officer at the Department of Public Expenditure and Reform with responsibility for procurement policy. I am joined by Mr. Billy Noone, who deals with goods and services procurement policy, and Mr. David O'Brien, who is from the construction procurement side.
I call Mr. Buckley, the Comptroller and Auditor General, to introduce the 2010 annual report and appropriation accounts, Vote 10 Office of Public Works, chapter 9: public procurement.
Mr. John Buckley
The net expenditure of the Office of Public Works was €425 million in 2010. The appropriation account, which received a clear audit opinion, covers the cost of rent and rates on Government offices of €128 million as well as the cost of construction and alteration of State assets of €89 million. The first unitary payments on an upfront VAT charge of €26 million relating to the construction of the National Convention Centre is also covered by this Vote.
Chapter 9 in the annual report relates to public procurement for which the Office of Public Works has a range of functions. These include establishing framework agreements, developing web-based e-procurement and providing advice and training on procurement. Other chapters in the annual report, specifically chapters 42 and 45, deal with procurement in the HSE which will be considered separately.
From a national perspective, the main initiatives pursued in 2010 were staffing up the National Procurement Service which is part of the OPW; surveying public bodies and their main suppliers; developing framework agreements and expenditure reduction initiatives; continued monitoring of non-competitive procurement; and the issuing of a circular designed to restructure competitive processes with the aim of getting increased participation from the small and medium enterprise sector.
Our audit work reviewed the development of the procurement systems in central government and sought to confirm the guidance on non-competitive procurement was being implemented. The main general findings included that the establishment of the National Procurement Service was proceeding slower than planned at that time. However, it has adopted a strategic plan with high-level goals and produced legal input through links with the Chief State Solicitor's Office.
A survey of public bodies was conducted to isolate their main suppliers. We felt this would be more effective in a future round if it focused on the items supplied rather than on the suppliers, so as to comprehensively capture goods and services common to all Departments. The NPS has commenced putting frameworks in place and it reported having 41 framework agreement contracts in place by the end of 2010.
The once-off expenditure reduction initiative fed into cost reductions allowing procurement budgets to be cut by €39 million in 2010. Monitoring of non-competitive procurement reported 469 instances of procurement without a current competition and a related contract value of €75 million. The report classified as procurement by Department and reason. The single most common reason given for procurement without competition was that there was only one suitable supplier. In 2010 a further circular was issued designed to facilitate access by SMEs to State contracts. The 2010 audit was too early to review its effect.
The results of audit testing indicated that not all instances of competitive procurement were being reported. Additional exceptions representing 6% by value of the reported cases were noted in the course of audit sampling. Some Departments did not have the recommended processes in place. For example, seven Departments did not have a procedure in place to review proposed non-competitive procurements in advance of contracts, six did not have registers of these kinds of non-competitive procurements, two did not have designated procurement officers in place and, in some instances in which the processes were in place, there was often a lack of evidence of reviews having taken place.
I will outline some possible enhancements that can be considered. Maintaining a register of all contracts rather than just the non-competitive ones would help to ensure the completeness of returns, provide the organisation with a list of financial commitments and allow it to analyse its procurement patterns. Extending the returns to State bodies could also be considered. As the committee knows from its sessions with vocational education committees, VECs, and others, a number of recent reports have identified non-competitive procurement in the semi-State and other sectors. Another suggestion would be to monitor centrally the uptake of framework agreements.
I thank Mr. Buckley and invite Ms McGrath to make her opening statement.
Ms Clare McGrath
I am pleased to appear before the committee to discuss with members the 2010 appropriation account for the Office of Public Works, OPW. If I may, I will deal with the first item on today's agenda, which is Chapter 9 - Public Procurement.
The National Procurement Service, NPS, which was established in April 2009 within the OPW, was charged with a number of tasks, including the establishment of national framework agreements to procure goods and services to achieve better value for money. The service now has more than 50 framework contracts in place from which in excess of 300 individual contracts have been placed to date. These contracts have a combined and, in some cases, multi-annual value of €1.4 billion, achieving estimated savings of €79 million in 2012 alone through the analysis, review and retendering of some of major Government contracts. Further administrative savings in the procurement area and the better value being achieved by Departments will secure savings well in excess of the above.
Another task was to provide professional procurement advice. The NPS has established several cross-sector networks with suppliers, buyers and procurement experts. The service has also created a standard suite of tender and contract documents complying with all relevant EU legislation and directives for use across the public sector. In 2012, these documents will be augmented by single and multi-supplier framework tender and contract documentation. This work has provided new opportunities to all suppliers, including small and medium-sized enterprises, SMEs, to partake in the Government procurement process actively.
The NPS has also been tasked to target procurement training and education measures. Supplier education events, awareness conferences, procurement seminars and workshops have been arranged to meet demand in recent years. Accredited training in the form of a diploma-certificate course for NPS staff in conjunction with the Dublin Institute of Technology, DIT, and a masters in strategic procurement in DCU are in place.
The final objective was in respect of e-procurement. Significant progress has been made and it is anticipated that the enhanced eTenders website will be relaunched in late 2012. In addition, the NPS launched procurement.ie in April 2011, which is an asset of importance to suppliers and buyers alike and provides them with strategic information and relevant data. A pilot project on e-invoicing was launched by the NPS this month. I anticipate that the outcomes from this project will be successful and will inform the Government on the best way forward for the introduction of e-invoicing. This major project will be strategically monitored, as the outcome will have a significant impact on how business is done in future.
While the work I have outlined highlights progress on specific objectives set by the Government for the NPS, it does not fully reflect the advancements under way in terms of procurement. Now that a procurement template has been established for the public sector, the next challenge will be to encourage the greater use of centralised contracts to ensure maximum efficiencies and savings for users, the Government and the taxpayer. The question of mandatory usage of some of these large framework contracts is being critically examined. I would welcome a discussion on the progress made to date and the challenges that lie ahead for the shared service, as it forms one of the core deliverables for the OPW under the reform agenda.
I will take this opportunity to refer to some other important aspects of the work funded through the 2010 appropriation account and provide the committee with an update on the current position. As part of the Government reform agenda, the OPW participated in a pilot programme for Revised Estimates in 2011. The Revised Estimate presentation, which attempts to align input resources - staff and money - with demonstrated tangible outputs, refers to three main areas of OPW activity, those being, the NPS, flood risk management and estate portfolio management.
The OPW is the lead agency for the management of flood risk. Although there has been an overall drop in the OPW's capital funding of 63% since 2008, the Government's commitment to this critical area of investment is clearly demonstrated by the ring-fencing of capital funding for flooding. The vision of the programme is to minimise the national level of flood risk to people, businesses, infrastructure and the environment. This will be achieved through the primary functions of the programme, namely, to develop and deliver flood risk management work programmes and measures, to maintain an effective programme of maintenance of river courses drained under the provisions of the Arterial Drainage Acts and to advise the Government on flood risk management and flood risk management policy.
In 2010, which is the accounting period being examined today, the OPW made significant advances on capital works in this area, including the completion of the first phase of major flood relief schemes in Mallow, Clonmel, Waterford and Ennis, with further phases of work in Mallow and Clonmel to be completed this year. Other schemes that progressed in 2010 included works at Mornington in County Meath, Johnstown in County Kildare and on the River Dodder in Dublin.
While major defence schemes tend to attract the most public scrutiny and attention, the committee is well aware that many areas of the country afflicted by severe localised flooding events fall outside the remit of the major flood defence programme. The OPW developed a programme, first introduced in 2009, of minor or small-scale flood defence works in local areas. Under the programme, a total of €16 million to date has been approved to local authorities for works and studies in respect of 193 projects located nationwide, with €9.9 million provided to local authorities in 2010 in the aftermath of the 2009 flood event and a further €5.2 million in 2011. As part of our aim to foster greater co-operation with local authorities as set out in our action plan for the Croke Park agreement, we will continue to work with them to undertake flood mitigation measures in their administrative areas.
The estate portfolio management programme involves the management, maintenance and development of the State's property portfolio, including the care, protection and presentation of national monuments and historic properties in our care. The programme comprises a wide variety of services, including professional services in architecture, engineering, valuation, quantity surveying and project management. The primary constituent parts of the programme that, in funding terms, were the largest in 2010 were property management functions, primarily rents; heritage services involving the care of 750 national monuments and 26 national historic properties with a combined provision of 69 visitor facilities; the provision of building and maintenance works at OPW-managed buildings; and the management of unitary payments relating to the National Convention Centre in Dublin.
The programme also administers certain grant payments on behalf of the Government. In 2010, grants were made to Dublin Zoo and Glasnevin Cemetery, two fantastic visitor attractions in the capital city. The zoo is the most visited attraction in Ireland, with more than 1 million visitors passing through its gates in 2011. The committee may be interested to know that the most visited attraction in 2010 was in Shanghai, China, where the Irish pavilion at Expo 2010, a programme funded and managed via the OPW, welcomed more than 3 million visitors through its doors in a six-month period.
As part of its property management role, the OPW endeavours to ensure the best deployment of State property assets through a combination of owned and leased property resources. In recent times, the office has actively pursued opportunities to rationalise office accommodation and dispose of more expensive leases with a view to achieving significant rental savings. Expenditure on rents amounted to €128 million in 2010, a significant part of the OPW Vote. The same year saw the surrender of 41 leases and a total of 358,000 sq. ft. through the rationalisation programme. The impact of this on the rental bill in 2011 was a decrease in the annual outturn to €118 million. As we continue to exit long-term lease arrangements and renegotiate existing terms, the total amount spent by the OPW in this area will continue to fall and the total cost of leasing buildings will further reduce in 2012 to €112 million.
The OPW continues to be actively involved in the area of energy conservation and significant savings of 16% per annum in energy consumption has been achieved in all our large buildings in recent years. A combination of awareness campaigns, such as the Optimising Power at Work campaign and individual energy audits to analyse and monitor consumption at larger buildings, are just some of the measures being undertaken in this area. In monetary terms, these savings amount to almost €4 million. The target for the current programme to the end of 2012 is 20% energy savings per annum.
In the heritage area, the office undertook a task of particular significance in the past year. The work carried out by staff in the facilities management area at OPW sites, including Dublin Castle, Farmleigh, the Garden of Remembrance, the Memorial War Gardens and the Rock of Cashel at the time of the State visits by Queen Elizabeth II and President Obama, demonstrated the flexibility of the OPW organisation to meet the various tasks assigned to it by the Government. A large part of this work was carried out behind the scenes and preparations are now under way to prepare for Ireland's hosting of the upcoming term of the EU Presidency in 2013.
I draw the committee's attention to the fact that the OPW also manages many services which are not directly funded from its Vote. Although the gross 2010 outturn for the OPW Vote in the appropriation account amounted to €453 million, this did not reflect the full range of activities of the office. The OPW acts as an agent and incurs expenditure on behalf of a range of Departments and agencies, the total amount of which was more than €112 million. Furthermore, the project management and architectural services of the office provides specialist procurement and technical advice to Government and various Departments on major projects which in 2010 saw the completion of the Lansdowne Road stadium and the Convention Centre, Dublin. More recently, the OPW agreed to project manage the delivery of at least eight replacement schools due for completion in 2013, together with ten school extension projects, which will be funded by the Department of Education and Skills. These do not appear as expenditure items in the Vote but provide a valuable input to the development of the State's portfolio and assists Departments and agencies concerned in delivering on their remits.
I thank Members of the committee for their attention. I am happy to answer any questions they may have on the Vote.
I thank Ms McGrath for her presentation. May we publish it?
Ms Clare McGrath
Yes.
I thank Ms McGrath for attending. Does the NPS have an advisory board?
Ms Clare McGrath
Yes.
Who are the members of that board and how are they selected?
Ms Clare McGrath
The NPS advisory board comprises three members: Mr. Paul Davis, DCU; Mr. Malachy Fergus, Intel; and Mr. Martin Sykes, Value Wales.
How are the board members selected?
Ms Clare McGrath
We sought people outside the public sector with an expertise in the area of procurement. A number of people were identified and asked to take up a position on the board. The three people I mentioned accepted the offer.
How often does the board meet?
Ms Clare McGrath
It is due to meet tomorrow. It meets every six months.
Are the board members paid?
Ms Clare McGrath
No. They may be paid expenses but no fee.
Are they ministerial appointees?
Ms Clare McGrath
Yes.
Can Ms McGrath elaborate a little on the €79 million savings to be achieved in 2012 by the NPS?
Ms Clare McGrath
The 50 framework contracts relate to particular areas of procurement. I have a list I will go through in a moment. The single biggest element relates to the procurement of energy, which is a multi-year programme. It does not necessarily follow that €1.4 billion relates to actual spend in 2012 because this is the value of the contracts, which themselves are multi-year. For example, the contract value for the managed print service is €100 million, the estimated savings on which are expected to be €15 million. The value of the contract in respect of electricity is €920 million, the estimated savings on which are expected to be approximately €30 million. I can give the Deputy a list of the contracts about which we are speaking and the expected savings in that space.
I referred to the Optimising Power at Work campaign. We expect to make a 16% saving on consumption within our own portfolio. We are, through this programme, assisting occupiers of buildings to reduce their consumption, which is a saving, although only a saving on use, which is a return within departmental Votes. We do not fund that consumption. Savings are being achieved within contracts and through user consumption of goods and services.
Does Ms McGrath believe that is due to action by the OPW?
Ms Clare McGrath
Yes, because we have been monitoring the consumption of energy within buildings and have put in place programmes of awareness for occupiers of buildings to assist them in reducing their energy consumption, having regard to how energy is being consumed. Overnight consumption within buildings, including machines being left on, impact on how energy is consumed in buildings. That is not reflected here. Departmental allocations have been considerably reduced and, by default, procurement is being cut.
I have a list of the contracts which relate to the €1.4 billion.
Perhaps Ms McGrath will circulate that list.
Ms Clare McGrath
Yes.
The framework agreements are an important part of the NPS work. Does it negotiate deals with suppliers on behalf of Departments and public bodies?
Ms Clare McGrath
No. The obligation on us in respect of public procurement is to advertise. However, prior to determining what we want, we analyse the market and what consumers in the public sector want in a particular area. We then discuss with suppliers how they can best provide and bring innovation to how things can be procured. We then make a decision about how we go about doing the procurement. All procurements - I note the Comptroller's report in this regard - over certain values are competitive. As such, one must advertise. Where the value is above a particular amount, one must also advertise in Europe. We do not, as might the private sector, undertake market analysis following which we make a decision in regard to the person with whom we are going to do business. We have to advertise because we are using taxpayers' money.
On behalf of whom do you act?
Ms Clare McGrath
Public bodies. Our remit is in relation to the public sector. Taking the Deputy's point the other way, we would like to think that most public bodies would avail of the common goods and services contracts we put in place. However, this is not currently mandatory.
This is what puzzles me. The NPS negotiates on behalf of public bodies which have not given it a mandate.
Ms Clare McGrath
We are mandated by central government to do this on behalf of the public sector. We can show and demonstrate to buyers that value is to be obtained by making use of central government contracts. We interface with local authorities, the Department of Education and Skills, the HSE, representatives from which are on the steering group which oversees the work of the NPS and who inform their sectors of what is happening in the area of procurement by the NPS. People are coming on board because of the savings being achieved. Officials from Department of Public Expenditure and Reform will be going to the Government to seek a mandatory position where all public buyers will have to use centralised contracts.
We must recognise that some public bodies and buyers may have contracts in place now or extant contracts that must run their course. Those will subsequently move to the centralised contracts. We must also recognise that in the HSE sector in particular, there are very specific procurements, which would not happen at the centre. These are specialist procurements which will remain in the sectors. We are talking about common goods and services that we can all share.
It is, therefore, up to the different bodies and they can ignore the public procurement procedure completely. This has no teeth.
Ms Clare McGrath
It is not in their interests to ignore us.
They can do so.
Ms Clare McGrath
Their budgets have been cut and they are trying to achieve savings while doing other business in their sectors. What we are doing relates not to core services but it must be done by bodies to complete the main work. We are doing this for those bodies and they will achieve savings administratively as they will not need people to do the procurement; such people can be redeployed to other core work. That message is out there and people are moving in that direction. I accept that these bodies are not obliged to use this process but the force of the evidence of what has been achieved has people moving to this space. We have shown this with stationary items, with savings to be achieved on unit prices by using the centralised contract. That is demonstrable and we are telling people as much. It does not make sense not to use the central contracts.
There are no teeth to enforce this. What percentage of bodies which can use the centralised processed do so?
Ms Clare McGrath
We wish to have a benchmark and currently we believe it to be between 50% and 60%.
Between 40% and 50% are not using the service. Can the witness explain why that is so?
Ms Clare McGrath
I cannot speak for them. There may be an issue with extant contracts and if there is a multi-year contract in place with the supplier, it will have to be continued until it has run its course. That will account for part of it. There may be decisions by certain bodies not to procure certain things because of cuts. There may be issues with local authorities with regard to small and medium enterprises in local areas; the authorities may interface with them, which can be a factor in deciding to use central contracts.
Does the witness have anything more than a vague idea why the central process is not being used at this stage?
Ms Clare McGrath
No, but we want to get to the stage where it will become mandatory.
Is there any indication when that will happen?
Ms Clare McGrath
It is an element within the public sector reform agenda on public sector procurement.
Therefore, it will become mandatory under the Croke Park agreement.
Ms Clare McGrath
It will be a Government directive.
There was a €39 million saving in 2009 and 2010. Did that arise from a Government directive?
Ms Clare McGrath
Yes. It was viewed that in all extant contracts a reduction would be sought from suppliers.
There is a vote in the Dáil but I will miss it. Independents do not pair so I could be voting for the Government.
It is very doubtful. The Deputy is more valuable to us here.
Ms Clare McGrath
The €39 million was a cut in allocations.
Therefore, it did not have anything to do with central procurement. It was a Government decision.
Ms Clare McGrath
There was a cut in allocations and for people to meet that cut, they would have had to use centralised contracts.
Does this central process have anything to do with legal services or the vast legal fees we see in the public sector all the time? Does it have anything to do with accountant and consultant fees paid by the Department of Finance?
Ms Clare McGrath
Yes. With the Department of Public Expenditure and Reform there will be a process regarding how Departments procure legal and professional services. We will be talking to the various bodies with particular responsibilities on how to formulate a procurement model for dealing with professional services. We expect to progress that during 2012.
What is the target in terms of a reduction in legal fees paid by Departments?
Ms Clare McGrath
We have not set a reduction target. It is one element that is to be decided. There is a steering group in place that will consider the area but no target has been set.
We are talking about an enormous sum that could be reduced. What is the witness's view on the legal fees?
Ms Clare McGrath
My view on all things in procurement is that considerable savings could be achieved by aggregation and leverage of the Government covenant.
Is that right?
Ms Clare McGrath
There are savings to be achieved.
What other professional areas would that apply to?
Ms Clare McGrath
It would have to apply to all fees. We are particularly familiar with fees relating to professional services on the construction side, and there has been a considerable reduction in the past number of years in fees in that space. I can revert with figures in that regard. There is a competitive market at the moment so that would continue to pertain. I am familiar with considerable reductions in professional fees in the construction end.
When can we expect professional fees to be tackled?
Ms Clare McGrath
It will be in this year. We have a target to move to procurement competitions with regard to professional fees. The sectors within that must be determined.
What are they? Will they be lawyers, accountants and consultants?
Ms Clare McGrath
Yes.
Will the witness provide some estimate of what reductions are envisaged? The current fees are outrageous.
Ms Clare McGrath
Does the Deputy have an idea?
They could be reduced by 80%, or probably more. What does Ms McGrath believe?
Ms Clare McGrath
I will allow the exercise to be completed and return to the committee.
This time next year we can expect Ms McGrath to return with some fair reductions in legal fees.
Ms Clare McGrath
I will return to the committee with the news that a competition is in place. We can see what will come out of that competition and what is being offered based on it. It is an interesting question as to whether we set the rate on certain services rather than going to the market with what we want. In certain areas we should be setting the figure.
There will be a competition.
Ms Clare McGrath
Yes.
Can she guarantee it?
Ms Clare McGrath
Yes. I know from initiatives undertaken by the Attorney General that reductions have been obtained in fees relating to certain legal services. The actual expenditure is within other Votes and I would not know the exact figures. There have been initiatives on legal services in advance of a complete procurement initiative.
Is the Attorney General participating in or encouraging that?
Ms Clare McGrath
Yes.
That office is one of the prime offenders in not putting things out to competition.
Ms Clare McGrath
The Attorney General has obtained reductions in legal fees with the areas in which it is involved.
I will get to the non-competitive procurement. Why are so many State agencies not going out to tender?
Ms Clare McGrath
I can speak about that issue as it relates to the Office of Public Works but the reporting by other bodies is to the Comptroller and Auditor General and the Department of Public Expenditure and Reform. The National Procurement Service is not involved. I can speak to the Office of Public Works element. In the first instance, Circular 40/2002 is recognising that there will be instances where single tendering might arise. There are legitimate reasons for having a single tender, including urgency, proprietary goods, an extension of an existing contract, an expert service or a single supplier. There is an example in the Office of Public Works in 2010 on the account of single tendering. That concerns digital mapping and Ordnance Survey Ireland is the agency for the provision of digital maps. We use digital maps to underpin our flood hazard mapping websites and data on floods. We go to the Ordnance Survey Ireland because it is obliged to keeps its maps up to date. Originally, we had tendering in this area but through Ordnance Survey Ireland we can access the latest information. This is an example of a single supplier. Circular 40/2002 allows that. Perhaps the Comptroller and Auditor General has views on its use by other Departments and bodies.
Regarding legal fees, the Office of the Attorney General is the worst offender for non-competitive procurement projects. There were five non-competitive contracts from the Office of the Attorney General. Does Ms McGrath have any views on that?
Ms Clare McGrath
Perhaps I am repeating myself but Circular 40/2002 allows for this where there are legitimate reasons where single tendering may arise. It is a matter for consideration by the Accounting Officer in the Department.
We have a hit list here. The reasons are extremely broad and any tender can come under one of those categories. Is there any enforcement mechanism? Is the Accounting Officer also the deciding officer in this case?
Ms Clare McGrath
No, there is usually an independent officer within the body, who looks at what is being proposed.
Does Ms McGrath have any role in deciding whether they go to competitive procurement?
Ms Clare McGrath
The Office of Public Works is one of the bodies that comes under the remit of Circular 40/2002 but it is not an enforcer under that circular. Reports are made to the Comptroller and Auditor General and to the Department of Public Expenditure and Reform but not the Office of Public Works.
I must accept that. Does Ms McGrath have no role in deciding whether there is non-competitive tendering?
Ms Clare McGrath
We do not at present.
Is that nothing to do with the OPW, even though its role is to see that the body gets the cheapest possible contract? If a contract goes to a non-competitive tender, the Office of Public Works cannot say that, as part of its mandate, the contract should go to a competitive tender in order to get cheaper contracts.
Ms Clare McGrath
For the areas we put contracts in place, there is no reason for State bodies not to avail of them. There may be instances outside of that where the circular applies and there are legitimate reasons for not choosing centralised contracts. That call is made by the officer within the body.
Do they not have to come to the OPW on that point?
Ms Clare McGrath
Not for matters coming under Circular 40/2002. They must comply with the guidelines under the circular set by the Department and report on it.
Is it correct that 1,800 people work in the OPW?
Ms Clare McGrath
Yes, 1,797.
Is it correct that, last year, some 1,400 people received overtime?
Ms Clare McGrath
No, that is not the case.
Was it 1,420?
Ms Clare McGrath
In 2010 it was 123. I apologise if I gave the incorrect figure.
The figure referred to is in the Comptroller and Auditor General's report.
Ms Clare McGrath
This concerns all industrial and administrative staff in the office.
It is either 123 or 1,420. It looks like the latter to me.
Ms Clare McGrath
Yes, I apologise, that is the case.
How can 78% of staff receive overtime?
Ms Clare McGrath
There are very small numbers for this. The figure for 2010 for overtime was €5 million.
I am talking about the number of people, not the cumulative sum.
Ms Clare McGrath
The largest proportion of staff, 1,200, are industrial grades. These include guides at visitor sites, maintenance operatives, craftsmen and drainage operatives. In the course of the year, there will be a small amount of overtime because of time spent closing up after visitors at sites. It is relatively small amount individually because the work is not from nine to five. It can run over if one is working on a drainage site on a river. It does not follow that one can turn off the machine at five o'clock if the job is almost finished. It can also be the case that visitors leave a site at 6 p.m. rather than 5.30 p.m.
I am sure that is true in some cases. Nevertheless, nearly 80% of the staff get paid overtime, which is staggering. Some 1,200 staff, 66%, received special or additional duties allowances. What are they? Some receive both.
Ms Clare McGrath
The average for overtime is very low based on individual numbers. I will come back with a paper on allowances. The Deputy raises a valid point about the number of staff as a percentage of the overall staff complement. It is the nature of the work we do.
Do some people get more overtime work than normal work?
Ms Clare McGrath
Some 15 staff receive overtime payments in excess of €10,000.
According to me, it is 128. I do not know where Ms McGrath is getting 15 from.
Ms Clare McGrath
I beg your pardon, 15 staff receive in excess of €20,000.
Do 128 staff receive overtime payments in excess of €10,000?
Ms Clare McGrath
Yes, out of 1,800.
I may be maligning the OPW but I have never come across a body where over 80% of the staff receive overtime and 66% receive special allowances. I cannot understand a structure like that, which is staggering to me. Many people are receiving special duties or allowances and overtime. Do they receive a normal salary as well?
Ms Clare McGrath
Obviously, I am not explaining the work of the Office of Public Works on sites, buildings, maintenance, being available in the Houses of the Oireachtas in the evenings to provide facilities and being available at events, for example, in Dublin Castle. All of that requires staff to be in attendance outside of normal hours.
If I could move to a situation where all employees were engaged on the basis of a certain rostering, I would wish to do so, where the employment terms under which all the grades are employed were to move to a situation where it is a fixed period over a seven-day period, but where staff work on Sundays, and we have many sites that are open, different rates apply. There is a considerable number of Office of Public Works employees working outside of normal times based on the nature of the work we do and they are paid accordingly to agreed rates under joint industrial council agreements and various agreements.
Is that satisfactory to Ms McGrath?
Ms Clare McGrath
As the manager, ultimately, of that service, I would wish it to be rostered.
What will Ms McGrath do about that?
Ms Clare McGrath
This is where we, as a Civil Service organisation, as a sector under the Croke Park agreement, would look to seek input. It is an item we have raised under our agenda for the Croke Park agreement, that this rationalisation would be somehow undertaken. I do not underestimate that there is a lot involved. We operate within the legal framework and regulations that we operate under at present but we would wish that we could move to a situation where it would be based on rostering and pay over the period.
I assume then that Ms McGrath is doing something about it.
Ms Clare McGrath
Yes. We are raising it with the Department of Public Expenditure and Reform under public sector reform and the agenda on-----
What sort of response has Ms McGrath got from that Department?
Ms Clare McGrath
The Department is anxious to see how this can be looked at as well. I would not-----
In other words, the response is zero.
Ms Clare McGrath
No.
The overtime will go on.
Ms Clare McGrath
Sorry?
The system will go on like this.
Ms Clare McGrath
No. The Department of Public Expenditure and Reform has put things in place in regard to the moratorium about allowances, about any additionality on pay. There is a whole moratorium in that regard and nothing new can happen in that space. That is a start.
However, staff have terms and conditions. Staff are employed under regulation. Staff in the hotel sector, which would not be dissimilar to those who work for the Office of Public Works on the heritage side, have terms and conditions that apply to their employment, and we have to operate within that. I am not going to act unilaterally but, in looking at it and how we can reform, ultimately, from my point of view, there should be something done.
Can I ask one more question?
Would the Croke Park agreement impact on those?
Ms Clare McGrath
It is operating within the Croke Park agreement.
Exciting things happen within the Croke Park deal. There are many immediate changes and savings being made by the Department. Is that correct?
Ms Clare McGrath
Yes. From the point of view of the Office of Public Works, where people talk about savings, our Vote was at €630 million a number of years ago and it is now at €380 million.
On work practices, we are told that the Croke Park deal is working, that savings will be made in the costs Deputy Ross outlined. Can we take it that, under this Croke Park deal, this will substantially change over the next 12 months? Does Ms McGrath think that will happen?
Ms Clare McGrath
I think it is happening. In 2011, for example, in the State visits, flexibility was shown by staff of the Office of Public Works in responding, from 17 March when we were advised of them to the time of the visits, at all levels and without grade reference, with staff stepping into spaces. We have been affected by the moratorium and the cut in the numbers. It depends on staff stepping up and stepping into places, and undertaking work outside and beyond the remit that they would have ordinarily, and that has happened.
I am sorry for pursuing this but I did not ask about the staff. Ms McGrath answered that question as if I had criticised the staff, and I have not. I understand that they may be co-operating fully and doing very well, and doing things that, maybe, they did not do previously.
I am asking about how the staff are managed relative to the Croke Park deal. It is the management of the staff I am querying. Out of the management of the staff relevant to the cutbacks, the Croke Park deal, etc., will the OPW achieve savings in all of these higher, special or additional duties and allowances, overtime, etc., in the course of this year?
I have no comment to make about the staff. I have seen their work at first hand and it is excellent. I am asking about the management within the office and achieving what is necessary under the Croke Park deal. Does Ms McGrath see significant savings in the current year relevant to that management that is necessary?
Ms Clare McGrath
On the overall numbers - when we talk about numbers, then we are talking about the management thereof as well - there has been a saving to the value of €22 million in pay in the past four years, and that comes from within the Croke Park agreement as well. That is an actual figure. Over 2009, 2010 and 2011 and into 2012, it is in the order of €22 million.
I ask Deputy Ross to conclude.
It is ludicrous that there are 80% being paid overtime and 66% being paid special allowances, and some staff getting both. It should be remedied. Ms McGrath should make strong representations for a change or make the changes herself unilaterally.
As a final question, how much per hour does the OPW pay for the convention centre, which is basically Ms McGrath's responsibility? Is it the case that this deal was negotiated by the Office of Public Works?
Ms Clare McGrath
The Office of Public Works is the contracting authority. The sponsoring Department for this was the then Department of Arts, Sports and Tourism with input from Fáilte Ireland, Tourism Ireland, the NDFA and the Department of Finance.
There were a few layers.
Ms Clare McGrath
They put a project team together to look at this. It is, singularly, an incredibly complex procurement because it is design, build, finance, maintain and operate for a period of 25 years.
Is the deal with Treasury Holdings?
Ms Clare McGrath
The deal is with the Convention Centre Dublin.
Which is Treasury Holdings.
Ms Clare McGrath
The equity, ultimately, is in the Spencer Dock Development Company.
Where is that going to go now in view of what is happening to Treasury Holdings? Will the OPW still be paying? How much does the OPW pay every year?
Ms Clare McGrath
The unitary payment is €20 million per annum in the first five years on capital and then in the order of €20 to €27 million on the current side.
I had a figure much higher than that.
Ms Clare McGrath
The current expenditure in 2010 on the unitary payment was €32 on capital and €8 on current.
That is €40 million.
Ms Clare McGrath
Yes. In 2011, it is €20 million on capital and €34 million on the current, and after five years it will revert to only current.
What does Ms McGrath think of the deal? Is the State getting good value for it?
Ms Clare McGrath
On the procurement of it and the public sector benchmark, yes.
Is the State getting good value for that?
Ms Clare McGrath
The State is getting good value based on the assessment of how, if it had to be done otherwise, it would be done on the public procurement side.
What is the State getting back from the convention centre for the large amount of money it is paying?
Ms Clare McGrath
The initiative for undertaking the convention centre was to have Ireland taking a space in relation to international delegates at conferences or in relation to conferences. The doing of that was determined in relation to the share of conventions being operated in other jurisdictions. Fáilte Ireland, with Tourism Ireland, determined the value and economic benefit that accrues from having international delegates at conferences. The convention centre is a catalyst for economic activity beyond itself and it was considered that value in that area could be obtained within this jurisdiction.
Does Ms McGrath have figures to show the State is securing a return?
Ms Clare McGrath
Yes, I do. What was determined at the time was that for every delegate, the economic activity would be in the order of €1,400 per head.
Are we meeting targets?
Ms Clare McGrath
Yes. There are targets within the project agreement for the first five years. After the fifth year - I stand to be corrected on this - the convention centre has to reach international delegate numbers of some 36,000. It is allowed to grow to the 36,000 figure in its initial years of operation, having commenced operations in August 2010. If it does hit this target after five years, there are implications for the convention centre in that space. If it goes beyond that, there is a profit-sharing arrangement back to the State in excess of that.
I note there are implications, which I understand involve penalties, fines, etc., under the original contract with Treasury Holdings. In court yesterday, the Treasury Holdings group of companies was declared insolvent and past the point of commercial rescue by the National Asset Management Agency. What implications does dealing with a company such as this have for the Office of Public Works?
Ms Clare McGrath
The implications are the project agreement in respect of the convention centre. The centre, given its funding structures, is not affected in relation to that; it continues. In the event that some event occurs which might trigger a termination, I would be very concerned in this space. One of the things from our point of view is the convention centre and its marketing and the message to international bodies which might choose to come here to run their conferences that the convention centre is open, doing business and working very well. In the event that some particular item might impact on that, there are very clear procedures within the contract to allow for step-in by various entities and ultimately the State to run the convention centre. There should not be any impediment to the ongoing operation. I would be very concerned in that space that any message in relation to that might-----
Is the State ready and prepared to take over in the event of some sort of disaster happening? Are contingency measures being prepared?
Ms Clare McGrath
There is a series of steps in relation to that and there are funders involved who have step-in rights in relation to that space. I would expect that all of that would activate before something in relation to that-----
What are the contingencies? What contingency plans has the OPW made?
Ms Clare McGrath
There is not in the sense of-----
Let me put it this way. Penalties and fines and so forth can be imposed. In the event of insolvency, there is not much point in imposing penalties or fines. Is that not the case?
Ms Clare McGrath
Sorry, there is no prospect of insolvency in relation to the convention centre.
In regard to the developers who are the people with whom the Office of Public Works did the contract-----
Ms Clare McGrath
There is no prospect of insolvency in relation to the convention centre.
There is no danger of that whatever. It is just a holding company.
Ms Clare McGrath
That is not arising.
It is just a holding company.
Ms Clare McGrath
I do not wish to speculate in relation to anyone else but in relation to the convention centre it is fully capitalised.
Fine.
I welcome Ms McGrath and her officials. I will change tack as Deputy Ross has comprehensively addressed most of the procurement issues. The late Dr. Garret FitzGerald often had a great turn of phrase. He once branded a Government programme a most flagrant example of the stroke mentality which afflicts so much of Irish politics. The programme to which he was referring was the decentralisation policy. While the Office of Public Works and Civil Service are clearly not responsible for issues of policy, it is clear the former was given a central role in the delivery of the decentralisation policy. Much of the foreword to the 2011 annual report of the Office of Public Works focused on decentralisation which was described by the then chairperson as a major challenge which impacted on the organisation at many levels. He also refers to the decentralisation of the OPW headquarters to Trim and establishment of a significant regional office in Claremorris and refers to a considerable turnover in staff and serious logistical challenges in readying the organisation for major structural change.
On the challenges facing the Office of Public Works, the 2011 report features a note on the decentralisation programme which refers to the office continuing to meet regular work demands and delivering on the needs of the programme. As Ms McGrath will be aware, in 2003, when the decentralisation programme was announced, it was expected that 10,922 civil service jobs would be relocated to 58 different locations. I have a map covered in dots which shows that every constituency would benefit from relocated jobs. There was literally one for everyone in the audience. However, 21 of the 58 locations did not secure a single new job. These include Donegal, Gweedore, Drogheda, Arklow, New Ross, Waterford, Dungarvan, Youghal, Fermoy and Mallow. The overwhelming majority of the remaining locations received only a small number of the jobs which were due to be delivered. It is fair to describe the decentralisation process as a failure. A current Government Minister described it as "deranged". The whole issue was finally tied up and brought to a head in recent months when decentralisation was effectively stopped or paused - one can use whatever term on wishes to describe what has occurred. I ask Ms McGrath to outline the role of the Office of Public Works in the process of decentralisation.
Ms Clare McGrath
The role of the Office of Public Works was to provide the office accommodation required under the decision and, in respect of the office itself, to decentralise. Our role was the acquisition of sites and leases, the construction of buildings and the decentralisation of the OPW to Trim and Claremorris. That is-----
Is it fair to state, as the Comptroller and Auditor General outlined, that the Office of Public Works was effectively charged with meeting the property or accommodation needs of the programme?
Ms Clare McGrath
Yes.
With regard to the OPW's headquarters in Trim, I note that eight Civil Service headquarters were expected to move. I am open to correction but I understand the OPW was the only headquarters that moved.
Ms Clare McGrath
The Department of Defence headquarters also moved.
The Office of Public Works headquarters was built at a cost of €32 million on a site that cost €5.5 million. It is described as a "curious circular building" which is occupied by 320 OPW staff. Some OPW staff are conveyed to Trim on a week day basis by a morning bus which leaves Dublin Castle at 8 a.m. and drops them back at 5 p.m.
Ms Clare McGrath
That does not pertain.
Did it ever pertain?
Ms Clare McGrath
It pertained in the initial period for a very small number of staff. However, this practice ceased, possibly in 2010.
It is no longer the case.
Ms Clare McGrath
There is now a public bus service to Trim.
Is it Ms McGrath's experience that a significant number of people are still making the daily commute from Dublin to Trim?
Ms Clare McGrath
I cannot speak about exactly where staff live as that is a matter for themselves. However, they are coming to the office.
How has the OPW found the move to Trim in terms of the decentralisation of its headquarters to Trim?
Ms Clare McGrath
There was a considerable turnover of staff when we moved in 2009. However, we were able to give effect to that over a number of years in advance of 2009. As decentralisation was voluntary, people moved out of the organisation while others came into the organisation. We then moved to Trim.
Is Ms McGrath satisfied that the move to Trim has worked well?
Ms Clare McGrath
I am satisfied that we have given effect to it. That is what we were charged by Government to do, to give effect to decentralisation. There are issues.
What sort of issues? Was turnover of staff an issue?
Ms Clare McGrath
Yes, turnover of staff, the loss of knowledge and expertise and the need to acquire them again. However, that is balanced by the benefits that accrue to having new blood in the organisation. It is a work in progress.
Did the OPW have any involvement in the national spatial strategy?
Ms Clare McGrath
No. Its production was done under the auspices of the Department of the Environment, Community and Local Government. I do not recall, but we may have commented with regard to areas in which we might have been involved. However, we did not have an input in the sense the Deputy suggests, in its production.
I am just asking because obviously, within a short space of time, we had strategies that ran counter to each other. I presume that would have posed logistical difficulties for an organisation such as the OPW charged with securing the property needs. Is that a fair comment?
Ms Clare McGrath
Yes, it would be fair to say that. We act as a property organisation charged with procuring property and acting commercially, but have regard to the fact that we do so within the public sector. Therefore, it is known we are coming, because announcements are made in advance and we do not get to determine locations or to decide on them where we might have thought of optimising locations. That is the market in which we operate and we accept that.
Please do not get me wrong, I do not hold the Accounting Officer responsible for a botched Government policy. What I am trying to do is to get an insight into what steps the OPW took when this was dumped in its lap and to discover what the legacy issues are with which we, as taxpayers, must deal.
Ms Clare McGrath
It is fair to say that there are legacy issues. From our point of view, in the provision of this accommodation, we provided what we might call places in locations. Now, due to the changed decisions on decentralisation and, in fairness, to the moratorium on recruitment and the reduction in staff we all see, including the OPW, we will have space in locations. It is not that we have vacant spaces or that under decentralisation we have buildings that are empty. We do not. However, we may have space within those buildings.
Let us just talk that through, if Ms McGrath does not mind. With regard to the timeline for delivering on the decentralisation programme, the OPW was charged with the task of finding the property. What timeline was it given by Government for that?
Ms Clare McGrath
I do not recall the original announcement, but it was to be delivered within a short period of years. That raised difficulties for us and we had to revert and say that given there was no market for leasing outside of major centres, we were talking about getting into procuring buildings, which would involve construction. We had to consider how we would engage in that because it meant acquiring sites. Therefore, the programme had to be considered in that light. There was pressure then where there were Departments where staff were ready and wanted to move to locations, so then we had to look at taking advance office space and taking leases, which we did.
What budget or allocation did the OPW set aside for decentralisation, in terms of both staff involved in the project and hard euro?
Ms Clare McGrath
The capital allocation was provided on an annual basis on the basis of the programme. If the Deputy's question relates to expenditure, some €370 million in capital has been expended on decentralisation since its inception. On the other hand, disposals or sales of property since 2004 have amounted to approximately €356 million.
Are those disposals directly linked to the decentralisation programme?
Ms Clare McGrath
Yes, in the sense that we undertook them because opportunities were arising because of decentralisation. The actual deleveraging means that now, some 50% of the Civil Service now occupies spaces outside of Dublin.
Sticking to the decentralisation issue, of the 10,922 posts expected to move to 58 locations, only 3,159 did, which is equivalent to a success rate of approximately 30% in terms of the positions moved. Will Ms McGrath talk me through the situation with regard to lease agreements in the 58 locations set up for decentralisation? I am curious about this. Does the OPW have some sort of list with regard to what work was done in each of these locations? The OPW was given a list of 58 locations and was charged with finding properties in them. How far did it get? I am particularly interested in knowing what happened with regard to the 21 locations in which we got no jobs. Did the OPW sign any leases where jobs did not follow or were any buildings built?
Ms Clare McGrath
If the Deputy gave me a specific location, I would give him a specific answer. Generally, we do not have locations where there are buildings where there are no staff. However, we do have sites where there are no staff. We acquired sites for construction projects which have now not proceeded.
I do not wish to be rude, but in terms of specific locations, I would love to see what work was undertaken on all 58 locations. Does that body of work exist or can it be made available?
Ms Clare McGrath
It does exist.
That information would be very useful. I will take a random example of a location to which no jobs went - Gaoth Dobhair. Some 30 jobs were supposed to be located there. I find it difficult to read the print on this document, so excuse me if I name the wrong place.
Ms Clare McGrath
I do not think anything was done there. No property was acquired in Gaoth Dobhair.
I could go through this painfully and call out each of the 21 locations one by one, but that would probably not be the best use of our time.
Ms Clare McGrath
No, and I am concerned not to say there is or is not something in a location and get that wrong.
It is a relatively small number of locations - 58 locations. Therefore, it is either 58 potential leases, sites or buildings. Can Ms McGrath give me an overview of how many leases were entered into on the basis of decentralisation?
Ms Clare McGrath
I can give the Deputy the information on leases in a moment. I have a page that gives me the number of leases in place. Approximately €6.2 million is spent on annual rent for decentralisation locations. That is the recurring cost on leases per annum. We spent €39.1 million on eight sites where decentralisation has now been cancelled.
Is that €39.1 million?
Ms Clare McGrath
Yes.
Therefore, the OPW spent €39.1 million on sites that were ring-fenced for decentralisation, but the decentralisation did not proceed. What is the plan for those sites?
Ms Clare McGrath
Following the recent decision, we must now look at each of those sites and determine whether there are other State uses for those sites or whether we should consider disposal of those sites. Given the current market, that might not be the best option. We will also consider whether there might be other local uses for the site. The Minister has said that where there are local viable community uses, we should consider those. Therefore, we will not proceed to consider the options for those sites.
Again, I do not hold the Accounting Officer politically responsible, but for €39.1 million to be spent on what has turned out to be political gimmickry is a serious concern. In Ms McGrath's view, is it likely that will ever be recouped, considering the value of the sites have been significantly diminished? Are we now left in the position where the OPW is being asked by Government to find something we can put on these sites so that we do not have sites we bought for which we have no use? To how many sites does the €39.1 million relate?
Ms Clare McGrath
It relates to eight sites.
Does Ms McGrath have the geographic location of those sites?
Ms Clare McGrath
I do. Does the Deputy want those locations?
I would like to know the eight counties or areas.
Ms Clare McGrath
They are Waterford, Thomastown, Mullingar, Knock, Thurles, Edenderry, Dungarvan and Drogheda. I apologise, but I would like to correct something I said. When I said eight sites, I was referring to eight sites where decisions were made not to proceed. However, there were another four sites which were under review recently. A review was being undertaken as to whether decentralisation would continue. I must include those four sites also.
Is that 12 sites?
Ms Clare McGrath
Yes.
Would that increase the value from €39.1 million?
Ms Clare McGrath
It would increase to approximately €42 million.
Roughly then, we have the OPW owning 12 sites to the value of €42 million that were earmarked for decentralisation, but which have not been used. Then we have the leases being paid of approximately €6.2 million. What is the status of each of those leases? Are they all successfully leased?
Ms Clare McGrath
They are occupied. Based on the outcome of the review, there are two locations where we will have to avail of lease breaks which exist, because there will be movement of personnel in those locations to other locations. However, the leases are in place for the remaining locations, and we will have to consider if that is the optimum way to accommodate the staff in those locations into the future. It had been planned that more permanent accommodation would be put in place but now that there is a decision on decentralisation, we will look at those locations as well. However, we are not committed in the property sense to those leases in the long term, except where we want to be.
To how many properties does the €6.2 million value of those leases relate?
Ms Clare McGrath
I will need one moment to get that.
No problem.
Ms Clare McGrath
We have to recognise that this has meant that besides disposals in Dublin of property which I had previously mentioned, we have also surrendered considerable leased estate in Dublin. We have been rationalising and reducing the accommodation portfolio in Dublin. Our efforts are focused on that because it represents a very significant outturn on the Vote of the office.
Ms McGrath states that the buildings leased are occupied but are they occupied for the purpose intended, directly pertaining to the decentralisation programme?
Ms Clare McGrath
Yes.
It would be very important if we could have the list of exactly what State offices-----
Ms Clare McGrath
In respect of leases?
Yes, please. I could understand the logic, if decentralisation worked, that there would be a significant deleveraging of properties in Dublin. That would have made sense from the Exchequer point of view. However, the programme was not successful. Some 70% of those who were meant to move did not move, so presumably 70% of those who were meant to move are still based in Dublin. Only two out of the eight headquarters that were expected to be outside Dublin are outside Dublin. I am finding it very hard to see tangible examples. Can Ms McGrath give me an example of an office that was here and is now located elsewhere?
Ms Clare McGrath
The Office of Public Works occupied No. 51, St. Stephen's Green. We vacated that property, which is an owned property, in 2009 and moved to Trim. The Department of Justice and Equality occupied an office on Harcourt Road, with an annual rent of around €1.6 million. We surrendered that lease and the Department occupied No. 51, St. Stephen's Green. We are now not paying an annual rent of €1.6 million in Dublin.
Credit where it is due, because Ms McGrath's own organisation clearly led by example in this. It was probably the most successful with the decentralisation model. Why did the project fail? The OPW was charged with finding the properties and persuading people to move in a voluntary programme. The project did fail, because 70% of the people the Government expected to move did not do so, and 21 locations were promised jobs in a run-up to an election that they never saw. Did it fail because it was too rushed? I do not want to put words into Ms McGrath's mouth, but I would really appreciate her insight.
The Deputy is being very helpful.
I like to try to be helpful. It is very frustrating. This committee is not charged with examining policy, but with how taxpayers' money was spent. I do not expect Ms McGrath to have a policy, but from the point of view of value for money, she has told me that we own 12 sites with a stated value of €42 million and which her organisation was charged with purchasing by the last Government, which then did nothing with them. That is a lot of money.
We then have €6.2 million worth of leases. I am not sure if we can drill down into the effectiveness of each of those organisations. For example, there were due to be 297 people relocated to Mullingar via decentralisation but only seven were relocated. How does that organisation even work? I presume 297 people were working on a cohesive strategic plan in the interests of the citizens but now there are seven in Mullingar and 290 in Dublin.
Excuse my frustration but I am trying to figure out, from Ms McGrath's perspective in dealing with property, leases and land, what went wrong. Did something go wrong? Was the OPW asked to deliver more than was possible for it to deliver, or was it all on the human resource side?
Ms Clare McGrath
The Deputy's final point may hit on it. This is on two fronts. There is a property front and what has been achieved in respect of disposals and leases, and then there is the other side. Decentralisation is balanced on the property side. The people issues and the operational issues for Departments in respect of decentralisation is not a question for us, having given effect to it ourselves to the extent that we could. It may be a question elsewhere.
I take that point. The OPW delivered on the 58 sites that it was asked to deliver.
Ms Clare McGrath
The programme moved from our point of view as we had the briefs, the requirements and the comprehension of the people who would be moving. The worst of worlds would have been if we built a building somewhere and had nobody in it. An impetus on how the programme developed for us was the briefs on what was going to be in those locations. That is why there was a hurry in some cases. We had to put advance places in place because people were anxious to be in those locations, and their Departments and managers were anxious to facilitate that, because they operationally could see that it would work. That may not have been the case for other locations but I cannot comment on the personnel aspect. On the property side, an issue remains in respect of sites that we acquired and their market value. The market will not return and I do not see how it can.
There is also an issue where we provided places in locations where there may be empty desks. That is not a matter over which I have control, even though it may be an owned estate, but it does have cost. A priority for us is the rental bill of €112 million in 2012. We need to continue to make inroads on that. The bulk of that rental bill is in Dublin. The rationalisation of the estate portfolio is related to initiatives which will have to be put in place. This is public sector reform. They will have to deal with the density with which we occupy buildings, the numbers of people, our utilisation of space and how that space is configured. As property managers, we will be looking at open plan and increasing numbers in space. We have a lot of demands and requirements, but the bottom line on our outturn is around rent and we absolutely have to focus on that with our occupiers.
I accept that point and the OPW has a huge body of work to do. The OPW is dealing with a situation that is not of its creation and I accept the bona fides of Ms McGrath's efforts on it. However, I am still worried about the seven people in Mullingar. There were 297 people due to move to Mullingar, but there are seven people located there. Is the OPW renting or was a building constructed for 297 people?
Ms Clare McGrath
We did not build a building for 297 people.
This may not be a question for Ms McGrath, but I would like if somebody could answer it. What are the seven people in Mullingar doing? They were due to be joined by 290 colleagues. If we are putting on lights and electricity and leases for seven people who are short 290 colleagues in another office in Dublin, then that is a tangible example of the failure of the policy.
Ms Clare McGrath
I believe that might be a question for the Department of Education and Skills. I do not know what the people in Mullingar are doing.
I would like to make a point on a wider property perspective, which includes public sector reform and all the Government's estate portfolio, beyond that which is in the care of the OPW. All public bodies, including local authorities, education and the health sector, have accommodation in locations that may be underutilised. There is a point where the State should not be taking any space anywhere. We all need to get to a point where the State collectively knows exactly what its portfolio is, knows exactly who wants to move in and move out of it, and gets to a point where we can share accommodation across sectors, so we are not all competing in sectors as well. To do that, there is a huge body of work in gathering the data. I might know my part, while somebody else might know his or hers.
With regard to accommodation, I have had to interact with State bodies in terms of their portfolios. We need to be more open with each other about what we have and how it might best be utilised. The next step is that there may be staff in these organisations who could share work. That may be more radical and it goes beyond individuals. Maybe there is capacity within organisations and in certain disciplines that could be made available to others. How one manages that is difficult, but maybe that is where we need to put ourselves, in a space where we are all dipping in numbers.
There may be a body of work for this committee in helping to compile that.
Or make recommendations.
Exactly.
Before the Deputy finishes, in answer to his question about the seven people in Mullingar, was the accommodation arranged for 297?
Ms Clare McGrath
No.
The accommodation was only arranged for seven. So there is not a big building there with seven in it?
Ms Clare McGrath
No. I am anxious to convey that that is not the case.
I am reassured.
Ms Clare McGrath
That is not to say there are not some buildings with some capacity, but no, we did not provide a building-----
That was a worry.
I was very worried about that. Morale must be pretty bad.
Ms McGrath might explain to us how she goes about securing properties. Let us stick with the same example. The OPW is told there is a plan to relocate - I do not know whether it was something to do with the proposed move by Department of Education and Skills to Mullingar - and that the Government is seeking to move 297 people. What does the OPW do then? At what point does it decide that accommodation is needed for only seven people rather than 297?
Ms Clare McGrath
In the initial period, we advertised for all locations and we asked the market to tell us what might or might not be in all of those locations. Local authorities, private individuals and companies responded - there were a whole series of responses. However, the decentralisation implementation group was overseeing the process, and this had to be married with the people aspect. The OPW could go and get an idea about properties, but that was just the set-up for the people part - who wanted to go to these locations, because it was voluntary. That was the second exercise being undertaken under the auspices of the Department.
Had the OPW advertised for a building of the size that the Government specified?
Ms Clare McGrath
Yes, based on the number. We would look and see what was out there but we would not do anything about it until we knew the brief and the numbers. Very quickly, when it got to the point that the numbers were not there for that location and it was to be an advance office, we were looking at something different and then we were considering leasing. We look first at whether there is owned estate in that location, such as a building owned by our public sector colleagues that might be made available to us. If there is not, we will go out into the market to look at leasing.
I may not have actually picked the most extreme example, because I have now found Naas has 12 people where 343 were expected. I know Ms McGrath says in good faith that there may be desks empty or space not occupied. Am I misquoting her?
Ms Clare McGrath
All accommodation that is leased, as is the case in Naas, was obtained with a view to the individuals who were actually going at the time, not the ultimate number.
I take that point, but am I correct in saying that Ms McGrath said there were buildings with greater capacity than the number of people in them?
Ms Clare McGrath
Yes.
What I am interested in is the cumulative effect of that. One might have extra space for ten people here and 20 people there. With so many locations around the country, we could be talking about a sizeable amount. Would that be fair to say?
Ms Clare McGrath
Yes.
Has the OPW done work on that?
Ms Clare McGrath
Yes. If I may say so, my efforts are concentrated on Dublin, because that is where we are paying money. It is the case that we have provided accommodation in some locations and we have expended the money. We have an outturn on our 2012 Vote of €112 million on rent. We need to determine whether all that accommodation is being used optimally, because we need to obtain savings on this.
Here is where I see a difficulty with that. If the OPW's effort is focused on Dublin, and decentralisation is effectively paused, the only way it will get further deleveraging in Dublin is by moving people to some of these decentralised locations.
Ms Clare McGrath
That is optimising the use of the accommodation within Dublin.
Then that is quite separate to the body of work that the OPW needs to do.
Ms Clare McGrath
The Deputy is asking me about prioritising. My resources are being reduced as well because of the moratorium, so we are trying to determine how we can prioritise them. One of the areas in which we can do this is by reducing our outgoings, and one of our single biggest outgoings is rent in Dublin. We are looking at prioritising that, but the Deputy is right in saying that we must look at all locations. We will be surveying all buildings and deciding how to manage with the occupiers. The review undertaken by Government recognised that there would be under-utilisation of space and it has asked the occupying Departments to work with us to optimise that.
Perhaps Ms McGrath would provide the committee with a note stating the actions taken by the OPW with respect to each of the 58 locations for decentralisation and the current status of each, be it a lease agreement or a site purchased. If Ms McGrath could provide that in tabular form, it would help us to do what she is asking us to do, which is to encourage a greater level of information sharing across the public sector.
Ms Clare McGrath
The information about each location may exist in the report by the Department of Public Expenditure and Reform. That might give the committee more information.
Can we have a general note on the locations, the costs and so on?
Ms Clare McGrath
Yes.
The OPW is paying €112 million in rent in Dublin. Ms McGrath might also provide in the note information on whether this includes car parking.
Ms Clare McGrath
Yes, it does.
How much does the OPW pay for car parking in Dublin?
Ms Clare McGrath
I will get back to the committee with that information.
I want the figure for car parking costs.
Ms Clare McGrath
I will provide that information for the committee. Much of the time, when one signs a lease, car parking is included in that. For instances in which we are singularly renting car parking spaces, I will get the information for the committee.
I will just make a comment based on that exchange and my own experience. Ordnance Survey Ireland was supposed to move to Dungarvan, and this was announced along with a promise of a couple of hundred jobs. There was a delay and, frankly, people such as myself began to think the whole thing stank. We made comments on the floor of the Dáil and in committees. It became clear to me and others that this was not going to happen. Ministers repeatedly denied this, saying it was going to happen. What I actually did was to call up the Ordnance Survey and ask to meet with its representatives, and to my surprise they agreed. I went to the Phoenix Park and met with the head of Ordnance Survey Ireland and the head of human resources, who told me in no uncertain terms they would not be moving to Dungarvan because they could not. Their staff were not going anywhere. What they do in the Phoenix Park is technically very sophisticated, and many of their staff were in their 50s and had children going to college in Dublin. They said the whole thing was ridiculous. I said this publicly but I still got denials. The whole thing was a pretence. In my experience, this was what manifested itself. The people heading up the actual agency that was supposedly coming to my town made it clear to me that it was never going to happen, but I still got denials. The pretence was maintained within the Civil Service and people bought houses based on that pretence. People would contact my office asking when the move would happen; they might have come from the area originally, and they had made their applications to move from another agency or Department to the Ordnance Survey.
The question that arises from what Deputy Harris brought up is this: when should the line be drawn within the Civil Service when it is known that something is completely wrong and that money is going to be wasted? We could call it a public administrative omertà. I understand there are policy decisions that the witnesses cannot get involved in. However, there does come a time, whether it is the State guarantee or something like this, when it is absolutely clear to everybody in the public service that this will not happen, even though people are buying houses and so on, yet the pretence continues for years. That is where I have a serious problem. It is not directed at Ms McGrath, obviously, because she was not dealing with this. I found it utterly distasteful, in particular for the ordinary people who had bought properties, that a promise was being made that the agency was going to move to Dungarvan when everyone dealing with it knew that was not going to happen. That is just a comment, on which Ms McGrath can respond if she likes. That is the factual situation in relation to Dungarvan.
Ms Clare McGrath
The Office of Public Works was being mandated by the decentralisation implementation group to give effect in the locations where it was identified there would be people. We did that, from our point of view, comprehending that all of this was happening. We would have had concerns in terms of knowing the briefs, which is the reason we did not procure buildings.
A site was bought in Dungarvan.
Ms Clare McGrath
Yes. That was purchased on the basis of the initial brief. We would have done so because it was what we were being instructed to do by the body put in place by Government. I note the Deputy's concerns.
Things have happened over the past three or four years, which are relevant to this committee. The Civil Service has a question to ask itself, through its ranks, in respect of terrible mistakes that have been made within Government. Expenditure on decentralisation is minuscule compared with where we are with regard to the mistakes made in terms of the banking crisis. However, it was an indication for me that something was wrong when the civil servants dealing with the project, which I and they knew in their hearts and souls was never going to happen, continued the process, obviously taking instruction from politicians and Ministers. It is a question for the Civil Service that needs to be asked. All I had to do was pick up the phone and go to the Phoenix Park and I knew what the truth was. However, the pretence was continued well after that at a cost to the State and individuals, which was wrong.
The figure I have for rent is €128 million. However, I will not quibble about that.
Ms Clare McGrath
I beg the Deputy's pardon, that is the figure for 2010.
Fair enough. The figure has increased.
It has decreased.
Ms Clare McGrath
It was €128 million in 2010, €117 million in 2011 and is now €112 million.
I am not going to quibble about the amount. How is this being dealt with on a long-term basis and how ambitious is the OPW with regard to reducing it in the current property market? Ms McGrath mentioned the property market and how depressed it is. She also mentioned a particular combination in Dublin. The OPW has focused in on this as a key area, perhaps a priority, in terms of overheads. The question that arises is, given that commercial values have fallen a great deal and bearing in mind renting is costing €112 million, are we considering purchasing properties? I accept this is a hard time to get money out of any Department, but in the long term, is consideration being given to whether the State would be better off purchasing properties as opposed to increasing densities? Some people would make the argument that we would be better off in the long term building as opposed to continually renting and leasing properties. I accept there are some leasehold contracts that have to be maintained. Is the State forward-looking? Is the OPW suggesting this to Departments? Is it putting these options to them? Is it putting before them in a spreadsheet what is likely to be paid out in rent over five or ten years and the benefit to the State in the long term of purchasing a number of properties? Is that type of thinking going on within the OPW?
Ms Clare McGrath
Yes. We have gone beyond thinking. In 2010, we purchased a property in Clare Street which we had been renting. All of this is dependent on having an allocation which enables this to be done. Such purchases would be for cash and so one would need to know-----
This is key. Is Ms McGrath making the case within central government for this to be done by way of increased allocation?
Ms Clare McGrath
Yes.
What type of response is Ms McGrath getting?
Ms Clare McGrath
We believe we should purchase properties. We try to identify our strategic purposes around actual buildings rather than a programme. We have identified opportunities but given the current economic situation the funding is not available. We would be aligned with the Deputy in that strategically, for government, we should be purchasing.
That sounds like OPW got a "No" as far as purchasing properties is concerned.
Ms Clare McGrath
We got the funding for Clare Street. We were able to achieve this through savings. However, there is a balance to be struck between having, owning and leased. Where agencies are ceased or amalgamated with other bodies there will be properties for disposal. In that regard one does not want to have owned a property which one has to dispose of in the current market. One is always trying to maintain a balance.
Fair enough. I read in a newspaper a couple of days ago that 45% of city centre commercial properties are being bought up by US companies. If our Government does not see the value and these companies do, then the question that needs to be asked of central government is whether it has scrutinised this closely enough, notwithstanding the tightness we are experiencing in terms of every Department's budget. If it is in any way true that almost half the commercial properties in the city centre are being acquired by foreign companies, then this begs the question whether central government is forward looking enough with regard to reducing our rent bill not from €128 million to €112 million over the course of a couple of years but at the very least cutting it in half.
Ms Clare McGrath
I might suggest going beyond that and ask whether we have to be in city centre locations. There may be greater opportunities-----
I was only using the city centre as an example.
Ms Clare McGrath
-----on the M50 ring. Perhaps that is where we should be locating some of our Dublin services rather than in the prime rental and purchasing locations in the city centre. If the Deputy is asking if that is being considered by the OPW in terms of its portfolio, then the answer is "Yes", but we operate on a cash-based accounting system in a given year and we do not like to show our hand and acknowledge the properties we are interested in. We like to have a programme in this space and to deal quietly with it. We have been given the opportunity to do so, Clare Street being an example.
Fair enough. Ms McGrath mentioned the 50 framework contracts, which have a combined value of €1.4 billion, in respect of which it is estimated there will be a €79 million saving in 2012 alone. The big ticket item today is public procurement and the €15 billion which the State spends on goods and services every year, with €9 billion being spent on current goods and services and €6 billion going on capital works. Ms McGrath spoke of further administrative savings within the procurement area and better value being achieved by Departments. The €79 million saving looks good when put against the €1.4 billion. However, what is the figure in terms of overall spend and the type of savings we can look forward to? The big ticket item today is that figure and the type of reform taking place in regard to public procurement. What is the lead Department and who is leading this within Government? Who is responsible for oversight? Perhaps Ms McGrath will give us an idea of what savings can be achieved?
Ms Clare McGrath
Some €6 billion of the €15 billion is on capital side. As regards the remainder, €4.6 billion relates to the HSE, €1.6 billion relates to the local government sector, approximately €900 million to the education sector and €1.9 billion to central government. The €1.4 billion is a multi-year figure, €9 billion of which touches on parts of many sectors in respect of common services and goods. It does not relate to the capital side.
If I wanted to buy furniture locally in whatever sector I am in, it will cost in the order of €6,000, never mind the value of contracts. Centralised procurement has been factored at about €25,000. We are talking here about contractual savings on the unit cost of items. There are considerable savings in the administrative costs of procurement and expertise, particularly given the moratorium.
We are the lead agency for putting in place procurement frameworks. I understand the Comptroller and Auditor General has a role in oversight in terms of looking at how it operates. The Department of Public Expenditure and Reform plays a role at Government level in how progress on public sector procurement is happening. Departments are being cut, therefore usage is reducing which creates efficiencies. It is driving people into centralised procurement.
I have one more question, involving what is for me a local issue. The Office of Public Works has been dealing with negotiations regarding the Mount Congreve estate and its world famous gardens since Mr. Ambrose Congreve passed away and the possibility arose of the estate being taken over by the State. It is common knowledge that negotiations are continuing. From a public perspective, the primary elements are the welfare of the employees on the estate as well as the ongoing maintenance and preservation of the gardens. That said, the OPW has responsibility to strike a deal that makes financial sense to the State and stands up to scrutiny by the committee, Department of Finance and taxpayer. I spoke to Ms McGrath and the OPW about this matter on several occasions and I ask her to indicate the status of the negotiations.
Ms Clare McGrath
From the Office of Public Work's point of view, the gardens are an incredible asset to the State which we would like to have care of, in conjunction with all of the other garden assets, the primary one being the Botanic Gardens, for which we have responsibility. The gardens at Mount Congreve are vested in a trust of which we are part. Since the passing of Mr. Congreve, we have been in negotiations with the other parties in the trust as to the optimum transfer of responsibility for the trust wholly to the State.
I am very concerned that the best deal is achieved by us on behalf of the taxpayers and the State. Negotiations are ongoing. The transfer will happen and elements within it have to be dealt with to bring finality to something which has been in place for quite a number of years. We are as concerned as everybody locally, and from the point of view of the employees and the care of the asset, which will come to the State 21 years after the passing of Mr. Congreve, that we give effect to that transfer sooner. We have to negotiate with the other parties and in doing that, we have to ensure it is best value and we get the optimum deal. I would like to think that is in train. I would like to bring it to finality, but I have to let it run its course in order that I get the optimum return for the State.
I know Mr. Sydenham is the point person within the OPW dealing with this. Has he anything to say?
Mr. John Sydenham
On the positive side, the negotiations are progressing quite satisfactorily. There are a number of issues. We want to acquire some additional parcels of land. There is ongoing dialogue with the Congreve foundation vis-à-vis acquiring them. With two parties negotiating on land, there are differentials in price. We will reach a successful outcome.
There is also the legal side and we are working with our colleagues in the Office of the Attorney General and the Office of the Chief State Solicitor to deal with transferring control of the trust. As the Chairman outlined, the trust will control the gardens for the next 21 years. It will engage the OPW to manage the gardens on its behalf. The trust will be the controlling interest. The negotiations are progressing and there is a tentative requirement by both parties to have all matters concluded by August or September this year. We have given ourselves a deadline and I would be confident, as the Chairman has said, that we can satisfactorily conclude negotiations.
I want to return to the issue of decentralisation. What plans does the OPW have in place to decommission specific sites? It looks to me that of the 58 sites referred to, eight have been fully decentralised in terms of the numbers of employees who have transferred, which means 50 have not been fully decentralised. I think there are 21 sites where decentralisation has not occurred at all - there is zero decentralistion. There are 58 sites in total, 21 where no one has been decentralised and eight which have been fully decentralised, which brings the total to 29. This means another 29 or 30 sites have been partially decentralised.
What plan does the OPW have in place for the overall review of decentralisation? The delegation spoke about Dublin in terms of rents, but there is also a need for a constructive, coherent plan for decentralisation. Perhaps the delegation might clarify some of these points on decentralisation as well. The witnesses said €300 million in capital expenditure has been spent on decentralisation to date and the sale of properties totalled €356 million. Does the figure of €356 million specifically relate to decentralisation?
There are 12 sites, four of which are under review and eight where no decentralisation has taken place, with a total value of €42 million. I am assuming of the eight sites that it relates to €39 million. I am just clarifying that. What is the position with those sites? Is it a situation where cattle are grazing on them? How large are the sites? How much was expended on the sites? Are they buildings or are they greenfield sites?
The witnesses might comment on the following as well. In Birr, County Offaly, decentralisation of 398 people was to take place but only 20 are currently decentralised. We are probing the situation in terms of value for money. There is an issue in terms of Dublin. Decentralisation worked in eight of the sites, one of which is in my area, Limerick. Then there are 21 sites where nothing has happened. Then the balance of 29 sites, almost 50% of the sites, have been partially decentralised. I ask the delegation to deal with that point in that context.
I would like to hear about sites which have been rented. Some €6.2 million has been spent on leasing buildings. Are they occupied? Where are the sites? I would like the delegation to deal with decentralisation. I ask Ms McGrath to address this point. I have another question about procurement but I ask her to deal with the question on decentralisation.
Ms Clare McGrath
If I may clarify what the Deputy means. He referred to "site" with regard to his own constituency. To which site is he referring?
The Irish Aid site.
Ms Clare McGrath
That is leased accommodation.
There are cases in eight locations around the country where decentralisation has worked.
Ms Clare McGrath
Yes, I beg the Deputy's pardon. When he referred to sites I was thinking of-----
It was by way of a comment to bring some perspective. If I could ask Ms McGrath to address the figures, the cost to the taxpayer.
Ms Clare McGrath
I have to hand a list of advance office accommodation locations which is largely leased accommodation. These are in Athy, Carlow, Cavan, Claremorris, Clifden, Dundalk, Kilkenny, Portarlington, Portlaoise, Roscrea, Shannon and Thurles.
What type of accommodation is specified in the list?
Ms Clare McGrath
This is leased accommodation, largely, where advance office accommodation is in place so, therefore, the number is fewer than the number in the original decision but these offices are occupied. This is the factor of the €6.2 million leasing.
People are now in these buildings.
Ms Clare McGrath
Yes.
Will these buildings be used for decentralisation or what will happen with regard to the €6.2 million in rents?
Ms Clare McGrath
The decision has been made under the review that, leaving aside the property, these are viable entities within their organisations for the purpose of decentralisation. Therefore, the numbers in those locations are viable and that will remain. The short-term leases in those locations are needed to accommodate staff in advance of decentralisation.
Are any leases held on a long-term basis?
Ms Clare McGrath
There may be one or two long-term leases but they all include breaks so we will be able to leave them if necessary. The Government's review of decentralisation has resulted in decisions being made on which locations are viable operational entities and they will remain. Therefore, we will continue to be required to provide accommodation. Now that the review is completed, we will have to consider how we can do this.
As regards the Office of Public Works in Claremorris, 32 are in leased accommodation. The OPW will remain in Claremorris. The accommodation may change but we will have an entity in Claremorris delivering services in that location.
I ask Ms McGrath to deal with the question of the €40 million and the sites.
Ms Clare McGrath
The individual sites include Carlow, with 1.1 acre, Cavan, 10.8 acres, Claremorris, 2.7 acres, Drogheda, 2.1 acres, Dungarvan, 3 acres, Edenderry, 2.1 acres, Knock, 6 acres, Mullingar, 5.3 acres, Thurles, 6 acres, Thomastown, 3.1 acres, and Waterford, 3 acres.
What is the total acreage?
Ms Clare McGrath
I do not have that calculation to hand. I will come back to the Deputy in a moment with the figure. This accounts for the €42.2 million. The Office of Public Works did not act in the matter of Birr so I am not in a position to comment regarding the questions raised by the Deputy.
To return to the question of the sites, it would seem to amount to 40 acres, about the same size as a farm. What is the current situation with those sites? For instance, it is almost 11 acres in Cavan and six acres in both Thurles and Knock.
Ms Clare McGrath
The decision with regard to the review of decentralisation has just been released. These sites are largely unused. The remit of the OPW had been to provide them for decentralisation but now they will not be used for decentralisation. The OPW will now proceed to look at each of those sites individually to see if the State sector requires any of those sites. We will then be looking to dispose of them. We may not do so now, considering current market values. If viable local use for these sites becomes apparent - I underline the need for this to be viable use -----
Will Ms McGrath say how much was paid for each site and the date of the acquisition of each site?
Ms Clare McGrath
I can provide the information on the price paid but I do not have the dates of acquisition. I will revert to the Deputy with that information.
We can deal with the price paid for each site.
Ms Clare McGrath
That information is as follows: Carlow, €1.44 million; Cavan, €2.9 million; Claremorris, €2.5 million; Drogheda, €12.4 million; Dungarvan, €2.1 million; Edenderry, €1.5 million; Knock, €390,000; Mullingar, €8.25 million; Thurles, €967,500; Thomastown, €1.8 million; and Waterford, €8 million.
It is interesting that in Drogheda, the OPW paid €12.4 million for 2.1 acres, roughly €6 million per acre. This is a phenomenal sum of money. I note that the Carlow site cost €1 million per acre. I ask Ms McGrath to explain how the OPW paid €6 million an acre for 2.1 acres in Drogheda, a site which is farmland.
Ms Clare McGrath
The money was paid to the local authority. I do not have the dates of acquisition but it was a case of operating with the market values at the time.
It seems to be a phenomenal figure for land. I am confused and the taxpayer would like to know when was the land acquired. It is astounding that a site cost €12.4 million - €6 million an acre - and decentralisation did not happen. A total of €40 million of taxpayers' money is tied up in approximately 40 acres, about €1 million an acre.
Ms Clare McGrath
We sold two acres in Ballsbridge in this period for €171 million. This is the market. Another question is why decentralisation did not happen subsequently. The OPW was operating to the mandate to deal with the accommodation for the numbers of people to be accommodated, and the development and implementation of the provision of accommodation.
The site at Drogheda is outstanding in terms of its cost. Who directed the purchase of that site? In my view, the taxpayers are entitled to know. Those living in Ireland paying taxes or drawing social welfare payments will wonder why €12.4 million of their money is tied up in 2.1 acres of land in Drogheda. There are 12 locations throughout the country. They are asking how, in the name of God, did this happen. These figures show the amount of taxpayers' money tied up in these sites. What is the Drogheda site worth in today's values? I acknowledge the review was important but how did we get to the point where this level of funding, taxpayers' money, was thrown around like confetti in the acquisition of these lands? I note that in some instances, the land was acquired at a very good price. Was a limit on the amount to be paid envisaged at any stage?
Will Ms McGrath explain the process by which exorbitant amounts of taxpayers' money were spent in acquiring sites that, as she acknowledged, are now effectively idle? Are any of these sites leased as farm land? Is the taxpayer getting any value for money in that type of way? How much is being spent on security for these sites and what is the ongoing cost of servicing them? The argument is sometimes made that there is no ongoing cost associated with sites which the State has purchased. The reality is that there is a huge ongoing cost in terms of the money that is now unavailable to deliver hard-pressed services to taxpayers. Can Ms McGrath explain how on earth we got to this point?
Ms Clare McGrath
The Government decision on decentralisation is the starting point for decisions in regard to the acquisition of property-----
To clarify, in the case of the Drogheda site, for example, was a decision taken at political level by a Minister and delivered to the OPW that the site must be acquired?
Ms Clare McGrath
Instruction was not given in respect of an individual site, but we were instructed to acquire sites. We would have advertised-----
Was the OPW given a priority as to which sites to acquire?
Ms Clare McGrath
We were given a priority in respect of what the centralised applications facility was saying in terms of staff who had expressed an interest in moving to decentralised locations. However, our initial trawl was based on the 53 locations.
I understood the number was 58.
Ms Clare McGrath
It was initially 53, but several more may have been added to that.
The number got larger.
Ms Clare McGrath
In regard to value for the taxpayer, Drogheda is a particular case. There may be one or two similar examples.
There certainly are other examples.
Ms Clare McGrath
The local authority in Drogheda got the value that was available-----
In Cavan the cost was almost €3 million per acre.
Ms Clare McGrath
These transactions took place against the background of the market forces at the time and in a situation where entities and bodies knew we were coming. It was not the case that we could go in locally and determine sites that might be available-----
Was any type of quantitative analysis done or was the OPW simply told it must acquire a particular site at whatever the market price happened to be? Was there ever a point at which the OPW concluded that it could not justify paying, say, €6 million for a site?
Ms Clare McGrath
Yes, there were locations where we considered that the price being asked did not represent good value. I will have to revert to the Deputy on that. However, that was not the case in respect of the locations we are discussing.
Will Ms McGrath outline the specific circumstances of the Drogheda site acquisition and why the project did not go ahead?
Ms Clare McGrath
From the property point of view, we did not conclude the briefs to go out to tender on it. That was based on-----
However, the OPW acquired the site.
Ms Clare McGrath
Yes, that is the first step. However, the other side of that is having a brief for the accommodation to be provided in that location.
As we all know, it is in the nature of developers to speculate. Some of that speculation got us into a great deal of trouble and the taxpayer is now picking up the tab for it. I did not think the OPW was in the business of speculating. I am trying to understand the process of what took place here. Ms McGrath is saying that the initial phase was to purchase these sites. Forty acres were acquired for €40 million approximately, which works out at €1 million per acre on average, with some of the sites costing €3 million or €6 million per acre. Surely the OPW should have acquired a site only where there was a sufficient timeframe in which to apply for planning permission, construct the building and confirm that the body or Department in question was willing to decentralise. Where was the joined-up thinking in all of this? I acknowledge that the OPW was carrying out political instructions, but it seems to have been all over the place in its execution.
Ms Clare McGrath
I may have to look back on the records but, if my recollection serves, the initial deferral of decentralisation took place in 2008. A brake was put on the advancement of a considerable element of the programme in that year. I am not sure of the time period between the acquisitions and that decision. The programme was paused rather than stopped, with an understanding that it would be revisited. That review was announced last year.
Decentralisation was announced five years before that, in 2003.
Ms Clare McGrath
Yes, but I am referring to its progression, the move from the property acquisition phase to construction. A brake was imposed in 2008.
This is most unsatisfactory. The purpose of this committee is to ensure the taxpayer gets value for money. However, we now have a situation where the taxpayer is the owner of 40 acres of land that has depreciated considerably in value. These sites were purchased at a premium. In the case of Drogheda, the fact that the moneys were paid from one public body to another raises serious questions. Ms McGrath probably cannot give me any further details on the matter, but does she not agree that decentralisation has turned out to be a shambles for the taxpayer in terms of value for money? I accept she was not in charge at the time. Looking at it as a taxpayer, however, does she agree there was a terrible waste of public moneys?
Ms Clare McGrath
I cannot comment on the policy decision in regard to decentralisation. In terms of the acquisition of properties and sites, those transactions were done in the market conditions of the time and taking account of the commercial requirements of the various parties. All of this was done competitively in the context of prevailing market conditions.
Were any of these sites purchased without planning permission?
Ms Clare McGrath
In effect, yes. The point there is that unless one gets planning permission within a certain time, one is-----
For most people, the golden rule is that any decision on purchasing a site is made subject to planning permission. Such a condition would have functioned as a control mechanism. How many of these 12 sites are now effectively agricultural lands without planning permission?
Ms Clare McGrath
In the case of the site in Drogheda there is an element of clawback arising from the decision not to proceed with decentralisation. Now that we have a decision from Government in regard to all of these sites, we will proceed to examine them individually in terms of the conditions attaching to them and the options available to us.
How much of a clawback are we looking at in respect of the Drogheda site?
Ms Clare McGrath
In the region of €5 million.
That is less than half the price paid for the site. Is that clawback guaranteed or subject to legal considerations?
Ms Clare McGrath
There is a legal element to it.
Does the same clawback apply to all the other sites?
Ms Clare McGrath
It applies to some but not all of them.
Where it does not apply, taxpayers' money has been flushed down the drain.
Ms Clare McGrath
Many of these sites were acquired for value in the market at that time. I accept that the value in the market is not what it was then.
In regard to the site in Drogheda, Ms McGrath is saying that of the €12.4 million the OPW paid for it, it will get back €5 million. That means the taxpayer is down by some €7 million. Are clawbacks available in the case of any of the other 12 sites?
Ms Clare McGrath
I will look at them individually and revert to the committee.
It would be helpful if Ms McGrath could provide a full report on each site and the clawback that might apply in each case. Since we apparently do not have all of the information, we will have to revisit this matter.
Ms Clare McGrath
I will do so.
As regards procurement, has the OPW received a breakdown from each Department in terms of the savings it is making in this area?
Ms Clare McGrath
No.
Does the OPW intend to seek that information?
Ms Clare McGrath
In the context of the introduction of new requirements regarding the placing of contracts with the national procurement service, I would expect that, in accordance with Circular 40-02, Departments may be asked to report back to the Comptroller and Auditor General in that regard.
Again, I am of the view that it is extremely important this control procedure should be put in place.
On a point of clarification, the OPW will provide us with the information relating to the sites. I do not want Ms McGrath to venture into the area of policy. However, when the policy relating to decentralisation came into being, was a mechanism put in place which would have allowed the OPW to report back to the Minister and state that particular sites were overly expensive? Ms McGrath referred to prevailing market prices at the time. When the properties in question were being purchased, did the OPW inform the Minister, at any stage, that they cost too much? Did it have a blank cheque in the context of purchasing the properties and delivering the relevant sites regardless?
Ms Clare McGrath
There was never a blank cheque in respect of sites.
Was there a mechanism whereby the OPW could inform the Minister, as policy was being formed in respect of decentralisation, that certain sites were particularly costly?
Ms Clare McGrath
If that was arising, we would always seek to be in a position where we had sites competing in locations. We would never try to focus on an individual site, even though the parameters might indicate that, based on access, location, etc., it was the optimum. We would try at all times to ensure there would be competition between different sites. We would not have reverted to a Minister in respect of particular matters, it would have been our remit to-----
Who would have had final approval with regard to the purchase of a site?
Ms Clare McGrath
Internally-----
Would the Minister have had to issue final approval in respect of the purchase of sites?
Ms Clare McGrath
In terms of normal sanction of acquisitions, we would, through the Department of Finance, provide advice in respect of sites over a certain value. It would be based on us giving advice about the value to the-----
When these sites were being purchased, was the Department of Finance concerned in any way with regard to the amounts of money being paid in respect of them? Did the Department examine the position with regard to competition in price between local sites? Was it satisfied, even in light of the prices which then obtained, that value for money could be obtained in respect of these sites?
Mr. Frank Griffin
We were in constant contact with the OPW in respect of the roll-out of the programme. Detailed procedures were in place and oversight was carried out by the decentralisation implementation group and the Government. On the cost of sites, a detailed valuation process was carried out by OPW valuers in respect of each site. These individuals considered the market in specific locations. Deputy O'Donnell referred to Drogheda. The site there is at a central urban location. As far as I recall, although I am open to correction, there was a proposal to co-locate a number of Government services on that site. We would have been aware of the detailed review that was being carried out by the OPW in respect of each of the sites in the context of the values in particular urban centres. We were also aware of the advice of OPW's valuers and the competition element. We were conscious that all of that was gone through. For certain elements of this, the OPW operated under a delegated sanction and within certain parameters that were laid down for it. At the time, we were satisfied that a rigorous process was undergone in respect of the acquisition of all of these sites.
Based on all of that information, was the Department of Finance satisfied the price was acceptable in each case?
Mr. Frank Griffin
We would have been satisfied in a general sense. How I would express it is this: for any particular site, we might have had a discussion if certain questions had arisen. As already stated, however, there was a delegated sanction in place and this was subject to OPW using the services of its professional valuers, considering the competition in the various localities and examining the values that were applicable in the various urban centres. As I already pointed out, the cost record with regard to Drogheda is significantly higher than those of some of the other localities. That is natural enough because values in large urban centres will be considerably higher than those which obtain in smaller centres. We were satisfied that a very rigorous process was being conducted in the context of examining values at the time of acquisition.
Have any of these properties been revalued recently? Do our guests have any idea of their current worth?
Ms Clare McGrath
Now that we have the decision on decentralisation, we will move to consider the position of all of the sites and examine, individually, how we might deal with them. Part of that process will involve valuation.
Would the OPW not value them now? In view of the fact that there is a huge difference in current values as against those which obtained when the sites were purchased and in prevailing market conditions, would the OPW not want to discover what are the values of the properties now? Everyone is doing this at present. People are having their homes, land, farms, etc., valued. The OPW is one of the major property holders in the State and obviously it will be obliged to take a major hit in respect of the properties in question. Would it not, in its own interests and those of the taxpayer, immediately set about having these properties valued? Is that not a reasonable course of action to take?
Ms Clare McGrath
We would be doing that in light of whether we would be moving to dispose of them.
I have a difficulty here. I do not say it is an excuse but one of the comforts the OPW possesses is that it was operating under a delegated function and that it was told to do certain things. Given the existence of that function, it appears alarm bells did not go off. The OPW was told to procure properties and it had its own staff carry out valuations in respect of these. At the same time, the decentralisation process was ongoing and the OPW was fulfilling a policy directive. I return to Deputy Deasy's question. Did no one inform the Minister or someone else within the Department that these properties were costing a great deal more than was originally anticipated and that a problem existed? That was at the point of initial purchase. Given that we have reached the stage where the OPW is aware that, despite its best efforts, many of these properties simply will not be used, would it not set about having each of them revalued, regardless of whether it is being sold? I and my colleagues on the Committee of Public Accounts would like to know the value of those properties now against what the OPW paid for them. That is an exercise which I believe should be carried out because it would inform the committee in respect of the current position regarding the loss to the State and assist in quantifying the possible write-down that will occur and the corresponding direct loss to the taxpayer, without blame being apportioned to anybody.
Ms Clare McGrath
If the Chairman is asking if we would undertake an exercise in this regard, we can do so.
Such an exercise would be helpful.
For the sake of completeness.
Ms Clare McGrath
The owned portfolio obviously goes beyond these sites. To a large extent, we do not propose to dispose of buildings we occupy. However, discovering their value would be an interesting exercise. That is something which we have not necessarily prioritised. We will consider the eight sites in question.
I am of the view that it is a necessary exercise and not just an interesting one.
Ms Clare McGrath
Yes.
I cannot understand why the Committee of Public Accounts is discussing why the OPW should engage in such an exercise. It always amazes me that the-----
If I could just make a point, the OPW is being asked to carry out a review. There are 12 sites at issue here which are not being used and some of which will never be used. As is the case under normal business practice and in the context of any portfolio, the market values relating to those sites should be available. This is about getting value for the taxpayer, these sites have been purchased and this area needs to be examined. I assume the OPW is examining these sites in great depth to ascertain how it can claw back money, given that Ms McGrath reckons €5 million can be clawed back on the property in Drogheda. This comes back to the Chairman's point that finding the market values of these properties, their saleability and use is a basic business prerequisite and should be an integrated process. On the basis of what the Chairman asked, I assume that this will be part of the OPW's process.
Ms Clare McGrath
Yes.
I thank Deputy O'Donnell and now call Deputy Donohoe.
I want to kick off on a positive note before returning to the points that have just been made. One of the OPW's main roles is to manage a range of properties on behalf of the State, a number of which Ms McGrath listed in her opening statement, including Dublin Castle, Farmleigh, the Botanic Gardens and the work the OPW does in the Phoenix Park, where her staff do a magnificent job. Much of that was highlighted during the visits by the Queen of England and the US President. People who visit those properties every day see at first hand the work that is done, as I do when I visit them. I want to acknowledge that.
With that in mind, I want to zero in on the procurement element and some of the observations made in the Comptroller and Auditor General's report, but before I do that I want to touch on a few points made by some of my colleagues. Unfortunately I missed a large chunk of Deputy Ross's contribution because a vote was called in the Dáil but at the end of his contribution he spoke about the status of the National Convention Centre. Ms McGrath gave a number of assurances in terms of its status and future operation, regardless of proceedings that take place in regard to the developer and so on. Can Ms McGrath assure us that the future operation and status of that centre will not be affected by any of the proceedings currently taking place?
Ms Clare McGrath
I thank the Deputy for his opening words. I will convey his comments, which are much appreciated, to the staff in those locations.
The contract in place between the State and the National Convention Centre Dublin means that it is robust in the various permutations that may arise around ownership way back within it to ensure that the centre operates. It is important from our point of view to ensure that it operates and is marketed. International business tourism is delivering very considerable economic benefit. The PPPCo, as we would call it, is a fully capitalised subsidiarity and it is not dependent on the commercial actions or success of Treasury Holdings. It continues in operation regardless of the outcome of any court case.
Is a possible future option that the State would take fuller control of it?
Ms Clare McGrath
The State has step-in rights in regard to the operation to fully protect it.
At what point would such step-in rights be triggered?
Ms Clare McGrath
It would be in regard to termination in the event that certain availabilities, management of demand and operational parameters are not being met. They are all being constantly monitored and there is no issue in this space.
Deputy O'Donnell and the Chairman touched on the issue of the valuation of properties. Does the OPW have to go through a valuation process of all its different assets on a regular basis?
Ms Clare McGrath
We have to, given the nature of the portfolio, ranging from small rural Garda stations to this property here to Dublin Castle. We have different valuations and we report on them to the Comptroller and Auditor General in regard to our assets. The last valuation undertaken to any great extent was in 2000 to 2001 and we are revisiting that process. Much of that will relate to constructed properties and the value of construction. Different values pertain depending on the nature of the building. From 2012 we will be looking at taking a new approach overall in this space. We reflect it within our operation cost statement.
Ms McGrath mentioned the years 2000 to 2001, is that when the last valuation cycle ended?
Ms Clare McGrath
Yes. We revised them around 2000 when we looked at quite a considerable number of properties. We are now due to look at these again.
Therefore, the earlier exchange that took place on the properties applies more broadly across the full estate of the Office of Public Works.
Ms Clare McGrath
Yes.
Is it typical for a valuation cycle not to be triggered in nearly over a decade?
Ms Clare McGrath
It is, particularly in the space where there were disposals or a balance between acquiring and leasing. We would consider the overall properties in the portfolio, but there are a considerable number of signature buildings within the portfolio in Dublin. The disposals undertaken by us since 2004 are in the order of €356 million but we would not necessarily have values commensurate with what we got in market on those on our books.
How long does the valuation cycle take? When the OPW begins the next one this year, how long will it take to complete it?
Ms Clare McGrath
It will take a number of years given that we have 2,500 properties. We deal with different segments of it differently. I will be prioritising the sites on decentralisation.
I emphasise that the link between valuation and potential disposal is one that should be broken, a point that Ms McGrath has accepted, and within that it is vital to prioritise the properties on which we have touched. I accept her point that the OPW has 2,500 estates and that it cannot value all of them regularly, but I am stunned that in regard to the properties we mentioned there is not a more regular valuation cycle in place to allow for their inclusion in financial accounts and reporting back to the different bodies that have an oversight role.
Ms Clare McGrath
I should correct myself. We have a value as at 2010 in the account. That was done based mainly on a desk exercise in regard to the individual properties. We undertake that annually but in terms of going within the context of the market and individual properties, which we have acquired over a considerable period, we are looking at a new approach in 2012.
I want to move on to the procurement element and the focus on it in the Comptroller and Auditor General's report. Deputy Ross referred to the text of it earlier in terms of the implementation of the framework agreements, which is contained in paragraph 9.1.4. It states that framework agreements are open for use by public bodies and agencies, however, it is up to the individual organisation to decide whether to use the agreements. We had a discussion on this earlier. Why is there not a more rigorous tracking process in place to know who is or who is not making use of them?
Ms Clare McGrath
That is coming. The next phase is to make use of central agreements, under the public sector reform agenda on public procurement, to make it mandatory for bodies to avail of central framework agreements. I suggested that might have to be reported on centrally by those bodies.
What would be the largest contracts or organisations that are not participating in the framework agreements at present?
Ms Clare McGrath
I do not have individual organisations in mind but within the sectors - the health sector, the local authority sector, and the education sector - there are elements within it because they are all individual buyers. Perhaps more could come in. One of the parts of the remit of the national procurement services, NPS, is to engage with buyers. We hold conferences to inform and educate buyers on the use of the frameworks. An issue arises in terms of the communication of the message about the central frameworks. We do that through local authority networks. We have run education events for suppliers. We have had 26 buyer education events which 1,300 public sector buyers attended. Much of our work is about informing people of what we have in place.
Perhaps I will come at the issue from a different angle. Does Ms McGrath know what percentage of Government expenditure in the various areas is covered by the framework agreements?
Ms Clare McGrath
I cannot give the percentage, but of the contracts we have put in place under the framework agreement - I outlined that in my opening statement - it is a multi-year contract and €1.4 billion is covered by framework agreements. There are more than 50 frameworks covering more than 300 individual contracts. That is within the €1.95 million in the Government sector. It is part of the €4.6 billion within the HSE sector and it is part of the €1 billion in the local authority and education sectors. It is a part of each of those.
On what base can I evaluate the figure of €1.4 billion? For example, Ms McGrath said €1.4 billion is covered by framework agreements. In 2010 the State spent €15 billion on goods and services. Am I making an erroneous assumption in saying that less than 10% of Government spending is covered by framework agreements?
Ms Clare McGrath
The €1.4 billion is a new contract value. The last year reported on for total Government procurement is a number of years ago. We do not yet have the figures for 2011 for total State procurement. The €1.4 billion is a current figure.
Ms Clare McGrath
The Deputy is correct that a data gathering exercise is required of everybody. The data are collectively coming into the Department of Public Expenditure and Reform. We will have baseline figures on what makes up the various elements of procurement within sectors. That data is being gathered but there is some distance to go yet. We know we have contracts in place under certain headings. We can say it is a value of €1.4 billion but it is multi-year. Some of it is not for 2012 so it would go into part of-----
I am trying to get a grip on what is covered by that sum. Is the €1.4 billion a little or a lot of Government expenditure? The reason I press the point is that one of the main challenges with which we deal all of the time is the perception of waste and inefficient spending within the public service. The framework agreements appear to present a strong way of dealing with that. I seek to understand how much of current spending is covered by the implementation of framework agreements.
Ms Clare McGrath
Deputy Donohoe should forgive me for over-simplifying the issue but the €1.4 billion is a part of the €15 billion. Some €6 billion of that is capital so it is not included.
Okay. Is it €1.4 billion of €8 billion?
Ms Clare McGrath
Yes. I qualify that because some of the €1.4 billion goes into other years. We would need to see the final figures for procurement before we could give an accurate answer.
Could Ms McGrath come back to the committee with the information?
Ms Clare McGrath
Not readily, because the information is all being gathered at present. The State needs it.
We need it. Even with the clarification made by Ms McGrath, she made the point that some of the €1.4 billion is multi-annual.
Ms Clare McGrath
It is contract value.
Of course. Let us say the base is €8 billion. I am trying to figure out how much of that amount per year is covered in framework agreements. The actual per year value of it could be less than €1.4 billion, which could mean 10%, 12% or 13% of expenditure, is covered by that. Ms McGrath is aware of how important it is to be able to demonstrate that.
Ms Clare McGrath
Yes.
I shall move on to the issue of non-competitive procurement. In paragraph 9.28 it is indicated that for 2010 payments were made under 469 contracts, which were concluded without a competitive procurement competition. The total value of the contracts reported for 2010 was €75.4 million, which represented an increase in non-competitive procurements on the previous year. Annexe B of the section helpfully details some of the legitimate reasons to justify non-competitive procurements. For example, if a passport machine breaks down and it must be urgently replaced that will be done. A total of 114 cases were reported which involved the extension or rolling over of existing contracts for goods and services which does not appear to be a strong reason for saying they should be excluded from retendering. Could Ms McGrath outline what steps are being taken, given that we are in a financial emergency, to go through competitive retendering in as many cases as possible?
Ms Clare McGrath
Again, I cannot speak on this part of the chapter on procurement for the totality of it but I can speak on the Office of Public Works.
Ms Clare McGrath
As the Deputy has said, there are instances where for legitimate reasons one can have single tendering but one wants to keep that to a minimum. We have instances in construction terms of where there was a collapse in part of a structure or a fire when it was imperative to get someone to deal with the situation as fast as possible.
On roll-over, the issue is about organisations in the first instance scoping out what they need to do completely and the timing of that, and then being ready well in advance of the time being up for the next procurement.
Sure.
Ms Clare McGrath
That is where framework agreements can help.
I understand that. If I may clarify, Ms McGrath said she can only speak for the OPW on retendering, but who can speak for everyone else?
Ms Clare McGrath
The individual accounting officers for their part of that section of the chapter. That is reported to the Comptroller and Auditor General and to the Department.
Who is responsible for oversight of that? Could anyone else comment on that? I ask the question because on page 100 of the report, sentence 9.24 appears rather ominous in that it states that the expenditure reduction initiative is now considered closed. Surely, there has never been a more opportune time to keep the expenditure reduction initiative alive and well. Who is responsible for ensuring that competitive retendering is taking place across all Departments?
Mr. John Burke
We must be mindful of the overall scale. Single tendering is allowed in exceptional circumstances.
Sure.
Mr. John Burke
It is helpful that the annexe highlighted particular issues.
I acknowledged that.
Mr. John Burke
We need to be mindful of the issue of roll-over of contracts and the extent to which it may reflect inertia in certain contracting authorities. The policy unit is in regular contact with contracting authorities and procurement officers but ultimately the responsibility lies with the Accounting Officer of the relevant Department or office.
Does the unit play a central role in sharing good practice on re-tendering procedures across all Departments to ensure value is achieved? I am concerned about the reference in the briefing note to the initiative implemented in 2009 to seek reductions of up to 8% on contract expenditure. What is happening to ensure contracts are re-tendered in order to achieve savings?
Mr. John Burke
The reduction in allocations creates pressure on all offices and Departments to procure the same amount for less funding. This in itself is resulting in an increasing impetus in procurement from outside the reform initiative.
How are the savings captured?
Mr. John Burke
They may have a reduced allocation and as a result are procuring the same level of service or product for less money.
Is that saving stored centrally? If the Department of Education and Skills saves a sum of money through a competitive retendering process, is it stored elsewhere than in the Department?
Mr. John Burke
It it fair to say it is not readily identifiable.
It is telling that the Comptroller and Auditor concludes: "[t]he NPS believes that further savings were achieved due to re-tendering and new contracts at more competitive prices but those savings have not been quantified." Surely we should be valuing the savings that we achieve in order to disseminate learning across the public service.
Mr. John Burke
To return to the big issue, the aim of the framework agreement and the public sector reform plan is to address the need to procure the same amount for less. That will be a matter of fact for the next few years. Under the reform plan we are examining each category and sector to determine whether a framework is available and, if not, whether one should be established. Expenditure on procurement should have greater visibility. Arguably we are not there yet but we are getting there. We are heading to a position where we can identify in each sector whether a framework is available for expenditure and, if not, the extent to which one should be taken up.
It is essential that we be able to identify the percentage of Government expenditure that is covered by framework agreements, the savings achieved as a result of them and the targets for their further roll-out over the year. I welcome the progress made towards that position but the fact that we are not there already is a cause for concern given how far our financial crisis has advanced. I urge Mr. Burke to get there quickly.
Ms Clare McGrath
As regards the savings on the framework contracts, we can say that X was a certain price previously but now costs us less. We cannot say how many people are buying X, however. We can identify the savings that could be achieved by putting in place a framework based on the unit price but it is up to the individual office to decide whether it is still in the business of acquiring X. The €80 million in savings that I identified out of the overall figure of €1.4 billion is based on demonstrating that the cost of item X decreases once the framework in place. Public bodies may have paid a third price for that product but while they can now achieve savings through the framework, it is not necessarily the case that they will acquire the product.
I understand the distinction. The point remains that a good approach like this could be rolled out in other areas of Government expenditure. I simply want to understand the value of Government expenditure which is not covered by these arrangements in order to identify the further savings that could be yielded to the Exchequer.
In terms of procurement by the OPW, has there been much of a churn of suppliers subsequent to the additional tenders being issued?
Ms Clare McGrath
We are seeing a good deal of competition in tendering. This is also a result of circular 10/10 because competitions are now advertised more generally by all purchasers.
I ask Ms McGrath to focus her remarks on the OPW.
Ms Clare McGrath
We are seeing more. It is possibly less apparent on the construction side because there are fewer in that sector. Some areas have contracted but on the supply side there is quite an element of competition.
I have only one more question on decentralisation because the issue has been well, if shockingly, ventilated. Were all of the 12 sites referred to earlier purchased prior to 2008? I ask because Ms McGrath reminded the committee that a pause had been previously imposed in the decentralisation project. Were the 12 idle sites acquired before that pause or subsequent to it?
Ms Clare McGrath
I will have to revert to the Deputy on the question but I believe I am safe in saying they were acquired beforehand.
Is Ms McGrath certain of that?
Ms Clare McGrath
I will confirm it but I am fairly confident about it.
I join Deputy Donohoe in commending the OPW's facilities management staff on the fabulous job they do. They do not get the recognition they deserve. I hope Ms McGrath will convey our commendations to them.
I would like to explore the issue of leasing arrangements. We were told that expenditure on leasing buildings will decrease to €112 million in 2012. Has there been any communication between the OPW and NAMA with a view to occupying or making use of some of NAMA's portfolio of empty office spaces?
Ms Clare McGrath
We have not entered into formal communication with NAMA in regard to availing of its properties. Our priority is to dispose of leases.
I will come to that issue. Why would that be the case? The OPW holds its property portfolio on behalf of the State and, while NAMA holds properties for an entirely different reason, the lack of communication on or, at a minimum, consideration of using NAMA properties to reduce the OPW's burden of expenditure strikes me as odd in the context of joined-up government.
Ms Clare McGrath
There would be restrictions on communications with NAMA in regard to some of its estate. With regard to the State portfolio of property, part of which is held by the OPW, part of the public sector reform agenda involves considering how the totality of the estate portfolio might be optimised. There will be reversion to Government in this space in respect of teasing out some of the elements of how that might be considered. I anticipate that conversations with NAMA in some of that space would arise in that context.
Regarding the OPW, we have no programme such as the decentralisation programme in respect of which there is considerable scale, acquisition or necessity for acquiring property which may be elsewhere in the public sector. It would be normal for public sector bodies, if acquiring or disposing of property, to ask other parties in the same sector whether they have an interest in it before making it available commercially. We would be in the same space in that regard but we are not at that stage yet. We are first focusing on the leasehold we have.
Ms McGrath argued the toss in her evidence as regards the necessity to be located in the city centre, for obvious reasons. She stated she might consider the M50 ring as more economical and appropriate. It is in that spirit that I make my inquiry vis-à-vis NAMA.
Ms Clare McGrath
If we had a lease in respect of which we said we could vacate in 2016, for example, we might be asking what we would do given that people are accommodated in the premises.
It is a question of where the OPW accommodates them.
Ms Clare McGrath
Exactly. The first place we look is within the existing owned estate, and nowhere else. We need to be able to accommodate more people in our owned estate. I refer to our usage and densities. We are engaged in surveying all our estate, particularly in Dublin, to determine how we are using it. There are central agreements in regard to some of this space. It is partly a matter of the OPW being put in a position to have its occupiers comprehend the cost to the taxpayer of the space. It is a cost borne within the OPW, which, after pay, I consider to be a singularly large element of the overheads associated with the public sector. In the first instance, we must ask how we can increase density. We would ask where one could relocate to but we are not at that point.
I understand the concept of increasing densities. Having heard of the seven staff in Mullingar and the 12 in Naas, I believe it is a worthy practice. Given that the OPW is to spend €112 million on its leasing arrangements over the course of 2012, is it not fair to say that consideration should be given to the properties held by NAMA with a view to reducing the costs?
Ms Clare McGrath
In the year in question, 2010, our rent figure was at €128 million. It is a serious consideration. What has been done has been done by vacating leases. It was partly made possible owing to the decentralisation of a certain number of staff, creating vacant space in Dublin. We are not looking beyond our portfolio at present to provide accommodation. Should we have to, we would consider how we could occupy other vacant space in the public sector at the going commercial rate.
What about properties held by NAMA?
Ms Clare McGrath
I suspect that if we advertised stating we were seeking space, NAMA would respond.
Is there no institutional communication between the OPW and NAMA?
Ms Clare McGrath
As I understand it, NAMA is holding debts rather than properties. It is a question of who is managing the property. I suspect NAMA would talk to the OPW if it were seeking to obtain a return on its property and the OPW were looking for space. It is not ruled out.
It is reasonable to say, regarding the management of assets, that it is not in NAMA's interest or that of the taxpayer to have vacant office blocks around the city. I propose to the OPW, in the spirit of joined-up government and achieving bang for the taxpayers' euro, that my proposal be investigated thoroughly. If there is no communication, this should be remedied.
With regard to the cost of the OPW's current leasing arrangements, what is the implication for the OPW of the Government having stepped away from the commitment on upward-only rent reviews in respect of expenditure and leasing arrangements?
Ms Clare McGrath
The expenditure and leasing arrangements are contractual commitments under leases. Certain of those have upward-only clauses. We would be vigorous in seeking negotiations on reductions. We have been successful in part in that regard.
I do not doubt Ms McGrath's vigour. Can she indicate what proportion of the OPW's leased properties are subject to upward-only rent reviews?
Ms Clare McGrath
I have given that information in replies to parliamentary questions. I may not have the information with me but can provide it to the committee. We have in the order of 436 leases on a smaller number of properties. We have given a list of the actual properties with upward-only rent reviews.
I presume that information can be provided to the committee.
Ms Clare McGrath
That can be provided. Bearing in mind site acquisition, we would never have taken property at the height of the market, at a rate of €670 per square metre. Our properties would have been acquired at a rate closer to the current rate, €325 per square metre. We have not been in locations with very high returns relative to the market position. That does not mean that we would not be vigorous in our demands at the time of a review.
I appreciate that and Ms McGrath has made it clear. It would be helpful in the OPW's drive to reduce the cost of leasing arrangements if the upward-only rent review element of many of the lease arrangements were subject to a discount.
Ms Clare McGrath
We operate within the legal framework set by the Legislature.
I understand and I am not asking Ms McGrath to comment on policy. I am just observing that the arrangement is not helpful. While I appreciate the fact that €112 million is a large sum, I believe a core objective of the OPW should be to lower the cost substantially. Therefore, it would have been much more preferable for the OPW and many other bodies if the upward-only rent review issue had been addressed.
I have a couple of specific questions. We spoke about sites that are idle. Ms McGrath made reference to the number of leases the OPW had surrendered and said it had no empty buildings.
Ms Clare McGrath
We have no empty buildings in regard to decentralisation.
I stand corrected.
I want to ask about unallocated properties. I will begin with a couple of specific points and then move to the more general one. The annual rent associated with Westward Town Centre in Sligo is €31,000 and the lease was commenced in July 1992. The property has been unallocated since March 2010. Has that lease been surrendered?
Ms Clare McGrath
We are surrendering it in 2012.
Can the OPW Chairman explain this delay in disposing of the lease to me? I note it has been unallocated since March 2010.
Ms Clare McGrath
The disposing of the lease is in line with the lease surrender, which is due in 2012. Consequently, as our obligations under the lease run until 2012, what we do is to ascertain whether we can re-accommodate someone on a short-term basis. However, for many of our clients, moving into a place only to be obliged to leave it again because our objective is to surrender it, does not suit.
Is anyone in that location at present?
Ms Clare McGrath
No, there is not.
I am correct in saying that.
Ms Clare McGrath
Yes.
Okay, so it has been unallocated for two years.
Ms Clare McGrath
Yes.
I will turn to a larger place, namely, the Irish Life Centre on Lower Abbey Street in the heart of Dublin. The rent per annum is €215,000, the lease commenced in 1977 and it has been unallocated since December 2010. Has that lease been surrendered?
Ms Clare McGrath
It will be surrendered in 2012.
Again, it will be surrendered.
Ms Clare McGrath
Yes.
Okay, so again it will have been idle for two years.
Ms Clare McGrath
Yes. The Deputy is aware of when this lease was taken and the factor we must take into account is that it is an older building and refurbishment costs would be involved in advance of occupation. Consequently, we take an informed view as to whether to do this and then temporarily occupy it or whether to carry it. I note that relative to the entire lease portfolio, a very small number are unallocated.
I will revert to that point. Phoenix House is located on Conyngham Road, Dublin 8, adjacent to the Phoenix Park. Its rent per annum is €365,000, the lease commenced in February 1999 and I understand it has been unallocated since August 2011. Has the lease on this site been surrendered?
Ms Clare McGrath
No, we will allocate space within that property this week. It will be occupied.
What organisation is going into that building?
Ms Clare McGrath
I can revert to the Deputy on that.
Please do.
I raised those three specific examples because although members have shifted gear from talking in billions in respect of some of the other contributions, to being in the rather more modest terrain of thousands and hundreds of thousands, it is instructive that properties such as these remain or have been unallocated for substantial periods. I have cited three examples. Can the OPW Chairman now provide members with the global picture in respect of the office's unallocated properties in their entirety?
Ms Clare McGrath
There is a fourth property, so it is the aforementioned three and one more.
What is it?
Ms Clare McGrath
It is located in The Square, Tallaght, and has been unallocated since January 2012. We are about to sublet that property.
Okay, I thank Ms McGrath for-----
Ms Clare McGrath
In that regard, any expenditure on unallocated property is a problem for us. To get to the point where one has a vacation happening at the closest point to the surrendering of a lease and having it occupied, because one must rehouse the occupier, one must plan for that and so there can be an overlap. This is the nature of managing a leasehold estate, namely, that one will have overlaps in temporarily vacant spaces while one is moving into another property and surrendering. While this is an overhead, it is about minimising the costs.
It is about minimising the costs.
Ms Clare McGrath
Absolutely.
Ms McGrath gave the case of the property of Tallaght, which has been unallocated since January 2012 and which the Office of Public Works is about to sublet. To me, that is a case study of good management in this regard. However, as for those properties that have remained unallocated since 2010, given the current budgetary position and how tight money is, the thousands and hundreds of thousands add up and they matter and count in the overall-----
Ms Clare McGrath
The issue is these properties have come very close to the lease surrenders, whereas the site in Tallaght has a longer lease and as we know we are there for longer, we can move someone in for a longer period. However, I take the Deputy's point and yes, it is about minimising costs.
Therefore, I can surmise that, for instance, in respect of the aforementioned town centre in Sligo, there was no useful purpose to which that site could be put for two years. Is that the point Ms McGrath is making?
Ms Clare McGrath
Not in terms of the value proposition of refurbishment for that duration and the operational issues for people to occupy that space. However, on the commercial side, we would not be averse to some of this, as to whether there also could be temporary uses of space the State has. Nevertheless, I take the Deputy's point in respect of minimising cost.
I will turn to the forthcoming European Union Presidency next year. Clearly, I am not asking about the substance of this but from the point of view of the Office of Public Works, the Chairman should inform the committee as to what work this will entail for the office and as to the costs or estimates in this regard.
Ms Clare McGrath
For us, the work pertains to providing events for EU Presidency meetings. Consequently, in support of planning, for us the centre of that would be Dublin Castle for those six months. It is about optimising the use of Dublin Castle for the period to facilitate meetings and whatever but it also will be about the further owned estate and other locations-----
Such as Farmleigh.
Ms Clare McGrath
One presumes so, as well as Rathfarnham Castle and other locations. Our clients will be the Departments of Foreign Affairs and Trade and the Taoiseach in respect of uses, meetings and how they will be arranged. The objective of the Government will be to maximise the use of State-owned property to facilitate all the events and otherwise that might take place and perhaps to prioritise those located in Dublin. The Office of Public Works will undertake works in the course of 2012 at Dublin Castle that we otherwise might not have done to upgrade the facilities for the hosting of these events. We have the advantage of works that were undertaken last year at Dublin Castle to facilitate the State visits, when we were able to extend facilities in the Lower Yard of Dublin Castle of which we will avail in 2012.
Does the Office of Public Works have a budget in respect of what these works will cost it?
Ms Clare McGrath
I have an allocation, which has been given and which I believe has been published. The allocation for the EU Presidency to the Office of Public Works is in the order of €3 million for 2012 for capital works. There also is an allocation on the current side for a certain level of current expenditure.
What is that?
Ms Clare McGrath
It is in the order of €1 million in 2012.
There was some public commentary to the effect that the Danes have outdone us by way of value for money in respect of EU Presidency costs but Ms McGrath could not possibly comment on that.
Ms Clare McGrath
One would need to see the detail before making a comparison.
Sure. I thank Ms McGrath.
I thank members for their contribution. As I have another important matter to deal with at the end of this meeting, I will cut-----
May I ask a quick question?
The Deputy may ask it.
I apologise. NAMA and the Office of Public Works effectively are State bodies that are involved in the management of properties. Obviously there are differences but as the Office of Public Works tries to reduce its rent bill and as NAMA disposes of its assets, Ms McGrath should comment on the interlinkage. I apologise if someone has asked this already-----
Yes, it has been dealt with already.
----- but she should comment on the linkage or crossover between the Office of Public Works and NAMA.
Ms Clare McGrath
There is no overt one because we are looking to get out of properties, not to acquire them. However, were opportunities to arise in that space, in a case where NAMA was not the holder of debt but was a manager of property, we might engage if that was in our interest and we knew about it.
This is important because even the chairman of NAMA brought it up at this committee. He raised the issue of the social dividend and the fact that local authorities were not contacting NAMA when there was an opportunity to give it to the State or a local authority for example. If there is a commercial property that could be used, does NAMA contact the OPW or vice versa?
Ms Clare McGrath
The situation has not arisen. I would like to think of an example where we have wanted property in recent times, but we are not in that space. I am seeking to reduce costs. In taking the Deputy's earlier point, I will not say there might not be occasions - not necessarily opportunistic - where it is worthwhile investing in some of the assets we have that are otherwise leased. If they are held within the NAMA estate then, yes, we would engage in that.
Should the OPW not be actively communicating with NAMA with regard to what is on its books when it is disposing of the assets, and whether they could be utilised by the State? We are all talking about the €112 million for that purpose.
Ms Clare McGrath
From the OPW's viewpoint, communication with NAMA will be when we have a need we think it can meet or we have something, but less so the other way, as that arises. I am taking the points made earlier that would be something we would actively do; that would be driven by the need arising. As regards having conversations in the round as to what might be, all of us communicate about the management of our own portfolios but not necessarily the interaction suggested.
The committee has an important matter it wants to attend to. I had some questions about sites other than the main ones. I was going to pick a random location for my questions, as Deputy Harris chose Kilkenny.
The Chairman is familiar with the terrain.
I am not going to do that now. We will perhaps do it on another occasion. I thank Ms McGrath for her contribution. She should pass on to her staff our compliments for the way in which they work on the various sites, as well as their contribution to the visits of Queen Elizabeth and President Obama. That work was significant and did a lot for the country. It is important to relay that positive message to all of those concerned, down to those who pushed wheel-barrows to achieve what was necessary. The OPW does an excellent job in spite of all the other questions we have to ask.
Many questions could have been asked today but were not, so we would like to get back to them again. I suggest that on another occasion, earlier than usual, we invite Ms McGrath back to discuss properties, including the closure of Garda barracks. We will need to bring Ms McGrath back in, so she will have to bear with us on that.
We will leave the Votes and Chapter 9 open so we can reintroduce those matters at a meeting to be agreed with Ms McGrath.