COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 17 May 2012

Chapter 9 - Public Procurement (Resumed)

Ms Clare McGrath (Chairman, Office of Public Works) called and examined.

Chairman

I remind members, witnesses and those in the Visitors Gallery to turn off their mobile telephones as interference affects the sound quality of the transmission of the meeting. I advise witnesses that they are protected by absolute privilege in respect of the evidence they are to give to the committee. If they are directed by the committee to cease giving evidence in regard to a particular matter and they continue to so do, they are entitled thereafter only to a 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 a way as to make him or her identifiable.

Members are reminded of the provisions within Standing Order 158 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

I welcome Ms Clare McGrath, chairperson of the OPW, and ask her to introduce her officials.

Ms Clare McGrath

On my right is Mr. Tony Smyth, director of engineering services. To his left is Mr. John Sydenham, commissioner in State portfolio management, which is a particular responsibility for property and projects, Mr. Vincent Campbell, director of the national procurement service and Mr. Michael Long, accountant.

Chairman

Who is present from the Department of Public Expenditure and Reform?

Mr. Dermot Quigley

I am Dermot Quigley from the sectoral policy side of the Department of Public Expenditure and Reform. On my left are my colleagues, Mr. John Burke, Mr. John Kinanne, Mr. David O'Brien and Mr. Kieran Sheedy dealing with procurement and decentralisation matters.

Chairman

I ask Ms McGrath to make her opening statement.

Ms Clare McGrath

I am pleased to return to the committee at this resumed session to answer any questions the members may have on the Appropriation Account for the Office of Public Works for 2010. If I may, I would like to comment briefly on the matters raised in my written response to the committee following my last appearance on 23 February.

In regard to the National Procurement Service, the Government has tasked the service with centralising and restructuring public sector procurement arrangements for common goods and services. The service now has 48 revised contracts in place with an estimated multi-annual value of €1.4 billion and has achieved estimated savings of €176 million since its establishment in 2009. The more integrated approach to procurement using tools such as aggregation and framework contracts means that many more contracts will be put in place in 2012 to facilitate further savings across all sectors. However, it is important to stress that the true benefits of these contracts can only be achieved by greater take-up of these contracts by public bodies.

One specific area the committee referred to is the retention of professional services. The NPS has commenced a process of determining the optimum procurement strategy to be deployed in this area for the public service and due to the level of expenditure specifically incurred on legal services the NPS has decided, in the first instance, to concentrate on this category and has established a working group to address the issues arising. It is hoped the working group deliberations will allow the NPS to go to the market for the supply of legal services for a selection of public service bodies in the third quarter of this year.

On the matter of payments for overtime and allowances, raised at the last meeting, these payments primarily arise as a result of the front-line nature of many aspects of the work of the OPW. Many of the payments and allowances are in the nature of pay for industrial employees with less than 8% of all overtime and allowances relating to administrative, professional and technical staff. The service nature of OPW business, particularly on the heritage and engineering sides, means that staffing attendance is critical outside of normal business hours, particularly during the summer months when supplementary staff are also employed to ensure maximum access to the public at visitor sites and an appropriate response to maintenance and emergency requirements in the flooding area.

In many cases these pay agreements and allowances are centrally controlled and, as the committee will be aware, there is a review already underway of such allowances and premium payments by the Department of Public Expenditure and Reform. As regards the issue of car parking, details have already been provided to the committee on car park spaces held by the OPW on behalf of Government. The ongoing policy of the OPW is to monitor the requirements for all car park spaces and where possible surrender those deemed to be surplus to Government requirements. Since 2008, the OPW has disposed of 1,281 leased car parking spaces, primarily in the Dublin area. As requested by the committee, I have provided members with a table which summarises the current property status of all the decentralisation projects - it includes both OPW managed projects and those not managed by the OPW. The information includes details of the 12 sites which were acquired but have not been developed.

Specifically in regard to the purchase of these sites, many were acquired at a time of rising property prices, which peaked during 2006 and 2007. The OPW is not immune to market forces. We operate in the same property market as everyone else - we are subject to the same highs and lows and were further restricted to sourcing sites in the published locations. However, we did take advantage of the market at the time in the disposal of a number of Dublin properties. In tandem with the procurement of sites and buildings, the disposal programme in Dublin netted over €356 million for the Exchequer, while leases with an annual value of €18 million have been surrendered in the Dublin area in recent years. The office continues to rationalise leased office space, particularly in Dublin, in order to drive down rental expenditure with the achievement of considerable savings on the State rental bill year on year since 2009.

Now that Government has made final decisions to cancel some projects, on foot of the 2011 review of the programme, OPW is examining all aspects of the 12 sites purchased which have not been developed as Government offices. The OPW will manage the sites as an integral part of the overall portfolio in its care.

In the current market, with little or no transactions or evidence of willing buyers, we know that values have fallen significantly but in order to assess all options and to inform decision making, an independent current valuation of these sites has been commissioned. As I have stated in my written response, I do not anticipate that a large-scale disposal programme of surplus State-owned properties will prove to be the optimal solution. Rather than sell surplus property at a considerable loss, sites may be held until the economy and the property market picks up with alternative solutions being considered in the interim.

I wish to remind the committee that the OPW's role in the decentralisation programme was to procure accommodation at the locations agreed by Government decision. The OPW did not have any role in arranging for the transfer of staff or functions to the Government's nominated locations, other than to the OPW's own headquarters in Trim where approximately 280 staff are now based and our offices in Claremorris where a further 30 staff are located.

As requested, I have provided details of upward-only rent reviews in my response of 28 March. However, I would like to inform the committee that the OPW, on behalf of the State, continues to actively renegotiate the terms of all leases and of the list provided, it has negotiated a rent reduction in the case of nine leases, surrendered one other lease and targeted seven others for surrender later this year.

The accommodation at Phoenix House, which was raised specifically by Deputy McDonald at the previous meeting, has proved to be unsuitable for the client that was proposed to occupy the building. An alternative client is currently considering a move to this office space.

I thank the committee for its attention. I will be glad to answer any further questions it may wish to raise on the 2010 accounts.

Deputy Kieran O’Donnell

I welcome Ms McGrath and her colleagues and the other officials back to the committee.

I wish to take up a couple of points. I welcome that Ms McGrath, in her opening statement, committed to carrying out an independent review of the valuations of the 12 sites because in the response we received, that was not the case. I take on board that she has done that.

I want to concentrate on the outline Ms McGrath gave us of the 12 sites. Rather than going back over old ground, I will deal with one or two specific items. It would have been helpful to give the acreage in her list on the decentralisation sites. Ms McGrath gave such information to us on 24 February, after the previously meeting and I was able to compile both what she gave us and the acreage figures, and it made for interesting viewing.

The OPW spent approximately €43 million on the 12 sites comprising 54 acres of land. This amounts on average to just short of €800,000 an acre, which seems crazy money. That €43 million was almost evenly broken down between the purchase of public sites and private sites. Some €20.4 million was spent on private sites and €22.8 million on public sites, yet the average cost per public site was four times the average cost for the private sites. The average cost per acre for the private sites was €486,000. I have made my own inquiries into the matter. Agricultural land is selling for approximately €10,000 per acre on average. The OPW purchased 2.7 acres in Claremorris for €2.5 million, or an average of €925,000 per acre. This morning I found out from the website property.ie that the average price of agricultural land is between €7,400 and €8,300 per acre. If one was to do that, one would be looking at a write-off of approximately €24 million.

Is it possible to withdraw from the deal for the 1.1 acre site in Carlow, which cost €1.44 million in total or €1.3 million per acre? How many sites have planning permission and how many are effectively agricultural land? How much of the taxpayer's money has been lost on these transactions. On how many of the various sites are the previous owners still grazing cattle? Are there agreements to this effect? What is the annual cost of managing these sites?

The committee is trying to determine their overall cost to the taxpayer. If the prices of the sites were written down to their agricultural value, one would be looking at losses in the order of €42 million. The price of development land has decreased by approximately 90% from peak values, which would work out at approximately €39 million. Even if we accept the argument that €22 million is tied up in circular transactions with Departments, the write down on the private side alone would be €18 million to €20 million. Any business would quantify that figure.

Ms Clare McGrath

The Deputy raised a number of issues and I ask him to forgive me if I miss some of his specific questions. All the sites to which he referred were zoned for development. None was purchased in an area zoned for agricultural purposes.

Deputy Kieran O’Donnell

Do they have planning permission?

Ms Clare McGrath

No, but the land was zoned for development. We bought in a market where everybody else was also seeking to purchase land and we paid market rates based on the valuations of the time. I take the Deputy's point that the State owned some of the sites both before and after our purchase of them. There was an element of circular movement, therefore, and it was in those instances that the most was paid. However, these were market rates based on the valuations of the time. We went to those sites because of a Government decision which told us exactly where we were to go. All the lands were zoned for development. I totally accept that their current value is considerably less than the price at which we acquired them.

However, in the part of the review we are undertaking of the valuations - this is not part of the review by the external consultants we have appointed for the valuation - we will investigate the sites in the context of local, community and other uses. The Minister of State at the Department of Public Expenditure and Reform, Deputy Brian Hayes, has referred to this in the context of properties that are possibly surplus to our requirements. In the context of public sector reform we will investigate other potential requirements for land beyond the central government, such as among local authorities or the HSE, rather than engage in a straight disposal. As I noted in my opening statement, it may be the case that we retain the land. I will revert to the committee on the costs that may have attached to the management of the sites. We incur few if any annual current sites costs given the nature of the sites. I am not aware of whether lands are being grazed but I will revert to the committee if that is the case as to the values involved.

Deputy Kieran O’Donnell

The lands are effectively idle.

Ms Clare McGrath

They are sites.

Deputy Kieran O’Donnell

I ask Ms McGrath to explain the significant difference in the average prices paid to public bodies compared to the private sector. The amount paid to the private sector was €486,000 per acre for 42 acres, which is very high, but the public bodies were paid almost €1.9 million for 12 acres. I regard the argument that money flows between Departments as theoretical because much depends on the use to which the money is put. This money could have been used for other purposes. Ms McGrath has told us none of the sites has planning permission.

Ms Clare McGrath

No.

Deputy Kieran O’Donnell

For all intents and purposes, they are little better than agricultural lands in the current climate. Agricultural land is worth approximately €10,000 per acre. Some €40 million in taxpayers' money is tied up in lands that may have no use. When will the independent valuation be ready? Can the OPW back out of the Carlow deal or any of the other transactions?

Ms Clare McGrath

I do not have specific information on when the valuations exercise will be completed but I think it will take several months. In regard to Carlow, yes we can.

On the Deputy's assertion that the sites are agricultural lands that can be used for grazing, some of them are centrally located in towns and cannot be used for this purpose. Furthermore, in the wider context of the estate of all organisations, it may be the case that we decide at some point to rationalise into State owned sites for construction purposes. One takes the long view on Government requirements because they do exist for most locations. For example, we investigated the number of leases signed in Portlaoise to accommodate the Department of Agriculture, Food and the Marine and we purchased a site there for the State sector. The view might be taken that the better option is to construct accommodation. The funding may not be available at present but the site could be retained with a view to building on it. We would not say the valuation is what it is now and decide to dispose of the site because it does not have a purpose.

Deputy Kieran O’Donnell

The Portlaoise site offered good value relative to other areas. The nine acre site was purchased from the IDA for €112,000 per acre. Claremorris has a population of 4,000 but the OPW paid almost €1 million per acre. It paid almost €1.6 million per acre in Mullingar, €700,000 per acre in Dungarvan and €2.67 million per acre in Waterford. It paid €600,000 per acre for a site in Thomastown, which has a population of 2,500 people. Over a two to three-year period €43 million of taxpayers' money was ploughed into 12 sites that do not have planning. Ms McGrath has said the OPW backed out of Carlow, which brings it down to 11 sites. They will effectively have no value. One would have to say this was squandering of the taxpayers' money. How did it happen? Obviously the OPW needs to manage it now, but it seems extraordinary that that kind of money was spent. The valuations are haphazard and it cannot be put down to their being development sites. From what I can see many of these were agricultural land or sites with no further use than for agriculture. I was disappointed that in her initial response Ms McGrath was not willing to identify the market values. Today's proposal has amended that and the OPW will do it. The witnesses should be brought back before the Committee of Public Accounts when the OPW has done the valuations. Given the prices paid, would Ms McGrath not agree there was an element of recklessness in how the money was spent? What one could do now with €42 million of taxpayers' money-----

Ms Clare McGrath

I completely refute recklessness. These sites were purchased in a market. The market determines the price. We were operating within a Government decision that these were the locations that decentralisation was to be provided in. Regarding comparisons with other sites purchased locally in those markets for land zoned for development, that was the market we operated in at the time.

Deputy Kieran O’Donnell

The OPW would have-----

Ms Clare McGrath

The market has changed. At the time, as I said previously here as well, we obtained €173 million for two acres in Dublin. This was the market. On the one hand-----

Deputy Kieran O’Donnell

However, the OPW's decisions were driven by Government policy at the time.

Ms Clare McGrath

The provision of all the accommodation we do is based on Government policies and departmental requirements as to where they operationally have to work from. I would absolutely say to this committee, if it was a case that locations were not specified and it was said we had to provide accommodation in locations, we would have done so based on, maybe, existing sites that were in the State portfolio, but we do not determine the policy. So we are not a property organisation of the market. We are not property developers. What we are is an accommodation office which operates in a property market.

Deputy Kieran O’Donnell

Let me rephrase what I said. It was enormous wastage of taxpayers' money given that we now have idle lands with money that is tied up. When representatives from the OPW appear before the committee again, we should get the market values and they should give us their strategic review of these sites. They should outline what they can do with these sites in the short to medium term. They are there now, but we have to find a way to manage them in order to give the best value for the taxpayer. I have no doubt that Ms McGrath will give that commitment.

Ms McGrath told us that the OPW is leasing 4,500 car-parking spaces in Dublin and elsewhere in the country. In Dublin it is costing €7.2 million per annum and in the regions it is €1.14 million, giving a total of €8.3 million per annum. She has indicated that the cost of managing these leased sites is probably another €2 million. So we are talking-----

Ms Clare McGrath

I beg the Deputy's pardon. That €2 million is for car parks in leased accommodation where there is not a specific reference to the cost of the car-parking space. We have estimated that on those leases where there is car parking-----

Deputy Kieran O’Donnell

Built in.

Ms Clare McGrath

Built in. We have given that value based on the estimate. That €2 million sits on car-parking spaces being leased.

Deputy Kieran O’Donnell

Direct costs of €8.3 million are quantifiable and there is probably a €2 million imputed cost in rents of buildings the OPW has elsewhere.

Ms Clare McGrath

Of car parking, yes.

Deputy Kieran O’Donnell

That comes to €10 million. Is it necessary to spend that much taxpayers' money per year on car-parking spaces? Has the OPW done a cost-benefit analysis and a value-for-money review on that area? This committee is looking for value for money for the taxpayer.

Ms Clare McGrath

If that is a suggestion of the committee that a value-for-money-----

Deputy Kieran O’Donnell

Has the OPW questioned spending that level of money on car-parking spaces?

Ms Clare McGrath

We have questioned it in the context of leases and the acquisition of leases and the value we get under leases, yes. We have done so in terms of the market values and how we place them, yes, but if the Deputy is coming at it from the other point of the operational requirement and demand, that is not something that in terms of the-----

Deputy Kieran O’Donnell

Who would have use of these leased car-park spaces?

Ms Clare McGrath

Usually they are allocated to the occupiers of the building. When we come to lease the accommodation, usually what happens then is that accommodation has car-parking spaces within it, so we acquire those as well. They are allocated proportionately to whoever is occupying the building and then the occupier allocates them to staff or otherwise as they determine. We do not determine that.

Deputy Kieran O’Donnell

Does the OPW have any car-parking spaces that are not assigned to or aligned with a property? Is the OPW leasing any standalone car-parking sites?

Ms Clare McGrath

There are a number of those - they would be under licences, not leases. We are undertaking a review of car parking generally and following this committee's inquiries into it, we are reviewing car parking.

Deputy Kieran O’Donnell

Ms McGrath gave us a list of the upward-only rent reviews. I would have expected details of the length of the leases, break clauses in the leases and when the next review is due. Can the OPW furnish us with those specific details?

Ms Clare McGrath

As I have said earlier, we are in the market, but not of the market. We have to act commercially in some of the treatment relating to how we are negotiating terms under leases. Some of this is commercially sensitive. To the extent that I can - we have answered parliamentary questions in relation to this - I would provide it, but I would not be in a position to provide, maybe, all the information the Deputy has referenced.

Deputy Kieran O’Donnell

Can Ms McGrath come back and provide it?

Ms Clare McGrath

I will to the extent that I can because it is commercially sensitive and we are trying to operate in the market.

Chairman

The total cost of the upward-only rent leases is €147.5 million.

Ms Clare McGrath

Our annual rent roll is €112 million. Of that-----

Chairman

When one tots up the figures Ms McKenna gave us-----

Ms Clare McGrath

I beg your pardon. Our annual rent roll is €112 million. We have, within that, 460 leases, approximately. Of that, 150 are upward only. I would prefer to-----

Chairman

There are 154 leases, 79 in Dublin and 75 outside Dublin. The total cost as per the figures Ms McKenna gave, is €147,403,370.

Ms Clare McGrath

Sorry Chairman, it cannot be that because our rent roll is €112 million.

Chairman

I am taking these from the figures Ms McKenna gave us.

Ms Clare McGrath

Yes, I know, so I will have to come back on that.

Chairman

There is a big difference between €112 million and €147 million.

Ms Clare McGrath

Absolutely, but I know what I am paying - €112 million.

Chairman

I know what Ms McKenna told me.

Ms Clare McGrath

Chairman, I will revert on that.

Chairman

I would ask Ms McKenna to check our figures against what she has and let us know the exact figure-----

Ms Clare McGrath

Yes, absolutely.

Chairman

----- because one of us has totted incorrectly.

Ms Clare McGrath

Yes.

Chairman

That is a huge amount of money. Ms McGrath told us earlier that the OPW got reductions in nine of those leases.

Ms Clare McGrath

Yes.

Chairman

What about the rest of them? Are they under ongoing scrutiny or negotiations? Can the OPW negotiate them downwards?

Ms Clare McGrath

In nine instances we have negotiated them downwards. We surrendered one and we will surrender several others this year. In our ongoing management of the lease portfolio we actively engage with all of our landlords on rent.

Chairman

A question arises from the answers given. Is it correct the OPW acts on the say so of Departments which require property or car parking spaces?

Ms Clare McGrath

Yes.

Chairman

Does the OPW challenge the Departments on what they state they require and on their current requirements given that they may have downsized since making a request? Does such discussion take place with regard to property management?

Ms Clare McGrath

Absolutely. It is essential for us in any engagement with a Department making demands, and we are experts in the field of providing accommodation for central Departments in particular. Through our experience we know the nature of requirements and demands. As I stated when I came before the committee previously, I accept that within the State portfolio we could have increased densities in the accommodation provided or greater use of the existing estate. This is the policy we have pursued by getting out of leases and moving staff into owned estate. This means people make available space for others in the accommodation they hold. The Chairman is correct as generally we do this in a consultative manner with the occupying Departments. There may be a directive role for the Office of Public Works in determining the standard as central agreements on accommodation exist. We would like to have more open plan accommodation, which is less cellular and has greater densities commensurate with the appropriate operational facilities for the functions performed by a given Department.

Chairman

The Tallaght Garda vehicle pound costs €1 million per year. Is this an absolute requirement if it is not used to its maximum capacity? Is it necessary to downsize it and to challenge the rent paid?

Ms Clare McGrath

I can provide information on the leasing. Questions on its operation would have to be answered in conjunction with the Garda authorities.

Chairman

Ms McGrath stated the OPW sometimes challenges Departments on their ongoing needs. Is there an ongoing need to spend €1 million per year on a compound?

Ms Clare McGrath

There is an ongoing need for a compound.

Chairman

At €1 million?

Ms Clare McGrath

This is what I am saying with regard to all-----

Chairman

No. If there is an ongoing need for the compound I accept this, but did the OPW challenge the payment of €1 million per year for the particular compound? Is there now available a break clause whereby the OPW could purchase property to provide better value for money given the downward trend in the market? Does the OPW do this or must this committee challenge the relevant Department on it? If it is the role of this committee we need a breakdown on where all of the money is spent so we can challenge the Departments as they appear before us.

Ms Clare McGrath

We do this because we know when the breaks will occur. The policy is that where a break arises we exit the lease.

Chairman

What about the €1 million?

Ms Clare McGrath

If in this case there is a break we will challenge continuing in occupancy but I am not sure of the particular circumstances.

Chairman

Ms McGrath might let us know.

Ms Clare McGrath

Yes.

Chairman

I will move on quickly because I am conscious of Ms McGrath's time. I want to ask about car parking. Does the OPW have a list of Departments which demand stand alone car parking spaces not associated with their buildings? Have Departments or agencies expressed a need for stand alone car parking spaces? Are such arrangements in place? Are all car parking spaces associated with buildings?

Ms Clare McGrath

To a large extent car parking spaces are associated with buildings. However a number are stand alone car parks. All of these will be examined in a general review of the provision of car parking. This must be balanced with-----

Chairman

When will the review be completed?

Ms Clare McGrath

The Minister of State has requested it and it is ongoing.

Chairman

What is Ms McGrath's view on the cost of car parking spaces? The average cost in Dublin is €2,428 and €710 in the regions, which is a huge difference. It costs almost three times as much in Dublin.

Ms Clare McGrath

We have surrendered 1,281 and we are working with the occupiers on getting out of leased car parking spaces. The difference in cost is due to the market.

Chairman

Deputy O'Donnell used Carlow as an example. Under the arrangement the OPW pays €369,000 every year-----

Ms Clare McGrath

In rent for accommodation in Carlow.

Chairman

-----for vacant spaces.

Ms Clare McGrath

No, not for vacant spaces but for offices.

Chairman

Will Ms McGrath explain the figure of €369,000?

Ms Clare McGrath

The Department of Jobs, Enterprise and Innovation has approximately 100 staff in Carlow in accommodation which we lease.

Chairman

And the cost of this office is €369,000.

Ms Clare McGrath

Yes.

Chairman

I am taking this as an example. Is there a way to renegotiate the amount of money being paid?

Ms Clare McGrath

I believe we have done so in this instance.

Deputy Kieran O’Donnell

Ms McGrath stated OPW purchasing was based on the Government's decentralisation policy. What I find difficult to understand is that under normal commercial criteria one buys land subject to planning permission but Ms McGrath states none of the sites has planning permission. Will the OPW be able to exit the contract in Carlow? I find it incomprehensible that €43 million of taxpayers' money is tied up in sites with no planning permission. How were they bought without being subject to planning permission?

Ms Clare McGrath

When one does not have a choice about location, the market determines to an extent the conditions on which one will acquire a site. Including planning permission among the criteria would not have allowed us acquire certain sites.

Deputy Kieran O’Donnell

The site in Carlow cost €1.3 million per acre; the site in Drogheda cost €5.9 million per acre; the site in Dungarvan cost €700,000 per acre; the site in Edenderry cost €714,000 per acre; the site in Mullingar cost €1.6 million per acre; the site in Thomastown cost €580,000 per acre; and the site in Waterford cost €2.67 million per acre. With due respect I am concerned those selling the land saw the OPW coming. If the OPW could not have bought the sites subject to planning permission it should have gone to the relevant Minister and stated it could not spend taxpayers' money on them. This is the one issue Ms McGrath needs to explain to me. I rarely saw people buy land without it being subject to planning permission; if they did it was speculation and is the reason Ireland is in the mess it is. Many developers have land which does not have planning permission. In the main, land was bought subject to planning permission. How was €43 million of taxpayers' money tied up in land without planning permission?

Ms Clare McGrath

With regard to the risk in obtaining planning permission, all of these sites are in land zoned for development. The time between acquisition and the review of decentralisation was more than allowed by the conditions for planning permission. Therefore we could not have built when the decision was made to cancel. To get planning permission, conditions would have applied, but we subsequently did not build because the decision was made to cancel.

Deputy Kieran O’Donnell

My final point is important. There was no guarantee-----

Chairman

I must move to Deputy Fleming once Ms McGrath has completed her answer.

Deputy Kieran O’Donnell

I will conclude on this point. Even had the land been zoned for development, there was no guarantee that the OPW would receive planning permission. People could have objected. I do not take Ms McGrath's response as a relevant argument.

Ms Clare McGrath

We were operating in a market. It is a question of a vendor and purchaser who are both willing and able to conduct a land transaction, what conditions they will set and-----

Deputy Kieran O’Donnell

The Government should not have been willing to buy land. It put €42 million of taxpayers' money at risk without the land being subject to planning permission.

Deputy Sean Fleming

I will also conclude on that point. For Ms McGrath's information, as I understand that she does not have all of her files with her, the site in Portlaoise acquired from the IDA had planning permission. It went through a separate process. Permission has been obtained on some of these sites.

Will Ms McGrath confirm something for me? I am a bit surprised by this morning's conversation. I assume that, in any of the towns in which sites were considered, the OPW sought expressions of interest, various sites were purchased and the OPW examined the zoning for the sites, which is a presumption of planning. Nothing in the world is certain, but that would be a presumption of planning. I expect that the OPW had conversations with the planning departments of the relevant local authorities concerning the suitability of the sites for the scale of the offices to be built thereon. The OPW would not have proceeded with a site if the local authority, which was the planning authority, claimed the site was not suitable. Did the OPW have conversations like that?

Ms Clare McGrath

We would generally have such conversations.

Deputy Sean Fleming

Of course the OPW had. If the OPW was buying sites that were subject to conditions, in particular sites that already had planning permission, the cost would have been several times greater than the cost of a site taken through the planning process by the OPW on behalf of a Department.

I wish to ask about two specific sites. If Ms McGrath cannot answer now, I would be happy if she replied with a note to the committee. She supplied a memo. One of its pieces of information is an error and I would like an update on another. I do not want to be parochial, but HIQA for Portlaoise is listed under No. 43 on page 8 of the schedule supplied. I was shocked to see this. I suspect that HIQA means the Health Information and Quality Authority. According to page 8 of the schedule, the project has been cancelled by a Government decision.

Ms Clare McGrath

Yes.

Deputy Sean Fleming

Is that HIQA?

Ms Clare McGrath

Yes.

Deputy Sean Fleming

I have been around that constituency for a long time, but I never knew that HIQA was earmarked for Portlaoise before I saw this schedule. When I received the schedule last week, I submitted a parliamentary question to the Minister for Health, as I was shocked by the intention to go to Portlaoise and by the decision's cancellation. I had heard of neither. On 1 May, the Minister replied and told me that there were no plans at present to decentralise the authority to Portlaoise, as it was already in Mahon in Cork city, in regional offices and Dublin city. The memorandum might be mistaken and Ms McGrath might clarify.

Ms Clare McGrath

There may have been an original intention as regards a regional office, but I will revert to the Deputy. If the matter has been queried, I will confirm it.

Deputy Sean Fleming

The Minister does not seem to know anything about it.

I would like an update on an issue mentioned in the schedule. I raised the issue with the Minister of State when a committee was considering the Estimates on 2 May. I am not sure whether the officials were present. The matter relates to the Equality Authority of the Department of Justice and Equality in Roscrea. The OPW is occupying the building. I visited it last week, having raised the matter previously. The Government has decided that decentralisation in that regard will not proceed. While the OPW is in occupation, it is paying the lease. The line Department has made a policy decision to vacate the premises.

Ms Clare McGrath

In that vacation, we may seek a lease break if one is available or determine who else may be accommodated in the building. This is the nature of our work. When a decision is made that accommodation is no longer required, we must deal with the consequential property issues.

Deputy Sean Fleming

Will Ms McGrath revert to the committee with a note on the current situation?

Ms Clare McGrath

Yes.

Deputy Sean Fleming

During the meeting on the OPW's Vote two weeks ago, at which some of the officials opposite may have been present, I was intrigued that the Minister of State was unaware of this matter when I raised it with him. I will put my point to the officials from the Department of Public Expenditure and Reform, although they need not respond. I was shocked that the Department of Justice and Equality was allowed to make such a decision without consulting the OPW on the property, the lease or the financial commitments in respect of the building. This was the clear impression that I was given two weeks ago. I am shocked that something with an expenditure implication could have been made without the involvement of the Department of Public Expenditure and Reform and, in particular, the OPW, which managed the property. It is not good policy, although Ms McGrath cannot comment on policy.

Ms Clare McGrath

I may have an opinion on the property, the operational requirements and so on-----

Deputy Sean Fleming

It should have been considered.

Ms Clare McGrath

-----but Departments have opinions on operational requirements that require locations.

Deputy Sean Fleming

Ms McGrath can revert to the committee with notes on that issue.

Having examined the list of upward-only rental reviews, I wish to ask a couple of questions. The most expensive rent is €2.97 million per annum, which is for Nos. 29-31 Adelaide Road, which house a Department. The Garda buildings on Harcourt Street, some four blocks, cost €4.8 million per annum. The Molesworth building, which includes the Passport Office, costs €2.26 million per annum. I could go on, but for how long has the State been renting these three upward-only rental properties? Some of them are quite old. For example, the Garda station has been on Harcourt Street for a long time, as have the offices on Molesworth Street and Adelaide Road. What is the oldest lease on the schedule provided? Some of the leases are new, as they stem from decentralisation, but some are probably decades old. For how many decades have we been paying upward-only rent on the oldest lease?

Ms Clare McGrath

I can revert to the committee on that question.

Deputy Sean Fleming

Tell us the ten oldest leases. It is bad enough being caught in an upward-only lease agreement, but I would raise another question if I found that we had been in it for the past 48 years.

Ms Clare McGrath

No, our longest lease is a 25-year lease. I will revert to the committee on the question of when those leases started.

Deputy Sean Fleming

How long has the State been in occupation on them? I picked large figures.

My final point is on the National Procurement Service contract. I am pleased to see the list of the 48 contracts that are in place. I will ask about a few specific contracts. I am pleased that the OPW gave the No. 1 slot to one issue, namely, the procurement of Garda cars, which was a major issue for committee members a couple of years ago. The previous contract had a set price, money was available and we were accused of being in breach of the Maastricht treaty because we were actually in surplus. Since we were ticked off at European level for running surpluses, we spent some of that money on Garda cars to reduce the surpluses. When an extra hundred cars came to be purchased, there was no facility in the old fixed contract to get a better price with increased volumes. What is the current position in respect of the number of cars purchased? If an extra 50 cars were to be purchased, would there be a volume discount?

Contract No. 19 is on fuel charges. This year, the estimated contract value for car fuel charges is €12.5 million, representing a saving of €8 million. This is phenomenal. What occurred to allow such a saving on last year's figure?

No. 21 is a hardy annual, namely, examination answer books. Are these for the leaving certificate or public service entry exams? Where were the exam papers printed? People ask this obvious question.

I am intrigued by contract No. 47 on €135,000 for election ballot papers, representing a saving of €330,000. That is separate from the referendum issue. What election will occur this year that we have not heard about yet? The witness may have missed the last question. The election ballot papers issue is separate from referendum ballot papers. What election is planned for this year which would necessitate a contract for purchase of ballot papers this year? I am not aware of one.

Ms Clare McGrath

I am not aware of one either. It is for elections that may arise. I take the point on what would be drawn down. I will revert to the Deputy.

Deputy Sean Fleming

What does "drawn down" mean in that context? Is it not a retainer?

Ms Clare McGrath

No. I will revert to the Deputy on the matter.

Deputy Sean Fleming

The witness can answer what she can and come back to us with the others.

Ms Clare McGrath

The Garda cars have a volume discount within the figure. The figures are estimated because there is a dependency on what is purchased. The matter of how much is drawn down from the contract is for the Garda and the Department of Justice and Equality. The volume discount is within the saving.

The last time I appeared before the committee I may have mentioned that where we ascribe savings, we have been able to verify that doing a central procurement for an item gives rise to certain savings. That is instead of individual procurements in all public bodies. There are administrative savings that derive and allow authorities to deploy resources that may have been spent on procurement on other matters. Part of these savings are reflective of that. It is not a money item in that if a certain amount is spent, it can be purchased at a lower price. It also comprises administrative savings. Fuel cards are being dealt with manually by many people.

Deputy Sean Fleming

What is the background on the fuel or charge cards?

Ms Clare McGrath

For example, the Garda authorities would use the fuel cards.

Deputy Sean Fleming

How is there a saving of €8 million on a contract of €12 million? I have picked this massive saving, which would be fantastic if achieved.

Ms Clare McGrath

The manual processing is not now involved because it is a centralised process.

Deputy Sean Fleming

It is computerised.

Ms Clare McGrath

I could write to the committee setting out the process.

Deputy Sean Fleming

It is not saving the fuel but rather the administration of the card.

Ms Clare McGrath

Yes, it is the administration.

Deputy Sean Fleming

I thought we were getting cheap petrol. I was going to ask where we are getting it and Oireachtas Members could all go and join the scheme. I say that in a light-hearted manner.

Deputy Simon Harris

I thank Ms McGrath for coming here again today. Some of the questions we are asking almost seem unfair as it is fair to say that neither Ms McGrath nor the Office of Public Works, OPW, designed the decentralisation scheme. Nevertheless, they are left holding the baby in answering the questions relating to it. The witness is accountable for her Vote. I want to get a sense of what it was like for the OPW when the decentralisation policy was announced. When was decentralisation announced by the Government.?

Ms Clare McGrath

I believe it was the 2003 budget.

Deputy Simon Harris

Deputy Fleming touched on the issue. What kind of pressure was on the OPW to deliver these sites? Did it feel it had adequate time to explore the options locally or was the office under time pressure on them? We had a discussion about this at the last Committee of Public Accounts meeting when I put it to Ms McGrath that perhaps the proper homework and research was not done before the policy was rolled out. As a result, the OPW found itself having to take on a significant workload in a very short space of time. There was an obvious ensuing cost for the taxpayer.

Ms Clare McGrath

I will not comment on the policy of decentralisation.

Deputy Simon Harris

No, but can the witness comment on how the organisation dealt with it?

Ms Clare McGrath

When the locations were announced, we undertook an extensive exercise of public advertisement for all the locations. We sought responses on property solutions for what was then 53 locations. It was a very considerable exercise and in order to be open and transparent, we advertised the substantial process. When proceeding, we were being informed by the decentralisation implementation group, which had charge of the overall implementation in all its elements. The information specifically related to numbers and which Departments would go to particular locations. Priorities became determined by locations and an organisation's ability to source staff, taking into account volunteers for those locations. We would have been advancing on the basis that no one location would be prioritised over another. This was taken in a three-year timeframe, so there was pressure.

Deputy Simon Harris

From the time of that budget, there were three years to deliver on the sites.

Ms Clare McGrath

That is how it was initially announced. There was consideration of all the matters with the setting up of the decentralisation implementation group, and that informed subsequent Government consideration of the matter. Decisions flowed from that.

Deputy Simon Harris

Did the OPW have representation on the decentralisation implementation group?

Ms Clare McGrath

Yes. The chairman of the OPW was a representative on the decentralisation implementation group.

Deputy Simon Harris

So in that sense, the OPW had a rather central role.

Ms Clare McGrath

Yes.

Deputy Simon Harris

It was linking with other Departments. We had maps and discussions about the feasibility of moving so many public servants from one location to the next, and there are now large offices with far fewer people in them than expected around the country. This goes back to the Chairman's point. Was the OPW, at any stage, raising with the decentralisation implementation body or in other fora concerns about space to be procured or the spending of taxpayers' money? Did people ask how the rest of the process was working and if there was a buy-in from public servants? This is similar to the Garda car compound issue. The OPW is asked to do a job but it is reliant on other Departments fulfilling their end of the deal. What was the dialogue like between the OPW and other Departments, as other Departments clearly did not live up to their responsibilities?

Ms Clare McGrath

The dialogue came through the decentralisation implementation group. As I understand it, representatives of Departments attended the group and advised on their progress in the decentralisation process from the operational side. All of the issues were being considered at the time.

Deputy Simon Harris

The witness may not be in a position to answer it today. I would love to know how those meetings flowed. Even if we forget about property prices and concentrate on the physical work of persuading public servants to relocate and be decentralised - or the work that obviously was not done in various Departments - I would dearly love to know how the conversations went on between the OPW representative and the Departments' representation. There was clearly a breakdown. Going forward there is an obvious need to improve the dialogue between the OPW and Departments. Is that a fair point?

Ms Clare McGrath

The consideration of property matters, when operational decisions are being made about provision of services, should be part of the business case. I am not stating that this was not the case. This is particularly relevant with regard to the use of State property. In the 1980s there was another programme of decentralisation with which the OPW was involved. It may not have been on the same scale but it was a considerable roll-out. It might not have been to the same scale but it was a considerable roll-out over previous decentralisations. Again, property was acquired and this was in some of these locations as well. On the accommodation front, it is something we would have experienced previously, but not to the same scale. It was bigger.

Deputy Simon Harris

Absolutely. It is unfortunate that we have a situation where the witness must appear before the Committee of Public Accounts and, effectively, preside over a situation in which, if one omits the Carlow site, there was €41.252 million spent on acquiring undeveloped sites. It is our job to find out what lessons can be learned. What I am learning from this and previous meetings is that there must be a greater link - although the witness might not be in a position to say it - between the OPW and other Departments. It cannot be a situation where a Department says it needs X amount of space for Y number of people and tells the OPW to go and find it. The OPW then finds the space and follows the processes correctly. I am not questioning the OPW on that but there must be a greater kickback, as it were, or the OPW needs to be given a greater degree of authority in terms of questioning whether that space is really needed before it signs the taxpayer up to paying more than €42 million for sites that are now not used. It needs to be able to ask if the Department can prove it has a use for the sites. That is just a comment to the committee.

I will return to two matters. One is the utilisation of these sites for future State purposes. That is probably the most pragmatic and progressive approach the OPW can take now. I corresponded recently with the Minister for the Environment, Community and Local Government about the new headquarters for the Irish water company that is due to be established. The reply was that this would be a matter for Irish Water, which is not really an acceptable answer. In the context of the OPW's dialogue with other Departments and if new State bodies are to be created or if any State bodies or offices are to be relocated, has it received any indication from those Departments about utilising the decentralised sites?

Ms Clare McGrath

Not specifically on the decentralisation sites, but we would have interaction with Departments because nobody wishes to incur additional expenditure on site acquisition if there are sites available. Where we would have a requirement, although it does not pertain at present, we would, as a matter of course, initially talk with other bodies that are holders of State property as to whether they would have facilities. However, under the public sector reform agenda on property estate management, there is a move to make that more formalised by having an inventory of all State property which would be available to other State bodies so it would inform decision making. Yes, there would be conversations with others in this regard. At present, with value for money and not incurring expenditure foremost in most Accounting Officers' minds, they would consider whether there would be other sources for what they need elsewhere within the State portfolio.

Deputy Simon Harris

Have there been any discussions about a location for Irish Water?

Ms Clare McGrath

I am not aware of that.

Deputy Simon Harris

If I had one criticism of the OPW, it would be with regard to the valuations. I welcome the independent review but I am still a little confused as to why the OPW cannot provide current market values for the sites. Why is that the case? Why can the witness not say what the 11 or 12 unoccupied sites - the site in Athlone is occupied - are worth as of today? I am confused as to why there is no current market value available, because my understanding is that it could be ascertained quite simply. I understand that the market can fluctuate but why can we not be given a current market value? The witness might explain that.

Ms Clare McGrath

With a view to?

Deputy Simon Harris

With a view to knowing the amount for which the taxpayer is left holding the can. There was a request at the last meeting of the Committee of Public Accounts that we would get all the data from the OPW, which is very detailed, and that there would also be an evaluation column. That column is missing. I understand that an independent review is being carried out and I welcome that. However, why can the OPW not provide a value for these sites today?

Ms Clare McGrath

The review is being undertaken and that will give us the valuation of the sites. I come from the point of view - and this was raised in the Deputy's earlier question - that we would have requirements too with regard to sites, and it arises on other decisions to cease operating out of OPW located sites for other purposes, such as community care units and social needs. Where there are requirements otherwise in other parts of the State sector, we would look at those State uses. The valuation's primary purpose to me, and I am not saying we are not doing this, is if I am looking at disposing of it. I take the Deputy's point about value.

Deputy Simon Harris

With respect, the witness is not in a position to comment on the decentralisation policy but it is our job to comment on policy. For us, as legislators, and for the Government to make policy decisions it is frankly our business, in terms of how those policy decisions are made. It is difficult for the Government and the Oireachtas to make policy decisions when we are not sure of the value of those sites. I still believe the value has an importance, although perhaps less for the OPW from a process point of view because it does not become relevant to the OPW until the policy decision is taken. However, for Government to make the policy decision it would be quite helpful.

Chairman

Does Mr. McCarthy have anything to add?

Mr. Seamus McCarthy

The Comptroller and Auditor General reported previously on the decentralisation programme. I am not sure if the committee concluded and reported on that, but some of the issues surrounding the value of sites were looked at in that context, taking account of location within towns and so forth. The importance of coherence between a change management process in the public service and issues such as land acquisition is certainly something the office has examined on previous occasions. Other than that, Chairman, public procurement is something that will continue to be a focus for the office and is likely to appear in future reports of the Comptroller and Auditor General.

Chairman

Thank you. Does the committee agree to note Vote 10 - Office of Public Works and dispose of Chapter 9 - Public Procurement? Agreed.

I thank the witnesses for attending this morning. We will suspend the sitting for ten minutes to allow the other witnesses to come into the room.

The witnesses withdrew.

Sitting suspended at 11.37 a.m. and resumed at 11.47 a.m.