Deputy Ruairí Quinn gave notice of his intention to raise on the Adjournment the subject matter of the design, construction and financing of certain schools under the aegis of the Department of Education.
Adjournment Debate. - Design and Construction of Schools.
I should like to express my gratitude to the Chair for seeing fit to give me permission to raise this matter tonight, despite the many claims on Adjournment time. As the House will be aware, I have been seeking to raise this matter for some time. To many outsiders this issue may appear to be professionally intricate and of interest to a minority but it relates to the specific waste of £750,000 of taxpayers' money which has already been paid out, and the legal complications in relation to consequential claims which may arise if the Government persist in pursuing a policy which is part and parcel of the nouvelle economique to translate a phrase from culinary language. The policy seems to be de rigueur with this new political consensus.
I am referring to the fashion that has won widespread acclaim in the Department of Finance for the procurement of buildings for public use, be they offices or, as in this case, schools by reference not to the traditional method with which every Member is familiar but by the use of a method that is known in the construction industry as developer competitions. I should like to ask the Minister of State at the Department of Education, who is present, if he will confirm, in the first instance, that the Department of Education have been obliged, indeed coerced, by the Department of Finance to go down that policy road in respect of the three schools. The Minister of State, who is not accompanied by his technical officials tonight, may, or may not, have that information with him and if he does not have it to hand perhaps he will, at a later date, furnish it to me.
Three schools were put out for design tender to three different design teams working to a brief prepared by the building unit of the Department of Education, a unit whose professional and technical competence is recognised by the private sector design profession. A set of comprehensive documents were prepared and fees were paid in accordance with the due process agreed between the relative institutions representing the profession and the Department of Education. The total amount involved was £750,000. The next stage was for those three schools to go for tender for construction in the conventional way, a process with which the House will be familiar, public advertisement followed by the submission by reputable contractors of a tender based on the documentation available. The most acceptable price, not necessarily the lowest price, is then recommended and the work commences. The protection of the citizen as taxpayer, and the protection of the occupant and user of the building, would then fall into place in accordance with established procedures and law.
It is because the Government want to find an alternative way to finance building projects which they cannot do publicly throughout the public capital programme that they have come up with a formula known as the developer competitions. Under that formula, the State acquires property on the never-never, or through a complicated and relatively sophisticated form of hire purchase — in this instance, schools — which it would otherwise have to pay for in the traditional way through an allocation of taxpayers' money put into the budget and the Book of Estimates through the public capital programme. Everybody in the world of reality knows that if one pays cash up front for any commodity, particularly one of some substance like a school, one gets the best value possible, that if one raises a loan from a bank one has to pay interest leaving a higher cost on top of the first option. Everybody knows that the dearest way to buy anything is through a hire-purchase company. The only people who traditionally have to resort to that method of purchasing are the most vulnerable and the least well positioned people economically.
What the State is doing in this instance is not only wasting the £750,000 of taxpayers' money that has been paid out to date but is buying three sets of buildings in the dearest manner possible because of the rolled up interest charges that will accumulate over the 20 to 25 years under this developer competition. I should like to put on record the view of the chairman of the Society of Chartered Surveyors, Mr. Michael Webb, as reported in the property supplement of the issue of The Irish Times of 9 February last. Mr. Webb, a professional quantity surveyor who is renowned in the profession and with no particular axe to grind, was referring to the waste related to developer competitions. He stated:
On top of all this, the Department of Education decided to join the band-wagon. But they haven't got any new schools on the horizon. So they decide to redesign three schools for which full designs and bills of quantities have already been prepared — for which £750,000 has already been spent on fees, £750,000 of our, the taxpayers, money, is to be wasted on a futile exercise with no point or no purpose.
In reality it would probably be fairer from the political point of view of democratic accountability if the Minister for Finance was present to reply to the debate. It is because he is not present that I will confine my comments specifically to the question of schools, but their relevance extends to the whole question of developer competitions. I submit that the Government are engaged in a method of financing the construction of buildings, specifically schools but also offices — some are under construction and others are almost complete — through a sleight of hand which they think makes it look cheaper from an overall financial perception. However, no matter how attractive that mechanism may appear to the people in the Department of Finance and the subservient Office of Public Works or, indeed, the Department of Education, it is my view and that of the Institute of Architects, of the Construction Industry Federation and of a large number of people who have some specific knowledge in this area that this is a very wasteful, inefficient and perhaps very irresponsible way of going about the community's business because of the way in which liability with respect to the future performance of these buildings might be affected in the event of defects or faults manifesting themselves. We are given to understand that liability which currently prevails and is accountable under the existing arrangements would be waived under the terms and conditions of developer competitions, and perhaps the Minister could clarify this.
Let me quote from a note I obtained from the Royal Institute of Architects in Ireland who are this year celebrating 150 years of professional incorporation on this island and, therefore, have some degree of wisdom:
The following factors should be considered:
1. In three of the four community schools proposed, full tender documents have been prepared and fees paid to the design teams.
2. It would appear that the system of appointment could allow the design teams to sue for the full balance of fees due even if they are not appointed to the contracts.
3. The Department of Education has embarked on this process in the knowledge of the legal difficulties with regard to fees and copyright. The legal opinion is that the design teams concerned would have right of action for the balance of fees due for the entire contract. Representatives of the Institute are due to meet the Minister for Education on 8 March next to discuss the situation.
There follows a general observation as follows:
General
1. Developer Competitions represent a form of off-balance sheet financing, similar to leasing which would ultimately devolve to the taxpayer to pay.
2. Developer Competition documents, as produced by the Government, provide indemnity to the Developers in respect of defects, which absolve the Developers from responsibility in these areas. This has been done to enable the Developer to borrow from the financial institutions.
3. The Institute has discussed funding arrangements with the various financial institutions that could allow the State to finance buildings in this way while retaining the independence of professional consultants and proper accountability for the State.
Before I go on to make a proposal to the Minister, I want to state that it is my understanding that on 14 February this year the Construction Industry Federation which represents the main contractors in the construction industry which is the largest single employer after the agricultural sector in our economy made the following point: that developer competitions would not be opposed in principle. I concur with that view but I am deeply worried about the way in which the Government are administering it. They, like myself, are concerned at the waste of resources which is perceived as the major problem and agree that measures should be taken to reduce that waste. A code of practice should be drawn up to permit developer competitions along the lines which they set out.
I want to confine my final remarks to these three explicit proposals. There is a clear waste of money involved potentially if the Minister pursues his course. That has been the net point raised here tonight and I would like the Minister to address it. The industry, at all levels, is not against the concept of developer competitions, but we are totally opposed to the way in which it is currently managed and operated. There is, undoubtedly, a waste of resources at all levels. We would argue that the perceived benefits in terms of net value to the taxpayer through the administrators in the Department of Finance can be maintained if certain ground rules and methods of operation are taken on board by the Department of Finance in the main and by the Department of Education in particular.
I will not try to put on the record tonight the minutiae of such ground rules but they are available. The principle essentially is to eliminate waste, retain competition, invite a limited number of people to go to the first stage with regard to design and, having satisfied oneself with regard to the suitability of the design from a number of different groups and having come up with a preferred design one would then go to the next stage in relation to cost and subsequently in relation to financing. That is a very tight summary of what is a much more elaborate process. Thus we would get the benefits of both worlds. Most important, the industry at all levels would not be led up the garden path.
Because of the downturn in the economy generally two or three years ago people were so hungry for work that they would compete against each other either at no cost or on the possibility of recouping that cost down the road. That is no longer the case and anyway, if people lose on the first round, it is their obligation — and they are certainly exhorted to do so by their bank manager — to try to recoup that further on. It is not in the interests of the community to try to impoverish or impose unnecessary costs on any sector of industry or on any sector of the community and the present operation of developer competitions leads to that.
In relation to the proposed meeting on 8 March or in relation to any way in which the Department of Education propose to use this mechanism, I suggest to the Minister that, before he goes any further, he should open up a line of discussion through the building unit which is well respected within the profession and within the industry and with the relevant institutions to agree terms and conditions and means of operation that would meet with general approval.
I want to restate that there is no opposition in principle to the concept of developer competitions. There is an articulated concern across the spectrum. The architectural, quantity surveyoring and engineering professions are not a hot bed of revolutionary socialism so the fact that I am hearing it from them is not to be seen in any party political sense. I am concerned that this community is imposing additional costs on itself which it could avoid while, at the same time, retaining some of the benefits that undoubtedly exist in keener pricing and keener competition that may come from developer competitions.
There is no doubt that off-balancesheet financing has considerable attractions for any administration and it is not the concern of the industry or the professions what option the Government wish to take in that regard. That is for a wider audience and a different kind of debate. The net point I make, specifically in relation to the schools, is that this is the wrong way to introduce developer competition in the Department of Education. If it is a question that the Department of Education are being coerced by the Department of Finance perhaps, through whatever political convention, that coercion might be relieved or some satisfactory resolution obtained.
In the broader sense and I know the Minister is part of a Government who have collective responsibility, I have to conclude by saying that this is not the way to go about getting the kind of buildings we need and can afford. There is a better way. The Minister should please respond to this plea by opening up meaningful discussions with the relevant institutions and the relevant sectors of industry in the spirit of social dialogue that is so much part of the new bon mot of the 1992 project. We should get the formula right. There is no argument about the principle but there is great concern about the way in which the scheme is being currently operated.
I would like to thank Deputy Quinn for his contribution. I will take up some of the points he made later but first I will give some of the background to the matter and dispel any misunderstandings there may be about this project.
It is a trial scheme as the Deputy said, which is merely confined at this stage to just four post primary schools. Its extension to other such projects has not even been considered and will not be until such time as the pilot scheme has been fully evaluated and found to be satisfactory. If, on the other hand, it transpires at any stage that the experiment is not successful, it will be discontinued.
My purpose and that of the Minister in initiating the design, finance and construct scheme for post primary building projects was to examine the feasibility of funding such projects from sources other than from State funds. The scheme is being introduced on a pilot basis initially and should it prove to be uneconomical, when compared with the conventional system of funding, then, as I have already said, it will be terminated.
Under the scheme as currently proposed, developers may be invited to submit proposals to design, finance and construct four post-primary building projects on the basis that the developers would meet all related costs and that the completed developments would be made available to the State on a deferred payment basis over 20 years. Accordingly, funding of the projects would be provided from outside the State sector and no payments by the State would arise until the completed buildings were handed over.
The four building projects which have been selected to participate in the scheme are as follows: (a) Cashel: A new community school for 800 pupils to replace a vocational school, a convent secondary school and a Christian Brothers School; (b) Newcastlewest: A new secondary school for 550 pupils to replace two existing secondary schools, Scoil Mhuire and Scoil Íde Naofa; (c) Castlerea: An extension to the existing convent school to provide a new community school for 675 pupils, to replace a vocational school and a convent secondary school and (d) Newbridge: A new extension to bring the capacity of Newbridge College to 425 pupils. It will be seen, therefore, that different categories of schools and structures have been selected so that the pilot scheme would be broadly representative of post-primary projects generally. It was considered that this approach would make evaluation of the experiment of greater value.
I was anxious also to facilitate centres such as Newcastlewest, Cashel and Castlerea in which rationalisation had been agreed with the school authorities in an effort to ensure that the required school accommodation would be provided as speedily as possible. It will be appreciated that the current financial constraints under which my Department must operate its building programme inevitably affects the rate of progress of individual projects. In these circumstances, I consider it important to examine any possible alternative methods of financing projects, particularly at centres where rationalisation has been agreed so the necessary facilities could be provided at these centres without undue delay.
The pilot scheme, as the Deputy may know, was publicised in the daily newspapers and the present position is that applications have been received from developers interested in submitting tenders. These applications are at present being examined in my Department. The legal formalities arising from the proposal are also being considered in consultation with the Department's legal advisers and while these are complex, I am hopeful that the difficulties will be resolved and the matter can be finalised in the near future. It is my intention to proceed with the invitation of tenders as soon as possible.
With regard to the question of designing of the projects, it is true that designs have already been prepared. It was felt however, that it would be more attractive to developers if they had the possible option of using the existing designs or of presenting their own.
The relevant professional bodies have written to the Minister and have indicated that they wish to discuss constructive proposals with her with a view to resolving general difficulties in relation to the scheme. As the Deputy has said, a meeting for that purpose has been arranged and the Minister will consider carefully the matters put forward by the relevant professional bodies during the course of that meeting.
With regard to a number of points specifically made by Deputy Quinn, first there is no question of the Department of Education being coerced into anything by the Department of Finance. This was a Government decision taken in an effort to establish if it would be possible to make available school buildings of the best quality, faster and cheaper than has been done up to now. The Department of Education, the Minister and I are enthusiastic about the possibilities that exist for the provision of these school buildings. There is no sleight of hand involved and I reject completely that this is a wasteful, inefficient or irresponsible way to go about this task.
I questioned Deputy Quinn on his difference of opinion regarding the scheme which is being proposed — I accept he does not argue in principle with the idea of inviting tenders for these projects by competition — and I understand his only objection is that he would prefer if a limited number of people were asked to design the projects. There is of course, as Deputy Quinn will appreciate, a difficulty with that because the Department would be obliged to invite tenders from the professional bodies in the construction sector at large. It simply would not be acceptable by Deputy Quinn or indeed by many other people to pick a selected number of people. Therefore, it would be only correct that a general invitation be made to anybody who is interested in tendering, as has been done in this case.
I take the point made by Deputy Quinn that if a large number of people go through the fairly expensive business of designing projects of this size, because there can be only one winner, there will be a number of losers. I would not argue with that but Deputy Quinn must accept that it would be impossible for the Department to invite selected individuals to design the projects as this would leave us open to accusations of choosing some professional people at the expense of others.
There are mechanisms to deal with that but it is a fair point.
It is a fair point. I am sure the Minister will be quite happy to hear the views of the professional bodies on that and to give consideration to what they have to say and to what the Deputy has said here this evening.
In regard to the other question raised by Deputy Quinn, that of liability with regard to future performance, I would find it rather difficult to accept — I have not the information here, I am giving a personal opinion — that the Department or indeed any public body would allow projects of this magnitude to proceed without the developers having full liability for providing the quality of buildings they contract to supply. Clearly this is an issue which will be taken up in the course of consideration of the projects. It is nothing new to select design, construct and finance proposals by competition at present. I think it is fair to say that the State is getting very good quality buildings at a very competitive price. That, at the end of the day, is what this scheme is all about.
I would remind the Minister that the most expensive housing this country ever built was the so-called low cost housing of the seventies which we are still paying for today. The Government are now going down the same road.
There is a big difference between a low cost housing scheme and the type of schemes that are now being put in place. There is no question, in this scheme, of accepting low cost buildings or buildings of a lesser quality than those we are used to. That is a very essential difference. The quality of buildings will be as good if not better than those being made available at present. An interesting statistic in the Department of Education for the past two years is that there have been reductions in the cost of primary school buildings of up to 40 per cent and 50 per cent compared with those which were provided three years ago. That has come about as a result of much more effective operations in regard to the design and construction of primary schools. We also have been able to build many more schools in the past two years and that is what we hope to continue doing.
I hope Deputy Quinn and anybody who is interested would see the advantages of this scheme. For our part in the Department, we will gladly take into account the points the Deputy has made here tonight. We would be happy to have further discussions with him and indeed, as the Minister has already indicated, with the professional bodies involved so that we can sort out any difficulties that arise to the satisfaction of everybody involved but with the principal objective of providing good quality buildings at the lowest possible price and as quickly as possible.
The Dáil adjourned at 11 p.m. until 10.30 a.m. on Thursday, 2 March 1989.