National Children’s Hospital: National Paediatric Hospital Development Board

The purpose of this morning's meeting is to examine in detail the reasons for the significant projected cost overruns at the new children’s’ hospital and to hear evidence from the National Paediatric Hospital Development Board. I welcome Mr. Tom Costello, chair, Mr. John Pollock, project director, Dr. Emma Curtis, clinical director, and Ms Eilísh Hardiman, chief executive officer of the Children's Hospital Group.

I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on 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 are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

I advise witnesses that any opening statements made to the committee may be published on its website after this meeting.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

I invite Mr. Tom Costello to make his opening statement.

Mr. Tom Costello

I thank the committee for inviting us to attend this morning.

In August 2013 I was truly honoured when asked by the then Minister for Health, Senator Reilly, to chair the National Paediatric Hospital Development Board. The board’s remit is to design, build and equip the new children’s hospital for the island of Ireland. The proposed new children’s hospital development is the most significant capital investment project ever undertaken in healthcare in Ireland, bringing together three children’s hospitals in a modern custom-designed building to deliver the best care and treatments for Ireland’s sickest children.

I was joined on the board by 11 other dedicated members with the collective skills and experience of major projects to deliver on the responsibility with which we were entrusted, namely, to build a world-class children’s hospital on the site of St. James’s campus. The urgent need for a new children’s hospital for the country has been recognised for decades. Acknowledging the importance of the challenge ahead of us and the realisation that we were building a hospital that will care for sick children and their families for many generations to come, we set out a bold vision for the project.

The project aims to deliver one of the finest children’s hospitals in the world and specifically a hospital that provides a truly supportive and therapeutic environment for children and their families. It will also provide a safe and stimulating environment for staff, recognising the importance of wellness. It will be a hospital sensitive to and positively enhancing of its urban setting and the quality of life of the local population.

Its layout, detailed design and construction quality will facilitate the optimum delivery of all aspects of leading current and developing clinical practice. It will be a leading edge fully digital hospital. It will be cost effective in terms of capital and whole-life costs, with sustainable solutions integrated into all stages of the project life cycle. In that regard, we have targeted a Building Research Establishment environmental assessment method, BREEAM, rating of "excellent" and BER A3 standards.

On design team selection, with a clear vision for the project and an experienced executive team in place, the board put in place a structure and process for design team procurement, securing planning permission and the procurement of contractors to ensure the timely delivery of the new hospital, while working closely with St. James's Hospital in decanting buildings from the 12-acre site identified for the new children’s hospital. Following a comprehensive procurement process, we reached our first major milestone with the appointment of the design team in August 2014. Thereafter, the design for planning was produced in a most expeditious manner. A planning application was lodged in August 2015 and An Bord Pleanála granted planning permission in April 2016. This represented the crossing of a major hurdle for the project in the light of the previous experience with the Mater site. The decanting of buildings from the 12-acre site identified for the children's hospital commenced immediately and an enabling works contract focused on demolition commenced in July 2016.

Importantly, shortly after receipt of planning permission, the procurement process for contractors began in June 2016. A procurement sub-group had earlier been established to define the most appropriate approach to contractor procurement. The group included our board, HSE estates and members of the Government construction contracts committee. Given the history of cost overruns and adversarial behaviour on public sector projects, it was decided to consider alternatives to the traditional form of tendering. Reference was made to lessons learned and evolving best practice in the UK and internationally. The universal challenge in all was to replace adversarial cultures with collaborative ones. The construction of terminal 5 at Heathrow airport is held up as a prime example of collaborative working. Prior to its construction, the British Airport Authority, BAA, conducted a two-year study in which every major UK construction project of over €1 billion completed in the previous ten years was investigated. The two main areas identified by the BAA as contributing to the general poor performance across all projects were a lack of collaboration among project partners and the clients' reluctance to assume responsibility for project risk.

The procurement model for the national children's hospital had to align with EU procurement rules and work closely with established government construction contract forms. Following deliberations over several months, which included presentation of the proposed option to the Government construction contracts committee, the strategy group recommended a two-stage tender process for procurement of contractors. This process was and remains the accepted best international practice for procurement of large-scale complex projects such as the children's hospital. Among the clear and defined benefits of the two-stage approach are that it attracted the desired calibre and number of local and international contractors to bid competitively for the project and it enabled tendering to occur prior to the completion of full detailed drawings for phase B, meaning that phase A construction could start two years earlier than if a traditional procurement strategy was deployed, thus allowing the bulk of costs to be secured at 2016 levels, that is, when they were tendered. It also facilitated early involvement by contractors in the design development process, with critical input on buildability, contractor and supply chain integration, risk management and innovation resulting in the completion of a fully integrated design. Critically, prior to commitment of expenditure on the main building works there is now certainty on cost and programme, with client and contractor risks reduced or eliminated. The programme includes delivery of a fully commissioned and quality assured building. The two-stage tender process has and will continue to foster a collaborative culture, eliminating traditional adversarial and opportunistic behaviour.

Stage 1 of the two-stage tender process involved the works being bid on on the basis of a preliminary design and an approximate itemised bill of quantities based on that design. The contractors provided rates for all elements of the works. Stage 2 included the designers and contractors working together to develop the design to completion. The tendered rates were then applied to the final bill of quantities produced by our quantity surveyor. The actual cost is determined by multiplying the final quantities by the tendered rates. Where there is disagreement between our quantity surveyor – Linesight – and the contractors, it is resolved by the independent expert whose decision is binding on both parties. First stage tenders were returned on 21 October 2016. The lowest bid - €637 million - was received from BAM and very competitive. It was €131 million lower than the second place bid. Following a detailed tender assessment, preferred bidders were identified in February 2017. BAM was the main contractor. H. A. O'Neill received the mechanical installation contract; Mercury Engineering received the electrical installation contract, while Schindler was successful regarding the lifts. The final brief and definitive business case were approved by the Government in April 2017, enabling the board to commence phase A of the build, namely, the works below ground, including the basement excavation and construction, while the adjusted contract sum was being determined. The total capital cost identified in the project brief was €983 million. As the tenders returned were substantially above the quantity surveyors' pre-tender estimate, there was pressure for cost reductions. The capital cost - €983 million - included a target amount of €66 million for cost reductions or value engineering. An additional cost - €61 million - was reported, mainly related to fire officer requirements, including sprinklers, and costs associated with programme alignment between the main contractor and specialists. The contract was signed with BAM on 3 August 2017 and work commended on site on 3 October 2017. At that stage we recognised that a major procurement exercise had been completed successfully and that it was a significant milestone for the project. We had begun construction. Let me give more detail on the second stage. At the same time works commenced on site, the contractors began the engagement on the design and development of phase B with the design team. The two-stage procurement process transfers the risk to contractors in regard to cost, quantities, co-ordination issues and project delays, unless caused by client changes or a lack of design information. As the design development progressed from October 2017, the design of earlier packages such as the concrete frame, the steel frame, stone cladding and internal walls was completed and costed and trending within expected costs. This trend changed by mid-2018 as the design of the very complex mechanical and electrical systems – there are 24 in total – was completed and it became clear that there was a very significant gap developing between the estimated quantities at tender stage and the quantities now required to deliver the completed design. With this very significant increase in project scope came the requirement for an extended programme and the costs associated with the programme extension and the additional scope. Working closely with the project team and external advisers, we scrutinised all costs as they became clear, dealing, first, with the increase in the construction cost which ultimately came to €320 million. The process of determining the cost of the various packages was fully interrogated and independent reviews were commissioned, validating the fitness for purpose of the mechanical and electrical design and reviewing the adherence to agreed procedures during stage 2. The contract allows the board, if it sees fit, not to proceed with phase B building works with the main contractor. Therefore, we explored the alternative options for project delivery, including not proceeding if it were deemed to be the correct option. It became clear after this exercise that the option of awarding phase B to BAM would result in the lowest cost and fastest completion by a significant margin. This is covered in slides Nos. 18 and 19 in the pack issued to members. On completion of the various exercises, the board was satisfied that, despite the great disappointment at the outcome, proper procedures were followed throughout the stage 2 process in determining the final contract sum. The correct option to complete the children's hospital was to proceed with phase B.

Following our meeting in November 2018, the board made a recommendation to the HSE and the Department of Health that the works should proceed as set out in the agreed tender process and that BAM should be instructed to proceed with phase B, the main building works.

I will go through some of the detail on the cost but we can go into greater detail later on. I will switch the two around in the sense that I will deal first with the construction costs at a high level. The sum of €570 million, which was included in the approval of the overall €983 million in early 2017, increased by €320 million up to €890 million. As I mentioned earlier, we had targeted savings of €66 million. At the end of the day we achieved €20 million. That added €46 million to the project. Statutory issues, such as fire regulations following the Grenfell fire and additional sprinklers, added €27 million to the project. Engagement with clinicians on the final design added a further €21 million. Between those three elements, €94 million was added to the figure of €570 million. In essence, the result of the stage 2 process, that is, the design and development element, accounted for an additional €94 million. There were omissions in the design at tender stage that were brought into the final design during the design and development process at a cost of €20 million. The impact of the nine-month extension of the programme and the additional scope added €90 million. Then, as happens in construction contracts, there were additional claims from the contractors to reflect the changes in scope. At the end of the day, through the intervention of the independent expert, they were settled and agreed at €22 million, which takes us up to €890 million. We can go into greater detail on that later.

As well as an increase in construction costs of €320 million, there were additional costs of €130 million. These included €50 million in VAT, additional costs on the satellite centres at Tallaght Hospital and Connolly hospital, staff, site supervision, design team, medical equipment and risk and contingency costs. The final project cost is now €1.433 billion, which is €450 million higher than the figure of €983 million approved by the Government in 2017.

Following the Government's approval of the investment decision, the phase B works and the main building works have now been instructed to BAM, with construction works of the main hospital on the St. James's Hospital campus to be completed in mid-2022. Close to the end of my submission I address benchmarking. In early 2014, the paediatric hospital board prepared a preliminary budget. That is detailed on slide 11. It showed project costs of €800 million. This was based on advice from AECOM, the quantity surveyors for the Mater children's hospital proposal. The estimate included construction costs of €2,500 per square metre, which was the appropriate cost at the time. We were in a deep deflationary period at the time. We allowed an inflation allowance of 3% per annum in accordance with the trend at the time. In the AECOM estimate, which totalled €800 million, there was an overall cost of €2,875 per square metre. An international benchmarking report completed by AECOM in October 2018 concludes that the average construction cost for an international hospital project similar to the national children's hospital is now €5,951 per square metre, more than twice the estimated cost of construction in 2016. Indeed, this is borne out by information from the industry on the decade up to 2022, which indicates that construction costs for large, complex projects in the Dublin area will have increased by up to 100%.

The cost per square metre for the children's hospital is €6,500.

It is above the average of €5,951 per sq. m but not above the maximum costs.

The timeline to deliver the new children's hospital from the appointment of the board in August 2013 to project completion in mid-2022 is a total of nine years. I am satisfied that the board and executive team have set about the task in a competent and professional manner, putting in place the most appropriate structures and processes based on best international practice. If we were to start again on a project of this scale and complexity we would adopt the same procurement approach. Notwithstanding this we are deeply disappointed and acknowledge the very significant cost increases and the challenges these pose. There are lessons to be learned regarding the wisdom of pursuing cost reductions on competitive tenders and ensuring the sufficiency of tender information, in particular, mechanical and electrical services at tender stage. This would have ensured a more accurate prediction of actual quantities and costs at the tender stage and, to a large extent, would have reduced the under-estimation of costs at stage 1.

With cost and programme certainty now achieved, our focus is on ensuring that all parties work safely and collaboratively and deliver a hospital of outstanding quality in a project of which we all will be proud, namely, one of the finest children’s hospitals in the world providing unsurpassed care for the nation’s sick children for generations to come. At the same time, we are mindful of the Government's concerns to ensure the project is indeed delivered within the agreed time and within the revised budget. We welcome the planned independent review of board’s processes and procedures. Any issues identified will be dealt with speedily and comprehensively in the interests of successful completion of the project and the effective management of public funds.

I thank the members of the committee for their attention. My colleagues and I will be delighted to answer any questions they might have.

I thank Mr. Costello. Will he explain why these overruns were not anticipated? Was it a fault in procurement, tendering or both? An expression of deep disappointment does not reflect the frustration and anger felt by this committee over what has happened. We want to find out who was responsible for these failures as this is an unprecedented overrun in one of the largest infrastructural developments in Ireland. The consequences of these overruns are not confined to the national children's hospital, but will have knock-on effects in all capital investment in our health service over coming years, including the National Maternity Hospital, the national forensic hospital, the National Rehabilitation Hospital, the building of elective-only hospitals as identified by Sláintecare, the primary care programme and the replacement of equipment, which is necessary in all our hospitals, as well as the transitional funding that will be required to develop Sláintecare reform. It is not only a question of an overrun in the children's hospital, as it will be extremely damaging to all capital investment of the next few years. Therefore, I would like Mr. Costello to answer why these overruns were not anticipated.

Second, what has the board identified as the premium for building the hospital at the St. James's site rather than a greenfield site? There is obviously a huge cost in decanting buildings, as Mr. Costello described it, and demolition before construction was to take place.

Third, why has the cost exceeded the international average and become the most expensive children's hospital in the world and one of the most expensive hospitals in the world? What factors have led to that overrun? Why were they not anticipated? There are knock-on effects that will affect our health service. What was the premium for building on the St. James's site?

Mr. Tom Costello

On the first question, we should be mindful of the fact that we are operating in a hugely inflationary time, having come from the recession through to the period of 2012 and 2013 and the decade after that, as I mentioned earlier. It is likely that building costs will have increased by up to 100%. We set out on a journey. We had a deliberate approach in how we structured the project.

The two-stage tender process was internationally regarded as the best approach, whereby one goes to the market with a preliminary design and every element of the project identified but the quantities not finalised. We went through the process and I earlier went through the advantages of going this route. These are advantages which have accrued now and will in the future so that we are now at a stage whereby, through that process, we now have firm price and programme certainty.

I mentioned there were two issues in terms of lessons learned around seeking to get cost reductions when there was a competitive tender process. In hindsight, there was pressure on the budget, mainly driven by tender price inflation, and pressure to reduce the costs. People must remember that it is a huge project. It is one of the most expensive hospitals in the world but it is also one of the biggest children's hospitals in the world. It is important to remember that and because it is big, it is extraordinarily complex. People might walk into a room and say a room is a room but the infrastructure behind the delivery of that room to deliver a fully digital hospital is absolutely enormous. At the early stage of the design, the complexity of those services and the quantities involved were not fully recognised within the early stage tender. That became clear as the design developed over 2018.

It is important to remember that the quantities that are now applied to the rates we got in 2016 are the quantities that are required to deliver the project.

My question was why those were not anticipated.

Mr. Tom Costello

It is a complex project. For instance, there are 5,000 km of cable, of all different sizes, and we have rates for each type of cable but the actual quantum of it was not fully defined in the documentation. It is now fully defined and, when we learned of the large increase, we sought an outside review to consider if we had over-designed the building. The feedback at the end of that exercise was that the building is fit for purpose for a modern, fully digital hospital. The quantities that have come out of that two-stage process are applied to the rates we got at tender in 2016 and that gives us the final cost. Does that deal with that question? In fairness, it is complex and difficult to understand because of the quantum but that is the nature of it. We set out on the journey of doing a two-stage tender, which meant that at the beginning, the rates, by their nature, were approximate.

Has Mr. Costello estimated what percentage of the costs relates to the premium of building on the site at St. James's Hospital?

Mr. Tom Costello

I do not have the cost. The reality is that there is a big premium on building on any site in Dublin.

This particular site has certain costs built into it relating to demolition and decanting of buildings as Mr. Costello described in his opening statement.

Mr. Tom Costello

That information is available and we can come back with it but I do not have it to hand here.

Would Mr. Costello be able to provide that to the committee?

Mr. Tom Costello

We can do that. We will follow up on that.

Mr. John Pollock

To add to that, none of the €320 million increase in costs that we are reporting here today is associated with being on the St. James's campus. These are costs that would have occurred on any site. For example, statutory issues arose around sprinklers and the Grenfell Tower fire and we had to comply with those changing regulations.

Regarding omissions in the bill of quantities, the scale and complexity of this job is that it has an area of 158,000 sq. m, which is the size of Dundrum Shopping Centre, and within those 158,000 sq. m, there is a great deal of complexity with the 6,000 rooms and the level of services involved. Mr. Costello has spoken about the digital hospital. This is the first public digital hospital in Ireland and that comes with cost impacts. People might ask what is meant by a digital hospital. It means that we no longer rely on paper records. Everything is digitised. We have electronic healthcare records so clinicians will use their iPads and tablets to connect with records. Every piece of equipment requires an interface with the electronic healthcare records so everything is stored centrally. That has an enormous impact for the design of the building to ensure there is resilience built into the hospital. If the IT systems crashed the entire system would go down, whereas in the old days one might have lost a piece of paper. In all the 6,000 rooms there are multiple data points for pieces of equipment and for staff to connect to, but each of those data points is replicated in case something goes down. There is an A and a B. They must go to a separate computer room rather than to the same computer room in case a computer room fails. They also each need a separate power supply and back-up generator. There is a huge amount of resilience and duplication in a digital hospital.

Why would that not have been anticipated in the original design, procurement and tendering?

Mr. John Pollock

The user engagement piece that we set out on day one in terms of getting on the site two years earlier than with our traditional procurement model was that we engaged with the users and we took typical rooms. We did not design all 6,000 rooms at that stage because that would have taken us a further two years. We got prices for everything so when our tenders came back in 2016 we had prices for all those pieces of equipment and IT points. However, the quantities increased more than anticipated through the detailed design development.

Thank you.

I wish to clarify a point. Is the witness saying, effectively, he got the price of the cables but he did not know how many he would need?

Mr. Tom Costello

That is the nature of the two-stage process. The design was at a preliminary stage when we went to tender. That is the way a two-stage tender works. One brings in the contractors for their expertise rather than bringing them in when the entire thing is designed and then for the next five years the contractors seek to dismantle, in essence, and create opportunities for themselves. In this case the contractor has worked collaboratively with the design team to finalise the design. Yes, it is right to say the quantum of cables, taking that as an example, was not known until the full design was done. I mentioned earlier it is 5,500 km of cables. That is the quantum involved.

Thank you. We will return to that point. We will take a break at 11.30 a.m. for 20 minutes or so to give people an opportunity to recharge their batteries.

Mr. Tom Costello

You had a final question, Chairman, if you want me to answer it. You asked why the cost has exceeded the average. The average cost of the exercise that was done by AECOM was €5,951 per square metre and in the children's hospital it is €6,500. The highest cost of the hospitals was €8,000 per square metre. To answer your question on why it is more expensive, Dublin is an expensive place to build at present but it is mainly because, and I spoke earlier about the vision, we set out to build one of the finest children's hospitals in the world. It is also one of the biggest children's hospitals in the world. There are elements in it that cost money. In terms of providing a truly supportive and therapeutic environment for children and their families, all 380 rooms are private rooms en suite with space for the parents to sleep.

That is a quantum shift from what we are doing now. We have also created gardens such as the rainbow garden in the roof, which is the length of Croke Park. That is about recognising the importance of feeling in all of this. Dr. Curtis will come in on that later. We then talk about the sustainability. It costs more to put energy-efficient systems in the building we are constructing but that will yield huge savings during the life cycle of the building. We set out to build an outstanding hospital and there is a premium for doing that. It is fit for purpose rather than too good. It delivers on what we set out to do, which was to build one of the finest children's hospitals in the world.

The premium now, unfortunately, is that every other capital project in the health service is going to be set back some years because all moneys are going to be directed to the national children's hospital. That includes money from other Departments to try to pay for the hospital, as far as we can gather. The premium is excessively high. I call Deputy Donnelly.

I thank the Chair and all of the witnesses for coming. I have looked at this in some detail and when it comes to the costs I believe that Mr. Costello and the board have failed completely and catastrophically in their job and their obligations to the State. The original bid from BAM came in at about €640 million. When the dust has settled, I do not think we are going to see any change from much less than €2 billion. When this is all done, I think the overspending will be somewhere between €1 billion and €1.5 billion - and it could be higher.

The fiscal space for the entire country last year was less than a billion euro. Think of the work, the analysis and the oversight involved in deploying that €800 million, or so, while Mr. Costello and his team in St. James's Hospital were spending more than that. As the Chair said, a Cabinet memo from December began to outline the costs of that. What will not happen includes additional hospital beds, new emergency cancer and cardiac facilities, primary care facilities, long-term residential units, accommodation in the community for people with disability, new laboratories, new operating theatres, investment in paediatric blood services, the second catheterisation laboratory in Waterford, a new emergency department and cystic fibrosis facilities at Beaumont Hospital and no development of appraisals and early planning for Sláintecare capacity projects until 2022 at least.

That is the reality of the incompetence and failure that I think we are seeing from Mr. Costello and his board in respect of the financial control of this project. He keeps talking about a figure of €890 million. The figure the Taoiseach gave to the Dáil was €1.433 billion and the memo which the Minister for Health, Deputy Harris, presented to Cabinet referred to €1.73 billion. Can Mr. Costello tell us the total cost at this stage? I am not interested in phase one and phase two, above ground or below ground, kit out or commissioning. What will be the total cost to the State by the time the doctors, nurses and children actually get to walk into this hospital? Is it the €890 million that Mr. Costello keeps talking about, the €1.4 billion to which the Taoiseach referred, the €1.7 billion stated by the Minister for Health or, indeed, a higher figure than all of those?

Mr. Tom Costello

I will try to clarify that. I respect the fact that it is perhaps confusing with so many numbers. It is certainly complicated. When we talk about the contract with BAM, that is a figure, excluding VAT, for the construction of the national children's hospital at St. James's Hospital. It does not include the satellite centres or design fees. When we speak of the tender for BAM, therefore, that is solely for the construction costs and not an overall development cost for the project, which includes not only the national children's hospital at St. James's Hospital but also the satellite centres and the associated costs of staff, design fees etc.

Through the stage two process, that figure of €640 million has gone to €890 million. We are talking about two different quantums of work when we talk about one and the other. We are also talking about a shift of risk and getting to a place where there is certainty about a large complex project.

My question concerned how much this will cost.

Mr. Tom Costello

I will cover that but I just want to clarify that the figures of €640 million and €890 million relate to the construction price. Regarding the overall development, the figure at the end of stage two is €1.433 billion. We are certain at this stage that through the design process and the contractors because we have gone through everything - we talk about quantum and we now know exactly what the quantities are - the contractors have bought into and now take the risk on the quantity so it is down to the finest detail-----

Does Mr. Costello recognise the figure of €1.73 billion in the Cabinet memo?

Mr. Tom Costello

I recognise the figure. Our board's responsibility relates to the design, build and equipping of the hospital. Thereafter, the operation of the hospital and its start-up are matters for Children's Hospital Ireland. Ms Hardiman might explain what the add-on-----

Could Mr. Costello answer the question? What I want to find out is the final number. Could Mr. Costello give us this number?

Mr. Tom Costello

In terms of the responsibilities of my board, our final number is €1.433 billion.

What is Mr. Costello's estimate of the total final number to the State?

Mr. Tom Costello

I will ask Ms Hardiman to answer that question because it is outside the remit of the National Paediatric Hospital Development Board.

So Mr. Costello believes the total build will not exceed €1.433 billion.

Mr. Tom Costello

Correct.

And that is up from approximately €640 million, which was the initial bid.

Mr. Tom Costello

No, it is not. The initial one was the figure of €983 million so just in terms of-----

The initial bid was €637 million.

Mr. Tom Costello

But that has increased to €890 million.

I know it has increased. The initial bid was €637 million.

Mr. Tom Costello

That was for construction only-----

And the figure for construction is €1.433 billion.

Mr. Tom Costello

No, it is for the total development. The construction price - the BAM contract - is now €890 million.

I know what it is but BAM bid €637 million.

Mr. Tom Costello

Correct.

What was not included in that figure that is now included in the figure of €1.433 billion?

Mr. Tom Costello

Does Mr. Pollock wish to go through it in detail?

Mr. John Pollock

The BAM bid was €640 million. That is purely construction. It does not include VAT, the two urgent care centres at Connolly and Tallaght hospitals, the decant and crèche at Tallaght Hospital, the enabling works, the decant at St. James's Hospital and aspergillus treatment so there are a lot of other construction contracts that are part of the children's hospital. The construction piece tendered by BAM in 2016 was €640 million and that piece has increased to €890 million. On top of that-----

If building the children's hospital is going to cost about €900 million, what is the other €500 million that gets us to €1. 433 billion being spent on?

Mr. John Pollock

I am coming to that. The other elements that are included are the urgent care centre at Tallaght Hospital; the urgent care centre at Connolly Hospital, which will be completed in April 2019-----

They are small - 5,000 sq ft. Even if one applies the massively inflated euro rate per square metre, one would get to about €45 million. That leaves about €450 million.

Mr. John Pollock

I am coming to that. It does not include the decant works at St. James's Hospital to clear the 12-acre site. That was €16 million. It does not include equipping the hospital, which is, obviously, a significant contract at about €70 million. It does not include VAT, which is about €200 million for the entire project. It does not include our project, staffing, design team, legal team and procurement advice costs - all the other costs.

We have taken out a project insurance policy on the entire project. We insure the entire project to avoid splitting responsibility for it. There are all those elements.

Following the addition of the costs of some fairly small, low-cost satellite centres and the clearance of the site, the cost of those elements that matter to the public and children increased from €640 million to €1.4 billion. How many extra beds are we getting for that increase?

Mr. John Pollock

The scope and the brief of the hospital was set out on day one. As Mr. Costello stated, this is one of the largest-----

I am not asking what size it is. I am asking how many extra beds we are getting for this massive additional spend.

Mr. John Pollock

The scope of the project was set out on day one. It is 470 inpatient beds. That is the level of bed capacity.

I would appreciate if Mr. Pollock would give a direct answer to my question. How many extra beds are we getting?

Mr. John Pollock

The hospital is about far more than just beds.

I am not asking Mr. Pollock what the hospital is about. I am asking him how many extra beds we are getting. Is the figure zero, ten, 100 or 200? What is the number?

Mr. John Pollock

The project has 470 beds.

How many extra beds are we getting for this overspend? Will Mr. Pollock please answer the question?

Mr. John Pollock

It has the same number of beds as we had.

Are we getting any extra beds?

Mr. John Pollock

There are no extra beds in the hospital.

I thank Mr. Pollock.

Ms Eilísh Hardiman

If I may, because the question is probably more appropriately answered from the services perspective, we are getting extra beds from what we have at present, if that is the Deputy's-----

No, that is clearly not my question. How many extra beds are we getting for the considerable additional overspend that we are discussing this morning?

Ms Eilísh Hardiman

My apologies.

I do not accept the benchmarking used. Having looked through it in some detail, I think all sorts of costs have been left out. I do not accept the rationale for the benchmarking that has been used, according to which the cost of €2,500 per square metre four years ago now stands at €5,500 per square metre. The only explanation the witnesses seem to have given is that it somehow has become twice as expensive to build in Dublin. However, the site cost has not gone up because the State owned the site. Bricks have not become twice as expensive in three years and labour wages have not increased by 300% in the past four years. I do not accept this increase. When this project is finished, the cost per bed to the State will be twice the cost of the most expensive hospital ever built anywhere in the world. How is it conceivable that the board is managing a project in which the Irish people will have to pay twice as much per bed as the most expensive hospital built anywhere in the world?

My second question on that relates to accountability. If Mr. Costello was asked by a client to build a high-quality hotel that had to be cost-effective in terms of the capital used and he informed his client two years into the project that on the basis that inflation was high and he had underestimated the amount of bricks, wires, windows, beds and pipes needed, the client would have to pay twice as much for the new hotel as the most expensive hotel built anywhere in the world, he would be fired, his company would be taken off the contract and numerous court cases would be taken to find out what happened. I am trying to understand how we will end up spending twice as much per bed as the most expensive hospital ever built. How many of those involved in this project have lost their jobs to date and how many contracts, whether for quantity surveyors, mechanical and electrical works, building or site clearance, have been cancelled due to these cost escalations?

Mr. Tom Costello

I will go back to the benchmarking exercise. AECOM is a reputable international company with a reach across the world in terms of the data that it collected. The information it has given us is supported by facts and figures from a range of international hospitals similar to the children's hospital. At the end of the day, the information it has presented to us, which we are happy to share and which can be interrogated, is that the average cost for building a hospital of the size and complexity of the children's hospital is €5,951 per square metre.

We are above that figure, at €6,500 per sq. m. They are the facts and we are happy enough to have that information to validate it.

In terms of accountability, we are a very accountable group of people. Our board was appointed based on the skills required to deliver a project of this complexity and scale. We appointed an executive team, headed by Mr. Pollock, and across the board the expertise on our executive team matches or is much better than what would be seen on any international project. The project is managed really well; there are experienced people involved in it and we have set about our work in a structured way.

I apologise for cutting across Mr. Costello because it is pushing towards the end of my time. The specific question I am asking is how many people have been fired so far because of the cost overruns and how many of the commercial contracts involved in the project have been cancelled because of them?

Mr. Tom Costello

On the contracts, there was a very thoughtful approach in how we went through a competitive bidding process. At the end of the day there are strict EU rules that govern procurement. If somebody has failed to deliver a project or to deliver a project in a safe manner, the contract might be terminated, but so far there has been no basis to deal with any contract in that way because, apart from our management team and board, we now have BAM Ireland, H. A. O'Neill Limited and Mercury Engineering Ireland on our team. They are three of the five biggest contractors in the country. We have the resources-----

I am sorry to cut across Mr. Costello again, but I do so in the interests of time. Has a single commercial contract been cancelled?

Mr. Tom Costello

No.

Mr. Tom Costello

There has been no basis-----

I can see plenty of bases. Has a single person lost his or her job over this anywhere?

Mr. Tom Costello

As I said-----

Mr. Tom Costello

The calibre-----

I understand the calibre and I am not asking about it; rather, I am asking a simple, direct question. Has a single person lost his or her job? Yes or no?

Mr. Tom Costello

No.

Earlier Mr. Costello explained to a member of the committee that the quantities had been wrongly calculated to the tune of hundreds of millions of euro of taxpayer's money. Hundreds of millions of euro was added because the amount of materials needed to build the hospital had been underestimated. When it was sought to pull some of the costs back, amazingly, mistakes were not made in the other direction. Some €65 million in cost savings were sought, but less than one third of that figure was identified. For example, if commercial companies were estimating the amount of equipment needed to build a hospital and it turned out that they had massively underestimated and given per square foot estimates half of what they are now, would any of these issues trigger legal or commercial conversations where very serious mistakes had clearly been made in design? It appears that underestimations were made left, right and centre in terms of what was required to build the hospital.

Mr. Tom Costello

It is important to understand and look at how large, complex projects are delivered internationally, as we have done in the past few years. It is a really challenging exercise, which is why we have resourced the project with-----

Mr. Costello is right that it is complex, but given all of the complexity, is it not amazing that the cost only seems to go up? Complexity never seems to mean that costs will go down. As the Chairman said, complexity is difficult, but it can be anticipated and budgeted for. However, it appears that it just means underestimation.

Mr. Tom Costello

In fairness, the management of complexity takes time, which is why in the past 18 months we have had the contractors working with the designers to make sure all of the complexity in this job in the next four years has been anticipated and that it is now at the risk of the contractors.

Before we had committed-----

It is at the risk of the contractors now that the price has gone up. A fixed-price contract works before the price escalates. It does not work afterwards.

Mr. Tom Costello

In fairness, it works when the complexity and the full quantum of the work is fully anticipated. That is why the two-stage tender is international best practice. When a project of this complex nature is started without clarity and without a shared vision or shared input into its design, what happens once it has been worked on for four years - this happens all the time - is that the contractors seek to improve their situation through perceived gaps. The designers will never close all the gaps. What we have done here is that we have brought the contractors in early and they have worked together to close all the gaps. There is now certainty before we commit to the major part of the spend.

I thank all the witnesses for coming in this morning. While Deputy Donnelly was teasing out the figures, it struck me that, whereas we all know that cost overruns can happen, in this case, the overruns are on a monumental scale. If I was having work done on my house and the costs were escalating at this rate, I am not sure I would continue with the contractors. The board seems to have great faith in their ability to deliver, notwithstanding that the costs keep increasing.

This question was asked previously but I want to get to the bottom of this matter. In terms of the additional capacity for sick children, I fully appreciate and welcome that the hospital will have single occupancy rooms. The Irish Nurses and Midwives Organisation only started to count the number of children waiting on trolleys just over a year ago. Its figures would lead us to believe we have a capacity problem, which we clearly have. Is it the case that the sum total of additional beds being provided is four? Will there be only four additional beds?

Ms Eilísh Hardiman

I am happy to answer that question for Deputy O'Reilly. I agree with her that there are challenges in respect of the existing hospitals which are trying to accommodate and meet care needs. I want to clarify that children's emergency medicine is different from adult services. I know that, unfortunately, the reason all but one of the children who are waiting this morning are in the emergency department is isolation. We have beds in the hospital but they are multiple-use beds and because these children have influenza and other infectious diseases we cannot place them in the wards. There is an absolute crisis. We need to get the hospital built as fast as possible because of the additional need for isolation specific to paediatric healthcare.

To answer the Deputy's question on the number being added to the existing bed base within the three children's hospitals, as a total number there will be 68 more beds. It is important, however, to break down that figure in order that it is understood. It is not just about numbers, but about the types of beds we are trying to introduce. The most important figure relates to inpatient and day cases, for which there will be 44 beds. Within that there are new beds for mental health and for children with eating disorders, of which we currently have none. Most important, we will also have 60 critical care beds. This will be the largest critical care unit on the island of Ireland. It will provide paediatric critical care for all of the sickest children in Ireland. It will provide the cardiac critical care for the whole of Ireland's services, because we are now providing cardiac services on an all-island basis. It will also have neonatal intensive care and critical care beds. That is a fundamental change. The greatest challenge for us in paediatrics is dealing with critical care needs and getting really sick children transferred from the regions quickly when they need to be transferred.

There also are the isolation requirements.

As for what is new, another 24 beds are based within the paediatric outpatient urgent care centres and in the emergency department as short-stay beds. We have demonstrated and already put them into Tallaght Hospital and we started to do so at Temple Street this year. I can report that for the children waiting for emergency care, our access for admissions in 2017 and 2018 has consistently reduced throughout the TrolleyGAR system because of these new ways of working. This hospital will address the critical need for isolation facilities for paediatric care, which has a greater demand for such facilities than in adult services. This year, we will open up the services at Connolly Hospital Blanchardstown. By July, we will have opened an urgent care centre and outpatient unit at the hospital. It will be the first time that there will be paediatric services in north County Dublin that will meet the vast majority of the requirements for that population. We have major pressures in this area, particularly at the facility at Temple Street, because 124,000 children avail of our paediatric emergency care facilities and 48,000 of them make use of the smallest unit at Temple Street. We anticipate that from this year, the investment that has been made in paediatrics will bear fruit and reduce some of the pressures being experienced at Connolly hospital.

We are dealing with a different way of working on the part of GPs. As we have demonstrated, by having short-stay beds we do not need to admit as many patients as at present and consequently, the initiative should help to alleviate any bed capacity issues. The initiative will be rolled out in Tallaght Hospital next year and then it will be rolled out in the hospitals. We have a highly integrated phased approach to how we are going to transform services for children, particularly in the areas of general paediatrics, trauma orthopaedics, in which we have seen significant improvements due to the investment that has been made in paediatrics, and of course urgent and emergency care. In line with the rest of the system and the Sláintecare report, we are increasing the bed capacity but we are doing so in a very niche way. It is not the same old, same old. We are identifying and future-proofing where we anticipate the future healthcare requirements are.

I thank Ms Hardiman for her comments. I do not accept there are empty beds when there are people and children waiting for them but I will investigate that further.

Ms Eilísh Hardiman

I can forward a report to the Deputy.

I would be very grateful for a report.

Mr. Tom Costello

On the first comment about our confidence in the contractors, I refer to the way the contract is structured. We gave the first phase to BAM Ireland. However, during the second phase, if there was any reason that we did not want to go forward, including when we checked whether it was the best option for the project, we had the option of not going ahead with the contractor. Earlier, I mentioned slides Nos. 18 and 19 and Mr. Pollock can explain them if the committee so wishes. Following all of the interrogations that we did, and looking at the different options that we had, it transpired that the option of choosing BAM Ireland was by a large margin the best choice in terms of cost and certainty. Given the increase in cost, our decision was not made lightly. Our decision was based on the work that we had done and we made a recommendation to proceed on that basis.

Mr. Costello has said that it was the best option in terms of cost. Is he suggesting that other people could have contributed more to the massive escalation in costs? Such a claim lacks credibility. I have read the slides and as I am conscious that our time is short, I would rather that we did not go through them.

Mr. Tom Costello

That is okay.

At the initial tender process stage, did nobody ask why one bid was €132 million less than every other bid? If that was me I would find such situation alarming. If I was tendering for a contract to install a few presses I would wonder how someone else could do the job for substantially less. I do not believe there are other people who could escalate the costs at quite that rate. Perhaps they could if they thought they would be given a blank cheque for such work. The board selected the cheapest bidder.

The initial figure was just over €600 million. It is now €1.7 billion. No one inside or outside this room would be surprised if it reached €2 billion. Did no alarm bells go off?

Mr. Costello has been in his position for five and a half years. In that time, what sort of updates did he give the Minister? Relatively recently, the Minister said in the media that the cost would be €605 million and that he was fully confident the project would be delivered on time, on budget, etc. The figure is now multiples of that and could be multiples more. In terms of briefing the Minister, how many meetings did Mr. Costello have with him, what was the format of such meetings and was the Minister kept apprised of all of the cost overruns?

If I get the chance, I wish to go through the table that the witnesses supplied the committee in order to get some detail of how these figures were arrived at. If Mr. Costello was not asking the hard questions about how this was happening, was the Minister not asking them either? Notwithstanding the fact that we need investment, this is a substantial amount of money and it now appears that, on the back of an assertion that the costs would be controlled and certainly would not escalate at this rate, it will come at the expense of other badly needed projects.

Mr. Tom Costello

The Deputy asked a number of questions. The bid was competitive; it was €131 million lower than the second bidder. The EU procurement rules are clear in terms of pre-qualification. Due to the complex nature of the project, we were anxious to get international bidders. We were fortunate, in that we had a shortlist of five bidders. We made a decision on the basis of cost and quality, so it was not all cost based. The criteria were 75% cost and 25% quality. Before bidding opened, we went through an assessment of quality. In fairness to all of the bidders, the quality of the bids submitted was outstanding. When the tendering process opened, the criteria on how to make an assessment were clear. One follows the rules for months and then awards a contract to the bidder that comes through the assessment of quality and cost. In this case, it was BAM. It was a competitive bid.

Due to the way we are structured-----

I am sorry to cut across Mr. Costello, but does he now accept - I am trying to choose my words carefully, but a former Taoiseach used to refer to "smoke and daggers" - that items the board wanted may have been left out of that competitive bid, ensuring it was the lowest bid? Mr. Costello is saying that the board was obligated to go with the lowest bid. That does not make any sense, as people should be looking for value for money, but if the board was not doing so, that is fine. It was going with the lowest bid. Does Mr. Costello now accept that it might only have been the lowest bid on paper and not in reality, and that the persons tendering for it were aware that the board would go for the cheapest bid and gave the board an estimate that was not realistic? It does not stack up that the cost would move from the initial figure to the current one, and perhaps more again. They would have known that. They are in the construction business; I am not. I do not know whether Mr. Costello is either.

Mr. Tom Costello

I am.

Clearly, they knew. They must have had a handle on how the costs could escalate. When the board was considering the bids, did no one express concern that one of them appeared to be an outlier in terms of cost and might not be able to deliver this project for that amount?

It was far out of line. The sum of €131 million is not a small amount of money; it is a huge amount. If one thinks about the people who are working in the hospital and how long they will have to work to pay the taxes necessary to generate the money to be able to pay for it, one is talking about massive amounts of money. Did nobody scratch their head and think that there might be something hidden here or wonder how this was such an outlier? It strikes me as odd that the board would simply opt to choose the lowest price bidder and nobody questioned that. I would question it. If it was even a small household project and if a bidder was making a significantly lower bid, I would question it. I am trying to get a handle on what the thinking was at the time.

Mr. Tom Costello

First, I am in construction and am 40 years in the business.

With respect, that makes it worse because Mr. Costello should have known. I am simply a householder and am not involved in construction so if I am engaging somebody to do so some work, I could be forgiven for going with the lowest bidder who turns out to be three times the initial cost quoted to me.

Mr. Tom Costello

To return to EU procurement rules, they are very clear in terms of pre-qualification, bidding and how one selects the preferred bidder. We do not have discretion in that. We cannot say, perhaps, how somebody is thinking. One cannot use that discretion. The rules are very clear. We do not have the discretion one might have if one was doing a project of a smaller scale that was not bound by EU procurement rules.

The tender figure from BAM was €640 million and we have now reached a position where, as we go forward and seek to complete the project by 2022, we have a programme and cost certainty on a figure of €890 million. The €640 million at tender stage excludes VAT of 13.5% and the €890 million also excludes VAT. As John Pollock mentioned, that is one of the figures that make up the €1.433 billion.

I am sorry to interrupt but if a bid comes in at 20% lower than the next bid, there must be a reason for it being 20% lower. The person making that bid is using the same materials and has the same criteria. A reduction of 20% in respect of the nearest bidder is huge so there must be a reason for that. Did you find out what the reason was?

Mr. Tom Costello

There was a great deal of interrogation of it. Ultimately, there are different criteria as to whether it is a balanced bid. If a contractor decides he is going to provide a square metre of block work at 10% cheaper than the competition, it is very hard to tell him that he cannot do that, or he might say that because he does not have enough work he is taking a 5% reduction on the project overall. The reality is that contractors such as BAM and the other bidders are professional companies. They would have put several hundred thousands of euro worth of work into preparing the bid. At the end of the day, the bill of quantities was presented in a very professional format. The bids came in during August 2016 and we only finally got through the assessment in March 2017. A period of six months went into the quality and price assessment. Unless one had very clear grounds, one would end up in court for two or three years if a contractor decided he had not been treated fairly. In this case, from a quality and price point of view the tender was professional, as it was for the four bidders.

I would say it was. They were bidding for a very lucrative contract. I asked Mr. Costello another question in respect of the Minister. At some point in the proceedings, I would like to think someone in the process put up his or her hand to ask a few questions. If it was not the witnesses, then maybe it was the Minister. The Minister made public comments on the costs and he has now been entirely contradicted by the information we have at the moment. It remains to be seen how large that contradiction will grow in the future. How was the Minister kept apprised? How was it ensured that he was briefed? How many meetings were there?

Mr. Tom Costello

There is a very clear reporting structure. The board reports in to the children's hospital project and programme, CHP&P, steering group which meets monthly. That in turn reports into the children's hospital project and programme board which meets bimonthly. Our reporting on a monthly basis is through what is known as the CHP&P. Feedback is all done in respect of the board. We meet every month. For the period from the middle of last year up to the end of the year we probably met every week. We did that because for months it had become clear that there was a challenge with the costs.

We first had to try to understand the basis of it and then work with our professional teams, our executive team and with the professionals we got externally to review it to ensure, as I mentioned, that we were not overdesigning the building and that the stage two criteria were being applied properly. I might ask Mr. Pollock-----

Does Mr. Costello meet the Minister directly?

Mr. Tom Costello

The way that it is structured-----

I understand the structure. Mr. Costello does not meet the Minister. Is he-----

Mr. Tom Costello

I meet the Minister when there are events, so I do meet him regularly. The formal structure-----

I am talking about formal seated meetings with a calculator out. If the Minister has a flashing red light going off and he is concerned about the monumental overrun, he will then go through that structure and communicate to Mr. Costello that he has a concern. Has he communicated any concerns on the overrun to Mr. Costello?

Mr. Tom Costello

It has been ongoing since we flagged-----

I mean specifically in the intervening time between when the Minister made a statement about the cost and that being subsequently contradicted. In the intervening time, while the cost was escalating, did the Minister communicate to Mr. Costello, either through the formal structure, informally at an event, in writing or in any other way, that he had a concern about the cost overrun?

Mr. Tom Costello

The structure is clear in respect of how the board communicates with the Minister through the CHP&P.

I am sorry, I am not trying to trip up Mr. Costello. If the Minister had a concern and he wanted to relay that to Mr. Costello, was Mr. Costello aware that the Minister had any concerns, either through the structure or any other way? Was it made known to Mr. Costello that the Minister had a concern?

Mr. Tom Costello

Absolutely, going back as far as when we raised the issues on the sprinklers and all of that. Mr. Pollock might explain how the structure works.

I do not want an explanation. I want to understand whether, if the Minister had a concern, he raised it with Mr. Costello. If he did, was there a response to it? That is not clear. It is a really simple question and it should be clear.

Mr. Tom Costello

It is very clear. It goes back as far as late 2017 when the issue on the sprinklers was raised. I referred to a sum of €61 million earlier. When that was presented as a possible additional cost to the CHP&P, we got into a two or three-month phase of challenge in respect of what we could do to ensure that we did not go above the €983 million. We looked at many different things. There has been a major ongoing challenge to keep costs to a minimum. The structure is tough and it is robust.

Mr. Costello will appreciate that it does not seem that way to everybody. I have one more question and then I will save my questions until after the break in the interest of time. Mr. Costello said that when he learned of the level of the increase in the costs, his reaction was to commission an external review. How much did that cost?

Mr. Tom Costello

I can get the figures for the Deputy but I do not have them to hand. There were several reviews so-----

I am referring to the one Mr. Costello spoke about in his submission.

Mr. Tom Costello

We got a review because the biggest cost increase related to the mechanical and electrical services. Our sense at the time was that it might have been overdesigned so we commissioned one of the leading companies in the UK, DSSR, to do a full review of the mechanical and electrical services in order that we could confirm that they were fit for purpose. DSSR has carried out many similar projects in the UK and it confirmed that, based on what we were setting out to achieve, namely, a fully digital modern hospital that was-----

My question was just about the cost of that review. Mr. Costello can see how it looks to other people because of the phrase that when one is in a hole one should stop digging but when there is a massive cost overrun, if one attempts to spend his or her way out of that, it does not look right to people. I would appreciate details on the money that was spent on that.

Mr. Tom Costello

It is important. Arup is our designer and we needed an external professional view and that was part of our due diligence. The board took its decision very seriously because we had the option not to proceed with the project. In a way that might have been an easy way out because we could have said that it was too expensive but we spent four or five months analysing this in every possible way so that when we came to our board meeting in November we could make this decision. It was an enormous decision but it was not made lightly. It was made on the basis that, despite the fact that the ultimate cost of the building was far higher than we expected it to be, we made a recommendation that we should proceed with it.

Perhaps I can get that figure at some point.

Mr. Tom Costello

Yes, that is no problem.

I welcome our guests. I will speak to them twice because I understand they will also appear before the Committee of Public Accounts on 31 January. This was a major topic of conversation over Christmas and the new year when politicians have time to reflect and talk to people at length. This will be a case study for years to come. It will affect future projects, as the Chairman outlined, and it will have a considerable impact on future capital projects in health. I was a member of the Government that made the decision to build the new children's hospital and it was the right decision. I was a Minister of State when the then Tánaiste, Eamon Gilmore, and then Taoiseach, Deputy Enda Kenny, allocated approximately €450 million for the project and I was part of the Government that made the decision to go ahead with the project. I would not have been part of a Government that would have made a decision to go ahead with a new children's hospital for €1.7 billion because the impacts on other health capital projects would have been so dramatic. We would have had to rescale and review the project and there is no way any Cabinet would have signed off on it in any way shape or form for anything near that figure or for even half of it.

I note the Taoiseach's recent comment, when answering questions about the hospital, that he had to choose his words carefully. He indicated he believed the costs should have been anticipated and noted that this was the first time this model had been used to build something like this. It was, he said, being done by a dedicated build board set up by legislation.

He said it was very disappointing that this had happened. That must concern the delegates. I believe the Taoiseach was being polite in his language because it was obvious to everybody in the Chamber and among the public that he was extremely annoyed. As legislators, we are extremely annoyed. Frankly - I am united with others in this - we will not stop until we get to the bottom of what happened. We must learn from it, but we must also have accountability, given the scale of the overrun. Members of the public are enraged and want to find out about the entire decision-making process.

Will the delegates remind us how the board is constituted? On the reporting mechanism, I sensed that they were very uncomfortable with Deputy O'Reilly's second last set of questions. Will they enlighten us on how the reporting mechanism works? I presume the board is constituted as a public entity. Is that correct?

Mr. Tom Costello

Yes, under a statutory instrument.

How do board members communicate with each other?

Mr. Tom Costello

The board meets monthly. We have six sub-committees. People with expertise and knowledge chair different sub-committees. For example, John Cole who is an architect and was previously head of-----

I understand, but how do board members communicate with each other? Is it electronically?

Mr. Tom Costello

As mentioned, we meet monthly. The sub-committees meet-----

How is information shared between members of the board? Is it electronically?

Mr. Tom Costello

Yes, it is.

Is it done using a consistent, dedicated NPHDB email address or members' private email addresses?

Mr. Tom Costello

It is not private.

Mr. John Pollock

I can answer that question. We have an IT MinutePad system in place. Board minutes and action items are all uploaded onto a hosted site.

It is very simple. The board is a public body and information cannot be outside its circle. I am asking if all of the information is within the circle of that body.

Mr. Tom Costello

Absolutely.

As chairman, Mr. Costello can guarantee that there is no information outside it.

Mr. Tom Costello

Absolutely. We are very mindful of freedom of information legislation.

Perfect. Mr. Costello might remind us of the reporting mechanism. To whom does he report?

Mr. Tom Costello

I report to the children's hospital project and programme steering group. Communication is through John Pollock, the project director.

Specifically, to whom does Mr. Costello or Mr. Pollock report?

Mr. Tom Costello

Mr. Dean Sullivan, the assistant director of the HSE, who chairs that group. The group above it, the CHP&P programme board, is chaired by Mr. Jim Breslin, Secretary General of the Department of Health.

Therefore, the reporting mechanism involves Mr. Costello or Mr. Pollock acting as PRO, for want of a better phrase. They communicate with Mr. Dean Sullivan who, in turn, reports to Mr. Jim Breslin, chairman of the other body. Is that correct?

Mr. Tom Costello

That is correct.

I am very interested in this. There are a number of critical decision-making milestones in the project. Obviously, there is the awarding of the tender. I have major concerns about the scale of the undercut by the contractor. It sets off alarm bells. There are examples in other projects, even large-scale projects, in this country which are well known. That was one critical milestone. Another was when the cost escalated to €983 million, or whatever the figure was, and the decision to proceed. Awarding BAM stage B of the contract was a critical decision and a milestone. Then there is the escalation to €1.4 billion and subsequently the Government memorandum refers to a figure of €1.7 billion.

With regard to all of these junctures, I assume there is documentation which the board will be providing to this committee or to the Committee of Public Accounts about how this was communicated up to Dean Sullivan, who obviously needs to come before the Committee of Public Accounts, and to Jim Breslin and about the decision-making which will be described in the communication. Will the board provide the committee with all of that relevant documentation in the next week or so?

Mr. Tom Costello

There is no reason we cannot.

Good. That is a very honest answer. I thank Mr. Costello very much. The information behind those critical decisions will, dare I say it, help the board because, from a transparency point of view, it will help us. We just need to get to the bottom of this. We also, on behalf of the taxpayers, need to get to the process behind making a decision to proceed at the very top, from a Government perspective. I know how it works at Cabinet. I have been there. We need information on those critical junctures, the decision-making, and the documentation that went up to Dean Sullivan and, subsequently, to Jim Breslin.

When it comes to those critical decisions, and particularly the decision to award the stage two contract to BAM, on what date was that decision taken?

Mr. John Pollock

At its meeting on 5 November the board made the recommendation that the phase B contract be awarded to BAM. Prior to that it had not been. As the Chairman pointed out, we had the option not to award it if we believed that was the right thing to do, but having looked at where the costs were and at the alternative options, it was by far and away the best option. We recommended-----

I am really asking about how that was communicated.

Mr. John Pollock

The board issued a report recommending to the HSE, through Dean Sullivan, that phase B be awarded to BAM.

It is my understanding that the first the HSE knew about this was in and around the middle of November. Would that be correct?

Mr. John Pollock

As Mr. Costello-----

There was a meeting in the HSE around the middle of November, which was absolutely mind-boggling to it. As politicians, we deal with the HSE all the time. I had been warned for months that I might as well forget about the 60 bed unit in Limerick hospital and the 50 bed unit in south Tipperary, both of which would be of concern to my constituency, about the national maternity strategy, about a rake of other issues in respect of primary care and all of that because they were gone. I was told they would be profiled. That is how the politics of it would work. They would happen and they would be announced, but they would be profiled out over a number of years because of this overrun. The communications in this regard went up through the system to Dean Sullivan on that date. Is that correct?

Mr. John Pollock

It would have been after that date because that was the date on which the board met. It would certainly have been within a week of the day the recommendation was issued.

Obviously Dean Sullivan is not here. We should bring him in next week. I will be recommending that to the Committee of Public Accounts. I presume that would then have been communicated up the line to Jim Breslin pretty quickly.

Mr. Tom Costello

Would Mr. Pollock mind responding to that, because Deputy Kelly had said that the only communication the HSE had was in November?

If that is not accurate, the witnesses can tell me.

Mr. John Pollock

The contracts in respect of the phase A works, which relate to the underground works BAM was initially instructed to get on with and which are now nearing completion, were signed in August 2017.

Mr. John Pollock

Work was commenced in October 2017. At that stage we had a grant of fire certificate from the fire officer, which had imposed the requirement to put sprinklers into the building. We appealed that decision because it was far in excess of what the current building regulations stipulate.

The Bord Pleanála inspector confirmed that we were exceeding the building regulations, but notwithstanding that, An Bord Pleanála determined that sprinklers should be installed.

I am aware of that.

Mr. John Pollock

In late 2017, we anticipated that decision might be made, so we costed the sprinklers. Prior to the signing of contracts on the urgent care centres at Connolly and Tallaght hospitals, two of our mechanical and electrical contractors got into financial difficulties. One went into examinership and the other was liquidated, so we had to revert to the second-ranked candidates. Prior to signing contracts with BAM Ireland, Mercury Engineering and Jones Engineering in regard to the mechanical and electrical, we had to align their programmes. In late 2017 we apprised the children's hospital project and programme board and steering group of €60 million in additional costs.

A total of €60 million.

Mr. John Pollock

A total of €60 million.

The Department, namely, Jim Breslin or the Minister or both, would have been aware of that in late 2017.

Mr. John Pollock

Correct.

That is fine. That is not the issue on which I wish to concentrate.

Mr. John Pollock

I was going to continue.

We are somewhat short on time.

Mr. John Pollock

Yes. Sorry. We continued working through the two-stage process, that is, closing out the final cost with our designers and contractors on a package-by package basis. Until mid-2018, our design team was confirming that we were on budget and that, apart from the €60 million we had previously-----

When was that?

Mr. John Pollock

That was until the middle of 2018.

Mother of God.

Mr. John Pollock

At that stage, we were beginning to complete the packages around mechanical and electrical. In August 2018 the design team reported a very significant cost increase of €140 million on top of the €60 million. We briefed the HSE and the Department at that stage regarding the approximate increase of €200 million.

That was in August 2018.

Mr. John Pollock

That was in August 2018.

Obviously, there was no comment from the Department at that stage. That is another €140 million. When did the cost escalate from €200 million?

Mr. John Pollock

Our board directed us to conclude the two-stage process and go back and determine the final cost. In parallel with that, we were to look at alternatives and determine whether there was a better procurement option. We told our design team to bring the process to a conclusion. It concluded at the end of October and we brought it to our board at its November meeting.

That is when the approximate €400 million overrun was identified.

Mr. John Pollock

Correct. That is when the total cost was made known.

The cost went up by €60 million and then another €140 million. In the two months from the end of August until the end of October, by how much more than €400 million had the final cost risen?

Mr. John Pollock

A total of €50 million. I have been referring to figures net of VAT. The board meets on the first Wednesday of every month, so the meeting was in early August.

The Department of Health was aware of a €200 million overrun in August 2018. By the time of the board meeting at the end of October or in early November, the overrun was €450 million.

Mr. Tom Costello

As Mr. Pollock stated, it is important to note the €200 million increase related solely to construction costs.

Mr. Tom Costello

Because we were going through the two-stage process, the report-----

The conclusion of the statement provided by Mr. Costello reads, "There are lessons to be learned in relation to the wisdom of pursuing cost reductions on competitive tenders and ensuring the sufficiency of tender information, in particular, mechanical and electrical services at tender stage."

Mr. Tom Costello

We recognised that the complexity of the mechanical and electrical services had not been fully defined at the time. On the cost overrun, while we are deeply disappointed at the outcome, we are disappointed at the fact that the ultimate cost of doing the job was underestimated at tender stage.

We are also disappointed because of the impact it has on other projects.

I know that. Mr. Costello said that he would not change how he did the tender or he would not change his decision making.

Mr. Tom Costello

That is correct.

I have serious problems with that because we are in virgin territory here in that we have never done this before and that is why the phrase "best practice" is not applicable here. I do not accept that this is international best practice because of the circumstances in this case. When it comes to best practice, we are not comparing like with like. It is not apples and apples and oranges and oranges, it is a completely different jurisdiction so there is no best practice. This is the first time ever and to be frank, we obviously have failed massively. There are learnings here but best practice does not cut it. The line that is being thrown out at political level to the effect that we are delivering the best children's hospital also does not cut it because the consequences for other capital plans and for people's health in this country are catastrophic.

I will come back on this but we need to get into the decision-making process to proceed with BAM based on the fact that it was so far under everyone else in its pricing and the escalation of costs that has resulted. The €983 million did not include ICT, electronic health records, EHR, family accommodation and a whole range of other things. Politically, I am not sure how aware people were of this. They were not aware of it in any way, shape or form. When an announcement was made that €650 million was to be spent on a hospital, that was seen as the cost of carrying out all of the work and cutting the ribbon and that is what people thought, including the witnesses. That is what at least 95% of the members of this committee and the public thought was happening.

I have a specific question on governance. On the actual specifications, Mr. Costello said in response to questions that the cost escalated because of the specifications, the requirements and the tightening up during phase B. How were the requirements for the scale and expense of the requests for facilities that were being put forward by the current hospitals that are a part of the group coming through validated? In future, I want to see each and every request and how it was validated.

I refer to the hospitals that are coming together to create this new hospital. They obviously have requirements and that is fine but how did we validate the scale, the necessity and the cost of same?

Dr. Emma Curtis

We assessed the activity and capacity that would be required in the new children's hospital. We have the three Dublin children's hospitals so we started by collecting the data of their current activity. Then an exercise was carried out by health planners-----

How many beds are there in the three hospitals?

Dr. Emma Curtis

There are 350 beds.

I understood that they had considerably more.

Dr. Emma Curtis

That is the number of inpatient beds. I have the data here and I can share them with the committee. There are 350 beds, of which 189 are in Crumlin, 45 in Tallaght and 116 in Temple Street.

Those are inpatient beds?

Dr. Emma Curtis

Yes and there are 79 day beds, of which 44 are in Crumlin, ten in Tallaght and 25 in Temple Street.

Do they all have full occupancy?

Dr. Emma Curtis

Yes, most of the time except we do obviously have challenges.

I ask Dr. Curtis to do an equation for me and to come back to the committee. Go back the last three years, get the total number of beds that are in circulation in the three hospitals, divide it by 365 for occupancy and day occupancy because we must remember that weekends need to be taken into account as well and come back to me with the figure. That is what the requirement is in this State and then we will see whether the figure of 473 is needed or not.

Dr. Emma Curtis

There is healthcare planning-----

I agree and we face population increases and so on.

Dr. Emma Curtis

Correct. Does the Deputy want-----

I do not want that. We will figure that bit out and fill in the gaps. I ask Dr. Curtis to do the equation I asked her to do, if she does not mind. Then we will see what that figure is and we will look at the figure of 473 to see if that is what this hospital requires.

We will then allow for future planning and future population. With the advent of Sláintecare, information and communications technology and all of that sort of stuff, and with the two satellite centres outside the main hospital, we have to look at the scale of decision-making as regards requirements. This is where costs soar.

Mr. Tom Costello

It would useful if Dr. Curtis could give a flavour of how that decision was made and how the scope of the project was defined. That is the starting point.

Dr. Emma Curtis

It was based on current activity and then population growth and immigration were taken into account. Currently, there is very significant unmet need. There are very lengthy waiting lists. Some 45,000 children are waiting to be seen at an outpatient clinic, of whom 17,000 have been waiting for longer than a year. There is probably a waiting list of between 12 and 18 months for a magnetic resonance imaging, MRI, scan for a child. There are significant waiting lists for children who are waiting for non-urgent surgery, that is, elective surgery. There are extremely long waiting lists, sometimes lasting years.

That is fine and I am glad to hear all of this. I want to do the equation. We know what the final figure is. Once that has been done, the witnesses may want to introduce a completely separate document outlining what those other figures are. Presumably that will fill in the gap.

Dr. Emma Curtis

Yes, we can do that, certainly.

We can then judge if filling in the gap was the correct procedure.

I have one last question if that is all right. It is a specific question concerning private practice. What facilities in the hospital are being built to be used to provide for care and treatment for children by clinicians in private practice? What is the cost?

Dr. Emma Curtis

I can respond to that question. The new children's hospital is 100% composed of single rooms, so no differentiation is made between a private ward and a public ward in the way there might be in an adult hospital. Currently, the consultants we have in the hospitals have type B contracts, which means they are entitled to attend to outpatients in the hospital. We have nine outpatient suites which are meeting that requirement. Paediatrics has considerably less private practice than adult medicine. I have to bow to Mr. Pollock, who knows what the construction contracts are. However, that component is very small and it meets the contractual obligations we have in employing those consultants.

Can Mr. Pollock indicate what the quantum is?

Mr. John Pollock

My recollection is that it was about €2 million. I would need to check the figure, but that was my recollection at the time.

I will come back in again. I thank the witnesses.

I thank the witnesses for providing these figures. Could we get a breakdown of the 6,000 rooms? We discussed the number of beds and the number of day-care facilities. Could we get a breakdown in respect of the 6,000 rooms? The general public believes that all that is being built for the hospital is 470 rooms. I would like some clarification on the breakdown and purpose of the 6,000 rooms. I understand there will be a need for medical personnel. It might be helpful if the witnesses gave us an idea of how many clinics would be running at any one time when the hospital is fully operational, taking into account that there will be 6,000 rooms. That is my opening question.

Mr. Tom Costello

Could Ms Hardiman give the Senator a sense of that?

Ms Eilísh Hardiman

We can give the Senator a full report. The committee members have that. Sharing that information is no problem. With regard to how we deliver paediatric services, it is important to understand that the vast majority of the services we deliver are outpatient-based services and emergency and urgent care. The committee will note that in the planning for this hospital we have seen significant increases in provision for outpatients. We would have a total of 141 outpatient rooms.

They are spread between the outpatient centres in Connolly and Tallaght in addition to the new children's hospital. The vast majority of services can and should be delivered in paediatrics on the same day through outpatient facilities. Again, that reflects how we are moving, with Sláintecare, to much more nurse-led and health and social care professional-led clinics, not just consultant-based clinics.

We have considered the activity and planning and projected the future requirements and we have mapped them into the particular rooms. We can give the members a breakdown because the mapping is based on different specialties. Let me give an example. Some clinics usually involve once-off visits. Some 25% of the population are children and because we are dealing with all those with the tertiary needs and those who require the high-end specialties, many have multiple appointments. Sometimes they come to our hospitals and spend the whole day going between the various specialties. The cystic fibrosis children take up the whole day in one room because we do not mix them with others for infection-control reasons. Sometimes one child can take up a whole day in clinic. The breakdown accounts for this. The activity and planning analysis can map this.

It is important to note a children's hospital is different from an adult hospital and needs very many auxiliary supports. We have facilities for parents to stay in the hospital close to the critical care, or what we call "within dressing-gown distance". The mothers and fathers and other family members are with critically ill children and we need to support them. This is different from other cases.

It is important to note that the hospital is to be the only one educating future healthcare professionals in paediatrics. All the undergraduates in medicine and nursing and the health and social care professionals will be based there. The hospital includes the education centres to facilitate this. We have developed these with the universities. All seven universities will have some association with the hospital. That has to be taken into account.

One must consider the sheer volume of support required. In our planning, we have prioritised to ensure that all the clinical requirements are met. We have sought and optimised the support structure. That was one of the benefits of being co-located on a large medical campus, namely, the 50-acre campus at St. James's. We have managed to achieve some efficiencies in this regard through shared services. We are utilising services that are for the whole of the campus and not just for the children's hospital. We have actually built in capacity to take on the maternity hospital also. All these factors need to be taken into account.

In fairness, trying to explain to the public that there are 6,000 rooms is the issue. Ms Hardiman talked about 141 clinics. Will some of the rooms be attached to those clinics?

Ms Eilísh Hardiman

Yes.

If we could get some kind of breakdown on the 6,000 rooms, it might be helpful.

Ms Eilísh Hardiman

I will be happy to do that.

The public is thinking solely about the number of beds and the cost per bed but we are in fact talking about the provision of many additional facilities at the hospital.

Ms Eilísh Hardiman

Absolutely. An example concerns the assessment areas in the emergency and urgent care centres. There are 54 assessment areas. Those are really important. That is how we actually get the children in and out in a timely manner. We have ten assessment cubicles. They are all single in keeping with the nature of paediatrics, which requires isolation. There are ten even in the satellites and there are 34 in the emergency department. Even with all those, there are treatment rooms and other supporting facilities that are important.

I assure members of the committee that we have had three external reviews of our activity and capacity. These were commissioned by the HSE in our early stages of planning to test the robustness of the clinical planning and the requirements. I give assurance on the requirements. I am happy to give a breakdown and demonstrate how much of the hospital concerns the clinical aspect.

It is complicated because even the 60-bed critical care ICU will be the largest unit of its kind. Many support rooms are needed around such a facility, including mechanical and electrical. We can happily break that down for the Senator.

It might be helpful as well if Ms Hardiman could give us an idea of the number of people who are likely to be going through the outpatient department every day. Have we figures for that?

Ms Eilísh Hardiman

Yes, we do.

We are talking about three hospitals combining. While we have the individual figures for each of the hospitals, it might be helpful to know the numbers going through per day. Have we any idea of the figures involved?

Ms Eilísh Hardiman

What I have is the total activity projections. We anticipate significant increases in that, particularly because, as Dr. Curtis already identified, we have significant challenges around access to some paediatric services. We have anticipated that the activity for our inpatient department will involve 24,000 cases annually and that there will be 26,000 day cases. We anticipate there will be over 124,000 emergency department cases. I can break those down into daily rates. It would be a good point to demonstrate.

It would be helpful because it would then give an idea of the service the hospital will be providing. People are now looking at just the number of beds where there is a significant amount of additional activity. These breakdowns would be helpful when looking at the overall costs of this project.

Ms Eilísh Hardiman

This year alone we are opening up the paediatric outpatient and urgent care centre at Connolly hospital. This will significantly help deal with our current challenges. We know we have challenges with outpatient access. This year alone, we will be able to offer an extra 7,500 outpatient facilities. We will see the benefits of this investment starting this year, along with other service developments. This is about how we are transforming the delivery of services to children. While we are cognisant of the investment involved, from the perspective of Children’s Health Ireland we are confident the children and families, as well as the taxpayer, will see the benefits of this investment, starting from this year.

On the initial tender by BAM, which was €130 million less than the next contractor’s, documentation was issued to each contractor as to what was required. When the tenders were submitted, is it correct that a bill of quantities was also submitted as to how the costing was broken down? Was the listing for each item the same for all contractors or was there a variation? Did that variation mean a contractor which was including less in its tender document could, as a result, tender at a cheaper price? I have been involved in a legal capacity in arbitration proceedings in building cases and I am very much aware of cost overruns. I know where something was not specified, it becomes an additional item and normally costs far more than what was originally tendered for. From Mr. Costello’s own experience, he is also aware of the arbitration process. Will he provide some clarification on this issue?

Mr. Tom Costello

It was not the first time a two-stage tender has been worked. It has been used by the National Roads Authority, NRA, in early contractor involvement, ECI, contracts, as well as being used widely in the private sector.

In this case, we made a decision to get our quantity surveyor to prepare the bill of quantities. It was not prepared by the contractor. Accordingly, everyone is working off the same basis.

A bill of quantities went out to the contractors and a check was done to make sure a fair rate was applied to every single item. The Senator will know from his own experience that there are arguments as to whether it is €15 or €20 for a four-inch block. In this case, when the check was done on all the bill of quantities, it was deemed that the tender from BAM was balanced. It was competitive but it was not below cost. It was deemed to be a reasonable tender supported by a really high-quality bid. BAM was not just bidding on a bill of quantities basis. It had to set out how it was going to approach the job across all the different disciplines of health, safety and environment.

One thing on the positive side that was prescribed here relates to the local community benefits package. We have always set out that the project should be a legacy project. It is of such a scale that it should obviously be a legacy for childcare in the future but also for the local Dublin 8 area and the city generally. Within the contract were things as diverse as the local employment benefits, but the quality of the submission that came back from BAM, and indeed the other tenders, was outstanding and supported its commercial bid. I confirm that the bills of quantities priced by each of the bidders was the same bill of quantities.

When Mr. Costello looked at the overall contract and all the additional items that needed to be put in place, if for argument's sake he had taken the second highest bidder and had started working with them, would the costs now be far higher than those we have ended up with at this stage?

Mr. Tom Costello

They would, because many of the additional costs here are in mechanical and electrical services. While we have had a lot of discussion about the main contractor and the fact that there was a competitive tender, a lot of the additional cost is in the mechanical and electrical packages. People should have comfort and we are happy enough to share this information. No more than the rules of EU procurement are very prescriptive, the rules around stage one and the bill of quantities, the development of the stage two process, and ultimately the finalisation of the contract price are also very prescriptive. The revised quantity in the bill of quantities is prepared again not by the contractor but by our quantity surveyor. The Senator will know that nowadays, with the benefit of building information modelling, BIM, and because of the complexity of this, the BIM model, in essence, takes the uncertainty out of it. The BIM model will prepare the bill of quantities in association with our own quantity surveyor so there cannot be arguments over measurements because the BIM model verifies the quantities. The ultimate quantity of every element of the job is absolutely clear. This really complex BIM model means that someone can press a button to ask how many single doors are required and that information is there. There is nothing ambiguous about this.

It is also important to note that of course there were some arguments, but within the contract it was agreed that the independent expert would adjudicate on those and his finding was binding on both parties. At the end of the list here is an amount of €22 million for the contractors' additional claims, but they are predicting all the challenges there will be on this project for the next four years.

Obviously, they are protecting their risk but, ultimately, a process was in place through the independent expert to deal with those.

Could I ask one final question?

Does the Senator want to bank his questions until after the break or is he happy to keep going?

I have one simple question. Could far more have been put into the original bill of quantities that was sent out to builders? Mr. Costello talks about the additional costs associated with mechanical and electrical services. Could far more have been put into the original bill of quantities when tenders were invited?

Mr. Tom Costello

That is a fair question. One of the lessons learned concerns the complexity of mechanical and electrical services. There are 24 different systems across mechanical and electrical services from duct work to pipe work to medical gases and so on. In respect of the 5,500 km of cable, there are different sizes of cables and we have rates for all of them. As Mr. Pollock mentioned, in respect of a digital hospital, it is not just about having a socket on the wall, it is about how the cable is distributed within the building and back into the data centres and switch rooms after that. There was significant complexity involved that took two years to develop. We went out to tender in June 2016. We eventually had the mechanical and electrical design completed in mid-2018. An option we considered in 2015 was to go on the basis of completed design and then go to the market. We would have been going to market two years later at a time of high inflation.

We will break for 15 minutes.

Sitting suspended at 11.42 a.m. and resumed at 12.07 p.m.

I propose we resume. Deputy Durkan was the next speaker.

The last man standing.

I thank the Chairman. I welcome the witnesses and thank them for coming along this morning.

This project is an emotive project nationally among professionals and the general public. Anybody who has spoken with the parents of sick children over the past 20 years will say always that there is a burning requirement for a modern hospital. In fact, the argument and debate has taken place over the past 20 years with little progress. I mention that as a backdrop to what we are talking about now.

Tendering, particularly in relation to inflation, is a sensitive issue at present. It does not take too much inflation in a particular area to increase suddenly and dramatically the cost of a project. There are one or two questions that I would put.

First, in the number of tenders received, will the witnesses remind me what was the difference between the lowest tender and the highest tender, and the extent to which the specification was observed in each?

Another question relates to the €890 million plus the ancillaries that affect other locations and sites. Is the cost likely to increase further under any of those headings and, if so, to what extent? I refer to the €1.4 billion eventual cost. To what extent can the cost be retained at that?

It is €890 million excluding VAT. I thought there was a clause somewhere that VAT was not chargeable on some State projects. How does that apply to this case? If one is building local authority houses, it does not apply anyway. Maybe we could get clarification. How much would the VAT be? I do not want to get a calculator. It is not too difficult a job but it is a contributory factor.

Were the various bids in any way date conditioned?

In many cases it is usual to specify that a bid will last for a specified time and then there is a question of what it will cost after that time.

Is the project in accord with international norms regarding the specification for hospitals of different categories, A, B, or C, for instance? I ask because if we want a state-of-the-art world-class hospital, and the parents of sick children want nothing less than a world-class hospital, then we must be careful not to dumb it down before it even starts and create a situation where we expect to get it for half price. It will not work that way and we will not get what we are looking for, which is the highest possible standards of care for sick children in the future.

To what extent did the hospital's internal quantity surveyor and evaluation show any discrepancies? Did a discussion take place vis-à-vis the various tenders? Were they compared and if so, how? Was it pointed out that tenders A, B, or C, had more or less than was required and so on?

Was a request made or recognition given to the impact of inflation on various building works, whether it was in construction, electrical works or whatever and if so, what were they? Were they marked as being of a particularly sensitive nature? To what extent were they likely to change over a period of years?

How satisfied was the evaluation team that it was dealing with the best that could be done and that its efforts were not upstaged by any of the bodies involved seeking to increase the cost extent, scale or value of the project beyond what the board itself required?

I am aware that since last July, the group has spent considerable time discussing what would be done next after it discovered the price overrun. By what amount did it overrun in the period between July 2018 and November or December? There definitely was an overrun during that period so was it wise to delay at that stage beyond acknowledging that there were cost increases in excess of what had been anticipated?

Were the cost levels anticipated at every level and potential increases identified at an early stage? I refer especially to the lowest, middle and highest bids. Is the board satisfied that at all times that each body which tendered was ad idem with its intention, namely, to put in place the most cost-effective building and facilities in line with the project's specification and regulations?

I am sorry to link all the questions together but it cannot be helped.

Mr. Tom Costello

There are probably seven or eight questions. I will ask Mr. Pollock to deal with the challenge of whether it was wise to delay and the exercise we undertook to look at the options.

Mr. John Pollock

To return to the Deputy's question, in the middle of 2018 the cost overruns were starting to arise. At that stage our board requested that the executive go back and look at alternative options for the project, conscious that we did not have to award the phase B works to BAM Ireland. We had the option to tell BAM Ireland to complete the phase A works and go back out to the market so it did not have any entitlement to get the next phase of the project. It was important for us to conclude the process to say definitively what the overall cost of the project was and in parallel with that, to look at what our other options were.

We looked at two other options, one of which was that we now had a totally completed design with all 6,000 rooms fully designed and detailed. We had a fully detailed specification and bills of quantities, and everything had now been itemised out so we could have gone back out to the market with that and re-tendered the project. The issue with that was that it would cost a further €300 million, additional to the €1.4 billion we are reporting today and it would also delay the project by up to two years. We looked at a traditional model of procurement in going back out to the market and we looked at a construction management model of going back out to the market which might have saved us some time but this had not been done under the public construction contracts and an increased risk would fall back to the client. Having done that evaluation, it was clear that far and away the best option remained to award phase B to BAM Ireland, notwithstanding the cost challenge it poses.

The HSE carried out its review of that process as well as our internal review. We met with the HSE and we presented to it over two days challenging whether that logic still held up but the clear recommendation was that it would delay the project further and it would cost more so the best option in procurement was to award phase B at that stage. That was the decision our board made in November 2018 which was subsequently approved by Government in December.

Mr. Tom Costello

The Deputy asked about the difference between the lowest and the highest and that came to €180 million.

Mr. John Pollock

To attract contractors to tender for this price we were conscious of the need to get Irish contractors and international contractors because there were a limited number of contractors in Ireland that could take on a job of this scale and we wanted to make sure that we maximised competition in the marketplace so we went to the UK to meet with contractors and present at the buyer events there, encouraging them to tender for this project. We shortlisted five companies to tender for it but notwithstanding that, in the end we only received four tenders. The perception was that contractors would be falling over themselves for a project of this size but we only received four tenders. However, it was important for us that we had managed to get international contractors. Three international contractors made our shortlist, which sent out a message to the marketplace that this was a competitive process and that there would be high quality companies from abroad, which obviously delivered a competitive price at the end of the day.

Mr. Tom Costello

On the question of a fair price or the contractors abusing their position, which they could not have done in any case as they did not have an entitlement to the contract afterwards as Mr. Pollock has said, the procedures were clearly set down on how to get from stage one to stage two. As I mentioned, the contractors and the design team worked together to develop the design to completion and to remove the risk because risk ultimately comes back to the client.

We are pleased to see that the HSE has commissioned a review of the stage two process and the determination of the final cost. That is due to start next week and will be carried out over an eight-week period. That is another level of due diligence that will happen on top of the due diligence we have done ourselves.

In evaluating the tenders our quantity surveyors go through the bill of quantities line by line for every item. They carry out an analysis, in this case across the four bidders, to see if there are any outliers in costs, percentage add-ons or whatever. That is why the process took a long time, from October 2016 when the bids went in to the final award in February 2017. Before the contractors know where they are placed, there is an opportunity to seek clarifications. A very detailed questionnaire goes back from the quantity surveyor to each of the four bidders seeking a document clarifying perceptions. For instance, if an item does not have a price, it will clarify whether the price is deemed to be zero. There is a due diligence process that goes on around that.

There was a very robust process to make sure that at the end of the day they were in line. In the case of the lowest bidder, because it was very competitive, its tender naturally got a lot of scrutiny to make sure there were no gaps in it. If there were gaps, they were clarified to make sure that as we went on to stage two, the information gathered in stage one supported the proper development of a final price.

What about the VAT?

Mr. John Pollock

I would be happy to take that question. Out of the €1.4 billion, the total VAT for the project is €180 million. That is obviously a circular tax which ultimately returns to the State.

That element of it is not a net loss because it returns to the State.

Mr. John Pollock

Correct.

Why is it included in the contract? VAT is not charged when building local authority houses. That is my understanding. Alternatively, it is set aside per contra.

Mr. John Pollock

As part of this we examined whether we were exempt from VAT. We also looked to see if there was any exemption from planning charges. We are not exempt from either of these, so we have to function exactly like a normal commercial organisation in terms of reporting on VAT and planning contributions.

I have a question for Mr. Costello. Were all of the bidders initially aware of the two stages to the contract?

Mr. Tom Costello

Absolutely.

What were the variations between them at completion of the first stage and the second stage? Did any obvious differences show up there? For example, was there an understanding that the bidder that got the first stage would automatically be in a good position to get the second stage, or was there a pricing element that various tenders might have included in view of the fact that the bidder concerned might not get the second stage?

Mr. Tom Costello

It is awarded as one contract, but if we cannot reach a satisfactory conclusion of stage two, we can opt out of it. The expectation-----

Mr. Tom Costello

Absolutely, yes.

Did the board consider doing that?

Mr. Tom Costello

We absolutely did.

The board evaluated the cost of the second stage. Suppose the lowest tenders in each stage were taken separately. What result would that have given?

Mr. Tom Costello

Under EU procurement rules, once an award is made, which took place in February 2017, the competition ceases. One does not have the option of going back to a second or third bidder at that stage.

That is not what I am suggesting. I am suggesting that initially the board could have stopped the contract after phase 1 and gone back to the bidders again. The witnesses themselves said that. Is that not true?

Mr. Tom Costello

We would have had to start a completely new process. That is what Mr. Pollock just set out.

Right. Initially, when the contracts were evaluated in making the award, could the board have decided to take stage 1 from contractor A and the continuation from contractor B?

Mr. Tom Costello

It is not the way the two-stage process works.

I am aware it is not, but could the board have done that?

Mr. Tom Costello

Part of the process is that the contractor is engaged on site in doing the phase A works. At the same time the contractor works with the design team in developing the design, in this case for more than a year. Then, on the basis of the quantities that come out of the completed design, the final price is evaluated. Perhaps Mr. Pollock can go through it again to finalise or clarify that.

I ask him not to forget the date restriction or date conditions that might be applied.

Mr. John Pollock

We went to tender in 2016. Once we received the tenders, BAM was the lowest contractor. The recommendation was to award the contract to BAM. It was awarded the phase A works, which are the below-ground works, but at that stage it did not have a commitment to the phase B works. Those phase A works would take 15 months to complete. Within the programme that we laid out in the tender documents it was specified that while the contractor was completing the phase A works on the ground there would be a period of approximately a year to conclude the second stage, which is the phase B works. That would then conclude. That timeline was set out in the contract. We did not pay any additional cost in relation to the programme and timelines.

I know that there are international norms concerning the cost per sq. m of a hospital of a certain standard. The witnesses themselves have referred to them. There are certain standards, grades or levels of hospital, be it a basic hospital, an elevated one or a high-class one, which is what we are talking about here. Were the tenders examined with that in view in order to ensure that the price was kept to the international norms?

Mr. John Pollock

We carried out the benchmarking study. AECOM was appointed to carry out a benchmarking study and it accessed children's hospital projects around the world, trying to find projects of a similar level of care, scale and complexity. AECOM then produced a report-----

AECOM itself did that?

Mr. John Pollock

The firm did that itself.

Did the witnesses do any of that in their capacity as the management team?

Mr. John Pollock

Our own consultants carried out benchmarking reports previously, but we wanted to get an independent benchmarking report done. AECOM was appointed to do that. As we were discussing earlier this morning, the benchmarking study concluded that based on the hospitals AECOM examined around the world the average construction cost was €5,951 per sq. m. One of the projects cost €8,000 per sq. m, and one was €7,000 per sq. m. Our benchmarking cost for our project is €6,500 per sq. m.

This is my last question. Has the board also carried out an evaluation of inflation costs in construction, in building works and in electrical installations generally, both here and across the globe? Incidentally there was one particular case where a UK contractor was operating here, much to the grief of the Department of Education and Skills, so I would not necessarily regard the UK as the most competitive, the best or the most well-founded measurement.

That is in terms of a bid for a contract. I presume the witnesses were conscious of that anyway.

Mr. John Pollock

We were particularly conscious of a potential impact from inflation, as evidenced by the collapse in Carillion in Ireland which has had implications for other contractors, including Sammon and MDY Construction, which were building primary care centres. If a contractor failed in any way during the construction project, it would have a major impact. It was reported across the water that Carillion was building the Midland Metropolitan Hospital in the UK and because the firm went bust, the project will overrun by an estimated €300 million and be delayed by a further three years. People do not fully understand that consumer price inflation is very different from construction tender inflation. The Society of Chartered Surveyors Ireland publishes on its website construction tender inflation figures on a half-yearly and yearly basis.

People say costs do not come down but they do at times. From 2007, when the construction industry was running full steam ahead, the fall in tenders to 2010 was measured at 50%. If a party bought a project in 2007 at €100 million, in 2010 contractors would price it at €50 million. That is a major drop and people at that stage were trying to buy business and protect their organisations. They were trying to use their balance sheet to trade. They were looking to avoid adversarial claims in their approach to projects. From approximately 2013 onwards, construction inflation started to rise at 3% and it has been trending now nationally at approximately 7%. In Dublin it trends higher than that. Our construction contractors priced the job in 2016 and they have absorbed the risk to date on the project.

Before bringing in Deputy Donnelly on the second round of questioning, I will ask some questions. Does the contractor bear any responsibility for the financial overrun? In other words, are there any penalty clauses built into the contract or have any of those been triggered by targets not being reached?

Mr. Tom Costello

Its real risk kicks in now. The contractor now assumes the full risk in terms of cost and programme certainty.

That did not apply up to now.

Mr. Tom Costello

It applied in respect of phase A works. The phase A works - the basement works - were done with the contractor having risk. That will be completed on budget in the next few months. That part of the job has gone well. Again, one might argue it is relatively straightforward as it is digging a large hole in the ground and creating a concrete box in that but we are going to the next phase in terms of risk. Given the size and complexity of the job, the contractors have undertaken a very substantial risk for the next four years.

Given the transition from the first to the second phase, would it not be pretty obvious that the party with the phase A contract would get the phase B contract? There is a penalty for a contractor in the form of incurred costs of €300 million if horses are changed mid-stream. There may also be a delay in the delivery date by two years. It would be pretty obvious to BAM Ireland that there was no possibility it would not get the second phase.

Mr. Tom Costello

One could assume that but we had an opt-out clause that did not require a reason.

That clause had two serious elements. One was the extra €300 million and the second was the potential two-year delay.

Mr. Tom Costello

It depends on how a cycle goes. Part of the current cycle is the characteristic of it being so inflationary, and as Mr. Pollock has stated, a two-year delay carries a tag of 6% or 7% per annum of an uplift. If we were in a deflationary cycle, as we were post 2007, it is likely we would have made a very different decision. As I stated to Deputy O'Reilly earlier, the analysis that was done prior to making the recommendation to go ahead factored in all of this. One could make the assumption described by the Chairman but there is an opt-out clause. Contractors do not always behave well and if the contractor took a really aggressive approach towards us, we could find while working with the design team that there was no collaboration. Our contract is based on that. The right answer in such a scenario is not to go ahead with another phase. Sometimes this depends on money and we are talking about that today because it is very important. In order to achieve project certainty, having had it tough to get to this stage of cost and programme certainty, it is important that everybody on the team, including contractors, the client and those relaying the requirements of the Children's Hospital Group, accept that it is fully defined. Everybody must work together to honour this. There is a contractual risk and associated responsibility in any case. People must genuinely work together to ensure we deliver the hospital to a high-quality standard. In the delivery, everybody should come to work and go home safely in the evening. These are really important elements.

Will the penalties that are part of phase B be sufficient to ensure costs do not exceed what has been estimated?

Mr. Tom Costello

Absolutely. To go back to the discussion we had with Deputy Durkan, the market is inflationary. Given the amount of ongoing work, there is pressure on contractors to get tradesmen. There is an industry rate but in order to get work done, one must pay the cost. All of that risk now goes on the contractors. If the electrical contractor falls behind and needs 450 electricians and apprentices rather than 400, it would be at a major risk of penalty if there was an overrun.

Is VAT at the 13.5% rate?

Mr. Tom Costello

Yes.

The €650 million and €983 million figures are exclusive of VAT.

Mr. Tom Costello

The €1.433 billion figure includes VAT. Within that there is a figure of approximately €180 million for VAT.

We must finish by 1.45 p.m. and four contributors remain. Perhaps we could have ten minutes or 15 minutes per contribution.

Sure. Mr. Costello has stated several times that the risk is now on the contractor, as essentially this is a fixed-price contract.

Mr. Tom Costello

Correct.

Mr. Costello is missing the point entirely. The risk has been wholly costed in this and it is being borne by the taxpayer. If this came in at the average price of a hospital, I would say it was fair enough. A hospital is to be built and we would have agreed a price that was approximately how much it cost to build hospitals, so the risk would be with the contractor. The reality is this will be the most expensive hospital built anywhere in the world. Anybody in the country looking to build a house or extension, or who gets in a builder to do any work, can have a fixed-price contract that will put the risk on the contractor.

If they have been quoted by the contractor the highest price ever quoted anywhere in the world to do the work, clearly they are being hoodwinked and taken for fools if they think any of the risk, in a real sense, is with the contractor. I just find it extraordinary that the board maintains we are going to have the most expensive hospital ever built anywhere on Earth but that we are very clever because the risk of the construction costs is with the contractor.

Will the board release the various reports to the committee? I would be very surprised if several of the figures we are discussing were like-for-like comparisons. For example, the board's initial estimate was based on AECOM stating in 2014 that the cost would be €2,500 per square metre. The size of the project is 160,000 sq. m, which gives a total construction cost of €400 million. I was a member of the finance committee when the national lottery was sold for €400 million. The conversation we had was that the €400 million would pay for the national children's hospital because that was the estimated cost. That is where it all started - at a figure of €400 million. If AECOM stated in 2014 that the cost would be €2,500 per square metre for a building 160,000 sq. m in size, that gave a figure of €400 million. The board's representatives have said inflation was factored in and it was. If one factors in inflation at a rate of 3%, the figure moves from €400 million to €460 million. AECOM's estimated price would have given us a total building cost of €460 million in 2018, yet the board states AECOM gave it another report in 2018 that stated the cost was not, in fact, €2,800 per sq. m but €6,000. Somehow, within a short period of four years, the estimated cost per square metre had jumped from €2,800 to €6,000. I do not believe that and fundamentally do not accept that they are like-for-like comparisons. The material, labour and professional services used on a project of this size are not all being sourced in Ireland. They are international commodities. There is no way the cost of bricks and mortar and the amount of money paid to sparkies, chippies and engineers doubled in a four year period. I just do not accept that it did.

There is a second report from Linesight that conveniently states there has been 95% tender price inflation, which fits in quite neatly with the massive overruns we are discussing. Two international benchmarking studies are also referenced, one of which I presume is the Linesight report. Can the board release to the committee AECOM's work in 2014 that started with a figure of €2,500 per sq. m, giving a total estimated cost of €400 million, the 2018 figures - somehow the figure moved from €2,500 per square metre to €6,000 - and the Linesight report that states there was 95% tender price inflation?

Mr. Tom Costello

We can. It is documentation that was submitted to the Department. Our board was appointed in August 2013. In late 2013 and into 2014 we were asked to prepare a preliminary budget. That was the first one to which we referred in which the rate of €2,500 per square metre was used. The total project cost came in at €800 million. For clarity, with regard to like-for-like comparisons, when one starts to apply rates in areas, one must bear in mind that we are also talking about VAT on top, the additional costs Mr. Pollack outlined for the satellite centres and all additional costs in design fees and so on. The Deputy stated a figure of €460 million of the sum of €800 million, but it is important to note that €800 million was the starting point.

I thank Mr. Costello.

Mr. Tom Costello

With regard to risk, as I mentioned, there are two major failures that have been identified in major, complex projects. One is when there is no collaboration between the different parties involved and it is all done on a contract basis. For example, the contractor may bid for a job potentially at below cost.

When one considers the turnover and profits of the top ten UK contractors, five were loss-making last year, in a boom time. It is an aggressive business. As Mr. Pollock said, it is a big attractive contract and many of the contractors are well skilled. They believe that if one enters into a contract with an inherited design, there are loopholes-----

I understand all of that and, in fairness, the delegates have laid it out. On that point - the profit margin of the main contractor - the initial bid was €687 million. It would have included a profit margin, an internal rate of return, a return on invested capital or whatever metric the contractor wanted to use. There will be a net current value of the contract. Given that there is an additional €450 million and more since - nearly €1 billion more - has the contractor's margin or total profit increased substantially, or potentially decreased substantially?

Mr. Tom Costello

The process of two stages and the rates at which the contractor bid in 2016 are the same as those that now apply to the updated quantities, based on the revision. They may be reduced because of the pressures in the marketplace, but the mechanism is very clear and there is no real opportunity to increase the margin.

Therefore, the margin has not increased.

Mr. Tom Costello

It is not visible. We do not have sight of the contractor's accounts.

Does the board not have an open book with the contractor for a bill of quantities?

Mr. Tom Costello

It is an open book for rates but not the profit margin.

I would like to come back to the main figures because there are a lot of numbers being thrown around. I ask the Chairman to request a like-for-like comparison from the board. There are lots of figures, some of which include VAT, while some do not. As I see it, there are four big chunks. Phase A involved the below ground work, decanting buildings, getting the site ready and laying the foundations. Phase B involves the building of the building. There is a third piece which involves the commissioning, IT and all of the rest. The fourth piece is tax, which is not terribly relevant because it is a percentage. Am I right in thinking the figure of €1.73 billion includes the cost of all of the construction works on the St. James's Hospital site, the satellite sites at Tallaght and Connolly hospital, commissioning, IT and all equipment at all of the sites, as well as all of the training required? Does it cover everything, or could we potentially meet up here in one or two years when the delegates will say, "Well, it did not include the extra €50 million for IT and the extra €50 million we needed to move the employees across"? Is every conceivable cost associated with opening the doors of the hospital included?

Mr. Tom Costello

I will speak to the part for which Mr. Pollock and I are responsible on the National Paediatric Hospital Development Board - the figure of €1.433 billion. In the process we have gone through we have cost and programme certainty. Perhaps Ms Hardiman might speak to the additional element that brings the figure up to €1.73 billion.

I would love to come to Ms. Hardiman, but would she mind if we concentrated first on the figure €1.43 billion?

Ms Eilísh Hardiman

No.

Does the figure of €1.43 billion include the cost of commissioning?

Mr. Tom Costello

Yes, absolutely.

Does it include the cost of IT?

Mr. John Pollock

It includes the cost of commissioning of the building such as turning on the air handling units and commissioning the IT systems, but it does not include the cost of clinical commissioning which is not part of our remit. Our remit covers the design, building and equipping of the hospital. When it is completed, we will hand it over to our client and clinical commissioning will then take place.

Where does IT fit, clinical or non-clinical? Is that included in the €1.4 billion figure?

Mr. John Pollock

ICT, in terms of what we call the behind-the-walls piece, the cables and data points providing the rooms, sits with us. The in-front-of-walls piece, such as the software systems and server rooms, will be fit out by us, but that does not come within our remit. It is part of our plans.

I know there is overlap and I am simplifying. When the development board finishes and leaves, there will be a building that is painted and finished, with all the cables and oxygen pipes, all of that, but no beds or equipment. Will there be beds?

Mr. John Pollock

There will be beds. Again, our remit is to design, build and equip the hospital. We will fully equip the hospital, so, for instance, putting in the imaging equipment, X-rays, CT scanners, the beds, lockers, medical devices and all of that is part of our remit.

It is part of the remit.

Mr. John Pollock

Correct, and it is included in the €1.43 billion figure.

Let us simplify again on the physical structure. There will be a day when the doors open and the clinicians and patients walk in. In terms of what they will see and use in the hospital, is ICT the only thing missing at that point? It sounds as if the beds and diagnostics will be there, and the canteens and cookers will be in place. Will all of that be there?

Mr. John Pollock

Correct.

The syringes will be there?

Mr. John Pollock

No.

The disposable medical equipment will not be there?

Mr. John Pollock

Consumables will not be there.

Consumables will not be there?

Mr. John Pollock

Correct.

For that €1.433 billion, would Mr. Pollock mind doing the following urgently, because the officials will be here before the committee next week? Would Mr. Pollock please give the committee an evolution of that figure? We are comparing different figures. The €1.43 billion figure includes VAT. The €687 million figure from BAM did not include everything we have just talked about. It included a bit of what we just talked about.

Mr. Tom Costello

It does not include equipment.

It does not include equipment. We know that the construction costs have increased by about €450 million.

Mr. Tom Costello

That figure is €320 million.

Plus an additional €130 million on VAT, additional costs at Tallaght and Connolly, site supervision and professional design fees.

Mr. Tom Costello

We also did a review of the cost of equipment.

Site supervision and design fees are construction costs. They are part of building a building. If the professional fees for building a building go up, that is a construction cost. Let us take VAT out. The construction costs have gone up by about €400 million, €420 million or €430 million, excluding VAT. Would the witnesses mind working backwards - and they may not be able to do it now - on that €1.4 billion? We are tracking different numbers. We started with the figure of €687 million from BAM. That figure then jumped and, by the time the final capital cost was identified, had gone up by €346 million, so we were nearly at €1 billion. From the original bid by BAM, it then jumped from about €637 million to nearly €1 billion.

Mr. Tom Costello

The figure was €890 million

Mr. John Pollock

Some of this information is in the slide deck. Our first, preliminary business case was done in early 2014 and, at that stage, we quantified the project as costing €800 million.

Does that include everything that is included in the €1.43 billion figure?

Mr. John Pollock

Yes, correct.

In a like-for-like comparison, the jump is €800 million in 2014. Is that right?

Mr. John Pollock

That is correct.

And up to €1.43 billion.

Mr. John Pollock

Yes, but there was an intermediate step after the receipt of tenders in 2016, so when our business case was submitted to Government in early 2017, it was €983 million.

That is part of the process. In terms of starting point and end point, it went from €800 million-----

Mr. John Pollock

It went from €800 million, to €983 million, to €1.4 billion and that is on a like-for-like basis.

It went from €800 million to €1.4 billion?

Mr. John Pollock

Yes.

That is an increase of €633 million from €800 million essentially.

Mr. Tom Costello

That is correct.

I thank both witnesses. There might be a table with the information there but it would be useful to have that walked through on a like-for-like comparison. To go from €800 million to €1.4 billion is quite the jump. It would be very useful to know how much of that is genuinely inflation, how much is additional, unanticipated fees and how much is the underestimation of the quantities of materials that were going to be used.

May I move on to Deputy O'Reilly?

I beg the Chairman's pardon. I have one more quick question for Ms Hardiman which we may not have time to answer now. Ms Hardiman's budget was approximately €300 million, I presume. Is that about right?

Ms Eilísh Hardiman

The building and equipment is with the development board.

Ms Eilísh Hardiman

Anything that is outside the walls, from an ICT perspective, is with Children's Health Ireland, as are the future operational costs. Those costs, obviously, relate to staff, usually pay and non-pay. So, from an ICT perspective-----

Could I just step back, and I apologise to the Chair because I know have gone over my time. Is it correct to say the increase to €1.4 billion is all with the Children's Hospital Group?

Ms Eilísh Hardiman

Yes, but one part of it is delivered through the HSE because it is the national electronic healthcare record. ICT contains two elements. It is these and everything outside the wall that we need for the hospital and that is in one of the increases. The HSE has to implement the national electronic healthcare record and that is another cost that has been quantified here. We have to get ready to move into this building. When the building is handed over, we have to service and commission it, train all the staff and do all the moving of patients into it. That is also in our projected costs.

How much of the €300 million is ICT, between the Children's Hospital Group and the HSE?

Ms Eilísh Hardiman

About €150 million, giving a figure around it, and that is broken down, as I said, to the hardware we need and the electronic healthcare record.

Ms Eilísh Hardiman

Yes and software and the people to help implement those changes.

We have spent an awful lot of time talking about the increase from €800 million to €1.4 billion. What did Ms Hardiman's €300 million start at? Did it start at €300 million or less than that?

Ms Eilísh Hardiman

It started at less than that but the changes that have happened since-----

I am sorry to interrupt, but how much less? What was the equivalent to the €800 million budget of the development board?

Ms Eilísh Hardiman

The ICT has increased by €9 million and the reason for that is that, in the original proposal that we put in back in 2014, the functionality to do the interfacing between medical devices and the electronic healthcare record was supposed to be in the electronic healthcare record bid but the advice from the HSE was that that needed to be put back into our budget.

In 2014, that €300 million would have been €291 million.

Ms Eilísh Hardiman

Yes. The €9 million is the only difference in the ICT.

Can Ms Hardiman provide the committee with some documentation?

Ms Eilísh Hardiman

Absolutely.

It sounds as if Ms Hardiman's budget has not moved much at all.

Ms Eilísh Hardiman

It has not moved too much. Again, to be open with the committee, what has changed for us is our projected operational cost and that is purely because of restoration of pay. We have not changed our projected head count but, obviously, the pay has gone up with restoration.

To be clear, would Ms Hardiman stand over that her estimated budget in 2014 was about €290 million and has gone up to €300 million?

Ms Eilísh Hardiman

That is correct.

I have a couple of questions and some detail might be needed after this meeting but in advance of next week's meeting.

In August, when the witnesses started to give some consideration to not continuing with the project and were meeting on a weekly basis as a board, how was that concern communicated to the Minister? Were the witnesses at those meetings making sure that the Minister was kept in the loop, kept informed, and that the concerns of the witnesses were shared with the most senior person within the health arena? I think we all understand the structure, so there is no need to describe that. Were the witnesses satisfied that their concerns about the cost overruns had been fully made known to the Minister and he was fully across it back in August? As there were meetings on a weekly basis, I am sure that would have caused some concern.

A number of the questions I was going to ask have been covered already, so I will stick to the ones that have not been asked. Who owns the land that the proposed children's research and innovation centre is being built on? Who will own the building and how will the construction be paid for? Is it to be paid for through some sort of philanthropic fund? How is it envisaged that will be paid for?

My next question relates to the naming of the hospital and the concern regarding a memo brought to Cabinet which alluded to the naming rights being sold. The Minister moved quickly to say that he would not sell the naming rights for the hospital but he did not say he would not sell the naming rights for individual areas within the hospital. Does this feature in the board's plans? Notwithstanding the opposition of other parties in the Dáil, Sinn Féin believes there is good reason the hospital should be called the Kathleen Lynn hospital. As in the case of many of our universities, is it intended to sell the naming rights for a particular area of research and so on and, if so, have any discussions in this regard taken place to date and do the witnesses have ballpark figures with regard to investment which they may be able to share with us?

With regard to the Crumlin children's hospital site, what are the plans for it? Will it be available to the board? I would like to return to an issue I raised earlier with regard to the additionality of beds. Will beds in hospitals other than the three children's hospitals, for example, Limerick hospital, be closed on the basis of bed capacity at the new hospital? Obviously, this would have an impact on the sum total of beds available for children. Mr. Costello said in his opening statement that there are lessons to be learned in regard to the wisdom of pursuing cost reductions on competitive tenders and ensuring the sufficiency of tender information. Will he identify those lessons, perhaps, in detailed follow-up correspondence? Mr. Costello used the word "disappointment" in his opening statement. I would use a much stronger word than that. The lessons being learned are extremely expensive. Has Mr. Costello communicated the lessons learned to the Department of Health and, if so, is he in a position to share that correspondence with us?

Mr. Tom Costello

I will ask Ms Hardiman to respond to the Deputy's questions regarding the children's research and innovation centre, CRIC, the naming of the children's hospital and the additionality of beds.

Ms Eilísh Hardiman

I thank the Deputy for her questions. It is important to speak to the broader health system. From the get-go, the planning for this hospital has been a whole-of-Ireland approach. There is a national model of care for paediatrics that underpins the policy position as to why we need to consolidate the high-end tertiary, quaternary requirements into one hospital and for it to be based in Dublin. Through the HSE, we have been working with our colleagues across the system to ensure that we are planning in a collaborative way around children's health. We have an integrated care programme for children, such that we engage not only with our colleagues in Cork, Limerick and Galway in the acute system but with colleagues in social care, community and mental health, which is important in terms of the experiences of First World countries with young people and mental health issues. We have identified that there are services that could and should be done locally in the regional units. The model of care maps the services that can be done in regional units and the services that can be done in local units and the required resourcing of them. We have appointed a paediatric network lead, a surgeon, to work with the regional units on the appropriate utilisation of their beds. This is about transforming children's health care.

The biggest transformation is around ambulatory services. What we are putting out at Connolly Hospital and Tallaght Hospital is testing within the Irish system the feasibility of safely delivering outpatient, trauma, orthopaedic and urgent care in an efficient manner.

We would envision that in testing it in these units, it is something that the wider system could look at in terms of bed utilisation. There is repatriation needed from the Dublin hospitals to the regional units, but only in a supported way. We work closely with the clinician we have put in place in regard to the putting in place of education and supports in the regional units. Increasingly, we are holding shared clinics in the regional units. We are trying to keep services child and family centric so that service users can access services locally and only need to come to Dublin as required. There is no additionality. Cork has plans for a hospital. In regard to the plans for the elective hospitals, we have been working with our colleagues in the regional units identifying the parameters that we use for the model of care to try to ensure the most efficient use of bed planning. Cork is the only region that has identified additional plans.

My question was if there are plans to close beds that are currently being utilised for paediatrics.

Ms Eilísh Hardiman

No. We are testing the model of care with the ambulatory and other care centres that could possibly bring benefits around that, but that would need to be tested and demonstrated and then taken into consideration as part of the transformation programme.

The Deputy asked about the Crumlin children's hospital site. It is important to record our appreciation of the committee's help in getting the legislation to merge the three children's hospitals through in 2018. As of 1 January, Children's Health Ireland governs the provision of paediatric services in the Dublin hospitals at Crumlin, Temple Street and Tallaght and will open services in Connolly hospital in the middle of this year. Under the legislation, the voluntary boards of Crumlin and Temple Street hospitals had to voluntarily transfer their assets and liabilities to the new entity. The Crumlin hospital campus was owned by the board and it has transferred to Children's Health Ireland. We can only use our assets to deliver services to children. The future use of the campus has not been explored. We will use it to deliver children's services until such time as the new children's hospital has opened and, as such, it will be occupied for the next four years. We will have to engage in a planning process in regard to the future use of the site. Following on from the merger, we see it as a planning option that we will put into place over the next few years. We certainly have use of the site for the next four years. Its future use has to benefit the children's hospitals. That is the condition under which it was transferred and it is the only purpose for which we can use it.

On the naming of the hospital, I am happy to clarify that there is no proposal to sell the name of the children's hospital, which the Minister has confirmed. We have already reported that there is a process to be engaged in for naming the hospital. It will acknowledge the work that has been done to date and take into consideration nominations and submissions made. We intend to kick off the process of naming the hospital soon.

On the Deputy's question as to whether there will be an opportunity to have philanthropic fundraising for parts of the hospital recognised, that is up for consideration. Many of the children's hospitals already do this. On the children's research and innovation centre, planning permission has been secured. The lands on which the centre will be built are owned by the HSE and so whatever is constructed on the land will be owned by the HSE. As in the case of Crumlin children's hospital, funding for the children's research and innovative centre will come from philanthropic fundraising. We see this as an ideal opportunity for naming one part of the building.

There are commercial elements that are feasible that we are exploring. Those are only in the discussion stages and will work through the HSE and the Department.

On that point, I saw a posting on social media from somebody who was outraged at the suggestion that the naming rights for any part of the national children's hospital would be sold off. The individual wondered, no doubt tongue in cheek, whether we could see the name of a brand of cigarettes being borne by the national children's cancer research centre. The fact is that once that process is started, there is less and less control over it. I could point to examples in the third level sector where this practice does not only represent poor value for money but also assists individuals in purchasing a certain amount of credibility that they possibly should not have. I am referring to very wealthy individuals who, in a very tax efficient manner, channel money into certain causes.

That would concern me. It could be said that it is done all over the world but we have only to look across the water to see what is being done over there. We are not replicating that. Just because something is being done somewhere else does not mean we should be doing it as well. At this stage, given that the process appears to be advanced, does Ms Hardiman have a set of criteria to ensure that it would not, for example, be possible to have a children's cancer research centre with the name of a cigarette brand or, indeed, an obesity centre branded with the name of a fast food company? Are such criteria in place? If so, how were they drawn up and how will they be enforced?

Ms Eilísh Hardiman

We are kicking off that process now. There will be criteria and we will share those with the committee.

I thank Ms Hardiman.

I asked Mr. Costello some questions.

Mr. Tom Costello

I will deal quickly with them and perhaps we can revert to the committee on the issue if necessary. As part of the exercise we have done, and ultimately the report to the HSE, we have learned lessons. As always, there were positives as well as negatives, and we identified two in my statement. I will go through them a little. On cost reductions, because we are in an inflationary cycle, the tenders received were higher than the pre-tender estimates. In those cases, people invariably look for cost reductions. Again, in hindsight, we are referring to looking for a cost reduction at a time when prices were still inflating at 6% or 7%. A cost reduction might also be an alternative material. While in that inflationary cycle, however, there is no guarantee that the cost reduction will come to anything and eventually one may end up back where one started. That was a lesson learned in the cycle. Those things cannot necessarily be predicted. They were all done with good intentions and the contractors bought into it, but when we interrogated deliverability over the months, we found it was not possible.

The other question was on reporting. We were meeting regularly. I will ask Mr. Pollock to speak on that.

Mr. John Pollock

On the reporting structure, we reported to the CHP&P steering group in August. At that stage, we gave it the quantity to cost escalation of €200 million and stated that we would look at alternative options that could be pursued. We spent the next number of months completing the two stage process of examining the alternatives. At the end of October, they both came back stating that was the final price but, notwithstanding that, it was still the best option to proceed with the project.

We have roughly half an hour left and three other contributors. We will take Deputies Kelly and O'Connell and Senator Colm Burke in that order.

I am just getting my bearings. Deputy Kelly can go first.

I thought Deputy O'Connell would be first. I asked earlier for full documentation on the decisions that were made. That would include minutes on the key critical milestones in the escalation of the project. I ask the witnesses to also provide a full list of attendees at those meetings, including sub-committee meetings, since the establishment of the National Paediatric Hospital Development Board.

Returning to what Mr. Pollock said, for clarity again, because I want to run through this in my head based on other evidence and information provided to me, on what date was he aware that the project was going to cost €983 million?

Mr. John Pollock

Those figures were included in our definitive business case of February 2017.

It was February 2017. What date was the €60 million increase?

Mr. John Pollock

In September we had quantified it but some of that was still in early warnings. That was particularly in respect of the sprinklers because An Bord Pleanála had not adjudicated on that.

It was September 2017.

Mr. John Pollock

Yes, in September 2017 we said there was a risk of €60 million.

That is fine. In August 2018 then, as Mr. Pollock said in evidence previously, it was €140 million more.

Mr. John Pollock

That is correct and that was in respect of the construction costs.

That was in August 2018. I presume that information would have been communicated up to Mr. Sullivan and to Mr. Breslin?

Mr. John Pollock

That is correct. That was our reporting structure.

We know that Mr. Sullivan, who is in his role for a reason, and Mr. Breslin, who obviously talks to the Minister for Health, Deputy Harris, every day, communicated that information up the line in August. Is that correct?

Mr. John Pollock

We report to the chair-----

It would be strange if it was not.

Mr. John Pollock

We report directly to the chair of the-----

Mr. Sullivan definitely knew.

Mr. John Pollock

He did.

Mr. Sullivan knew but it cannot be guaranteed that Mr. Breslin knew.

Mr. John Pollock

We briefed the Department in August 2018-----

Mr. John Pollock

-----about a week after we briefed-----

What date was that?

Mr. John Pollock

I would have to check.

Will Mr. Pollock come back to us with that date?

Mr. John Pollock

It was sometime around the middle of August.

There is a reason I am asking Mr. Pollock this question. What was the total cost of the project then at that point in August 2018?

Mr. John Pollock

We did not report on the total cost. We reported on where the two-stage procurement process was and that, overall, we were looking at a cost escalation of €200 million.

One would assume it was €983 million plus €200 million.

Mr. John Pollock

There are certainly other elements that would not have been included in that. I refer to the issues in respect of the urgent care centres that I referenced previously. Two of our contractors had also gone into financial difficulties prior to the signing of contracts so they would not have been part of that update. We were updating on the construction costs for the main national children's hospital on the St. James's campus.

That is fine. In August 2018, therefore, it was €283 million plus €200 million plus VAT plus the urgent care centres plus the issues with the contractors. That equalled X. Was that the equation?

Mr. John Pollock

As I said, we purely reported on the €200 million.

Am I wrong in what I just said?

Mr. John Pollock

I do not know. In September we reported-----

I just repeated back what Mr. Pollock said. That is all I did.

Mr. John Pollock

In September, we identified the €60 million and then in August we identified the €200 million.

That is fine. Let me repeat, because there is deep concern here. What was the €200 million made up of?

Mr. John Pollock

The €200 million was related to the phase B construction costs.

Why was there an escalation of €140 million? I understand the €60 million. Mr. Pollock explained the issues with that.

Mr. John Pollock

The issue with An Bord Pleanála had-----

I know about the €60 million. Mr. Pollock has explained that very well, in fairness to him. I am asking about the €140 million.

Mr. John Pollock

User engagement was complete at that stage.

User engagement was basically the other three hospitals.

Mr. John Pollock

It was done for the one hospital, yes, but obviously the user engagement groups had concluded their work at that stage.

The €60 million related to the whole issue of An Bord Pleanála in September 2017. Then the €140 million was for user engagement.

Mr. John Pollock

It is more than user engagement.

The seven categories are set out in the table.

I understand. It should be borne in mind that thousands of people are watching these proceedings. Therefore the figure is €283 million plus €60 million plus €140 million. The figure of €60 million was for what Mr. Pollack outlined. There was then the figure of €140 million, which brought it to €200 million, on which Mr. Pollack reported in August to Mr. Sullivan and a week later to the Department.

Mr. John Pollock

That is correct.

In reality, it was €283 million plus the €200 million. In fairness and to be complete, Mr. Pollock is saying it did not include VAT. It also did not include the issues related to the urgent care centres and to two contractors who had problems. For completeness, is that correct?

Mr. John Pollock

Yes. To be totally clear, in September 2017 we identified the figure of €60 million. It included an issue with two contractors getting into financial difficulty in the provision of the urgent care centres.

Okay; the urgent care centres and the contractors were one issue.

Mr. John Pollock

Yes, but they are two separate contracts.

That provides clarity. The figure is €283 million plus €60 million and €140 million, plus VAT and the two issues related to the urgent care centres and contractors. I have got that. That was in August-----

Mr. Tom Costello

Let me intervene. Obviously, at the same time we were making an analysis of the equipment required. That had not been fed into the information to which the Deputy is referring.

It is an important clarification.

Mr. Tom Costello

It is. I will let the Deputy return to Mr. Pollock shortly as he is in full flight.

He is being very helpful.

Mr. Tom Costello

The report we made at the time was an update on the development of the stage two process. It was related to the cost of construction at that point in time. The cost of construction was €980 million, excluding VAT. It was within that bucket of costs, as opposed to the overall development cost.

I will return to this issue in a different forum, but that is not what was communicated publicly at the time, which is why I wanted to have it broken down. The figures communicated to the Department in August 2018 are critical.

I have a few more quick questions, some of which are about costs based on operations. Therefore, I presume Ms Hardiman will answer them. Before that, on the figure of €1.433 billion going up to €1.7 billion, the breakdown was outlined for Deputy Donnelly. Are there ancillary costs or surprises outside them in respect of reinstatement or disturbance costs related to the project?

Mr. Tom Costello

What does the Deputy mean by "reinstatement costs"?

Are there costs related to any of the buildings nearby or disturbance? Are there other costs in addition to the €1.7 billion? It was said the figure was €1.43 million and then Ms Hardiman explained. In fairness, there is a difference of only €9 million. Is it absolute?

Mr. John Pollock

Again, in the slide deck the Deputy has-----

The people watching at home do not have it.

Mr. John Pollock

I will elaborate on it. The family accommodation unit is not part of our project. We received planning permission for it because it was important to have a master plan for the site. The children's research and innovation centre is also not part of our project. Therefore, it is not part of the contract we have with BAM

That is fine. There is no problem in that regard.

Mr. John Pollock

Clinical standards and practice evolve. Therefore, the scope is as it is, but if clinical standards and practice change and this were to change the scope of the project, it would have an impact on the cost. Construction tender inflation at a rate in excess of 4% post-July 2019 is not provided for in the contract. Changes to legislation regarding VAT, PRSI, labour rates-----

Will Mr. Pollock, please, answer my question about reinstatement and disturbance costs?

Mr. John Pollock

I do not understand the question.

Are there any costs relating to the site, disturbance on the site, reinstatement of other buildings or any ancillary costs relating to that?

Mr. John Pollock

There is a legal action regarding O'Reilly Avenue.

To be fair, the board does not have control over that. Are there any other anticipated costs? If the answer is "No", that is fine.

Mr. John Pollock

There is no reinstatement cost.

Okay. From an operational point of view, will the hospital operate an accident and emergency department 24-7?

Ms Eilísh Hardiman

Yes, absolutely.

How many operating theatres are there?

Ms Eilísh Hardiman

There are 22 and that includes a catheterisation laboratory.

Will they operate for five, six or seven days?

Ms Eilísh Hardiman

Two of them are urgent emergency and they will operate 24 hours if required, depending on needs. Some of the rest have been programmed to work up to 6 p.m. for safety reasons because the surgery being undertaken is highly complex. We do not like very complex surgery finishing at 8 p.m. or 9 p.m. going into critical care.

That makes sense.

Ms Eilísh Hardiman

As part of the planning and requirements for the theatres we have benchmarked the opening and operating hours of those theatres.

The McKinsey report a long time ago-----

Ms Eilísh Hardiman

It was in 2006.

-----recommended 380 beds. We now have 473. Across the sea, there was a report on the use of technology in the NHS. The witness will find nobody else in here who is a bigger fan of e-health than me. I say this consistently. It was one of the things I concentrated on with regard to Sláintecare. It is to do with my background in technology. There were decreases in clinical attendance as a result in the advances in technology, particularly with regard to children. Ms Hardiman will have seen the report as it was released a couple of weeks ago. Surely that will have an impact after we do the figures relating to bed usage, which I asked about in the last round of questions. I am concerned about the use of technology, the figures I asked about earlier and the escalation. How do we know all that is accurate? How do we know we have made the specifications correctly?

Ms Eilísh Hardiman

As part of planning for the capacity requirements, we took into account the model of care and how technology can help. I am glad to report we are implementing some of the changes at present whereby we are running virtual clinics without patients having face-to-face contact with the clinician but with the clinicians communicating to them either by telephone or by Skype. We are also running trauma access clinics, for example, whereby clinicians are looking at the digital presentations and not having to bring the patient in but communicating. We are demonstrating that, and as part of our planning we included a percentage for where we expect that technology to be. Where it will increase, however, our clinicians will still have to be in a room communicating possibly with patients at home or with clinicians in Cork or Limerick. We have identified that they still need to be in a space somewhere.

The Deputy is correct that there are still 380 beds in this hospital, as was projected at the time. It is important that one of the things that definitely has deteriorated is our ability to meet our clinical demand.

I have a last question for Mr. Costello. Obviously this has been a difficult responsibility at times, and undoubtedly in the last six months. I have a typical interview question and I am sure Mr. Costello has interviewed many people. If he had to do it again is there anything he would do differently?

Mr. Tom Costello

The lessons learned is an open response in terms of what we have learned from the exercise. I said in the statement regarding the procurement that it was and still is the best way to procure the job.

Mr. Costello would not do anything differently.

Mr. Tom Costello

In fairness-----

I know. I read it.

Mr. Tom Costello

We also have broader lessons learned.

What are those further lessons?

Mr. Tom Costello

I am happy enough to-----

There is only one. In fairness, I read Mr. Costello's statement on electrical, tendering and all of that. However, I did not see any broader lessons.

Mr. Tom Costello

No, I did not refer to them, but in the documentation and the report we prepared for the HSE we have been open about-----

Is the board going to release that report?

Mr. Tom Costello

We can. It includes what worked well and what did not work well. There are positives as well as negatives. The process actually worked well. We use the term "disappointed". It is very disappointing that the price at the tender stage, which ultimately fed into the contract award, underestimated the real cost of doing the job. Because what we are paying-----

It is a classic situation. Mr Costello should go down to Cork and look at the convention centre, and at what has gone on there. It is a smaller project, but-----

I thank the Deputy.

I ask the Chair to allow Mr. Costello to finish. I will shut up.

Mr. Tom Costello

At the end of the day, with the way the price is evaluated we are paying for what we are buying. With the quantities that have ultimately come through from the completed design, we are applying the rates that were bid in 2016 to give us the contract we have now.

To some extent I have to congratulate the witnesses on getting to this phase with the hospital. Like many members of the committee I feel that Irish children have been neglected for a long time at Our Lady's Children's Hospital, Crumlin. I have reason to be there a bit myself, and I often send the Minister for Health photographs of the walls to remind him what it is like. I look forward to this project reaching completion in 2022.

I am not a big fan of fellows learning on the job when they are getting paid to do a job. It is quite shocking that Mr. Costello would say that a process has worked well when we are at the price we are at currently. It is rule 101 that the difference between the tendering price and the contract price must be watched. Who was watching this? Was a team of quantity surveyors employed in the initial tendering phase? Regarding the differential between the tender price and the contract price, I am assuming that a team of quantity surveyors was involved, and I am assuming that all of the work it did was therefore pointless if there was such a difference between point 1 and point 2. Perhaps Mr. Costello can elaborate on that.

Deputy Louise O'Reilly was talking about this as I was coming in. I missed the start of what she was saying. Can the witnesses clarify that other than the three bits the witnesses identified as being operated by other people, the land will all be kept under HSE ownership? Can they also clarify that no external private company will be contracted to provide services in the hospital? For example, can we be assured that the cath lab, the minor injuries unit, if there is one, or whatever facilities there are will not be run by a private entity? Can we be assured that we are not going to carve bits out and allow them to be operated by a private medical company despite being owned by the HSE? It is something we will probably discuss in this term at the Joint Committee on Health. I have seen an emerging trend of private companies operating in sites with HSE logos over the door. It is something that concerns me. Perhaps the witnesses could clarify that for me.

Mr. Pollock referred to the change in clinical standards. I assume he is saying that if some piece of equipment or infrastructure that will be of benefit to the hospital comes on board between now and 2022, the hospital will want to move with the times. Technically, there could be another bill if a new type of magical cable comes out and the board will just have to pay it. I am assuming as much. We cannot predict that right now.

Mr. John Pollock

Medical technology emerges literally on a yearly or six-monthly cycle, so we want to buy our equipment as late as we can-----

Mr. John Pollock

-----to get the best equipment at that time. Where the world will be in three years in terms of technology we do not yet know.

Absolutely. That is what Mr. Pollock was referring to there.

Mr. John Pollock

Correct.

Perhaps Mr. Costello could answer the first few questions while I get the next bit ready.

Mr. Tom Costello

The shorter answer is probably the one about the operation.

Ms Eilísh Hardiman

The operating model for the hospital as it is being proposed and as we are trying to staff and develop it does not include the outsourcing of services to private companies, as the Deputy outlined. I am familiar with this within the system. Having said that, we will obviously be contracting cleaning, catering and other support services, as would be expected in a hospital.

It is important to add that the hospital has been designed to be flexible in the next 20 years, to the degree that we can project where future technology is going. That is very important because of the investment being made. We have contributed to the design and obtained advice from other colleagues that have built hospitals on how to keep the design as flexible as possible because we know that services will develop. We know that services being provided in the United Kingdom and internationally will be repatriated. We have projected and identified where new service developments will occur. I am glad to say we are actually making progress in new service developments that we will be able to accommodate. While there is a risk and I appreciate new technology is moving very fast, it is important to give an assurance that the investment has been designed to allow flexibility to accommodate the new model of care.

As such essentially the hospital can evolve as medicine evolves.

Ms Eilísh Hardiman

Yes, absolutely. We have identified where the key areas are; they are at the high end of critical care. We have an ability to increase the critical care unit within the hospital. The other area is ambulatory and outpatient services. That is where the biggest changes are. We have built flexibility into the hospital to accommodate the future projection of healthcare trends.

Mr. Tom Costello

Coming back to Deputy O'Connell's' first question, I said in the statement that we had been appointed to the board as people with the skills and competencies required to deliver a project of this size and complexity. Skills in the areas of project management, construction, procurement, architecture, engineering and legal matters were sought. We then employed a really capable and experienced executive team.

Mr. Tom Costello

To actually deliver what we had been remitted to do - to design, build and equip the hospital. I am going through the stages of employing the design team. Fundamental to it all was a clear process to carry out different stages, including procurement and employing the design team. The big one, about which we are talking a lot today, was that after a year of deliberation on procurement, we settled on the two-stage tendering process as being the most appropriate for the job. That was not because we had sat around and said, "This is it," but because it is acknowledged and accepted internationally as best practice in delivering large, complex projects.

By whom is it accepted? Is it accepted by the building sector?

Mr. Tom Costello

That is outlined within the report. It is acknowledged by clients and governments. It was even used in Ulster Hospital.

Did costs run over by 100% there?

Mr. John Pollock

The National Health Service in the United Kingdom has a framework called ProCure22-----

In the United Kingdom or the other examples that include a two-stage process did costs run over by this percentage? I would like a simple answer to that question as I am under pressure of time.

Mr. Tom Costello

I will give a simple answer. We will measure it between now and four years from now. In the two-stage process that can be determined at the end, when the design is finished, we now have cost and programme certainty. The test of the two-stage system will be between now and what happens at the end of the day. On the basis of the work done with the design team and the contractor working together to get it down-----

I understand but the day has ended in Ulster Hospital and those hospitals so did they go over by twice the amount? I understand that we are only partially through the process. In respect of Ulster Hospital and the NHS hospitals that are completed, did the two-stage process result in such an overrun - yes or no?

Mr. Tom Costello

I do not have that information. I do not know if Mr. Pollock has it.

Mr. John Pollock

We will have to look for that information.

I am a lay person. The witnesses are sitting here as the people who were appointed to the board for their skills and competency - their words - and they are telling me that a two-stage process is the way forward because it is acknowledged and accepted internationally as the best way. Mr. Costello then references Ulster Hospital and the NHS as organisations that have used this model but cannot tell me whether they had the same problems. It seems like a very simple piece of information that people like the witnesses with their skills and competency should have. I do not think it is an unreasonable question.

Mr. Tom Costello

That is fair enough. We spent a year looking at the most appropriate procurement method for the contractors. Within the report, I quote information generally from the UK because, obviously, far more large-scale and complex projects have been delivered there than have been delivered here. I will read it out. It states that "the construction of-----

I do not want Mr. Costello to read it out. We are under time pressure.

Mr. Tom Costello

It is important.

I know it is important but I am here as a questioner and Mr. Costello is here as a witness. I have asked him a very simple question to which I would like an answer as soon as possible because the witnesses or somebody else must have it. If the witnesses do not have it, we have a serious problem in that the witnesses have not looked at the outcomes in terms of cost overruns in other countries involving the model they state is the best one. That is my point. At the start of this meeting, the witnesses spoke about cables. They had a price for cables. It seems insane that they had 5.5 km of cable but in their first phase of pricing, they did not know how many strips of cable would be needed and whether it would be 5 x 5 km. How could they start off a tendering process without knowing how much wire they needed or without having a sum built in for that so that they could say it could go between X and X x 10?

Mr. Tom Costello

I will explain the process again. First, we did deep analysis in terms of ultimately deciding that the two-stage process was appropriate for this project. One thing that is certain and that has been learned in Ireland, the UK and internationally is that the model of traditional tendering where the client designs it without any involvement with contractors has been proven to fail repeatedly because the contractors invariably bid at or below cost and try to exploit the opportunities if there is a looseness in the contract documentation. It is a very competitive marketplace. With the two-stage tender, one works on the basis of a preliminary design, the contractor then works with the design team to develop that to completeness and the contractor takes the risk from that day forward. There is any amount of literature about it that we are happy to share with the committee.

I have no problem understanding what Mr. Costello is saying. He is saying that the traditional model of tendering was not suitable in this case. I understand completely. If there is a theatre, we do not want to say that it will cost €1 million, only for the builder to build it for €1 million and then shave off €200,000 by putting in a cheaper tile, wall or ceiling. I get that, so Mr. Costello does not have to explain it like this to me. My problem concerns the overrun and how the board did not see it, the fact that the overrun is so large and that Mr. Costello maintains that this process is the best one but cannot tell me how it worked out everywhere else.

I think Mr. Costello can understand my point.

I thank the Deputy for making that point.

Can Mr. Costello say for the record that he will get me the information about the overruns relating to the examples he cited today of how this is the best way to go about it?

Mr. John Pollock

We will find out what the outcome of the project involving Ulster Hospital was.

If the cost overrun at Ulster Hospital went over twice, the board should have seen it coming.

I thank Senator Colm Burke for his patience.

For clarification, I understand that the Midland Regional Hospital is 100% over budget compared with where it started. I know there were other issues there involving the builder but my understanding is that it is 100% over budget. Regarding the building of new hospitals in Ireland, when did the last major hospital project in the country take place? I am talking about something like a significant increase in the number of beds. When was the last time a major project like this was done?

Mr. Tom Costello

The last one was the extension to the Mater Hospital. That is the most significant project.

Ms Eilísh Hardiman

An example of a single hospital would be Tallaght Hospital, which was done 20 years ago.

So that was-----

Ms Eilísh Hardiman

It was 1998. Other projects have just been extensions to hospitals since then.

So Tallaght Hospital was the last major project.

Ms Eilísh Hardiman

Correct, and Beaumont Hospital before that.

So we are really talking about going back 20 years for any kind of experience to be available. I know the witnesses have experience in building but we are really talking about a new area in many ways. It has been 20 years since the last major project.

Mr. Tom Costello

Correct.

Regarding the number of staff who will eventually be working in this new facility, will all the staff transfer from the other units? What will be the total number of staff working in this new unit?

Ms Eilísh Hardiman

We are all one, which is very important. We have 3,330 staff within Children's Health Ireland in the three locations of Crumlin, Temple Street and Tallaght. We are glad to report that we have been funded for staffing for the opening up of Connolly, which is very helpful, and further service developments this year, which involve badly-needed investment in paediatrics.

Our projections are for 3,663 whole-time equivalents across the hospital and the two paediatric outpatient and urgent care centres. We have developed a workforce plan to incrementally increase the workforce over the next year as opposed to waiting until the last year. While we acknowledge staffing is one of the challenges in new developments, I can report that in respect of the model of care we are trying to implement, we have been successful in attracting people back to the positions. We have advertised 14 consultant posts that have been filled. I am pleased to say that in general paediatrics, 18 people applied, 12 were shortlisted, four were appointed and we put two on a panel, which is fantastic. Therefore, we know there is a desire to return to the Irish healthcare system but it must be done in a way whereby there is investment in what is being done and we are transforming and making a difference in how we deliver our health system. That seems to be able to attract people. We have also been successful in planning nursing recruitment for the paediatric outpatient and urgent care centre at Connolly and, more importantly, the back-filling within the existing hospitals is well advanced.

Does that number include catering and maintenance staff or does it just relate to medical staff?

Ms Eilísh Hardiman

The total number for the workforce includes everybody.

I thank Mr. Costello, Mr. Pollock, Dr. Curtis and Ms Hardiman for coming before us. We have been here over four hours so I thank them for their perseverance. The meeting is adjourned until 9 a.m. on Wednesday, 23 January when we will hear from the Departments of Health and Public Expenditure and Reform.

The joint committee adjourned at 1.40 p.m. until 9 a.m. on Wednesday, 23 January 2019.