We have a quorum so the meeting can proceed. We are in public session. I have received apologies from Deputy Arthur Spring. The item for consideration is the Department of Public Expenditure and Reform, Revised Estimates, Vote 13 - Office of Public Works. I welcome the Minister of State at the Department of Public Expenditure and Reform, Deputy Brian Hayes, and his officials. The purpose of the meeting is to consider the Revised Estimates and the supplementary performance information regarding the outputs and impacts of programme expenditure. A draft timetable has been circulated. Is the timetable agreed? Agreed. I call on the Minister of State to make his opening statement.
Vote 13 - Office of Public Works (Revised)
I thank the Chairman for the opportunity to address the committee. As Minister of State at the Department of Public Expenditure and Reform with responsibility for the Office of Public Works I am pleased to be here with my officials to present the Revised Estimates for 2012. Before I introduce the details of the Estimates I wish to advert to work under way in the OPW in pursuance of the Government's public sector reform agenda. As members of the committee are aware, the Government launched its public sector reform plan last November. As everyone is aware, the public sector is complex, made up of organisations stretching to all corners of the country. We are dealing with hundreds of diverse organisations with almost 300,000 people employed.
It is important to recognise the scale of the task and the critical factors involved. However, there is a strong commitment in the public sector to change and to help our country get to a better place. The Government's public sector reform plan consolidates all Government activity in this area. There are 14 public service reform initiatives at the heart of the plan. The OPW has a significant role to play in several key areas. In particular, the OPW is the lead agency and, therefore, central to the achievement of the goals set by the Government in two specific areas, procurement and property asset management. In addition to these areas, I have been asked to lead on shared services and Government level performance management, GovStat. These are the four areas for which I have responsibility.
Significant progress is being made in the procurement area by the national procurement service, NPS, located within the Office of Public Works, especially in terms of developing centralised contracts for commonly used goods and services. Contracts placed by the NPS working with the wider public service achieved savings in excess of €28 million in 2011. Total savings achieved since the establishment of the NPS are approaching €176 million. It is important to highlight that since the service was established the net savings as a result of new centralised contracts put in place amounts to €176 million, a significant achievement.
In addition to the potential for savings, the programme for Government has identified public procurement as a key driver in supporting SMEs. Public procurement is a difficult and increasingly complex process. It demands strict adherence to EU procedures. EU directives have placed a heightened emphasis on the need to be procedurally accurate and legally compliant. The National Procurement Service is committed to educating both public service buyers and suppliers in this area. To date, over 3,000 businesses nationwide have benefited from information sessions delivered by the National Procurement Service which continues to engage with small and medium enterprises to provide practical advice on how to compete for public contracts. It has also provided numerous seminars, conferences and workshops for public service buyers to ensure they are familiar with correct procurement procedures.
How we manage the State's property interests is important in minimising our cost base. We will realise significant savings in the management of the property portfolio by reviewing our leasehold and maintenance agreements and raising additional capital through the sale of excess property, where appropriate. To date, we have realised savings of €19 million, or 15%, of the allocation. The public service reform plan sets out some specific actions in this area, including developing a property management plan with a particular focus on office accommodation and improving strategic decision-making capability. The new public service will not only be smaller but will also have to adapt to a smaller property portfolio, with shared accommodation and back office facilities.
In terms of how the Office of Public Works has been affected by the reduction in public service numbers, authorised staffing levels have reduced significantly by over 400 staff in the period from 2008 to date, a significant drop relative to the total size of the organisation. The staff of OPW are changing the way they operate and manage to ensure services to the public are maintained, despite these reducing resources. Staff resources are being assigned to the areas of the office prioritised under the public service reform plan.
Before I deal with each of the programmes, I note the efforts under way within the reform proposals to strengthen the input of this and other Dáil select committees in the task of scrutinising the allocation of public funds, particularly in three areas. Given the timing of my appearance before the committee, it will acknowledge that resource allocation for the current year is already well established. However, with future allocations for this office, particularly in 2013, I make the point that given the multi-annual nature of the OPW's business, there is no room for manoeuvre from the expenditure ceilings already set. With over half of next year's capital allocation and 40% of the 2014 allocation contractually committed, the OPW has initiated work programmes based on Government spending priorities. Capital unitary payments for the convention centre in Dublin, flood relief projects and building works to maintain the fabric of buildings and deal with the ongoing office rationalisation programme will absorb the medium-term OPW capital allocation.
On the current side, wage payments for nearly 1,800 permanent staff, unitary payment commitments and contractual commitments for rent on buildings occupied by Departments account for 85% of the 2013 allocation. The remaining allocation will be required to fund property maintenance, drainage maintenance and the heritage service programme, a critical component of the Governments' efforts to revive and develop the tourism sector. A more robust value for money code is to be established for all policy areas within Departments and I look forward to applying it to business areas within the office. As the OPW was one of the offices to pilot the restructured Revised Estimates, I would welcome feedback from the committee on the format or content of the output and performance indicators presented in the 2012 Estimate template.
The Revised Estimates for the OPW are broken down into three programmes: programme A - flood risk management; programme B - National Procurement Service; and programme C - estate portfolio management. With regard to flood risk, the OPW is the lead agency for the management of flood risk in Ireland. I am pleased to say that, despite the overall reduction in capital spending for this year which is critical to enabling the Government to stay within overall budgetary constraints, I have been able to ensure the funding allocation for flood relief works has been maintained. This allocation has been fully assigned for 2012, with €44.5 million provided this year to carry out major flood relief schemes at a number of locations. There is the expected completion of six major flood relief schemes at Clonmel north and east, Mallow south and west, Mornington, Clonmel west, Johnstown and on the River Tolka. We are progressing with phase two of the River Dodder scheme, as well as the commencement of schemes at Fermoy south, Ennis lower, Bray, Tullamore, Carlow - phase B, and Waterford. There will also be continuation or completion of the design of 11 schemes at various locations nationwide.
Central to the OPW's approach to flood risk management is the programme for the production and implementation of catchment flood risk management plans and associated flood mapping for all national catchments areas. In 2011, the first stage of this process, a draft preliminary flood risk assessment was completed and circulated for public consultation. This consultation process is now complete and represents an important part of the delivery of the overall catchment flood risk assessment and management programme by the end of 2015.
It is also worth noting that during 2011 the OPW provided funding of some €5.2 million for local authorities for 72 minor flood relief works. A further critical element of the flood risk management function necessitating a significant direct labour workforce is the continued maintenance and upkeep of arterial drainage channels and completed flood relief schemes. Flood risk management remains a priority for the OPW and the Government and they are committed to its implementation throughout the country.
As I indicated, the National Procurement Service, the second programme listed in the Revised Estimates, assists Departments, Offices and agencies in the procurement of goods and services at competitive costs. I am pleased to inform the committee that significant progress has and continues to be made in the reform of the public procurement system. The National Procurement Service will continue its works in achieving significant savings to the State in 2012. Building on already developed initiatives in procurement reform, with 50 national frameworks in place, we are committed to implementing further initiatives in contract aggregation, mandated use of common frameworks, increased professionalism and more innovative use of technology. It is a matter of using the State's bulk purchasing power to secure optimum value for the taxpayer. In the past six months, as Minister of State, I have personally met the main suppliers to the State and emphasised to them the imperative of treating the State as a single customer who expects a consistent approach to price and value for money. I am also conscious, however, that not all suppliers are large players in the market. We must, therefore, also be mindful of the impact on smaller businesses and local suppliers. We can consolidate at central level and still accommodate the smaller supplier, an issue of which we will not lose sight.
Other NPS initiatives include the piloting of an e-invoicing programme which is under way and the objective of which is to have a paperless billing system that will operate across the public sector. That is good for business because it will cut down on red tape and costs and facilitate the prompt payment of suppliers. The full roll-out of the e-invoicing programme has the potential to result in multi-million euro savings for the Exchequer, with reduced administrative and transactional costs, as well as providing savings for suppliers of goods and services to the public sector.
The National Procurement Service has introduced a managed print service solution that is strategic, cost-efficient and provides the public sector access to a modern and reliable service that has been tailored to meet the specific needs of the organisation. The potential savings this year alone are €15 million if the projected take-up of the service by NPS clients is achieved. In 2012 the National Procurement Service will also put in place a low value purchase card system for use by the public sector. Again, this initiative aims to significantly reduce transactional costs around purchasing and will ensure suppliers will receive payments more quickly.
The suite of standard procurement documentation, launched in June 2011, considerably reduces the administrative burden on both suppliers and buyers. It means that suppliers wishing to compete for contracts can now expect to receive the same documents, regardless of which public body issues them. Such a development will further streamline and simplify the process, thereby reducing costs for suppliers when transacting business. Further work in this area will be carried out by the National Procurement Service which intends to develop during the year standard documents for single supplier and multi-supplier frameworks for goods and services. These documents are already being used to good effect where the OPW is establishing frameworks and contracts for use in procurement for the forthcoming EU Presidency.
For Irish public service procurement, the eTenders website is a very important platform. Through this website, suppliers wishing to do business with the State can see and compete for all contracts over the value of €25,000. In 2011 the number registered on the website increased to over 80,000 suppliers. The National Procurement Service is involved in a project to redevelop the website, with the aim of increasing its attractiveness and usefulness for both public service buyers and suppliers. The project will be completed this year.
I take the opportunity to appeal to businesses in Ireland to register on eTenders. There is little point in having such a portal if people are not aware of the business opportunities provided in public service procurement because they are not registered. I use this opportunity to encourage SMEs to register, otherwise they will not know about the opportunities available.
The National Procurement Service also recently established a multi-stakeholder working group to ensure there are no barriers for companies when accessing the public service marketplace. The group consists of employer representative groups, including ISME, IBEC, the Small Firms Association and the chambers, as well as representatives of the main public sector buyers, including the National Procurement Service, the HSE, education and health. I am confident that this important development and the other initiatives under way will reap significant benefits during 2012 and succeeding years.
The final programme is estate portfolio management which comprises the management, maintenance and development of the State's property portfolio, including national monuments and historic properties. Unitary payments for the convention centre in Dublin and grants to various bodies are also funded from this allocation. Property is a core aspect of our work in the OPW. Part of the policy we are pursuing is to aggressively pursue significant savings in the portfolio. Considerable progress has been made in recent years and I am determined to push on with these savings across all leased State property as the consolidation of the Civil Service continues.
Annual rental expenditure peaked in 2009 at €131 million, but by 2011 the figure had reduced to €117 million. By the end of this year I expect the annual outturn to have reduced even further to a figure of approximately €112 million for leased buildings. My office successfully negotiated 21 downward rental reviews during 2011, with over 357,000 sq. ft of office space surrendered in 2010 alone. I am confident that this trend will continue, given the country's changing economic circumstances. The OPW's rent reduction strategy will be pursued aggressively in the coming years in tandem with the surrender of leases on expiry or availing of lease break clauses. A further 50 plus leases will be reviewed in 2012 and rent reductions will be pursued in all cases, regardless of the existence of upward only rent review clauses. Further gross savings in the region of €12 million for the period 2013-14 are projected at this stage, excluding new demands for additional space from Departments. It is important to stress that the savings made are not once-off savings; they are annual savings which, over time, will significantly reduce the annual State rental expenditure, but they may initially be offset by fit-out or dilapidation costs which may arise as part of the rationalisation programme.
Reducing the State's rental costs is only part of the overall strategy. I will soon bring proposals to the Government to further increase the efficient use of office accommodation. Measures such as optimising the amount of office space allocated and a greater use of open-plan office layouts will enable the office footprint to be reduced. There will be a detailed assessment of current OPW managed State-owned buildings to determine which are fit for long-term use and which should be disposed of. As part of the overall reform agenda, the OPW, in conjunction with other State property owners, will play a key role in developing processes and procedures to facilitate the more efficient and effective use of property, especially office accommodation, across the various sectors within the public service.
Turning briefly to heritage, the importance and cultural significance of more than 800 heritage sites throughout the country cannot be overstated. I have said before and it is worth re-emphasising that the tourism sector will be critical in terms of the financial stability of and growth opportunities for this country into the future. I am confident that the extensive array of significant OPW heritage sites will contribute to this process, both through the excellent visitor facilities provided and the value for money that these facilities represent. However, as a principal actor in the preservation and presentation of a significant portion of the country's heritage sites, the OPW needs the help of local community and heritage groups. In March I launched a nationwide advertising campaign seeking expressions of interest from local heritage-community groups which may be interested in co-operating with the OPW in our endeavours. The truth is that funding for extending opening times or the excellent guide service is simply not available, nor will it be in the next few years. If we want more domestic or international tourists to visit our fantastic sites, we need the help of communities. I am hugely encouraged by the interest shown in this initiative which I have launched and I am confident that a pilot scheme, with more than 30 partnerships, will be in place by the summer. In 2011 I introduced the first free Wednesday initiative at heritage sites and I am glad to say the overall number of recorded visitors increased by more than 5% on the previous year. If one offers something free of charge, by and large, people buy into it and use it. There is a lesson in this for everyone.
As members are aware, Ireland will take on the mantle of the EU Presidency in 2013. The OPW will be central to the provision of conference facilities for the Presidency and preparatory work is under way in this regard. The success last year of Queen Elizabeth's visit, followed by the shorter but equally successful visit by President Obama, in which the OPW played its part, provided excellent opportunities to showcase Ireland on the world stage and a great boost to the country. The EU Presidency will provide us with a similar and more lengthy opportunity to showcase Ireland, in which the OPW will assist. This year it has been allocated €3 million for capital works to include the provision of a new conference facility in the former print works area of the Stamping Building where the Mahon tribunal took place for a number of years. The modernisation of the building will significantly improve the conference facilities available during the term of the EU Presidency, but it will also have a long-term benefit to the State, through its use for cultural purposes post-2013. The facility will result in significant savings into the future because it will be used for other conferences long after the Presidency has come to an end at relatively small amounts of money in terms of the size of investment we are making.
All capital in the Revised Estimates has been allocated for use in 2012. Areas of expenditure covered include the conference centre in Dublin, the continued rationalisation of office accommodation driven by the lease surrender programme, ongoing works to cultural and heritage institutions and a building programme set by Garda Síochána priorities. As I have stated previously, the OPW acts as an agent and incurs expenditure on behalf of other Departments and agencies not funded from the Vote. Expenditure of €85 million was incurred in 2011 on these services. The main areas of expenditure were major capital works, maintenance works, leasing of accommodation, local loans and health and safety works.
The OPW also performs specific roles not attracting voted funds which demand an input and resources on a continuing basis. For example, it regularly advises on architectural matters, develops sustainable energy options for Departments, conducts universal access audits, examines and implements flood protection proposals and sources and assesses the acquisition of sites for primary schools. It is acting as an agent for the Department of Education and Skills in the project management of eight new schools on seven sites to be completed next year.
My colleague, the Minister for Children and Youth Affairs, announced the Irish Youth Justice Service facility at Oberstown. OPW staff are involved in the design and procurement of this project. We do much work for other Departments in a range of professional areas, which is an example of shared services. A cost is incurred, but the work has huge value for other Departments for which we undertake work. Finally, I assure the committee that the OPW continues to competently and effectively manage its three functional areas with the provision of value for money for the taxpayer as a central motivation. Its staff have faced the challenge of reform under the Government's reform agenda in a professional and ambitious manner and is working to deliver more with decreasing resources.
I will be glad to respond to any questions members may wish to raise.
In keeping with our practice for dealing with the Estimates, I will invite the Opposition spokesmen to make the opening general remarks. I encourage them to stick to generalities because I will call each subhead and there will be an opportunity for people to contribute on them. I do not want to trespass on Deputies' remarks but I want to avoid duplication. It might be a better way for us to organise our business.
I will assist that process by not making too many general comments and I will make a few specific points we can take up in due course. Flood relief measures are a major issue in the report. I welcomed the statement about the catchment flood relief assessment management scheme. What is the OPW's role in planning applications in local authorities? If a local authority is applying to build a development adjacent to a river, does the OPW make a formal submission or does it ask the local authority to take note of the report that has been published?
Why have there been so few payments following last winter's flooding in Dublin? Is the system too cumbersome? We have seen some of the houses that were flooded on the television as recently as this week. Many claims have not yet been processed so can that process be simplified?
Procurement is the second area of responsibility for the Minister of State. The OPW traditionally has been too good relative to other Europeans. In Germany it just so happens that almost 98% of Government contracts are given to German companies. In France, it just happens that up to 95% of Government contracts go to French companies. The situation in Ireland is much less satisfactory. I am sure they are complying with the same EU procurement procedures as us. An effort has been made to improve this area recently to assist local businesses but I suspect a lot of this goes to the design of the tender process. We could pull on the green jersey when spending Irish taxpayers' money and design the tenders so they can be competitively suitable to the Irish market. If a tender is too big, sometimes there are no Irish companies big enough to take it on. Before we even start, we know the contract is going abroad. We all know about exam papers being printed overseas and so on. I want that issue to be addressed because our tendering process became overly cumbersome. That works its way right down the line.
In all public tendering, companies make submissions, a short-list is drawn up and the detailed tendering is then done. Part of the assessment involves the financial standing of the company, and that can be based on turnover in the last few years. By definition, because of the recession in construction in Ireland, which also applies to flood relief, Irish companies might not meet the turnover qualification for previous years and are ineligible, even though those companies were well able to do the work on previous occasions.
The main money in the OPW is in its property portfolio. Could we get the total square footage under the management of the OPW, how much is owned and how much is rented? In 2010, almost 357,000 square feet were surrendered but in 2011 the figure had fallen to 70,000 square feet, a fall of 80%.
It relates to leases coming to an end.
We would like the projection for 2012 and the average rent, in Dublin and outside of Dublin.
The OPW must be leasing a lot of properties from developers who are in NAMA; that is inevitable. What level of discussion has there been with NAMA about mutual clients who are OPW landlords and NAMA debtors? While the OPW has a duty to drive down the rents, the other State agency, NAMA, has the opposite duty to get as much from its debtors as possible. What are the machinations between the OPW and NAMA on their mutual clients?
Last night, in an answer to a parliamentary question, the Minister for Justice and Equality said the Equality Authority and the Irish Human Rights Commission are to be amalgamated. A review of that process was completed on 20 April. The outcome was the recommendation that the Roscrea office be closed. Birchgrove House in Roscrea currently houses 18 staff from the Equality Authority. I am specifically asking about the property issue related to that decision. When is it up for renewal? How much is the annual rent? What scope is there for the further use of the property as part of the OPW portfolio? I accept the Minister of State might not have the details to hand but he might send them to me.
I do not know if the Minister of State's offer to stop talking and to allow interruptions is open-ended or if it just refers to this meeting.
The Deputy is quite good at it.
I did not make the offer, the Minister of State did. The OPW is a good outfit. It does not always get the public recognition it deserves and we should acknowledge its work.
I echo Deputy Fleming's remarks on the tendering process. Mr. Conor Murphy, when he was a Minister in the Stormont Executive, successfully managed a system in which contracts were broken down into smaller constituent parts to facilitate access for local or domestic suppliers or contractors and to allow them to compete for work. I recommend that system to the Minister of State and would be interested to hear what he has to say about it.
I have already met the Department of Regional Development on this issue.
Perhaps the Minister of State would outline the outcome of that meeting.
Flood risk management is a matter of public policy concern and community concern. Dublin has had its own experiences with flooding, which has been replicated in other parts of the State. I know the purse strings are tight at present and we must have an eye on budgetary control, but will the Minister of State outline the adequacy of the current allocation for flood risk management? I would appreciate the Minister of State giving us a sense of what he deems necessary to advance that work.
I have questions on the staffing levels in the Office of Public Works. I have the figures on the serving staff. Will the Minister of State talk us through the figures of 631 and non-administrative staff of 1,126?
Two thirds industrial and one third- - - - -.
I would appreciate if the Minister of State could outline possible consequences for the service provided by OPW when staff who availed of the enhanced pension deal that was available up to end of February, retired early. Have the cost savings from the incentivised early retirements been calculated? Will he discuss the property portfolio and address the extent of unallocated properties, for example, Phoenix House on Conyngham Road? I am aware that some of these issues have been aired at the Committee of Public Accounts but it would be beneficial to discuss it.
Will he detail the works on the new conference facility in the stamping building in Dublin Castle?
It will be used when Ireland hosts the EU Presidency.
I appreciate that it is good to modernise State facilities. We have a conference centre, the titled building, which is quite controversial.
We know all about it.
Will the Minister of State talk us through it? Sin é.
I have made a note as best I can, but we must all be vigilant. I will try to deal with matters in accordance with the subheads, otherwise we will end up duplicating the process. Members may have other questions, and the question does not have to be under the absolute specific subhead. I will exercise flexibility, but at the same time we must make progress. Under flood risk management, there are five to six different heads and any questions are bound to come under one or other of those subheads. The first subhead in most of the Votes is administrative pay and non-pay. That covers a multitude. If members have a question it will probably find its way in there.
Deputy McDonald's question on whether the OPW was badly affected by the - - - - -
I would prefer to deal with questions in accordance with the order, because otherwise we will have no smacht on it at all. Vote 13 - Office of Public Works. Members will find the subheads in pages 1 to 15 of the briefing documentation. A comparative set of statistics has been distributed which will be extremely useful. I thank the secretariat again for preparing the documents, which shows the provisional outturn for 2011 and the 2012 Estimates, so that we can compare year on year with what has actually happened.
On programme A - flood risk management, A1 and A2, administrative pay and non-pay. As questions have been posed, I will ask the Minister of State to respond to them.
Deputy Fleming asked about the catchment flood relief assessment management scheme, CFRAMS, model. We have divided the country into six areas and we are doing six CFRAMS. The objective is to have a flood mapping system that we can all agree on, mapping the worst areas in terms of 100 year events and 1,000 year events. We have not had that up to now. Our agreement under the EU directive is that we will have this in place by 2013 and a programme in place beyond that. Up to this point, we have not had a picture of the whole country, which we will put in place. It is not our task to involve ourselves in local development plans but these will be available for public pursual. Will they affect local authorities? That is a matter for those local authorities.
What I find when I travel around the country is that already the planners are having regard to the preliminary CFRAMS assessment. I was in Fingal County Council some weeks ago and a planner told me that when a map showing the flood problems areas is provided, immediately the councillors have a view in terms of the development plan. It is already happening around the country. It is an issue. People are becoming much more conscious of the location of their house and more importantly where the developments will be located. We do not feed into that process directly, we simply provide the maps and come to a conclusion as to where the real priority is. That will be important because Deputy McDonald asked whether I have enough money. One never has enough money, but at least I know how much money I will have for the next three years, which was not the situation before. I am grateful for that.
When I first came to the Department, I was told there were 250 hotspots where effectively one could have instant flash flooding and difficulties emerging. If we were to have all the money required for this work, could we get it all done? No, we could not do it, but at least we will have an objective criteria once the CFRAMS mapping is in place as to what we can do with the available money. We have an assurance for the next three year, which I think is important.
In relation to the flooding last October in Dublin, I hear the criticism, but the Department has been working very closely with the four local authorities in Dublin. In the first instance, local authorities submit an application to the Department for funding. We must wait for the local authority to put in an application, which the Department will deal with and turn around as fast as possible. However, the process takes time. There is a very rigorous cost benefit analysis of the local authority's suggested solution. We examine whether it will work from a hydrological basis, and whether it will have the impact we expect. There is no point in spending money if we find that in the first major flooding the capital structure has not worked. It is unfortunate that it takes time but we are working closely with the local authorities and as the applications come on stream, they will be dealt with by us. I have been to a number of locations. The good news is that where we invested the money, for example, the Tolka, the river held its banks very significantly. It highlights the capital works that go into that, and the difference the Department can make in providing assurances.
Deputy McDonald asked about the adequacy of the current allocation for flood risk management. I think it is adequate but if I had another €100 million, the Department could roll out another 200 schemes. It is important that I know the direction for the next three years, which was not the position last year. There is some assurance about this. As I said at the start of my statement, all of the money for this year is spent, 60% of next year's capital allocation and 40% of the 2014 allocation is contractually committed. We are rolling out the projects. It is complicated because of the tendering system and the planning issues. We must also deal with the consequences when a contractor, as we have seen in some cases, pulls out of the project and we must return to the market, which slows up the whole project. We also have to deal with the fallout when a community objects to the proposed works, as we have seen in one celebrated case in Dublin in the past six months. I appeal to the local authorities to work with the Department in working up as much consultation as possible so when a solution is arrived at, we can get public buy in and support for it.
Are there other comments or questions on flood relief? As no one is offering, we will deal with the following subheads under flood risk management. Members should indicate if they have comments or questions. The subheads are: A3 - purchase plant and machinery; A4 - hydrometric and hydrological investigation and monitoring; A5 - flood risk management; and A6 - drainage maintenance. In relation to the key outputs, are the 2011 outputs agreed? Agreed. Are the 2012 output targets agreed? Agreed. Are the 2011 context and impact indicators agreed? Agreed.
On programme B, which is the national procurement service, Deputy Fleming asked a number of questions on tendering. Will the Minister of State deal with that first?
Both Deputies raised this crucial issue. The total amount spent by the public sector two years ago was €16.5 billion. While the full figure for last year is not yet available, we believe it is approximately €14.5 billion, which means we have reduced expenditure by €2 billion in two years. Much of this saving can be ascribed to reduced capital expenditure resulting from a smaller, albeit still substantial, capital programme. However, some of it has been achieved through the significant cost reductions we are achieving.
I will be blunt about this issue and avoid diplomatic language. As far as I am concerned, we have too many procurers for such a small country. Every agency, Department, school and local authority has a group of people involved in procurement, not all of whom have, with respect, the professional outlook and competence required of procurement in the private sector. If we are honest, we must move to a much smaller procurement service. In the two years since the establishment of the National Procurement Service, NPS, we have achieved savings of more than €150 million.
The issue of printing contracts was raised. Private sector businesses have managed print contract systems in place. This means that every time one makes a photocopy one is charged as against owning the photocopier and the other materials required for printing. The public sector must adopt a similar system. We have devised such a system and there is no reason central Government cannot buy into it in the same way as Dublin City Council bought into such a system. We must move towards much more centralised contracts and framework agreements. We have already introduced framework agreements and I will shortly bring to government other examples of such agreements.
Many people claim that significant amounts of money are leaving the country through procurement contracts. Despite perceptions to the contrary, approximately 95% of what we spend is rooted in value in this country. I accept, however, that issues arise in this regard and I concur with Deputy Fleming that we need to do more to address them. Turnover is one issue we are closely examining, as are insurance criteria. We are considering whether we could build into assessments of tenders whether the awarding of a public sector contract would secure one, two, three, four or five jobs in a community. This criterion should form past of such assessments and I hope to be in a position to make an announcement in this regard in the coming weeks. I will seek to secure Government agreement on the matter.
I also agree with Deputy Fleming that simple measures can be taken to break down bureaucracy. It is the task of government to ensure we obtain value for money. However, this must be done within the framework of EU directives. We do not want to go outside EU directives or subsidise employment. Given the shortage of money, now is the time to do more. I am hopeful that the changes we have made thus far, for instance, e-invoicing and the suite of documents we have introduced to eliminate the need to cut and paste legal documentation for every contract, will make a major difference for small businesses.
Circular 10-10, which was introduced by the previous Government of which Deputy Fleming was a member, was a good document as it tried to tap the potential of small and medium-sized enterprises to win some public sector contracts. This could be further developed in the current climate. If the country is spending money, our companies should win the contracts but they will not do so if they do not have the best price or meet the standards required. Ireland is not a major manufacturing country, unlike Germany and France. The Department is conscious of this issue and is working hard to ensure we focus much of our energy on technology and collaboration with the small and medium-sized sector.
As there are no further comments or questions, we will move on to subheads B1 and B2, which relate to administrative pay and non-pay under the National Procurement Service programme.
The Minister of State indicated that insurance is being examined. Is he referring to the Irish public bodies mutual insurances?
I refer to general tendering requirements. To submit a tender, one must have a certain level of insurance and be able to demonstrate that, for example, turnover was X or Y over the previous three year period. I share Deputy Fleming's view on this issue which is being closely examined.
The Minister of State is not referring to overall insurances.
As there are no further comments or questions, we will move on to subheads B3, the Government Publications Service, and B4, the National Procurement Service. Are there any questions or comments? No. Are the 2011 outputs agreed? Agreed. Are the 2012 output targets agreed? Agreed. Are the 2011 context and impact indicators agreed? Agreed.
Programme C is estate portfolio management. Before discussing individual subheads, I note that Deputies Fleming and McDonald asked questions on the programme.
On the question as to whether we have had discussions with the National Asset Management Agency, we have not yet had direct discussions with the agency because we are in the business of exiting the property area. The size of the State's property portfolio will rapidly diminish in the next few years because the size of the public sector will decline from approximately 320,000 staff to roughly 280,000 in the years ahead. The Office of Public Works will demand shared services and insist that a number of organisations work under one roof. We will not seek more facilities because sufficient properties are available. The key task facing us is to surrender lease agreements as soon as possible.
To respond to Deputy McDonald's question, of the 2,500 properties we have, only three are unoccupied and these will be reoccupied later this year. If one has a 20 or 30-year lease and one suddenly finds that a section of a Department has been moved out, one must fill it again. The Office of Public Works is being asked to sort out problems for many Departments which requires us to engage in a constant game of chess. If truth be told, while we have secured co-operation thus far, we need to wield a large stick. This will be clear from the memorandum we will bring to government shortly in terms of the OPW having greater control over who goes where. The days of Departments issuing demands to have a property with X number of car parking spaces in Dublin 2 or 4 are over. I want to send out that strong message to my colleagues in other Departments.
The Office of Public Works has responsibility for the State property portfolio. We must sweat the asset and ensure we secure value for money. The outputs show the significant reductions achieved by surrendering and breaking leases in recent years and we will continue to do this. A lease is, however, a lease. That less than 1% of the property portfolio - three out of 2,500 buildings - is unoccupied is not a bad achievement. However, we must work harder and ensure that organisations which work with us understand that the brave new world in which we operate demands that they work with other people. Open plan offices are important in this regard. We need to abandon the silo mentality that dictated that certain individuals in the Civil Service were entitled to X amount of space. This approach does not work in the private sector and will be challenged. That is one of my tasks in the Office of Public Works.
Deputy McDonald asked questions on two specific buildings.
My understanding in the case of Phoenix House is that the lease will come to an end or the building will be reoccupied in 2012.
I also asked about Dublin Castle.
Yes, my apologies. The Deputy asked a straight question seeking the reason we are putting money into another conference facility when we have a large convention centre. Every time an event is held in the convention centre, it must be paid for even though the State effectively owns the building. The advantage of using Dublin Castle for the Presidency is straightforward. By having everyone located in Dublin Castle and limiting the right of Ministers to hold events in their constituencies, as occurred during the previous Presidency, one reduces costs, including security costs, and the large number of cavalcades travelling through Dublin city centre. During this Presidency the events will all be held in one location. A large room is needed to accommodate representatives of 27 member states and the Stamping Building is ideal for this purpose. The State will be able to use the new facility for other purposes. Dublin Castle is a fantastic and iconic group of buildings and we have an opportunity to use the facility for cultural events and conferences.
While the Presidency does not come within my remit, I understand from the Department of Foreign Affairs and Trade that expenditure on the Presidency will be one third lower than during the previous Presidency. This is as it should be in the current circumstances. While we want to have an efficient Presidency, we also want to obtain value for the money we spend on it. The use of the space in question is a good example of this.
Deputy Fleming asked a question about the reported merger of the Equality Authority and the Irish Human Rights Commission.
Deputy Seán Fleming
The Minister of State may revert to me if he does not have a note on the matter.
Line Departments are responsible for decisions on departmental agencies. We are like the big landlord. They come to us looking for stuff, and then we have to sort out their problems. If they make a decision on that, we will have to utilise that space according to the demands that are there. It is like this gigantic game of chess that we play constantly, and we are often left carrying the baby.
Can the Minister of State give us a note on the property aspect arising from that decision? That is all I am asking.
I will come back to the Deputy directly on that.
That is fine. I asked a few specific questions. What about the total square footage?
We have 1.16 million sq. m. Some 61% of the portfolio is in Dublin, 5% in Cork and 4% each in Galway and Limerick. We have over 2,500 individual property holdings in all areas of the country. That includes around 800 Garda properties. We have responsibility for Garda stations as well. We have 750 heritage properties all over the country. Around 54% of the office accommodation is leased, and 46% is owned by the State.
How much is being surrendered this year? There was a big lot two years ago.
Seventeen leases are being surrendered this year.
NAMA is the largest property management company on the planet. The OPW is renting approximately 500,000 sq. m, based on the figures given by the Minister of State. The OPW is the biggest renter of property and office space in Ireland. Another arm of the Department of Finance, NAMA, is the biggest landlord in the State. In the interests of the taxpayer, I find it extraordinary that the largest renter of property in the State has not been speaking to the largest property management company in the State about mutual clients and mutual leases. The OPW is paying the leases that are keeping NAMA's books in order and vice versa. Does the Minister of State think he should or should not be having those discussions with the chairman of NAMA? Can he explain his thinking? I find it very strange at this point. I know that NAMA likes to operate behind closed doors and that is acceptable to a point.
How much of the cost of the 500,000 sq. m of space currently rented by the OPW is being paid to developers in NAMA? If the Minister of State does not know that, then shame on him. I hope he knows. He should know and he should be making it his business to know for a variety of reasons. If he has not made contact to date, will he please start? It will be to the benefit of the Irish taxpayer.
I understand the Deputy's comments, but that is not the way the system works. We are in discussions with all those people with whom we have a contractual relationship. The contractual relationship is not with NAMA. NAMA effectively is holding these properties, but those properties-----
I never suggested that it owns these properties.
The notion that we are not in discussions as a landlord is not realistic. The idea that we are going to go in and effectively get a reduction-----
I never said that.
-----in discussions with NAMA is wide of the mark. I have made it quite clear that we want to get out this property situation. We are in a contractual relationship, and where it is possible to reduce those leases, we have done so and will continue to do so, as I have identified in the information given. However, those negotiations are in the first instance with the direct owners of the property. In so far as we have made those savings, we will continue to make them. It is my view that if we transpose over the next few years, the total footfall and the total amount of office space leased will radically reduce. As we can get out of these leases, we will do so.
I want to make it clear that I never said that NAMA owns these properties; of course the developers who built them own them. It is only their loans that are in NAMA. However, those major developers have a scheme with NAMA and they cannot budge without the permission of NAMA. NAMA's officials will tell them whether they will accept proposals on their financial arrangements. I saw that NAMA recently approved some reductions in rent for some of its clients, possibly even when there was an upward only rent review clause. I am just referring to the broad issues in the point I wish to make and I am not talking about specific properties.
While the Minister of State is telling us that he is dealing with the particular owner of a property, that owner has effectively no control over the management of his property if NAMA is dictating to him how he is to run his business. There is scope for useful discussions between the Minister of State and NAMA. That is all I am saying. I do not claim that it will result in a reduction, but there is scope in a discussion for something of mutual benefit.
I hear what the Deputy is saying. I just do not want it left on the public record that we are not in discussions. We are in constant discussions with the wide range of interests who own this property as a means of getting out of leases and reducing the total amount there. The reason the number of leases may not be as significant this year as it was last year is largely because the number of leases do not come up. Those discussions continue. Now is the time to make those decisions and we are making those decisions. Looking at the top of the market, there has been a reduction of about 15-20% on the total amount that the State owns.
If I may be honest, there are some towns where if the State decided to get out, the whole economy would collapse. This is due to the scale of investment by the State in the leases that are there. This is the legacy that we have been left. I fully recognise that, which is why we are going to drive the programme over the next three years to get out of these leases and to reduce the costs. That can only be done in the context of where the existing ownership lies.
Deputies Mathews, McNamara, McDonald and Creed have indicated that they wish to speak. Deputy McDonald, do you have a supplementary on questions you already asked? Or has something arisen since?
It is allied to this line of questioning.
That is fine. I will take Deputy Mathews next and I will come back to you.
I thank the Minister of State for the presentation. It is an area with which I am fairly familiar, having spent 30 years looking at portfolios of assets and whether they are owned or leased. I echo Deputy McDonald's praise for the OPW at many levels. Given that there will be contraction in the number of people in the public service and semi-State bodies, the most useful exercise to be conducted would be a plenary or summary overview of the entire leasehold portfolio, to be done on the basis of the expiry dates of leases and the amount of space available. It would be like a summary spreadsheet programme. We would know every year over the next five years the leases that are going to expire, including the space and the locations. We would then be in a position to present this to the market. As the OPW is one of the biggest property owners and renters in the State, it is a huge influence on the market; on yields, on capital values, on everything.
The OPW rental is worth around €110 million per year. If this is capitalised at a yield of 7%, a very crude average, we are multiplying the rent roll by 15 or 16; therefore, the value of the portfolio on which the OPW pays rent is around €1.5 billion to €1.7 billion. That exerts a big influence on the market for office space, in combination with the spreadsheet maturity of leases. The OPW might carry out mapping of the country, showing with various colour codes where leases are expiring, to address the point the Minister of State raised, that is, in a provincial town vacating 20,000 sq. feet of office space for which a lease is due to expire could bomb the local economy. There is a multidimensional exercise to be carried out.
Are we dealing with subheads C1 to C13, inclusive?
Yes. I will call each one separately. If the Deputy has a specific question on one of them, he might hold onto it until we reach the particular subhead, as it might help the flow of the meeting. However, I will not stop him from commenting now, if he prefers.
I commend the Minister of State for the savings achieved across all headings, including the President's household staff. Obviously, it is not for this House to determine, but it is good to see people leading by example.
I am particularly pleased to see that the heritage services have been subject to the smallest reduction. The OPW has a part to play in driving down costs as part of our economic recovery, but it also needs to promote heritage services as part of our tourism product. It is particularly good to see that this funding is not being reduced by much. As a frequent visitor to County Clare, the Minister of State will be aware of various heritage sites under the OPW's control which are being developed. There is one that can be seen but not up close, that is, Leamaneh Castle, which any visitor to west Clare will see. However, nobody can access it, unlike 20 years ago when there were busloads of tourists outside. It cannot be accessed anymore, although it is located on the main road to the Burren from Ballyvaughan, Liscannor or anywhere else. I appreciate that this committee cannot concern itself solely with it, but sites such as this should be made accessible because there is an economic dividend for the country from the tourism product, both domestically and internationally.
I want to raise the issue of upward-only rent reviews. To what extent is the State tied into such contracts and what is the cost?
Like previous speakers, I thank the Minister of State for his presentation. I have a couple of questions on property portfolio management. I have heard about the bouquets delivered to the OPW which are probably well earned in the areas over which it has immediate control, but I am more specifically concerned about cases in which it acts on an agency basis for other Departments. What informs my comments in this regard is the experience in my constituency, in which various Departments, including the Department of Education and Skills, the Department of Justice and Equality and the Department of Health, have looked for properties or land to develop property. In many cases, opportunities were vetoed by other Departments and the consequence would have been a greater cost to the Exchequer.
With regard to the management of State assets, do we have an effective directory of publicly owned properties across the various agencies, including commercial State bodies, semi-state companies, local authorities, the HSE, the OPW and Departments? Such a directory should include properties that are owned, leased and vacant. We should be particularly concerned about properties owned by the State but which are vacant, from the point of view of their asset value and potential to fulfil functions for which we may be leasing property. The Minister of State may reassure me, but I am not convinced the OPW has sufficient reach and control over the activities of other Departments, State agencies and local authorities with regard to how we get the best value for the taxpayer.
My colleague mentioned Leamaneh Castle. I can immediately recall a number of properties in provincial Ireland that I would consider to be bordering on derelict which are owned by the State and have been rejected by various Departments in searches that may be ongoing for properties for schools, hospitals or Garda barracks. How does the OPW envisage its social role in using some of these properties which are teetering on the verge of dereliction in order to allow the streetscape in many provincial towns to be restored? Does it see itself as having a function in that regard and does it have a list of properties that may be in this category? I am concerned that the stock response will be that such properties will be disposed of. This means such buildings will continue in a state of dereliction for a long period. If the OPW took an innovative approach, in conjunction with the Departments involved, we could improve the streetscape in much of provincial Ireland.
To answer Deputy Mary Lou McDonald's question first, less than 20% of the total number of leases involve upward only rent reviews.
On the question asked by Deputy Michael Creed, property management has been everyone's and no one's business at the same time. When I first came to the Department, I found this was an area in which we had to pick up a lot of pieces because other Departments were in this space. It seems that in a small country such as Ireland someone should be in charge of the management, maintenance, organisation and construction of property. As long as this function is spread out and everyone's business, there will be serious cost inefficiencies. One of the key things we must do, to which the Government has committed in the public sector reform plan, is to produce a new memo on property management which will be brought to the Cabinet within the next month or so. That will scope out whose responsibility this area is.
The Deputy asked about a database. We have much of the information, but it needs to be in the public domain. People need to know who owns what and what types of lease are involved, without releasing commercially sensitive information, as well as how many people are in these buildings, whether they contain areas not being used and whether they are thermally efficient. I have been talking about this issue and we will be bringing a memo to the Government very shortly which will give us a much clearer policy remit for whichever Department ultimately has responsibility for this area.
There are many unused buildings that will have to be used in the future. I will give one example. The decision of my colleague, the Minister for Justice and Equality, to close some small Garda stations in Dublin and rural Ireland means there will be opportunities for others to use these spaces, including those involvedin the health sector, the education sector or the community sector. As far as my Department is concerned, we do not want to see fencing around these buildings. We would prefer if someone was in them using heat and light and maintaining them. We have a massive property portfolio which we must maintain. It is like any house: if one has a house one must maintain it. Since our capital amounts have reduced from €400 million to somewhat under €100 million in a short period, the money is not available for this work in future. As far as we are concerned, the more other agencies or the community can use these facilities, the more we are pleased to enter into discussions.
Will the range of the Minister of State's proposals in respect of that directory be cross-departmental? Will it extend to the local authorities, the health service and every area where taxpayers' money has been used to acquire a given property?
It will set best practice. In the first instance it will deal with the Civil Service and all attached Departments and agencies. As I understand it, at the moment it will not deal with hospitals or schools because, effectively, they are not owned by the State but by religious trusts or denominational organisations. The first focus will be on central Government and its agencies with regard to use of office space.
Does that include State and semi-State companies?
It includes local authorities.
What about commercial semi-State companies?
No, but local authorities must be part of the mix.
We have a memorandum which is due to go to Government shortly and I am confident that we will see a good deal of progress in this area. This is one area in which a strong eye was taken off the ball in the good times, although not so much by this organisation. We had to fix the problems, whether as a result of decentralisation or otherwise. We were left in the breach to fix up the problems. There should be one Department in charge rather than multiple Departments, each demanding their own buildings, entrances, this, that and the other. That day is over.
If a Government decision is expected, perhaps we could revisit the matter at this committee.
The Minister of State alluded to one point but perhaps not in the detail I sought. He referred to the closure of Garda barracks and he indicated his wish that they would be used. However, I had something else in mind. The OPW has a remit to assist in terms of landmark buildings in provincial Ireland. Some of these are in State ownership but have been vacant for a considerable period and are in danger or dereliction. Does the Minister of State envisage the OPW having a responsibility in respect of re-engineering these properties? Does he envisage the OPW working with other Departments to determine if they can be brought back into use? This will require considerable investment in many cases. Many of them are significantly-----
Who are they owned by?
The are owned by the Departments of Justice and Equality, Defence, Education and Skills and perhaps by the OPW.
There is a wider role in this regard and it will be dealt with by the memorandum. We must get to the point of efficiencies. However, it depends on the owners of the properties. We will work with anyone, as we have always done, to find a solution but one must have moneys attached to the process to maintain and fit out a given building. In a circumstance in which the entire public service is shrinking and where there are more shared services, there will not be a need for all these buildings. I imagine there will be gaps throughout the country. I visit local authorities in many parts of the country which have built huge buildings in which one or two floors are totally vacant. We must be more imaginative in the way we use that space and in how we involve the private sector and voluntary community organisations. It seems we have space throughout the country with a significant footfall but there was little mapping or planning of it during the good times.
I am keen to proceed. Is there any comment in respect of Deputy McNamara's question?
I know the castle to which Deputy McNamara is referring. I am usually there for the last two weeks in August every year. The question relates to accessibility. The problem is that the lands around the castle are totally private. We have this problem throughout the organisation. The buildings in our care and maintenance may be privately owned but the access around them is the key issue. Perhaps we can have a discussion about that given the complimentary remarks about the OPW.
Subhead C1 relates to administration pay and Subhead C2 relates to administration non-pay under the estate portfolio management heading. Are there any further comments or questions? No. Subhead C3 relates to President's household staff (pay). Are there any further comments or questions? No.
Subhead C4 relates to grant to Zoological Society of Ireland. Are there any comments or questions? There appears to have been a significant increase in the capital grant.
It is for the zoo. It is a carry forward but we are doing the elephant house as well.
Very good. It is not a case of the elephant in the room.
Subhead C5 relates to grants for certain refurbishment works. Are there any comments or questions? No. Subhead C6 relates to purchase of sites and buildings. Are there any further comments or questions? No. Subhead C7 refers to new works, alterations and additions. Are there any further comments or questions? No. Subhead C8 refers to property maintenance and supplies. Are there any further comments or questions? No. Subhead C9 refers to rents and rates etc. Are there any further comments or questions? No. Subhead C10 refers to fuel, electricity and water. Are there any further comments or questions? No. Subhead C11 refers to unitary payments. Are there any further comments or questions? No. Subhead C12 refers to heritage services. Are there any further comments or questions? No. Subhead C13 refers to EU Presidency. Are there any further comments or questions?
Are the 2011 outputs agreed to? Agreed. Are the 2012 output targets agreed to? Agreed. I notice one issue relating to the key outputs under the estate portfolio management. The output target for 2011 includes a statement that the rental outturn for 2011 would be reduced below €116 million. You mentioned a figure of €117 million in your statement. That is not reflected in the 2011 output figures before us.
The figure is €118 million.
Does that mean there is a slight overshoot of the target?
The target reduced from €117 million to €112 this year.
It was to be reduced below €116 million in 2011. The 2011 output target provides that the rental outturn would be reduced below €116 million.
The figure we have is €118 million. Can I come back to the committee on that point? Where is the figure of €116 million?
It is contained in the summary of the output targets for 2011. We extracted the figure from the documentation. It is published in last year's Revised Estimates. I put the question so that we can understand clearly the figure for one year.
I will come back to the committee on that.
Very good. Apart from that query, are the 2012 output targets agreed to? Agreed. Are the 2011 context and impact indicators agreed to? Agreed.
Next is the administrative subheads (i) to (vii). Subhead (i) relates to salaries, wages and allowances. Are there any comments or questions? No. Subhead (ii) relates to travel and subsistence. Are there any comments or questions? No. Subhead (iii) relates to training and development and incidental expenses. Are there any comments or questions? No. Subhead (iv) relates to postal and telecommunications services. Are there any comments or questions? No. Subhead (v) relates to office equipment and external information technology services. Are there any comments or questions? No. Subhead (vi) relates to office premises expenses. Are there any comments or questions? No.
Subhead (vii) relates to consultancy services and value for money and policy reviews. Are there any comments or questions? No. Am I correct in stating there was a significant increase in consultancy and other services?
There is a reason for that. It is largely down to the catchment flood risk assessment and management study, CFRAMS, expenditure. All the work on CFRAMS projects is out to tender.
I understand the increase is from €11,000 to €54,000.
There is a value for money review going on. This is the rationale for the 10% increase. It involves external consultants.
I am reading a more significant increase. The overall global figures are not that high in the context of the Vote but there appears to be a 390% increase from €11,000 to €54,000. It is not a vast amount of money.
As I understand it, we did not do a value for money review last year but we are doing so this year. That is the rationale.
I thank the Minister of State. If there are no further comments or questions, I thank the Minister of State and his officials for assisting the committee with our consideration of the Revised Estimates and programmes. As we have now completed our consideration of the Revised Estimates for Vote 13, the clerk will send a message to that effect to the Clerk of the Dáil in accordance with Standing Order 87. Under Standing Order 86(2), that message is deemed to be the report of the committee.