We will note that paragraph and move on to paragraph 17.
Paragraphs 17, 18 and 19 of the report of the Comptroller and Auditor General read:
17. Capital Projects
Capital projects at prisons are carried out on occasions on behalf of the Department of Justice Equality and Law Reform by the Office of Public Works (OPW). Each year I review a sample of capital projects so as to satisfy myself that contracting authorities adhere to public procedures for managing capital projects. In this regard, the sample includes projects which have just commenced, are ongoing, or have been completed. The final payments on a completed contract may not arise for some period after the project has been completed. However, if in the course of my review I note that there are matters which may have ongoing implications for the way projects are managed, I may deem it necessary to include a reference to them in my report, even though the project had been completed some years previously. Two such projects are outlined in the following paragraphs.
18. Castlerea Prison Perimeter Wall
The original cost estimate of the Perimeter Wall project at Castlerea prison prepared during the design stage in February 1994 was £3.57m while a second cost estimate prepared in April 1994 was £2.5m. Tenders were to be sought from 9 contractors short-listed from 46 firms who had declared their interest in the project. The Government did not agree to this restrictive tender approach and decided that an open tender competition be held.
Following receipt of 36 tenders the lowest one in the sum of £1.18m was accepted in May 1994. The successful tenderer had been declared as unsuitable when the original short listing assessment was carried out.
The completed contract price came to £1.2m and the project was completed in 1995.
In response to my inquiry as to why the cost estimates were so significantly higher than the contract price, the Accounting Officer of Office of Public Works stated that the estimates were guided by the cost of the Wheatfield Prison Wall, which although similar, was constructed differently but which was the only like project undertaken by the Office of Public Works in the modern era. The disparity between the estimate and the lowest bid reflects the keenness of the tender competition, and in particular the pricing approach adopted by the lowest bidder who, to quote the quantity surveyor's tender report has adopted a keen price and risk taking method.
As to why a restricted tendering procedure was considered by the Office of Public Works to be appropriate in this case, the Accounting Officer stated that the tendering procedure to be used depends on the particular circumstances pertaining to the project. In this instance the size of the project and the nature of the work (i.e. on a security installation) restrictive tendering was appropriate. The Department of Justice Equality and Law Reform concurred with this view.
In the light of experience of this project, I inquired whether criteria for using restricted tendering have been revised to ensure that optimum value for money is achieved in the awarding of contracts. The Accounting Officer informed me that the Office of Public Works holds the view that the use of restricted tendering does not inhibit the achievement of optimum value for money. In addition, the existing criteria for using restricted tendering in the prisons context are not solely concerned with economic considerations (although they naturally form a large part) but also deal with issues particular to the security aspects of such projects.
19. Castlerea Prison Project
A design and build contract is one where the building client contracts with a developer/contractor to purchase a building complete in every respect and suitable for the intended purpose, at a fixed price. So as to ensure that design and build contracts are successful from an economic and cost control perspective it is vital that the outline design and specifications for such projects are clearly defined before tenders are sought so as to ensure that changes and/or additional works do not arise once the contract is awarded. However, during audit I noted that the Castlerea Prison design and build project which was contracted to cost £12.7m was completed at a cost of £14.34m.
In March 1994, the Government decided to provide accommodation for 150 male prisoners in Castlerea. The project involved the conversion of the existing hospital building to use as a prison and the construction of some new buildings. It was also agreed that the design and build method of procurement should be used for this project.
During 1994, the Office of Public Works (OPW), acting as contracting agent for the Department of Justice, Equality and Law Reform (Department), invited 19 contractors to apply for inclusion in the pre-qualifying process. Fourteen positive responses were received and, following assessment by Office of Public Works, were ranked in order of merit. In March 1995, tender documents were issued by Office of Public Works to 7 firms as:
-4 had been ranked as highly suitable
-1 had previous involvement in prison work
-1 had previous experience of design and build developments and was located in the area
-1, though ranked 13th in the order of merit, had a design team on board who had experience of prison work in the UK and was classed as a wild card.
Following discussion with the Construction Industry Federation, Office of Public Works reduced the list of invitees from 7 to 4 but no tenders were received as, in June 1995, the Government decided to defer the project. In March 1996, the Department requested Office of Public Works to revise the project to effect cost savings, to reduce the prison accommodation from 150 to 120 and to construct a less elaborate prison within the budget of £12-13m.
Tender documents were re-issued in November 1996 to the 4 firms previously selected by Office of Public Works and four tenders were received, ranging from £11m (by the firm previously ranked 13th out of 14) to £23.5m. The tender documents issued to the firms included a design brief indicating the extent of the work to be carried out and the costs to be covered in the tender proposal.
Following review by Office of Public Works, the lowest tender was increased to £12.7m to adjust for an error of £200,000, the inclusion of VAT at £1.38m and the provision of a bond at a cost of £75,000. It was also agreed that payment of £250,000 to the local authority for a sewerage connection would be paid by the Department, even though the tender documents issued to the four firms required its inclusion.
It was further proposed by the tenderer, prior to the execution of the contract in January 1997, to substitute precast concrete for concrete block work (as proposed by Office of Public Works) in the construction of cell walls as this would provide an additional 12 cells. The proposal was accepted, at an extra cost of £247,500, the work to be carried out under a separate contract.
The project was completed in 1998 and the full cost came to £14.34m comprising
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|
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£m
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12.70
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Design and Build contract
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0.22
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Sewerage Connection
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0.25
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Extra spaces as a result of change in cell block construction
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1.17
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Additional costs after work commenced.
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In reply to my inquiry as to whether the assessment of contractors was satisfactory given that the contractor who was eventually successful was ranked 13th out of 14 in the order of merit, before being included in the short list of 4 who were invited to tender, the Accounting Officer informed me that:
The Office of Public Works have informed him that it is considered that the assessment procedure was satisfactory, given the factors applying at the time. The assessment was based on information and data supplied, on request, by the candidates and which was current and valid at the time the evaluation was carried out. The criteria employed were also considered directly appropriate to this particular project, given the procurement method proposed.
The placing achieved by the successful contractor following the assessment process did not necessarily reflect adversely on either that particular contractor or the assessment method used. The assessment did not, for example, conclude that this contractor, (or indeed any of the other candidate contractors), was incapable of carrying out the work, but merely said that, on an objective analysis based on the requirements of the project, the information supplied by candidates, the accepted criteria employed to evaluate that data and the Office of Public Works's own knowledge of the firm in question, this was the appropriate rating.
It should be noted that the successful contractor for the project had already tendered and completed successfully the construction of the prison wall at Castlerea, at a very competitive price. (see paragraph 18).
As a design and build contract should include all costs to provide a suitable prison building, I inquired as to why the proposed sewerage connection estimated at £250,000 and the additional spaces costing £247,500 were not included in the tender proposals received from the successful applicant. In this regard I noted that the contractor expressly excluded any local authority charges from his tender bid price contrary to the tender document requirement.
The Accounting Officer informed me that:
The sewerage scheme as originally designed and tendered for envisaged that there would not be a need for onsite sewerage treatment. The preferred option in dealing with this matter was to connect directly to the public system and this was the solution pursued by Office of Public Works. The existing public system did not have the capacity to deal with the volume of effluent from the proposed Prison so this option was not feasible. However, following discussions with the local authority and the Department of the Environment and Local Government, the Department and Office of Public Works became aware that there was a proposal, by Roscommon County Council, to construct a new public town sewerage scheme for Castlerea and in that context, it was logical that provision should be made to allow the County Council to connect the Prison directly into this new scheme and thus obviate the need for any arrangements to be made within the contract to deal with this item. An agreement was reached between the County Council and the Department that the cost, to the Department, of this connection and associated works would be £250,000. This would have had the dual benefit of removing a significant element of work from the project and also ensuring that there would not be a need to provide for a continuing expense in future years in maintaining sewerage plant on site. The County Council had no difficulty with this proposal and consented to allow the direct connection to be put in place.
As the project progressed through the construction phase however, it became apparent that, contrary to previous indications the new public scheme proposed for Castlerea was not, in fact, likely to be provided in the timescale previously indicated. The Department of the Environment and Local Government confirmed this to the Department as the contract for the Prison was nearing completion. In this context, the Department was obliged to make separate arrangements for the treatment of sewage. An onsite solution was eventually adopted, since neither of the public options was then feasible. The Department following a separate tender competition entered into a separate contract with a different contractor to install a suitable modern sewerage treatment plant exclusively for the prison at a cost of £220,227.
The proposal to provide additional spaces was not made by the contractor in his tender because his price was based strictly on the tender documentation supplied. The proposal was made separately, later, on his own initiative and was specifically approved by the Inter-Departmental Committee (Departments of Justice, Finance and Office of Public Works) overseeing the Accelerated Prison Programme on the basis that it represented good value for money and should therefore be availed of.
In reply to my inquiry as to why £1.17m additional costs arose following the award of the design and build contract the Accounting Officer stated that these arose in order to deal with new requirements arising since the original design and matters which could not have been foreseen at the outset but which were necessary for the proper completion of the works. These included:
£768,000 for the inclusion of Palmreaders and Audio Visual Units on doors and gates, the provision of fibre optic cabling between blocks, variations to doors and additional fencing. As the project developed, the Department became aware of the use of Palmreaders and Audio-Visual Units to gates and doors in prisons in Northern Ireland and the UK, where they proved to be very effective and cost-cutting. The installation of these devices in Castlerea has achieved staff savings in the region of 20 staff posts at a saving of £380,000 per annum. This will result in substantial savings over the coming years. The variation on the doors, the fibre optic cabling, additional fencing and other works were items which were identified during the construction period and were necessary for the proper completion of the works and the smooth running of the prison.
£181,000 for sundry work including £78,500 for a water softening system. The water softening system was recommended by the technical engineers to prevent the build up of limescale on all the hot water equipment, which would have caused difficulties to the smooth operation of a working prison. The other principal items of expenditure were the provision of service ducts between Block B and the south west gatelock and the provision of firehose reels and enclosures. These were essential items which were required for the prison.
£114,000 to construct a surface water drain. (Though the tender documents issued to the four firms required the inclusion of such a drainage system in the tender price, I noted that the contractor specifically excluded provision for this in his successful tender proposal). Towards the end of the contract, it became apparent that a scheme of works would be required to rectify a problem which was then becoming apparent in relation to the system of surface water drainage. Historically, since the former hospital had been constructed, the surface and foul water systems had fed into one unified sewerage treatment plant. The system then in place was designed to cope with this. However, when the new prison sewerage system was constructed, it became apparent that this method of mixing foul and surface water would not be possible, since the more modern system proposed required that the two feeds could not be mixed. For this reason, it was necessary to put a project in place to separate the two and provide a separate outfall for the surface water, since it would, if it continued to drain into the sewerage system, interfere with the efficient operation of the sewerage system. The scheme of works to give effect to this proposal was put out to tender and was awarded, after competition, to the on site contractor.
£55,000 for securing and making good the west wing. During the course of the contract, the contractor used the former hospital west wing as his base of operations/site office. This meant that he did not have to set up temporary site office accommodation and thus avoided incurring costs (which would ultimately have had to be borne by the Department under the contract). Since the building had up to recently been occupied, a minimum of work was necessary to bring it up to an acceptable standard. No specific prison related use had been established for the building by the time the contract had been completed and the contractor vacated the site. In the interim, until a final decision was made on the long-term use to which the premises would be put, it was decided that, in order to prevent the building from falling into disrepair, a scheme of works should be put in place which would weatherproof the premises and establish a stable environment so that the building fabric would not deteriorate. This was especially relevant given the onset of winter when, unprotected, the building might have been vulnerable to frost and rain damage in particular. The contractor on site was awarded the contract for the works required after a competitive tender process and the necessary protection was duly applied to the building so that it could remain in relatively good condition pending a decision as to its future.
£48,000 for a water main which was a requirement made by Roscommon County Council. The works included the extension and diversion of the water main with appropriate connections and junctions, as well as a 100mm spare duct in one of the trenches for future use.
The Accounting Officer also stated that consideration should be given to the fact that this was the Department's first experience of a design and build project. Because of the experience gained through this project, he has ensured that on current design and build projects under way there is a greater involvement of the Department's technical staff at all stages of the project. This leads to more cost effective and smooth running of the contract.
