National Roads Authority.

Mr. Niall Callan (Secretary General, Department of the Environment and Local Government), and Mr. Michael Tobin (Chief Executive Officer, National Roads Authority) called and examined.

I welcome Niall Callan, the new Secretary General of the Department of the Environment and Local Government. He has succeeded Mr. Farrelly who was a familiar face at this committee. I wish Mr. Callan well in his new position.

I remind you that as and from 2 August 1998 section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, grants certain rights to persons who are identified in the course of the committee's proceedings. Notwithstanding this provision in legislation, I should remind members of long standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

Perhaps Mr. Tobin would introduce his officials.

Mr. Tobin

I am accompanied by Gerry Murphy, PPP manager; Eugene O'Connor, head of project management and engineering and Brian Cullinane, who is in our corporate affairs division.

In the past we have had witnesses make an opening statement but I intend to have the Comptroller and Auditor General comment on the accounts and then to proceed to questions from Members as they already have the opening statement.

Mr. Purcell

This goes back to the committee hearing of 16 January 2001 when the then Chairman decided not to note the accounts of the NRA for the years 1996 to 1999. I will paraphrase what he said - in order that he could give further consideration as to whether the committee should make a special report to the Dáil on the issues pertaining to the NRA. The main issue at that stage, as Members will recall, was the payment of more than £3 million in compensation to a company by Limerick County Council because of its failure to award a road construction contract to the lowest qualified tenderer. The failure was due to errors in checking the tenders in the Mungret regional design office for which the county council has responsibility. The NRA contributed £2.88 million from State funds to the compensation award. A great deal of correspondence has been received by the committee since its original consideration of that matter and at previous meetings the chief executive, Mr. Tobin, explained what had been done to tighten up procedures so there would not be a recurrence. That is where the matter stands.

I am a member of Limerick County Council and I am well aware of that saga and I know it was investigated by the previous committee. I thank Mr. Tobin for the full clarification and details which he sent us of all the contracts awarded in the mid-west region. There was one deficiency which was discovered at the time, which was that you did not have insurance to cover the type of eventuality which ensued with Limerick County Council and the compensation which had to be paid. Limerick County Council did not have adequate insurance either. Much of the work was done by manual checking rather than spreadsheets. I know Mr. Tobin has referred to this in his submission but he might again clarify, as there will be much work around the country in the future, that circumstances like this will not prevail again and that he has taken out sufficient protection.

Mr. Tobin

Maybe in that context I could repeat some of what I would have offered by way of comment at the last session of the committee and to confirm that we have taken out insurance indemnity against a repeat of such an occurrence. What we have available is cover to the extent of £5 million in any one incident, be that the original design office or, in the case of a local authority where the planning of projects is being undertaken in-house rather than a design office, we also have cover in that situation.

Regarding steps we have taken to avoid a recurrence, a system is now in place whereby any tender which is received in a local authority or regional design office is subject to check for mathematical errors on an electronic spreadsheet-type format. In the case of projects with a value up to £5 million, the check in the local authority or regional design office is subject to a second check, normally in another local authority or regional design office. In the case of contracts where the value exceeds £5 million, obviously there is the initial check within the local authority or regional design office and a further check is undertaken by a completely external, independent firm of quantity surveyors.

Since our last appearance, when I signalled that we were in the process of trialling an electronic tendering system on the N5 project, I can report that that trial ran very successfully and now all new projects being tendered for will be tendered for using an electronic tendering system. That should totally rule out any possibility of some firm tendering and failing to do its sums correctly or omitting to price items, which would have been the sort of issues which led to the problem we had with the case in Limerick. We have made reasonable progress on that and I can give a reasonable assurance that we should see no recurrence of the type of problem that occurred on the Adare-Limerick project.

One more point. The arbitration award was for an amount over £3 million. Is there any other arbitration claim or whatever involving compensation?

Mr. Tobin

No. The arbitration award for Adare was full and final and there are no outstanding loose ends. I am not aware of any other instance in which we are in a similar position.

Where you have taken out appropriate insurance up to the value of £5 million to guard against any eventuality like that in the future, was there a parallel responsibility on councils to increase their insurance? Is that necessary?

Mr. Tobin

That is a matter for each authority. Parallel with the requirement that the insurance we look after for the work of regional design offices or local authority design staff, we also require certification that all consultancies working on our projects have an equivalent level of liability insurance at all times.

Mr. Tobin referred to electronic tendering. I am quite illiterate in this area and would welcome some information as to how it works. What are the tendering practices? It was suggested to me that minimum levels are required before tenders are accepted.

Mr. Tobin

I would not claim to be an IT buff, but a firm wishing to tender for a project is provided with a CD which it can use on its own systems. It goes through the bill of quantities on the CD and fills in the price for each item on the bill. As it is electronic the system carries out all the calculations and summaries and produces a final total. The system will not allow a company to close out if it omits to price an item. This is one area in which we had difficulties in the past. A bill of quantities can include thousands of individual items and, given human nature, it would not be unusual for a mistake to be made. Despite the extent and value of contracts, items were not being priced. This was a mortal sin under our tendering rules. The system prevents such occurrences.

The issue in Adare arose because, despite checking, someone did not realise the tenderer had omitted to bring all the items down to the total bottom line. This should not happen with an electronic system which we hope is foolproof. We have done everything we can in terms of advice to ensure that once the tender is forwarded on a CD there is no possibility of mathematical errors or failures to price items.

When a tender is submitted is it complete in every way? Is it the case that the system will not provide for a contractor charging additional prices on top of the tender price? Tenders have been loose. What has been the greatest difficulty regarding tenders which gave considerable scope to tenderers to come again and again with the result the contract price varied considerably from the original intention?

Mr. Tobin

Electronic tendering has no impact on that issue. I referred to the Deputy's point in my last discussions with the committee. We are conscious that in preparing specifications and bills of quantities, it is critical we make every effort to ensure all items of work required under the contract are fully outlined and detailed. In the case of earthworks in particular, a certain level of site investigation is undertaken which reveals the nature of the soils involved. A judgment has to be made. Testing takes place at intervals of so many metres and there can be quite significant variations in samples taken four or five metres apart.

The best possible expertise is brought to bear on assessing the quantities used. However, notwithstanding this fact, there will be occasions, particularly involving earthworks, where the quantities which emerge will be different to those included on the bill of quantities. In other words, a contractor may be required to extract greater quantities of unsuitable material than were estimated. In such circumstances imported material must be used to replace the additional exported material. This involves an add-on cost and the contract is designed to provide for such situations.

The Deputy's general point is well made and we accept it. Every effort is made by us and by local authorities to try to ensure that the bill of quantities and specifications are as near to the outturn as we can provide so as to minimise scope for claims over and above the work we specified.

In the case of projects where we estimate the value at up to £5 million, we operate what we call an open tendering system, in other words, everyone has the right to bid for the work. If the project is valued at £5 million to £30 million, we use an open tendering system, but we indicate that in assessing the suitability of contractors they must meet certain thresholds as regards previous work.

In the case of projects where we estimate the value at over £30 million we use a prequalification system in which we announce thresholds in advance so, before they enter the tendering process, contractors seeking to bid will have to demonstrate they have the requisite expertise and experience and have undertaken projects of an appropriate size.

Do the projects have to be similar? Would they have to involve roadworks or road development?

Mr. Tobin

Yes. This is particularly relevant bearing in mind that most of our projects incorporate bridges. Expertise in structural work and roads would be a requirement.

With the exception of a few in the south-west, virtually no one qualifies in the west in the second category regarding contracts between £5 million and £30 million.

Mr. Tobin

We do not require that contractors have carried out work to the same value. It is usually about a third of the value.

To a value of £10 million?

Mr. Tobin

Yes, at the top end of that figure.

Do many contractors qualify in this category in the west?

Mr. Tobin

Off the top of my head I do not know. I am not aware of anyone in the west - Mayo, Galway. Sorry, Wills Brothers and Coffeys are the only contractors in that category in the west.

That leaves out a lot.

Mr. Tobin

Yes, but one must ask why we have that requirement. Let us assume a local authority running a programme for us wishes to undertake a project with a value of £30 million. In order to bid for such a contract, a tenderer must have carried out work to the value of about £10 million. We made this judgment which we believe is realistic and reasonable.

If a person has done work to the value of £1 million and bids to take on a project 30 times that size there is a risk to the public purse that the company would simply not have the background in terms of capacity and management experience to seriously tackle the job. We made a judgment and are satisfied, having consulted the EU Commission, that it is a reasonable way to operate, namely, that we require some level of experience related to the type of project being undertaken from those who are tendering.

Regarding Limerick and the point raised by Deputy Doherty, can Mr. Tobin explain again in layman's English how the mistakes made in that regard are likely to be avoided under an approved IT system?

Mr. Tobin

What happened in the Adare-Limerick job——

Perhaps you should remind the committee of how much that cost.

Mr. Tobin

It cost the public purse £3.2 million, of which the NRA contributed £2.88 million, the balance being funded from the resources of Limerick County Council. What happened in that case is that in the Mungret office, as would have been standard practice, a check was done in respect of arithmetical errors. In other words, somebody went through each item in the bill of quantities, found the rate inserted by the contractor and checked that the extension of that in terms of multiplying it by the number of units for that particular item to give a total was correct, that the total of items on that page was correctly summed, that the sum was correctly taken forward to a summary page and in turn right through to a final total sum for the tender. Despite best efforts in checking one of the tenders the checkers failed to bring forward an item which the contractor had also failed to bring forward. An electronic type system is geared so everything is multiplied and added correctly. One will generally accept that in terms of spreadsheets and electronic systems, it is fairly basic that it can——

Will the central system of Mungret still apply?

Mr. Tobin

It will not arise when we go to electronic tendering because the system is so designed that it is very difficult or wasteful for a person to start checking that a computer is multiplying correctly. One can reasonably assume it will do additions correctly. That is why we piloted——

Will you talk to us for a minute about escalating costs? What has been the experience in the last year or so in terms of contracts and rising costs?

Mr. Tobin

Our best estimate is that in each of the last two years we have experienced construction inflation of about 15% per annum. The main contributor is labour. Last October a general increase applied which added 21% to labour costs. Overall for 2000 there was an increase of 29% in labour costs. For asphalt and bituminous materials there was a 20% increase in 2000. There was just short of a 16% increase on structures during the year.

Has that slowed or is it still escalating?

Mr. Tobin

Our prediction is for an increase of the order of 11% this year, but we cannot be certain. We expect on the basis of general agreements in place that labour costs will increase by 16% and we are hoping there will be reasonable stability in oil prices which impact on blacktop and such material.

Do you recall the figure in the national development plan?

Mr. Tobin

Not off the top of my head.

Perhaps if somebody has that figure they will give it to us. Therefore, the figure was 15% per annum over two years, namely, 1999 and 2000.

Mr. Tobin

Correct.

Regarding the Dublin Port tunnel, when can the oppressed citizens of that part of the city——

Mr. Tobin

The contract for that project was signed towards the end of last year and the contractors are now in possession of site. Though I have not been to see it myself, I believe a sizeable hole is developing in the fields south of Whitehall church, the point at which tunnel boring machines will be put to ground. They are half yearly contracts over 42 months. Our expectation is that around the third quarter of 2004 we should see completion of the Dublin Port tunnel.

Have all environmental problems, in every sense of the word, been resolved?

Mr. Tobin

I am not sure we can ever say that all environmental problems at any particular time have been resolved. There is a regime of monitoring air quality in the area which will have to be put in place, including after the opening of the tunnel, to ensure the quality of air emerging from the tunnel meets appropriate standards. There is a requirement that should air quality fall below required standards, a retro-fix system will have to be put in place to ensure compliance.

I was also referring to aggrieved citizens in the vicinity. Have agreements been reached——

Mr. Tobin

I have no doubt there still are people in the Marino area who are less than satisfied that a tunnel will be built 30 metres beneath them. I hope at this stage they will have been convinced there is little chance of any collapse into the tunnel at that depth, bearing in mind we are talking about rock at that point. The intention is that there will be a fairly widespread level of public consultation as the project progresses so people will be aware of exactly where the tunnel has reached and what is happening on a week by week basis. Every effort will be made to allay fears. It is very easy for me to say the fears are totally unfounded. If one looks at any major city in the world one will see they are criss-crossed by tunnels and it is quite unusual to find anything falling into them from the surface. In this case we are using a tunnel boring machine which is far less likely to give rise to even minor collapses at that level. Many of the concerns were expressed in the context of the possible use of what is referred to as the new Austrian tunnelling method, which does involve generating a hole which is subsequently strengthened and lined. In this case the lining is put in as the tunnel boring machine makes progress. The prospect of collapses is negligible.

Regarding the Southern Cross route, when is the belt to Ballinteer likely to be opened?

Mr. Tobin

That is scheduled for an official opening on 7 August. It is virtually complete at this point.

That is 8.5 kilometres.How many kilometres are left to complete thering?

Mr. Tobin

About 11 kilometres to make the remaining link, namely, the south-eastern motorway. Quite recently we approved the award of contract on that. Our expectation is that this autumn the contractor will have mobilised and moved onto site for that and by the end of 2004 will have delivered the completed project.

About three years work.

Mr. Tobin

That is correct.

There was a reference in your opening statement to toll roads. You said that under the approach proposed by the NRA, toll roads will be constructed as additions to the current national roads network rather thanprovided by means of the improvement ofexisting roads. What is that likely to mean in practice?

Mr. Tobin

Quite simply, we are trying to convey the point that in all instances in which there are proposals to deliver these roads under the PPP mechanism with hard tolling, the existing road network will remain in place. We are trying to assure people who may have conscientious objections or otherwise to using a toll road and paying a toll that they may still avail of the current road network.

Are proposals actually being contemplated in terms of where such toll roads may be built?

Mr. Tobin

At present, we have 11 toll road projects. For example, the Fermoy project is a new alignment quite far removed from the existing road. Anybody who is averse to paying a toll can continue to use the existing road.

I appreciate that. I am trying to ascertain the status of any one of these proposals. Which of the projects is likely to be concluded first?

Mr. Tobin

We have already signed an agreement on the first project - the duplication of the West Link project on the Dublin C ring for which MTR already has a franchise - and it is expected that the contractor will commence work in August. The next two PPP projects are the Waterford bypass——

I apologise for interrupting but the first project is simply a continuation of a similar arrangement as the previous MTR arrangement, is it not?

Mr. Tobin

Yes, although some changes have been made in regard to the financial mechanisms. It is an extension with some variations.

Could that involve moving and widening the toll plaza?

Mr. Tobin

Not under the existing agreement; the existing agreement simply concerns the duplication of the present bridge. A second bridge is to be built parallel to the existing one. The availability of two bridges will impact on traffic flow. The need for further widening on the M50 and the need to move, widen or enhance the toll plaza is under consideration in the context of another study which is under way. This study is considering whether additional capacity could be provided through the widening of the existing route and is also examining the possibility of upgrading the interchanges to provide free flow movements where possible. The NRA has received a report from the consultant which has been seen by each of the relevant county managers. Presentations are currently being made to local authority members in two of the counties and the process will continue in the days ahead in the other affected counties.

What is the professional advice? Could the toll plaza itself be a restrictive factor in terms of traffic flow?

Mr. Tobin

Yes, and there is a variety of options which could prove helpful in this regard, one of which is electronic tolling, an issue currently receiving a good deal of publicity. MTR has in recent days promoted the idea of an "easy pass". This, combined with additional toll lanes, could prove helpful.

You were going to give me a couple of examples of other projects coming on stream.

Mr. Tobin

Yes, the next two PPP projects with proposals for hard tolls are the Waterford bypass and the Kilcock-Kinnegad project. We received submissions from 12 consortia on the Waterford project and from 11 consortia in regard to the Kilcock-Kinnegad project and we have short listed the number to four in each case. We hope to provide the short listed consortia with documentation in the coming months to further progress the bidding process for these toll schemes.

On the £2.4 million being provided for traffic calming projects in the present year, is this the same £2.4 million scattered throughout the local authorities?

Mr. Tobin

It would be.

That is the total national figure for traffic calming?

Mr. Tobin

Yes.

Am I correct in saying that the ratio in regard to local authority contributions has been changed?

Mr. Tobin

In this case we are talking about full cost grants.

I do not wish to go over the ground already covered on electronic tendering. I have fought with technology in recent times and technology has won although I learned a little bit. Who will compile the CD referred to and what form will it take?

Mr. Tobin

It is compiled by the local authority with the backing of the Local Government Computer Services Board. We are relying upon the board for the technological end. It has developed a system for us which has already been piloted quite successfully. Local authorities will issue the CD to anyone who wishes to tender.

Can one be certain the CD will replicate precisely in each case?

Mr. Tobin

We are assured it will.

If it did not, problems would arise.

Mr. Tobin

Absolutely. We are assured the technology is tamper proof.

Is it possible for the person who receives the tender document to obtain further information which could prove helpful to him or her in achieving an advantage over competitors?

Mr. Tobin

At the point of tenders closing, the system involves each of the contractors bringing in the disk which is inserted in a PC to ensure it is readable and that it has not been degraded or damaged in any way. Once the disk's validity is established, the disk - of which the tenderer retains a copy - is read on to the system and securely stored. If someone alleges that the bid has been tampered with or that a particular price was changed, the original disk can be checked.

So anyone seeking compensation through the courts could discover the original document?

Mr. Tobin

Yes.

The people of Kilcock will be anxious to hear the details of the proposed Kilcock-Kinnegad bypass, especially since they have lived in isolation for the past eight years.

Mr. Tobin

We have already gone out publicly with the toll scheme in regard to which we received nine objections.

I live within two miles of the area.

Mr. Tobin

The closing date for objections has passed.

I am aware of that but I would hazard a guess that objections will become far more serious as the date of construction commences and realisation dawns. How many more toll projects are proposed throughout the country?

Mr. Tobin

Taking the West Link into account, there is a total of 11 projects, ten of which will be PPP projects; two are in the area of Portlaoise, one heading into the N7 and one heading into the N8. Both will be delivered as a single toll project.

None of these projects overlaps an existing road or incorporates any part of an existing road.

Mr. Tobin

That is correct.

In the case of impacting on by-roads, will provision be made in all cases for the continuation of the existing by-road, notwithstanding the proposals?

Mr. Tobin

In general, yes. I cannot say specifically for each scheme that every road that ran through the path of the new motorway will be continued straight through. Regardless of whether this is a toll project or a motorway that would not be tolled, a judgment has to be made as to the extent to which existing roads are continued through either underneath or by way of overbridge and clearly there is an economic balance to be drawn. We all recognise that in rural areas there can be a multiplicity of smaller roads. A judgment has to be made in each case as to whether one combines one or two of those and has a single processing or whether each has a sufficient volume of traffic that it needs to be carried through on its own. The judgment being made would be independent and would be covered by the motorways scheme for the project but would show exactly what was intended. The decisions would be taken on the same basis regardless of whether we are dealing with a toll project or a non-toll project.

That is not true because in a non-toll project the taxpayer pays for the entire project and there is no profit accruing other than to the taxpayer by way of improved amenities or facilities thereafter. In the case of a public private partnership there is also the facility whereby a profit goes to the private sector afterwards. In achieving the preliminaries for facilitating the projects, regard must now be had for the fact that the corporate sector has a potential profit accruing to it from the proposal. Cutting corners to facilitate the projects on that basis is not acceptable.

Mr. Tobin

That is not happening. It is simply not happening.

May I illustrate further? I have had occasion in the past to make considerable representations particularly where the public inquiries were held where minor changes were required by local residents and individuals to facilitate themselves. They proposed to continue to have the same quality of life as previously which meant little or nothing in terms of overall expenditure but the final decision reached was in favour of the proposal rather than the individual or group of residents. In the case of the public authority carrying out a public inquiry where no tolls are involved, I can understand - I may not accept it - how the same principle can apply in the case of public private partnerships -

Mr. Tobin

At the end of the day the project which will be delivered - let us stick with Kilcock-Kinnegad since the Deputy raised that specific one - will have to go through all the normal statutory procedures regardless of whether it is a toll project. The local authority will develop its scheme. It will show what roads it is carrying over, carrying under, stopping up, combining for the purpose of carrying over or whatever. An Bord Pleanála will eventually take a decision either to confirm that motorway scheme or not. If people feel that some little road should be carried over they can make their objections to An Bord Pleanála which is totally independent of the local authority, the private sector consortium or the National Roads Authority. It is that body which will take the decision. When that decision is taken the scheme, as approved in that context, is what will be delivered and there would not be leeway for anybody - private sector consortium or otherwise - to renege on what is in it. For the sake of being clear on this, and it is relevant, the point has been made that the private sector is paying for the projects so, therefore, they look to cut corners. In reality, we do not see that any of the 11 projects or ten PPP schemes will be fully funded by the private sector. There will be input from the public purse in all cases. Clearly the level of input will be determined following the competition, bidding and so on. In all instances, there is likely to be an input from the public purse in financing these projects as well.

That does not clear my concerns. In fact it further emphasises my doubts. I am concerned at where we are heading at this stage. Notwithstanding the legitimate case that can be made for the roads, I have no problem with that or the need to build new roads, I am concerned that there is a combination of the public and the private sector whereby it will be deemed by arbitration at some stage that it is in the common good to proceed in a particular fashion when we know that the private sector will make a profit. I have no problem with it making a profit so long as it pays for it and that the common good coincides with the individual corporation's eventual good. The theory that existed heretofore whereby public funds were at issue and where the public purse was totally involved is not the same any more. It is an attempt now to hitch a wagon to a different vehicle and it will cause considerable problems in the future.

I attended a number of public hearings in the past. I am not satisfied that the points I have raised have been addressed or are likely to be addressed because I have gone through all the procedures referred to. I strongly object to the notion that in a public private partnership it is sufficient to explain that "the procedures are there, and they are the procedures we will go through". I do not accept that. I attended quite a number of public hearings in regard to compulsory purchase, a procedure that has to be gone through in the event of their being no agreement. The most peculiar thing about a compulsory purchase is that an influential individual, not necessarily a farmer or a wealthy business person, who may find his property seriously devalued as a result of a proposal, wants to know what the compensation will be paid, in which case he will be able to withdraw his objection on that basis or do otherwise. The procedure is that the compensation is a separate issue and the making of the compulsory purchase order comes first. This means they are put in an invidious position where they have to fight a rearguard action. Having looked at some of these issues in the past, I am of the view that the National Roads Authority is storing up trouble for itself, unless it takes into account the experiences I have had. No doubt they will be multiplied in the not too distant future.

Mr. Tobin

I must admit, I am at a loss to put a handle on what has been said. Let me seek to assure the Deputy that in the project between Kilcock and Kinnegad——

I am not talking about that one alone.

Mr. Tobin

Taking it as an example, I would argue that the local authority designing that project will be taking the same account of the requirements as the local inhabitants as it would have done in the past. I am not sure that the argument about the PPP involving some consortium making profit should be made as a reason for saying somebody will cut corners. The private sector consortium building roads under our standard arrangements, is also a profit making arrangement. At least we assume it is, otherwise they would all be gone out of business. There is a profit even in the traditional contracting method. There will surely be a profit also in relation to the PPP type operation. I would not be prepared to accept that any short cuts are being counten-anced just because these projects are being advanced.

That was not the point I was making. The point I was making was not necessarily about short cuts but that this was a new animal that was appearing on the scene. The point made was that this was a new issue previously under the local authorities or the public sector only. This is now a utility service being provided for the private sector. It is not the same thing in terms of the rights of the individual or of those who have had use of a road, lane, bypass or wayleave or whatever. It is far more involved than Mr. Tobin makes it out to be.

I have one final question which has agonised me for weeks. I have had occasion to travel up and down to Tipperary and off the Portlaoise bypass there is a row of cones on the left hand side as one exits for Cork. My colleague will no doubt confirm that as he travels that way regularly.

I asked that question last year and the year before.

Why are they still there? I assumed that someone would have moved the cones by now or at least give some explanation why a road is designed with a siding that is not used at all. What went wrong there?

Mr. Tobin

We wrote to the committee with full information on that. There are legal difficulties there but we have given a full response to the clerk of the committee. The road was designed with the intent of having a free flow slip at that point. An issue of road safety emerged because a person has access to the road towards the end of that slip.

Dangerous design then.

Mr. Tobin

It has now emerged so.

The one in use is not very safe either. One would need a neck like a giraffe to turn around to see the traffic. We should be able to merge with traffic there.

Mr. Tobin

The new road design for that area will resolve all those issues for us.

Deputy Rabbitte mentioned plazas. In future will plazas be sufficiently far away from intersections and interchanges to ensure we do not have the kind of jams that are leading onto the M50 every morning?

Mr. Tobin

That is an issue that will be addressed——

Why was it not addressed at design stage?

Mr. Tobin

The Deputy is asking me to answer for something that happened quite a considerable time ago at a time when the expected traffic volumes using that facility were a lot less than they are known to be today. The question was raised by Deputy Rabbitte and I made the point that we have a consultancy study examining the issue of widening the M50, from the airport to Sandyford, to three lanes and also considering the upgrade of the existing intersections. Part of the study will look at an appropriate layout and location for an upgrading of the toll plazas. The proximity of the toll plaza to the bridge is an issue in terms of capacity and throughput. We will try to ensure in selecting a location and designing toll plazas for other projects that we avoid similar problems.

In reply to parliamentary questions the Minister for the Environment and Local Government has stated repeatedly that the National Roads Authority and Mr. Tobin are responsible for all the activities that they inherited including previous mistakes and I would like them to be aware that I am watching them carefully.

Mr. Tobin

I fully accept that Deputy and we are looking ahead in order to improve the situation.

We have a very interesting time ahead.

I am sure Mr. Callan and Mr. Keating from the Department of the Environment and Local Government are following this debate with interest.

I raised the question of the Portlaoise bypass twice here. I agree with Deputy Durkan that such a situation on a primary route is a very bad advertisement for the NRA. If some private sector individual designed or tried to put up a business with that type of access he would be refused point blank. Any business or plant emerging into the centre of a national route from the slip road would not even be allowed remain a week. I am disappointed that nothing has been done. I have got out of my car to examine the access situation there. It is the safety issue that concerns me rather than the use of half a mile of cones. It is very dangerous on a rainy winter's evening. There is no indication or sign for merging but the road goes straight into the middle of a main route. The situation should not be tolerated by a national organisation set up to remove such danger points. I will not labour the point.

I return to the issue of the Limerick incident. At the time I ruled that we would not close the account. That was not to be awkward but we wanted in place some procedure to avoid a repeat of the incident. We analysed at the time and questioned where contracts went and there does not seem to have been anything underhand. A lot of useful information was supplied to the members of the committee. It appears that it was human error and that somebody thought they were being helpful in adding up the figures. That cannot happen again.

To go back to the electronic issue, it seems to me that any computer disk is only as good as the information fed on to it. I was a little concerned at Mr. Jimmy Farrelly's last correspondence to us. He said much the same as the NRA. He made the point that to develop an electronic tender valuation system which will include automated checking to ensure that all kinds of pricing at tolls are correct will minimise the risk of errors by bidding contractors. It will also assist local authorities in detecting such errors should they occur. That was how the problem arose before. Somebody detected an error and then corrected it. It seems that we expect errors will still occur. What is the difference? Whatever electronic system we have it is dependent on the person inputting the information. If they cannot get it right on paper with hard copy how will they get it right electronically?

Mr. Tobin

With all due respects we will have to ask the Deputy to treat the last element of what Mr. Farrelly said as a slip of the tongue. The system does not allow for errors. Let me correct myself. It is still possible that a tenderer would put in £1 as a unit rate rather than £10 and that would always be a problem. However, in terms of issues that previously led to difficulties, such as putting in the correct rate but failing to extend it and therefore failing to add it in and get the right bottom line, there has been a major improvement. With electronic tendering all of those checks are built in before the contractor can sign off and hand over a disk. Perhaps if the committee wishes we could arrange for somebody to come and demonstrate the system.

We are not trying to be awkward but we have been told so often that things cannot go wrong and that concerns me. I am also concerned that the same company has had another case of a similar nature gone to Europe in the last week. I was amazed when it was said that nothing similar had occurred.

Mr. Tobin

That is not connected with the roads area. That refers to an issue in the sanitary services area.

I did not get the full details so was concerned because it sounded similar. I notice that this will only apply to new roads and realignment of major roads. It was a costly lesson for us, £3.2 million. Is there any intention to use the lesson in a wider field, maybe in the DE, in contracts other than just for roads?

Mr. Tobin

I am reluctant to answer for that.

Mr. Callan

I wish to respond very briefly to Deputy Dennehy's request because he is bringing the discussion into other infrastructural programmes for which the Department has the supervisory responsibility. The answer certainly is yes. My predecessor, Mr. Farrelly, and I gave assurances to the committee. We would not be rash enough to think that similar hazards do not lie in wait for us in relation to projects arising in other programmes. It is a relatively simple and straightforward matter to apply some of the safeguards that Mr. Tobin has spoken about immediately from the national roads area into the non-national roads programme. We are doing that in parallel with the work that the NRA is doing. Where applicable, all the good things that the NRA is doing now to tighten up processes will benefit the non-national roads programme straightaway.

In relation to water services programmes, there is a greater responsibility and a greater use of private consultants to design schemes and assess tenders than has been the case historically in the roads area. To a greater extent we rely on the insurances to be carried by these private consultants. We have already taken steps in relation to the water services programme to bring the risks which came to light in this instance to the notice of all concerned in the operation of those programmes. We will continue to liaise with NRA as we go forward.

I asked Mr. Tobin earlier whether they had taken out insurance safeguards up to the tune of £5 million to cover themselves against eventualities as happened in Limerick in the design office. I asked what would be the responsibility of local authorities in that situation or would they have any responsibility.

Mr. Callan

As I understand it, and Mr. Tobin may be able to clarify this more, the indemnity that Mr. Tobin has spoken about is indeed being paid for by the National Roads Authority in relation to national roads. It may well be beneficial to individual local authorities, that is my understanding. It is not an indemnity that just applies to one organisation, the National Roads Authority. It applies to individual local authorities acting in their road authority capacity also.

We have looked into the question of insurance for other services. In relation to water services it is more relevant here to remind private consultants of their insurance responsibilities which already arise under the contracts that we have with them in relation to major water schemes, and that is being done.

We are looking more generally at the question of insurance in the light of what is happening and I can certainly get a note on that for the committee.

The reason I asked in the first place is that Mr. Tobin said that in order to pay the compensation of £3.2 million, you paid a certain amount of it but the council out of its own funding——

Mr. Tobin

It would have been the difference between £3.2 million and our contribution of £2.88 million. Perhaps I should say that it was my understanding that the local authority had cover for about £250,000 through insurances they had. It was not the type of insurance one would normally associate with this type of situation. They were insurances to cover administrative error but effectively in this instance Limerick County Council had that cover and were able to avail of it to meet £250,000 of their contribution.

The point is you would not expect them to be taking out parallel insurance cover if you are covering the tab for eventualities on the design office. They felt at the time that they had to make a contribution.

May I raise the question of road signage with you? I would presume that the NRA as the experts would design and recommend a standard of road signage for all the major roads. The signs are in a very bad condition, they are battered and broken, even though many of them are relatively new. There are at least 43 shattered road signs on the Cork to Dublin road. Some are the smaller brown local destination signs and speed limit signs but many of them are the new signs and they are already in very bad condition. I was only counting the signs on my own side of the road as I travelled to Dublin and I believe there are a greater number than that. There are a minimum of nine or ten major signs damaged. Surely the NRA can design signage that will not be damaged so quickly. This should be regarded as an urgent matter. They are very costly and they do no credit to the country.

Thanks to my colleague, Deputy Michael Ahern, I am in possession of an excellent document from the Fermoy by-pass group. This document is titled "Tolling National Primary Routes". I presume Mr. Tobin has received and studied a copy of this document. It makes some very reasonable arguments on the question of tolling.

The question is are they reasonable.

I presume that they are reasonable. I have personal experience in a number of instances. I have been to see the Severn Bridge when we were talking about a tunnel or a bridge for Cork. That bridge was a disaster because of tolling. People have now learned and that bridge is tolled in one direction only. The local authority in Gloucestershire found in the 1980s that it did not solve the problem of removing cars from the city centre and people were not using the bridge. The Severn Bridge project has not been succcessful. Many Irish people will have travelled on the Autopista del Sol in Spain. It has been another disaster from the point of view of taking people off the old road. There was only a 2% drop in traffic. They are two examples of when a toll charge is pitched too high, people will not use the facility. We were very concerned in Cork about the tunnel. I have seen examples where it has not worked.

I was chairman of the roads committee in Cork when we were deciding what we would do there. There are reasonable arguments made in the Fermoy document about funding. I think they are reasonable, whatever my colleague, the accountant might say. If the toll is pitched at our present price, people stand to make billions of pounds in profit over the next 30 years. This seems an unreasonable amount of profit. How will a reasonable profit be evaluated? A toll of £1 and £2 for heavy vehicles seems a very easy kind of system. The argument is made based on the Fermoy-Rathcormac bypass example on page 9. At a cost of £63 million they say that the bypass would take in £821 million and it would pay for itself 13 times over if it were hard tolled as they describe it.

We were soul searching for a long time in Cork and many of us argued for and against tolls. It was stated that heavy vehicles would not come out of Cork city centre. I appreciate that the NRA will have looked at this and tried to get some kind of balance. However at what point is the level of tolling decided upon? How is it worked out? The growth in the number of vehicles was totally underestimated by the experts in the Department of the Environment and Local Government over the last 15 to 20 years. We all know we have the number of vehicles now that we were supposed to have in 2020. I wonder how we arrive at these figures.

Are we giving too large a cheque to somebody with the money to invest? I do not begrudge people making profit. It is the only way the country can keep moving and I have no ideological hang ups. However, is there any cut off point? If they reach a certain figure after five years, will the road be given back to the State? Cork Corporation was one of the first authorities in the country to buy back a high rise car park. It was innovative then, but everyone is doing it now. It was based on a fixed number of years and the owners had to make their profit in that time. If we give it to them for 30 years, are we really taking a risk on giving them excessive profit and can it be used against us?

Mr. Tobin

I am taken aback by the Deputy's comments on the road signage between here and Cork. We have co-ordinated a programme of putting a new signage regime in place on the national primary and secondary routes. We are close to the end of implementing that on the national secondary routes at the moment. The signage content is agreed with the local authority personnel and the implementation is by private sector contractors having got the appropriate directions and instructions.

I am seriously concerned at what the Deputy has to say because, apart from anything else, the loss of the signs means that people are not quite sure where they are going. He seems to be saying there is a road safety issue there. I undertake that we will review that and other routes to see to what extent this is happening, seek to put it right and ensure that in locating signs we are not in any way contributing towards poor safety on the road network.

On that point, I emphasise that I am totally in favour of the content and the design of the forward warning signs. They are excellent. It is their location and physical destruction that I am concerned about.

Mr. Tobin

I take the Deputy's point.

On the issue of tolling, we will stick with the Fermoy example. He mentioned the Severn Bridge. The toll on that bridge is single direction in that a person pays a toll in that direction and on the way back they travel for free. It is £4.20 for a car to pass over the Severn Bridge. In the case of Fermoy, the toll we have proposed is £1.10. It is a far more modest level of charge. We opted for that bearing in mind transportation studies we did. We got a feel for the number of vehicles using the route and a feel for the extent to which a particular toll regime would lead to diversion from that. In the case of Fermoy, we are quite satisfied that the level of diversion using the toll we propose will be quite small.

We see construction cost for the Fermoy-Rathcormac bypass approaching £100 million. In the context of remarks that there will be massive profits here, the consortium obtaining this toll franchise is required not only to build the road but also to maintain it for something like 27 years. We normally expect a 30 year concession, including the construction period. Allowing three years for construction, in addition to spending something approaching £100 million to build the facility, the consortium has to man the tolling operation for 27 years and has to maintain the road to a proper standard for that period. It then has to hand the road back to the public sector with a residual life at the end of the 30 year period.

We believe that the toll revenues will meet about 70% of the construction cost in the case of Fermoy. We believe the toll revenues will be worth about £122 million in today's money. I say that bearing in mind that £1 in 15 years may have a current value of about 32 pence. A pound in 30 years, which is the end of the concession period, is worth about 10 pence today.

In negotiating these deals we are satisfied that there certainly will not be any mechanism for windfall profits for the concessionaires. In negotiating with the consortium, some level of agreement is reached as to the likely traffic volumes. The income stream that would arise to the consortium, including obviously certain rate of profit for the investment being made, would be based on those volumes. If the volumes of traffic go beyond that, we then bring into play a mechanism whereby part of the income starts to flow back into the public sector thereby ruling out the possibility of massive windfall profits that some people talk about. Through that mechanism, I believe we can give the assurance that we will have a relatively modest level of toll and that there will not be massive windfall profits for the people securing these concessions.

That is an important point and we should publicise it. I would be anxious that there are checks and balances like that because there are many imponderables. Can I ask Mr. Callan what percentage of the road tax in total goes into local authorities? I understood that it all went back and it was ring fenced.

Mr. Callan

All auto tax receipts flow into the local government fund plus a top up from the Exchequer. The percentage of revenues from road taxation more generally varies from year to year. However the annual budget would amount to less than one-third of total tax revenues which could be said to be generated by use of the roads. I would have to check that figure.

I think 28% of the motor tax goes back directly into the road network.

Mr. Callan

This is based on using motor tax in its wider sense.

However the sore point for the people paying motor tax is that it does not go back as a contribution directly into the roads. It is swallowed up elsewhere.

That used to go to the Exchequer. Since the Minister ring fenced the vehicle taxation, that has obviously increased the percentage that goes back. Is that correct?

Mr. Callan

That is correct. It is not hypothecated just for roads purposes but rather for general local government purposes, including non-national roads to a considerable extent. Responding more generally to the Chairman - and here I am carrying the argument on behalf of my colleagues from the Department of Finance - it is a feature of developed countries that there is considerable use of taxation deriving from use of the roads and being applied for various other social purposes. I do not believe there is any developed country which has a roads budget exceeding or even approaching volume of taxation generated from roads activities.

I have one final question for Mr. Tobin on a matter which has arisen in the last two days in relation to an alleged conflict of interest. I read just one article on the matter. I am not sure whether it is a claim by the IFA or whether it was just raised by some individual within the IFA. I would like to hear Mr. Tobin's comments on it.

Mr. Tobin

I can give some background to that. I attended a meeting in south Kilkenny on Monday evening at which an individual stated that he had visited our offices and sought access to the declarations of interest of the members of our board, as he was quite entitled to do. Arising from that, he said that, in his view, four board members had potential conflict of interest, following which another person very quickly intervened to say they should resign. The reason given for suggesting a conflict of interest was that the board members had linkages to external commercial interests.

I sought to make the point - and my views have been more reasonably covered in yesterday's Irish Examiner - that we have a board of 14 members, including the chairman, all appointed by the Minister for the Environment and Local Government. Clearly, in making those appointments, the Minister has to be conscious of finding people who have some knowledge and background or interest in the programme. To appoint a board to a national roads authority and to exclude from it people with a knowledge of engineering or contracting would leave us with a rather peculiar board. There are a wide range of interests represented, including people from the consulting engineering field and the building sector, representatives of trade unions, people from the Civil Service, local authorities and, indeed, the IFA. There is a broad spread of representation from the social partners.

There are very clear legal requirements with regard to declaration of interest. At board meetings, there is a requirement that any member who finds that he has a potential conflict of interest in a topic being discussed must declare that on the spot and must leave the meeting for the duration of the discussion on that matter. I can assure the committee that that has happened on many occasions at our board meetings. To the best of my knowledge, where there is even the slightest hint, the member concerned will ask for advice as to whether it is appropriate to remain for the duration of the discussion, a decision is taken and the member will then withdraw. That has happened on many occasions. In a board which is representative of a broad range of interests, there will, of necessity, be situations where issues will crop up at board level where an individual member may have a potential conflict of interest. There are clear rules set out in law for dealing with that circumstance and they are complied with very fully.

Has the National Roads Authority got a public affairs section?

Mr. Tobin

Yes, we have.

Do you realise you have been getting a very bad press recently? You are being described as arrogant, dictatorial and not listening to people.

Mr. Tobin

Yes, I have heard those comments. I can assure the committee there is no desire on the part of the National Roads Authority - or of local authorities who have been coupled with us in this - to be arrogant. We have a task assigned to us by Government and we are seeking to deliver on that, in combination with our local authority colleagues. The extent to which we involve the public, by way of consultation, in our projects is far, far greater than ever in the past. Possibly part of our difficulty is that people are more aware of what we are doing. It may also reflect the fact that the scale of our operations is now much greater, with so many schemes in progress. Not very long ago, the NRA or our predecessors in the Department of the Environment might have two or three sizeable schemes in planning. We now have a multiplicity of major projects on hands and, naturally, greater numbers of people are being affected, with consequently greater interest in our activities and how we are progressing them.

One particular phase of public consultation attracts special attention. Acting in consort with us, the local authority concerned displays a map showing, for any segment of road, a number of route options. That results in a considerable number of people becoming exercised on the basis that their house or farm may be affected. In the final analysis only one route will be selected but, in the meantime, during that particular phase of the process, many more than the numbers who will be eventually affected are suddenly concerned and worried about the possible impact on their property. Due to EU requirements to look at alternate routes, we no longer have the option of following the system which might have applied ten or 15 years ago, whereby the local authority and the predecessors of NRA would get together quietly, decide exactly where the road should go, make a CPO and only then would the public hear anything about it. I am sure nobody would suggest we should revert to that situation. There are downsides to the system we are using now, which involves leaving people "on hazard" - and a far greater number thinking they are on hazard - than will eventually be affected by the scheme. Despite that downside, I believe this broader level of public consultation is worthwhile. It is possible that the comment which has been referred to was made in the context of a rush of blood to the head.

As we all know, there are negotiations between the Department of the Environment and Local Government and the IFA in relation to the compensatory aspects of compulsory purchase procedures. That being the case, there is a slight conflict situation. The negotiations have been going on for some time and there is some more ground to be covered before we reach an agreement on terms acceptable to all sides. I would not wish the view to go abroad that the NRA or local authorities who take these projects on a day-to-day basis are in any way setting out to be arrogant. We are not. We are most anxious to be as helpful as we can to everybody who is affected by our projects and to give them the greatest possible information and opportunity to make their views known. At the end of the day, we are also anxious to make progress with that programme and to deliver on it. That is what is expected of us.

The comments which I quoted do not represent my personal opinion but simply what I read in the newspapers, where the NRA is certainly getting a very harsh profile at present.

I apologise for my late arrival due to another commitment. At a previous meeting, I asked Mr. Tobin a question about the building line near motorways. I do not know if that question has been asked here. There was no co-ordination with local authorities. Therefore, the building line was applied to a greater extent in some counties, as in the case of Louth and Meath. This created many problems for a State company which lost a substantial amount of money due to the building line being extended. I asked for that to be considered with a view to co-ordination on a national basis, and so that people buying land would know in advance what the building line was to be, and if a motorway was to pass through. Has any progress been made on that?

Mr. Tobin

I am not aware of any. The issue of a building line, or a setback from a road or motorway, is a matter for determination by local authorities in the preparation and development of their county development plans. That is a reserved function of local authorities. Regardless of the advice we give, the final decision rests with the elected members of local authorities. I would be reluctant to interfere in their business and tell them what the building line should be.

I thank Mr. Tobin for his reply because he has clarified one point. The officials in Meath advised the elected members that Mr. Tobin's organisation was responsible for that extension. Mr. Tobin clarified that in writing and I want to put it on the record. This is a question for the local authority and not the NRA. I have travelled southwards several times in recent months. I cannot help asking why the bypass at Nenagh is a single-carriageway. Why is it not a dual carriageway? Would Mr. Tobin agree that it will cost a fortune to extend it at a later stage?

Mr. Tobin

If the Deputy allows, I will return briefly to the building line issue. It is strictly a matter for each local authority in the context of their county development plans to look at the issue of having a setback from roads. It is proper that there should be some setback rather than having houses or factories adjacent to the roadway. Common sense suggests that there should be some setback but the determination of that is for the local authorities in their various county development plans.

Turning to the Nenagh bypass, planning for this route started close to ten years ago. The view at the time was that a single-carriageway was all that was required to cater for traffic as then projected. That was before the Celtic tiger and the enormous annual increases in traffic volume. The NDP rightly points to the current need for dual-carriageways on major routes. The committee should be assured that the Nenagh bypass will not cost an enormous amount of money to upgrade to dual-carriageway standard. It will be possible to incorporate a dual-carriageway roughly within the current road borders. I accept that this may be by use of the median barrier and that the road may not have all the frills of wide grass central medians. However, we can convert from the present facility to a dual-carriageway facility without enormous expenditure.

Mr. Tobin is very optimistic. With the experience of 27 years service on two local authorities, I do not share his view. The single-carriageway was a terrible mistake. It will cost the Irish and the European taxpayer a great deal of money to do what should have been done initially at half the cost.

Mr. Tobin

I disagree. My advice is that it will not cost an inordinate amount. The road is capable of conversion to a dual-carriageway.

I hope this error will not be repeated elsewhere.

Mr. Tobin

There is a clear policy. There is a national development plan which, in the case of the major inter-urban links, has unequivocally stated that the level of service required demands dual-carriageway or motorway for those links. There is no question on this matter.

What progress is being made on the Kildare bypass which is now one of the biggest bottlenecks?

Mr. Tobin

There is a contractor on site, as the Deputy may be aware. From passing the site on occasion, I offer the view that the contractor is making good progress there. Our expectation is for that project to be completed in the first quarter of 2004.

Are there no more snails?

Mr. Tobin

The issue of snails has been addressed. There is an extensive monitoring regime as to the impact of the project on the snails. That monitoring regime is by way of agreement between the NRA, Kildare County Council, Dúchas and all relevant bodies. It will continue during the construction project and for some time afterwards. The contractor is on site and I have seen noticeable progress at the southern end of the project near Monasterevin.

We look forward to the completion of the project.

Can Mr. Tobin quantify the cost of the snail saga?

Mr. Tobin

The two-year delay has added two 15% sums to the contract cost. The contract value was about £90 million. About £25 million has been added to the cost due to the delay.

What kind of snail is involved? I was not at the last meeting and hope I will be forgiven for asking.

Mr. Tobin

I have not ever seen such a snail and do not know its correct scientific name. It is a small snail, smaller than one's smallest nail. The important point is that the existence of the snail is dependent on the tuffa springs which exist in the area of the fen. I cannot be more scientific than that.

Are there many snails there?

Mr. Tobin

I do not know if a count has been carried out.

Some £25 million makes them expensive snails.

My question relates to the document concerning the Fermoy bypass. Despite what Deputy Dennehy has said, I had nothing to do with its content. One of the main concerns from those making a song and dance in Fermoy is that heavy goods vehicles will continue to pass through the town. Will Mr. Tobin comment on that? My experience of bypasses in my constituency, from Glanmire to Watergrasshill and up to Mitchelstown, suggests that the amount of time officials have given to the public is second to none. The comment that officials are not listening to people does not stand up. The important thing is to get the answers out to the general public. It is important that responses are given to the objections and points that are made. Politicians cannot sit on thrones and expect people to look for information. We should ensure that people are made aware of the reality of every situation.

Mr. Tobin

I think the Deputy was present when I went through the general aspects of the Fermoy bypass plan. We share our consultants' view that virtually all passing traffic will use the bypass and pay the toll. Looking at the network around us, we need to consider a scenario whereby one can drive from Dublin to Cork on a motorway or high-quality dual carriageway that provides ease, comfort and safety. I do not agree with the suggestion that it may be handier to drive through Fermoy than pay a toll. People will not leave a network that can take them all the way from Dublin to Cork to avoid modest levels of tolls. They will not watch for the exit allowing them to leave the system, to go through Fermoy and to come back on to the network somewhere further south. The toll levels are modest. We agree with our advisers' comments that the level of diversion in places like Fermoy will be quite small. I suspect that anyone in the middle of Fermoy during the afternoon who tells drivers they can be transported on to a bypass if they pay a toll would be lost in the rush. Such a person would be over-run by people anxious to have a higher grade facility, to avoid urban areas and to make quicker and safer progress.

It has been commented that the same toll will be paid by those travelling from Portlaoise to Cork as by those travelling from Fermoy to Watergrasshill.

Mr. Tobin

That is the reality. Those who travel relatively short local journeys are concerned, but the existing network is there for them. While it is not up to catering for the levels of traffic anticipated on that route in the longer term, it will be seen as a pretty good road when the bulk of traffic has been moved on to the new facility. Those making short journeys around Fermoy will receive a good service.

Mr. Tobin mentioned dual carriageways in a single carriageway situation, but what about farmers whose lands border such roads? Is maintenance, such as drainage, the responsibility of the NRA? Does responsibility change hands when single carriageway roads are upgraded to dual carriageways? Many people are concerned that road drainage will be unsatisfactory and that oil from roads will run on to farms, causing pollution.

Mr. Tobin

I confirm that local authorities are responsible for the maintenance of the road surface and the associated drainage. I understand the Chair's point about possible pollution caused by run-off from roads. In this era of greater awareness of environmental matters, we must look at whether traps are needed to hold on to chemical spills. We are conscious of the possibility that chemicals like petrol might run off roads following rain and we must be careful when new roads are being designed.

Farmers are concerned by this issue. I am sure it has been encountered at public meetings.

Mr. Tobin

Of course.

There is a feeling that local authorities and the NRA are responsible for dual carriageways, but that farmers are responsible for drainage on single carriageways.

Mr. Tobin

Regardless of the road category, whether the road is a single or dual carriageway, maintenance——

I am concerned about drainage.

Mr. Tobin

——including drainage of all public roads is a matter for local authorities. The cost of the maintenance of national roads can be recouped from the NRA.

The IFA has said that farmers are to withdraw support from the work of the NRA and that access to land will be stopped. Bord Gáis had a similar compensation problem on a smaller scale when setting pipelines, but a liaising committee embracing farming organisations was put in place and a satisfactory resolution was found. Would it be worthwhile for the NRA to consider liaising with farming organisations to satisfactorily resolve this issue? It appears that farmers are dissatisfied with receiving £10,000 an acre. If the ambitious plans of the national development plan are to progress and the objectives of the NRA are to be met, the co-operation of all parties is needed. How will the NRA respond to the concerns of farmers?

Mr. Tobin

We should realise that there is a difference between the work of Bord Gáis and the building of a road through a farm by a local authority. Once Bord Gáis has finished its work and filled the trench, the farm is the same as ever in terms of raising stock or growing crops, apart from the fact that buildings may not be built on the pipeline. If a road is built on a farm, it will be there forever. The NRA supports liaison with the IFA. There have been ongoing negotiations on the issue of compensation between the IFA and the Department of the Environment and Local Government and the NRA was represented at meetings. The figure of £10,000 that has been mentioned by a number of people is the lowest that has been paid in recent years. Strict rules for assessing compensation flow from the use of compulsory purchase orders. Urban dwellers and others are affected by such orders, but we are talking about the farming community. An amount of compensation equivalent to the straightforward value of the land, along with compensation for the disturbance caused to the landowner and for severance or injurious affection, is allowed under the strict rules of compensation. Members can rest assured that many settlements exceed £10,000.

To address any confusion that may have set in, I will make a few points. There seems to be a principled objection to compulsory purchase powers which have been used for many years. In the common good, local authorities may use such an order to provide public services. The compulsory purchase order system has been tested in the courts and has been found to be viable. The NRA recommends that local authorities should use compulsory purchase orders for a number of reasons. It is unrealistic to assume that the property of each of the 20, 30 or 40 people affected by a major project can be acquired by agreement. A small number of people could hold up an entire project, but such difficulties are overcome by using compulsory purchase orders.

It is possible that a very small number of people - possibly even one person - could hold up an entire project. By having the CPO quietly in the background that difficulty can be overcome as it is reached. There can often be difficulties with the type of property. The person occupying the property may well have been given it by a maiden aunt who in turn may have inherited it from somebody and God knows whose name is with the Land Registry. The person has been in occupation without hindrance and they are quite happy, but when it comes to the formality of someone seeking compensation that becomes an issue. By having the CPO the local authority has clear title to that property and the issue of compensation and ownership can be handled in accordance with that.

In the case of the limited number of people with whom agreements cannot be reached, the legislation provides for the use of a property arbitrator. We ask local authorities to use that system. When the CPO or motorway scheme is confirmed, as a matter of general practice local authorities regard that as something they have in reserve. In reality they seek to acquire by negotiation, in so far as they can, the properties they need. In practice they reach agreement in at least 95% of all acquisitions. There is a difficulty regarding what should be paid for land or other property in 5% of cases affected by CPOs. It is a relatively small amount. In reaching those agreements I am satisfied that local authorities do not rigidly apply the rules the property arbitrator would have to apply when the issue is referred to him. On the odd occasions acquisitions are arbitrated, the arbitrator tends to give less than the local authority. If anything local authorities err on the side of generosity if one were to strictly interpret the rules of compensation. They are working out deals they regard as fair and reasonable and that is the appropriate thing to do. People are having property taken from them and they are entitled to a reasonable level of compensation.

Thank you for that response which addresses the issue of farmers. You mentioned the word "disturbance". There is often disturbance to a person who is not a farmer who finds that because he built a nice bungalow he has an elevated road over him. He is down below and may have to put up with the noise of constant traffic. What happens in his case? Is there any compensation for disturbance?

Mr. Tobin

There is no entitlement to compensation under existing rules if we take no property from that person.

Is not that very harsh?

Mr. Tobin

I would not necessarily disagree with you but that is the law as it stands. Unless some property is taken there is no compensation.

Is it not the case that in the past contributions were made to enable people to install double glazing in their properties to minimise the noise from roads?

Mr. Tobin

It is unlikely that a local authority would have installed double glazing for people. The norm would be that the authority would take specialist advice as to the likely level of noise affecting surrounding properties. Where that would exceed a certain level, they would build mounds or landscape so that the level of noise affecting houses would be kept within reason. They would do that regardless of whether they are taking property from the person or not. Local authorities would be conscious of the noise level and would undertake what measures they could to minimise the level of noise reaching a property. In terms of what compensation that person is entitled to, the short answer is they have no such entitlement.

I am sure at public meetings you encounter many who feel very upset.

Mr. Tobin

Yes I do and one can have sympathy for them but as the law stands there is no way of compensating them other than to install noise barriers.

You might be kind enough to send me a response to this next question as I do not want to delay the meeting by talking about an issue which is very important down my way. The N69 is a secondary route with a huge volume of traffic. The bane of any politician's life in west Limerick is the condition of that road and I am assailed about it at all times. People cannot overtake on it. I believe there are some plans in the operational programme and I would very much appreciate it if you could send me at least a letter stating what the plans are in relation to the N69 and telling me what funding is available.

Mr. Tobin

I would be delighted to do that.

Thank you, and I thank you for your very frank and honest responses. You are not a dictator. We note the accounts.

The witnesses withdrew.

Vote 31 - Agriculture, Food and Rural Development.

Mr. J. Malone (Secretary General of the Department of Agriculture, Food and Rural Development) called and examined.

I welcome Mr. Malone and his officials. My apologies for detaining you so long. Roads and the National Roads Authority have become a very important issue in recent times.

Witnesses should be aware that they do not enjoy absolute privilege. I remind you that as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, grants certain rights to persons who are identified in the course of the committee's proceedings. Notwithstanding this provision in legislation, I should remind Members of long standing parliamentary practice to the effect that Members should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

Mr. Malone, I ask you to introduce your officials.

Mr. Malone

From my Department I am accompanied by John Fox, Assistant Secretary, Denis Byrne, Assistant Secretary, Tom Arnold, Assistant Secretary, Seamus Healy, Assistant Secretary and Marian Byrne, head of our financial control unit. I am also accompanied by three officials from the Department of Finance, Michael McSweeney, Dave Ring and Tony Gallagher.

I thank Mr. Malone for his comprehensive reply which was very meticulously prepared and provided responses to many of the queries arising from our first meeting. Since then we have had an opportunity to meet Department of Finance officials to discuss the VAT refund issue. They established that Mr. Malone had been in contact at an early stage. I will proceed immediately because there will be a vote shortly. We are not rushing Mr. Malone because we have decided there is very little to discuss at this stage. Deputy Bell, however, wants to ask a specific question about the Cooley area. We are very happy with the response the witness has given and will monitor progress on an ongoing basis.

At our last meeting we had a lengthy discussion on the foot and mouth outbreak and circumstances on the Cooley Peninsula. We thank the witness for the great detail he has provided in his report on the matter, about which I have several questions. If accurate, which I do not doubt, Tables 2 and 3 on pages 9, 10 and 11 indicate very substantial fraud, worse even than the figure presented to us on the last occasion. We started out with rumours, which later indications showed to be fact. Now the fraud has been quantified in detail and, I gather from the report, under investigation. Could Mr. Malone put a cash figure on the fraud if these figures are proven to be correct? How many millions of pounds does this involve?

It is unbelievable when one considers that 16 farmers who applied for premium on 2,163 sheep had no sheep at all. I had to read that three times before it sunk in that it was possible. There was a deficit of between 10% and 20% in 21 cases, and of less than 10% in 34 other cases. That must amount to a very sizeable amount of money. If this was reflected throughout the country, it could add up to billions of pounds over a period of time.

The report also discusses the penalty regime. Would it not be more appropriate to prosecute the people concerned for robbing the State? Does the witness agree that their names and addresses and the sums of money defrauded from the State should be publicised in the same way as publicans and social welfare claimants who defraud the system? The IFA wants this to happen and I agree.

Mr. Malone

As I am aware of the time pressures, I will be brief. There have been 23 files submitted to the Garda for——

Does Mr. Malone have any objections to the circulation of copies? We have journalists present.

Mr. Malone

No, I do not. A premium is worth on average £18 to £20 per ewe per annum. We need to delve more deeply into this, but the figures in those cases could possibly add up to hundreds of thousands, rather than millions, of pounds. We could investigate the idea of publishing names. I, and I believe the Department, have no objections.

The reason I ask is that many farmers in my constituency, from Cooley and elsewhere, believe publication of names needs to happen because they are all being tarred with one brush. A small group has created this problem. They should be brought to court and publicly named by the Department.

Mr. Malone

We are conscious of that and do not want to tar everybody with one brush. We acknowledge the problem is attributable to a number of individuals and it is very unfair, therefore, to damage the reputation of the Cooley Peninsula in general. We have tried to labour that point. I should bring to the committee's attention that, as the prosecution system gets into the court procedure, names will inevitably become public. We will certainly examine the idea of publishing them. We would probably have to check out some of the legal aspects of so doing, including against procedures in Brussels bearing in mind that this is European Union money. In principle, however, we have no objections.

Deputy Bell is very familiar with the Cooley Peninsula. He has voiced his concerns on the matter because he has been approached by many farmers from the area who act reputably and are concerned that certain people have brought disrepute on them all. I respect the fact that the Department will probably act and presume prosecutions will proceed.

Mr. Malone

Yes.

I want to ask a question on the VAT fraud. Could Mr. Malone quantify it? It was referred to in the Irish Farmers Journal and Deputy Michael Ring raised the matter in the Dáil in Parliamentary Question No. 269 of 20 March. Apparently, there is fairly substantial VAT fraud with sheep.

Sitting suspended at 1.37 p.m and resumed at 1.47 p.m.

I apologise for turning up late, but I was otherwise engaged. The fire at Ballaghadereen occurred in January 1992. Will Mr. Malone, please, tell the committee the reason there was a delay up to 1999 in processing the litigation?

Mr. Malone

Although a strenuous effort was made, we ran into a number of hurdles. The sheer complexity of the issue, the involvement of a number of different insurance companies and at least two underwriters combined with legal challenges slowed down progress considerably. The basis of our case was challenged. We were also challenged in regard to jurisdiction and ended up with nine different sets of legal proceedings. It was the view of the Chief State Solicitor's office that the case was getting too complex and it decided to engage the services of a firm of private solicitors to assist. The engagement of this firm has enabled us to pull all the different strands of the case together. On 21 February we successfully defended our right to have the case heard in Ireland. It is notable that the judge refused to refer the matter to Europe.

We are at the point where we have all the issues on the table. We feel we have cleared many of the legal side issues. We want a single approach that will consider all the dimensions of the case. Deputy Rabbitte has a fair point in saying that the process has been very slow and tedious.

It has taken almost ten years, which is an uncommonly long time. Will Mr. Malone state what the expectations are in terms of finalising the process?

Mr. Malone

We feel it is now in the final stages, but I cannot be absolute. I accept that it has taken an uncommonly long time. It would have been easier if one were dealing with one insurance company rather than a number of them. We are now at a point where the issue will have to be settled one way or the other, probably within the next six to 12 months, but I would not like to be held to that. It is my best estimate.

Is Mr. Malone still doing business with the main broker?

Mr. Malone

No, we do not do business at all with him now.

With regard to the additional £9 million in respect of the calculation of intervention prices against carcass weight, etc., the Comptroller and Auditor General's report states that this was expected in early 2001.

Mr. Malone

It has not been finalised. It is a matter for the European Commission. It is a grossing of the figure. Deputy Rabbitte is aware of the background.

We have been arguing that the £9 million, in some ways, would be fortuitous for the European Commission. If the fire had not occurred, it would not have been an issue. We are still engaged in discussions. Finalisation will be in the very near future.

If that is the case, I will not interfere. Are there any other matters that have come to finality since the publication of the report of the Comptroller and Auditor General?

Mr. Malone

With regard to the issues referred to, none has come to finality.

Has the matter of the Emerald Meats case been finalised?

Mr. Malone

It has not. Emerald Meats submitted a claim for damages in February. It is being discussed between lawyers and cost accountants on both sides.

Mr. Malone will recall our discussing the FEOGA question on a few occasions. Heads of a Bill were being distributed and some were going to Cabinet relating to the beef tribunal recommendation and the establishment of a separate agency outside the aegis of the Department in terms of FEOGA funds. I read in the papers that Mr. Malone has defeated a second Government, which is a remarkable achievement. Is that true?

Mr. Malone

That is not a fair way of putting it. The Deputy is referring to a Government decision to establish a separate FEOGA payments agency. The difficulty that emerged was that, subsequently, the Government made another decision to set up a Food Safety Authority involving the same people. Obviously, it could not have recourse to both agencies. The Food Safety Authority has been established, which is well known. There are a number of people in the Department working on contract for the Food Safety Authority.

There was also a recommendation from the Cromien group, which emanated from this committee, to break the Department into three pillars. We have almost finalised this process. The Minister has been bringing periodic reports on the matter to the Government. The Government has not made a final decision, but we have almost restructured the Department in terms of the three pillars. We are prepared to live with the decision of the Government, but it is not fair to say that it is a question of defeating one Government or two Governments.

There was a decision taken by the previous Government, which was endorsed by the present Government. It still has not been done, and will not be done. Mr. Malone and I know that. There is no point in our quibbling about it. Maybe the decisions of the Governments are wrong, but the matter should be recorded.

Mr. Malone

It is a political decision and one for the Government to make. The Department has not stood still since the beef tribunal. The nature of the payments we make has changed dramatically. We have moved substantially from the traditional FEOGA payments, which were the payments made through intervention and market support. We are now involved in direct payments to farmers. Also, we have had to adopt a range of new schemes. To compare today's circumstances with those in the early 1990s is not fair.

At our last meeting, we rightly complimented Mr. Malone and his colleagues on the tremendous work done during the foot and mouth crisis. Is it too early to create a balance sheet of the costs involved in this regard?

Mr. Malone

I assume Deputy Rabbitte is talking about the costs in relation to the Exchequer.

Yes, as well as the economic costs.

Mr. Malone

I can give an indication. The total Exchequer costs, as far as our Department is concerned, will be in the order of £25 million to £30 million. With regard to the cost to the economy in general, it is a bit early to quantify it. In the early part of the year, there were clear costs, but the tourism and agriculture sectors have recovered to some extent. Therefore, I cannot give an accurate figure at this juncture.

In broad terms, what is covered by that cost of £25 million to £30 million?

Mr. Malone

It covers the cost of the culling and removal of approximately 60,000 animals and the associated compensation costs. Also included in the cost are activities along the Border. At one stage, up to 1,000 people were working along the Border. Blood testing of the national stock, as a follow up to our work, also incurs costs. It is amazing how much the costs can mount.

Did Mr. Malone reply to the question?

Mr. Malone

With regard to the issue of VAT, the first point is that the Revenue Commissioners, in the past two or three years, recovered approximately £300,000 from lamb processing plants, although I did not get that figure from them. More importantly, there is a more thorough investigation taking place that involves many Revenue staff, departmental staff, and Garda activity. It remains to be seen what revenue will be recovered.

Does Mr. Malone agree that the basic problem is that many people who defraud the Department - which seems to be at the mercy of every form of gangster - do it quite openly and what they do is generally known in the community? Yet, a case is rarely brought to court and an example made. If a poor person went into a supermarket and stole a loaf of bread he or she would be brought to court, but these people can get away with millions of pounds and are rarely, if ever, brought before the courts. They can take the gamble. I represent a Border constituency and I have seen people who were abusing the customs and excise regime so much that they were prepared to have trailer loads of cattle confiscated. They knew they would not be brought to court. Their vehicle might be confiscated, but their profit margins were such that they were prepared for that. Until such time as the Department takes a heavier hand and brings every case before the courts the problem will not be solved. Mr. Malone should give a commitment to this committee regarding that.

Mr. Malone

It is important to bring to the attention of the committee that we now have much greater powers under legislation that was enacted earlier this year at the height of the foot and mouth disease crisis. The penalties now are much more significant. Our difficulties are like those of any other organisation, we have to operate totally within the law. We have to apply fair procedures. We get a great deal of help and co-operation from the Garda, but it is for the courts to decide when we bring a case to them. One of the positives that has come out of the foot and mouth disease episode is better powers and legislation to deal with wrong-doers. There is also a less tolerant attitude within the community to these people now. We hope the industry overall has learned a salutary lesson.

We now have a tagging system in place for sheep which we did not have before. Without that we did not have much of a chance. If one cannot identify one's own sheep then it is very difficult to identify anyone else's.

With regard to premiums for sheep, the document supplied by the Department reveals that 51 applicants had a deficit of 20% or greater involving 5,848 sheep. Of these, 16 who applied for the premium for 2,163 sheep, were found not to have any sheep. Can Mr. Malone explain to the committee, how that could happen? How could these people, who did not have any sheep, go into the agricultural office and make an application for 2,163 sheep premiums?

Mr. Malone

They had to have a sheep quota. As is indicated in the document there must be a quota and a quota has some value. The implication is that they had sheep at some stage. If someone applies for a premium and does not have a sheep quota, then obvious questions arise. We have not made any payments this year. Normally these payments would be made in mid-June, but they have been stalled this year. No ewe premiums have been paid to anyone yet, and will not until we clear up our investigations.

There has been an announcement in the press by the Minister that there will be extensive payment of the ewe premiums in July.

Mr. Malone

We hope to use the time between now and July to carry out more extensive checks. One of the points we have indicated in the documents, is that through a variety of different checks we will probably check slightly more than 40% of applications. We hope that by the middle of July we will pay the claims about which we are satisfied. There will then be a number of others on which there are queries and, as the queries are dealt with——

I want to raise a question about what has gone on in the Cooley peninsula and what has gone on in the past regarding mountain sheep. The Department had to give advance warning that the inspector was visiting and the person who got the benefit of that warning seemed to marshall a great many number of sheep. As we know now, not all the sheep belonged to the applicant. Will that advance warning prevail or does the Department expect that sheep tagging will take care of that?

Mr. Malone

The sheep tagging will help in the sense that we will have a better fix of where the sheep are and where they should be. That will give us a better database to work from. There is a real practical problem about inspecting sheep in mountainous areas without giving advance notice. We discussed this at our last meeting, the inspector can arrive and the sheep are on top of the mountain.

One of the initiatives we have taken, since our last meeting, is to put 20 or 30 inspectors into certain commonage areas at once and try to calculate numbers systematically. However, that cannot be done everywhere. It would be very difficult to get away from giving some advance notice to people whose sheep graze on mountains. Having a tagging system and flock registers in place will force producers to clearly set out what sheep they have and individual identification numbers. It will end up being the same as with cattle.

Mr. Malone has highlighted in his submission, that of the farmers with a deficit of 20% or more, 32 are farming within three kilometres of the Border. There is obviously some reason for including that. Is there something significant about that?

Mr. Malone

First, it is a statement of fact. Second, there is a temptation to avail of the premium on both sides of the Border.

I am glad that Mr. Malone hassaid it, that is what has been said to me. I wastrying to confirm that. Is it true or are there reports that say that Department officials and inspectors have been threatened in the course of their work?

Mr. Malone

I am not aware of any direct evidence of that. It is generally accepted that inspections in that area are difficult.

So there could be difficulties in that regard.

Mr. Malone

I have not heard any complaint about people being threatened.

Rumours are never too far wrong down there.

Mr. Malone

No.

There is nothing else I have to say on this.

I have a brief question relating to something in my constituency. There is a specific case, relating to intervention beef, where the third employee was acquitted by the trial judge. He is taking a case against the Minister for damages arising out of the criminal proceedings. What is the current status of those criminal proceedings? If that person was acquitted - which he was - why did the Department have to go through the lengthy court process wherelegal representatives were employed by both parties? Can the Department settle in a case like that?

Mr. Malone

As far as I understand, the individual is bringing the case against the Minister. The case has only just been lodged and has not progressed very much. What the Department was trying to do was speed it up and bring it to a head. I do not think it is anything which the Department or the Minister has done which has delayed the case, it is up to the individual.

He actually took it on. Referring back to the beef tribunal and the different facets of the beef tribunal - I happen to know this guy - he feels he was totally victimised in the past and that he has a strong case against the Department. Does Mr. Malone know when it is coming up?

Mr. Malone

No, I do not.

I understand it was listed for the High Court a few months ago.

Mr. Malone

Yes. The point I am trying to convey is that I do not think the Department or the Minister did anything to delay the case. We have no problem with——

I do not want it to be like the beef tribunal where people like him and others ended up being victims of the whole saga while the main players seem to pass by. That has been discussed many times before. I apologise to Mr. Malone forkeeping him so long. I assure him that in the event of a second sitting in the future we will not have people here at 11 a.m. waiting that length of time. I thank him for his response and the comprehensive notes sent to the committee as a follow-up to the queries raised on the last occasion. The committee will be monitoring and tracking the effectiveness of how he is proceeding and will have an opportunity in the future to speak with him.

We note the Vote and thank him for his attendance. He and I will be on opposite sides next Sunday. May the better side win.

Perhaps Mr. Malone will keep us updated on that subject.

Mr. Malone

Yes.

Perhaps we can have another report at a later date.

The witness withdrew.

The committee adjourned at 2.15 p.m. until Thursday, 5 July 2001.