Chairman, I would prefer to make my opening statement. People have it and I would prefer to do that. I am very happy and would like to make a number of comments at the end of the opening statement in relation to the points that have already been made.
I welcome the opportunity to meet with the Committee of Public Accounts and I am grateful to you, Chairman, and to the committee for agreeing to hear an opening statement from me. I will concentrate on two main issues that have generated recent controversy. I will be happy to answer any questions the committee has.
I would like to begin by asking the committee to consider an invitation that I am happy to make to you to visit and see the work in progress on the National Aquatic Centre. Very significant progress has been made in a very short period of time towards completing the aquatic centre as what I believe is a world class facility. The committee, if it decides it would be appropriate for it to visit the site, will see for itself work that represents significant value for money.
I would now like to address the two issues on which there has been significant controversy in recent times and on which I value this opportunity to set the record straight as far as I am concerned. These issues are the High Point Rendel report and the contract for the National Aquatic Centre. I will take the High Point Rendel report first. It has been said in the media that on the evening of the publication of the HPR report I gave an emotional response. I would prefer the phrase "significantly concerned". I remain significantly concerned both at some of the contents of but more particularly about the interpretation that has been put on the HPR report.
The significant concerns I would have apply, in particular, to two assertions now attributed to the HPR report. The first is the report was and is widely quoted as having asserted that Sports Campus Ireland would now cost €1 billion and as having undermined my assessment that the project could be delivered at a net cost to the Exchequer of £350 million or just under €445 million. The second is ever since its publication the HPR report has been quoted variously as having been "savage" or "merciless" or "scathing" in its criticism of the inexperience of the team entrusted with this project. I am seriously concerned about these because, in fact, neither appeared in the report, yet I suspect many people who have not had an opportunity to read the report genuinely believe that they did. I want to set the record straight that they did not.
Let me take the issue of cost first. It would take a long time to go through the figures point by point, but in my judgment the basic facts are these. The HPR report contains three estimates of cost as set out in the table appended to this statement. One of them is the CSID estimate which is based on the bids we actually received at the outline bid stage. The other two are HPR's estimates of what certain aspects of the project would cost. The first HPR estimate relates to what it calls the outline bid brief. The second relates to the project that HPR calls the post-bid stage. The second estimate is considerably smaller than the first and, in fact, the second estimate, if people look at the table, is almost identical to the CSID estimate, yet for reasons that are not clear to me, almost everybody has seized on the higher HPR estimate. HPR says in its report at paragraph 4.12 that after the outline bid stage CSID amended the scope and size of certain facilities. HPR then went on to say at paragraph 4.14 that CSID's costs "are a viable estimate". However, it then makes a qualification. Our figures, it says, are wrong because we are basing our design on what is called a sunken bowl concept. Excuse me for getting into what is a technical concept, but I believe it is very important. HPR, to be honest, in my view, has got this wrong. At all stages of HPR's work we tried to make it clear to it that we did not intend a sunken bowl in the sense that it has used the term. In getting it wrong about the sunken bowl HPR effectively added a very significant sum to the cost of the stadium.
HPR then went on to add a figure of £66 million for contingencies to this total and to allow that the project would attract total income of £95 million, somewhat lower than our estimate of IR£127 million. Even if its figures under these headings are correct - I do not agree with them - that leaves a net Exchequer exposure in mid-2001 figures of IR£445.2 million which includes the aquatic centre.
Somehow or other this figure has been translated into a "billion euro project" which has become part of what I see as the mythology surrounding this project. I say, as I have said before, that there is no basis for the assertion that this is a billion euro project. Furthermore, the commentators who quote HPR always seem willing to add the cost of moving the State laboratories to which Barry Murphy has referred to the total, even though in its report HPR said it should not be added.
I remain of the view that the Sports Campus Ireland project can be completed in its entirety for considerably less than HPR's higher estimate. I am also confident that we will secure more income than it has suggested. I stand by the figure I have consistently put forward that the cost of this project to the Exchequer will be of the order of IR£350 million or, as I said, just under €445 million in mid-2001 terms.
I now turn to the issue of experience and the "savage" or "scathing" criticism in the HPR report. HPR makes two particular comments on that subject. The first is:
The outline management structure of the combined Executive Services and Project Management teams provides the basis for a management structure for a project of this nature.
A perfectly acceptable statement as far as I am concerned. Second:
In our opinion the breadth and depth of skills available in-house within CSID should be reviewed as it is our view that the CSID's in-house team needs to be strengthened to create a well rounded in-house management team.
I have no difficulty with this. I readily admit to the committee that this is the first time I have been entrusted with the construction of a stadium and a wide range of associated facilities, although I do have experience of complex negotiations at local, national and international level. However, I have always accepted and believed that no one person, or even a small group, can have enough expertise at their disposal when it comes to ensuring value for public money. It is precisely for that reason we have sought from the very beginning of this project to be advised by what I believe are world class professionals as well as having local knowledge and expertise. The companies we have appointed, in all cases following open tender competitions, all have the highest reputations in their field.
I do wish that HPR had made clear in its report that it had discussed this issue with me and that I had said to it that we, in CSID, fully appreciated the need to add people with particular experience of the different facilities that were to be put in place as part of our in-house management or assessment processes. I also made clear to it that we intended to act on that basis in relation to the stadium and other campus facilities. I did say that I believed such expertise should be brought on board as required, not necessarily at the start of the project.
As particular examples, I believe the executive services team has significant experience in the delivery of complex renewal projects on time and in budget. I also believe that the project managers CSID appointed, again after open tender, Davis Langdon/PKS, have significantly more experience in relation to stadia than do HPR. This may well explain the difference that has arisen in relation to the sunken bowl.
I would now like to turn to the more recent controversy, the one surrounding the awarding of the contract to build the aquatic centre. When the Government decided in July 2000 to include an aquatic centre in the campus it was clear to us that if we were to reach the target of hosting the Special Olympics in the summer of 2003, we would have to have the aquatic centre ready, functioning and tested well before that date. It is, in fact, a requirement under the rules of the Special Olympics. In order to achieve this, we set ourselves the first target of applying for planning permission before the end of the year 2000. That was the specific target we set ourselves, otherwise the pool would not be in place for the Special Olympics.
Within five days of being asked to build the aquatic centre by Government we sent off to the Official Journal of the European Communities an advertisement for a contract to design, build, finance, operate and maintain an aquatic and leisure centre. That began a process of tendering that was intended to culminate in a decision to appoint a contractor by the end of the year if possible. Fair-minded people who have experience of public procurement processes, especially for large and complex projects, will, I hope, appreciate the amount of work involved in that stage of the process, especially in view of the target we had set ourselves of end year 2000.
Expressions of interest were received from eight consortia comprising more than 20 companies on 25 August 2000. Those expressions of interest were assessed on Monday, 28 August 2000 by a panel consisting of senior CSID and Office of Public Works personnel, with technical and legal support. At that stage the assessors examined all the original information furnished by the different consortia, including financial and economic information received. In the view of the panel, five consortia qualified for the next stage. These included a consortium - it is important to underline the fact that it is a consortium, there is not somehow a separate arrangement with Waterworld (UK) Limited. We are dealing and have dealt with a consortium.
It is worth pointing out that this particular consortium at that expression of interest stage consisted of Multi Development Corporation NV for the Netherlands with €336.9 million turnover in 1999. It also included S and P Architects as designers with a very substantial track record of successful design of swimming pool and leisure facilities primarily in the United Kingdom, including a Cambridge parkside pool, Tonbridge swimming pool and more than 15 others, including be it said the Aquadome in Tralee. It also included Waterworld (UK) Limited as operator of the complex. Waterworld (UK) Limited was described at that stage as closely linked to a leading aquatic operator, Schlitterbahn, and a significant manufacturer of leisure pool attractions, NBGS, both US companies. Waterworld (UK) Limited outlined in its submission that the operation of the pool at Abbotstown was well matched to its portfolio and capability and that NBGS would offer site planning and patented attractions. This submission was signed by Keith Palmer, director of Waterworld (UK) Limited.
Following this initial assessment, Multi Development Corporation NV withdrew from the competition. Rohcon Limited replaced MDC NV prior to the consortium making an outline bid. The replacement was accepted on the basis that the consortium would have pre-qualified had Rohcon been party to the original consortium and that a replacement was allowed under EU procurement rules on that basis. CSID sought and received legal advice to this effect.
In addition to this consortium, four others were qualified to make outline bids. In fact, three qualifying outline bids were received on 9 October 2000. The outline bid in respect of the consortium which now included Rohcon made it clear that Waterworld (UK) Limited was closely linked to NBGS International, a US company with many years of design, manufacturing and consulting in the waterpark industry - "the NBGS executive management team has decades of experience in building and operating waterparks." In addition, details were provided on Schlitterbahn, which is owned by the same people and a major waterpark operator in the United States.
Meanwhile CSID commissioned PricewaterhouseCoopers to carry out a detailed review of the many different companies involved in all the bidding consortia right across the three consortia with which we were still dealing. These searches were commenced on 22 November 2000 and inquired into 13 different companies altogether. They were carried out in advance of entering into a contract with whoever would emerge as the preferred bidder out of the detailed bid process.
The issue was notified to us by PwC on 18 December and said Waterworld (UK) Limited was a dormant company. In my judgment, what one looks for in such cases is adequate evidence of the bona fides, capabilities and financial strength of the people involved in the company. I did not explicitly bring the word "dormant" to the detailed bid assessment panel's attention because I regarded the issue which I would have to deal with was that of their financial standing. The panel's brief was to determine the quality of the bids rather than their financial standing. I believe it is very important to underline this fact for the committee. The brief of the panel at detailed bid stage was to determine and make a judgment on the quality of the bids, in particular in terms of the most economically advantageous bid, not to make judgments on their financial standing. I did, however, tell the panel - I believe that is what was important - that there was a funding issue with this bid which would have to be dealt with.
I might also mention to the committee that a number of the other companies examined also required further investigation and information, for example, the company known as Dublin International Arena Limited, DIAL, had been incorporated at the start of that year and never traded.
As I have said, because Waterworld (UK) Limited was part of the consortium which had already pre-qualified and submitted the bid which our assessment panel judged to be the best - so the detailed bid assessment panel judged that consortium, again the consortium of which Waterworld (UK) Limited was part - I advised the assessment panel on 19 December - I quote from a note prepared at the time by PricewaterhouseCoopers:
The Waterworld proposal was not the best funded, and there were issues to be resolved particularly in this area with them.
I also decided, on legal advice, that we should not at that stage declare the consortium to be the preferred bidder. The normal situation would be that if it was judged to be the most economically advantageous, you would, in fact, say to it that it was the preferred bidder. Instead, later on the same day, 19 December 2000, and on my instructions, CSID wrote to Mr. Keith Palmer, a director of Waterworld (UK) Limited and told him there were certain matters in respect of which we required clarification and confirmation by each member of the consortium. Our desire to proceed with it as the desired bidder was, the letter said, subject to these clarifications and confirmations.
The issues raised with Mr. Palmer were: (1) that a special purpose company should be formed comprising each of the consortium members, we are still dealing with the consortium; (2) that the obligations of the special purpose company should be guaranteed by the consortium members in an appropriate format; (3) that satisfactory heads of agreement and the contract sum should be agreed in further negotiations; (4) that they supply satisfactory financial information on the standing of NBGS in the United States and their agreement to guarantee Waterworld (UK) Limited for the purpose of operation; (5) that they would furnish satisfactory details for the financing of any cashflow required from the commencement to the completion of construction.
On 21 December 2000 CSID wrote to each member of the consortium, including Waterworld (UK) Limited again with further details of our requirements and setting out a range of issues that required further negotiation before we could make a final decision on who would become the preferred bidder. In that letter I said we hoped to appoint them, the consortium, as preferred bidder on or before 31 January 2001, subject to agreement being reached on the range of issues I outlined which again included a number of financial guarantees and assurances. I also wrote to S&P Architects on 19 December regarding using their scheme for planning permission purposes because of our deadline that we had set ourselves. We lodged their scheme for planning with Fingal County Council on 22 December 2000.
I hope it will be clear from the brief account I have given that we were fully aware that the issue of the financial standing of Waterworld (UK) Limited was an issue on which we needed assurance before we could proceed. It was only one of the issues. Many of the others were more demanding and onerous as I have pointed out in the issues we raised with it.
I dealt with the Waterworld issue as a problem that had to be solved. I did so acting, as I saw it, on the basis of delegated authority from the board of CSID. In this connection, the board's report to Minister McDaid on 8 March 2002 states:
The Board had established parameters for a process in relation to the award of the contract for the Aquatic Centre and had delegated the implementation of that process to the Executive. The Board is satisfied that the process established was appropriate.
I did not, as I have said, see the issue of dormancy as the essential issue that needed to be dealt with. What I said to the detailed bid assessment panel reflected my view that the essential issue was the financial standing of the consortium and Waterworld (UK) Limited as a member of that consortium. I do regret - I wish to underline this - that I did not say clearly to the panel, the Department of the Taoiseach and the board of CSID that Waterworld (UK) Limited had been found to be dormant and that I believed the issue could be dealt with along the lines on which we acted in CSID. I regret, very genuinely, any embarrassment that has arisen because I did not use the word "dormant". My purpose at all times was to handle this matter as efficiently and expeditiously as possible, but I now accept that if I had explained the position fully to the assessment panel, the board and the Department of the Taoiseach, then much, if not all, of the concerns that have arisen in the recent past could have been avoided. The actions I put in place to resolve the problem that arose were designed to resolve the problem. I believe they did so. I accept again that my communication in the matter was inadequate. I have accepted this and I am prepared to accept that I made a misjudgment in not giving fuller reports and information. I will not accept, however, any suggestion from any source that my actions were designed with any dishonest or improper motivation in mind.
I will now deal with the issue about which Deputy Rabbitte spoke earlier and would like to make an interpolation into what I have to say. As just one example - there have been several - on RTE radio a member of the committee, Deputy Rabbitte, a member for whom I have - I genuinely mean this - always had the highest respect, suggested that one possible explanation was that this project was - I quote from a transcript I received of what Deputy Rabbitte had to say - "always intended for the three principals in the Kerry equation" and went on to imply - I quote again from the transcript - "break all procedures, EU procurement procedures and so on in order to contrive to give it, if that's what happened, to the people now responsible." In saying this, Deputy Rabbitte was, I judged before hearing him today, offering, in my view, to say the least, an innuendo that I was involved in a conspiracy of some sort to divert public money to people on no basis other than that they were from Kerry.
I have heard what Deputy Rabbitte said. I fully accept what he said that he did not intend any innuendo. I still have to say that I have a problem with much of the comment that has been made in relation to the issue of these three people being from Kerry and Tralee, in particular. I have that problem at two levels. One is there would appear to be an implication that because people are from Tralee that somehow they are less good or will be less good at running aquatic centres than people from anywhere else in the world. I do not believe that is fair. Second, there is an implication in some of what is being said that I knew these people and was somehow involved in a conspiracy with them. I want to put on record that I did not know any of the three people concerned before they became involved in the project. I had never met any of them. I have no connection with their families. I want to put that clearly on the record.
I did not believe I would find myself in the position after what I believe has been a long and committed career of public service of defending myself against innuendo of that kind. I fully respect what Deputy Rabbitte said earlier, but hope he and, more particularly, some of the others involved in what, in my view, is similar innuendo, will find the grace to admit that they were wrong and unjust.
I accept, as I have accepted for many months, that it is entirely appropriate that in a project as complex as this one there should be a full-time chief executive. I have made it clear that I do not wish to be a full-time chief executive. It has been suggested that I should resign as chairman over this affair. To do so would, in my view, be to accept wrongdoing. There has been no wrongdoing. I regard it as a fundamental principle that the public's money must be protected and managed well and have honoured that principle in this transaction as in every other in which I have been involved in the Irish public service.
I could and should, as I have said, have communicated better, but since the day I was appointed as chair of this project I have sought to implement the decisions of the Government in relation to it without favouring anybody. I have, in particular, sought to implement the decision of having the aquatic centre in place for the Special Olympics. My commitment in that regard has been to contribute to the building of a set of facilities on time and in budget, of which the people of Ireland will be proud. I believe we will succeed in doing so.