2000 Annual Report of the Comptroller and Auditor General and Appropriation Accounts:

Vote 35 - Department of Tourism, Sport and Recreation.

Vote 3 - Department of the Taoiseach.

Vote 10 - Office of Public Works (Resumed).

Ms M. Hayes (Secretary General, Department of Tourism, Sport and Recreation), Mr. D. McCarthy (Secretary General, Department of the Taoiseach), Mr. B. Murphy (Chairman, Office of Public Works) and Mr. P. Teahon (Executive Chairman, Campus and Stadium Ireland Development Limited) called and examined.

This meeting will consider Campus and Stadium Ireland Development Ltd. financial statement for the period 10 December 1999 to 31 December 2000 and 2000 Annual Report of the Comptroller and Auditor General Appropriation Accounts, Department of Tourism, Sport and Recreation - Vote 35, Department of the Taoiseach - Vote 3, Office of Public Works - Vote 10 (Resumed). Please note that at its private meeting on 12 March 2002 the committee decided that its examination of these Votes today would be confined to administrative and operational control aspects associated with Campus and Stadium Ireland Development Ltd. We have received correspondence from Ms Margaret Hayes, Secretary General, Department of Tourism, Sport and Recreation, which is noted, as is further correspondence from the Department.

Members' and witnesses' attention is drawn to the fact 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 remind Members of the long standing parliamentary practice 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. Members are reminded of the provisions of Standing Order 149 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies. Members should note that the committee is concerned with the accounts specifically listed for examination and administrative and operational control aspects in relation to same which are within the knowledge and competence of the witnesses being examined.

Mr. Teahon, will you introduce your officials please?

Mr. P. Teahon

Thank you, Chairman. I am the executive chairperson of Campus and Stadium Ireland Development Ltd and with me is Donagh Morgan, Company Secretary of Campus and Stadium Ireland Development Ltd.

Thank you. Ms Margaret Hayes, Secretary General of the Department of Tourism, Sport and Recreation, will you introduce your officials please?

Ms M. Hayes

Good afternoon, Chairman. I am accompanied by Ms Eugenie Deegan and Ms Kathleen Stack, principal officers in the Department.

Thank you. Mr. Dermot McCarthy, Secretary General of the Department of the Taoiseach, will you introduce your officials please?

Mr. D. McCarthy

I am accompanied by Mr. Peter Ryan, assistant secretary, and Mr. Martin Fraser, principal officer, from the Department.

Thank you very much. Mr. Barry Murphy, Chairman of the Office of Public Works, will you introduce your officials please?

Mr. B. Murphy

I am accompanied by Commissioner Sean Benton who is present in that role.

Thank you very much. I ask Mr. Purcell to introduce the accounts.

Mr. Purcell

Thank you, Chairman. Last April I received a request from the Secretary General of the Department of Finance to audit the annual accounts of Campus and Stadium Ireland Development Ltd. I agreed to audit the company's accounts on a voluntary basis pending the enactment of legislation to put the company and its operations on a statutory footing. The audit, which was completed in June 2001, covered a period from the date it commenced operations on 10 December 1999 to the end of the year 2000. Almost £2 million was allocated from the Department of the Taoiseach's Vote to meet the costs of the company in the initial period. The committee will see from the accounts that something around £560,000 of that went to fitting out the offices which were rented in Blanchardstown, £400,000 went to pay for executive services for the last four months of the year 2000 and £313,000 or so went on consultants' fees. They were the main items of expenditure. The rest are detailed on page 11 of the accounts before you.

Before finalising my audit report on the accounts I formally queried a number of matters with the executive chairman - corporate governance arrangements, tendering for executive services, fee levels for executive services, credit card expenses and the tax status of the company. I can expand on the specific issues during the course of the examination if the committee so wishes. The main activities of the company during the period of the accounts were developing an architectural and environmental scheme for the Abbotstown site, devising the structure of a competition for the provision of the various facilities on the site and latterly organising a competition for the provision of an aquatic and leisure centre.

As the committee will be aware, the main project is in limbo consequent on a decision to suspend development following publication of the report of consultants appointed by the Department of Tourism, Sport and Recreation to review the cost of providing the proposed stadium and other facilities on the Abbotstown site. This decision did not affect the construction of the aquatic and leisure centre. In July 2000 the Government agreed to the development of such a centre on the site on the basis of a design, build, finance, operate and maintain agreement and provided for a capital grant of up to £30 million towards its cost. However, when the bids came in and were assessed it became clear that the Exchequer would have to fully meet the capital costs of the centre. This was computed at £48.4 million, a figure which had appeared in the report of the management consultants for the overall project. The fact that the bids reflected a far higher cost to the Exchequer than had been envisaged raises doubts about the reliability of the information underpinning the July 2000 decision of the Government. The consortium that had scored highest in the bid competition under the design and maintenance elements of the proposals was also the lowest in terms of price by virtue of the fact that the operator would make a £0.5 million contribution upon the granting of the 30 year lease.

What ultimately emerged was far from the classic public private partnership arrangement originally envisaged. In effect, the Exchequer is putting in at least £48.4 million while the private sector's financial input is limited to £0.5 million. Moreover, the transfer of risk to the private sector which is normally a feature of these partnership arrangements was almost non-existent. There are a number of issues surrounding the arrangements for the aquatic and leisure centre that have come into the public domain in recent weeks which the committee may wish to explore but the fundamental concerns that arose out of my audit and subsequently are: (1) the appropriateness of the corporate governance framework of the company; (2) the nature of the executive services contract and (3) the circumstances in which a project that was supposed to cost the State a maximum of £30 million in July 2000 increased five months later to a minimum contribution of £48 million or so.

I am willing to expand on any of those points if the Chairman wishes.

We will refer to you for clarification at various stages. I understand Ms Margaret Hayes, Mr. Dermot McCarthy and Mr. Barry Murphy do not have opening statements but Mr. Teahon has one. However, I would like to leave that until later as some aspects that might arise in the questioning by members might be relevant to other Departments. We have a copy of your statement, Mr. Teahon, and will return to it later.

In his report the Comptroller and Auditor General referred to concerns with corporate governance. What were his concerns in relation to both the corporate governance of this structure and the nature of the executive services contract? Perhaps, if Mr. Teahon has views on that he will respond as well.

Mr. Purcell

In the matter of corporate governance I specifically sought to be informed of the arrangements made by the board to assess and address any business and operational risks associated with its operations and ensure controls and monitoring systems appropriate to its construction and project management operations were in place, the arrangements to assess and address the risks associated with the arrangements for the supply of executive services by an independent company and the arrangements to put a system of governance in place which specifies the reserved functions of the board and implements controls which govern the actions of the various organs of the company.

These are not unusual and I would have looked for reassurance on these matters before I completed my audit report on the company. They are very much in line with the guidelines being promulgated by the Department of Finance on corporate governance for companies in the State sector. As I understand it, these will be mandatory shortly for all State bodies in the commercial sector and a little later in the year for non-commercial State organisations.

It would have been a general concern, particularly where the roles of chairman and chief executive officer were held by one person and where the services were being provided by an executive company. There is nothing necessarily wrong with either of these, the joint holding of the role of chief executive officer and that of chairman of the board and services being provided by an outside executive company, but they add to the risk of having a proper corporate governance framework in place and specific actions have to be taken to ensure the principles of good corporate governance are met. That was my concern.

What is the overall value of the executive services contract?

Mr. Purcell

The executive services contract was set initially at 1.75% of the total development cost of the project. This was later adjusted to 1.8% of the total development cost to take into account some additional responsibilities that arose out of overseeing the project. As you will see in a note to the accounts towards the end, encompassed in this is a floor fee of £100,000 a month which equates to the £400,000 charged in the accounts for the period ended 31 December 2000, that is, £400,000 for those particular services.

On a five year basis the floor price would be £6 million for executive services.

Mr. Purcell

If the project went ahead and the arrangement was not terminated and there was a five year timescale envisaged, it would be IR£6 million.

Do you wish to seek clarification, Deputy Doherty?

How does the Comptroller and Auditor General describe the situation where the same individual holds two separate positions and how is corporate governance adequately complied with in that context?

Mr. Purcell

It makes it more difficult but not impossible. There are certain other measures that must be put in place in such circumstances to avoid the risk in order that there is the classical governance structure of having an executive reporting to an independent board and the checks and balances inherent in such a structure.

Was an internal or an external auditor appointed?

Mr. Purcell

There is an audit committee.

That is a separate matter.

Mr. Purcell

As far as I am aware, I should have clarified for the committee——

Did you examine that?

Mr. Purcell

——when I finished the audit last June I had not come back to this matter except as a means of briefing myself for the purposes of this meeting. I am the external auditor.

You are the external auditor. For the purposes of the audit you undertook and completed in so far as that was done, did you take account of the necessity for an internal auditor?

Mr. Purcell

Not specifically. I addressed a series of questions which outlined concerns I had to the executive chairman. Having received his representations in relation to those concerns I was satisfied I could give a clear audit report on the accounts.

In fairness to Mr. Teahon, it is only right that the last sentence be amplified for the purposes of those reporting the meeting. You may have inadvertently given the impression that there is a question mark over the corporate governance, the structure of the executive services contract and so on. As far as you were concerned from your discussions before signing off on your audit, you were happy that those issues had been addressed following the representations made to you by Mr. Teahon. In fairness to a former senior civil servant of his standing, that point should be made clear. You are happy about those issues now.

In a statement made today when dealing with the Estimates for the Department of the Taoiseach there was an insinuation of corruption regarding Campus and Stadium Ireland Development Limited. It is important that the opinion and audit report of the Comptroller and Auditor General are clarified and this matter dealt with.

I do not know who participated in that discussion, but I do not believe any member of this committee made any statement alleging corruption.

It was not made by members here.

I would like this committee to focus on the line of questioning. The Comptroller and Auditor General can deal with corporate governance.

My question relates to the Comptroller and Auditor General's last statement that following the representations made to him by Mr. Teahon he is happy with the state of the accounts, corporate governance, the management services contract and the risk and cost issues that he raised initially as being among his concerns.

Mr. Purcell

Without being mealy-mouthed about it, happiness is a relative state. I have to be satisfied to a level that will enable me to append an opinion as to whether the accounts show a true and fair view. I am absolutely of the opinion that the accounts show a true and fair view. I was not required, as external auditor at the time, to make a comment on corporate governance. That will be a requirement from a current date, but it was not required at that stage. However, I had certain concerns. Mr. Teahon did reply and I accepted those representations. He stated for instance——

You used the word "representations". Mr. Teahon made comments clarifying the points you made and you accepted that your concerns about the corporate governance structures were resolved. The word "representations" could——

Let the Comptroller and Auditor General finish his point.

Mr. Purcell

When a formal audit query is addressed to an individual that person will make whatever reply he or she wants to. In this case, I am auditing this body in a voluntary capacity. The company is merely a company incorporated under the Companies Act. It does not have a statutory basis other than that. There is the intention to put it on a statutory footing. It is in the never never world where we must try to apply public service values to what is in effect a private sector company even though its total income is obtained from the public purse. It is unsatisfactory that it should be so. In view of the imminent introduction of standards for corporate governance in public bodies I felt that I should take those on board in applying what would be seen as best practice to my audit of the company, but it does not necessarily impact on my ability to give a clear audit report on the accounts and I stand over that opinion. I do not make any attestation of the adequacy or otherwise of the corporate governance framework in my audit report. I may have to in the future.

In the context of executive services and your auditing of different accounts, is this the first time you saw a category where there was an expenditure programme for executive services? Mr. Murphy is familiar with Government procurement policies and embodied within those is the different range of services which must go to tender. You must advertise in the European Journal if it goes over a certain amount and in this case the amount for executive services has been exceeded. If we look at procurement policy, consultancy services, advertising and so on are listed and must adhere to EU procurement policy. Mr. Murphy, is this the first time you have encountered the category of executive services and are you happy with that? It would appear that by calling it "executive services" and not "consultancy services" it did not need to be advertised in the European Journal. Will the Comptroller and Auditor General say whether he questioned the "executive services" and if he is happy the proper procurement policies were followed in this case?

Mr. Murphy

I do not like to pass on the question but the Office of Public Works was not involved in the procurement of the executive services contract. That was done through the Department of the Taoiseach at the time. We gave some comments and some would say drafts, but beyond that we had no involvement. It is not open to us to comment on the points you made.

I put the question to Mr. McCarthy, Secretary General of the Department of the Taoiseach, who was responsible for Campus Ireland up to 31 December 2000 and these are the accounts we are reviewing.

Mr. McCarthy

Chairman, the contract in question followed on a tender process carried out by Campus and Stadium Ireland Limited as the contracting authority. It was the subject of public advertisement nationally and I understand internationally. In the subsequent period, the Department raised with the executive chairperson and the director of the executive services team whether the procurement process was appropriate. We made no payment in respect of that contract until we were satisfied that the contracting authority had operated on the basis of legal advice that in terms of the EU Directive on Services the executive services concept and contract was an exempt category. Legal advice to that effect was produced to us following which payments in respect of the contract were made.

A consultancy service is listed as one which would have to be advertised in the European Journal. What is the difference between consultancy services and executive services? It is a new category.

Mr. McCarthy

Fundamentally, Chairman, the concept of executive services is the parcelling together of a range of services that might stand separately if they were advertised for separately but which together constitute something more than the sum of their parts. It is a process by which one manages the logistics and the support services in a structure or organisation. In accordance with the legal advice which the Department saw and which was obtained by the contracting authority, the determining question regarding whether an EU procurement obligation arises is the respective value of the elements within the executive services package, as it were. The legal advice which the contracting authority relied on was that, having regard to the quite specific definition in terms of that directive and the EU nomenclature of services, the balance of the value of the contract pointed towards it not being covered by the EU procurement requirements but it was the subject of competitive tendering in the other sense.

That competitive tendering was in the European Journal?

Mr. McCarthy

No, it was not. It was, as I understand it, in other media.

It seems a huge contradiction that if you give a service for a period and it is £1.2 million a year you do not advertise in the European Journal but if you have up to 260,000 ecu for consultancy services you would have to advertise in it.

Mr. McCarthy

There are two elements to the EU threshold, one is monetary and the other is the nature of the services to be contracted. In terms of executive services, as I understand it, the nature of the relationship between the entity offering the executive services and the contracting party is different from the normal consultancy relationship and it is in that context as in other aspects of service definitions that the legal advice pointed towards it not being covered by the EU procurement but it was subject to the requirements which the Department had made clear applied to CSID, namely competitive tendering as a procurement method.

It would appear that if you advertise an executive service you are precluded from advertising in the European Journal but for consultancy and so on you must advertise if it is over a certain ceiling. Deputy Durkan, do you wish to comment?

I would like the Comptroller and Auditor General to comment.

Mr. Purcell

There are two issues, the tender competition and the executive services contract. I also asked in the audit query why the services were not advertised in the EU Journal and the legal advice, as has been described by Mr. McCarthy, was given to me stating that it was not necessary because the preponderance of the services fell into administrative type secretarial support. Technically in that sense it did not have to be advertised.

Did you check that independently?

Mr. Purcell

No, I did not. There is legal advice and I will not try to interpret EU procurement directives some of which have come before the European Court of Justice. I was happy that there was legal backing for what was done. When we speak about competitive tendering, as I understand it, cost was not a factor. We are talking about presentation, quality and so on. That can be clarified by any of the principals present but it is my understanding from returning to the papers that cost was not one of the assessment criteria. As regards the contract for executive services I had a figure of £400,000 in the accounts. I had no evidence to back up that figure. I had seen as part of the contract that it was 1.8% of the total development cost. That as much as anything else prompted the query on that matter to the executive chairman. He pointed out that the contract as agreed provided for a float but the amount was not mentioned in that contract.

I would also have a general concern which I expressed in relation to another company about this type of contract. Let us say, for instance, that the main development at Abbotstown is in abeyance at present. In such a situation if you were tied down to a fee of £100,000 a month, that might raise doubts for me as to the value for money of that exercise. The nature of the contract on which I needed clarification, and which was given to me by the executive chairman, makes it clear that the proposal of the company was that it had a stipulation that if a positive balance between the annual floor fee level and a percentage base fee remained in year five, this would become payable to it in that year. What I am saying is that if 1.8% amounted to more than £6 million in fees over a five year period, the difference would be paid to the executive services company. If, however, the then development value was £330 million on which the £100,000 per month was based and it was not reached, there would be no claw-back of the fees paid. Let us assume you could build a bare bones stadium for £150 million in Abbotstown and that was the final development value, you would imagine there would be a claw-back to the State of the fees because it would have paid the equivalent of 1.8% on £330 million. In fairness - I am sure the executive chairman will clarify this - he said to me at the time - I quote from the letter dated 12 June 2001:

The finance and audit committee of the board are currently examining a proposal from the executive services company such that a fee in the contract be based on the required level of resources rather than be calculated on a percentage basis. When it is agreed with the executive services company it will be the subject of a revised contract. I will write to you at that time to inform you of the terms of the revised contract as approved by the board.

As I said, I have not revisited this matter since last June, but, to the best of my knowledge, we have not received any indication that a revised contract arrangement is in place. There are people present who can clarify this better than I.

To recap, we are dealing with the accounts.

Deputy Rabbitte, on a point of clarification.

Was that legal advice from the Office of the Attorney General?

Mr. Purcell

It was from the solicitors who serve as the company's solicitors, the legal advisers to the company. The Office of the Attorney General was not involved.

The legal advice was from the solicitors to the company.

Mr. Purcell


Does the Comptroller and Auditor General know of any contract anywhere in Europe that is similarly structured on a figure of 1.8%, irrespective of what the costs might rise to?

Mr. Purcell

I do not. There is some resemblance to the contract in the case of the Digital Hub Company. I said in my annual report last year I concurred with the concern of the Department of Finance in relation to agreeing a contract based on a percentage of an indeterminate amount that could grow. Arguably, the more something goes over budget the more you have to pay. That did not seem to be a very good incentive for any company. Other than that, I am not aware of contracts of this nature. It is quite a novel approach to the delivery of executive services and, in many cases, may be the appropriate way to go. I have seen the delivery of executive services to State bodies for particular aspects of their activity, for example, payroll or internal audit services, that are contracted out to a services company, but this is the first of that type I have come across. I have no doubt it may well be a feature in the private sector. I do not know.

Is the same company involved in the delivery of executive services for Digital Hub and is the same legal interpretation put on them vis-à-vis Digital Hub?

Mr. Purcell

The same company is involved. I cannot recall offhand the terms of the contract. I am subject to correction, but recall it was amended following concern expressed by the Department of Finance. I said in my report I shared that concern.

The Comptroller and Auditor General took on board the legal advice available to the company.

Did you see the legal advice?

Mr. Purcell

Yes, of course. All documents were made available to my staff and, through them, to me. I saw the legal advice. It is as good as any other legal advice.

It was convincing.

Mr. Purcell

I am not a lawyer and do not try to evaluate the quality or quantum of legal advice given to clients.

Did you seek to avail of legal advice in the first instance? You sought access to that legal advice.

Mr. Purcell

I sought an assurance from the executive chairman regarding the reason the services for tender were not published in the EU Journal which, on the face of it, seemed to be a requirement. I then saw the legal advice in conjunction with the reply from the executive chairman and was satisfied to accept it.

Who appointed the legal advisers?

Mr. Purcell

The legal advisers were those appointed by the company from day one.

How were they selected?

That is probably a matter for Mr. Teahon.

Mr. Purcell

They would be selected by a competitive process. Clearly, cost was a factor in that process.

You said in relation to the executive services that it was competitive tendering and that cost was not a factor. I find it hard to reconcile competitive tendering with cost not being a factor. Perhaps I am na13161ve in the circumstances.

Some people are getting excited about executive services versus consultancy. From my experience of the private sector, executive services are provided for people who run a company. Consultants do not run companies, they advise companies on how they might be run.

Nobody is getting excited. All we know is that there are procurement policies in place and what we are trying to establish is if for this new category of executive services one is deviating from normal procurement policies. We want to have clarification of this new category.

We are dealing with the accounts. Perhaps it would be opportune for Mr. Teahon to respond at this time. He will respond later with an opening statement that addresses the current issue of controversy. Let us be clear that there is no controversy as far as the Comptroller and Auditor General is concerned about the current state of the accounts. The accounts for this organisation are well run, in order and reflect a true and fair view of what has been happening within the company. There is nothing untoward in that regard. However, on certain issues raised by the Comptroller and Auditor General Mr. Teahon may wish to have an opportunity to respond, particularly in relation to corporate governance and the representations that he made in order to improve it, the executive services contract and the increase in cost as regards the changeover in the timeframe of a five month period.

We will leave Mr. Teahon to reflect a little longer. I am sure he remembers the line of questioning. I am anxious to involve other members who may have similar type questions. I do not want to go back over the same issues again. If the Deputy has finished making his point I will call Deputy Bell.

I am addressing the question to Mr. Teahon.

I accept that. Mr. Teahon, you will answer the questions shortly. You remember the questions?

Mr. Teahon


I do not want to go back and forth to you all the time. I want other Deputies to ask questions. Mr. Teahon will respond to your questions, Deputy Lenihan.

I am sorry I am late as I was attending another function. It would appear from studying the report of the Comptroller and Auditor General which we had yesterday - to correct something that appeared in one of the national newspapers where it was suggested we did not have it at all - particularly page 9, that the opinion given in the last paragraph indicates quite clearly that as far as he is concerned, and he is the person who reports to the committee and has the expertise to deal with it, everything he examined in regard to the financial structure is in order, in accordance with the Companies Act and with law. What should be the criteria for examining this subject? The Comptroller and Auditor General is telling the committee that he found everything in order and yet we are having a debate on whether money was spent in accordance with the law. Are we questioning what the Comptroller and Auditor General is telling us? His report is quite clear. If his report is correct and accurate, which I accept it is, the only issue that remains to be answered, and it can only be answered by Mr. Teahon, is in the first paragraph and half of the second one on page 12. Will Mr. Teahon tell the committee who advised him? What company advised him? Will he name the people he hired or had as advisers who indicated that this shelf company or dormant company should be awarded the contract? Surely that is the nub of the issue. In his statement on page 12 Mr. Teahon apologises for not referring to the fact that it was a dormant company and he apologises to the Department of the Taoiseach.

Mr. Teahon has not made his opening statement. He will do so later and we will have questions specifically on that.

I want to put that on record.

I accept that.

That is the key question.

I know it is a key question but there are other aspects we want to tease out about the executive services. He will come back to you.

Could I have an answer from the Comptroller and Auditor General? Is my interpretation of his report and in particular the opinion on page 9 correct or is there any reason to doubt that?

Mr. Purcell

There is no reason to doubt what I have written in my report. I said I stand over that. However, it has to be seen very much in the narrow context of an auditor's function in relation to a true and fair view of the figures in the account but there are special considerations that apply to State bodies in relation to the proper conduct of public business which had not fully matured at the end of December 2000 which was the date of the account on which I appended my audit report here. It is perhaps a technical point but here I am carrying out an audit on a voluntary basis as an auditor appointed under the Companies Act and not in the same sense as I would carry out an audit of the Department of Taoiseach, for example, where I would have a much more discursive type report that would touch on the kind of issues I elaborated on earlier. It is a fine point and a difficult one to grasp.

Are you happy that Mr. Teahon will respond shortly to your other questions?

Members should bear in mind that we have invited other Departments so they should not be afraid to digress and address specific questions to the Departments of the Taoiseach, Tourism, Sport and Recreation and the Office of Public Works.

I wish to clarify with the Office of Public Works the extent, if any, of direction given, requirements made, questions asked and so on and at what stage?

Mr. Murphy

During the drafting phase of the executive services contract we were asked for comment, as Departments are, even though we had no direct responsibility. We work in parallel with the various agencies and were then providing a project management service. In that context we were asked for our views on the terms of the executive services contract. We gave those. We had three headings of concern. We were concerned with the overall cost and we made that known.

Was Mr. Murphy aware at the time that there were consultants working alongside and that there would be separate consultants' fees?

Mr. Murphy

That was not part of our remit. We got the draft contract on a purely informal basis.

In respect of executive services fees only.

Mr. Murphy

That is correct. It was on a purely informal basis. We commented on cost and the items the Comptroller and Auditor General has mentioned, the exposure of Government and the clarity of the services that were being set down in the contract. Having given our comments, that was it, as far as we were concerned. We were not in at the drafting of the final version of the contract or anything like that. We had no responsibility for it. It went to the Department of Tourism, Sport and Recreation.

Who asked for your opinion on an informal basis?

Mr. Murphy

Let me be accurate. I would guess, without going back on it, it was the Department of the Taoiseach.

The Department of the Taoiseach asked you for it and you made your recommendations and expressed your concerns.

Mr. Murphy


How did the Department of the Taoiseach react to the expressions of concern from the Office of Public Works?

Will you or one of your colleagues respond, Mr. McCarthy?

Mr. McCarthy

In terms of when that would have happened, it probably would have predated the period I referred to earlier when we raised particular issues in relation to the contract. My understanding is that it was at the time that the form of the contract was being prepared which was relatively shortly after the company was established. The comments that undoubtedly were received, as Barry Murphy outlined, were taken on board by CSID rather than the Department.

Who in the Taoiseach's office, obviously for good and valid reasons, sought the opinion of the Office of Public Works?

Mr. McCarthy

I am not in a position to answer that.

Would any of the officials who may pre-date you in the Department be in a position——

Do you know as opposed to not being in a position to answer?

Mr. McCarthy

I do not know.

Do any of the officials with you know?

Mr. McCarthy

I am afraid not.

You are all new to the Department of the Taoiseach.

Mr. McCarthy

Alas, no.

Perhaps the Office of Public Works will elaborate further on that.

Mr. Murphy

It was Mr. Donagh Morgan and it was 6 March 2000.

Mr. Morgan

Just to explain my position. I was the official at the Department of the Taoiseach at the time who was liaising with the Office of Public Works. The Government would have established Campus and Stadium Ireland shortly after its decision in January to go ahead with the Sports Campus Ireland project. I would have worked closely with the Office of Public Works with regard to advice and contract matters or any matters that we are discussing. I would have taken up any concerns with the chairman, Mr. Teahon.

Are you seconded to Campus and Stadium Ireland Development Limited or have you left the Department of the Taoiseach?

Mr. Morgan

I am on secondment.

At what stage was the Department of Tourism, Sport and Recreation involved in the compilation of the final project? At what stage was advice sought, given or offered by that Department?

Ms Hayes

The Department of Tourism, Sport and Recreation took over responsibility for the project with effect from 1 January 2001 when provision for funding for the project was included in our Estimates. We had prior notice that the change of responsibility was taking place but by that time the contracts to which you refer were finalised and were well in place. They had come into place at the end of August or early September. We would not have been consulted on the terms of the contract prior to signature.

Would the Department of Finance have been alerted to the ongoing procedures?

We have a representative from the Department of Finance.

Pól Ó Duibhir

I could not comment directly on that. I am not aware if that is the case.

The reason I am asking is because of the magnitude and scale of the project as then envisaged. I presumed that everyone who might have a possible responsibility at some later stage would be consulted. Is that not normal practice?

Pól Ó Duibhir

It might be in some cases, and I am not saying this case because it is different, but it would not be necessarily in all cases.

Does Mr. McCarthy wish to comment?

Mr. McCarthy

We had a series of discussions with the Department of Finance on accountability, governance and procedure in relation to Campus and Stadium Ireland Development Limited. We then established a project steering group as a formal entity involving the Departments of Finance and Tourism, Sport and Recreation as well as the Office of Public Works and representatives of CSID. That came into place in September 2000 but there had been discussions with the Department of Finance in advance of that, including some about the terms of the executive services contract.

Why does the executive services contract come up again and again? The Taoiseach's office was concerned and referred to the Office of Public Works. That office expressed concerns and the Comptroller and Auditor General has expressed concerns. The Department of Finance must have been restive when the dialogue took place. What was the reason for that continuous roundabout of concern?

Mr. McCarthy

As mentioned by the Comptroller and Auditor General earlier, this was a relatively innovative way of structuring the delivery of services. That evoked a degree of interest. There was also the fact that we were dealing with a relatively new entity. It was established by Government in late January, the membership was approved in February and the first meeting was in March. We were dealing with a relatively new body as well as a new contract. It was inevitable that there would be a focus on procedures in general in the first instance and then on this as a relatively innovative arrangement.

The Taoiseach's office was aware of the consultants' fees and costs associated therewith and also the executive services fees. Not all agencies would have been so informed. Is that correct? Would everyone have been aware that two separate entities were running side by side? You mentioned earlier that the two were greater than their separate entities, or words to that effect.

Mr. McCarthy

There were contracts for specific services additional to the executive services contract. That is clear. Whether Departments or bodies other than us were aware of them I could not be sure. I suspect there was probably an awareness in the Office of Public Works because of the relatively close involvement at that stage in the development of the project.

The Office of Public Works would have been aware of the existence of two types of consultants' fees, costs and executive services fees as well.

Mr. McCarthy

I believe so as a by-product of its involvement. We had an agency agreement with the Office of Public Works at that point in relation to certain aspects of the development of——

Did it express concern about the existence of both?

Mr. McCarthy

I am not aware that such concern was expressed. The other contracts, as I recall, were in relation to legal services and some other specific design services.

Mr. Murphy seemed to have indicated some expression of concern earlier and made observations arising from that concern.

Mr. McCarthy

That was in relation to the scope of the executive services contract rather than other contracts or services not comprehended by it. That was my understanding of the point made.

We will come back to it, Chairman.

I was at Question Time earlier but I have since had an opportunity to look at Mr. Teahon's statement. Perhaps I should clear the air at this stage.

We will allow him to make his statement shortly. I want to finish these questions. I have no doubt there will be further questions following his statement.

Mr. Teahon draws attention to a question I posed on national radio. I want to make it clear that I intended no innuendo or imputation against Mr. Teahon's honesty or integrity. The question I posed was in the interrogative. In due course I intend to pose it again but not because I make any imputation against Mr. Teahon. I want to clarify that. Mr. Murphy, what were your three concerns?

Mr. Murphy

The three concerns were as I have described them. They parallel the concerns expressed by the Comptroller and Auditor General. One was the overall cost, one was the exposure of Government to further costs and one was the clarity of the job to be undertaken. It was the third one we were concerned with most as it had implications for the work of the Office of Public Works. We had the project management role and we were working in parallel with executive services in that role. We were ensuring that there was no overlap, duplication or unnecessary State expense at that time. That was our main concern.

For how long were you working with executive services?

Mr. Murphy

We worked in parallel with executive services up to February 2001.

Why did you disengage then?

Mr. Murphy

At that stage the aquatic centre project went for planning permission. It was quite a rush to get it to that point. There was a little bit of quiet on that project and we were about to enter into the next phase which is the larger part, the stadium and other facilities. Our experience leads us to require clarity in the roles of the various people involved in anything of that scale, complexity and speed, otherwise there will be duplication and confusion. At that point we asked - this is not unusual - Campus and Stadium Ireland Development Limited to enter into a formal agreement with us on what services we would provide. We failed to reach agreement on such a contract with Campus and Stadium Ireland Limited.

Mr. Murphy

Because the role that was to be defined for us was not one we could carry out with any kind of final accountability. In other words, the role had to be one we had some control of. For instance, when we do project management we would normally shape the brief. We would assemble the design team and tender documentation and run the competition. We require these elements so that when we get on-site and we have a contract and there is a price on it we can be sure we are managing something that is manageable and can be brought in on time and on budget. We could not get these elements put into the document.

You have a long tradition of project expertise in public works and it is well known. Were you disappointed that the Office was not used for this project?

Mr. Murphy

Yes we were. It is a huge project. It is one we would have liked to do. Part of the Abbotstown project is the removal and reinstatement of the laboratories for the Department of Agriculture, Food and Rural Development, the State Laboratory and so on at Backweston. That is a project worth €200 million. It is very large and sizeable in the context and is the one on which we concentrated. In the past year we have developed our brief, brought it through planning and been out to tender. We will sign the contract within the next week or so. We had that contract to concentrate on. It is not that we were without work.

We have established you are not redundant, Mr. Murphy.

Mr. Murphy

Thank you.

Who filled your very large shoes when you pulled out?

Mr. Murphy

It was advertised by Campus and Stadium Ireland Limited. It may well be better able to speak on this but, as I understand it, it was advertised and Davis Langdon/PKS is the firm looking after the project management.

What did you mean when you said one of your concerns was exposure of Government?

Mr. Murphy

Just as the Comptroller and Auditor General has described it, that the Government could be exposed to a price for executive services that did not match the work done. The example the Comptroller and Auditor General gave was if the project were to come in luckily at half price the fee would still remain the same.

So you think Mr. McCarthy's description of it as an innovative way of structuring delivery of services is a euphemism.

Mr. Murphy

I am not sure. I am not going to speak for Mr. McCarthy.

Mr. McCarthy can speak for himself.

What about the overall cost?

Mr. Murphy

This was the cost of the executive services. I believe I am right in saying the Office of Public Works has not commented on the cost of the overall project.

If I were to ask you, would you comment?

Mr. Murphy

No because the High Point Rendel study published recently makes it clear, and we are clear on this too, that the requirement of the project is not yet clear.

The first concern you expressed was the overall cost of the executive services contract. What was your precise concern in that regard?

Mr. Murphy

Simply that it was large.

Too large, you thought?

Mr. Murphy

It seemed to be large, yes.

What do you think now with the benefit of hindsight?

Mr. Murphy

The executive services contract is not one for which we had responsibility but maybe if I took up Mr. McCarthy's view and said perhaps we should not have been quite as innovative, as he has described it.

Did you put those concerns on paper to the Department of the Taoiseach?

Mr. Murphy


Do you think your concerns have been borne out, by and large?

Mr. Murphy

I cannot comment on that because we have not been involved in day to day contact with executive services.

You read the papers and you heard what the Comptroller and Auditor General has said. You heard what the Chairman said if the contract runs for five years.

Mr. Murphy

The only person who could have a valid view on that is the Secretary General of the Department of Tourism, Sport and Recreation. It is not for me to say.

I will ask Ms Hayes about that and also about the corporate governance aspect of it and the checks and balances between the board and the executive. Are you happy with that in your capacity as Secretary General and Accounting Officer?

Ms Hayes

As regards the integrated role of chairman and chief executive, as early as last June, which was within six months of taking over responsibility for this project, the Minister, Deputy McDaid, brought his proposals to Government with the heads of a Bill to put the company on a statutory basis. Those proposals included provision for the separation of roles. We had concerns about the workload this put on one individual and we were concerned that when we moved to a statutory basis the separation would be an integral part of the statutory provision. In relation to other corporate governance matters, on the executive services contract we have had correspondence and meetings with both the project director, who is the head of the executive services team, and with the executive chair. We have taken the contract as a given and have expressed our concern about achieving value for money for the contract now in place. Most of our concern has been concentrated on the structure of the service being offered, the skills and capabilities included on the team and where resources are being deployed given this phase of development of the project. We have written to the team and have discussed these issues with the executive chair. Since we first raised these issues a number of significant events have taken place including the High Point Rendel review and its recommendations and recent events. As recently as last night, we discussed this matter with the board and it has indicated it has the matter and structure of the contract under active consideration and that in response the finance and audit committee will look at proposals from the executive services team to address our concerns and others raised both by HPR and the board.

It would appear from what you have said that the High Point Rendel criticism of the expertise and management was valid. You made the criticism prior to the High Point Rendel report.

Ms Hayes

There were similar comments that we had made already.

Thank you.

Mr. McCarthy, did the Department of the Taoiseach seek the Attorney General's opinion on the contracting authority's legal advice?

Mr. McCarthy

The Department did not seek the Attorney General's opinion. The advice from the contracting authority's solicitors was received. It was clearly from a well-established legal firm that was known to have advised a number of Departments on procurement issues, including our agents in this context at the time, the Office of Public Works. The contract had been executed at the time the copy of the advice was received by us so no opinion from the Attorney General was sought on it.

Would it not be normal for an outside contracting authority to come in with its legal advice? Would it not be normal on a multi-million pound project of this scale to seek the advice of the Attorney General?

Mr. McCarthy

The position is that the contract had been executed by the contracting authority. Our primary concern was to establish that in doing so it had acted on the basis of legal advice. We confirmed that was the case and had sight of it. It appeared to be persuasive.

It was already in place. The regulatory body for public procurement in Ireland is the Department of Finance. Were there discussions with that Department? I know you said there was in respect of other matters, but in respect of public procurement, were there discussions with the Department of Finance?

Mr. McCarthy

There were in relation to the broad practice to be followed. It was a matter of explicit communication between ourselves and CSID that it would abide by the procurement guidelines which, as the Deputy will be aware, have a number of different dimensions to them, some specifically in relation to capital projects, some in relation to, more narrowly, governance procedures and then the more general procurement issues, including the EU dimension. We confirmed both directly and through sight of the company's procedures manual and in other ways that the company was both aware of and committed to abiding by those procedures.

Did the Department of Finance approve the execution of this contract in any fashion?

Mr. McCarthy


Was it notified to the Department in any way?

Mr. McCarthy

It was notified, but it was at a point where, as with us, the contract had been executed.

Did the Department, even post hoc, make known any views about it to your Department?

Mr. McCarthy

It did. It raised concerns about the cost incentive issue, which is perhaps the best way to express it, as has been referred to already. Our view on that issue was coloured to some extent by the understanding which I believe was explicitly reflected in the contract between CSID and the executive services team that the intention was to proceed on the basis of a design, build, finance, operate and maintain process. In that process there would be, at a minimum, the expectation of a firm estimate of cost and that the risks inherent in cost escalation would be borne by the contractors rather than the contracting party. In that context, the exposure from the fee implicit in the executive services contract would be a known entity rather than one that had the potential to escalate further. We were also aware of the fact that there was a termination provision in the contract that, in the event, economic advantage would be secured by terminating the contract with a view to renegotiation or substitution, albeit on payment of a termination penalty. That option was available to CSID, of which we were aware. While conscious of the concerns in relation to a fee or percentage based structure, we were also aware of factors in the structure of the project that would serve to mitigate those concerns.

But if you moved against the contract there was a termination cost——

Mr. McCarthy


——that would be paid to the executive services company.

Mr. McCarthy


Is there a view in the Department of the Taoiseach on the contract going from £30 million to £48 million?

Mr. McCarthy

The estimate of £30 million implicit in the Government decision of July 2000 to proceed with the aquatic centre was on the basis of analysis prepared by independent consultants, in this instance PricewaterhouseCoopers, which indicated that was their estimate of what would be required on the basis that the total capital cost would be of the order of £48 million and a sum of £18 million or more might be negotiated from a contractor on the basis of the cumulative value of the surplus of operating a facility over a period of 30 years. In that report the extent to which that was a challenging objective was made clear. That was made known to Government at the time of the decision. In the event, as it appeared, there was not a willingness in the market to commit a capital sum of that scale.

We will return to this. I know my colleagues want to contribute. Does £500,000 from the private sector not cause alarm bells to ring in so far as the notion of expectation of significant private sector involvement is replicated in the greater project?

Mr. McCarthy

Clearly, it is a matter of concern, but there are differences between projects having regard to their scale and nature and also the extent of the likely level of income to be generated from usage. It would not be reasonable to assume that an aquatic centre was entirely representative of the range of sports and amenity facilities envisaged for the wider campus project. What it points to is the need for clear project specification and effective negotiations.

Do you think the Department was well advised by Mr. Murphy's Department?

Mr. McCarthy

In what respect?

In the advice he gave you on lack of clarity of specification.

Mr. McCarthy

In regard to the aquatic centre, I do not believe there was a lack of specification on the nature of the project. What was clear was that the market interest and the market calculation of the surplus to be generated over a period of 30 years were not at the optimistic end of the PricewaterhouseCoopers spectrum.

Do you recall the order of the termination bonus that would have to be paid?

Mr. McCarthy

It was related to the period of months' notice to be provided which we can provide later.

Thank you. The Comptroller and Auditor General can clarify the point.

Mr. Purcell

As I understand it, it depended on the amount of notice given. Taking both ends of the spectrum, if six months' notice was given, it would have worked out at £400,000 and if no notice was given, it would have worked out at £1 million approximately.

How is it posited that you could give six months' notice if you felt it necessary to get rid of somebody?

Mr. Purcell

I do not know. I can only presume that as they would have been earning £100,000 per month for those six months in working out their notice, effectively the termination payment would have been about IR£1 million.

From what we have heard so far, much of the discussion will break down between the old departmental arguments of going ahead, trying to get a job done and meet deadlines or going for the slow steady slog with a different approach. We will deal with that in the next few meetings.

I appreciate the Chairman's stance, that he is not responsible for what is said at the Committee on Finance and the Public Service but the term "corruption" has been used. As we are dealing with the accounts and Mr. Purcell's report it is very important to put on record what was said: "reasonable assurances that the financial statements are free from material misstatement whether caused by fraud or other irregularities or error". That is a specific statement regarding the financial statements. On page 5 there are outlines regarding the finance and audit subcommittee of the board of CSID which was established and a few points about corporate governance. Do they deal with the concerns raised earlier by the Comptroller and Auditor General?

Mr. Purcell

Yes, they would. The existence of an active and effective finance and audit subcommittee is an essential element of corporate governance. That would go some way towards meeting my concerns. It would be clearly an essential building block of any proper system of corporate governance.

When we look at Mr. Teahon's report we will debate the issue of trying to build a centre within a given time and whether certain methods might be slower than others. I join in the compliments to the Office of Public Works and to everyone involved but we will be thrashing this out. It has been stated on several occasions that no firm estimate of the cost was available. I appreciate that some Deputies have become experts on this over the past two years and various figures have been mentioned - £1 billion was a handy one to latch on to. Is it true that there was no firm estimate of the cost? Mr. Teahon has produced figures and I know we will deal with those later. He has stood over them during the week but everyone else says they are not firm figures. Is that correct?

Mr. Murphy might deal with it. The figure of £1 billion is often mentioned but it is in the context of the infrastructure, relocation of the Department of Agriculture, Food and Rural Development and road entrance to the stadium.

Mr. Murphy

I mentioned earlier that the Office of Public Works has not done any independent costings. The High Point Rendel report has a range of costings in it. They are not to hand but I am sure someone here has them. The range of costs is set out in that report.

I understood Mr. Murphy to say in reply to Deputy Rabbitte that one of his concerns was there was no firm estimate of costs available. I am not quite sure if I heard it from another source also. Either there was a firm estimate of costs available or there was not. It may not be accurate and some might say it could not be delivered on but the evidence we are given must be factual.

Mr. Murphy

I will answer that in two ways. There was an estimate of costs from the Office of Public Works on the aquatic centre only. That was borne out in the event. Campus and Stadium Ireland is working to that cost. In regard to the overall, that is where the argument arises and it is why the High Point Rendel report has a range of costs. The report also refers to the fact that a difficulty is that the actual requirements for the stadium are not tied down.

So there are figures and estimates available but they are disputed. Campus and Stadium Ireland Development Limited has one set of figures and you are suggesting that other people have different sets of figures.

Mr. Murphy

These sets of figures are set out in the High Point Rendel report. It also states that one of the jobs to be done is to state the requirements clearly.

We will obviously need time to establish the credibility of these sets of figures. As Deputy Lenihan mentioned earlier, we are dealing with the report and accounts of Campus and Stadium Ireland and we would want to put very carefully on the record that whatever about procedural difficulties there is no question or suggestion of financial irregularities in thereport.

Mr. Purcell

I confirm that absolutely. We are talking about getting value for money, organising affairs in a way that allows one to act as efficiently and effectively as possible with due regard to transparency and accountability.

In the accounts for the year 2000 there is a figure of £397,000, almost €400,000, for consultancy fees. Who were the consultants and what were they consulted about?

Mr. McCarthy, are you familiar with that aspect?

Mr. McCarthy

CSID might be able to answer that.

Mr. Teahon, perhaps you might deal with that in a few minutes.

There is expenditure of £49,750 for travel and entertainment. I would expect there would be a fair amount of entertainment in a campus stadium and sports complex but not before it has been built. How did that arise?

That is a question we will ask——

Mr. Purcell

Without wishing to pre-empt what the executive chairman might wish to say, if one wants to build something one must go and see similar edifices elsewhere and how they are run. I would imagine that would involve a fair amount of travel. As I recall it, that accounts for most, if not all, of that figure.

The Comptroller and Auditor General said in his report that the main project was in limbo. From what I recall from my penny catechism limbo is a state or place of rest where some souls suffer for a time before they go to heaven.

I learned that they never get there.

That is how I learned it.

The Deputy is mixing it up with purgatory.

Will this project ever go to heaven?

We will try to put it to bed.

Mr. McCarthy, you were addressing the question of the specification. From whom is the specification obtained?

Mr. McCarthy

In relation to the aquatic centre?

Mr. McCarthy

The basic brief description for what was to be procured was based on the feasibility study presented to the Government which had been prepared by PricewaterhouseCoopers. It outlined the essential elements in terms of both the wet and dry facilities, so to speak——

What would they have addressed in the specification?

Mr. McCarthy

In particular in the context of its availability for the Special Olympics, the nature of the project to include a 50 metre pool, a diving pool and other facilities including those for a given number of spectators as well as support or ancillary services such as catering.

By whom were they commissioned?

Mr. McCarthy

That was a brief given by Campus Stadium Ireland Limited which was authorised to do so by Government in January 2000 and the report was submitted in July.

PricewaterhouseCoopers was selected as the company to deal with the provision of the specification.

Mr. McCarthy


Are there any particular skills or aspects that you would need to have in your Department in order to make a prudent assessment and evaluate such a specification?

Mr. McCarthy

The basic criterion was to ensure that the analysis was robust in terms of its financial and design aspects. It was not a detailed design specification. What the feasibility study essentially did was to estimate the likely cost ranges of producing a facility which would meet, in the first instance, the Special Olympics brief but which would be comparable to the best aquatic centres with leisure facilities operating in Europe.

Was it measured against them in that context?

Mr. McCarthy

In effect the report that was produced was an analysis of what the implications of matching best practice would be and the initial capital costs, operating costs and the likely revenues that might be generated. What was called a benchmark option or scenario was presented.

Who went where or who inspected what? How was the calculation made?

Mr. McCarthy

I presume the consultants, from their own expertise and network of support, would have reviewed——

You referred to PricewaterhouseCoopers. Did you establish the veracity or the surety that would be essential for you in the context of their specification?

Mr. McCarthy

I should say that they were——

This committee has often found that on close examination of auditors' reports and accounts of situations they are not necessarily as accurate as they should be. In that regard it is necessary to be able to test them against what they are basing their calculations on. From that point of view, one cannot speak about cost effectiveness or value for money unless one knows what one is talking about and is able to either make it stand up, see it in an amended form or dismiss it in its entirety.

Mr. McCarthy

In carrying out this assignment PricewaterhouseCoopers consultants engaged Faulkner Browns, a UK firm of architects with particular and significant experience of aquatic facilities to work with them. The question of their expertise is not one I would have any reason to doubt. In terms of the value or accuracy of their report, it is validated by the fact that their estimate of the capital cost of producing what they outlined as the benchmark project was in line with the market when tenders were received and examined. The order of magnitude of what it would cost was borne out in the marketplace. The question of what a private operator would be willing to invest by way of equity in the project, which they regarded in the report as the challenging aspect of the brief, was not borne out on the optimistic end when the market had produced its tender.

Thank you. I am happy that the Comptroller and Auditor General is in a position to say there is no irregularity in the expenditure. This committee must first and foremost acknowledge that it is not engaged in a formal inquiry such as the one we have had. It is wrong that the integrity of very competent and well-intentioned senior persons would be impugned or damaged by very serious and worrying reporting that could do harm and damage to individuals. We must always be conscious of that and I am delighted the Comptroller and Auditor General is in a position to correct that.

We will wait until——


That is the type of remark I do not like.

This is becoming hopelessly political.

I did not hear the remark.

Preconceived notions damage people's reputation——

Fine Gael has a——

——and we should not allow that. This committee has always worked well and I have always found my colleagues to be very generous in their attitude and sincerity of approach. To depart from that in any way that would sully the name of any individual is grossly wrong and damages the credibility of the committee.

You have made your point forcibly. As Chairman, I have tried to be constructive throughout the meeting and I respect what the Comptroller and Auditor General had to do in this instance. It was not like reviewing the Department of Tourism, Sport and Recreation. There was no statutory basis. It is only right for the committee to probe the area of executive services. It is a new dimension as regards procurement policy. I have certain reservations about what is happening. That is my view on it. Legal advice was sought on this aspect. I believe it will be queried in the future. Perhaps it would be no harm for Barry Murphy, who is used to procurement policy, to access that legal advice because it is an issue that will arise. It is giving rise to an unfair tendering process. Prior to this meeting I received telephone calls from people in the construction industry who are concerned about this type of executive services. Their concern is that they have to tender for a project and it must be advertised in the European Journal. I make no apologies for raising that dimension publicly. I am still concerned but that is another day's work.

I thank Mr. Teahon for being so tolerant and listening to all the questions. You can make your opening statement now and respond to some of the questions. I know some questions were raised earlier. I would like the permission of the committee to publish Mr. Teahon's opening statement.

I thought the approach was that Mr. Teahon would respond to the issues of governance before proceeding with his opening statement.

People have been waiting to hear Mr. Teahon's opening statement but if he wants to respond to questions before making it that is his privilege.

Mr. Teahon

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.

It is fair to say that all the members of this committee, including Deputy Rabbitte, accept the bona fides, reputation and integrity that precedes Mr. Teahon. It is not the objective of this committee to besmirch his character or reputation. Our concern is for the proper management of a project that will involve millions of taxpayer's money. That is the principal concern of the committee. I do not envy Mr. Teahon in his task because this, unfortunately or fortunately depending on which part of the political equation you position yourself in, has become an intensely politicised project with the Opposition making a very clear point that it will scrap this project if it is in government after the next election. It is intensely political and has become intensely politicised. I hope the way we conduct ourselves in this committee will mean that we do not join in what I can only describe as an Opposition lynch mob, particularly Fine Gael——

That is ridiculous.

——determined to destroy the character and reputation of a very eminent civil servant who has served us extremely well.

Do not lower the tenor of the discussion

It is not lowering it. It is a statement of fact.

The Deputy is talking about external factors outside this committee. Everyone is trying to be constructive in this debate and he should be, too. I will move on to the next speaker if the Deputy does not conduct himself.

What the Deputy said was outrageous.

It is important to point out that neither the Tánaiste nor the Taoiseach is a member of any Opposition lynch mob.

I said it was intensely politicised.

Deputy, please.

It is quite clear from your response, Chairman, that it is.

I ask the Deputy to withdraw that remark. I have tried to be constructive in this debate and manage it as best as is possible. It is a difficult discussion and I will let people such as Mr. Teahon make an assessment on whether the debate has been balanced. I ask the Deputy to continue with his questions. I do not want to hear another Ard Fheis speech from him.

The Chairman is being partisan again. I will not talk about his Ard Fheis. Mr. Teahon, on page 9 of your statement you indicate that the issue of dormancy was notified to you by PricewaterhouseCoopers on 18 December. Many people have been engaged in hyping and exaggerating the implications of dormancy for a company of this kind set up for a special purpose to bring a consortium together. What was the nature of the notification from PricewaterhouseCoopers? This is very important. Was this a heavy or light warning or was it "by the way it should be noted" that this company was dormant and not in the true sense of the word an operating company?

Mr. Teahon

I do not believe that it was "by the way". As far as PricewaterhouseCoopers was concerned, this was an issue that had to be dealt with. That is how I saw it. My reaction was to say that, in my judgment, it was not unusual that in making a bid of this nature the company might be dormant. That was not the issue for me. The issue I believed needed to be dealt with and it went back to the consortium because it is important to keep saying we were not contracting, and did not contract, with an individual company, Waterworld (UK) Limited. People who listened to media presentations would believe that we contracted with one company called Waterworld (UK) Limited. That is not the case. We contracted with three members of a consortium. We contracted with Rohcon Limited, Dublin Waterworld Limited, the special purpose company, and Waterworld (UK) Limited in a minority position. When I saw the PricewaterhouseCoopers notification I was clear that this was an issue that it believed, and I believed having read it, needed to be dealt with. That is the action I put in place. I first saw the report on 18 December and, as I said in my statement, put the action in place having mentioned it in the way I did at the assessment panel on 19 December 2000.

What is your concern about dormancy or what was that PricewaterhouseCoopers' concern?

Mr. Teahon

The issue I believe is not one of dormancy. Dormancy means that the company is not trading or has not traded. There are two concepts that have been in the public domain, one is shelf company and the other is dormant. A shelf company is one which is put in place and then converted into another company. I understand this is a vehicle which has been used in many business transactions from recent comment in the media, including in the takeover of Eircom in recent times. A shelf company is something that would not be found unusual in the business community.

Dormancy means that the company has not traded in recent times. That would raise the issue of why it had not done so. That is what led me to say that we need to be sure, in moving forward to contract and confirm as preferred bidder this consortium, that the financial standing of Waterworld (UK) Limited has been examined. In practice, what happened was it said to us that two US companies, the NGBS company in particular, would provide a parent company guarantee. In practice, what happened was that did not prove possible. We were offered, and consulted PricewaterhouseCoopers on accepting the letter from Anglo Irish Bank, £3 million at that time which was secured per the letter on the assets of John Moriarty, the majority shareholder in Dublin Waterworld Limited. That is where the trail led.

To be clear, the company was a dormant shelf company, but you had secured financial guarantees from the participants in the consortia to ensure there would be no loss to the Exchequer and it would not be a case of a contract being given and suddenly there was no financial wherewithal to carry through the ambitious project envisaged. Is that the position?

Mr. Teahon

In my judgment, what I put in place on the day after seeing for the first time, on 18 December, a reference to dormancy was a process that led to the financial standing of the consortium, in my view, being solved.

You deal on page 10 with the issues raised with Mr. Palmer that a special purpose company should be formed with each of the consortium members and the obligations of the special purpose company should be guaranteed by them. Was that achieved?

Mr. Teahon

The contract that was eventually approved and signed is with three companies, Rohcon, Waterworld (UK) Limited in a minority position and Dublin Waterworld Limited. Under a system of joint and several liability, that contract is guaranteed at a level of IR£750,000 plus a separate guarantee of IR£360,000. That was what eventually emerged from that process through the letter from Anglo Irish Bank which referred to IR£3 million.

You are happy in the unforeseen event of anything going wrong with this company that there will be no liability for the Exchequer because of the structure and the guarantees you have entered into.

Mr. Teahon

The guarantee, in effect, would be called in where the operating company, in particular, was not able to continue to run the aquatic centre. Most people will make a judgment on the guarantee in relation to the cost of running the centre. Contrary to some reports, the expected return from the centre is IR£100,000 annually. We are not talking, therefore, about millions of pounds but a centre which will, if it operates well, return IR£100,000. The guarantee has to be set in that context. In my judgment, it is adequate to cover the expenses of putting an alternative operator in place, but I hope that never happens.

I am very happy with that. Were all five issues resolved? You dealt with one of them, the satisfactory financial information from the American company, for instance.

Mr. Teahon

As I have explained——

If you were ticking a box, were all five satisfied?

Mr. Teahon

They were satisfied, but not in the form set down. As I explained, the parent company guarantee that it was said to us in December could be provided by NGBS in the United States did not happen. The guarantees now in place were in substitution for it.

Are you saying they are arguably stronger?

Mr. Teahon

I do not believe they are stronger, but as a result of what were difficult negotiations, we have put in place a guarantee that is adequate for the purpose that I explained to you of covering the cost of putting an alternative operator in place, which I hope will never arise, in the event that the operator does not continue.

There seems to be a shock horror reaction to the dormancy issue. I am sorry to harp on about it, but as regards the concern expressed by PricewaterhouseCoopers regarding dormancy, was it the case that it indicated this is a dormant company and you would need to verify its finances before proceeding to the next stage of formal contract? Was that its concern on 18 December?

Mr. Teahon

I would not wish in what I say to attempt to minimise what PricewaterhouseCoopers said.

Mr. Teahon

It said what it said. As far as I was concerned, there was an issue that needed to be dealt with. As I explained, I believe I put in place a process that led to the issue being dealt with.

What did it say, Mr. Teahon? Was it that you should not consider Waterworld (UK) Limited on account of it being a shelf company?

Mr. Teahon

No. It was a statement of the outcome of its research on the company in question. There were a number of companies, as I have said. It is a tabular statement of the outcome of its search on these companies.

Therefore, PricewaterhouseCoopers, a very eminent company, did not put any caveats or express any reservations about you proceeding to deal with Waterworld (UK) Limited?

Mr. Teahon

It certainly did not put any caveats. I believe it was satisfied because it participated in the production, with our legal advisers, of the letter of 19 December. There was a meeting of the assessment panel, as I have pointed out. It was not the function of the assessment panel to make a judgment on financial standing. We have legal advice to this effect. That was not its role. After the meeting of the assessment panel and the remarks I made to it, PricewaterhouseCoopers, McCann Fitzgerald, our solicitors, and the executive services team, on my instructions, produced the letter that went to the consortium.

PricewaterhouseCoopers was not unhappy with you proceeding to deal with Waterworld (UK) Limited. I am sure it made you aware that the company was based in the Virgin Islands and had a £4 share at the time. You were happy to proceed, even in the context of what has been heard about the Virgin Islands, the Caymen Islands, Ansbacher and so on and public's perception of this. The ordinary person in the street believes there is a smell off this project on the basis of what has been revealed in the media.

Mr. Teahon

In terms of what has been said in the media we did not contract with Waterworld (UK) Limited on its own. We contracted with a consortium of Rohcon, Dublin Waterworld Limited and Waterworld (UK) Limited. As regard the issues raised by PricewaterhouseCoopers, it was party to the production of a letter with which I believe it was fully satisfied that went to the consortium and led to the contract that was eventually signed.

On the basis of what you have said, PricewaterhouseCoopers, the consultants, was happy, having carried out its assessment of the bona fides of Waterworld (UK) Limited that it was a company with which you could do business. Is that what you are saying?

Mr. Teahon

In the sense that it participated and agreed a letter, as I have stated in page 10 of the statement. I believe the answer is, "Yes".

Did Waterworld (UK) Limited ever trade?

Mr. Teahon

To the best of my knowledge, no.

It never traded.

Mr. Teahon

A dormant company is one which is not trading at the time. It never traded subsequent to being part of the consortium. The reason I am giving the explanation is that I believe "dormant" means it did trade previously, but that was not an issue for us.

The point is that Waterworld (UK) Limited was pulled into the consortium on the basis that the Government instructed you to ensure the best possible management expertise of international projects was brought in and involved in this project. You mentioned Waterworld (UK) Limited and that it is associated with Schlitterbahn, a company involved in water based rides. Waterworld (UK) Limited took you for a water based ride on this issue.

Mr. Teahon

I do not think there is any justification, Chairman——

The point is——

Mr. Teahon

I do not believe there is any justification for you making a remark of that nature.

It would appear that way.

Mr. Teahon

With respect, Chairman, you did not say it would appear that way. You stated it as a fact.

Sorry, I will change it. It would appear that way to many people. We can obfuscate all we like, but that is what it appears like.

Mr. Teahon

I hope I am not obfuscating in any way.

I am not saying——

Mr. Teahon

I came here today to make a full statement.

I respect your honesty in your responses. I am saying what the ordinary person is saying. If you are oblivious to that, you are oblivious to reality. I believe that is what people are saying.

Mr. Teahon

I have tried to bring out - I hope the perception changes as a result of my statement - that people have come to that conclusion and have also come to conclusions about the HPR report on the basis of comment that is not well informed.

I accept that. I accept the HPR report and your analysis, but in case you think I am making a definitive statement, that is the perception.

Mr. Teahon

I respect that.

I was giving the public's perception of it. People say that to me because they see it in the context of what happened in the past with Ansbacher and the Caymen and Virgin Islands, tribunals and so on. They read of a shelf company with a shareholding of £4 associated with the Virgin Islands and cannot understand how it is part of this consortium.

Mr. Teahon

With respect, when they read in The Irish Times that the company which acquired Eircom was a shelf company they did not reach an equivalent conclusion because of the way in which it was presented.

All right. I take your point.

Now that the Chairman has raised the issue of how the ordinary person might feel about this, perhaps it is important to clarify PricewaterhouseCoopers' view of dormancy. Its view of dormancy was not one of alarm bells ringing and something must be done, we must verify and check out this and that. It was not the highlight of that section of the report.

Mr. Teahon

I have a difficulty answering that question. I do not want anything I say here today to suggest that I came here to minimise what PricewaterhouseCoopers said. I have said that, in my judgment, the issue was not dormancy but the financial standing of a consortium, not the financial standing just of one company. I do not want anything that I say in reply to imply that I am somehow trying to minimise what PricewaterhouseCoopers said.

There were no alarm bells ringing in the report. There was nothing to say look at this about dormancy.

Mr. Teahon

No. I believe PricewaterhouseCoopers——

It did not come to you in a tizzy following its report to you saying you must deal with dormancy, it is vital.

Mr. Teahon

It did not use words such as "vital".

It did not come to you in that——

Mr. Teahon

My problem in a sense is that perhaps if I had used the word "dormant" at the time, we might not be here today.

Mr. Teahon

I do not want to say it is not the issue. Maybe if I had used the word "dormant," we would not be here today. I was very genuine in stating the regrets that I now have. I do regret that I did not give a full account of this at every stage and do not want now in commenting after the event to in any way suggest I am trying to minimise it. I am not.

Yes but to cut to the chase, you accept you made a mistake on the dormancy issue from the point of view of perception. The perception of it is unfortunate, but the reality is you have stated elsewhere you will not resign. You do not believe you have done anything wrong on that issue. It would appear that PricewaterhouseCoopers backs you on that. It does not believe it to be wrong.

Mr. Teahon

No. It participated at every stage of the process subsequently.

It did not say this was wrong, we should have rectified it. We are dealing with a problem of perception of the word "dormancy," as the Chairman rightly said, by the ordinary person in the street who does not understand finance or corporate or company structure or company law. Is that not the reason for all the calumny that has been visited on you? I say "calumny" lightly.

Mr. Teahon

I agree with what you and the Chairman say. There is a perception, but it is based on accounts in the media that were not based on full information.

I am sure you wish you never heard of Waterworld (UK) Limited.

Mr. Teahon

If I could say something that is important in terms of some of what has been said. It is my judgment and it has never been put to an assessment panel - again there has been a certain innuendo in this direction - but you will recall that in saying Rohcon replaced MDC from the Netherlands the standard that our legal advisers put to us and the assessment panel was if Rohcon had presented at the outset, would it have gone through the stages and the answer of the assessment panel was "Yes, it would." It is my view that if Rohcon and Dublin Waterworld, being the people from or living in Tralee who are now there, had presented at the outset, they would have gone through the tender without involving Waterworld (UK) Limited.

The public would not see anything wrong with that.

To put the dormancy issue to bed once and for all - I hope that is not an unfortunate pun - is it the case that the other three consortia which pre-qualified in this contest also had shelf companies established? I do not know if you checked this. They may also have had dormant shelf companies which, if they had won the tender, would have been an issue.

Mr. Teahon

As I have said, one of the consortia had a company being the operating company and it was such a company. It is in the statement.

You said you would deliver this project at a cost of £350 million. You stated at the height of the controversy over this project that you would stake your reputation on that figure. Do you mind if we ask on behalf of taxpayers that you not only pledge your reputation but also the fees in the contract? Is there a relationship between the cost at which your company through the executive services delivers this project and the final project cost and the fees you would earn from this project?

Mr. Teahon

It might be useful to clarify this. I do not earn fees in relation to the executive services contract. I am not part of the executive services team. I was appointed by the Government to be the executive chairperson of Campus and Stadium Ireland Development Limited for which I receive a reasonable but small amount of money.

Are you confident that would be reflected if it is delivered on that figure? If it goes over it, would there be a requisite level of penalty or whatever? One of the issues, like others that have confronted us here today, is that of perception. Unfortunately, the perception is that this project is a rolling one, the figure is indeterminate and keeps rising. From the point of view of the taxpayer, there needs to be some contractual or other reassurance that if it goes over the figure of £350 million, if there is a roll-over that is not explicable, it would be reflected in the fees paid and there would be a suitable penalty imposed on the people who are tasked to deliver the project. You are one of them because you are committed to the figure of £350 million.

Mr. Teahon

I will make three points on that. As I have stated, and as the table shows, the HPR company had a figure in its analysis under cost No. 2 in the table of £350 million which is not significantly higher than ours. It states in the report that ours is a viable estimate. What I believe strongly is that in the event that the Government at a point approved the go-ahead for the project and gave a budget to Campus and Stadium Ireland of £350 million or €445 million I would be fully satisfied that all the facilities could be put in place for that amount of money on a fully acceptable basis. That is where I am coming from. I am saying that when you look at the figures for the different facilities and compare them with the experience of similar facilities worldwide there is a sound basis for the figure of £350 million being the sum, as the table shows, for the different facilities.

Is the contract designed to punish an overrun of that figure? That is the key point from a taxpayer's point of view.

Mr. Teahon

The third point - this is important from the committee's point of view - is the executive team, the lead company, Magahy and Company, made a proposal on a voluntary basis to which Margaret Hayes referred at an earlier stage that the 1.8% contract would not be pursued, that what would be put in place was a contract that would specify what were called charge out rates by the number of people involved and the amount of time that they would put into the project, in other words, a different contract, but fully transparent in terms of some of the criticisms that have been made.

When was that proposal made?

Mr. Teahon

It was made some months ago. It has been considered by the finance and audit committee of CSID. As Margaret Hayes said, it now falls to be finalised by the board. Clearly, there is no problem from the side of the executive services team because it proposed it voluntarily. It is complicated by the fact that the executive services team made a second proposal which is that it would work for a number of months in this period to, let us say, the end of May this year for 75% of the costs, in other words, to take account of the position in which we now find ourselves that the project is not going ahead. The board will consider in the next short while and reach a definitive conclusion on both propositions and will then put them to the Department for agreement.

Did that renegotiation come as a result of your initiative or that of Margaret Hayes and the Department of Tourism, Sport and Recreation?

Mr. Teahon

Neither. It came at the initiative of the executive services team lead company. It is concerned at some of what is being said in the media that somehow there is a large and wrong amount of money being paid. It felt that it was very important that there should be something that was clear, transparent and readily understood by anyone looking at it.

As regards the figure of 1.8% - this relates to what was said earlier - percentage amounts are not unknown in projects. Architects and so on can be paid on a percentage basis. It may well be that people would say this is not equivalent, but it is not unknown. There could be a significant advantage in a 1.8% contract for a particular amount of time. In other words, the figure of 1.8% applied in a situation where the executive services team had to guarantee that it would provide these services irrespective of the length of time of the project. The predication was that it would take five years, but if it took ten years, it would still have to provide all the services for those ten years for 1.8%. That has never been referred to. It may be that if people had considered it, they would still have concerns. There were circumstances in which if there was a time overrun, one of the issues on which HPR is very strong, the figure of 1.8% would still apply, in other words, you have to have a certain number of people who cost a certain amount of money on an annual basis. If you have to provide this for ten rather than five years, you could end up making a significant loss in certain circumstances relative to the figure of 1.8%. I accept that in putting the proposal the lead company of the executive services team believed that it was preferable on all counts that what would be in place was a contract that would specify these charge out amounts for particular individuals, clearly identifiable, for particular amounts of time they would put into the project.

Thank you.

Could I ask for your guidance, Chairman?

I have an unavoidable commitment. I do not want to leave the meeting, but I cannot avoid it now. How do you intend to proceed and for how long? I have been a member of this committee since 1989 with a break during the rainbow Government and there was a time when we proceeded by way of question. We did so for many years. I have to say about my constituency colleague and dear friend, Deputy Lenihan, that I sincerely hope he is successful in the general election because if he had to go to the bar to make a living, he would be in very great difficulty.

Chairman, with all due——

I am not a lawyer. The Deputy specialises in insinuation.

He is making statements and——

Insinuations directed at me.

We will leave the constituency to them. Could we have a direction on what we are doing as regards time?

Making statements such as we have put dormancy to bed——

I am going to the loo.

That would have been an appropriate place to be. We have not put anything to bed. We are still asking questions. The only issue we have put to bed is that nobody on this committee challenges Mr. Teahon's honesty. We have not put dormancy or competence or contracts to bed. Could we have a copy of the contract before we renew, Chairman?

Is that possible, Mr. Teahon?

Mr. Teahon

In fairness, I should ask the executive services team. I would have thought what would be useful would be not just the contract that exists but the contract that will be put in place very shortly.

I understand that and the reason you would have to talk to——

The Deputy asked me what way I intended to proceed. I was allowing Mr. Teahon to tease out questions. We are meeting in a vacuum. When this meeting was originally scheduled we anticipated that the Attorney General's report would be with the Cabinet and we would have access to it and could proceed with our discussions accordingly. On the basis of what the Tánaiste indicated in the Dáil this morning, the report will be available tomorrow. I hope it will be accessible to the committee in the morning. It is my intention to resume this session tomorrow at 12 o'clock. In teasing out the parameter questions about the executive services and the accounts for Campus and Stadium Ireland Development Limited we will get down to the issues raised within Mr. Teahon's opening statement and the Attorney General's report. We will be able to conclude accordingly. I do not see us finalising the debate this evening. I ask the Secretary Generals of the Departments to be on standby for a meeting tomorrow at 12 o'clock. If we do not have the report, we will suspend and indicate the time at which we will meet in the afternoon. I am anxious to have the issue finalised by the committee tomorrow evening rather than return to the topic next week. I know I had the agreement of members to my original suggestion at the beginning of the meeting.

For how long do you intend to proceed tonight?

I do not intend to proceed much longer. I will allow members to ask opening questions. We will return to it tomorrow. Mr. Teahon's statement and the Attorney General's report will help us to put the pieces of the jigsaw together better.

Ms Hayes

Chairman, before you close on that subject you should be aware that the Attorney General has issued a draft of his report to the principals referred to in the report and given them until noon tomorrow to give comments and views. I doubt, therefore, if he will be in a position to finalise his report and have it available to the committee tomorrow morning, certainly not in time to facilitate consideration of it tomorrow afternoon.

We might have to meet on Saturday. Will we proceed for a while?

Ms Hayes

I suggest you consult the Office of the Attorney General. I do not know when exactly they intend to finalise, but the principals have been given until noon tomorrow. I presume, therefore, he does not intend finalising until he receives those comments and has considered them.

In the light of the Tánaiste's remark today that it will be published tomorrow and Ms Hayes's remarks now, is it awkward for colleagues who are not Dublin based to meet at 5 p.m. tomorrow?

I have no objection. I am prepared to stay on.

It is fairly certain from what Ms Hayes has said that we will not have had an opportunity to see the report by 12 noon tomorrow.

It is possible from what Ms Hayes has said that we could have it by 3 p.m.

It is unrealistic to expect to have it by 3 p.m. If they have been given until 12 noon to respond, the best we can hope for is somewhere in the region of 4 p.m. or 5 p.m.

We will set the time provisionally for 4 p.m. tomorrow in anticipation that we will have the report. Is that agreed? Agreed.

In view of what the Chairman said I will reserve further comment. I agree with Mr. Teahon when he said that if it had not been for the fact that he made a mistake, we might not be here. That clears up that element of it and I am glad it has been put on the record. There is much disquiet because of it, as has been stated. The dormant company was not raised by Members of the Oireachtas but by the media. The first I knew of it was when I read it in the national press. It was very difficult for the general public to understand how a dormant company - as far as they were concerned it meant a non-existing company - could get a contract of this magnitude. Are you satisfied that the companies which have given the guarantee within the consortium are capable of completing the project on time and will do so within the funding allocated?

Mr. Teahon

Yes, I am.

Thank you.

HPR was the company which produced the report. Was it an independent company?

I believe they were international consultants.

Ms Hayes

Let me give the background. The Government instructed my Department to carry out an independent cost overview of the projected cost of the stadium and gave us a certain set of criteria. We established a steering group which oversaw a public procurement process where we advertised internationally for consultants, received a number of bids and——

How do you think it got it so wrong if it was such a competent company?

Mr. Teahon

Can I address that question?

I will address it to you, Mr. Teahon.

Mr. Teahon

In my judgment, it got it wrong because it did not understand the sunken bowl concept put forward by our project managers. The fact that it is an independent company does not mean it cannot get something wrong. I am fully satisfied and have gone into the matter in a significant way. It is not a simple idea. Normally, a sunken bowl means you have a pitch at a lower level than normal ground level. What our people are suggesting is, not that you would sink the pitch down, but rather that having the pitch at ground level you would then build up the outside. That is where communication between our project managers and HPR went astray. It refers in that context to sliding out the pitch which is one of the things stadia do internationally. If you have sunk the pitch and want to slide it out, you must excavate a large amount. By building up the outside and having the bowl in that sense you can slide out the pitch at ground level. When it looked at the issue of sliding out the pitch and said we had a real problem I was satisfied it did not understand what our project managers were talking about.

Why should the cost of relocating the laboratories not be taken into account? Is that not a real cost of the project? If you have to relocate very expensive buildings, as was said earlier, why should that not be taken as a cost?

Mr. Teahon

I will address that question and perhaps Barry Murphy will add to it. All I said was that HPR in its report said it should not be taken into account.

Why should it not be taken into account because it will be part of the cost if it ever gets out of the limbo in which the Comptroller and Auditor General has put it? I accept Mr. Teahon's regret that he did not clearly say to the panel and to the Department of the Taoiseach that the company had been found to be dormant. From my judgment of Mr. Teahon and from the very well presented report here today, he is a man who chooses his words carefully. He is good with words. I know Mr. Teahon has admitted the error but it does not ring true to me from the presentation made today. Deputy Rabbitte is well capable of dealing with this himself tomorrow but when Mr. Teahon was referring to innuendo he said "and some other people involved". Being a very sensitive person, for a while I thought he was looking at me. We had better be very careful about using the word "innuendo". I do not think anyone on this committee has made any such suggestions. In case the press or anybody else would get the impression that Mr. Teahon was talking about me because I was the person addressing the question at the time or any other member of the committee, it should be made clear that I have said nothing that would indicate that it was me, when Mr. Teahon spoke about some others involved in adverse comments as well.

Mr. Teahon

If I believed any other Deputy in the committee had made such a statement I would have referred to it. I am making it clear that I was not referring to any other Deputy. We should be honest with each other. People here know that there were two programmes on national radio and television where these statements were made in what was not in any sense an acceptable form. Both of them suggested that people from Tralee and from Kerry could not be expected to run significant aquatic centres. That is completely wrong.

Thank you.

Has any public money been lost to date on this project?

Mr. Teahon


People in the constituency raise the issue of the "Bertie bowl". They do not realise that there is an arena, a multi-purpose hall, outdoor pitches, tennis centre, golf academy, etc. It is very important that all of what I hope, will be provided is made clear to the public.

Mr. Teahon

I accept that perhaps we have not been able to communicate as strongly as I would have liked. I have attempted to do it on every occasion I have been interviewed. I genuinely believe that the campus we can put in place is what Ireland deserves as a country and what our sports people want. When it is put in place, as I trust it will be, it will be a world class campus that will compare with anything in the world. That is the standard that as Irish people we should seek to attain. We should not be prepared to say that somehow if it is people from Tralee it cannot be world class. As a country we should set out to achieve world class facilities and I believe we can do so.

I am glad to hear Mr. Teahon use that phrase because one of the parties has adopted that as their slogan. It wants health care and various other issues to be of the highest possible standard, and that is only right. I received two pages of correspondence signed by a number of sporting organisations. How many of the national sporting organisations support the concept of the stadium?

Mr. Teahon

All the relevant organisations. Donagh Morgan tells me 45 in total.

I was saying 37. That is important. There was some "argy-bargy" between constituency colleagues but we need to get real. This project is intensely political. For different reasons members have taken sides for or against this concept. I hope after May, it may all change. People will have different views across the House but our job is slightly different here.

What is on in May?

The Deputy will know soon enough. He might not know now but he will know then. Whatever our views on the complex, our job is to examine the value for money and financial aspects of it. It is critical to spell that out. If we took a stand and tried to either justify the building of it or knock it we would not be doing justice to our role. People have made a judgment, particularly in regard to the aquatic centre, based very much on one-sided arguments. I welcome Mr. Teahon's contribution. Others have said they accept his credentials and record. I am glad he held up his hands and said mea culpa from the outset. To a lay person it was a major error not to notify people of this and I am glad he explained it. PricewaterhouseCoopers carried out 13 company searches. Is it standard practice when awarding a contract to do a company search?

Mr. Teahon


It would have happened anyway. Nothing was concealed. You were not hiding a shelf company. People were being carried away in talking about islands and where you have all this money. Can the consortium deliver on the project? I heard a journalist on one of the radio programmes, say that believe it or not, the expertise on swimming happened to be in Tralee. As an Irish person I found that very hard to take. It shows an inferiority complex on the part of those making the comments.

Mr. Teahon

All I would add is that we had an international expert, Kit Campbell, from Scotland who is an international expert on this front to advise the assessment panel. It was his judgment that the people from Tralee came highly respected in the field.

Have you any idea of the percentage cost of the sunken bowl? Is it £10 million, £20 million or £40 million?

Mr. Teahon

It could be as high as £100 million. It is very significant. In effect most of these stadia operate on rings or layers. By building up the first layer one could save as much as £100 million. Because of the way in which we are doing it, it may be that they did not include as much as £100 million but some figures that I have seen suggest that it could be that high. If one looks at the table, it could explain the difference between the two figures.

That is the kind of information both we and the public need. We have not had that until now. We can get involved on the technical aspects and be side-tracked by Waterworld UK and so on. I would be concerned that the project would fall for the wrong reasons. I have been a member of this committee on and off since 1987 and I have seldom seen people of your standing from any Department come here and say they will put their career and record on the line and stand over this figure and deliver. I take it you will stand over the figure you have given. With that in mind, why is there such great disparity between the figures? The first HPR figure is near your own, the second one you explain is because of the sunken bowl but where did the figure of €1 billion that is usually thrown about by the Opposition come from? Such a figure frightens the public.

Mr. Teahon

In fairness to HPR, consultants in their situation tend to err on the side of covering themselves and put in a higher figure. One of the ironies is that, in a different situation, when HPR put in a higher figure I can say this is good, because if I believe it can be delivered for £350 million and HPR put in a figure of £550 million and if the Government gives £550 million, then I have a very easy task. I am not suggesting that delivering it for £350 million at 2001 prices is easy. It is not. It will be very difficult. We will have to be very focused on delivering value for money. In the same way when the three original aquatic centre bids came in, the range between the lowest and highest was £20 million. We were not talking about one figure being £50 million and the next being £52 million and next being £54 million. We were talking about a range of £20 million. I believe it will be delivered on budget. If the committee sees fit to accept the invitation I offered, it could see for itself. It is significantly advanced now and will be a great national aquatic centre and wonderful for the Special Olympics.

People are confused. On 25 August the initial examinations were assessed by CSID and Office of Public Works personnel. At that stage they were all working together. It would now appear that the Department of the Taoiseach, the Office of Public Works and your organisation are working separately. At what point were personnel from the Office of Public Works no longer involved? Together with you they carried out the initial assessment of the eight consortia.

Mr. Teahon

Sean Benton who is present——

I was reading from your report which is why I took that aspect, but perhaps Mr. Murphy——

Mr. Murphy

We decided to assume the role of adviser to the Minister for Tourism, Sport and Recreation in February-March because of our inability to reach agreement with CSID on a working arrangement.

Could you repeat that, please, Mr. Murphy?

Mr. Murphy

In any large project that we do for an external client we have an agreement on what are our range of activities and responsibilities. In January 2001 we started a process during the down phase, if you like, when the aquatic centre had gone for planning permission and before we entered into the larger phase of the stadium. We raised the question then - we had always known it was a question to be raised - of the kind of agreement there would be between Office of Public Works and CSID. The agreement we wanted was the same type of agreement that we had used in many other cases. It was not anything new or different but we failed to come to an agreement with CSID on a division of work.

We will probably come back to that.

Mr. Teahon

I was very disappointed we were not able to reach such an agreement. I very much value the contribution Sean Benton made, and I have said this publicly before so I am just repeating what I said previously. It was invaluable. He is now a member of the board of CSID. This was considered at a meeting that Barry Murphy and I attended with Margaret Hayes and which was chaired by the Minister for Finance. The outcome of that meeting was that we in CSID should take on project managers by open tender which is how DL/PKS came on board and that Office of Public Works should act as technical advisers to the Department of Tourism, Sport and Recreation. That is the reality. I was disappointed, and I want this to be known, that we could not come to an agreement between ourselves and Office of Public Works because I valued very much the work that had been done up to then by Office of Public Works as project managers.

This building will stand as a monument to Sean Benton and his colleagues and the Office of Public Works, Mr. Murphy and others. The sunken pitch is——

It is a sunken bowl.

Mr. Teahon has a marvellous reputation for getting things done and was involved in the North and elsewhere. It is unfortunate that this has cropped up. He likes to get things done and I do not believe he would have much patience with people who want to go the slow slogging way. Was it because of the anxiety to get things done that Office of Public Works found it hard to keep up to the pace?

Do not go swimming in deep waters.

I am asking Mr. Teahon——

The Deputy is casting aspersions.

If I could finish the question.

Mr. Murphy is upset too.

He cannot interrupt a witness. I would not interrupt Mr. Murphy.

Mr. Murphy

I am going to interrupt.

I will praise you again if you give me half a chance. Mr. Teahon, the phrase "cutting corners" has been used. There are systems laid down and we are here to ensure they are adhered to. Was there any conflict surrounding the approach to getting the job done? You had a very specific and one of the tightest targets ever set to have this project gone to tender six days after the announcement. You sent a notice of contract to Europe. That is unheard of. It is unprecedented. I am trying to find out the genesis of the split between the Office of Public Works and your organisation.

Mr. Teahon

We would not have got where we did in December in terms of getting this project to planning permission stage were it not for the work of Sean Benton and his colleagues in Office of Public Works. There is no suggestion other than at all times they worked in the fullest possible way with us. I am disappointed that it was not possible to reach agreement in taking it forward in that way. To this day I do not fully understand why that was not the case. It was not that it came from our side, in other words that we were saying that in terms of corporate governance we must have an arrangement that makes sense in terms of the company. I believe Barry Murphy, his colleagues and the Minister, Deputy Cullen, who was involved in that meeting made the judgment given their experience of how they dealt with projects, that they did not believe they could be part of such an arrangement. As I said, I was very disappointed. The judgment in the end was not made by me or by Barry Murphy. It was made ultimately by the Minister for Finance, Deputy McCreevy.

There were some comments made when I raised the question of division and so on. If Mr. Teahon cannot understand why there was division and why they did not proceed together surely I am entitled to question that. I have put on the record over and over again my praise of Office of Public Works, the new era of Office of Public Works. I am asking why they did not proceed together and Mr. Teahon, as one of the senior witnesses, says he does not understand why they did not do so. We will find out the reasons there were difficulties. He made a fair comment earlier that if he had mentioned it was a dormant company he would not be here. I want to know why we have difficulties and where we are at and if I offend somebody in asking those questions, so be it. We are offended every day of the week and no one has any sympathy for us or protests in any way.

Mr. Murphy

I acknowledge that Deputy Dennehy has always been very fair to the Office of Public Works but I thought that slagging off the Office of Public Works at a particular point was something that had been put to bed. It was not a question of one meeting. We had many weeks of discussions and documentation between ourselves and CSID and still could not come to an agreement. We have come to an agreement with every other company or client with whom we have done business but not with this client. When Deputies read the papers they will see the reasons.

Would it not be easier to hear the reasons now?

I am asking for that too, Mr. Murphy. We will be here tomorrow and when the meeting finishes I will have a four hour drive to Cork but I will remain to hear the evidence. I would prefer to hear it now from you. We are here to get information. I am not slagging you off. I believe people must have a slow methodical approach at times.

Mr. Murphy

I do not mind you using the words "slow" and "steady". All I tell you is that over the past ten years we have stopped being slow but we are steady and we offer compliance with all the EU and Government regulations and so on. We are in no way slow. We would have brought this project to the same pitch ourselves and at the same speed. There would be no problem with that. We would like to bring the stadium project forward in the same way. If you are asking me for a reason for not coming to an agreement, we were being asked to take responsibility for the project at a particular stage where we would not have had an input into the ingredients that made up that project so we simply could not be accountable for the end product. Not being in charge of ourselves at the key phases was something we could not allow happen to us.

Ms Hayes

It is important to bear in mind that there was another side to this discussion. As early as January when we were gearing up to take over responsibility for the project I identified a need for access to technical support for the Department. We were a Department that did not have a track record in managing projects of this scale and I was most anxious to build up the back up support. I spoke to the Department of Finance independently of any discussions ongoing between Office of Public Works and CSID and said I would either have to go out to the market and recruit expert advice, architectural, quantity surveying, engineering and so on to assist us in monitoring and overseeing this project or take on board the advice and client arrangement with someone such as Office of Public Works. What was Paddy's loss was my Department's and our Minister's gain and we have received a very efficient, independent and professional service from Office of Public Works. It was not just a question of the situation between Office of Public Works and CSID. The Minister for Finance had also to decide what was the best way of providing technical support to the Department of Tourism, Sport and Recreation, just to put the entire subject in context.

There was mention earlier of a 30 year lease. What is that about?

Mr. Teahon

The contract specifies that the operator will be in place subject to satisfactory performance for a 30 year period.

Some commentators have said that is a long time. I do not know whether it is long or short in this type of operation.

Mr. Teahon

It would not be unusual to have a 30 year lease for a facility of this kind where you wanted operation into the future.

I have no difficulty with Kerry men. I admire them. Some of my best friends are Kerry men. My brother-in-law is a Kerry man and we have managed to co-exist for several years. I have always admired their prowess both on and off the field.

I am half Kerryman.

I have never known Kerry men to be sensitive. What worries me is that I appear to be chided in some of the remarks made by Mr. Teahon. I know him to be a highly respected public servant with an excellent track record but I would not like anyone, Kerry man or other, to feel they could soften us up before the match starts with a couple of public warnings to the effect that in some way someone associated with the committee had made allegations that were wide of the mark. This committee will do its job at all times, regardless of what it is, within the parameters laid down.

I am concerned about a few matters. Mr. Teahon's loss was the Department's gain but I still do not know exactly why it was not possible for the great minds to meet on what is a laudable project. I have no hesitation in saying the stadium project is laudable and the accommodation of the Special Olympics is a highly laudable project. In the scheme of things, we have to make decisions and choices. Other people made that decision. I do not think it appropriate we should be told by anybody before the committee the merit or otherwise of the project. That is not our function. I will set down a few parameters before we start. For instance, it would be great if we did not have hospital waiting lists and we should aspire to that but we do not do so. It would be great if we did not have housing lists. We should aspire to that too but we do not. In the scheme of things we balance one against the other and do the best we can. We set our priorities. When we are asked to examine something that is contentious for one reason or another, people outside this room ask questions. The Comptroller and Auditor General asked questions about the procedures being pursued. The Office of Public Works in its innermost heart has had some little concerns and did not come to an arrangement in the usual fashion. The Department of Tourism, Sport and Recreation had some concerns and was not happy. If all these people have shown some degree of unease or unrest, it is quite legitimate for this committee to ask whatever questions are necessary, including hard questions.

On the Order of Business this morning the Tánaiste said: "We now know that on four different occasions the Government was not given the information at the time it requested appropriate information and that is my concern". That was not a newspaper but a senior Cabinet Minister. The Tánaiste also said: "The Chairman of CSID has already said he did not inform his board nor did he inform anyone else". I will deal with that later. That is not a wild allegation made by a newspaper editor looking for a good headline. That is the Tánaiste speaking. She also said in reply to another question:

It is no secret that I have had concerns about this matter for quite some time. That is why we had HPR evaluate this project. The HPR report reaches some serious conclusions which we should all take on board.

In reply to questions from Deputies Noonan and Quinn, leaders of their respective parties, the Tánaiste said:

My concerns relate to the fact that appropriate processes and procedures were not in place for the expenditure of huge sums of public money. This was a 30 year contract awarded to a company which had no trading record, which was a requirement. When the Government made decisions in this matter it did not have the full information that the Government was entitled to.

We should set the scene against a different background from the one we have had so far. Those queries raised by the most senior Government Minister after the Taoiseach require to be addressed by all bodies concerned without any hesitation. We need to know the answers sooner rather than later. It is not sufficient to say someone on a radio or television programme made allegations or innuendo. We can only go on what we have before us. What I quoted is taken from the blacks of the transcript of this morning's Order of Business. Perhaps Mr. Teahon might comment on that.

Mr. Teahon

I do not believe it would be appropriate for me to enter into some form of debate with the Tánaiste through the committee. I attempted in what I said here to explain the situation as far as I am concerned. I have no problem in accepting, and I did accept, that if I had explained the position fully to the board, the Department and the panel, many if not all of the concerns that have arisen could have been avoided. In that sense when the Tánaiste said I had not told the Department of the Taoiseach at the time, and through it the Government, I fully accept that. I believe, as I have said today, that we did not contract with Waterworld UK. We contracted with a consortium that includes Rohcon Limited, Dublin Waterworld Ltd. and Waterworld UK. I have equally said today that in my judgment if we had been faced at the outset with a consortium that included Rohcon Ltd. and Dublin Waterworld Ltd. being the company that it is with the shareholders as they are, we would have let them through all the different stages of the competition.

I fully appreciate that the Tánaiste has concerns and that Deputies here will have concerns. What I was trying to do today was respond to those. To a significant extent I would categorise those concerns. You suggested there is a perception that we contracted with a shelf dormant company. I do not believe that is accurate. We did not contract with a shelf dormant company on its own. We contracted with a very significant construction company, Rohcon, and in the same consortium a company that an international expert, Kit Campbell, from Scotland said - he was not saying they were the best in the world - by comparison with the other companies was the best operators available to us. He said it had a very significant reputation in its field. I believe it does. I am not sure if that responds to the concerns that Deputy Durkan expressed at the Tánaiste's words.

It does not. I am still concerned. Page 9 of Mr. Teahon's statement says:

Meanwhile CSID commissioned PricewaterhouseCoopers to carry out a detailed review of the many different companies involved in all of the bidding consortia.

I will come back to the procedure and operation of a site in a project of that size.

These searches were commenced on 22 November 2000 and inquired into 13 different companies altogether. They were carried out in advance of entering a contract with whomsoever would emerge as the preferred bidder. . . . .

That was a good safe procedure. They would check them out beforehand and test their viability and standing.

The issue that was notified to us by PricewaterhouseCoopers on 18 December was that Waterworld UK was a dormant company.

That was said by PricewaterhouseCoopers, not a newspaper, as a result of instructions received to assess the viability of the companies before the board.

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.

The next step was to find out who were the principals in the company, what they were and how they stood up. PricewaterhouseCoopers were concerned about it and brought it to the attention of the principals of CSID.

I did not explicitly bring the word "dormant" to the assessment panel's attention because I regarded the issue that I would have to deal with was that of financial standing. The panel's brief was to determine the quality of the bids rather than their financial standing. I did, however, tell the panel - and I believe this is what was important - that there was a funding issue with this bid which would have to be dealt with.

It would appear that the Tánaiste's concern is she was not in possession of all the information that would be required of a Minister. Many Members will be conversant with the brief that is normally sent to Cabinet. A brief is sent to Cabinet by the sponsoring Minister or Ministers, as the case may be, and it is supposed to contain all the information setting out the pros and cons and carries with it the remarks of other Departments. That is how the system works. I have had the privilege of sitting at such meetings a few times.

Mr. Teahon said: "I did not explicitly bring the word "dormant" to the assessment panel's attention", yet the word "dormant" was used presumably by PricewaterhouseCoopers in its report. Why was it not brought to the attention of the panel? Surely it was a major item which could set the project at nought were something to go wrong. Mr. Teahon qualified the procedure by saying that was a financing issue that would have to be dealt with. I appreciate the need for speed and efficiency but this is a big project. With any big project there is a requirement to ensure that as well as speed there is consistency and safety. Is that not correct?

Mr. Teahon


How were those two parameters kept in sight at that stage?

Mr. Teahon

No. That is why on 19 December we sent a letter to the Waterworld UK consortium saying how we believed they should deal with the issue. There was no delay in addressing the consequence of dormancy.

Suppose they could not deal with the issue. You had no way of knowing they could not deal with it at that time.

Mr. Teahon

Correct, and we said to them that we were not confirming them as the preferred bidder unless they satisfied us of this. We also wrote on the same day to the other two bidders and asked them to keep their bids open. That was a clear indication that there was a possibility that the person who may be becoming the preferred bidder may not be able to deliver. If, in effect what had happened was we went through the process and the consortium - I come back to the point that it is the consortium that has to deliver on financial standing in the end - had not been able to deliver we would not have confirmed it as the preferred bidder.

Did you consider, in view of your long experience as a senior civil servant, that in the proposals sent to Cabinet for Government approval at that critical stage all queries had been dealt with to your satisfaction?

Mr. Teahon

I was satisfied that I had put in place a process that would lead to those being dealt with. I am absolutely satisfied. Looking back on it, I remain satisfied of that. Other than what I have said, in the event that I could replay my life, I would tell fully the panel, the board and the Department of the Taoiseach all that I was putting in place, I would not change one other single thing about what I did.

As an experienced senior civil servant I have no doubt you took into account the PricewaterhouseCoopers' reservations and comments. Given the magnitude of the project did you contact the Department of the Taoiseach and alert it to the fact that there was a difficulty that could present at a later stage and that it has been identified by PricewaterhouseCoopers? Did you look for instructions?

Mr. Teahon


You did not do any of those things?

Mr. Teahon

I did not do any of those things. My statement says that. I made it clear that I did not tell the Department of the Taoiseach what I was doing. That is on page 12 of the statement.

Are you aware of the seriousness of sending a submission to Cabinet, having regard to the financial implications of a project of this size, in the knowledge that the necessary requirements had not been complied with and you were presuming to hope that at some stage they would be complied with? The project having gone to Cabinet for Government approval, the single most important step in any such project, did you not regard it as a serious matter that, given the information you had at your disposal based on the PricewaterhouseCoopers' report, you did not think it worthwhile to telephone the Department of the Taoiseach and say there is a problem, we are informed we are dealing with a dormant company and will have to defer or take certain action. Did you not do that?

Mr. Teahon

No. I put in place a process as in the letter. In the event that the consortium in question was not able to satisfy the requirements I was satisfied I could have gone to the next bidder.

Did you anticipate the embarrassment of a Minister bringing such a project before Cabinet in the event of anything going wrong?

Mr. Teahon


Did you anticipate that the Minister would be embarrassed if it should happen that everything did not stand up because the project was a multi-million pound one? As an experienced senior civil servant you would not have considered it embarrassing in the event the project blew up, given the information you had at your disposal and that the Government was about to give its approval and there could be a liability for public money at some later stage?

Mr. Teahon

The issue of liability for public money did not arise then or now. What arose, as I said in my statement and I regret the embarrassment as well, was I did not explain the position fully to the Department of the Taoiseach.

Did you explain the position at all to the Department of the Taoiseach in the wake of the PricewaterhouseCoopers' report?

Mr. Teahon

To the best of my knowledge, no.

So you knowingly withheld information you had on the project from the Department of the Taoiseach. I am surprised at that.

Mr. Teahon

No, I am not saying that. In fairness I do not recollect what I did or did not say. For example, when this issue first arose in The Irish Times I did not recollect what I had said at the assessment panel. I became aware of what I said at the assessment panel from a note that PricewaterhouseCoopers brought to my attention. So I was not aware. When this issue broke, I was, the same as other people, concerned about it, more immediately because I was the executive chairperson. I did not recollect what I had said at the assessment panel.

Which Minister brought the project to Cabinet?

Mr. Teahon

The Taoiseach.

The Taoiseach was handed the package to bring to Cabinet for approval. He was the promoting Minister at Cabinet. Can you explain, as a good and reliable senior public and civil servant, how you withheld information from the most senior Cabinet Minister, the most senior Member of the Executive, given the importance of the project to the country as stated by you and as the Taoiseach has often indicated? Are you saying you did not tell him there was a probable financial difficulty with one of the companies concerned and let him walk into the Cabinet meeting oblivious of the true position?

Mr. Teahon

I am saying very clearly that I did not knowingly withhold information. I am saying clearly here today that I did not explain the position fully and I regret not having done so.

I find it very difficult to understand. There are a number of senior civil servants in this chamber at present all of whom know the consequences of failing to bring to the attention of their Minister, the Taoiseach or Tánaiste, reservations that they, their Department or any other agency might have. There must have been some reason for this. Did you believe PricewaterhouseCoopers' report was not sufficiently well based? Did you discuss the report with the Office of Pubic Works or the Department of Tourism, Sport and Recreation prior to going to Cabinet, two offices that would have an ongoing interest in the subject matter?

Mr. Teahon

As a matter of fact, Sean Benton who is here today was a member of the assessment panel and heard what I said. I am not saying he had any responsibility but you asked me a question.

Mr. Murphy

I am sorry to interrupt, Chairman, but I must intervene here. The information was withheld from us too. It is a fact to say that Sean Benton was on the assessment panel. It does not follow that he had the information. He did not have the information. I object to the insinuation that is being made.

He could not have because he said already that the assessment panel was not told. He apologised for not giving the assessment panel the information.

Chairman, let me follow on with my questions. I thank Deputy Lenihan for his assistance and will call upon him in due course. I mentioned two Departments and asked to what extent you conferred with them as they might have a possible involvement, responsibility or custody of a similar project either at that or some other stage down the road.

To what extent did you alert either Department about the existence of difficulties as pointed out by PricewaterhouseCoopers?

Mr. Teahon

I accept what Barry Murphy has said. I am not trying to say Sean Benton had the PricewaterhouseCoopers information. He did not.

He did not?

Mr. Teahon

He did not. There was another document that was produced by Kit Campbell who made a presentation at the meeting. Sean Benton did not have that either. I am making that very clear.

How many documents were there that could have been useful and material to the making of a decision in support or otherwise by three Departments, the Department of the Taoiseach, the Department of Finance and the Department of Tourism, Sport and Recreation?

Mr. Teahon

I believe, Deputy, that you have to make a distinction between the use that would have been made of documents and people being aware of them.

Hold on, now.

Mr. Teahon

Please, if you ask a question you should allow me to finish the reply. I believe that the action that was put in place on foot of the information in these documents was the correct action.

Nothing, in other words. Is that what you are saying?

Mr. Teahon

No, not nothing.

I hate to labour this but it is our job to get answers. If the information is presented to us in a particular fashion we do our best but if we cannot get answers that are reasonably plausible we must ask more questions. You are aware of the reservations expressed by PricewaterhouseCoopers. You were aware that the Taoiseach, the most senior Government executive, was going to Cabinet with a proposal which required approval and you were aware there were two other Departments that could perhaps have an involvement and you said to them, "I am sorry I did not indicate there was a financial problem". There was another report produced by Mr. Campbell. That information was not available to him and his information was not available to the other Departments

Mr. Teahon

He made a presentation to the assessment panel.

He did. Chairman, I do not believe we will finish this tonight. In a major project such as this - you mentioned, Mr. Teahon, that it was a consortium made up of a number of individual companies that would have to carry it - there are companies that specialise in co-ordinating activities on a project, on a building site, through the whole financial evaluation, the management of the site and all aspects of the work from start to finish. They claim to be experts in that area. They also claim to be able to reduce the overall costs by ensuring people do not cut corners or endanger the project and that good value for money is given. Was any consideration given to the employment of such a concern on a project of this size?

Mr. Teahon

Yes, the company we had employed as project managers, Davis Langdon/PKS, is providing project management to CSID in relation to the contract being carried out by the consortium.

In respect of all the areas to which I have referred?

Mr. Teahon


They have expertise in all those areas.

I call on the Comptroller and Auditor General before we conclude this session.

Mr. Purcell

I do not want to make any specific comment on the issue under discussion, though I cannot but say I was not in a tizzy about that matter. My concerns were those I outlined at the outset. On the basis of the earlier discussion there seems to be general agreement that the corporate governance framework for the company needs to be strengthened or developed. That was signalled as far back as the middle of last year when the heads of a Bill to set up the company on a statutory footing were put forward and considered.

I made an adverse comment about the nature of the executive services contract. Through my office, I expressed those reservations as far back as last May. I am happy to hear the executive chairman say these matters are being looked at. I was informed last June that they were being revised. I note that they have not been revised yet but I am gratified to hear that they are being revised in two respects, on the percentage of the total development cost and that there is some quid pro quo for the scaling down of the activity of executive services in this period of limbo, though I will try to avoid religious metaphors.

The last point is one worth revisiting. As regards the memo that went to Government on 11 July 2000 setting out the basis for a maximum cost of £30 million to the Exchequer for the provision of this very desirable facility, I spoke earlier about the reliability of information on which Government can make decisions. In this case the information given to Government on which to base this decision envisaged an income stream from the operation of the facility of a lower range of £472,000 a year to an upper range of £2,129,000 a year. I think I heard the executive chairman mention a realisable figure, the current best realisable figure, of £100,000 a year. I said on many occasions in this forum that when a Government makes a decision it should be in possession of the best possible information in order to make a judgment. We are talking about priorities in spending and so on. That is worth considering, with hindsight of course. We are not talking about huge increases in inflation as is often the case when talking about an increase in cost to the Exchequer. Here we are talking about an estimate produced by experts which was so far wide of the mark that it means we are talking about a capital contribution of probably £50 million as against a maximum of £30 million. When the dust settles on all this maybe we can revisit that as a general point and one that is applicable not only in the context of the aquatic and leisure centre but across the board.

Mr. Teahon

I wish to make a comment and will return to this at the next meeting.

Mr. Teahon

One of the reasons - I will produce the figures at the next meeting if you wish me to come back - for the difference between the £30 million and £48.4 million is there is provision for a very significant amount by way of public policy requirement of what, in effect, are free hours in terms of the operator. I cannot remember the figure at present but it is very significant. It is millions of pounds. You have to make the judgment and the simplest way is for me to bring back the different figures and say they operate a surplus of £100,000, these are the number of hours the operator has to provide free by comparison with the PricewaterhouseCoopers assessment which was that the operator would charge for all the hours. I do not think it bridges the gap between £100,000 and £400,000, but it goes some way toward doing so.

In the note to Cabinet there would have been observations from other Departments. There should have been observations from the Office of Public Works but there were not because it had no involvement as it could not reach an agreement on the operation of the project.

Mr. Teahon

Sorry, Deputy. We are talking about two different situations.

I know we are but I am coming to——

Mr. Teahon

The Office of Public Works was involved at the time the Comptroller and Auditor General is speaking about. This was the initial decision.

We will come back to that again.

We have been discussing this for more than four hours. I thank the Secretaries General of the Departments, Mr. Teahon and their staff. I understand the Attorney General, as Margaret Hayes has stated, will be finalising his report and hopes to have it by lunchtime tomorrow. It will then be delivered to the Government secretariat. We are depending on the Government secretariat to make the report available to members of the committee. We will recommence this session at 4 p.m. tomorrow. Hopefully we will have the report of the Attorney General at that stage and will be able to finalise this issue. Thank you.

The witnesses withdrew.

The meeting adjourned at 8.12 p.m. until 4 p.m. on Friday, 22 March 2002.