(Secretary General, Department of Health and Children) and Professor B. Drumm (Chief Executive Officer, Health Service Executive) called and examined.
Value for Money Report No. 51 — Development of Human Resources Management Systems for the Health Service, PPARS (Resumed).
Mr. M. Scanlan
Today's business involves resuming our consideration of value for money report No. 51, development of human resources management systems for the health service, PPARS. Later we will examine the 2004 annual report of the Comptroller and Auditor General and Appropriations Accounts, Vote 33 — Department of Health and Children.
Witnesses should be aware that they do not enjoy absolute privilege in their evidence before this committee. The attention of members and witnesses 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 identified in the course of the committee's proceedings. These rights include the right to give evidence; the right to produce or send documents to the committee; the right to appear before the committee, either in person or through a representative; the right to make a written and oral submission, the right to request the committee to direct the attendance of witnesses and the production of documents and the right to cross-examine witnesses. For the most part, these rights may be exercised only with the consent of the committee. Persons invited before the committee are made aware of these rights and any persons identified during the course of proceedings who are not present may have to be made aware of them and provided with the transcript of the relevant part of the proceedings, if the committee considers it appropriate in the interests of justice.
Notwithstanding this provision in legislation, I remind members of the long-standing parliamentary practice to the effect that they 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 also reminded of the provision within Standing Order 156 that the committee shall 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 policy or policies.
I propose that the committee resume its examination of the report on PPARS before beginning its examination of Vote 33. I welcome Mr. Scanlan and invite him to introduce his officials.
Mr. Michael Scanlan
I am accompanied by Mr. Dermot Magan, principal officer in the finance unit, and Dr. Richard Nolan, principal officer in the ICT unit.
I welcome Professor Drumm and invite him to introduce his officials.
Professor Brendan Drumm
I am accompanied by Mr. Sean Hurley, director of IT at the HSE, and Mr. John Magner from the HR department, previously acting director of HR in the HSE.
I welcome Mr. Kelly and invite him to introduce himself to the committee.
Mr. Michael Kelly
I am the former Secretary General of the Department of Health and Children.
I welcome the representatives from the Department of Finance and invite them to introduce themselves.
Mr. Joe Mooney
I am from the public expenditure division. I am accompanied by my colleagues, Mr. Dave Ring from CMOD and Mr. Alan Zambra from the OMT division.
Mr. Purcell will reintroduce VFM report No. 51.
Mr. John Purcell
I will not go into the whole history of the PPARS project because it is fairly well established at this stage. When the committee last considered the report five weeks ago, there were two main areas where issues requiring resolution had not been finalised. The first related to the exercise being carried out by the HSE to determine whether to continue with the intended implementation of PPARS or to pursue a different course in order to achieve its objectives in payroll and human resources management. I understand that work is not yet complete.
The second issue relates to circumstances surrounding the engagement of technical personnel through a number of agencies to carry out configuration work on this system in the period prior to the hiring of Deloitte as project support adviser. We found there was a lack of clarity around this issue concerning compliance with public procurement rules and cost control. A review has been undertaken by internal audit in the HSE and I understand its final report is expected soon.
Aside from the important task of examining matters relating to accountability for the way the project has been handled up to now, looking forward, the key question appears to be how to progress in a way that will deliver a workable system that will yield the expected benefits while protecting the taxpayer from any further unwarranted financial exposure. Perhaps I could say with cautious optimism that the omens are hopeful for the future. We heard on the last occasion about the introduction of a new peer review process which is loosely based on the so-called gateway procedure in the United Kingdom for governing the way major IT projects should be managed. This, coupled with the build-up of a central IT resource in the HSE and a realistic strategy for future IT development, should help to reduce the risk of failure or further excessive costs.
There will always be risks. The real challenge is to manage those risks, which is easier said than done when implementing major change in large organisations such as the HSE which is still trying to cope with the legacy of fragmentation in the health sector.
Mr. Scanlan
At the meeting of 27 October 2005 the committee decided to dispose of chapter 14.1, National Treatment Purchase Fund, and to note but not close Vote 33. At its meeting of 15 December the committee considered value for money report No. 51 and decided to revisit it today, 19 January, together with Vote 33. I made a detailed opening statement at the two previous meetings. The views of the Department in regard to PPARS are set out in report No. 51. In the circumstances I will confine my observations at this point to a few of the main issues from the Department's perspective in regard to PPARS.
Looking back to the very beginning of the project I have considered again, in the light of all that has been said on the subject, whether the Department was correct in approving this project for funding in the context of an organisational structure comprising a range of large statutory independent agencies where the chain of command for a national project had to operate on the basis of consensus. I continue to believe it was the correct decision at the time. I am aware that even then the estimated cost was very significant relative to the overall funding available at that time for ICT investment. However, I am also particularly conscious — I think I said this the last time I was here — of the major deficit in the quality, timeliness and range of information available for managing human resources within the health service at all levels — at local level, at regional level and at national level. An appropriate opportunity to address this deficit was provided by the proposal for funding PPARS which was made to the Department by the health boards' CEO group.
Moving forward to the initiation of phase 2 of the project, it is reasonable to consider whether the Department should have continued to fund the project at that stage given the scale of the revised cost estimates and the emergence of variances as a significant issue. At this point PPARS had clearly become a much bigger project. It had also become a major HR project rather than a narrow ICT project. At the same time the overall level of expenditure on human resources in the health services made the need for information to manage it even more pressing. In addition, the Health Boards Executive was coming into operation to facilitate conjoined working among the health boards and PPARS was to become one of the projects within its programme of work. The PPARS project team had also obtained independent external advice, the Hay report, which was generally positive and supportive.
Prior to the establishment of the HSE and implementation and overall project management of a system such as PPARS was a matter for the health boards themselves working conjointly. However, I agree fully with the point made by the Chairman at the last hearing that the responsibility of the Department does not stop at simply funding projects such as this. I believe it also has a responsibility to ensure that the relevant agencies have structures and systems in place to support cost-effective delivery of individual projects, be it PPARS or any other project. In the case of PPARS, as my colleagues explained to the committee at the last meeting, the Department participated on an ongoing basis in the project governance structure, including the sponsorship group where three assistant secretaries, one each from the finance unit, personnel unit and IT unit, represented the Department. The Department also had representation from these three areas at the next lower level, the national project board. The progress reports received by the Department through these fora and in discussions with HeBE when annual ICT allocations for PPARS and other projects were agreed were generally positive.
The Department's overall focus was on the need to minimise costs and complete implementation as effectively and speedily as possible. As implementation progressed, we became increasingly concerned about the escalating consultancy costs and this led to the commissioning of the Gartner report. As I mentioned previously, this issue was still being pursued by us with the lead CEO for PPARS when funding responsibility moved across to the HSE.
Another issue raised is whether the implementation arrangements should have given more attention to ensuring that the initial sites at St. James's Hospital and the North Western Health Board were working properly before moving on to further sites. It has been suggested that what happened in this regard was influenced to some degree by a perceived pressure from the Department to speed up national implementation. It is true that the Department was very anxious to see greater progress from the very significant funding provided, but it took as a given in project management terms that a transfer to a live operation would never be proceeded with unless the agency concerned was completely satisfied as to local testing, implementation, functionality and support arrangements.
As the committee is aware, the system is working in a number of agencies and is not, therefore, a failure in that sense. As the Comptroller and Auditor General said, we have to await the report of the review group which has been set up by the HSE to see whether there is a better, less costly way forward to achieve what I continue to believe is required to remedy the serious information deficit in this area. The Department has accepted an invitation to participate in this review.
I reiterate that I agree with the recommendations in the report of the Comptroller and Auditor General. These, together with the Department of Finance arrangements for managing ICT expenditure by the HSE, which we discussed here on the last day, and the new arrangements, which the Comptroller and Auditor General has mentioned, decided upon by Government in regard to pay review and consultancy engagements will, I hope and expect, provide a much better framework for taking forward PPARS in whatever way is eventually decided and for other health service change management and ICT projects. I thank the committee for its attention.
May we publish the statement?
Mr. Scanlan
Yes.
I invite Professor Drumm to make some opening remarks.
Professor Drumm
We decided in our original statement that we would not add a further statement to it except to confirm what the Comptroller and Auditor General has stated that we have an ongoing review of where PPARS goes or does not go from here. The organisation, through Mr. Seán Hurley, has a comprehensive review of this. I stress it is not a review which the Comptroller and Auditor General did and is not a repeat of the Comptroller and Auditor General's work of what happened in the past, it is to ascertain where to go from here. It is planned to have that report for our board meeting in the first week of February.
There was much controversy leading up to the last meeting in regard to specifically Blackmore Group Assets Limited, as a provider of consultants, and as a consultancy to the whole PPARS project. That is being reviewed by the internal auditor, Mr. Michael Flynn. I am informed that he hopes to be in a position to report to the internal audit committee of the HSE next Thursday.
When will he be in a position to inform the committee of his findings?
Professor Drumm
His findings should essentially be brought from the internal audit committee to the board at its meeting in the first week of February and should then be available to the committee.
I invite Mr. Kelly to make his opening statement.
Mr. Kelly
I welcome the opportunity to address the committee on the Department's role in the PPARS project during my period of office as Secretary General. In doing so I want to place this project in its proper context and also, I hope, bring a sense of proportion to shortcomings identified in the delivery of the project by the then health boards and health boards executive.
Before getting into the detail of the PPARS project I want to make it clear what the role of the Department of Health and Children was and also what role it did not have. This matter was analysed in some depth in the Prospectus and Brennan reports on the basis of which the Government made its decisions in June 2003 on the reform of structures for the health system. Both reports made clear that under the statutory provisions then in place, the Department's role was about policy making, funding and regulating and that responsibility for delivery was located at regional and local level. As part of its funding responsibility the Department also had to take a view about the performance of health boards but in doing so it would have relied primarily on the accuracy and completeness of reports received from the relevant chief executive. He or she was an accountable person in his or her own right under the Health Acts and the Comptroller and Auditor General Act 1993.
In regard to ICT developments, this split was also very clear and from the early 1990s the external systems unit in the Department had been slimmed down to a smaller policy unit involving a handful of staff. At the same time health boards and other agencies were facilitated in building their own ICT capability and this clear split in authority-responsibility and accountability was brought into sharper relief with the establishment of the health boards executive in 2002. I will return to its role later.
The context of the report by the Comptroller and Auditor General is value for money in regard to this specific project. The whole context of the PPARS project was about delivering stronger effectiveness, value for money and accountability for the very large pay bill of the health service, currently in the order of €6.5 billion to €7 billion per annum. It is necessary to take account of the benefits flowing from the system and to take a view about potential benefits in the future in order to make a valid judgment on the value for money offered by this project.
The most extensive piece of work done on value for money in the overall health system in recent years was the VFM audit commissioned by the Department and published in 2001. In the course of a long and detailed report it identified many indicators of relative efficiency in the management and operation of the health service but it also highlighted a number of factors as militating against the achievement of value for money. Its most revealing conclusion was that at that point it was difficult to draw a firm conclusion as to whether good value for money was being achieved because sufficiently reliable hard data on which a definitive judgment would need to be based was simply not available. The report pointed to increased capital investment in infrastructure generally but specifically in ICT and management systems as key steps in moving forward on value for money in the health system.
During the same period the health strategy, Quality and Fairness — A Health System for You, was prepared and published. It again reflected an in-depth analysis of the aims and achievements, operation and performance of the health system in all its dimensions and was backed up by detailed examination of each aspect. It was also based on an unprecedented consultation process, leading to strong consensus on the policy actions and measures to address the needs of a patient-client centred health service which was quality assured, performance focused and providing value for money. Two of the six main areas of action identified were a powering up of human resource management and of information management. The actions required under both headings were outlined in greater detail in two follow-up blueprint documents, namely, the action plan for people management in 2002 and the national health information strategy in 2004.
Consistently through all of this process of review, analysis and strategic planning the need to upgrade radically the capability within the health system to better manage its primary resource — those who work in it — was a constant and recurring theme. This was the policy context and background for any policy decisions about the PPARS project over the period 2001 to 2004. That is the period and context to which my remarks relate.
The policy decision to support this project was taken in principle at a MAC CEO meeting in February 1997 and the letter of approval was issued by my predecessor as Secretary General in February 1998. While I had no part in that decision — I was at that point assigned to the Department of Justice, Equality and Law Reform — I later could see the justification for it, based on the desire to support the group of health boards then proposing the system in finally getting to grips with an aspect of the management of the health system that had clearly been problematic and dysfunctional for a long time and had been largely ignored by previous generations of those responsible for the health system. It is also clear that nobody was suggesting that at that stage the order of investment likely to be required was capable of firm estimation. The Department would also have seen the joint approach being proposed as a major bonus and as marking a very constructive change in the behaviour of health boards towards joined-up thinking and action in the area of systems development.
My first substantive input was the decision to continue to fund the project after the initial period and following on the preparation of the investment appraisal and quality review by Hay Management early in 2002. At that point it was clear that the initial projections of effort involved, likely costs and likely timetable, had been overly ambitious and highly optimistic. On all accounts the earlier assumptions on which the health boards had been working and making their proposals to the Department were proved to be inadequately based. However, by early 2002, on the back of the work already done and the various reviews conducted all the advice available to me suggested there was an adequate basis on which to plan implementation, including projected costs and timescale.
The need for improved human resource management had been emphatically restated in the health strategy adopted by the Government. It was clear that resource management systems generally would be a strong feature of the national health information strategy then in preparation. The apparently random approach by health boards and other health agencies to managing and reporting on employment levels continued apace and the case for PPARS, in terms of need, had become stronger in the Department's view by 2002. My own thinking about the project was that it positively needed to be undertaken and that it had to be looked at as a long-term investment which would require a large investment up-front in order to produce benefits to health service users, managers and staff over many years ahead. This view was also put forward clearly in the Hay review.
The Hay review concluded that the project was a complex business transformation rather than just an ICT programme. This meant that the change management aspects would require serious attention.
There have been considerable benefits from the system to date around approved reliability, speed, efficiency, control and some standardisation, but the original time and cost estimates were too ambitious and it pointed to the significant risk and potential gains involved and the need for determined and sustained leadership. The Hay review recommended, inter alia, standardisation of data and processes where possible and revised governance structures, including a national project board and a high level sponsorship group. On the costing side, it estimated costs at €92.5 million for 2002-05, excluding some own costs by agencies, and it also concluded that given the business needs identified, options other than proceeding with the project would involve costs which were comparable or more expensive overall.
In the current exercise we are looking at a system which is partly implemented and attempting to reach a judgment about value for money in the context of benefits already being realised. While the report makes it clear, at paragraphs 7.4, 7.5 and 7.6, that there are considerable benefits being realised, any fair judgment needs to ask also about the potential benefits stretching out into the future. To put this in context, the total spend on this project to end 2004 involved an average spend of €14 million per annum over a seven-year period. While this is a very considerable sum, it is the equivalent nonetheless of about 0.25% per annum of the health pay bill in 2004 terms.
Overall, the level of investment in information systems remains relatively low. For example, the OECD norm for health is 2% of non-capital spend, equivalent to over €200 million per annum in Irish terms as against the actual investment of €65 million in 2004. I understand that the international benchmark for financial services is about 6%, suggesting that a 2% norm for health would not be excessive.
Looking forward, on the assumption that roll-out is seen through to completion and, conservatively, that the system produces benefits even at a modest level over a period of ten years ahead, I certainly expect it to pay for itself. Furthermore, with the integrated management dividend expected to flow from the establishment of the Health Service Executive, I expect this investment to produce a return for the taxpayer by supporting better employment practices and elimination of poor practice within a unified health system. Exploiting this potential, however, will require a more assertive approach by health employers to rooting out inefficient practices and phasing out cost increasing variances in the system over time. The single incidence of staff rostering in the mid-west region highlighted in media reports last week involving, I understand, a potential gain of €500,000 per annum, if fully exploited, would lend weight to the view that there are significant gains to be made but that they need to be worked for and they will take time.
Regarding the decision to continue the project in 2002, it is also significant that the organisational landscape had changed in two fundamental respects in 2002 with the establishment of the Eastern Regional Health Authority and, more particularly, the Health Boards Executive under the Eastern Regional Health Authority Act 1999. The Health Boards Executive, HeBE, was put in place in February 2002 to enable the health boards, the ERHA and non-statutory service providers to work together on an agenda to develop and modernise the health service. The members of the executive were the chief executive officers of health boards and the ERHA who constituted the board of the executive. Two nominated CEOs of the Dublin academic teaching hospitals and the voluntary hospital sector also attended board meetings.
From its establishment, the HeBE became a key actor in leading and facilitating joint action by health boards and others in a number of areas, including, explicitly, ICT developments across the health system. The HeBE annual report for 2003, for example, makes clear its role in relation to ICT. This new capability and commitment to joint action, with a strong statutory basis, would also have been a significant factor in the Department's decision to continue supporting the project, quite apart from its view that the project itself was worthwhile and viable. The HeBE was seen by the Department as providing additional assurance and accountability as well as a new capability in project implementation across the health system. It would not have been an unreasonable expectation on the part of the Department that with this new structure in place, the necessary levels of commitment and competence would have been brought to the task of seeing through a project for which the health boards were pushing.
The year 2002 also saw the adoption of a policy by the Department and the Health Boards Executive that all future significant investment in ICT in the health sector should take place in the context of developing enterprise-wide solutions against a background of piecemeal development and fragmentation, with agencies each heading off in their own direction on systems developments. This was a deliberate strategic move towards standardised processes and systems across the health sector which would enable much better communication and coherence and support both local management needs and whole-system reporting, analysis and performance benchmarking.
One of the major criticisms of the health system at this time was that we had ten different health systems, one in each board area, with different ways of doing things. That had to change as part of the modernisation and reform programme. Again, this policy was seen as supporting not just ICT developments but a business transformation process which was as much about developing a stronger culture of devolved decision making, accountability and performance management as it was about ICT per se. This was a policy position which I fully supported and I understand was consistent with the business approach being taken by other large-scale enterprises faced with similar challenges. The decision to take PPARS forward in an enterprise-wide solution needs to be considered in this wider policy context. Based on all the advice available to me, I believed it was the right thing to do then in the context of its long-term strategic and value for money impact. The Government’s subsequent decision to establish a unified management structure for the entire health system later added further justification for this policy.
In agreeing to continue to fund the project in 2002, the Department also took on board, in so far as it was in a position to, the key recommendations made in the Hay review relating to stronger project governance and management of costs. These and other recommendations were also addressed to those responsible for delivering on implementation — the health boards and the Health Boards Executive. Stronger governance arrangements were put in place for the resumed project including a high level sponsorship group, a national project board and a national project team. Each level in this governance structure had a defined role and responsibilities.
The Department took its participation very seriously and three members of the top team at assistant secretary and director level were appointed to the sponsorship group. Three officers at principal level, all very experienced, were appointed to the national project board. The Department's representatives, or their alternates, participated actively in these groups and, where they had concerns, made them known. I would have reviewed progress on their work programmes with each of my direct reports at top team MAC level on a regular basis. My recollection is that the read on the PPARS project was positive overall until mid-2004. By that I mean that any concerns were being addressed within the project structures and progress overall seemed largely satisfactory. By mid-2004, however, my understanding is that there was a shared concern by the Department and HeBE about slippage in projected timescales and the domino effect this was having on the implementation schedule overall. The scale of slippage at that stage seemed manageable provided adjustments were made to methodology, sequencing, etc. I understand this was followed through by the national team.
There was also a concern in the Department about the spend on consultancy costs overall. My understanding is that it was these concerns which led to the commissioning of the Gartner report and, ultimately, to the letter of 16 November 2004 from the Department to the chair of the national project board expressing continuing concern about costs and pressing for a response for consideration by the sponsorship group. Shortly after this, responsibility transferred from the Department to the Health Service Executive at the start of 2005 and, following my departure from the Department, I have no knowledge of how things developed over the course of 2005 other than what I have read in this report and media reports.
I believe all of the evidence points to the Department having taken its responsibility as policymaker and funder very seriously. The high level of representation on the various governance groups is one indication of that and the ongoing, clearly expressed concern of the Department in relation to the management of costs by the health boards as evidenced by the interventions leading to external reviews, for example, are a further illustration.
It is also clear that there was continuing pressure from the Department with regard to timescales. While I had no direct involvement in any of these exchanges — they were handled at the appropriate levels in the Department — I believe the officers concerned discharged their roles in a rational and responsible way and, overall, the actions of the Department indicated its ongoing concern to ensure the then health boards and HeBE delivered the project as speedily and efficiently as possible.
Before concluding I would like to comment briefly on a number of organisational issues relating to this project. The report by the Comptroller and Auditor General questions whether the governing structure in place was sufficiently robust for a project of this nature. That feature of the project was considered carefully by the Department in 2002. In examining it, however, it is important to appreciate that the governing structure did not exist in isolation from the health boards executive. The lead CEO for this project — the CEO in the north west — had immediate access to each of the other health board CEOs and co-directors of the health boards executive. It is, therefore, difficult to accept an argument that the necessary authority to progress matters in individual health boards was inhibited in some way. Quite simply, it was the CEOs who pushed for this project. They had collective ownership of it through the health boards executive and they had a responsibility in each of their boards to activate all the necessary support around implementation.
It is true, however, that the organisational context was a challenging one, requiring a group of agencies to work together on an unprecedented scale. The establishment of a single Health Service Executive should have addressed any remaining difficulties in terms of command structure but I am not in a position to comment on how well that has worked in practice.
It is also the case that this project was being implemented during a period that was far from steady in the health system. During 2004, the administrative cadre in the health system was undergoing a period of major turbulence as a result of the restructuring then under way. People at senior levels, in particular, were clearly unsettled but were expected to continue to perform their primary roles in their boards, support a range of system wide initiatives such as the PPARS project and contribute to the transition to the new structures. It was also a period of high mobility, with people moving to new posts and individuals being appointed on an acting basis to replace them. The latter part of 2004 was marked by a serious industrial action and the environment generally became much more difficult. It is reasonable to expect that, apart from other considerations, some slippage in performance would have been inevitable in these circumstances.
Every effort was made by the Department and, I believe, by the outgoing CEOs and senior management of health boards to ensure the transition to the HSE would be carefully managed and controlled by maintaining momentum on service delivery, in the first instance, and on other developments to the greatest extent possible. Again, an objective evaluation of performance would have to factor in the atypical organisational environment that prevailed over this period. However, I acknowledge the value of review and evaluation and the fact that there are lessons to be learnt from every project. I have no way of knowing what the HSE's plans are for the future of this project but it will be important that all lessons are taken on board.
The policy decision to invest in the PPARS project, given its potential benefits, was more than justified. Key assumptions underpinning that decision were that the project would be managed competently and that benefits realisation would be pursued vigorously. The policy decision to undertake significant systems developments on an enterprise wide basis was appropriate. The evidence points to the Department having taken its responsibility towards this project very seriously.
Any objective analysis of its value for money must take account of the wider policy context in which it was undertaken, the extent of the benefits already realised and some assessment of future potential benefits as well as an examination of costs. I support the view that the lessons from this project, like others, should be identified and taken on board.
May we publish Mr. Kelly's statement?
Mr. Kelly
Yes.
The committee got the impression on the last occasion from Mr. Scanlan and the Department of Finance that at the time the letter of approval was issued in 1998 by Mr. Kelly's predecessor and when he reviewed the position in 2002 and authorised the project to proceed, the Minister of the day was not informed and the Department of Finance was not in the loop to give specific authorisation to the expenditure. Is that the position as he recalls it?
Mr. Kelly
With regard to the original decision in 1998, that was covered on the previous occasion and I had no involvement with it. My recollection is that this issue was raised by health board CEOs at a time when a capital programme for the future had already been finalised. Nonetheless, in view of the value it could contribute, there was an anxiety at the time on the part of the Department to facilitate it. My understanding is that the decision was taken without reference to the Department of Finance. I am not clear about what type of ministerial contact there might have been at that time.
With regard to the decision in 2002, on the basis of the previous decision already having been made, experience to date with the project and the work done by Hay Management in appraising the project, the decision was taken within the Department. Again — this would have been within normal procedures — that would not have involved detailed discussion with the Minister. With respect to the expenditures involved within the capital programme, each increment of expenditure as part of the capital spend plan each year would have been cleared by the Minister.
What about the Department of Finance?
Mr. Kelly
My understanding is that there would have been contact with the Department of Finance, not necessarily at the time the decision was made but certainly in terms of some of the implications of the project as part of the capital programme. That would have occurred in 2003. In addition, there are documents, relating to contact with regard to support staffing and so forth, which would have given some indication of the scale of the project. It is clear, from the way the Departments of Health and Children and Finance operated with regard to ICT, that the Department of Health and Children had delegated authority for the content of the ICT programme. The overall scale of it was cleared as part of the Estimates process and where there were specific issues that needed to be cleared with the Department of Finance, they were cleared.
Does Mr. Mooney agree?
Mr. Mooney
Yes. As I said on the previous occasion, we had no specific role that we could trace in our papers with regard to the approval of the original project, nor was it specifically raised in Estimates discussions subsequently. The capital programme was dealt with at an aggregate level, as Mr. Kelly said. In other words, a sum of money was set aside for information technology provision but we did not get into the make-up of the specific projects underlying that aggregate sum. The question of the Department of Finance being involved with the PPARS project on an ongoing basis did not arise.
We were aware of the project and, like everyone else at the time, supported the concept behind it. Mr. Kelly and Mr. Scanlan have made it clear that the concept was always accepted as necessary and good. It continues to be a valid concept. Whether we do it through PPARS being extended or some other way, there is a need to obtain control of HR and payroll management and information. A centralised system is necessary to do so and we continue to support that. The issue is not the object or the validity of the project but the way it was handled and implemented by the project team, a matter about which Mr. Kelly and Mr. Scanlan have spoken.
Mr. Kelly stated that in 2002 the initiative came from within the Department of Health and Children, that the Minister would have agreed the capital expenditure and that the Department of Finance would have been aware of it in general terms but would not have authorised specific elements of the expenditure. Is that correct?
Mr. Kelly
Yes. The decision in the Department — it came to my level — was based on its analysis of all the facts presented to it at the time and was to the effect that we should proceed with this project. With regard to the authority to spend funding on it, that arose in the capital programme in each of the subsequent years and in the context of, first, briefing the Minister on the capital programme and then the decision that was made on the capital programme. ICT would have been dealt with in that context as a block, in the first instance, but the overall scale of the programme — we were talking about national scale systems in HR and in financial systems — would have been apparent to the Minister from 2003 in the context of approving the capital programmes for those years.
Without wishing to resurrect all the issues raised at the committee's previous hearing, I will make some observations and refer to what I regard as some unanswered questions.
My first observation is that the old piece of advice is still good, that one should never work for a committee. It appears that this was the basic problem: a committee of eight members of a peer group, all of equal status. I thought this was a recipe for disaster. Many questions were raised at the last meeting but the committee did not receive answers to three or four key questions and we have failed to establish who was ultimately responsible for the mismanagement of the project. The committee has not established how any team of consultants could, more or less, write their own terms of reference in order to maximise their own benefit. This is an issue that needs to be teased out and dealt with. Promises have been made but we need to do more.
One of the key issues is that Professor Drumm has stated there are no fewer than 2,500 variations of pay and conditions of work agreements within the health service. Considering this project was first mooted in 1995 to control these variations, I question what action has been taken since then to rationalise the situation. Were all the Secretaries General and Ministers since that time aware of the situation and what action did they take? What Mr. Kelly has stated has been damning in that regard. In the context of discussing the policy decision he said the policy decision to support this project was taken in principle at a MAC-CEO meeting in February 1997 and a letter of approval was issued later. He stated that he later conceded justification for it based on a desire to support the group of health boards then proposing the system and finally getting to grips with an aspect of the management of the health system that had clearly been problematic and dysfunctional for a long time and had been largely ignored by previous generations of those responsible for the health system. This is a fairly damning and tough statement and I am pleased Mr. Kelly is present to put it into context.
The committee is trying to tease out where the responsibility lies and this has not yet been properly done. This may be of historical interest only because the health service now consists of a single body. In the context of 70% of the total spend on health — a massive spend — being expended on wages and salaries, I question what steps have been taken to rationalise the 2,500 variations. I take the point made at the last meeting that ideas involving a risk element should not be scapegoated and that care should be taken to avoid an over-cautious approach in future initiatives. I am afraid that one bad experience such as this might allow any future initiatives to be killed off. I refer to Mr. Kelly's robust defence of this project and his positive comments but I wish Mr. Hurley — whom I presume is the right person to ask — to state how the project can be utilised to the best possible effect. I appreciate a progress report is due and I ask Mr. Hurley to inform the committee before the fact in this case. I ask him to explain progress to date and the benefits he foresees. Does Mr. Hurley agree with Mr. Kelly's opinion that the project will be able to pay for itself within ten years? I am not asking for any conclusive answers but rather the answers to the questions of what can be achieved through the PPARS project.
Mr. Seán Hurley
As Professor Drumm said, a review is under way and is not yet completed. The ICT department will present a report to the board of the HSE at its meeting on 2 February. The terms of reference are included in the Comptroller and Auditor General's report. I reiterate Professor Drumm's statement about the review being undertaken, although a review may be the wrong word. We want to produce the best option for the HSE for use in the future. The original imperative was the strategic imperative to deliver an integrated payroll and human resource management system. That is still an imperative and must be delivered. The HSE must be able to manage its labour costs. This is the position in which the HSE finds itself. It has spent more than €100 million on the system.
The last paragraph in the Comptroller and Auditor General's report at the end of chapter eight makes it clear the action the HSE should take in the future, which is that it must learn the lessons from this review. The Comptroller and Auditor General has made some recommendations that we must take on board and much work remains for us to do.
Professor Drumm set up the review group in early October and there have been some significant events since. The Comptroller and Auditor General's report was published and there was a decision by the Government and the Department of Finance to establish the peer review process. The HSE has been informed by the Department of Finance that PPARS will be subjected to that peer review before it can recommence. These are very important events. The HSE takes Mr. Purcell's comments on board and it now has a good sense of what is entailed in the peer review process. It must ensure that whatever plan it devises will come through the peer review process.
The ICT department will need to demonstrate to everyone, not just to the CEO of the Health Service Executive and the board but to the external bodies such as the Departments of Health and Children and Finance, that there is a clear plan for the future and that it will be able to deliver the benefits that can be derived from the integrated system. The Hay report and my reading of the Comptroller and Auditor General's report, demonstrate that this project is essentially a business transformation project with ICT being only one small element of the project. Therefore, it is not about the ICT system or the SAP system which works in other countries. The key challenge for the HSE is whether we can deliver on the business transformation agenda. Technology of itself is of no value because any system can be bought. The HSE must derive benefit by employing the technology and ensuring that management uses the information derived from the system. This is a business transformation agenda for the future.
I have had discussions with the human resources directorate because we are all aware that a future plan must be led by the HR people because it is a question of how to put a shape on managing pay costs in the future. The ICT system will be there to support that vision. The ICT department has not yet concluded its report to be presented to the board on 2 February. I am quite clear that we must deliver on the original vision to deliver the integrated payroll and HR management system.
The last line in the Comptroller and Auditor General's report refers to building on the investment that has been expended to date to avoid nugatory expenditure and we need to build on this. I have no doubt that the now unified health system will enable us to put in place the processes which will be supported by a proper ICT system which will deliver the benefits we all want to ensure management has the information such as numbers employed and deployment of staff. I am very confident that we will come up with the solution.
It is very important that the HSE management makes the right decision. Significant investment has been made to date. The manner of implementing the decision will be very important for the HSE. It is taking some time, perhaps longer than we thought, to make a decision. However, we need to give such a pivotal decision the time it requires.
The committee recommended the use of consultants on many occasions but, needless to say, such a recommendation would not go down too well in this case. Has the HSE needed any outside assistance with the review? What is happening?
Mr. Hurley
The HSE has not engaged any outside consultants as part of this review because its future organisation is really an internal issue. The HSE needs to ensure all its managers support the new system and are aware of the benefits which will derive from its implementation. One of the original objectives of the development of PPARS was to devolve human resources management down to the line. If we are to do this, we need to ensure that the system throughout the HSE is ready to take it on board. We have not hired any consultants because we do not need them. We have to face certain issues ourselves.
I am asking Mr. Hurley about this matter because he is dealing with it. When the Committee of Public Accounts examined a similar project in another Department, it heard direct evidence of a great deal of resistance within the organisation to the installation of a new system. Has Mr. Hurley met any resistance to the project in this case? Was there resistance, for example, to the promotion of the project?
Mr. Hurley
Everybody is in favour of change but nobody likes to be changed. It is obvious that the installation of this system has encountered resistance because people are being obliged to change work practices, etc. I am being honest with the committee. People are more concerned about being involved in any project that involves major changes as a result of what has happened in recent times. Generally speaking, however, everyone understands the need for a system of this nature and the benefits that will accrue from it. There will not be any problems with it because we now have a unified health delivery system, although the environment is slightly more difficult following the recent experiences.
I would like to ask Professor Drumm about the figures supplied by Mr. Kelly, who mentioned that, within the OECD, 2% of overall health expenditure is normally spent on information systems. Mr. Kelly has said the relevant figure in this jurisdiction is just 0.25%. Does Professor Drumm expect the HSE will spend 2% of its budget on information systems? How does he perceive matters? I have always felt that a system of this nature is needed in the interests of patient care but that is a separate issue. Where does he see the HSE going in terms of money? Does he intend to make the case for such a level of expenditure?
Professor Drumm
When one examines the level of expenditure in the health system, one must consider how money is spent across the entire system. The HSE needs to consider whether, if it were to increase the amount of money spent on information technology, it would recoup those moneys elsewhere in the system. Since I took up my current position, I have been openly critical of the hospital focus of our system. I have highlighted the tendency for Irish people, compared with their counterparts in other countries, to stay in hospital for extremely long periods. Issues such as expenditure on information technology are relevant in this regard. We should ensure primary care services are linked to an IT system that is directly linked to the hospitals system. Considerable savings can be made, for example, in the system at the provision level if we allow for electronic prescribing. Further investment in forms of IT such as electronic prescribing is essential because they will lead to significant savings in other areas. It is remarkable, in this day and age, that we follow paper trails when prescriptions are passed between general practitioners, patients and pharmacists, to be finally paid through the HSE system. Increased investment in systems like electronic prescribing will be required.
I would like to conclude by asking about the possibility of a rationalisation of the structures. I refer to the separate agreements in place throughout the country which presumably resulted from the input of the various CEOs in the past. I presume they were negotiated with individual CEOs.
Professor Drumm
The arrangements are found throughout the public service in general. For example, there were some county council arrangements in individual counties. I ask Mr. John Magner who is familiar with the human resources system to comment on the matter.
Mr. John Magner
This is a key issue for the HSE. It is clear that the boards developed from old local authority systems. The HSE inherited many employees and groups of employees to whom differing terms and conditions applied. As a single organisation, it is clear that the HSE's objective is to standardise the various terms and conditions as much as possible. It has started that process by making new appointments to particular grades in the health sector. In its dealings with new grades within the sector, the HSE is considering issues such as standard job descriptions, standard terms and conditions and making appointments accordingly. The full extent of the variations came to light during the configuration stage of the PPARS implementation process. When the scheme was being implemented in each agency, the HSE tried to weed out as many of the variations as possible on a local area basis. The HSE tried to configure as many as possible of the other variations within the system. It is clearly cheaper if they are configured in that way because they are on the system afterwards. One of the HSE's key human resources objectives will be to work with the staff associations to address the variations in terms and conditions.
Having read the report on the human resource management system in the health service again, it seems an objective of PPARS was that a unified system be put in place. Can Mr. Hurley confirm whether that is still the case? It is clear that devolving a human resources function to line managers was also an objective of PPARS. It seems to me, therefore, that one of the objectives of the system was to provide for high levels of centralisation, accompanied by parallel high levels of decentralisation. It would be helpful for the public to be able to understand what the term "human resource management" means in this context. It seems to refer to the payroll at various times and to have a much broader meaning at other times. What exactly is it?
Mr. Hurley
The twin objectives of PPARS relate to the management of payroll systems and human resources. I agree one of the intentions of the HSE is to put a single system in place. The same simple system of processing the payroll is used regardless of the part of the country in which a person is being paid. The payroll for the entire 100,000 employees could be processed in a single location. The same process would be employed if the payroll were being processed in many different locations, all over the place. As part of the Government decision taken in 2003, it was intended that shared services would be established within the health system. It is obvious that many functions, such as finance, human resources, etc., could be carried out on a shared services basis. It does not need to be done——
The concept of shared services can be rather different from the concept of a unified and centralised system.
Mr. Hurley
It can. Shared services are all about doing back office processing that is routine in nature. There are two elements to the single human resources payroll system that the HSE intends to put in place. The first element of it is the processing of weekly or monthly payrolls and the subsequent payment of all employees. The second element of it, which is new to the HSE, is the management of human resources. The former health boards all had payroll systems. The boards that have not yet gone live with PPARS are continuing with their old payroll systems. As stated, one of the objectives of PPARS was to facilitate the devolution of human resources management. Hospital and network managers in the PCCC area, which used to be known as the community care area, will need to be able to access information on numbers currently being employed, the cost of such employees and the degree of absenteeism and sick leave, etc., in order that they can manage their staff across the various disciplines and manage their own budgets. One of the objectives of this process was to devolve responsibility for budgets. If budgets are devolved to line managers, such as hospital managers, it is obvious they will need as much information as possible on the pay and non-pay sides. We are talking about putting in place an integrated system so we can pay our staff and support our managers as they manage labour costs.
With the benefit of hindsight, what are the thoughts of Mr. Hurley and Mr. Kelly on the issue of public accountability? There is a view that complex change management involves high levels of public accountability, including peer review. While people can at times find such reviews uncomfortable, they assist the process. According to the description in the presentation of the level of change pressure, many of those at the top of the project's management structure changed jobs, which I presume involved applications and interviews. With hindsight, would it have been better to provide a level of public accountability? As originally intended, should the review group be favourable to continuing until 2012? How do witnesses feel about establishing levels of accountability, not just internally to top management but without the system?
Mr. Kelly
As I am reluctant to take a view about the forward prognosis for the project and how it might proceed, I will seek to answer the question in principle. Peer review is an excellent system for judging performance anywhere. I work now in a sector in which peer review is the name of the game in bidding for new investment. The academic world revolves around peer review. I have never found hindsight to be terribly useful when faced with a decision looking forward. It is useful when one comes to look back with 20:20 vision. While it is no harm to do this, it is not terribly useful as a predictor of future behaviour. With hindsight, there was certainly an overload in the health system in the latter part of 2004 and into 2005 in respect of the number of issues arising. A new organisation was forming, while ten old ones were being phased out. Significant change occurred in the Department and there was a great deal to be done in a short period. It is a reasonable defence, especially for those in the health board system charged with the management of change, to point out that they were being hit by many guns in the period. It must have been extremely difficult to keep things going.
The project was underpinned all along by a strong process of public accountability and there was strong governance within it. I cannot think of another project in which the Department was involved that had the same level of care and attention. The project was managed under the general heading of the health boards executive, which meant the board of the executive, the chief executive officers of all health boards — each of whom was accountable in his or her own right — and the director of the executive had full sight of the project. Each player had responsibility and ownership of it. There was no deficit regarding an absence of accountability structures surrounding the project. While I do not know in detail how the project has progressed in 2005, it is not clear that the pace of progress has improved since the establishment of a single management structure. I am not sure why that is the case.
I agree in general that peer review is preferable. The process now being put in place, especially for specialised, large-scale project management such as that for significant ICT projects, will be a great help to public managers faced with the challenges of conceiving and managing projects into the future.
There is evidence in the Comptroller and Auditor General's report that the consultants took a different view of their role to that taken by the Department. The brief for Deloitte & Touche, as principal consultant, suggested it was to carry risk elements. Given that so many high level actors within the Department were involved in the management or oversight process following the recommendations of the Hay Group, was there not concern at the number of consultants involved and a question as to what they and their staff were doing? While everybody has experience of consultants, does there not come a point at which one is falling over them and is prompted to ask what they are doing? When a management or ICT consultancy goes wrong in the private as well as the public sector, the consultants can end up inputting data and doing the primary job, rather than providing oversight expertise and making recommendations.
Mr. Kelly has provided a vivid picture of a kind of hell in the health service, with all the people concerned on the move and out-of-town bodies seeking to cover themselves. People were attending interviews, inquiring where they would be next month and asking what the body to which they would be attached would be called. For many managers, it must have been a very stressful period. Where were the consultants in this process? Did they not suggest that things were crazy and that there was a need to stand back and consider how to progress the project to 2012?
Mr. Kelly
There was no difference of interpretation between the Department and the consultants. My reading of the report suggests the difference of interpretation was between the project team and the consultants. Mr. Magner dealt with that issue in his contribution to these meetings and explained the technical matter involving what constituted a technical implementation partner in a staff project as distinct from the nature of what the consultants were hired to do. As the person closest to the project team, Mr. Magner may wish to comment further.
Is the key point not whether Deloitte & Touche was an adviser or an implementation partner in the project?
Mr. Kelly
That is an issue Mr. Magner should explain. I have not had detailed sight of documents and was not part of the project team.
Mr. Magner
Since my engagement with the project last May, my clear understanding has been that Deloitte & Touche was engaged as a strategic implementation partner. The issue of an advisory role arose when we received the draft of the report of the Comptroller and Auditor General. I have discussed the matter with Deloitte & Touche since the committee's previous meeting and was informed that it was of the view that I was correct in identifying its role, which was also the role as stated in the contract.
Does Mr. Scanlan, as Accounting Officer, have any observations on what has been said in past few minutes?
Mr. Scanlan
I am guided by Mr. Magner on the issue of the role of Deloitte & Touche.
The peer review issue is important. The previous debate in which we engaged, which went beyond PPARS, involved the role of the Department. The HSE structure is an improvement because one deals with a single agency rather than ten. However, the core issue remains. While the delivery agencies to which Government provides funding should be left to implement and deliver, they should not be left entirely alone. In answering a question posed by the Chairman at the previous meeting, I grappled with the matter of where the Department comes into the process. While it is accepted that we have built up IT resources, the Comptroller and Auditor General has said the issue now is to pull them together within the HSE. I do not have that level of expertise in the Department.
As we reduced the resources in the Department's ICT area, we were left to rely on hiring outside consultants. At one level, one must ask whether one should expect to get a reasonable answer from reputable firms of consultants. There is still a gap and, therefore, the idea of having a peer review seems to be that we use public service resources to ensure there is no need for replication. In this instance that was in ICT, although it could be in other areas such as capital management, architecture, engineering and so on. I am not obliged to replicate ICT resources in the Department to take a heavy-handed look at the HSE. However, if I can somehow draw on resources available in the public service, it would be another good way to plug the accountability gap.
The HeBE report stated, "By 2011, the end-date by which the strategic ICT framework will be achieved, there will be an advanced ‘neural' capability for the entire health system". What are the implications for where the system stands now and where it will be in 2011? Mr. Kelly suggested spending up to 2% of the budget on ICT might not be inappropriate and that the previous level of spending was comparatively low. Do the witnesses envisage an increase in the level of expenditure? While I am not sure what the word "neural" means in this regard — I presume it refers to the brain or something similar — do they believe neural capacity will have developed by 2011?
Mr. Hurley
There is no doubt we will be obliged to invest more in our ICT capacity if we are to deliver on the reform agenda because many of the items thereon will be heavily dependent on the appropriate ICT being available to support managers, especially around integration and delivering integrated care and total management information. The figure of 2.5%, or €65 million, of the budget to which Mr. Kelly referred accounts for just one element of current ICT expenditure. It relates to the amount allocated on the capital side every year that is primarily used for new projects or new implementations. We also have approximately 400 staff throughout the system. A more accurate figure, when everything is taken into account, for current expenditure on ICT would be closer to €200 million. The figure of €65 million is only one aspect of ICT spending. As to whether €200 million is adequate, we will have to invest more if we are to deliver on the reform programme. The national health information strategy published in September 2004 also acknowledged that we will have to invest significantly more in this area.
The word "neural" in this context refers to the need to have infrastructure in place across the entire system and country to support all those involved in delivering care, particularly frontline managers. We will have to invest not only in our staff but also in developing the infrastructure. We are examining this issue because the former health boards had reached different stages in terms of infrastructure development. We are about to conclude an audit of our current position on this issue in order that we can formulate a plan to invest more in infrastructure. I envisage that we will invest significant amounts of capital money in building up infrastructure because we have many systems which will require support. In addition to PPARS, we have financial systems and patient information management systems that will come on stream in the coming years. These can only be installed if we first have the appropriate infrastructure in place. While expenditure in the ICT area is currently around €200 million per annum, we will have to invest further in the next few years.
Mr. Kelly
I wish to respond to the two other points Deputy Burton raised because I have not had an opportunity to do so. The first arose in the context of the question on the Department's involvement in management or oversight of the project. We need to be clear that the Department's role was confined to oversight and it was not involved in managing the project. The second question was whether concerns arose about consultants being, as the Deputy put it, "all over the place". Let us be clear on this. A serious, high level project management group, headquartered in Sligo, was working full-time on the project. Local teams were in place in each of the sites where the project was being implemented. The Department's involvement was through intermittent contact as a member of various groups, at which it received reports from project management, raised the issues which had to be raised and so on.
A concern arose in mid-2004 about the rate at which the budget was burning up in relation to consultancy spend. The Gartner report was commissioned around that time specifically to determine whether the level of spend was appropriate, not just in respect of rates but also on the input of consultancy firms. It is clear from the exchanges which took place in the latter part of 2004 that the Department was not absolutely satisfied with the answers it was getting at that point and it continued, I understand, to pursue the matter after the transfer to the Health Service Executive at the beginning of 2005. There was, therefore, a concern about the level of consultancies' engagement at that stage and the matter was pursued.
Mr. Scanlan
I wish to offer one quick observation on the question about investment. At a general level, I fully support the need to invest in information. Mr. Hurley has described what is starting to emerge as a result of bringing the ICT piece of what was a disparate system together and getting a better grip on one's technical resources and investment. At the same time, I caution that one of the big lessons to be learned from the report, as Mr. Hurley mentioned, is that many other groups other than the ICT people need to be brought together. In the case of PPARS, for example, even if one got the ICT aspect of the HSE right and poured more money into it, it will not work if one does not get the HR aspect right. I imagine the same would be true of other systems — be they hospital or financial systems — we would all like to see established. One must get the——
What does Mr. Scanlan mean by the term "HR"?
Mr. Scanlan
What I mean is that if one has managers, either in HR or in particular hospitals or community centres, it is important to start to get people to realise they no longer work for a committee and now work for a national organisation. That is a valid point. This change brings an important difference in mindset.
As Mr. Hurley pointed out, one must start to realise that one can really only manage 70% of a huge budget if one puts one's mind to it and views it as part of one's job. There has been a tendency to dismiss the pay bill, which is actually the resource that goes with it, as something that is handed to one but one cannot manage. There are good examples of the HSE engaging in discussions with staff associations with the result that people are happier in their jobs, work more cost effectively and provide a better service for patients. That is one vision of HR but to achieve it one needs information, as is the case with any other resource.
Mr. Scanlan has come close to the point the public debate has reached. The most recent employment figures indicate that slightly more than 2 million people are at work, of whom 100,000 are employed in the health service. This means that of every 20 people working here, one is employed in the health service. The message I am getting from taxpayers, as the users and funders of the service, is that they do not believe they are getting value for money from this major resource. Professor Drumm's task is to ensure this substantial resource, both in human and financial terms, delivers a service which satisfies the taxpayers who pay for it. I can envisage a scenario in which someone proposes a memorial to the Irish taxpayer, a tomb of the unknown taxpayer with a flame in front of it. We are approaching such circumstances. How can this resource be applied to deliver the service for which people are paying? That is the issue.
Mr. Scanlan
I fully agree, with one caveat. I would not see it as negative. Someone used the term "black hole" the last time I attended, but many good things are happening in the health services. Much good service is being delivered. Other than that, I agree there is huge potential.
As there is an indication that this goes right through to 2011, the cumulative cost indications for the future are very high. I want to get some idea of the notion of value for money. Professor Drumm might care to comment.
I will be brief because I read the full transcript of the meeting held before Christmas and there is no point in going over many issues which have been answered. I am also aware that the lead questioners must move to the Vote when this segment is finished.
I would like to sort out the issue of the consultants, because that sticks in my mind and is not resolved. I refer to the basis on which consultants were employed. Mr. Kelly was like Banquo's ghost at the last meeting. We missed him. Perhaps he can add a few points in that regard.
When Bull Information Systems — I almost said Bull Island information systems — which had an original contract of €9.14 million, withdrew, and threw up its hands, saying it was quite impossible to do what needed to be done because of the complexity, was Mr. Kelly fully aware of the basis on which Bull Information Systems departed? Should that have sounded warning bells in every section of the Department of Health and Children with regard to how the project would subsequently be dealt with?
Mr. Kelly
I am not sure what warning bells entail. However, I have been involved for many years in decision-making on investment in public projects. Anyone who has ever dealt with me either as a consultant or a chief executive of a health board would not argue with the fact that I take great care in decision-making where commitment of public funds is concerned. That is my track record.
With regard to this issue, the additional assurance that the Department had, which it did not have on the previous occasion, related first to the external assessment of whether this was a worthwhile project to be involved in. It clearly was, because if one were interested in really managing one's human resource, which is the main resource in the health service, one would need to do something like this. That was the first answer.
The second question related to their possibly being particular considerations around such a project which would need particular care in terms of management of risks and the sort of governance structure which would need to be put in place to manage those risks. Again, the clear answer came through that risks were certainly involved, and had been identified, and that these were the sort of considerations which would have to be borne in mind, and that this was the kind of governance structure which would carry such a project.
The third issue related to whether there was a reasonable basis at this stage on which to judge what the future costs of such a project might be, and again the clear answer came back that there was a reasonable basis, with some uncertainty around the edges, yet one could take it that the figure given was the ballpark figure. Accordingly, the proposition on the second time around was very different to the first one.
I have already made the point that on that second round, the Department was not looking merely at a group of health boards, which did not even include all of them, but was looking at the health boards executive as a body which would bring co-ordination, with greater assurance and accountability in carrying forward such a project. Accordingly, care was taken at that point, and I thought very carefully about this project at the time. I took on board all the advice available to me, through the reports to which I referred and from talking in detail with the systems people I had around me in the Department, the HR and finance people there and with the person who at the time was heading up the national team on the previous project, and who would be likely to be carrying the project forward. As it happened, he was also chairman of the CEO group at the time. The need for care and attention was clear and I believe in the decision made, subsequently, in the actions of the Department, it was clear we were proceeding with caution on the matter.
I understand that for Bull Information Systems, time and materials were a key issue. I find it amazing that when Deloitte & Touche was taken on, the same arrangement held. The Comptroller and Auditor General has identified that there is confusion and possibly conflict as to whether Deloitte & Touche was a support adviser to the project or its implementer. It seems these are fundamentally different roles. Can Mr. Kelly say how this could arise, or be allowed, with such large amounts of funding involved? I do not want to misquote the Comptroller and Auditor General but essentially he makes the point in one sentence I recall, that in essence, the consultants were controlling the project. At the last committee meeting the Comptroller and Auditor General stated Deloitte Consulting Limited was engaged to assess the status of the project and to define the scope, and a few months later was engaged as a project support adviser on a rolling contract basis, commonly known as a time or material basis.
Incidentally, the recorder of that session made a slight error, which hit the nail on the head, by quoting the Comptroller and Auditor General as saying Deloitte was engaged as a project support adviser on a rolling contract basis commonly known as a "time immaterial" basis. That seems quite appropriate because the consultants must have felt like a fox being handed the key to the hen-house, to choose the fattest broilers there. A fabulous amount of money was involved, which rolled up to about €50 million for the consultants. Is Mr. Kelly saying it was his understanding that this should not have happened, that it was the project team which made a mistake there, or did Mr. Kelly know at the time that it was a sort of unlimited situation of time and materials for Deloitte & Touche?
Mr. Kelly
I am going to be very clear about this. The decision about the type of contract was taken by the project board and did not come near the Department. I had no knowledge of it and no hand, act or part in it. Regarding contracts generally, in my own experience in dealing with consultants, I have never entered into a contract based on time and materials. I would always have insisted on a fixed price contract. That would also have been the norm in the Department and, as far as I know, throughout the health system.
I am struck by the reasons brought forward by the project management team for doing so. As I understand it, based on my reading of the report, those reasons had to do with an assessment and a judgment that, had they entered into some kind of fixed price contract, the conditions under which that would be done would more than likely have led to penalty payments or other penalties with regard to meeting the conditions being set down. I do not know the details of those conditions. The Department was not involved in managing the project; it stood far back from it, having put its faith in a serious, high level project team put in place to deliver it. At the top of that team was the chief executive of a health board who took lead responsibility as a member of the Health Boards Executive. He is a person accountable in his own right, and in so far as there are questions to be asked, they should be addressed to him.
I will leave it at that, but it might throw some light on the discussion that we had in private session regarding whether the chief executive officer in question should be requested to attend in future.
At the last meeting a few questions remained unanswered because information was unavailable. I hope, in the interim, information may have come to light. Mr. Hurley compiled information for the benefit of the Health Service Executive. The question related to the additional €65 million cost to accrue if the PPARS system is rolled out to all ten HSE regions and St. James's Hospital. I asked a specific question regarding the proportion of that €65 million that it is anticipated might go toDeloitte & Touche consultants if the contract were completed. Of the money paid to date, those consultants have received approximately 35%.
Mr. Hurley
The €65 million mentioned refers to the capital ICT budget. The position remains the same. I cannot answer Deputy Boyle's question today either. We have not yet finalised our plans and do not know how long it will take to roll it out across the rest of the HSE, what it will cost, or what, if any, role there will be for consultants.
Perhaps I might ask direct questions. Is it envisaged that a time and materials contract will be continued, or will it be a fixed-cost contract when it is eventually agreed? Will a cap be placed on the extra money to be spent, in order that it is no more than 5% or 10% of overall costs?
Mr. Hurley
If consultants are involved, it will obviously be for very specific work they will have to do. It will be properly managed and awarded as a fixed price contract rather than on a time and materials basis. Regarding whether any cap will be placed on it, we will have to examine the overall context. I do not think it will be a question of doing that but rather of seeing why we might have to employ consultants, what they would do, and why we could not use internal resources or perhaps recruit. Perhaps I could call on contractors. There would, therefore, be many issues to examine. One could not simply say that if one spent another €100 million on a large-scale project, €30 million would automatically be assigned to outside consultancies. The bottom line is that, at this stage, since we have not yet worked through to that level of detail, I cannot answer the Deputy's questions.
I suspect Mr. Hurley will not have the information regarding my second unanswered question. However, if he has a ball-park figure, I would be grateful. The €65 million roll-out was to take the project to the ten HSE regions and St. James's Hospital. A final roll-out was intended to the Dublin voluntary teaching hospitals and several voluntary agencies. Does Mr. Hurley have any idea of the final cost beyond the €65 million figure?
Mr. Hurley
No, not yet. The immediate focus will be on rolling it out across the rest of the HSE and St. James's. We have not yet begun to consider the voluntary hospitals or agencies.
I find that disappointing, but I hope the information will become available sooner rather than later.
Does the peer review process being undertaken involve members of the project team? Have some of them since left the health service? For instance, is the former CEO of the North Western Health Board, Mr. Pat Harvey, involved?
Mr. Hurley
The Department of Finance is sponsoring the peer review process established on the basis of a Government decision. Several peer reviewers have been selected by the Department, but neither I nor the HSE is involved. We are involved in the peer review of another project. However, when it comes to peer-reviewing PPARS, I assume the Department of Finance will once again select those who are to conduct it.
Mr. Dave Ring
On the peer review, we have set up a panel. The idea is that it will select members from a broad list. To my knowledge, the person mentioned is not on any list that we have.
Regarding the ongoing review being undertaken on behalf of the HSE, is Mr. Ring involved in consultation with members of the project team, and particularly with people who have since left the health service?
Mr. Hurley
No one who has left the health service is involved in that review. There are officials from the HSE and, as I said at our last meeting, we have representatives from the Department of Health and Children and the Department of Finance. Apart from those nominees, there are no external people.
Perhaps I might briefly move to Mr. Kelly, whom I also thank for attending today.
In Mr. Kelly's statement he outlines a process whereby his predecessor and he and subsequently the Department of Health and Children attempted rationalisation of the health service. Would it be fair to suggest the Department took an ever more hands-off approach? As part of the process, might the bigger picture be missed? The obvious questions were not asked regarding what the health service was and what it constituted. One essential question is who is in the health service. At a previous meeting, Mr. Scanlan expressed the difficulty of quantifying the number working in it and the circumstances in which they are employed. Drawing on his experience, perhaps Mr. Kelly might explain how that process of rationalisation happened. It was going on, yet no one seemed to ask about the bigger picture.
Mr. Kelly
I am not sure if I understand the question. Regarding asking about the bigger picture, I spent most of my time at the top of the Department doing that, since the development of the health strategy, which had long sections on human resource management, patient services, population health, information management, the acute system, primary care and so on, was essentially concerned with standing back from the health system and asking what we would like to see at the end of a developmental road. It covered services for those who depend on the system, patients and clients, and what sort of system we should desire in order that those who work in it might contribute productively and be reasonably content as employees. What sort of system should we have to produce a performance-based, value-for-money outcome? That is the essence of the health strategy.
That was not my question. The health strategy was about what the health system could be and how we could make that come about. I do not think questions were ever asked regarding what the health system consisted of. If one is introducing a programme for human resources, how might that be defined and used across the health service? That seems to be the problem with the PPARS project — those big questions were not asked.
Mr. Kelly
I dispute that. In a previous existence, as assistant secretary on the HR side of the Department, I can remember leading an exercise about managing human resources better. It led to the establishment of an office for health management whose raison d’être was to raise management capability in the health system, with a very specific emphasis on human resource management. The Comptroller and Auditor General’s report refers to there being a lack of clarity regarding what human resource management meant in a health service context. If there was a lack of clarity, it certainly was not for want of effort in attempting to answer the question, having produced the strategy piece on human resources and a follow up to it, the action plan for people management, the establishment of quite sophisticated partnership structures and a whole lot of individual initiatives at agency level which were about the involvement of people on the ground in things like service planning and developing a partnership process locally, in working on individual service improvement initiatives in a collaborative way and so on.
There was actually a great amount under way in the health boards and health agencies over quite a number of years on this issue. I am a little puzzled by an assertion at this stage that people did not understand what human resource management was about. I think they did. This project was about putting the instruments in people's hands through which they would have the knowledge and information they needed on the key parameters in human resource management. There would also be an accountability loop in order that a central manager responsible for resources would know how the system was performing.
Mr. Kelly said that his own experience in managing a project would be to avoid, to every extent possible, the use of consultants on a time and material basis and that that was standard practice in the Department. Why was the project team not made aware of standard practice or the usual procurement practices within the Department in making the decision to give a time and materials contract to Deloitte & Touche?
Mr. Kelly
I do not think they were unaware of the general practice. It was not just the general practice in the Department of Health and Children. There was nothing set down that prohibited anybody from making an arrangement with a consultant on any basis, nor should there be. There will always be situations where such a policy is appropriate. I just pointed out that from my own experience, I would not go for that type of contract if I had the choice. I believe that would have been the same instinct of the chief executive heading the project and of the project team. Had there been an alternative to time and materials, I feel confident that they would have taken this.
As Secretary General in the Department of Health and Children, when will Mr. Scanlan know how many are working in the health service, the number of categories working in the service and whether those categories have standardised employment conditions?
Mr. Scanlan
I would not like to think I am only focused on inputs. Having listened to the previous debate and in fairness to the Deputy, he is picking up the message that I have been trying to convey. How is it that we cannot pin down exactly where the money is going or where people are employed? The answer to the specific question is that I do not know. The HSE is undergoing a major transformation process and I believe it will take some years. My colleagues in the Department of Finance are putting me under pressure and I hope the HSE feels the same pressure from me in order that we can get to grips with the numbers at some level. That will not get us to the next level of understanding more than an aggregate. The third part of the Deputy's question related to variations——
Standardising the terms and conditions of each employment category in the health board.
Mr. Scanlan
To be fair to everyone involved, standardisation raises big IR issues. Mr. Magner stated we may have to start that with new recruits. However, we cannot start to look at the options until we know what exists and I would certainly like to know what is there.
I am now opening the Vote. I thank Mr. Kelly for attending and for being so forthcoming in his contribution. Before Mr. Kelly leaves, I would like Mr. Purcell to conclude this part of the meeting.
Mr. Purcell
In the interests of transparency, Mr. Kelly should be present to hear one or two of my comments. I have no fundamental problem with what he said in his contribution. Anybody who knew what was going on in the health service would have no qualms about the objective of what was being done. However, as Mr. Mooney said, we might take issue with the way in which it was done. There would be value for money if we had a proper system in place, controlling staff numbers and pay and helping people manage staff. I have been preaching that gospel in reports I have brought before this committee. However, we cannot have a new system at any cost and that was the problem. The appraisal by Hay Management Consultants commissioned by the Department, which referred to €92 million on top of the €17 million already there, has proved to be very wide off the mark.
The governance structure on paper looked quite well, but perhaps there is something in what Deputy Dennehy said about too many committees. There may be a need to have some supremo in place. That is not just my conclusion as a result of our work in this area. An internal report by the HSE in January 2005 stated that the large board was too unwieldy to make all the necessary decisions around project planning, design, HR and IR issues. The HSE took a particular course of action to try to overcome that rigidity.
There was much talk today about consultants such as Deloitte. Whether the company was a partner or an adviser could be seen as an exercise in semantics. We engaged with Deloitte in finalising this report. Appendix F of the report lists the company's role as its management saw it. That has been borne out by the contents of the letters of engagement up to 2005. I do not think it was just a case of semantics. Being a strategic implementation partner implies a share of the risk and of the concerns and that should be built into an arrangement where one company is a partner.
I would not disagree with Mr. Kelly's opinion on time and materials contracts, depending on the circumstances. In this situation, the same firm had been commissioned to scope the rest of the project and was paid €400,000 for doing so. Having been commissioned to do this and then to operate on a time and materials basis, suggests to me that there must be something wrong from a management perspective to accept such an approach.
I thank Mr. Purcell. Mr. Kelly is free to go. I thank him for attending today.
The witness withdrew.
Sitting suspended at 2.30 p.m. and resumed at 2.32 p.m.