COMMITTEE OF PUBLIC ACCOUNTS díospóireacht

Chairman

The committee will discuss the 2005 Annual Report of the Comptroller and Auditor General and Appropriation Accounts concerning the Department of Justice, Equality and Law Reform and the Irish Prison Service — Vote 21 — Prisons, specifically chapter 4.1 — acquisition of site for prison development.

Witnesses should be aware that they do not enjoy absolute privilege. 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 who are identified in the course of the committee's proceedings. These rights include the right to give evidence; the right to produce and 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 or 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 being invited before the committee are made aware of these rights and any person identified in the course of proceedings who is not present may have to be made aware of these rights and provided with a transcript of the relevant part of the committee's proceedings, if the committee considers it appropriate in the interests of justice.

Notwithstanding this provision in the legislation, I remind members of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions within Standing Order 156 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.

There is some relevant correspondence received by the committee that has been forwarded to the Department concerning prisons. This may be referred to today. I call on Mr. Aylward to introduce his officials.

Mr. Seán Aylward

I am accompanied by: Mr. Jimmy Martin, assistant secretary in the Department, who is responsible for prison policy matters and who also chaired the committee that selected the site and oversaw its purchase; Mr. Brian Purcell, director general of the Prison Service; and its director of finance, Mr. John Conlon.

Chairman

I call on the officials from the Department of Finance to introduce themselves.

Mr. Fred Foster

I am from the sectoral policy division of the Department of Finance. My colleague, Mr. Jim O'Farrell, is expected imminently.

Mr. David Byers

I am the Commissioner of Public Works in charge of property.

Chairman

I call on Mr. John Purcell to introduce Vote 21 and chapter 4.1.

Mr. John Purcell

Chapter 4.1 reads:

Prison Service

4.1 Acquisition of Site for Prison Development

The Prison Service is part of the Department of Justice, Equality and Law Reform. Establishment of a statutory board to manage the Prison Service is planned and, in anticipation of the necessary legislation, an Interim Board has been appointed to advise the Minister on the management and administration of the Service. In May 2003, the Capital Sub-Committee of the Interim Board recommended the building of a new prison on a greenfield site in the Dublin area to replace prison facilities at Mountjoy, most of which are in a very sub-standard condition.

The Prison Service asked the Office of Public Works (OPW) to help in finding a site for the prison development. The OPW commissioned property consultants CBRE to carry out a site search and CBRE reported back to the OPW in September 2003, identifying 17 properties. The OPW subsequently refined the search criteria and CBRE reported back again in January 2004. On this occasion, it identified two properties, one at Balbriggan and the second located at Dunboyne, County Meath. The OPW reported the results to the Prison Service which, in turn, kept the Department informed of developments. The OPW informed me that the Department considered the distance of the sites from Dublin to be too great.

In February 2004, the Department decided to advertise for suitable land. The Prison Service placed an advertisement in one of the national newspapers, inviting offers of sites in the greater Dublin area suitable for the development of a secure prison.

In May 2004, the Department decided to set up a Site Selection Committee, comprising officials of the Department, the Prison Service and the OPW, to assess the various site options. The Committee commenced work on 1 July 2004 and, on 16 September 2004, produced a short list of three recommended sites.

CBRE conducted negotiations with the vendors of the three sites, and reported back on the results. The Department decided to purchase a site of just under 100 acres at Coolquay in north County Dublin, at a price of €31.35m (just over €318,000 per acre). However, on 30 November 2004, the Department was informed that the owner of the Coolquay site was not willing to proceed with the sale. On the same day, the Government authorised the purchase of a site subject to the final decision of the Minister as to location.

A farm at Thornton — in the same general area as the Coolquay land — was subsequently offered to the Prison Service. CBRE wrote to the vendors on 13 January 2005 outlining the principal terms under which the Prison Service was prepared to purchase the land. These included a price of €29.9m for the site.

The Site Selection Committee met on 18 January 2005 and agreed to recommend the purchase of the land at Thornton. A binding agreement to purchase the land was signed by the Prison Service on 26 January 2005. Payment for the land was incurred on the Prison Service Vote in 2005.

For ease of reference, key dates and events in the procurement process are set out in Table 22.

**Table 22 Key dates and events in the purchase of lands at Thornton**
Date	Event
May 2003	Capital Sub-Committee of Prison Service Interim Board recommends replacement of Mountjoy on a greenfield site in the Dublin area
Sept. 2003	Prison Service asks the Office of Public Works (OPW) to search for a suitable site. The OPW asks CBRE to carry out a search for a site of between 60 and 100 acres, in the greater Dublin area
Sept. 2003	CBRE reports the results of its property search to the OPW, identifying 17 potential sites
Jan. 2004	CBRE makes a second report to the OPW and, as instructed, present two land options of around 80 acres
3 Feb. 2004	Government agrees on announcement by Minister of intention in principle to replace Mountjoy prison complex with a new prison facility on a greenfield site in the greater Dublin area
11 Feb. 2004	Prison Service advertises in Irish Independent for sites of around 100 acres, within 25 kilometres of central Dublin
23 Feb. 2004	Advertised latest date for receipt of offers of sites
1 July 2004	1st Meeting of Site Selection Committee — Committee discusses selection criteria
9 July 2004	2nd Meeting — Committee agrees site evaluation scheme; carries out preliminary review of site offers
15 July 2004	3rd Meeting — Committee evaluates site options and selects six sites for further investigation
31 Aug. 2004	4th Meeting — The planning and engineering consultants make presentations to the Committee on the specified sites
15 Sept. 2004	Director General of the Prison Service asks Committee to change evaluation criteria
16 Sep. 2004	5th Meeting — Committee agrees to Director General’s request; recommends negotiations commence in respect of three sites
22 Nov. 2004	CBRE writes to Coolquay vendor with draft agreement; the proposed price is €31.35m for just under 100 acres
29 Nov. 2004	6th Meeting — Committee agrees to recommend the purchase of Coolquay land
30 Nov. 2004	Government approves site purchase
20 Dec. 2004	Thornton site offered to Prison Service
21 Dec. 2004	The solicitor for the vendor of the Coolquay land writes to CBRE formally withdrawing the land
12 Jan. 2005	Prison Service and CBRE representatives meet with Thornton parties and agree a deal
13 Jan. 2005	Written offer to Thornton vendor to purchase 150 acres at a price of €29.9m
18 Jan. 2005	7th Meeting — Committee agrees the Thornton site is suitable for development of the prison
26 Jan. 2005	Contract for the purchase of Thornton land signed by the State and the vendor

This examination was undertaken to assess how the identification and evaluation of the site options were managed and whether the procurement process was conducted in a manner that would ensure the State got good value for money. In carrying out the assessment, I sought to establish the market price for land comparable to the land at Thornton at around the same time.

Lisney Limited were contracted to assist in the examination.

Defining the Site Requirements

In its May 2003 report on the options for the redevelopment or replacement of Mountjoy Prison, the Capital Sub-Committee of the Prison Service Interim Board recommended the building of a replacement 600-place prison on a greenfield site elsewhere in the Dublin area. They concluded that it would be more cost effective and operationally easier and quicker to build a new prison on a greenfield site than to redevelop the existing complex while it was still in use. They also concluded that building a prison on a greenfield site should result in significantly reduced operating costs, and would allow provision of the work training facilities and recreation areas required for a modern prison, but that could not be provided on the constrained Mountjoy site.

The Sub-Committee's report did not specify the kind of land that should be acquired for the prison site, the location of the land (other than that it should be in the Dublin area), or the amount of land required. The requirements for the site in these respects consequently had to be defined as part of the procurement process.

Type and Location of Land

Under Section 181 of the Planning and Development Act, 2000, certain developments by or on behalf of State authorities are excluded from the application of the planning code in the interests of national security or the administration of justice. As a result, in its search for a site, the Prison Service was not restricted to buying land in urban areas or land zoned for development. Agricultural land that met the Prison Service's requirement was consequently suitable for consideration.

When the OPW commenced the site search on behalf of the Prison Service in September 2003, it asked CBRE to look for sites in the area bounded by Balbriggan to the north, Navan to the northwest, Naas to the southwest and Ashford to the southeast i.e. a boundary zone 25 to 30 kilometres from the centre of Dublin. The scope of the search was to include agricultural land, land zoned for industrial purposes and institutional land. The OPW later refined its instructions to CBRE, asking them to restrict the search to the area north/ northwest of the M50.

When the Prison Service advertised for land offers on 11 February 2004, it specified that it was seeking sites within 25 km of Dublin city centre. The Department has stated that this limit was based on an operational assessment that a site further than 25 kilometres was unlikely to be viable as a Dublin prison. The initial assessment of the sites by the Site Selection Committee was carried out on this basis.

In September 2004, the Director General of the Prison Service asked the Site Selection Committee to consider only sites that were within eight kilometres of the M50 motorway — i.e. about 15 to 16 kilometres from Dublin city centre. He was of the view that the M50 would form a primary artery for the transport of prisoners to and from any new prison, and that any location further than eight kilometres from the M50 would present unacceptable operational difficulties.

The initial searches carried out by the OPW/CBRE identified a number of sites that were already in State ownership. The OPW has stated that it was aware of all large State holdings of land in and around Dublin and had recently assessed these holdings for uses such as affordable housing, sites for asylum seeker centres, etc. Consequently, it was quickly able to confirm to the Site Selection Committee that there were no suitable State-owned sites available.

Amount of Land Required

The Mountjoy prison complex stands on approximately 20 acres of land in central Dublin.

The OPW's initial instructions to CBRE were to search for a site of between 60 and 100 acres. The instructions were later refined to a site area of around 80 acres, and CBRE reported on this basis in January 2004.

When the Government approved the Minister's proposal to relocate the prison to a greenfield site on 3 February 2004, it asked the Minister to consult with the Minister for Health and Children on the future of the Central Mental Hospital, Dundrum. A review of requirements for replacement of the hospital concluded that around 20 acres would be optimal to meet its requirements.

The Prison Service advertisement on 11 February 2004 specified that it was seeking a site of "circa 100 acres". The Department has stated that this was its estimate of the area of land required to

provide single cell accommodation and facilities for the number of prisoners currently in the Mountjoy complex (over 900)

allow for expansion of the prison in the future

provide a buffer zone around the perimeter sufficiently deep (70-100 metres) to inhibit drugs being projected into the prison and

provide for the possibility of the Central Mental Hospital being sited adjacent to the new prison facility.

In September 2004, in the light of apparent difficulties in identifying an ideal site, the Director General of the Prison Service indicated that a smaller site, without provision for the Central Mental Hospital or for future expansion, might be acceptable. He did not specify what reduced area might be acceptable, because the topography and the shape of the site would also have to be taken into account.

The Prison Service subsequently bought 150 acres at Thornton — 50 per cent more than the estimated area required.

The Accounting Officer of the Department has stated that the exact size of the site to be purchased depended on a number of variable factors including

optimum size taking into account the Central Mental Hospital and possible future development

availability

cost

conditions imposed by the vendor

future use

resale potential.

He stated that these were dynamic factors that could not all be assessed in advance or in isolation from the actual sites available, but that there was no ambiguity as to the minimum requirement.

Site Acquisition Budget

The May 2003 report of the Capital Sub-Committee of the Prison Service Interim Board includes an estimate of €10m for the cost of acquiring a greenfield site for the prison development. No details are provided in the report in relation to how this estimate was arrived at (e.g. size of site, cost per acre, location, etc).

The Department/Prison Service did not adopt a budget or affordability limit to guide its site procurement.

The Department has stated that, in the light of the number of variables involved, it was not considered to be of any significant benefit to try and set an artificially established budget for the site before the Committee had completed its work. Based on their extensive experience, the OPW and CBRE were able to advise on general market prices for different types of land which might be suitable for a prison development. The Committee also recognised that they might have to deal with an unwilling vendor because of the proposed end use for the land and that a premium might have to be paid to induce a vendor to sell. The cost of the site was seen as only one factor in the overall project of replacing Mountjoy (and the Central Mental Hospital) by new facilities on a new site. The purchase cost of the site would only have become a critical factor if it threatened the viability of the entire project.

Disclosing the State’s Interest

A prospective purchaser with a special interest in a landholding is faced with the choice of disclosing his interest to potential vendors, or arranging for agents to make discreet approaches on his behalf, without identifying the purchaser's identity or the reasons for the interest in the property.

Many developers of land choose to acquire property discreetly, even when the land may be openly for sale. The primary reason for not publicly disclosing an interest is that vendors may be able to identify why their land would be of special interest for the developer, thereby identifying him as a special purchaser who would be expected to pay a significant premium over the market price, particularly where the owner of the land may need to be induced to sell.

The OPW has stated that it advised the Department and the Prison Service that, to acquire the necessary land at the lowest possible price, it would be best to proceed confidentially, using a third party agent who would not publicise the fact that the State was the ultimate purchaser. This was on the grounds that any public announcement of the State's interest in acquiring land had the potential to drive up the asking price.

The Accounting Officer of the Department acknowledges that the confidential third party strategy might have resulted in a lower price, but rejected it for a number of reasons.

The Prison Service was not convinced that this strategy would produce a broad enough range of sites that might be suitable. The Department considers that this view was confirmed by the fact that the advertisement resulted in a number of sites being offered that would not otherwise have been identified.

The Prison Service was concerned that the third party approach did not comply with best practice for acquiring a site for a major prison development as it was not open and transparent, that it could give rise to allegations that political influence or corruption dictated the choice of site and that therefore it would be difficult to justify such a strategy to the Government or the Public Accounts Committee.

Because of the size of the purchase and the need for in depth assessments and surveys prior to purchase, the Prison Service had real doubts as to whether it would be possible in practice to close a contract without the vendor becoming aware of the identity of the purchaser.

The Accounting Officer of the Department has stated that the cost of any premium paid above farmland prices should be weighed against the monetary and non-monetary benefits of inviting expressions of interest by public advertisement. He has also stated that the Department did not seek professional advice on the potential impact that advertising its interest in acquiring land would have on the price it would be likely to have to pay. He pointed out that the advertisement seeking offers of sites was intended also to provide some indication of the prices being sought for the type of land that might be suitable for a major prison development. However, these asking prices would be expected to already include a special purchaser premium, and so would be difficult to interpret without corresponding market value amounts.

The Accounting Officer of OPW has stated that he accepts that the approach taken by the Prison Service was reasonable. He has also pointed out that a Part 9 planning application following a confidential purchase would have the effect of conferring on the State, and on no one else, the ability to develop the land. He raised the question of whether the State should use this procedure to confer on itself planning gain and increased value after having paid a much lower price for land on the basis that it had no developmental potential.

Hiring of Advisers

Central government departments and offices must comply with EU Procurement Directives in acquiring professional services, including those of consultants. The Directives require that, where proposed public sector contracts for services are expected to exceed certain threshold values, they must be advertised in the Official Journal of the EU. In 2004 and 2005, the relevant threshold for services procurement was €154,014 (excluding VAT).

In addition to the EU Directives, the Department of Finance publishes guidelines setting out best practice principles and guidance for engaging and managing consultants. These include requirements to seek competitive tenders from a number of service providers, to agree fixed fees for specified services, and to formally review the work done by consultants prior to final payment.

Based on the EU and Finance rules and guidelines, OPW has established a Consultants Selection Committee that considers requests for the appointment of consultants for construction projects. This Committee is also responsible for reviewing the terms of engagement of consultants and their fee levels.

OPW asked CBRE to become involved in the site search around the middle of 2003. There was no tendering for the service and no formal contract. Despite carrying out searches and producing two reports, it was only in May 2004 that CBRE formally wrote to OPW, setting out its fees for proposed professional services required to complete the site acquisition. This was prior to the decision of the Department to set up the Site Selection Committee.

CBRE's cost proposals included fees in respect of site selection study, site inspection and site acquisition negotiations; engineering studies of services, roads and site conditions; and studies of planning issues. CBRE indicated that they planned to sub-contract the engineering and planning studies to named firms of consulting engineers and consulting planners.

When CBRE made its fee proposal to OPW, it was envisaged that only three sites would be assessed as proposed. Consequently, the total fee proposal for the consultancy services was €184,500 (plus VAT and expenses).

By the time the process was completed, ten sites had been assessed by the consultant engineers and planners. As a result, the amount paid to CBRE in connection with the prison site acquisition was €256,506 (plus VAT of €53,866).

The manner in which OPW contracted with CBRE for the provision of professional services for the site selection and procurement did not comply with the rules for procurement of professional services in a number of respects.

The requirement for professional services was not advertised in the Official Journal, even though the total amount paid exceeded the advertising threshold.

There was no competitive tendering for the professional services' contract.

OPW's Consultants Selection Committee was not asked to assist in selecting and engaging the service providers.

OPW did not have a specific written contract with CBRE, which militates against the assessment of service delivery and the determination of the amount payable for those services.

In response to my enquiries relating to advertising and competitive tendering, the Accounting Officer informed me that judgments have to be made on a case-by-case basis on the known facts at the time. The Accounting Officer did not believe that it was necessary that the requirement for professional services should have been advertised in the Official Journal. He said the initial input by CBRE had been on the basis of their carrying out a confidential search for sites. CBRE had already done work for the Prison Service, had been aware of the issues involved and had recent relevant experience.

He also said that, in the case of the prison site, OPW's initial approach had been to acquire the site discreetly. The estimated cost of this service was below the EU advertising threshold. Furthermore, as it was at the time intended to keep confidential the ultimate use of any property acquired, it would not have made sense to have a public procurement for the appointment of professional advisers. When it was decided to adopt a more transparent process, OPW felt that tendering for a new agent at that point would have led to delays and given rise to an unnecessary duplication of effort and cost.

He said that a different approach is taken for property consultants and estate agents than for external consultants required for OPW building and engineering activities. While a list of suitable firms is drawn up on the basis of public advertisements for property consultancy services, OPW reserves the right in the public interest to make appointments from outside the list in specific instances or in circumstances when a special expertise is required or for reasons of confidentiality where the interest of the State should be kept confidential for a period.

He said that the initial approach of the OPW to this case — that the State's interest and purpose of the acquisition be kept secret — was, along with CBRE's relevant recent experience, one of the reasons why a confidential appointment had been made.

In the matter of a contract with CBRE, the Accounting Officer said that the contract was founded upon an exchange of emails between the two parties.

Finally, the Accounting Officer believed that the ongoing oversight and review of the firm's performance by both OPW and the Committee constituted normal and adequate oversight and monitoring.

Evaluation of Site Options

The Prison Service's advertisement asked for offers of sites to be submitted by 23 February 2004. However, this wasn't treated as a fixed closing date (as would be the normal case in a competitive tendering process) and offers received after the specified date were not excluded from consideration. Land purchases are not covered by EU procurement rules, so it was appropriate for the Prison Service to consider offers as they arose, in the interests of maximising competition among potential vendors.

Initial Evaluation

By the end of April 2004, the Prison Service had received a total of 28 offers in response to the advertisement. A further three potentially interesting sites were identified by OPW/CBRE through their search work. The OPW and CBRE assessed all the sites, and produced a short list of three, drawn from those sites which conformed in size and location to what was required. The basis on which the short list was arrived at is not clear. OPW reported to the Department on the short-listing on 20 May 2004.

Given the very significant financial and operational implications for the Prison Service of the site selection, the Department was strongly of the view that the site options needed to be rigorously evaluated in an objective way by people with expertise and experience in all the relevant areas. Because OPW and CBRE did not have the full range of necessary experience and expertise, the Department decided on 27 May 2004 to establish a Site Selection Committee to carry out the evaluation and to record the basis on which the site selection recommendations were made.

Evaluation Criteria

The Site Selection Committee held its first meeting on 1 July 2004, and discussed a site evaluation scheme. Eight evaluation criteria were proposed including cost per acre, general location and accessibility of the site, and shape and size of site. With some minor amendments, the scheme was agreed at the Committee's second meeting on 9 July 2004.

After receiving a letter from the Director General of the Prison Service, the Site Selection Committee revisited the evaluation criteria on 16 September 2004. They decided to drop cost per acre from the evaluation scheme and reallocated the associated marks to the criteria relating to general location and shape/size. Evaluation of sites on and after that date was based on the revised scheme. Sites eliminated from consideration earlier on cost grounds were then reviewed, and some were evaluated against the revised evaluation scheme. Sites eliminated earlier on other grounds were not re-evaluated. Table 23 sets out the evaluation criteria, and indicates the weights assigned to each.

**Table 23 Evaluation criteria and weightings used in site selection process**
Evaluation criterion	Original scheme (9 Jul to 31 Aug 2004)	Revised scheme (16 Sep 2004 to 18 Jan 2005)
	Maximum mark	Percentage weight	Maximum mark	Percentage weight
		%		%
Cost per acre	80	16%	—	—
General location /accessibility vis a vis Courts, other prisons, etc.	60	12	100	20
Proximity to public transport links	80	16	80	16
Availability of emergency services (Fire/Garda/ hospitals)	15	3	15	3
Access/egress options	65	13	65	13
Shape, size, topography of site	100	20	140	28
Availability of services, power, sewerage, etc.	40	8	40	8
Planning/community impact	60	12	60	12
Total	500	100	500	100

Consistency of Evaluation

The Site Selection Committee agreed that sites would have to score a minimum of 40% of the total available marks on all criteria to avoid elimination from consideration.

The Committee eliminated most of the site options on a consensus basis, without assigning evaluation scores, judging them to have failed on at least one of the evaluation criteria. It assigned scores for a total of 13 sites against the evaluation criteria at its meetings on 15 July 2004 (8 sites), 16 September 2004 (4 sites and revision of one site scored earlier) and 18 January 2005 (1 site — Thornton).

The Committee did not record the basis on which scores were awarded to individual sites under the various criteria, even though the criteria were generally amenable to technical analysis and quantification e.g. distance from the centre of Dublin, proximity of public transport services, call out time for availability of emergency services, aggregate estimated cost for provision of services and road improvements, etc. How the information provided by the engineering and planning consultants impacted on the decision making about site selection is also not clear.

Because the basis of the scoring is not recorded, it is difficult to establish whether or not the evaluation of the sites was consistent. For the purposes of this examination, the evaluation scores awarded by the Committee to four of the sites were compared to assess their consistency. To allow comparison between sites marked under the original and revised schemes, the marks awarded by the Committee under each criterion were expressed as percentages of the relevant maximum marks.

The four sites were selected because they were all located relatively near one another, and on or near the N2 national primary road. The sites were

the Open Golf Centre, located between the M50 motorway and Dublin airport — this site received the highest score of all the sites evaluated by the Committee, but the site offer was withdrawn by the vendor in August 2004

a site at Bullstown, just inside the County Meath border, and which was eliminated from further consideration by the Committee on 31 August 2004

the site at Coolquay, which the State offered to buy in November 2004

the Thornton site which the State ultimately bought.

It should be noted that the sites were not re-evaluated as part of this exercise. The objective was to establish whether or not the relative evaluation marks were consistent, not to identify what the ‘correct' marks would have been.

There are a number of respects in which the marks awarded by the Site Selection Committee appear to be inconsistent. For example

The respective distances by road from the sites to the junction of the M50/N2 (and to the centre of Dublin) do not appear to be reflected proportionately in the marks awarded under the general location/ accessibility criterion.

Sites served by the same public bus service got different marks in relation to proximity to public transport; and a site not served by any direct bus service got the same mark as a site that was served by a public bus service.

One site got a significantly lower mark than two others in respect of availability of site services, even though the consultants estimated that the cost of provision of water, sewerage and energy services would be higher at the other sites.

The Accounting Officer of the Department has stated that he does not accept that the use of percentages makes for a valid comparison when different weightings were used and a completely new assessment has been carried out. He stated that the priority was to ensure that each assessment process was internally consistent to ensure a valid comparison could be made between the sites in contention.

Evaluation of Cost

The original evaluation scheme drawn up by the Committee included cost per acre as a criterion, but with a low weighting (16% of the total available score). This created the risk that even very significant differences in cost per acre between site offers might be outweighed by relatively small differences in site characteristics.

The removal of the cost per acre criterion from the scoring system in September 2004 potentially allowed sites to be compared on their respective merits and a relative rank order of the sites on offer to be established. However, some test of the relationship between costs and benefits was then needed to bring cost back into consideration in the site selection process if good value was to be achieved.

The Committee recommended that price negotiations should commence with the vendors of three sites ranked highest in the evaluation carried out on 16 September 2004. Cost wasn't considered at that stage — the Department/Prison Service decided to postpone consideration of cost until actual land prices emerged in negotiations with vendors. However, this resulted in negotiations being opened only on sites where high prices had been sought initially by the vendors.

Better value for money might have been achieved if the Department/ Prison Service had looked at all the sites that exceeded the specified minimum score levels during the full evaluation process, and weighed up whether or not the perceived extra benefits of more expensive sites were worth the additional costs. Options for improving the suitability of the less expensive sites should also have been considered e.g. securing small adjoining properties to regularise overall site configuration.

The OPW has stated that the Site Selection Committee felt strongly that the capital cost of the site was but one element in the overall value equation to be considered for the new prison. It said the Committee considered it vital to obtain the best-configured site so as not to compromise the form of what would be a major State institution with an operating life of probably 150 years. It was the Committee's strongly held view that any layout flaw in the new prison caused by a less than ideal site would cost multiples of the initial site price in lost operating efficiencies over the long life of the prison.

Valuation of Sites

Having publicly advertised its interest, the State had declared its position as a purchaser with a ‘special interest'. Negotiating a successful procurement in these circumstances demanded, at a minimum, that the State agencies maintain competition and equip themselves with key information in the form of a valuation report.

The Department and the OPW have stated that, while they did not seek valuation reports on the properties under negotiation, they comprehensively discussed with CBRE the likely market valuation range for the sites of interest. They recognised that the prices proposed by the vendors would be likely to exceed the respective market valuations by the ‘special purchaser' premium that attached to the sale. The advice of CBRE on the likely valuation range for sites of interest to the Prison Service was not recorded at the time.

Analysis of Land Values

The market value of land is the price it is likely to achieve in an open sale, where the vendor initiates the sale. In such circumstances, the price achieved will usually reflect the productive capacity of the land (and of any associated buildings) and any generally perceived ‘hope value' deriving from the development potential of the land e.g. related to proximity to towns or developing areas, infrastructure, zoning plans, etc.

At the time of its purchase, the main characteristics of the Thornton land relevant to its market value were

it was a large landholding (150 acres)

the land was zoned agricultural, but included a small element of ‘RC' zoned land.

it was situated in a mainly rural setting (the nearest urban centre — Swords — is about 5 kilometres away, via local roads)

there was no access to mains drainage nearby

the land was located 1.6 kilometres from the N2 and had direct access to regional and local roads only

the site was not served by public transport.

A survey of auction results in 2004/2005 for large holdings of agricultural land in the north Dublin and east Meath areas indicates that the prices achieved were in the region of €20,000 to €30,000 per acre. Table 24 sets out a sample of these auction results.

**Table 24 Prices paid for agricultural land in north Dublin and east Meath, November 2004-October 2005**
Address	Size (acres)	Price per acre	Total price
Ballyboughill, County Dublin	86	€29,766	€2,560,000
Garristown, County Dublin	102	€30,293	€3,090,000
The Naul, County Dublin	109	€19,265	€2,100,000
Ratoath, County Meath	238	€26,050	€6,200,000

The degree of developmental potential that might attach to any particular parcel of land, like Thornton, is difficult to assess. Within the north County Dublin area, higher prices have been paid for large parcels of agricultural land, reflecting different degrees of development potential. For example, €68,000 per acre was paid for 73 acres of agricultural land at Turvey, County Dublin, adjacent to the M1 — this land was later zoned industrial.

In areas undergoing large scale urban development, unzoned land can attract much higher prices. For instance

€191,000 per acre was paid for 115 acres of unzoned land at Adamstown, County Dublin, which is an area intended for significant new town expansion under agreed action area plans

€400,000 per acre was paid for 96 acres of unzoned land at Tyrrellstown, County Dublin, which is an area undergoing significant residential development.

The Accounting Officer of the OPW has stated that knowledge of the demographic pressure on the greater Dublin area and a study of the map of north County Dublin and the relative positions of settlements and road networks would confirm that development is likely to reach the Thornton area in the future. His view is that, in assessing its value, a vendor would assign a ‘hope value' to such a holding on the basis that it was only a matter of time before development would be permitted, particularly at a stage when development plans in the greater Dublin area were being revised. He stated that the Site Selection Committee took the long view of the value issue into consideration in the context of the probable 150-year life of the proposed new prison and its place in an expanding city.

Subsequent to the agreement to purchase the land at Thornton, CBRE wrote to the Prison Service on 3 February 2005 stating that "As (we) mentioned to you from the outset, the land being purchased in the Fingal county area by developers speculating on land with the hope of getting those lands rezoned in future development plans, trade at anything from €75,000 to €100,000 per acre.”

CBRE attributed the balance of the cost to the fact that, because the public advertisement of the Prison Service requirements meant that potential vendors knew the identity of the purchaser, there was always going to be a premium price placed on properties being offered for sale by the vendors. This premium, in their opinion was “ . . . purely down to the ‘fall-out’ factor being identified by vendors for the stigma attached of being the vendor of the property for the prison in their locality.”

Ultimately, the price paid by the Prison Service for the Thornton land — around €200,000 per acre — was at least twice the market price at the time for well-positioned agricultural land with development potential in the target area in north County Dublin. While it is acknowledged that the hope value attached to any particular holding may vary according to the subjective assessments of the parties on the prospect and nature of future development, it is likely that the main factor giving rise to the differential between the price paid for the Thornton land and the going rate for similar land in the area was public knowledge of the State as the purchaser and the premium associated with that status.

Negotiation of Purchase

Negotiations with the prospective vendors were conducted on behalf of the State by CBRE, with some involvement of officials of the Prison Service.

There is no official record indicating that the Department/Prison Service and/or the OPW clearly specified to CBRE what the negotiation strategy should be, what the spending limit was or what conditions were to be applied to protect the State's interest. The only evidence of a negotiating mandate is contained in two letters from CBRE to the OPW and the Prison Service on 11 and 22 November 2004, putting on the record the main elements of the proposed State offer to buy the land at Coolquay.

No similar record exists in relation to the State's offer to buy the land at Thornton. However, the cost limit set for the Coolquay offer (i.e. up to €31.5m, as noted by CBRE in their letter of 22 November 2004) may have been treated by the Prison Service as setting the limit of what could be spent in relation to Thornton.

It is noted that the initial approach from the Thornton vendor's agent proposed a price of €210,000 per acre, implying a total asking price of €31.5m for the 150 acres on offer.

Level of Competition

In late September 2004, negotiations commenced with the vendors of three shortlisted sites. These were located at

Coolquay, County Dublin

Sillogue, County Dublin, and

Clonee, County Meath.

However, when the Committee met on 29 November 2004, it was told that the cost of one site had escalated to circa €500,000 per acre, and that the owner of another site was "not open to realistic discussions in relation to cost". Therefore, it had become apparent to CBRE, the Department/Prison Service and OPW that only the remaining option (Coolquay) was a realistic prospect. By the time the Thornton land came into play, that was also the only realistic prospect.

In effect, the State twice ended up negotiating a sale with single vendors, with no effective degree of competition. While the vendors may or may not have been aware of this, the lack of competition weakened the State's negotiating position. The lack of apparent alternative deals on offer may have created a fear on the part of the State agencies that other, better offers were unlikely to emerge.

Disclosure of Connection

On 10 January 2005, the OPW was informed in a telephone conversation with the CBRE representative that he had discovered that he had a distant connection through marriage to the vendor of the Thornton site. Prison Service officials state they were also informed on that date.

The OPW record includes a copy of a CBRE file note written by CBRE's representative dated 12 January 2005. The note states that

The CBRE representative had only become aware of the connection to the vendor on 10 January 2005.

On 12 January 2005, OPW gave him approval to negotiate to purchase the property subject to title, contract, Ministerial approval and Cabinet approval on the basis that the approval should be forthcoming given the comparisons with the Coolquay property.

The CBRE representative, along with two officials from the Prison Service met the Thornton vendor on 12 January 2005 to discuss the possible sale of the land to the State.

The OPW stated that, following the disclosure of the connection, it invoked its internal procedures in relation to declarations of interest or connection in this case. The CBRE representative offered to withdraw from negotiations but the OPW declined the offer, judging that the connection was at a sufficient remove and the process would be damaged more by the withdrawal of the CBRE representative.

Pre-acquisition Procedures

At the time of its offers to buy land at Coolquay and Thornton, the State had not completed certain procedures.

Comprehensive site surveys, which would have taken some months to complete, had not been carried out on either property prior to the purchase offers. In these circumstances, offers to buy are normally made conditional on comprehensive site surveys being carried out.

There was no comprehensive costing in either case of the work that would be necessary after acquisition to enable the site to be used for a secure prison. For example the cost of road widening to serve the Thornton land was not assessed and, in the case of the Coolquay land, the cost of dealing with a recognised site flooding problem was not assessed.

The OPW Accounting Officer has stated that the professional advisers supplied surveys which included all the relevant information and costings required to make a decision on acquisition, and that the successful completion of the Thornton sale demonstrated that no deal breaking issue emerged. He also stated that risks associated with sites and post-acquisition costs were discussed by the Committee prior to offers to vendors being made.

The Accounting Officer of the Department informed me that, although not ruling out the option that the road might be widened in the future, the existing width of the R130 road from the N2 to the Thornton site was assessed as being perfectly adequate.

Completion of Purchase

Following the recommendation of the Thornton site by the Site Selection Committee on 18 January 2005, the Prison Service and the Chief State Solicitor's Office examined title, clarified with the vendor the exact boundaries of the site and prepared a contract for signature. A memorandum for information was prepared for the Government meeting on 26 January 2005, at which the proposed purchase was noted. Department of Finance sanction for the purchase was issued on the same day and the contract for the purchase was signed that afternoon. Ten per cent of the purchase price of €29.9m was payable on signing the contract, with the balance due on closing on 1 October 2005.

Conclusions

The evaluation criteria adopted by the Site Selection Committee, set up to carry out an objective assessment of the sites on offer and to record the basis on which site selection recommendations were made, were relevant to the site selection. However, the available records do not provide sufficient information about the basis for the Committee's assessments, and there are some apparent inconsistencies in its evaluations.

The overarching factor in the high cost of the purchase was the decision to disclose the State's interest in acquiring a site for a prison. This identified the State as a special purchaser with the attendant financial implications for the Exchequer. The fact that the target location was land to the north/north-west of Dublin City, within a reasonable distance of the M50, meant that the asking price for the land would also include an element of hope value, regardless of its current zoning for planning purposes.

OPW initially favoured a confidential approach. The Department, while recognising that a third party strategy might have resulted in a lower site cost, considered that, in principle, the purchase should be open and transparent and that, by publicly disclosing its interest, it would attract a wide range of potentially suitable sites, especially lands not even contemplated for sale by their owners hitherto. The Department also considered that, on a pragmatic level, it might be difficult to close a sale without the vendor becoming aware of the identity of the prospective purchaser in light of the in-depth assessments and surveys that would be needed prior to purchase.

OPW accepted the reasonableness of the Department's decision to disclose its interest and the proposed end-use. It was conscious of the possible implications of the State using a special procedure in the planning law to confer a monetary gain on itself.

Considerable effort was expended in trying to identify and evaluate sites for the new prison. However, identification rounds by the OPW and the invitation of expressions of interest by way of public advertisement did not directly contribute to making available a property that was suitable in all respects for the stated purpose at an acceptable price. One consequence of the process undertaken was the determination of a price, €31.5m, that the Department was willing to pay for the Coolquay site – a purchase which fell through. Subsequently, as a result of a third party contact, the site at Thornton became available for sale at the same price. Ultimately, the Department purchased this site for €29.9m.

The procurement arrangements and, in particular, the use of a public advertisement did not position the State to acquire the land at the lowest cost economically achievable. However, once that approach had been adopted, it was important to have an element of competition in order to try to mitigate upward cost drift. In the event, no real competition on price materialised. Twice during the acquisition process, the State was left negotiating a price with only one potential vendor. This weak negotiating position was not conducive to achieving value for money.

The Prison Service had the freedom under planning law to use agricultural land for development of the prison facilities. The price paid for the site at Thornton is likely to have been at least twice the market price at the time for well-positioned agricultural land with development potential in the target area in north county Dublin. In the circumstances, a well-managed, confidential, third party approach might have allowed the Prison Service to procure suitable land at a much lower price than was paid for the land at Thornton.

The area of land acquired was also greater than that sought by the Prison Service to meet its needs and those of a relocated Central Mental Hospital. While the larger site affords the opportunity for future expansion without further land acquisition, the fact that the land was purchased at a price substantially more than the market price of similar lands calls into question the value obtained from the enlarged acreage.

The purchase of this site raises the question as to whether there is a need for greater consistency in the land acquisition procedures employed by the State for public good projects. In this respect, it is worth noting that under Compulsory Purchase Order mechanisms, prices paid for land required for public infrastructure development are based on market value, while under the mechanism employed in acquiring land for an essential structure like a prison, a considerable premium was paid by the State.

General Views of the Department

The Accounting Officer of the Department, while accepting that in many cases a third party approach may result in the best value for money, has pointed out that the moral and strategic imperatives in the purchase of a site for the most significant prison development in the history of the State imposed special and unique demands. A deliberate and principled decision was taken not to use a third party approach for the purchase of the site both for the practical reasons already outlined but also for ethical reasons particularly where local opposition might be aggravated and the vendor forced to leave the area. He is satisfied that in the particular circumstances, it would not have been possible to obtain a site as suitable as Thornton for any less than was paid. This view is reinforced by the fact that to the best of the Accounting Officer's knowledge no comparable sites closer to Dublin have been sold in the recent past for an amount per acre less than was paid for Thornton.

Members will recall that there were requests in this committee and in the House itself for me to examine the purchase of land at Thornton Hall in north County Dublin before the legal completion of the transaction. I declined to do so on the grounds that I would be involving myself in the administrative process which would not be in accordance with my mandate. However, I undertook to examine the completed purchase in the normal course of my audit and to report my findings in the Annual Report on the Appropriation Accounts for 2005. This is the origin of chapter 4.1, which is before the committee for consideration today.

As is now well known, the Department entered a binding agreement to buy the Thornton Hall site, comprising 150 acres, for €29.9 million on 26 January 2005. This represents just under €200,000 per acre for agricultural land. The purchase was completed later in 2005 when all legal formalities were finalised. We examined how the identification and evaluation of the site options was managed and whether the procurement process was conducted in a manner that would ensure that the State received good value for money.

I concluded that the State paid at least twice what it might have done for land with development potential in the area. I also concluded that a substantial proportion of the premium paid for the land was because the Prison Service advertised publically that it was in the market for a site. These conclusions are supported by the State's own property adviser, who wrote to the Prison Service soon after the agreement to buy the land had been signed. The relevant e-mail stated:

As ... mentioned to you at the outset, the land being purchased in Fingal county area by developers speculating on land with the hope of getting those lands rezoned in future development plans, trade at anything from €75,000 to €100,000 per acre.

It went on to state that since the potential vendors knew the identity of the purchaser, there would always be a premium price placed on property being offered for sale by the vendors. We are at one in this regard.

To fill in some background, the Department and the Prison Service initially set out in 2003 to acquire a site for the prison on the basis of conducting confidential inquiries. The Office of Public Works, OPW, and its property advisers were mandated to identify suitable sites within an area of 25 km to 30 km from the centre of Dublin. The OPW subsequently refined the search criteria and communicated the results of its inquiries to the Prison Service. However, the Department and the Prison Service were unhappy with the outcome and decided to embark on a public purchase process. To this end, in February 2004 the Prison Service placed an advertisement in one national newspaper seeking a suitable site of approximately 100 acres within 25 km of the city centre.

Having assessed the offers received and the other available sites that were known to the OPW through market intelligence, the OPW and its advisers drew up a short list of potential sites in May 2004. At that stage, the Department decided to establish a site selection committee to formally evaluate all offers received. Over the period July to November 2004, the committee examined the properties on offer and sought to carry out price negotiations on three options. Only one emerged as a realistic proposition, that is, a 100-acre property at Coolquay, in north County Dublin. While the State made an offer of €31.35 million to acquire this land, negotiations broke down and the vendor withdrew the property from the market. Shortly after the Coolquay property was withdrawn in December 2004, land at Thornton Hall, approximately 1.5 km from the Coolquay site, was offered to the State through a local auctioneer. The asking price for the 150-acre site at Thornton Hall was €31.5 million, or €210,000 per acre. The outcome of the negotiations was an agreed price of €29.9 million.

While I had some reservations about the consistency of the evaluation of the sites by the site selection committee and about the way the State's property advisers were retained, these matters do not affect the assessment of whether the purchase represented best value for money. That issue centres on whether it was prudent to advertise the State's interest in acquiring a site for the new prison. The Accounting Officer's view was that in principle, the purchase should be open and transparent and by publically disclosing its interest, the Prison Service would attract a wide range of potentially suitable sites, especially of lands not contemplated for sale by their owners hitherto. No doubt, he will elaborate on those views in the course of this morning's proceedings.

I agree it is important that the State acts in an open, honest and fair way in its dealings. However, that does not seem to me to preclude the State from adopting a business-like approach in the interests of taxpayers. The standard approach to purchasing land, whether in the public or private sector, is to do so by way of private treaty or at an auction, either directly or through an agent. There is nothing unethical about this as one is merely following a long-standing convention.

In conducting land acquisition in this fashion, the vendor tends to get the market value for the land so there is nothing unfair about this. On the other hand, once the State identifies itself as the purchaser and bearing in mind that in this case, the purpose of the purchase was disclosed, the inevitable consequence is that it must pay over the odds to a considerable degree. Moreover, the cost differential was accentuated by the lack of competitive tension. The State was left negotiating a price with single potential vendors on two occasions. Putting it as diplomatically as possible, this weak negotiating position was not conducive to achieving value for money.

Chairman

I thank Mr. Purcell. Will Mr. Aylward make his opening statement?

Mr. Aylward

I will put this development in a policy context. Mountjoy Prison is the largest committal prison in the State and the Mountjoy complex represents nearly one third of the total prison capacity in our jurisdiction. It was opened in 1850 and nearly 500,000 prisoners have been held there in the intervening 156 years. While Mountjoy was a model prison in its day, it is now well past its sell-by date. Conditions in the prison have been condemned both by the Council of Europe and our own Inspector of Prisons and Places of Detention. The shocking spectacle of hundreds of men slopping out on the Mountjoy landings every morning, which I have witnessed occasionally, must be ended. The only viable solution is a new prison complex on a larger site to replace the prison with improved facilities, in-cell sanitation and increased capacity both to hold inmates and provide them with positive regime options.

The logic in favour of replacing Mountjoy Prison with a new facility on a greenfield site is compelling. The fabric of the prison building is such that cost-effective refurbishment and the provision of in-cell sanitation is an engineering impossibility. There is insufficient space on the Mountjoy site — 13 acres or so — to provide proper facilities for prisoners or additional capacity. It would be both unjustifiably expensive and very complex to carry out any significant redevelopment while Mountjoy remains operational as a major prison. To use a domestic analogy, it would be like trying to re-wire one's house while keeping the lights on.

Even if it were possible to redevelop Mountjoy, the reduction in capacity would mean another prison would need to be built elsewhere to take the surplus. While every effort is being made day and night to prevent drugs and weapons being thrown into the prison, it is simply not possible to maintain a fully secure environment when there is insufficient space to ensure a sterile buffer zone around the prison to block access to the perimeter wall of exercise yards and other walkways accessible to prisoners.

The interim prisons board, whose members have a considerable amount of business experience between them, was the first to point out, in 2003, the logic of replacing the Mountjoy complex by a greenfield site development. I was then the director general of the Prison Service and was initially resistant to the idea for both historical and sentimental reasons as Mountjoy Prison was so much a part of the fabric of the history of the State. However, the overwhelming logic of the proposition prevailed and I became and remain an ardent supporter of the decision and have become more and more convinced that it was the correct thing to do. The replacement project proposal was considered in due course in the Department of Justice, Equality and Law Reform and was accepted by the Government in February 2004.

The report of the Comptroller and Auditor General focuses in minute detail on the process used to acquire the greenfield site. Subject to a few detailed points which I will deal with shortly, my understanding of this report is that it does not suggest that the procedures followed were incorrect or illegal nor does it suggest that a better site could have been acquired using the same methods at less cost once we were open and transparent about the fact that the site was intended for a prison development. The criticism centres on our openness. I understand that the report's main conclusion is that if a completely different approach had been taken and the fact that we were looking for a prison site kept secret, we might have acquired land at a cheaper price. I understand this argument.

I do not think that we could have obtained such a superb site for significantly less money in this case. I do agree with the Comptroller and Auditor General that experience shows that vendors do add a premium to their price when they know the State, with its deep pockets, is interested in purchasing land from them and that premium is going to be even higher when the site is for a development that may provoke major local, if not national, controversy.

I also agree that there are times when it is appropriate for the State as a purchaser approaching landowners who have not offered their property for sale, to cloak its identity behind a third party when acquiring or renting property. An eminent example is where our colleagues in the Department of Foreign Affairs seek to obtain apartments or offices for diplomatic staff in Northern Ireland. There are clear and compelling reasons the State would work through a third party. However, I completely reject the suggestion that it would be proper practice for the State to conceal from the vendor the reason for acquiring the land when dealing with a project on this scale. Such an approach would be unethical.

I am the Accounting Officer for the Department of Justice, Equality and Law Reform and am here to account for the decision made. This is a very large and controversial project; the largest ever undertaken by the Department in its 85 year history. The project is, of course, subject to intense scrutiny. Experience has shown that any dealings involving large sums of money and land can give rise to all sorts of allegations regarding corruption, people on inside tracks and golden circles. This factor informed my approach from the outset in respect of this project. I resolved and persuaded the Minister that the process should, as far as practicable, be open and transparent so we would never lay ourselves open to the accusation that we had favoured anybody. I persuaded the Minister that we would need to be able to demonstrate to local objectors that the maximum number of available sites had been considered and that no favouritism was being shown to any individual landowner or class of landowners. That was far more important to us than the cash cost of this site.

It may have been inadvertent on our part, but the Comptroller and Auditor General reported to the committee that only one national newspaper was used. We advertised in six national newspapers and I apologise if he gained another impression through some misinformation of ours. Advertisements were placed in the Irish Independent, The Irish Times, The Irish Examiner and three national Sunday newspapers. In securing this site for this very controversial development, we wanted to be able to assure anybody in future that the site was assessed on the basis of objective criteria and that as far as possible, there would be a competitive market, which is not an easy thing to do in respect of a site of this scale in Dublin.

None of these principles could be properly observed without a public advertisement inviting expressions of interest from landowners. In this regard, it is worth citing the public procurement guidelines issued by the Department of Finance, which state that as a general rule, a competitive process carried out in an open, objective and transparent manner should be used when commissioning a major public project. In addition, the State must demonstrably act in good faith in its dealings with citizens.

Despite the fact that the Prison Service is and tries to be a good neighbour, a prison development can provoke a hostile reaction in some sections of every local community where it arises. This hostile reaction can be directed at potential vendors. It is our contention that it would be ethically questionable for the State to put any person in a situation where he or she was tricked into selling land for a prison development and became the object of local hostility, possibly forcing him or her to leave the area as a result. Similarly, it might be considered ethically questionable for the State to profit from insider knowledge and purchase land zoned for agricultural use at an agricultural price in the certain knowledge that it could be rezoned for massive State development at the stroke of a pen.

Moving away from the method of acquisition to the actual price paid, the committee should be aware that the price of land varies enormously in the environs of Dublin. One option open to the selection committee, and perhaps the only option that would be open to a private developer, would be to purchase land already zoned for development. Any such land in the greater Dublin area would at a minimum cost approximately €1 million per acre. Indeed, five acres kept back from the sale by the vendor and marked with a slight portion of hatching on the photograph we circulated was cited by Deputy Jim O'Keeffe, the Fine Gael spokesman on justice, in a press release issued on 27 July 2006 as being worth €1 million per acre. We would not contest this valuation which concerned a tiny corner of the site which was held back by the owner. We were fortunate that we had the option of developing a prison on land zoned for agricultural use. This is because section 181 of the Planning and Development Act 2000 and Part 9 of the Planning and Development Regulations 2001 provide for a special planning regime for certain State developments, including prisons.

Although the option to purchase land zoned for agricultural use was available, that did not alter the fact that the selection committee was looking for a site for a prison development, not a golf course or a farm. Some commentators have referred to Grange Farm, County Meath, which is reported to have been sold for €26,000 an acre. Despite our extensive advertising campaign, this land was never offered to the Prison Service so it was never formally evaluated by the selection committee. We have, however, examined that site. A preliminary examination of the site would show that it is 2 km. further from the centre of Dublin than Thornton Hall. More critically, road access is so poor that it would not meet the minimum access criteria. The site is 5 km to 6 km from the nearest national primary route and must be approached via narrow and winding third class roads. That the site is not suitable for a prison or any major development in the foreseeable future was reflected in its price.

Even land zoned for agricultural use only can attract a high price if it is suitable for development or may be rezoned in the future. The site at Thornton Hall falls into this category. We know of at least ten other sites in the greater Dublin area that were zoned for agricultural use and have been sold recently for prices ranging from €125,000 per acre to €800,000 per acre. We are unaware of any site as suitable for our purposes or as close to Dublin as Thornton Hall that has been sold for less than €200,000 per acre. A local auctioneer interviewed on RTE radio confirmed that he would not have been able to find a similar site closer to Dublin for less money.

We have an excellent site at Thornton Hall. The cost of its purchase is being met in full by the disposal of another prison property at Shanganagh Castle, which is 18 km from the city centre and was used as an open centre for boys aged between 16 years and 21 years. When closed in December 2002, a decision in which I was central, it had held a daily average of only 29 prisoners for the previous four years, effectively operating at less than 50% of its capacity. The building and facilities were becoming increasingly unsuitable for this category of offenders. It is obvious that the Government's decision to realise the value of these lands while providing the majority of the site at a discount for social and affordable housing made real sense.

In 2003, the General Prisons Board took advice on the matter and advised that both Shanganagh Castle and Mountjoy Prison could realise approximately €38 million together, but we recently disposed of the former for €29 million. The Dalymount Park disposal adjacent to Mountjoy Prison has demonstrated the likely value of the prison site when it becomes available as in the hundreds of millions of euro.

The Government took a decision that the proceeds from Shanganagh Castle should be used to offset the cost of purchasing the Thornton Hall site as a replacement for Mountjoy Prison. The expectation was that the sale would cover approximately two thirds of the cost. The Department's prudent management of the prison property portfolio has resulted in the sale of Shanganagh Castle covering the entire cost.

Detailed specifications for the prison complex at Thornton Hall have been drawn up and invitations to tender will issue in the next few weeks to the preferred bidders who have gone through a selection process for the design, build, maintenance and finance of a prison complex through a public private partnership. I expect a contract to be awarded for the new prison facility in early 2007 with construction to commence later that year. The target date for completion is 2010.

I will address issues raised by the Comptroller and Auditor General in his report. He stated: "Available records do not provide sufficient information about the basis for the committee's assessments and there are some apparent inconsistencies in its evaluations". The basis for the marking system, the system itself and the marks recorded are set out in the minutes of the selection committee, the chairman of which is sitting beside me, and comply with public procurement guidelines. The minutes give a brief indication of what was regarded as significant in marking particular sites. The function of marking systems is to allow an objective comparison to be made between the sites being assessed so that they can be arranged in order of merit.

Two separate assessment exercises with different weightings were carried out. Only the site at Clonee was assessed under both systems and it got 288 marks out of 500 in the first assessment and 285 marks out of 500 in the second assessment. Each of the assessments was consistent internally and what has been described as the "apparent inconsistencies" arise only when one tries to compare the marks across the two separate assessment processes. It is analogous to comparing apples and oranges. The Comptroller and Auditor General is not suggesting that the inconsistencies affected the order of merit in any substantive way, but my colleagues can explain the matter in more detail if committee members wish to probe further.

In our advertisements in the six national newspapers, we sought sites of around 100 acres. This was on the basis that a smaller site would not allow sufficient space for a prison complex with a capacity of at least 1,000 prisoners, a sterile perimeter zone to stop drugs, weapons and various contraband being thrown into the prison — such a zone can take up 20 to 30 acres — room for future expansion and 20 acres for a possible site for a new central mental hospital, which deals predominantly with mentally ill prisoners.

From a prisons point of view, the usable land on a site depends on its area and shape. A 100-acre site that is narrow or has an irregular boundary would be of little use to the Prison Service. Therefore, it is never possible to be fully precise in respect of sizes. Some sites offered were more than 200 acres in size. If such a site had been assessed as suitable, the option was to purchase part of it or all of it and sell the unwanted land. In the case of Thornton Hall, 150 acres were offered for sale and the entire site taken. The additional land allows for a lesser profile — we can build two-storey blocks rather than three-storey blocks — a less dense development and scope for future expansion. The design worked up for the purpose of tender specifications does not leave much unused space on the site and I am satisfied that the purchase of 150 acres was a worthwhile investment and will be vindicated in time.

The Comptroller and Auditor General stated that if we had used a compulsory purchase order or if one was used in future, it would hold down the price. To avoid confusion, I would like to put it on the record that no such mechanism was available to us and I am unaware of any that is being contemplated by the Oireachtas. We cannot acquire land by means of a CPO for the purpose of building a prison. The question of whether this power should be introduced is a policy matter on which the committee can express an opinion, but it is only fair to point out to its members that persons affected by a prisons CPO would not have recourse to the planning appeals mechanism available to all other categories of CPO recipients. If someone is trying to take one's land to build a road, one can object through the planning process, but that would not be the case in respect of prisons because of Part IX measures.

Two questions arise in this saga, namely, was due process followed and is the project in the public interest. I am satisfied that an honourable and due process was followed. The procedures used to select Thornton Hall followed appropriate public procurement guidelines and resulted in the purchase of an excellent site. As Accounting Officer, I would not have been happy to use a third party to mask the identity of the purchaser for this project. Furthermore, I am not convinced that it would have been possible to acquire the site for less than was paid and still meet public procurement guidelines.

I have no doubt whatsoever that the project is in the public interest. The disposal of the underutilised site at Shanganagh Castle has paid for the site at Thornton Hall, which is significantly larger and closer to Dublin. It has put us on the cusp of being able to do away with the dreadful conditions and overcrowding in Mountjoy Prison, end the shameful practice of slopping out and provide prisoners with safe and secure accommodation that meets European standards and proper facilities for rehabilitation.

The closure of the Mountjoy Prison complex and its redevelopment will be a major boost for the community in that part of the north inner city. The Mountjoy development, in conjunction with the new metro to run alongside it and developments in the Dalymount Park and Grangegorman areas, will provide a major boost to Dublin's urban renewal. The taxpayer will get the benefit of several hundred million euro from the sale of the Mountjoy site.

Another major public good to emerge from this saga is that the disposal of the Central Mental Hospital site will enable the State to not only fund the building cost of its replacement at Thornton Hall, but a new tranche of investment by the Department of Health and Children in mental health funding in this State, a historically underfunded sector.

We welcome that the Comptroller and Auditor General has examined what was a considerable acquisition at the start of what is a major and crucial State project. While it is possible to speculate as the Comptroller and Auditor General has done as to the effectiveness of alternative approaches that might have been taken to the issue of transparency, it is just speculation and no more.

I hope I have set out our stall. I look forward to explaining to the committee why we took the approach we did.

Chairman

May we publish the Department's statement?

Mr. Aylward

Yes, by all means.

Chairman

Before taking questions I wish to clarify one point. One of the issues was the decision to take an open approach and advertise for sites in six national newspapers rather than retaining an estate agent or going to a public auction to acquire a site without revealing one's hand. That approach had been taken several times in the past. Mr. Aylward stated that he would set matters in the context of policy. He stated that he was resolved to take the open approach and persuaded the Minister to agree to it. Was it a policy decision made by the Minister and not an administrative decision of Mr. Aylward, his officials and the head of the Prison Board?

Mr. Aylward

It was a decision I could not take alone. I knew that at some juncture people would allege we had paid over the odds for the site. I suggested that we would have to defend this decision in the face of a tremendous onslaught against it because of the sheer scale of the project. After discussing the matter, I persuaded the Minister that this was the option to take.

This was a deliberate, strategic, ethical decision.

Deputy Dennehy

We should point out that our brief is to examine the value for money. Policy is outside the remit of the committee even though we stray into the area occasionally. The residents, prison reform advocates, the Prison Service and Deputies will have different priorities but many will dovetail.

I refer to the point made in the report highlighted by the Chairman, the public declaration of the State's wish to buy a site for a prison. The Comptroller and Auditor General's report suggests the land might have been purchased for half the price if a different approach had been taken. That has now become the story on which the media focusses and other matters, such as conditions in Mountjoy Prison are not being addressed. Initially the OPW favoured the secretive, under the radar approach. This changed to a more open approach and Mr. Aylward declared his interest in this respect.

I disagree with the suggestion, from the Comptroller and Auditor General or anyone else, that we should have taken an underhanded approach. It would have gone against what we are trying to implement. Much money has been spent on transparency and openness in dealing with the public, something that the secretive approach would have undermined. We cannot opt out of an issue like this by referring to the money that could have been saved if our interest had been hidden. This is a matter of policy. I disagree with some points made in the report which states:

The Prison Service had the freedom under planning law to use agricultural land for development of the prison facilities. The price paid for the site at Thornton is likely to have been at least twice the market price at the time for well-positioned agricultural land with development potential in the target area in north county Dublin. In the circumstances, a well-managed, confidential, third party approach might have allowed the Prison Service to procure suitable land at a much lower price than was paid for the land at Thornton.

Let us consider the history of the case. The Coolquay site was 100 acres at a cost of €31.35 million. This was approved by the Government on 30 November 2004. This is an obvious benchmark for the area. The Thornton Hall site had half as much land again and was purchased for €29.9 million. The casual observer might congratulate the Department on the purchase. Instead, we are told that it could have been purchased at half the price if a veil of secrecy had been used.

The Chairman has anticipated some of the questions that arise. Was the Minister made aware of the change from the secretive approach to the more open approach? Was this concept easy to sell, knowing that the potential price might double?

Mr. Aylward

The Minister told me that I would take a hit for this on the subject of the price. I replied that we were buying for 150 years and that major controversy would ensue if we purchased the site in secret. The local people would claim the State had acted in a deceitful way. Given the scale of the project, we could not stand over that approach. The biggest criticism we would be subject to was that we had passed over sites that would have been less intrusive and would have had less impact on the community. We had to ensure it was incontrovertible that every conceivable landowner would be flushed out. We were mindful that property development was progressing at a tremendous rate. Land was becoming an increasingly competitive market and we had to let every estate agent know that we were in the market.

We are building for centuries, not for a quick buck or profit. It is a different proposition when the State is involved. This is a unique State development. The Minister was fully aware and debated the matter with me.

Chairman

Deputy Dennehy has limited time.

Deputy Dennehy

I wish to ask Mr. Byers about the role of the OPW. Was the OPW agreeable to the change or was that imposed on it by the Department?

Mr. Byers

We were in full agreement. Once the reasoning behind it was explained to us, we supported it completely. We understand the point the Secretary General made. We support and are happy to go with it.

Deputy Dennehy

Could a compulsory purchase order have been made or was a policy decision taken not to go that route? Did Mr. Aylward state a compulsory purchase order could not have been made?

Mr. Aylward

We do not have that power. It would be a major policy decision by the Oireachtas to confer it on the prisons.

Mr. J. Purcell

It may have come across the wrong way, but we did not suggest it should be done by compulsory purchase order. I will quote the last paragraph on page 70 of the report:

The purchase of this site raises the question as to whether there is a need for greater consistency in the land acquisition procedures employed by the State for public good projects. In this respect, it is worth noting that under Compulsory Purchase Order mechanisms, prices paid for land required for public infrastructure development are based on market value, while under the mechanism employed in acquiring land for an essential structure like a prison, a considerable premium was paid by the State.

The question is raised that if a purchase is for the public good, perhaps it is appropriate that compulsory purchase orders should be used. We do not suggest that in this case a compulsory purchase order should have been used, far from it. Any reasonable reading——

Deputy Dennehy

It is a very clear statement by Mr. Purcell that the process did not comply with the rules for public procurement in a number of aspects. It is a matter the committee must pursue to determine who is correct. It is a very serious matter and I do not wish to interrupt the flow of questioning on it. For that reason, I will refrain from asking questions about Spike Island at this stage. However, I would be grateful if we could return to the issue later.

I am concerned at suggestions that the purchase was underhand and that the prison will be fobbed off on the public. That has happened with other facilities which people do not wish to have in their areas. It is a question of policy to which we can return at a later date.

Deputy Boyle

I was very surprised that Mr. Aylward made no reference in his opening statement to the decision regarding the Coolquay site. One of the central issues in the Comptroller and Auditor General's report is that the decision must have come through the site selection committee, been approved by the Department and, subsequently, the Government. Coolquay is a 100-acre site. All through the process, it seems it was determined that 100 acres was needed and was sufficient, which begs the question as to why a 150-acre site was subsequently purchased. The main concern surrounding the decision is that the Government made its decision on 30 November, when the sale price was €31.35 million. It appears that on that date the owner of Thornton Hall withdrew the site from sale. Subsequently, he made his site available for purchase by the Department of Justice, Equality and Law Reform. The question remains as to how that approach was made. How was the knowledge gained as to what the interest of the Department was with regard to purchase prices? The fact that the price initially sought for Thornton Hall was €35.5 million, subsequently reduced to €29.9 million, raises very serious questions as to whether information on a Government decision was made known to those who had an interest in selling and purchasing property.

Mr. Aylward

Deputy Boyle

I introduce for consideration a letter in the possession of the committee, a copy of which would have been received by Mr. Aylward. The letter is from Mr. Paddy Spain who describes himself as a qualified chartered accountant and a Fellow of the Institute of Professional Auctioneers and Valuers with 40 years of experience, having been a former partner in Lisney and Spain Courtney Doyle. In the letter Mr. Spain outlines his knowledge of the area in question and his belief that at the time the market value of property there was €25,000 per acre. He also enclosed a submission to the committee, a copy of which I presume was received by Mr. Aylward, comprising a table that sets out a number of land sales in the area between March and October 2005, including Ballyboughal where the price per acre was €34,375, Hollywood where the price was in the region of €30,000 an acre, and Garretstown where the price was €43,000 per acre. A site in Turvey which is located north of Swords between the N1 and M1 and which has significant development potential was sold in March 2004 for €67,700 per acre, the highest price of any of the developments listed in the table. By any benchmark, these figures are well below the price eventually paid by the Department.

Deputy J. Higgins

For clarity, it was asked by me, among others, at a very early stage that the Comptroller and Auditor General would carry out his investigation, which he declined at that stage to do. There is no mystery about that.

Deputy Fleming

In my opening comments to the witnesses, I wish to quote a letter which came from the Rolestown St. Margarets Action Group, dated 8 October to this committee. The opening paragraph states: "Deputy Noonan, further to our previous correspondence in September 2005, we wish to highlight [two points are referred to] ... our belief that Thornton Hall is a totally unsuitable site for a development of this size and scale".

I fully understand that the residents there do not want a prison in their area. It is a fact of life that most people do not want most things in their backyard. I speak from a position where I represent Portlaoise town, which is probably one of the biggest prison towns in Ireland. Portlaoise Prison is the highest security prison and there is also the relatively new Midlands Prison. I would advise people to come to Portlaoise and they will see it does not cause issues which people may be concerned about.

I am of the view that had the State acquired that land for a euro an acre, there would be the same level of objection from the residents today as there have been because the price was €200,000 an acre. The letter from the Rolestown St. Margarets Action Group sets out the view that Thornton Hall is totally unsuitable for this development. This debate is not about whether the State paid too much, it is about the fact that people do not want the prison at this location. Understandably people will use every method at their disposal to justify an objection when they are opposed to the location of something in an area, be it a mobile phone mast to a landfill site to a prison to social housing to a halting site.

I can certainly come back to openness and transparency and public procurement guidelines at the end of the meeting.

Deputy J. Higgins

I have to comment on Mr. Aylward's projection that the prison will continue to represent good value in 150 years. Many prisoners in Mountjoy came from conditions of social and economic devastation and I hope in 150 years this will not be the case in our society. The prison may be redundant at that stage.

I am disturbed by the interventions of some members, who have subverted the role of the Committee of Public Accounts. Deputy Fleming said the debate was not over cost or value for money but something else. I remind the Deputy that the role of this committee is to see that taxpayers' funds are properly applied and it is the duty of members to ask hard questions, rather than throw floral bouquets at whoever spent the money.

The advertisement seeking land carried a closure date of 23 February 2004. Was that date ever changed?

Mr. Aylward

I will ask Mr. Martin to respond to that.

Mr. Martin

Deputy J. Higgins

Do not try to make a fool of me. What is written is written. I have to press on because I am not able to get to the bottom of that issue.

The report of the Comptroller and Auditor General quotes from CBRE in February 2005, justifying the price most likely. It quotes a letter to the Prison Service. "As we mentioned to you from the outset, the land being purchased in the Fingal County area by developers speculating in land with the hope of getting those lands rezoned in future development plans, traded anything from €75,000 to €100,000 per acre." The justification for the additional €100,000 per acre is as follows. In CBRE's opinion, this premium is, "purely down to the fall-out factor being identified by vendors for the stigma attached of being the vendor of the property for the prison in their locality". We have an extraordinary development of €100,000 per acre being attached for stigma. Stigma is a state of mind. Which eminent psychiatrist was asked about this? If we quantify it for the farm in general, it means €15 million towards the purchase of Thornton was for ameliorating stigma. Every landowner in the country must be screaming to be stigmatised so that they can get such a fortune for their land. That is completely ludicrous, Mr. Aylward, is it not?

Mr. Aylward

To pick up on the Deputy's last comment, a strikingly small number of landowners seem to have been willing to put themselves through this potential stigma. That is an important point.

In my opening remarks, I referred to an issue that was in my mind that if we had covertly approached someone and had our agent pretend it was for a purely commercial development, this person could have been subjected to the odium of his neighbours. I did not want to put a price on that, but it was an issue for us and I felt it could have led to subsequent litigation where someone would allege they were deceived. The Part IX element could have been constitutionally challenged. I did not feel this was a risk worth taking.

Contrary to what the Deputy has just said, we ultimately were not able to rustle up any parcel of land of this size as close to a road or motorway for half the price we eventually settled on.

Deputy J. Higgins

Why did you not come back to Coolquay when it came back onto the scene?

Mr. Aylward

As I understand it, the owner decided he did not want to live with the public odium of selling it to us. He also had an issue about his taxes. Mr. Martin was managing the project, perhaps he can expand on it further.

Mr. Martin

The owner of Coolquay never re-offered the land. He indicated that he was still considering it. The day before we bought it, he said he wanted to postpone the sale and think about it further. He then formally withdrew it through his solicitor and never formally offered it again. I believe he had informal discussions with our agent, who asked him whether he was formally offering the land. He was not willing to do so. That land was not on the market. In any event, the site at Thornton received better marks and was cheaper per acre than the site at Coolquay. Even if the latter site had been put back on the market, the selection committee still would have recommended Thornton ahead of Coolquay. This is to clarify that point.

Deputy J. Higgins

I have many other questions and will ask them together. To Mr. Martin's knowledge, the site became available just before Christmas and by 12 January, a deal had already been agreed. Six days later, on 18 January, the site selection committee agreed to it and eight days later, a contract for the purchase was signed. This seems to be an extraordinary and imprudent speed with which to sign off on the matter, that is, a few weeks after the land first came to the knowledge of the various parties.

While I do not have time to quote the documentation, earlier in 2004 the site selection committee had demanded that any site would be obliged to undergo the most rigorous testing to ascertain its suitability, including boreholes and so on. This was not done and it was impossible to perform such rigorous site testing etc. The committee also made the point that a flaw caused by a less than ideal site by virtue of a lack of proper testing could cost a great deal more subsequently, thus making the point that there should be comprehensive test analysis of the site. What changed?

Mr. Martin

I will reply to this. Yes, we acted with speed. Normally we are criticised for acting too slowly. However, we did not act with extraordinary speed. While the agent was given authority to negotiate a price, that was subject to acceptance by the selection committee and subsequently by the Government. However, it got the same survey as the other sites and I have a copy of the survey report to hand. It was surveyed in the same manner and was assessed in the same way by the committee. The committee was conscious that the site we had identified as the best site in the appraisal was sold under our noses because we did not act quickly enough. Carrickmines Castle was in our minds at the time because of the delay to the motorway. Under the circumstances, while we were very conscious that we had to check out the site, we were happy that all the necessary surveys were carried out.

To clarify, a second level of surveys must be carried out. Members who view the photograph of Coolquay will see destructive testing. Effectively the land ends up like a battle site because holes are dug all over it. The performance of the next level of survey would have been so destructive that no owner of land would allow one to do it. I do not know whether this aerial shot has been circulated, but members can see all the holes. This constitutes the next level of a survey. We would not have been able to induce any landowner to allow us to do this on the off chance that we might buy the site afterwards.

Deputy J. Higgins

As €15 million of the price was for odium, it is hardly sustainable that it would be snatched from under the Department's nose unless an incinerator or something similar was to be put in there.

Mr. Martin

Another site that we felt was dearer than the site in question was snatched from us for a higher price. People are willing to pay a great deal of money in the Dublin area.

COMMITTEE OF PUBLIC ACCOUNTS díospóireacht - Thursday, 26 Oct 2006

2005 Annual Report of the Comptroller and Auditor General and Appropriation Accounts.

Mr. Seán Aylward

Mr. Fred Foster

Mr. David Byers

Mr. John Purcell

Mr. Aylward

Mr. Aylward

Mr. Aylward

Mr. Aylward

Mr. Aylward

Mr. Aylward

Mr. Aylward

Mr. Byers

Mr. Aylward

Mr. J. Purcell

Mr. Foster

Mr. J. Purcell

Mr. Byers

Mr. Aylward

Mr. James Martin

Mr. Byers

Mr. J. Purcell

Mr. Aylward

Mr. Martin

Mr. Martin

Mr. Martin

Mr. Martin

Mr. Martin

Mr. Martin

Mr. Martin

Mr. Martin

Mr. Martin

Mr. Martin

Mr. Martin

Mr. Martin

Mr. Aylward

Mr. Aylward

Mr. Aylward

Mr. Aylward

Mr. Aylward

Mr. Aylward

Mr. Brian Purcell

Mr. B. Purcell

Mr. B. Purcell

Mr. Martin

Mr. Aylward

Mr. Aylward

Mr. Aylward

Mr. J. Purcell

Mr. Aylward

Mr. Aylward

Mr. Aylward

Mr. J. Purcell

Mr. J. Purcell

Mr. J. Purcell

Mr. J. Purcell

Mr. J. Purcell

Mr. J. Purcell

Mr. Aylward

Mr. Martin

Mr. Martin

Mr. J. Purcell

Mr. J. Purcell

Mr. Aylward

Mr. Martin

Mr. Martin

Mr. Martin

COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 26 Oct 2006