COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 10 May 2012

National Roads Authority, 2010 Annual Report and Financial Statements

Mr. Tom O’Mahony (Secretary General, Department of Transport, Tourism and Sport) and Mr. Fred Barry (Chief Executive, National Roads Authority) called and examined.

Chairman

I remind members, witnesses, those in the Public Gallery and members of the press to turn off their mobile telephones. The interference from mobile telephones affects the sound quality and transmission of the meeting.

I wish to advise witnesses that they are protected by absolute privilege in respect of the evidence they are to give the committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against a Member of either House, a person outside the House, nor an official, by name or in such a way as to make him or her identifiable.

Members are reminded of the provisions within Standing Order 158 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.

I welcome Mr. Tom O'Mahony, Secretary General, Department of Transport, Tourism and Sport and invite him to introduce his officials.

Mr. Tom O’Mahony

I thank the Chairman. Ms Doreen Keeney is the principal officer in the public transport investment and rural transport division. Mr. Dominic Mullaney is a principal adviser and heads up our roads division and Mr. Fintan Towey is our finance officer.

Chairman

I welcome Mr. Fred Barry from the National Roads Authority, NRA, and invite him to introduce his officials.

Mr. Fred Barry

I am Fred Barry. With me is Mr. John Maher, head of finance and administration and Mr. Michael Kennedy, head of PPP finance and tolling.

Mr. Ronan Gallagher

I am Ronan Gallagher from the Department of Public Expenditure and Reform.

Chairman

I invite Mr. Andy Harkness from the Office of Comptroller and Auditor General to introduce the report.

Mr. Andy Harkness

The appropriation account for the Department of Transport records payments of €2.7 billion in 2010. A total of €426 million of this outlay was recouped from the local government fund. Most of the Department's expenditure is incurred on road improvement and maintenance - €1.6 billion of the total. The other major areas of expenditure are €614 million on the public transport investment programme and €289 million on the provision of public service transport by operators.

Included in the outlay on roads is an annual investment programme for the construction, maintenance and improvement of regional and local roads by local authorities. In 2010 €411 million was provided to local authorities under the programme, €300 million of which was spent on road construction and improvement. The remaining €111 million was provided for road maintenance and management. Responsibility for the administration of the investment programme transferred to the National Roads Authority from the Department in late 2009 with the intention of obtaining improved efficiencies. The authority's main role is to provide technical support and guidance to local authorities and to process payments under the programme.

Chapter 27 of the annual report looks at one aspect of that administration, specifically the cost of surface dressing funded from restoration maintenance grants. The chapter outlines the initial efforts by the Department and the authority to get behind the variation in costs across the various local authorities. Outside the Dublin area these varied from €3.78 to €10.87 per sq.m in the case of regional roads, and €2.72 to €11.53 per sq.m for local roads.

As the Accounting Officer has pointed out, apart from supply factors there are a number of reasons the variations may be occurring including the proportion of urban and rural roads within counties and catering for roads with different traffic volumes. Ultimately, the achievement of value for the State's outlay and that of local authorities will depend on categorising these situations and responding to each in the most effective way. The establishment of benchmark levels based on maximum unit costs above which explanations are required together with the application of financial penalties, in instances where a sufficient explanation has not been provided is a good start that should allow the Department to refine its funding policy based on more detailed information. In the longer term, the evolution on the basis of cost-benefit analysis of the more effective solution to different road-maintenance challenges and the establishment of an efficiency target at national level may be further refinements worth considering.

Chairman

I invite Mr. O'Mahony to make his opening statement.

Mr. Tom O’Mahony

I have given the members briefing material in advance in accordance with the new procedures the committee instituted. I hope it is helpful. If members have any comments to make on the content of that material, or how it might be better presented, I will be happy to hear them directly or from the clerk at a later stage. In accordance with the procedures, my comments will be quite brief.

With regard to Vote 32, on transport, in 2010 the Department's total expenditure totalled €2,739 million, of which €2,061 million was capital expenditure and €678 million current expenditure. A technical supplementary estimate was approved by the Dáil to provide for a reallocation of funding during the course of the year, mainly to avail of savings arising under the provisions for smarter travel and the Derry-Aughnacloy Road in Northern Ireland and to apply them to fund additional expenditure in the maritime area and on regional airports. The overall expenditure outturn represented a saving of just under €19 million of the funding allocated by the Dáil, which is less than three quarters of 1%.

On the capital side, the main areas of expenditure were road improvement and maintenance, public transport investment, maritime safety and Irish Coast Guard.

In 2010, a total of €1,414 billion was spent on road improvement and maintenance. The National Roads Authority successfully delivered the major inter-urban routes connecting Dublin to Waterford, Cork, Limerick and Belfast by the end of 2010. The final piece of that jigsaw, the final section of the M7, was opened to traffic on 22 December 2010.

In 2010, €43 million was spent on public private partnership projects, PPPs. The final remaining projects in the first PPP programme were completed and opened to traffic. These include the M3 Clonee-Kells PPP, the N7 Limerick tunnel, the N7 Portlaoise-Cullahill-Castletown PPP, and phase 2 of the M50 upgrade. In addition, three service areas were opened under a PPP arrangement, at two locations on the M1 and one on the M4. The high-quality motorway network now in place will contribute significantly to supporting our national competitiveness, job creation and the achievement of more balanced regional development well into the future.

In regard to regional and local roads, a total of €300 million was invested in 2010. This investment was primarily aimed at the improvement and maintenance of the regional and local road network. These amounts are intended to supplement local authorities' own resources as the local authorities have statutory responsibility.

In 2010, the Department spent €614 million on the public transport investment programme. Of this, expenditure on the greater Dublin area accounted for €388 million. That money was channelled through the NTA, which provided €195 million to larnród Éireann for a range of projects, the major ones being the Navan rail line, accounting for €69 million, rolling stock, accounting for €38 million, and the Kildare route project, accounting for €33 million. Some €110 million was expended on light rail and metro projects for which the RPA is the implementing body. The main elements were the Luas extensions to Cherrywood, Citywest and the Docklands. Expenditure in this regard was €78 million. Some €15.6 million was spent on Metro north. The NTA provided €37 million for traffic management grants in the GDA in 2010. The funding was deployed to QBC and bus priority infrastructure projects, cycling facilities, traffic calming, computerised traffic signal control systems, etc.

Expenditure on public transport safety and development outside the GDA was almost €198 million. The major area of expenditure was the railway safety programme, which accounted for €108 million. Some €29 million was spent on rolling stock and €17 million on the western rail corridor.

Other public transport projects incurred expenditure of €28 million, including the public transport accessibility programme, regional bus priority measures, integrated ticketing and preparation for the Marlborough Street bridge, which is now in construction.

Some €20 million was spent on investments in the maritime area. The main area was coast guard buildings and equipment. This included a payment due on commencement of the production of a new build S92 helicopter for the Irish Coast Guard's search and rescue helicopter service. The new contract required an up-front capital payment to achieve a reduced monthly standing charge. In addition, €3.6 was spent on remedial works at regional harbours.

Current expenditure in 2010 was €678 million. One of the areas in question was road improvement and maintenance, in respect of which we spent €222 million, exactly half of which, €111 million, was spent on the maintenance of regional and local roads. Some €52 million was spent on the maintenance of the national road network and €43 million on PPP operational payments. NRA administration costs amounted to €15 million.

Some €289 million, rather than the €289 referred to in the advance briefing, was spent on public transport. I apologise for the error. Of this expenditure, rail services accounted for €155 million and Dublin city bus services accounted for €76 million. Some €45 million was spent on provincial bus services. These were PSO subvention payments. The rural transport programme accounted for €11 million while green schools programme funding was just below €2 million.

Since December 2009, the funding of the PSO services has been governed by public transport contracts between the National Transport Authority and the three CIE operating companies.

The other major areas of current expenditure under my Department's Vote in 2010 were maritime safety and the Irish Coast Guard, in respect of which the figure is €45 million. Road safety agencies and expenses accounted for €28 million and regional airports accounted for €20 million.

With regard to Chapter 27 of the Comptroller and Auditor General's report, relating to regional and local roads, I have given the committee specific briefing material. I will not devote time at this stage to adding to it. I will be very happy to respond to questions. If I do not have the relevant material with me today, I will furnish a note to the committee as soon as possible.

May we publish Mr. O'Mahony's opening statement?

Mr. Tom O’Mahony

Yes.

Chairman

I call Mr. Barry of the NRA to make his opening statement.

Mr. Fred Barry

I am grateful for the invitation to appear before the committee today to discuss the National Roads Authority's accounts for 2010. As with the Secretary General, we have furnished some information in advance and, as with the Department, we will be very happy to amend it or change its style to meet the committee's needs. This was our first time to submit it so we would welcome feedback on it.

The authority has succeeded in modernising much of the national primary road network over the past decade, with benefits including much safer driving conditions on the improved roads, reduced journey times, reduced wear and tear on travellers and vehicles, and environmental improvements. The safe and efficient management of this network is now one of our core activities. The authority has specific statutory responsibilities in this regard arising not only from Irish legislation but also EU legislation, the most recent addition to which is the road infrastructure safety directive, transposed in 2011.

The NRA also manages a tolling business worth €100 million per year and provides a clearing house for all toll operators. In addition to normal customer service and commercial considerations, the European electronic toll service directive is adding complexity to what is already a fairly sophisticated business model.

It is vital that we maintain the value of the billions of euro invested in the network in recent years. To this end, we have, with local authorities, hundreds of bridge renewal and pavement strengthening works and similar rehabilitation works in construction every year. Most of the national secondary network routes are deficient in terms of capacity, safety and alignment. We have, in 2012, over 50 local improvements in planning or construction. Those that cannot be built this year, due to funding constraints, will be built as soon as funding permits.

We have a number of major schemes in construction. However, given the continuing reductions in funding planned for 2013 and beyond, we will be dependent on PPPs to provide the construction funding for any major works after this year, at least until the economy recovers and normal funding resumes.

We are very pleased that the Comptroller and Auditor General, who audited our 2010 accounts, noted that the accounts give a true and fair view of the state of the authority's affairs as of 31 December 2010, and of its income and expenditure for the year then ended, and that proper books of account have been kept by the authority. If members have questions we cannot answer today, we will give a written response in a day or two.

Chairman

May we publish the opening statement?

Mr. Fred Barry

Please.

Deputy Paschal Donohoe

I welcome all the witnesses. I will focus primarily on Mr. O'Mahony from the Department of Transport, Tourism and Sport. Due to the varied nature of his responsibilities and the number thereof, he has been a frequent visitor to the committee, about which I am sure he has mixed feelings. I welcome him back.

Mr. Tom O’Mahony

It is always a pleasure.

Deputy Paschal Donohoe

I thank Mr. O'Mahony for the material he furnished in advance of the meeting.

The unit cost of road resurfacing is touched on in the Comptroller and Auditor General's report. It goes through it by local authority area, the costs per square metre of work done and the trend over time. Figure 125 of volume 2 of the 2010 Comptroller and Auditor General's report sets out the average costs for the Dublin area and the rest of the country from 2008 to 2011. What struck me when I checked these figures was the unit cost per year went up until 2011 as opposed to going down. For example, in 2008 the average cost outside of Dublin was €4.61 per sq. m. but by 2010 that had gone up to €4.96 per sq. m. In Dublin in 2008, the cost went from €22.20 per sq. m. to €27.53 in 2011. In percentage terms, this means average costs outside Dublin went up by 18% while the average cost in Dublin went up 24%. This was at a time when construction costs were falling. The most recent information I got on this was from a Society of Chartered Surveyors Ireland report in 2010 which stated unit costs in construction had gone down by 31.8% since the peak of 2007. Why did the costs of resurfacing increase at this time?

Mr. Tom O’Mahony

This is an area in which averages can be very misleading because there is no such thing as an average job. The nature of the resurfacing or restoration work that may have to be done on a road will depend completely on where the road is, the type of damage that has occurred and the type of traffic management measures that will have to be put in place while the work is going on. If the surface of a road is in poor condition, it will cost significantly more to resurface. If polymer modified bitumen emulsion has to be used, it will be more expensive. If the road is in an area where extensive traffic diversions are going to take place, the cost of the job will increase rapidly. If the job is in an area where the work can only be done at night time or the weekend because the road cannot be closed for too long, that will increase costs too. Without having a detailed analysis of what roadworks underlay all of these figures in 2010, it is hard to explain the increase. It strikes me that with a table in which one year is out of kilter, the explanation has to be that there were significant differences in the nature of the work done.

More importantly, the question that arises from the Comptroller and Auditor General's report is what are we doing to ensure the taxpayer does not overpay for road work. In 2011, all local authorities were issued with a new memorandum on grants for local and regional roads which commenced the process of establishing maximum unit rates but different rates for different types of work. As part of its role, the National Roads Authority gets local authorities to provide unit costs for the maintenance of regional and local roads. If a local authority exceeds the maximum unit costs, an explanation is sought as to why. The explanation may be satisfactory because it may touch on the various factors to which I referred earlier.

If the explanation is not satisfactory, the local authority is asked to revise its planned works in three weeks to bring costs below the maximum limit. If it does not do that, then the grant is reduced.

Deputy Paschal Donohoe

I got that from the briefing material submitted to the committee. I accept there is no such thing as an average job and the significant diversity of our road network. However, my point still stands. In 2009 and 2010, the economy was experiencing the largest collapse of construction activity in the developed world. As a result, costs were falling. Between 2009 and 2010, the average cost of road resurfacing went up, however. Outside of Dublin the costs went up by 10% and within Dublin, it went up by nearly one third from €18 to €27. This is at a time when costs in the construction sector were in free fall. I am struck by this significant disparity. Did anyone point out how this was unusual?

Mr. Tom O’Mahony

The person who looked at this is Mr. Mullaney, our expert and principal adviser on this, and who happens to be sitting next to me. He is an engineer and has been working on roads projects for a long time. If the committee wishes, I will ask him to provide the technical detail on this matter.

Mr. Dominic Mullaney

The answer lies in two parts. First, there was an increase in the price of bitumen, a major factor in cost fluctuations. Second, there is a health and safety aspect. In 2007 more stringent requirements were introduced that would have increased the cost of an average resurfacing job from 5.5% to 11%. Another factor is the type of work that was done. This was one of the principal reasons for bringing in the cap and ensure what was paid under restoration-maintenance was not road rehabilitation. We wanted the grant to be used in a preventive way. If a council had a bad road, there was a tendency for it to do more than surface dressing and start repairing it. That was a major factor in the past as to why unit costs were particularly high in some local authorities.

Deputy Paschal Donohoe

Would that explain an increase of nearly one third between 2009 and 2010 in the Dublin area?

Mr. Dominic Mullaney

I suspect it is a combination of all the factors to which I referred, the price of bitumen and health and safety. There is also the fact that in certain cases local authorities were trying to do their worst roads, but failing to take account of the fact that surface dressing is essentially a preventative treatment. Those roads that they were trying to do out of it should in fact be done under the restoration programme.

Deputy Paschal Donohoe

That may explain the trend I am seeing there. By how much did the price of bitumen increase during that period?

Mr. Dominic Mullaney

We did some calculations but I do not have the figures to hand.

Chairman

Mr. Mullaney could send them on.

Deputy Paschal Donohoe

I ask Mr. Mullaney to provide us with a note on any other germane factors that we have not addressed. The disparity is striking. In a period when construction costs were reducing so rapidly - I have information indicating a reduction of one third - costs for road maintenance work were increasing. I would welcome an update on any factors that we have not discussed which might explain it.

Mr. O'Mahony touched upon what is being done to bring greater uniformity and accountability in the use of taxpayers' money. Mr. Mullaney mentioned the memorandum issued by the National Roads Authority. I presume that is the process referred to in paragraph 27.12 on page 393 of the report, referring to the first circular sent in December 2010 and the second circular in February 2011.

Mr. Dominic Mullaney

Yes, there is the memorandum. It contained the information regarding maximum unit costs but this was reinforced in the circular.

Deputy Paschal Donohoe

So that is roughly what we are talking about. That makes sense given the discussion we have just had about unit costs. Given that the circular was sent out in February 2011, what information has the Department received from local authorities regarding their adherence to it? Have we reduced the grant to any local authority whose costs exceeded the unit cost target?

Mr. Dominic Mullaney

We have analysed what the costs were. It has not been necessary to take money back on the basis that they complied. I think in 2011 there were nine local authorities that were above the maximum rate.

Deputy Paschal Donohoe

Yes.

Mr. Dominic Mullaney

When one isolated the surface dressing work from the other more significant work where they were passing through urban areas, the unit rate did comply for surface dressing. So what was bringing it up was the work they were doing in, say, an urban area where surface dressing is not appropriate.

Deputy Paschal Donohoe

Up to this point it has not been necessary to reduce the grant to any area because they have been hitting the targets or if they are exceeding them, the Department has been satisfied with the explanation.

Mr. Dominic Mullaney

That is correct.

Deputy Paschal Donohoe

Did Mr. Mullaney say that nine local authority areas were exceeding?

Mr. Dominic Mullaney

Yes.

Deputy Paschal Donohoe

Which local authorities were they?

Mr. Dominic Mullaney

The information I have with me relates to the 2012 figures. We would have details of the nine, obviously, back in the office.

Mr. Tom O’Mahony

We will include that in a note as well.

Deputy Paschal Donohoe

Did Mr. Mullaney just say he had figures for 2012?

Mr. Dominic Mullaney

Yes. We have asked them to predict 2012 once they got their grant figures. It is subject to review at the end of the year. We would have the figures for the nine.

Deputy Paschal Donohoe

I welcome that. The table we have refers to 2010 and I presumed Mr. Mullaney was talking about 2011. However, he is in fact talking about this year. So the Department already has the unit cost per local authority area.

Mr. Dominic Mullaney

Yes. There are 29 county councils. Eight have not given us returns yet while the remainder have. Sixteen of the 21, which have returned material, are fully compliant and they have not gone outside the surface dressing material. The balance have, but they have given us explanations and they are satisfactory.

Deputy Paschal Donohoe

I wish to focus on the performance of the Dublin local authority areas. Paragraph 27.11 states that across the three Dublin areas there is a large spread in cost with Dún Laoghaire-Rathdown paying €50.75 per sq. m in 2010; South Dublin is paying €22.56 per sq. m and Fingal is paying €9.27 per sq. m. That is a huge variance in unit costs. What would drive it?

Mr. Dominic Mullaney

There is a reason. Essentially Fingal carries out significant surface dressing work and the others do not. South Dublin has sent in a return for this year and all the work is stone mastic asphalt.

Deputy Paschal Donohoe

What is stone mastic asphalt?

Mr. Dominic Mullaney

It is surface course such as one would see around the city. It is a bit like hot rolled asphalt with pre-coated chips. It is a similar type of material.

Deputy Paschal Donohoe

That variation is explained by the kinds of roads being redone and the material that is being used for it.

Mr. Dominic Mullaney

Yes. Essentially Fingal has a large enough percentage of rural roads even though it has urban areas, whereas the other two are almost all urban.

Deputy Paschal Donohoe

I understand. Is the variation between those costs still as pronounced?

Mr. Dominic Mullaney

There would be still a significant difference, yes. Dún Laoghaire-Rathdown is down considerably and Fingal is also down. All of them have come in with lower rates this year.

Deputy Paschal Donohoe

I refer to the table with the average resurfacing costs. Mr. Mullaney mentioned the up-to-date figures he has. Does he have 2012 figures for the average cost outside Dublin and average cost in Dublin?

Mr. Dominic Mullaney

Rather than waste time here, I would have to give that to the Deputy in a note. As I say, we have returns from 21 out of 29 so those figures are available.

Deputy Paschal Donohoe

If Mr. Mullaney could supply that I would be grateful. The projected figure for 2011 was €4.27 for outside Dublin and €19.52 for Dublin. Does he have an actual as opposed to a projected figure for that now?

Mr. Dominic Mullaney

I have not, but we can give it to the Deputy.

Deputy Paschal Donohoe

If Mr. Mullaney could supply that, it would be helpful.

I wish to ask about the status of the merger of the Rail Procurement Agency and the National Transport Authority. From the Department's website I got the summary of the regulatory impact analysis, which outlined the options for what might happen and the associated savings. Where does that stand?

Mr. Tom O’Mahony

The Minister will shortly be bringing proposals to Government. So I cannot go beyond that at this point, as the Deputy will understand. It will be going to Government for decision, I would think, in the next four to six weeks

Deputy Paschal Donohoe

So that is imminent. Given that I have brought myself into a cul-de-sac, I will change tack. The local integrated transport services project, which is the integrated ticketing project-----

Mr. Tom O’Mahony

No. They are two different things.

Deputy Paschal Donohoe

Are they?

Mr. Tom O’Mahony

Yes. The local integrated services is taking what was the rural transport scheme and looking to integrate that with school transport, non-emergency transport and so on.

Deputy Paschal Donohoe

I thank Mr. O'Mahony for explaining that. I took the opportunity to peruse the MVA Consultancy report, which is contained on the Department's website and which provides some commentary on where matters stand at present. One of the issues on which this report focuses is trying to integrate transport in the context of the HSE and local transport providers. On previous occasions the committee has considered the large amounts of money the HSE has spent on transport at various stages. The report to which I refer makes the point that the HSE does not appear to have a single integrated transport co-ordinator to whom the transport bodies might go in order to develop and roll out an integrated transport project. Has there been any change in that regard since the report was published?

Mr. Tom O’Mahony

I do not know how things are structured within the HSE. However, I am aware that an implementation committee has been established by the Minister of State, Deputy Kelly, in order to drive forward what the Government has decided upon regarding integrated rural transport. The HSE is represented on that committee.

Deputy Paschal Donohoe

Okay.

Mr. Tom O’Mahony

The intention is that this year up to four pilot projects will be launched in various areas of the country and that these will involve testing the type of integrated model under discussion. These projects will build on existing rural, school and HSE transport services. The steering group will identify the four areas in which these projects will be put in place. I must acknowledge that significant work has already been carried out in particular areas by individual local community groups and public transport providers. In some cases, the latter have worked successfully with the HSE on this concept.

Deputy Paschal Donohoe

I will leave it at that. I ask Mr. O'Mahony to forward to us the actual figures for 2012 in respect of the unit cost for the work.

Mr. Tom O’Mahony

We will do that.

Deputy Paschal Donohoe

If there is any further information in respect of the increase in cost between 2009 and 2010, I would also like it to be provided.

Chairman

Mr. O'Mahony referred to school transport, which is contracted out to Bus Éireann by the Department of Education and Skills. How much is that contract worth?

Mr. Tom O’Mahony

Approximately €180 million. The money for it comes out of the Vote of the Department of Education and Skills, not that of our Department.

Chairman

Bus Éireann gets that money.

Mr. Tom O’Mahony

Yes.

Chairman

Bus Éireann comes under the remit of the Department of Transport, Tourism and Sport.

Mr. Tom O’Mahony

Yes.

Chairman

What sort of value-for-money analysis has the Department carried out in respect of the school transport scheme?

Mr. Tom O’Mahony

I think the Department of Education and Skills has just completed something. I might ask Ms Keaney to comment on that matter.

Ms Doreen Keaney

It is purely a matter for the Department of Education and Skills, which does all the negotiating with Bus Éireann. We will be considering how to integrate the rural transport initiative being promoted by the Minister of State, Deputy Kelly, with rural and HSE transport services. Policy issues relating to school transport - such as those involving the provision of services by Bus Éireann and subcontractors - are a matter for the Department of Education and Skills. We deal solely with the integration aspects.

Chairman

I do not want to stray into the area of policy, I merely wish to understand something before I take the matter up with the Department of Education and Skills. Some €180 million is paid to Bus Éireann which, in turn, negotiates with subcontractors. Is that a matter at which the Department of Transport, Tourism and Sport would look in the context of achieving value for money?

Mr. Tom O’Mahony

No, because the Department of Education and Skills oversees the scheme. That Department has carried out a value-for-money study into this.

Chairman

Is negotiating with the subcontractors also a matter for the Department of Education and Skills?

Mr. Tom O’Mahony

I suppose it is a matter for Bus Éireann. However, it is the Department of Education and Skills' money. In terms of accountability, it would be the Department of Education and Skills.

Chairman

Bus Éireann gets €180 million and it then does deals with subcontractors.

Mr. Tom O’Mahony

Yes, on behalf of the Department of Education and Skills.

Chairman

Who is responsible for the €180 million?

Mr. Tom O’Mahony

From a Civil Service point of view, it is the Department of Education and Skills. It is not our scheme and the money does not relate to our Vote. We are not involved in that scheme. What we are now trying to do, on a cross-departmental basis under the new approach, is to examine how the money invested in school transport, rural transport, etc., can, perhaps, be pooled and used more effectively.

Chairman

Would Mr. O'Mahony be concerned with regard to the breakdown of that €180 million in the context of the proportion of it that is paid to subcontractors? Is there a profit to be made by Bus Éireann from the deal with the subcontractors in respect of this money? Does it actually cost €180 million to run the school transport system? This matter is directly linked to the delivery of the service and Bus Éireann rather than to the Department of Education and Skills. Does the €180 million in question cover the cost of the school transport scheme? Is Bus Éireann losing money or is it making money in respect of the scheme? Who is responsible for answering these questions? Surely it must be Bus Éireann.

Mr. Tom O’Mahony

As stated, the Department of Education and Skills is responsible for the scheme and has carried out a value-for-money exercise in respect of it. It is certainly the case that all services Bus Éireann is providing at present are under severe pressure. This is because, notwithstanding the amount of the subvention relating to the scheme - which would have been set by the Department of Education and Skills - fuel costs and so on have risen substantially. I do not believe that Bus Éireann is making money on any of the services it is currently providing.

Chairman

The Department of Transport, Tourism and Sport is responsible for Bus Éireann-----

Mr. Tom O’Mahony

Yes.

Chairman

-----and the company is responsible for itself and its profitability.

Mr. Tom O’Mahony

Yes.

Chairman

The Department of Education and Skills does not have a responsibility in that regard. Bus Éireann receives €180 million from the latter to run the school transport scheme.

Mr. Tom O’Mahony

Yes.

Chairman

Is Mr. O'Mahony in a position to confirm whether that €180 million covers the full cost of the scheme, whether money is being lost on it or whether Bus Éireann is making a profit on the backs of the subcontractors who are involved with the scheme? That is a question which should be answered by Bus Éireann, not the Department of Education and Skills. The value-for-money and policy aspects are separate issues. The management of the scheme is, in my opinion, a matter for Bus Éireann. If the latter is doing its business properly, it should be able to provide an answer with regard to whether it is making money on the scheme.

Mr. Tom O’Mahony

I will obtain that information for the Chairman.

Chairman

Bus Éireann also receives €289 million in respect of public transport. It therefore receives a great deal of money from the State and is responsible for managing how this is spent. Who will answer the questions I have posed? Will Mr. O'Mahony do so?

Mr. Tom O’Mahony

I will request the information from Bus Éireann and I will provide it to the committee.

Chairman

I thank Mr. O'Mahony very much.

Deputy Sean Fleming

I will address my comments, in the main, to Mr. Barry from the NRA. I thank him for coming before us. I wish to deal first with the issue of road tolls. VAT is payable on these tolls, particularly those charged by private operators. It makes no difference to me whether I pay a public or a private toll because such tolls help to finance our roads. Further to a decision of the European Court of Justice in a case involving the European Commission v. Ireland, which was issued on 6 July 2009, Revenue instructed that VAT would be applied to public sector tolls with effect from 1 July 2010. I understand the NRA is contesting this. Will Mr. Barry explain why VAT should be paid in respect of the tolls imposed by private operators with regard to the M1, the M3, the M5, the M7, etc., and not on the tolls imposed by the NRA in connection with the M50, the Dublin Port tunnel, etc.? Why should the tolls imposed by the NRA be exempt from VAT when the vast majority of other tolls attract VAT? Why should the NRA be treated differently?

Mr. Fred Barry

The reasons the tolls might be treated differently is down to European Union law. To synopsise what lawyers would spend several pages describing, the law, in essence, states that one does not charge VAT on services of this sort being provided by the public sector unless they are in competition. That was the issue in the case decided by the European Court of Justice. The issue here is whether the roads and tolled roads being managed and owned by the pubic sector, which in our case would be the West Link and the Dublin Port Tunnel, are in competition with any private sector business. If they are not in competition, as defined by the law, VAT is not chargeable, but if they are in competition, VAT is chargeable. That is issue we are arguing with Revenue.

Deputy Sean Fleming

I thought the European Court of Justice stated that VAT should be applied to public sector tolls.

Mr. Fred Barry

As the Deputy will see, the note states it should be applied depending on whether it is in competition, but the European Court of Justice did not make any reference or was not interested in our tolling arrangements in Dublin. It gave a general-----

Deputy Sean Fleming

Who will decide this issue?

Mr. Fred Barry

The Revenue appeal commissioners.

Deputy Sean Fleming

The appeal commissioners.

Mr. Fred Barry

Yes.

Deputy Sean Fleming

Therefore, the appeal commissioners are experts on road traffic competition.

Mr. Fred Barry

Well, the Deputy will have to-----

Deputy Sean Fleming

We had a big issue concerning VAT in the case of the National Aquatic Centre, the details of which I will not go into. On the issue of how to deal with VAT in the case of State bodies and disputes between companies and State organisations, the Revenue is a world in itself. The Revenue appeal commissioner would be a very competent person dealing with taxation matters but I have no doubt he would have zero competence on traffic competition matters. Who is the authority bringing in to argue its case to the appeal commissioner that VAT should not be paid on this traffic competition issue?

Mr. Fred Barry

VAT law is very complicated. The appeal commissioners are probably quite expert on it these days, but I do not know that. I am not speaking for the appeal commissioners but I would be surprised if they were not were not quite expert on it.

Deputy Sean Fleming

The authority should have access to persons in that area.

Mr. Fred Barry

The appeal commissioners will have their own advice.

Deputy Sean Fleming

Given that a decision has been made on the face it in so far as VAT is liable and the authority is contesting it, I do not see a note on this issue in the accounts. Is there a note on it in the accounts?

Mr. Fred Barry

Since the decision of the Revenue Commissioners is that we should be paying VAT, we have been paying VAT.

Deputy Sean Fleming

The authority has been paying VAT.

Mr. Fred Barry

Absolutely, yes.

Deputy Sean Fleming

I did not realise that. The authority might be looking for a refund if it wins.

Mr. Fred Barry

We will be looking for a refund if we win but in the absence of that, we are paying VAT.

Deputy Sean Fleming

I am pleased the authority is taking that approach.

Mr. Fred Barry

We have no choice in the matter.

Deputy Sean Fleming

The note did not specify that. How does it work for motorists who have electronic tags for the tolls? Mr. Barry has said the software has been changed. Therefore, the receipts motorists will get for the payment of tolls will show VAT. When did the authority introduce VAT on those tolls?

Mr. Fred Barry

In July 2010.

Deputy Sean Fleming

The authority changed its software to facilitate that.

Mr. Fred Barry

Yes.

Deputy Sean Fleming

Okay. That is fine. I wanted to ask about the VAT issue because it is one that is raised regularly at this committee.

My next question relates to traffic guarantees under the public private partnerships. The last paragraph on page 10 of the authority's accounts states that under the terms of certain PPP contracts, a large share of the revenue accrued to the authority subject to sales levels exceeding specified thresholds. Obviously, if the authority does not meet the thresholds, the payment goes from it to the contractor. In the year under review the authority had to pay €524,000 in respect of the M3 Clonee-Kells route and €1.243 million in respect of the Limerick tunnel, making a total of €1.76 million because traffic did not meet the previous specified threshold.

Mr. Fred Barry

Yes.

Deputy Sean Fleming

Mr. Barry has not given any figures for money the authority received where it exceeded the thresholds on other contracts. Does he have that information, or did that happen?

Mr. Fred Barry

I am sure we have it.

Deputy Sean Fleming

One half of the equation is mentioned in the accounts but not the other is not.

Mr. Fred Barry

It is under-----

Deputy Sean Fleming

On what page?

Mr. Fred Barry

-----note 3 on toll income on page 10 of our accounts.

Deputy Sean Fleming

That is the page I am reading.

Mr. Fred Barry

There is a reference to income from the M4 Kilcock-Kinnegad route of €836,000 and a lesser amount from the Dundalk road of just over €2,000.

Deputy Sean Fleming

The income of €836,000 is from the Kilcock-Kinnegad route. What was the other one?

Mr. Fred Barry

The other one is the Dundalk western bypass where the income was just €2,000 that year.

Deputy Sean Fleming

A small amount.

Mr. Fred Barry

A very small amount that year.

Deputy Sean Fleming

The authority has included that in its overall toll income. Therefore, the authority received some payments.

Mr. Fred Barry

Yes.

Deputy Sean Fleming

That is good; at least it works. A myth prevails among the public in this respect when traffic drops on all these projects. Is a figure payable in respect of all the PPP projects if the volume of traffic drops below a certain level?

Mr. Fred Barry

No, there is not.

Deputy Sean Fleming

To which ones does that condition apply?

Mr. Fred Barry

The only two on which we have to pay out are the M3 and the Limerick tunnel-----

Deputy Sean Fleming

Those are the ones I mentioned.

Mr. Fred Barry

-----both of which had their own special circumstances, which we discussed with the committee at the time the contracts were going forward. On the others, we gain if the revenues exceed certain upward thresholds but we do not carry any of the downside risk.

Deputy Sean Fleming

That is good to hear because the public thinks that shadow tolls are being picked up by the authority-----

Mr. Fred Barry

All around the place.

Deputy Sean Fleming

-----on many of these projects. It is good to clarify that aspect.

Mr. Fred Barry

The cumulative position is that we are about €2 million ahead to the end of 2011.

Deputy Sean Fleming

What the authority received versus what it paid out.

Mr. Fred Barry

What we received as against what we paid out. To give the Deputy the current picture, during 2012 it will probably cost us a net €5.5 million this year. Looking at traffic figures and everything else, assuming economic growth recovers come 2013 and beyond, we envisage the payout will decrease and we will get back into positive figures again, but by the end of this year even after four and half years of the recession, the total cumulative cost of all of this will be in the order of €4 million or €5 million.

Deputy Sean Fleming

Therefore, perversely in a recession the taxpayer pays more.

Mr. Fred Barry

That is right.

Deputy Sean Fleming

Okay. On note 3 to which Mr. Barry referred, the total amount the authority received from its tolls in 2010 was €104 million.

Mr. Fred Barry

Yes.

Deputy Sean Fleming

Has Mr. Barry an estimate of the total amount collected by the private operators on their tolls? He must have if he is able to calculate all this.

Mr. Fred Barry

We have the data but whether we have it to hand------

Deputy Sean Fleming

What does Mr. Barry calculate to be the total amount collected?

Mr. Fred Barry

I have the 2011 figure, rather than the 2010 figure-----

Deputy Sean Fleming

That is fine.

Mr. Fred Barry

-----and the amount was €112 million.

Deputy Sean Fleming

That is all that has been collected from the other approximately ten tolls?

Mr. Fred Barry

Yes. To be clear, that excludes what we have collected on the Dublin Port Tunnel.

Deputy Sean Fleming

Yes.

Mr. Fred Barry

It would not include the East Link in Dublin which is not on the national road network.

Deputy Sean Fleming

That is in operation with Dublin City Council.

Mr. Fred Barry

Dublin city, the port and some private interests.

Deputy Sean Fleming

That is good.

Mr. Fred Barry

That is the order of magnitude of it.

Deputy Sean Fleming

The authority has grants refunds of €9 million. Will Mr. Barry explain from whom and for what those refunds were? What does that mean?

Mr. Fred Barry

We are not the auditors for the local authorities but we do some spot checks on the grants we pay over to local authorities. As in the case of the Department, which has a memorandum on grants which sets out what is chargeable and what is not, we have a similar arrangement on the national roads. While we are not the auditors of the local authorities, we do spot checks, some audit-type activities and all of that. We tend to get refunds from the local authorities sometimes and that comes into this category.

Deputy Sean Fleming

Okay.

Mr. Fred Barry

Most of this money is not where there has been any overcharging or anything like that by the local authority. Much of that money is where land was acquired for the purposes of building a road and there are pieces of land left over at the end that can be sold on to the public. When a local authority does that, the money comes back to the National Roads Authority.

Deputy Sean Fleming

That is good. I was worried they were excessive claims by local authorities.

Mr. Fred Barry

We have occasional situations where things were charged against road grants that should not have been but it is not a huge figure. I would also say that it has got better over the years.

Deputy Sean Fleming

What number of staff had the authority at the beginning of 2010 and what number has it now?

Mr. Fred Barry

We now have 120 people on the books but a number of those are on leave of absence, secondments and so on. Our whole-time equivalent, as calculated for employment control purposes, is about 108 at present. That is down from 149 when we started. I am not quite sure the number in 2010, but that indicates the reduction in the number of staff.

Deputy Sean Fleming

The NRA still has two thirds of its staff but the bulk of the work has dried up. What are the 100 staff doing? It is an obvious question. The NRA had a large staff when it was building motorways but the projects are all done now, and well done to the NRA on that, but what are the staff all doing now?

Mr. Fred Barry

Most of our staff are engaged in managing what we have. The largest number of people is dealing with tunnel and motorway operations, the tolling business and supervising the PPPs. That end of the business is a large portion of our work. Our maintenance and rehabilitation work goes on year in, year out. We have approximately 500 small projects every single year between ourselves and the local authorities that are still going on and I hope they will continue to do so. They take a proportion of the workforce.

Deputy Sean Fleming

Does an NRA inspector have to clear each one of the 500 projects on the ground?

Mr. Fred Barry

Yes.

Deputy Sean Fleming

That is good.

Mr. Fred Barry

We had two fairly large major project groupings with the NRA, one for public private partnerships, PPP, projects and the other for non-PPP. The PPP projects management grouping has been wound down entirely and the people involved have either left the organisation or have been moved on to other tasks. The other major projects group for non-PPP projects has been substantially reduced in numbers. We have reduced the number of regions and our own staff members and, with the local authorities we have reduced the number of people engaged in the regional offices. The numbers there are down to probably about half of what they were. With most of our work and activity outsourced, the biggest reduction in numbers charging to the budgets is the amount of consultants charging. In that regard the numbers are hugely reduced.

Deputy Sean Fleming

I have a few specific questions on note 12 to the accounts on the bottom of page 14. Debtors and prepayments have increased from the small sum of €200,000 to more than €20 million. To what does the expenditure relate? I do not suggest any issue arises.

Mr. Fred Barry

Could I ask Mr. Maher to respond to that?

Deputy Sean Fleming

Yes, please do.

Mr. John Maher

It was as a result of a prepayment at the year end. A contract payment was made to a PPP company that was reported in our accounts in December. The prepayment was due from 1 January, so it is more of an accounting exercise to reflect that.

Deputy Sean Fleming

It is to reflect year-end activity. Page 5 of the accounts overall show expenditure of €1.114 billion spent in 2010 of which according to note 1, €147 million, more than 10%, has come from EU sources. Could Mr. Barry outline which of the projects got EU funding and which were fully funded by the State? There was an impression that the EU used to pay a lot of money for roads but in the year in question it appears to be only of the order of 10% or 12%. Have we finished drawing down funds from the EU or are there more to come through for last year? Maintenance was dealt with in the figure outlined. Why does the NRA get money for maintenance from Europe?

Mr. Fred Barry

As the Deputy indicated, the contribution from EU funds to the national road programme used to be significant about a decade ago. However, its importance has been decreasing. At this stage I am not sure what the figure will be for 2012 but it will be very modest. The money does not come to the NRA. While we report in the accounts how much of the NRA expenditure is attributable to money that comes from the EU, the moneys from the EU go to the Department of Finance. We do not have a direct funding line from the EU nor have we had at any stage. The money goes to the Department of Finance and the Department uses it as a source for the money that is voted to us by the Oireachtas.

Deputy Sean Fleming

Is it the case that the note in the accounts about the State grants of €147 million is not connected with the NRA's accounts but it is additional information? That sum of money was not in the NRA's accounts at all. It just reads that way.

Mr. Fred Barry

No.

Deputy Sean Fleming

Mr. Barry gets my point.

Mr. Fred Barry

We could change the wording on the note.

Deputy Sean Fleming

How many PPPs were there in total? In the accounts there is a note on each PPP. Many of the projects were completed in 2010, the year under review. Reference is made to the estimated cost of construction. I gather the PPP only deals with the construction costs. Mr. Barry might not have the information today but what we would like to know is the total costs for all the PPP contracts. The cost of the Portlaoise M7 and M8 project amounted to €265 million but that is only a portion of the cost of the project because it does not include design, non-construction costs and land acquisition. Could Mr. Barry provide the committee with the total cost of each of the projects with the PPP element separated out because as far as I understand that only dealt with the construction element. In some contracts the majority of the costs were not covered by the PPP element and the State carried the majority of the costs even though the PPP operator gets 100% of the tolls as part of the concession. Does Mr. Barry have that information or could he send it to the committee?

Mr. Fred Barry

I do not have the information immediately to hand but I will send in a note containing the detail.

Deputy Sean Fleming

In general, what was the proportion of construction costs to total project costs in the projects that were completed under the EU?

Mr. Fred Barry

The PPP element usually covers construction costs, in some cases only some of the construction costs. We have made significant construction contributions so it has just been part of the construction cost. They typically cover the operational costs which can be significant over 30 year or 35 year concessions. As a very round figure I would say that to the end of construction the amount paid directly by the State as against funded through PPPs would typically be approximately 40%. However, that is a very round figure. I will give exact figures on all of the PPPs to the committee in a matter of days.

Deputy Sean Fleming

On the completion of those projects, and I am sure on some of those in which the NRA was the contracting authority, did the NRA tend to be the contracting authority?

Mr. Fred Barry

Yes, we tended to be the contracting authority.

Deputy Sean Fleming

Did the lead local authority tend to be the contracting authority for normal motorway projects.

Mr. Fred Barry

Yes. That is correct.

Deputy Sean Fleming

I preface my comment by saying that I know Mr. Barry has no legal obligation to answer, but how does he feel about all those subcontractors who did work on the projects and were never paid by the main contractors? Some of the subcontractors went bust as a result of believing they had a reasonable expectation of payment given that they were involved with a Government project. I preface my question by saying that it is not Mr. Barry's legal responsibility. We have all read reports of trucks pulling in on the morning of official openings that would not leave the location until they got their cheques, for millions on some occasions. We have all read many reports on other projects, such as the N7 to Limerick where contractors threatened to dig up the motorway because they had not been paid for their work. How does Mr. Barry feel about that? I know it is not his legal responsibility but he must accept it is a big issue. How does he deal with those contractors the next time he sees their name on his desk seeking the next contract?

I am sure Mr. Barry has had several protests at the NRA offices by people who have been bankrupted as a result of not being paid for work done on the fantastic roads we have. We are driving on those roads while people who have worked on them have gone bust. How does Mr. Barry feel about that? He may say contracts are a broader Government issue but there is nothing preventing the NRA putting in place its own mechanism to carry out its own spot checks because there are plenty of NRA staff on all sites to ensure that all subcontractors will be paid before the NRA makes its payment. Mr. Barry is aware that the cheques given to subcontractors by some contractors bounced and people only found that out when they went home at Christmas. How does Mr. Barry feel about that and what he can do?

Mr. Fred Barry

It is entirely wrong that main contractors, or anyone paid for work, do not treat their subcontractors or those who are working for them fairly and honourably. As the committee is aware - reference has been made to my somewhat limited legal powers - I fully welcome the efforts that have been made and the Bill that is coming through at the moment that will give us and everyone both an obligation and an authority to do something about the problem. I am all in favour of that. There is a lot of toing and froing between interested parties as to the exact wording of the Bill but I am in favour of a measure being put in place to allow that to happen.

Deputy Sean Fleming

Does Mr. Barry have an idea of the extent of the problem with projects funded by the NRA?

Mr. Fred Barry

I cannot put it in euro and cent but I have been working in the industry for most of my adult life and I know what happens from both the private sector side and more recently from the perspective of the State sector. I know how big a problem it is when subcontractors do not get paid. Smaller companies are living on the edge all of the time. They have cashflow problems and when they run into cashflow problems on a job they will usually have trouble getting funding from their banks. It is a very bad situation.

Any time I have talked to main contractors about it where I thought they were short-changing people, because we hear things sometimes and we know things we cannot legally say, I have been told that the payments in question are in dispute and that the money is not owed. I know in my heart that in some cases that is just a fig leaf for moneys not being paid down but as to what I can do about it, when the new Bill comes through I would hope we will be able to make direct payments to sub-contractors against appropriate certifications or whatever, which will greatly help the situation.

Deputy Sean Fleming

In hindsight, would Mr. Barry have any inclination that some of the people who won those contracts deliberately under-priced? We will assume he did not know that at the time. In terms of their track record and the way they conducted other contracts they knew that some sub-contractors would be left swinging, so to speak, at the end of it. They took the contract knowing that life is tough and that happens. I believe some of the main contractors knew that starting out. I am not suggesting Mr. Barry could have known it but in hindsight does he believe there is some credence to that point of view?

Mr. Fred Barry

There is a real concern that contractors are bidding for work at below cost.

Deputy Sean Fleming

Is that not an issue?

Mr. Fred Barry

That is probably a bigger issue in the past year and a half or so than it was a few years ago but that is the case. They are looking to recover their situation through a combination of aggressive claims management on the contracts vis-à-vis the clients and by squeezing their suppliers, the labour force and all of that quite significantly. That is an issue at the moment.

Deputy Sean Fleming

Yes, and the NRA should be conscious of it for future contracts. The NRA is providing a good deal of money through local authorities-----

Mr. Fred Barry

We are, and just-----

Deputy Sean Fleming

-----and the regional and local roads. It is providing some grants to the Department, and it should be aware of that issue.

Mr. Fred Barry

On our-----

Deputy Sean Fleming

We have seen differences in pricing here on roads and therefore various funny practices must be going on in terms of sub-contractors.

Mr. Fred Barry

On our own projects, when we are aware that contractors have put in a keen price for a job we intensify the audit efforts we carry out to ensure the labour force are being paid as they are supposed to be. On all national road jobs we do an audit of payments in terms of everybody who is working on the site to make sure they are getting paid and that their pension payments and so on are being paid. We find sometimes that pension payments are not being made and we can deal with that, and do deal with that, with the contractors. Where we know we have a contractor who has either got a poor reputation or has put in a particularly keen price we put in intensified audit actions. That will help the individuals on the job. That does not go to address the problems in terms of the sub-contractors.

Deputy Sean Fleming

Has the NRA been joined in any legal proceedings in regard to unpaid bills? I suspect it has no legal responsibility.

Mr. Fred Barry

We do not have any. Initially, we might have been joined in the odd one but we are not joined in any.

Deputy Sean Fleming

I compliment the NRA on the roads building project. My final question relates to a different aspect that is directly related to its work and on which I want to compliment Mr. Barry. The work carried out under the new motorway projects involved what I would call the largest archaeological dig not just in Ireland but anywhere in the world in the past decade. The NRA has produced brochures and booklets on every individual project in respect of artefacts found in ruins in villages, churches and graveyards that were so deeply buried even local people did not know about them. I am aware that took a long time and might have added a year to those projects. All those archaeologists had great experience and the NRA has taken great care of those artefacts - I mentioned the publications it produced, although I forget the name of the booklet now - but can a case be made for a specific section in a museum for those? Are they in different locations throughout the country? Will Mr. Barry refer to that? It is part of our-----

Mr. Fred Barry

Heritage.

Deputy Sean Fleming

-----unknown heritage which was a welcome by-product of that exercise. I compliment the NRA on that. People give out about it in terms of the snails, the butterflies and so on. When people did not want a route going through their area they went looking for a rare species to try to stop the NRA coming their way but it is to be complimented on this aspect of it. Mr. Barry might indicate to us where those artefacts will end up.

Mr. Fred Barry

On the publications, we decided some time ago, and we are delivering on it, that it was not good enough to just do all of this archaeological investigation or to tick the box and say we have met the minimum requirements, that there was a wealth of information available and that it should be made available to the public as part of the value the public would get out of all of that. We are publishing reports on all of the schemes and investigations, and the publications are at two levels. The technical data from all of the schemes is on our website or is being moved onto our website and is available for professional archaeologists and practitioners. Over and above that we are producing fairly high quality publications for the general reader who is interested in what happened. There is a series of those and there are some hard copies available but they are all going on our website.

All of the material is the property of the National Museum of Ireland. Most of it is delivered to the national museum but by agreement with the national museum, in certain places around the country some of it is going on local display. For example, they have a local display in Waterford and in a few other areas around the country. Whenever local communities want to do a local display we support them by giving them information and helping them set up in terms of brochures, information stands and so on. We would very much welcome approaches from anywhere around the country for local displays of that sort but the national museum is the legal owner of all of the artefacts and it must give permission.

Chairman

Given the expertise Mr. Barry has built up in his line of work in terms of construction, engineers, archaeologists and so on, and the many difficulties along the route, did he ever consider the case for internationalising the services of his organisation, given developments in other countries and the demand for expertise in that area, and holding the assembled body of people together in terms of archaeologists, engineers, planners and so on? Would there be a case for-----

Mr. Fred Barry

There would be a case. We have expertise that would be of value in other places. To provide those services we would need a change in the Roads Act to give us the authority to do it. As the Chairman knows, as a statutory body we are constrained by the language of the Act but in principle I would say there would be a market for those services.

Chairman

Given that Irish companies are now operating abroad and linked to what the NRA has achieved in this country, it is an expertise that would be in great demand and probably profitable in terms of Ireland and setting that experience.

Mr. Fred Barry

Yes. That is an expertise we have and that we share with many of the local authorities because many of the jobs and the programmes were managed by ourselves working with the local authorities. If we are looking at opportunities to retain our expertise and perhaps sell it overseas, I would make the point that a lot of expertise in local authorities is being threatened by the downturns as well. Any measures might examine how the NRA might incorporate the local authorities or the regional offices in that.

Chairman

Regarding the local authorities and the arrangements the NRA has with them, section 15 on commitments, which is in page 48 of the report, states that it enters into many commitments with different local authorities. I presume it is renting accommodation and so on. In Donegal it entered into a lease for 20 years from 2004.

Mr. Fred Barry

Yes.

Chairman

Was there a reason for that because it has not entered into long-term leases in many areas? Is there a break clause in that lease should the NRA decide not-----

Mr. Fred Barry

I could not tell the Chairman offhand.

Chairman

The rent is €226,000 a year.

Mr. Fred Barry

I could not tell the Chairman offhand whether there is a break clause in the lease but in many of the situations reported local authorities have larger offices and we are taking some space from them.

Chairman

The NRA is paying them.

Mr. Fred Barry

We are but in those circumstances we have been able to agree shorter rental periods or whatever, and in some cases we have longer term leases. I would not have any concern about us having a long-term lease for somewhere like the Donegal regional office because even with the ups and downs in the investment in major programmes a significant body of activity is still concentrated on management, maintenance and rehabilitation of the roads in that area. Moreover, the Donegal office services both that county and some of the neighbouring counties.

Chairman

Are such rents and arrangements negotiable? Can the NRA go back to them because of the market and the downturn in rents? For example, is it committed to a rent of €226,000 per year in County Donegal or is an upward-only rent review in place?

Mr. Fred Barry

We have carried out a number of rent reviews that have been positive and in our favour. We also have changed the lengths of commitment on some of them to recognise the new realities.

Deputy Kieran O’Donnell

To follow up on the Chairman's comments, I refer to the note to the NRA's accounts. The rent to Donegal County Council appears to be higher than the other local authority rents and amounts to €226,648 per annum. It is a 20-year lease that does not appear to have a break clause, whereas many of the other financial commitments appear to be subject to five-year reviews. In taking up the Chairman's point, I note the NRA has a 20-year lease on its main headquarters building that will expire in 2016, while the lease on its headquarters at Kildress House, Pembroke Row, will conclude at more or less the same time, in 2015. What does Mr. Barry envisage in respect of an overall review of cost to the taxpayer? He should deal with County Donegal only. Is there a break or review clause in respect of Donegal County Council? It appears to be much higher relative to the other leases. This is simply a statement of fact.

Mr. Fred Barry

I do not know whether there is a break clause in the lease. I will find out and revert to the Deputy in this regard.

Deputy Kieran O’Donnell

Or a review clause, to which Mr. Barry referred earlier.

Mr. Fred Barry

Or a review clause. I will revert to the Deputy in this regard. The Donegal office is one of the bigger offices and consequently, I would expect to be more expensive. However, I do not have any more detail to hand at present but I will provide more detail to the committee.

Chairman

Mr. Barry should let members have that detail.

Mr. Fred Barry

I will.

Deputy Kieran O’Donnell

Second, I refer to the issue of the M50 buy-out. I understand the NRA paid approximately €52 million and €40 million in 2009 and 2010, respectively. Mr. Barry should explain the structure of the payments and should indicate the total amount that must be paid in respect of the M50 buy-out. From the perspective of the ordinary taxpayer looking in on the arrangement, the figure seems very high. While this probably goes over old ground to an extent, I seek an update to ascertain the total amount paid to date in the buy-out and the full amount that will be paid, as well as an overview on how the NRA came to have such a structure in place for a buy-out.

Mr. Fred Barry

As much of this is old ground, I will synopsise a lot of it.

Deputy Kieran O’Donnell

I suppose the payments are current or up to date.

Mr. Fred Barry

Sure. While we make monthly payments, the payments are for €50 million per year subject to indexation. The original €50 million rose to more than €52 million in 2009 and then fell in 2010 on foot of deflation. I believe the amount fell a little again last year to €47 million but with inflation will rise again. The payments will run until April 2020.

Deputy Kieran O’Donnell

For how many years will €50 million per annum be paid?

Mr. Fred Barry

By the end of it, it will have been for a total of approximately 12 years.

Deputy Kieran O’Donnell

That is 12 multiplied by €50 million.

Mr. Fred Barry

So it is approximately €600 million.

Deputy Kieran O’Donnell

Can Mr. Barry explain-----

Mr. Fred Barry

How did we get to such a sorry place?

Deputy Kieran O’Donnell

Yes, to more than half a billion euro.

Mr. Fred Barry

It is an enormous amount. We got there because the concession contract that was put in place for the West Link deal back in the 1980s was, by any normal standards, certainly by any modern standards and perhaps even by standards then, quite deficient and one-sided.

Deputy Kieran O’Donnell

It was a sweetheart deal.

Mr. Fred Barry

It was a sweetheart deal. It did not seem like a sweetheart deal to the concession company in the following years because rather like the present, there was a recession in which traffic volumes fell and it lost money in the early years. Then, however, as the economy picked up and as the State invested in building the M50 and bringing more traffic over the bridge, there was no mechanism for the State to recover the full benefit in this regard. There was some recovery and some revenue sharing but it was inadequate.

Deputy Kieran O’Donnell

When did the payments of €50 million begin?

Mr. Fred Barry

In August 2008.

Deputy Kieran O’Donnell

This arrangement will extend until 2020.

Mr. Fred Barry

Yes it will. I make the point that bad as it is, it is being paid for out of the toll revenue. While we all feel badly - the NRA is the same as everyone else - that it has been and is necessary to pay out so much to recover this bridge back into public ownership, the actual money for it is coming from the toll revenue that otherwise would be going to the toll concessionaire. The NRA is not receiving a funding stream through the voted expenses for this.

Deputy Kieran O’Donnell

Mr. Barry will appreciate there is an opportunity cost in this regard.

Mr. Fred Barry

Absolutely.

Deputy Kieran O’Donnell

I will make two points in this regard. At the time when that contract was negotiated with the concessionaire or operator, was it not extraordinary? In any normal contract, one would provide for a number of options whereby, in the case of traffic reaching a certain level or the putting in place of infrastructure in the surrounding areas, the terms of the buy-out would change. Am I correct in suggesting this was a straightforward, down-the-line payment of €50 million per annum for 12 years or €600 million in total? I just am perplexed-----

Mr. Fred Barry

On the deal we did, the €50 million was arrived at and we believed that traffic on the M50 would continue to grow, which has proven to be correct. Since the deal was struck, all the growth in revenue accumulates to the State and none of it goes to the PPP company. From that perspective, we could have done a deal perhaps specifying a lesser fixed amount and a greater variable amount depending on traffic. Had we done so, however, in practice we would have ended up paying more rather than less. Traffic on the M50 has grown even through the recession.

Deputy Kieran O’Donnell

Mr. Barry should explain how the figure of €600 million was decided on. What was its basis?

Mr. Fred Barry

The €50 million was built around revenue figures in the period preceding the buy-out.

Deputy Kieran O’Donnell

Okay.

Mr. Fred Barry

With respect, I am quite happy to provide the Deputy with a note on it. It is very complicated and of course, we have covered it at some length previously. I certainly will provide the Deputy with a note on that matter to bring clarity.

Deputy Kieran O’Donnell

Clearly, much of this increase in traffic was generated by other infrastructure provided by the State.

Mr. Fred Barry

Absolutely. However, at least under this arrangement, the benefit of this is coming to the State, rather than to the toll company as it otherwise would have done. We got that side of it right.

Deputy Kieran O’Donnell

As for subsequent learning from it, what is the NRA doing now to ensure-----

Mr. Fred Barry

There were several core deficiencies. The level of service provisions in the original contract were completely inadequate, which meant that not only was huge money being paid out but the level of service being provided was very poor. This has been addressed fully in the modern contracts. There was no proper termination clause in the original contract, which never envisaged the State seeking to terminate the contract before 2020. It was in the absence of such a clause that we ended up with an arrangement whereby we are paying so much.

Deputy Kieran O’Donnell

This was an open-ended contract.

Mr. Fred Barry

It ran until 2020, which is the reason the NRA is making these payments until then. However, within that timeframe, there was no provision for the State simply to terminate the contract. Modern contracts all have termination clauses and such clauses in all the PPP contracts limit the payout to the PPP company. We have super-profits clauses-----

Deputy Kieran O’Donnell

Mr. Barry should explain how such clauses would change the payout. Were this a modern contract, how would the payout have been limited? What would have been the difference?

Mr. Fred Barry

One could limit the payment to amounts of debt or one could tie it to equity. There are all sorts of different structures and caps one can include but all aim to have a fairer arrangement for the State.

Deputy Kieran O’Donnell

Under a modern agreement, does Mr. Barry think the NRA would be paying out significantly less than €600 million?

Mr. Fred Barry

Yes.

Deputy Kieran O’Donnell

Would he hazard to indicate what that figure might be?

Mr. Fred Barry

I cannot do that but it would be significantly less. The modern PPP contracts do not quite include a super-profit tax through their revenue sharing arrangements. However we have an arrangement whereby if there is any repeat of the M50 situation where the traffic grew so much, the State will get an increasing proportion of the revenue. If the happy day comes when the economy grows strongly again, a lot of the benefit will come to the State.

Deputy Kieran O’Donnell

It is profit sharing.

Mr. Fred Barry

Yes.

Deputy Kieran O’Donnell

I have one final question for Mr. O'Mahony. How was the average cost of resurfacing roads so much higher in Dublin than in the rest of the country? Is it because Dublin has far better roads and Dublin motorists are looked after in a much better fashion than us rural brethren?

Mr. Tom O’Mahony

Most areas of Dublin do not have rural roads. Fingal does and if the Deputy looks at those figures he will see that they are lower, which reflects the fact. If one looks at South Dublin, where there is a small amount of rural roads, the figures get that much higher. In Dún Laoghaire-Rathdown there are absolutely no rural roads. If one is talking about heavily trafficked roads, one needs much different material. The cost of the job itself in terms of what must be done with traffic diversions is much higher and one might have to do a lot of it at night-time.

Deputy Kieran O’Donnell

Is Mr. O'Mahony satisfied that in the interest of balanced regional development there has been a redistribution from the east coast to the west coast in the road network?

Mr. Tom O’Mahony

I am sure that is not a question the Deputy wants me to answer. We covered some of this ground earlier and we said we would provide a note with a lot more detail to help set out the factors. We also have up-to-date figures on what we have been doing to try to bring costs down everywhere, and that is working. Quite a detailed note will be coming to the committee which will cover that. The main answer to the Deputy's question, however, is apples and oranges, essentially.

Chairman

When Mr. O'Mahony is giving us the note on rents and payments to local authorities, he might let us know how many staff are employed in each of the locations mentioned.

Mr. Fred Barry

Yes, we will.

Chairman

Could Mr. O'Mahony also let us know about St. Martin's House? The rent from January 2011 is in excess of €1 million per annum. What was it before 2011? Has the rent been negotiated downwards and what are the arrangements there?

Mr. Fred Barry

We have not negotiated it down simply because the lease contract is an upward-only rent review.

Chairman

What was it prior to 2011?

Mr. Fred Barry

It was exactly the same. There was no increase.

Chairman

So there was no increase in the rent.

Mr. Fred Barry

No increase.

Chairman

Is that rent set for the year or is it set for a period?

Mr. Fred Barry

It is set for the period to the end of 2015 or 2016.

Chairman

So we have got a deal up to then of €1.075 million per year.

Mr. Fred Barry

Yes.

Deputy Simon Harris

I thank the officials for being here. I want to return to the issue of the public subsidy for the public transport providers, Dublin Bus, Irish Rail and Bus Éireann. My question is not too dissimilar to the Chairman's question about the school transport network. Who is policing the system to ensure we are receiving the public service obligation or that they are delivering it? For example, we have had situations across the greater Dublin area concerning Dublin Bus where there have been significant changes to bus routes. Commuters have grudgingly had to accept difficult fare increases, yet services have been curtailed or bus routes have been changed without consultation. In terms of public money being given to each of these companies, can Mr. O'Mahony explain exactly how the public service obligation works?

Mr. Tom O’Mahony

Since December 2009, the arrangement in place for public service obligation services is based on contracts. The contracts are negotiated with the companies or given to the companies by the National Transport Authority. Before that, the public service obligation was essentially deficit funding. Whatever amount of money the companies were losing was subvented by the State.

The mechanism now is that each year in December, the National Transport Authority, when it knows from the Government the amount of subvention that will be available, looks at the level of subvention. As the Deputy knows, in the current circumstances the subvention has been dropping each year for several years and is likely to continue to drop. The NTA makes a judgment in relation to whether any fare increase might be appropriate and, if so, what the level of fare increase might be. The NTA talks to the companies about their cost structure and cost efficiency measures that are being implemented. That is because for a number of years now the three companies - Bus Éireann, Iarnród Éireann and Dublin Bus - have been involved in an extensive and demanding reduction of allowances and various other cost-saving measures. Based on all that, contracts are negotiated for each company which are absolutely specific in terms of the service, timetable, frequency and fares. The companies cannot make any variations in those contracts during the course of the year without the NTA's approval.

There are service requirements, including punctuality levels and so on, which are also built into those contracts, and those are surveyed. If the companies are falling short on any aspect of those, they can be penalised in terms of the amount of the contract. The NTA publishes those surveys and the contracts on its website so that there is transparency on this.

As the Deputy said, this relates to the question the Chairman asked about school transport. Does the possibility exist for the companies to make an excess profit out of these PSOs? The answer to that is "No". These contracts are awarded under an EU regulation which is specific. After all, PSO contracts are moving away from competition. The whole principle of the EU is competition, but it recognises that there can be a situation where, under competitions, particular public services that are necessary will not be met and therefore there has to be another means of doing them.

The rules for PSOs do not allow the companies to be more than adequately compensated, as it is termed. It is not written down anywhere as to precisely what that means, but I understand from the National Transport Authority that in general the understanding around Europe on PSOs is that a profit margin of no more than 5% to 7% would be regarded as adequate compensation. For example, over the course of the year, bus passenger numbers may exceed expectations and therefore fare revenue would exceed expectations. At the end of the year, the NTA audits the companies concerning the PSO contracts and if it transpires that fare revenue has exceeded expectations, then some of the public service obligation would be clawed back.

It is well known that public transport companies are not making any money at the moment. The National Transport Authority has been trying to have the companies maintain the highest level of service they can, notwithstanding the reduction in subventions. Apart from that, they have also had significant fuel cost increases. I would imagine that when this is audited at the end of the year, the NTA will find that if the companies made any profit on the PSOs, they certainly did not come anywhere near meeting this.

Deputy Simon Harris

I am not suggesting they are making a profit on it, but ordinary commuters find it somewhat illogical that fare increases are approved by the NTA, in many cases at a higher percentage than the subvention was decreased, yet bus routes are curtailed, and sometimes in a bizarre manner. Consultation seems to be a buzzword or something that is done as a box-ticking exercise. A submission is then sent for approval to the NTA by the semi-State company, Dublin Bus, and is generally approved. What role has the Department in overseeing the NTA's contract? In other words, are there certain requirements that the Department instructs the NTA that these companies must fulfil in terms of the provision or are we merely giving public money to the NTA, which signs off on contracts with Dublin Bus, Irish Rail or Bus Éireann?

Looking in at it from the outside, it seems there is some sort of faceless body - "quango" is nearly a dirty word - making decisions about approving bus routes, the commuter is paying an increase in fares to use these services, yet there is no consultation. If I contact the Department of Transport, Tourism and Sport, I am referred to the NTA. As a public representative, let alone a commuter, I cannot interact with the NTA on this issue. It is confusing how this operates.

Mr. Tom O’Mahony

Of course the NTA is accountable. The NTA has appeared, and would appear any time it is asked, before the transport committee. Its accounts are audited by the Comptroller and Auditor General. I presume that means - I am not certain on this - that the NTA itself would come here as well, and the NTA will come here.

In fairness, I do not want necessarily to disagree with Deputy Harris in regard to consultation. I appreciate that any level of consultation, no matter how far one goes, may be seen as unsatisfactory, particularly if one feels that consultation does not have much of an effect on the final decision.

In terms of Dublin Bus services, the Network Direct project has been going on now for several years and the company has taken that in phases. Each time a phase is decided, there is a substantial period - I have seen this in routes in which I myself would be interested personally - of five or six months where, first, an announcement is made on the website and public meetings are held which set out the changes. In the briefing note here, I see reference to 30 public meetings and 250 meetings with key stakeholders. I do not know over what period that relates to. Social media, national media and local media is used to promote this and also leaflet drops, etc.

I am aware that there have been tweaks in what is proposed but the problem is there is an inevitability in present circumstances about the need to make services more efficient. There are ways in which services can be made more efficient without reducing the volume but Network Direct, which was based on recommendations by the Deloitte company, was trying to make the entire network operate and provide a service using fewer buses.

There are areas where people can say now that the service specifically available to them is not as good as it was. It may mean them having to walk further to a stop or the frequency is reduced but the context in which that must be set is that the amount the Government is in a position to give for funding of public service obligation services is limited.

Deputy Simon Harris

I accept that. The reason the people or I, as a taxpayer, am willing to give funding to Dublin Bus is because of its public service obligation and because it will sometimes do what would be inconvenient to a private company to do in the interests of public service.

I will not get parochial about this but I can assure Mr. O'Mahony that there are instances in my constituency where Dublin Bus services were changed. The company told a local authority meeting that it would revert back to councillors and Deputies and the wider community before the changes were made and that never happened. The submission was made to the NTA. I and others have written to the NTA. I presume the NTA will now sign off on it. That is what is meant by the consultation process. I appreciate that Mr. O'Mahony is not here on behalf of the NTA but in terms of the funding being given from the Department Transport, Tourism and Sport to the NTA and on to Dublin Bus, something to bear in mind is that the consultation must be meaningful. I appreciate one can have different views in consultation and not everyone can get what he or she wants, but the people want to know exactly what they are getting in that regard.

On a second matter, and not to pick on the NTA, in this issue of its grants to local authorities there seems to be a serious waste of money. It is never popular for any politician to say that funding coming to his or her community or local authority can be a waste of money but I have seen projects in my constituency where the NTA has provided significant funding for what are called traffic calming measures or whatever, where one ramp might have been needed but one gets 11. This happened on one road in my town. When one contacts the local authority, it is told that the NTA had little flexibility in that the funding was assigned for this project. One is trying to explain to constituents and hard-pressed taxpayers why the local authority is stating that it cannot fix a pothole or construct a roundabout when other projects are being done to excess. My understanding, which Mr. O'Mahony might clarify, is that the NTA funds local authorities via suggestions from area engineers and the local authority; in other words, the local authorities would submit a list of projects to the NTA for which they are seeking funding and the NTA would approve certain projects and provide the funding, which must be used for that purpose.

There needs to be much greater oversight on some of these projects. I do not know the level of linkage between the local authorities and the NTA in terms of the scrutiny of these projects, and there are many good ones funded, but at a time when Mr. O'Mahony correctly tells us budgets are constrained, he would be amazed to see some of the goings on under the heading of NTA funding. Mr. O'Mahony might explain the linkage between the NTA, the funding the Department gives to the NTA and local authorities.

Mr. Tom O’Mahony

I will ask Ms Keaney to do that. I repeat that the NTA is not unaccountable. It is accountable, both to this committee and to the transport committee.

Deputy Simon Harris

We might look at bringing in the NTA.

Chairman

We will send a transcript of this meeting to the NTA and ask it for its observations on what Deputy Harris stated.

Deputy Simon Harris

I thank the Chairman.

Mr. Tom O’Mahony

I will ask Ms Keaney to explain how the process works.

Ms Doreen Keaney

As part of its overall funding and its responsibility for public transport in the greater Dublin area, the NTA has a certain amount of funding for sustainable traffic management measures, which would be bus lanes, traffic calming, safety measures, and cycling and pedestrian issues. The NTA consults with the seven local authorities in the GDA, which would include Meath, Louth and Kildare. Each year it allocates a certain amount of funding for individual projects. Much of the funding has been going on bus lanes in the city centre area. Each year, as Deputy Harris stated, there are allocations made, in consultation with the local authorities.

We have asked the NTA, from this year, to get three or four year plans from the local authorities so that ad hoc type measures are no longer funded and also so that we can see some forward planning and long-term outcomes to these projects, many of which are small-scale.

In the main, the purpose of all this is to facilitate use of public transport. Sometimes there are complaints about too many roundabouts, too much looking after pedestrians or cyclists, etc. There is competition for road space. Some of the criticisms are to do with making it more difficult for the car.

Deputy Simon Harris

I am all in favour of pedestrians and cyclists. That is not the issue. The issue seems to be, if one talks to area engineers in a variety of councils, that often they feel under a great deal of pressure to respond to the NTA's request for their list and there is a rush to send in any project with which they can go ahead.

Many of the projects are worthy. I have seen significant worthy investment throughout my county, but what Ms Keaney spoke about in terms of bringing a multi-annual focus to funding and planning would be a help because the idea that one must get a project approved or the funding spent by the end of the year results in projects that can be half-baked.

Deputy John Deasy

In his opening statement, Mr. O'Mahony said that in 2010 the overall spend on the national network was €1.4 billion. Can he provide an estimate of what was spent in 2011 and differentiate between the local authority road network, on which he stated €300 million was spent in 2010, and what the NRA is projected to spend? What is the projected expenditure on the national network in 2012, differentiating between what will be spent on local and national roads and what the NRA will spend?

Mr. Tom O’Mahony

We will dig further into the matter but I understand from the tables we have brought with us that the figure reflects current capital combined. The €1.4 billion to which the Deputy referred is from capital, and later in my opening statement I added in current expenditure on roads of €222 million, which gives a total of approximately €1.63 billion in 2010. The equivalent figures for 2011 and 2012 were €1.270 billion and €1.111 billion, respectively. The vast bulk of the decrease is in the NRA's funding.

Deputy John Deasy

I expected a decrease in the NRA's figure. Of that €1.1 billion, what does the NRA expect to spend?

Mr. Tom O’Mahony

I can provide a breakdown between national and regional and local expenditure.

Mr. Fred Barry

The main capital grant for national roads was €1.14 billion in 2010 but this was reduced to €674 million in 2011. As the Secretary General noted, this was the biggest element of the reduction. The national roads maintenance budget was €52 million in 2010 and €49 million in 2011.

Deputy John Deasy

How much of the €1.1 billion projected for 2012 will be taken by the NRA?

Mr. Fred Barry

The capital grant for the NRA for 2012 is in the order of €650 million and maintenance will be €42 million or €43 million. Additional funding of approximately €83 million will be provided out of the Vote for public partnership payments. This figure was €81 million in 2011 and €43 million in 2010.

Mr. Tom O’Mahony

Is the Deputy trying to arrive at the figure remaining for regional and local roads?

Deputy John Deasy

Not necessarily. We are coming close to the point at which the NRA will be spending half of what it formerly spent, if it has not already reached that point.

Mr. Fred Barry

We are coming closer to a more grievous situation. Next year our planned capital budget will be down to €280 million from its previous level of approximately €1.4 billion per annum.

Deputy John Deasy

These are the basic figures. I am now going to turn to my point, which is organisation and the roles of the NRA and the Department of Transport, Tourism and Sport. Do we need the systems and structures currently in place in light of the massive reduction in budgets? Do we even need separate administrations given that the NRA is under the aegis of the Department? We will continue to operate with less money. Should we not prioritise what little we have left between the two organisations? In my own constituency I have come across a lack of co-ordination between them. How do they co-ordinate the spending of their budgets on their respective areas of national roads and local and regional roads? Councillors and members of the public do not believe the money is being prioritised properly in terms of co-ordinating the remaining budget for roads across the network. Reference has been made on several occasions during this meeting to the new reality. Are we prioritising overall expenditure on roads and do we need to consider amalgamation or greater co-ordination between the NRA and the section of the Department that deals with local and regional roads?

I note the NRA has proposed to bring it together with the Railway Procurement Authority. Is this the kind of administrative rationalisation being considered by the Department?

Mr. Tom O’Mahony

Several threads run through the Deputy's questions. Decisions on prioritising roads projects, whether national, regional or local, are ultimately taken by the Minister for Transport, Tourism and Sport. The priorities in the national roads programme and for regional and local roads are approved by the Minister, based on recommendations.

The Department plays a very small role in regard to roads. We are not involved to a significant degree in the direct administration of any of the road funding programmes. Through efficiencies introduced two or three years ago, the NRA carries out the administration and main advisory work for local and regional roads on our behalf. With the exception of my principal adviser and his small team, all the specialist advice and expertise available to the Government in this area is based in the NRA.

The proposal to bring together the NRA and the RPA is made with a view to streamlining operations even further. These bodies are responsible for a considerable amount of technical transport investment of various kinds. Efficiencies can be achieved by bringing this expertise together and benefits would potentially ensue for other areas of public investment in the State. The potential that our expertise might be usefully deployed outside of Ireland could also be considered when the necessary legislation is drafted. We have gained so much experience over the past ten or 15 years that, like ESB International and Aer Rianta before us, we have an opportunity to bring revenue into the country by selling it. Another major benefit would be the possibility of retaining our expertise while we go through a valley period for our own investment because of financial circumstances so that we will not have to reassemble it if we are asked to implement a number of projects in four or five years' time.

Deputy John Deasy

My questions were not intended to reflect on the work done by Mr. Barry's organisation or the major success it has enjoyed on our motorway and national road network. In the context of reduced budgets, however, people are curious about how the two organisations are going to prioritise the smaller amount of money available to them. I am interested in hearing the views of Mr. Mullaney, as the official in the Department who deals with this area, on how the money should be prioritised. Do we need to consider better co-ordination in prioritising what is a far smaller pot of money and the accompanying administration?

Mr. Fred Barry

The prioritisation on the national roads side is fairly well given to us by the reduced budgets. Given the scale of the budgets, we are not planning, other than as I mentioned earlier through the public private partnership, PPP, process, to commence construction on any new major schemes for the foreseeable future. The moneys available will go to do rehabilitation works, that is, work on the bridges, pavement strengthening and all of that sort of work. We prioritise that with input from the local authorities. We work quite closely with the local authorities, especially the regional offices, on prioritising that, but on a national basis rather than a local basis. We are looking at conditions of roads on a national basis rather than saying that so much money has to go to this local authority or this area and so on.

When it comes to the regional and local roads grants, it is the Minister, with advice from the Department and whatever input from ourselves, who takes decisions on how much to put in the different pots and which strategic investments to support. Many of the decisions as to where the money goes are made by local authorities. One would have to think they are very often the ones in the best place to make those decisions. There is much to be said for looking for co-ordination, particularly when we are looking at major schemes to ensure there is proper connectivity between them and all of that sort of thing.

We heard a little from Deputy Harris earlier about some local issues. He said, in essence, that some of the local area engineers are almost disenfranchised in using their own judgment as to how to use modest sums of money. I do not think any of us would advocate trying to take away that discretion and have a decision made by ourselves from the centre when those decisions are better made by those locally. This is not giving a great answer to the Deputy's question except to say that no matter how we structure it, some discretion has to be left with the people in the local authorities to figure out how best to deal with the smaller local issues, something that is best done at that level.

Deputy John Deasy

Local authorities would argue that such discretion is not very extensive.

Mr. Fred Barry

Indeed.

Deputy John Deasy

They would argue strenuously that they need more discretion on the budget and not enough money is coming to the local pot. In some cases they believe that needs to change. Mr. Barry is making the case that it occurs, but they would disagree. There is a smaller amount of money for everyone involved with the road network. We need, possibly, to review internal structures in the Department and the NRA for prioritising a much smaller amount of money. This year the local authorities were lucky that the weather was fairly good. We did not have a disaster such as we had previously, which cost so much more and put so much more pressure on local budgets. I believe Mr. Barry gets my point. Does Mr. Mullaney wish to comment?

Mr. Tom O’Mahony

Perhaps Mr. Mullaney could come in on it as well.

Mr. Dominic Mullaney

I would endorse what Mr. Barry said regarding the decisions at local level. At the moment more than 85% of our moneys are directed towards maintenance and rehabilitation work. That has been the situation for the last few years. There are few enough projects. It is fair to say that in all cases, whether it is the five year restoration programme, the specific grant programme or low-cost safety, all the submissions come from the local authorities. They draw up the lists and send them in. To try to assist them, we have introduced a map road system through the Local Government Computer Services Board. It is in place in all local authorities now - the five city and the 29 county councils. It should assist them in terms of identifying roads and identifying cycles of when roads need to be surface dressed and when they need treatments and so on. We are hopeful it will be of assistance to them. The point will still remain that it is the local authorities that will be deciding which roads get done and there is no plan to change that.

Deputy John Deasy

I have a separate question for Mr. Barry. There is a lack of figures for the money expected to be generated from tolls. What was the expectation for Waterford and what was the outcome?

Mr. Fred Barry

I can give the Deputy some information. The traffic levels in Waterford on the bypass and certainly the traffic levels going through the tollgates on the bypass are well below the levels that were expected by anybody, either by ourselves or by the tenderers.

Deputy John Deasy

Can Mr. Barry give an indication as to how much?

Mr. Fred Barry

I have access to commercial information from the toll company, but it is confidential to it and I cannot put it on the record of the committee. Its finances as a company will go into the public accounts office and it will reveal whatever it needs to reveal. I can talk in broad terms, but I cannot give the Deputy specific figures. I will continue a little further with it. The risk and the cost of this or the lack income here is borne in the Waterford case entirely by the PPP company. If it came to pass - I am not speaking about the financial strength of any PPP entity - on one of the PPP projects that the PPP concession company became insolvent, the funders to that PPP company would have a choice of bringing in new entities to operate the road or to step in and do it themselves. However, the same obligations would still exist to ourselves. If the funders wanted to write off all their loans and the equity was all written off, there are clauses in the contract to deal with all that which would involve the roads coming back into the hands of the State. As it stands at the moment, Waterford is not the only situation where PPP companies are generating income less than they or their funders expected. The risk and the cost of that are being carried by the PPP companies, except in the case of the two guarantee schemes we spoke of earlier where we are sharing that.

Deputy John Deasy

Is Mr. Barry saying that the revenue being generated in the case of Waterford is far less than was expected?

Mr. Fred Barry

Yes.

Deputy John Deasy

I have a general question on regional airports for Mr. O'Mahony. I preface this by saying we all know the kinds of stresses that exist in the airline business generally, airports and associated businesses. Waterford has some success recently in attracting Flybe and Aer Lingus Regional. I watched with interest the developments in Shannon announced yesterday. I welcome what the Minister and the other public representatives in the area had to say. Waterford Airport has had one arm tied behind its back since its construction, which relates to the runway not being long enough to take jets. Waterford Airport probably gets the lowest amount from the State when one combines the public service obligation, PSO, and the subvention, which will be reduced substantially. The Department has made clear the subvention will be reduced from in excess of €1 million to €750,000 over the next three to four years. The airport is being extremely proactive about the future and is investigating financing a runway extension. Assuming it will cost €4 million or €5 million, it does not expect the State to come up with that money. Instead, it will produce and present to the Department a cost benefit analysis. What is the policy on Waterford Airport, which has endured the significant disadvantage of being unable to take jets? The airport has proven itself in the market, as 55% of its customers come from the UK. It needs this development.

Mr. Tom O’Mahony

I can go as far as informing the Deputy of Government policy on regional airports, but no further. They need to move towards viability. In the long run, the Government does not envisage being able to continue funding them. I am citing last year's announcements by the Government when it changed the support structures, removed operational funding from Sligo and Galway airports and decided to continue supporting Donegal, Knock, Kerry and Waterford airports.

Much has changed as regards regional airports, one of the most significant changes being the matter under discussion, namely, the transformation of the motorway network. Domestic air travel is dwindling because flying from Dublin to any of the regional airports does not make much sense for most people compared with the journey time by road. If one is flying, one must allow extra time to get to the airport, be processed and so on.

In terms of viability and benefit to the State, the major issue is attracting tourism, business contacts and so on. The airports that are still receiving funding must put together business plans to justify continued support. I acknowledge all of Deputy Deasy's comments, in that Waterford Airport is proactive in what it is trying to do. The current level of support has effectively been guaranteed for the next three years.

Deputy John Deasy

Waterford Airport is confident that it can make that proposal, put together a cost-benefit analysis and make a case for the additional capital investment to make them viable. When one compares it with the remaining regional airports, one notes it gets the least amount of money from the public service obligation, PSO, and the subvention. I welcome Mr. O'Mahony's comments, but-----

Mr. Tom O’Mahony

The case should be made, but I cannot pre-empt future Government policy.

Deputy John Deasy

I do not expect Mr. O'Mahony to do so. Is it departmental policy to entertain and review proposals and to examine the financial cases for investing money to make the airports viable?

Mr. Tom O’Mahony

We are the Department of tourism as well as the Department of transport. For an island, access is critical. Regional airports will need to be viable. If Waterford can be viable, demonstrating that ability in the way outlined by the Deputy is important.

Deputy John Deasy

I thank Mr. O'Mahony.

Deputy Paul J. Connaughton

I welcome the witnesses and have two quick questions, the first of which is to Mr. Barry. A witness stated that, in terms of local and regional roads, the local authority plays an important role at the start of the process, in that it identifies which roads need work. I imagine that local authorities apply to the Department for grant aid to carry out that work. Does the local authority calculate the cost of the road project?

Mr. Fred Barry

I would need to ask Mr. Mullaney.

Mr. Dominic Mullaney

The initial estimate comes from the local authority. It depends on the size of the project, as there are different categories. If it is a large project, it goes through a more rigorous process, the cost is estimated at the start and there are approvals at different stages. For large projects, the National Roads Authority, NRA, deals with approvals on our behalf. In terms of smaller projects, for example, day-to-day work on resurfacing roads, local authorities supply information on the cost, the area to be done and so on. They are expected to carry out the required work within their overall budget and with a view towards the total number of kilometres covered. That is to say, each project does not necessarily need to match the exact figure originally forecasted. One project could cost slightly more and another could cost slightly less. This is in terms of an overall restoration programme. Resurface dressing is the other large block of money and was addressed during the discussion on unit rates. I am unsure as to whether I have answered the Deputy's question.

Deputy Paul J. Connaughton

On the point of unit rates, I do not doubt that, in each county, every project has a different cost. If a road is being improved, it is welcome, but the general public wants to know how the money is being spent. If a project is announced and €250,000 is to be spent to work on 1 km of road, one wants to break down that amount of money and discover why more could not be achieved.

When a council makes an application for grant aid, does the Department subsequently seek information on how the money is spent? If there is an underspend, does the Department or the NRA reclaim the money?

Mr. Dominic Mullaney

We do not reclaim the money. Instead, we require local authorities to work on extra lengths of road. We have discussed unit costs and the large category of restoration-maintenance, which amounts to €60 million per year, but the restoration-improvement category accounts for €165 million this year. We examine the figures in respect of the latter more closely. Where road restorations and refurbishments are concerned, the only complication is that it is not simply a question of setting a single rate. The cost depends on how much work needs to be carried out, the depth of overlay, whether an existing road needs to be planed out at the edges so as not to exceed the level of the footpath, etc. Through the MapRoad system, we hope to improve the database on unit costs, what is appropriate in different situations and so on.

Deputy Paul J. Connaughton

After a project has been carried out, is information available on how the money was spent per section? I understand Mr. Mullaney's point, in that every road is different and it depends on how much money is provided.

Mr. Dominic Mullaney

There would be outturn figures at the end of the year.

Deputy Paul J. Connaughton

Given the fact that tourism falls under the Department's remit, how linked is it with transport? Airports have been mentioned as providing access to local areas. The road infrastructure is also important. I am from County Galway and travel to County Clare via the Burren and the Cliffs of Moher, which are major tourist attractions. The state of the N67 is deplorable. How linked in is the Department's transport work with the tourism aspect, given the importance of the road infrastructure to the latter?

Mr. Tom O’Mahony

We are linked in because we are the same Department. I am the Secretary General for transport as well as tourism and they have the same Minister. In our analysis of which priorities money might be spent on as more financing becomes available, we take into account cases made by local authorities and Fáilte Ireland in respect of areas where some transport investment could have a significant benefit to tourism.

Deputy Paul J. Connaughton

So Fáilte Ireland is included?

Mr. Tom O’Mahony

Fáilte Ireland has made recommendations to us in relation to areas where it would feel that transport investment, if made, would generate a significant return for tourism. Yes, it is linked in with it.

Deputy Mary Lou McDonald

I know the area of differentials and the costs of road maintenance was addressed earlier and I take my hat off to County Cavan. I know the county has a reputation for thrift and it is reflected here. I assume that the matter has been addressed but I just wanted to say that.

I want to return to the issue of tolls. Mr. Barry mentioned that there are two guarantee schemes in which the State underwrites the loss of revenues in the event of reduced traffic numbers. What does that cost the State?

Mr. Fred Barry

The cumulative costs to date of those risk and rewards schemes is that, to the end of 2011, we are €2 million ahead. That is, when one takes the money received and the money paid out to the end of 2011, we are €2 million ahead. We are only in May but this year I expect that it will cost us between €5.5 million and €6 million. That is the order of magnitude.

Deputy Mary Lou McDonald

Is Mr. Barry referring to the Limerick tunnel and M3 schemes?

Mr. Fred Barry

Those are the two schemes, yes.

Deputy Mary Lou McDonald

Mr. Barry was quite critical of the buyout of the M50 in an earlier discussion. Is he equally critical of those recoupment provisions for those schemes?

Mr. Fred Barry

No, if I could get somebody to enter a PPP contract on those same terms tomorrow morning I would grab it with both hands. While we are paying out a certain amount because of the lower traffic it is risk sharing and the bulk of the cost of the reduced traffic is being carried, in the first tranche, by the PPP companies. Our problem is that there was a transition in the procurement of PPPs. In the earlier years the PPPs, the companies and their funders were very bullish. They would take full traffic risk on tolled roads. By the time we got to the middle of the last decade they were willing to take full traffic on straightforward smaller schemes but they would not take full traffic risk on more complex ones like the Limerick tunnel, or on very big ones like the M3, so we had to come to the arrangement where they took the first tranche of risk and we took some of the risks after that. Subsequently, and in the current market, we do not have tolled PPPs at tender at the moment but knowing the marketplace we could not get PPP companies to carry any traffic risk if we were tendering. Even though we would prefer not to carry our share of the traffic risk of the earlier ones, sharing the risk is better for us than having to carry the full risk which is how it will be at the moment.

On the PPPs that we have for tender at the moment, they are not being tendered on a tolled basis. They are being tendered on a straight unit repayment basis so that the payments are not in any way reduced or increased but are unchanged by the volumes of traffic on the road.

Deputy Mary Lou McDonald

Is if Mr. Barry's view, given that risk sharing model, that it will even out over time and that the benefit will accrue to the State? Is that what Mr. Barry is saying?

Mr. Fred Barry

Yes, it is. As I say, in earlier years the benefit was accruing quite strongly to the State up to the point where and, even though, we made payments out to some concessionaires in 2010 and 2011. By the end of the 2011 we are still in the positive. It is going to cost us this year and it will probably cost us next year. I think that as the economy improves we will get back to the situation where the State is gaining more than it is paying out.

Deputy Mary Lou McDonald

I am looking at the figures that Mr. Barry gave for the NRA's capital budget next year. I think he said it would be €300 million for 2013.

Mr. Fred Barry

Give or take.

Deputy Mary Lou McDonald

Yes, give or take. It is a ballpark figure. Will that not leave the NRA pretty hamstrung?

Mr. Fred Barry

It means that we have a certain number of major medium-sized schemes in construction at the moment. We have got a couple of PPP schemes at tender. Other than that we have one major scheme, the Ballaghaderreen bypass, which we expect will start construction later this year. On the current funding levels, we are unlikely to start any major schemes for the following several years until funding recovers. There will still be money and we will still use the money that is available to do the basics, our bread and butter work of the rehabilitations and the sort of surfacing that we talked about earlier.

Deputy Mary Lou McDonald

In that light I shall ask about two issues. First, the A5 motorway which, as everyone will know, was agreed in a particular set of arrangements between the Irish and British Governments. Funding from this jurisdiction has been greatly slashed in respect of the delivery of the project. Can the NRA reassure me about the project?

Mr. Tom O’Mahony

In fairness to the NRA I should take that question.

Deputy Mary Lou McDonald

Okay. The second part of my question harks back to an earlier set of questions. Given that the NRA's budget is so restricted is there any net gain, or would it cause damage in terms of the NRA's delivery of service and expertise, if it were taken back by the mother Department along with the RPA? I presume that it would be the Minister that would take such a decision. Would it be problematic for the NRA? Would it be difficult for it to fulfil its functions?

Mr. Tom O’Mahony

I will take the two questions and I will take the A5 one first. The Irish Government's contribution to it has been £400 million - and all of these figures are in sterling - of which £22 million has already been spent in terms of the planning work and has got the project to the stage that it now has planning. When the Government was doing the capital review last year it decided that it was not going to be possible, in view of the amount of money that was now available for capital expenditure for the State as a whole over the period to 2016, to provide £400 million within that period. The Government decided that it would make contributions of £25 million in 2015, £25 million in 2016 and defer payment of the rest. That is not a cancellation or a statement of a reduced commitment. Again, while I can only relay the Government's policy position, it has made it explicitly clear, and has done so in the context of the North-South Ministerial Council meetings, that it remains committed to the project.

Deputy Mary Lou McDonald

Of course the Northern Executive held steady in respect of its commitment to the project.

Mr. Tom O’Mahony

Yes.

Deputy Mary Lou McDonald

It is not credible to say that the commitment to the project has not been, at the very least, downgraded when such a massive adjustment in the proposed funding commitment has been made. Delivering in those fairly modest tranches, in the first instance, and then deferring a decision on the rest of it clearly creates a dilemma and places a question over the delivery of the project. Is that a fair or rational thing to say?

Mr. Tom O’Mahony

It would not be fair to ask me to comment in those terms. I cannot in any case, in relation to a Government policy issue, do anything other than say to the Deputy what the Government has said which is that the Government remains committed to it but has had to defer its further contribution because of the financial circumstances that we are in. What now will happen with the project, and it was agreed at the North-South Ministerial Council, is that a revised funding and implementation plan will be agreed and that will then be brought back to the North-South Ministerial Council.

Deputy Mary Lou McDonald

I understand all of that.

Mr. Tom O’Mahony

Yes.

Deputy Mary Lou McDonald

I do not wish to cut across Mr. O'Mahony.

Mr. Tom O’Mahony

Okay.

Deputy Mary Lou McDonald

Can Mr. O'Mahony reassure us that, from a departmental point of view, the necessity and strategic value of this motorway for Donegal and Monaghan is still fully appreciated?

Mr. Tom O’Mahony

Yes.

Deputy Mary Lou McDonald

Does it?

Mr. Tom O’Mahony

Yes.

Deputy Mary Lou McDonald

Does the departmental commitment to it remain?

Mr. Tom O’Mahony

Yes.

Deputy Mary Lou McDonald

Does the departmental commitment still exist?

Mr. Tom O’Mahony

Yes, it is a departmental thing but it has also been expressed. The Department ultimately does not make policy but the Government and the Minister have expressed it in those same terms which is why I can confidently say to the Deputy that that is the stated Government position. It is not just a contribution to a road in Northern Ireland. That is why I can confidently say that is the stated Government position, that it is not just a contribution to a road in Northern Ireland but is also the creation of a link to the north west of the country. The commitment has not changed, but the ability to fund it in the short term has.

Deputy Mary Lou McDonald

It remains the position that the connectivity to the north west of Ireland is still on the agenda-----

Mr. Tom O’Mahony

Yes.

Deputy Mary Lou McDonald

-----and given priority.

Mr. Tom O’Mahony

On the other question, this question arises not just about the NRA but also with regard to a range of State agencies. Why are the State agencies there? What has tended to happen over a period of time is that many functions which were being carried out by Government Departments have been devolved to State agencies. The usual reason, and it particularly applies to the NRA and other agencies such as the RPA, is that high levels of specialist expertise are required for the work to be done properly. It has been found over time that to attract, retain and provide career structures for the specialist expertise, it is best carried out in an agency outside the rigid structures of Government Departments, which are very rigid. Any agency could be subsumed back into a Government Department. My view, and I can only express a personal view here, is that it would not work well with the NRA because of the way in which the NRA has emerged and developed itself as a centre of technical expertise. Perhaps Mr. Barry has a perspective on that.

Mr. Fred Barry

To echo what the Secretary General says, the NRA could be merged back into the Department and the Department could take over its functions. It could be done. The practice across Europe is not universal but in most countries there is a national roads authority or some such organisation by a different name. In the Netherlands, for example, the same organisation is responsible for the roads, the waterways and the water, while in other countries the organisation is just responsible for the roads. It varies, but far more countries than not have separate entities to deal with national roads. In one or two they are still managed through the general civil service. It is generally found that having a separate expertise and focus is beneficial. In Germany, there is a federal road grouping and then the state levels - of course, the states are all bigger than Ireland - and various levels below that. Switzerland, which is perhaps the same size as Ireland, has a road administration very like ours except that the roads it deals with are mainly the motorways. It does not have quite as many local roads as us. There are variations like that throughout Europe but the fundamental structure of having something separate and focused is the norm.

Deputy Mary Lou McDonald

I wish to make it clear that I am not gainsaying the level of expertise and the necessity to have it in a configuration that is very focused. I accept the international examples mentioned by Mr. Barry. The difference is that this State is broke, insolvent and in big difficulty. Many decisions have been taken about State agencies, not all of them very well considered, in an effort to see how efficiencies can be achieved. I take it from the reply that while it could happen, it would not be the best course of action.

Mr. O'Mahony mentioned that the rigidities or lack of flexibility in the line Department do not apply in respect of the NRA. Will he discuss that further? Is it in respect of recruitment or remuneration? What did he mean?

Mr. Tom O’Mahony

I meant it more in the sense of recruitment, the ability to contract people in for relatively short periods of time. There is a greater degree of flexibility than one tends to have within a Government Department.

Deputy Mary Lou McDonald

Are the pay grades in the NRA linked to Civil Service grades?

Mr. Tom O’Mahony

I think they are linked to local authority rates.

Mr. Fred Barry

It is actually Civil Service grades.

Deputy Mary Lou McDonald

How do the percentages break down within the NRA in terms of how many would be linked to the Secretary General or assistant principal and so forth? Can the witness discuss that?

Mr. Fred Barry

Roughly speaking, the only one who would be equivalent to the Secretary General would be me. We have a number of vacancies at present, which is why I am couching the answers a little. We have a few positions that are filled at assistant secretary level or, when the dust settles, will probably be at that level. Then we have the usual range of people in every position down to clerical officer or laboratory technician level. However, within our grades we would have far more of the engineering grades, as well as accountants, archaeologists and all the professional service grades.

Deputy Mary Lou McDonald

How many staff are there?

Mr. Fred Barry

We have a total of 120 staff, and with secondments and short work weeks it is 108 wholetime equivalents.

Deputy Mary Lou McDonald

There are two entirely different things that jump out from the accounts about which I am curious-----

Chairman

Can I intervene? You mention that the pay grades are equivalent to civil servants.

Mr. Fred Barry

Yes.

Chairman

How many people are on the board?

Mr. Fred Barry

I think there are ten on the board at present.

Chairman

What is it normally?

Mr. Fred Barry

It is normally between ten and 14. There is a maximum of 14 and a minimum number. I am the only staff member of the board. All the other board members are non-executive members.

Chairman

What is their annual payment?

Mr. Fred Barry

It was €7,695 in 2010. I am not sure if that has been adjusted since.

Chairman

The total cost of the board in 2009 was €120,977 according to the annual report.

Mr. Fred Barry

Yes.

Chairman

In 2010, it dropped to €71,833. What was it in 2011?

Mr. Fred Barry

In 2011 it was €72,373.

Chairman

I ask the question because you mentioned your payment is equivalent to the Secretary General's payment. However, you also receive a payment for being on the board.

Mr. Fred Barry

I used to but I no longer receive it.

Chairman

That is where the difference emerges in 2009 in terms of the cost of that board. According to the annual report €36,876 was made payable to you, but that is for a number of years of being a member of the board.

Mr. Fred Barry

That is correct.

Chairman

Likewise, in 2010, you were paid as a member of the board as well as being Secretary General.

Mr. Fred Barry

Yes.

Chairman

Is that no longer the case?

Mr. Fred Barry

Yes. During last year a measure was put in place - I think it applied to more than just me and was not personally directed - whereby people like me who were receiving fees as well as salaries lost the fees.

Chairman

That is fair enough.

Mr. Fred Barry

It depends on where one sits.

Chairman

It certainly is for the taxpayer. It is a question I have often asked at the committee, as to why people who have an interest in the board and are getting paid should also get paid for sitting on the board. The social partners have positions on some of these boards as well. It is a good thing that only board members are paid. Is there a case to be made for reducing the numbers on the board?

Mr. Fred Barry

I am not in a position to comment on that. They are the Minister's appointees.

Chairman

Deputy McDonald can resume.

Deputy Mary Lou McDonald

When you talked about the additional payment, Chairman, I was going to say it would not happen in Cavan. We need somebody from Cavan in charge of all of these matters.

Under miscellaneous items in the accounts, compensation and associated legal and miscellaneous costs total €690,225. Payments ranging from €1,500 to €212,000 were paid in 12 cases taken against the Minister.

Mr. Tom O’Mahony

Does that relate to the NRA or the Department?

Deputy Mary Lou McDonald

It is the Department of Transport, Tourism and Sport, Vote 32, on page 441 and relates to actions against the Minister.

I do not know if Mr. O'Mahony has the precise detail.

Mr. Tom O’Mahony

Can Deputy McDonald ask her other question and give us a moment to fish it out? If we have it, we will give it to her. If not, we will send her a note.

Deputy Mary Lou McDonald

Regarding appropriations-in-aid 2009, the pension contribution from the Commission for Taxi Regulation amounted to €687,000. It drops dramatically in 2010 to €25,000.

Mr. Tom O’Mahony

The Commission on Taxi Regulation was subsumed into the National Transport Authority and I assume that is the reason. If it is for a different reason, I will send Deputy McDonald a note on it. The Commission for Taxi Regulation ceased to exist during 2010.

Deputy Mary Lou McDonald

One presumes those moneys can be traced elsewhere.

Mr. Tom O’Mahony

I will send a note to the committee to confirm that point. We do not have a breakdown on the compensation so we will send Deputy McDonald a note on that too.

Chairman

I must express my interest in transport. I refer to road haulage licences. The figures in the appropriation accounts show that the Department predicted haulage transport licence fees, having realised €604,000 in 2009, would amount to €1.15 million in 2010, rather than €800,000. The interest in road haulage licences dropped considerably in 2010. What is the figure for 2011? Is there a reason for that? Given our export led drive, does it involve the road haulage industry? One would expect an interest in that area.

Mr. Tom O’Mahony

I assume that in 2010, due to the effects of the recession, a number of licences were not renewed.

Chairman

How many licences were issued? While Mr. O'Mahony is looking for that response, I have a question for Mr. Barry. Is there a policy of providing regional salt storage units?

Mr. Fred Barry

Yes. We are buying salt for the national roads on a centralised basis. We are also providing grants to some local authorities to set up small depots around the counties. We are also putting regional depots in place so that next time we have that sort of weather, the salt will be much closer to where it is needed.

Chairman

Are these greenfield sites or will local authorities, particularly in depot locations, provide the sites from landbanks?

Mr. Fred Barry

Yes, if they have one. Sometimes they are being built where there is a maintenance depot and in some places they are being built where we have land from construction. There may have been construction huts in a particular area and we can use them. In a few cases they are being built on new sites but mostly they are being built on land in local authority or in NRA ownership.

Chairman

Can we have details of the local authority locations, the costs involved and whether they are greenfield sites or council provided sites? Can Mr. Barry also let us know the regional locations, the costings involved and whether they are greenfield sites or council provided sites?

Mr. Tom O’Mahony

I now have the haulage figures. In 2010, the number of licensed haulage operators was down 27% compared with 2007. Passenger licences, which also come under road transport operator licence fees, decreased by 43% from the 2007 peak. Figures fell by much more than was estimated and it is due to less economic activity.

In 2011, income increased to just over €1 million. We do not believe this was due to an increase in activity in the sector. There was one large-scale vehicle transfer by a major haulier and it involved large fees. The amount will vary from year to year because there will be spikes in a five-year cycle for licence applications and renewals. In 2010 and 2011 we are operating at lower levels of activity, notwithstanding the fact that exports have increased.

Chairman

Can we have a note on income and the number of licences?

Mr. Tom O’Mahony

Yes. A substantial amount of haulage activity is related to construction and that market is in a desperate state. I imagine a significant number of the people who left the business were involved in haulage for construction. We will provide a detailed note on the number of licences issued, etc.

Chairman

What is the view of Mr. Barry on the amount of money spent on the construction of motorways that bypass small villages and towns? Part of the reason for constructing them was to assist traffic management in villages and towns. Despite the construction of a motorway and probably because of the introduction of tolls, the same level of heavy goods vehicle activity continues through the villages. Applications are made by local authorities, either to the Department or to the NRA, to deal with these issues and it is neither a local authority problem nor an NRA problem. People who reside in villages and towns must bear the ongoing problem of heavy goods vehicles in their towns. What is the response of the NRA? It is difficult to get a response from the councils because they say it is a problem for the NRA, which generally sends me back to the councils. The money was spent to relieve the problem but the problem has not been relieved. On part of the road to Cork in my constituency, Johnstown continues to be plagued by heavy goods vehicles driving through it without much action from the council or the NRA. Goresbridge and Graiguenamanagh, on the other side of the county, where one has access to the Dublin-Waterford main road, are also experiencing difficulty. Does the NRA carry out analysis after construction and work with councils to fund an alternative to address the problem that continues to exist?

Mr. Fred Barry

When the introduction of tolled motorways was presented to various transport committees, the NRA was pressed to commit to making an untolled alternative to toll roads available to the public so that people were not forced to use tolled roads. In the case of the M50 in Dublin, one is not forced to use it but it is difficult to avoid. In dealing with the transport committee and An Bord Pleanála and putting in place toll schemes, a commitment was given that untolled alternative routes would be provided. Notwithstanding the untolled options on all of our schemes, we track what is happening with traffic generally and the volume of heavy goods vehicles.

Even though I take the Chairman's point that heavy goods vehicles are still on the roads in many towns and villages, a significant number, which is increasing, is paying the tolls. What can we do to encourage more heavy goods vehicles to use the toll roads? It is possible to put limits on the vehicles that go through a town or village or to put a heavy goods vehicles ban in places, as is done in the greater Dublin area. This places a significant administrative burden on the local authority and is difficult to do in addition to other possible ramifications. Not many places have taken this step. Short of telling people they are obliged to use the toll road, and making it convenient to do so, I am not sure what can be done other than stopping the alternatives of going through the towns.

Chairman

In view of the introduction of tolled roads, would the NRA consider making funding available to local authorities to assist them to put in place proper traffic management systems in small villages and towns?

Mr. Fred Barry

During the progress of works on the network we will have given certain allocation, and when we come to hand back the network to the local authorities they will often get a lump sum to deal with residual problems at that time. After that we would be acting ultra vires if we were to give grants for works on roads other than national roads. It is not a matter of whether we in the NRA think it is a good idea to give money; we cannot take money which the taxpayers have voted for national roads and pass it on for schemes that are not on the national road network.

Chairman

This is a problem all over the country. I outlined a problem in two locations - what money was given to the local authorities, in whose administrative area the problems arise, to deal with what Mr. Barry terms "the residual issues"?

Mr. Fred Barry

On the network issues, I will give the Chairman the figures. In response to the general question on what the NRA can do now or on future schemes, there is a clear divide and we cannot reallocate money which is for national roads to non-national roads.

Chairman

That is okay. Will Mr. Barry outline the payments provided by the NRA to cover residual issues in the problem areas I raised? May I have that information as I wish to see how the funds are applied at local level?

Mr. Fred Barry

Yes.

Chairman

There have been a number of fatalities on the Piltown-Fiddown bypass. When one inspects how that stretch of road way operates, the engineering solutions on the ground are bizarre. The NRA funded the changes to that route, which made it more bizarre. A further proposal to erect a flyover over that stretch connecting Carrick-on-Suir to Waterford through Piltown-Fiddown is being considered. What general analysis is carried out by the NRA on a project where design difficulties continue to arise? The NRA continues to fund add-on bits that are bolted on to the main design as problems arise. Is it not time to revisit such schemes to arrive at an overall solution to a problem that has been ongoing since 1997? Does a network, which must be altered continuously to make it safe, represent value for money? Has the NRA the capacity to revisit its work and put in place modern engineering solutions when a stretch of roadway does not work?

Mr. Fred Barry

In any situation where a stop-gap measure is put in place or there is an insufficient response to a situation, and I would include the original work on Piltown-Fiddown in that category, it is always more expensive to do a partial fix and then come back later and do some more. That is an inefficient way of doing it. We would hope not to do that anymore. We have peer reviews of all schemes these days, so that people outside of the scheme can cast a cold eye on the scheme before it goes forward to the planning stage to try to avoid that type of situation. I hope we will never see a repeat of that in the schemes that are being developed at present.

If work on the Piltown-Fiddown project had been more appropriate in the first place, it would have been more cost effective than continuing with the stop gap works since then. The current proposal is being worked on in the Tramore regional office and will be put through a thorough review before it goes forward to ensure we are not back here again in two or three years' time talking about a further change being needed.

Chairman

We did not get value for the significant amount of money has been spent on the scheme to date. May I ask Mr. Barry to revisit and review the scheme and all the moneys expended on it, in view of the number of fatalities on that stretch of roadway? I understand there are 13 junctions and a number of roundabouts off the main road to facilitate U-turns to go back up the road. This is not a safe stretch of road and I think a great deal could be learned for the future, if it were to be sent for peer review.

Mr. Fred Barry

Yes.

Chairman

Mr. Barry said the NRA has the facility to audit and carry out spot checks on the carrying out of the schemes by local authorities. Will he provide a note on the Ballinaslee Road, County Laois, which connects two counties and a major industry? I would like to know what money has been spent to date by the NRA, the lands that have been purchased, and if such lands will be used in the current planning of that roadway?

Does Deputy O'Donnell wish to put a question?

Deputy Kieran O’Donnell

Thank you, Chairman. I wish to raise the question of VAT on the tolls. Has the NRA retained legal and taxation experts to advise it on the appeal?

Mr. Fred Barry

Yes.

Deputy Kieran O’Donnell

Who is providing such advice?

Mr. Fred Barry

Our legal advisers are McCann FitzGerald solicitors and our tax advisers are KPMG.

Deputy Kieran O’Donnell

Do these firms expect the appeal will be successful?

Mr. Fred Barry

As with all advisers, they do not give any guarantees, but on balance they expect the NRA appeal to be successful.

Deputy Kieran O’Donnell

Is this on the basis of case law? Second, what amount has the NRA paid in VAT to date? If the appeal is successful, what is the expected refund?

Mr. Fred Barry

Depending of course on how long it takes before we get a decision, our VAT payments are running at about a net figure of €10 million.

Deputy Kieran O’Donnell

Is €10 million the amount?

Mr. Fred Barry

It is the net amount. We get offset for VAT paid on services relating to the toll link, maybe €20 million.

Deputy Kieran O’Donnell

If the NRA were to indicate tomorrow, the net refund from the Revenue would be approximately €10 million.

Mr. Fred Barry

It would be something like that, perhaps a bit more.

Deputy Kieran O’Donnell

While I acknowledge the great work the National Roads Authority has done on the road network, one of the main reasons public representatives have for interacting with the NRA is the issue of sound buffers and barriers for residents living adjacent to roads. The level of soundproofing provided has changed over the years. Sound barriers built in the past two years, for example, are much better than those built ten years ago. Has the NRA considered doing an audit with a view to upgrading sound barriers for residents living near roads that were built a number of years ago? Mr. Barry will be aware of this issue given the number of representations the NRA has received on the issue.

Mr. Fred Barry

There is noise mapping taking place on all of the major roads throughout the country at the moment and not only on the roads. It is being done by the local authorities under the general direction of the Environmental Protection Agency. The NRA is doing the mapping on major national roads for the local authorities and collating a lot of information for them on the regional roads. This is getting all the information together and out of this there will be a fairly clear picture and an objective measure of where the real noise problems are on the roads and around transport and industry generally in the country. As to what happens after that, I am not entirely sure.

Deputy Kieran O’Donnell

Is the mapping exercise being completed by the NRA?

Mr. Fred Barry

It is being managed overall by the Environmental Protection Agency but the National Roads Authority is doing a lot of work for it and feeding work into it. As to what will happen when all that information is made available, I do not know. There are some EU directives around this issue but I believe they are a little woolly as to what is supposed to happen next.

Deputy Kieran O’Donnell

Will Mr. Barry provide a timeframe?

Mr. Fred Barry

We expect to have all of our mapping work done this year. I do not know what the timeframes are after we feed the mapping into the EPA.

Deputy Kieran O’Donnell

I hope the NRA will take this issue on board.

Mr. Fred Barry

Yes, we will.

Deputy Kieran O’Donnell

When does the NRA expect the Limerick tunnel to break even? I have examined the 2010 accounts in this regard. What payments have been made to date to the concessionaire, the operator of the public private partnership?

Mr. Fred Barry

The biggest payments to the operator have been the fixed construction and operating costs as against the variable costs.

Deputy Kieran O’Donnell

Let us take the direct payments.

Mr. Fred Barry

The direct payments towards the whole construction would be several hundred million euro. The variable payment-----

Deputy Kieran O’Donnell

I refer to the variable payment for the operation of the tunnel which is based on traffic volumes.

Mr. Fred Barry

I do not know when we will get back to the point where we no longer have to make that payment. If we get back to economic growth of 3% or 4%, as we all hope, it will be a matter of a few years' time.

Deputy Kieran O’Donnell

How much has been paid to date under the variable costs associated with traffic volumes?

Mr. Fred Barry

The figure is approximately €3.5 million.

Deputy Kieran O’Donnell

Does that date back to 2009?

Mr. Fred Barry

The tunnel had not opened in 2009.

Mr. Michael Kennedy

It opened in late 2010 and we make payments twice each year on the basis of a six month look-back.

Deputy Kieran O’Donnell

How much was paid in 2011?

Mr. Michael Kennedy

The total payments made in 2011 amounted to €3.6 million.

Deputy Kieran O’Donnell

What was paid in 2010?

Mr. Michael Kennedy

No payments were made in 2010 as the tunnel opened in late 2010.

Deputy Kieran O’Donnell

How much has been paid to the operators to date in 2012?

Mr. Michael Kennedy

We have paid slightly more than €2 million to date in 2012.

Deputy Kieran O’Donnell

Given that the payment is based on growth levels, we can expect to make an annual payment of the order of between €3 million and €4 million.

Mr. Fred Barry

Yes, and if the economy stutters, the figure will increase before it declines.

Chairman

Does Mr. Harkness wish to add anything?

Mr. Andy Harkness

No, thank you, Chairman.

Chairman

Does the committee agree to note Vote 32 - Transport - and dispose of Chapter 27 - Maintenance of Regional and Local Roads - and National Roads Authority, 2010 Annual Report and Financial Statements? Agreed.

I thank the witnesses for attending.

The witnesses withdrew.

The committee adjourned at 1.25 p.m. until 10 a.m. on Thursday, 17 May 2012.