I am pleased to be here today to present the appropriation account for the Office of Public Works for 2011 and to answer any questions members may have.
The first item on today's agenda is chapter 14 of the annual report of the Comptroller and Auditor General, Measuring Procurement Performance. The National Procurement Service, NPS, which was established within the Office of Public Works in March 2009, is tasked with centralising public sector procurement arrangements for common goods and services, which include office equipment, stationery and office supplies, electricity, fuel, printing, uniforms and transport. By identifying key markets and analysing procurement trends, the service continues to develop a more integrated approach to procurement across the public sector, utilising procurement tools such as aggregation and framework agreements. The service also facilitates collaboration with clients in markets where savings can be achieved through the aggregation of requirements. These strategic approaches have achieved and will continue to achieve real savings and value for money.
During the course of 2011, expenditure under the NPS contracts amounted to an overall value of approximately €180 million. These contracts covered areas of procurement as diverse as stationery, energy, ICT consumables and paper. While the primary concern of the NPS on its establishment was to save money on goods and services for the State, a constant challenge is how best to calculate any savings or efficiencies that arise as a result of this procurement effort. This becomes an even greater challenge when one considers that the NPS is not actually purchasing on its own behalf. Rather, it is putting in place arrangements whereby public bodies throughout the system can procure goods and services from their own funds in a legally compliant and economical manner. The actual savings derived are reflected within those individual Votes.
The Comptroller and Auditor General's report calls attention to the many different approaches taken to the calculation of these savings or efficiencies. The reality is that the nature of the commodity or the particular market will usually dictate the approach taken to calculating the level of efficiency arising. For example, the procurement of energy in a rising market requires a different approach to calculating savings and efficiencies to the procurement of paper in a falling market. The situation is compounded by the general lack of easily accessible data on purchasing trends across the whole of the public service. Since the 2011 audit, however, the NPS, in association with its clients across the public service, has done considerable work to bring a level of reliability and consistency to these methodologies. That effort is ongoing.
A particularly active part of the business programme in 2011 involved the procurement of some €146 million worth of energy contracts. This area of procurement required the retention of expert external services to assist the NPS in its task. In 2011 the rapid expansion in demand for the services of the NPS in the procurement of energy resulted in an escalation in the associated cost of the external service providers of energy consultancy. When this development was identified, the service made arrangements to have the contract re-tendered through an EU competitive process. Given the particularly complex nature of this area of procurement, it is anticipated that the NPS will continue to require services of this nature for the foreseeable future.
The Government agreed in September 2012 to reform the central procurement function under a new Office of Government Procurement at the Department of Public Expenditure and Reform and, as part of that process, appointed a Chief Procurement Officer, Mr. Paul Quinn. A further Government decision of April 2013 agreed the outline plan for the development of a significantly expanded central procurement function.
I will now take the opportunity to refer to other important aspects of the work that was funded through the 2011 Appropriation Account and provide members with an update on the current position in several areas. Following on from the pilot Estimates introduced in the Revised Estimates for 2011, the Appropriation Account is structured under three main programmes of OPW activity, namely, the National Procurement Service, flood risk management and estate portfolio management.
The OPW is the lead agency for the management of flood risk in Ireland. Although there has been an overall drop in capital funding for the office since 2008, the committee can be assured of the Government's commitment to this critical area of investment, as clearly demonstrated by the maintenance of capital funding for flood relief and the catchment flood risk management plans in the OPW Vote. In 2011, the accounting period being examined today, works under this programme included the completion of first-phase major flood relief schemes in Waterford, Carlow and Clonmel west. Other schemes that progressed included works at Clonmel north and east, Mallow south and west, and Claregalway. In order to facilitate the comprehensive delivery of relief schemes throughout the country, €5.2 million was also provided to local authorities under the minor floods and coastal protection programmes. We will continue to work with local authorities to ensure there is sufficient capacity to undertake flood mitigation measures in their administrative areas as promptly as possible. Since 2009, more than 400 schemes have been approved for funding through the Vote of the Office of Public Works to local authorities.
The estate portfolio management programme involves the management, maintenance and development of the State's property portfolio, including the care, protection and presentation of national monuments and historic properties. The programme comprises a wide variety of services, including professional services such as architecture, engineering, valuation, quantity surveying and project management. The primary constituent parts of the programme, which, in funding terms, were the largest in 2011, include: property management functions, primarily rents; heritage services, involving the care of 750 national monuments and 26 national historic properties with a combined provision of 69 visitor centres; the provision of building and maintenance works at OPW managed buildings; and the management of unitary payments relating to the Convention Centre in Dublin. The programme also administers certain grant payments on behalf of the Government. In 2011 grants were made to Dublin Zoo and Glasnevin Cemetery, two very important visitor attractions in the capital city. Since 2007 considerable work has taken place at that cemetery, where the most recent ongoing development is the opening of a link between it and the neighbouring National Botanic Gardens, providing an opportunity for mutual enhancement for both national institutions.
As part of its property management role, the Office of Public Works continues to pursue opportunities to rationalise office accommodation through the surrender and renegotiation of more expensive leases with a
view to achieving significant rental savings. The office has made significant progress in this area, with departmental rents falling from €131 million to €107 million in the period from 2008 to 2012. In 2011, the year of account, expenditure on rents amounted to €118 million, a significant reduction on the €128 million in rents paid on behalf of the State in 2010. We have also released 88 million sq. m of rented accommodation recent years. The latter is a considerable achievement, but work remains to be done.
The office rationalisation programme is just one part of the broader reform of the State's property management function, in respect of which I am currently chairing a steering group of the State's key property holders. This year the Department of Public Expenditure and Reform has also made the OPW responsible for the funding of building maintenance on State property. The essential maintenance will now be provided on a shared-service basis to Departments, which has necessitated a transfer of funds from other departmental Votes to the OPW. The reformed service will produce savings both directly through the OPW prioritising the operation of planned and preventative maintenance and indirectly through the centralisation of the professional expertise in this area and the administration of maintenance for all Departments.
In the area of energy conservation, the OPW continues to be actively involved and has been allocated further responsibility in this area by Government. Significant savings have been achieved through the Optimising Power at Work programme in recent years - an initiative under the OPW in which all Departments participated - amounting to some 18% per annum on energy consumption in all our large buildings. Given the success of this programme, we have been asked to roll it out to the wider public service. The office has received an allocation of €9 million to this end for the coming thee years.
While the OPW is clearly focused on the core functions of the organisation, there are often occasions where we have to show flexibility in responding to the needs of Government. In the heritage area, for instance, with very short notice, the office undertook a task of particular significance in 2011 in successfully hosting State visits by Her Majesty, Queen Elizabeth II, and the President of the United States. In a similar vein, Ireland is currently hosting the EU Presidency from 1 January 2013 to 30 June 2013.
The Government, in order to ensure a cost-effective Presidency, decided that events would be centralised primarily around OPW managed properties such as Dublin Castle, Farmleigh House, Castletown House, the Royal Hospital in Kilmainham and the Botanic Gardens. In excess of 280 events will take place during the term of the Presidency and the feedback on the facilities provided to date has been very positive.
I wish to remind the committee that many of the services managed by OPW are not directly funded from its Vote but they have absorbed administrative resources presented in the 2011 account. Although the gross 2011 outturn for the appropriation account amounted to €402 million, this does not reflect the full range of activities of the office. The OPW continues to act as an agent for and incurs expenditure in facilitating other Departments and agencies in delivering on their remits. In 2011, these services exceeded €68 million in value. That figure is money we managed on their behalf but it does not include instances where they paid directly. In the context of the latter point, I refer to the €180 million of expenditure relating to contracts managed by the NPS.
I thank members for their attention and I will be pleased to answer any questions they may wish to pose in respect of the appropriation account or any other matter.
