COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 8 Oct 2015

National Paediatric Hospital Development Board Fund: Finance Statements 2013

Chairman

I welcome the witnesses and advise them that they are protected by absolute privilege in respect of the evidence they are to give to this committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to do so, 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 are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a Member of either House, a person outside the House or an official by name or in such a way as to make him or her identifiable. Members are reminded of the provisions of Standing Order 163 that a committee should 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. John Pollock from the National Paediatric Hospital Development Board and I invite the witnesses to introduce themselves.

Mr. John Pollock (Project Director, National Paediatric Development Board), called and examined.

Mr. John Pollock

I am project director for the National Paediatric Hospital Development Board.

Mr. Jim Farragher

I am finance officer with the development board.

Mr. Tom Costello

I am chairman of the development board.

Ms Fionnuala Duffy

I am from the Department of Health and Children acute hospital policy unit.

Chairman

I note Mr. O'Brien from the Department of Public Expenditure and Reform is also present. I now invite the Comptroller and Auditor General to make his opening statement.

Mr. Seamus McCarthy

The National Paediatric Hospital Development Board was established in 2007 to oversee the development of a children’s hospital at the site of the Mater Hospital. Between 2007 and December 2013, the board had incurred costs of just under €42 million. Funding for the project was provided by the Health Service Executive. The cumulative expenditure by year is shown in figure 1 of the document circulated. The breakdown of total expenditure at the end of 2013 is shown in figure 2.

By December 2013, the business services team had incurred expenditure of €24.5 million in respect of business and health care planning and programme management. Cumulative expenditure of the integrated design team, of €6.4 million, related to engineering, architectural and quantity surveying activities. The project management team had incurred expenditure of just over €3.2 million, mainly relating to design costs and €7.6 million had been incurred in respect of administration costs, including salaries. All of the expenditure incurred had been capitalised and recognised as an asset in the National Paediatric Hospital Development Board's balance sheet. The carrying value of the asset was impacted upon by the Government decision on 6 November 2012 to change the location of the hospital.

In December 2012, the term of the existing board expired. Following its appointment in August 2013, the new board undertook a review of asset values, which took account of the extent to which the outputs produced could be used on the project at St James’s. The audit of the 2013 financial statements included a review of the impairment calculation. The financial statements for 2013 reflect the writing down of €35.5 million of the accumulated expenditure. The breakdown of total expenditure to December 2013, as between amounts written off and value retained by type of expenditure, is set out in figure 3. At December 2013, taking account of the write-down of €35.5 million, the asset was valued at €6.2 million.

My office completed the audit, including examination of the impairment review and its impact on the 2013 financial statements, by 14 October 2014, which was just before the committee’s previous examination of the board. However, the Department of Health and Children wished to consider the impairment further in consultation with the HSE and the Department of Public Expenditure and Reform. My office received signed accounts for 2013 from the board on 17 February 2015 and these were certified by me on 20 February 2015. The audit certificate noted a clear audit opinion but drew attention to the significant impairment charge in the year.

The 2014 financial statements were certified on 1 October 2015, again receiving a clear audit opinion. Further impairment was not required. As I mentioned earlier, they have been presented for the committee.

Chairman

I thank Mr. McCarthy. I now invite Mr. Pollock to make his opening statement.

Mr. John Pollock

The National Paediatric Hospital Development Board, NPHDB, would like to thank the committee for the opportunity to outline and discuss its annual accounts for the year ended 31 December 2013.

As set out in the accounts for 2013, a number of significant developments took place in 2012 which impacted the work of the NPHDB, including, in particular, the refusal by An Bord Pleanála of the planning application for the children’s hospital at the Mater site, the subsequent decision by Government to locate the hospital at the St James’s site and the resignation, in July 2013, of the transitional board that was appointed in January 2013. On 2 August 2013, the current board was appointed and a new executive recruited. Total expenditure for 2013 was €1.71 million. This can be summarised under the following headings: payroll and related costs, €460,000; site clearance cost €260,000; design team fees, €260,000; health planning, €200,000; and administration and other costs, €530,000. The 2013 balance sheet includes assets valued at €39.98 million at the beginning of 2013 in respect of the planning and development work for the children’s hospital planned for the Mater Hospital campus. This value relates to accumulated expenditure in the period 2007 to 2012. These details were discussed at a previous Committee of Public Accounts meeting with the NPHDB on 23 October 2014.

The current board of the NPHDB was announced in August 2013 and commenced familiarising itself with the overall project details, including the 2012 and 2013 accounts. On page 14 of the 2013 accounts, note 3 identifies that, arising from the Government decision to change the location of the new children's hospital to the St James’s hospital site, the board spent considerable time ascertaining potential reusable value of the accumulated expenditure. The development board initiated a process in 2014 to review and analyse the asset impairment. The review was carried out based on guidelines in financial reporting standard, FRS 11, ensuring any impairment or loss is measured and recognised. The board has reviewed all expenditure for construction work in progress, identified the deliverables which were supported by that expenditure, set out the sections of the deliverables which can be utilised on the St. James's campus and carried out detailed analysis on the value of the sections of work which can be utilised or modified to provide future value.

The impairment analysis comprised detailed examination of all expenditure, divided into separate, distinct components being examined by the staff of the board who have project knowledge of the individual components involved. The review involved detailed analysis of the costs up to November 2012 - the date of the decision to move to the St. James’s campus - and the costs in 2013 that relate Mater site project. The staff members then reviewed the data to assess what portion of each individual component could be reutilised on the St. James’s site. The review was completed in September 2014. The proposed impairment was reviewed by the NPHDB audit committee, the board of the NPHDB, the HSE, the Departments of Health and Public Expenditure and Reform, the Comptroller and Auditor General as part of the audit process and PricewaterhouseCoopers has reviewed and confirmed that the process is in compliance with generally accepted accounting principles, GAAP.

The Comptroller and Auditor General, Department of Public Expenditure and Reform and the HSE, as funder, were in agreement with the approach taken by the development board and the Department confirmed to the development board that it had no objection to the write-down in the development board’s 2013 accounts. The review resulted in an impairment of €35,501,586 which related to the provision of services as set out in page 15 of the 2013 accounts, which were specific to the activities and services supporting the Mater site and cannot be utilised or transferred to the project on the St. James’s site.

I will now turn to the current status of the project. A strategic infrastructure development planning submission for the new children’s hospital was submitted to An Bord Pleanála on 10 August 2015. We expect an oral hearing to take place in November 2015. A planning decision from An Bord Pleanála is expected on 15 February 2016.

Chairman

May we publish the statement?

Mr. John Pollock

Yes.

Deputy Joe Costello

I welcome the witnesses here to the Committee of Public Accounts. There are two issues to which I wish to draw attention. The first is the impairment charge and the second is where we stand regarding delivery of the new hospital. The impairment charge is €35.5 million and the total expenditure was just short of €40 million. To anyone looking at this, it would seem extraordinary that a figure of more than 90% of the expenditure relating to design, business services, administration and project management was written off and was not reusable or transferable. When the witness was before this committee on a previous occasion, questions were raised about this matter. It was indicated that a full review was taking place. What is here before us today is the outcome of that review. Perhaps the witness might give the committee some detail as to why so little of the funding that was made available, and the expenditure that took place, has been transferable to the new proposed premises in St. James’s hospital?

Mr. John Pollock

I thank the Deputy. In looking at the impairment charge, we broke it up into 15 separate work streams which we saw as deliverables. By deliverable it is meant something that was a tangible asset for us. Therefore, items such as the civil structural engineer’s design for the Mater project was very specific to the Mater site as it was for a16-storey building on a totally different footprint. So even though we have drawings and calculations, that particular deliverable would not be transferable.

Deputy Joe Costello

Is Mr. Pollock telling me that of the €6 million plus that has been spent on design, no elements were transferable?

Mr. John Pollock

No, there are some elements that are.

Deputy Joe Costello

Yes, there are, but very few and at a value of €2.6 million.

Mr. John Pollock

No, of the design there is nearly €500,000. In terms of the integrated design team, there is a breakdown of the information provided on page 5 of the briefing document.

Deputy Joe Costello

The amount stated is €490,000.

Mr. John Pollock

Yes, €490,000 - nearly €500,000 - was a retained value for the St. James’s campus. Most of that related to the architects’ drawings: how the hospital was laid out and the adjacency of the rooms; the configurations of single-bed wards and operating theatres, offices and open-plan offices; and the configuration of the accident and emergency department. It was possible to transfer those drawings to the new design team and they were handed over at the time that the team tendered so they could say “Well that is the layout of a room that was configured and set out, therefore we can retain a value for that.”

Deputy Joe Costello

And who made that decision?

Mr. John Pollock

That would have been the executive of the development board. It was those in my team with project management skills in architecture and engineering who would have made that determination. That was presented to our audit sub-committee to see whether-----

Deputy Joe Costello

But you made the decision and then you presented that decision to the new design team. Did you ask the new design team to look at the old design.

Mr. John Pollock

We did at the time of the tender, we issued them with all the drawings so they were able to-----

Deputy Joe Costello

Did they come to the conclusion?

Mr. John Pollock

It was not part of their scope of service to do an assessment of the write-off. We recognised there was value there so we wanted to extract that value. By handing over the architects’ drawings and layouts to them at the time they tendered, their tender would then have reflected the benefit of that work.

Deputy Joe Costello

There were two designs for the children’s hospital at the Mater site. There was the initial design that was thrown out of court by the An Bord Pleanála inspector. The design team was told to go back to the drawing board. Following the rejection of that plan by An Bord Pleanála, in a very short space of time the development board conducted a second design, which did not go to An Bord Pleanála. Does Mr. Pollack know anything about that design?

Mr. John Pollock

I do not.

Deputy Joe Costello

It was of another hospital design for nine storeys instead of 16.

Mr. John Pollock

I do not-----

Deputy Joe Costello

Did the development board review not consider that?

Mr. John Pollock

I do not know a lot about that design, it was not done to anything-----

Deputy Joe Costello

Surely Mr. Pollack should know since he has spent an awful lot of time conducting the survey for this analysis, and this has now been approved by everybody inside, with no mention of the second design that took place immediately after An Bord Pleanála rejected the first design.

Mr. Tom Costello

That was a very high-level design at the time and I support what Mr. Pollack is saying.

Deputy Joe Costello

Surely the committee could have had a mention of the second design.

Mr. John Pollock

Yes, we could. The Deputy is correct.

Deputy Joe Costello

It is not even referred to.

Mr. John Pollock

The Deputy makes a reasonable point.

Deputy Joe Costello

What happened after An Bord Pleanála rejected the design, which took five years - from 2007 to 2012 - to produce? The design team went back to the drawing board and in the space of three or four weeks it came up with a new design for a children’s hospital on the same site.

Mr. John Pollock

They did but it was not done to a level of detail. The team would have done stacking arrangements which shows basically how one might configure the operating theatres, for example, but it would not have had the level of detail provided for in the original planning application to An Bord Pleanála.

Deputy Joe Costello

The point is that no reference was made to it.

Mr. John Pollock

The Deputy is correct.

Deputy Joe Costello

It may have had some relevance and it should have been referred to the new design team when the development board made its decision. This new design was nearly half the height of the first design.

Mr. John Pollock

It would not have changed the configuration of the rooms and that is the real hard detail that the architects and the design team look for; physically knowing-----

Deputy Joe Costello

It would have changed the footprint. The reason previously given to this committee for the rejection, which, of course, was totally wrong, was that the footprint was too small and that there is a much bigger footprint at St. James’s Hospital. That was not the reason An Bord Pleanála rejected the initial planning application. It rejected it because it was totally loony. It was for a 16-storey building which could not accommodate a helicopter landing on the roof. It was in breach of the Dublin city development plan and the local area plan - two statutory plans. How in God’s name could a design team have gone in to An Bord Pleanála with these breaches of statutory compliance? I do not see any of that in the analysis that has been presented to this committee. There is a serious question to be answered. How could a development board spent five years and all of this money – not just on the design but also on administration and business services, the cost of which was €24 million – and yet come up with such a poor design that was totally rejected by An Bord Pleanála? The business of this committee is to find out why taxpayers’ money was spent so badly, and I do not see an answer to that in the financial statement in the survey conducted by the new board.

Mr. Tom Costello

The important thing for us when we took over as a board was to learn from the experience of the Mater Hospital. Unfortunately, we cannot rewrite history, but we have to learn and make sure that in every step we make along the way, in respect of any of perceived weakness in the decision-making processes during the five years, we ensure this will not happen. Mr. Pollock might set out the steps we have taken from the outset in ensuring there is robustness to what we are doing.

Mr. John Pollock

The last time we met we discussed the fact that the development board had been given a new remit to concentrate on the design, building and equipping of the hospital. Previously, it had had a dual remit. It had to concentrate on delivering the building and the medical-clinical integration of three children's hospitals. The Government decided to have two boards - our board, that is, the development board, and the group board, which is chaired by Jim Browne from NUI Galway. The skillsets in our board relate very much to building. The chairman has 30 years experience in the construction sector. We have two urban planners who worked with local authorities, one of whom was a member of An Bord Pleanála. The chief government procurement officer is on our board because, given the amount of procurement work we have to do, we also have a lot of financial work to do. We have an architect who is the chief architect in the Northern Ireland health service.

The next thing was to make sure the executive was put in place. Again, my background is in engineering. I have worked on health care and building projects for 30 years. The other members of my team, from the commercial director to our design director, come with engineering and architectural backgrounds; therefore, we know what it takes to deliver a building.

Having these two streams in place, we said the next thing to do was to get in place a world-class design team with experience in designing children's hospitals. We said we would not accept a design team with no experience of designing a children's hospital. BDP Architects is leading it. It delivered Alder Hey Children's Hospital and the Royal Alexandra Children's Hospital in Brighton in the United Kingdom. During the procurement phase the board was making sure we could minimise risk. When St. James's Hospital was originally proposed as the site of the national children's hospital, a smaller site was offered. I think we discussed this issue the last time we met. The site comprises 12 acres of land in the middle of Dublin and three times the size of the site proposed at the Mater Hospital.

Deputy Joe Costello

The site originally proposed.

Mr. John Pollock

Correct.

Deputy Joe Costello

It was the site originally proposed, but the second design covered a much broader footprint.

Mr. John Pollock

Correct, but our remit-----

Deputy Joe Costello

That is the point. Why did the original board decide to build up to 16 storeys as it was just not going to happen and was not good practice in the case of a children's hospital when there was a footprint that could have been extended and which became available immediately after An Bord Pleanála had rejected the application?

Mr. John Pollock

We were not around at the time. I am not aware of-----

Deputy Joe Costello

I know that Mr. Pollock was not around. As we are talking about the financial accounts for 2013 and the impairment charges, we want to know. Mr. Pollock has said the board has learned lessons, but it cannot really have done so unless it knows what happened in the past. How did it happen that a footprint far in excess of what was available originally became available immediately after An Bord Pleanála had rejected the planning application? If it had been available, there would have been a different design. We ended up with an explanation that it had something to do with the footprint of the Mater Hospital when, in fact, it had had nothing to do with it. It was related to the flawed planning application to An Bord Pleanála.

Mr. Tom Costello

There is another way of looking at it and it relates to what Mr. Pollock said about lessons being learned. If one was to look back and say-----

Deputy Joe Costello

Do not forget that the footprint at the Mater Hospital was approved at the time by a number of professional bodies.

Mr. Tom Costello

Yes, but the site had been identified and the design team was instructed to design a hospital. The square footage of the hospital we are now building is quite similar to what was available at the Mater Hospital; therefore, the scope of the project was always defined. It was a defined site. The lesson we have learned is, as Mr. Pollock said, that before we appoint a design team or engage in any expenditure on behalf of the State, we need to stress-test the decision making. If we were to roll back six or seven years, the answer to the question of whether making sure all of the stress-testing was done before proceeding was the right thing to do is probably "Yes". We are reinforcing it, but that was our first step.

Deputy Joe Costello

Did the board speak to the previous one? I know that a transition board was appointed, but I do not know why it only lasted about six months. Has the development board spoken to any of the members of the previous board which was responsible for the project from 2007 to 2012?

Mr. Tom Costello

We spoke to the transition board.

Deputy Joe Costello

But it was not the same board.

Mr. Tom Costello

To be honest, I spoke to many people in trying to understand it and there is no clarity, which is why we cannot honestly say, "This is where it went wrong." The actual sequence of events was: a site was identified and a board and a design team designed a building. They had no choice other than to make it 15 or 16 storeys high.

Deputy Joe Costello

It took five years for all of that to happen. Who was monitoring what the board was doing? Who was ultimately responsible? Was it the HSE or the Department of Health? Why did no one ask why it had taken five years to get an application to An Bord Pleanála when this was regarded as something that needed to be done very quickly and the Government was looking to have a national children's hospital in place by 2016?

Mr. Tom Costello

I will let Ms Duffy deal with that question. There are a few things that are fundamentally different in the way we are structured compared to the Mater Hospital. In the Mater Hospital there was a board which, as Mr. Pollock said, straddled the integration of the hospitals in delivering the project. In essence, at executive level, much of the work was outsourced to a business services team. Our structure involves a board the remit of which is to design, build and equip the hospital. The board has appointed an executive who has ownership of the project to deliver it. That is fundamentally very different from outsourcing the work to a business services team. Certainly, we are happy with the robustness of the structure in terms of the executive, the sub-committees and the reporting to the board such that there is ownership all the way through. When the Deputy asks why somebody did not ask, I can guarantee that on an ongoing basis there is a lot of questioning every day of the week in making sure we-----

Deputy Joe Costello

Among yourselves.

Mr. Tom Costello

Yes.

Deputy Joe Costello

I am asking about the survey and analysis of what had been going on over five years and whether it was found out why it had taken so long and then why it had been done so badly.

Mr. Tom Costello

The five years include-----

Deputy Joe Costello

We are talking about €35.5 million of taxpayers' money that went down the drain. I do not think we have received an adequate explanation as to why and how all of this happened and how such a completely inadequate plan was sent to An Bord Pleanála after five years. Where was the accountability throughout the five years? Can we just leave it and say, "That was the previous board and that that was then"? The board is learning lessons, but we have received no analysis of what happened.

Mr. Tom Costello

We have interrogated the figures and understand where all of the money was spent.

I am confident the board is delivering on its responsibilities. We have in place a very accountable system, including in respect of the design team for this project which although only appointed on 6 August 2014 managed to get the application in to An Bord Pleanála within one year which, given the size of the project, is remarkable.

Deputy Joe Costello

Which begs the question, why did it take the previous board five years to do that?

Mr. Tom Costello

In fairness to the previous board, the five-year timeframe includes the period from the time of its appointment to the time of appointment of the design team, design of the project, submission of the application to An Bord Pleanála and its rejection of the plan, and the subsequent decision and analysis of the process.

Deputy Joe Costello

Mr. Costello is being very generous to the previous board.

Ms Fionnuala Duffy

Perhaps I could come in at this point. In terms of the timeframe, a decision was made in principle to build a single new children's hospital, which was a fundamental decision after years of consideration around what should happen to the future of paediatric services.

Deputy Joe Costello

That was decided in 2006.

Ms Fionnuala Duffy

Yes. There was then a period during which there was discussion on where the hospital should be located. It was then decided that it should be located on the Mater hospital site. That was followed by a process of appointment in respect of the development board.

Deputy Joe Costello

All of these issues had been dealt with before the end of 2007.

Ms Fionnuala Duffy

It was only from 2007 that the then development board commenced, from scratch, the process of development and design of a new children's hospital. As Mr. Tom Costello said, whether about the financial loss, the reason, in part, the current development board has been able to speed up the timeframe in the context of the putting in place a new design team and submitting a planning application, is because it was able to build on much of the work already done by the previous board. As Mr. Pollock said while the vision for the hospital on the first site cannot be transferred to the new site-----

Deputy Joe Costello

The previous board was building on what had been previously. The decision to build a new hospital was not made overnight. The decision to have one national paediatric hospital was made in 2006. Prior to that, a decision had been taken to build a children's hospital on the site. I have not asked what happened to all of the design work that took place prior to that, which should have had some bearing on the business services and so on. Perhaps I could get some information in that regard at this point. As I said, the previous board was not starting a process from scratch because it had available to it a great deal of work that had been done previously. Did the previous board take on board any of that work?

Ms Fionnuala Duffy

The previous plan to build a children's hospital on the Mater site related to the transfer of the Temple Street facility. There was no previous plan to build a single new national tertiary hospital, which is considerably bigger and much more complex in terms of the services that a single tertiary hospital provides for children.

Deputy Joe Costello

If a decision had been made not to proceed with the plan to only transfer the Temple Street hospital to the Mater site, why then was a larger site in the context of the decision to build the national paediatric hospital not acquired?

Ms Fionnuala Duffy

That goes back to the decision made in 2006-2007 to use the Mater site for a single national hospital.

Deputy Joe Costello

The Mater site had been identified for donkeys' years. Why was the decision made to fit the national paediatric hospital into that site when there was a broader footprint available? There is a question mark over the initial decision of the then board to develop a national paediatric hospital on the Mater site, the length of time it spent on that process despite precedent in that regard and the availability of a site that could be expanded, and was expanded following the rejection by An Bord Pleanála of its application in that regard. What occurred in relation to the planning is an unholy mess. There is no adequate explanation for any of this in the submission, other than figures around expenditure in relation to this process and a statement that the board has taken on board the lessons learned. We have to take the board's word for all of this. I accept that the new board comprises architects and that it is going about the process in a somewhat different fashion but the impression is given that the only reason we are where we are is because the Minister made a decision to transfer the children's hospital from the Mater site to the St. James's site. That is not the reason we are where we are at this point in time. The reason we are where we are is because the previous board made a cock-up of the plan to An Bord Pleanála. That plan was rejected because it was flawed and that should be reflected in the document. It is not sufficient to state that arising out of the decision of An Bord Pleanála the Minister made a decision to transfer location of the hospital to another site and, therefore, we have incurred this, that and the other. The submission to An Bord Pleanála of a planning application that was flawed left the Minister with little choice other than to vacate the original site.

Mr. Tom Costello

With respect, Deputy, I do not think that we as a board could or would make that assessment of the situation. I think what we have done is correct in the sense that we were appointed on a Government decision to deliver a new children's hospital at the St. James's site. In that regard, we were required to do two things - analyse the value we could get from the documentation and information inherited from the Mater site project and learn from the lessons of the Mater site process. I genuinely believe that that is our obligation and that is what we have done.

Deputy Joe Costello

We need to get a handle on the scenario at play over many years in relation to the Mater site that resulted in the loss of a considerable amount of money.

Chairman

Perhaps Mr. McCarthy will elaborate.

Mr. Seamus McCarthy

I might just observe because I agree with the line of questioning that the public spending code requires that on completion of a project a project review be carried out. It is a bit anomalous here in that the original project was not completed but the write-off is very significant. It is appropriate that the write-off is explained from an accounting perspective. In line with the principle of the public spending code that a review be carried out of the project, it is appropriate for the Deputy to raise questions as to the reason it failed.

In undertaking a capital project of this kind a business case analysis is required. Again, this is set out in the public spending code which was issued by the Department of Public Expenditure and Reform. The purpose of pre-appraisal of a project is to identify the critical project risks, one of which in this situation would be the obvious requirement for planning such that a project would not get into the detailed design phase until the major risks had been analysed. I would imagine that there would have been an analysis in terms of the height of the building in relation to the footprint available and how that would get through the planning process. One would expect to see that kind of analysis being done. I am sure the board has done that since in relation to the St. James's site but if it was not done previously then that may be where the fault lies.

Deputy Joe Costello

That would be pertinent.

Mr. Seamus McCarthy

The second point I would make is that the change in the character of the project from that of the transfer of the Temple Street facility to the construction of the national paediatric hospital should have triggered a complete re-appraisal of the business case for the project, to include questions around the adequacy of the site given a much greater requirement for provision of services. The point that arises is who should be doing that review given that the previous board no longer exists and the current board has a project which is forward-facing and of a different character. In order to sanction a project there is a sanctioning authority which I think in this case is the Department of Health. By definition, the onus must revert to the Department of Health in that situation.

Would that be DPER's view as well perhaps?

Deputy Joe Costello

That is the point I am getting at in respect of the history of it. We need to know more than the accountancy side of the matter. It was the same with the Thornton Hall prison project. Significant additional work is required in terms of the history of the project as distinct from where and how the money was spent. I would like us to be in a position to examine this matter further because we need details relating to the history of it in order to get to the bottom of why so much money was spent in such a way that none of it was transferable to any other project. Is it possible to make a request to the Department of Health to look at this aspect of it?

Chairman

Ms Duffy is present.

Ms Fionnuala Duffy

Obviously, if such a request is put to us, we would agree to do such a review if that is what is required.

Mr. Seamus McCarthy

I would suggest there is probably a wider issue. Perhaps it is for DPER to consider that rather than carrying out a review at the end of a project, there be a requirement in the public spending code to the effect that there should be a review of a project which fails and which results in significant write-offs. That might be the general learning point that would form a recommendation on the part of the committee.

Deputy Joe Costello

That is effectively what I am trying to get at.

Mr. Seamus McCarthy

There are similar issues around Thornton Hall or around-----

Deputy Joe Costello

If the Chairman agrees, will Ms Duffy take that back to the Department-----

Ms Fionnuala Duffy

We will take that back.

Deputy Joe Costello

-----with a view to conducting a review on why this project failed and the elements that brought it to the current pass?

Chairman

I will first go through the list of questions. These relate to the question the Deputy has asked about the review. Mr. Tom Costello said the main work on the original plans was carried out by a business services team. Therefore, the board or whomever gave most of the work to this team, which, presumably, appointed the architects and worked up the plans in the context of making the original application for this 16-storey hospital building. The decision of the board at that time was to refer essentially all of the elements of this work to a business services team. I think we need to question that team in the context of what led it to believe that a planning application in respect of a 16-storey building could be successful; whether it examined the city or county development plan, as would be done for a normal site; whether it decided the footprint of the site was such that it would be allowed by the planners; and what analysis was conducted of services on the site and so on. Is Mr. Costello aware of the analysis carried out by the team in the context of the lead-up to an application being made? In other words, had it ticked all the boxes along the route to planning and then reached a point where it said, "We have ticked all the boxes; now we will make an application"?

Mr. Tom Costello

There were mitigating circumstances at the time as well whereby Dublin City Council, DCC, had said that in cases of exceptional architecture, it could look at height over and above the development plan limit of seven storeys. That was not entirely clear. Again, our lesson learned from that is no matter how brilliant the architecture is, stick to the rules. If one does so, one is far more likely to be successful.

Chairman

I understand the lessons being learned. I am trying to get to the point before the board started to learn lessons from this saga. To assist Deputy Joe Costello, I am simply asking if there is documentation that can inform the committee, the Department and the Department of Public Expenditure and Reform as to what happened in the course of the business services team's analysis of the potential in terms of planning permission. Can we have documentation?

Mr. John Pollock

Perhaps I can intervene. I do not think that documentation exists. At the time of the-----

Chairman

Would there not have been procurement at the time?

Mr. John Pollock

At the time of the previous project, the executive for the development was maybe 1.5 people and, therefore, the project services team, which comprises private companies, basically ran the project and they were hit with one major change in the project. The strategic infrastructures legislation was not in place at the time and then they lodged the application for the Mater. The proposal was to go to DCC and the council was supportive of the planning application, including the 16-storey development. The team would have relied on the local area plan, which referred to buildings of 12 storeys and, as Mr. Costello said, possibly more for buildings of significant architecture. DCC was supportive of the application but it never went to the council because the Government changed the legislation and brought in the strategic infrastructures legislation and, therefore, rather than going to a local authority with major health care projects and potentially an appeal to An Bord Pleanála, it was decided to go straight to An Bord Pleanála.

Chairman

That is what I am seeking. I am looking for the evidence that would show us the process that convinced the business services team and 1.5 or two people who were involved at executive level that they should go with the possibility of a successful planning application and the support of DCC to An Bord Pleanalá. There must be documentation.

Mr. John Pollock

Again, in dealing with local authorities, there are meetings with them but officials will not obviously say, "We will endorse this project", because there is a planning process to be gone through. One, therefore, attends meetings and they will identify-----

Chairman

I understand all of that because that goes on all over the country in terms of planning authorities. I am seeking the documentation that helped that team to reach a conclusion that there was a possibility of securing planning permission. If the two people gave the contract to a business services team, they must have had a set of instructions and the team took a set of actions. They must have reported back to the two people and that is what I would like to see.

Mr. John Pollock

That reporting would be to more than the two people; it would be to the board-----

Chairman

Well, then the board.

Mr. John Pollock

-----but the business services team would have appointed their planning consultants and the consultants along with the architects would have engaged with DCC-----

Chairman

Is Mr. Pollock telling me that essentially what happened here is the business services team was appointed and off it went and there was not much engagement with it?

Mr. John Pollock

There was a lot less control than there currently is because it was a much smaller executive. It was a time when the Celtic tiger-----

Chairman

What volume of paperwork is available to Mr. Pollock and, therefore, through him to us in the context of the activities at the time of the board or whoever else was involved and the business services team?

Mr. John Pollock

The minutes of the board meeting at the time, which obviously would have recommended lodging the planning application based on the recommendation-----

Chairman

Can we have those?

Mr. John Pollock

Yes, of course.

Chairman

I refer to where we are now in terms of a review. At the outset, Mr. Pollock stated, "The Comptroller and Auditor General, Department of Public Expenditure and Reform and the HSE, as funder, were in agreement with the approach taken by the development board and the Department confirmed to the development board that it had no objection to the write-down in the development board’s 2013 accounts." That could be read as, "All is okay". However, it is not okay and that is the point made by Deputy Joe Costello.

It has been suggested to undertake a review of that expenditure. Arising from this hearing and the wishes of the Committee of Public Accounts, the Department of Public Expenditure and Reform, either alone or in conjunction with the Department of Health, should undertake a speedy review of that expenditure. I think that is what is required here. That would lead us to the minutes of the meetings and the decisions being made with the service providers and so on. Someone was responsible for the spend of €35.5 million of taxpayers' money. We are not talking about nickels and dimes here. It is a significant amount of money. While I understand the new board will take it on and learn lessons, I certainly would not be satisfied without a commitment from Mr. Costello's board, from the Department of Health and from the Department of Public Expenditure and Reform that a review will be undertaken and that it will be done efficiently and brought back to us within a reasonable timeframe. Deputy Costello is that where you-----

Deputy Joe Costello

That is precisely my position on the issue. We need that information. The Comptroller and Auditor General also suggested there should be a review of projects that fail. That should be built into the process, irrespective of whether it comes directly through the Department of Public Expenditure and Reform or the individual Departments. It needs to be done on that umbrella basis.

Mr. Barry O'Brien

I think that is a great suggestion - the suggestion of the Comptroller and Auditor General to basically include language around that in terms of the public spending code. So we will look into that straightaway.

Chairman

Does Mr. O'Brien believe that review could be undertaken quickly? What is the process for that?

Mr. Barry O'Brien

As the Comptroller and Auditor General pointed out, the review is the responsibility of the Department of Health in the first instance. The public spending code pushes the responsibility for the projects onto the sanctioning authority, which is effectively the Department of Health. In terms of the wider implications for other Departments which the Comptroller and Auditor General has pointed out, we would certainly be amenable to looking after that and trying to deal with that issue. However, the review is a matter for the Department of Health.

Chairman

That is the broader recommendation. However, for the specific purpose of us continuing to look at this, is it okay for you, Mr. O'Brien, to tell Ms Duffy to go ahead and do the review?

Mr. Barry O'Brien

Absolutely.

Chairman

There you go.

Mr. Seamus McCarthy

I should point out that the Department of Public Expenditure and Reform has economists who specialise, I think, in reviewing projects and reviewing the cases for projects. So there might be scope for Mr. O'Brien to assist the Department with that.

Mr. Barry O'Brien

There is no problem with that; we do that as a matter of course.

Chairman

That would include the issue of who decided what, in terms of the services team and so on.

Deputy Joe Costello

It would also be desirable to get submissions and the determination of the An Bord Pleanála inspector's report. This should give all the detail as to why An Bord Pleanála rejected the application and the poor opinion had of the quality of the application after that considerable length of time and enormous amount of money that had been spent on the process. It should all be part and parcel of the review.

The last time the witnesses appeared before the committee, I was told that the board was located in Sir Patrick Dun's Hospital. Is that still the case?

Mr. John Pollock

No, we have moved since. As part of St. James's making the site available to us, there was a disused ward there. So we have moved our offices down there.

Deputy Joe Costello

Part of the reason the board moved is because it was a smaller operation and because it was rent-free. Is it still rent-free?

Mr. John Pollock

It is still rent-free, other than paying, obviously, for services.

Deputy Joe Costello

Mr. Pollock was to get us the figures that had been spent by the previous board for the five years at Nos. 2 and 3 Parnell Street.

Mr. John Pollock

We issued those previously, so we did.

Deputy Joe Costello

Do we have those figures?

Mr. John Pollock

We issued them about a couple of weeks after we last met.

Deputy Joe Costello

Could we get those? Clearly from what Mr. Pollock has said, the board has learned lessons for the new project.

I have some questions about the new hospital. I ask Mr. Pollock to outline the present status. The board submitted the planning application. What is the process from here on?

Mr. John Pollock

When we last met we had only appointed our design team in August 2014. Almost a year to the day later, on 10 August 2015, we had completed the design to a stage where we could lodge the planning application. So that went in to An Bord Pleanála, because it comes under strategic infrastructure. An Bord Pleanála then basically writes out to prescribed organisations, of which I think it has identified 19. We had to issue them with copies of the application and the planning documentation. The time period was from 10 August to last Friday, 2 October, for any members of the public to lodge observations, either in support of the project or with concerns about the project.

Deputy Joe Costello

Have many observations been lodged?

Mr. John Pollock

As of last Friday, there were 122 observations lodged, but we have not got the full feedback from An Bord Pleanála as regards the content of that. However, we are aware that about 30 of those are positive observations from people like the Liberties Business Forum, and some of the local community groups who are in support of the project and want to see it happen on the campus. There are about 30 of them which are supportive and the detail of the others we do not have.

Deputy Joe Costello

What about the other 90?

Mr. John Pollock

On the other 90, we do not have the detail around that. Some of them were from the residents' groups and obviously the concerns that one would expect around: construction and the construction impacts; traffic impacts; how we will control dust and noise; drainage issues that they might have concerns about; and how we can mitigate potential overlooking issues.

Deputy Joe Costello

Is an oral hearing due to take place?

Mr. John Pollock

We expect an oral hearing probably in the middle of November or the third week in November. An Bord Pleanála has not confirmed that yet, but we would be surprised if it did not have an oral hearing given that the project is more complex this time because we have the satellite centre in Connolly Hospital; the satellite centre at Tallaght; that construction compound at Davitt Road to mitigate impacts; and the St. James's site. So we actually have four different sites that are impacted by the children's hospital. Previously the oral hearing-----

Deputy Joe Costello

They are all contained in the application, including the two satellites.

Mr. John Pollock

It is all one composite planning application to An Bord Pleanála. So we think it will probably be about three weeks of an oral hearing; it might be two, but we think two to three weeks of an oral hearing and An Bord Pleanála has said it is working to try to have a decision made by 15 February next year.

Obviously there has been a huge amount of engagement with, I suppose, all the stakeholders, who are many, starting, obviously, with the staff in the hospitals - the consultants, nurses and clinicians who will operate this hospital as to what will make a world-class hospital. In the community, we have done a mail drop to 4,000 residents and we organised, I think it was, four or five drop-in sessions at the local community hall, in the F2 in Fatima, where we had our architects and design teams and boards to present what the hospital would look like. We took on board, where we could, comments and feedback from the locals. For example, they were concerned about the height of the balconies. We raised the height of the balconies. We put screening on it. We lowered the road to reduce potential overlooking. We took on board comments about the family accommodation unit which is for mums and dads who could be staying there for months on end. That is not a project that is going to be funded by the HSE. Residents in Cameron Square were concerned about the impact of that and what it might look like. So we agreed that we would include it in our planning application. So it is a two to four-storey building that is residential in nature and it backs on to their property.

Deputy Joe Costello

So there are no significant objectors at this time.

Mr. John Pollock

I think it depends on the Deputy's definition of what a significant objector is. Certainly Mr. Jonathan Irwin has been in the media since the St. James's site was announced.

Deputy Joe Costello

However, that is on the basis of where it is located.

Mr. John Pollock

It is on the basis of where it is located.

Deputy Joe Costello

But not on a planning basis.

Mr. John Pollock

Friday was the deadline for the observations. An Bord Pleanála is currently processing them to ensure the documentation-----

Deputy Joe Costello

If, fingers crossed, the board is on track to have a planning decision by February of 2016, what finance is in place for the construction?

Mr. John Pollock

Some €650 million is committed - €450 million from the HSE capital programme and €200 million from the sale of the national lottery.

Deputy Joe Costello

Is that all in place?

Mr. John Pollock

We have been informed it is all in place.

Deputy Joe Costello

What of the Department, Ms Duffy?

Ms Fionnuala Duffy

We have the commitment of the €200 million from the lottery funding and the €450 million in the capital plan for the €650 million that is required for the hospital.

Deputy Joe Costello

Is that ready to go?

Ms Fionnuala Duffy

It is.

Mr. John Pollock

Obviously, in anticipation of a positive decision next February, we would have prepared cashflow statements for the HSE, which is our funder, saying basically what capital we will need for the next number of years. Lodging for planning permission on 10 August completed a milestone of deliverables for the design team. They have had to go back and revalidate the budgets to show that they are in compliance with the construction budget, and they confirmed that prior to us lodging for planning permission.

Deputy Joe Costello

What has been the expenditure to date on the works?

Mr. John Pollock

Our expenditure in 2013, which is the year in question, was €1.7 million. In the accounts for 2014, which we have signed off on, it is just shy of €8 million. Expenditure this year to date is €11 million and we expect by the end of the year, we will spend probably about another €9 million or €10 million of that. Since the current board was appointed in August 2013 to the end of this year, we will have spent approximately €30 million to €31 million.

Deputy Joe Costello

That is before we get the project up and running.

Mr. John Pollock

Correct.

Deputy Joe Costello

Will the hospital be going out to tender at a figure of €650 million?

Mr. John Pollock

The €650 million is the all-in cost. It includes VAT, inflation, contingency sums and the project cost. There are equipping costs and design fees. There are a whole load of other costs. That is not the construction costs. The construction costs are for both the main children's hospitals in St. James's and also for the two satellites, at Connolly and at Tallaght.

Deputy Joe Costello

The €650 million, more or less, remains the figure that was there at the very beginning in the middle of the Celtic tiger, does it not?

Mr. John Pollock

It is comparable.

Deputy Joe Costello

Would circumstances not have changed in terms of costs since then?

Mr. John Pollock

Equally, the model has changed somewhat. Back then, there was one ambulant and urgent care centre in Tallaght. We now have two. There is a satellite centre on the north side, at Connolly, and the one on the south side, at Tallaght.

Deputy Joe Costello

That is included.

Mr. John Pollock

It is included in it. The children's research and innovation centre has always been a separate project but it is of the order of the same as it was.

Deputy Joe Costello

Is there any plan B?

Mr. John Pollock

We are mandated by Government, obviously, to implement Government policy. Government policy, which-----

Deputy Joe Costello

Is all the work done transferable?

Mr. John Pollock

Some of it would be, in the event that we fail. I suppose I do not foresee that we will not get planning permission.

Deputy Joe Costello

Of course, not; no board ever does.

Mr. John Pollock

It would depend again on An Bord Pleanála. For instance, if it decides that the satellite centre at Connolly was not in the right location, obviously, that would have a small impact, and likewise for Tallaght. However, if it decided that the St. James's campus was not suitable, that would have a significant impact - the same as it had for the Mater. Very similar to the elements we have just described would be transferable to another location but a lot would not be transferable.

Deputy Joe Costello

Are we talking about the same figure, with 90% not transferable?

Mr. John Pollock

Some 15% was transferable this time. It would be up. Maybe it might be 20%. There is not a radically different shift because a lot of the work that is done is highly specific. If one gets all the site investigations, the bore holes, the topographic surveyors extracting the water from the ground and does the business case, that is all specific to the St. James's campus.

Deputy Joe Costello

What about the design? Some €0.49 million was all that was transferable out of €6 million or €7 million in the Mater.

Mr. John Pollock

Again, unfortunately, what one finds is that a design is very much customised to the site. For instance, in St. James's, we share a lot of services, whether it is around facilities management, FM, clinical sterilisation or corporate services, and that impacts on the area of the building. The more one can share, the more one keeps the cost down. If one moves to another location, one might have to then put those back into the building which means it is a very different design.

Deputy Joe Costello

Does the board scope for expansion in the future?

Mr. John Pollock

We do. That was one of the key requirements we set the design team, that not alone had they to design the site for the children's hospital, they had to provide a minimum of 20% expansion. We have in excess of 20% expansion. Also, within our design, we have future-proofed that we could share an energy centre with St. James's adult campus which would be a more efficient way to have one shared energy centre and that, in turn, would free-up further capacity so we will be able to expand well beyond the 20%.

Deputy Joe Costello

There are some problems in relation to access to the hospital. It is not exactly in the most accessible area in the city. That could be a consideration for the planning application.

Mr. John Pollock

Absolutely. I suppose that was one of the risks that the board would have identified, that traffic is an issue. This is where our partner in the project, St. James's Hospital, which wanted this project on its campus so that we eventually deliver the Holy Grail of adult services, paediatric and maternity all on the one campus, is handing over the 12 acres of land and in doing that, it will be forfeiting car parking. At its simplest analysis, traffic is at its worst first thing in the morning and last thing in the evening. That is when we all are going to and from work. However, when the children's hospital opens in 2019, there will actually be 240 less car parking spaces for staff than currently exist. Between now and 2019, a whole change in culture and behaviour will take place within the children's hospitals and within the adults'. Public transport is there. It is the best served hospital in the country for public transport. By forfeiting those 240 car parking spaces, first thing in the morning and last thing in the evening, that frees up a bit of capacity. That is when people are coming to the outpatient services and we use up that capacity. What the analysis shows is that we are at 5% increase at peak, morning and evening.

Deputy Joe Costello

I will believe that when I see it but that may well be.

Will Mr. Pollock tell us about the philanthropic fund and its research aspects? Has the board set up the committee to fund-raise at present?

Mr. John Pollock

Philanthropic promotion is the responsibility of the group board. It is not a responsibility of the development board.

Deputy Joe Costello

Can Mr. Pollock give us any indication of what is happening?

Mr. John Pollock

I am not sure whether Ms Duffy can.

Ms Fionnuala Duffy

A committee has not yet been set up. I suppose it is quite early in the project to be at the philanthropy stage. At this stage, the proposal is that we would appoint a committee member to the children's hospital group board with expertise in philanthropy and that there would be an executive that would work with that committee to ensure that the right approach is taken from the outset to secure the right type of philanthropy that can be secured for such a project. It is really only the starting point of philanthropy for this project.

Deputy Joe Costello

This was spoken about ten years ago. No structure was ever set up when the hospital was to be settled on the Mater site. Why are they waiting to start fund-raising for it because the research side of it would be important as well?

Ms Fionnuala Duffy

Absolutely. With our discussions with the children's hospital, it is appropriate that one starts from a low-key behind-the-scenes perspective to get the right approach to philanthropy before one goes out there proactively seeking philanthropic funding.

Deputy Joe Costello

What is the estimated cost of the new research and education facility?

Ms Fionnuala Duffy

The research and education facility is of the order of €35 million but, obviously, embedded within the core hospital, there are lecture rooms and educational facilities as part of the core hospital within the €650 million.

Mr. John Pollock

It is probably worth pointing out that the research block, which, obviously, is hugely important, is a much more modest building. We have designed it as a stand-alone building and the construction phase for that would be approximately two years. The construction phase for the main hospital is approximately four years, so there is a potential two-year lag. The research building would not actually need to start being constructed until two years after the children's hospital.

Deputy Joe Costello

Is the research and education facility included in the planning application?

Mr. John Pollock

It is.

Mr. Tom Costello

There are good lessons to be learned from how philanthropy has helped to develop education campuses all over the country. The chairman of the national children's hospital board is Dr. Jim Browne who is president of the college in Galway. Galway is one of the colleges, with that in Limerick, Trinity College Dublin and UCD, that have led the way in using philanthropic funding to develop a campus. That is a good model from which we will learn.

Deputy Joe Costello

I thank the witnesses.

Chairman

I have some questions about the accounts. In 2012 legal expenses were €242,408 and in 2013, €133,000. Will Mr. Pollock comment on this?

Mr. John Pollock

In 2013 legal expenses were €133,000. If the Chairman is saying they were lower in 2014-----

Chairman

No. They were €242,408 in 2012-----

Mr. Seamus McCarthy

They are included in the 2013 financial statements.

Chairman

-----while in 2013 they were €133,000.

Mr. Tom Costello

What is the question?

Chairman

What happened in 2012 when they were €242,000?

Mr. John Pollock

In 2012 An Bord Pleanála refused the application for the Mater Hospital and a legal service was required to terminate the contracts for the business services team, the integrated design team and the project management team.

Chairman

That was in 2012.

Mr. John Pollock

Yes.

Chairman

It was related to the termination of their contracts.

Mr. John Pollock

It carried into 2013.

Chairman

When the contracts were terminated, did compensation have to be paid-----

Mr. John Pollock

No.

Chairman

-----or was it just a matter of terminating the contracts?

Mr. John Pollock

No, the contracts were not structured in that way. As one paid up to the milestone of delivery, there was no compensation.

Chairman

There was a carryover into 2013.

Mr. John Pollock

Some of it was carried over. Also, at that stage we were starting to embark on a new procurement procedure for the new design team, for which, obviously, we would have had legal support.

Chairman

The figure for other professional fees in 2012 was €31,149, while in 2013 it was €137,727. I presume there was a ramping up in their use.

Mr. John Pollock

I have a breakdown of on what we spent the money. In 2013 we had embarked on the new procurement strategy for a design team that was going to deliver a design and build project.

Chairman

I am sure that explains the bigger part of it. There is a figure for financial support of €78,000 in 2013.

Mr. John Pollock

It was to produce our business case. Prior to getting approval to appoint the design team in August 2014, we had to have the business case updated to show that we were still operating within the figure of €650 million. A company, BDO, was appointed to carry out that work.

Chairman

That is a payment to one company for a financial report.

Mr. John Pollock

It was also providing our internal accountancy services at that stage. At the time it was a small executive and it was also providing monthly accountancy reports for the board.

Chairman

Did that continue in 2014?

Mr. John Pollock

No, it has now been reduced. We built our own executive team to take on the role internally.

Chairman

Site clearance costs were €261,000.

Mr. John Pollock

Obviously, as we are moving onto the St. James's Hospital campus, works needed to be undertaken there. It involved moving things such as ESB power points, gas stations-----

Chairman

Other ground works.

Mr. Tom Costello

I am sorry, but Mr. Pollock was talking about what happened in 2014. It was 2013. I must correct the date.

Mr. John Pollock

In 2013 the amount was €261,000. One of the projects involved a new cardiology research facility in an existing building St. James's Hospital had built - the haematology and hepatology building. It was moving some of its services from the site of the national children's hospital into that building and there would have been some associated construction costs which we were funding.

Chairman

Who looks after the accounts now?

Mr. John Pollock

Mr. Jim Farragher.

Chairman

Yes. Does he have his own office?

Mr. Jim Farragher

Yes, rather than having the support function outsourced, a person was hired in 2014.

Chairman

Mr. Faragher is replacing BDO?

Mr. Jim Farragher

I would not say that-----

Mr. John Pollock

And others.

Mr. Jim Farragher

-----but I am doing the work.

Chairman

We will leave it to Mr. O'Brien and the Department of Health to conduct the review and report back as soon as possible. I thank the witnesses for attending. Is it agreed to dispose of the accounts? Agreed.

The witnesses withdrew.

The committee adjourned at 4.30 p.m. until 10 a.m. on Thursday, 22 October 2015.