COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 19 Oct 2023

Children’s Health Ireland and National Paediatric Hospital Development Board: Discussion

Ms Eilish Hardiman (Chief Executive Officer, Children's Health Ireland) and Mr. David Gunning (Chief Executive Officer, National Paediatric Hospital Development Board) called and examined.

An Cathaoirleach

Apologies have been received from Deputies Brady, Verona Murphy and James O'Connor. I welcome the witnesses. I remind all those in attendance to make sure their mobile phones are switched off or on silent mode.

Before we begin, I wish to explain some limitations to parliamentary privilege and the practice of the Houses as regards references witnesses may make to other persons in their evidence. The evidence of witnesses physically present or of those who give evidence from within the parliamentary precincts is protected, pursuant to both the Constitution and statute, by absolute privilege. This means that the witnesses have an absolute defence against any defamation action for anything they say at the meeting. However, witnesses are expected not to abuse this privilege and it is my duty as Cathaoirleach to ensure it is not abused. Therefore, if the witnesses' statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction. Witnesses are reminded of the long-standing parliamentary practice that they should not comment on, criticise, or make charges against any person or entity by name or in such a way as to make him or her identifiable, or otherwise to engage in speech that might be regarded as damaging to the good name of a person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply.

Members are reminded of the provisions within Standing Order 218 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government, or a Minister of the Government, or the merits of the objectives of such policies. Members are also reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

The Comptroller and Auditor General, Mr. Seamus McCarthy, is permanent witness to the committee and he is accompanied this morning by Ms Elena Moldovanu, audit manager at the Office of the Comptroller and Auditor General. It is Ms Moldovanu's first time attending a meeting of the committee. She is very welcome.

This morning, we will be engaging with representatives from Children's Health Ireland and the National Paediatric Hospital Development Board. We have Mr. Derek Tierney, assistant secretary general from the Department of Health, with us as well. We will examine the financial statements 2021 for Children's Health Ireland and the financial statements 2021 for the National Paediatric Hospital Development Board. The following areas have been flagged for particular interest: the independent review of the operating theatres in the new children's hospital; the timeline for the commencement of the commissioning period for the hospital; the level of claims and potential liability; updated budget and timelines for the completion of the new children's hospital; and the handover of the new children's hospital to Children's Health Ireland.

From Children's Health Ireland, we are joined by Ms Eilísh Hardiman, CEO, Mr. Stephen Flanagan, chief financial officer, and Ms Julia Lewis, transformation director. From the National Paediatric Hospital Development Board, we are joined by Mr. David Gunning, chief executive officer, Mr. Phelim Devine, project director, and Dr. Emma Curtis, medical director. As stated, Mr. Tierney from the Department is also with us. There is a big list of witnesses this morning. They are all very welcome.

To begin, I ,call on Mr. Seamus McCarthy, Comptroller and Auditor General, to make his opening statement.

Mr. Seamus McCarthy

As the members are aware, the National Paediatric Hospital Development Board is responsible for the planning, design, construction and fit-out of the new children's hospital at the St. James's campus, together with the construction of two paediatric outpatient and urgent care centres located at Tallaght and Connolly hospitals. Children's Health Ireland, CHI, will operate the services in the buildings into the future. Construction and fitting out of the centres at Tallaght and Connolly hospitals has been completed and they are now being operated by CHI. As members are aware, construction of the main hospital at St. James's is ongoing.

The overall budget approved by the Government in December 2018 to get the hospital and both satellite centres up and running was €1.73 billion. The budget for the physical development and equipping of the hospital and the satellite centres is the responsibility of the National Paediatric Hospital Board and amounts to €1.43 billion. The budget for the parallel CHI integration projects is €300 million. The development board is funded by Oireachtas capital grants provided via the HSE. In 2021, the grant funding provided amounted to €302.8 million, matching the expenditure in the year. The 2021 financial statements were certified by me on 22 September 2023 and have just been presented to the Oireachtas. I issued a clear audit opinion. However, my report draws attention to a disclosure in the statement on internal control of a board payment in March 2022 of almost €1 million in penalties to the Revenue Commissioners in respect of the board's non-compliance with certain tax obligations in the period 2016 to 2019.

Note 2 to the financial statements indicates that the total accumulated project costs incurred by the board to end 2021 amounted to €923.5 million including VAT. This included €86.3 million spent on the construction of the assets at Tallaght and Connolly, which have been transferred and are no longer included as assets of the board.

In note 8, the board indicates that at the end of 2020-21 it had future capital payment commitments estimated at €527.8 million. Combined with the expenditure already incurred, this implies an expected total project expenditure of at least €1.45 billion, which exceeds the approved project budget. Further commitments yet to be contracted for and the value of claims yet to be finalised will raise the overall cost further.

Notes 12 and 13 to the financial statements disclose that the board has been notified of a large number of claims by the main contractor. The note also outlines the structures in place for the resolution of such claims, as provided for in the contract and the board's intention to strongly contest the claims.

CHI was established as a legal entity on 1 January 2019 through an amalgamation of the existing children's hospitals located at Crumlin, Temple Street and Tallaght. CHI operates as one of the section 38 agencies supported by grant funding from the HSE. In 2021, income totalling €459.4 million was recognised by CHI. Grant funding received amounted to €415 million including €17.5 million provided to fund hospital integration programmes.

Retained staff superannuation contributions amounted to a further €15.5 million. Income from patient charges amounted to €19.1 million and other income was €9.3 million. Expenditure in 2021 totalled €462.1 million. This comprised €327.1 million spent on pay and pensions and €135 million on non-pay. The deficit for the year was €2.3 million.

The 2021 financial statements were certified by me on 14 October 2022. I qualified my opinion on the financial statements on the basis that, in compliance with the directions of the Minister for Health, CHI accounts for pensions only as they become payable. The standard accounting approach requires that financial statements recognise the costs of retirement benefit entitlements earned in the period and the accrued liability at the reporting date. The audit report also draws attention to non-compliant procurement by CHI, about which the committee has previously corresponded with the chief executive officer.

An Cathaoirleach

I thank Mr. McCarthy. I now call on Ms Hardiman to give her opening statement. There are three opening statements, so I ask everyone to try to keep it within five minutes.

Ms Eilísh Hardiman

I thank the committee for the opportunity to address it today on CHI's financial statements for 2021 and to give an update on the commissioning programme for the new children’s hospital, including an extensive integration and transformation programme currently under way.

I am the chief executive of CHI. I am joined by Mr. Flanagan and Ms Lewis, who is charged with leading CHI’s efforts to be ready and able to move into and open the new children’s hospital.

We represent 4,845 people working diligently at the front line of healthcare in CHI at Temple Street, CHI at Crumlin and CHI at Tallaght, as well as in the CHI urgent care centre at Connolly Hospital. Despite often dealing with outdated and inadequate infrastructure, annually CHI treats 153,000 emergency department attendances, 26,000 day cases, 23,000 inpatient admissions and 15,500 theatre procedures.

The financial statements before the committee have been audited by the Office of the Comptroller and Auditor General for the year ended 31 December 2021. Notwithstanding issues like Covid-19 and the ransomware attack on the HSE, significant increases in activity were attained in 2021, plus, we opened the new outpatient and emergency care unit in CHI at Tallaght. As members will have read in our accounts, CHI returned a deficit of €2.3 million for 2021, compared with a surplus of €584,603 in 2020. This deficit related to statutory accounting adjustments made during the preparation of the financial statements. CHI achieved break-even on operational expenditure compared with the final HSE allocation provided for 2021.

The key drivers for the increase in HSE allocation of approximately €28 million in 2021 are: full-year funding in relation to service developments in 2020; significant new service developments across CHI in 2021; Covid-19 funding; funding associated with public pay policy implementation; and the implication of the reduced scope for private income generation. An increase in patient income of €2.7 million primarily reflects the return of increased patient activity and the reduced impact of Covid-19 when compared with 2020.

Total expenditure in CHI increased by €33 million in 2021. Of this amount, €20.6 million relates to pay expenditure including national pay restoration and increments, increased headcount related to service development funding, the full-year pay costs of prior years’ service developments and Covid-19 related costs. Non-pay expenditure increased by €12.4 million, driven by inflation. The main drivers of clinical expenditure growth have been in medical and surgical supplies and laboratory costs.

CHI notes the committee's correspondence of October 13, outlining its concern regarding non-compliant procurement processes. CHI is very aware of our duty to comply with procurement regulations when expending funds in the delivery of our mandated services. While CHI has disclosed amounts related to non-compliant procurement in our financial statements, significant progress has been made in this regard. CHI has worked since its inception to centralise procurement teams, implementing standardised processes and controls. In 2023, CHI went live with a single HSE-supported SAP finance system across all CHI locations, providing a single foundation system for contract, vendor and material management and the end-to-end procurement to pay cycle. While much progress has been made, we still face challenges in achieving 100% procurement compliance. Reasons for this include: the complexity and range of patient treatments across our 39 clinical specialties; significant challenges in facilities management, especially in CHI at Temple Street, and often urgent requirements to act and avoid impacts on delivery of services. While noting progress made, in the interest of transparency we continue to foresee a level of non-compliance in 2022 as we address these challenges.

As client to the National Paediatric Hospital Development Board for the new children’s hospital project, I welcome the opportunity to provide this committee with an update from CHI’s perspective. Once the development board hands over a fully completed building, CHI will complete whole hospital commissioning of the building for it to be operational to international standards. The commissioning team is currently implementing a detailed commissioning plan to ensure the safe opening of the children’s hospital on a shared campus with St. James’s Hospital. CHI has secured commissioning experts who have extensive international knowledge and experience of successfully opening digital hospitals and have commissioned 24 hospitals across the world.

A dedicated commissioning framework is being used to ensure day one opening success, with 171 workstreams to be completed before opening the children’s hospital. The hospital is being commissioned to international best practice to open a digital hospital by applying Joint Commission International, JCI, accreditation standards to the commissioning process. The cross-city clinical directorate model was implemented in 2023, which is CHI’s clinical and operational leadership model for the new hospital.

A detailed CHI staff engagement programme is in place to educate and involve our staff in the commissioning process. All areas of the children’s hospital will have agreed a scope of service for each department, service and function as part of this engagement process.

To get our state-of-the-art children’s hospital ready, there are significant interdependencies and complexities that need to be thoroughly planned, including alignment with go-live of the electronic healthcare record. To ensure safe services for children and families on opening the hospital, all staff will need to be familiar with the building and with new ways of working in a digital hospital. To do this, staff will receive training in their new teams, know how to use new equipment and will run scenarios such as running a ward, theatres and a helicopter landing. All of this activity will take place while 36,000 pieces of equipment are placed, installed and commissioned. It is a complex operation requiring meticulous planning. We have provided an update on operating theatres to the committee on 19 September, and I am happy to answer any questions on this.

CHI’s primary focus at all times is to deliver safe care to the highest possible quality. Our integration journey continues and by the time the new hospital opens, we will be one team with one set of standards and processes. We look forward to continuing to meet the needs of children and their families in our current hospitals, as we wait for the day when we can welcome them to the new children’s hospital; one which is nothing less than what they need and deserve.

Mr. David Gunning

I thank the committee for inviting the National Paediatric Hospital Development Board, NPHDB, today to present on our 2021 financial statements 2021.

The NPHDB’s 2021 accounts have been audited and approved by the Comptroller and Auditor General. The expenditure as at 31 December 2021 for that year on the design and build of the hospital was €302.82 million. I draw the committee’s attention to the table on the bottom of page 1, which sets out not only 2020 and 2021 audited financial statements but also includes 2022 and 2023 year-to-date to September 2023 unaudited financial information for the committee.

In December 2018, the Government approved an investment decision of €1.433 billion for the design, build and equipping of the new children’s hospital and the two outpatient and urgent care centres at Tallaght and Connolly hospitals. There are a number of contract provisions that were not included as part of the capital approval. These include construction inflation in excess of 4%, any changes in scope resulting from healthcare policy changes; statutory changes; Covid-19, implementing PwC recommendations, claims defence and the sectoral employment order.

These items have added cost to the project. To date, the total amount spent by the NPHDB up to 30 September 2023 is €1,361,703,344, including accruals and VAT. This leaves €71 million remaining in the current overall capital budget of €1.433 billion. Work on the hospital is 92% complete as of the end of September 2023.

I will move on to the issue of progress to date. I do not propose to read through the detailed bullets in the opening statement. I would like to say that the NPHDB is fully engaged with CHI on the operational commissioning phase of the hospital to ensure there is a seamless handover at substantial completion. The key work streams are equipping, technical commissioning and the hospital's ICT systems.

On the programme timeline, the building is well advanced but there is still some way to go to substantial completion. Typically, in a building of this size and scale, the last 10% is the slowest to complete because it incorporates all the finishes, system integration and commissioning to ensure the room finishes are to the highest clinical standards. The contract with BAM states that there was substantial completion in August 2022. Some additional time was awarded to BAM by the employer’s representative, which extended the contractual substantial completion date to November 2022. Clearly, this date has been missed. Over the course of the past two years, we have received a number of revised programmes from BAM, with changing substantial completion dates.

We said at the Joint Oireachtas Committee on Health in July 2023 that BAM had committed to delivering an updated programme. This programme was delivered in mid-July 2023. The NPHDB highlighted concerns with this programme and this resulted in BAM providing a new programme at the end of September 2023. This September programme is currently being evaluated by the employer’s representative. The stated substantial completion date in this latest programme is 29 October 2024. We are in constant engagement with BAM to ensure that the October 2024 substantial completion is achieved. All our efforts are focused on getting certainty on this date.

Regarding costs, the NPHDB has kept the HSE and the Department of Health informed of the potential cost implications of the extended timeline. The capital request was submitted to the HSE lead director on 31 May 2023. This is being considered by our stakeholders and as such I am precluded from discussing the details of those figures.

On claims, etc., the NPHDB has provided the committee a pack with details on the current claims status. BAM continues to submit large volumes of claims. Some 2,379 claims have been raised up to the end of September 2023. The substantiated value as claimed by BAM is €769 million. The employer’s representative has determined 1,610 claims at a value of €16.75 million and a further €2.1 million has been agreed through the dispute management processes. The additional €18.85 million is approximately 2% of the overall contract value.

The NPHDB is fully committed to delivering the new children’s hospital in a timely manner, delivering the best possible value to the State, to a standard and quality that the children of Ireland deserve and staff of CHI are proud to work in. We have worked and will continue to work with BAM to do all we can to ensure certainty on the completion date. We are acutely conscious of the need for certainty required by our colleagues in CHI. The substantial completion date of the building phase becomes the start date of the operational commissioning phase. I want to assure them and all members of the committee that we remain focused and fully committed to delivering the project.

An Cathaoirleach

I thank Mr. Gunning. The first committee member this morning is Deputy Dillon. He has 15 minutes.

Deputy Alan Dillon

I would like to welcome our guests back to the Committee of Public Accounts. They are very welcome. It is safe to say that we all want to see this hospital being built as quickly as possible. We are dealing with children who need better healthcare and certainly better outcomes. This hospital will be revolutionary in terms of access to the future healthcare they all require.

I will start with Ms Hardiman. The development board has indicated that the substantial completion date in their latest programme for the children's hospital is now 29 October 2024. How important is it for CHI to have clarity about when that timing will be?

Ms Eilísh Hardiman

I thank Deputy Dillon. Of course, all our planning falls out from the substantial completion date. We have an operational commissioning programme. Once the development board has finished with the technical commissioning, we will have to get this hospital open. We have, as the Deputy can see, almost 5,000 staff who need to be made familiar with all the buildings. We also have the electronic healthcare record and many other ICT projects that need to be implemented. Certainty around the date is therefore important to us. While we have a plan, it is important to ground it in time. It is critical, yes.

Deputy Alan Dillon

I thank Ms Hardiman for that. CHI will take over following the end of the building phase and the technical commissioning. How long will the commissioning programme take?

Ms Eilísh Hardiman

I want to assure the Deputy that we are working very closely with the development board. Even in the pre-substantial completion period, our teams are actually engaging with the technical commissioning element of it. We are loading as much as we can into the pre-substantial completion period to try to achieve the tightest timeline. The Deputy can appreciate that we want to get this hospital open as fast as possible, as he suggested in his opening remarks.

Deputy Alan Dillon

Sure.

Ms Eilísh Hardiman

We have made an estimate with these international experts who have opened 24 hospitals. We have timed out what is at least a six-month programme of operational commissioning. That will obviously be subject to even more as we continue to do our planning. However, that is currently our estimate process.

Deputy Alan Dillon

Will it be until the end of April 2025?

Ms Eilísh Hardiman

It will take at least six months. That is what we are saying. We propose the end of that date, yes.

Deputy Alan Dillon

Is CHI saying that the hospital will see children being admitted, and the hospital being opened, by April 2025? When does Ms Hardiman expect the hospital to be fully operational for admissions and for public use?

Ms Eilísh Hardiman

We are saying the same. As I said, the commissioning period will take at least six months. The Deputy has heard from my colleague, Mr. Gunning, that the current date is the end of October, and it is subject to that programme being tested by the development board. From our perspective, we have a detailed plan with 171 workstreams that need to be done. We also have a migration plan because we will then need to move the three children's hospitals. That will be over a period we estimate will take between seven and ten days. As we get nearer to the planning, we will firm that up and that will be done well beforehand. That is our plan. Then, it is our plan to be fully operational. Because we are already in four locations, opening up another location will present a significant challenge from a staffing perspective. This therefore needs to be a pretty narrow period. We do not intend for that to be a long period of migration. Then, we will close down the units in Temple Street and Crumlin and we will move out the inpatients from Tallaght.

Deputy Alan Dillon

CHI was allocated a project budget of €300 million. Does that include the commissioning element?

Ms Eilísh Hardiman

Yes, exactly. It includes the electronic healthcare record, elements of which my colleagues can go into detail on, as well as the commissioning budget. Funding relating to the Mater Hospital project was also included in that allocation. That relates to those three big blocks.

Deputy Alan Dillon

In terms of the experts CHI has engaged with and the procurement it has entered into, does it feel it will stay within that budget of €300 million to deliver the commissioning programme and have it fully operational?

Ms Eilísh Hardiman

That figure was originally for five years and we have managed to make it stretch to seven years because of the delays. However, further delays on this project mean that CHI will require additional funding. We are engaging with the HSE through the governance structure that is in place with the lead director in the HSE and with the officials in the Department of Health in relation to this. This is a matter that has to go to the Government for consideration.

Deputy Alan Dillon

What are the estimated or predicted additional costs?

Ms Eilísh Hardiman

At the moment, we are still in discussions with the HSE officials and the Department of Health. It is my understanding that this will have to be considered by the Government.

Deputy Alan Dillon

It is important that we have an understanding in the Committee of Public Accounts in terms of what that figure could subsequently be.

Ms Eilísh Hardiman

I understand, and my Department colleagues are here, that we are precluded from getting into those details until it is considered by Government. However, we have actively engaged with the-----

Deputy Alan Dillon

It is a very important figure on which we would like to have visibility if there are going to be cost overruns. CHI is before the Committee of Public Accounts. This has implications for the taxpayer and we are seeking information on that. I would ask that we get a note from CHI regarding the breakdown of costs.

Ms Eilísh Hardiman

I thank the Deputy.

Deputy Alan Dillon

I will move on to Mr. Gunning with regard to the contract compliance programme that was submitted to the board by the contractor, BAM. It eventually got one in mid-July. Did the board have any concerns from the one that was submitted in July?

Mr. David Gunning

We did indeed. It is important to remind the Deputy that the last time we appeared before this committee, we did not have a programme. There was not a programme. We managed to get a programme submission. The July programme had a number-----

Deputy Alan Dillon

What were the concerns?

Mr. David Gunning

-----of problems with it. Just to be clear, it was given to us in July and it was clear as soon as the end of July and then into August that the contractor was not able to deliver to its own programme in the July period. There were a number of technical reasons for that around the profile of the work, the way it was laid out and the sequencing of the activities. There were issues with a number of areas that were incorrect. We engaged with the contractor to point out these difficulties and point out the underperformance with regard to what it had just told us it was going to achieve. It did replace that programme-----

Deputy Alan Dillon

What changes?

Mr. David Gunning

-----and reworked it with what we received on 29 September.

Deputy Alan Dillon

Is Mr. Gunning happy and satisfied with the new programme?

Mr. David Gunning

To be clear, there is a two- to three-month review period. The contractual responsibility with the review of the programme rests with the employer's representative. That is a process that has to be gone through contractually and it will take two to three months. I will say that we are concluding our initial review of the new programme. There are still some issues with it but it is an achievable programme.

Deputy Alan Dillon

Mr. Gunning is saying it can be-----

Mr. David Gunning

It is an achievable programme. We believe that if the contractor staffs up; puts in place the resources, leadership, management and supervision; and does all that is required, it can deliver on the October 2024 timeline.

Deputy Alan Dillon

Mr. Gunning is expecting 100% compliance with this new programme, and if not will there be-----

Mr. David Gunning

It is subject to review. Our initial assessment is that it is an achievable programme. I would not ever say we will get 100% compliance with anything - we have not on this project to date - but is it good enough and will we get it in October? The answer is that we believe it is an achievable programme.

Deputy Alan Dillon

Has the board implemented sanctions or penalties for any variance in the programme?

Mr. David Gunning

We have received a programme. If we did not have a programme, we would be able to make some sanctions as we did in the past. The development board sanctions the contractor in that we are able to-----

Deputy Alan Dillon

We have seen delivery commitments time and time again and we have failed to achieve them. What is different with this programme?

Mr. David Gunning

The Deputy asked me if we can apply sanctions. Under the contract, a failure to provide a programme by the contractor is something the development board can take action in relation to. That action amounts to withholding 15% of monthly payments. We have done that in the past. Now, we have a programme from the contractor so there is no basis for us to apply any sanction under the contract.

Deputy Alan Dillon

Again, that contract fell out of compliance in 2021 and we are in October 2023.

Mr. David Gunning

We did have a programme.

Deputy Alan Dillon

In 2021.

Mr. David Gunning

We did have a July programme, which we had a problem with. We have to be very careful with regard to applying the contract in the appropriate fashion.

Deputy Alan Dillon

Okay.

Mr. David Gunning

We are well advised legally on what we can and cannot do and the appropriateness of the actions we can and cannot take.

Deputy Alan Dillon

Is the board satisfied with the current activity on site and the productivity from the contractor?

Mr. David Gunning

We have had an enormous amount of interaction with the contractor in the recent period.

Deputy Alan Dillon

That is not the question.

Mr. David Gunning

To put it in context, myself, the chair and others have detailed engagements with senior executives from the contractor. We have seen quite an impact flowing from that engagement with regard to increases in resources and commitments for further increases in resources. We are seeing what I would say are behaviours on site that we welcome and that give us some confidence. We are not there yet, but we have been given some confidence that things have improved. That is what I am saying.

Deputy Alan Dillon

When will you get there?

Mr. David Gunning

We have to make sure the programme is compliant. That is a requirement under the contract. Then we have to see that the contractor is delivering month by month with regard to what it has set out in its programme.

Deputy Alan Dillon

How is the board tracking progress? Is it weekly, monthly or daily?

Mr. David Gunning

We track progress on a monthly basis.

Deputy Alan Dillon

In terms of the cost, and we have talked about costs numerous times at this committee, the most recent information is that it is €1.73 billion. Is that correct?

Mr. David Gunning

The development board-approved budget is €1.433 billion. There is the €300 million on the CHI side, which I have no visibility on. The total is €1.7 billion.

Deputy Alan Dillon

What is-----

Mr. David Gunning

I think those are the key components to the number the Deputy has just mentioned.

Deputy Alan Dillon

What is Mr. Gunning's current estimate of the remaining payments to which the board is already committed?

Mr. David Gunning

The board is committed to the contract with the contractor.

Deputy Alan Dillon

We are aware of that.

Mr. David Gunning

With regard to the capital sum required to get this project across the line, the development board has been through a process of finalising those numbers. They were shared with our lead director and the Department of Health at the end of May this year. It is my understanding that they are the subject of a pending memo to the Government.

Deputy Alan Dillon

Do they include the value of the claims that have already been agreed?

Mr. David Gunning

There are a number of-----

Deputy Alan Dillon

These are straightforward questions-----

Mr. David Gunning

Hold on-----

Deputy Alan Dillon

-----and I expect an answer.

Mr. David Gunning

We do not agree. I can say that some claims have been settled.

Deputy Alan Dillon

Yes.

Mr. David Gunning

Twenty-eight claims have been settled.

Deputy Alan Dillon

To what value?

Mr. David Gunning

It is in the table that we provided to the committee. At the bottom of that table, the Deputy will see that under the heading of conciliations agreed and no longer in dispute - this is on the left-hand side - the number is 28 and the value of those claims is €2 million. In addition, claims have been determined by the employer's representative. There were 1,610 claims for which BAM was seeking €641 million. The employer's representative has said the value of those settlements, or what she is proposing, is €16 million. Therefore, the total amount settled is the sum of those, which is €18.8 million, which is less than 2% of the value of the project. The increase in the liability of the project from its original value is approximately 1.8%.

Deputy Alan Dillon

It is 1.8%.

Mr. David Gunning

Correct.

Deputy Alan Dillon

What is in conciliation at the minute?

Mr. David Gunning

Again, if I draw the Deputy's attention to the table, he will see that the contractor has submitted 2,379 claims. If he moves down four lines, he will see that 1,359 claims are currently in the dispute process.

Deputy Alan Dillon

What is the value associated with that?

Mr. David Gunning

I think it is €656 million.

Deputy Alan Dillon

It is €656 million. With regard to the disputes Mr. Gunning has talked about, how many claims are currently in the High Court?

Mr. David Gunning

There are two separate proceedings in the High Court. Briefly, we refer to the first one as the phase B claim. This where BAM made a claim on the phase B instruction, which the NPHDB issued instructing it to initiate and complete the phase B works. We are questioning the validity of that claim.

That claim was put during the moratorium, which we have discussed here previously. That was paused or put on hold in the High Court. As of earlier this year, before the summer, BAM reinitiated those proceedings and they have been admitted to the commercial list of the High Court. There will be a hearing today in relation to the discovery phase of that particular process. The second one is the frame claim, which is in the High Court, but nothing is happening in relation to it.

Deputy Alan Dillon

Is there a value associated with both of those? Have they been submitted-----

Mr. David Gunning

They came through the disputes process. However, once they leave the disputes process and go to the High Court, one has to forget everything because nothing that happened previously is then relevant. I do not think we can get into what the High Court will say about this.

An Cathaoirleach

Could Mr. Gunning give us the figures determined by the employer's representative?

Mr. David Gunning

I will come back to the Cathaoirleach on that.

An Cathaoirleach

Please do.

Mr. David Gunning

I do not have those to hand but I will come back on them.

An Cathaoirleach

It would be good if somebody could get that information during the meeting.

Deputy Paul McAuliffe

Yes, that would be very useful. There are many issues around the word "compliance". I will raise a different type of compliance. The Comptroller and Auditor General has drawn our attention to a settlement of almost €1 million between the board and the Revenue Commissioners in regard to relevant contract tax. I want to explore how that occurred. Will Mr. Gunning clarify the figures we have that are related to nearly €1 million in transactions? The contract tax should have been withheld by the hospital board. Will Mr. Gunning explain how that came into being?

Mr. David Gunning

I can explain. This was a misclassification of tax. Instead of operating using the relevant contracts tax, RCT, system, the development board at the time operated VAT. This was in the period from 2016 to the middle of 2018. During that period, the wrong tax system was being operated. It is important to say that exactly the same amount of money was paid by the development board to the Revenue Commissioners during that period.

Deputy Paul McAuliffe

Is Mr. Gunning saying there was no penalty attached?

Mr. David Gunning

The development board has received a penalty for not operating the RCT system, but what I am saying is there was no underpayment.

Deputy Paul McAuliffe

What was the amount of that penalty?

Mr. David Gunning

It is €938,665.

Deputy Paul McAuliffe

When Mr. Gunning suggests that it is the same amount, therefore, that is not true because there is a penalty of almost €1 million.

Mr. David Gunning

Correct. I am referring to the tax system. To be clear, the amount of money paid by the development board-----

Deputy Paul McAuliffe

Is it fair to say that the error of using the wrong system, or the "misclassification", as Mr. Gunning calls it, has cost the taxpayer €1 million?

Mr. David Gunning

That is correct. There is €1 million of-----

Deputy Paul McAuliffe

Obviously, it has come back to the Revenue Commissioners. However, it has cost the project €1 million. That is a significant sum.

Mr. David Gunning

It is a very significant sum, yes.

Deputy Paul McAuliffe

Given all the legal and governance advice available to the NPHDB, why did the hospital board which deals with construction contracts not explore the possibility that the RCT system should have been retained? Mr. Gunning spoke of 2018, whereas the date I have is 2019. Why did the board not sit down with the Revenue Commissioners to discuss this until that date?

Mr. David Gunning

I was appointed in September 2019. One of my first actions was to get advice from tax advisers in relation to this matter. The tax advice was that the development board should make a voluntary declaration in relation to this matter. That is what we did. That was the decision taken by the finance, audit and risk committee and, ultimately, it was the decision taken by the board.

Deputy Paul McAuliffe

Is Mr. Gunning saying that the question had not arisen until he raised it?

Mr. David Gunning

It was a hot issue that was being discussed during the time before my appointment. I remember that on one of my first days I had a meeting with the Revenue Commissioners.

Deputy Paul McAuliffe

The reason to have the board is for it to be the legal vehicle for managing the contracts and the financial arrangements around them. Was this not discussed at the very beginning of the contract?

Mr. David Gunning

I have been reading the minutes of various things to understand and give the committee this detail. I was not personally present at the time. The understanding was that because the development board did not see itself as a contractor, it therefore did not apply RCT and it applied VAT. Again, it was exactly the same amount of money that was remitted to Revenue.

Deputy Paul McAuliffe

Was that the opinion of the internal staff or was it the-----

Mr. David Gunning

It was the opinion of the internal staff and it was the way that the systems-----

Deputy Paul McAuliffe

Is it the case that no external legal advice was sought when that decision was made?

Mr. David Gunning

I do not believe that sufficient legal or tax advice was sought in this case on that particular issue.

Deputy Paul McAuliffe

Okay. I will move on to the increased costs claims. I have some sympathy for the NPHDB in this area. It is well known that contractors often tender for something and they make their profit through the process of increased costs claims and wearing people down along the way. By and large, the NPHDB has fought many of those claims, with some success. I am fearful that we might be rushing to buy out the options within those contracts. Is the board seeking to buy out options where increased costs claims might apply?

Mr. David Gunning

Is the Deputy asking whether we are seeking to settle claims?

Deputy Paul McAuliffe

Yes.

Mr. David Gunning

We have settled a number of claims but, as I mentioned, these were 28 claims that amounted to €2 million. When we reviewed these claims, we felt these were issues on which we could reach an agreement with the contractor. I think that was the right way to go about it.

Deputy Paul McAuliffe

Okay, so I-----

Mr. David Gunning

If I just-----

Deputy Paul McAuliffe

I am interested in the process of how that is done. When the decision is made to do that, what checks does the board put in place to ensure that what has been claimed by the contractor is physically in place on the ground?

Mr. David Gunning

The first step is that the employer's representative, which is the independent body, makes an assessment of the contractor's claim. That is an independent, objective assessment of the claim. She then puts a value on what the claim is worth.

Deputy Paul McAuliffe

She examines the work on the ground, on-site and the condition of the outcome.

Mr. David Gunning

Correct. She is very experienced and she has a team that conducts that work. That work is carried out and she makes her determinations. In general, that is it. As the Deputy can see in the top half of the table, she has made determinations on 1,610 claims for which BAM is claiming €641 million. She says those are worth €16.7 million to the contractor and we align with that position. However, if I could just go to the bottom of the table-----

Deputy Paul McAuliffe

She is independent.

Mr. David Gunning

She is independent.

Deputy Paul McAuliffe

That work is then taken at face value.

Mr. David Gunning

She is a professional employed. It is taken at face value-----

Deputy Paul McAuliffe

Something like-----

Mr. David Gunning

-----by her professional indemnity-----

Deputy Paul McAuliffe

I take Mr. Gunning's point. Something like a building management system will have huge levels of complexity. Even the detailed measurement of the components of that system could incur a very significant cost. We have seen here how building sizes have been measured incorrectly and have incurred huge costs for the taxpayer. My question is on the specific measurements of those works. Are they being carried out to Mr. Gunning's satisfaction?

Mr. David Gunning

We have very good expertise in these areas, both in our design team and available to the employer's representative. If we need additional expertise, we can bring that in, as necessary, to do that work.

Deputy Paul McAuliffe

Unfortunately, I am due to ask a parliamentary question, which will save two minutes. I might come in for the second round.

An Cathaoirleach

Deputy McAuliffe has two minutes' credit.

Deputy Paul McAuliffe

I am glad.

Deputy Alan Kelly

I appreciate that a number of the witnesses have not been involved throughout this project and were not responsible for some of the issues that went on in the past.

I ask for short answers to my questions because our time is obviously limited. I am not being rude; it is just the way we have to work. Deputy Catherine Murphy and I have a long track record on this issue going back to a previous Committee of Public Accounts. I think it was in February 2019 that I asked the then Secretary General if this whole project would come in at under €2 billion. I said I did not believe it would and he could not give an answer. I said it would go over €2 billion.

That was nearly five years ago. I am not clairvoyant or anything. I know there were other issues but this is going to come in substantially over €2 billion. If anyone in the room would like to contradict that, he or she should please tell me now. That is as I expected.

My question is going to be to the Department because we have heard a lot from Mr. Gunning and Ms Hardiman. I appreciate everything they are trying to do and the conditions by which they have to do them. I have been in government and I understand the way in which these things have to be done.

Ms Hardiman and Mr. Gunning have put forward a plan as regards the expectation in terms of what capital they will require to close off this project. Is that fair? The question is directed to Mr. Tierney who, for the audience, is in charge of capital projects on behalf of the Department of Health.

Mr. Derek Tierney

That is correct. We have an ongoing engagement with both CHI and the build board in terms of progress.

Deputy Alan Kelly

So we have a ballpark budget of €1.4 billion for the infrastructure and building of the hospital and we have €300 million for the work Ms Hardiman is doing as regards commissioning. By the way, does the commissioning include additional staffing?

Ms Eilísh Hardiman

Does Deputy Kelly mean for the running of the hospital?

Deputy Alan Kelly

Yes.

Ms Eilísh Hardiman

No, this is purely to get it up and running.

Deputy Alan Kelly

The current figures are that we have €1.4 billion plus €300 million, which is €1.7 billion, and it does not include staffing. That is plus X. We know that Mr. Gunning and Ms Hardiman - I have put my caveats as regards their roles, in fairness to them - have had to put in substantial claims on 31 May, both on the same day. The Department and the HSE are fully aware of what the capital envelope on this project will potentially be but it has not gone to the Government.

Mr. Derek Tierney

No, and Deputy Kelly could perhaps let me respond. In December 2021, we did advise the Government formally that we would not be able to deliver this hospital within the current sanctioned budget for a number of reasons.

Deputy Alan Kelly

That is right.

Mr. Derek Tierney

One of the primary reasons is that the contract that was signed does not align with the sanctioned budget. There are a number of provisions and entitlements to the contractor within the contract which were never catered for in the original budget so they will have to be accounted for. They include a recovery of inflation over 4%-----

Deputy Alan Kelly

In fairness, they are listed.

Mr. Derek Tierney

They are, yes. There are provisional sums that were uncosted at the time.

Deputy Alan Kelly

I accept all that.

Mr. Derek Tierney

I guess what my colleague, Mr. Gunning, is bringing us to is that until we have a determination by the employer's representative, ER, on the programme - that would give everybody certainty, because the ER is an independent body under the public works contract. That will give us certainty on how robust the contract is from a contractual compliance basis, whether the 40,000 activities are logically linked, what is the critical path etc.

Deputy Alan Kelly

When does Mr. Tierney expect to be able to send a memo to the Government saying this is going to cost two point whatever billion euro?

Mr. Derek Tierney

I would hope that by the end of this month or very early in November, we can bring a memo to the Government.

Deputy Alan Kelly

So at the end of this month, Mr. Tierney expects that all the variables will be there for him to make a guesstimate as regards what it is.

Mr. Derek Tierney

Yes.

Deputy Alan Kelly

As we all know, it will be well over €2 billion.

I listened to the Taoiseach talk this morning on Newstalk about it. One of the things he said was that BAM did not have enough workers on site. That was effectively it in layman's terms. Is that an accurate statement? I ask Mr. Gunning to respond very briefly.

Mr. David Gunning

I think there are two issues. Yes, historically we have not had enough workers. BAM's progress up to July, on average, was 65% of its programme. BAM would argue that it has enough workers. Our argument is that it does not because if it is only hitting 65% then it is not getting-----

Deputy Alan Kelly

Let me just get it straight. Mr. Gunning has had a long history in this and in fairness to him, he has given very direct answers, I do not think there is a snowball's chance of the October deadline being met next year. In fairness to Mr. Gunning, he actually conditioned it in his commentary and in what he wrote, to protect himself. I think he is right. I do not think there is a snowball's chance of that happening.

I also think that when it comes to Ms Hardiman's work, which I read thoroughly - it is very comprehensive – I am very excited about some of it. The e-health part is something that I have been roaring and shouting about for years. I just do not think that the handover line and handover positioning is going to be at the stage that will allow this to happen, so we will not have this six months after that. I would even be surprised if this is up and fully operational in 2025 at all, based on the evidence that the witnesses have given us here. I am not saying that is their fault.

Let us just get some facts for the public. This project is going well north of €2 billion. That is what I would expect and it could possibly be even closer to €2.5 billion. I do not think anyone disagrees with that. We also have a situation where the Government is going to have a memo outlining in ballpark terms what that is, at the end of this month or early next month. Is that correct?

Mr. Derek Tierney

That is correct.

Deputy Alan Kelly

We have a situation where the chair of the board, to be fair to him, is hoping that his project will be completed and handed over on 29 October 2024, but we have a severe doubt about that. We know that until that happens, Ms Hardiman's work and CHI's work cannot fully happen until the date is met accurately, although I acknowledge some preparatory work can be done. Is that not all correct? Does anyone disagree with anything I have said? I want to break it down into bite sizes for the public watching.

I am sorry, but I forgot one piece. The outline of the amounts does not include staffing. I do not want to put Ms Hardiman on the spot but what figure are we looking at there?

Ms Eilísh Hardiman

As Deputy Kelly can appreciate, we are funded on an annual basis through the Estimates process and we work with the HSE on that. We have two Estimates processes before we expect to open in 2025. We are actively engaging with the HSE through the governance arrangements around what staffing we can bring in in 2024 and 2025. The Deputy can understand that there is some staffing that we cannot bring in because we do not have the resources for them to work in-----

Deputy Alan Kelly

Yes, I appreciate that.

Ms Eilísh Hardiman

-----but we have a plan and Deputy Kelly is absolutely right that we work it out through the annual Estimates process.

Deputy Alan Kelly

Okay. I wish to raise a couple of other specific issues in the remaining time. I have a question for Ms Hardiman on electronic healthcare. I am a huge advocate for it and I have been talking about it for nearly a decade. My background is in technology. Is this reversible back into all other health scenarios within the HSE? In other words, has it been tested so that this will eventually be the healthcare that will be used across the health service? In other words, we are not spending a huge pile of money on something that cannot be reverse-engineered into the rest of healthcare in the HSE.

Ms Eilísh Hardiman

To be very clear, we did start this process by trying to make it a national project but what was approved is what is specified for CHI.

Deputy Alan Kelly

I accept that. I remember the history.

Ms Eilísh Hardiman

We are implementing that.

Deputy Alan Kelly

I just want to know if it is scalable.

Ms Eilísh Hardiman

I can get Mr. Flanagan, the CFO, to talk to it a bit more, because in the procurement process we identified how we could communicate to our colleagues in the regional hospitals, for example, in paediatrics. The HSE is also rolling out a platform that allows systems to talk to each other and it will fully work with that.

Deputy Alan Kelly

I hope Mr. Gloster is watching this because we need whatever amount of money that has been spent on this not to be lost and for it not to be another small white elephant whereby we have one e-healthcare inside in the children's hospital and we have something else going on elsewhere. I thank Ms Hardiman.

Ms Eilísh Hardiman

The whole of Northern Ireland is doing it as well, on this system.

Deputy Alan Kelly

Previously, €168 million for this hospital was coming from philanthropic sources. Could Mr. Tierney state if that is still the current figure or whether it is has gone up or down?

Mr. Derek Tierney

I might refer that to Ms Hardiman in the first instance.

Ms Eilísh Hardiman

We have looked at a philanthropic element for the research centre. There is a children's research and innovation centre that has planning permission since 2018 and that has to be funded through philanthropic sources. We are working with the Children's Health Foundation-----

Deputy Alan Kelly

I am sorry but I just want the figure.

Ms Eilísh Hardiman

It is still-----

Deputy Alan Kelly

It has not changed.

Ms Eilísh Hardiman

It has gone up because the cost of building has gone up since that time.

Deputy Alan Kelly

So how much is it now?

Ms Eilísh Hardiman

We are estimating €27 million.

Deputy Alan Kelly

But the previous amount was €168 million.

Ms Eilísh Hardiman

This is for the children's research and innovation centre.

Deputy Alan Kelly

Ms Hardiman might just write us a note in regard to all philanthropic projects. That might break down the figure.

Ms Eilísh Hardiman

Yes, exactly.

Deputy Alan Kelly

I have one last question for Mr. Tierney. When it comes to this capital project, it has had a huge impact. The learnings are massive and we have been conditioned, in that everybody was not here at the beginning of it and all of that. No one can tell me, because I have seen it on the ground in my own area, that this has not had a major impact on other projects not happening. I know the word "profile". A lot of projects do not ever disappear. It is like the roads projects with the Minister for Transport, Deputy Eamon Ryan. They do not disappear, they just get profiled. I am also seeing that with primary care centres, public nursing homes and other projects. Will he provide a list of changes to the approved capital plan?

Incidentally, the capital plan is managed by the HSE. The Minister cannot direct any project to be funded in any way, shape or form. It would be a resigning matter, under the Act, if he did. Will Mr. Tierney provide us with all changes that have been made in relation to the capital plan over the past three years, based on the fact that this project has overrun?

Mr. Derek Tierney

Yes, we will try to provide a note. That will be fairly comprehensive, as one can imagine. As a first response, our capital plan is predicated on an annual budget. We profile the budget based on the priorities at the time.

Deputy Alan Kelly

There is no doubt but that this had an impact on the project.

Mr. Derek Tierney

The children's hospital is a key priority for Government and is a key priority within the allocation.

Deputy Alan Kelly

Is it not a fair statement to say that this project has delayed other projects?

Mr. Derek Tierney

If I was to fund everything that is required, the Deputy knows and I know that funding is not sufficient in the NDP and in the annual budget. That is always the case, so in that context we have to prioritise.

Deputy Alan Kelly

I have parliamentary questions going back years. I can show timelines where projects were expected and I could nearly compile the list myself.

Mr. Derek Tierney

It is a fact that it is consuming one third of our capital budget.

Deputy Alan Kelly

A fair point. I thank Mr. Tierney for his contribution.

An Cathaoirleach

Can a list be supplied to the committee?

Mr. Derek Tierney

It is probably a thesis the Deputy is looking for, but we will try to get a note just to show what the profile is. It is three years of capital.

Deputy Alan Kelly

I do not expect a thesis.

Deputy Catherine Murphy

If we do anything here, we decode language, routinely. Mr. Gunning talked about an achievable programme, which I think was a heavy caveat in relation to the October 2024 deadline for handing it over. He went on at another point to talk about sufficient staff being on site and the project being behind profile right from the word go. We are well aware of this issue because it has come up before.

He mentioned a rate of 65%. That will come into the evaluation. If it is at 65%, the project will not be completed by October 2025. Is that correct? It has to be at 100%.

Mr. David Gunning

It has to be-----

Deputy Catherine Murphy

It is not at 100% the moment.

Mr. David Gunning

It is in transition, to put it that way. We have not yet got the September readout. However, we are seeing some encouraging signs in relation to the delivery of the new programme.

Deputy Catherine Murphy

Every week that goes by that it is not at 100% means there is slippage.

Mr. David Gunning

And there is risk and challenge, absolutely.

Deputy Catherine Murphy

What are the encouraging signs?

Mr. David Gunning

To summarise, the contractor has talked to us about the process in which it plans to close out the project. They have talked to us about the core team they want to have in place.

Deputy Catherine Murphy

That they want to or that they have put in place?

Mr. David Gunning

They are putting in place a core team and afterwards a finishing team to come along through the areas afterwards. I will give one metric. When we reported to the health committee earlier this year, we talked about our disappointment with the number of rooms being offered as completed. Since then, 32% of the rooms have been offered, so there has been a significant improvement.

Deputy Catherine Murphy

It was 11% before, is that correct?

Mr. David Gunning

It was just not anywhere near where it needed to be.

Deputy Catherine Murphy

It is at 32% now?

Mr. David Gunning

No, it is 32% of the overall number of rooms they have achieved by the end of September. Momentum is building in this particular area, so we are getting some encouragement from that one metric.

Deputy Catherine Murphy

Is it correct that Mr. Gunning would not be satisfied to tell us he would guarantee that this would be handed over in October of next year?

Mr. David Gunning

Given my experience with this project, and I have been very open with this committee on these issues, there are always challenges with these things. What can we do? What we have to work on, what the board is focused on, what-----

Deputy Catherine Murphy

Mr. Gunning would not give us that guarantee.

Mr. David Gunning

I cannot. Again, to be clear, this is BAM's programme, under the contract.

Deputy Catherine Murphy

I completely understand that and we have been trying to be fair all along in this regard. The behaviour of the contractor right from the word go, in terms of not having sufficient staff on the site, not providing the substantially completed programme, all of that will only change if there are sanctions and funding is withheld. In any contract there are always opportunities, because a contract is a two-way process. There are always opportunities for sanction if things are not completed. For example, this contract was supposed to deliver a hospital by a particular date. It was not delivered and after that, inflation took over, adding to the cost. Yet the State is picking up on the over-4% building inflation rate. I maintain that we should be looking at a counterclaim at this stage and I think we have been through that before.

There have to be sanctions to ensure this is delivered as quickly as possible, albeit well behind the schedule.

On a separate issue, Mr. Gunning says that €71 million remains in the current overall capital budget of €1.43 billion for the build. How far will that take us?

Mr. David Gunning

The end of the year is what we have communicated to stakeholders and to Mr. Tierney.

Deputy Catherine Murphy

The board will run out of money at the end of the year?

Mr. David Gunning

Yes. It may go into January. It depends on - to go back to our programme issue, if BAM hits its programme, we will pay it more money. If the company is not delivering, if it is doing 50%, it will get less money and therefore it gets extended.

Deputy Catherine Murphy

The money will only stretch into the new year if there is slippage in the deadline. Is that correct?

Mr. David Gunning

That is correct.

Mr. Derek Tierney

The approved budget that is sanctioned, we reach that sanction limit by the end of the year. It is important to understand that.

Deputy Catherine Murphy

The Government and the Department will be more than aware that money has to be available from January next year. As Deputy Kelly says, we can only spend money once and this is impacting on other projects. Claims will have to be paid out of this amount as well, if claims are approved. The potential implications for the extended timeline has gone to the Department. Has any contingency gone to the Department in relation to claims?

Mr. Derek Tierney

There is a full readout within the brief and Mr Gunning's opening statement on the extent of claims and the commercial position taken by the contractor. I cannot comment on that because if I do, I am giving the contractor a floor target with which to aggressively pursue the State.

Deputy Catherine Murphy

I am not asking for the amount, I am asking whether it has been included.

Mr. Derek Tierney

We will bring all of that consideration to Government.

Deputy Catherine Murphy

Okay, so it has been included. Is the Government aware that it must come up with additional funding by the end of this year?

Mr. Derek Tierney

It is clear that we are going to come up against our sanction.

Deputy Catherine Murphy

The 2021 accounts were laid this week. We had expected to be able to see some amounts or some contingency. That is not included. I direct this question to the Comptroller and Auditor General. If the accounts do not accurately reflect, in terms of payments that are decided afterwards in relation to claims, would that mean that there are embedded arrears and does that mean that there would be an adjustment in those accounts or how is that treated?

Mr. Seamus McCarthy

I am not sure that I follow. Obviously, the accounts have to reflect the payments that were incurred in the period and all the previous periods. At the end of the year they are required to indicate the level of commitments that they are locked into. If there is a determined figure, if a claim has been decided, then that should be included and it is a payment that will be made in the future. That should be already incorporated into the figure but obviously, if there are claims that have not been determined-----

Deputy Catherine Murphy

It would go into the following year.

Mr. Seamus McCarthy

They remain contingent liabilities and there is not a figure.

Deputy Catherine Murphy

For contingent liability.

Mr. Seamus McCarthy

Yes.

Deputy Catherine Murphy

Okay. The committee received a reply from CHI a couple of weeks ago on a range of topics, one of which is agency and recruitment. CHI draws staff from seven different recruitment agencies. Ms Hardiman is telling us there is a staff engagement programme and training of new teams. How does CHI train agency staff? Is workforce planning under way to avoid the need for agency staff as much as possible? A hospital may have world-class facilities but it will only be a world-class hospital if there are staff to deliver the services. Agency is emergency. It is not ideal.

Ms Eilísh Hardiman

From the perspective of the healthcare agency spend, we try as much as possible not to rely on agency staff. Paediatrics is specialist and the agencies do not have staff available who meet our requirements. Some of our agencies are in niche areas and that is why we have to work internationally to get consultants in from the UK's National Health Service, NHS, and so on. In terms of our objective, we have already engaged in the commissioning programme and staff are already coming in. We have an immersion programme. It is like when we designed the hospital. They are coming together. They walk onto the ward where they will be working from all the hospitals. They learn about how it will happen. It is part of how they are-----

Deputy Catherine Murphy

I appreciate all that.

Ms Eilísh Hardiman

We are not replacing them with agency staff. We are doing this as part of our work.

Deputy Catherine Murphy

At the moment there is a high level of dependency on agency staff, however. CHI deals with seven different agencies. How will it avoid that when this hospital opens?

Ms Eilísh Hardiman

That is one part of the training programme. We rely on narrow, niche areas. There are some agency staff who work with us regularly because it is a very narrow profile of people whom we can bring into paediatrics. We will have to include them in our training programme. That is part of the plan.

Deputy Catherine Murphy

That assumes there will still be agency staff after-----

Ms Eilísh Hardiman

We will always have an element of agency staff. It is just the nature of the business. If there is a sudden absence caused by a person being out sick, for example, we cannot cease providing a service. There are very niche areas that require-----

An Cathaoirleach

I call Deputy Munster.

Deputy Imelda Munster

I will start with questions for Mr. Gunning, if I may. BAM furnished an updated programme of work in July and it was non-compliant. What date was given in that programme of work?

Mr. David Gunning

The date in that programme was October, the same date. It was early October 2024.

Deputy Imelda Munster

Mr. Gunning can state definitively that he sees the new updated programme of work as being compliant.

Mr. David Gunning

That is a role for the employer's representative. What we stated earlier was that we see it as being achievable. That is our initial assessment of it. It takes two to three months to go through the detail of it but we are encouraged by what we see.

Deputy Imelda Munster

Did Mr. Gunning state that only 65% of targets are being hit but BAM is insisting there are sufficient workers?

Mr. David Gunning

Historically, looking back to the first half of this year and last year, BAM hit 65% or 66% of its monthly performance targets, on average. If it set out to deliver 100% in a month, it was hitting 65%. Our contention in that regard is that more resources and supervision are required to get that done. It has always been our position that there are not enough resources to get the job done.

Deputy Imelda Munster

Is there a guarantee in the new updated programme of work that those resources will be in place? If so, as of when?

Mr. David Gunning

We have had several meeting with Mr. John Wilkinson, the chief operating officer of BAM, who heads up its UK and Ireland operations He is also a member of BAM's executive board. The chair and I and other members of my team have met with him and we got assurances from BAM that it believes it can hit the October date.

Deputy Imelda Munster

Given what went on in the past, does Mr. Gunning believe that updated programme and the commitments BAM has made are genuine? The previous one was non-compliant, so BAM furnished the board with another one. Is this a way for BAM to avoid financial fines?

Mr. David Gunning

I do not believe so. We have been engaged with the contractor. On the history, we have discussed this previously. We have had very robust engagements------

Deputy Imelda Munster

That is why I am asking. Mr. Gunning has engaged and the history is there.

Mr. David Gunning

-----and we are now in an engagement. BAM is telling us its commitment is there to this programme.

Deputy Imelda Munster

Mr. Gunning is taking that as genuine.

Mr. David Gunning

To be clear, the optimism has been beaten out of all of us in respect of this project. At times, however, when one has that kind of interaction with a person, one likes to be able to say, "I think they are serious about this." As I stated to Deputy Murphy, however, there remain challenges in getting this across the line. Our focus now is on how we can assist and support getting and building certainty and confidence in that date. That is where we want to be.

Deputy Imelda Munster

Mr. Gunning is going with the date of the end of October 2024. The actual completion would take a further six months.

Mr. David Gunning

That is the CHI-----

Deputy Imelda Munster

Yes, the service activation will take six months.

Mr. David Gunning

Service activation is the responsibility of CHI. We are going with the date. We do not have any role in that regard. I am reporting our opinion on it. It is accepted by the employer's representative. That is the legal contractual position. We have done our assessment, which I am happy to share, in terms of what our-----

Deputy Imelda Munster

I am concerned-----

Mr. David Gunning

The bit that goes on afterwards is the responsibility of Children's Health Ireland.

Deputy Imelda Munster

Okay. With regard to the service activation, there is reference to a six-month period. Ms Hardiman stated it is a complex operation. Is it not normally a nine-month period for service activation? I asked Mr. Gunning at a previous meeting about the nine-month period and he stated that was correct. Given it is a complex operation, why is a period of six months being given?

Ms Eilísh Hardiman

CHI is engaging with some of the technical commissioning now. We are not waiting for us to be engaged at substantial completion. We are trying to work with the development board and what they can do with the contractor to see what we can achieve before substantial completion. We have a detailed plan. The key areas relate to the electronic healthcare record. That commenced in July. We have those on board and are in detailed planning. At the moment, we are saying it will be at least six months. That is our best estimate.

Deputy Imelda Munster

At least six months.

Ms Eilísh Hardiman

We will refine that further. We are doing extensive planning. It is our best guesstimate. The more we can get done before substantial completion, the better it will be. It is still work in progress. We are working with the development board to try to bottom that out. We expect to be in a better position around this-----

Deputy Imelda Munster

Being extremely optimistic that everything falls into place and goes to schedule, it will be six months. Realistically, however-----

Ms Eilísh Hardiman

We want to be in the children's hospital by the summer of 2025.

Deputy Imelda Munster

We all want that but my point is that in the general scheme of things, it is normally a nine-month period. I know CHI is doing work in advance, but it is a massive project and it is normally a nine-month period.

Ms Eilísh Hardiman

We acknowledge that. We are trying to work as much as we can.

Deputy Imelda Munster

I accept that.

Ms Eilísh Hardiman

It will be at least six months. That is our position.

Deputy Imelda Munster

I thank Ms Hardiman. The NPHDB wrote to the Minister to request additional capital. To what specifically does that relate? Is it anything to do with the claims?

Mr. David Gunning

It is our assessment of the cost outturn for the project and the additional moneys required to get it to the end. That is-----

Deputy Imelda Munster

I asked whether it relates to the claims.

Mr. David Gunning

My colleague, Mr. Tierney, summarised the position earlier in that regard. There is a provision for contingency in that budget but I do not believe I can give the number.

Deputy Imelda Munster

Mr. Gunning cannot give an overall new price tag whatsoever.

Mr. David Gunning

No, I cannot.

Deputy Imelda Munster

Mr. Gunning stated BAM submitted 2,379 claims.

Mr. David Gunning

Correct.

Deputy Imelda Munster

For a total of €756 million. Mr. Gunning gave a breakdown of the 28 claims that settled for €2 million. Realistically, could we be looking at that sort of amount being paid out for those claims or is there no chance whatsoever that it will not cost us more than €700 million?

Mr. David Gunning

I will set out the position currently from the development board’s point of view. We rely on the decision of the employer’s representative. To repeat, on the claims table, the employer’s representative has looked at 1,610 claims where BAM requested or is claiming €641 million, and change, and she has valued that at €16 million. That is the gulf between the development board and BAM with regard to the assessment of the claims. I was asked whether I can give certainty on any of these things. I cannot provide certainty about these claims. I can give the Deputy certainty that we will defend each and every one of these claims robustly. Let there be no-----

Deputy Imelda Munster

Is that not going to delay the completion date? Are there not legal concerns around-----

Mr. David Gunning

I read a case recently where the settlement of a project – the final account – was 11 years after the particular building opened.

Deputy Imelda Munster

Mr. Gunning has no fear that there may be concerns legally that this will delay the opening of the hospital. There is nothing with regard to these claims or legal actions that could possibly delay the completion date. Is that what Mr. Gunning is telling us?

Mr. David Gunning

That is my assessment of where things are. However, I cannot give a definitive answer to that. With this project, you cannot be absolutely confident.

Deputy Imelda Munster

We know there is a stand-off and there are claims disputed and all that. However, the fact that Mr. Gunning cannot give absolute clarity on it-----

Mr. David Gunning

I do not think anyone could.

Deputy Imelda Munster

Yes. By saying that, Mr. Gunning also cannot give absolute clarity on the completion date and opening date of the hospital and what the overall cost will be. Even years on, we still do not know when the hospital will be open, when the first patient will be treated and how much the hospital will cost. It that not ludicrous? This hospital will earn the title of the most expensive children’s hospital in the world at this stage.

Mr. David Gunning

We try not to get distracted by those kinds of headlines and try to focus on the job we are doing.

Deputy Imelda Munster

It is the reality.

Mr. David Gunning

There are many challenges here. On the claims, I cannot give an absolute guarantee. I do not know what claims the contractor will put in front of us. Then, if these claims go to the High Court, that is a different ball game completely. I cannot give an answer that I think will satisfy-----

Deputy Imelda Munster

This has been a complete and utter mess, and we are now looking at the National Maternity Hospital. Would the development board consider making a submission to the HSE and the Department on all of the problems encountered, everything that has gone on in this and the nightmare it has been, to make them aware for future in order that lessons could be learned? Would the board consider providing them with a detailed analysis of what happened and everything encountered? Would they consider doing that to ensure-----

An Cathaoirleach

The question is clear.

Mr. Derek Tierney

I will answer that. That has happened and is happening.

An Cathaoirleach

The development board has considered being involved in that.

Mr. David Gunning

I can definitively answer "Yes" to Deputy Munster's question.

An Cathaoirleach

I thank Mr. Gunning for the clarification. Deputy Ó Cathasaigh is next but Deputy Devlin is trying to attend to parliamentary duties. Perhaps Deputy Ó Cathasaigh will give way to Deputy Devlin, the deputy Chief Whip, to allow him to fulfil his duties. Is he okay with that?

Deputy Marc Ó Cathasaigh

We are both Whips but I will let Deputy Devlin have this slot.

An Cathaoirleach

I thank the Deputy for being agreeable.

Deputy Cormac Devlin

I thank the Cathaoirleach and Deputy Ó Cathasaigh. I appreciate it.

I thank the witnesses for the update and the information provided. Mr. Gunning remains optimistic and has a positive outlook, given the history of the project and the issues with it. He said that 32% of the rooms were near completion or progress was being made-----

Mr. David Gunning

Yes.

Deputy Cormac Devlin

So there is substantial progress. The update Mr. Gunning provided shows much progress on various wards and rooms since members visited the site. That is good to see, if we are to take a silver lining from today. That said, and to take up the issue my colleagues raised, which I appreciate is a tricky conversation for the witnesses, there is a substantial number of outstanding claims. I think the figure given in the briefing document was 2,379, at a total value of €16 million or so. When the satellite centres were opened in Connolly and Tallaght, were there claims outstanding from those two sites?

Mr. David Gunning

There were claims on both of those sites but final accounts have been agreed for that entire piece of the project.

Deputy Cormac Devlin

They are not included in the 2,300 claims.

Mr. David Gunning

They are not. That is a separate project and a separate contract.

Deputy Cormac Devlin

The 2,300 figure is purely for the children’s hospital.

Mr. David Gunning

Yes.

Deputy Cormac Devlin

Roughly how many claims were there for the satellite centres?

Mr. Phelim Devine

Off the top of my head, across the two projects, there were around 300 claims. Under the public works contract, a claim can be anything over €500. There might be a claim for €600, all the way up to millions of euro.

Deputy Cormac Devlin

I appreciate Mr. Devine has provided a figure off the top of his head. Of those approximately 300 claims for the satellite centres, how many were disputed? Were they all disputed?

Mr. Phelim Devine

A number of them were disputed but it was not anything like the percentage we have on the children’s hospital project.

Deputy Cormac Devlin

What was the total cost?

Mr. Phelim Devine

In terms of the budget, the €1.433 billion, that project ran over by about €5 million. In saying that, I think the overall outturn, including all the support, was about €82 million, off the top of my head. The Comptroller and Auditor General mentioned a value of €86 million. That was our direct cost for it, so that is €86 million. However, in terms of construction design team fees, Aspergillus works fees and everything, that is €82 million. With regard to the extra €5 million, part of that was additional investment, particularly in Tallaght. We had to put in new chillers, new condensers and do new road works, so there was also additional investment in the Tallaght site as part of the €5 million.

Deputy Cormac Devlin

It was not just the centre itself.

Mr. Phelim Devine

It was not just an overrun of the project.

Deputy Cormac Devlin

Regarding the Comptroller and Auditor General’s report, there were internal control disclosures in 2021 for CHI amounting to €2.2 million because it did not follow procurement guidelines. That included the external laboratory testing facility management, ICT, recruitment, medical consumables and professional services. From that period until now, what has changed and how did it happen?

Mr. Stephen Flanagan

We are aware of our duty with regard to European regulations when expending funds for our mandated services. While we have a level of non-compliance, we believe we have in place all the appropriate governance structures, policies and processes one would expect of a public entity of our materiality. Unfortunately, when running a live hospital environment, there are challenges. Some of those challenges are borne out in the non-compliance we see. For instance, the Deputy mentioned laboratories. Laboratories would have come into use across these hospitals historically under some clinical guidance, not through procurement processes, for externals. Now, at this point, procurement will be the correct route. For CHI, as we prepare for day one-go live at the new hospital, we have some very large procurements we need to do. We need to take all those laboratories and procure altogether what we call a managed laboratory service. In some sense, this precludes us from actioning these issues now to ensure that we are ready for day one-go live at the new children’s hospital.

That is just one of many challenges in that regard.

Some of the infrastructure in the likes of Temple Street, while we have frameworks in place for contractors, etc., is too large essentially to react urgently when you have a Portakabin on top of a flat roof and some guy has to go in underneath and fix that roof on a Tuesday morning to stop a ward being closed down. It is a challenging environment. We do have good systems and policies, and processes, in place.

Deputy Cormac Devlin

Is Mr. Flanagan saying those systems and policies were not in place for 2021 and they have been strengthened?

Mr. Stephen Flanagan

No, I am not saying they were not in place. I am saying we have strengthened them in that we have centralised our procurement.

Deputy Cormac Devlin

Is Children's Health Ireland, CHI, applying them across the board now?

Mr. Stephen Flanagan

We are applying them across the board.

Deputy Cormac Devlin

Okay. Obviously it stands out in the financial statement. From CHI's financial statement, page 20 of the annual report states that €77,000 in respect of request for settlement of private insurance invoices was rejected by the insurance company. Who wants to take that and what was the issue there?

Mr. Stephen Flanagan

I will take that. Under a memorandum of understanding between the HSE, including CHI, and the VHI insurers, there is an agreement in place where private claims are essentially paid upfront to the relevant healthcare institution and then there is a nine-month period under which you are required to provide the full submission to them. In some of these instances, the claims and coverage are complex, and the additional services which would become part of the claim are also varied. Then there are other challenges in terms of getting the relevant approvals from clinical teams, etc, who move around different entities for us.

In this instance, there was a loss of income for claims that would have either submitted after the deadline or submitted and were seen as not valid. There would have been a recoupment of those amounts if the claim was genuine.

Deputy Cormac Devlin

Are the processes changed somewhat to try to minimise that rejection of invoices?

Mr. Stephen Flanagan

The processes are in place to try to minimise it, and were in place at this time. It is an area which would be a challenge across the system.

Deputy Cormac Devlin

The reason I ask is it will be a bigger challenge with the bigger entity. Mr. Flanagan mentioned complex claims. I presume it will be a more challenging issue for the bigger hospital.

Mr. Stephen Flanagan

On the contrary, private income relative to public hospitals is reducing through the Sláintecare initiatives and as we have more consultants move to public contracts, and as the Deputy will be aware, children's public stays were all made free in the last number of years. This is an issue which should reduce over time.

Deputy Cormac Devlin

That is a fair point.

I only have two minutes left. In terms of the recommendations from the PwC report of April 2019, there were 11 recommendations made. Specifically, the report states:

The Guaranteed Maximum Price established through the two-stage tender process does not provide a contractual ceiling on cost and significant residual risks remain of further cost escalation. A primary focus of the NPH Client must be on managing this risk and preventing further cost increases. In this regard we make the following recommendations.

Preferably in a word, have all 11 recommendations been implemented fully now at this point?

Mr. David Gunning

Fully implemented.

Deputy Cormac Devlin

Every single one?

Mr. David Gunning

Every one. We did report on that to the committee the year before last when that was done.

Deputy Cormac Devlin

I just wanted to clarify that.

An Cathaoirleach

Mr. Tierney wants to comment briefly on that.

Deputy Cormac Devlin

Sorry, yes?

Mr. Derek Tierney

We will give the committee a note on that.

Deputy Cormac Devlin

I thank Mr. Tierney for that.

Finally, in terms of the special purpose body established in 2007 that Mr. Gunning leads, sticking with Mr. Gunning's projected timeline of October 2024, if that is happening, what happens to the special purpose vehicle? Does it continue on for 12 months or 24 months? What is the timeline attached to the special purpose vehicle?

Mr. David Gunning

I thank the Deputy for that question. We have mapped out the end phase, if you like, in terms of the wind-down. I certainly want to send a message that we want to keep our team very much in place to get to the substantial completion and then, as we go beyond that, through the warrant period and various other legal matters, depending on the tail that is on this, we may or may not need to retain some of the skills for a longer period. Ultimately, this development board disappears. It dissolves or whatever the correct term is.

Deputy Cormac Devlin

If Mr. Gunning were to hit the ambitious October 2024 target, is it 12 months, 24 months or does it depend on the work?

Mr. David Gunning

It takes a bit longer. The warranty period is approximately 18 months, 15 months or whatever.

Deputy Cormac Devlin

Okay.

Mr. David Gunning

It will be beyond that. Then it will depend on whether there are legal issues and whether the development board can successfully transfer those to another entity to take those forward, and if so, is that the HSE, or who is it? There are some questions to be asked there. I guess we are just trying to get the thing across the line. While we have modelled that from a financial point of view, which is included in our memo or what Mr. Derek Tierney has talked about, we have a very clear plan on that.

Deputy Cormac Devlin

I thank Mr. Gunning for that and I thank the Chair.

An Cathaoirleach

I propose we suspend the meeting for ten minutes for a short break and resume at 11.15 a.m. sharp.

Deputy Colm Burke

Chairman, I am now caught as I am due in the House.

An Cathaoirleach

Deputy Colm Burke is caught. Would the witnesses mind if we proceeded for ten minutes to facilitate the Deputy? The Deputy wants to speak now because he will be caught in the Dáil.

Deputy Colm Burke

If they do not mind.

Mr. David Gunning

Of course.

An Cathaoirleach

I will lift that proposal to suspend and we will continue. Is that agreed? Agreed.

Deputy Colm Burke

My apologies about that. It is just that I am in on questions with the Minister for Further and Higher Education, Research, Innovation and Science.

First of all, I thank the witnesses for being here this morning and for the information they have given. On the contract and the inflation clause in it, under the contract there is building inflation. What additional cost has occurred as a result of inflation since the contract was first signed?

Mr. David Gunning

I thank the Deputy. The precise number that has been paid to the contractor is €55.1 million.

Deputy Colm Burke

That is purely, not as regards additional claims-----

Mr. David Gunning

That is the inflation payment.

Deputy Colm Burke

-----but only the inflationary element of it.

Mr. David Gunning

Correct.

Deputy Colm Burke

Inflation has changed quite dramatically over the past 12 months. Is there an estimate as to what the additional inflationary costs will be by the time we get to October 2024?

Mr. David Gunning

I will clarify the development board's position on this. It is that the inflation payable to the contractor under the contractor - that payment - ceases at the contractual substantial completion date, which is November 2022. The development board's position is that no further inflation is payable beyond November 2022.

Deputy Colm Burke

What of additional items that the builders are claiming, say, for argument's sake, they say the specifications did not include a particular item and the cost of that additional item is €1 million but, because of inflation, it will now cost €1.050 million?

Mr. David Gunning

There is a very clear inflation clause and I have summarised the position. There would be case-by-case analysis on a number of these items but it does not apply, as it did in the past, to the entire payments by the development board to this.

Deputy Colm Burke

Because the increased building costs now have gone beyond the completion date, is Mr. Gunning saying that the development board is entitled to defend any inflationary cost claims that are being made?

Mr. David Gunning

Yes. However, on provisional sums, for example-----

Deputy Colm Burke

I accept that.

Mr. David Gunning

-----the Deputy mentioned where things are now materialising, they will materialise at current rates and, therefore, that would apply. However, on a continuation of paying anything like the €55 million, I have clarified that position. If I might say, the contractor has inflation claims because they do not accept that position.

Deputy Colm Burke

I accept that.

Mr. David Gunning

That is another matter.

Deputy Colm Burke

The additional cost because of building inflation is €55 million but Mr. Gunning does not believe that they are entitled to validly claim for inflation costs going forward.

Mr. David Gunning

Correct. That figure includes the VAT as well. It is the full number.

Deputy Colm Burke

In contracts, there is a penalty clause because of delays by builders. What is the story on the penalty clauses that are in place and can they be used as a bargaining tool in relation to new claims being made by the builder?

Mr. David Gunning

Deputy Catherine Murphy mentioned sanctions. There are three sanctions in this contract. There is a right to withhold 15% in the situation where the project programme is not provided. There are so-called liquidated damages.

There are three instances in which we can apply liquidated damages: sectional completion of the family unit; sectional completion of the ICT rooms, which are called something different in the contract; and the entirety of the NCH works. There are two sectional completions and then the project itself. The other sanction is the extreme sanction of termination of the contract. We have three sanctions within the public works contract. Those are the formal sanctions available to the development board.

Deputy Colm Burke

Do those sanctions put the board in a bargaining position in dealing with the additional claims being made?

Mr. David Gunning

We did a good job and are happy with the outturn of Tallaght and Connolly. This is a bigger challenge. I will not comment on our position one way or the other in relation to this.

Deputy Colm Burke

I fully accept Mr. Gunning does not want to declare-----

Mr. David Gunning

We will be robustly defending the State’s position on all of this.

Deputy Colm Burke

Deputy Munster asked earlier about possible delays as a result of claims being made. The contractor has no right to delay the opening of the hospital once it is substantially completed.

Mr. David Gunning

Correct.

Deputy Colm Burke

I want to clarify that because it was a bit unclear when Mr. Gunning replied. If I buy a house and do not pay the builder for additional work, he can refuse to close the sale. This situation is not the same.

Mr. David Gunning

It is not. To be clear, where the employer's representative, ER, has determined the contractor is entitled to additional money, and I have given the number of €16.75 million, and if that has fallen due, it has been paid to the contractor. There is no suggestion we have not paid the contractor what the contract says they are entitled to.

Deputy Colm Burke

It was outlined already that the board is trying to fast-track some of the checking processes. The builder cannot prevent the hospital from putting in place cross-checking of equipment, etc., and the whole system inside there.

Mr. David Gunning

Mr. Devine can maybe talk in more detail about this but the contractor is responsible for installing a large amount of the equipment. That is clear. It is part of that process. Where we are working closely with CHI is on items such as CHI appointing people who will ultimately be facilities managers or clinical engineers, so it is involved at this stage in installation, turning up the services, making sure they work and learning through that process. It is part of our team from that perspective.

Deputy Colm Burke

So the builders cannot interfere.

Mr. David Gunning

We welcome the opportunity to work more closely with the contractor and bring in that co-operation and collaboration.

Deputy Colm Burke

I will touch on the computerisation issue. Some maternity hospitals have put in place a computerised system. What is the link between the maternity hospitals and the computer system the witnesses are doing? Will there be a connection between them?

Ms Eilísh Hardiman

The HSE plans as part of its e-health strategy to have a platform connecting computer systems so they can talk to each other. That is the proposal and it is being progressed as a priority within the HSE. It is because there are different systems out there for labs, for imaging-----

Deputy Colm Burke

I understand at one stage we had something like 1,700 different computer systems in the HSE and one would not talk to the other. I am wondering are we sure we can get all of this in order.

Ms Eilísh Hardiman

That is an important platform the HSE is looking to progress. If you look at the system that is in five of the maternity hospitals, that happens internationally and they have ways of communicating with them. There is evidence of this happening internationally.

Deputy Colm Burke

Where are we with computerisation in the existing children's hospitals in terms of it being transferred over? We are talking about a huge transfer of staff, patients and information.

Ms Eilísh Hardiman

We explored this. It is not feasible to retrofit the electronic healthcare system into the existing children's hospitals and then bring it across. That would be four different implementations. It is not viable. What we have is what is being done with this system internationally. EPIC has been procured, has a very good success rate at implementation and goes from paper to electronic. What we are doing is not just around the electronic healthcare record. We are also looking at our corporate systems and other systems. As much as possible, we are bringing in the systems that will be in the children's hospital, bedding them in now and just going across with them. However, the electronic healthcare record is such a big implementation it will go from paper to electronic healthcare by the time of the opening of the hospital

Deputy Colm Burke

Will the transfer from paper to electronic only start when patients start to be transferred?

Ms Eilísh Hardiman

Correct. We will open electronically.

Deputy Colm Burke

Will there not then be a long period, probably nearly six months, when there will be a huge workload involved in transferring information?

Ms Eilísh Hardiman

We have a data migration process to manage the data. Not everything needs to be transferred. There is a data migration element to it but the biggest risk talked about internationally is getting staff trained so they can move and become familiar with the project. The company we have, EPIC, has a big training and familiarisation programme and we will be doing that in the hospitals before we move across.

Deputy Colm Burke

Will there be connection between the other children’s units around the country as regards computerisation? If I am transferring a child from CUH in Cork to the new hospital, will the records in Cork be computerised and capable of being transferred over?

Ms Eilísh Hardiman

That is what we are talking about, a system that will be able to transfer electronically. We are also working with our colleagues in the regional units. We have a chief information officer who is a consultant doctor and who has been linking with clinicians in the regional units to look at providing them with read-only access to our system so they see the child’s record. The Deputy must remember this is transformational.

Deputy Colm Burke

Absolutely.

Ms Eilísh Hardiman

The child will have their record on their phone. The record belongs to the patient and we are here to facilitate that. That is the opportunity we have with this: to get access for families and children and then a read-only access.

Deputy Colm Burke

I have come across a scenario in a hospital where records were computerised but a section of the hospital refused to computerise. As a result, there were two files, one manual and one computerised, which caused----

Ms Eilísh Hardiman

We are opening digital. It is the only way.

Deputy Colm Burke

Okay. Thank you.

An Cathaoirleach

We will take a short break.

Sitting suspended at 11.17 a.m. and resumed at 11.28 a.m.

An Cathaoirleach

The next speaker is Deputy Ó Cathasaigh.

Deputy Marc Ó Cathasaigh

I thank the witnesses for what has been a fairly forthright and honest discussion today. I might be going over old ground, so I apologise if I ask questions or restate points that have already been covered. I want to start with claims. Looking at the opening statement, it is a bit apples and oranges in terms of how it is expressed. According to the statement, 2,379 claims have been raised and the employer's representative has determined 1,610 claims of €16.75 million. Then the language changes and it states that "a further €2.1 million has been agreed through the dispute management process". If I do very simple subtraction, I can see that that €2.1 million does not touch the sides of the 770 remaining claims. We have been told that there are two claims before the High Court. Of the 770 claims that are not accounted for in that metric, how much does that €2.1 million cover and how many outstanding claims are not included within that?

Mr. David Gunning

I refer the Deputy to the table we provided.

Deputy Marc Ó Cathasaigh

It is not the easiest to decipher.

Mr. David Gunning

I will do my best to try to guide members through it because it does contain the information required. So, 2,379 claims have been notified, of which 1,937 have been substantiated. In other words, the contractor has provided explanations that are required under the contract to justify them.

That is where we get the €769 million in claims.

Deputy Marc Ó Cathasaigh

We have 442 then yet to be substantiated.

Mr. David Gunning

That is correct. That is dealt with there.

Deputy Marc Ó Cathasaigh

Have we-----

Mr. David Gunning

Some are withdrawn before they are substantiated, some time out and some get substantiated. That is, therefore, a constantly evolving number, shall we say.

Deputy Marc Ó Cathasaigh

Okay. That is what we are interested in in terms of the accountability of public money. Have we any sort of metric? Do we know how much the company has made that claim for? Have we any sort of metric?

Mr. David Gunning

Absolutely. Of all claims, 1,937 have substantiation. Therefore, we know what the money dimension is. I just want to jump to an explanation here. Where is the money in all of this? There are 17 claims that account for 82% of the €769 million. There are 17 big claims, just to be clear. We have claims for values in excess of €100 million and then claims right down, as Mr. Devine said. The materiality here is €500 under the public works contract. Therefore, the contractor can claim for €501. However, the money is in extensions of time where the contractor is saying the project has been extended and that time is our responsibility. It is holding us responsible. It says it is our responsibility that happened.

An Cathaoirleach

To clarify for the meeting, Mr. Gunning said some claims are so big they are in excess of €100 million.

Mr. David Gunning

There is at least one claim that is more than €100 million. I do not want to go into it too much-----

An Cathaoirleach

Okay, that is all right.

Mr. David Gunning

-----but as I said, 17 claims account for 82% of the total. The 17 claims account for €628 million approximately.

Deputy Marc Ó Cathasaigh

However, there has been an enormous disparity between the size of the claim initially made and the figure that is finally settled on in settlements. Mr. Gunning gave that figure of €16.75 million-----

Mr. David Gunning

Correct.

Deputy Marc Ó Cathasaigh

-----that had been settled on-----

Mr. David Gunning

Well, that is what the-----

Deputy Marc Ó Cathasaigh

-----but the nature of the claims submitted were in the order of being ten times larger. Am I right in saying that?

Mr. David Gunning

With the claims submitted in that case, €641 million ends up at €16.7 million. The contractor is claiming €641 million. The employer's representative in her determinations said that in her assessment, that is €16.75 million. That is correct.

Deputy Marc Ó Cathasaigh

Mr. Gunning might give me a context to understand that in terms of similar-sized projects. To go from €641 million to an actual figure of €16.75 million-----

Mr. David Gunning

I will just-----

Deputy Marc Ó Cathasaigh

-----seems incredible to me. Is that normal in disputes of this kind or is it irregular?

Mr. David Gunning

Under the contract, the contractor is entitled to submit claims to the value it sees and thinks it is entitled to. Whether it is time or money, it can submit those claims and we have the responsibility, through the employer's representative, of dealing with those claims. We do not control what the contractor puts in. It is up to the contractor to put in its numbers. The Deputy can see the numbers in front of him.

Deputy Marc Ó Cathasaigh

The process should be that if there are disputes of this type, it should go through the employer's representative and it should be settled there. From the company's point of view, how many has it escalated beyond that in percentage terms? Has Mr. Gunning found himself in a situation where the employer's representative made a finding and he pushed back against that?

Mr. David Gunning

Again, going back to the table, 1,338 are in dispute. That is the total number that are in the dispute process. The Deputy can see that some of these have been determined. The High Court is mentioned there. Then, of the ones the Deputy mentioned that have been settled, 28 have been settled. Out of the 2,379 claims, 28 have reached a conclusion.

While we are looking at it, in addition to the contract, the contractor can also use the construction payments Act and refer items to adjudication, which is a separate process. Six items have gone to adjudication where the contractor claimed approximately €60 million. The total that has been awarded by adjudication is €1.9 million.

Deputy Marc Ó Cathasaigh

It is important to get clarity about this.

Mr. David Gunning

I appreciate the complexity of what is there. The Committee of Public Accounts recommended this table as the way it wanted to see it. I am open to any improvements and clarifications that would help the committee members. We are absolutely available to do that.

Deputy Marc Ó Cathasaigh

I want to put this in-----

Mr. David Gunning

It has been an issue with ourselves and the Comptroller and Auditor General in trying to understand the complexity of the system here.

Deputy Marc Ó Cathasaigh

It is just to get a clear picture in terms of the public purse, which is our job here. It is difficult to get and I know much of this is still in play, so it is difficult to arrive at a final figure.

Mr. David Gunning

That is it. I will focus on-----

Deputy Marc Ó Cathasaigh

I want to-----

Mr. David Gunning

Sorry, Deputy. The last thing is that €18.8 million is the increase on the project liability with the contractor, which started off at €909 million. It is now plus another €18 million. Therefore, after the five years-----

An Cathaoirleach

And Mr. Gunning added that as a percentage.

Mr. David Gunning

-----that is the score on the board.

Deputy Marc Ó Cathasaigh

I want to direct a question to the Comptroller and Auditor General around the timelining of the accounts. The National Paediatric Hospital Development Board 2021 financial statements were certified by Mr. McCarthy in September of this year. By contrast, the 2021 financial statements of Children's Health Ireland were certified on 14 October last year. That is nearly 12 months in the difference. Is this usual or unusual? How is it that it took this long?

Mr. Seamus McCarthy

It is unusual. I would have cleared the 2021 financial statements in December of 2022. However, there were two areas where additional information needed to be provided - additional back-up, effectively - for the figures that were in the financial statements. That related to the commitments figure and to these claims. We basically went to and fro for a significant number of months trying to settle on, if you like, sufficient support for the information that was being presented in the financial statements.

Deputy Marc Ó Cathasaigh

Considering we are likely to be back at this again before we have an open and functioning children's hospital, is that something that needs to be streamlined so that both the Comptroller and Auditor General and we as a body have better oversight?

Mr. Seamus McCarthy

I hope the process we went through with regard to 2021 will not need to be repeated in relation to 2022. However, I think we are still waiting for some of the information with regard to the end-2022 position.

Deputy Marc Ó Cathasaigh

Okay. Will Mr. Gunning be able to commit to working a bit more proactively with the Comptroller and Auditor General on this?

Mr. David Gunning

Absolutely. Definitely.

Deputy Marc Ó Cathasaigh

It is important because we very much rely on the Comptroller and Auditor General's expertise to do the job that is in front of us.

I will go back to this programme, which is landing us at 29 October 2024. The poor employer's representative has been kept incredibly busy by this job. There is a line that states the programme is currently being evaluated by the employer's representative. Do we have a timeline for that piece of work so that we at least get a little bit more clarity on how reliable that October 2024 date is?

Mr. David Gunning

The guidance we have given in the past is that is a two- to three-month process. We are already nearly one month into it so it should be another month or so.

Deputy Marc Ó Cathasaigh

It will be another month or two before-----

Mr. David Gunning

Yes.

Deputy Marc Ó Cathasaigh

We are hoping that will firm up-----

Mr. David Gunning

We try to get interim information and not just wait until the very end, if the Deputy can understand. This is a formal contractual responsibility of the employer's representative and we certainly cannot interfere in that. That is her job.

Deputy Marc Ó Cathasaigh

In the time remaining I will ask a final question that is different in character. I want to focus on this accounting practice for forecasting future pension liabilities that was identified as an issue by the Comptroller and Auditor General. We are told this is done at the direction of the Minister. The material effect of that is to minimise the pension liability. We know there are a considerable number of people who are working in the area for whom pensions will have to be provided. What is the rationale for reporting it in this way rather than the standard accounting practice?

Mr. Stephen Flanagan

The rationale for CHI recording it in this way is that it is a direction. Under legislation, the format of the accounts are determined by the Department. We do not have an option in terms of how we report it.

Deputy Marc Ó Cathasaigh

Okay. CHI is reporting in the way it is told. Does Mr. Tierney wish to comment?

Mr. Derek Tierney

We would probably have to look back into the Act to see what was behind that provision. I can send the Deputy a note on it.

Deputy Marc Ó Cathasaigh

Okay.

An Cathaoirleach

I thank Deputy Ó Cathasaigh. I have some questions regarding the timeline.

The new date, released this week, is October 2024 for substantial completion. That is what we are being told. I would take substantial completion to mean completion of the building and substantial fit-out. Is that correct?

Mr. David Gunning

That is correct, yes, and technical commissioning of all of the systems within.

An Cathaoirleach

You said in answer to questions earlier that if you have 100% performance, it is doable to comply with that-----

Mr. David Gunning

To achieve that, yes.

An Cathaoirleach

Achieving it is doable but it would require 100%. Has there ever been 100% performance in terms of progress on the development of the hospital in the past six years?

Mr. David Gunning

The average, as I said, is 65%, so we are looking for a significant improvement in performance from the contractor.

An Cathaoirleach

Would I be correct in saying there were months when the performance was in the mid-30s, at 33% or 34%? Would that be correct?

Mr. David Gunning

I am not sure it was ever down at that level but it certainly fluctuated around the 60s. There have been periods when the contractors did hit 100% but on average it has been about 65%.

An Cathaoirleach

Over the next 13 or 14 months, it would need to be 100% every month to get to the target.

Mr. David Gunning

To nail October 2024, which is only 12 months away, it has to-----

An Cathaoirleach

Yes. Hallowe'en next year, and then we are looking at the commissioning. Ms Hardiman has outlined a lot of that and she referred to nine months as the expected timeframe for that. Six months would be a high bar to set. Would that be correct?

Ms Eilísh Hardiman

Yes. At least six months is the estimate at the moment-----

An Cathaoirleach

Therefore, we are looking at a scenario where it will be August 2025 at the earliest before the doors would be open to accept patients.

Ms Eilísh Hardiman

At the moment we are saying the summer of 2025. As we do the more extensive planning, the question of how much we can do before substantial completion is an important factor.

An Cathaoirleach: This requires everything to go according to plan, 100%, including the commissioning and the timeline with the contractor.

Ms Eilísh Hardiman

That is correct. It is a very tight plan.

An Cathaoirleach

If you operate at 65%, which has been the average, then we are possibly looking at beyond Christmas of 2025. If you operate at 65% in terms of progress, then we could be looking at January 2026.

Mr. David Gunning

Well, you can run the numbers but again, that is what is in the BAM programme. You can run the scenarios around the what ifs-----

An Cathaoirleach

Given that it is nine months for the commissioning and given the fact that there has never been progress over a three-month period of 100% or anything near it, with the average coming in at 64%, then we are looking at a scenario of possibly January 2026 for actually opening and accepting patients. Is that a possibility?

Mr. David Gunning

Yes, it is a possibility but what we are reporting is what the contractor has in its latest programme, which is October 2025.

An Cathaoirleach

I understand, as I have said previously, that everything is easy until one goes to do it. I understand that. Even a small job can turn out to be more difficult and I understand that. However, I want to put a couple of points to Mr. Gunning. Hindsight is great, of course, but would he agree that the location presented a lot of challenges? I do not expect him to say, because he cannot, that this was the wrong location. I understand how far he can go here but would he agree that the location has presented huge challenges, given where it is in that warren of little streets, in a high-density residential area?

Mr. David Gunning

I came into this when the project was where it was. The hole was in the ground and everything was going and my job was to focus on getting it done. I have no comment whatsoever to make on the location desirability or anything else.

An Cathaoirleach

I watched one day for about 15 minutes. I watched trucks going in and out when the excavation was going on and I could see the difficulties even then. Would Mr. Gunning agree that it does present challenges? No matter where you go, there will be challenges. If you went down to a green field site beside the M50-----

Mr. David Gunning

I agree that no matter where you go, there would be challenges.

An Cathaoirleach

Yes, but especially in that particular location, and the design, which could be described as a wow or vanity project from an architectural point of view, is complex. It is probably not the easiest building to build. Would that be correct?

Mr. David Gunning

The design got planning permission.

An Cathaoirleach

I know it did.

Mr. David Gunning

It was critically important that we would get across that line.

An Cathaoirleach

I have seen the most awful buildings getting planning permission, as has everybody in this room and everybody watching these proceedings. The design is both complex and challenging. Would Mr. Gunning agree with that?

Mr. David Gunning

I think it is within the capabilities of a tier one contractor to deliver this.

Ms Eilísh Hardiman

Can I add to that, with reference to the location issue? This is driven by the policy position of getting the best outcomes for children.

An Cathaoirleach

I understand that.

Ms Eilísh Hardiman

It is really important that we understand that.

An Cathaoirleach

I am questioning Mr. Gunning, as project manager, at this point. In terms of the contract, PwC produced a report and recommendations, which I read yesterday. PwC said that the type of contract that was used presented risks. If we were doing it all again-----

Mr. Derek Tierney

May I comment?

An Cathaoirleach

We will have Mr. Gunning's response first and then I will let you in, Mr. Tierney.

Mr. David Gunning

I think what PwC said was that the procurement process presented risks. It did not talk about the contract, or at least that is my understanding.

An Cathaoirleach

PwC had a good deal to say about the way the contract was structured.

Mr. Derek Tierney

You are asking a question around a Government decision on the site and we cannot comment on that. That is a Government decision and that is a fact.

An Cathaoirleach

I know that. I understand that.

Mr. Derek Tierney

It would be remiss of me-----

An Cathaoirleach

The site is challenging though.

Mr. Derek Tierney

It would be remiss of me to comment on that. On the contract itself, that contract form is public procurement policy. We do not have a choice, unless there are exceptional circumstances, to stray outside of that policy. Again, that is the contract form and future construction will be dictated by public works contracts.

An Cathaoirleach

The future came up earlier and obviously everything we do can be improved the next time.

Mr. Derek Tierney

Correct.

An Cathaoirleach

It can always be improved, no matter how many times we have done it. If a team has played ten matches in the season and is going out to play the 11th, it will look at the mistakes made in the first ten games and try to improve for the next one. I understand that and what is important is that there are other contracts coming up, including for a national maternity hospital, which is badly needed. It is important that the lessons from this are learned so that improvements can be made.

I want to ask about the claims now. The way we were provided with the information on this made it difficult to understand but the Office of the Comptroller and Auditor General did some further work on the data. It drew up a chart for us, using the figures provided, which was helpful in terms of deciphering exactly what is happening with regard to claims. The overall sum claimed for determination by the employer's representative is €769 million. That is obviously the figure given by the contractor. The figure as determined by the employer's representative is €641 million. To date, just over €18 million has been paid out. On the disputed claims-----

Mr. David Gunning

Sorry to interrupt but the contractor does not determine the €641 million. That is the claim figure by BAM. The contractor determined the figure of €16 million.

An Cathaoirleach

That is what I meant by the contractor. I meant BAM.

Mr. David Gunning

Sorry, the employer's representative determined the €16 million.

An Cathaoirleach

That is what I meant by the contractor. BAM put forward the figure of €641 million but the outcome was €18 million. There is a huge gulf between those two figures. On the determination of disputed claims, how many have been submitted by the board itself?

Mr. David Gunning

Are you asking about the 28 claims at the bottom of the list, the ones that have been resolved?

An Cathaoirleach

No. I am going to ask my question in a different way because I want to try to get an answer here. Of the 2,379 claims, which is the total on the project so far, how many have been submitted by the board?

Mr. David Gunning

They are all contractor claims.

An Cathaoirleach

Every one of them?

Mr. David Gunning

Yes, every one of them.

An Cathaoirleach

When you say contractor claims, what do you mean? I want the public to understand this.

Mr. David Gunning

I mean BAM.

An Cathaoirleach

Has the board submitted any claims?

Mr. David Gunning

Yes, we have submitted a number of claims.

An Cathaoirleach

How many? That is what I am asking.

Mr. David Gunning

I cannot remember.

An Cathaoirleach

Is it ten?

Mr. Phelim Devine

I do not have the total but it is between ten and 20, in that range. They are employer claims under the contract.

An Cathaoirleach

The board has made ten to 20 claims in respect of this project, but in the context of the contract for BAM there have been 2,379. We have established that. The total figure is now €18.85 million, if the extra €2 million is added in. It was said regarding delays that CHI has the right to withhold 15% per month. Has there been an occasion when that has been done?

Mr. David Gunning

In the past, yes, there was.

An Cathaoirleach

Yes, but subsequently paid.

Mr. David Gunning

Once the breach is cured or remedied, then the money gets paid back.

An Cathaoirleach

On the payment for July, in the absence of a programme for future progress, which CHI was not getting, and trying to advance the project, it did not have a satisfactory schedule from BAM. CHI then got that and released the payment but withheld 15%.

Mr. David Gunning

We had gone through the mechanisms of withholding the money, but the contractor submitted the programme before the withholding was executed.

An Cathaoirleach

On costs, we are now looking at this project running until January 2026. A figure €2.5 billion was mentioned, but it is safe to say, at this stage, it will go over €2 billion. That is as far as we will go for now. The original budget was €900 million. This increased to €1.433 billion in 2018. There is now a request for more. Mr. Tierney said he cannot state the figure because he would obviously be giving the game away in terms of the public interest. What was the highest level of inflation as regards a section of the project? There were reports of in excess of 20% at times. As I understand it, construction inflation is normally in the region of 4% but that obviously changes-----

Mr. David Gunning

I have the numbers for the years. There were inflation payments for the years 2019 to 2021, inclusive. The average tender price inflation for 2019 was 6.67%. It went down in 2020 to 2.48%. It rose in 2021 to 10.24% and in 2022, it was 11.4%.

An Cathaoirleach

That reflects the post-Covid surge in prices in construction generally.

Mr. David Gunning

Absolutely. Again, what makes this project more difficult is that those rates have to be applied in a compound sense. We provided the formula to the committee in the past. For example, the actual compound inflation applied in 2022, because of the higher number in 2021, was 14.79%.

An Cathaoirleach

It can be seen, however, when the budget started at just over €900 million, then went to €1.43 billion, and that we will go way past €1.7 billion given what we heard this morning and the information CHI supplied, that the runaway nature of it is obviously of huge concern. It is about trying to rein that in. It was illuminating what was said regarding claims. There were 17 large claims that accounted for €621 million.

Mr. David Gunning

That is correct.

An Cathaoirleach

Some are more than €100 million, although that is the figure being put on it by BAM.

Mr. David Gunning

Correct.

An Cathaoirleach

What is the highest claim?

Mr. David Gunning

It is over €100 million.

An Cathaoirleach

It could be €200 million.

Mr. David Gunning

No, it is not.

Mr. Seamus McCarthy

According to the CHI table, one claim which is in the High Court is €115 million. Is that the one Mr. Gunning referred to?

Mr. David Gunning

I am not going through the High Court ones. It is outside of those two in the High Court. There is one over €100 million or of that order.

An Cathaoirleach

Will the CHI contest that vigorously?

Mr. David Gunning

Correct.

An Cathaoirleach

Okay. I will open for a second round of questions. Deputy Catherine Murphy has seven minutes.

Deputy Catherine Murphy

CHI stated it would not get into discussion about the extended timeline up to next year, but it was extended from November 2022 until now. What was the cost of that extension?

Mr. David Gunning

I will give the Deputy a quick answer to that. The development board's costs are about €2.1 million or €2.2 million per month. CHI has additional costs on that, which I do not have visibility on.

Deputy Catherine Murphy

Are there additional claims-----

Mr. David Gunning

As I indicated, the numbers include that €18 million of additional liability on the project. I am not putting in any additional costs to BAM. The contract sum of €909 million, plus the additional €18 million, is our current estimate of the liability.

Deputy Catherine Murphy

Those figures would be disputed because they are gone past. That falls into the same category as CHI's approach to inflation. Once you go beyond November 2022, building inflation does not apply. I am just trying to establish-----

Mr. David Gunning

That is our position.

Deputy Catherine Murphy

-----that there is no advantage to the contractor in stretching this out.

Mr. David Gunning

Previous senior executives in BAM have pointed out that the most silly thing for a contractor to do is to stay on site any longer than it needs to. It just costs more money.

Deputy Catherine Murphy

When the snagging is substantially complete, does that mean all of the snagging is done or will there continue to be work?

Mr. Phelim Devine

The contract states that on substantial completion there can only be very minor snags permitted. That is what the published work contract states and that is what we are aiming for. Obviously, a good tier 1 contractor should be aiming for, as much as possible, a defect-free building and substantial completion. That is what is being discussed-----

Deputy Catherine Murphy

On the issue that arose regarding the ventilation problems in the theatres. I think it was 11 theatres or something.

Mr. Phelim Devine

The concern related to 11 theatres. I am delighted to say that we have, with our design team, which was responsible for the design of the ventilation in the theatres, done a significant amount of computer modelling and physical testing. We now have a proposed solution set out in a comprehensive report that demonstrates that the theatres will be in full compliance with the guidance, which is the National Health Service, NHS, health technical memorandum, HTM.

Deputy Catherine Murphy

Does that require amendments to what is there?

Mr. Phelim Devine

It requires changing the four square grilles, which are 600 mm x 600 mm, to four circular grilles in each of the-----

Deputy Catherine Murphy

It is very modest.

Mr. Phelim Devine

It is a modest change. We have already completed this in one of the theatres on the site. We have physically tested that to demonstrate comprehensively that we are in full compliance with the NHS HTM.

Deputy Catherine Murphy

There was a big controversy around that at the time.

We are all probably a bit confused about the claims, including where they are and at what part of the process. I appreciate the table CHI provided us with, although I do not find it that easy to read. CHI is trying to pack a lot of information in there. The financial statements tell us that in April 2023, the employer had been notified by the contractor of 2,506 claims. The point I am making is the numbers do not seem to align with the table and-----

Mr. Seamus McCarthy

There are timing differences-----

Deputy Catherine Murphy

Is that what it is?

Mr. Seamus McCarthy

That would be a complicating factor. This was finished in August. The table gives a September figure. There are additions, subtractions and so on. There would also be some withdrawn claims.

Mr. Phelim Devine

Correct.

Deputy Catherine Murphy

That is how that is accounted for. It is really a simple table. Information on the nature of the claims would be quite useful, including whether they are to do with inflation or breakages.

For example, hand basins were changed to metal basins or something at one point. I remember that was one of the issues that-----

Mr. David Gunning

I will ask the project director.

Mr. Phelim Devine

I do not recall that one.

Deputy Catherine Murphy

It was for infection-control reasons.

Mr. Phelim Devine

The change that has gone through the employer's representative relates to a number of issues. It is critical that we complete the hospital in a way that is fully compliant with statutory, regulatory and clinical best practice or standards. There have been a number of changes because it is a huge, complex project. There are over 5,600 rooms and spaces. The public works contract does not allow you to set out any products or materials. The contractor comes after the GMP is set and comes to build the building, offering a range of different products and systems, all of which have to go together. When put together, there are slight changes, updates and variations, and that is what causes the changes in question. Some of them may have an impact on a compliance issue.

Deputy Catherine Murphy

A lot of that is avoided by nailing things down in advance of a contract.

Mr. Phelim Devine

In a private project, you can do that. With public procurement, you cannot specify any product name or system. There has to be generic specification and you have to allow everybody to procure and-----

Deputy Catherine Murphy

Therefore, there can be a change from ceramic to aluminium. I would have thought that something with the highest level of infection control could at least be specified. The highest level of infection control is surely something that should be specified by a quantity surveyor. That determines the product.

Mr. Phelim Devine

I might clarify that. Let us say a stainless steel stink of a certain type is specified. A sink is quite simple but different manufacturers' sinks might have to be fixed in slightly different ways although they may be very similar and all meet the specifications. They might have very slightly different dimensions, and incorporating them within the panel in the room might cause a minor or very small change.

Deputy Catherine Murphy

Is Mr. Devine saying one can never actually nail down in advance the cost of building a hospital?

Mr. Phelim Devine

You can nail down the cost because, when you specify a sink, the contractor prices for that in the bill of quantities or pricing document. However, when it is incorporated into the works, there may be something missed, the alignment might require an extra bit of mastic, or the bulkhead might have to be built out further. The costing will be for a certain number of kilometres of bulkhead or plasterboard, but there might be an extra bit of plasterboard required. The contractor is entitled to seek the amount of the additional cost because it is a re-measurement contract.

Deputy Catherine Murphy

It is very hard to know how you learn lessons if that kind of practice exists. I refer to lessons in terms of location. I completely understand this is not a function of the NPHDB, but we are going to be building a national maternity hospital when the census is telling us babies are not being born. It seems a lesson should be learned about location. One of the issues with this location has always involved people asking how sick children will get to the hospital. The Luas was pointed to as the means of doing that. Good luck with that if you have a sick child in the car.

An Cathaoirleach

I will come back to the Deputy again for another round.

With regard to the procurement process, PwC stated that significant failures occurred during the crucial planning and budgeting stages of the project, that the basis of the original budget was flawed and that risks were underestimated in the business case. It stated there was a lack of sufficient comprehensive and robust planning for the process to establish a guaranteed maximum price, GMP. It went on about that. It also stated that the two-stage procurement process used to award the contract for the construction of the national children's hospital is widely used. That is fair enough. It stated that the process can deliver significant benefits in regard to accelerating project time but added that the controls required to mitigate the associated risks and the consequences of this approach were not put in place. In this regard, reference was made to the understanding of the risk profile, the procurement strategy and so on. Does Mr. Tierney want to comment on that from the point of view of the Department, which oversees this? His Secretary General was told, "Write the cheque." Has a lesson been learned in this regard?

Mr. Derek Tierney

There are two vantage points. We have committed to providing Deputy Devlin with a note on how the recommendations are applied in this project. In a wider sense, the public spending code has been revised whereby two independent assurance steps are asked for at the outset so any business case worth over €200 million will be put through independent evaluation. This is something every Department needs to do. There is a second step whereby every project, after external evaluation, needs to go through a major projects advisory group step, controlled by the Department of Public Expenditure, National Development Plan Delivery and Reform. That is all about giving assurance to the taxpayer, the Government, sponsoring Departments and approving authorities on the viability, credibility and assurance behind the proposal. Yes, lessons have been learned as a consequence of the process that have been applied at a macro level to the public spending code, and there are direct lessons transferable from this project to the thinking around how we plan for the next project.

An Cathaoirleach

I mentioned three things. I do not expect our guests to agree with my observations on the location, design and contract. These are what I was referring to. With regard to the contract itself, PwC examined this matter. From my reading of this, the design was not finally nailed down until nearly three years after the contract was awarded. The first phase of the contract was in 2016 and the second and third phases were in 2017. However, there were still design issues in 2019, three years from the original date. I am trying to understand how that happened. It is a complex project and the hospital is not the easiest thing to build. It is large and expensive. Why would design not be finally pinned down before sticking shovels in the ground?

Mr. David Gunning

I might make a comment on that, and then Mr. Devine can add some more detail. This is really the issue at the core of the phase B court case in the High Court. Again, there are quite differing views from the development side regarding the contract. I just want to make sure that is clear. Mr. Devine was on the job during the phase and maybe he can provide some information without putting us on the hazard in relation to the High Court. We can still provide some commentary.

Mr. Phelim Devine

Just to add detail, we originally tendered the job in the middle of 2016. The contract was signed in August 2017. The phase A works, which entailed the basement, piling, drainage and works up to low ground, started officially in October 2017. In the 15 months from October 2017 to the GMP instruction, which was issued in January 2019, the Government having signed off in December 2018, the contract was modified. It was turned from an initial tender, the first stage, into a second

stage, which involved the completion of the GMP. The responsibility of the design team and employer at the time was to bring the design to a level that allowed the GMP to be agreed, which is the completion of procurement. While we had a two-stage process to bring us to a GMP, normally in a contract there is a single stage, but it brings you to the same point, after which the job pretty much goes to site. Then, obviously, you operate the contract.

As was explained earlier, during that phase the contractors were paid by the State to input into the design and satisfy themselves that it was at the required level so they could agree the GMP. We paid them approximately €8 million for that.

An Cathaoirleach

On the day of the site visit, in the presence of a member of the board and a member of BAM management, I asked to be shown an example of something that had brought about a claim. I was shown a doorway and window that had to be moved slightly. Am I correct in saying that during the process over the past five years - I know there was a period at the beginning before the contract was awarded when it was not finalised - many of these claims have arisen from design issues?

Mr. Phelim Devine

It is important to say that there has been no material change to the design since we agreed the GMP.

An Cathaoirleach

I am trying to understand this. The public are trying to understand it. I accept there will be claims. If it was only a house that was being built, there would be variations. However, there is a substantial number of them in this case. A substantial amount of money is being sought. I am trying to get my head around how this came about. Is it the case that there were design changes and tweaks throughout the process in the past five years that caused many of these claims?

Mr. Phelim Devine

Since the GMP was agreed - that instruction was issued in 2019 - there have been changes. As we have talked about, the employer's representative, as determined in the contract-----

An Cathaoirleach

That is what I am asking about.

Mr. Phelim Devine

Some €80 million-----

An Cathaoirleach

I do not-----

Mr. Phelim Devine

Just let me finish. They are as a result of design changes or requirements in the contract. It is also important to say that-----

An Cathaoirleach

A lot of claims arose from that.

Mr. Phelim Devine

Yes.

An Cathaoirleach

How much has the design team been paid to date?

Mr. Phelim Devine

I do not have the exact figure. It is €80-something million.

An Cathaoirleach

How much will they have been paid by the time the ribbon is cut? What is the total?

Mr. Phelim Devine

That is part of the capital request that has gone in.

An Cathaoirleach

A figure must have been agreed at this stage.

Mr. Phelim Devine

We have agreed an overall figure. We pay them on a three-month by three-month basis because the majority of the design team's work at this stage is quality inspection. We have more than 20 people on site checking that the quality of BAM's work is-----

An Cathaoirleach

They could be on site for another two years.

Mr. Phelim Devine

They will be on site until substantial completion. After substantial completion, during the 18-month defects liability period, they have a responsibility to ensure all the snags are-----

An Cathaoirleach

None of the witnesses disagreed that this could run into January 2026.

Mr. Phelim Devine

The defects liability period is 18 months post substantial completion, which is October 2024.

An Cathaoirleach

I understand that. We could be looking at early 2026 before the opening of the doors.

Mr. Phelim Devine

That is a matter for CHI.

An Cathaoirleach

I know. It is also a matter for the development board because CHI is depending on the board. If the house is not built, the furniture cannot be moved in.

Mr. Phelim Devine

Our responsibility is to bring the project to substantial completion. Then we hand it over to CHI for operational commissioning

An Cathaoirleach

The design team has received €89 million.

Mr. Phelim Devine

It is more than €80 million.

Mr. David Gunning

That detail can be provided.

Mr. Phelim Devine

Yes, we can give the figure to the committee.

An Cathaoirleach

Is there a final price for either?

Mr. Phelim Devine

It depends on the time and when the contractor, BAM, reaches substantial completion, but yes in-----

An Cathaoirleach

Incrementally, if payments are being made every three months, perhaps it can be roughly estimated that-----

Mr. Phelim Devine

We have done a full estimate based on a completion date of October 2024.

An Cathaoirleach

We have approximately another two years to go. Okay, I will bring Deputy Dillon back in.

Deputy Alan Dillon

What level of agreed staffing resources is the main contractor obliged to provide to meet the agreed October 2024 deadline?

Mr. David Gunning

The contract does not specify that level of detail.

Deputy Alan Dillon

How does the board know it will get there?

Mr. David Gunning

I guess it is down to looking at progress on a monthly basis. We watch the progress. We monitor it monthly. We look at a number of key performance indicators, KPIs, and at the resources. To be clear, there is nothing in the contract to say the contractor must have X or Y resources. We have no levers other than the application of liquidated damages. As I explained earlier, the three sanctions we have-----

Deputy Alan Dillon

Sorry now, I-----

Mr. David Gunning

Just to give a full answer-----

Deputy Alan Dillon

No, no. The questions come from this side. Will Mr. Gunning give me some detail on the KPIs being tracked?

Mr. David Gunning

I will ask Mr. Devine to jump in because he does this on a regular basis. We look at things like the number of room completions and what is happening-----

Deputy Alan Dillon

Let us look at room completions. How many rooms has the contractor offered as complete for inspection by the design team?

Mr. Phelim Devine

It is approximately 1,800, or 32% of the overall rooms and spaces in the building. That is in line with the revised programme we got at the end of September.

Deputy Alan Dillon

What is the contractor's projected monthly number of completion offers? What is the forecast?

Mr. Phelim Devine

I do not have the exact figure so I cannot give it, but it is approximately 80 rooms per week or 300 per month. The room offers go all the way to May-June 2024

Deputy Alan Dillon

Have there been any delays in it offering rooms to date?

Mr. Phelim Devine

Currently, it is delivering in accordance with the programme it gave us in September.

Deputy Alan Dillon

What about previous to that?

Mr. Phelim Devine

Previously, the programme was more ambitious. It has been reprofiled. Mr. Gunning spoke earlier about the programme we received in July. There was an ambitious profile which has been changed and it is now meeting the timelines in the programme it gave us at the end of September.

Deputy Alan Dillon

What is the projected productivity or level of resources required to deliver 80 rooms per week?

Mr. Phelim Devine

That is a matter for BAM. From our perspective, all three-----

Deputy Alan Dillon

The board is tracking it.

Mr. Phelim Devine

There are 40,000 activities in the programme, of which approximately 10,000 remain to be completed to complete the project. We track those activities to make sure they start and finish at the right time and we look at where BAM is in any given activity. From that, we monitor its progress against the programme. We also look at the room completion offers Mr. Gunning spoke about and we look at commissioning KPIs. This job is now all about technical commissioning, which includes the mechanical electrical systems such as the boilers, the air handling units, the air site commissioning------

Deputy Alan Dillon

BAM is subcontracting those to specialists.

Mr. Phelim Devine

Yes, Jones Engineering/H.A. O'Neill is the mechanical subcontractor and Mercury Engineering is the electrical subcontractor. They are the two main players for the mechanical and electrical systems. Schindler Limited is providing the 36 lifts that are to be commissioned in the building, 12 of which have been commissioned and 12 are in progress.

Deputy Alan Dillon

Has all the specialist equipment been installed? Is there much left?

Mr. Phelim Devine

It has all been procured, including the MRI scanners and the CT machines.

Deputy Alan Dillon

What was the total cost for the procurement?

Mr. Phelim Devine

Approximately €25 million of built-in equipment was part of the BAM contract. Separately, we have procured €20 million worth of specialist medical equipment which will be installed before substantial completion - the MRI scanners, the CT machines, the X-ray machines, the fluoroscopy machines and so on. Some of them have been manufactured, some are being manufactured, some are about to be installed and most will be installed in the coming months.

Deputy Alan Dillon

Will Ms Hardiman tell the committee how much of CHI's €300 million budget for equipment has been spent to date?

Ms Eilísh Hardiman

All the equipment for the children's hospital is in the budget of the development board.

Deputy Alan Dillon

Has CHI spent any of the €300 million that was allocated?

Ms Eilísh Hardiman

No, the equipping is the board's responsibility. We have committed to transfer equipment from the existing children's hospital. We are making sure any new equipment that we procured last year or this year, or that we will procure this year or next year, is compliant and can come with us to the new children's hospital.

Deputy Alan Dillon

I read that CHI will be looking at 36,000 new pieces of equipment.

Ms Eilísh Hardiman

That is still in budget but cannot be installed until after substantial completion.

Deputy Alan Dillon

It is in BAM's contract. What is the €300 million for CHI being spent on?

Ms Eilísh Hardiman

Some €40 million related to the Mater project, €88 million relates to our integration programme and the rest is part of the electronic healthcare record, EHR, which is broken down to the level of procurement of the hardware. We look after what is outside the walls. Our costs relate to the teams who will implement the programme.

Deputy Alan Dillon

How advanced is the validation for the EHR at this stage?

Ms Eilísh Hardiman

We obviously spent the last 18 months in procurement. We just started in July of this year to do implementation. That then requires us to do design because it is the first in the country even though it has been in the NHS and they are doing it in Northern Ireland. We actually work with them.

Deputy Alan Dillon

Has CHI frozen the design of the EHR?

Ms Eilísh Hardiman

It is a well-established clinical operating model for children's hospitals internationally. We work with them now just to make sure it works within the Irish healthcare system. That has all been built into the plan. That is the work we are doing at the moment.

Deputy Alan Dillon

Will it be done in the current facility before deploying it in the new hospital or will it be directly installed in the new hospital?

Ms Eilísh Hardiman

No, we would have to open up digital to put it into the existing facility before implementation. That is just not feasible or viable.

Deputy Alan Dillon

Will the EHR be available on the opening of the new hospital?

Ms Eilísh Hardiman

Yes.

Deputy Alan Dillon

What is the timeline for that to be commissioned and validated, and be live?

Ms Eilísh Hardiman

We estimate in March 2025.

Deputy Alan Dillon

I thank Ms Hardiman.

Deputy Catherine Murphy

What was the maximum agreed price when the tender was signed?

Mr. Phelim Devine

Is that the bid price? The GNP was €909 million or €910 million.

Deputy Catherine Murphy

That did not transpire to be the-----

Mr. Phelim Devine

That is after the Government decision in December 2018. The second stage in the process resulted in a GNP of €909.9 million.

Deputy Catherine Murphy

I will come back to Mr. Devine on that.

I have a question for CHI. Does Ms Hardiman expect it to stay within the €300 million budget or have inflation or other costs impacted that?

Ms Eilísh Hardiman

As I said earlier, the delay in the project means that we require additional funding. We have brought that up through the HSE and the Department. It is part of the Government consideration.

Deputy Catherine Murphy

Ms Hardiman is saying it will be brought to substantial completion and then there are a further six months. If this does not occur at the end of next year and continues to, for example, February 2025, it would then be September or October before the work is complete. Is it tenable to open a hospital at that time of year?

Ms Eilísh Hardiman

One of the things we have assessed in particular is winter opening. As the Deputy will appreciate, there are additional risks related to the surge period. Our preference would be that it would be outside the November to February period because that is when we would have the RSV and other respiratory illness season. It is where we have huge surges. In migrating the hospitals, to get it to the absolute minimum number of patients - they are usually the sickest who need to be moved - we would be looking at our elective activity. However, when we are in winter surge very little of what we do is elective and a lot of what we do is emergency and urgent care, and those patients are quite sick. Our preference - it is a timing issue - is to open in summer 2025; that would be ideal for us.

Deputy Catherine Murphy

Therefore, the time for substantial completion is critical to avoid being delayed by another year.

Ms Eilísh Hardiman

It is another challenge, yes.

Deputy Catherine Murphy

Okay. I think those are all the questions I have.

An Cathaoirleach

We have been provided with some photos of what the building looks like. When we had the site visit and were up on top of the building as it then was, I asked whether solar panels would be fitted on it. Will there be solar panels on it?

Mr. David Gunning

The Chairman prompts me to renew the invitation, not that he needs one. We invite members of the committee to come back and have a look at it now. Mr. Devine has been looking at this issue.

Mr. Phelim Devine

We looked at solar technology when we did the design back in 2015-16. At that time, we could not get enough solar on top of the roof to make it viable. The Chairman might remember from when he was out on the site that the helipad is on the south side of the roof which is the area where solar panels could be put. Obviously, we cannot put solar panels on that south side of the building because of down drafts affecting the helicopters and obviously the reflection from the solar panels.

An Cathaoirleach

It is a big building on a small site in a confined space.

Mr. Derek Tierney

In fairness to the designers, this building is one of the most environmentally sustainable developments in the State.

An Cathaoirleach

I have another bit to go on this. Are there any built-in mechanisms for any renewable energy?

Mr. Phelim Devine

The first thing I would like to say is that we have received a building research establishment environmental assessment methodology, BREEAM, excellent sustainability certificate for the building.

An Cathaoirleach

Here is the question I am asking. The building is substantially complete and we welcome that. If I were building a house tomorrow, I would need to get planning permission from the local authority and to do a whole lot of things in terms of energy efficiency. Is anything built into this project in terms of renewable energy?

Mr. Phelim Devine

The renewable energy comes from the grid.

An Cathaoirleach

I am asking about anything built into the project.

Mr. Phelim Devine

We had originally built into the design a combined heat and power plant, which is gas fired. That may change because that was the most sustainable technology at the time. Now, that will probably evolve differently. We have built in 1,000 sq. m of grey space in the basement to allow for any emerging technologies that may come to the fore. Hospitals use a lot of energy in terms of heat; it is all medium-grade heat. The heat-pump technology that is now used in houses is getting better and better. At some stage in the future, there may be the possibility of retrofitting heat-pump technology into that 1,000 sq. m to help with reducing energy costs. The systems we have put in place, in terms of the thermal insulation of the facade, the building systems, and natural ventilation where permitted, all reduce the energy footprint of the hospital quite significantly compared with existing facilities.

An Cathaoirleach

When I looked around that day, on the neighbouring streets I saw many terraced houses and semi-detached houses. They are all very modest houses, and some of them are small houses. Even though that was nearly two years ago, I was struck by the number of them that had solar panels. I understand that it needs to fit in with the helipad and a number of other things. We were standing on this massive roof space, a lot of it tilted towards the south, which could capture sun and get the best results. However, there was no attempt to put in any measure that would capture any of that solar power. It struck me-----

Mr. Phelim Devine

I just explained that in terms of treating patients and providing maximum services, the first rooftop helipad in the country is going on the children's hospital. That has to have priority over placing solar panels on the south side of the roof.

An Cathaoirleach

Is it because of the location that the hospital needs a helipad to get patients in and out quickly in emergency situations?

Mr. Phelim Devine

Best practice would dictate that a rooftop helipad on top of a building is best.

An Cathaoirleach

What will heat the building?

Mr. Phelim Devine

Low-temperature gas fires.

An Cathaoirleach

Will that gas be supplied by Bord Gáis Éireann?

Mr. Phelim Devine

Yes.

An Cathaoirleach

Has there been any estimation of gas usage, energy usage?

Mr. Phelim Devine

There has been as part of the design. I do not have any of the figures with me. That is all part of the design. We can provide it if the Chairman wishes.

An Cathaoirleach

As the project has evolved, a lot of things have changed - even politically - in the last seven or eight years. Have modifications been made to it in terms of further upgrading? I am wondering whether we will be going back in a few years' time talking to SEAI about retrofitting part of the building or anything like that.

In other words, as the project evolved, were changes made to upgrade it because of the changes to specifications over the last seven years?

Mr. Phelim Devine

I do not see the fabric of the building changing in any way because we have already set a very high standard in terms of its design. It is class-leading. Because of the transformation that is under way as regards heating, solar panels, renewable energy and heat pump technology, over the medium term, there may be a change as to how heat is brought into the building. Most of the energy consumption of a hospital relates to the air systems. That is what generates most of the cost and that is not going to change.

An Cathaoirleach

In terms of the national maternity hospital, while I know it is not possible to put solar panels on certain buildings and in certain places, I advise Mr. Tierney to note the issue of renewable energy. Issues around energy availability, energy usage and energy costs are going to ramp up over the next 20 years and we will have to deal with those. I suggest that be taken on board in respect of this project.

Deputy Alan Dillon

I have two or three follow-up questions. When will the Department of Health make a decision on the request from the development board for additional capital?

Mr. Derek Tierney

It will be end of the month or early November, subject to Government approval.

Deputy Alan Dillon

What about Children's Health Ireland, CHI?

Mr. Derek Tierney

That is all-encompassing.

Deputy Alan Dillon

It will be at that time as well.

Mr. Derek Tierney

Yes.

Deputy Alan Dillon

On the details that have been presented today, we have a substantial completion date of October 2024 to be followed by a six-month commissioning programme, leading us to April 2025. Are we safe to say that this hospital will be delivered in summer 2025? How close to summer 2025 do the witnesses feel is realistic?

Mr. David Gunning

I can comment. I will probably be repeating myself in mentioning the contractor's programme. We talked about October as a date. That is certainly achievable but not without challenges. That is what the contractor has said it is committed to. If that happens, it will be handed over to CHI to begin its processes.

Deputy Alan Dillon

In terms of future change management and change control, does this hospital have to be delivered with 100% efficiency and productivity if we are to deliver on that timeline or can there be any slippage? Is there contingency built into the timeline?

Mr. David Gunning

The answer to that will come out of the analysis we are doing on the degree of slack there, which we have not yet identified. However, I will again note that we have a commitment from the contractor.

Deputy Alan Dillon

The board must have project management consultants scrutinising these matters.

Mr. David Gunning

Absolutely. We have said it will take two to three months to do a full detailed analysis of the programme. As I said previously, the initial results suggest this is achievable, provided the resources are available.

Deputy Alan Dillon

Will Ms Hardiman speak about the experts CHI has to deliver on the commissioning programme? I have worked in validation and commissioning myself so I understand there will be failures, mitigations and new equipment that just will not operate or fit. Is there contingency built into the six-month plan?

Ms Eilísh Hardiman

There is very little, to be quite honest. We are trying to do as much work as possible with the development board on as many of these issues as we can before substantial completion, subject to the board's discussions with the contractor. We are trying to predict as much as possible as early as possible and to deal with things as early as possible to allow us to succeed. The further planning we are to do over the coming months will give us greater certainty and security about that so we will probably be in a better position in that regard later on. This is complex. There are a lot of parts that need to fall in line. We are committed to doing it as fast as we can but the current estimate is for at least six months. As we move into next year, we will have a greater understanding of what the detailed planning will be able to tell us.

An Cathaoirleach

That more or less completes the questioning. I thank the witnesses from Children's Health Ireland, Ms Hardiman and her team, Mr. David Gunning of the National Paediatric Hospital Development Board and Mr. Tierney from the Department of Health for the work involved in preparing for today's meeting. We have covered a lot of ground. I thank the witnesses for the information and the replies. I also thank the Comptroller and Auditor General, Mr. Seamus McCarthy, Ms Elena Moldovanu and their staff for their assistance in preparing for the meeting.

Is it agreed that the clerk will seek any follow-up information and carry out any agreed actions arising from the meeting? Agreed. Is it also agreed that we will note and publish the opening statements and briefings provided for today's meeting? Agreed. I wish the project well and I hope that it will be as near as possible to 100% successful, that timelines are kept to and that we can prevent runaway costs from running too far away. I will suspend the meeting until 1.30 p.m., when we will resume briefly in private session before resuming in public session.

The witnesses withdrew.

Sitting suspended at 12.36 p.m. and resumed at 1.34 p.m.