Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions

National Children's Hospital Expenditure

Barry Cowen

Ceist:

1. Deputy Barry Cowen asked the Minister for Public Expenditure and Reform the level of engagement his Department will play in developing an implementation plan for the recommendations from a report (details supplied) on the cost overruns on the national children's hospital; and if he will make a statement on the matter. [18078/19]

Jonathan O'Brien

Ceist:

2. Deputy Jonathan O'Brien asked the Minister for Public Expenditure and Reform the number of quarterly progress reports submitted to the Department of Health for the national children's hospital that have been audited by his Department; and if he will make a statement on the matter. [18076/19]

Regarding the national children's hospital, we might have had an apology on the part of the Government but we have not definitively had accountability on its part for the debacle that was, and is, the children's hospital. The PricewaterhouseCoopers, PwC, report concluded that the definitive business case did not adhere to the public spending code. What can the Minister and his Department do, if anything, when the public spending code is breached, first before the finalisation of a definitive business case and, second, after the business case has been finalised? What level of accountability exists between him, his Department and other Departments in similar cases?

I propose to take Questions Nos. 1 and 2 together.

The management, delivery and oversight of individual investment programmes and public services within the agreed allocations are a key responsibility of every Department and Minister. With this in mind, the monitoring of the national children's hospital project, including regular progress reports, is a matter in the first instance for the Minister for Health and the Department of Health.

On 9 April, the Government published the report on the independent review of the escalation in national children's hospital costs carried out by PwC.

The report acknowledges that the national children's hospital is a project which is unique in scope, scale, and complexity in comparison with any other health infrastructure project in Ireland's history and is explicit in stating that the project's complexity should not be understated. However, the report did identify a series of weaknesses in set-up, planning, budget, execution and governance.

The PwC report made 11 recommendations to address issues of planning, budget execution and governance relating to the national children's hospital, and the Government has accepted these recommendations.

Nine of the recommendations relate to the specific execution, oversight and governance of the hospital, on which my colleague, the Minister for Health, is currently preparing an implementation plan. The other two have a wider application to capital infrastructure projects generally.

My role is to oversee the national development plan, NDP, up to 2027 and to maintain the national frameworks such as the public spending code, within which Departments operate to ensure appropriate accounting for and value for money in public expenditure.

To support the efficient implementation of the NDP, we have put in place the following measures: the establishment of a construction sector working group; a Project Ireland 2040 delivery board of Secretaries General; the establishment of an investment projects and programmes office; the publication of a capital projects tracker; and a capability review of public sector bodies. The public spending code is being reviewed in tandem with the review of the construction procurement strategy as part of the ongoing reform of our capital management systems. The reviews of the public spending code and the construction procurement strategy will strengthen existing guidelines on key areas of project delivery, including cost estimation; development of business cases; governance and project roles; and quality of information, risk identification and mitigation.

The revised central elements of the public spending code relating to the appraisal and management of public capital projects will be published before the summer. Further technical guidance building upon these central elements will follow in the second half of 2019 and into next year.

I thank the Minister for his response. I have not seen it in written form yet, and there is much detail contained in it regarding various groups and bodies he has put in place in his efforts to seek to adhere to the likes of the recommendations contained in the report. Focusing on recommendations Nos. 10 and 11, which relate to other capital infrastructure projects, is he convinced now that the standards to which business cases must adhere are more clearly defined? Has he reviewed or audited which business cases were in place? Does he now have criteria such that he is convinced that these business cases will be more robustly enforced, as indicated and sought by the PwC report?

My answer, when the Deputy sees it in written format, will slightly fill out some of the points I have made to him. I am clear that with business cases being developed now, particularly in the aftermath of the great challenges and difficulties we had with the national children's hospital, I am seeing two features in place more and more. First, I am seeing the costs in place refer to projects after they have been tendered or with far greater certainty and clarity as to what the likely cost will be. The second factor I am seeing is more and more recognition, particularly for very big projects, of the complexity and risk and, because of this, the contingency cost. I am seeing more of this in place but I also believe we need to keep on challenging ourselves to see whether both these factors are as realistically in place as they need to be. This work is under way.

Is the Minister satisfied that he, also, in his role, will more robustly challenge, analyse or scrutinise the recommendations that emanate from various groups to these boards? Ultimately, it is his decision as a member of Government to make the recommendation for Government to accept a recommendation that emanates from these boards. They are supposedly at arm's length from political decisions, and I understand that, but the Minister has a responsibility on behalf of the taxpayer and the Government to ensure that taxpayers' money is well spent and that those who represent the taxpayer on these boards have a line of communication for which, ultimately, he is responsible. This was clearly lacking in the case of the children's hospital, as became clear during the course of the investigation.

My Department and I play a role in appraising and further understanding cost-benefit analyses that come into our Department. However, this is the case not just with analyses that come in from independent boards, but also with those that come in from Departments.

To respond to the Deputy's second question about the participation of officials of mine on boards, we have seen a greater clarity now regarding the roles and responsibilities that individuals should have when they are on these boards. I have a small number of officials who may serve on boards of other projects. I continue to be of the view that their first line of reporting should be to the line Minister for a given project.

My experience of the national children's hospital project has reaffirmed that to me. We have all drawn many lessons from the difficulties that have developed with that project, however.

Turning to the quarterly progress reports that are going to be forwarded to the Minister's Department for any projects costing more than €20 million, how will those reports be handled when they come into the Department? What will the process be? Will they be reviewed every quarter? If I recall correctly, the Minister stated last night that the reports will be put on a tracker on the departmental website. Will the Minister give us some information on what happens when those progress reports come into the Department and where they go from there?

As I stated to Deputy Jonathan O'Brien in our debate last night on the national children's hospital project, when information comes into the Department regarding the delivery of the project it feeds into an online tracker. That is available but we are going to publicise it further in the coming weeks. I have to decide whether we need to go beyond that. Having quarterly reports come into my Department for every single project costing more than €20 million would result in a vast number of reports coming in. I do not mean to diminish the point made by the Deputy. I would be concerned, however, that having so many reports coming in would diminish the responsibility of the line Departments which, first and foremost, have responsibility for projects. I have to make a final decision on this matter but in the interim we are feeding everything into the tracker. That tracker will be available to the public and it will include information on what is happening with a project, when and the current status of planning and construction.

I agree that the Department would be crippled if progress reports came in for every single project costing more than €20 million. To have some confidence, however, in the progress reports coming in and being put on the tracker, we have to ensure there is sufficient expertise within line Departments to ensure all relevant information is forwarded. If there is an issue, a red flag should be raised and that should be brought to the attention of the Minister. We would at least know then that a difficulty, or a potential for difficulty, with some projects will be raised with the Minister's Department at the earliest opportunity.

I appreciate the Deputy recognising the scale of information that might come into my Department. I expect that any red flags regarding a project will be flagged to my Department. Many different difficulties develop with many projects along the way, however, though none on the scale of what we are now dealing with in respect of the national children's hospital project. It is first and foremost the responsibility of Ministers who receive budget allocations from the Department of Public Expenditure and Reform to make sure they live within those allocations and deal with issues regarding projects for which they are responsible. As I will state in a later response to a parliamentary question from Deputy Cowen, my Department plays a major role at the start of the project, particularly in the cost benefit analysis aspect. Once that is approved by Government, it is then up to individual Departments to deliver on their commitments.

National Broadband Plan

Barry Cowen

Ceist:

3. Deputy Barry Cowen asked the Minister for Public Expenditure and Reform the role his Department is playing in relation to the tendering process for the national broadband plan; if the role of his Department when it comes to the tendering and construction of major capital projects will change in the future; and if he will make a statement on the matter. [18079/19]

There is great disappointment, dismay, frustration and even anger at the Government's and Fine Gael's collective failure to deliver on the commitment made by the then Deputy and former Minister, Mr. Pat Rabbitte, to deliver broadband to every household in the country at a cost of €500 million. The Taoiseach's mutterings in recent days suggest that will not now be the case. What role has the Minister and his Department played in seeking to ensure that commitment could be lived up to? What processes are in place to ensure due diligence and evaluation during the awarding of a contract to protect the best interests of the taxpayer? The Taoiseach is failing to live up to the commitment he made. He stated this was a personal crusade. This project has the potential to unravel in a similar fashion to the national children's hospital project, unfortunately. I want the Minister to allay that fear.

Under the public spending code, before any tender process is run, the relevant procuring Department must first undertake a project appraisal to help inform whether the project should be approved to proceed to procurement or not. At that stage, my Department is involved in conducting a technical review of the cost benefit analysis undertaken by the line Department. In this case it is the Department of Communications, Climate Action and Environment. It reviews the methodology and compliance with the requirements of the public spending code in advance of any decision being taken by the line Department on whether to proceed to procurement or tender stage.

The public spending code further requires that the project appraisal is continually updated as the procurement process evolves and as actual tender costs, as opposed to cost estimates, become available. My Department may be consulted to review technically the updated cost benefit analysis. That is the case with major projects such as the tender for the national broadband plan. While my Department is not involved in the assessment of the tenders for individual projects, if it emerges that the cost of a project is not capable of being met within the agreed multi-annual capital allocation of the procuring Department, then that Department should engage with my Department to explore how to proceed with the project. That is what is happening now with the national broadband plan process.

In addition, the Office of Government Procurement was represented in an advisory role on the procurement board for this project. The primary aim of this board is to independently review the Department of Communications, Climate Action and Environment's oversight of the evaluation stages of the procurement process but has no decision making or due diligence role in the procurement process. That is a matter for the Department of Communications, Climate Action and the Environment.

I think that is quite amazing, unfortunately, especially considering we have spoken about the lessons we expect to learn from the recommendations of the PwC report regarding the national children's hospital. The Minister is, essentially, stating he has no role regarding evaluation or due diligence, apart from the Vote provided funding in a given year. The Minister has stated, however, that his role crystallises when spending costs get out of control. I refer back to the Minister's answer. It is similar to an answer he gave me in response to a parliamentary question earlier this month: "The Office of Government Procurement was represented in an advisory role on the procurement board for this project". The primary aim of the board is to review independently, as the Minister rightly states, the Department's oversight of the evaluation stages of procurement. No decision-making responsibility, however, lies with the Minister's Department.

That brings us back to the Office of Government Procurement. The Minister's Department has a representative on that, as it had in regard to the same office and its role regarding the national children's hospital project. The spending there went out of control to the extent that it was six times the original spending that the Government estimated would be needed to deliver the project. Was the Minister not informed? What oversight role does the Department of Public Expenditure and Reform really have? What prudence can it engender in other Departments? We do not seem to have learned lessons from the recommendations of the PwC report because the Office of Government Procurement, with a representative from the Minister's Department, is again not informing a line Minister.

Deputy Cowen is making many assumptions regarding how this project is going to develop and those assumptions have yet to be tested. The Deputy's view is underpinned by an assumption that I am not aware or not involved in what the cost of this process will be or decisions that will be made regarding it. I am actively involved in all of that. I have laid out what the process is to the Deputy and I think it is an understandable one. My Department is involved in the cost benefit analysis and the estimation of costs at the start of the project. My Department will also be involved if there are any developments regarding the cost benefit analysis. The key difficulty regarding the national children's hospital project was the development in the cost and complexity of the project.

Regarding where we are with the broadband plan, it is fair to say the complexity and challenge in delivering the project has been identified in an exhaustive tendering process.

I ask for a final clarification on the role of the Department of Finance in the delivery of the broadband plan and contract, ultimately to homes. There was a cost-benefit analysis in the first place, which the Minister acknowledged was in the region of €500 million in respect of the Government's contribution. According to the Taoiseach, it now transpires that the level of expenditure on the part of the State will be more in line with €3 billion, which is six times the original estimate. Am I to believe the Minister's representative on the Office of Government Procurement, OGP, has not yet informed him of the likely overrun in this area? Surely, the Minister was informed given that the Taoiseach can say it will be €3 billion over 25 years. What level of discussion, thinking or process was involved to allow him to give that answer in the Dáil the other day? I just want to be sure and certain, as taxpayers should be, that the Minister and his Department are on top of this and aware of what is going on and that they acknowledge the difficulties within the procurement process which mean it is now six times the original estimate provided by Government. Is the Minister actively engaged in resolving this issue?

As the Deputy will be aware and as the Taoiseach said yesterday in the Dáil, the €500 million indicative figure that previously existed in respect of this project was for a completely different level of coverage from the level we are now looking to deliver.

That is where we differ.

As the Taoiseach indicated yesterday, the memorandum referred to how we were going to get to villages but this is now a project seeking to provide coverage for up to 500,000 homes.

That is a line the Government is throwing out there now.

If the Deputy is asking me whether I am aware of, and involved in, the process regarding where the costs stand, the answer is "Yes." When the decision goes to Cabinet, it will be on the basis of costs and complexities which are known and understood and I will continue to play a role as member of Government in the decision-making process at that point in particular.

Action Plan for Housing and Homelessness

Richard Boyd Barrett

Ceist:

4. Deputy Richard Boyd Barrett asked the Minister for Public Expenditure and Reform his views on the impact on public finances of the heavy reliance on leasing, housing assistance payment, HAP and the rental accommodation scheme, RAS, in the housing policy; and if he will make a statement on the matter. [18075/19]

We are talking about the potential for vast cost overruns in the hospitals sector. The Government's reliance on the private sector to resolve the housing crisis is not only a disastrous social failure, it means the cost will be extortionate. Private developers and landlords will have the State over a barrel for well in excess of €1 billion and perhaps €2 billion a year for the foreseeable future while costs simply go through the roof. Is this not economic madness?

To ensure an effective and efficient response to urgent social housing needs throughout the entire country, a variety of mechanisms are provided for under Rebuilding Ireland, the Government's Action Plan for Housing and Homelessness. These include build, acquisition, lease, HAP and RAS. There are a variety of objectives behind this mix of delivery mechanisms, including speed of delivery, the appropriateness and efficiency of support and value for money for the Exchequer. HAP and RAS utilise private rented tenancies to deliver speedy and efficient responses to social housing requirements. Under budget 2019, the current expenditure allocation for these programmes amounts to €557 million, which funding will deliver more than 17,000 units of much needed social housing solutions. In addition, just over 2,000 new social housing units will be provided by local authorities and approved housing bodies, AHBs, in 2019 through a variety of leasing initiatives. There is also provision of €155 million in current funding in 2019 for the ongoing costs associated with leasing. It is important to remember that leasing maximises delivery, offers a flexible and efficient response and optimises the use of available resources for the State.

While we have increased our build programmes significantly, it remains the case that more homes can be provided through leasing than could reasonably be expected to be delivered under construction and acquisition programmes alone. For this reason, 10,000 of the 50,000 new social houses to be delivered under Rebuilding Ireland will be leased from a range of different sources. Delivery of new build and acquisitions has been steadily increasing over the first three years of Rebuilding Ireland, with acquisitions rising from 2,000 in 2016 to 2,600 in 2018, while new builds have risen from 3,000 units to just under 5,000 over the same period. In recognition of the need to accelerate the delivery of additional homes, €1.25 billion has been allocated for the delivery of 10,000 new social homes in 2019. This includes an allocation of €747 million for the local authority housing capital budget, which is an increase of one third over 2018.

Rebuilding Ireland has a target of 137,000 social housing units. Of those, it is intended to source 104,000 from the private sector through acquisition, lease, RAS and HAP. The cost of that will be extortionate. Indeed, I ask whether the Government has massively underbudgeted for HAP in 2019. The Minister says €423 million is the allocation for an additional 16,700 HAP tenancies in 2019. However, the allocation for only 43,000 HAP tenancies the previous year was €417 million. That means there will only be €6 million in additional funding yet there will be an extra 17,000 HAP tenancies. In fact, the number of HAP tenancies will probably exceed significantly what the Minister suggests to compensate for the fact that Government has failed to meet its construction targets. Current and capital expenditure going to the private sector at extortionate cost will probably reach, when one throws in NAMA and everything else, €2 billion. It is madness when we could build the houses for a fraction of the price on public land.

We need to look at what the figures are at the moment and at the balance between what we are spending in schemes like HAP and RAS and what we are spending to directly deliver homes. I want to put those figures on the record. The amount being spent to make use of existing houses is €526 million for 2018.

No. I will come to that. It is €143 million for RAS, €277 million for HAP and €106 million for leasing, which is a total of €526 million. To build new units, we provided for spending of €1.16 billion in 2018, of which €742 million is to build new homes and €420 million is to acquire homes that are being built across the State. Those are the figures. When the Deputy puts to me a charge in respect of the mix between HAP and new building, it is €1.16 billion for build and acquisition and €526 million for the various schemes he has raised.

As the Deputy may be aware, the plan is that, by 2020 or 2021, we will be housing more citizens in local authority and AHB homes than through the private rental scheme.

Let me state the obvious - we have a worsening housing crisis. Today's report from the Ombudsman indicates that. We are going to spend €100 million building new hubs this year. The average cost of keeping a household in a hub is €100,000 per year. Two years of such expenditure would build a council house on public land. In that light, the suffering of the children is also madness from an economic point of view.

I do not understand the overall current expenditure figures for this year. In the budget book, the Government has allocated €423 million for HAP, €155 million for leasing from the private sector, €134 million for RAS, which goes to the private sector, and €146 million for homelessness services. All of that adds up to €858 million. I cannot understand how the €423 million for HAP will be sufficient, given that the Government allocated €417 million for it last year and has claimed that we will have an additional 16,700 HAP tenancies this year. Despite that, there will only be an extra €6 million allocated to it. That does not add up.

At each point in the year, we try to ensure that we are able to provide the right level of funding for HAP. The reason we have HAP in the first place is to ensure that, while we continue our work on rebuilding homes and building new ones, the citizens who are waiting for that housing to become available have homes and access to accommodation. That is why we are using this funding. Were we not making use of that kind of funding to ensure that people had access to accommodation, the Deputy would be criticising us for that as well. He would say that we were not doing enough to support people while we were building new homes.

The Deputy made a point about our investment in the delivery of new homes, particularly within local authorities. This year, we are involved in spending €742 million on building new homes. In 2017, that figure was €334 million. We are investing more in building new homes. While they are being built by local authorities and AHBs, we are using funding to ensure that people have access to accommodation.

Public Procurement Regulations

Mick Wallace

Ceist:

5. Deputy Mick Wallace asked the Minister for Public Expenditure and Reform the way in which he plans to strengthen, by legislation or statutory instrument, the procurement oversight role of his Department in view of the lacuna in his powers of oversight identified recently by the IMF and in view of the projected costs overrun for the national children's hospital; and if he will make a statement on the matter. [18004/19]

The Government said it is clear there are lessons to be learned from the overrun on the children's hospital and other projects, but are we going to find out what went wrong? Who made the decision to get accountants to check what went wrong with a construction project and its procurement process instead of a construction and procurement firm and quantity surveyor team from, for example, outside the State? According to PricewaterhouseCoopers, PwC, we should not retender, but can we have the analysis and proof of same? Mr. Robert Watt told the Committee on Public Accounts that commitments were given regarding the approximate bill of quantities underpinning the contract and how accurate it was. He said that it did not turn out to be accurate, but who gave those commitments? Many answers are required.

The Deputy was present for the Dáil debate on this matter last night. We explained why we had commissioned the PwC report and what work PwC could do to help us understand what went wrong with this project. The Deputy disagreed with us, but I pointed out to him that the PwC report went through the various elements that went wrong and what we could learn from it. The report made the point that the level of complexity involved was very significant and that, in light of the various options that were open to the Government at the time that this issue developed, there was no assurance that we could have done this any more cheaply or quickly. The Deputy and I differ on both views. He said so last night and I respect his expertise in and knowledge of this area, but I assure him that, based on the work we did across that period, I have formed the view that, had we made the decision to retender or stop the project, the difficulties we would be facing now would be even greater.

If we do not get the answers, we will not learn the lessons. We are not getting the answers and do not seem to understand what happened. The PwC report reads: "The understanding of the risk profile associated with the procurement and contracting strategy was poor at all levels of the governance structure." Understanding the risk profile of a capital project is the first step. Who did not understand it and why?

The report also reads: "The strategy identified that a lack of interest from the market was a 'primary potential risk' to the procurement and mitigation strategies were put in place to address this." Why was a different form of contract not considered? Why was an International Federation of Consulting Engineers, FIDIC, contract not used? That would have attracted European interest.

The Tánaiste stated that there was a gross underestimate that should have been flagged earlier, but a public benchmarking exercise provides an advance estimation of what a project will cost. Why was one not done? Who decided not to undertake one? Why was phase A a stand-alone contract? Who made that decision? Was it the advisers, McCann Fitzgerald, the executive or the board? The bill of quantities was only based on a preliminary design. Why was it not based on a detailed design? Who made that decision? If McCann Fitzgerald did not ask the right questions or give the right advice, will its public indemnity insurance be called in? How much has McCann Fitzgerald been paid for its work?

The Deputy has asked a series of questions regarding who was involved in particular decisions. Many of the decisions that the Deputy mentioned were made by the National Paediatric Hospital Development Board, NPHDB. A board and an executive were in place. Recommendations were made to the board, which then made decisions. In the debate on this matter, I have tried to point out that, while there was a board in place, there has been a change in that board since. The Minister for Health, Deputy Harris, has stated that he will seek to strengthen it further.

I have always acknowledged that, as the Minister for Public Expenditure and Reform, I have responsibility for how the country's money is spent, in particular on capital projects. The PwC report made a number of recommendations that are particular to me. I will ensure that they are implemented.

The Minister is saying that the board carried all of the responsibility. Do we know whether it was well advised? Was the executive put in place to control the information going to the board on behalf of the HSE? Did the HSE have too much influence over the project? The procurement strategy used was sure to lead to an unmanageable increase in price. As a result, we will not know where the price will end up. Who is responsible for that? Is it the board or others?

We should not standardise construction project contracts. The capital works management framework, CWMF, is not fit for purpose and is problematic, yet the Government is wedded to it. The Government should change its strategy in that regard. We need flexibility to match the bespoke requirements of particular construction projects. The CWMF does not provide that flexibility.

Is it possible for me to see the contract, please? It would be beneficial and I could learn from it.

The Deputy put the final question to the Minister, Deputy Harris, last night. He will check to see whether it is possible for the Deputy to see the contract. I am afraid that I am not in a position to answer the question and I do not know whether there is any legal issue.

Regarding responsibility, the board and representatives of the national paediatric hospital appeared before the health committee and answered many questions on this issue. They had responsibility for certain elements and the Minister had responsibility for particular matters. So did I.

I have appeared before a committee and the House on two occasions, most recently last night, to answer questions about my role in the project. It is clear where responsibility lies, as was laid out in the report we debated last night. As the Minister for Health, Deputy Harris, indicated, he will examine what he needs to do to strengthen the board further. The PwC report outlined specific recommendations in respect of me and I will implement them.

Is the Minister satisfied the consultants have enough experience in hospitals-----

The Deputy's opportunity to respond has passed.