National Children's Hospital: Discussion (Resumed)

This is the committee's second meeting on cost overruns at the new national children's hospital. The purpose of the meeting is to examine in detail the reasons for the huge projected cost overruns at the children's hospital and the impact these increased costs will have on other capital projects in the health sector. On behalf of the committee, I welcome Mr. Colm Desmond, Ms Tracey Conroy, Ms Aonraid Dunne, and Ms Fionnuala Duffy from the Department of Health, and Mr. Dean Sullivan, Mr. Jim Curran and Mr. John Pollock who are representing the HSE.

I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Any opening statements that have been made to the committee may be published on its website after the meeting.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

Before we begin, the committee also invited the Department of Public Expenditure and Reform to attend the meeting. The members are quite disappointed that the Department declined the offer and the committee feels it has been treated with disrespect in this regard. The Department of Public Expenditure and Reform felt it was neither necessary nor appropriate to attend this meeting or to attend any other sectoral committee meetings. The Joint Committee on Health has only asked the Department of Public Expenditure and Reform to attend it on two occasions, this being the second, and on both occasions the Department has declined. We believe that the Department of Public Expenditure and Reform has had to be consulted in relation to the cost overrun for the hospital and also the negative knock-on effects that this will have. It will have to provide €50 million extra capital funding for 2019 and find €220 million extra capital funding in 2020 to 2022, inclusive. Therefore, we think it has a responsibility to explain to the committee how this will be provided. The committee also believes that the Department of Public Expenditure and Reform has responsibility in relation to procurement, which is the central issue to the cost over-run.

I now ask Mr. Colm Desmond to make his opening statement.

Mr. Colm Desmond

I am joined by my colleagues, Ms Tracey Conroy, assistant secretary in the acute hospitals policy division, Ms Fionnuala Duffy, head of the acute policy unit, and Ms Aonraid Dunne, principal officer in the finance unit.

There are many challenges before us to deliver a new national children’s hospital. The infrastructure and the fragmented nature of the existing children’s hospitals in Dublin are not fit for purpose to deliver the best possible service for children and young people in Ireland. We must not lose sight of the ultimate goal to deliver a new children’s hospital that will provide national services of the kind that can only be provided in a centre with the scale of services, critical mass of clinical expertise and highly specialised healthcare facilities.

Last week in this committee, the National Paediatric Hospital Development Board outlined the current position on this project, including progress in the completion of foundation works at the St. James’s campus, phase A, and work on the two urgent care centres, together with approval to proceed with the main construction contract, phase B.

On 18 December 2018, the Government approved the construction investment to allow the National Paediatric Hospital Development Board to instruct the main contractor, BAM, to proceed with phase B of the hospital at an overall capital cost of €1.433 billion. To complete the build of the hospital and outpatients and urgent care centres, an additional €450 million will have to be found over the period 2019 to 2022, including an additional €100 million in 2019.

The total of €450 million requires net additional Exchequer funding of €320 million, of which €50 million is VAT, and an additional €130 million in philanthropic funding. This is a very significant and disturbing escalation in cost. On balance, the Government decided to proceed with the project in the face of these higher costs because of the importance of the project for children’s healthcare. At the same time, a full independent review of the cost escalation has been commissioned and is under way.

In February 2018 Project Ireland 2040 and the national development plan were launched and included a very significant overall increase in capital funding for health services in the next ten years. The new children's hospital is a major element of public health investment provided for in the national development plan. The capital funding provides the opportunity to reform and modernise the health service to deliver one that is fit for purpose, that citizens can be proud of and that can meet the needs of the growing and ageing population. Capital funding for the health service will be 165% higher for the next ten years than it was for the last ten. We have an ambitious plan to build a better health service for the future through the combination of a significant capital investment programme alongside the implementation of Sláintecare reforms.

Looking at capital investment plans for the public health sector, in addition to the new children’s hospital, there are many other health capital projects under way and at various stages of development in the public health sector. They include the national programme for radiation oncology in Cork, Galway and Dublin, building the new National Forensic Mental Health Service hospital at Portrane, County Dublin, redeveloping the National Rehabilitation Hospital in Dún Laoghaire, the primary care centre construction programme, the replacement and refurbishment of community nursing units for older people and long-term residential care units and housing in the community for people with disabilities and the ongoing need to maintain and update buildings and healthcare equipment and ambulances in response to critical clinical risks.

In the coming decade the national development plan will also support reform in the public health sector, in line with health policies and the implementation of Sláintecare, including integrating healthcare and a decisive shift towards primary care, investment in maternity hospital relocations in line with strategy, delivery of additional health capacity, including the development of dedicated ambulatory, elective-only hospital facilities which will be provided in response to demographic changes and future demands and investment in health service ICT infrastructure to enable the integration of services and the flow of information across and within hospitals, primary care and community care services.

The health capital allocation in 2019 is €567 million for the construction and equipping of health facilities. This represents an increase of €129 million on last year’s provision. In the 2019 budget the Government has also provided for additional capital of €50 million in 2020, bringing the 2020 provision to €659 million. Following publication of its national service plan for 2019, the Health Service Executive is developing its capital plan for 2019. The capital plan will determine the projects that can progress in 2019 and beyond, having regard to the available capital funding, the number of large national capital projects under way, the cashflow requirements attaching to each project and the relevant priority. A number of projects in progress are contractually committed to and nearing completion, including the National Forensic Mental Health Service hospital at Portrane and phase 1 of the National Rehabilitation Hospital.

In developing its capital plan for 2019 and future years the HSE must consider a range of issues, including the expenditure that is contractually committed to, the annual requirement to meet risks associated with clinical equipment, ambulances and healthcare infrastructure and the total capital Exchequer funding required for the new children’s hospital in 2019. The impact of the increased costs for completion of the new children’s hospital will, based on the HSE’s analysis and Government priorities, see the timing of non-contracted capital commitments managed within the available health capital allocations.

In line with statutory requirements and consultation with the Department of Public Expenditure and Reform, the Department of Health and the HSE are engaged in a process to finalise the HSE's capital plan for 2019, informed by the Government's decision on the children’s hospital. Details of total capital investment in 2019 will be set out in the plan and the HSE will be required to manage its capital expenditure within the agreed plan. In line with the recent Government decision, the Minister for Public Expenditure and Reform is to revert to the Government in the near future on capital allocations post-2019.

In terms of the financing of the children’s hospital project in 2019, €150 million had already been included in draft HSE capital profiles for the project in 2019. Based on the outcome of the guaranteed maximum price process, an additional €100 million is required to fund the project in 2019. The Government decided €50 million of this sum is to be provided from the health capital allocation. The balance will have to be met by reductions in the capital allocations for all Departments out of a proposed capital allocation of €7.33 billion in 2019, which is an increase of €1.33 billion, or 22%, on the 2018 allocation. Overall, a total of €10.9 billion is provided for the health sector in the national development plan in the period 2018 to 2027, inclusive. As regards meeting the additional funding requirements for the project in future years, the Department is engaging with the Department of Public Expenditure and Reform and the HSE.

The new children’s hospital project includes a national hospital being developed on the campus shared with St James’s Hospital. Together with its two paediatric outpatients and urgent care centres on the campuses shared with Connolly and Tallaght hospitals, it will provide all secondary, or less specialised, acute paediatric care for children from the greater Dublin area. The hospital will become the single national tertiary and quaternary centre providing specialist and complex care for children from all over Ireland. The fundamental aim of the project is to ensure best possible health outcomes for children with significant ancillary benefits through the creation of a research-intensive academic healthcare institution. There are also significant wider economic and community benefits. The new children’s hospital development is the most significant capital investment project ever undertaken in the healthcare sector in Ireland, a hospital designed and built to support its staff to deliver the best care and treatments for Ireland’s sickest children.

In terms of construction and development, considerable progress has been made on the project since April 2017. Enabling works on the main hospital site are complete, while phase A construction works, substructure works on the main site, commenced in October 2017 and are now also nearing completion. Development work is also well advanced on the paediatric outpatients and urgent care centres. Works at Connolly hospital are on target for practical completion of the building in spring 2019, with the opening scheduled for July. Works at Tallaght hospital are under way, with a target hand-over date of July 2020. A fully aligned construction programme has been agreed to, with main hospital construction to be completed by July 2022.

A key milestone in the programme of work under way to integrate the paediatric services across the existing sites in advance of the move to the new facilities is the Children’s Health Act which was signed into law at the end of November and commenced in December. The Act provided for the historic establishment of a new body, Children’s Health Ireland, CHI, which has taken over responsibility for the paediatric services provided by the three hospitals from 1 January 2019.

As the committee is aware, operational responsibility for the delivery of the construction project lies with the National Paediatric Hospital Development Board which is charged with planning, designing, building and equipping the new children’s hospital and outpatients and urgent care centres. It is headed by a board, appointed by the Minister for Health, the chairman of which the committee met last week. The board has full statutory responsibility for the design, procurement, building and equipping of the new hospital. A comprehensive review of the governance structures for the children's hospital project and programme was undertaken in 2017 by the Department and the HSE, in collaboration with the Department of Public Expenditure and Reform, in the context of embarking on a new phase of the project. Revised governance structures, including the establishment of a children’s hospital project and programme steering group and a children’s hospital project and programme board, were approved by the Government in April 2017. They were implemented in recognition of and to reflect the need to prepare well in advance of completion of the facilities for the integration of the clinical and non-clinical services of the three children’s hospitals, preparation for the opening of the outpatients and urgent care centres and the need to manage dependencies across the various components of the project which will support the operation of the new hospital.

The children’s hospital project and programme board which is chaired by the Secretary General of the Department of Health oversees and monitors progress on the children’s hospital project and programme. The children’s hospital project and programme steering group is chaired by the deputy director general of the Health Service Executive who is also before the committee today. The steering group directs the overall programme of work within agreed parameters and reports to the children’s hospital project and programme board. The national paediatric development board receives its capital funding for the project from the HSE, as the sanctioning body for the new children’s hospital programme. The paediatric development board provides regular updates on progress on the capital project for the HSE chaired children's hospital project and programme steering group.

It is acknowledged that the challenges and operational environment for the project will be fundamentally different in some respects as the project moves into phase B. In particular, the focus on design and value engineering will switch to construction management. The construction activities and monitoring of the guaranteed maximum price will need constant and active management as the project proceeds and oversight by the governance arrangements. When the Government approved, on 18 December 2018, the construction investment to allow phase B of the hospital to be constructed, it also made very clear its concerns to ensure the project would be delivered on time and within budget.

There is no doubt but that the additional costs associated with the project are of great concern and we must have assurance that phase B of the construction project will be delivered within budget and timescale. Accordingly, the Government has also approved the commissioning of an independent review of the escalation in cost in determining the adjusted contract sum, a review of the existing oversight arrangements between the Department of Health, the HSE and the National Paediatric Hospital Development Board and a scenario analysis to identify potential costs of any residual risks to the capital project. The independent review of the escalation in cost in determining the adjusted contract sum, which commenced last week, will examine the contributory factors and associated responsibilities in order that any potential weaknesses are identified and comprehensively and speedily resolved in the interests of the successful completion of the project and the effective management of public funds. The Department, the HSE and the National Paediatric Hospital Development Board are fully committed to collaborating with these reviews and to implementing any recommendations arising.

In parallel with the building of the new children’s hospital and the urgent care centres, the integration of the three existing paediatric hospitals and the transfer of services to the new hospital facilities represent a highly complex project in its own right. Children’s Health Ireland is leading this major programme of work of integration and change management to, first, run integrated services on the existing hospitals’ sites and, second, achieve a successful transition to the new facilities as they open. My colleagues and I are happy to address any queries members may have.

Thank you. I call Mr. Dean Sullivan of the HSE to make his opening statement.

Mr. Dean Sullivan

I thank the committee for the invitation to attend. I am deputy director general in charge of strategy and planning for the HSE. I welcome the opportunity to discuss the increased costs for the national children’s hospital, an issue which is clearly of significant concern. I am accompanied by Mr. Jim Curran, head of estates within the HSE, and Mr. John Pollock, project director within the National Paediatric Hospital Development Board.

I would like to provide members with an overview of the structures and processes in place and the HSE’s role in regard to the children’s hospital project and programme. The National Paediatric Hospital Development Board was established as an independent board through statutory instrument in 2007. The statutory instrument conferred on the board the functions of planning, designing, building, furnishing and equipping the national children’s hospital in accordance with a brief approved by the HSE with the prior consent of the Minister for Health. The chair of the development board and the 12 board members are appointed by the Minister for Health.

The HSE is the sanctioning body for the new children’s hospital and the associated urgent care centres and is the principal capital funder for the programme, which must be managed within the overall capital plan. The HSE provides funding for the programme based on approved plans submitted by the National Paediatric Hospital Development Board and approved by the Minister.

As outlined to the committee by the Department, in May 2017 the Department of Health set out revised governance structures for the children’s hospital project and programme. The programme board is chaired by the Secretary General and I have been chair of the steering group since May of last year. The responsibility of the programme board is to oversee progress of the project and programme to ensure the programme is delivered against the agreed parameters in regard to timeline, scope and funding. The responsibility of the steering group that I chair is to direct the overall programme of work within agreed parameters and, crucially, to ensure an integrated approach is taken across all the different programme elements. Both the programme board and the steering group include director-level representation from the Department of Health and the HSE. The steering group considers monthly progress reports in regard to the capital project, the integration of the three hospitals, workforce, ICT and other relevant issues. These monthly steering group reports form the basis for updates to the programme board.

As committee members are aware, the procurement process for the national children’s hospital involved a two-stage tender process. This approach was agreed in 2014 with the Government contracts committee for construction. The substructure for the building, that is, phase A, was tendered on the basis of a full design, while the associated tender for the main hospital building, phase B, was on the basis of a preliminary design with an approximate and re-measurable bill of quantities. Consistent with this approach, and following a competitive tendering exercise, the work on phase A was commenced in October 2017 and, in parallel, the second-stage detail design work was initiated to determine the cost for phase B. The outcome of phase B is a cost which is considerably in excess of that envisaged following the initial tender process. As has been noted already, this escalation in costs is of significant concern and will undoubtedly impact on other priority health investments.

An independent review of the escalation in cost in determining the guaranteed maximum price has been commissioned by the HSE in discussion with the Department and commenced this week. This review will examine the contributory factors and associated responsibilities in order that any potential weaknesses are identified and comprehensively and speedily resolved in the interests of the successful completion of the project and the effective management of public resources. This review is expected to be completed in March of this year.

There is no doubt that there is an urgent need for a new children’s hospital to care for sick children and their families in Ireland. The development of the new hospital and the two urgent care centres is central to the implementation of a national paediatric model of care, a model in which children receive the care that is appropriate to their needs, delivered as close to home as possible. That concludes my opening statement. With my colleagues, I am happy to answer any questions the committee may have.

Thank you. To open proceedings, I will ask three questions. First, having listened to the evidence given to us last week by the development board of the hospital, we heard of the two-phase tendering process. We feel the cost overrun is particularly identified in that two-phase tendering process. Phase A was tendered on the basis of full design but phase B was tendered on the basis of preliminary design, with approximate and re-measureable bills of quantities, and this is where the cost escalation arises. Phase A was agreed without knowing the cost of phase B or agreeing the cost of phase B. When it came to agreeing the cost of phase B, the cost had escalated by €320 million. Mr. Desmond might comment on that.

The second question is in regard to the reporting process. In his opening statement Mr. Desmond outlined the reporting process, which seems overly cumbersome. We have the National Paediatric Hospital Development Board, which receives funds from the HSE and provides regular updates to the HSE. We have the children's hospital project and programme board, which is chaired by the Secretary General of the Department of Health and is tasked with the integration of clinical and non-clinical services; preparing for the opening of the outpatient department, OPD, and urgent care centres; and managing dependencies across various components. We then have the children's hospital project and programme steering group, which is chaired by Mr. Sullivan and is to direct the overall programme. Mr. Desmond might go into detail on those reporting processes.

The third question is in regard to the knock-on effects this will have on other capital programmes. The Department has identified that where contractual arrangements have already been entered into, projects will continue, such as at the forensic hospital and the National Rehabilitation Hospital in Dún Laoghaire, but all other projects seem to be subject to the knock-on effects of the excessive cost of the children's hospital. Mr. Desmond might comment on those three items.

Mr. Colm Desmond

I ask my colleague, Ms Tracey Conroy, to commence.

Ms Tracey Conroy

I will start with the first question. In regard to the evidence around the two-stage procurement process, it is important to say that, owing to the size and complexity of the project, and there was some discussion at the committee last week in this regard, it was decided at an early stage that the traditional design and tender method of procurement was not suitable or realistic. A procurement strategy was developed to ensure the new children's hospital would be delivered without further delay, as well as to deliver value for money, comply with public and EU procurement rules and reduce risk.

It is important to say there was extensive collaboration with the Government's contracts committee for construction. That committee recognised the challenges a project of this size and complexity would face in attracting contractors with the skill and capacity to undertake it. The Government's contracts committee accepted the principles of the procurement strategy in February 2014 and its procurement subcommittee agreed the detail of the strategy in May 2015, which is some way back in time. In regard to the investment decision for phase A, the Government was advised in April 2017 of the two-stage contract process, with stage one consisting of a scope refinement and value engineering process based upon tendered rates, as the Chair has mentioned, to finalise the contract sum and a guaranteed maximum price.

The Government was advised at the time that a risk contingency allocation had been set aside to fund the guaranteed maximum price. It is important to talk a little bit about the key components of that two-stage strategy.

The tendering of the substructure, or phase A, works on the basis of a full design with a full bill of quantities reflecting that, while then at the same time tendering the main project works, or phase B on a preliminary first stage design with an approximate and re-measurable bill of quantities, reflecting the preliminary first stage design.

Having started the phase A works on site, the second design phase for the phase B works could be completed, and the bill of quantities updated to reflect this.

By agreeing a guaranteed maximum price for the contractors involved, reflecting that detailed design, which requires the contractors to take all of the risk for the quantities thereafter, and limits their recovery of additional costs to clearly define scope challenges and changes and inflation in excess of 4% which might occur post-July 2019, it significantly de-risks the project. That was the decision was taken at a time.

In considering the benefits of two-stage procurement process-----

On this point, was a maximum price ever placed on the construction of the hospital by the Department of Health or the Government that could not be exceeded? Was there ever a target that could not be exceeded?

Ms Tracey Conroy

We were clear with the Government in April 2017 as to the details of what the two-stage process meant and entailed. At that stage, we were operating on the basis of what would be required for phase A. We also gave a commitment to come back to the Government in the context of approval for phase B, which is what we did do in December 2018. The best way to describe it is that we were operating within indicative parameters.

To recap in terms of the benefits of a two-stage procurement process, the first part is the full participation of suitable main contractors and the special subcontractors in the tendering process. The build board was absolutely clear that this was really essential. That is about the development of a collaborative tendering process.

There was some discussion at the committee last week about the availability and suitability of contractors for a project of this complexity. It became evident very early in this process that only two Irish main contractors would have had anything near the kind of capacity to undertake this project. Even then, they would have challenges in resourcing and undertaking it.

To achieve competition it was essential for the contract that the tendering strategy and the terms and conditions of the contract would encourage international contracting interest. That required the development of bespoke tendering and contract conditions, which is what was formulated by the build board, after lengthy consultation and engagement with the Government's contracts committee.

I understand what Ms Conroy is saying, which was outlined in the Department's opening statement.

Ms Tracey Conroy

Second, I refer to timelines and the need to facilitate an early start on site. It was articulated here last week that the two-stage process facilitated a collaborative approach. We now have a guaranteed maximum price to which the contractor is signed up. Importantly, it facilitated the start of construction two years earlier than would otherwise have been the case.

The evidence we heard last week was that the board, having experienced what it has experienced, and the cost overrun of €320 million, believes that by going through this two-stage process, it would not change anything with regard to what it had done in the past. Its view was that this was the best way to go forward, in spite of the fact that it has led to an overrun of €320 million. Is that still the case that there would be no change if this was to be repeated?

Ms Tracey Conroy

From the Department's perspective, we are comfortable that the two-stage process was the right process. The cost overruns are very significant and concerning. When the Government considered this last December, it agreed to proceed with phase B and to allow the instruction of the contract, given the importance of the project. That is not to lessen the very serious nature of the overruns here. That is why the Government has required the establishment of an independent review of the escalation of costs and that is necessary.

As Mr. Sullivan has outlined, that external review has been commissioned by the HSE in consultation with the Department. It began its work on Monday with a completion date in March. The view of the Department and the Minister is that it is very important that that review takes place. This is an independent external review and is being conducted by PricewaterhouseCoopers. It will identify any weakness in the process here between the build board and the various key parties, such that those weaknesses can be first identified and addressed in the context of the progression now of phase B of the project.

My second question is on the reporting procedure where there are four different bodies involved in the project. Was was that overly complex and did it lead to missing out on the cost overruns or to only identifying them late? Can the witnesses comment on these four different bodies and the reporting process?

Ms Tracey Conroy

I will answer this question as well, initially at least. Owing to the complexity of the programme and project and the number of stakeholders required to ensure the project is safely delivered, we put in place new governance oversight arrangements, which were agreed by the Government in May 2017. First, the National Paediatric Hospital Development Board has statutory responsibility for the delivery of the capital project. It is headed by an experienced board and is facilitated by a strong executive team and experts, of which the committee was advised last week. This board reports to the HSE and to the Departments on its functions through the children's hospital programme and project governance structures.

As the Chairman has already outlined, the children's hospital programme and project board is chaired by the Secretary General of the Department, as Accounting Officer, and it has responsibility for overseeing the project in its entirety. The children's hospital programme and project steering group has responsibility for the delivery of the project. It is chaired by the deputy director of strategy section, a delegated function from the director general of the HSE. It has responsibility for ensuring that the project is delivered within its parameters.

It is important to say that the various roles of the various parties, namely, the build board - we call it that for shorthand - the children's hospital programme and project board and the children's hospital programme and project steering group all flow from legislation, including the Health Acts, with the respective roles of the Secretary General of the Department as Accounting Officer and the director general as accountable officer. We believe in the Department that these governance structures are appropriate. They were put in place to reflect the move, post the government decision on construction of phase A, from the design process into construction of phase A.

The committee will be aware that as part of the Government decision in December, it requested an external review of the oversight arrangements. These refer to the governance and oversight arrangements of the project as between the Department, the HSE and the build board. The intention is that the review of cost escalation, which will be completed in March, will inform and feed into that review. This will start in March once the first review had been completed.

While we feel that the arrangements are robust, were agreed and considered in close consultation with the Department of Public Expenditure and Reform and were approved by Government, in the light of the cost overruns here there certainly is a need to have a look at those arrangements to see if there are any weaknesses that need to be identified in the context of the move now to phase B of the project.

The last question concerns where Mr. Sullivan said that the cost escalation will undoubtedly impact on other priority health investments. Can he comment on that?

Mr. Colm Desmond

I will outline a broad position from the Department's prospective and Mr. Sullivan can come in then.

It is quite clear that we have some significant projects under way which I outlined my statement such as, for example, the radiation oncology project, the forensic mental hospital, the rehabilitation hospital and a range of other areas. The development plan, however, absolutely will now need to be reconfigured to take account of the Government decision is in December to accommodate increased costs for the children's hospital.

We had already commenced the process late last year of engaging with the HSE on the 2019 capital plan. That process is now intensively under way again because we now have the decision of December on the children's hospital and we know the extent of commitments arising from that.

In developing the 2019 capital plan, that will have to take account of what is contractually committed by the HSE via its annual requirement to meet the risk associated, as I mentioned earlier, and the Exchequer funds required for the children's hospital. Inevitably, that process will require prioritisation and the HSE has been requested to do this. That is under way; it is the process in which the Department is engaged.

In effect, the Department of Health has to provide €50 million this year and then seek €220 million through 2020, 2021 and 2022 from the existing capital programme.

Mr. Colm Desmond

The position for 2019 is that we have to provide €50 million - with a contribution, very helpfully, from other Departments - to make up the additional cost arising from the December decision on the children's hospital. The position from 2020 onwards will be subject to a memorandum for Government that the Minister for Public Expenditure and Reform will bring forward by the end of this month. This will inform our envelopes for 2020 onwards and those of other Departments also. We will be working in parallel to determine our contractual commitments for ongoing projects but that process will await that particular Government decision. We will then have the parameters within which to frame the additional costs arising for the hospital and all other capital costs from 2020 onwards.

Any programme that is not the subject of a contractual arrangement at the moment will be subject to change or deferment, however. For example, I refer to the building of elective-only hospitals, the 96-bed unit in Limerick, the hospitals in Cork, Sláintecare implementation, the replacement of equipment in hospitals, which is an urgent matter, and developing the ambulance service. All of those matters could be set back a number of years.

Mr. Colm Desmond

A number of the matters to which the Chairman referred are at different stages of development. The replacement of equipment in hospitals is part of what is called "general infrastructure", but is really equipment and upgrading. HSE colleagues can speak to that. It is an ongoing annual programme and is necessary, as the Chairman stated, to keep the health estate going, including its buildings and equipment. As to Limerick and Cork, we will certainly have to examine carefully what we can now manage going forward and that is a process that is under way. The elective hospital piece in the national development plan is tied to Sláintecare and the development of additional capacity. That is a process which requires a comprehensive and detailed examination from a policy perspective as to what is the appropriate location in each of the urban centres mentioned. It is about the existing service delivery in those areas that needs to be complemented or enhanced. That is slightly down the road in terms of development. The priority will be to manage the contracted projects and accommodate as much of the ongoing infrastructure and other equipment the Chairman mentioned.

I thank Mr. Desmond, including for his patience. I call Deputy Donnelly.

I thank our guests for their time. The second most expensive hospital that has ever been built globally is the Royal Adelaide in Australia. It cost €1.4 billion, which is less than the children's hospital is going to cost. For that amount, the Australians are getting nearly twice as many beds. The most expensive hospital ever built anywhere in the world is the Karolinska University Hospital. At the current rate, that will cost a bit more than the national children's hospital, but they are getting three times as many beds. Per bed, the Irish people are going to pay more than twice as much as the two most expensive hospitals ever built anywhere. On behalf of the Department and the HSE, do Mr. Desmond and Mr. Sullivan accept that this represents a catastrophic failure of management?

Mr. Colm Desmond

I will ask my colleague, Ms Conroy, to deal with the issue of comparisons.

Ms Tracey Conroy

There was some discussion of this last week. I might bring Mr. Pollock in as well. As part of its examination, the build board commissioned AECOM to look at an international cost benchmarking exercise to identify construction costs for similar large-scale international hospital projects. That study sourced data on ten projects.

This sounds like it is going to take some time. We have been over all of these figures. The figures Ms Conroy is about to quote are in euros per square metre. I am not asking her about that. I am asking whether the Irish people paying more than twice as much per bed as the two most expensive hospitals ever built represents a catastrophic failure of management.

Ms Tracey Conroy

It is difficult to make comparisons regarding hospitals because different parameters exist in different countries at different times.

It is not difficult. I am looking all over the world and at the most money any country has ever spent on a hospital, and I am obliged to conclude that we are spending more than twice as much per bed as the most expensive hospitals ever built. Is that a catastrophic failure of management?

Ms Tracey Conroy

I go back to AECOM. Its report concluded that in terms of cost per square metre, the new hospital was at the higher end but in line with similar projects. The cost of €6,500 per square metre matches international norms. A subsequent benchmarking exercise was commissioned by the HSE, with specialist external input, and it found that Dublin ranked second worldwide regarding tender cost inflation.

Ms Conroy may be leading up to an answer. I ask for the answer first. Is the answer "Yes" or "No"? Does Ms Conroy believe it represents a catastrophic failure or management?

Ms Tracey Conroy

I do not.

Does Mr. Sullivan believe that paying twice as much per bed as the most expensive hospital ever built represents a catastrophic failure of management?

Mr. Dean Sullivan

I do not either.

Ms Fionnuala Duffy

To come in from a service point of view, we can look at square metres and at beds. However, what is really important is the activity and service we will get for children through the capacity. As the CEO, Ms Eilísh Hardiman, outlined last week, while there may not be a significant difference in the number of beds from the bed stock in the current hospitals, what is significant is the volume of activity for children we can get through this new hospital. An increase in-patient activity of more than 16% will be possible with broadly the same number of beds.

The new children's hospital will have 473 beds. How many beds do we have at present and which are being replaced?

Ms Fionnuala Duffy

They are broadly similar. I think Ms Hardiman was going to provide the committee with the detail on the beds.

Broadly speaking, how many extra beds are we getting?

Ms Fionnuala Duffy

It is broadly similar.

Based on the current number of beds, the new children's hospital will have the same number.

Ms Fionnuala Duffy

However, it is a very different capacity.

Before Ms Duffy says "however", is that correct about the same number of beds?

Ms Fionnuala Duffy

It is broadly similar in simplistic bed numbers. However, to take one example-----

But the capacity regarding outpatients will be greater.

Ms Fionnuala Duffy

To stick to the beds, we have approximately 22 intensive care beds across the hospitals currently, whereas we will have 60 intensive care beds in the new hospital. That is a huge difference in the make-up of the beds. There will also be single rooms. As outlined briefly last week, one can get a lot more patients through a hospital that has single rooms because one does not have to wait for isolation facilities. From tots to teens, one can use every room and is not trying to cohort similar patients in wards.

It is the same number of beds but a better mix.

Ms Fionnuala Duffy

It is a far more efficient use of beds to get far more capacity through.

A response was given to the Chairman on the governance of this which would be worthy of The Castle by Kafka. We have the children's hospital project and programme steering group, the children's hospital project and programme board, the national paediatric hospital development board, the children's hospital group, the HSE, the Department and Cabinet. Ultimately, who is in charge?

Ms Tracey Conroy

I go back to what I said previously, which is that the roles and responsibilities of the various stakeholders, the build board, the Department and the HSE in respect of this project fall from the roles and responsibilities of those organisations set out in legislation.

Ms Conroy said all that.

Ms Tracey Conroy

It is an important framework.

It is, but the question of who is in charge is also important.

Ms Tracey Conroy

The children's hospital programme and project board oversees the entire project.

Who is in charge? Is the board ultimately in charge?

Ms Tracey Conroy

It is chaired by the Secretary General of the Department who is the Accounting Officer.

In the new phase of the project, post-2012 and following the decision in the Mater, the Government has been apprised at every stage.

Can the Government stop the works? Is the Cabinet ultimately in charge?

Ms Tracey Conroy

At every stage of the project since 2012, the Government has been apprised.

It has been apprised but who is in charge? We are also being apprised but we are not in charge. Who is in charge? Ms Conroy said the National Paediatric Hospital Development Board, chaired by Mr. Tom Costello, is ultimately charge of the project.

Ms Tracey Conroy

No. As set out under a statutory instrument, the National Paediatric Hospital Development Board has operational responsibility to build, design and equip the hospital and oversees the entirety of the project and programme because, as we have stated, it is not just about a capital project but rather the integration of the three existing children's hospitals and the provision of services. That is overseen by the children's hospital programme and project board, which is chaired by the Secretary General.

It is chaired by the same Secretary General who could not appear at this meeting because he is interviewing people. Is that correct?

Ms Tracey Conroy

He is on an interview board and he informed the committee about that when he received the invitation in December. He will appear before the committee next week.

Yes, but on a separate issue. Has anyone on the project and programme steering board, the hospital project and programme board, the National Paediatric Hospital Development Board or the children's hospital group been asked to resign over the additional €1 billion cost for not a single additional bed?

Ms Tracey Conroy

No, but-----

Has anyone been sanctioned in any way for the increase of more than €1 billion in costs without a single extra hospital bed?

Ms Tracey Conroy

I refer the Deputy to the decision the Government took in December on the need for an external review of the cost escalation and a review of the governance and oversight arrangements.

I understand, but my question is whether there has been any sanction against anybody on any of these boards, groups, committees or programme steering groups.

Ms Tracey Conroy

No.

In April 2016, the then Minister for Health and current Taoiseach, Deputy Varadkar, stated on the "Six One News" that the total cost of the project would be €650 million. He stated that included the satellites, VAT, a contingency for inflation and a general contingency for unforeseen events. In two years, the cost has gone from €650 million to more than €1.7 billion, which is more than €1 billion in additional funding. Yesterday in the Chamber, the Taoiseach confirmed that the €1.7 billion could increase even further.

Imagine if someone contracted a builder to build a nice house, where the agreed price including contingencies, inflation and everything else was €400,000. Imagine if the builder started work on the foundations but came back to the client two years later, stated he or she had done the detailed design, inflation turned out to be higher than previously thought and, therefore, the client would not get anything extra but rather the same house - with no extra bedrooms and no larger - and instead of costing €400,000 it would now cost €1 million. When the client paid the €1 million, he or she would pay twice as much per bedroom as the most expensive house of this kind that anyone has ever built. There is a guy in Sweden who built a house like this and it is the most expensive of its kind ever built. Per bedroom, the hospital will cost twice as much as his. There is not a man or woman in Ireland who would not ask what is going on and tell the builder to stop the work, take the workers off the site, lock the gates and do a full review of what has happened.

When were the Minister and the Department informed that the total cost had risen to €1.7 billion? When it was discovered that this had happened, which is the equivalent of someone agreeing a price of €400,000 for a house but being told that it would actually cost €1 million, did anyone suggest that things should be stopped while a review took place to figure out what on earth was going on?

Ms Tracey Conroy

After the Government's decision in 2017 to proceed with phase A, we put the new governance and management arrangements in place. I will address sequentially the escalation in costs that occurred after that. There was an issue of potential additional costs of €61 million, which was discussed at the first board governance meeting in September 2017. It was the subject of detailed discussion and monitoring from then until approximately August 2018. The factors behind the €61 million increase were discussed at the committee meeting last week and, therefore, unless the Deputy wishes, I will not speak about that.

No, the question specifically relates to the €1.73 billion. When did that figure emerge?

Ms Tracey Conroy

On 24 August 2018, the Department was advised of developments in ongoing negotiations between the National Paediatric Hospital Development Board and the main contractor regarding the guaranteed maximum price. At that stage, the National Paediatric Hospital Development Board was still in the process of negotiating the guaranteed maximum price with the main contractor. An indication was given at that stage of an escalation in costs and a potential increase in construction costs.

To €1.73 billion.

Ms Tracey Conroy

The conversation at that stage was about the construction costs relating to the hospital. The €1.73 billion covers the full programme cost.

When did the figures of €1.43 billion or €1.73 billion emerge?

Ms Tracey Conroy

The first indication was on 24 August 2018.

From the development board.

Ms Tracey Conroy

Yes, it was an indication of a problem and at the time the estimate was of the order of €200 million. The board was working through the process of negotiating the guaranteed maximum price with the contractor. From the Department's perspective at that stage, we were conscious that the board was working through the process and we advised the Minister immediately. We were cognisant that the build board was working to an end date, which at that stage was a date in November by which time the decision on the award of the contract would have to be made. If it was not made by that date, we would start incurring penalties. We knew we needed to discuss it with the Government in advance of that decision and we were working to that date. The build board was instructed to finalise the guaranteed maximum price and revert to the Department with a recommendation on the options.

When was a review commenced? It is clear that something had gone wrong. I know Ms Conroy does not accept that it is a catastrophic failure of management but this is the definition of a catastrophic failure of management. We appear to be spending an additional €1 billion for nothing. If a builder told anyone that it would no longer cost €400,000 to build a house but rather it would cost €1 million for the same house, the client would say "Stop" and start looking elsewhere. When was a review into how it had gone so badly wrong ordered?

Ms Tracey Conroy

The build board submitted its report to the HSE and the Department on the process to the guaranteed maximum price, which set out the confirmation of the guaranteed maximum price, namely, the overall outturn costs of €1.433 billion. That happened on 12 November. The Department was subsequently engaged in the process of drafting the memorandum to Government and engaging with the Department of Public Expenditure and Reform and so on in advance of a submission of the memorandum.

When did the review start?

Ms Tracey Conroy

Will the Deputy clarify what he means by "review"?

A review of what is going on. The cost rose from €650 million to €1.7 billion in two years. We have been told by the Taoiseach that a review of how it could conceivably have happened has been commenced. When did it start?

Ms Tracey Conroy

A number of reviews were undertaken in the context of even getting to the report in November to the HSE and the Department. I will ask Mr. Pollock to speak on the detail of this but, as part of the submission of that report, the build board commissioned external reviews from both Mazars and AECOM regarding both the process of the guaranteed maximum price and benchmarking the costs of the hospital with those of other hospitals internationally. The HSE also commissioned some external advice to feed into its examination of the options presented by the National Paediatric Hospital Development Board to the HSE and the Department. Due to the two-stage nature of the tendering process, the development board had a number of options which it considered. On the move to phase B, it could have decided the other option was not to move to phase B with the current contractor and to retender. The third option was to use an overall different means of contracting the project.

Did nobody look-----

Ms Tracey Conroy

They were reviewed in detail by the build board in the first instance and the recommendation was what was submitted to the Government. The HSE's external advice confirmed that it was the best option. That is what the Department used in its recommendation to the Minister and the Government in December 2018.

Ms Tracey Conroy

In a nutshell, the review started immediately after the build board submitted its final report to the Department.

I have a final question for the HSE and the Department. Our guests can give me a quick answer. Given what we now know, do they believe that the development board is up to the task? Do they believe changes are required on the development board?

Ms Tracey Conroy

I will reply to that. The build board is a competency-based board appointed by the Minister and-----

Obviously, it is clearly not a competency-based board. It is about to build the most expensive hospital per bed in the world. Clearly, it is not competent in what it is doing. That is why we are here. Does Ms Conroy really believe it is still up to the job?

Ms Tracey Conroy

It is a competency-based board. Its membership has with significant competencies, as does the executive team appointed by the Minister. The Minister reappointed the board for a term up to 2023. It is important to point out that we are moving into a different phase of the project in terms of construction. The Government has decided on the external reviews we have mentioned. Those reviews will certainly feed into consideration of any future appointments on the build board.

I thank Ms Conroy. Mr. Sullivan is responding on behalf of the HSE. Does the HSE have confidence in the development board?

Mr. Dean Sullivan

As Ms Conroy said, the HSE has commissioned a review, as requested by the Government, which will examine the reasons for the cost overruns associated with the construction. This will include the identification of the contributory factors and associated responsibilities so we can identify any potential weaknesses in personnel, governance structures and so forth for the future. The outcome of that review will allow us to reach a view on the question asked by the Deputy.

At this time does the HSE have a view on whether it has confidence in the board?

Mr. Dean Sullivan

The HSE has no reason not to have confidence in the board, until I have evidence to the contrary.

I can think of 1.73 billion reasons not to have confidence in the board, but I thank our guests.

I welcome our guests. It is obvious that there are grave concerns. Mr. Desmond stated that there is no doubt that the additional costs associated with the project are of great concern. I am sure the people sitting at home and the members here who are worried about their local projects and the knock-on consequences of this catastrophic overrun will take a massive amount of comfort from the fact that senior people in the Department are greatly concerned about the project. We are here to find out what, if anything, was being done to curb it. Mr. Desmond also stated, "we must have assurance that phase B of the construction project will be delivered within budget and timescale". I thought that was a joke, but apparently it is not. Who will be providing that assurance? Presumably, the Department is dealing with the same personnel it has been dealing with all along. There is no significant change in personnel. I share the view on what does and does not constitute competency in respect of the board, based on the actions and this overrun.

From whom will the Department get the assurance, particularly in view of the fact that it states that it must be assured that phase B of the construction project will be delivered within budget and timescale? Perhaps the witness could answer in two parts. First, there is why that assurance was not available initially. It is becoming increasingly obvious that senior people went into this project with a hands-off approach to spending, which is why we are here. Now the Department is concerned about the spending, which is welcome if a little late. However, it is going back to the same people to seek assurances on phase B. How will it assess those and why were such assurances not sought or given or why were they not part of the project in any way in the run-up to this?

Ms Tracey Conroy

I do not accept that there was a hands-off approach on the part of senior people involved in the project. There has been tight governance, management and oversight of the project. We are gravely concerned about the overruns. We will continue to seek assurances from the National Paediatric Hospital Development Board reporting up through the governance structures that we have outlined, that is, through the children's hospital project and programme, CHP&P, steering group and the board. There are lessons to be learned. Some of them have already been identified. The National Paediatric Hospital Development Board report on the guaranteed maximum price process concluded that a more robust early warning process during the design development phase was required. It is clear that with a number of the capital project's fundamental systems there were some issues relating to the cost and we are-----

I am sorry to cut across Ms Conroy but she must appreciate that a phrase such as "there were some issues relating to the cost" is what one says when one goes to the supermarket and accidentally buys a little more than one had intended. One has spent an extra five or tenner, but we are talking about €1 billion. There were slightly more than issues.

Ms Tracey Conroy

We have indications from the reviews that have already taken place that there were issues with the checks and balances in place. We have commissioned an independent external review of the cost escalation. That is ongoing and will be completed by March. The concern - and the Government's concern - is reflected in that commissioning. That is about identifying weaknesses which will be addressed in phase B. In the interim the build board has identified actions which it is taking in terms of ensuring it will protect the guaranteed maximum price. I will ask Mr. John Pollock to outline some of them.

Mr. John Pollock

One of the actions the development board took was to appoint Mazars to carry out a review of the two-stage procurement process. Some of the recommendations from that, which have been implemented, relate to the reporting structures between the design team and the development board. We were getting trending reports from the start of 2018 up to the middle of 2018 saying we were on budget. That was not correct. Those reporting structures-----

Can Mr. Pollock repeat that? The board was reporting to the HSE until 2019 that this was-----

Mr. John Pollock

No, our design team.

Is it the HSE's design team or the hospital's design team?

Mr. John Pollock

It is the development board's design team.

The development board's design team up until very recently, in the last number of days, was reporting that this project was going to be on budget. Several budgets were mentioned. Is it the Taoiseach's budget, when he was Minister for Health, of €650 million or some other budget? Clearly, the board was not adhering to any budget. Let us be honest. What budget is it that the board was told it was going to be on budget for?

Mr. John Pollock

When we received approval for our business case in April-May 2017 it was the €983 million approved business case. That was approved by the Government.

In late 2017, the issue of the sprinklers, the statutory issues with Grenfell and two of our contractors getting into financial difficulties with the urgent care centres at Connolly Hospital Blanchardstown and Tallaght Hospital were identified. Consequently, as Ms Conroy said, we apprised the HSE and the Department in late 2017 of the €60 million increase in costs at that stage. Through 2018, as our design team was concluding the second stage, phase B procurement process, it reported to us on a monthly basis. Up until the middle of 2018, with the exception of the €60 million in late 2017 pertaining to the issues I mentioned earlier, it was reporting that we were on budget. In August, our design team apprised us of the €200 million issue of which we apprised the HSE and the Department. At that stage, we said that we needed to conclude the process before we could make any recommendation on what the final price would be. In parallel, we undertook to look at alternative options because we did not have to appoint the contractors; we had the option of not appointing them. We looked at alternative options of procurement and when the design was fully completed, we could have gone back out to the market to retender it. We looked at that option and that would have added an additional €300 million to the costs that are now being reported and would have delayed the project by up to two years. Our board made the recommendation to the Government that the current procurement strategy remained the right option and that the current contractor should be appointed for phase B.

It is lost on me that this remained the right option. According to the Department's statement, the Government has approved the commissioning of three new reports. One report in particular identifies the existing oversight arrangement between the Department of Health, the HSE and the National Paediatric Hospital Development Board. Last week at the committee, we had extensive discussions about the reporting structure and many words were spoken about that but we are not any the wiser as to where the buck stops because we got a series of organisational charts presented to us demonstrating various committee structures. However, one of the committees was reporting that the design committee would be on budget but as Mr. Pollock has outlined, it was revising the budget as it was going along. It is easy to always be on budget if that budget is constantly being revised but nobody set a spending limit on it.

Three reports were commissioned before any of the new reports or any of the other reports that might have been commissioned by the board. Was Ms Conroy aware that since 2011, the Department and the HSE have commissioned and paid for three separate reports on the new national children's hospital? One in particular, called the evaluation of costings for the national children's hospital, was commissioned and paid for in 2012 to 2013. Does Ms Conroy want to outline to us what was in that report?

Ms Tracey Conroy

I am not familiar with that report.

Does Ms Conroy understand why that is a problem? She is telling us the Department is going to commission three more reports but here we are a couple of years after a report was commissioned and paid for and presumably made recommendations on a project of this nature and size and Ms Conroy is not aware of that report-----

Ms Tracey Conroy

Was it in 2012?

-----so I am saying to her that the Department commissioning three more reports when reports have already been commissioned and there appears to have been no learning from those.

Ms Tracey Conroy

Is the Deputy referring to the Dolphin report?

No it was done by MCA Architects.

Ms Tracey Conroy

It was before my time in this position but it sounds like it might be a report that informed Dr. Dolphin's report.

It is before the time of a lot of people but when a project of this nature is being embarked upon, I would have thought that a very simple thing to do would be to amass whatever knowledge was there already. I am making the point that three more reports are being commissioned and paid for. I do not know how much they will cost but I assume that Ms Conroy will be in a position to tell us how much they will cost unless it is another open-ended process where the costs will be revised as it goes along. If Ms Conroy cannot tell me what they will cost, how are we to believe that we will get value for money from any of this because reports that were commissioned will not now be referenced? They are consigned so more reports will be commissioned. Sometimes it sounds like the commissioning of a report is an easy answer when the Department does not want to answer a question. Three more reports are going to be added to the other reports and there has clearly been no learning from the other reports so how much will these new reports cost? How can we have any confidence that anything that comes out of them will be implemented or even remembered in a couple of years' time? Is there a maximum cost set for these reports? There has been no maximum cost for any other area so I would not be surprised if there was not. When will we hear from them? I know that one is due in March. How will they be implemented? To whom will the reports be delivered to ensure that they will be implemented? That goes back to the question of governance, namely, where does the buck stop in controlling the spending at this stage?

Ms Tracey Conroy

There are a number of layers to that question. On the report the Deputy mentioned, as I have said, I am not familiar with it but we can come back to her with detail on that. As a frame for the answer to this, it is important to say that at every stage in this process, the build board, the Department and the HSE were operating within approved budget limits approved by the Government at each stage and that was on the basis of approved project briefs in 2014, 2015, 2016, 2017 and in December 2018 that reflected the stage at which the project was at each time.

On the new external reviews which the Government has requested in the context of the approval to move to phase B, just one of them has started, namely, the external review of the escalation of costs that has been commissioned by the HSE. Mr. Sullivan will be in a position to advise us on the exact costs of that. The other two reviews have not yet started. The second one on governance and oversight will start once the first has been completed. The third review on the scenario analysis of potential risks has also not yet started but it has been agreed in principle that it will be undertaken as part of the review of the cost escalation.

Mr. Dean Sullivan

As Ms Conroy mentioned, the PricewaterhouseCoopers, PwC, review began this week and it is due to be completed by the middle of March. The overall cost envelope for that is in the order of €450,000 and up to 250 days. That will obviously depend on the way the review pans out but that is the maximum for that work and that is in the context of the scale of what we are talking about today.

Mr. Sullivan should be aware that we are all aware of the scale of what we are talking about today.

Mr. Dean Sullivan

We also need to understand whether there are lessons. Deputy Donnelly asked me earlier for my view of the development board and everyone in this room needs to be assured that the development board is able to effectively oversee the new phase of this process in terms of construction.

As we sit here today, are there questions in Mr. Sullivan's mind about the ability of the board to oversee phase B that he requires assurance on and that he is hoping that PwC will give him assurance on for €450,000?

Mr. Dean Sullivan

As it sits here today, the development board itself has flagged up issues around oversight of costs and projected costs during the last year. Mazars, the auditors of the development board, has flagged up issues around oversight, linkages and so on, so it seems entirely reasonable to me and Government has requested that we would now seek to secure definitive advice and a definitive position as to whether the structures, processes and so on that are in place within the development board are fit for purpose in the context of the very important phase we are moving into. As Ms Conway has said, it is equally important that at a higher level, we are satisfied that these-----

The board itself has concerns about the oversight and Mr. Sullivan shares those concerns.

Mr. Dean Sullivan

There are lots of boards here. I know the terminology is quite clunky around all of this-----

I am talking about the National Paediatric Hospital Development Board, so we can start with that board.

Mr. Dean Sullivan

Yes, it has identified in its report-----

It has an issue with its capacity to exercise oversight.

Mr. Dean Sullivan

No, it has identified learnings from the past year or so that it has now taken steps to address.

Mr. Sullivan also knows that those sorts of learnings come under the heading of closing the stable door after the horse has bolted because this money has been spent now.

Mr. Dean Sullivan

It is not about money having been spent now. No money has been spent outside of budget limits or budget authorisations.

But it has been committed.

Mr. Dean Sullivan

This has now been committed with Government oversight. It was not that money was being spent for which there was no cover. It was that the initial forecast of required expenditure levels was lower than that which has turned out to be required.

Okay. The shorthand for that is a cost overrun, I suppose. Last week we were advised that €90 million of the overrun will be incurred due to the project running over time by nine months. Every month it runs over, that is a cost of €10 million which, for the avoidance of any doubt, is €320,000 a day. That may seem like a small amount given the billions we are talking about, but it is really not. What are the funding implications if this project is not completed on time? The deadline has been moved on more than one occasion, as Mr. Sullivan will be aware. There is absolutely no disputing it. The deadline is fluid, the cost appears to be very fluid as well, as indeed does the oversight and everything else that goes along with it. What are the funding implications-----

That will be the Deputy's final question.

Yes. What are the funding implications if this project runs over?

Mr. Dean Sullivan

I will ask Mr. Pollock to come in to supplement my response. The first thing I would say is I have no expectation, and I know the Government has no expectation, that there will be any overrun in terms of the delivery date for this project, or indeed any overrun in terms of costs not being within the budget now set, other than insofar as that is allowed for within the contracts between the development board and the contractors in terms of things like hyperinflation and so on. There is no expectation of overruns on either of those other than that. Mr. Pollock may wish to comment.

Mr. John Pollock

This again goes back to two-stage procurement. One of the things where we wanted certainty prior to the instruction for the phase B works was certainty on the cost of those works. With traditional procurement, the model is that one has four years of adversarial interaction and the costs creep. We have now got a fully designed building with detailed specifications. The price has been determined from that and we have cost certainty prior to the instruction to award those phase B works. The project now gets completed two years earlier than would have been the case had we taken a different procurement route.

Mr. Pollock will appreciate that is not much comfort in the context of a massive, catastrophic overrun on spending, which we know will have implications for other projects at a time when capacity within our health service is critically low. Mr. Pollock will be aware of that and that the knock-on consequences of this overrun will be paid for by other local projects. I hope I will have an opportunity to get back in on that.

I thank the witnesses for their presentations. I have a question for Mr. Sullivan. We are talking about a time delay. Is there a penalty on the contractors if at some stage in the future there is a time delay in their delivery of the final project?

Mr. Dean Sullivan

I will ask Mr. Pollock to respond, if I may.

Mr. John Pollock

Yes, under the contract there are liquidated damages.

Is there a set date by which the project must be completed and a penalty if that date is not met?

Mr. John Pollock

Yes, there are a number of dates set in the contract with the liquidated damages attached. That is all as originally tendered back in 2016.

Okay. I will go back to the start in respect of this project. The statutory instrument setting up the original board is dated 2007. It now looks like it will be 2022 when it is finished so we are talking about a 15-year timescale. I was wondering whether the HSE and the Department have learned anything from this process. Initially, we wasted five years between 2007 and 2012 when a site was picked but An Bord Pleanála turned down the final planning permission, so we had to start from scratch again between 2011 and 2013. Have we learned anything from that as regards forward planning? Every hospital we build seems to take an enormous amount of time getting from the initial discussion to turning the key and opening the door. Can we set in place a process for dealing with these projects? We do not seem to have a structured process in place. Is this being examined by the Department and the HSE in respect of new projects?

The second issue I want to touch on is that there are to be 6,150 rooms in this hospital. My colleague, Deputy Donnelly, seems to have focused on the number of beds rather than the overall project itself. In Cork, we opened a brand new maternity facility more than 13 years ago with a theatre for gynaecology services that still has not been opened. Obviously there are three hospitals feeding into the design on this and they were looking for all of their requirements. Is there some duplication in respect of the overall size of this project? Will we have the same situation as we have now in Cork? We may open this project in 2022 and then ten years later find that part of it is not properly in use. I am wondering if that process was looked at. Each of the three hospitals, like everyone here, will have fought its corner. Was that really analysed? We are now talking about a huge project of 6,150 rooms. I know other people will just focus on the number of beds but it is more than beds. It is about rooms. From last week, I understand something like 141 outpatient departments will be running at any one time. Will there be duplication and will we end up with facilities lying idle? Are we satisfied that every part of this building will be fully operational from the day it opens? Obviously it will be a phased opening and will not be all in on a single day but two years from opening, will every aspect of this hospital be fully operational? I hope we will not have the scenario that we have in Cork. This is not just in Cork but in other hospitals around the country where facilities are lying idle because there is not funding available for staffing or to set them up.

Mr. Colm Desmond

In general terms I agree. We have an obligation to plan for all stages of project implementation to ensure that we do co-ordinate the construction, as well as the necessary staffing and facilities. That is a significant challenge with such a quantity of the health infrastructure and estate that needs to be upgraded from what historically was perhaps a very varied base, albeit with some very big successes in certain areas in recent years. This is the first major significant hospital facility bringing together three hospitals. It is of its nature a very significant project anyway and it brought challenges with it. My colleagues can deal with the historical issues the Senator raised regarding the earlier phases of this. We deal very closely with our colleagues in HSE estates in respect of what we can negotiate with the Department of Public Expenditure and Reform each year regarding the capital envelope. We have to operate within that each year and, within that, we then consider what is actually required from a contractual point of view and what it needed from the point of view of policy development so that we can meet those requirements within the funding available to us. It is important in that context that we take a longer-term view and the national development plan is providing us with that context. The Senator mentioned, for example, the hospital in Cork. I presume he is referring to the elective proposal.

Mr. Colm Desmond

That is a proposal, as for the other centres, that needs policy consideration at this point in order that we are clear on what services and facilities we do need and where they need to be developed to complement gaps within the urban centres identified. We can then move to the various stages where we can actually ensure we can fund that from the national development plan allocations, which will be increasing in the later part of the plan as published. I am just acknowledging the point the Senator is making that we have a significant number of issues we need to balance each time in respect of the planning for major health facilities, as well as keeping the existing infrastructure and other day-to-day type facilities up to a standard that is acceptable.

Maybe my colleague would like to deal with the history of the children's hospital.

Ms Tracey Conroy

Senator Colm Burke is right about the children's hospital itself. This project has had a chequered and difficult history. We have been talking about building this national children's hospital for decades. Lessons were learned in the context of the project's previous history, particularly leading up to the failure of the planning permission at the Mater site. Those lessons were learned and addressed in the appointment in August 2013 of two competency-based boards; the National Paediatric Hospital Development Board, with the competencies required to design, build and equip the hospital, and what was then the children's hospital group administrative board, which acted as the client for the build board and was responsible for planning the integration of services. That has been known as Children's Health Ireland since the enactment and part-commencement of the Children's Health Act 2018.

While I acknowledge I am speaking in the context of significant cost overruns that are of grave concern, in fairness, if we chart the history of the project from the appointment of those boards in 2013 to where we are now, there have been very significant achievements and progress in the timelines of the project. I refer to the design, the key milestone of the achievement of the planning permission and the start of construction since the Government decision in April 2017. All of those timelines are now within parameters. The build board is on time in respect of completing phase A of the project shortly. Phase B will have commenced on site by the end of this month. Mr. Pollock will correct me if that is wrong. The project is on track where the outpatients department, OPD, and urgent care centres are concerned. We are looking forward to completion of the Connolly hospital facility in spring of this year and an opening in July, as well as an opening at Tallaght Hospital in spring of next year. They are very significant milestones.

The enactment of the Children's Health Act 2018 and the establishment of Children's Health Ireland are very significant achievements. We went from having three voluntary children's hospitals, which came together and worked with the Department in a highly collaborative fashion. They practically wrote that legislation with us. It is really elegant legislation that achieves a good balance between accountability and authority and will oversee a radical transformation of children's health services in this country. They are the lessons learned on the project to date. We need to continue to learn lessons, however. The external review on the cost escalation will not just have implications for this project. It will also have learnings for other capital projects.

The question I asked concerned the children's hospital as currently proposed and what was proposed for the Mater. What is the difference in capacity? What change has been made in that? For instance, were 6,150 rooms envisaged when we were talking about the Mater project? Have we reached a stage where everyone who fought their corner from the three hospitals got what they wanted, rather than looking at the overall context?

Ms Tracey Conroy

The decisions on the scope and scale of the project were informed by detailed population health planning, some of which was discussed at the committee last week. The committee has received some documentation since then. In relation to the differences between the Mater and the hospital as it now is, I might pass questions to my colleague, Ms Fionnuala Duffy.

Ms Fionnuala Duffy

It is important to note that from the outset of this project throughout its long history we have been very concerned to get it what I call "right-sized", to ensure it can actually deliver and meet the demand for children's services in the future. That will mean a gradual ramping-up and phased opening of services for this hospital. That is the appropriate thing to do. The activity and capacity planning started as far back as 2007 in order to get it right-sized. That has been continuously refreshed and amended, as my colleague has said, with a view to demographics and, more importantly, the changing clinical practices and the model of care that is right for children in this country. That has informed the capacity. In fact, rather than having idle capacity we were more concerned with having sufficient capacity in this hospital to meet the demand. Two things were really important in that regard.

The first of those was to gradually ramp up the staffing, which we have been doing. Over the last few years and in the years leading up to the opening of the new hospital, we have been investing in expanding the workforce from a revenue perspective. That is particularly apparent in 2019. The HSE's service plan includes significant investment in expanding the workforce in order that we can open the urgent care centre in Connolly hospital this year and plan for the opening of the Tallaght Hospital facility next year. It is very important that we ramp up that workforce because attracting and retaining the calibre of staff we need may be a limiting factor. We need to do that incrementally.

We found it equally important to avoid excessive demand on this hospital from the regions. Starting this year, we have been investing revenue in expanding the regional centres for paediatric care in Cork, Limerick and Galway. We are working to ensure the Dublin hospitals work very closely with them to keep providing children and families with services close to where they live rather than obliging them all to come up to the new hospital and the existing services. There is a lot of activity and workforce planning happening to get the capacity right, to get the regional capacity right and to attract and build up the workforce well in advance of the opening of the hospital.

I would like to go back to forward planning. It was said to me recently that if we carried out forward planning for building during recessionary times we could build at a far cheaper cost. We do not seem to be able to do that with a hospital service. We are going from year to year. On the Cork project, there is a need for an elective hospital. We face an increase in population of 130,000. There has been no consultation at all with the voluntary hospitals in Cork on how that plan is to go forward. Will it be it next year, the year after or in five years that this consultation will start? When we talk about forward planning in the HSE and the Department, what engagement is currently in place on forward planning for projects identified under the national development plan? What engagement has already started so that we do not end up with the same scenario as with the children's hospital? I saw a tweet this morning saying it was 31 years ago when we first thought about the national children's hospital. Where are we with that, both in the Department and the HSE?

Mr. Colm Desmond

The Department recognises that there is a need to plan for the elective facilities. At this point we need to make sure that the policy guides the location of such facilities in each of the centres, including Cork. It is a question of the learning we will achieve from the points made by my colleague, Ms. Duffy, with regard to the particular needs. That will inform-----

To date there has been no engagement.

Mr. Colm Desmond

In fairness it was always envisioned that it would take place towards the middle of the national development plan because there are significant new departures that derive from the needs identified in Sláintecare, for example, and the overall consideration of capacity. It is certainly a significant area of planning that requires early consideration, I agree.

Will it be 2019, 2020 or 2021 before that engagement starts?

Mr. Colm Desmond

We will get that engagement going as quickly as we can. Our priority at the moment is to settle the 2019 plan and to get our envelopes for 2020 onwards. At that stage we will have a greater indication of what our capacity will be to begin the initial planning, which also has a cost.

Ms Tracey Conroy

I would like to comment briefly on the elective hospitals. Regarding the children's hospital there has been huge collaboration and engagement with the three existing children's hospitals on the design, scope and progression of the capital, as well as the integration programme. Any decisions that have been taken by the Government around capital projects on which we have been engaged as a Department in recent years have been informed by a very strong evidence-based policy. I refer to the maternity strategy and the decisions taken by the Government on the principle of trilocation of maternity hospitals with acute hospital sites. That was all done in collaboration with the key stakeholders. We are engaging with the National Maternity Hospital and St. Vincent's University Hospital. Decisions have been taken by the Government on the provision of maternity hospitals. The moves of the Coombe and the Rotunda hospitals, as well as a Limerick maternity hospital, are all included in the national development plan. There will be detailed consultation with all of those hospitals in that regard.

We have a national trauma strategy, which was written by the key clinicians, patients and hospitals involved and is now being implemented by the HSE in a groundbreaking consultative fashion. Mr. Sullivan may want to speak about this because there have been recent consultations in this regard. We have also published a national cancer strategy that makes recommendations on capital infrastructure, which will also be the subject of detailed engagement with the hospitals concerned. The elective hospitals, including those in Cork, will be no different. A process is required on decisions on policy in the first instance, then engagement with the hospitals on that policy and engagement on implementation and timelines. I agree that when we look at the scale of what is proposed in the national development plan we need to improve the system to fast-track the delivery of these projects. There will be lessons in the reviews in this regard.

If people wish to do so we will take a break at 11.45 a.m. but there is also the option to work through.

Mr. Colm Desmond

We will work through.

That is a hint to me. I welcome and thank the witnesses and my colleagues for the detailed scrutiny and questioning. At a public level, and especially at the level of families who have children with serious chronic conditions and the many organisations and other interests that support them, this is a frightening scenario. I do not say this to be difficult but it is. They feel this is a runaway horse. Whether or not it is, it is the feeling people have in their guts about it. It is important to make this statement.

Ms Conroy stated several times there are lessons to be learned and this is very helpful. It is important these lessons are put in the public domain as quickly as possible so we can have a good open discussion and consideration of them. This is one challenge I am putting to the witnesses. One learning might be for us to be forensic outside the project building element. Ms Duffy made reference to staffing capacity and planning and this is one example. The cost of the capital project will be what it will be, and certain decisions have been made. I know it is an awful political statement but we are where we are. None of us likes where we are.

We also need to start looking at how the hospital, which is not just a building on a piece of ground, will link with, for example, a local GP in Clare, people and families, and how it will be able do more and have support. There are issues outside of health with regard to the conditions in which people live, such as housing, their incomes and their remoteness or closeness to services, support and education. I strongly underline this.

More specifically, I want to discuss Mr. Desmond's opening statement. When dealing with the capital plans he stated seven projects are on the move at present. I will take one, the redevelopment of the National Rehabilitation Hospital in Dún Laoghaire, as an example. Since I started working in the Irish Wheelchair Association as a young fellow in 1980, I have constantly heard about capacity and development issues. Ten or 15 years ago there was talk of having another unit in Cork. Last year, we had bed closures. I cannot remember the detail but in the middle of last year there were also issues with a consultant on the children's side. There are people in that hospital, and I have met some of them, who are there not because they need to be there but because they cannot be at home. In recent times the best thing we have been able to do is put them into a less acute residential or nursing setting rather than have them at home. I am simply making the point. We get best value when we look at what is happening around and outside as well as at the dysfunctions and issues. I am interested in any comment or remark on this.

How will planning identify where the problems are? All of us are familiar with the HSE stating it will be in a position to look at the support needs of a person when he or she gets a house while the local authority states that until the HSE is able to tell it the support package is in place it will not move on the housing side. This is happening today and will happen tomorrow as well as having happened yesterday. It is not just history. Many issues impact on this. We will have retrospective consideration of these matters if we do not look at parallel issues now.

With regard to the governance structure of the hospital, I want to underline the fact it is about what happens outside as well as within the operation. It is not the actual eye of the discussion we are have this morning but it is about value for money and getting the best bang for our buck for the people and families who need the services. I would welcome any remark from our witnesses on this and I welcome the fact the committee will specifically look at this issue.

Mr. Colm Desmond

I cannot disagree with the Senator on the priority we would like to see on care being provided to individuals and individuals being accommodated, if that is the appropriate issue, closest to where their need is and, ideally, in a community or primary care setting. The focus of the hearing has, understandably, been on the scale of the particular project under discussion. I mentioned the National Rehabilitation Hospital in my opening statement. There are also the primary care programme, community nursing units, disability and other work of which the Senator is aware. The focus of Sláintecare is entirely to support this. The Minister supports this and an implementation plan is in process. Deadlines are in place with regard to when it will move forward. Our ideal would be to have equality of development of the most appropriate accommodation settings for individuals. I agree the National Rehabilitation Hospital has a history. It arose out of various reports on rehabilitation so at least the development of the hospital was based on evidence. I agree with the Senator that we are learning from the need to tee up these processes in a more sequential manner. Sláintecare has an emphasis on all the issues raised by the Senator.

I can comment only on the health sector. Obviously, other matters, such as the housing and employment issues mentioned by the Senator, are wider societal challenges for the Government. He is aware of the very good collaborative work done between the health sector and other Departments on homelessness and housing. They are small steps but they are significant. The housing strategy recognises the need to collaborate with regard to people with disabilities. There is also the decongregation programme as well as the challenges posed by the need to adhere to certain standards.

The focus has been on the big project but we do not lose sight of all the issues raised by the Senator. There is significant acceptance and agreement in the health sector on the need to give equal emphasis to what the Senator has described.

Mr. Desmond mentioned decongregation. I do not know what the target is for this year, perhaps it is between 150 and 200, but at the same time more than 100 young people with disabilities will go into nursing homes.

He mentioned also that he can speak about the health side. Last year, Mr. Jim Breslin, Secretary General in the Department of Health, when attending a meeting here, named issues outside of the Department that impact on the efficient delivery of health, such as housing, education and various other things. There is a problem when representatives of Departments or public entities say what they can talk about. I remind people that the Department was involved, along with this committee, the Joint Committee on Education and Skills and the Joint Committee on Health, in the compilation of a report on people with disabilities last year, which was groundbreaking. We have to find a mechanism as a Government, and as a State, to be able to consider things that are outside of one entity.

Ms Tracey Conroy

I will respond to the first question about the publication of external reviews and the request to have them included.

My question concerned people learning from this.

Ms Tracey Conroy

Yes. The learnings will be captured. We intend to bring them to Government and then publish them.

What is the timeline?

Ms Tracey Conroy

We have a timeline for March. We expect that the reviews will be conducted expeditiously. Publication will be this year and I imagine it will be in the first half of this year.

What about previewing, as distinct from reviewing, consideration being given to how the hospital, the facility and its campus interact with the rest of the Department and other public services that people need?

Ms Tracey Conroy

I could not agree more with what the Senator said about the matter.

Is work being done on that aspect?

Ms Tracey Conroy

Yes. There is a huge focus, which is necessary, on the capital project.

Ms Tracey Conroy

We want the capital project to act as a lever to drive a radically reformed paediatric model of care, which is all around a network of services. Therefore, the children's hospital will act as a hub and support an integrated national network for paediatrics. One will have much strengthened and interconnected roles at a regional level in Cork, Limerick and Galway, and at a local level. That is not just for the 17 paediatric units located around the country but in the non-acute side as well. That is the core aspect of the paediatric model of care that we are delivering here.

Let us consider the national policy that the Department has brought to Government and published in the past few years. Whether it is the national trauma strategy, the national maternity strategy, the national cancer strategy or work that is ongoing in Sláintecare, it is all about ensuring that we provide care at the right level, at the right time, in the right place, and as close to home as possible. Even though the national trauma strategy was developed and published by the acute hospitals division in the Department, it is much more about rehabilitation than about acute services. It is a key part of the strategy. I know that the HSE is very conscious of that when implementing the strategy.

I could not agree more with the Senator's statement that the Department needs to interact with all sectors to ensure there are better outcomes and experiences for patients. That agenda is at the core of the Healthy Ireland policy. There is a huge amount of collaborative work going on between the Department and all Departments, agencies and sectors to promote that agenda. There is a huge amount of work going on in the context of the children's hospital in that regard with everybody from the Dublin City Council and all kinds of agencies. I know Mr. Pollack is very fluent on this in terms of describing how the National Paediatric Hospital Development Board, in progressing the capital project, even at this stage and prior to completion, is engaging with the local community to harness the economic benefits of the project, from a health and other points of view.

Yet, it is my experience and I would say is the routine experience of other Members of the Oireachtas, that one public body, in the way that it does its work, trumps another body so there is a nil-all draw. One body will claim it cannot provide housing until another body says it will provide personal care supports but then it will claim the supports cannot be provided until there is housing available. That is just one example of the day-to-day frustrations and that mindset needs to change. It is 11.45 a.m. and I have said enough about the matter.

I welcome all the witnesses here this morning. I wish to make a number of comments and ask questions. I thank the officials from the Department of Health and the HSE for coming here. The committee extended an invitation to the Department of Public Expenditure and Reform but no officials from that Department are in attendance. Their non-attendance is akin to staging a production of "Hamlet" without the Prince of Denmark. Their non-attendance is not the fault of the witnesses present. I wish to put it on the record how disappointed I am that the Department of Public Expenditure and Reform decided not to send any officials to the meeting.

As we all know, a quarter of the population are under the age of 16. Without doubt, they deserve the very best of services but the overspend on the national children's hospital is very worrying. If this matter was not so serious it would be funny. I listened to what the witnesses said this morning and it seems the costs have snowballed. Plans were made but the hospital will cost so much more than originally planned. Would the witnesses define the costs as an overrun or an underestimation? Both aspects are very serious, unacceptable and unprofessional.

Many members have watched the television programme "Room to Improve" where the architect Dermot Bannon comes up with great ideas for house extensions and improving houses. On the programme, he has a very able quantity surveyor who manages the project and ensures that he does not do anything that was not part of the original contract. The hospital is a very big plan so surely there was someone in a similar role who should have said, "Stop", reminded people that the expenditure was not part of the original agreement and asked people to curb expenditure. Who signed off the original contract? What name is on the contract? Is the initial contract not binding? What projects will be delayed due to the overspend? What are the knock-on effects of the overspend? I am a great believer in looking forward and accept that the past cannot be changed. What lessons can be learned from this debacle?

I wish to ask a few questions about the opening statements. Mr. Sullivan said that an independent review is ongoing and will be completed in March. Does he think that completion time is acceptable? I believe it is too long to wait, particularly after he mentioned how much the project will cost. Let us remember that taxpayers' money will be used to pay for the building project. Taxpayers will also pay the extra cost for the review. Does he see it as value for money?

Mr. Desmond said that there is a "disturbing escalation in cost", which is putting it mildly, and that "the Government decided to proceed with the project". Can he tell me the exact date the Minister for Health and the Taoiseach were made aware of the "escalation in cost"?

Mr. Desmond mentioned also that there are different health capital projects under way. I especially welcome the fact the plans include the radiation oncology unit in Cork as it is very difficult for patients to travel from Cork to Dublin for a treatment due to the distance involved. Can he outline the status of that project, please? If he does not have the information to hand then he can forward it to me.

Mr. Colm Desmond

The Deputy has asked a wide range of questions, some of which are appropriate to other colleagues here. In general, it is quite clear that we are operating in quite a busy and charged construction market. That is a challenge for everybody in terms of planning, design and bringing forward projects. Obviously, it is a factor here in terms of the issues that have arisen, which were described earlier.

In terms of who signed off, I refer that question to my colleagues here. In terms of the other projects that are under way, we have to work on an annual basis with the Exchequer allocation we have.

I mentioned in my statement the significant projects that are under way and contractually committed. There are clearly other projects that are considered desirable and are in the pipeline for consideration. We are working closely with HSE colleagues and we will be guided by future envelopes that will be advised to us by the Department of Public Expenditure and Reform from 2020 onwards so we can make more definitive allocations across the full range of the projects. We are subject to the process involved in that case. With regard to radiation oncology, the programme continues in 2019. The CUH unit will be equipped, commissioned and become operational by the end of 2019. That is the timeframe given at this point in time. The enabling works contracts to facilitate the construction of the unit in Galway University Hospital campus has commenced and construction of the main building will commence before the end of 2019. There is a phase 2 facility in Beaumont Hospital and the design team has been appointed for it. The design will be progressed in 2019. My colleague, Mr. Curran, from the HSE might give a more detailed update but that is the essential position on those major projects. There are some specific questions on signatures. Will Ms Conroy address that?

Ms Tracey Conroy

I will ask Mr. Pollock to answer the question about who signed the contract.

Mr. John Pollock

The construction contracts were signed in August 2017 between the NPH, which was the client for the build, and the three contractors, BAM, which was the main civil engineering structural contractor; Jones Engineering Group, which was the mechanical contractor; and Mercury Engineering Ireland for the electrical contract. We signed contracts with all three parties. When we signed contracts in August of 2017 for the phase A works, which are the below ground basement works, that is what they had an entitlement to until we completed the phase B works which are the above ground works for the full 6,000 rooms. They did not have an entitlement to get that contract. Having concluded the process of determining the cost for it, we went back to Government to say our recommendation was to award it to the same three contractors but there was an option not to award it to them. It was not binding on us.

The next step was not tied in.

Mr. John Pollock

That is correct.

Ms Tracey Conroy

I will come in on the question about when the Minister was told, which was the subject of some discussion earlier. At each stage of the process when it became clear or when the build board indicated an escalation in costs, the Minister was apprised. We referred to post-April 2017. An issue arose in September 2017 with regard to potential additional costs of €60 million. The Minister was apprised as soon as the Department became aware of it. The issue was the subject of detailed discussion, including with regard to mitigation measures and the use of contingency funds and so on, between the steering group, the CHP&P board and the build board from September 2017 to August 2018 when the further indication of the escalation of costs was indicated by the build board to the Department. That was on 24 August 2018. The Minister was apprised on 27 August. In other words, 24 August was a Friday and the Minister was told on the Monday. I will emphasise that it was an indication of escalation of cost. At that stage, the build board was in the process of finalising the guaranteed maximum price for the contractor. It was going through that process. The Department advised the Minister of that. The build board then went through its process of finalising the negotiations, having a guaranteed maximum price agreed and making a recommendation, which it did in November to the HSE and the Department. It made a recommendation on the guaranteed maximum price and the next steps and whether the build board would proceed with phase B with the contractor.

So he was aware of this.

Ms Tracey Conroy

He was apprised at each step along the way and once we had the final report from the build board, we engaged, in the normal course of events, on a draft memorandum for Government with the Department of Public Expenditure and Reform. Subsequently, it was considered by Government on 18 December.

Is the Deputy happy with that?

I will call Deputy O'Connell followed by Deputy Durkan, which will complete questions by committee members.

I thank the witnesses for coming in this week to speak to us. I have a number of questions. What happened to spark the establishment of the additional board in May 2017? Ms Conroy just spoke about April 2017 when the overruns became apparent. I spent a lot of time reading the opening statements last night. It took me a lot of time to work out. Maybe it is not fair to say but it strikes me that it dawned on the witnesses in April 2017 that things were not going right, that the board was not fit for purpose, so instead of discharging the board, they decided to create another layer, which is typical of the HSE, to my mind. It added another layer on top. Can anyone tell me what happened? Was there a report? Was there an investigation? Was there anything internal that led to the establishment of a new board in 2017?

Ms Tracey Conroy

I will answer that question. What happened in April 2017 was the Government took the investment award decision for phase A of the project. The proposal by the Department to the Government and then the agreement by Government of the revised governance arrangements reflected the new stage of the project we were moving into. In other words, we were moving from what had previously-----

Ms Tracey Conroy

-----been design stage to-----

Ms Tracey Conroy

-----expenditure of public funds.

I understand. At the outset-----

Ms Tracey Conroy

It was an acknowledgment that we needed more robust governance arrangements in place to reflect that. It is not just about the capital project. It is also about the need to prepare for the integration of the services to move into that.

So it was not a surprise. Ms Conroy is saying this was planned. In a sense what she is saying is - perhaps I do not understand her - that a new board was established because the HSE had moved into a new phase and, therefore, the existing board had run out of time.

Ms Tracey Conroy

No.

So what is Ms Conroy saying?

Ms Tracey Conroy

The role and responsibility of the national paediatric hospital development board did not change. It was established by statutory instrument in 2007 as a competency-based board. It still had its role to design, build and equip the hospital. What changed was the overarching governance and management arrangements above that.

Why did that change?

Ms Tracey Conroy

That changed because there was a recognition by the Department of Health-----

What led it to that recognition?

Ms Tracey Conroy

It was a recognition that we were moving into a new phase of the project. Up to then it was about designing and agreeing the scope. In April 2017, Government agreed the investment award decision and it was a reflection of the fact that money was now going to be spent on this project and construction would start-----

I refer to 2007 with the establishment of the national paediatric hospital development board and the brief. When I look back at the documents, it was charged with planning, designing, building, furnishing and equipping. At some point it was decided we would not worry about equipping or furnishing and in phase B we would have to engage another board to deliver that.

Ms Tracey Conroy

No. The role of the build board has not changed at any stage in this process. Its overarching role set out in statutory instrument under legislation to design, build and equip the hospital has remained the same. The revised governance and management arrangements that were put in place post-April 2017 reflected the stage of the project we were moving into. Up to then it had been about designing, getting planning permission, agreeing scope and so on, to a position where Government had approved the award of moneys and those moneys were now going to be spent on construction and phase-----

At the outset and the planning of the project, was it envisaged that it would be needed at this point? Was the new board, as Ms Conroy has just described it, planned from the start or did the recognition she spoke of lead to the establishment of the board?

Ms Tracey Conroy

It is fair to say it was an evolving position but I-----

I am stuck for time and we have heard a lot of answers and I do not want to hear a repeat. I am being very clear with Ms Conroy. At the outset, ten years ago, was there a plan to have the board that started in May 2017?

Ms Tracey Conroy

No.

Ms Tracey Conroy

It was a decision that was taken-----

When did this recognition in the Department that this new board was needed occur and what sparked it?

Is Ms Conroy saying that it was an evolving situation?

Ms Tracey Conroy

What I am saying is that it reflected the new phase the project was moving into. The competency-based build board was appointed in August 2013 and there have always been reporting arrangements by that build board into the HSE and the Department on this project. It was not that governance and management arrangements did not exist-----

Ms Tracey Conroy

-----prior to April or May 2017.

There was no formal board-----

Ms Tracey Conroy

There was a steering group, which I chaired in the Department and which included HSE representation and the build board reported to that.

In terms of the remit of the new board, its remit was to ensure delivery against agreed parameters, timelines, scope and funding. Who decided the remit of the new board?

Ms Tracey Conroy

Which board is the Deputy referring to here?

The second board, the new board, the board of May 2017.

Ms Tracey Conroy

If the Deputy is referring to the board the CHP&P steering group and the CHP&P board, the Government decided and agreed that in April 2017.

Was the steering group appointed at the same time as that board?

Ms Tracey Conroy

Yes.

Is there overlap between the steering group and the board? Do some people who sit on the new board that was established in May 2017 sit on the steering group?

Ms Tracey Conroy

Yes.

Is there a payment to sit on those boards?

Ms Tracey Conroy

No.

It is very clear from the language in the opening statements that the HSE is the sanctioning body and the principal capital funder sourcing the money from the capital plan. It is very clear that the HSE is in charge of the purse strings here.

I wish to move on to the two-stage tendering process. We spoke about this here last week and I am quite happy with the explanations, to some extent, and having read about the process over the last week. However, what I am concerned about is competition. I am concerned about the fact that phase A, the substructure, was awarded to a contractor. How many tenders came in for phase A?

Mr. Colm Desmond

Mr. Pollock might address this question.

It requires a fairly simple answer. How many people tendered for phase A, the substructure?

Mr. John Pollock

We shortlisted five contractors and we issued tender documents to five and four of these submitted tenders.

For phase B, the tendering for this started once phase A had started. How many looked to tender for phase B?

Mr. John Pollock

There was only one tender. When we went out to the market, we tendered for phase A with a fully defined scope of work. Included in that tender was the phase B works, which was on a preliminary design with an approximate bill of quantities. We received back just one tender for phase A and phase B. There was no second tendering process.

That was from the company which ultimately got the project.

Mr. John Pollock

BAM was the lowest tender for both phase A and phase B. It was one tender and it was awarded the contract.

Mr. Pollock's background is in the construction industry. Would it be fair to say by BAM being on site, having knowledge of the site and having intimate contact with the design teams on the project, that it was at a fairly significant advantage when it came to tendering for phase B in the sense that if one was another building contractor, it would not make any sense to go onto a site that somebody was already on, with hoardings and cranes and having cleared the site? What I am saying is that it was de facto decided that when BAM was awarded contract phase A that no other contractor would bother tendering for phase B because it would not have had the intimate knowledge of the site and it would, therefore, have been at a disadvantage. Let us be realistic here. Who was going to come in and build a building on top of a substructure built by another company? What if it fell down? Who would be to blame, the lad to build the bottom bit or the lad who built the top bit? It is very strange that there would be one contractor on site and that one would then empty the site and allow another one onto it. What I am getting at here is competition. There might be a competition element here because BAM had access to information that other did not have because they were not on site.

Mr. John Pollock

Perhaps I did not explain myself fully but we only went out to the market for one tender. We went out to tender for phase A and phase B.

A preliminary phase B.

Mr. John Pollock

BAM did not get to resubmit any new prices for phase B. There was not a second bite of the cherry.

Is that not the problem in the sense that it tendered for a preliminary costing based on re-measurable quantities, as part of phase A? That is why we ended up with this problem. That is where the costs of escalated. It tendered essentially by "picking a figure out of a hat" rather than a real figure in terms of the overall costs.

Mr. John Pollock

The rates tendered back in 2016 are the same rates that are now applied to the phase B works. Whatever rates it submitted in 2016, whether for concrete or steel, it is contractually bound by those rates. It does not get an opportunity to change its rates.

I understand that. That was explained last week and that it is more about the different lengths of cables rather than the actual measurement. Mr. Pollock explained that very well last week but he has not answered my question. As somebody with experience in the construction sector, would he not consider it highly unusual for another contractor to come in and look to build on someone else's substructure? What I am saying is that BAM had it in the bag from day one. It had us by whatever it is appropriate to say in the sense that we were caught. It was on site and it could charge what it wanted. What were we going to do? Were we going to turf it off the site?

Mr. John Pollock

As I said, there has been no change in the rates that it tendered. It submitted competitive tender rates which were the best prices we got in 2016 and we are still holding them to those rates. Those rates are still the best rates. It did not have an advantage.

It did not have an advantage. In Mr. Pollock's considered opinion, did already being on site not lead to any competitive advantage?

Mr. John Pollock

It had no advantage because the rates were already locked down at that stage. It had already submitted those and they were the rates that we applied.

I get that. It had a rate per fill of concrete, per square foot of tiles or whatever. People simply did not seem to know how many square foot or how many lengths were needed. That is very clear. I am very concerned that a company came in and tendered for both phases, got the first one and gave a preliminary price for the second one which bore no reflection to the final price. Essentially, I would argue that was perhaps always the plan. It knew that once it was on site and very clearly from the submissions that it was cushioned by references to the desperate need for a new children's hospital. It knew that we were stuck. I would argue that we have a serious competition issue here. The division of the tender into two phases did not lead to the opportunity for two contractors to come in and properly tender for a job.

Was it always the plan that the outpatients department and the urgent care units would be separated out in terms of costs? I do not remember them being separated out in terms of costs.

Mr. John Pollock

Yes. The plan always recognised that the urgent care centres in Tallaght and Connolly hospitals are very distinct and different projects in themselves. The unit at Connolly is almost a mirror image of the unit at Tallaght. There would be economies by having one contractor-----

As to specifications for these units, are they of the same specification as the proposed new building of the children's hospital in terms of digitalisation and the matters we heard of last week?

Mr. John Pollock

In terms of specification, they are quite different in terms of the level of acuity. These are outpatient units-----

I understand that but I am talking about the 5 km behind the casings in terms of specifications.

Mr. John Pollock

I refer to the scale of them. They are 5,000 sq. m whereas the main children's hospital is 158,000 sq. m.

I am talking about specification and the paperless and digital aspect of it. I am not talking about size.

Mr. John Pollock

Once the digitisation of health is completed, with electronic healthcare record systems, both Tallaght and Connolly will be part of that as well.

Last week it was explained to us that one of the issues about not knowing the full price was because medicine evolves and that it was not known how many cables would be needed for such and such a transmission and that each room had to have a closed circuit, so if the circuit went down, it would not shut down the whole ward.

However, there was something to compare it against if the outpatients department and urgent care centre were of the same spec. Last week, we were told that the board did not know what standard it was going for, but it did, as it was working to the same specs in the outpatients department and urgent care units. The board could probably have done a back-of-the-envelope calculation using square footage. The argument last week was that the board did not know how much X spec would cost. This week, we are being told that the outpatients department and urgent care centres are of similar spec.

Mr. John Pollock

I did not say they were of similar spec.

Someone said "similar".

Mr. John Pollock

They do not have operating theatres-----

Mr. John Pollock

-----or inpatient wards, so the level of treatment is different.

In terms of the wires behind the casings, they are similar. I am referring to the digital data feed and so on. It is the same idea.

Mr. John Pollock

It is 5,000 sq. m-----

I understand that.

Mr. John Pollock

-----and the others are 158,000 sq. m. In terms of scale and complexity, they would not have the same specs. Last week, we discussed the resilience and duplication of IT systems. That same resilience is not installed in the urgent care centres because the consequences in a major hospital are different.

I totally understand. There is no need to-----

Mr. John Pollock

All of the resilience and duplication of systems that we discussed last week have to be built in.

We have spent a great deal of time today asking questions, but I am not sure any of us is the wiser apart from being told that, yet again, there was a change of governance structure. I believe the same happened with CervicalCheck, in that people moved the chairs around the table. Due to a change in governance structure, it is difficult to find out who is to blame. We have received an opening statement each from the HSE and the Department of Health as though they were acting independently of each other. It is another example of why there are too many layers even though there is no need for half of the people to be involved. It appears that, despite all of the experts, competencies, quantity surveyors, remeasurables and bills of quantities, we may as well have just handed BAM a blank cheque and told it to build us a hospital and we would take it whenever BAM was ready in 2022.

I will next call Deputies Durkan and Brassil and Senator Devine.

When I first became aware of this projected cost overrun, I immediately thought that someone had decided that the project was too expensive and should stop. In whose interest would that be, by the way? Knowing how the system works and how rumours extend within Departments and structures such as the HSE, what was the immediate knock-on effect when the overrun was identified in 2017?

I would like to go through the details. We have heard various exaggerations of the cost overrun. When was the figure of €660 million or whatever it was first identified? When was the VAT added to it? I am asking so that we know where we were coming from with the overrun.

Ms Tracey Conroy

The issue of the potential additional cost of €61 million was first discussed in September 2017 and was then the subject of a detailed discussion, including of how to mitigate it, over the course of 2017 and 2018.

The figure was €61 million.

Ms Tracey Conroy

Yes.

Did that increase the cost from €660 million or €880 million?

Ms Tracey Conroy

For clarity, I might ask my colleague, Ms Duffy, to take the Deputy through the various elements. It might be a good frame for this discussion. We can talk about the various cost escalations, starting with the €61 million, within that context.

Ms Fionnuala Duffy

I will start, and Mr. Pollock might wish to add further detail. I understand that the submission provided by the development board last week worked through in detail the cost changes from the starting point of €650 million in 2013.

Yes, but there are-----

Ms Fionnuala Duffy

That was a pre-tender estimate.

-----so many constituent bodies within that figure that it is virtually impossible for an outsider to determine-----

Ms Fionnuala Duffy

Perhaps if I try to explain it simply.

-----where the dogs have buried the bones. What I am trying to do is simplify the matter. There have been a multiplicity of boards and people with various responsibilities. Although I presume they were all interlinked and there was a constant updating between one and the other, I am not so sure about that. A monthly reporting system would not be sufficient to keep everyone abreast of what was happening.

I have another question that I just forgot about for a moment. Of the various boards that were sitting in parallel, did all members attend at all times?

Ms Tracey Conroy

It is important to say that the roles and responsibilities of the build board, the children's hospital project and programme, CHP&P, steering group and the CHP&P board fall from legislation and the roles and responsibilities of those agencies set out in legislation. For the build board, they have been set out in statutory instruments since 2007. It has clearly defined responsibility in respect of designing, building and equipping the hospital. That role has not changed at any stage in this project.

That was not the question.

Ms Tracey Conroy

But it is important to outline when talking about the boards. Governance and management arrangements exist over the national paediatric hospital development board. The CHP&P steering group is chaired by the HSE, reflecting its role as principal funder, and the CHP&P board is chaired by the Secretary General of the Department of Health, reflecting his role as Accounting Officer.

My question is-----

Ms Tracey Conroy

The roles were clearly defined, described and approved by Government.

What question did I ask?

Ms Tracey Conroy

That is just the frame.

I asked a simple question - were all of the people who were supposed to attend at the various board meetings in attendance at all meetings? There is a reason for my question because I will follow up with another. I presume "No" is the answer.

Ms Tracey Conroy

I can give the Deputy the detail of the meetings. Of the CHP&P board, which is chaired by the Secretary General,-----

My conclusion-----

Ms Tracey Conroy

-----the answer is "Yes".

Its members attended at all meetings.

Ms Tracey Conroy

The board chaired by the Secretary General. I am trying to remember, but I believe there were ten meetings. That board meets quarterly.

That is all the more reason-----

Ms Tracey Conroy

I can give the Deputy the detail of when it meets and so on, but my recollection is that there was full attendance by the CHP&P board. I will give the Deputy a sense of matters. The board met on 14 September 2017, 12 December 2017, January 2018, March 2018, June 2018, and September, November and twice in December 2018.

All of the people who were supposed to be in attendance-----

Ms Tracey Conroy

On that board.

-----at each board meeting were in attendance.

Ms Tracey Conroy

That is my recollection.

Ms Tracey Conroy

Regarding the CHP&P steering group, which is chaired by Mr. Sullivan, I might refer to him.

Ms Tracey Conroy

It is not a parallel board. It is a steering group that reports to the CHP&P board.

Yes, but what I am trying to find out - Deputy O'Connell raised the same question - is the extent to which the interests and concerns in, and views on, all that we are now discussing were represented at those board meetings. Ms Conroy's answer is that it was not those boards' responsibility, but it was. If there is a project, and a very expensive one as it now happens, it would naturally follow that all people who have an influence over or interest or concern in it should be advised at the same time. They obviously were not.

Ms Tracey Conroy

No, that is not the case. The CHP&P board is chaired by the Secretary General of the Department of Health and includes me as assistant secretary for acute hospital policy and the director general of the HSE. Those meetings are also attended by the deputy director general for strategy, who chairs the steering group and reports to that board, Mr. Pollock as programme director of the national paediatric hospital development board, and Ms Eilísh Hardiman as CEO of Children's Health Ireland.

They are the key people in single leadership positions on this project. They are all either members of the board or they attend meetings and report in.

As a result, they were apprised of developments at all times.

Ms Tracey Conroy

Yes.

There were no exceptions. Did nobody pose questions in April 2017 when it was apparent that there was going to be an overrun, and perhaps a considerable one?

Ms Tracey Conroy

There was no overrun in April 2017.

It was obvious that it was going to happen.

Ms Tracey Conroy

The €61 million overrun first became apparent in September 2017 and the steering group and the board were advised of it at that stage.

The problem arose between April and September. That is the period in question.

Ms Tracey Conroy

No. That is €61 million to which I am referring.

That is one of them.

Ms Tracey Conroy

The first indication of any overrun beyond that was in August 2018.

Ms Tracey Conroy

Yes.

To return to my original point, I cannot understand how it is possible to have so many constituent bodies allegedly operating in the same direction. From the very beginning, the issue has related to the original cost. I know preliminary costings were done. How preliminary were they in this instance? The presumption would be that, based on preliminaries, there could have been 10%, 5%, 4% or whatever and that various PC sums were written in. To what extent were those overruns raised initially in 2017?

Ms Tracey Conroy

The Government had approved the overall cost of €983 million.

When did it do so?

Ms Tracey Conroy

In April 2017. The programme was operating within those parameters. An indication of a difficulty to the tune of €60 million was given in September 2017 and that was monitored throughout 2017 and 2018.

I presume the €921 million included VAT.

Ms Tracey Conroy

It did.

That was an increase of how much on the previous guesstimates.

Ms Tracey Conroy

I will ask my colleague, Ms Duffy, to go through the various iterations of the project. At every stage, the Government was apprised of the indicative costs of the project.

Was that on a monthly basis?

Ms Tracey Conroy

No, on a yearly basis. We would have gone to Government in 2014, 2015, 2016, 2017 and 2018 on the capital project.

So it was done on a yearly basis.

Ms Tracey Conroy

Yes, reflecting the necessity for Government approval at each stage - design, pre-investment award decision, the satellite centres and, in December, phase B.

In 2017, there was an estimated cost of €920 million based on more solid information that was available.

Ms Tracey Conroy

No, €983 million.

In round figures, it was almost €1 billion in 2017. The questions that were raised at that time were regarding the overruns in various areas, to which I will return. To what extent did the various groups refer to other hospital projects that had taken place in the past ten, 15 or 20 years by way of comparison in order to be alert to possible snags that might occur? Was there any reference to those? Did anybody do that?

Mr. Dean Sullivan

I was not present at last week's meeting. The numbers relating to all of this are potentially confusing. As Ms Conroy stated, in April, as signed off by the Government, there was an expectation that the total cost for the construction element will be of the order of €983 million and that was what was sanctioned at the time. There was a recognition, however, that the procurement process being taken forward under the auspices of the development board involved a fully specced-out design phase A and that phase B was designed to a high percentage but there were details to be worked through. As Ms Conroy also stated, in April 2017 when Government sanction was issued and the new structures were put in place, not to change the role of the development board in any way but simply to evolve the governance arrangements with respect to which it reported, the figure was €983 million. The first time that figure changed, as we discussed earlier and as was described by Mr. Pollock and Mr. Costello last week, was when there was a €60 million or so pressure reported in the period October to December 2017 and into the early part of 2018. No pressure at all was reported in April 2017. That was effectively the start of the process. Contracts were signed in October 2017, phase A works were under way at that point and phase B was taken forward as well in terms of speccing out what the final project would look like. However, all the way through the back end of 2017 - October to December - and into early 2018, the extended issue or pressure on the €983 million was that €61 million. Mr. Costello previously explained the components of the €61 million.

The first time the development board, the steering group to which it reports or the board to which the steering group reports were aware of significant pressure over and above the €61 million was in August 2018. Again, we have discussed that. That was finally bolted down and crystalised within the GMP report that was shared in November 2018, which takes us all the way through to the overall pressure of €450 million on top of the €983 million. It is complicated, but not that complicated. In April 2017, there was no pressure. We had sanction to proceed with an overall expected cost envelope of €983 million. The €60 million pressure emerged towards the end of 2017 and the beginning of 2018. That grew to a pressure of approximately €200 million in August.

From what did it arise?

Mr. Dean Sullivan

A comprehensive analysis was provided last week.

Can I have specifics?

Mr. Dean Sullivan

I am very happy to hand that over if it would be helpful to the committee.

Mr. Dean Sullivan

That detail was gone through last week. There were details as to what was included in the €61 million and details as to what was emerging in the context of the €200 million or so figure in August. There is also detail regarding the €450 million that was the final figure on top of the €983 million. Those sums are eye-watering but it is not more complicated than that. Those are the three phases, namely, the €60 million grown to €200 million odd in the summer of last year, settling finally at €450 million on top of the €983 million. A detailed breakdown is available as to the component parts of all that - all anchored back to the end of 2017.

Does Mr. Sullivan have that breakdown or can he provide it?

Mr. Dean Sullivan

It was provided by Mr. Costello last week.

It was in the slides that accompanied the presentation.

Mr. Dean Sullivan

We can certainly provide that.

I thank Mr. Sullivan.

We have digested last week's information in the meantime and perhaps it looks different now but I have a concern about health services being dependent on projections that obviously do not stand up. For example, I have tabled numerous parliamentary questions on this subject since before the Mater project. At one point I was informed that some economies would emerge as a result of the work done on the Mater project on which, I believe, in the region of €55 million was spent. Is that figure correct? It could have been more. We were informed that the amount involved was approximately €55 million. That was probably to fob me off at the time. I was also informed that the preliminary work done there would be recorded as a benefit for the subsequent work that would be carried out at the next site. How much of that was of benefit to the work carried out at the next site?

I thank the Deputy.

I have not finished. I have one further question.

Does the Deputy want to add that question to those he has already asked?

I would first like to get an answer to the question I have asked.

Mr. Jim Curran

On the Mater project, I cannot be precise but I understand that the cost was of the order of €40 million. The benefit accruing from that project in terms of transferring was that the work done between 2007 and 2010 in developing the brief for the project and the business case led to the latter becoming the business case for the project at the St. James's Hospital site. There was a time saving in that regard.

We were not starting a blank page when the site was moved. The essential components of the hospital did not change. They were reviewed, as was outlined earlier, in terms of service developments and projections and they were verified at the time the brief was handed over to the new design team appointed for the hospital on the St. James's Hospital campus.

I was told at the time it would be more than €50 million. These figures have a habit of changing. It has been a feature.

Mr. Jim Curran

Some of the work done on the site of the Mater Hospital was of benefit to that hospital and the children's hospital, so in a sense it was not lost to the project.

The Deputy has one more question.

I am finalising it now, but I have been sitting here for a long time waiting for this moment to come. My patience was just about at its tether, and when one's patience goes to one's tether it is a dangerous thing. My colleagues have raised the issue of projects in their constituencies, and there is also one in my constituency, namely, the endoscopy unit and an oncology extension at Naas General Hospital. The theory is we will have to bite hard and they will all get shelved for the foreseeable future. Is this the intention? What is the projection on this? Is finance available in the budgeting provisions made and the long-term health services plan?

Mr. Colm Desmond

As I mentioned in my opening statement, at this time we are actively taking stock on foot of the decision in December to continue with contractually committed projects and work out what will be the final capital plan for 2019 for the HSE. We have the overall envelope plus the additional funding decided by the Government. Other projects, such as that mentioned by the Deputy, are at various stages and they will continue, subject to us ensuring we can accommodate all of the costs within the overall capital envelope we will finally have this year. That process is very active at present and we hope to bring it to a conclusion as quickly as we can.

It needs to be active because planning permission has been granted for that project. Where planning permission is granted, a substantial extra cost is involved if we have to go back over the entire thing again and start from scratch. It would be like the children's hospital.

Mr. Colm Desmond

On that, the Naas endoscopy unit is due to go to tender in 2019. We always ensure we can position the development of projects whereby we can line up funding with the planning and development stage and the award of contract stage down the road. We will be doing our level best to ensure we can prioritise where projects are ready. However, we will have to go through the process because of the scale of the projects we have on hand and the request for them.

As time goes by, I get more and more confused about the general project. We were led to believe the increase in costs would be from €660 million to €1.7 billion, which would have been alarming. It now appears the project had been projected to cost just short of €1 billion. That was a reasonable and fairly accurate estimate when the various boards put their heads together. It is now estimated that it will go to €1.4 billion, which is made up of building costs, extra specifications and miscellaneous issues. Is it unreasonable to ask whether this is the final estimate? Do we finish at this? Are we in danger of something else happening at a later stage? If so, what?

Ms Tracey Conroy

The €1.73 billion figure reflects the total guaranteed maximum price now agreed.

Is that for one project or a multiplicity of projects? Does it include outreach projects?

Ms Tracey Conroy

It is for the full project.

Ms Tracey Conroy

The €1.7 billion is for the full project and everything it takes to deliver it.

Was the €980 million also applicable to the full project and all of the ancillaries?

Ms Tracey Conroy

The €983 million was for the capital build.

Ms Tracey Conroy

The 2017 cost estimate included a capital build subtotal of €983 million, a total capital cost, including ICT, of €88 million and €18 million for the children's research and innovation centre, bringing the total capital cost to €1.089 billion. If we add another €85 million for the children's hospital integration programme, it brings us to a total project cost of €1.17 billion. That was the 2017 cost.

I do want to finish, although I know the Chairman does not believe it. The question I asked was what is incorporated in the figure of €1.74 billion, or whatever it is now as it keeps moving from hour to hour, as opposed to what was incorporated in the €980 million?

Ms Tracey Conroy

What is incorporated in the €1.73 billion is €1.443 billion for capital, which includes €18 million for the children's research and innovation centre, €97 million for ICT and €85 million for the children's hospital integration programme.

They were not incorporated in the €980 million.

Ms Tracey Conroy

They were. The capital build subtotal in 2017 was €983 million and the equivalent now is €1.443 billion.

On the same subjects.

Ms Tracey Conroy

On the same subjects. The total project cost in 2017 was €1.26 billion and now it is €1.73 billion.

Does the Chairman find this very easy to understand?

Ms Tracey Conroy

The difference is there is a €450 million additional cost, made up of €319 million for construction. These details have been given and were discussed in detail by the committee last week.

Yes. It might not be any harm if we got a printout of all of this and like-with-like comparisons.

Ms Tracey Conroy

I am very happy to provide that. It was included in the slide pack last week-----

I know it was-----

Ms Tracey Conroy

-----and I know it was provided to the committee subsequently

-----but slides have a habit of moving on.

Ms Tracey Conroy

I am very happy to provide it again.

If there is any discrepancy between what Ms Conroy has said and what was presented in the slideshow, perhaps we can clear it up. We are getting confused about figures but perhaps we can clear it up.

Mr. John Pollock

On a like-for-like basis, which is what the Deputy is seeking, when the business case was approved in April 2017, the project was €983 million, which is roughly €1 billion. On a like-for-like basis this has increased to €1.43 billion.

Not €1.7 billion.

Mr. John Pollock

Not €1.7 billion. Separately, there were always elements that were not part of the build board's remit, for example, ICT, capital infrastructure, electronic healthcare records and the integration of the three children's hospitals. These were always outside and reported separately. This accounts for the additional €300 million between €1.4 billion and €1.7 billion.

They were not included previously.

Mr. John Pollock

They were not included in the €1 billion. They were outside of that.

I have an idea and I will speak to Deputy Durkan about it later.

I have an idea too.

Ms Tracey Conroy

The difference is they are not funded from capital and are not under the remit of the build board. They relate to the integration programme, electronic healthcare records and the management of equipment service. They were always outside the capital build amount. The cost escalation from April 2017 to December 2018 relates to the capital build.

That has to be understood in the context-----

We will allow Deputy O'Reilly back in later.

Okay, but there is a fundamental-----

I thank the witnesses for coming in. I read the report of last week's committee meeting at which there was a discussion on the rationale behind the two-stage process, including all of the good reasons for doing it. The unfortunate reality is that it did not produce any of what it set out to do. It did not produce determined costs, reduce cost uncertainty or eliminate client-contractor risk. It resulted in a €400 million overspend or increase on the original tender price. Deputy O'Connell hinted at something earlier and I want to expand on it further. Five tenders were submitted, the lowest of which was for €637 million. That was €131 million lower than the next highest tender. Did anybody anywhere raise a red flag when he or she saw that?

Mr. John Pollock

The call for tenders was issued in June 2016 and when tenders were submitted, they were interrogated by ourselves and by our design teams to ascertain whether the rates were appropriate. An assessment was carried out, and when the evaluation was complete, no concerns were raised about the pricing tender strategy adopted by the contractor. It was accepted as value for money in the current marketplace.

Having spent 15 years in the construction business, I can tell Mr. Pollock that if the lowest tender is 20% below the next tender, someone should ask why. Some of the people on the board are former CEOs of big companies. I can guarantee that if they tendered for a job of that size and were out by 20%, a lot of questions would be asked. To be out by 20% is beyond reasonable in this business. My contention is that BAM, knowing that if it got in it could not be removed, bought the contract with the aim of recovering its costs at a later stage. Deputy O'Connell hinted at a lack of competition. BAM knew exactly what it was doing. It got in at the beginning, knowing that there was no way the client would get another contractor to do phase two and it could get its money back then. That is what has happened and I anticipate that the independent inquiry will find to that effect.

The phase one tender was for €637 million. What did phase one end up costing?

Mr. John Pollock

The €637 million was for phase A and phase B works.

Are the works completed to date for that tender running at, below or above that tender price?

Mr. John Pollock

The phase A works accounted for approximately €80 to €85 million of the total contract and that phase is on budget.

Phase A of around €80 million is on budget but phase B has gone up by €300 million.

Mr. John Pollock

Correct.

How did that happen?

Mr. John Pollock

There are multiple reasons. The first, which was raised in late 2017 by the fire officer, concerned sprinklers in the building. We appealed the condition to An Bord Pleanála.

Was that €61 million or €27 million?

Mr. John Pollock

It is around €27 million. We also had the Grenfell Tower fire which impacted the regulatory environment. Modifications to the design were required to reflect current best practice. When we recommended to Government and got business case approval of €983 million, we drew up a schedule of targeted savings where we could get better value. The target was €66 million but we did not deliver the full €66 million. We delivered €20 million of savings over what was tendered in 2016, leaving €46 million.

There is one figure from last week of €90 million for the additional nine months, including preliminaries. What is the preliminaries element of that?

Mr. John Pollock

In determining the final contract price now, which is the €890 million, the scope of work has increased over what was tendered in 2016. There are greater quantities in the building-----

Yes, but the €90 million that is given for the extra nine months, which is €10 million per month, includes preliminaries. How much is allocated for preliminaries per month?

Mr. John Pollock

There are two levels of preliminaries in that. One is a straight extension of time to which the contractor is entitled, as the contract duration goes out. Second, because the scope of the job has increased, the contractor has had to mobilise additional resources. The contractor has had to increase manpower, the number of cranes, teleporters, hoists, canteens, drying facilities, site compound and so on. There are two elements of preliminaries uplift within that €90 million.

Does that roughly equate to €10 million per month?

Mr. John Pollock

It does and that is very much based on the tender figures that the three contractors would have submitted.

Just by way of comparison, I spoke to a colleague of mine from my engineering days who is working with one of the biggest construction companies in Canada. That company is working on a $1 billion airport contract at the moment but for an overrun on that contract, it is getting $500,000 for preliminaries and he said that figure is at the top end. If there are 25 or 26 extra cranes on site, it might bring it up to €1 million, but €10 million a month is absolutely off the park. How anyone on the board driving this project cannot see that is beyond comprehension, given the experience of board members. It is beyond my comprehension and I was involved in construction for 15 years.

Moving on to the design team, what percentage of the contract is accounted for by its fees?

Mr. John Pollock

The design team was procured in August 2014 on a lump sum tender. It was not appointed on the basis of a percentage of the contract price. It tendered a lump sum price. It is not a percentage so the design team does not get an uplift if the contract increases.

Even if the contract price increases from €637 million to €900 million to €1.4 billion, the design team will still get the same money. Is that correct?

Mr. John Pollock

The design team will submit additional fees for prolongation. When the project was tendered, the design team won and the first preliminary business case was produced in 2014. It was anticipated that the project would be completed in 2019 but it will not now be completed until 2022 so the design team will submit additional fees for increased scope of work and for having additional people on site to supervise the construction of the project.

So the design team will get extra fees-----

Mr. John Pollock

It will get additional fees for those elements, yes.

Let us say, for example, omissions in design are costing an additional €20 million. At some stage, the design team will be paid for its omissions.

Mr. John Pollock

As I said, the design team is not on a percentage fee so-----

Yes, but it is not a fixed fee either.

Mr. John Pollock

The design team is not entitled to an uplift. It is a fixed fee and then it submits additional claims. If we cannot agree those, we will go to conciliation on those matters.

Again, it is quite obvious that while the design team is not getting a percentage, it is getting paid for the extra work. At the end of the day the design team is not going to suffer any consequences for poor design or design omissions. The design team is going to be well paid for the work it does.

The question was asked as to whether the two-phase process was the correct way to go about this project and the answer given was that it was the correct way to do it.

The summary last week from the National Paediatric Hospital Development Board explaining why the board stayed with BAM described option 1 as not awarding phase B to BAM and retendering the project to the market. That would delay the project by a further two years. It would cause further construction costs of €305 million in addition to the €1.43 billion. I want to know how the hospital board came up with that figure. The summary refers to split contractual responsibilities for phase A and phase B, increased risk for project claims and so forth. By the board's definition, on the basis of the submission, it has more or less told us that there is no way anyone other than BAM could be used for phase B. Given the two options, option 1 and option 2, what the board has pointed out tells me clearly that the only option left to the board was to go back to BAM. The original reasoning of the board for the two-phase tender process referred to all the good things it was going to do. The result was that the company that got phase 1 was also going to get phase 2, it could do what it liked with the price and it did so.

Mr. John Pollock

As I explained, the rates tendered in 2016 are the same rates that the contracts are being held to now for phase B works. We were highly conscious that we were in a construction market where tender inflation is very different from consumer price and product inflation, for example, in respect of the price of steel or glass. Construction inflation, when we drew up our first budget in 2014, was trending at 3%. We are in a very different environment now. Publicly reported figures show construction inflation is trending at 6%, 7%, 8% or 9% in Dublin. By going to the market in 2016, we were able to secure prices for concrete and steel at 2016 rates, which correspond to a better price than we would get today if we went out into the marketplace.

That may be the case for concrete and steel, but the other stuff the board is getting has been charged at premium rates. This includes €90 million for nine months' extra work, including premium preliminaries. The figure for works to comply with fire regulations is €27 million. One could build a 90,000 sq. ft office block for €27 million. If we make a comparison of €300 per sq. ft, then that is what one would build for €27 million. That is the amount being charged in respect of fire regulations. They must be very good sprinklers to cost that amount of money.

Mr. John Pollock

There were sprinklers already in the building. In the design that we tendered in 2016 we had sprinklers on the ward floors. That was already in excess of the building regulations. The fire officer wanted sprinklers put into the entire building. We had rates for sprinklers in the building and those were the rates in the four hot floors, which are the largest areas. The same competitive rates that we got in 2016 apply today.

My assessment is that a process started and a decision was made around the two-stage tendering process. A contractor renowned for its ability to claim extra on original tender prices saw an opportunity, came in and underbid everyone else by an amount that would have raised red flags in any circumstance. How that did not happen given the experience of the board members is beyond me. Once the company got in, it was in a position to gouge the next section of the job. Costs have gone from €900 million to €1.4 billion and will probably not stop there. I hope the independent inquiry will produce a breakdown of the €90 million cost of nine months of extra preliminary works. I would love to see how that figure was justified and agreed, how a figure of €27 million was agreed for increased fire regulations and how €94 million was agreed for finalising on detailed itemised quantities of all materials and fixtures with a further €20 million for design. The millions roll into hundreds of millions. Unfortunately, taxpayers and the various health facilities that are needed throughout the country and are crying out for a couple of million euro here or there, for example, to build an additional theatre, will suffer for many years to come.

I thank the witnesses for the presentations. Much has been said in discussing the procurement and accounting for the large overrun and the cost of €1.5 billion. There are too many noughts in the figure to consider. This will affect the public health services we provide. I have tried to work out the figure. The hospital will cost every man, woman and child a little under €400.

Will the board provide a breakdown of the costs so far for the excavation of the site and site preparation? Do these costs include the costs of the facilities that were demolished, the decanting of various hospitals or clinics, the kitchens that were newly constructed and any other new buildings?

I wish to raise a parochial issue relating to the reduction in, and perhaps halting of, construction of other capital investment projects. Will construction of the primary care centre in Drimnagh, which is close to where I live, stop? The project is in mid-construction. I imagine there are many other projects, including in Limerick and throughout the country. I was worried about that and I know Deputy Ó Snodaigh wants to find out about it.

Mr. Desmond spoke about reviewing the capital spend. When will the outcome of the review become available? Will it be late in the year? People in every area are keen to find out what will happen to their health services.

I am here as a resident of the South Circular Road in Dublin 8. I see the impact of this daily on local communities. In 2015, people from the local community asked questions at the oral hearing of An Bord Pleanála, which lasted for three weeks. Many of these questions were swept under the carpet. I did not consider the questions minor. They related to irritants for communities, including problems with dust, noise, roads and lighting, all of which is impacting on us. BAM frequently does not adhere to requirements. Trying to get through to the company is a problem, but that is another issue for the board and BAM, one we will return to outside of this meeting. Who will pay the costs of ancillary works and the clean-up, for example, window cleaning in neighbourhoods adjacent to the St. James's site?

With regard to Ceannt Fort and Mount Brown, we are all aware of the case that is ongoing regarding subsidence and major cracking and movement of houses on the right hand side of O'Reilly Avenue heading towards the site. The core houses at the end of the road have been particularly affected and have required remedial work. Residents have to be decanted elsewhere to have kitchens and conservatories to the rear of their homes rebuilt. We told An Bord Pleanála at the oral hearing and we also told the hospital board and Dublin City Council that the land was unsuitable for building on. In 1917, when building started in the area, it was known as McCaffrey's orchard. It became one of the first estates to replace tenements in Dublin. It was also one of the first estates in which the British provided front gardens for the health of people in Dublin.

The estate was completed and O'Reilly Avenue was added much later because even 100 years ago with less technology and information it was known that the soil was unstable, yet the National Paediatric Hospital Development Board and An Bord Pleanála maintained in December 2015 that the black soil was perfect. That is where the early warning systems came in, but the information was ignored. What is the projected cost of rebuilding part of these houses, the cost of ongoing monitoring and legal services? Cracks are also appearing in houses on the opposite side of O'Reilly Avenue. As residents, we alerted the National Paediatric Hospital Development Board to the unstable land way back then. I would like to get an idea of the costs involved.

Houses at the South Circular Road end of the site are also impacted on and surveys of some of them have been completed, but no surveys have been carried out on the opposite side of O'Reilly Avenue. At the demand of the residents, they were initially carried out on the right hand side.

The children’s research and innovation centre, CRIC, building is not on HSE land. Has it been bought or is it leased? What is the cost and is it included in the overall overspend?

Our Lady's Children's Hospital has transferred to Children's Health Ireland. A figure of €2 million per acre has been suggested. I do not know how true that is as I am not a valuer. Discussions on the future of the site are ongoing. Part of the deed dating from the 1950s required that it be kept for institutional or community use. However, other parts could be sold. It is zoned 15. When will the discussions finish and when will we know the plan for that public land that has been handed over?

How well is the National Paediatric Hospital Development Board working with Dublin City Council because the cost of parking for residents in the surrounding areas has jumped? There is now 24-hour paid parking in the area and the cost is being borne by residents through no fault of their own. It reflects the decreased number of parking spaces in St. James's Hospital and also the cost differences. The problem of parking has been pushed to local streets.

The projected cost of the maternity hospital is €300 million. I am sure many with an interest in construction and making a buck are looking at this with glee. If the same happens in the next phase of St. James's Hospital, they must love this overrun in costs. By how much will the €300 million jump in the meantime?

Are there other hidden costs in the St. James's Hospital or the development of the national children's hospital of which we have not yet been advised?

Mr. Colm Desmond

As a number of broad-ranging questions have been asked, I suggest I deal with the overall capital piece in terms of finality. I will ask Mr. Curran to deal with some specific local projects such as the one in Drimnagh that are not connected to the hospital project. I will then ask Mr. Pollack to deal with issues in the management of the project within the locale or Mr. Curran, as appropriate.

It is our priority to come to finality on the capital plan for 2019 as quickly as we can. As I mentioned in the opening statement, we clearly have a challenge in that regard, but we will work through the issues with the HSE. That process has commenced. It actually commenced late last year, but we had to await a Government decision on the additional funding required for the hospital project. As we now have it, we know the parameters. As projects have a multi-year focus, we will also depend on proposals from the Minister for Public Expenditure and Reform towards the end of this month for 2020 onwards. I have mentioned the overlapping issues that arise in the different stages of projects. However, we will be giving it priority with HSE Estates and HSE Corporate and that is happening.

The Senator expressed an interest in hearing about specific projects in Drimnagh and elsewhere which are not connected to the hospital project. Mr. Curran might have a view on them.

I asked for a timeframe. Will it be later in the year or a few weeks' time?

Mr. Colm Desmond

I cannot say specifically, but it would not be of benefit to us in the HSE to leave it much later than the first quarter of the year at the very latest. We hope it will be earlier than that, but we are dependent on a number of factors becoming clear in the costings available to us. We will work through the priorities with the HSE. There are many projects, a number of which have been contracted, while others are projects we would like to see progressed.

Might it be done by Easter?

Mr. Colm Desmond

I hope it will be earlier than that.

Mr. Jim Curran

The Senator mentioned the primary care centre. I presume she is referring to the one on the South Circular Road in Rialto. The contractor went into examinership before Christmas.

It is a different one.

Mr. Jim Curran

The Senator talked about one in Rialto that was under construction. Work has halted.

The one in Drimnagh was granted approval and work was then suspended. We are awaiting a further announcement on it in the next few weeks. Obviously, it has all been thrown up in the air.

Mr. Jim Curran

Planning permission for the primary care centre in Drimnagh was part of the PPP programme announced in 2012. The granting of planning permission was delayed, subject to an appeal to An Bord Pleanála. We had to move ahead with the primary care centre PPP project and could not include the Drimnagh site in it. It is still included in our development plans, but in terms of waiting and our deliberations on our overall capital programme as and when we can factor it in for-----

Is that a "No"? Will the project in Drimnagh go ahead?

Mr. Jim Curran

It is still planned to go ahead, but the timing depends on the availability of capital funding.

That sounds like a "No" to me.

Mr. Jim Curran

On that matter, a consideration is the future of Crumlin hospital. As the Senator is aware, the site of the primary care centre is quite close to the hospital. Its site may be of benefit to primary care facilities in the area in the future.

What about the discussions on the potential sale of Our Lady's Children's Hospital to offset costs?

Mr. Colm Desmond

I will ask Ms Conroy to answer that question.

Ms Tracey Conroy

The Children's Health Act which commenced at the end of the year provides for the transfer of property and liabilities from Crumlin hospital to the new body. The discussions will be between the board and the CEO of Children's Health Ireland and Crumlin hospital on the use of the lands. It will be done in the interests of the provision of paediatric healthcare.

It seems that we might be creeping into selling the jewels to offset the extra inflated costs. When will the decisions be made?

Ms Tracey Conroy

The discussions are ongoing with Children's Health Ireland. I do not have a date for when they will be concluded.

Ms Tracey Conroy

Crumlin hospital is providing services. Obviously, it will be quite some time before it will be available.

Mr. Colm Desmond

On the National Maternity Hospital which is a totally separate project, the preparation of the decamp facilities at that site is progressing. We have had no indication of an uplift in the overall cost of the project, apart from the figure mentioned by the Senator of about €300 million.

Will we learn from these mistakes?

Mr. Colm Desmond

Of course, it goes without saying these processes require very careful monitoring. At this point we simply have the construction of the decamp facilities in the preparation of the area for moving the hospital. That is the only piece-----

Has a planning application been made?

Mr. Colm Desmond

I will ask Mr. Curran to respond to the question on planning permission.

Mr. Jim Curran

Mr. Desmond is talking about the National Maternity Hospital moving to the St. Vincent's University Hospital campus. We have received planning permission for that development.

No, I am talking about the maternity hospital on the St. James's Hospital site.

Mr. Jim Curran

That has not been-----

Mr. Colm Desmond

I apologise.

That has not been decamped. There is nothing there yet.

Mr. Colm Desmond

No, it is a separate-----

That is the €300 million for the maternity hospital on the St. James' Hospital site. There will be tri-location.

Mr. Colm Desmond

The maternity hospital programme expansion will take place slightly down the road.

Ms Tracey Conroy

Obviously, it is some way down the road. We are building the children's hospital on the campus at St. James's Hospital. It will be some time before we are in a position to progress the project.

The plan is to move maternity services from the Coombe hospital.

With regard to the €300 million and the cost, people will roll their eyes up to heaven at it and ask how much the €300 million will be multiplied by. It is about learning from all these mistakes and from the overspend.

Ms Tracey Conroy

As we said earlier, the lessons learned and identified in the context of the reviews will be identified and addressed, not just in the context of the children's hospital-----

One of the Deputies said it earlier. Perhaps there has to be a maximum cut-off point. We cannot just keep going. Perhaps it should be written in contracts that there is a maximum cut-off point.

I thank Senator Devine. I am sorry. Just before I bring in Deputy O'Reilly-----

There was the issue of Ceannt Fort and the destruction of those houses.

Mr. Colm Desmond

Mr. Pollock will address the issues raised on the locality around the children's hospital.

Mr. John Pollock

One of the questions was about environmental monitoring, which is a condition of our planning permission for An Bord Pleanála. It relates to noise, dust and vibrations. Those costs are all embedded in the contractor's prices, as are road-sweeping and window cleaning. He does not price them separately. They are just part of the duties and responsibilities. Those issues are by and large being handled through the project management committee which has representation from local residents, three local councillors, Dublin City Council, ourselves and the contractors. That is when those issues get teased out, including the issue of car parking that has been raised. Dublin City Council has undertaken to go back and report on those issues. We do not control car parking and charge rates.

With regard to the Ceannt Fort and O'Reilly Avenue, it was an issue that was brought before the High Court probably 18 months ago and we have been written to by the solicitors on behalf of the residents and told we are not to speak about those matters. They say it is their business and they do not want us speaking about it. We are resolving it and the issues are drawing to a close. Hopefully we will have a proposal. I have been directed by their advisers not to talk about them.

I understand that but it has also impacted on the other side of the road. There are 20 houses on the other side of the road now. Those costs keep spiralling up. It goes back to the early warning system. I am not saying "I told you so" but we did. We said the soil is unstable. There was a canal there. The maps were there for people to see. It seemed to be railroaded through. It was very obvious it was reclaimed land and it was unstable. It will cost a lot more.

I thank the Senator. Before I bring in Deputy O'Reilly, in Mr. Desmond's opening statement, he stated that to complete the build of the hospital and outpatient and urgent care centres, an additional €450 million will have to be found from 2019 to 2022. That is €100 million this year, €50 million will come from the health capital programme, and €50 million will come from other Departments. That leaves €220 million to be found between 2020 and 2022. He mentioned that the additional €130 million to make up the €450 million is going to come from philanthropic funding. Where will that funding come from and how will the Department get it? Is it guaranteed? If it is not guaranteed, will it impinge on additional Exchequer funding being required?

Mr. Colm Desmond

I will deal with the issue of the overall Exchequer funding post-2019 and ask my colleague, Ms Conroy, to deal with the philanthropic funding. We will be awaiting and engaging with the Department of Public Expenditure and Reform on whatever the overall capital envelope available to us is from 2020 through to 2022. We are also expecting an allocation for 2023. I am talking about a global envelope which will enable us to plan the additional funding to complete the overall figure of €450 million.

Commissioning funding.

Mr. Colm Desmond

I am sorry.

The €300 million is the commissioning funding.

Mr. Colm Desmond

Essentially, the €450 million cost and its components, whatever way it falls, will be worked through when we have an indication, which we hope will be soon, of what our overall capital envelope for HSE capital will be and we will then work through the payments beyond 2019.

The €300 million on commissioning is not capital funding.

Mr. Colm Desmond

Correct me on that. I am talking about capital funding only.

Where is the €130 million in philanthropic funding going to come from?

Ms Tracey Conroy

I can take that question. Under its founding legislation, Children's Health Ireland is given specific responsibility to engage in fundraising and philanthropy for the new children's hospital project. We previously had a commitment of €20 million factored into the capital project but it was considered there is significant scope for philanthropy. It reflects international practice in children's hospitals.

There is very significant scope for attracting philanthropic funding. Children's Health Ireland is proposing to establish a single chargeable foundation called Children's Health Ireland Foundation and it will be tasked with raising the funds. In that context, the three children's hospitals in Dublin each have a separate independent charity affiliated with them which fundraise for various projects. There is a lot of experience in that regard and it will be captured in the context of Children's Health Ireland Foundation. It has some interim steps already because it has been giving significant consideration to this. The Children's Hospital Group, before it became Children's Health Ireland, had been giving consideration to the potential for philanthropy over many years. After the establishment of Children's Health Ireland, with the right governance arrangements in place, it can really hit the ground running with regard to philanthropy. Children's Health Ireland and the three hospital foundations in existence have established a short-term philanthropy steering group consisting of two board members from each of the four organisations and their lead executive. That is where the work will be progressed.

With regard to the philanthropic funding of €130 million, how was the figure arrived at? The funding is going towards the capital overrun.

Ms Tracey Conroy

It is.

It is going towards the capital overrun.

Ms Tracey Conroy

Yes.

So the fundraising is not going for philanthropic works; it going towards capital costs.

Ms Tracey Conroy

We already had a commitment of €20 million prior to this overrun arising. That is €150 million. The decision on the scope for a further €130 million was agreed with the Children's Hospital Group board in the context of discussions on the overrun.

How did the Department come to that figure?

Ms Tracey Conroy

It was based on a review of other projects internationally and the experience in terms of capacity to attract philanthropic funding for children's hospitals of this nature. There is very broad scope for philanthropic funding here.

Can the Department guarantee the figure of €130 million was not just picked to plug the gap rather than as a result of realistic backing? When examining Estimates from the health Vote last year there was a gap of €346 million in costs. They were to be delivered by savings but the savings only came to €120 million. The implication was the figure of €346 million was picked to plug a gap. Can the Department guarantee the figure of €130 million was not picked to plug a gap?

Ms Tracey Conroy

We have been assured by the chair of Children's Health Ireland of its capacity to deliver on that funding in terms of the €130 million. That is based on its interactions and engagement on its scope over the last number of years.

If it fails to reach that target, would the difference be transferred to the Exchequer?

Ms Tracey Conroy

We would have to look at it in that context. It would be a difficulty because we advised Government in December that €130 million would be delivered by philanthropic funding.

I will speak for myself on this. I am not in any way convinced by the explanation given about the €130 million. It sounds exactly like the explanation the witnesses' colleagues gave for the savings. I doubt the figure will be achieved because the assurances the Department is getting that the figure will be achieved are coming from the same place that gave assurances that the project would be delivered within budget. The witnesses will appreciate the scepticism. I am sure it is shared by plenty of the people in this room and anyone watching proceedings from outside.

Ms Tracey Conroy

Regarding philanthropy, the engagements are with Children's Health Ireland as opposed to the National Paediatric Hospital Development Board.

Another board, and just when there were not enough boards already. This strikes me as odd.

A reference was made to a table in a document that we were given last week. It relates to construction cost drivers and was to give the speaker the opportunity to explain some of those drivers. No. 3, to which Ms Conroy also referred to, relates to €664 million prior to design development and design omissions. No. 5 relates to omissions in design and sets out a figure of €20 million. There seems to have been a large number of expensive design omissions. Does Ms Conroy have the details of what they were?

Ms Tracey Conroy

I will ask Mr. Pollock to provide the details.

Mr. John Pollock

In that slide pack, some examples were given. An issue was raised around secondary containment, that is, support systems for the electrical cables. The scale of the project is huge at 158,000 sq. m, so small changes can have a large impact on the overall project.

We are certainly seeing that. That the design omissions point appears twice gives me pause for thought. As Mr. Pollock mentioned, we are discussing very large sums of money, but is he satisfied that providing more money for design omissions is normal for a construction project? Is there no penalty for the person responsible for the design omissions? Presumably, one could use terms such as "design flaws", "issues left out" or "job not done well". The amount involved is tens of millions in this case. Does Mr. Pollock understand what I mean? We do not know who is responsible for the design omissions. That person probably has a position on a board, as there seems to be a lot of that. Design omissions pop up in two headings. Who was responsible for the omissions? What was the penalty imposed on that person? Will he or she pay? Presumably, we will pay.

Mr. John Pollock

We appointed our design team in 2014 after a competitive tender process as part of which we considered entities that had previously delivered children's hospitals. It was a multidisciplinary team involving architects, civil and structural engineers, mechanical and electrical engineers, fire engineers, quantity surveyors, urban planners and building research establishment environmental assessment, BREEAM, assessors. A multidisciplinary team was put in place to design the hospital project.

Did the team have collective responsibility for the design omissions?

Mr. John Pollock

It reports to us monthly on the cost of the project. Some €20 million in design omissions have been identified. It was not a perfect set of tender documents. A two-stage procurement meant that not all 6,000 rooms were fully designed and detailed.

The amount involved is €41 million.

Mr. John Pollock

Which amount?

The amount is €41 million. It appears twice. The increase in cost was €21 million under No. 3. Under omissions in design, there is a figure of €20 million - a 3% increase on €664 million - and €21 million plus €20 million equals €41 million. Mr. Pollock can see how it all adds up. I referred to what I called a hands-off approach to keeping an eye on spending.

Mr. John Pollock

If I could address-----

Nothing I have heard has changed my mind.

Mr. John Pollock

It does not arise twice. There are two separate items, one being omissions in design and the other being user engagement. When we went out to tender, not all 6,000 rooms were designed in terms of having every piece of medical equipment, data point, gas point or pneumatic tube. All 6,000 rooms have to be drawn up, including every socket and light switch.

That is obvious to me, so it is shocking that it was not obvious to the people in question before now. Design omissions appear twice, and the sum total is €41 million, not €20 million. Is anyone responsible? Mr. Pollock referred to the board team tendering, so no one person was responsible. However, someone is racking up these bills and we know who will be paying them. There is not a bottomless pit of money. There will be implications for capital projects within the HSE. This is already being discussed. Recently, I attended a meeting in Monaghan at which people were under the impression they would get some money to develop their hospital. Youghal Community Hospital was to get €38 million. Midleton Community Hospital was to get €10.3 million. We can probably kiss the scanning equipment for the primary care centre in Balbriggan goodbye. Sláintecare requires a capital investment. I understand that the Government saw fit to invest a mere €20 million in Sláintecare's budget under its agreement with Fianna Fáil. Do our guests not believe that there will be implications for the roll-out of Sláintecare as a result of the massive and catastrophic, or whatever other word they want to use for it, overrun?

Mr. Colm Desmond

The €20 million in Sláintecare's budget is an initial allocation.

I am aware of that.

Mr. Colm Desmond

Sláintecare has been established very quickly and has been making good progress in the short timeframe the office has been established within the Department. It reflects where Sláintecare stands at this point, but this does not impact on where it will be down the road.

My question relates to something else. Does Mr. Desmond envisage that there will be a knock-on effect from the massive cost overruns, which are only going to get bigger, let us be frank, before this project is over? Maybe they will not get bigger and whoever is in charge of ensuring that will get a promotion, but there will be knock-on consequences. Does Mr. Desmond believe that they will impact Sláintecare? Will the people in Youghal, Midleton, Monaghan, Balbriggan and so on be left out? Where will the implications of this cost overrun fall, assuming the gap is not filled by Supplementary Estimates? Where will it have the most impact? Will it delay Sláintecare, which is already delayed? I was on that committee. Will it be bad news for Monaghan? How will that be decided?

Mr. Colm Desmond

We were clear in our opening statement that there would be an impact. We have to work through what that will be. That is the process we are undergoing. I cannot outline choices until we engage in all of our priorities and make the best assessment of how we can accommodate the cost within 2019. From 2020 onwards, we will be doing a similar exercise when the overall capital allocations are available. Therefore, we could give the Deputy an update on the status of individual projects such as those mentioned in Youghal, Monaghan and Midleton if she wished.

Mr. Colm Desmond

I will ask my colleague, Mr. Curran, to do that.

It might not be appropriate to this meeting.

Mr. Colm Desmond

It is not a problem, regardless of appropriateness.

Perhaps it could be emailed to me, as it is causing people concern.

Mr. Colm Desmond

At this point, the issue is that we have to go through a process to see how the additional costs can be accommodated within the capital programme and what the impact on all other projects will be. That is the process we are going through at the moment. It is appropriate to raise the matter, but we are still working through the process, including the Sláintecare piece.

Mr. Desmond will understand that this project is part of one of the Department's processes. If I were in Monaghan, Youghal or somewhere else watching these proceedings, I would not be filled with confidence. However, I am sure those people want to hear from the HSE if their projects have been shelved or whatever other term it will use for that.

Does Mr. Curran wish to add anything?

Mr. Jim Curran

We are going through a process of finalising the capital plan for 2019 and making decisions about what projects will be progressing in light of the reduced availability of capital in 2019 as a result of €50 million extra being allocated from the HSE capital programme to the children's hospital project. Our discussions will be further informed by engagement with the Department of Public Expenditure and Reform in terms of how the additional funding required for future years will be treated. For example, will it all come from the health capital funding or will it be supplementary funding? I understand the intention is to have those discussions concluded by the end of January.

We will get a full update.

Mr. Jim Curran

Yes, on the capital programme.

We look forward to that. The final paragraph on page 4 of the submission of the Department of Health states that the health capital allocation for 2019 is €567 million. The Revised Estimates from the Department of Public Expenditure and Reform indicate a figure of €667 million. This underlines why the Secretary General of that Department should be present. Is that a typo?

Mr. Colm Desmond

No. It includes other issues, mainly ICT, as well as capital.

I understood that the budget for ICT was €300 million, of which €150 million was to be allocated for ICT and €150 million for staffing and other issues.

Mr. Colm Desmond

The 2019 allocation for ICT is €85 million capital and €15 million from the Department of Health. That is the difference between the €667 million and the €567 million.

Is that part of the €300 million to which Ms Hardiman referred in terms of the ICT budget? This is the point I wished to make earlier, although I appreciate Deputy Brassil had been waiting for quite some time. My understanding is that the €300 million represents a block of money the spending of which has not yet commenced. The spending will not begin until the hospital is very near completion, at which stage work will start on those projects. Am I correct in that regard?

Ms Fionnuala Duffy

Not quite. They are happening in tandem. It is vital that they happen now so that the hospital is fully ready to open appropriately. We are currently investing in ICT in Connolly and Tallaght urgent care centres which will open next year and the year after in order to ensure there is appropriate ICT in those facilities. Investment in services and the work that is going on with staff, families and others to ensure an appropriate safe transfer to these new facilities is required. That has been happening over the past few years and could continue up to and a little beyond the opening. We are funding that through revenue-----

In regard to the €300 million that was referred to by Ms Eilísh Hardiman------

Ms Fionnuala Duffy

Some €88 million of the €300 million is for that service integration programme. It is funded on a multi-annual basis out of the revenue funding.

Is that €88 million per annum or in total?

Ms Fionnuala Duffy

It is a total programme.

Over how many years?

Ms Fionnuala Duffy

We have worked out the programme with Children's Health Ireland as it is an investment programme required to integrate the services between now and the opening of the hospital. There is a total budget of €88 million revenue funding. It is totally separate from the capital.

That is included in the €300 million.

Ms Fionnuala Duffy

It is included in the €1.7 billion. The difference between the €1.4 billion and the €1.7 billion is the €300 million.

Is that the same €300 million that Ms Eilísh Hardiman last week told us is ring-fenced for ICT and staffing?

Ms Fionnuala Duffy

It is. It also provides for service integration. We have been providing that funding over the past few years.

Ms Duffy is stating that €88 million comes from revenue.

Ms Fionnuala Duffy

That is correct, on a multi-annual basis. Approximately €30 million of that and some additional funding is already in the base budget of Children's Health Ireland.

That €30 million has been spent. That means that Ms Hardiman has €270 million left to spend.

Ms Fionnuala Duffy

Not quite. As I said, Ms Hardiman's service integration component is €88 million of that €300 million.

Some €150 million is going on ICT.

Ms Fionnuala Duffy

No, that relates to broader ICT. The difference between the €1.4 billion and the €1.7 billion is made up of three components, namely, ICT investment, service integration and the children's research centre. There are three different funding sources for those. The ICT component is approximately €97 million and is funded through ICT capital. That is what will be needed over a number of years between now and the hospital opening. The integration programme is funded through revenue, as is done through the Estimates process each year, and it is approximately €88 million. It is well under way and some work has taken place in that regard. The third component, which represents the overall investment on this campus associated with this project, involves construction of a children's research and innovation centre. It was always intended for that to be funded through philanthropy funding. However, it is incorporated in the €1.7 billion total of which we advised the Government because that reflects the total investment from all sources, including capital, philanthropy, various non-Exchequer revenue and ICT funding.

Ms Duffy is saying the Exchequer will not have to pay out those moneys.

Ms Fionnuala Duffy

The children's research and innovation funding will not be funded by the Exchequer but, rather, by non-Exchequer sources, as was always the intention.

It does not come out of that €300 million.

Ms Fionnuala Duffy

It is part of that €300 million because the €1.7 billion of which we advised Government represents total investment from all sources, Exchequer and non-Exchequer.

The Department could probably help its cause if it were able to advise the Government that there is a bill which it will not have to pick up. Ms Duffy does not expect the Government to have to pick up the tab for the entire €300 million of which it was advised by the Department.

Ms Fionnuala Duffy

That is correct because-----

Approximately how much of the €300 million will the Government have to pay?

Ms Fionnuala Duffy

I will provide the estimates and we can follow through with the detail. As Ms Conroy outlined, it has always been intended that €20 million philanthropy funding would form part of the capital contribution. We are now incorporating an additional €130 million philanthropy funding. In addition, philanthropy funding will be used for the children's education and research centre, the cost of which is estimated at €18 million. That is an estimate because it is not Exchequer-funded and has not commenced. It will be sourced from non-Exchequer funding.

Last week, a journalist said to me that this story will run and run. I concur with that opinion because the more answers we get, the more questions we have to ask. The State will not have to pick up the full tab for the €300 million but it will not be able to lay off any other part of the €1.7 billion to other sources, philanthropic or otherwise.

Ms Fionnuala Duffy

There is and always was a consideration in the original estimates that there are commercial aspects to this project, including the car park. Although it may initially have to be funded through the Exchequer, there was always an intention to seek commercial involvement in that aspect. There will also be commercially leasable and rentable space within the new hospital. There are the components-----

As one who does not support the involvement of the private sector in the public sector, which the witnesses, as public servants, may appreciate, it seems to me from what Ms Duffy is saying that the State will build the car park and an operating company will come in and make a profit from it. I do not think that will work well for patients.

Ms Fionnuala Duffy

I am not saying that will necessarily be the case.

That is what usually happens in practice. I am not convinced that is a good way to go but I understand that the Department may consider it, given the funding shortage. Last week, we discussed the naming rights for certain parts of the hospital. Although I am sure the witnesses are aware of it, I reiterate the Sinn Féin belief that the hospital should be named after Dr. Kathleen Lynn for very obvious and good reasons. We did not get support from other parties for that proposal but that does not mean that it has gone away. We still hope that it will be a possibility.

A significant amount of philanthropic money will be spent on the hospital and, obviously, there will be some sort of payback. I presume that the naming rights of individual units within the hospital will be auctioned off to the highest bidder, however appropriate or inappropriate that might be. Has a schedule been set up in that regard? Are naming rights implicit in the philanthropic donations or is it the witnesses' belief that people will donate money because they want children to get better?

Ms Tracey Conroy

It is not implicit. A programme of work will be delivered under the Children's' Health Ireland foundation to which I referred. I neglected to mention that a director of philanthropy with specialist expertise in this area will be appointed and there will be a detailed five-year plan in terms of philanthropy for the hospital, which reflects what is done internationally. The Minister has been clear that the name of the hospital will not be considered in that context but there are other naming rights, as the Deputy correctly pointed out, throughout the hospital that could be considered in that context and that will be part of the five-year philanthropic plan.

When will that plan be published?

Ms Tracey Conroy

Established at the end of last year, Children's Health Ireland is working on establishing a foundation and recruiting a director of philanthropy and it will work on the plan. I do not have a date for when it will be completed but the foundation is actively engaged on it and, as I stated, is benefitting from the very significant fundraising expertise of the foundations currently in existence in the three children's hospitals.

That was a very long answer to a very simple question. I just asked when the plan will be published. If Ms Duffy does not know, she should say so.

Ms Tracey Conroy

I said that I do not know. The work in that regard is commencing.

On a final point, philanthropy funding will be €150 million, comprising €20 million and €130 million, and also the cost of the children's research centre. Is that correct?

Ms Tracey Conroy

Yes.

The latter will cost approximately €18 million.

Ms Tracey Conroy

The €18 million figure is an indicative amount.

I thank the witnesses for coming in this morning and afternoon.

I have one last question to clarify. I would like a graph on a single sheet to make the comparisons between the original estimated or projected cost, whatever it was, including the specification and the bill of quantities involved, and then to show the next step from €660 million, plus VAT of whatever the amount was, to €1.4 billion. I would like the graph to show the level of increase and to what it relates in each case.

I also raised at the previous meeting the difference between the highest and lowest tender prices. The lowest was the successful one. Was the total amount €400 million?

Mr. John Pollock

For the overall tender?

Mr. John Pollock

That was €637 million.

I am asking about the difference between the highest-----

Mr. John Pollock

The difference was €130 million.

I was given a different figure for that last week.

Mr. John Pollock

For the difference between the highest and lowest?

Mr. John Pollock

I apologise to the Deputy, I do not think I have that figure with me but I will give it to him.

I would like the figure and the explanatory sheet I described. Might the highest tenderer now feel disappointed given the problems that have arisen? Could the highest tenderer not say that, if its tender price had been accepted, there would not be such a vast amount of increase? Is it a fair enough assumption that the highest tenderer could say that?

Mr. John Pollock

That would not be a fair assumption. Everything that is now in the current phase is tendered as per the original 2016 tender rate, just the quantities have increased. Similarly, the second ranked candidate back in 2016 would already have been starting €130 million higher and would also be entitled to increased costs for the increase in quantities.

That is not necessarily true because if that tenderer had pitched its costs more accurately, and I have a bit of experience in this area, we should not presume that it would have increased its costs subsequently in similar fashion to the lowest tenderer. That would be extraordinary.

Mr. John Pollock

That is not the point I am making. If the quantity of the concrete required increased from 2016 to 2018, the second ranked candidate is also entitled to say there is more concrete, steel or electrical cable in the building and it is entitled to get paid for those at the rates it tendered.

When are these tenders opened? When I worked in a county council, they were opened at a council meeting?

I understand these are important questions but we have two minutes to vacate the committee room.

These could be two very important minutes. Where are the tenders opened?

Mr. John Pollock

The tenders were returned to our office. It is a dual process comprising quality and price. We noted that the tenders came in. They are not opened on that day but are sealed in a safe. The quality evaluation then takes place and there is an external process auditor who reviews this, so it is quality and price, and the quality is scored and it is only after that has been determined that the pricing envelopes are opened. They are witnessed and signed by our board members.

I thank Mr. Pollock and Deputy Durkan. It has been a long morning and afternoon. I thank the witnesses, on behalf of the committee, for coming in. Thank you to Mr. Aonraid Dunne, Mr. Colm Desmond, Ms Tracey Conroy and Ms Fionnuala Duffy on behalf of the Department. Thank you also to Mr. Jim Curran and Mr. Dean Sullivan on behalf of the HSE and to Mr. John Pollock on behalf of the development board. I thank them all for their attendance.

This meeting is now provisionally adjourned until next Wednesday morning at 9 a.m. because we may have a meeting in the meantime.

The joint committee adjourned at 1.44 p.m. until 2.30 p.m. on Tuesday, 29 January 2019.