Procurement of Public Works Projects: Discussion with Department of the Environment, Heritage and Local Government.

The next item is No. 3, a discussion on the procurement of public works projects which follows on from our discussion on circular IPPP 3/2008 on construction procurement reform — additional measures to the revised arrangements for the procurement of public works projects and the engagement and payment of construction consultants. At our meeting on 31 March a number of members commented on this circular and expressed concerns about how it was being implemented at ground level. The clerk issued a copy of the circular to members. The assistant secretary of the Department of the Environment, Heritage and Local Government is with us today. Members should note that the officials present can discuss procurement matters within the remit of the Department but not within that of any other Department. This issue is relevant to every Department, but we are only dealing with the Department of the Environment, Heritage and Local Government today. I welcome the following: Ms Mary Moylan, assistant secretary; Mr. Gerry Galvin, principal adviser; Mr. Barry Linehan, principal adviser; Mr. Peter McCann, principal officer; Ms Áine Ní Bhriain, assistant principal officer; and Mr. Stephen Roy, administrative officer. I thank all of them for attending. The format of the meeting is that there will be a brief opening presentation by the officials which will be followed by a brief question and answer session.

Before we begin, I draw attention to the fact that members of the joint committee have absolute privilege but this same privilege does not apply to witnesses appearing before the committee. 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 Houses or an official by name or in such a way as to make him or her identifiable.

I invite Ms Moylan to make her presentation.

Ms Mary Moylan

The committee has asked the Department to provide information on the operation of procurement policies for public works contracts by local authorities in relation to projects financed under the Department's capital programmes. In particular, the committee wished to see if there was any evidence that the procurement process was indicating a bias towards larger firms. I would like to outline the general policy on public procurement and will then follow up with a summary of the evidence that emerged from the case studies in the areas of housing and water. I understand details of these case studies have been circulated to members. It was proposed that we examine projects with a value in excess of €5 million.

The European Union public procurement directives and the regulations that transpose them into Irish law set out the rules governing public procurement. Public procurement guidelines are issued by the Department of Finance which has overall responsibility at national level for public procurement policy. All public bodies, the Department and local authorities must comply with these EU and national public procurement rules. It is a basic principle of public procurement that a competitive process must be used, except in justifiably exceptional circumstances. The competitive process can vary depending on the size and characteristics of the contract to be awarded. The revised EU public sector directives permit four tendering procedures, namely, open, restricted, competitive dialogue and negotiation. For our purposes today, the open and restricted methods are the procedures relevant to the case studies.

Under the open procedure, any interested party may submit a tender. The procuring authority may seek information on the tenderers' capacity and expertise and only the tenders of those deemed to meet the specified minimum levels of technical and financial capacity and expertise are evaluated. It is important that any such minimum requirements are made clear in the notice or the request for tenders, RFT, to avoid bidders without the necessary qualifications incurring the expense of preparing and submitting tenders.

The restricted method is a two-stage process where only those short-listed parties which have been determined to meet minimum requirements in regard to professional or technical capability, experience and expertise and financial capacity to carry out the project are invited to submit tenders. As a first step in this process, the requirements of the contracting authority are set out through a contract notice in the Official Journal of the European Union and expressions of interest are invited from potential tenderers. The contract notice will indicate the relevant information to be submitted or the information may be sought via a detailed questionnaire sent on request to interested parties. EU Directive 2004/18/EC sets out the criteria which may be used in pre-qualifying candidates. These criteria relate to financial capacity, technical capacity, relevant experience, expertise and the competency of candidates. Contracting authorities may opt to short-list qualified candidates but they must have a minimum of five, provided at least this number meet the qualification criteria, and may have up to a total of 20. In our experience, the number of contractors short-listed is usually approximately five. In the second step those candidates who have pre-qualified are issued the complete specifications and tender documents, RFTs, with an invitation to submit tenders. Evaluation of tenders received is carried out on the basis of the most economically advantageous tender, MEAT, principle.

Housing and water are the two largest capital programmes in the Department with a 2009 capital budget of €1.6 billion for housing and €500 million for water programmes. The water services investment programme, WSIP, is the instrument through which all major public water and wastewater infrastructural schemes are delivered. The Department, in consultation with local authorities, undertakes periodic needs assessments which determine the priority listing of schemes. The Department is responsible for the approval of all major schemes and provides the requisite capital funding. Approval of projects with a value below €5 million is generally devolved to local authorities which are the water services authorities.

In housing, local authorities normally receive approval to take projects up to a capital value of €5 million that do not contain an unusual level of complexity straight through to procurement without further referral to the Department. The Department provides an overall budget cost for the project and approval is subject to compliance with all regulatory requirements, including procurement. Tenders for projects above €5 million are approved by the Department. Where a tender report is submitted to the Department for approval under any of the capital programmes, it will typically outline details on the preferred bidder and the unsuccessful bidders in order that the Department can be satisfied that the proper procurement principles have been observed. The Department has provided for the committee a list of projects in excess of €5 million in these areas indicating to whom each contract was awarded and the names of the other tenderers.

New projects represent only part of the expenditure incurred in any year under the main capital programmes. Projects over €5 million in value tend to be large projects and their construction would generally span more than one year. These cases represent the vast majority of the work in progress. The case studies represent the new projects starting off.

I will summarise briefly the information which emerges from the case studies. In the housing area, 41 traditional construction projects have been approved since January 2008. Of these, only three were in excess of €5 million. As this figure would be too small to be representative, we have included the next ten projects in the analysis supplied to the committee in order to give a more comprehensive picture.

The list is made up of a mixture of open and restricted tenders and the top eight tenderers in each case are included. As members will see, the list shows a wide range of contractors tendering for, and being awarded, contracts in the social housing area. Based on the range of firms listed, the Department is of the view that there is no evidence of bias towards larger firms either through the use of open or restricted tendering in the housing area.

On water schemes, there have been 44 new projects of over €5 million since the beginning of 2008. Of these, only 12 were referred to the Department for sanction. Approval of the remaining 32 contracts was a matter for local authorities under devolved procedures. Of these 32 contracts, only three involved the use of pre-qualification criteria and 29 contracts were procured using open tender procedures. Nine of the 12 projects referred to the Department for approval were design-build-operate projects and were subject to pre-qualification criteria. The use of this procurement method is most suitable for DBO projects which are generally of specialised nature and include elements of a complex civil engineering nature, tunnelling and treatment works.

Standard pipe laying projects are normally procured through open competition. It is worth noting that most DBO projects have been procured under the public private partnership umbrella and where a project, or grouped projects, is advanced as a PPP, a process auditor is appointed to record that each step on an approved procurement process checklist has been addressed by the project manager or project board. The process auditor must be satisfied that each step of the procurement process has been given due consideration by the responsible authority. This is an extra safeguard to ensure strict compliance with public procurement requirements.

As with the housing project, the list shows a range of contractors tendering for, and being awarded, contracts in the water area. The number for each contract is not as wide as in the housing area but this is not unexpected given the specialist nature of the work involved in water works construction projects. Based on the range of firms listed, the Department is of the view that there is no evidence of bias towards larger firms either through the use of open or restricted tendering.

I hope the committee finds this information useful. My colleagues and I will be happy to answer any questions members may have.

I thank Ms Moylan for the presentation. It is great to receive practical case studies because people are interested in seeing them. I believe Ms Moylan said in regard to a housing contract that where the capital value is under €5 million, local authorities can take it through themselves.

Ms Mary Moylan

They can take it through as far as the procurement process but when the tender comes in and if it is greater than €5 million, the tender must be approved by the Department. They can do the design.

They can do the design, go through Part 8 and all those procedures.

Ms Mary Moylan

Yes.

Do they have to get approval to go to tender?

Ms Mary Moylan

No. They have approval to go to tender if it is within the budget.

When the tenders are received and before a contract is signed, it must go back to the Department.

Ms Mary Moylan

Yes.

I welcome the representatives from the Department of the Environment, Heritage and Local Government and I compliment them on the presentation. There are problems in regard to national public procurement policy, in particular in deprived areas of the country, including the midlands. I understand there are EU and national public procurement rules in place. Concerning contracts and local authority projects, there is a tendency — which I believe is in line with the policy of the Department — to group projects such as group sewerage schemes together in threes or fives. This does not provide a fair playing field for smaller contractors who are very efficient and have operated to a very high standard in this area in the past. Many native Irish contractors in the midlands have approached me or other public representatives claiming the playing pitch is not level with regard to contracts. In the midlands, particularly in my own county, many contracts have gone to firms from Northern Ireland. It has been pointed out to me on numerous occasions that such contractors do not have to pay VAT at the same rate as we do in the Republic. That concerns work in two separate jurisdictions where the VAT rates are different. Is this fair? There should be provision for local need in any departmental stipulation. I understand that in the UK and in other countries in Europe local need is taken into consideration.

When I worked first with my local authority most reports and drawings were done in-house but now almost all local authorities employ consultancy firms. In many cases these come from areas far away from the midlands. I do not claim this to be the case but there is a view that consultancy firms taken on from the bigger cities and from outside the midlands do not see the local needs. There are contractors in the midlands who feel hard done by and I am sure this is also evident in other parts of the country.

I do not agree with the operational rules of the Department of the Environment, Heritage and Local Government in respect of grouping sewerage and water schemes. Many local contractors are very annoyed and concerned about this and I know of some smaller contractors who are going out of business. They have all the requirements but are still overlooked. I understand there must be tenders that yield the lowest prices but often there might only be €1,000 between lowest and second-lowest prices. That must be examined. I have experience of this occurring in the midlands in the recent past and can provide evidence if the delegates wish to see it.

I thank Ms Moylan for her presentation which was constructive. However, I agree fully with Deputy Bannon concerning the grouping of contracts. It is not fair. I have seen this operating in my local authority where one firm may get a contract for up to six schemes. That is unfair and very annoying for local contractors who have done good work and employed many local people.

I have nothing against people coming from foreign lands. I have nothing against people coming from Northern Ireland; we are all the one nation and I make that clear. However, they seem to be able to compete unfairly. It has been alleged that many of the contractors who come from Northern Ireland employ people who are signing on in Northern Ireland but coming down to work during the week. If that is the case it is very unfair and local authorities and other Departments should make sure everything is checked out thoroughly to ensure that does not happen. I do not say it is happening, but we are led to believe it is. I appeal to the departmental officials to ensure that the local authorities are checking out all these matters thoroughly. Looking through my county, it is great to see the number of schemes that have taken place. At the same time, as Deputy Bannon says, it is very hard on small contractors who want to keep people employed. That one contractor can get five or six jobs at the same time is very unfair and this is something that should be looked at.

I will take a comment from Deputy Tuffy. We shall take the questions together.

I thank Ms Moylan for the presentation. From our perspective it is difficult to make a judgment when we only have the amount charged by the successful tenderer. Was it not possible to give the committee all the figures?

I will answer since, as Chairman, I would have spoken to the assistant secretary. The concern was to find out whether there was a bias towards large companies rather than small to medium-sized enterprises. The issue was not the actual price. Because we gave them less than a week to produce all this information, county by county, I had asked them to pick large contracts in an effort to make the job manageable. To see that one contract was for €11 million and another for €10.5 million does not tell us much. We really need to know whether there was a bias towards certain companies.

Can I assume that this was the cheapest price in each case? As regards those contracts for the sewerage schemes and water treatment, two companies are emerging more frequently and they seem to be doing well as regards tendering. The two are Response Engineering Limited and Veolia Water Ireland Limited. I have the same concerns as the two other Deputies who spoke.

Does the Department require local authorities to disseminate, or does it have certain guidelines itself, as regards the information available to the public? Should all this material not be on the Internet if the Department is looking for tenderers — the advertisements, the tenders and the outcome — in an open and transparent manner, as well as the price and everything else? If anyone has any complaints all the information will be upfront to assist him or her. Will the Department not move in that direction?

If it is working on the most economically advantageous principle, what about small businesses? Is it not good to promote small businesses, in the area of housing, for example? We have had an enormous property bubble and there was all this comment about the price of land. I was on the All-Party Committee on the Constitution which looked at property rights and one of the issues was that only a few major developers controlled the vast bulk of the land. Surely we should be trying to promote the future of small builders and our tendering process should ensure that we allocate small contracts for the building of social and affordable housing.

On a related issue I agree with most of the previous speakers as regards combining various schemes. I come from Waterford which has the seven villages sewerage scheme, about which the officials, no doubt, are all aware. I am told the local authority was asked to lump seven villages together to tender for a water treatment scheme. Four of the seven villages require foreshore licences, which means there are additional complexities. We have discussed foreshore licences on this committee and the major barriers that applicants can encounter. The net effect is that the seven villages scheme has been held up for nearly seven years, whereas three schemes might have been undertaken a long time ago because they do not require foreshore licences. The combining of all seven schemes was intended to achieve greater efficiency and cost effectiveness. Instead, we have seen a failure to deliver essential infrastructure to villages due to the decision to combine the seven schemes for procurement and tendering purposes. Who in the Department decided to combine the schemes and what was the rationale for the decision? I presume it was intended to create sufficient critical mass to make the projects cost effective. However, the real effect is that infrastructure is not being delivered and there are huge delays.

I agree with previous speakers on the pre-qualification of smaller businesses. Many small contractors who served local authorities very well for many years are being excluded from tendering for infrastructural projects in these villages. There is a concern that this policy is putting small contractors out of business. Are prices coming down in the current economic climate? If so, by what percentage are tender prices dropping? How do current tenders compare on price with those of three or four years ago?

I thank the officials for their presentation. When documents are sent to prospective tenderers, are guidelines included or are tenderers already aware of them? Most of the names in the documents made available to the committee are those of large contractors. Does one define large and small in this context by the value of a company or its assets? How can one be sure a company has sufficient finance to undertake a project?

What level of scheme or size of contract must be advertised in the Official Journal of the European Union? Are the contracts to which the officials refer for schemes which have commenced since 2008? Are the contracts fixed? In previous years they were not and people tendered a low fee and then had overruns.

There appear to be long delays between the time schemes are approved by the Department and their final conclusion. I know of a water scheme in County Kildare which has been ongoing for approximately ten years. It is a very large scheme and has been going to and from the Department for all of that time. I understand it is now being processed for planning. Is it possible to cut the red tape in the development of schemes before they go to tender?

Ms Mary Moylan

My colleagues and I will address the questions as well as we can. A number of members raised the question of bundling schemes. I believe the joint committee discussed this issue last November. The objective of bundling is to ensure value for money and, particularly on projects involving complex treatment works, to ensure the capacity of tenderers to deliver a project. A number are design-build-operate projects. They provide for the operation of treatment works for up to 20 years. There are many risks associated with this and as such it is important that tenderers have the capacity to operate the works. That is the rationale behind the bundling of projects. Generally, if the bundling of projects would result in some being delayed, they can be taken out. This has taken place on several occasions in the Department.

My understanding in respect of the seven village contract in County Waterford is that only the treatment works were bundled. It was a single contract. However, there are seven separate contracts for collection. I understand two of these are at construction stage and that one is shortly to be awarded. One must distinguish between the more complex water contracts and others and there is bundling to deal with the more complicated issues. Pipe laying and other more simple issues are usually dealt with separately by open tender. My colleague, Mr. Galvin, will deal with any further questions on that matter.

Deputy Bannon raised the issue of Northern Ireland firms and VAT. Under EU public procurement rules, we cannot discriminate. Projects are advertised. The limit for advertising in the Official Journal of the European Union is €5.16 million. Any project above this figure must be advertised in the journal. The competition is open and it is not possible to split projects to avoid the threshold. The principle of non-discrimination applies such that we cannot discriminate against Northern Ireland firms, although, in fairness, people were not suggesting this.

The application of VAT is a matter for the Revenue Commissioners. Foreign contractors must obtain pre-clearance from the Revenue Commissioners before they can tender for a project.

The VAT regime in Northern Ireland is different from that in place here and there is a different rate of VAT on materials in Northern Ireland. Oftentimes materials are brought across the Border. Contractors in the South usually purchase materials here which should be taken into consideration. The whole issue should be decided exclusive of VAT which should come into the equation afterwards. The lowest tender, minus VAT, should be examined by the Department.

Ms Mary Moylan

I am sorry if I have misled the committee; Deputy Bannon is correct. Projects are assessed and evaluated excluding VAT. What is assessed does not include VAT; therefore, there should be no advantage for Northern Ireland firms or firms in countries which have a different VAT regime.

That is not stated in the presentation.

Ms Mary Moylan

I did not touch on it in the presentation and offer my apologies if I have misled the committee. Submissions are assessed exclusive of VAT.

What is the position on the costings of materials? Materials brought in from Northern Ireland are subject to a lower rate of VAT than materials used in the South.

Ms Mary Moylan

My colleague, Mr. Galvin, will elaborate on that matter.

Mr. Gerry Galvin

The Deputy is correct; a contractor, whether Irish or UK based, purchasing in the South will reconcile VAT receipts in the same way as a private company. If a company is paying VAT at a lower rate, it is reconciled in its interaction with Revenue. The payment is reflected in the way for which VAT is accounted in its accounts. It is possible for companies from Ireland to buy materials, in particular, plant and process equipment not available on the Irish market, outside the Irish market which have other VAT regimes. They must, therefore, do this reconciliation. This is dealt with by a specific section of the Revenue Commissioners.

Would Mr. Galvin like us to write a note to the Revenue Commissioners seeking clarification on that? I am pleased to hear what Mr. Galvin has been saying, but we will write to the Revenue Commissioners asking for clarification on the issue, because it is one that keeps cropping up. We accept the Department is not the Revenue Commissioners, so will ask them to send us a note directly.

I am sorry to be specific, but the seven villages sewerage scheme in County Waterford is a large contract. I am aware that collection systems are proceeding, but they are of no use until the treatment systems are also in place. These schemes have been separated. Will Mr. Galvin clarify whether he said the three schemes that do not require foreshore licences can proceed separately, or are the seven treatment works bundled together? These three villages are being held up while we wait for the foreshore licences to come on stream for the other four schemes. The situation has gone beyond a joke. We have been waiting years, while these villages urgently require this essential infrastructure.

While I understand the policy and rationale of combining schemes in the hope of creating the critical mass that will make them more cost effective, this is resulting in no delivery of schemes in recent years. There seems to be no light at the end of the tunnel. We have been given target dates of 2010 and 2012, but the three villages are snookered. They cannot proceed. Is there any way they can be extracted from the contract to allow them to proceed separately?

Mr. Gerry Galvin

This is an issue of which we are very conscious in progressing the Waterford project. On foot of a recent Government decision, responsibility for foreshore licences is about to be transferred to the Department of the Environment, Heritage and Local Government. Therefore, we hope to be in a position to deal more expeditiously with the likes of priority schemes like the Waterford villages than has been the case up to now. It is hoped the Waterford villages project will proceed to tender for the treatment plant DBO contract before the end of the year. At this stage we do not envisage debundling the three villages where the collection systems are proceeding from the entire seven villages project.

I return to the issue of the bundling system. Is bundling a Department tactic to drag out a project for years? There is an eight-village scheme in Meath and it will drag on for many years. Perhaps one village will be done per year and the scheme will go on for seven or eight years. If that was given out in two contracts, it would be done in half the time. Is it a deliberate delaying tactic to bundle villages for these schemes? That is my concern.

The contractor needs to be tax compliant. In some cases, particularly contractors who come across the Border, the tax details of their employees may not always be in order. I am interested in knowing whether that is the case. I have been led to believe there is disgraceful carry on and that contractors are manipulating workers, including foreign workers. They are bringing workers in from Northern Ireland who are not in a union and are paying them buttons. This is not fair.

In the case of contractors based here, the unions are down on them immediately over the cases of foreign workers, or any workers. That is only right and I have no problem with that. However, it is very unfair if contractors coming in from Northern Ireland can bring in foreign workers and pay them buttons. This is not good enough, particularly when some of our own people are unemployed.

Deputy Brady raised two points I want to reiterate. There is a widespread view that bundling means that a scheme involving five, six or ten villages cannot start until the final detail of the last village is sorted. This is, therefore, a way of ensuring that all the projects move at the pace of the slowest. The evidence proves this.

Ms Moylan said the design, build and operate projects would be carried out through the PPP system. I am concerned about the projects now moving to DBO stage. I am concerned that these costs are starting to come in higher than one might have assumed they would come in. Perhaps the volumes have changed. We are being told that some of the existing projects are leading to bigger bills having to be paid by local authorities than would otherwise have been the case. Local authority employees have made the point to us that this amounts to an effort to privatise their jobs.

I ask the departmental officials to consider and comment on the point made by Deputy Johnny Brady. When companies are awarded contracts, after submitting tenders through the normal tender process that is available in Ireland, most tender agreements require them to comply with registered employment agreements that have been approved by the Department of Finance, the Construction Industry Federation and so on. We are concerned that some contractors say they will make payments in compliance with such an agreement, but actually pay people less than the amount detailed in the agreement. That is beginning to happen, as Deputy Brady has indicated. In such circumstances, contractors get the full contract price, on the basis of their tenders, but then pocket a certain amount of money when they do not implement the registered employment agreement. Perhaps the officials will argue that this issue is more relevant to the Department of Social and Family Affairs. From the point of view of the Department of the Environment, Heritage and Local Government, which branch of government is responsible for ensuring that registered employment agreements are being honoured? I will ask the same question of representatives of the Department of Education and Science and the Health Service Executive. We are often told it is a question of the architect's certificate. The architect checks the physical construction. He does not check whether registered employment agreements and pay rates are being honoured on the site. Is the Department dealing with that issue?

Ms Mary Moylan

The Chairman's last point related to employees' rates of pay. These contracts include provisions that set out minimum rates of pay. The National Employment Rights Authority regulates and polices this sector. If people raise issues about contractors who may pay less than the agreed rate, the authority will investigate and deal with such issues. I understand the authority has started to focus on the construction industry, in general, in this regard.

The wider issue raised by the Chairman was the possibility of delays arising from the bundling of contracts. It is not the intention of the Department that bundling would result in delays. My colleague, Mr. Galvin, can give the committee more detail on that. Bundling has been used extensively in rural water schemes. It has proven very successful in such circumstances. The quality of drinking water has improved enormously. This demonstrates that bundling has worked and has delivered the environmental results we wanted.

The Department of the Environment, Heritage and Local Government is doing its best to reduce bureaucracy. Deputy Fitzpatrick suggested that projects often have long lead-in times. We have tried to deal with this by devolving more contracts, including all water contracts below €5 million, to local authorities. We are constantly trying to be as efficient and effective as possible.

I do not want to blame the Department or the local authority. Responsibility for these delays must lie with somebody. I do not want to be parochial. I am aware that Kildare County Council was given €100,000 last year to bring a project to planning. As far as I am aware, the project has not yet reached the Department. Serious moneys are involved in this regard. In the case of a water scheme, we are talking about €800,000. When it is indicated that a scheme is of great importance because the water is dreadful and polluted and something needs to be done, I do not understand why it is not possible for somebody to come in and drive the scheme in question. I do not blame the Department. I blame the county council. I do not think the officials in the local authority are up to the mark when it comes to driving these large schemes.

Mr. Gerry Galvin

I do not wish to blame the county council either. Resources are scarce in all areas of the public sector.

They were not always scarce.

Mr. Gerry Galvin

The Chairman was right to say that there is a perception that a bundle of schemes will proceed at the pace of the slowest scheme. In such circumstances, we have responded by debundling the slowest project from delayed bundles to allow the other schemes to go ahead more quickly. That is what we advised this committee when this issue was discussed in more detail at this forum at the end of last year.

From the local authority perspective bundling greatly reduces the amount of administration involved in contracts such as the one in County Meath where one treatment plant contract covers eight plants. This required only one procurement process rather than eight separate processes. While there can be delays when eight schemes go through the unavoidable statutory processes for procurement, including foreshore licensing, once the contracts reach construction stage contractors deliver faster. Since capacity in the construction industry has become readily available in the past 12 months, there has been much faster delivery of water services projects.

There has been evidence of tenders for bundles being approximately 20% lower on average than traditional procurement tenders. There is also evidence that the operating costs of these plants are 10% lower than the pre-tender estimate for delivery of an equivalent standard, including the risks that the contractor now carries which the local authorities had until now been carrying without putting any costs against them.

I apologise for persisting with this point but I seem to be living in a different world. I have heard today that bundling has worked and that the Department has unbundled the slowest schemes.

Mr. Gerry Galvin

In a couple of cases.

In my experience, where seven villages were bundled together it has not worked but has delayed the process extraordinarily for several years. Three villages are ready to go but must wait for the others. I understand this is not the fault of the Department but that the foreshore licence is holding up progress. Mr. Galvin has said the plan for the seven villages scheme in County Waterford will proceed to design, build and operate stage by the end of the year. Is Mr. Galvin confident that this issue and all other outstanding issues for the seven village sewerage scheme in County Waterford will be dealt with because the foreshore licensing remit will transfer to his Department? I understand it cannot proceed until all issues are dealt with but Mr. Galvin says it will proceed by the end of the year. I would appreciate it if he would clarify that point.

If Mr. Galvin does not have the information, he can follow up after the meeting.

Mr. Gerry Galvin

We do not have the information to hand but will provide a note for the Senator in response to his question. I expect that once it has transferred to our Department, we will have more control over foreshore licensing than we have had up to now.

Does that mean the scheme will proceed by the end of the year as Mr. Galvin stated?

Mr. Gerry Galvin

My information is that it will proceed to procurement before the end of the year.

Was there a hold-up in all of these activities because of the new Department of Finance fixed price contract? Some projects were at the design stage and had gone to tender or were ready for tendering but were subject to the new fixed price contract which required a greater level of specification to identify risk. I am aware that some of these jobs were subject to further assessment before they went to tender. Did this happen in many cases? There was a case in County Laois but we can all mention our own counties.

Ms Mary Moylan

Any project that had proceeded to tender under the old contract was completed under that contract. Some of those mentioned in the case studies were processed under the old contract. The Department of Finance gave us a derogation on some water contracts which had not proceeded to tender but were ready to do so, allowing them to proceed under the old contract.

Some had to do further work.

Ms Mary Moylan

Yes, but the Department of Finance gave us a derogation to allow them to proceed if they were ready to go to tender.

I cannot understand why county council officials cannot see problems at treatment plants well before they pollute rivers. They depend on fishermen or people walking their dogs along the riverbank to see that sewage is flowing down the river after a heavy spell of rain. I have seen the council brought to court in my own town, Kells, and the neighbouring town of Oldcastle. Even at that stage, public representatives were being told that capacity was fine. At the same time, difficulties arose over sewerage schemes. Why can council officials not see there is a difficulty and why do they not address it until the system is about to close down? In the good times in Oldcastle, one could not build a house because of the inadequate sewerage facilities, although it would not be so bad now. This was allowed to occur although the councillors should have foreseen the problem years in advance. I cannot understand why they did not.

Mr. Gerry Galvin

I cannot speak about why councils cannot foresee events in specific cases. The combined drainage systems in the centre of many old towns are such that they cannot accommodate all the rain that can fall at once. We saw such rainfall about two hours ago in the centre of Dublin. Such was its intensity that the system could not hold the water. This results in overflows of storm water and it can cause localised pollution for short periods.

The new licensing regime for waste water discharges that is now being implemented through the EPA is designed to allow for a more far-sighted approach to considering the collection system and treatment plant discharge. Thus, the licences require the local authority to prepare an annual environmental report for the EPA on compliance with the licence. This shows the capacity taken up in the year since the last report and the spare capacity that remains within the system. This procedure will lead to much improved management of all the discharges from wastewater collection systems and treatment plants.

If the local authorities were doing their jobs properly, storm water would not enter the sewage treatment plants but enter the rivers directly.

Mr. Gerry Galvin

Unfortunately, we have inherited circumstances in which the centres of our old towns have collection systems dating back 100 years. They have combined systems and it is much more economical to retain a combined system that takes storm water overflows than trying to separate foul water from storm water in the centre of the major towns, bearing in mind the disruption of day-to-day business that the construction work would cause.

Unfortunately, the problem also arises in fairly new estates.

I thank the delegates for the chart on sewerage improvement works and wastewater treatment plants. There are approximately 12 contracts amounting to approximately €150 million. They are quite big and are bigger than the housing contracts. Three companies have six of the contracts, which is fine in itself. However, how would the Department assess the risk of something happening to one of the companies with a maintenance contract? Five or six big towns or cities could be affected. An individual county may not be affected because it will not be aware of those responsible in another. A risk must arise if three companies have 50% of the contracts. If this continues for three or four years, the wastewater treatment plants may be in the hands of a small number of companies. This must entail a risk from the perspective of the Department. Has Mr. Galvin considered this?

Mr. Gerry Galvin

We consider that year on year. If one considers the year before the one in question, one will note that the same firms did not crop up, principally because once a firm is successful in winning two or three contracts, it tends to be less competitive when competing for the next tender; it is not as hungry for the work. We are satisfied there is a good spread between seven or eight contractors or consortia of contractors that are winning this type of work, even in respect of the DBO contracts.

That is a fair point. We have discussed most of the issues, in respect of which I thank Mr. Galvin.

With regard to sewerage schemes, there is possibly a higher level of concentration but that may be due to the specialised nature of the treatment plants in question. As we understand it, the work involved is not like normal civil engineering. It is helpful to dispel the myth that a small number of contractors seem to be winning an inordinate number of contracts. There is still a suspicion out there in that regard.

The witnesses have done as much as was physically possible today to put some facts in front of us that we did not have before, which was useful. Perhaps if other committees did the same with their Departments, including the HSE and so on, they might get a clearer picture. However, we can only deal with our Department. I thank the witnesses for their presentation, which was helpful. It is nice to get practical information that people can use to understand and relate to particular jobs.

We invited the county and city managers to next week's meeting, but the date did not suit, so we are expecting representatives of the National Youth Council of Ireland to present their case on lowering the voting age, which might be of interest in the run-up to an election. We will also revisit the circular about the incentivised early retirement scheme which we mentioned earlier.

The joint committee adjourned at 4.45 p.m. until 3.30 p.m. on Tuesday, 26 May 2009.