Thursday, 7 February 2019

Ceisteanna (1, 2)

Barry Cowen

Ceist:

1. Deputy Barry Cowen asked the Minister for Public Expenditure and Reform if he played a role in the cost budgeting, tendering and cost management process for the national children’s hospital; the impacts on other projects as a result of the increase in costs; if the terms of reference for a report (details supplied) have been finalised; and if he will make a statement on the matter. [5977/19]

Amharc ar fhreagra

Jonathan O'Brien

Ceist:

2. Deputy Jonathan O'Brien asked the Minister for Public Expenditure and Reform when his attention was drawn to the cost overruns in the national children’s hospital; when he raised concerns with the Department of Health on the robustness of internal cost controls; and if he will make a statement on the matter. [6137/19]

Amharc ar fhreagra

Oral answers (11 contributions) (Ceist ar Public)

I will be brief because many of the points mentioned in this question, which had to be submitted by last Thursday, have been overtaken by events. The Minister need not elaborate on the PwC report; he can give a brief overview. I can pre-empt his answer on the tendering and cost management processes and cost budgeting that the Department would have done in the preparation of the contract.

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

With regard to the overruns associated with the build of the hospital, the full assessment of the cost overrun and the reasons for it were received by my Department in the form of a report from the National Paediatric Hospital Development Board submitted by the Department of Health on 19 November. My Department reviewed the report and met the Department of Health to discuss it on 23 November and made a formal submission to me on 26 November.

The Department of Health submitted a memorandum to Government in April 2017 that included a section on the proposed new governance arrangements for the national children's hospital, NCH, project. This proposal included the establishment of the board, to be chaired by the Secretary General of the Department of Health, with responsibility for monitoring the progress of the children's hospital programme against the agreed parameters for the programme in relation to its timeline, scope and funding.

There is much in my prepared statement which I have already shared with the Deputy. I will respond to one question he put to me with regard to the timeline for how I plan to deal with the issue for this year. My aim is to be in a position to agree this with Cabinet next Tuesday.

The Minister says he was made aware of the extent of this overrun on 19 November. We are led to believe that the board discussed seismic overruns in June and that in September the Secretary General of the Department of Health was present when a figure of €391 million was relayed to the committee. The Minister's representative on the board did not remind the chairman to contact the line Minister, as was his duty. The Minister and ourselves were in the throes of budget preparations. He was well aware of the overrun in respect of current expenditure in the Department of Health, so much so that he was looking at a supplementary budget to the tune of €600 million. Obviously the Minister deals directly with Department of Health officials, officials of his own Department, and the Minister for Health in respect of budget preparations. When it became apparent that there was such an overrun on the current side, did the Minister ask about the situation in respect of capital expenditure?

I would just like to point out that it is not the case that I am cutting the Deputies' time short. The time is doubled, but the two Deputies will have a better chance to ask more questions if they stick to one minute for each supplementary question.

To answer the Deputy's two questions, I did not deal with the issue of whether a supplementary budget was required for capital expenditure at that point. There were two reasons for this. First, a supplementary budget would have dealt with last year, 2018, rather than with any additional costs for 2019. The second reason is that in all of my experience of engaging on this issue in previous years, all supplementary budgets for the Department of Health focused on current expenditure. In any event, we were dealing with 2018 and the costs that are now the cause of debate and inquiry in the House related to 2019 and beyond. With regard to the role of my official on the board, I emphasise that, from working with him, I know of his excellence as a procurement professional and the work he has done in that area. From his point of view, he could see engagement on the matter taking place in the board and with the Department of Health. This engagement then led to the timeline that both the Minister, Deputy Harris, and I have shared.

There are serious questions which need to be answered and we are not getting the answers. For instance, we now know that in April an assistant secretary in the Department of Health made a request for an interim report to be forwarded to Government in respect of the escalating costs. In May she again asked for a report to be sent to Government in respect of these escalating costs. The minutes show that she asked for this to be done prior to the budgetary process taking place. We now know that the figure of €391 million was, to use the term used by the Secretary General yesterday, "crystallised" and known on 19 September. Despite this, nobody seems to have told the Minister or the Minister for Health what the figure was until after the budget. If that is the case, I put it to the Minister that there have been serious breakdowns in communication between the most senior officials in the Department of Health and the Minister and within the Minister's Department. He was not able to get that information from the Department of Health when discussing a black hole of €600 million or €700 million in current expenditure. Which is it?

It is very important to be clear around the timings. The so-called black hole to which the Deputy is referring, which ultimately resulted in a supplementary budget of €645 million for the Department of Health, referred to 2018. It was a supplementary budget for last year. A discussion about additional funding for last year cannot be conflated with funding for this year and the years to come. All of the engagement we had on the supplementary budget was focused on current expenditure for last year and referred to a process that had been ongoing between myself and the Minister for Health for a number of months. With regard to the engagement within the Department of Health and between my Department and the Department of Health, the Minister, Deputy Harris, has outlined all of the work he did in trying to interrogate all of the costs and to come up with a figure he felt he could submit to me and on which we could then work. That is what happened.

The Minister is saying that the discussions within his Department with regard to his preparations for the budget were solely concentrated on current expenditure. I do not doubt that but I find it amazing that he would never ask the Minister for Health or his representatives, or his own officials to check the situation in respect of capital expenditure. The Minister knows as well as I do that, when we spoke, we looked to see whether he was in a position to provide funds within the HSE service plan, under future expenditure for this year, to deal with our demands in respect of children who are were awaiting psychiatric assessment and in respect of the elderly and the lack of home help packages and hours to deal with the backlog in that area. That was a priority of ours. Obviously we were mindful of the commitments the Minister had made in the national development plan and the commitments he made at various roadshows around the country with regard to the different projects and primary care centres to be included in that plan. They are now in jeopardy because of an overrun in capital spending on the children's hospital to the tune of €100 million. If the Minister did not ask about capital expenditure, that is very disappointing. If he did ask, what is the answer? The Minister is saying he did not ask and that he is therefore exonerated. That is a poor reflection on the situation.

As I have said, I have to take, and do take, responsibility for the framing of any budget. Ultimately, while line Departments have responsibility for specific projects, I hold myself accountable for overall decisions on how the country's money is used and I understand why the House is putting these questions to me. The majority of the discussions we had with the Department of Health were focused on current expenditure because that is where services are delivered. The two issues the Deputy has raised, and which I acknowledge he pressed during our budget discussions, are entirely issues of current expenditure. If the matter of the national children's hospital had come up in the way it has now, I would have asked the Minister, Deputy Harris, to quantify the costs. As he has outlined, that is what he and his Department are doing.

We are led to believe that the Minister, Deputy Harris, was not aware of the costs in September, despite the Secretary General and an assistant secretary knowing that the figure was €391 million. I accept that is a capital cost but surely it is a pretty important figure to feed into the budgetary process. While the budget deals with current expenditure, there were also massive increases on the capital side, which we have all welcomed.

Surely if the Minister is dealing with the issue of increasing the capital budget for next year and further years, it is an important piece of information that the cost of the flagship capital project is running over by €391 million. Surely he would have an expectation that such information would be relayed to him, given that the assistant secretary in the Department requested as early as May that it be given to the Government as part of the budgetary process, which did not happen. Will the Minister give a commitment that he will find out why it did not happen, given that it was requested at the steering group meeting in May?

The minutes that have been released for the meeting of the steering group in May outline all of the options that body was considering in moving the national children's hospital project forward. Because the capital expenditure figures for this year had already been determined as part of Ireland 2040, the vast majority of the engagement I had with all colleagues on budget 2019 was on the issue of current expenditure. I will repeat what I said before. In dealing with a project of this size, for me to do the kind of work I now have to do, the key issue would have been to understand the exact figure about which we were talking. What we can see is that within the Department of Health that was exactly the work they were doing. They were trying to understand why it had developed. From the moment the Minister for Health was notified - he has outlined the timeline - he has shown what he did to try to interrogate the figure and deal with it. He did the work I would have asked him to do. I am now responsible for how we can include it in our plans for this year from a capital point of view.