Mr. Seamus McCarthy:

The 2019 appropriation account for Vote 13, Office of Public Works, records gross expenditure of €455.1 million. The surplus at the year end was €8.9 million. Of this, €8 million was unspent capital allocations for flood risk management which was carried over to 2020. The balance of €921,000 was surrendered.

The appropriation account is presented under two programme headings: €99.3 million, or 22% of the total expenditure, was spent on the flood risk management programme; and just under €356 million was spent on the estate portfolio management programme. Under the estates management programme, the OPW provides office and other accommodation to Government Departments and offices, with the costs being a direct charge on the Vote. This includes rent payments totalling €91 million; expenditure on new works, alterations and additions, costing just under €75 million; and property maintenance and supplies payments totalling just under €65 million. The account records the value of land and buildings held at the year end at €3.3 billion.

In addition to the activity accounted for under Vote 13, the OPW acts on an agency basis on behalf of other Government Departments and agencies. This mainly relates to the carrying out of major capital works and the leasing of accommodation. The expenditure associated with this agency activity is reflected in the accounts of the client Departments and agencies. Total agency expenditure handled by the OPW amounted to €112 million in 2019. This means that the aggregate value of the expenditure handled by the OPW amounted to €567 million in the year.

I issued a clear audit opinion in relation to the appropriation account, but drew attention to the disclosure in the statement on internal financial control about procurement that was not compliant with public procurement rules.

I also drew attention in the audit opinion to the disclosure in the statement on internal financial control about expenditure by the OPW in 2019 on a maintenance contract. I had previously reported on the origin and operation of this contract in my report on the accounts of the public services for 2018. That is the chapter before the committee this afternoon.

The OPW has its own in-house direct labour force to carry out maintenance work on high-profile heritage properties, such as Dublin Castle, Áras an Uachtaráin and Kilkenny Castle. For more standard properties, the OPW draws on the services of a private contractor firm for maintenance works, as required, under what is referred to as a "measured term" contract. This is a contract that provides for the drawdown of services within a specified period, with individual work orders assessed on the basis of a tendered schedule of payment rates.

Minor construction works were also allowed under the contract, with provision for individual works orders costing up to €500,000 each. Above that level, separate tendering of works would be required.

Following a publicly-advertised tender competition, the contractor was appointed in October 2014 for three years, with a one-year extension option which was exercised by the OPW. The contract indicates that the OPW envisaged the contract value would be of the order of €3 million a year, or €12 million over the full four-year term. In fact, the total value of the work carried out over the four years was €39.4 million, an average of just under €10 million a year. In addition, the Accounting Officer has disclosed that the OPW incurred further expenditure of €7.4 million in 2019 on works commissioned prior to the end of the contract term, bringing the total contract value to €46.8 million. All these figures exclude VAT.

In the course of our examination we also identified that at least six work orders placed by the OPW that cost in excess of the €500,000 limit. These ranged in value from €600,000 to €2.4 million.

When the measured-term contract was in its final year, the OPW advertised a tender competition for its replacement. As required by law, the tender invitation included an estimate of the value of the new contract, which was proposed to be for an initial three years. This is intended to allow potential bidders to understand the scale of the business proposed. The value indicated by the OPW in the advertisement was equivalent to €5 million a year, excluding VAT. Only two expressions of interest were received by the advertised closing date: the existing contractor and one other tenderer. Following final evaluation, the OPW awarded a new three-year contract to the existing contractor in October 2018. The new contract allows for spending on any one works order up to €750,000, or up to €1 million for conservation works. The Accounting Officer has disclosed that the expenditure incurred on work orders under the new contract had totaled €34.7 million by the end of 2019. Again, this is very significantly in excess of the estimated contract value presented in the tender advertised. Of this total expenditure to end 2019, €22 million was attributed to works on infrastructure required to prepare for Brexit.

We found that the OPW did not have adequate contract monitoring mechanisms in place, especially in the types of work being undertaken, which included pre-planned preventive maintenance, reactive maintenance, new capital works, and conservation projects. The Accounting Officer agreed to recommendations we made about improving their contract monitoring and estimation of contract values. Given the elapse of time since the report was published in September 2019, the Accounting Officer will be able to update the committee on progress made in that regard. I thank the Chairman.