Oireachtas Joint and Select Committees
Thursday, 23 May 2013
Public Accounts Committee
2011 Annual Report of the Comptroller and Auditor General and Appropriation Accounts
Vote 10 - Office of Public Works
We are dealing with No. 7, 2011 appropriation accounts and annual report of the Comptroller and Auditor General, Vote 10 - Office of Public Works, chapter 14, Measuring Procurement Performance. I remind members, witnesses and those in the Visitors Gallery to turn off all mobile telephones as they interfere with the sound quality and transmission of the meeting.
By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they are to give this committee. If a witness is directed by the committee to cease giving evidence in relation to a particular matter and the witness continues to so do, the witness is entitled thereafter only to a qualified privilege in respect of his or her evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and witnesses are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person or persons or entity by name or in such a way as to make him, her or it identifiable.
Members are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person outside the House or an official by name in such a way as to make him or her identifiable.
Members are also reminded of the provision in Standing Order 163 that a committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.
I welcome Ms Clare McGrath, chairman of the Office of Public Works and I ask her to introduce her officials.
Ms Clare McGrath:
I am accompanied by Mr. Tony Smyth, director of engineering services, Mr. John Sydenham, commissioner in charge of property management, Mr. John McMahon, commissioner with responsibility for property maintenance and heritage services, Mr. Michael Long, accountant, Mr. Vincent Campbell, director of the national procurement service.
Mr. Seamus McCarthy:
The principal activity of the Office of Public Works is the delivery of architectural, engineering, property management and project management services for both its own projects and those of other State agencies. The OPW manages a large property portfolio, consisting of State-owned property with a book value of around €3 billion, and substantial leased property. The OPW’s appropriation account records spending of around €400 million in 2011, divided between three programmes: estate portfolio management, flood risk management and the national procurement service. The major expenditure from the Vote in 2011 included rent and rates on leased properties amounting to €118 million; purchases of sites and building, new works, alterations and additions at a cost of €56 million; payment of €54 million in respect of the National Convention Centre public private partnership project; flood risk management and drainage maintenance at a cost of €51 million; property maintenance works and supplies costing €36 million; spending of €37 million on upkeep and visitor services at heritage properties. In addition to its spending on Vote 10, the OPW manages works reimbursed from other Votes. The expenditure in 2011 in that regard is estimated at €68 million, and is mainly property related.
The Department of Public Expenditure and Reform has estimated that the procurement of goods and services by public bodies amounted to €8.6 billion in 2011, with a further €4.5 billion spent on capital works. A procurement capacity review commissioned by the Department and completed in August 2012 highlighted that significant savings would be possible through the implementation of changes in public procurement practices. One of the functions of the OPW’s national procurement service, which was set up in 2009, is to establish national framework agreements which aim to help public sector bodies to obtain better value for money when they are procuring commonly used goods and services. A framework is an agreement with one or more suppliers setting out the terms that will govern contracts awarded to those suppliers during the term of the agreement. The aim is to reduce tendering costs for suppliers and allow public bodies to purchase without the need for multiple tendering procedures.
Chapter 14 reviews the extent to which centrally-agreed procurement framework agreements have been established in the public sector. At the end of 2011, there were 43 such agreements in place. Annual expenditure by public bodies under those frameworks was estimated by the national procurement service at €180 million. Energy purchases, in the form of electricity, natural gas and fuel for vehicles, account for 87% of that spend. In the past, public bodies could avail of framework arrangements but were not obliged to do so. Since September 2012, public bodies are required to use the central framework agreements for specified goods and services, or to have value-for-money justifications for failing to do so.
The report also examines the methodologies used by the OPW to calculate the savings achieved from procurement initiatives, including use of frameworks. The national procurement service reported estimated savings of €46.5 million in 2011 and projected that 2012 savings would be €78 million. Various approaches were taken to calculating those savings. The audit examined the methodologies used in four areas, and concluded that the savings estimates were not reliable. For example, estimated savings in 2011 on the cost of energy procurement included potential cost reductions of €4.2 million related to tariff changes and potential reduction of €8 million if public bodies paid energy prices notionally achievable by large private sector purchasers. However, insufficient evidence was available to the audit team about the extent to which the potential savings had been achieved. All contracts with an estimated value of €25,000 or more must be advertised on e-Tenders. Estimated savings of almost €12 million on newspaper advertising spend were based on the assumption that there would be a specific level of newspaper advertising in the absence of e-Tenders. While that assumption may have been realistic for high value contracts, the assumed level of advertising was unlikely to be incurred for many low value contracts. Estimated savings of €7.3 million in the cost of administering motor fuel purchases worth €11 million using purchase cards were found to have been based on a 1998 UK costing model which the UK National Audit Office subsequently concluded does not reflect current standard payment processing procedures. This suggests that the claimed saving is significantly overstated.
Overall, the examination found that there was a need for clearer definition and more consistent application of saving calculation methodologies. In response, the Accounting Officer stated that a more robust system of performance measurement is being put in place and that a working group had been established to develop a common approach to the measurement and reporting of procurement savings. The Accounting Officer will update the committee on the work of that group and on developments in savings estimation methodologies.
Chapter 14 also outlines the circumstances surrounding the extension by the national procurement service of a contract with an energy procurement advisor. Following an advertised invitation to service providers, a three-year contract for energy procurement advice was awarded in 2009 at an estimated cost of €20,000 a year. Due to very significant expansion in the scope of the work, a total of just over €1 million was paid to the service provider. Public procurement rules require that major extensions to contracts should be subject to tender but this was not done when the energy advisor’s role was extended. The work was re-tendered at the end of 2011 and a new contract with an estimated value of €2 million plus VAT over three years, was awarded to the same service provider. The level of expenditure incurred on that service underscores the importance of ensuring that the costs involved in undertaking procurement initiatives are factored in to any process of estimation of procurement savings achieved.
Ms Clare McGrath:
I am pleased to be here today to present the appropriation account for the Office of Public Works for 2011 and to answer any questions members may have.
The first item on today's agenda is chapter 14 of the annual report of the Comptroller and Auditor General, Measuring Procurement Performance. The National Procurement Service, NPS, which was established within the Office of Public Works in March 2009, is tasked with centralising public sector procurement arrangements for common goods and services, which include office equipment, stationery and office supplies, electricity, fuel, printing, uniforms and transport. By identifying key markets and analysing procurement trends, the service continues to develop a more integrated approach to procurement across the public sector, utilising procurement tools such as aggregation and framework agreements. The service also facilitates collaboration with clients in markets where savings can be achieved through the aggregation of requirements. These strategic approaches have achieved and will continue to achieve real savings and value for money.
During the course of 2011, expenditure under the NPS contracts amounted to an overall value of approximately €180 million. These contracts covered areas of procurement as diverse as stationery, energy, ICT consumables and paper. While the primary concern of the NPS on its establishment was to save money on goods and services for the State, a constant challenge is how best to calculate any savings or efficiencies that arise as a result of this procurement effort. This becomes an even greater challenge when one considers that the NPS is not actually purchasing on its own behalf. Rather, it is putting in place arrangements whereby public bodies throughout the system can procure goods and services from their own funds in a legally compliant and economical manner. The actual savings derived are reflected within those individual Votes.
The Comptroller and Auditor General's report calls attention to the many different approaches taken to the calculation of these savings or efficiencies. The reality is that the nature of the commodity or the particular market will usually dictate the approach taken to calculating the level of efficiency arising. For example, the procurement of energy in a rising market requires a different approach to calculating savings and efficiencies to the procurement of paper in a falling market. The situation is compounded by the general lack of easily accessible data on purchasing trends across the whole of the public service. Since the 2011 audit, however, the NPS, in association with its clients across the public service, has done considerable work to bring a level of reliability and consistency to these methodologies. That effort is ongoing.
A particularly active part of the business programme in 2011 involved the procurement of some €146 million worth of energy contracts. This area of procurement required the retention of expert external services to assist the NPS in its task. In 2011 the rapid expansion in demand for the services of the NPS in the procurement of energy resulted in an escalation in the associated cost of the external service providers of energy consultancy. When this development was identified, the service made arrangements to have the contract re-tendered through an EU competitive process. Given the particularly complex nature of this area of procurement, it is anticipated that the NPS will continue to require services of this nature for the foreseeable future.
The Government agreed in September 2012 to reform the central procurement function under a new Office of Government Procurement at the Department of Public Expenditure and Reform and, as part of that process, appointed a Chief Procurement Officer, Mr. Paul Quinn. A further Government decision of April 2013 agreed the outline plan for the development of a significantly expanded central procurement function.
I will now take the opportunity to refer to other important aspects of the work that was funded through the 2011 Appropriation Account and provide members with an update on the current position in several areas. Following on from the pilot Estimates introduced in the Revised Estimates for 2011, the Appropriation Account is structured under three main programmes of OPW activity, namely, the National Procurement Service, flood risk management and estate portfolio management.
The OPW is the lead agency for the management of flood risk in Ireland. Although there has been an overall drop in capital funding for the office since 2008, the committee can be assured of the Government's commitment to this critical area of investment, as clearly demonstrated by the maintenance of capital funding for flood relief and the catchment flood risk management plans in the OPW Vote. In 2011, the accounting period being examined today, works under this programme included the completion of first-phase major flood relief schemes in Waterford, Carlow and Clonmel west. Other schemes that progressed included works at Clonmel north and east, Mallow south and west, and Claregalway. In order to facilitate the comprehensive delivery of relief schemes throughout the country, €5.2 million was also provided to local authorities under the minor floods and coastal protection programmes. We will continue to work with local authorities to ensure there is sufficient capacity to undertake flood mitigation measures in their administrative areas as promptly as possible. Since 2009, more than 400 schemes have been approved for funding through the Vote of the Office of Public Works to local authorities.
The estate portfolio management programme involves the management, maintenance and development of the State's property portfolio, including the care, protection and presentation of national monuments and historic properties. The programme comprises a wide variety of services, including professional services such as architecture, engineering, valuation, quantity surveying and project management. The primary constituent parts of the programme, which, in funding terms, were the largest in 2011, include: property management functions, primarily rents; heritage services, involving the care of 750 national monuments and 26 national historic properties with a combined provision of 69 visitor centres; the provision of building and maintenance works at OPW managed buildings; and the management of unitary payments relating to the Convention Centre in Dublin. The programme also administers certain grant payments on behalf of the Government. In 2011 grants were made to Dublin Zoo and Glasnevin Cemetery, two very important visitor attractions in the capital city. Since 2007 considerable work has taken place at that cemetery, where the most recent ongoing development is the opening of a link between it and the neighbouring National Botanic Gardens, providing an opportunity for mutual enhancement for both national institutions.
As part of its property management role, the Office of Public Works continues to pursue opportunities to rationalise office accommodation through the surrender and renegotiation of more expensive leases with aview to achieving significant rental savings. The office has made significant progress in this area, with departmental rents falling from €131 million to €107 million in the period from 2008 to 2012. In 2011, the year of account, expenditure on rents amounted to €118 million, a significant reduction on the €128 million in rents paid on behalf of the State in 2010. We have also released 88 million sq. m of rented accommodation recent years. The latter is a considerable achievement, but work remains to be done.
The office rationalisation programme is just one part of the broader reform of the State's property management function, in respect of which I am currently chairing a steering group of the State's key property holders. This year the Department of Public Expenditure and Reform has also made the OPW responsible for the funding of building maintenance on State property. The essential maintenance will now be provided on a shared-service basis to Departments, which has necessitated a transfer of funds from other departmental Votes to the OPW. The reformed service will produce savings both directly through the OPW prioritising the operation of planned and preventative maintenance and indirectly through the centralisation of the professional expertise in this area and the administration of maintenance for all Departments.
In the area of energy conservation, the OPW continues to be actively involved and has been allocated further responsibility in this area by Government. Significant savings have been achieved through the Optimising Power at Work programme in recent years - an initiative under the OPW in which all Departments participated - amounting to some 18% per annum on energy consumption in all our large buildings. Given the success of this programme, we have been asked to roll it out to the wider public service. The office has received an allocation of €9 million to this end for the coming thee years.
While the OPW is clearly focused on the core functions of the organisation, there are often occasions where we have to show flexibility in responding to the needs of Government. In the heritage area, for instance, with very short notice, the office undertook a task of particular significance in 2011 in successfully hosting State visits by Her Majesty, Queen Elizabeth II, and the President of the United States. In a similar vein, Ireland is currently hosting the EU Presidency from 1 January 2013 to 30 June 2013.
The Government, in order to ensure a cost-effective Presidency, decided that events would be centralised primarily around OPW managed properties such as Dublin Castle, Farmleigh House, Castletown House, the Royal Hospital in Kilmainham and the Botanic Gardens. In excess of 280 events will take place during the term of the Presidency and the feedback on the facilities provided to date has been very positive.
I wish to remind the committee that many of the services managed by OPW are not directly funded from its Vote but they have absorbed administrative resources presented in the 2011 account. Although the gross 2011 outturn for the appropriation account amounted to €402 million, this does not reflect the full range of activities of the office. The OPW continues to act as an agent for and incurs expenditure in facilitating other Departments and agencies in delivering on their remits. In 2011, these services exceeded €68 million in value. That figure is money we managed on their behalf but it does not include instances where they paid directly. In the context of the latter point, I refer to the €180 million of expenditure relating to contracts managed by the NPS.
I thank members for their attention and I will be pleased to answer any questions they may wish to pose in respect of the appropriation account or any other matter.
I welcome Ms McGrath and her colleagues from the Office of Public Works. In the first instance, I wish to raise a matter which is not necessarily germane to the appropriation account for 2011. In that context, I want to focus on the correspondence received from the Office of Public Works, dated 16 May, in respect of the cost of the provision of a suite of offices for the then Minister of State at the Department of Enterprise, Trade and Employment, and current Chairman of this committee, Deputy McGuinness. I thank Ms McGrath for her subsequent correspondence clarifying the correspondence from 16 May. At this point the Chairman may wish to consider whether it is appropriate for him to remain in situ for this part of the meeting.
We will have to organise matters before the Deputy does so. If other members also wish to address this issue, then I ask that someone from the Government side volunteer to chair this part of proceedings. As the Vice Chairman is not present, perhaps Deputy Donohoe might agree to do so. I will vacate the Chair while the committee is dealing with this matter and thereafter we can return to the main agenda.
As already stated, I wish to focus on the item of correspondence to which I refer and which the committee very much appreciates receiving. In 2007 Bertie Ahern appointed a certain Deputy as one of three Ministers of State in the then Department of Enterprise, Trade and Employment. On taking up his appointment, the Deputy in question discovered that he had nowhere to locate himself for what turned out to be a short stay in the Department. Will Ms McGrath indicate what process is followed when a new Minister of State is appointed when there is no accommodation available within the Department to which he or she is appointed? Would he or she have any role whatsoever in identifying adequate facilities for himself or herself and his or her staff? Would he or she be brought around various suites of offices in order to evaluate the accommodation on offer?
Ms Clare McGrath:
New ministerial appointments would, in ordinary course, be facilitated within previous ministerial accommodation. In this instance, it was a new post and there was no accommodation available. The OPW did not, as such, initiate the process of providing accommodation. The Department requested that we should provide accommodation appropriate to a Minister of State.
I understand. Point No. 9 in the letter dated 16 May states that all existing suites in the relevant building were occupied. Will Ms McGrath indicate whether any civil servants who may have occupied rooms 118A and 119A were obliged to move in order to accommodate the then Minister of State and his staff? For what was that particular suite of offices used at the time?
Ultimately, the suite of offices in question was divided up into a large office space for the then Minister of State and four staff and a holding area to keep people away from him - in other words, there was no direct access to his office. I understand this is fairly standard practice within the Office of Public Works when accommodating Ministers or Ministers of State. It has been well reported in recent weeks - as a result of replies to freedom of information requests - that a very lavish and extremely comfortable bathroom facility was also put in place in the suite of offices. It seems no expense was spared in fitting out the suite. If we compare the expenditure relating to it with that for the only comparable we can locate for the same year - this relates to the provision of offices for a Minister of State in the then Department of Health and Children's headquarters at Hawkins House - in the amount of approximately €70,000. For the record, will Ms McGrath inform the committee as to the entire amount of money expended on the new office suite at the then Department of Enterprise, Trade and Employment on Kildare Street?
How was it that the State could manage to finance a similar office for another Minister of State at the then Department of Health and Children for €70,000? At the same time, for an amount which would pay for three semi-detached houses in Drogheda, a very lavish office that would be more suited to Wall Street was put in place on Kildare Street. The building in which what has now become the Department of Jobs, Enterprise and Innovation is housed on Kildare Street is a protected structure. I accept that and it is a point which must be respected. How was there such a huge variance between the requirements of a Minister of State located in Hawkins House and those of one who was headquartered on Kildare Street?
Ms Clare McGrath:
The difficulty I encountered in the context of presenting information relating to comparable cases was that the ministerial accommodation in Hawkins House was part of a much bigger refurbishment project. I was able to provide a figure because the final account specifically distinguished the accommodation of the Minister of State. However, it was a much larger job.
Ms Clare McGrath:
Yes, but that is fine in the sense that this was a decision of the then Government and we responded to it. The relevant Department then indicated what was to be the brief and as additional staff were assigned to the Minister of State - which would not be unusual - the brief changed. It is not a straightforward comparison. It is really important for me to convey to the committee that in the context of the industry benchmarks for the provision of executive accommodation-----
Ms McGrath was happy to provide us with information. I wish to put that on record. The entire project on Kildare Street appeared to cost in the region of €256,000. Ms McGrath indicated that the ministerial element of the project comprised €206,500. Is that correct?
That means there is a significant addition to the amount. There has been some focus in recent times, not least in the media, on communication between civil servants on, for example, the type of toilet roll in the accommodation in question. I do not wish to be facetious but could Ms McGrath outline the OPW’s system for the procurement of such products?
Ms Clare McGrath:
We have a janitorial supplies contract where there is a drawn down contract that Departments call on as needed for supplies. Framework contracts are drawn down in bulk and such items cost in the region of possibly less than 30 cent a roll. The supplies are available to every Department. We have no control over how things get reported.
In fairness, notwithstanding the fact that those issues have been reported, it has been communicated by civil servants in the Department by e-mail, which is subject to freedom of information, that particular types of toilet roll, namely Kittensoft, Inversoft and Andrex, would be required for the particular bathroom that was installed in Kildare Street. Could I ask this question-----
Three particular brands were identified in the e-mails. Neither the Minister nor his civil servants would have to go to the local Centra to buy the toilet roll of their choice. That is interesting. It would be one thing if it is the case that the people in the Department did not like the standard issue toilet tissue and that they had to buy something else but this was centrally acquired by the Department for this particular facility. I find that extraordinary. If someone does not like a brand of toilet roll, surely he or she could buy something else themselves. Is it the case that civil servants across the Department are using standard issue tissue while a particular type of tissue is purchased for use in the suite of offices in question? I find that extraordinary.
Ms Clare McGrath:
I cannot comment on the sending of e-mails and their content. The procurement of janitorial services is common for all occupiers of State buildings unless people choose to go out and acquire differently. All Accounting Officers draw off the framework contracts. I cannot comment on how people choose to send e-mails.
For a few extra euro we might have got the services of the Andrex puppy as well. I will leave this particular aspect of the question. The meeting might decide to pursue other aspects of the matter and might in future decide to engage with other witnesses who might be able to throw some additional light on the issue. However, I will return now to the 2011 appropriation accounts.
I thank the Acting Chairman and Ms McGrath and her colleagues for attending. In this part of the meeting I will focus on the issue raised by Deputy Nash. Reference was made to comparable work. I accept the difficulty in finding a figure. It might be the case that the figure from Hawkins House is not comparable in the way Ms McGrath described given the difference in the buildings and fit-out in the specific cases. Was there any comparable work since 2007? Was there any requirement for a new ministerial office?
Ms Clare McGrath:
That is the difficulty. No, there was not. There are instances where we carried out refurbishment work. The Office of Public Works has care of a considerable number of buildings. The Deputy will note that we referred to 2013. We now have funding for maintenance works. We do not get many opportunities to step into Departments and ask that the work would be paused because we want to carry out important maintenance work. When a Department has a fit-out requirement due to a change in function or a reorganisation of the Department we take the opportunity to carry out essential, proactive maintenance rather than addressing a problem at a later stage. When there are operational issues within Departments that they wish to have addressed, we take opportunities to undertake maintenance work as well. We will perhaps carry out work in ministerial areas but it is not specifically to provide ministerial accommodation.
Ms Clare McGrath:
The norm might be that equivalent to an assistant secretary. I might speak separately on that in terms of my role in property asset management reform. As I said in my response previously, the accommodation would be of that order. I have two assistant secretaries sitting beside me and they are in open plan accommodation. That is the type of issue we are examining in terms of property asset management reform for the wider public service but the specific accommodation in question would have been reflective of assistant secretary office accommodation.
Ms Clare McGrath:
Yes, in the sense that if we were building something new we would fit those criteria but if we were trying to work within existing accommodation, for example, a Georgian building, we would try not to interfere with the structure. As a result, some people could be in a larger or a smaller room.
Ms Claire McGrath:
I previously said before the committee that one of the responsibilities we have in terms of being the property arm of the State is the provision of accommodation and the norms relating to that. Office accommodation has largely been linked to grade, whereas what we are saying in future is that we should seek to provide space linked to function. We would largely be looking to have open-plan accommodation as it provides for increased densities and it is more flexible, which means that if one has to do a subsequent fit-out it does not require the removal of walls, for example. Such a system is much more flexible.
Ms Clare McGrath:
I am sorry; the system has not changed. I am the chair of a working group on property asset management reform. The group is representative of all public sector property holders. We are examining how we can best use the office accommodation within the State because the footprint is reducing according as numbers reduce. We are looking at how we can share the space. I might have said 88 million sq. m, but I should correct myself. We released 88,000 sq. m, which is 1 million sq. ft. All Departments have been very supportive. Since 2009 Departments have been moving up in space. We have been moving into the owned estate and we surrender leases where we can. That has meant people are now occupying less space. As a public sector reform steering group we are asking what that will mean for the future.
How should we measure office accommodation for the future? How should we allocate space? As the Comptroller and Auditor General said earlier with regard to savings on the procurement service, much of this is about gathering data and information on our existing estate and asking how we can best use it. I would like to prioritise funding for the future by spending money on retrofitting space so that we can increase densities and surrender other space. I hope that is reflective of what we are planning but in regard to this, it would have been what were the norms at the time.
It is difficult to find a comparison regarding this particular project. I am interested in the timeline for the project. We had the election in June 2007. How soon after that did we move to provide this accommodation?
Ms Clare McGrath:
The Department would have been addressing that. I am not sure that we provided something. It would have been the Department. The OPW might be a notional landlord in the sense that it occupies the space, and how it uses it during its occupancy is a matter for it. I could not tell the Deputy how it might have allocated space. I could inquire-----
It would be interesting to know what would be considered appropriate temporary accommodation for a Minister while such work was being conducted.
The last paragraph in Ms McGrath's letter of 16 May 2013 to the committee, correspondence 3B.5, states that the Department contacted the OPW requesting provision of a suite of offices for the Minister. On what level in the Department does that take place? Is it a case of the Secretary General contacting the OPW or is it-----
Ms Clare McGrath:
No. The way the Departments might title the divisions is different. It would be their accommodation, probably whomever of their personnel has responsibility for the provision of accommodation. It would have been to the area of my office, which has responsibility for accommodation as well. I am not sure of the grades but I suspect at assistant principal.
Ms Clare McGrath:
As it is advancing and having regard to the norms in terms of the accommodation, the area and the space, assistant principals would have financial authority, and this possibly could have been undertaken at that level. It probably would have been between assistant principal and principal officer for authorisation.
Ms Clare McGrath:
We commission a lot of work because we prioritise where we have our own resources working. In terms of a new request, if our own resources are not available because they are on other priority work we would then commission. It is not unusual. On lots of work we would commission architectural project management externally.
Ms Clare McGrath:
That circular has now been replaced; it is one of 13. I mentioned in my opening address responsibility for the maintenance of accommodation. It is an unusual circumstance in that maintenance of accommodation, while undertaken by the Office of Public Works, is funded by Departments. That is the ongoing maintenance of the space they occupy. Since one of 13, we are now responsible for undertaking the maintenance and the funding, so there has been a transfer of funds through the Estimates process from the Votes of other Government Departments to the Office of Public Works. That will allow us to undertake planned interventions on the maintenance side rather than reactive and waiting. We would be surveying properties in a more programmed way and determining planned maintenance interventions, which is to protect the lifetime of the building because otherwise we are shoring up problems a number of years out if we do not undertake planned maintenance. While still having demands from Departments in relation to, say, leaks or other problems, and we would respond and fund that, we will now be able to undertake more planned interventions in relation to maintenance.
Ms Clare McGrath:
What we would be looking at in terms of the provision of accommodation is whether it will be within the benchmark. As this is a particular protected structure and given the nature of the works we would ask what will be the order of costs around this. The area of it is 113 sq m. We would ask what is the benchmark figure and if it will be within that, and it was.
Ms Clare McGrath:
Not in respect of this job, but we have many different types of properties and projects so one size does not fit all. A particular type of accommodation may come up later where we undertake works that are unique to us. With flood risk management there are not necessarily private sector comparators because we probably are the main ones in relation to those. How do we develop norms for that? We would have internal norms for cells in Garda stations. There are not private industry standards for those. We use private contractors for all of the work, and then continue looking at how we can drive more efficiencies around that but in ordinary course in relation to office accommodation, there is no industry norm for such fit-outs in protected structures. They talk about executive fit-outs but not in protected structures, which is an added layer within this project that would not necessarily have been the case when one considers the Bruce Shaw figures. They are now revised again for 2013. We always have an eye to those. We always start a job with a brief - what is being asked, where am I to give effect to that?
I will conclude shortly. I am uncertain whether Ms McGrath can answer this question but does the accommodation officer in a particular Department decide on the brief from that Department or to what extent is there a discussion on the matter?
Ms Clare McGrath:
Usually, the accommodation officer determines this. I do not know what might be the layers within that role. However, in the instant case, if additional staff were coming in and as to how that was to be arranged in respect of ministerial accommodation, there would be conversations within the Department in respect of that. Moreover, one would have regard to equivalent ministerial accommodation within the Department, so that would inform the brief that would be given to us.
I thank Ms McGrath for helping members tease out this issue. While she has answered some of these questions in her written brief, obviously not everyone is privy to that and so I will ask her to put them on the record here. The OPW was responsible for meeting the cost of providing this office space. From where does it find that money? Ms McGrath has told Deputy Eoghan Murphy that there is no budget so to speak, in the sense there is no maximum or minimum, but the OPW keeps to industry norms. Obviously, however, as the money must come out of the office's budget somewhere, from where does the OPW find that money?
Very well. When the OPW is contacted by a Department, in this instance by the then Department of Enterprise, Trade and Employment, does it simply take the Department at its word that it does not have adequate accommodation space or does the OPW link in with it? Does the OPW try to establish whether it can save money? I have to hand many drawings and could be confused but one drawing from the Department shows an assistant secretary's office and I note assistant secretaries also have a shower room and it looks like a perfectly good ministerial office. In fact, it looks relatively similar to the ministerial office that was devised. Is there ever a conversation between the OPW and a Department on whether the latter could undertake a reshuffle of its personnel to make space within its existing structure?
I appreciate that some of these questions are for the Accounting Officer of the Department but I must put them to the Chairman because she is present. Does the OPW have any role in scrutinising the brief? Ms McGrath has stated the Department sends the brief to the OPW but what precisely does the office do with it? Does it go through it and check it is in line with everything the office is meant to provide? Does the OPW check for what people might view as being extravagance? What does the OPW do when it gets the brief?
Ms Clare McGrath:
We take the brief and make a plan of it, so we are very involved in it. Moreover, it is an iterative process because questions must be teased out between the OPW and the Department in respect of what is being provided. Again, I refer back to the benchmark and the norms and whether that would be within it and this was the case. Maybe in 2007 in general, there may be certain things in respect of standards of finishes - not particular to this job - where we might not be doing things the same way today. However, overall, in respect of this job, it is what it is because it was within a protected structure. It was 113 sq. m and there were a lot of interventions. There also are many interventions when one seeks to retain certain features and it is not a case of taking out everything. When one makes an intervention in existing structures, it is more complex. Furthermore, it is more complex within a protected structure than in a new build. That was a huge part in respect of this job.
I was eager for the OPW to provide a comparator because in fairness to the Chairman of this committee, the then Minister of State, it is important that the committee gets a sense of whether this was in line with the experience of other Ministers. I appreciate the difficulty Ms McGrath has had in this regard but in her letter to the committee of 16 May, Ms McGrath referred to the nearest comparator, which already has been referenced, namely, the ministerial office in Hawkins House. While it was referred to as being the nearest comparator, how near is it in comparison? Ms McGrath should talk me through it because it is referred to in her correspondence as being the nearest comparator and that the ministerial element of the project cost approximately €70,000, excluding VAT. Having sent in that example, is Ms McGrath still satisfied that it is the nearest comparator and how near is it?
Ms Clare McGrath:
Perhaps I included it because I was able to find, from a final account, a reference to ministerial accommodation. I was anxious to establish, for the purpose of the committee, whether I could get something. Many staff were working on how we could source this information across all the projects that were carried out in buildings that are occupied by Ministers. We found it very hard to extract that element because it depends on how it was presented in the account. Consequently, this one happened to have such a reference. As I indicated in my letter, it may not be a fair comparison, for want of a better word, because it was work undertaken as part of a bigger project. As a result, the overheads and preliminaries apply to a much bigger area than taking one job on its own. It is not a clear comparator but it was one in which the final account referred to the ministerial suite, that is, to a series of offices. I think it was in the order of approximately 90 sq. m and was in fact a smaller space but that is-----
Okay. Ms McGrath obviously has provided the committee with the cost of the office in the then Department of Enterprise, Trade and Employment, at approximately €205,000. How much of that cost does Ms McGrath think was attributable to the fact the building was a protected structure? While I appreciate the difficulty Ms McGrath has in making comparisons, members must also try to make comparisons. How much of the bill for the provision of that ministerial suite of offices is Ms McGrath able to attribute to additional works or efforts to which the OPW was obliged to go because it is a protected structure?
Ms Clare McGrath:
I imagine it possibly was quite significant but I come back to the point that this project was within the benchmark and that benchmark does not reflect it being a protected structure. Therefore, it is well within it, when I take the figure. I will not put a figure on what percentage it is because-----
No, I am not asking Ms McGrath to do that. However, I imagine that were the OPW to examine the associated bills, there would be a way of establishing that some of them were attributable to work it was obliged to do in the then Department of Enterprise, Trade and Employment, which it was not obliged to do in Hawkins House because the former is a protected structure and that this work cost X amount. That would be helpful because the committee is trying to arrive at a fair overview of what additional costs were associated, which pushes the cost of the office under discussion significantly above the cost of the office in Hawkins House.
I appreciate that and am not being pedantic in this regard.
We are the spending watchdog. Obviously, we have to be seen to be above reproach on this. We have an issue involving our Chairman and we must get to the bottom of it.
The entire narrative in Ms McGrath's correspondence has been that there were significant additional costs, additional time and additional resources because it is a protected structure, and that is what pushed the cost to the level that the taxpayer now sees, but we have not really had any explanation of those costs. I am not doubting them. However, we have not had a breakdown of those costs. I am not necessarily expecting Ms McGrath to provide it now. If she has provided it, she might direct me to it. Maybe Ms McGrath could come back to us on it.
It is a fair question. We have been told that the figure was €205,000 because there was substantial work done owing to it being a protected structure or substantial considerations having to be taken into account, but I am not yet satisfied that I know what they are. I am quite sure they exist but it would be helpful if we could have that if Ms McGrath can revert it to us.
I presume there are lower and higher ends of benchmarks as well. Clearly, this is a higher-end project.
Ms McGrath should feel free to correct me. She has told the committee that accommodation for a member of Cabinet was provided for €70,000 in Hawkins House. I understand that the circumstances were different and it was part of a larger projects. There were savings made there. I understand it was not a protected structure. This is a Minister of State's office in the Department of Jobs, Enterprise and Innovation, which is also an executive suite, that comes in at a substantially higher amount. I and many others want to know why that cost so much more. With due respect to industry norms and benchmarks, why was that one so much more expensive? There is credibility in what Ms McGrath states about the protected structure aspect, but if we could have detail on that I would be very grateful.
The other comparator table that Ms McGrath sent in to us on 22 May relates to the refurbishment of offices for the Minister and his staff in the Department of Transport, the refurbishment for the Minister of State and his staff in the Department of Transport and the office refurbishment for the former Taoiseach, Mr. Bertie Ahern, and his staff. Were those all stand-alone projects, or were the first and second done together?
While we are on it, because this is a broader issue than any one individual, from where would the brief have come for the refurbishment of the offices for the former Taoiseach? Would that brief have come from the Department of the Taoiseach?
The last page of Ms McGrath's letter of 16 May states, in the third paragraph, that, in order to provide for acoustic insulation and fire protection in the Minister's room, the OPW used timber-veneered panelling because it was an appropriate option to deliver within the restricted timeframe available. Would Ms McGrath explain the restricted timeframe, in other words, were there additional costs to meet a deadline?
Ms Clare McGrath:
We would have been looking to achieve this during the summer recess and there would have been an element of out-of-hours work but that partly is reflective as well of the fact that this is a building in which many other staff are accommodated and the contractor is working on a floor where there are other staff. Working on that is more complex than a new build or a new fit-out.
The issue about which there has been significant debate - if Ms McGrath is not the person to answer, she should feel free to say so - is that of ministerial involvement in these works. There have been media reports that it involved ministerial sign-off. What is Ms McGrath's understanding of the link between the then Minister of State and the OPW and the Department in carrying out these office works? There has been e-mail correspondence in national newspapers stating that X official or X individual in a ministerial office signed off on or approved this. Would that be Ms McGrath's understanding of what happens or would that not be the case?
I am sure that does not surprise the Acting Chairman.
I welcome the exchange here this morning. It has been quite informative, from toilet rolls to refurbishment. I hope it will help those outside of the debate to understand what went on in this project.
I can ask some questions on this matter because we are now dealing with the OPW, not the Department. I can feel free to ask those questions.
First, I want to place on public record the fact that the OPW has responded to me and has informed me that at no stage, through either written correspondence or meetings, telephone calls or e-mails, did I have anything whatsoever to do with this project. The OPW took full responsibility for the project.
My questions are simple enough in a way because I did not have an involvement in it. However, I am curious about the process and how the OPW gets to spend that kind of money.
The OPW received an e-mail request on 5 July 2007 on the provision of this office. Who, in the then Department of Enterprise, Trade and Employment, was that from?
That e-mail was sent on 5 July, and the telephone request was made around the same time. The date was 5 July.
The brief was prepared, as I understand it, in line with Civil Service norms - Ms McGrath states that in her letter also - and it was not something that was concocted out of the blue. In terms of the planning, it adhered to Civil Service norms. What Ms McGrath is saying in that particular comment is that Ministers' offices generally are the same and there is a norm for them, the position for junior Ministers is likewise, and, apparently, it goes down to Secretary General, assistant secretary and whatever the levels underneath that, so that most of the offices, in terms of square footage and accommodation, are constructed in exactly the same way. Would that be correct?
There was no space available in the building concerned relevant to that standard of ministerial space and it was a new construct. In terms of the cost, which is critical, I worked in that office and if one told me on the day I entered the office that it cost that much, I certainly would not have believed you. If I had known then what I know now, I probably would have added a further chapter to my book merely to compile it all and make it as an easy reference, but I did not.
In terms of the cost, was the OPW's only comparison, by way of tenders it received, the Bruce Shaw handbook, which sets out costs and other aspects?
What happens then? It is a considerable amount of money to spend. Where does the authority come from within the OPW to spend it? What is the next step after someone carries out the analysis, looks at the lowest tender and decides it is within the guidelines? Who signs off on it? Where does it go to from there?
I want to go back to this date of 5 July. On that date, a message was sent to the OPW in the standard format to say that a decision had been taken by the other Department that the office was required. It went from that Department to planning and other stages. Prior to 11 July, notice was given that the office was for five civil servants and various survey drawings were submitted. I wish to record these matters which arise from correspondence that is in the public domain. On 11 July, plans had not been finalised and were being described as "draft" in the various e-mails I have seen. I must address the following as I was the Minister of State in question. It was suggested that I generally agreed the plans on 13 July. In those plans, no offices were provided for civil servants. In other words, they were still draft plans and works in progress. It was not the final draft. It may have been referred to by Deputy Harris. In fact, on 16 July, architects confirmed that they were still developing the plans and options. Therefore, to suggest that these were final plans is not correct. These plans were reproduced in a daily newspaper and they were not the plans I had seen. On 18 July, the project drawings were described as working projects. On 27 July, the project went to tender and there was no reference to the Minister in relation to the matter. It was not my job to sign off on those plans. I am not an architect, engineer or clerk of works and, therefore, I am not qualified to sign off. It was done elsewhere in the Department and, as was the case in relation to the tendering process, it could have been stopped at any stage when the tender documents were returned with a price if that price were found to be excessive by the OPW. That did not happen either.
The minutes of the various meetings, which are available, show no involvement whatsoever by me - none. I say this because the PAC is the committee of audit and public accountability and I take my role in this seriously. I would leave no stone unturned to do my job professionally and well. This has caused me some concern, which I have not been able to address up to now in the way that I would like. The letter of 16 May demonstrates clearly that the project was managed and delivered by the OPW out of funding from the OPW itself. At that time, it was part of the Department of Finance. Is that correct?
However, it was subject to the Department of Finance. The OPW was within the Department of Finance and had its own independent Accounting Officer and line Minister. The OPW is now under the remit of the Department of Public Expenditure and Reform.
Therefore, at any stage, the line Minister or someone senior in this Department could have said "Yes" or "No" to the project. Depending on the outcome of the authority, the OPW had the authority to accept or reject it. Is that right?
I am not trying to pin this on Ms McGrath. I am just interested because I have never seen a newspaper get so many column inches out of a toilet roll story. The framework is there by which other Departments can purchase.
Regarding the e-mails on the choice of toilet paper referred to in the media, these were not reflecting on the Minister’s request for a particular toilet roll but on the toilet system that was in use.
Deputy Eoghan Murphy asked where I was accommodated from July to August. Again, if I can refer to the e-mails which were not touched on by the media, they stated I was in a room at the end of a corridor using borrowed furniture. In fact, I supplied some of the furniture. The point is that no funds were spent on other alternative accommodation during that time and that the new office was available from September.
Does any other member have a question? No. I thank the witnesses for their contribution to this area and the Chairman for his responses.
I propose we suspend the meeting until 11.55 a.m. when we will start off with Deputy Nash on other issues in the report. Is that agreed? Agreed.
I refer to valuation methodologies which are set out in accounting policy 7 on page 120 of the accounts. Recently undertaken exercises resulted in reductions amounting to €228 million in Dublin 1, 2 and 4. How many properties were valued using the new methodology in 2012 and where are they located?
Ms Clare McGrath:
Yes. That would also be with regard to unused sites. The committee has previously raised the matter. There were 12 sites and there would have been a circular movement of money between local authorities and the OPW. We have uses for five of the sites. Where other public bodies will use the sites, we will not necessarily carry out valuations.
Ms Clare McGrath:
The Cavan site is for the Department of Education and Skills, while the Drogheda site is for the Courts Service. We had a return of moneys in relation to the Carlow site from the local authority there. I include this as it is now back with the local authority. The Mullingar site is for the Department of Education and Skills. These sites are being looked at for the purposes of other public bodies. We will wait to see if they will advance to stages where they will be used.
I am particularly familiar with the site Ms McGrath has identified in Drogheda for a new courthouse project which is intended to commence in 2015 under the stimulus package the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, announced last July. In late 2006 two sites were purchased in Drogheda at a cost of €11.81 million. The site in the area of Murdoch's car park and the Abbey Centre car park was purchased by the OPW from the local authority for a decentralisation project involving the Department of Social Protection and other State agencies. Of the €11.81 million, €7.75 involved a local authority initiative to acquire a hardware premises on Narrow West Street in Drogheda and a rear car park to develop a multi-storey car park. What is the relationship in an instance like that with the local authority? Who funds the purchase of these facilities for the decentralisation programme? We are talking about a payment of €7.75 million at public auction for the site which, in my estimation, was overvalued.
I want to ask about leases sold to date. These are leases in which the OPW engaged as part of the decentralisation programme which, by and large, will not now proceed. What are the arrangements? Has the OPW surrendered leases in which it would have agreed to engage during the process?
Ms Clare McGrath:
We have no lease for an unoccupied property. No leases were taken on for decentralisation properties which are not occupied. The Deputy may be referring to situations where advance offices - offices taken in advance of permanent provision being made - continue to be used as accommodation.
They continue to be used as accommodation. With some, we have surrendered them and relocated staff, depending on the operational needs of the Departments to other locations. We may still have an ongoing need for leased accommodation because there is no alternative. However, it is not unused.
Ms Clare McGrath:
I do not have the specific number but I believe it is over 270. If I need to correct that, I will come back to the committee with the correct figure.
Decentralisation for personnel was on a voluntary basis. People chose to apply through CAF, the Central Applications Facility, which meant certain Departments, had staff coming in because people were interested in their locations and in other cases people went out. All the volunteers who chose to move to the OPW office in Trim are now in place.
The OPW manages most of the State’s property portfolio and has done so in a good way over the recent years. On Garda station closures, 137 stations have been closed to date. I understand 20 will be put on the market soon. What is the process as to how the decision is taken to put stations on the market? Is there any interaction with local authorities, other public agencies or the local community as to how to put those particular stations to the best possible use, considering the majority of the stations in question are located in rural areas where a local community may take some benefit from access to those particular facilities? When will these 20 stations be put on the market? What stations are involved?
Ms Clare McGrath:
Consequential to the operational closure of a station, the policy is to see if other State agencies may use the site. This has arisen in the past - although it may not be under the present programme - with Finglas and Whitehall where there were other State uses. We would then pursue that with a public body. That would be the initial decision regarding a station closure.
The second course of action - although it is a very depressed market - is if there was a market, we would consider whether a site may be suitable for disposal. The Deputy referred to 20 stations. We have yet to decide how we will bring them to the market but we will be examining it over the summer.
In other cases where we would not see the first two actions happening, we have asked, as has the Minister of State, Deputy Brian Hayes, if there are community uses for this site. We would require that there would be a legal entity that we could engage with for the purposes of licensing the use of the station for such activity. The entity would have to be in a position to take that licence, maintain the property, insure it and be able to undertake planning permission, if required. That is the policy around the stations that are being closed.
I will have to come back to the committee about the stations we have identified for disposal.
Ms Clare McGrath:
There was an initiative introduced by the Minister known as Free Wednesdays. This has possibly had an impact on visitor numbers. There is an increase in local tourism with people within the jurisdiction attending heritage sites. Much of the counting is done on sites where we have guide services. We have much more sites where there is no service, so the numbers are probably higher. I am glad to acknowledge the work of the organisation in managing the sites. We would wish to do more in the promoting of sites.
The busiest sites are Kilmainham Gaol, Newgrange-Brú na Bóinne, Dublin Castle, the Phoenix Park and Kilkenny Castle.
There is some concern about the ability of the Oldbridge site to capture the sort of visitor numbers Newgrange has. Clearly, Newgrange-Brú na Bóinne is a world heritage site and that in itself attracts significant numbers of international visitors. We have a site next door, namely the Oldbridge site, which is managed very well. It is a huge addition to the tourism and heritage offering of this country, North and South. How could there be greater interaction between the two sites to ensure a better apportioning of visitor numbers in that area?
Ms Clare McGrath:
We would be anxious on how best we can cross-market not just OPW sites but any other sites. We are looking at how we can market the sites and best achieve greater numbers or intensify visitor numbers. We also work under the auspices of Fáilte Ireland to see if there are initiatives upon which we should be engaged. For example, we would see how we could maximise the tourist potential around particular visitors who are disposed to particular types of tourism such as gardens and military sites. We work with the Department of Arts, Heritage and the Gaeltacht in this regard too.
We are very conscious our sites are in communities and how best we can engage with them. The communities initiative has been running for several years. With it we work with local communities to see how we can extend the tourism season, opening hours or have greater use for local communities of a site. This also brings added benefits to the site. We are also working with Fáilte Ireland on driving routes. Wherever we can help, or others can help us, we are very anxious to be in that space.
I thank Ms McGrath and her officials for attending the committee.
Regarding the sites under the OPW’s charge and their tourism potential, does it examine each site for potential to raise revenue from tourism? For example, I note many tourists outside the gates of Leinster House on weekends, stopping and taking photos. Has the Dáil been considered as a potential tourism site on weekends when the House is not sitting?
Ms Clare McGrath:
I think it is. That is managed by the Houses of the Oireachtas for the purposes of visitors to the Houses. As I understand it, there are tours and the same would be true of Government Buildings at weekends but it is managed by the occupier. It is not under the auspices of the Office of Public Works for the purposes of the presentation of those sites.
In respect of flood defence works, can Ms McGrath give me an update on the exchange of information between the OPW and the Irish Insurance Federation on selected completed flood defence schemes and how that is progressing?
Ms Clare McGrath:
Under the Minister's initiative, we have engaged with the insurance industry with a view to it having regard to those locations where we have undertaken works when it is assessing people for insurance. As the Deputy is aware, we do not have a role in the regulation of the insurance industry but we would ask it to have regard. I understand that is the case. I might refer to my colleague.
I am thinking in the context of Dublin south east where there are flood protection works going up the Dodder. They are completed at one end but not at the other. It does afford a certain level of protection, not complete protection, in a 100-year scenario.
I will now turn to Chapter 14 - Measuring Procurement Performance. If one turns to the penultimate page of the Annual Report of the Comptroller and Auditor General 2011 on page 194, paragraph 14.39 states that based on the four areas of procurement reviewed, the savings identified by the National Procurement Service are not reliable and are not suitable for use as a performance measure. Could Ms McGrath comment on that?
Ms Clare McGrath:
We have taken on board what the Comptroller and Auditor General said in respect of how we might determine the savings. My colleague from the Department of Public Expenditure and Reform might talk about that for the future. When the National Procurement Service was set up in 2009, our priority was to leverage the State's covenant to maximise savings and to get contracts in place. The estimation of the savings predicted was to an extent based on estimates of what we think the use of the contracts would be, with the actual figures for the consumption of the products for which we were placing contracts to come afterwards. We were doing estimations without the actual data. We are now taking real figures about what is happening and real comparitors. We set up a group at the end of 2012 to take the guidelines on how we decide and determine savings. That working group has taken on board what has been raised by the Comptroller and Auditor General and is reporting to the National Procurement Service with a view to how we do this in the future.
Ms Clare McGrath:
Notwithstanding what the Comptroller and Auditor General said in the report, I would still say that they are close to the actual savings because they are based on what we saw as the earlier usage - historic data. It is fair to say that to go from an estimated annual procurement expenditure by sector of €9.3 billion in 2009 to €8.6 billion in 2011 is a phenomenal change in respect of the totality of procurement by State bodies. I know there is a small element of capital in that. That is real in the sense that those are voted funds being cut or Accounting Officers deciding not to purchase more than-----
We cannot necessarily say that the savings delivered in 2011 were savings achieved by the National Procurement Service in creating greater efficiencies. It was more a case of them being caused by decreases in-----
Ms Clare McGrath:
I am saying how I measure them. While the Comptroller and Auditor General has a differing view, I believe those figures stand up but I am prepared to accept that we need to be more rigorous and stringent in how we define savings and take on board what he said for future determination of savings.
I want to move on to the framework agreements in a moment. Is that data then pulled centrally into the OPW or the National Procurement Service regarding what exactly is being done under the different framework agreements or the different contracts that are entered into? Does Ms McGrath have a bird's eye view?
Ms Clare McGrath:
As we are acquiring new contracts, we are making contract management information part of what we are doing so that we are gathering more data. The Deputy is correct in that there is work to be done within the public service regarding data on what is being purchased based on contracts throughout the service and within sectors.
Mr. Paul Quinn:
Perhaps I should intervene at this point. I am the newly appointed chief procurement officer and I joined the Civil Service at the end of January. I am responsible for putting in place the new office for government procurement. What Ms McGrath has articulated is fairly typical to both Government and private procurement in respect of the challenge of measuring benefits. This reflects a natural evolution in the approaches and methodologies used for measurement. It does not discredit previous measurements but recognises that as better processes and systems are put in place, the accuracy with which one can measure savings will improve. We are currently dealing with a significant number of contracting entities which have put in place and implemented the various frameworks. They may implement these frameworks at different times, however, leading to a degree of uncertainty as to when those savings will arise. We will standardise the methodologies and build on the work undertaken by the NPS under the umbrella of the OPW in improving those measures and moving towards a more robust methodology for making savings. As we roll out the new office towards the end of this year we will improve the methodologies for capturing those savings, but we have to be clear that while our systems capabilities remain poor and will require investment in the coming years, it is only when those systems are put in place that we will significantly improve the accuracy of our measurements. To some degree we will continue to rely on estimates. In terms of the benefits, these estimates will be produced in a clearly defined and auditable manner that will lend credibility to them but there will be a journey in improving our reporting.
Mr. Paul Quinn:
We are currently building on the work undertaken in the NPS and will bring that to a conclusion in the coming months. We will then issue guidance to all procuring entities so that we can collectively report in a standardised way against a documented methodology. The numbers reported in 2014 for 2013 will reflect the evolving new standards. Next year, after we put in better systems this year, we will be able to further improve the standards and accuracy of reporting.
Ms Clare McGrath:
There are multiple framework agreements depending on the nature of the product. We are still gathering data on uptake by public authorities of the mandatory contracts, which became mandatory towards the end of 2012. As we are doing this on a quarterly basis, information on the first quarter is coming through now. I can provide the committee with data on uptake but I understand approximately €194 million out of €221 million is within the mandatory framework. I can revert to the committee on details on how well people are doing in this regard. Contracting authorities are moving towards use of the mandatory frameworks. It will be the case that contracting authorities with extant contracts will continue to use these contracts until they expire. Others may choose alternative approaches and will be asked to comply or explain.
Paragraph 14.16 of the Comptroller and Auditor General's report refers to the calculation methodologies for procurement savings and states: "NPS provided details of estimated savings in 2011 of €46.5 million from a range of cost saving and cost avoidance measures." However, the data is not disaggregated between cost savings and cost avoidance.
Ms Clare McGrath:
This relates to the Deputy's earlier point in regard to how we calculate them. In regard to the use of central frameworks, there are international benchmarks of €36,000 for centralised procurement of individual contracts and €6,000 for decentralised contracts. When a framework is put in place for 200 bodies, the saving is 200 times €6,000 as distinct from €36,000 for central procurement. That is factored into the avoidance of costs. For example, the measurement of savings in the e-tenders contracts is based on the fact that we do not need to advertise. It is a cost avoided because advertising on e-tenders means one does not need to pay for advertisements. We have measured that based on taking out a number of advertisements.
Mr. Paul Quinn:
This is part of the methodologies I referred to earlier. We are standardising our definitions for cash savings and cost avoidance. The procurement activity can drive a number of benefits, some of which are bottom line cash and some are non-cash, such as cost avoidance in an inflationary market.
In terms of the level of detail in disaggregating the numbers, we will be able to achieve that under the new methodologies. We will be able to identify the amounts in cost savings and cost avoidance because they will not be lumped together into a single figure.
That is very helpful because, for example, table 14.3 sets out an estimate for stationery, paper and envelopes of €1.4 million for both 2011 and 2012. The figures are exactly the same.
It looks a bit strange that we would be saving the exact same amount on stationery, paper and envelopes in two years. If it is a one-off saving we made in 2011, are we counting it again in 2012?
In paragraph 14.15 there is a statement from the Comptroller and Auditor General:
In the OPW's Vote estimate for 2012 it reported NPS savings achieved on existing public service contracts of €28.2 million in 2011. In addition, it stated that there were further administrative savings but these were not quantified or valued.
Ms Clare McGrath:
Some of these savings are on other Votes so we would not be reflecting them in our Vote, if I understand the question. This is so as not to have double counting. We must be careful. The savings methodologies will have to take account of that because the sum of it is because of cost avoidance by accounting officers in deciding not to purchase, but we have to be careful not to double-count.
Moving on to page 191, paragraph 14.19, figure 14.4 is to do with energy savings. A saving of €4.2 million is attributed to the review of tariffs and import capacity levels, and the NPS methodology is:
Were these savings made?
Comparison of existing tariffs and charges on a meter by meter basis to identify more economical tariffs. Reviews of 12,000 meters identified potential savings of €2.1 million. The same level of saving was anticipated for a further 12,000 meters which the NPS planned to review in 2011.
Ms Clare McGrath:
This is where the actual savings made were a matter for the contracting authority, the ultimate State buyer. We are advising that, based on our looking at meters and usage, people are on the wrong tariffs. We advise them that they could be on lower tariffs, but they are their contracts with the suppliers so they have to follow up on that. We have had difficulty getting that information. Based on what we had, and our expertise, our analysis was that it was in that order. Was it realised? That was dependent, and I would have presumed all of them were exercised to get that saving, to give effect to changing the tariff. It is not done centrally because these are 24,000 individual meters.
That is the key question - was it realised? It is not a saving if it is not realised. It is just a figure on paper saying we could save this. Whose responsibility is it to verify that the saving has been realised?
I will move on to the eTenders site, paragraph 14.22. The idea of eTenders is that instead of advertising in three newspapers for certain tenders one does it through a website, engaging SMEs online. How many SMEs are engaged?
Ms Clare McGrath:
We engage with the Irish Small and Medium Enterprises Association, ISME, and the Small Firms Association, SFA. Through InterTradeIreland we have had workshops and meet-the-buyer events. We have engaged with approximately 4,500 SMEs, providing them with information on what it means to do business with the State and trying to help them with the documentation and the necessary compliance procedures and legal considerations, explaining how they can engage. It is constant work in the NPS to get more people actively tendering. Registering with eTenders alerts SMEs to competitions that may be of interest to them so they do not have to be constantly watching for it.
That is a great thing, but we are talking about how eTenders is saving the State money. In 2011, 6,120 contracts were advertised on the site and there was an estimated annual saving of €11.8 million due to the use of the site. That is calculated on the basis that each of those contracts would have been advertised in three newspapers. That is the saving we achieved. Would each of those contracts have been advertised in three newspapers? Do we do that for every single contract regardless of the amount?
Ms Clare McGrath:
We do, and I take the Comptroller and Auditor General's point on this. He said maybe we are being generous on that. Many advertisements are in local newspapers as well. They are in national and local newspapers, depending on the contract, and this is very much the case for local authorities. They do both. So we have said it is not unreasonable for us to base it on advertising in three newspapers.
Ms Clare McGrath:
That is a question that will arise. State bodies are legally obliged to advertise, and that is being done through eTenders, so there is a question over how long one can show this as a saving. If we did not have eTenders we would still have to advertise, so we are asking the question of how that should be reflected.
Mr. Paul Quinn:
We will be examining how we measure this in terms of multi-year savings and current-year savings, because it comes back to the point about the impact on the budget in a given year. If one saves something once, one typically takes on that saving forever. From a budgetary perspective, when money comes out of the budget it generally does not go in the following year to come back out again. While the benefit persists, one takes it into account from a budgetary perspective only once. Returning to the standardisation of the methodology, we are going to examine how we measure those savings and over what period of time.
I take it that to calculate the saving one would calculate the number of new contracts advertised between 2010 and 2011 and not the total figure for contracts that are not being advertised in each year, because one is just counting the same money, or lack of money, again.
That is not being advertised because one is counting the same money again or because of a lack of money.
I thank the officials for attending. Deputy Eoghan Murphy has covered many of the issues I wanted to raise, but I will circle back over a few of them. I would like to focus on the national framework agreements. How much of the procurement are the offices of Ms McGrath and Mr. Quinn overseeing or responsible for? How much is covered by national framework agreements?
No, Mr. McCarthy may have given me thunder. We will see how the next question goes before I make my mind up or others do. To enable us to compare apples with apples because the Comptroller and Auditor General is correct, if I accept the €1.4 billion spend, to what do I compare it?
Mr. Vincent Campbell:
In broad terms, as I said, we estimated that the addressable spend was in the order of €6.6 billion in 2012. However, much of this is being addressed by the HSE, local authorities and the education sector. It is not that it is out of contract; it is being addressed in the different sectors under different contracts.
Approximately 3% of the total expenditure, therefore, is covered by framework agreements, which sounds low. I may be generalising, but most people say framework agreements are the way to go because they enable us to achieve efficiencies of scale and leverage the State covenant, as Ms McGrath stated. We have discussed this issue with HSE officials also. However, only 3% of expenditure is covered by these instruments, which everybody says are the way to go. Is that figure not low?
Mr. Paul Quinn:
Perhaps I might intervene. This is the reason the Government has made the decision to drive centralisation. We need to increase the spend that is looked at centrally and pull in the common items from the various other Departments and agencies. The amount under negotiation centrally and frameworks will increase from approximately €220 million to more than €4 billion out of the total. It will, therefore, significantly centralise the management and procurement of common goods and services in the new office of government procurement.
Mr. Campbell is nodding in agreement. I am eager to understand. We are focusing on framework agreements, but I have worked out that 3% of overall expenditure is covered by them. What are the key reasons framework agreements are not in place for the remaining 97%?
Mr. Vincent Campbell:
One of the big issues is that many sectors were acting independently of the centre, but they were still complying with national procurement rules and EU regulations. It is not that they were not complying with the directives or the rules. However, the right hand was not seeing what the left hand was doing and they were not doing what the office of government procurement will do, which is looking at the bigger picture versus looking internally at what each sector is doing. There are a significant number of independent operations. While they are fully compliant, they are not looking at expenditure from the point of view that there are major savings to be gained through aggregation, looking at how the market is operating and applying the market intelligence to get better deals and talking to the market in advance before going to it, which is what we are now doing and will do in the future.
There is a further significant saving, as our chairman adverted to, in administration. Instead of 200 or 300 public bodies operating independently in procuring common goods, doing this centrally through one or two offerings to the market may in aggregate cost €25,000 or €30,000 - that is the accepted figure - but we will save up to €1.5 million on administration costs across the public sector before one starts to talk about the savings aggregation will deliver and that the market will deliver by putting bigger offerings to it.
We should tease out the inference Mr. Campbell is making. Of the expenditure that is not covered by framework agreements, of course, it would still have to be cognisant of procurement policies within the organisation and EU competition law. I was not suggesting there was a kind of "wild west" of procurement. We have had this big discussion about framework agreements but they only cover 3% of the total amount spent.
Mr. Vincent Campbell:
That is correct, but the point is that what we are trying to do is also bring the market intelligence on board as well so that when we go out to the market, we are conscious of SMEs to try to facilitate the best approach to the market to facilitate good offerings back from the SME community and that is important as well in how we look at the markets. From that perspective, it is not one approach to each category. It is different approaches depending on how the market is operating. We would talk to the market in advance of going out and look at it from a lotting perspective or whether it should be a single framework or a multi-supplier framework. So there are different approaches to different categories and we try to give best approach to facilitate best return from the market.
I have some specific questions on the future framework. I already made a point to Mr. Quinn on the nature of the framework models to which we are seeking to evolve. If we are in an environment with many buyers and suppliers, that is clearly inefficiency. I would argue there is also inefficiency in a model where there are many buyers and only a single supplier. We have talked about this previously in terms of the SME community. If we end up with only a single supplier of a good nationwide even for a country of our size, that is as inefficient as a model with thousands of buyers and thousands of suppliers.
Mr. Paul Quinn:
We recognise that increasingly and as we look to how we will roll out the new frameworks we are very conscious we do not want to be reliant on single suppliers unless the market is very much structured in that way. We will again look at the market dynamics and try to structure our offerings and our tender structures, particularly how we lot out various different services for potentially some degree of local delivery where possible and that should enable SMEs to compete. In the context of my appointment and the new office I am setting up, we are meeting various different industry representative associations. For example we met Chambers Ireland yesterday and we are meeting the Small Firms Association and the CIF next week to discuss how Government procurement is changing and what changes need to happen and need to be facilitated within the SME sector for them to compete. As we encourage them to collaborate more and work together, they will be able to compete increasingly for business, not only from the Irish Government, but potentially abroad as well. It is something on which we are working with the Department of Jobs, Enterprise and Innovation and Enterprise Ireland to promote within the community.
Figure 14.2 deals with the framework agreements for the end of 2011. A number of the framework agreements have a single supplier against them.
It is not my phone that is interfering with the sound recording and broadcasting equipment. I make the point that I turned my phone off completely.
It might be an I-Pad. I will just keep going.
I am not making any inference about any of these suppliers because I know they obtained these contracts through proper tenders and so on. However, if there is also a concentration of power at the supplier end, it could create difficulty for us.
Mr. Paul Quinn:
I agree. It comes back to understanding how the market is structured and how many players there are in the market. Obviously it is in the long-term interest for the procurement function to maintain a competitive marketplace. So we will be very conscious about how the market is structured, who is out there and just how much of the pie one player might be getting if they were to be awarded the overall business. Again it is something we are increasingly conscious of.
Mr. Quinn will be aware of the broader consequences here that if all the business goes to one player, it has a knock-on effect that might mean that there is a procurement saving on paper there are broader consequences in the real economy resulting in it not being a direct saving to the State overall.
The framework agreements are currently not mandatory and people have the option of entering into them. Is that correct?
I just have one question. I do not have the breadth of vision or depth of knowledge that Deputy Donohoe has. I believe Ms McGrath has covered the Garda stations. What will the OPW do with Stepaside Garda station?
Ms Clare McGrath:
As I said earlier, the policy is that we first look for other State bodies that will express interest and we interact on that. The second stage is to determine if there is market for it and if there is, we would dispose of it. This is for all stations. Third, we look at community use. In relation to Stepaside - it is at the first stage.
Ms Clare McGrath:
No. In fairness, having expressed an interest, it is in relation to their policies or how they are determining to operate. I do not know whether they have communicated what they are expressing an interest in to others. But fine - the Road Safety Authority is one of them and I am not sure of the second, but there is a second.
Mr. John Sydenham:
As we mentioned earlier, we are scheduled to dispose of approximately 20 this year. This will take time.
A number still have occupied married quarters and we need to resolve this issue with the Garda Síochána. As some are very old former RIC stations, the legal process to prepare them for disposal takes time, but a programme is under way. There is no outer limit on community engagement, but when we reach this stage, it will be a bit more involved than many communities realise. The transaction with a community must be through a legal entity with which we can have a formal enforceable agreement. Health and safety issues must also be considered. A building which was a small Garda station is not a community centre and severe modifications may be required to comply with fire and disabled access regulations if large numbers of people are to use it. This is expensive and generally beyond the reach of many community groups. It is not as easy as dealing directly and coming up with a solution, but we will work through it. That said, we have received very good proposals from a wide variety of groups which will in due course have merit and be worth pursuing. The organisation and the Minister are very anxious to go through the cycles. Another State body using a building would be good because it would save us buying alternative properties. Some of the buildings are very valuable and will make much needed revenue. Beyond this, the optimum way is to give benefit to communities, but we must be sure they have the wherewithal to make a go of it. In certain circumstances we will take back a building in a far worse state than we gave it. This will work for everyone, but we are going through a system. To answer the original question, there is no limit.
I have some questions on procurement many of which, in fairness, Deputy Paschal Donohoe covered. I will give the example of arts supplies for schools. I understand the basic idea is to save as much as we can, but at what point in the process is a value for money report or analysis undertaken? One can tell schools one knows where they can get supplies much cheaper, but this may remove small and medium enterprises from the market and lead to job losses. Is a value for money report compiled and is this taken into consideration?
Mr. Paul Quinn:
All Government procurement is governed by EU directives and a key principle in the process is non-discrimination in how people bid. It is not possible to consider one business against another in this regard. People bid and are successful based on transparent principles and processes to ensure probity, as we would expect in public procurement. The bidding process and evaluation criteria take into account price and quality. It is important to note that the Government has set out significant targets and savings to be achieved in public procurement. We are driving people towards looking at the markets more holistically and on an aggregated basis. That said, we will break down offerings into lots to enable small and medium enterprises to participate, but they need to participate and be competitive. That is the core principle.
If the preferred bidder is the one able to supply the product much cheaper, is there a fear that a bigger player will undercut small and medium enterprises and remove them? Is it the case from day one in the process that this simply cannot happen? A large company can drop its prices and if the Government wants to save money, it can go to it and small and medium enterprises will be blown out of the water.
Mr. Paul Quinn:
It is important that small and medium enterprises participate in the process. As my colleagues have indicated, many small and medium enterprises are registered and aware of the competitions. We work with Enterprise Ireland and various industry bodies to ensure small and medium enterprises recognise this is a challenge and that being competitive in a marketplace in which the Government is looking more holistically for value means they must change how they operate to deliver such value for the State. I am confident that small and medium enterprises can do this. Many small and medium enterprises operate with lower overheads and are more nimble than larger organisations. There are balances which enable small and medium enterprises to participate, but they need to recognise the frameworks, how little is centralised and to where we are trying to get. The industry must change in response to this. That is what we are communicating to industry.
How is the process going? People have contacted me because business was conducted in a particular way for many years and now the emphasis has changed and they feel they have been sidetracked by the process. We might obtain better value for money for several years, but it will not be good if a company which has supplied a school for 20 years goes out of business. I understand this is not within the OPW's remit, but while small and medium enterprises must understand the process and that they must be competitive, if a bigger player undercuts everyone else, why would the Government not give it the contract? My point concerns the damage this does.
Mr. Paul Quinn:
This comes back to how we address the marketplace. As part of our new process of professionalising procurement across the board and improving knowledge and understanding of procurement, we will examine how the markets are structured and where local delivery is possible. We will structure and break down the offerings in order that they are not all huge. We recognise that services may be locally or regionally delivered. This is where small and medium enterprises can step in and compete. The communications process is kicking in and we are engaging considerably with industry representative associations in order that they understand this process and work it through their networks in Chambers Ireland and the Small Firms Association.
Mr. Paul Quinn:
Absolutely; the term we use from a procurement perspective is value because one must consider the life cycle cost. If one buys the cheapest product, one may find it fails very quickly. If a cheap boiler is installed in a building, it may fail very quickly, which is not an economy or saving. We must consider the quality of the products and services we procure. A key part of the new operating model is that Departments and agencies will be key in assessing quality and it will not simply be presented to them as a fait accompli by a faceless central procurement function. A key element will be that Departments and agencies will work with the new office of government procurement in determining the standards and signing off on the requirements and assessing the tenders for this quality aspect.
I have a number of questions and want to deal with them as quickly as I can because I must speak in the House.
Deputy John Deasy raised concerns about an issue with regard to Mount Congreve in Waterford and I share his concerns. I have been following this very closely and know negotiations took place between the OPW and the Mount Congreve estate and that a conclusion was to be reached in August or September last year. However, this did not happen and tours of the estate were cancelled. Issues have been raised about the 12 members of staff, particularly the gardeners, who looked after the estate and were responsible for its maintenance. The annual cost of upkeep of the estate is €400,000. It is a significant estate and I would have thought the OPW would have dealt with the matter as quickly as possible to take it in charge in order that it would not run into maintenance issues or that the condition of the garden would not worsen.
This year, the cancellation of the public liability insurance has caused 17 tours of the estate to be cancelled. For what reason did the 2012 negotiations not materialise in an agreement? Is there a basis for an agreement? Is an agreement close that might rescue the situation and deal with the staff who are in limbo?
Ms Clare McGrath:
This issue has a number of elements. I can discuss them separately if there is no time pressure. The factual situation is that the Commissioners of Public Works comprise one third of three trusts that have ownership over Mount Congreve house and gardens. The staff caring for the gardens are in the employ of the Congreve Foundation, not the trust. I understand that the foundation wishes to withdraw from operations in Waterford, including the trust. The negotiations have to do with willing partners and driving value, given the original basis on which this structure was set up in the 1970s. Matters had progressed, but then needed to be addressed again. We are willing to sit down and talk and there is a basis for an agreement, but we need the other side to engage.
Will Ms McGrath forward me a note on the up-to-date position, when the last meetings were held, what is likely to happen in terms of re-opening the negotiations, if they have closed down, and the possibility of reaching a conclusion?
Deputy Deasy has expressed an interest also.
I wish to raise a number of other matters. I read of the artwork missing from Leinster House in some recent media reports. There was to be a complete list of the artwork on the premises. Has that list been completed and has the missing artwork been retrieved or found?
I am reading from reports, according to which the lease is for €1.3 million and will last until 2034. Where stands this matter in the OPW's negotiations on properties and withdrawing from leases? Will Ms McGrath provide the committee with a note on whether the OPW is in discussions with the owner?
Having allocated, how does the OPW follow up to ensure that the funds went to certain projects and were value for money? Does the OPW have people who examine the sum provided to local authorities? The committee has encountered difficulties with the auditing of those accounts.
Mr. Tony Smyth:
We have put in place an auditing system. We focus mainly on large projects, those valued at more than €100,000, but we also include a number of small ones. We will audit at least one project from each local authority area. We aim to audit approximately 5% of all of the works that have been completed. As we only started that process this year, I do not have a report on it yet. To check quality, we hope to have audited previous years by the end of this year. Our audits examine whether the works were in accordance with what was sought at application stage, whether the cost was reasonable, whether the standard of work was okay and whether there were obvious indications of adverse impacts.
As we cannot follow the money to the end, I am seeking examples of how other Departments follow their grant allocations to local authorities to the end. For the committee and the LGAS team, it is a question of value for money for taxpayers and proper accountability.
Kilkenny Castle was mentioned. If people do not mind, I must visit my constituency on this issue. In terms of the promotion of Kilkenny Castle as an event centre, how is the Parade Tower doing? Is it a successful project? I have found its use for public events to be exceptional and its media coverage positive. I would like to see more events scheduled at such locations. Doing so would be good for local economies as well as the country's profile abroad. What effort is being made, has it been successful and can more be done?
Ms Clare McGrath:
According to my information, 225 events were held in the castle - in Parade Tower and on the grounds - in 2012. I appreciate the Chairman's comments, which we will pass on to the people on the ground who are running the castle. Upgrades are constantly under way, as is the work on conserving the contents, including artwork, frames, etc. The education programme is ongoing. Outsourced heating for the tea rooms was completed this year. Work is under way with the St. Patrick's Day committee as part of a year-long programme to attract visitors from home and abroad. A Kilkenny Castle day was held on 11 March in 2012.
As with other facilities that we manage with a view to using them for events and presentations, Castletown House being another example, we are constantly engaging with the local community, the local authority and local and regional tourism boards as to how to promote it. We are examining whether there are ways to market it further. We might engage someone to help in that regard.
There is a need for marketing not only of Kilkenny Castle but also, for example, of Mount Congreve. I visited Mount Congreve with Ambrose Congreve when he was alive. It will be a fantastic asset, as are the castle and many other locations, if the State can manage to reach an agreement on it. There should be an encouragement to take ownership of the asset locally. Deputy Murphy raised the question of the Dáil and tours of it. That encourages people to take ownership of it and to feel part of it. We could include the office across the way also. There is great public interest in it after today and we could charge for entry. On a serious note, the marketing of these locations is hugely positive for the country and has a local impact.
Ms Clare McGrath:
Income is generated from certain of these sites. The funds generated are currently going to appropriations in aid. Where we can maximise that income, we are looking to pursue the facility to reinvest it back into the sites to further enhance them for tourism. We are looking to do something on the marketing of all sites.
I pick up on something members said about the closure of the barracks and the various buildings that are around. Do local community groups make applications to the OPW for the use of the barracks?
It would be useful if it could be made public as there is an interest in this. I would certainly like to have the information. If it could be made known, the OPW would probably get reasonable applications from community groups which would put the properties to very good use.
Mr. John Sydenham:
We have done some work in that area. We have canvassed people and published a number of notices structuring what we want coming back as we receive so diverse a range of submissions. We have done a lot of that. Now, it is about keeping it fresh. We will get to the point where we have quite a stock which we cannot dispose of. Then, we will really engage with communities. It is an ongoing process.
To make a point related to the Chairman's remarks, I thank the OPW for many of the properties and work it does in communities. The Chairman mentioned one in his own constituency. In my constituency, I have the Phoenix Park, including Farmleigh House, the Botanic Gardens and many other sites dotted across the city. The OPW staff at those sites do a tremendous job. I want to recognise that they are very open to the properties being used in different ways. We see art exhibitions, outdoor sculpture in the Botanic Gardens, and different types of community events at Farmleigh, which is a very different use from the one originally conceived for the building. The superintendent of the Phoenix Park and his staff are always extremely accommodating to any community event. Like the Chairman, I want to recognise that. There is a genuine openness among the people the OPW has running its properties and sites to try things out and do things differently. We should not let the meeting conclude without commending that and asking the witnesses to pass the message on.
Ms Clare McGrath:
I do not get the opportunity to acknowledge the staff of the office, whether it is someone working in drainage and maintaining flood relief works or someone working at a heritage site. I appreciate the Deputy's words and will take them back. I acknowledge myself the sterling work done by the staff of the organisation and their adaptability and flexibility in fairly tough times.