Oireachtas Joint and Select Committees

Wednesday, 22 January 2014

Joint Oireachtas Committee on Environment, Culture and the Gaeltacht

Proposed Incinerator at Poolbeg: Dublin City Council

2:10 pm

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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I welcome Mr. Owen Keegan, Dublin city manager; Mr. Michael Phillips, city engineer and director of traffic; Mr. Peadar O'Sullivan, acting head of waste management and Dublin waste to energy project engineer; and Mr. James Nolan, assistant engineer in the Dublin waste to energy project. I thank them for their attendance. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the joint committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable. The opening statements and any other documentation delegates have submitted to the committee will be published on the committee's website after the meeting. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.
Before I call our first delegate, I wish to make a number of comments. This is a very interesting topic which is of particular concern to politicians and people in general. We have of late seen issues raised regarding the spend in Uisce Éireann. Uisce Éireann management came before the committee and satisfactorily engaged with it on the issues raised and, in many respects, allayed concerns. There is also the issue of the Central Remedial Clinic. It, rightly, filters into the political system, whereby Members of Parliament wish to bring people before committees, hold them to account and have exchanges on expenditure. This is no different. What we want to establish is that the money spent to date has been well spent, that there has been good value for money and whether there are other issues in this regard. That will form the basis of our deliberations. I thank the delegates most sincerely for attending and engaging with us. Accordingly, we are very interested to hear the finer details to satisfy our curiosity. I invite Mr. Keegan to address the committee.

Mr. Owen Keegan:

I am delighted to have the opportunity to brief the joint committee on the Dublin waste to energy project and update it since the project was last considered by it on 3 February 2010. Since taking up my position as city manager, I have been concerned about the project and anxious to bring it to a resolution.

The background to the Dublin waste to energy project, together with a project chronology, is set out in detail in section 2 of our submission document. Dublin City Council, acting on behalf of the four Dublin local authorities, has been pursuing the provision of the waste to energy facility following the adoption of the Dublin region waste strategy in 1998. The Dublin waste to energy project was developed as a public private partnership, PPP, using the appropriate EU procurement procedure and carried out in accordance with the capital appraisal and PPP guidelines issued by the Department of Finance. The public tender competition was conducted by the client's representative on behalf of Dublin City Council to award a contract for the design, build, financing, operation and maintenance of a thermal treatment facility.

A project board was established in January 2004 to oversee the project. The project board comprised representatives from Dublin City Council, the Department of the Environment, Heritage and Local Government, the National Development Finance Agency, NDFA, and the client’s representative. In response to a public procurement process, three bids were received on 16 April 2004. In June 2005 the procurement report was finalised and issued to the Department of the Environment, Heritage and Local Government, the NDFA and the Dublin local authorities. The project was subject to financial assessment by the NDFA, which confirmed in 2005 and again in 2007 following a financial restructuring by the preferred bidder that the project represented value for money.

The project documents were submitted for approval to the Department and National Development Finance Agency, NDFA, in approximately June 2005. In September 2005, a letter issued by the assistant secretary in the environment division of the Department confirmed that the Department, following a detailed technical review, had no objection to Dublin City Council proceeding to enter into contractual arrangements based on the documents received. A project board meeting was held on 14 May 2007 at which Dublin City Council requested approval to proceed to finalise the project agreement with the public-private partnership company. The project board decided that approval to award the contract for the project would be given in accordance with the original sanction. The project agreement was executed on 4 September 2007. Planning permission was granted by An Bord Pleanála on 19 November 2007. The Environmental Protection Agency subsequently granted a waste licence for the facility in December 2008, and the necessary licences from the Commission for Energy Regulation, CER, were granted on 4 September 2009.
Since the Dublin waste to energy project was conceived in the late 1990s it has remained entirely consistent with regional, national and EU waste management policy. In addition to its importance in meeting waste management objectives for the Dublin region, its provision is crucial if the State is to meet 2016 landfill diversion targets without dependence on the export of municipal waste to overseas facilities. The policy background is dealt with in detail section 3 of the submission.
Delivery of the Dublin waste to energy project has proved extremely challenging and has gone on for far too long. In particular, it has been subject to unanticipated delays due to a range of factors largely outside the control of the Dublin local authorities, all of which are detailed in the submission. These factors include a successful High Court challenge to a variation to the regional waste management plan, which was necessary, following the increasing penetration by private waste operators in the Dublin household waste market, if the Dublin local authorities were to be in a position to retain control of waste arising in the Dublin region in order to meet the "put or pay" provisions in the original project agreement. There was also a complaint to the Competition Authority, a failure to secure foreshore licences required to facilitate the project and still-unresolved complaints to the European Commission on state aid and public procurement grounds, stretching back over three years, which have yet to be determined. I have dealt with the delay factors in detail in section 5 of the submission.
These delays have contributed to the very significant costs which have been incurred to date by the Dublin local authorities and the public-private partnership company in seeking to advance the project. A total of €96.3 million had been spent on the project by the Dublin local authorities to 31 December 2013. Of this total, €4.5 million was recouped from the PPP company, in accordance with the project agreement, and grant aid of €7.5 million was received from the Department. The net cost to Dublin local authorities has been €84.4 million, and full details of the expenditure incurred are set out in section 2 of the submission.
Total expenditure to date on the project should be seen in the context of an anticipated investment by the PPP company of approximately €500 million on the waste to energy facility should the project proceed. With the termination of the client representative contract from 31 January 2014, expenditure on the project from 1 February 2014 will be confined to site security costs, Dublin City Council project engineer costs and certain ongoing costs arising from the statutory consents - dealing with monitoring on the site - pending a decision on whether the project is to go ahead.
The principal local government auditor, as part of his audit of Dublin City Council’s accounts for the year ended 31 December 2011, reviewed cumulative expenditure on the Dublin waste to energy facility to 31 December 2011. In his report he drew attention in particular to a number of issues. There were serious weaknesses in the financial management of the project by the city council, there was escalation in the cost of relocating Westway Terminals Hibernian Ltd., and there was also escalation in the cost of the client representative, CR, contract due to the fact that the contract was extended well beyond the 50% increase in value permitted under EU procurement rules. He noted that the continued appointment of the CR should have been reviewed as far back as 2005, when the 50% threshold rule was breached in accordance with procurement guidelines.
On foot of the local government auditor’s report, financial management of the Dublin waste to energy project by Dublin City Council has been considerably strengthened, especially in the monitoring and controlling of expenditure. In addition, the executive board overseeing the project meets on a fortnightly basis and their meetings are minuted. The council’s response on the cost of relocating Westway Terminals Hibernian Ltd. is set out in section 5 of this submission, as is the council’s position on the CR contract, which will terminate on 31 January 2014.
If the project does not proceed, the bulk of the costs incurred by the Dublin local authorities will not be recouped. In addition, the PPP company has incurred significant costs to date and it may seek to recover these costs. If the project does proceed then, subject to certain assumptions, there is a real prospect that the Dublin local authorities will recoup the investment they have made in the project to date, albeit over a long period. In addition, the Dublin waste to energy facility will make a significant contribution to the achievement of regional and national waste management targets. The project will generate on average 275 jobs, with a peak of 500 jobs during the construction phase and 60 jobs once the facility is operational. It will also generate significant community gain.
The current status of the project is that the PPP company has put in place a funding package which is acceptable to the Dublin local authorities. The project agreement has been renegotiated to reflect the new funding package and the removal of the "put or pay" clause in the original project agreement. Dublin City Council is awaiting the outcome of the complaints to the European Commission. Assuming a favourable outcome to these complaints from the council's perspective and that the project can proceed to construction phase, Dublin City Council will proceed as follows. The revised or renegotiated project agreement will be finalised; a detailed suite of reports - including the revised project agreement - will be submitted to both the NDFA and the project board for approval; the views of the elected members of the four Dublin local authorities will be sought; and, subject to the necessary NDFA and project board approvals, a final decision will be made to proceed or not to proceed with the project by the Dublin local authority managers.
In summary, the message is that this project was and always has been in line with Government and EU waste management policy. The project has gone on for far too long, largely due to factors outside the control of Dublin City Council. I am determined to bring this project to a resolution and I have sought to minimise any ongoing expenditure in the project, with effect from 1 February 2014, at which stage the client representative contract will be terminated. It is undoubtedly the case that the city council has made mistakes in the management of this project. We have learned from those mistakes and sough to address them. With regard to any concern about whether this project represents value for money, the final proposal will be subject to independent verification by the NDFA, and we cannot proceed unless it certifies that it still represents value for money. In the context of national and regional waste management objectives, this project is still required.

2:15 pm

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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I thank Mr. Keegan and the other officials for coming before the committee. I sought this meeting last year because I am very concerned about the €96.3 million spent, with €4 million recovered from the PPP company. The rest has come from the public purse and on my last glance, there is no evidence of it on the site. The public has not seen any goods.

I recognise that the witness is relatively new in his position and there is a long history to this that I have tried to follow, including its various twists and turns. The public has been absolutely astonished at the sum of money that has been spent to date and the fact that there is no product at the end in the form of a waste management facility. I know that elected members on Dublin City Council of various shades of political opinion are extremely concerned; members from my party are extremely concerned about the issue. I want to tease out what has happened and how we can move forward, or at least stop the hole from getting deeper. Do we need to take the shovel from people's hands in order to stop them digging?

With regard to authorisation of the spend to the date, local authority members have tried to get sight of the contracts but the information is commercially sensitive and they have not been able to get that. There has been no accountability regarding what is in those contracts. Who has authorised the payments over the past ten years?

What does Mr. Keegan, as the new city manager, think of what has happened to date? Even during the boom expenditure of €96.3 million was causing concern but in the present circumstances how we spend every penny matters. Let me put the expenditure in context. The sum of €96 million is almost treble what has been spent on housing grants this year. Have we got value for money?

2:25 pm

Mr. Owen Keegan:

Nobody is more concerned than I am about the costs that have been incurred on this project. I share the concern and frustration of elected members. We will only realise those costs in the event that the project does not proceed. As I stated in my report, I am satisfied - this will be subject to independent verification by the National Development Finance Agency - that if the project does proceed then subject to certain assumptions, there is a very good prospect that the Dublin local authorities will recoup the full investment they have made and more.

Let me respond to questions on the role of the elected members. Since my appointment I have responded to their concern about the "client representative" contract, which I have addressed and the contract has been terminated. I have given them a commitment that I will give a full report before any final decision is made and it is my intention to give them the draft project agreement for their consideration. I intend to submit that report to them. I understand the other local authority managers in Dublin intend to submit a similar report and the project agreement to their members. We will have regard to what the elected members say before a final decision is made. We will certainly consult them.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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I have heard Mr. Keegan's phrase "We will have regard to what the elected members say" used many times during my term as an elected local authority member. The problem is that the elected members have been hung out to dry and have been left completely exposed to a roasting from the public on this waste of money. The public cannot grasp the reason this amount of public money could be paid from the coffers of the local authority. Mr. Keegan spoke of the prospect of the project being done but I would beg to differ based on what has been happening in waste management. Mr. Keegan's officials will be aware of the success of the recycling initiative, with increases in the rates of recycling. Further work has to be done in terms of waste reduction but it is hoped the volumes of waste will decrease, which means there will be less raw material to feed an incinerator.

I will now question Mr. Keegan on the payments to consultants. As of 2011, €28.4 million was paid to consultants. The estimated cost had been €8 million, but three and half times more than the figure in the Estimates was spent. How much has been paid to consultants to date?

Mr. Owen Keegan:

First, I will address the question of the need for the incinerator. There is a view going around that with higher recycling rates there is no need for an incinerator. In the course of my report, I have a graph showing how waste is treated in the countries with the highest rates of recycling, that is Austria, the Netherlands and Germany. For example in Germany they have 62% recycling but some 37% of waste goes to thermal treatment and less than 1% goes to landfill. That is what national policy aspires to and is something that the waste energy facility will be fundamental in achieving. It is not displacing recycling; it is replacing disposal to landfill, which at present is 53% of waste. There is significant scope in my view.

There is legitimate concern about the expenditure on the project. The primary element of expenditure on consultants was on the client representative contract. We have detailed in our report the total expenditure including VAT to the end of December 2013 which was €29.77 million. Let me explain how this came about when the anticipated figure initially was €8.3 million.

The Dublin waste energy project was one of the first proposed thermal treatment plants in the State. It was a pilot project in the PPP programme under the National Development Plan. It was the only design, build, operate and finance project in the waste sector. It was also one of the first projects to fall within the terms of reference of the National Development Finance Agency. At the time the concept of the public-private partnership was a new approach to projects. The city council would have had no experience of dealing with them. When the original client representative contract was drawn up - I have no doubt that it was drawn up in good faith - there were serious weaknesses in it. Certain services that turned out to be necessary were not included and the scope of works that were included in the contract proved to be totally inadequate in the light of what happened subsequently, particularly the long delays. It was necessary to extend the contract very considerably. I have the details of the breakdown of the expenditure on that contract. The fundamental problem was that the original scope of that contract proved totally inadequate in face of the actual complexity of the work required to be undertaken and the eventual duration of the assignment. That was unfortunate. The council can also be criticised for its failure in respect of issues that the auditor drew to its attention, and was determined by the Commission subsequently.

When the contract originally exceeded the 50% threshold in terms of the increase on the original figure, public procurement guidelines require that it should have gone out to procurement. For understandable reasons a view was taken by the city council that because of the complexity of the project it would be a bad idea to change the client representative team as a very significant degree of expertise had been built up in that team, at the public's expense, and it made sense to negotiate extensions of that contract. I think a view was taken that it was such an exceptional procedure it was justifiable to depart from the norm. This issue was first raised by the local government auditor in his report in 2013, the matter was subsequently clarified by the Commission and the Commission's view was that we should have abided by the EU procurement rules. I have accepted that. We were advised of that late in 2013 and I put in train arrangements to serve the notice on the client representative team and to terminate their contract. I do not think anybody is saying, given the complexity and change of the scope of the work, with the additional work that had been done, that expenditure of that order did not have to be incurred, the difficulty is that in the absence of public procurement I cannot say we achieved value for money. We have to accept the reality. With the benefit of hindsight, it would have been better to break that contract in 2005 and go out to tender. I have no doubt that had we known that the project would go on as long as it did, that decision would have been made. I think there was always a view that we were very close to getting this project over the line. Unfortunately-----

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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Was MC O'Sullivan the name of the company involved?

Mr. Owen Keegan:

It was MC O'Sullivan. The primary partner of the client representative was MC O'Sullivan, which is now RPS group.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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Is this company the same MC O'Sullivan which put together waste management plans for every region in the State? I saw somewhere that it was a cut-and-paste job. The company was subsequently bought out by RPS group. The midlands waste management plan -----

Mr. Michael Phillips:

The company carried out waste management plans as part of its work. The company would have tendered for the contract under normal procurement procedures for each region. I do not know how many regions it got the contract for.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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I think they fairly much covered the regions.

Mr. Michael Phillips:

It was under the public procurement process.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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The company certainly got the contract for the midlands and some other regions as well.

It is clear that the extension of the contract was not put out to tender and the then manager was in effect giving a blank cheque to a company that had built up the expertise at the public expense. That is part of the problem.

Mr. Owen Keegan:

I would not use the words "blank cheque", as every extension of the contract would have been negotiated by the project engineer and it would have been subject to a managerial approval, but I accept-----

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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Given the vast sums of money involved, to me it looks like a blank cheque

Mr. Owen Keegan:

I accept that it is unacceptable. It should have gone out to procurement in 2005.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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What is baffling about the project is that we have expended that figure and there is no product.

People who do understand them cannot get their heads around why such an amount of money is being wasted.

2:35 pm

Mr. Owen Keegan:

To come back on the question of product, we have acquired a site and have all of the statutory approvals for a waste energy-----

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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The council has a waste licence, planning permission and a vacant site.

Mr. Owen Keegan:

Anyone embarking on another waste to energy project would expect to incur significant cost in procuring those statutory approvals and procuring a site.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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I do not doubt that, but the amount of the cost is in question. Since Mr. Keegan took up office, I am sure he has had time to look back over the whole project. Does he think the whole project was ill thought out and fundamentally flawed in choosing incineration at that location? I come in through the south side of the city every morning and I try to get back in the evening or at night. How will the material get to the site on HGVs? There will not be enough material in Dublin, given the size of the incinerator, meaning it will have to be drawn in from a lot of Leinster and as far as Tipperary. Given the location and the traffic management aspect, does Mr. Keegan feel this is an appropriate project? The question presumes that incineration is a good idea in the first place or is necessary. Many countries are moving away from incineration.

Mr. Owen Keegan:

We are discussing the suitability of the site. The site emerged from a site selection study. People have raised concerns about the site's suitability but the issues have been adjudicated on by An Bord Pleanála. Traffic management concerns and emissions have all been discussed. These are not issues for Dublin City Council to decide; they are decided by independent bodies. The bodies have adjudicated on all of these issues and the project got the required consent. The Deputy may think it is a bad site and I happen to think it is a very good site, but at the end of the day all that matters is that the agency with the statutory responsibility for making the determination has determined that this is an appropriate site and granted planning permission.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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With regard to the location and the amount of waste to feed the site, has it ever been part of the plan of Dublin City Council and the company involved to import waste into Poolbeg?

Mr. Owen Keegan:

From abroad?

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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Yes.

Mr. Owen Keegan:

No.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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If the decision to move ahead with the Poolbeg incinerator were happening today and Mr. Keegan were the Dublin city manager, knowing what he knows now, would he back the project?

Mr. Owen Keegan:

If I knew there would be a fundamental change in the organisation of the waste market and we were no longer going to be the major players, which is a relevant factor, I would not have pursued the project in the manner it was pursued. At the time, we had been in the waste business for over 100 years and there was an expectation that we would still be involved. We failed to anticipate the impact of the polluter pays principle and, once charges were introduced, it provided for a significant opening up. That was not anticipated and, had I known it would happen, we would not have gone about the project in the same way. If we were not going to do the collection, we would have hoped the private sector, as it was providing the service, would take on the responsibility of providing for collection facilities. At the time the project was conceived, we were major players and we had a statutory responsibility to provide the facilities. There was an expectation on the Government side that the local authority would provide it.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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In the council chamber in Laois, I heard that we needed an incinerator facility in the midlands. They were going to be dotted all over the country. Looking at it now, no one would say they are needed. MC O'Sullivan & Co. told us we needed them. There is a logic to that company telling us we need them. Does Mr. Keegan agree with that?

Mr. Owen Keegan:

I do not agree with that. We have managed to deal with our waste by exporting it to incinerators abroad. That seems to violate a fundamental principle of the EU management of waste policy, which is the proximity principle. It is unclear whether that will be sustained, but I have serious doubts whether it can be sustained in the longer term. If that cannot be sustained, the onus will be on the Irish State to make appropriate provision to treat its waste in accordance with the waste hierarchy. The option of exporting it abroad may not be sustainable in the longer term. The issue has not come to the fore but we will not meet our diversion-from-landfill targets without reliance on exporting waste, and I am not sure that is a sustainable option.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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What does Mr. Keegan envisage as the total cost of the project, assuming it goes ahead at the planned scale? He has also talked about the scaled-down version. What is the cost to Dublin City Council and the cost to the public purse? There is a public-private partnership, PPP, involved.

Mr. Owen Keegan:

The total cost of the project, in addition to what we have incurred to date, will be of the order of €600 million. Some €500 million will have to be funded and provided by the PPP company to provide the plant. That includes the financing costs. Adding to the sum over €90 million, it is close to €600 million. The cost we have incurred should be set against the total project cost. It is below €100 million, but out of an expected total project cost of €600 million.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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Mr. Keegan said that if this fails the PPP company may try to recover the moneys paid.

Mr. Owen Keegan:

There is a real prospect of that if the project does not proceed. It is not for me to advise it, but people need to know that it is not a simple case of saying that we will stop and crystallise losses in terms of the expenditure incurred to date. There is a real prospect that the company may argue it had a legitimate expectation that the project would go ahead and that has been frustrated in that. The company has incurred significant costs and may seek to recover them. People need to be aware of that.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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It would be an appalling situation. I have one more brief question.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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In the informed opinion of Mr. Keegan, will the project proceed?

Mr. Owen Keegan:

I do not know.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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When will the decision be made?

Mr. Owen Keegan:

As detailed in my submission, we must first emerge unscathed from the complaints to the EU. Two complaints have been made and have been with the EU for some considerable time. We need to get a definitive determination from the EU on the complaints. Then, I do not anticipate a great delay in finalising the project agreement. All documentation must be independently reviewed by the National Development Finance Agency. If it certifies that it represents value for money, there is a prospect that the project can proceed. If it is not certified, the project is finished. I have given a commitment to go to the elected members with a full report, including the project agreement. I have said we will give them the opportunity to make their views known. Finally, assuming there is a value for money certificate from the National Development Finance Agency and the project board, which involves the Department's approval, it will be a matter for the managers to sign a revised project agreement, and the project will go ahead, or they will not sign it.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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Does Mr. Keegan have an idea of the timeframe in which the European complaints will have been dealt with?

Mr. Owen Keegan:

What has bedevilled the project is that we have given out timescales and been proved wrong. I would rather not give a timescale because I do not know. One of the complaints is now three years old.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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Mr. Keegan does not know whether it will proceed or not. So much money has been spent and we are now down €96 million without knowing whether the project will proceed.

With regard to Covanta, were Mr. Keegan and the officials aware that the company had been fined millions of dollars in the US for breaches of environmental legislation?

Mr. Owen Keegan:

I am aware of that because I read the transcript of the last meeting with the company, which gave a full explanation for the fines imposed. It is the largest operator of thermal treatment facilities in the world. The matter was adequately dealt with in 2010.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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Does that concern Mr. Keegan?

Mr. Owen Keegan:

Obviously I would prefer if everyone had a completely unblemished record, but Covanta won the tender fair and square. Its technical ability was assessed as part of that and so be it.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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I have no doubt about that, but that has been the problem with the process. The elected members, under the Waste Management Act, were cut out of it in the early 2000s.

2:45 pm

Mr. Owen Keegan:

The waste management strategy was adopted by the elected members.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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Okay.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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It was rubber-stamped. Did it have no hand, act or part in making the plans?

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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I welcome Mr. Owen Keegan and his officials. Certainly this issue has blighted Dublin south east for the past 17 years. If it was not this particular incinerator it was the illegal one that was on Sir John Rogerson's Quay. One of the first protests was Ban the Burn. It is a long time running. It was initially conceived by John FitzGerald, followed on by John Tierney and now Owen Keegan, whom I congratulate on being promoted to be the new Dublin city manager. I had hoped there would be a certain amount of fresh thinking rather than being tied to the past. Certainly the record on this project is not good. We had the problem with the then Minister for the Environment, Community and Local Government, Dick Roche, rushing to approve the signature on the contract before John Gormley became Minister for the Environment, Community and Local Government. There have been questions concerning site selection which I will not deal with today; we will try to deal with that issue with An Bord Pleanála. The site selection process does not come through the system lily-white either.

I was taken aback when Mr. Keegan said the whole issue of local authorities not keeping control over waste management was unforeseen. He will be aware of the local authority waste collection report published in 1998 when the collection market was going private - several of the authorities had already gone private at the time. Does Mr. Keegan still believe it was unforeseen that Dublin City Council would lose control over waste collection? I do not think the Panda case is relevant because it came quite some time afterwards. It was an amendment to the Waste Management Act 2001 which clarified the issue. In fact, Dún Laoghaire-Rathdown County Council, of which Mr. Keegan was manager, was one of the first to dispense with waste management collection. Does "unforeseen" really stand up in this example?

Mr. Owen Keegan:

In relation to the question of whether it was unforeseen, all of the issues precede the High Court case.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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The local authority waste collection report of 1998 already indicated that that was the direction in which it was going.

Mr. Owen Keegan:

Yes, but we had a signed project agreement from 2007. Prior to the agreement, there was agreement in principle in 2005 to sign the project agreement, and it was signed in 2007. My recollection is that penetration by the private operators began after that. I will be quite up-front: I do not think anybody would have gone ahead with this project if they had known that the whole structure of the market was going to change, but the project was conceived in a completely different era.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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The point I am making is that it was not unforeseen, even as far back as 1998, as some of the local authorities had already gone private and there were indications of what would happen long before 2007 and 2008 - before contracts were signed. That was the direction in which things were already going.

Mr. Owen Keegan:

I think there was a second factor. Initially the penetration by private operators was seen as a difficulty. Then the view was that it did not really matter if the private operators were in the market if we had the power to direct where the waste would go. All the indications in terms of public policy were that the State would go to a competition for the market as opposed to competition in the market and that we would have that power. As it turned out, the Panda judgment, while it was not specifically about that issue, raised concerns as to whether we did have the power to direct the waste. It was conceivable that we would have retained control even if the actual collection had gone out to private operators.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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I beg to differ. We will argue the point at a later stage. I think it was blatantly obvious from a very early stage. May I refer Mr. Keegan to page 9 of his presentation, where the spend to date on the project is shown as €96.27 million? Does that take into account the district heating, piping and so on that has been carried out?

Mr. Owen Keegan:

The district heating project has always been viewed as a separate project. It is a project that is being promoted by Dublin City Council. It is not a project for the four Dublin local authorities. I am advised it is capable of proceeding, given the likely development of the whole Docklands strategic development zone, and it has always been treated as a separate project by Dublin City Council. It is not dependent on the incinerator and the waste energy facility going ahead.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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From where would the heating come? Is it about €10 million that has been spent on the district heating project?

Mr. Owen Keegan:

Yes, about €10 million. My understanding is that a separate boiler entity would have to be built and that the heat would then be distributed. Some works have been undertaken to facilitate that. It is in abeyance now because development has slowed down significantly in recent years, but it is a project that is capable of being re-erected and could survive and make sense economically, independent of the incinerator.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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I am just a bit lost here. Where exactly is the heat source for the district heating if the incinerator does not go ahead?

Mr. Owen Keegan:

A separate heat source would have to be put in place.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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Can Mr. Keegan give the committee an example of a separate heat source?

Mr. Michael Phillips:

We would build a separate boiler unit, which is quite normal. In the early stage of providing district heating around town, one would build, for example, a boiler house near St. James's Hospital which could supply the hospital, the brewery and St. Brendan's Hospital. As one builds around certain areas one can install such facilities; for example, in the civic offices we had a combined heat and power plant which supplied out. As those areas expand we would bring in the big pipes and create a whole circuit in order that the town would have a trunk pipeline going through it. In the initial stages, if, say, the waste to energy plant did not go ahead, we would build a boiler house. That means that each individual building does not need its own boiler, which means carbon dioxide emissions are reduced and it is much more efficient.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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This is refreshing, as I served on Dublin City Council up to the last general election and the district heating project was always firmly hooked on to the incinerator. It was also explained by Matt Twomey that district heating was always to be dependent on the incinerator, and he spoke about the experience in Copenhagen, where district heating was run off incinerators. To be honest, this appears similar to a retrofitting, given that €10 million has been spent on pipe work for a different project. Out of curiosity, what was the procedure to approve the expenditure on the project? What was the governance in relation to the expenditure of €10 million on the pipe works for district heating?

Mr. Michael Phillips:

If you want to maximise the district heating project, the waste to energy plant really maximises it. What it means is that the hot water is not being expelled to the air; it is being taken from the waste to energy plant and used for heating. In this case it would heat up to 60,000 houses or units. If a waste to energy plant were used to its maximum, there would still be boiler houses for the peaks because the waste to energy plant is used as the base load. Therefore, one will have peak boilers, and one of them may be used in the office block or whatever.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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Let us be straight on this issue. The expenditure of €10 million was for a district heating project run with the incinerator. Is that correct? Would Dublin City Council have proceeded with the €10 million investment if it had not believed the incinerator would be built?

Mr. Michael Phillips:

Yes, it probably was.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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What was?

Mr. Michael Phillips:

When we were looking at the waste to energy plant, the district heating was-----

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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An integrated part of it.

Mr. Michael Phillips:

In the very initial stage. Because of the reports on climate change one can envisage further reductions in carbon dioxide emissions on a national and a city basis, and suddenly one begins to realise that district heating has to be a very important part of how we provide heat around the city if we are to reduce carbon dioxide emissions.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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Tell me about the governance issue. Who made the decision to give the €10 million and what was the procedure involved?

It was very clear at all stages, even that involving An Bord Pleanála, that district heating was an integral part of the incinerator project. Who made the decision to spend the €10 million on the pipework, etc., for the district heating system? At what meeting was the decision made? Who was responsible?

2:55 pm

Mr. Michael Phillips:

As the Deputy knows, part of An Bord Pleanála's decision was that we would have to carry out a feasibility study within 12 months and that district heating should form a major part of the waste to energy initiative. We had to take a decision early in the project because construction was beginning on a number of major buildings in the Docklands and both we and the developers wanted to incorporate these buildings into a district heating system. We then had to ensure the buildings' internal heating systems such as radiators in apartments were of a proper size. This is because a standard radiator is not used in buildings when a district heating system is used. Therefore, in order to incorporate the buildings in question, we stepped in to ensure the designs would be compatible with a future district heating system in the area.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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When was the decision made and who made it?

Mr. Michael Phillips:

I do not know the exact date, but I can provide it for the Deputy.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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What was the position on governance when the decision was made to spend €10 million to run the project? I believe the real expenditure so far is €106 million, not €96 million, because of that €10 million. There will be some retrofitting to justify it, but it will probably not be exactly what the council wants. Thus far, the expenditure of €10 million has really been on the incinerator. That is fair enough, but-----

Mr. Owen Keegan:

Just to be clear, I know from my former position of manager in Dún Laoghaire that the county authorities made it clear that the district heating system was to be a city project. We certainly were not contributing to the cost. At the time other county managers and I viewed it as a completely separate project. It was not something to which we were contributing and we never contributed.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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The county managers believed it was a decision of the city council. The decision was made internally in the city council.

Mr. Owen Keegan:

As the benefits would accrue to the city council, we felt, therefore, that it was not part of the project. We felt the waste to energy facility was a regional project but that the heating system was very much a city council project.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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Overall expenditure for the county is €96 million. For Dublin City Council involves it a €10 million add-on for a district heating project that may not work.

Mr. Owen Keegan:

Yes, that is the overall perspective, but there is funding of €12 million made available through the Department and PPP company.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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It would be helpful if Mr. Phillips explained at some stage the decision process. As a member of Dublin City Council, I never had sight of approval of the expenditure on the district heating element. I had always presumed it was part of the expenditure on the incinerator. Will Mr. Phillips revert to me on this point?

Mr. Michael Phillips:

I reassure the Deputy that managerial approval would have been issued for all expenditure on the project. Following the feasibility study-----

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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District heating system expenditure was approved by city council management rather than those responsible for the overall project. It is all part of what I would regard as the same body of expenditure.

A remark was made in answer to Deputy Brian Stanley's question to the effect that Covanta had won the project. Is that technically correct?

Mr. Owen Keegan:

Covanta is the successor to the company that won it. As I understand it, the original tender provided that the company could assign its interest. There have been changes in the composition of the PPP company. I have not documented these matters in my report, but they were dealt with during the last presentation in terms of the sequence of changes.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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Covanta never tendered for the project.

Mr. Owen Keegan:

No.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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It was actually included in chapter 11, or whatever chapter it was, but it was technically bankrupt when the project was being put to tender.

Mr. Owen Keegan:

It subsequently acquired an interest in the company that had won the tender.

Mr. James Nolan:

Let me provide some background information. Elsam would have been the preferred bidder. Dong acquired Elsam and Covanta took a major stake in the project. Covanta was subject to the same prequalification procedure as any of the original bidders. That is information that was presented to the NDFA as part of the value for money analysis. While Covanta was not one of the original tenderers, it followed the same procurement process.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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Elsam or Dong stepped out. Was there not an opportunity at that stage to cut our losses and change the contract? The dance partners were changing.

Mr. James Nolan:

In terms of the timeframe, this was around 2007 and we were still in the market.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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The alarm bells were clearly ringing in 2007 to suggest the project was not viable. Dance partners were changing. Covanta was stepping in and Elsam and Dong were stepping out. Without great scrutiny, the contract was passed on to Covanta.

Mr. James Nolan:

It was with the complete scrutiny undertaken in the original process. In 2007, when Covanta was the project partner, the NDFA issued its value for money certificate. It is unfair to say there was no scrutiny.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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Perhaps the delegation might help me with this. Could someone explain to me how the contract was managed and governed? Was there a management programme? Was there a group responsible for management on a monthly basis?

Mr. Owen Keegan:

There was an executive board located in the city council that had day-to-day responsibility. It would have reported to an overall project board – a very high level project board. It has met on 12 occasions and made all of the major decisions. Day-to-day management was under a small team in the city council.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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How often did that small team in the city council meet?

Mr. Owen Keegan:

One of the things the local government auditor highlighted was that there were no minuted records of its meeting. The city council's response was that it was meeting on an almost daily basis, or that there were very frequent meetings. I fully accept that there should have been a proper administrative process in place. Since the report, meetings have been held every fortnight and they are all fully minuted.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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However, significant decisions were being made during the period in question. We now have no way of tracking the decisions through minutes of meetings. We do not know what was even discussed at the level in question?

Mr. Owen Keegan:

Anything that would have had an impact in the issuing of tenders, approving variations or an assignment of a contract would have been documented. We would have records of when it occurred. There were no minutes kept of the executive board meetings, which I have accepted is unacceptable. They should have been minuted.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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There is a set of changes relating to the put-or-pay element of the contract. Will somebody explain how these changes came about? Who agreed to them?

Mr. Owen Keegan:

Following the Panda judgment and effectively our loss of control of waste arisings, obviously, we could not stand over a contract with a put-or-pay clause because we were not in a position to deliver the waste. The put-or-pay clause was originally conceived when we did have control of the waste. A similar set of circumstances would apply to the wastewater treatment plant in that we are required to deliver a certain quantity of wastewater to it. Put-or-pay clauses are quite usual in these kinds of civil engineering project. In this case, with our loss of control of waste, not just because of the increased penetration of private operators but also because of an expectation that the Government would move towards competition in the market such that we would still control the market and waste but put service provision out to tender, it did not come about. Obviously, we could not continue with a project agreement with a put-or-pay clause as we were not in a position to meet the provisions. Its nature has now been changed. There is a contingent revenue guarantee, which is something with which we can live. However, the ultimate arbiter will be the NDFA.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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I will not take up Mr. Keegan on this issue to any great extent because he was not present at the time in question.

When the put or pay clause was included in the Panda agreement, it was explained at city council level that the council would get a preferential tonnage rate and it could sell this tonnage to the incinerator and make a profit on it. The Panda judgment did not make a difference because the preferential tonnage rate meant the council did not need to change its contracts. Then there was a change. What work was done on the valuation? If the statements to the city council were correct, why was there a rush to amend the contract? I do not argue in favour of one side or the other, as I am trying to understand the logic behind this.

3:05 pm

Mr. Owen Keegan:

I do not know what explanation was given.

Mr. James Nolan:

What changed, as the manager said, is it is a contingent revenue support now and it is set again at those same preferential levels that we had under the original put or pay clause. We also reduced the duration of it from 25 to 15 years so we have reduced the risk to the city council.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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There were questions at the oral hearings about sludge and the contracting of the spreading of biofert by the contractor in the south east. Are there plans to burn the sludge and the biofert in the incinerator? Will there be a cost to the incinerator as a result of the thermal output this will generate?

I refer to bottom ash and fly ash and different contamination levels. The ash that comes off the scrubbers, etc., is highly toxic with dioxins and so on. Thousands of tonnes of ash will come off them. Where will this be shipped? Where will the bottom ash be disposed of? Early in the process, this was suggested for use as a mix in road construction but the EU says that contamination in bottom ash is too high. That will go either go to a landfill or be exported. Has a destination been found for that? Under EU directives, it should be kept close to its source. Will a location have to be found in Ireland? What is the current thinking on that?

Air quality standards on the peninsula have been breached and this was mentioned to An Bord Pleanála. Are they still being breached? It was stated the incinerator should not proceed until air quality reaches the recognised standard. What is the current position on that?

Mr. Peadar O'Sullivan:

I will deal with the question about sludge because I work in the waste treatment plant in Ringsend. While there is a comprehensive system at the moment of bringing sludge from the treatment works to land, it is expensive and it means hauling sludge from Ringsend to Carlow and having nutrient management plans on farms. Farmers and local communities are not always too keen to get Dublin sludge. While there are no plans to incinerate in the new waste to energy plant, if it were to come about, there would be huge synergies as sludge from the sewage of Dublin would create electricity for the national grid and there would also be a huge saving in transport costs with no requirement to transport it to Carlow. Heat from the waste to energy plant could also be diverted to the treatment works and save on electricity costs. While there are no plans, huge synergies could be addressed with great savings to the city.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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I recall questioning Matt Twomey at great length on this at a Dublin City Council meeting. He said the biofert generated from the sludge would never be burned because it is a financial asset to the council as a fertiliser. I accept Mr. O'Sullivan's honesty. That was always my belief but it was part of the propaganda tied to the incinerator.

Mr. Peadar O'Sullivan:

It is an expensive way of doing things and very environmentally friendly-----

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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I accept this is Mr. O'Sullivan's plan.

Mr. James Nolan:

The city council has no responsibility for the fly ash or the bottom ash and we do not incur costs relating to them but we understand that Covanta is engaged with operators in England regarding the bottom ash and the potential to recover and recycle it as aggregate. A company in England provides that service. Covanta is also looking to Germany in regard to fly ash, which is hazardous.

Photo of Marcella Corcoran KennedyMarcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I thank Mr. Keegan and his colleagues for attending. Does the project board that was put in place in 2004 still exist and does it have the same membership?

Mr. Owen Keegan:

It does but it will not meet until it is in a position to make a final decision. It only meets when there are major strategic decisions to be made relating to the project.

Photo of Marcella Corcoran KennedyMarcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Who is the client representative referred to in the presentation? Is it MC O'Sullivan-RPS?

Mr. Michael Phillips:

What happened is it started off with MC O'Sullivan in a joint venture with COWI, the Danish consultants, along with a number of legal, environment and other technical sub-consultants. MC O'Sullivan was then by bought out by RPS and it then became RPS-COWI. They are the client representatives whose contract will finish at the end of January.

Photo of Marcella Corcoran KennedyMarcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Will they still be on the project board until then?

Mr. Michael Phillips:

Yes. If the project boards meet, they have a representative on it.

Photo of Marcella Corcoran KennedyMarcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Will their representative remain on the project board even though the original contract was €8 million but ended up costing approximately €28 million?

Mr. Michael Phillips:

Yes. The reason is if the members of the project board want advice, the client representative can be asked for it and if the board is discussing something it does not want the client representative to be present for, he or she will leave the room.

Photo of Marcella Corcoran KennedyMarcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Is Covanta still involved? It has funds to remain in the PPP.

Mr. Owen Keegan:

It has negotiated revised funding and it has come with an acceptable funding package to the city council in the event that the project goes ahead.

Photo of Marcella Corcoran KennedyMarcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Is Mr. Keegan aware of how much the company has spent to date?

Mr. Owen Keegan:

No.

Photo of Marcella Corcoran KennedyMarcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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The auditor identified weaknesses in financial management. What has Mr. Keegan done to ensure those weaknesses are addressed? What has he put in place to ensure this does not happen again?

Mr. Owen Keegan:

I reviewed the improved financial management procedures that had been put in place by the previous city manager and I was satisfied that they were an adequate response to the weaknesses identified by the local government auditor.

Photo of Marcella Corcoran KennedyMarcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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In other words, he had put those in place.

Mr. Owen Keegan:

Yes.

Photo of Marcella Corcoran KennedyMarcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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A foreshore licence is important for a project of this nature. It was only in 2008 that such a licence was applied for and the delay in acquiring it contributed to the difficulties experienced in delivering this project. Does Mr. Keegan feel this had a major impact? Why was there a four-year delay in applying for the licence?

Mr. Owen Keegan:

It was always envisaged that we would apply for that when we had the other statutory consents. There was a view that it was very much a technical issue. We had met the requirements and nobody anticipated a delay with that. The feeling was that this was a technical thing and once we met the requirements and we had all the statutory consents, we would get that. As it happened, the application was never processed. It was never rejected; it was just never processed as I understand.

Photo of Marcella Corcoran KennedyMarcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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What is the position with it now?

Mr. Owen Keegan:

We have overcome the need for that.

When the indications were that it was not going to be processed, we arranged to purchase the actual sites through compulsory purchase and that obviated the need for the foreshore licence. While that was a way around it, it did delay the project for two years.

3:15 pm

Photo of Marcella Corcoran KennedyMarcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Okay. I believe that complaint to the European Commission has been in the pot for three years. Is there a possible timescale regarding its progress? Unless it is addressed, the project will have serious problems. Are there means the council can use to advance this process or to deal with the Commission in any way? Has any effort being made to establish what happens?

Mr. Owen Keegan:

In fairness to the city council, we have been in regular communication with the two different Directorates General dealing with the two different complaints in an effort to advance them. I am surprised myself that there appears to be no end date in respect of this process. In fairness to everyone, including the complainants, this matter must be resolved. It appears to me to be the last impediment and it appears to be going on for a very long time. The city council is in constant communication with the Commission in an effort to have the matter determined.

Photo of Marcella Corcoran KennedyMarcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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In what scenario can Mr. Keegan envisage the Department simply taking this over or will it?

Mr. Owen Keegan:

I cannot see the Department taking over the expenditure incurred to date, much as I would like it to.

Photo of Marcella Corcoran KennedyMarcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I mean in respect of delivering the project.

Mr. Owen Keegan:

I do not believe the Department will be in a better position to so do. Were we to emerge unscathed from the European Union complaints and were we to procure a value-for-money certificate from the National Development Finance Agency and were the project board, on which the Department is represented, to support the project, then the project would be in a position to proceed. However, if the complaints are not resolved to the satisfaction of the city council, I do not believe it will make any difference as to who has control of the project, as it would be very difficult for it to proceed. It may well be impossible and I would be obliged to review the decision made by the Commission but at this stage, I do not believe it is a question of who will take over. If the complaints are upheld, it will be extremely difficult for this project to proceed.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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A number of non-committee members wish to ask questions. As I intend to wrap up shortly, I ask them simply to ask the questions, as opposed to making Second Stage speeches or whatever. Senator Power is first, to be followed by Deputies Wallace and Pringle. We will take together three groups of questions.

Photo of Averil PowerAveril Power (Fianna Fail)
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I will be brief as other members have teased out already the deficiencies in the process thus far at the various levels. I appreciate Mr. Keegan is a new city manager and did not preside over the incinerator plans in that position in the past. I find it shocking that so much was spent and that the figure for consultancy rose from €8 million to more than €30 million. I acknowledge Mr. Keegan has stated that in hindsight, he believes it would have been better to break the contract in 2005 when issues then arose. Is this because there was a legal problem that meant it should have been re-tendered? Alternatively, is it because he thinks that expenditure of money on that scale does not constitute value for money over which one could stand? I query whether much of that work could have been carried out by Dublin City Council. It is a phenomenal amount of money and I do not understand how the council got it so badly wrong whereby nearly four times as much as predicted was spent on client services, public relations and things like that. It is an incredible amount of public money. The city manager stated at the outset that this entire debacle has been too complicated and has gone on for too long, which I consider to be an understatement, given the current position ten years later. My biggest concern is whether at this point, good money simply is being thrown after bad. I accept the amount that already has been spent although I would query the wisdom of it but note Mr. Keegan has told the committee that were he considering the project today in the present day context of the current waste management environment, he would not sign off on it. While €100 million already has been spent on it, a further €500 million is coming down the track. I am not confident that a case has been made to the effect that now is not the time to shout "stop". If Mr. Keegan is stating that the entire context has changed, is this a situation similar to that in respect of electronic voting, whereby a Department and agency decide that as so much has been spent thus far, they cannot admit to having been wrong and stop? Alternatively, is there a rational argument at this point for proceeding with a project of this scale at that location?

Photo of Mick WallaceMick Wallace (Wexford, Independent)
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Likewise, I realise this was not on Mr. Keegan's watch. However, does he have an opinion on the reason no serious internal investigation took place after the McKechnie judgment had been so damning of individuals in the council or the reason no one has been held accountable? In the interests of transparency and accountability, does Mr. Keegan have an appetite for carrying out such an investigation? He stated that although not all meetings were minuted, there is an account of most of the serious decisions that were made. My second question is somewhat similar to that of the previous speaker. Given that so much money has been spent on consultancy fees, did this actually hamper the decision-making process of the local authority? Would the city council have been in a more independent position otherwise? For example, some people thought the city council had an option in 2010 to walk away from Covanta but the commitments made to consultants made so doing more difficult. Now that Mr. Keegan is the city manager, does he plan to strengthen his own teams within the local authority to make the city council less dependent on consultants in the years ahead? Does Mr. Keegan agree the over-dependence on consultants in many areas is proving to be disappointing? I would have much greater faith in the city council building its own teams to deal with matters and it would represent a better value for money for the taxpayer.

Photo of Thomas PringleThomas Pringle (Donegal South West, Independent)
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I have a few questions in respect of the project. In his opening statement, Mr. Keegan stated the contract has been renegotiated with revised funding liabilities for the combined councils. Does the revised contract also include revised capacity for the incinerator with regard to the amount of waste it requires? Does this contract contain a commitment on the part of the four councils to provide a set amount of waste? If so, how much is it, given the amount of waste being produced in the four council areas reduced in 2013 to approximately 165,000 tonnes, while the original contract was to provide 300,000 tonnes? In the revised contract, what are the quantities in respect of the waste to be provided? As for the current status of the project, Mr. Keegan outlined in his statement that a number of steps must be taken after these procedures have finished. I take it from this that the four councils still are committed fully to delivering an incinerator on this site at some point in the future. Mr. Keegan might confirm whether this is the case. On the European Commission complaints, what has been the cost of consultants and correspondence in respect of dealing with that complaint? Are projections available on what will be the cost to continue to deal with this complaint until its completion? Does Mr. Keegan consider it is justifiable to continue on that road?

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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Deputy Kevin Humphreys also wishes to ask two brief final questions.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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First, my question on air quality was not answered. Second, approximately €52 million was spent on site acquisition. What is the current value of the site in question? Moreover the Hibernian Molasses site, on which the majority of the money, €31 million, was spent, had four tanks. Why did the city council build a facility with 11 tanks for that company? This appears to me to be a misuse of public money. My final point pertains to sludge-to-energy treatment. I believe it will be necessary to input energy to the burning of sludge and no gain will be derived from sludge, as if one includes the treatment of sludge, it is a minus, rather than a plus.

Mr. Owen Keegan:

On the points that have been raised, I wish to make absolutely clear that I am very concerned and with regard to the escalation of the cost from the predicted €8 million to €30 million, I have sought to explain the factors that gave rise to that.

I have no doubt that the increasing scope and all of the complexities to date contributed, but in giving the Deputy an assurance that we got value for money, this should have gone through the procurement process again - probably twice - but it did not. I accept the view, both of the local government auditor and the Commission, that that is what should have been done. That was wrong and all I can say is I have now put arrangements in place to terminate that expenditure.

Regarding the figure of €500 million, it has to be put up by the PPP company; it is not a charge on the Exchequer or the ratepayer. As part of the PPP, it has to source and finance it. I hope that if the project goes ahead - that may be a big "if" - the additional expenditure on behalf of the local authorities will be very modest, probably less than €4 million or €5 million. That is not a further charge on the Exchequer or the local authorities.

Deputy Mick Wallace mentioned some comments made by Mr. Justice McKechnie. That is water under the bridge and went by some time ago. The fundamental issue is that that judgment was unhelpful to the local authority and we have had to deal with it in a number of ways.

The suggestion was made that we could strengthen the capacity of the local authority instead of relying on consultants. That is not an unreasonable suggestion. It has been difficult in the employment control framework. Our employment numbers and full-time equivalents are down by 19.5% in the past five years; therefore, we have far fewer engineers - far fewer staff of every type - in the city council. I share the general consensus on an over-reliance and a loss of capacity in the city council, but it would be very difficult to address this in the current framework.

On the question of whether the four Dublin local authorities are committed to the project, I do not know. I will not give the committee my position on the project until we emerge from the European Union complaints process and the issue of value for money, which must be independently determined by the National Development Finance Agency, is determined. I will have to put a detailed report, including the project agreement, to the elected members and consider their view. At that stage I will express a view, but it is difficult to say whether we are committed because there are too many uncertainties that have to be resolved.

I apologise to Deputy Kevin Humphreys. I do not have the air quality data with me, but I will be happy to respond to him at some other stage.

On the escalation in the cost of the Hibernian Molasses terminal, I ask Mr. Philips to deal with that issue.

3:25 pm

Mr. Michael Phillips:

As part of the negotiation a design was made for the relocation of the plant. When a plant is being relocated, we have to examine the proposed new layout and health and safety issues. I vaguely remember there were new fire standards at the time. Recycling the existing tanks had to be examined also, but when the entire package was put together, a decision was made that it was an acceptable deal at the time. That is how the new plant was built and commissioned.

Mr. Owen Keegan:

There was a question about whether we had secured a current valuation. I do not have a current valuation. I accept that the sites were generally acquired at the height of the market. I believe they were acquired either on foot of a compulsory purchase order which is a separate statutory process or on the basis of a negotiated agreement. The purchase price would have been recommended by the chief valuer as representing value for money. Clearly, land prices have collapsed and I have no doubt that the value today is significantly lower than what we paid.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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Is the city council not obliged to keep an asset database and would it not be part of the assets of the local authority?

Mr. Owen Keegan:

I do not have the valuation figures with me.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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Will Mr. Keegan forward them to the committee?

Mr. Owen Keegan:

I can certainly obtain a valuation of the sites and forward it to the Deputy.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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Deputy Luke 'Ming' Flanagan wants to ask a question, but Deputy Thomas Pringle has a follow-up question.

Photo of Thomas PringleThomas Pringle (Donegal South West, Independent)
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A number of my questions were not answered.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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The Deputy might remind the visitors of them.

Photo of Thomas PringleThomas Pringle (Donegal South West, Independent)
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On the renegotiated contract, in terms of the capacity of the incinerator, is there any obligation on the local authority to provide a set amount of waste? I also asked a question about the cost of dealing with the European Commission complaint and whether it was envisaged it would be ongoing. What is the projected cost?

Mr. Owen Keegan:

I will deal with the last question first. The cost of dealing with the EU complaint was €1.2 million. Further dealings will have to be conducted by council officials; therefore, I do not anticipate any additional cost.

There has been no change in capacity which is determined by An Bord Pleanála's decision. We cannot modify the plant at this stage. That is my understanding. The plant received planning permission and it is not open to us to change the capacity.

Mr. James Nolan:

There is no commitment from the city council or any of the four authorities to provide waste.

Mr. Owen Keegan:

As there is a contingent revenue guarantee, there is a sharing of the revenue "gate free" risk, which is detailed in the project agreement. We are still sharing part of the risk of the project. We have converted the put-and-pay aspect into a contingent revenue guarantee.

Photo of Thomas PringleThomas Pringle (Donegal South West, Independent)
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To be clear, if the European Commission investigation ends up favourably for the project, that means that there will be a project that can start to build an incinerator to burn 300,000 tonnes of waste-----

Mr. Owen Keegan:

It is 600,000 tonnes.

Photo of Thomas PringleThomas Pringle (Donegal South West, Independent)
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The city council has shared the financial liability in terms of the viability of the project. It will have to determine whether it will still want to continue with the project and bring it back to the elected members in that regard.

Mr. Owen Keegan:

We share some of the risk. We also share the revenue. That is the structure of the contract, but it will have to be considered by the National Development Finance Agency which will have to determine, in accordance with the standard PPP process, whether it represents value for money and only if it deems it to represent value for money, with the revised project agreement, will we be in a position to proceed. There is an independent validation of whether it represents value for money and it will have to take account of the risks, etc. and the structure of the project agreement.

Photo of Thomas PringleThomas Pringle (Donegal South West, Independent)
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Has the local authority washed its hands of the question of whether the project is value for money? The National Development Finance Agency will decide that issue.

Mr. Owen Keegan:

The PPP procedures in the State require us to have a separate independent valuation of the value for money aspect. We cannot go ahead; it is not up to us. It is up to the NDFA to determine the matter and to issue the certificate. If it determines that the project does not represent value for money, we cannot proceed with it. I am only articulating what is included in the State's procedures that we are required to follow.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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We have to conclude.

Photo of Thomas PringleThomas Pringle (Donegal South West, Independent)
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I want to tease out this issue.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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Which, by the way, is just coming to an end.

Photo of Thomas PringleThomas Pringle (Donegal South West, Independent)
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If it gets through the value for money procedure, Mr. Keegan will be happy to proceed with a project to have an incinerator to deal with 600,000 tonnes of waste and share the financial liability.

Mr. Owen Keegan:

If we emerge unscathed from the EU complaints process, obtain a value for money certificate from the NDFA and the project board supports the project, I will consider the views of the elected members and then, in consultation with my colleague county managers, make a decision at that time.

Photo of Thomas PringleThomas Pringle (Donegal South West, Independent)
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From where will Mr. Keegan get the 600,000 tonnes of waste?

(Interruptions).

Photo of Luke FlanaganLuke Flanagan (Roscommon-South Leitrim, Independent)
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That is the problem. We will have to make sure there will be plenty of it around.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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The Deputy should ask his question and we can then conclude.

Photo of Luke FlanaganLuke Flanagan (Roscommon-South Leitrim, Independent)
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I will. The Local Government Auditing Service report of 2012 states: "...it is evident that the financial management ... has been weak [on this project]". It also states: "There needed to be evidence of much more comprehensive oversight in monitoring and controlling expenditure". What has changed since? Who was responsible for this? There had been suggestions the then manager, Mr. John Tierney, now head of Irish Water, was responsible for it. How responsible was he and is there anyone left in Mr. Keegan's organisation who is still responsible for it?

Mr. Owen Keegan:

I am the city manager and take responsibility for the project. That would be the standard arrangement. In my submission I drew attention to the fact that the local government auditor had made some adverse findings and identified serious weaknesses. I can assure the committee that when I took up my position I reviewed the changes that had been implemented by the previous city manager and was happy that the changes he had implemented, which I detailed, had constituted an adequate response to the weaknesses identified by the local government auditor.

There were weaknesses in the financial procedures, which was unfortunate. That situation should not have arisen but at no stage did the local government auditor state that moneys were spent that should not have been spent. He drew attention to weaknesses that should not have existed and I am satisfied that they have now been addressed.

3:35 pm

Photo of Luke FlanaganLuke Flanagan (Roscommon-South Leitrim, Independent)
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Would Mr. Keegan be sorry to see the manager go? Would it be beneficial to retain him?

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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I am going to draw the meeting to a close.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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With the Chair's indulgence, I wish to ask a few more questions. I will be requesting that we invite Mr. John Tierney before the committee to discuss this issue but, rather than bringing Mr. Keegan back, I would prefer to put my questions to him now about issues that are his responsibility. Mr. Tierney should also come before us given that he was the manager in situ.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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I ask the Deputy to put a proposal to the committee so we can agree on it.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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I will make the proposal at the end of the meeting but first I wish to put a couple of brief questions to Mr. Keegan.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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I ask the Deputy to be as brief as he can. It is the third time I have allowed him to speak.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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I will fly through them.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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How many questions has the Deputy?

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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I have three.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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Ask the three questions.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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Was a period specified on the planning permission? The only work done thus far has been site preparation and construction has not commenced. Normally planning permission lasts for either five or ten years.

We were notified today that the €10 million allocated for district heating was a separate project. Can we get a breakdown of that figure and how much was spent on consultancy services? Was there a separate project board for district heating and did consultants sit on it? Who were the members of the project board for that separate venture?

Mr. Owen Keegan:

Neither I nor my team know the duration of the planning permission but I would be happy to revert to the Deputy with the information. I do not have a detailed breakdown of expenditure on district heating but I would be more than happy to supply it directly.

Photo of Mick WallaceMick Wallace (Wexford, Independent)
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When I asked Mr. Keegan if he had an appetite for an investigation into how matters were mismanaged, he said it was water under the bridge. Does accepting such events as water under the bridge help our efforts to achieve accountability and transparency?

Mr. Owen Keegan:

My comments were made in regard to certain criticisms in Mr. Justice McKechnie's judgment. I do not see great merit in dealing with that issue but when this waste energy facility project is brought to fruition, I would certainly welcome an independent investigation of all aspects, including the factors that gave rise to delays. It would be entirely appropriate to conduct such an investigation.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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I thank Mr. Keegan and his officials for taking the time to appear before this committee.

Photo of Kevin HumphreysKevin Humphreys (Dublin South East, Labour)
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I propose that the committee invite Mr. Tierney to come before it to explain what exactly went on during his time as city manager.

Photo of Michael McCarthyMichael McCarthy (Cork South West, Labour)
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Is that agreed? Agreed.

The joint committee adjourned at 5.35 p.m. until 2.15 p.m. on Tuesday, 28 January 2014.