Mr. Martin Nolan:

I will speak to some parts of the document. The Chairman has already introduced the people accompanying me, and I have brought various levels of expertise to answer any questions. We have expertise on school transport, financial and legal issues, as well as procurement. I thank the committee for giving me the opportunity to address it, and we have been invited here to discuss the procurement process for the awarding of contracts under the school transport scheme.

Bus Éireann is a large, complex organisation with up to 10,000 people working, or in reserve, to deliver our services to rural and provincial Ireland on a daily basis. We are a competitive public transport company based in communities throughout the land. Our ethos is to think national but act local, where the greatest knowledge of local transport requirements and resources reside. We are a safe, effective and efficient provider which has delivered large savings during recent economic conditions.

The school transport scheme delivery is complex but its purpose is simple in terms of its support for access to education policy. It is to get 114,000 rural children to or from school safely twice daily. There are 40 million journeys on the scheme annually, and it is a public private partnership, where 90% of the services are delivered privately under our direction and to our standards. We are one of the largest supporters of rural Ireland, with nearly €110 million in 2013 alone being paid to 1,400 contractors directly employing 5,500 people. This money gives them the basic income to run their businesses but also ensures that 3,500 vehicles are available in rural Ireland to provide other emergency, sports and social transport services that might not otherwise be there if we ran the school transport scheme in a different fashion. We also provide direct employment in rural Ireland. The school transport scheme does not make a profit for Bus Éireann, and all moneys received under the scheme are spent on the scheme.

I will give a brief update on the general company before discussing how school transport works and procurement. Currently, Bus Éireann provides nationwide bus and coach services across three core products. There is the public service contract, including city, commuter and rural services, to the National Transport Authority, NTA. A second product is the school transport scheme, operated on behalf of the Department of Education and Skills, and the third product is our commercial Expressway services. The operations and delivery of the three products are fundamentally linked, and we try to run as many products or services out of rural depots to ensure the efficiency of all products and provide a good service to communities. We are no different in that regard from An Post in that for us to maintain rural depots and services, we need to put as many products as possible through those depots to spread the costs. Expressway services have had a difficult time in the recession through lower patronage and additional competition but I am pleased to say these services have achieved a break-even position.

It must be remembered that the main remit for Expressway services in a public service organisation is to help defray the cost of the public services to the State. The overhead absorbed by the commercial product is €5 million to €7 million per annum and also these services cover towns and villages that are not commercially viable. If those services had to be replaced, it would cost a further €6 million to €7 million. Our subvention is currently €32 million per annum but if the commercial services disappear, another €11 million to €14 million per annum would need to be found to maintain services. We also could make the same services more profitable by coming out of more towns and villages but that is not part of the company's ethos. We understand the necessity to maintain as many commercial services as we can for rural Ireland but it has to be recognised that we are putting ourselves at a commercial disadvantage in doing so.

Bus Éireann is the largest customer of the bus and coach industry and related suppliers in Ireland. Our employment and contracts are a huge boost to rural Ireland, especially during difficult economic times. In its dealings, Bus Éireann is committed to the highest standards of propriety, quality, honesty, openness and accountability with all of its customers, staff and business partners.

We have had a difficult time over the past seven years, like most of the rest of the country. Nevertheless, we have delivered 30% savings on subvention for public services since 2009 and Bus Éireann has implemented two staff cost reduction programmes in that timeframe. There has been a 12% reduction in internal staff numbers, with twice the number of back office staff leaving as those from the front office. Overall operating costs have reduced by 15% in that time but we have also managed to maintain very high customer satisfaction levels. In that time we have re-engineered our network and the ground work is there for the next few years in the current network. We should recognise the part played by the NTA in the process, and we have also implemented new technology, new systems and new additions to the fleet. All of these improvements have helped governance, operational efficiency and safety and quality assurance in the company.

I will explain the context of our relationship with the Department of Education and Skills. Bus Éireann manages the school transport scheme on behalf of the Department, subject to the policy requirements and criteria of the scheme as set out. In order for the scheme to operate effectively, it is necessary for the Department and Bus Éireann to ensure that they co-operate closely in respect of a broad range of functions and policy matters. Overall responsibility for the provision of school transport lies with the Department of Education and Skills, and the Department oversees its general administration.

The operation of a safe school transport service, provided in an efficient and effective manner, is the highest priority for Bus Éireann in its management of the scheme. Bus Éireann operates three separate schemes on behalf of the Department, each with their own distinct criteria, under the umbrella of the national school transport scheme. These are the primary school transport scheme, the post-primary school transport scheme, and the school transport scheme for children with special educational needs arising from a diagnosed disability. One third of the cost of the scheme is on special needs.

As part of this responsibility, Bus Éireann ensures that schemes are applied nationally in an impartial, uniform and equitable fashion on behalf of the Department. The scheme is a policy instrument designed to facilitate the achievement of the objectives of educational policy. Bus Éireann is very conscious of its responsibility to ensure that the nation’s children are conveyed to and from school by the safest and most reliable means of transport possible in the most efficient and effective manner. A wide range of measures and controls are in place to enhance the safety of our school transport services.

These include operational performance checks as well as checks on driver licences, insurance, PSV licences, the vehicles used, the nominated drivers that contractors must tell us about and the background Garda vetting check under which almost 12,000 individuals have been processed at this stage.
The school transport scheme is a very significant operation serving over 114,000 children, approximately 10,000 of whom have special educational needs. We serve almost 3,000 schools with 4,000 vehicles operating over 6,000 routes. Over 40 million individual journeys are undertaken in the scheme every year. The number of vehicles involved is more than the combined fleets of Dublin Bus and Bus Éireann. The management of the school bus network is co-ordinated and integrated where possible with the provision of local transport services. For example, over 3,000 schoolchildren use Bus Éireann's other services and use the rail and bus services of Dublin Bus.
In the annual statement of accounts in 2008, the cost of the scheme was €162 million. Over €30 million has been saved by Bus Éireann, working in conjunction with the Department of Education and Skills, from this figure and largely reinvested in 750 new services and 2,000 service improvements. Over €20 million of this amount was saved due to re-organisations of the network of contractor and Bus Éireann services undertaken on an ongoing basis by our local school transport offices, as well as through renegotiation of contract rates and retendering of existing contracted work. Since 2008, and in view of the serious financial challenges facing the country, Bus Éireann has also provided a rebate to the Department, the cumulative value of which amounts to some €10.5 million. These positive results echo the findings of the value for money review of the school transport scheme which endorsed Bus Éireann's role stating, "There is not an alternative national organisation with a regional dimension currently operating in Ireland which is an alternative to Bus Éireann for operating the school transport system", and, "No existing organisation is operating in Ireland with the range of expertise in place other than Bus Éireann."
Our services are organised across five regions through 11 local offices. Each region is under the authority of a regional manager who is responsible for all services in that region, including the procurement of contractors subject to procurement policy and the renegotiation of contract rates. We use a mix of our own vehicle resources and those of contractors to deliver school transport services. As noted in previous reports, this maximises economy and efficiency while at the same time retaining the ability to maintain full service coverage in the event of a threat to service for whatever reason. Almost 90% of the vehicles used to provide school transport services are provided by private contractors. Since the late 1990s the number of vehicles in the scheme has more than doubled from some 1,700 contractor vehicles in 1998 to over 3,400 now.
In the Celtic tiger years the number of new services required each year surpassed the level of interest received from the market. The way the system worked then was that we placed advertisements in local and national newspapers and when contractors applied they were put onto a panel. The local offices then drew up lists of suitable operators from the panel and invited them to quote for work when it became available. In our experience there tended to be little or no interest in school transport contract work when the economy was strong because other more lucrative opportunities were available. In 1999, for example, only 42 applications were received nationally from private operators and of these, 26 failed to meet the necessary standards in terms of documentation. All of the remaining 16 were recruited but a further 69 were needed to meet demand and these had to be found through canvassing of existing contractors.
Between 2001 and 2008 the shortage of suitable potential contractors was so acute and the additional cost that was invariably involved in recruiting new operators to replace those withdrawing from the scheme meant that, by agreement with the Department, existing contracts could only be opened to tender in very limited circumstances. There was more than sufficient new work being introduced each year to satisfy what demand there was from the market, with an average of 200 to 300 new vehicles needed annually. Quotations were always sought for new work from a minimum of three suitable operators, where possible.
In 2008 and by agreement with the Department, 150 existing services were retendered, but only 36 large buses were offered by the market in response. As the economy declined, interest grew again and in 2010 a more structured approach to the procurement of contractors was introduced with the introduction of an award criteria and a scoring matrix. In 2011 a revised tendering process was introduced, further enhancing the existing process. This is a competitive procurement process conducted in accordance with the negotiated procedure under EU Directive 2004/17/EC. This is the process now in place.
The revised tendering process is managed by each of the 11 local school transport offices and overseen by the procurement and materials department of Bus Éireann. The local school transport offices receive and evaluate all tender responses and the procurement and materials department liaises with and advises the local school transport offices on any queries that may arise during the process.
We advertise onetenders.gov.ie and in the Official Journal of the European Unioneach year. A pre-qualification questionnaire, PQQ, document is attached to the notice and can be downloaded or obtained from the local school transport office. These PQQs are submitted to Bus Éireann. Our written submission goes into great detail on the procurement process, including outlining what happens to both successful and unsuccessful tenderers and the negotiating procedure we go through so I will not go into that now.
Under the revised process, 100% of existing contracted work is subject to tender at least once in five years on the basis of an average 20% per year. Successful operators under this process are awarded a five-year contract. The panels of pre-qualified applicants established in each local regional office are also utilised when new work arises and is being introduced for the first time. In this case a minimum of three quotes are sought. The tendering process allows Bus Éireann to achieve the procurement objectives in terms of value for money, access to the contracts for all interested parties, transparency on how the contracts are awarded and equality of treatment. It is also in line with Government policy where expenditure of public funds is concerned.
The procurement process is large in a European context. If the call for tender for the east of the country went out in one go, for example, 150,000 documents would have to be sent out. That is why we do 20% per annum. It is a very significant undertaking which is executed impartially and fairly across the country. Since 2011 the annual re-organisation of services undertaken by Bus Éireann school transport offices has generated some €15.8 million in savings, with €4.63 million of this figure coming from the retendering of existing services under this procurement process.
As already mentioned, Bus Éireann is committed to the highest standards of propriety, quality, honesty, openness and accountability in its dealings with all of its customers, staff and business partners. We have a strong system of internal controls in the company, through both the board audit committee and the CIE audit committee but both our internal and external auditors constantly review systems for weaknesses and recommend improvements. We have a good faith reporting system rather than a whistle-blowing system which deals with the responsibilities of employees and management for the detection and reporting of any alleged impropriety or fraud.
The CIE group's code of business ethics for employees is very important and has been circulated to all employees in the company. This code establishes the principles of honesty, integrity and legality, among other principles, with which Bus Éireann employees are expected to conduct their business. Bus Éireann takes allegations of misconduct by Bus Éireann employees with respect to the operation of the school transport service very seriously and has carried out athorough and comprehensive investigation, in line with company control procedures and governance. As a complaint was made against specific named Bus Éireann employees and not against Bus Éireann itself, it was appropriate for the company to investigate the complaint in the first instance as an employer. The Minister for Transport, Tourism and Sport, the Minister of State with responsibility for commuter and public transport, and the Minister of State with responsibility for training and skills requested a full report from Bus Éireann into the entire matter. This report was completed and signed off by the Bus Éireann audit review group, ARG, and our chairman. The ARG is also attended by the CIE group head of internal audit and the CIE group chief operating officer. This has now been completed and circulated not just to the three Ministers but to this committee and the Committee of Public Accounts.
With reference to the original allegation the investigation team reached the conclusion that there was no basis for the allegations ---