Oireachtas Joint and Select Committees

Wednesday, 13 March 2019

Joint Oireachtas Committee on Health

National Paediatric Hospital Development Board: Chairperson Designate

9:00 am

Photo of Michael HartyMichael Harty (Clare, Independent)
Link to this: Individually | In context | Oireachtas source

In our first session, we will meet Mr. Fred Barry in advance of his appointment as chairperson of the National Paediatric Hospital Development Board, NPHDB, and ask that he outline to us his strategic vision for his role. On behalf of the committee, I welcome Mr. Barry to the committee and thank him for his attendance. I draw his attention to the fact that, by virtue of section 17(2)(l) of the Defamation Act 2009, the witness is protected by absolute privilege in respect of his evidence to this committee. However, if Mr. Barry is directed by the committee to cease giving evidence on a particular matter and he continues to do so, he is entitled thereafter only to a qualified privilege in respect of his evidence. He is directed that only evidence connected with the subject matter of these proceedings is to be given and is asked to respect the parliamentary practice to the effect that, where possible, he should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. I also wish to advise him that any opening statement he has submitted to the committee may be published on the committee's website after this 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.

I invite Mr. Barry to make his opening statement.

Mr. Fred Barry:

I thank the committee for inviting me to address it. I am here in my capacity as chair designate of the NPHDB.

The development board has the remit to design, build and equip a new national children's hospital on the campus shared with St. James's Hospital and the two paediatric outpatients and urgent care centres on the Connolly Hospital Blanchardstown and Tallaght University Hospital campuses. Considerable progress has been made on this remit to date. The Connolly facility will open later this year and construction of the main hospital at St. James's and of the Tallaght facility has commenced. I acknowledge the contribution and personal commitment of my predecessor, Mr. Tom Costello, in chairing the development board to this point.

My background is relevant to my proposed role. I am a chartered engineer, with additional qualifications in management, law, arbitration and mediation. I have worked internationally on the design and construction of many very large capital projects and was group managing director for the UK and Ireland with Jacobs, one of the world's largest engineering companies. I worked in the public sector as chief executive of the National Roads Authority, NRA, at a time when we built much of the motorway network. I have extensive board experience in both the private and public sectors.

The new children's hospital is not just another big infrastructure project. It is much more than that. It will be transformational for the care we give our children and young people, who represent approximately one quarter of our population. I am honoured to be asked to play a role in its development and I look forward to working with the board of Children's Health Ireland on this great national project.

I am happy to answer whatever questions the committee may have.

Photo of Michael HartyMichael Harty (Clare, Independent)
Link to this: Individually | In context | Oireachtas source

I thank Mr. Barry. I will open proceedings to members, starting with Deputy Donnelly.

Photo of Stephen DonnellyStephen Donnelly (Wicklow, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I thank Mr. Barry for contacting the committee and appearing before us. He has picked up the baton half way through the race, and it is a fraught race indeed. I wish him and his team the very best of luck.

Mr. Barry will be aware that there is serious public concern and widespread anger at the cost overruns from an initial declaration in 2016 of €650 million to a final Cabinet sign-off in 2017 of €980 million, representing a 50% increase, from that €980 million to €1.4 billion the following year, which was 50% extra again, and an additional €300 million on top of that for commissioning, IT and so forth, bringing us up to €1.7 billion. What is Mr. Barry's position on this? I appreciate that he is still chair designate and this will take time, but he is someone with significant experience in large capital programmes. As the incoming chair, what is his view as to the cost of €1.7 billion? Does he believe that it is an unavoidable and high cost for a complex project or that the cost has spiralled and it no longer represents a reasonable cost for that building?

If so, does Mr. Barry believe there are opportunities at this stage to bring the costs back down through an extensive value engineering exercise? He may, of course, think none of those things. What is his sense of where we are at with the current cost? Is it reasonable and can it be brought back down?

Mr. Fred Barry:

I caution everyone that my comments are based on limited knowledge since I have just come into the role. Regarding the costs, I am not sure regarding the sum of €1.7 billion. I am more familiar with what is involved in the approximately €1.4 billion for the build than I am for the other €300 million being incurred by the hospital operating entity. I am not familiar with its cost structures. Regarding the €1.4 billion, as far as I can judge - and much of this is in the public domain - what happened was an underestimation of the scope of the project at a very early stage. That was compounded by initial tender documents for the construction, which did not properly pick up the full scope. That led to prices coming in which did not represent what the cost would be.

In any circumstance, it would have been better to have had more of the total cost determined through competitive tendering rather than partially through competitive tendering and partially through subsequent negotiation. We could argue the toss as to whether the price is exactly what it would have been if it had gone through competitive tender. I do not think, however, that it would be significantly different from where it has ended. When I was reviewing this with my future colleagues, I found that an independent expert signed off on many of the additional costs and adjudicated on them as fair and reasonable for the work involved. What we are looking at here is a late recognition of the scope of the work and what it is going to cost, rather than a case of spending far too much on achieving the result that is to be obtained.

On the question of reducing costs, a major value engineering exercise was carried out at the time of the original tender. An ambitious target to save €70 million was set at the time and a saving of about €20 million was achieved. I know value engineering has also been carried out over the past few months examining further measures and some efforts are also being made at the moment. We are now, however, in the area of diminishing returns. There are no savings to be had that will significantly affect the headline figure. The challenge in the next few years is to contain any growth in that figure. The committee will be aware from previous evidence that there is a GMP with the contractor for the main construction elements. There are, however, exclusions to that. There is inflation, which is outside of our control completely. That will be what it will be. There may also be issues to be dealt with if there are scope changes as medical technology evolves over the next few years. Regulatory changes may also affect aspects of the project.

Our challenges, in reality, in the coming years centre on getting the hospital built. It is a five-year programme to build and commission this project. Thousands of people will be working on a constrained site and the challenge for me, the board and the executive will be getting the hospital built safely. We do not want accidents on the site and that will be a key aspect. We also have to ensure we get the design and build quality we are entitled to get for the money being spent. In addition, there is also the challenge of mitigating the impact of large-scale construction on hospital operations and on the surrounding neighbourhood. We are building in a busy neighbourhood. We also have to procure a great deal of equipment and deliver it to the hospital, deal with the integration between ourselves and Children's Hospital Ireland, as well as with all of the unexpected events that will occur over a five-year construction programme. Those are the areas where my focus, and that of the board, will be in the years to come.

Photo of Stephen DonnellyStephen Donnelly (Wicklow, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I thank Mr. Barry. Regarding eliminating or minimising further error, does he foresee any changes in personnel within the management structure? One of the things that struck me in the past two months is that in spite of the cost overruns, not a single person was fired and not a single person has had any HR sanction taken against him or her. We were also told that not a single contract was changed and not a single company asked to step down, in spite of these massive and unprecedented cost overruns. I am not asking for specifics, but as Mr. Barry comes into his role, does he foresee the need for any personnel changes? Does he further foresee that some of the companies involved may need to be asked to step back?

In the same vein, I would like to draw on his considerable experience on another issue. One of the other issues that jumped out at me from the increased costs was that one of the line items concerned the design team fees. We have heard that there were significant cost underestimations. I have a different view as to what happened but that is the Government's position. We heard from people at this committee that quantities were greatly underestimated and so forth. My understanding is that some of the people who work in that area are within this design team. Seven companies are involved in that design team, including quantity surveyors, architects, mechanical and electrical engineers, etc. In spite of this gross underestimation, and what appear to be major errors, not only were no members of the design team fired but it was agreed that the fees paid would jump from €44 million to €71 million. That is in one year. Not only was no one fired or penalised, therefore, their fees were almost doubled. Given all of that, does Mr. Barry have a view regarding the design team, any of the other contractors involved or personnel at management level, where changes may need to be made?

Mr. Fred Barry:

It would be a bit premature of me to make comments on any of the questions the Deputy asked for two reasons. One is that I am still the chairperson designate and it would be completely improper for me to form particular views on the companies or people concerned when I am not even in the role yet. The second is that we also have the PwC report coming in a matter of weeks. I am looking forward to seeing what is in that and I am sure everybody else is as well.

Photo of Michael HartyMichael Harty (Clare, Independent)
Link to this: Individually | In context | Oireachtas source

I thank Mr. Barry and I am going to move on, if that is okay?

Photo of Stephen DonnellyStephen Donnelly (Wicklow, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

That is fine.

Photo of Michael HartyMichael Harty (Clare, Independent)
Link to this: Individually | In context | Oireachtas source

I call Senator Colm Burke.

Photo of Colm BurkeColm Burke (Fine Gael)
Link to this: Individually | In context | Oireachtas source

Last week, I had the privilege of participating in a conference call with three people involved in the development of a new 380-bed children's hospital in Ontario, Canada. One of the issues there is that much work has to be done beforehand. An office block of 22 storeys has to be built and all of the administration staff decanted into it. All of the existing buildings then have to be demolished and the building of the new children's hospital commenced. One of the issues that arose during the conversation was the inflation in building costs in Toronto. Building inflation there has gone up by 15% in 15 months. It is increasing by approximately 1% per month.

It is in that context that I wish to ask about the mechanism in respect of inflation contained in the contract for the national children's hospital. The project is not going to be finished until 2022 or 2023. We have a price that we are discussing now. There are also, however, built-in issues regarding inflation. I acknowledge Mr. Barry has only had a preliminary look at the situation, but what is the likelihood of inflation adding to the cost? Can that be controlled? I ask Mr. Barry to give the committee his view on what building inflation will be like in Ireland in the next three to four years. That will be a factor regarding any major building project such as this.

Mr. Fred Barry:

The contract has an inflation rate of 4% covered within it. Inflation in excess of 4%, therefore, will lead to additional payments and costs. As to the likelihood of that happening, a continuous rate of inflation in excess of 4% going on for another four or five years would be unusual. If that happens, it will be because the economy continues to boom. The inflation rates are high at the moment. That is particularly the case regarding the skilled trades that will be needed for the construction of the hospital.

Many of them are the same as those needed for some of the major industrial developments. There are some very big life sciences developments taking place in the country. Many members will have seen that Intel has started a huge programme of work, while another is to follow hot on its heels if planning permission is received. Therefore, there are many cost pressures. Certainly, the construction inflation rate is running in excess of 4%. Depending on whose measure one takes, the rate is probably about 6% plus, but I would be surprised to see the rate of 6% continue for another four or five years, only because it would imply a very superheated economy during that period. However, I do not know.

Photo of Colm BurkeColm Burke (Fine Gael)
Link to this: Individually | In context | Oireachtas source

Will Mr. Barry translate what he said? He said the contract allows for an inflation rate of 4%. Is that 4% per annum or 4% over the four years?

Mr. Fred Barry:

It is 4% per annum. If between the middle of this year and the middle of next year the rate of inflation were to be 5%, rather than 4%, there would be an extra 1% payable in the moneys disbursed during that period.

Photo of Colm BurkeColm Burke (Fine Gael)
Link to this: Individually | In context | Oireachtas source

Which are agreed to. If the rate were to be 6%-----

Mr. Fred Barry:

Then there would be an extra 2% payable and so on.

Photo of Colm BurkeColm Burke (Fine Gael)
Link to this: Individually | In context | Oireachtas source

Mr. Barry believes there will be some inflation over the four years, but he is not convinced that it will be more than 4%.

Mr. Fred Barry:

I do not know. I am sure economists are always very keen to make inflation rate forecasts, but they are no more accurate than the rest of us. I do not know, but I do know that for the construction inflation rate to remain at a very high level in the period in question, it would require continuing very strong pressures in the marketplace. If there are such pressures, it is because the country is doing exceptionally well, but I really cannot tell the Senator what the rate will be.

Photo of Colm BurkeColm Burke (Fine Gael)
Link to this: Individually | In context | Oireachtas source

This is one of the biggest healthcare projects in which we are engaged. It is nearly 20 years since we built a major medical facility, although we have extended medical facilities. Does Mr. Barry envisage considering projects outside Ireland to ascertain how costs were controlled? For instance, I considered Royal Manchester Children's Hospital. It is a 370-bed unit which had cost €504 million in 2004 and took five years to build. Does Mr. Barry plan to examine other projects to determine how we can best ensure there will be no further mistakes?

Mr. Fred Barry:

From my role on the development board, once the user requirements are identified and the design is completed, the control methodologies used in managing the construction are not very different from those used in developing any of the large manufacturing facilities around the country. I will be looking at what has worked on other very large projects in Ireland. I have worked on large projects in other places and I am not averse to taking lessons from anywhere.

Photo of Colm BurkeColm Burke (Fine Gael)
Link to this: Individually | In context | Oireachtas source

Is Mr. Barry concerned about any issue related to the site that may cause delays and which, in turn, will result in additional costs?

Mr. Fred Barry:

There is no doubt that it is more difficult to work in a city site than a greenfield site. That is certainly true on St. James's Street, where the footprint of the hospital building occupies most of the land available. There are no big lay-down spaces available around the site and there are no significant spaces available for stacking equipment and supplies. That is a very definite constraint. The safety side concerns me as much as the efficiency side.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

I have a couple of questions. It might be easier if I ask all of them together and then Mr. Barry might answer them. I am aware that he is chairman designate, which restricts him. It was probably beneficial for him to come here. What did he make of the offer made by the main contractor, BAM, to opt out of the contract at the time it did? Does he believe, having examined the board, that it has the required expertise? I am not asking for any commentary on individuals; I am talking in general terms because I do not believe commentary on individuals would be appropriate. Within the structure, Mr. Barry's board reports to another board that reports to another which reports to the Government. Will he be making recommendations to the Government on changing that structure? To date, it seems there have been layers upon layers that may not necessarily be required or work.

I have two more questions, one of which was partially answered in response to Deputy Donnelly. Does Mr. Barry believe he can keep the project within the cost of €1.4 billion, plus a fit-out cost of €300 million? Everything hinges on the PwC report, much of which I presume will be similar to the Mazars report, but additional questions have been asked. I realise Mr. Barry cannot prejudge the content of the report, but what will be his intention as regards taking action once it is published? I refer to the timeline involved.

Mr. Fred Barry:

On the offer to opt out, if we were to negotiate a termination of the main contract with BAM and retender, it would take a minimum of a year and half to get a new contractor in place and it could be two years or even longer if there was to be any challenge. The State would pick up the extra inflationary cost for the couple of years involved. It would carry the costs of the development board and the CHI board before the start-up for an extra couple of years. The current contractors would have to be paid for de-mobilising and there would be a further payment to re-mobilise the new contract. There are many long lead-in equipment items and materials on order, not only through the main building contractor but also through the mechanical and electrical contractors. The State would have to pay all of the associated cancellation charges. Therefore, I do not believe it would be good business for it to stop the work now and retender as it would end up costing money and lead to a much later opening than would otherwise be the case.

On the expertise required, board appointments are matters for the Minister. Good, bad or indifferent, neither I nor any chairman should be-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

I was not asking about board members but about whether the board had the expertise.

Mr. Fred Barry:

Even collectively, the membership of the board is a matter for the Minister.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

That is true, but it is still a question.

Photo of Jonathan O'BrienJonathan O'Brien (Cork North Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

It is not true. I will get to it in a minute.

Mr. Fred Barry:

To respond to Deputy Kelly's other questions, on the figure of €1.43 billion, I have mentioned the caveats. Some will require decisions. If there are design changes proposed, there will have to be a decision on whether they are worth incorporating. I presume they would be driven by changes in medical technology or practice.

Construction inflation will be whatever it is. The rate is not under our control.

On the Mazars report and the PwC report, the latter will be issued in a couple of weeks and the Government will form its own view on how it should be adopted.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

It is not a Government report.

Mr. Fred Barry:

It is a report for the HSE; it is not ours either.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

It is not a Government report.

Mr. Fred Barry:

But it is not ours. The Mazars report contained a number of recommendations. Certainly, I would take one recommendation made in it. The supervisory team needs to be reorganised a little at this stage as we move from the earlier design phase and the procurement phase to the construction phase. Aspects need to be strengthened in that regard. I will be taking up recommendations made in that respect.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

I also asked about the layers.

Mr. Fred Barry:

Excuse me. Regarding the layers of government above us, many committees are involved, but that is a matter for the HSE and the Minister.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

Why is it a matter for the HSE?

Mr. Fred Barry:

Some of them are HSE committees. There is a HSE committee over the children's hospital-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

No.

Mr. Fred Barry:

With respect, Deputy, there is a HSE committee.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

That is not what it is called and that is not what we were told. They are Department of Health committees.

Mr. Fred Barry:

I thought there was a HSE committee as well.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

No.

Mr. Fred Barry:

I stand corrected.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

If it is a HSE committee, it is news to us. Is Mr. Barry happy to work within those-----

Mr. Fred Barry:

I will work within whatever parameters I am told to work.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

It is peculiar that, as chair designate, Mr. Barry believes it is the normal or right thing to do to report to, in his words, a HSE committee. First, there is no such committee. Second, even if there was, the idea that he as chair of a board that is building the hospital would report to it possibly defeats the purpose. Why was the board set up otherwise?

Mr. Fred Barry:

The HSE is the sanctioning authority for the hospital. It is not at all inappropriate that the HSE would have some role in it.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

I am not denying that. My issue is with the layers. They seem a bit-----

Mr. Fred Barry:

I understand, but it is unreasonable to expect me to criticise the government structures that are in place.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

I do not expect Mr. Barry to criticise them. I am only asking whether he would, as chair, make recommendations, have conversations or put forward his opinion on the matter.

Mr. Fred Barry:

If I did, I would put my opinion to the Minister.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

I agree. Would Mr. Barry do that?

Mr. Fred Barry:

Yes.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
Link to this: Individually | In context | Oireachtas source

That is all I wanted to know. I thank Mr. Barry.

Photo of Jonathan O'BrienJonathan O'Brien (Cork North Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I will also be running to the launch of the periodic report, so I will be brief. First, I wish Mr. Barry the best of luck with this.

Mr. Fred Barry:

I thank the Deputy.

Photo of Jonathan O'BrienJonathan O'Brien (Cork North Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Regardless of our political affiliations, we all sincerely wish him good luck.

I wish to ask a couple of questions, the first of which will be on the board. I do not want Mr. Barry to say anything that could affect future relationships on the board, but its membership is not an issue solely for the Minister. The legislation is clear, in that the chair of the board nominates three members to the Minister for appointment. Is this something that Mr. Barry has considered or is willing to consider? He is stepping mid-stream into a board. I do not know whether he has worked with any of the board members previously or has a prior professional relationship with them. Will he use this opportunity to bring in people whom he has worked with and whose experience he knows? Has he begun considering this matter?

Second, Mr. Barry has vast experience. I looked through his CV last night. He has international experience in project management and I am sure he has been involved in many large-scale tendering and procurement processes. One of the major questions that is starting to emerge relates to the two-stage process that was decided by the development board. The board received a derogation from the Government construction contracts committee, GCCC. This type of derogation in a two-stage process has only been taken up twice - once by the development board and once in respect of the Dunkettle interchange - and at a preliminary stage. The development board would have been a pioneer in this type of procurement process. From his previous work in project management, has Mr. Barry experience of this type of two-stage process? He might provide some commentary, after which I will ask a follow-up question.

Mr. Fred Barry:

On recommendations regarding board members, there is a vacancy on the board currently. Post the PricewaterhouseCoopers, PwC, report, I will discuss those with the Minister and make a recommendation or two as to how the board might be strengthened. That is not a reflection on the current board members.

Regarding the two-stage process, which is relatively new in the Irish context, the more general process of awarding contracts against approximate quantities at an early stage and subsequently converting those to either fixed prices, guaranteed maximums, target prices or whatever is commonplace throughout the world. It can work well and has the benefit of getting the work started much earlier than might otherwise be the case. Often, it helps in getting contractor input into design, development and some of the procurement issues. There are many positives to it.

It was certainly complicated this time around because the original tender documents did not capture the scope of the project as well as might have been the case. Consequently, there was far more left to be negotiated subsequently than might have been hoped. As a process, though, there is nothing wrong with two stages or variations on those. In the UK, for example, a great deal of work is done on a target price basis. There are many benefits to that sort of contract process. It is more difficult in the public sector than it is in the private sector, though. The public sector is understandably quite risk averse whereas, in the private sector, speed to market is often a much greater driver than getting the minimal construction cost. Saving time is regarded as much more valuable than shaving a certain amount off the construction cost.

Processes of that sort can work very well. That does not mean that they have worked very well in this instance, of course.

Photo of Jonathan O'BrienJonathan O'Brien (Cork North Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Does that surprise Mr. Barry, given that we have the Office of Government Procurement, OGP, the public spending code, the development board with its expertise and sub-committees dealing with procurement and tendering? To hear that the original tender documents did not capture the scope of the project-----

Mr. Fred Barry:

Fully.

Photo of Jonathan O'BrienJonathan O'Brien (Cork North Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

-----fully is alarming. The route taken was to get a derogation for a two-stage process. A report was even done on the advantages and disadvantages of going down that road. One of the disadvantages identified was that it could lead to cost overruns if capturing the scope of the project and the bill of quantities accurately was not done correctly. That is what has transpired in this instance. I am not saying that it is the sole reason for the overrun, but it has played a significant part in that. How could we get to that stage when we had all of this expertise? It is difficult to understand how the original tender documents did not capture the scope of the project fully.

Mr. Fred Barry:

I am afraid I cannot give the Deputy the answer to his question. The PwC report may or may not identify it; I do not know. I cannot go back in time and say why all of that was not captured.

Photo of Jonathan O'BrienJonathan O'Brien (Cork North Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

My final question will be a quick one. In Mr. Barry's role with the NRA, I presume he was involved with many capital projects.

Mr. Fred Barry:

Yes.

Photo of Jonathan O'BrienJonathan O'Brien (Cork North Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

This is not a question to try to catch him out. How many of those projects had cost overruns and, if any did, how did he deal with them?

Mr. Fred Barry:

We undertook hundreds and hundreds of projects during my time with the NRA. I could not give the Deputy a specific number.

We had annual funding and a multi-annual funding programme, so our target in the context of budget setting and projects was to ensure that we delivered the outputs we were supposed to deliver for the money we were getting. In terms of individual projects, some would be over budget while more would be under budget. One would have thought that if one did not have the occasional project going under budget then the budgets were probably being set too loosely. One would expect to have more coming in under budget rather than over budget so that, on balance, the programme was delivering the outputs it needed to deliver for the money being spent.

Photo of Jonathan O'BrienJonathan O'Brien (Cork North Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

One would also presume that there would have been a very strict monitoring process.

Mr. Fred Barry:

Yes, there would be very strict monitoring. There would also be a realistic assessment of the risks on projects and allowances made accordingly. It is desirable to capture as much of a project as one can within a single contract and get that nailed down but one never captures everything. No contractor is ever going to guarantee a fixed final price against any contingency because he or she could not do that and stay in business. Therefore, one must assess the risks and make appropriate allowances.

Photo of Michael HartyMichael Harty (Clare, Independent)
Link to this: Individually | In context | Oireachtas source

Deputy Durkan is next.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I welcome Mr. Barry. He is still Chairman designate but I am sure his appointment will prove to be very appropriate. I raised the issue of the multiplicity of boards associated with the hospital at the committee's meeting with representatives from the National Paediatric Hospital Development Board when it became obvious that there were some cost overruns. Interaction between those boards is an absolute necessity. They should not be acting independently of one another because experience tells us that there is a danger that one of the interests involved will lead the project in a particular direction, which can lead to situations such as that we are now facing. There must be regular, weekly interaction. Personnel from one board must have ex officiorepresentation on all of the other boards. Otherwise, one board will take off on a gallop over which the others have no control. I would not presume to advise Mr. Barry but I would suggest, based on past experience, that this is important.

Unfortunately, this project has got bad a press because it seems to be a question of guesstimating what will be the overall overrun. Deputy Donnelly has analysed the project from the very beginning and suggested that there could be no end to the overruns. I have listened to Deputy Donnelly carefully. I like him; he is a very nice fellow but I do not want to see over-exaggeration of the costs, even in the context of making a political point. I contend that the original guesstimate was way short of what it should have been. I look forward to the PwC report because it will identify the basis on which the figures were arrived at in the first instance. There was no basis at all for arriving at the figures mentioned at the outset. If one wants to quantify an overrun, the lower one starts, the bigger it will be. It is in the interests of those who want to criticise the project to have the original guesstimate of costs as low as possible. Between June and August of 2018, considerable effort was made by the boards to reduce the costs and a relatively small reduction was achieved. However, if this project were to stall, it would be a national disaster. The cost consequences would be massive. That has been the experience on many other projects here and throughout Europe.

I do not understand the need for the 6,000 rooms provided for in the project. I know that some of the rooms will house equipment and some will be for consultations but we have not been informed how the rest will be used. Obviously, the more rooms that are provided, the more expensive the project. It may be of benefit to reduce the number of rooms in the hospital. We do not know what will be in those rooms. Could the number be reduced without undermining the overall thrust of what the hospital is about? There is no reason it could not be revised further, subject to planning permission, the process relating to which can, admittedly, be fickle. Nonetheless, we should look at the fact that it is a 12-acre site on an overall site that is three or four times that size. I was approached recently about the possibility of rearranging the traffic to and from the site in a way that would reduce costs. I do not know if that is a realistic possibility because I am not familiar with the traffic movements in the area, but perhaps it could be considered.

This hospital has been campaigned for and sought for nearly 40 years but has not yet materialised. It has not materialised because agreement could not be reached on where it should be located. There will never be such agreement even if we are to wait for another 40 years. There will never be agreement on the optimum location and that is a fact. This is because of national and medical politics and the different objectives of various actors, many of which are held in good faith. However, if we are going to make progress we cannot postpone this forever. It is not in the interests of children's health to do so. It has not been beneficial to children's health that the hospital has not yet been built; it should have been built at least 20 years ago.

I also have a question on the fitting out of the hospital. The fitting out is an add-on in all hospitals and is expensive. I recall when Beaumont Hospital was being fitted out. The building was left idle for a year or 18 months while the fitting out took place. There are extra or add-on costs involved. It is no good saying that we knew what the costs would be because we did not know. We do not know what the total will be until the fitting-out costs are clearly identified.

I cannot understand why detailed specification and quantity surveyor reports are not always required before proceeding with a project, in order to protect everybody. We should not indulge in rough or even precise estimates in a project of this size. This hospital is needed but it must be built in accordance with the requirements for which advocates have petitioned for many years. It would be an enormous disappointment to the families of sick children and the children themselves were it to be delayed indefinitely while a political wrangle takes place over where it should be located and how it should be costed. This is not the first location chosen for this hospital. It was to be built on the Mater site and a number of other sites were also proposed. The proposal for the current location incorporates two other hospitals at Blanchardstown and Tallaght.

It is a comprehensive proposal that should not be dismissed in the way some people are dismissing it. Somebody spent money somewhere in the past ten or 15 years and we have very little to show for it yet. We should proceed cautiously and ensure that the hospital is at least on par with those throughout the world, which is what we hope.

Photo of Michael HartyMichael Harty (Clare, Independent)
Link to this: Individually | In context | Oireachtas source

Does Mr. Barry have a response?

Mr. Fred Barry:

I would simply note what Deputy Durkan said and thank him for his advice.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context | Oireachtas source

That supplementary is a safe bet.

Photo of Colm BurkeColm Burke (Fine Gael)
Link to this: Individually | In context | Oireachtas source

It is planned to spend more than €10 billion on hospital infrastructure under Project Ireland 2040. In view of what has occurred, does Mr. Barry believe we should set up a formal structure similar to the way the NRA took on roads projects and, as a result, acquired a great deal of experience as it went on and became efficient the delivery of roads infrastructure? Should something similar be set up for hospital development whereby a core group of people would be responsible for the management and roll-out of specific hospital projects?

Mr. Fred Barry:

As I understand it, and I am subject to correction, the HSE will be the sanctioning authority for at least most, if not all, of those hospital investments and, as such, I assume the HSE has a group within it overseeing projects. What its structure is around that I do not know at this stage.

Photo of Colm BurkeColm Burke (Fine Gael)
Link to this: Individually | In context | Oireachtas source

Does Mr. Barry agree it is time to look at that and bring in-----

Mr. Fred Barry:

That would be implying that the HSE has not looked at it. I do not know where it is on that or its oversight arrangements in respect of hospital projects beyond this one.

Photo of Colm BurkeColm Burke (Fine Gael)
Link to this: Individually | In context | Oireachtas source

We have not heard of any formal structure being set up. I am talking about people with Mr. Barry's expertise becoming involved in a structure in the same way it was done with the roll-out of national roads development. Does the same need to done in respect of the roll-out of hospital infrastructure?

Mr. Fred Barry:

It worked very well in terms of roads infrastructure and is continuing to work very well-----

Photo of Colm BurkeColm Burke (Fine Gael)
Link to this: Individually | In context | Oireachtas source

Absolutely.

Mr. Fred Barry:

-----but how that ties in with what the HSE has currently, I cannot tell the Senator. I am sorry.

Photo of Colm BurkeColm Burke (Fine Gael)
Link to this: Individually | In context | Oireachtas source

There is a €10 billion programme for capital spend on hospital infrastructure.

Mr. Fred Barry:

Indeed, but my knowledge base of the HSE's structures, management process and so on is very light.

Photo of Margaret Murphy O'MahonyMargaret Murphy O'Mahony (Cork South West, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

Mr. Barry is welcome. I thank him for coming in and I wish him luck in his role. It is not an easy one but as they say, no better man for the job. Much of what I wanted to ask and comment on has been dealt with by previous speakers but I have two questions. I realise Mr. Barry is responsible for the build aspect, as he said earlier. He said that things would not be significantly different if they had been done properly, for the want of a better word, in terms of tendering and so on. Was this entire process an underestimation of the costs rather than an overspend and, if so, how does Mr. Barry believe it happened?

We all agree this project got off to a bad start in terms of the overspend, despite everybody believing the hospital is needed and wishing the project well. The answer to this question may not come under his remit but how does he believe public perception can be changed?

Mr. Fred Barry:

There was an underestimate of the costs. I am not saying the costs would have come out exactly as they have done if that had not happened. As I said, with competitive tension there might have been a slight improvement in the pricing but it would not have been different in order of magnitude.

In terms of how it happened, I cannot answer that. I am hoping PwC will come up with some of the answers but it has had some months examining all the documentation and so on so it will have more detailed knowledge on that than I have at this stage. It is certainly unfortunate that what is a very much-needed hospital now has the aura of the cost issue hanging over it. In terms of what can be done about that, we have to build the hospital and it has to be a great facility for people. Eventually, if it works well for the public-----

Photo of Margaret Murphy O'MahonyMargaret Murphy O'Mahony (Cork South West, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

The memory of the costs will be gone.

Mr. Fred Barry:

-----the memory of the rest will fade. However, that delivery of something people value is the only way I can think of to re-establish the benefits of it.

Photo of Margaret Murphy O'MahonyMargaret Murphy O'Mahony (Cork South West, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

That is important. I thank Mr. Barry.

Photo of Kate O'ConnellKate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank Mr. Barry for coming in and I wish him the very best of luck.

Mr. Fred Barry:

I thank the Deputy very much.

Photo of Kate O'ConnellKate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I am a big supporter of the children's hospital on its current site so I am happy Mr. Barry has taken up the role and that, finally, we can get this project delivered.

He has answered a number of historical questions but I want to focus on where we go now. Driving by the St. James's Hospital site, one can see that it is coming out of the ground, yet there is still commentary on the site in the media and in political circles; we had a debate again in the Dáil last night. Mr. Barry might briefly outline to the committee the status of the project. There is an suggestion that there is a hole in the ground and nothing else. Initially, Mr. Barry might outline the reality of what is on the ground. As Deputy Durkan said, there has been medical politics, regular politics and all sorts of groups involved in this project but we now have to consider how to finish this hospital.

I understand there is some commentary on the estimates issue and that perhaps it involved poor calculation of quantities and inflation within the market at the time of design. There has been mention of de-scoping. We all know that if we want a fancy kitchen sometimes we have to forgo the curved cupboards or the brass taps or put whatever covering on the floors. In terms of de-scoping and pulling back on costs, can Mr. Barry say yet if there is any room to do that? There is a portion of aluminium cladding on the outside and some stone work. I have not studied the entire building but Mr. Barry might set in stone today - excuse the pun - if we can put an end to this de-scoping conversation or is there room for a cost saving in the future?

There has been a conversation about the 6,000 rooms. It is almost as if there is no need for 6,000 rooms but that is an issue for anyone who has been in an intensive care unit or high dependency children's ward. Mr. Barry might elaborate on the number of rooms off a main room that would be needed. I am aware that Crumlin Hospital is currently jammed. There are no treatment rooms. With regard to isolation for chemotherapy, children are immunocompromised, so we are not talking about 6,000 regular little rooms. Mr. Barry might elaborate on that for the committee.

There has been a lot of conversation about fire safety. I want to make sure the message gets out, if it is correct, that there are safe burn times and that there is no issue with the provision of car parking in the basement. On cladding and finishes, in light of what happened in Grenfell Tower, is Mr. Barry satisfied that our children will be safe if a fire breaks out and that there will be the proper response times to get them out of the building?

Equipment comes under his remit. Does equipment mean computers as in fixed hardware, telephones, kettles and such items or does it mean MRI and X-ray machines, or is it all of those? I do not know if there has been a discussion on how we will go forward in that regard. Approximately two years ago, we, as a committee, discussed how we should go about maintenance of equipment. I raised here the fact that there are always issues with the maintenance people in a hospital when it comes to taking on new roles and training in terms of depreciation of equipment. Equipment is often leased in the retail sector now and that there is a maintenance contract. If the retail and commercial sectors are doing that, it tends to be the best option. Are Mr. Barry and his team looking into that model, which will involve owning the telephones, the computers and such items? However, when it comes to large, expensive machines which may be rendered quickly out of date, how will that bill be divvied up?

Mr. Fred Barry:

Deputy O'Connell asked about a number of topics. On the site, certainly there is a great big hole in the ground, with an enormous amount piled around it. There is a four storey building on one side and there is another coming out of the ground. Therefore, a lot of work has been done on the site and the idea of moving to a new location should be removed from everyone's mind. An Bord Pleanála turned down the application for planning permission for the development on the Mater hospital site. It gave planning permission for where it is to be built at St. James's Hospital. There is no certainty that it would not turn down an application for planning permission to build it on another site. If that were to happen, it could be five or six years before the tendering process could even start again. If the project is to be delivered, it needs to be delivered where the hospital is being built.

There has been extensive value engineering and de-scoping work done and more or less everything that can be gleaned from it has been gleaned. There are still some bits and pieces being done, but, as I mentioned, they will only generate only modest savings overall. I think the facade is on order and being manufactured. We are, therefore, much further along than it appears. Even though construction work on the site is only starting to come up from basement levels, there are orders in place for equipment.

Photo of Kate O'ConnellKate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

There are lead-in times.

Mr. Fred Barry:

There are long lead-in times, but there is not a lot left to be done.

As I am not a hospital programmer, I have no knowledge of how many rooms are needed. What is in place has come from the user requirements signed off on by the HSE, the children's hospital board and so on, the people who will be using the hospital. The decision on rooms was not just conjured up, rather, it was made by the experts who will be managing and running the hospital.

There will be fire certificates for the hospital. While there is more work to be done in obtaining them, I know that work has been done in adding sprinklers to the hospital to make it even safer. The cladding issues that arose at Grenfell Tower have been reflected on at length and changes have been incorporated into the design.

The role in equipping the hospital is shared between the National Paediatric Hospital Development Board and Corporate Health Ireland, CHI. Let us take the computers as an example. We will be installing much of the wiring, while CHI will buy the actual computers. There will, therefore, be an integrated approach. The National Paediatric Hospital Development Board will also buy much of the hospital equipment to be used such as imaging equipment. I do not know, but CHI may buy some other equipment. I do know, however, that significant discussions took place before I came along on whether things should be bought directly or through a managed equipment service. I am not part of those discussions because I came in after the event.

Photo of Kate O'ConnellKate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Perhaps the committee might find out at what stage the discussions are in order that we will not end up in a similar bind on the issue of estimate versus cost in a year's time.

Mr. Fred Barry:

We will provide the committee with a note on that matter.

Photo of Kate O'ConnellKate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

If the role of the National Paediatric Hospital Development Board is to buy phones and computers and the role of CHI is to buy MRI equipment, we need to make sure there is a division.

Mr. Fred Barry:

Yes, a clear one.

Photo of Michael HartyMichael Harty (Clare, Independent)
Link to this: Individually | In context | Oireachtas source

I thank Mr. Barry for coming and wish him the best of luck in his new position. It is probably not ideal coming in halfway through the project to replace the previous chairman, which I am sure carries its own difficulties. Will he outline for the committee how he proposes to identify and make the relevant people aware of further cost overruns? We have spoken about a 4% inflation rate and the additional costs will arise if it move above it. The project is due to be completed in mid-2022. If it runs over time, there will be an additional cost.

Mr. Fred Barry:

Yes.

Photo of Michael HartyMichael Harty (Clare, Independent)
Link to this: Individually | In context | Oireachtas source

There are other costs which are outside the control of the board because if there are changes in PRSI and VAT rates, it will have cost implications.

Mr. Fred Barry:

Yes.

Photo of Michael HartyMichael Harty (Clare, Independent)
Link to this: Individually | In context | Oireachtas source

The Government has engaged or is proposing to engage in a scenario analysis to look at future unidentified costs. How will Mr. Barry, as chairperson of the National Paediatric Hospital Development Board, identify and deal with these costs as early as possible and communicate them to the various layers above the board? I think the layer directly above the board is chaired by a deputy secretary general in the HSE, above which there is a board chaired by the Secretary General of the Department of Health.

Mr. Fred Barry:

Yes.

Photo of Michael HartyMichael Harty (Clare, Independent)
Link to this: Individually | In context | Oireachtas source

How do Mr. Barry propose to make these costs known in order that there will be no suprises when it comes to additional cost overruns?

Mr. Fred Barry:

First, if there are cost pressures which will lead to increases, we need to identify them. We will have a keen focus on costs on an ongoing basis. We will have monthly board meetings, at all of which we will receive detailed cost reports and forecasts. If we forecast that the cost will move above the current figure of €1.43 billion, we will flag it immediately to everybody else involved. One of the disappointing aspects of the process so far is that the actual costs were recognised rather late in the day. We will try to avoid anything like that happening again.

Photo of Michael HartyMichael Harty (Clare, Independent)
Link to this: Individually | In context | Oireachtas source

On behalf of the committee, I thank Mr. Barry for coming. The committee will be writing to the Minister to say we have engaged with him. That will allow the Minister to proceed.

Mr. Fred Barry:

Yes.

Photo of Michael HartyMichael Harty (Clare, Independent)
Link to this: Individually | In context | Oireachtas source

I again thank Mr. Barry.

Sitting suspended at 10.37 a.m. and resumed at 10.40 a.m.