Oireachtas Joint and Select Committees
Thursday, 30 May 2024
Public Accounts Committee
Financial Statements 2022: National Paediatric Hospital Development Board
9:30 am
Brian Stanley (Laois-Offaly, Sinn Fein)
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Apologies have been received from Deputies Cannon and McAuliffe, who are unavoidably absent. The witnesses are very welcome. I remind all those in attendance to ensure their mobile phones are switched off or on silent mode.
Before we start, I wish to explain some limitations to parliamentary privilege and the practices of the Houses as regards reference witnesses may make to other persons in their evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected pursuant to both the Constitution and statute by absolute privilege. This means that witnesses have an absolute defence against any defamation action for anything they say at the meeting. However, they are expected not to abuse this privilege and it is my duty as Cathaoirleach to ensure it is not abused. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks and it is imperative that they comply with any such direction.
Members and witnesses are reminded of the long-standing parliamentary practice 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. Members are also reminded of the provisions of Standing Order 218 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.
The Comptroller and Auditor General, Mr. Seamus McCarthy, is a permanent witness and is accompanied today by Ms Olivia Somers, deputy director at the Office of the Comptroller and Auditor General.
This morning, we will engage with officials from the National Pediatric Hospital Development Board, who have appeared before the committee a number of times in the past four years, to examine the financial statements for 2022 for the National Pediatric Hospital Development Board. We are joined by the following officials from the National Pediatric Hospital Development Board: Mr. David Gunning, chief officer; Mr. Phelim Devine, project director; and Dr. Emma Curtis, medical director. We are also joined by the following officials: from the Department of Health, Mr. Eamonn Quinn, principal officer for major capital projects; and from the Health Service Executive, Mr. Martin McKeith, assistant lead director, children's hospital project and programme. They are all very welcome.
I call on the Comptroller and Auditor General, Mr. McCarthy, to make his opening statement.
Mr. Seamus McCarthy:
As the committee members are aware, the National Pediatric Hospital Development Board is a special purpose agency that exists to deliver the planning, design, construction and fit-out of the new children's hospital at the St. James's Hospital campus in Dublin and of two associated paediatric outpatient and urgent care centres located at Tallaght and Connolly hospitals. Children's Health Ireland will operate the services in the completed buildings into the future. Construction and fitting out of the centres at Tallaght and Connolly hospitals have been completed and they are now being operated by Children's Health Ireland. As members are aware, construction of the main hospital at St. James's is ongoing.
The development board is funded by Exchequer capital grants provided via the Health Service Executive. In 2022, the grant funding provided amounted to €316 million, matching the board's expenditure in the year. Note 2 to the financial statements indicates the total accumulated project costs incurred by the board to end 2022 amounted to €1.24 billion, including VAT. In note 8, the board indicates that it also had future capital payment commitments estimated at €217.6 million as at end 2022. Combined with the expenditure already incurred, this implies total committed project expenditure of at least €1.45 billion as at end 2022. This exceeded the budget of €1.433 billion allocated to the board in 2019. Further planned commitments yet to be contracted for will raise the overall expenditure further.
Notes 12 and 13 to the financial statements disclose that the board has also been notified of a large number of payment claims submitted by the main contractor. A small number of claims received have been certified and paid in line with contract terms. The board does not present an estimate of the additional costs it estimates it will incur arising from the remaining claims. However it discloses that a revised budget for the board's deliverables amounting to €1.88 billion was approved by the Government in February 2024. This represents a budget increase of approximately €450 million, or 31%. The budget for the parallel Children's Health Ireland projects was also increased in February 2024, from a previously estimated €300 million to €360 million, a 20% increase. The overall project budget to get all of the plant facilities up and running is, therefore, an estimated €2.24 billion.
The National Pediatric Hospital Development Board's 2022 financial statements were certified by me on 11 April 2024. In my view, except for the manner in which the board accounts for retirement benefit entitlements, the financial statements give a true and fair view of the assets, liabilities and financial position of the board at 31 December 2022.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I thank Mr. McCarthy. As set out in the letter of invitation, Mr. Gunning has five minutes to make his opening statement.
Mr. David Gunning:
I thank the Chair and Deputies for the invitation to attend this morning. I will skip the introductions and some elements of my opening statement which have already been covered. The NPHDB was appointed by the then Minister for Health in 2013 to design, build and equip the new children’s hospital. This includes the new children’s hospital on the site at St. James’s Hospital as well as the urgent care centres at Tallaght and Connolly hospitals, both of which are currently in operation. We are also overseeing construction of the new Ronald McDonald House, with 52 family bedrooms, at the new children’s hospital. It will be operated by Ronald McDonald House Charities Ireland. That construction commenced in March 2024 and is progressing well.
On the financial accounts, the details are presented in the table in the written opening statement I have provided and relate not just to 2021 and 2022, but also to non-audited figures for 2023, and a year to date figure for 2024. To date, the Comptroller and Auditor General has identified the amount of money already paid. Since 2019, the NPHDB has been reporting to our key stakeholders through established governance structures, including the Department of Health, the Health Service Executive and our client, Children's Health Ireland, that the project is behind schedule. Updates on these timeline changes and challenges and the associated impact on costs have been shared with all key stakeholders. In February, the Government approved enhanced capital and current budget sanctions for the project, bringing the total approved capital budget to €1.88 billion for the NPHDB component.
The Government-approved increase in the capital budget addresses areas not comprehended within the original 2018 budget and subsequently identified in the independent review carried out by PwC. The report said that the new children's hospital was unique in scope, scale and complexity in comparison to any other health infrastructure project in Ireland and was explicit in stating that the project's complexity should not be underestimated or understated.
The PwC 2019 report also noted that a number of risks had the potential to place further cost pressure on the approved capital budget, including contractor entitlements under the contract, the outturn of provisional sums, recovery of construction inflation above 4%, the need for additional capacity and capability in the executive team of the NPHDB and the contractor’s right to claim for additional true costs in line with public works contract provisions. Project costs, like other areas of the construction sector and wider society, have been impacted by other external pressures including the impacts to supply chains arising from the pandemic and other global events such as the war in Ukraine and Brexit. The NPHDB addressed all of that in its engagement with stakeholders on the capital increase. The enhanced budget of €1.88 billion reflects this at an appropriate level.
In terms of the progress update, we have provided a number of photographs and information, which the members can see. I do not propose to read through the bullet points other than to make it clear that the number of individual inpatient rooms being constructed and fitted out is 380. Specialist equipment is progressing very well in terms of MRIs, CAT scanners, X-ray machines, theatre imaging equipment, the central decontamination unit, CDU, and others. The commissioning of all the many hospital systems is well advanced.
On the programme timeline, the contract with BAM states that substantial completion was due in August 2022. Additional time has been awarded by the employer’s representative, which has extended the completion date to November 2022, from a contractual perspective. Since March 2020, BAM has changed its forecast completion date multiple times. The last baseline programme that was deemed compliant by the employer's representative was in quarter 1 of 2021. The latest baseline programme submission was received on 29 September 2023 and included a substantial completion date of 29 October 2024. This was evaluated by the employer's representative and determined as not being compliant with the contract. BAM is not meeting its contractual obligation to provide an updated programme which is compliant with the requirements of the contract. The employer's representative has requested an updated revised baseline programme from BAM that addresses the programme comments issued by the employer's representative, as is required by the contract. In its latest monthly progress report, BAM has indicated a further delay to the substantial completion date. The primary driver of the cost increases on the project has been the ongoing delay to the completion of the project. All possible contractual levers are being applied to secure certainty and the NPHDB continues to engage with BAM to explore mechanisms to deliver programme certainty and the earliest possible date.
We have provided the committee with an overview of the claims and there is a commentary on those in the documentation that has been circulated. I do not propose to read that unless we need to go through it, which I am happy to do. The employer’s representative award to the contractor is approximately €27 million in relation to those claims, which is just under 3% of the overall contract value. In addition, under the contract, an additional of payment of €48.5 million in inflation payments have been made.
In relation to dispute management, there are disputes at project board level currently in conciliation and in all parts of the contract management process. There are currently no adjudications. There have been nine adjudications to date, in which BAM has claimed approximately €63 million and has been awarded €2.3 million in those nine adjudications. There are two proceedings in the High Court: the phase B instruction and the frame claim. In relation to the phase B proceedings, the discovery phase is ongoing and is expected to finish in July, but we do not expect any outcome of the proceedings or the court’s decision until 2025, at the earliest. The frame claim proceedings were initiated in April 2021 and no further action has been taken by the contractor here.
The new hospital will provide 6,000 clinical spaces and 380 state-of-the-art inpatient bedrooms, 20 of which will be part of the new CAMHS unit. Some 60 beds are dedicated to critical care and there are an additional 93 day beds. There will be 22 operating theatres. The building will accommodate five MRIs and 110 outpatient rooms, a hydrotherapy pool, a rooftop helipad, a hospital school for primary and secondary level patients, a third level education centre for postgraduate students and more. I assure the committee that the NPHDB is fully committed to delivering the new children's hospital in as timely a manner as possible, giving the best possible value to the State and to a standard and of the quality that the children of Ireland deserve.
I will add some comments in relation to the programme issues, if I may. The baseline programme, which we received in September 2023, has been deemed non-compliant with the contract by the employer’s representative. The employer’s representative has directed the contractor to provide an updated programme and we have not yet received the updated programme. I wish to inform the committee that BAM’s most recent mostly update has indicated to the development board a substantial completion date of February 2025.
Brian Stanley (Laois-Offaly, Sinn Fein)
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February 2025.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Can Mr. Gunning clarify something before we get into this properly? How much is being paid to BAM in terms of claims at this point? Is the €27 million the total?
Brian Stanley (Laois-Offaly, Sinn Fein)
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delete
Brian Stanley (Laois-Offaly, Sinn Fein)
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It is over and above. In other words, the board carried that risk over and above the 4%.
Brian Stanley (Laois-Offaly, Sinn Fein)
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There are many moving parts from Mr. Gunning's opening statement. I call Deputy Kelly.
Alan Kelly (Tipperary, Labour)
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I thank the Chair and the witnesses. For the public watching, this has been a disaster zone for years. I believe it is the fourth time people involved with the hospital have appeared in front of the committee. For me, this whole project is like a bad episode of "Room to Improve" on speed. That is how bad it is. We collectively need to get into layman's language in setting out where we are at. We have got a national maternity hospital to build. The model used to build the children's hospital cannot be used for that. The idea that the contractor or the builder is separate to the design - the whole phase A and phase B that we have been through historically in this room - is completely nuts and is the baseline for where all the problems are.
I said in 2019 that this would go over €2 billion. The Taoiseach at the time scoffed at it and said I was just creating a bit of chaos. At the last meeting in October, I asked anyone in the room if they believed it would not go over €2 billion. Nobody objected. Would anyone in the room object now? Do any of the witnesses think this will land under €2 billion? I presumed I would get the same answer. When I read back over the transcript from last October, I was reminded that I said "I do not think there is a snowball’s chance of the October deadline [the substantial completion date of October 2024] being met". Mr. Gunning is now saying, without a baseline plan but based on monthly updates, that this will be February 2025. We heard previously from Children's Health Ireland that the commissioning phase would take seven to nine months, which is understandable. If the new date is February 2025 and the commissioning takes seven to nine months, which means approximately 5,000 employees transferring or being recruited, is there a snowball's chance that this will be open in 2025?
Alan Kelly (Tipperary, Labour)
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Does Mr. Gunning believe this will be substantially completed in February 2025?
Alan Kelly (Tipperary, Labour)
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Mr. Gunning does not know exactly-----
Alan Kelly (Tipperary, Labour)
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Mr. Gunning would not die on the ditch over the claim that this will be finished or substantially completed in February 2025.
Alan Kelly (Tipperary, Labour)
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Mr. Gunning does not have the confidence to say that here.
Alan Kelly (Tipperary, Labour)
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Does the Department believe that the hospital will be open in 2025?
Mr. Eamonn Quinn:
It is important to focus on the fact that the contractor said it would be finished in October 2024. The contractor then sought to resile itself from that position. I do not want to focus on the contractor, but it is not standing up to its previous commitments. While it is important that we debate these matters in the public realm, the contractor is the one that keeps moving away from its commitments and is attempting – I am speculating, but it is probably for commercial reasons – to move those dates out so that there is further pressure on us.
Alan Kelly (Tipperary, Labour)
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Will Mr. Quinn answer my question, please?
Mr. Eamonn Quinn:
The contractor should meet its commitments. If it says the date is February 2025, the Department and the development board expect it to meet that commitment by providing a detailed programme to support it, to resource it, to put the management in place and to substantially complete the project in February 2025 or earlier. It should add resources-----
Alan Kelly (Tipperary, Labour)
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Will Mr. Quinn answer my question? Including commissioning, does the Department believe that this hospital will be open in 2025? That would probably see it opening in the middle of next winter’s flu season.
Alan Kelly (Tipperary, Labour)
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Six to nine months was the previous target.
Mr. Eamonn Quinn:
Some of that operational commissioning will start before substantial completion. We are working on trying to move on that. It will involve putting some equipment into the systems in addition to the equipment that is already installed. When that crossover is added to February, it means August according to my maths.
Alan Kelly (Tipperary, Labour)
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I know, but will Mr. Quinn answer the question, please? He is the Department of Health’s representative at this meeting. I accept that he is a principal officer and not the assistant secretary or Secretary General, neither of whom are present, but does the Department believe that our national children’s hospital will be open in 2025?
Alan Kelly (Tipperary, Labour)
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Page 70 of the PwC report went through the risks going forward. One of them had to do with client changes. Since the GMP – for the audience, that means “gross maximum price” – was set, how many new and-or revised drawings have been issued to the contractor?
Alan Kelly (Tipperary, Labour)
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Remember the phrase “new and-or revised drawings”.
Mr. Phelim Devine:
For context so that people understand, there are circa 6,000 drawings on the project. Following the GMP, the drawings for the majority of the project were changed for issues of contract and issues of construction. Members should remember that we had built part of the base for the majority of the project, so those 6,000 drawings were pretty much issued again after the GMP. On average, they have been revised circa three times since. There were 23,283 drawings issued up to the end of April. It is important to understand-----
Alan Kelly (Tipperary, Labour)
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I understand, but there are people at home watching this. We had a sign-off on the design.
Alan Kelly (Tipperary, Labour)
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Yes, but we will not get into the history of the disputed phase B. The 6,000 drawings were redone three times plus, given the figure Mr. Devine set out. What was it again?
Alan Kelly (Tipperary, Labour)
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That were either put in or revised.
Alan Kelly (Tipperary, Labour)
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I know it is a massive project, but for the public watching, 23,000-----
Alan Kelly (Tipperary, Labour)
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But for the public, 23,000 drawings or more after the GMP-----
Alan Kelly (Tipperary, Labour)
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That is fine. I am sorry, but I need to move on. I have a set time.
In major construction projects, there is always a change process and we understand that nothing will be set in stone. That is obvious. With a project of this scale, no one is suggesting it would be any different. How many change orders have been given to the contractor in the past six months?
Alan Kelly (Tipperary, Labour)
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Was that not very late in the day? Is there an issue with ceilings, light fittings, exit signs and so on?
Alan Kelly (Tipperary, Labour)
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There are many people on that site, so this information is-----
Alan Kelly (Tipperary, Labour)
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Briefly, please.
Mr. Phelim Devine:
The contract does not allow any products or systems to be specified. They have to be generic. When a contractor comes along with its products and systems, those have to be co-ordinated and integrated into the employer’s design intent. That results in many, many changes to the drawings. This is what normally happens with public works contracts. Our job is ten times larger, so that is normal.
Alan Kelly (Tipperary, Labour)
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Okay. Mr. Devine has made his point. I thank him.
I wish to ask about an important table we received from the board relating to how disputes were dealt with. We have to get to the nub of this. The employer’s representative makes adjudications. The witnesses have been clear as to how those were sorted out and the volume of claims, including the volume that were sorted and paid. I accept the point on inflation. There is then the project board, conciliation, the High Court – there are two proceedings before it – and adjudication. The element I am interested in is conciliation. Mr. Gunning stated that there were no adjudications currently and that there had been nine to date, in which BAM had claimed approximately €63 million but was awarded €2.3 million. In fairness, that is a small percentage of the amount claimed. That information was up to the end of April. Have there been any conciliations or adjudications since then?
Alan Kelly (Tipperary, Labour)
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Is it not settled or adjudicated?
Alan Kelly (Tipperary, Labour)
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Let me tease this out. I understand it is non-binding, but whoever is on the losing side, for want of a better term and just using sporting parlance, would have to go to the High Court to change it. That is according to the board’s table.
Alan Kelly (Tipperary, Labour)
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The conciliator is independent.
Alan Kelly (Tipperary, Labour)
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I see that. It goes over-----
Alan Kelly (Tipperary, Labour)
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Fair enough.
Alan Kelly (Tipperary, Labour)
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To be clear, there are currently no adjudications. There have been nine adjudications to date, in which BAM claimed approximately €63 million and was awarded €2.3 million.
Alan Kelly (Tipperary, Labour)
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That is 3% or 4%, which is a small percentage. There have been no decisions of a conciliator since the end of April.
Alan Kelly (Tipperary, Labour)
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Has the conciliator issued any decisions that the board is reviewing at the moment?
Alan Kelly (Tipperary, Labour)
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Are they substantial?
Alan Kelly (Tipperary, Labour)
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Was the board on the winning or losing side?
Alan Kelly (Tipperary, Labour)
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It is €2.3 million out of €63 million. When will we know the outcome of the recent conciliations that Mr. Gunning just told us about?
Alan Kelly (Tipperary, Labour)
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Mr. Gunning has told us of nine. He said €63 million-----
Mr. David Gunning:
Those were adjudications. Adjudications are outside the contract and happen under the Construction Contracts Act. They are a separate matter. Within the contract, we have conciliations. In a conciliation, either party may accept or reject the outcome.
Whether we accept the conciliation or reject it will depend on the status of it as it goes forward.
Alan Kelly (Tipperary, Labour)
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Let us say the conciliator decided the contractor should be awarded more than €50 million or more than €100 million. The board has to decide whether it will accept that in the coming weeks.
Alan Kelly (Tipperary, Labour)
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If it accepts it, I presume that the details will become public, like the ones that Mr. Gunning has told us about - the nine.
Alan Kelly (Tipperary, Labour)
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Yes. So it will be nine, ten, eleven because there are multiples of these. There is more than one.
Alan Kelly (Tipperary, Labour)
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I respect that. On the conciliations that are currently live, where the board has had the conciliator make decisions, the board now has a period to reflect on those and decide.
Alan Kelly (Tipperary, Labour)
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I presume the board either accepts those or pushes them on to the High Court.
Alan Kelly (Tipperary, Labour)
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That is currently the board's table.
Alan Kelly (Tipperary, Labour)
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And therefore, would it be fair to say, substantial amounts?
Alan Kelly (Tipperary, Labour)
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Some of these conciliations would be eight or nine-figure sums.
Alan Kelly (Tipperary, Labour)
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I am pretty confident that I am right about that. Half a billion extra was allocated recently to the project. I am paraphrasing when I say that the Minister said not a penny would go towards paying the contractor. Is that a substantiated statement Mr. Gunning can stand over? An extra €500-odd million has been given to close off this project and the Minister, Deputy Donnelly, said none of it would go to the contractor. Mr. Gunning is in charge of this. Can he stand over this statement that none of that money, that extra €500 million, will end up with the contractor? I will be honest; I do not think Mr. Gunning can. I would not like to put words in his mouth so I would like him to answer my question. Does he not think, and I do not want Mr. Gunning to get into politics as it is not his role, that surely some of that €500 million extra that was allocated to Mr. Gunning and his team, and I appreciate this is a very complicated project, must be based on settling what we just went through in the disputes?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Mr. Gunning, do you wish to answer that, please?
Alan Kelly (Tipperary, Labour)
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If disputes are settled and there is an award for the contractor, whether small or large-----
Alan Kelly (Tipperary, Labour)
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Or a court settlement.
Alan Kelly (Tipperary, Labour)
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The only money that can pay for that is the €500 million that has been awarded to the board. Otherwise it would not be trading properly.
Alan Kelly (Tipperary, Labour)
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I take that as meaning some of that funding has to be used for that.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Mr. Quinn, do you want to comment on that. You are the Department representative. The question is whether not a penny more out of that half a billion will go to the contractor.
Alan Kelly (Tipperary, Labour)
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I paraphrased.
Alan Kelly (Tipperary, Labour)
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The additional €500 million? What is that for?
Alan Kelly (Tipperary, Labour)
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Is it substantiated or acceptable to say none of that will go to the contractor?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Yes, so it is not a statement. In my opinion it is a difficult statement to stand over. I call Deputy Murphy.
Catherine Murphy (Kildare North, Social Democrats)
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Thank you. Good morning to the witnesses. We meet again, as Deputy Kelly said. The two things people want to know is when the hospital will open and what it is going to cost. Mr. Gunning told us in his opening statement that the primary driver for the cost increase on the project has been the ongoing delay in the completion of the project. That is the first time that I can recall that he has said that very deliberately in an opening statement.
Mr. Gunning also told us that the board is using all contractual levers. An issue that has repeatedly arisen here is what is described as assets on site. I say that is people on site working rather than just assets on site. The board has no control over that unless there is something in the levers that allows that to happen. What levers has the board that can bring this project to completion?
Catherine Murphy (Kildare North, Social Democrats)
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Mr. Gunning is using the words "encourage the contractor".
Catherine Murphy (Kildare North, Social Democrats)
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There is a gigantic deficiency in this contract in terms of controls or penalties to bring this contract to a conclusion. The lack of people on site has been an ongoing problem right from the word go.
When the Government announced the extra €512 million, which is a ginormous amount of money, it said it would not be allocating any more money, but this project is not going to be completed within the lifetime of this Government. With court cases, disputes that still have to be settled and new claims that will come in, is Mr. Gunning confident there is sufficient headroom in that €512 million? Would he give us a guarantee on that? I want to hear a guarantee on that.
Mr. David Gunning:
I certainly cannot give a guarantee. I cannot foretell or forecast what is down the road. What I can say is that our forecasting and scenarios that went in as the underpinning of the capital request and capital increase were very thorough and had provisions, as would be expected, prudently, for some further time movement in relation to project completion. There is provision in there. There is additional contingency in there. Already there is a provisioning within that for all the items in the PwC report: the additional management requirements, systems and provisional sums. Inflation is now within the number. If the Deputy remembers, in the past, inflation was outside the number. We have been very comprehensive in pulling all that together.
Catherine Murphy (Kildare North, Social Democrats)
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I understand inflation is part of the contract. Had the project been completed on time, however, the board would not be in a position where inflation would have impacted to the extent it has.
Catherine Murphy (Kildare North, Social Democrats)
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On the 393 non-conformance reports that were issued by the employer's design team inspectorate, who is on that inspectorate?
Catherine Murphy (Kildare North, Social Democrats)
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So it is across the disciplines.
Catherine Murphy (Kildare North, Social Democrats)
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I just want to drill down here on this. On 26 March, there were 61 non-conformance reports to be closed. Six of the reports are being disputed by the contractor. The reports relate to things like not having a formal cleaning plan and the voids having material in them, which I would have thought was pretty important from the point of view of health and safety, and-----
Catherine Murphy (Kildare North, Social Democrats)
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Yes, particularly given that it is the hospital. Are any of those going to delay the completion of the hospital?
Catherine Murphy (Kildare North, Social Democrats)
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Please give me a brief response.
Mr. Phelim Devine:
There is a very robust quality management system in place. The contract demands that BAM put that in place. That is operated by the inspectorate team that Mr. Gunning just explained. Issuing non-conformance reports is part of that system. There are non-conformance reports, which are significant issues that need to be addressed by the contractor, and there are observations, which are minor snags. There are 61 open at the moment - they get raised and they get closed - but they will all be closed, including anything that is in dispute, prior to substantial completion because otherwise the contractor will not reach substantial completion. On a weekly basis, the design team works with the contractor, the contractor makes a submission to say, "This is how I might deal to close this", and that is approved or not. Then the work is done and it is signed off. Therefore, none of those will impact substantial completion. They should not impact substantial completion. The contractor needs to get them closed.
Catherine Murphy (Kildare North, Social Democrats)
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Is there a cost associated with these?
Catherine Murphy (Kildare North, Social Democrats)
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Will the witnesses remind us what the quantum is of the case that is before the court? There is another case where the proceedings have not yet progressed. Is there a value on both of those? It is not an ultimate value that the court will come to but what have they claimed?
Mr. David Gunning:
The first one was initiated by the development board. That is the phase B and structure. In that situation, the contractor was claiming that the instruction received was invalid. This was an issue which the development board felt it could not allow to sit unchallenged and that is now in front of the High Court. As I said, discovery is ongoing. As to when it will be resolved, it would be optimistic to say 2025. There is a counter claim and money involved in this. I can provide that detail but I just do not have it at my fingers.
Catherine Murphy (Kildare North, Social Democrats)
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If Mr. Gunning would provide it -----
Catherine Murphy (Kildare North, Social Democrats)
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The board has a date from the contractor but it does not have any of the details that substantiate that date for an additional three months. I heard a comment today that it is definitive there will be a three-month delay and that has been said by the Minister. Is the board confident? I do not believe it could be if it has not seen the detail of the additional three months. When does it expect to get that detail?
Mr. David Gunning:
There is a process laid out in the contract of how this works in terms of when the ER finds there is a non-compliance, she has to formally direct the contractor. It has a fixed period of time within which to respond. As to whether or not it responds in that timeframe, I would say that it has not happened in that timeframe-----
Catherine Murphy (Kildare North, Social Democrats)
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I was going to say that I have a memory of that and it was months before it complied.
Catherine Murphy (Kildare North, Social Democrats)
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Why would you not be cracking the whip at this stage? Why would you not be withholding money? This is absolutely scandalous. An additional €512 million has been put in to complete this hospital. Mr. Gunning is telling us that the things that are adding to the cost are the delays. Why would you not use that lever of withholding payment to more or less get the contractor to crack the whip and get this hospital completed? Aside from the financial part of it, we need this hospital and we have needed it for a long time. I do not understand why that, at least, would not be used in a robust way to get the contractor's attention to get this hospital completed.
Mr. David Gunning:
Withholding is about getting a programme. As I said, all options are on the table in relation to that. No decision has been taken. We are in a process that involves the contractor, the ER and the development board. I set out timelines for that and, as I say, all options are on the table.
The secondary point is that once you have that programme, does the contractor comply with that? I think that is the more important issue and as we have-----
Catherine Murphy (Kildare North, Social Democrats)
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But it is not.
Catherine Murphy (Kildare North, Social Democrats)
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In this contract - not in a contract - because we see it all the time with road projects that if you do close lanes for a particular number of days, there is a cost. That is clearly not in this contract.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Thank you, Deputy. I will continue on that. On penalties, is Mr. Gunning telling us that no financial penalties have been levied on the contractor to date? Is that correct?
Brian Stanley (Laois-Offaly, Sinn Fein)
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In Mr. Gunning's opening statement, which I read carefully last night again, it seemed to indicate that the board is using all levers. Is that right?
Brian Stanley (Laois-Offaly, Sinn Fein)
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We accept that. Those are the tools that they were handed. What the opening statement and what Mr. Gunning has just confirmed to me tells me that the taxpayer, the Government, the State and the board, and Mr. Gunning is the representative of the Oireachtas and the public there, does not have the necessary levers built into this contract to levy penalties against the carry-on that has gone on on that site where less than half the workers who should have been there were there? Mr. Gunning said in his opening statement that delays have driven inflation-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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I think some of us in this room have made this point before. It does. We will come back to inflation in a minute. There has not been one penny. This company has not suffered one penalty of loss because of any of this. Can we establish that is the case? From what Mr. Gunning said, that is a fact.
Brian Stanley (Laois-Offaly, Sinn Fein)
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This is outrageous stuff. This is absolutely outrageous stuff. Mr. Quinn is representing the Department here this morning. Was either Mr. Quinn or Mr. McKeith in situ in the Department of Health when this contract was being awarded? Did they have any role in this?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Who oversaw this in the Department of Health?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I am trying to figure this out. I want to go back a bit and figure out where the buck stops. As some of the members alluded to earlier, there is also a national maternity hospital to be built. I think we all accept that there has been substantial inflation in the wider economy and in the construction sector given forces beyond our control like war and Covid but the point is about us not being able to stop this from happening in future and us continuing to get into large-scale projects with tens of thousands of moving parts. From previous answers here, and I am trying to depersonalise this, Mr. Gunning has not been able to hold them to account in regard to the number of workers on site, which impacts on timelines, or costs. There will be claims, and I have accepted that here in the past, but my God, I refer to the number of them and the amount they are coming in at. We know there are high value claims, and the witnesses have alluded to that in the past. High value claims could be €10 million or they could be €100 million. I know the witnesses have to be careful and I do not expect them to put a figure on that here today but the taxpayer is left wide open here. We have had no penalties to date. We know the contractor has not complied with the work programme. We know from previous hearings of this committee that only a fraction of the workers who should have been on site were there at any given time. We know the original completion dates have been missed by a country mile. We know the Government has had to put in what is called an enhanced budget of €0.5 billion and now we have a completion date of February 2025 for substantial completion of the building. Given what has gone on, is that date realistic? Be realistic.
Mr. David Gunning:
I always attempt to be fully honest with the committee in my assessment of these matters. I have already said that in the absence of full detail in relation to the programme, and the fact that we do not have the details to support the date, I am not in a position to convey the certainty that the development board would like to have in respect of that date without that level of detail.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I am sure there are legal advisers and technical people who advise the board. Have the board’s legal advisers and other people who are involved in the technicalities of all of this examined and drilled right down to see if there are any instruments or levers, to use Mr. Gunning's word, that can be used to get the contractor to comply at this point?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Let me follow on from that. Does that advice indicate that you are not going to be able to keep the contractor to the commitment in respect of February of next year?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Let us refer to penalties for the sake of the public.
Mr. David Gunning:
I know. Just to be clear, however, penalties are unenforceable in a legal sense. Again, our legal advice is very clear on that. That is the lever in the contract regarding compliance with the date. Under the contract, the contractor is required to make regular and diligent progress to deliver the project in the earliest possible timeframe. That is what is required. That is in the public works contract, which is what we are implementing.
Brian Stanley (Laois-Offaly, Sinn Fein)
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We know that all of those have been missed.
Mr. Quinn, who is from the Department, is obviously keeping a close eye on this. I ask for his point of view and for those of the Secretary General and the assistant secretary. Is it his assessment and that of the Department that there has been too much risk and that all the risk in terms of timelines and costs has been loaded onto the board, the Department, the State and the taxpayer? This contract was left with too many loose ends and moving parts.
Mr. Eamonn Quinn:
As Mr. Gunning stated, this contract is based on a public works contract. That is what is required of us under the official guidelines. This is what we have to do. To do anything different would be to create an even greater risk because we would be moving into a space with people who are unfamiliar with contractual agreements.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Is Mr. Quinn identifying flaws in this?
Mr. Eamonn Quinn:
There are definitely issues with public works contracts and we have clearly called those out before. We have historically sought to engage with the Government construction contracts committee, GCCC, the Office of Government Procurement, OGP, and the Department of public expenditure to highlight some of those issues.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Careful notes are therefore being taken of this so that lessons can be learned for future contracts.
Brian Stanley (Laois-Offaly, Sinn Fein)
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It is safe to say that lessons have been learned and flaws have been identified. Substantial flaws have been identified in this contract.
Brian Stanley (Laois-Offaly, Sinn Fein)
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That is fine. Mr. Quinn might use different language than I do. In terms of the substantial change to the completion date, what does he think the cost implications will be?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I will call on Mr. Gunning in a moment, but Mr. Quinn and the departmental officials are monitoring this. That his job, as CEO. What extra costs are we talking about in respect of the substantial completion date?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I wish to ask Mr. Gunning about the figure of €2.24 billion. He stated that the board is using all levers but, to date, it has not been able to use those levers stop the runaway train. Is he in a position to say that this may run beyond the figure of €2.24 for construction, commissioning and having patients and doctors in situ?
Mr. David Gunning:
I can only comment on the figure of €1.88 billion, which is the development board’s element of that. As I stated earlier - I think it was in response to Deputy Murphy's question - we have undertaken many scenarios that fed into the amount of money that we requested from the Government. Those scenarios involved contingencies and various other elements, as well as sweeping up many items that were excluded from the 2018 approval. I cannot take account of a scenario, such as a new Covid pandemic or something that is off the charts. In terms of where we are, however, we are confident that we can deliver the project within the figure of €1.88 billion.
Brian Stanley (Laois-Offaly, Sinn Fein)
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That includes the substantial build. What are the outstanding risks? What are the big retrieving risks Mr. Gunning sees at this point?
Brian Stanley (Laois-Offaly, Sinn Fein)
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What are numbers two and three?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Are there other factors?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Does Mr. Gunning foresee technical problems?
Mr. David Gunning:
Mr. Devine spoke of the NCRs and the issues involved there. We have a good process in place. It is really important that this hospital that will last for 100 years or more. It is really important that when they hand it over to us, it is as perfect as we need it to be. I do not see issues there. We have a process. Issues are arising, and Deputy Kelly mentioned some of those. The Cathaoirleach will remember that when we were before the committee previously we discussed ventilation. That issue has been addressed. There were numbers thrown around to the effect that it would cost €30 million, but the cost of fixing it was less than €1 million.
Brian Stanley (Laois-Offaly, Sinn Fein)
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There might be a few of a different nature, but I will come back to them later. I call Deputy Ó Cathasaigh.
Marc Ó Cathasaigh (Waterford, Green Party)
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I apologise that I missed some of the contributions. use I was speaking in the Dáil, so I apologise if I repeat some questions that were put previously.
Deputy Kelly began by citing “Room to Improve”. Unfortunately, a different programme comes to mind here. It is one of the episodes of "Killinaskully" in which the Pat Shortt character is selling concrete frogs. The garda character asks him, “How much are they?” and the Pat Shortt character replies, “Well, that depends, is it for you or is it for the HSE?” There is a real element of that here.
I feel deflated. The Chair was quite forceful in his contribution, but I feel deflated as a taxpayer and a parent because we are in so deep here. Thankfully my children are in good health. I have not had the need to use the services of a hospital for them as yet. Touch wood, I am in a lucky situation. Yet, God Almighty, how would a parent who has a child with complex needs and who needs these kinds of services feel watching these proceedings. We are in too deep. It is not as though we can cut ties and say “Well, do you know what lads? Forget about it”. It is not throwing good money after bad. That would be unfair to say because we need this hospital. Yet, to hear about the dates and the budget slipping in the manner in which they have at meeting after meeting is incredibly dispiriting. I am sure Mr. Gunning and the Department have the exact same feeling, and perhaps to an even greater degree.
The question about penalties for the slippage in date has already been asked. Maybe I am wrong. I had been getting updates on my phone. Are penalties being applied? One contractor is taking part in a slow bicycle race. Will it doing so mean that it will take a hit in the pocket?
Mr. David Gunning:
I will respond to that. There is a liquidated damages provision within the contract. That provides for what is referred to as a pre-estimate of the loss that the development board will experience. That will arise once we understand the full delay. It is at that point that we can attempt to levy. To be clear, it is not just a question of us taking the money. There is a process to go through. I fully expect the contractor to oppose that process.
Nonetheless, we have a strong position on that. It is not without challenge. That is the liquidated damages clause. That is the significant item we have in the contract relating to non-performance in respect of the timeline.
Marc Ó Cathasaigh (Waterford, Green Party)
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Regarding that timeline, what is the baseline date? We see it slip and slip. We are now hearing February 2025 for a substantial completion date, which is a difficult date to believe when we do not have a baseline programme. If we are pursuing the contractor for these damages after the fact, what is the baseline against? What was the expected date?
Mr. David Gunning:
The contractual completion date was originally August 2022. That is the baseline. Covid moved that out to November 2022. The shutdown and some additional time that was awarded by the conciliator pushed that out to November. The contractual stake in the ground is November 2022. I cannot remember the precise date. Dates get counted from there to the substantial completion date, whenever that arises.
Marc Ó Cathasaigh (Waterford, Green Party)
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Okay, so we can expect the process after the fact, and probably a contested process after the fact, to seek-----
Marc Ó Cathasaigh (Waterford, Green Party)
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Which will cost time and money, as all of these things do. The last time Mr. Gunning was with us, he was quite sanguine about the number of contractors on site and the substantial completion date we had been given at that time, which has slipped as of this morning. He felt that, through robust engagement with the contractors, he was seeing enough boots on the ground to make that timeline credible. At the moment, we have a shifting date, back to February 2025. We have no updated programme. From Mr. Gunning’s view of the activity on site, are the contractors serious about getting this work completed in the anticipated timeline?
Mr. David Gunning:
I wish to respond on a couple of points the Deputy raised. This date has been provided and, yes, we need the substantiating data so we can really understand what the position is. It is also important to point out there are about 1,150 people turning up to work every day at the site, and we have to acknowledge their efforts. We are making progress but it is not at the level we would like. The question is whether it will be at the level that will deliver the February 2025 date. I cannot guarantee what the date will be. As you get to the end of the project, the window closes. That is the nature of these things. I cannot say when that window will close, but we are certainly getting closer as the work progresses. Members have seen the photographs of the good and the bad. We submitted to the committee pictures of areas that are finished and we then have areas that are still in progress. We have to eat this one bite at a time to get it closed and done.
Marc Ó Cathasaigh (Waterford, Green Party)
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Regarding when Mr. Gunning was supplied this, I assume that in preparation for his appearance before the Committee of Public Accounts today, he engaged with the contractors and told them, “We will be answerable to the Oireachtas; please give us updated substantial completion dates,” or whatever it is. When did that process happen? Where my question is going with this is there is no updated programme for Mr. Gunning to be able to validate this. When did the contractor come back to him and tell him the new date was February 2025? Was that plucked out of the air? Did the contractor tell him that earlier this week because he needed to have something to give to us when he came before us today? I refer to the idea that they gave Mr. Gunning a month on a calendar. There is no way for him to respond to the questions Deputy Kelly put to him earlier about the confidence he has in the date unless he has actually had a chance to properly review the updated programme. I ask Mr. Gunning to give us an idea of how the interaction came about whereby this date of February 2025 arrived in his opening statement.
Mr. David Gunning:
There are two parallel processes here. There is the employer’s representative, who is the independent person acting to look at and examine the baseline programme and the programme on an ongoing basis. I will go back. At the end of September 2023, a new programme, which indicated October 2024, was submitted. In April of this year - I can get the Deputy the specific date - the employer’s representative wrote to the contractor and said the programme is no longer compliant and directed it to submit an updated programme. It is not that they are just writing at each other about these things. There is an ongoing engagement of workshops between the employer’s representative and the contractor’s programming team to move forward and discuss these issues. That is one process.
Separately, under the contract, the contractor is required provide regular progress updates to the employer's representative and the development board. The February date was provided this month in one of those updates.
I know we discussed this at one of these meetings previously. We have not typically communicated publicly every change that happens on a monthly basis because sometimes it goes out and comes back and various other things. We have only provided dates that are an outcome of the baseline programme, if you like - the programme itself. Given where we are today, and this committee, we wanted to share the most recent information we have.
Marc Ó Cathasaigh (Waterford, Green Party)
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When was that most recent information provided to Mr. Gunning?
Marc Ó Cathasaigh (Waterford, Green Party)
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I am stating the obvious but it becomes clear that the relationship between the development board and the contractor is not the one that we would hope for, whereby Mr. Gunning could pick up the phone to somebody and say, “How are you there, Tom? How are things going? What is the latest?” Of course, it has to be a formalised process because of the amount of money we are spending. Certainly in this committee we see a lot of fly-by-night arrangements that lead to bad outcomes in the long run. However, it speaks volumes about the relationships that exist here.
Mr. David Gunning:
I wish to comment on that. There are engagements at multiple levels. There is the worker level engagement of people getting on with the job and building the hospital. Issues arise and decisions have to be made, for example, that a switch needs to be moved from there to there, and then it is agreed to move the switch. We are trying to make sure the building and getting it done proceeds and that the contractual processes and the row about the money does not get in the way of it. From my point of view, as well as that of Mr. Devine and other members of the senior team, we have good working relationships with our BAM equivalents. The past four weeks has probably been some of the most intensive engagement with them on all these topics. There is a working relationship. I want to make that point clear.
Marc Ó Cathasaigh (Waterford, Green Party)
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Good. That is better than what was existing in my head, so I am glad Mr. Gunning clarified it.
Alan Kelly (Tipperary, Labour)
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I just looked this up. This was covered in the media on 14 February. The Irish Times reported, “Mr Donnelly was adamant was that none of the funds [the €500 million] would go towards claims made by BAM.” I do not think that statement can be stood over. That is just absolute garbage. As a committee we should write to the Minister and tell him to withdraw this. He was either playing games or he is ignorant. This committee has shown that that is the most ridiculous statement the Minister has probably ever said. Obviously a component of the extra €500 million - I would suggest a large component of it - has to be the settling of claims. “Mr Donnelly was adamant that none of the funds would go towards claims made by BAM.”
Brian Stanley (Laois-Offaly, Sinn Fein)
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Given the number of moving parts in this project, I do not think anybody - the Minister or God almighty - is in a position to state that, so we will come back to it.
Alan Kelly (Tipperary, Labour)
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Exactly. I agree totally. I just wanted to make that point. I also believe we should write to CHI and get an update from it. Mr. Quinn said that some work, which I accept, would have been going on in parallel in respect of the six to nine months commissioning. We might get a status report from CHI on that. How many months has it cut off that nine months? That would be interesting.
I understand a task force was set up recently with regard to reflected ceiling plans, RCPs.
For the members of the public listening in to the committee, essentially this is where there had to be changes to the ceilings across the hospital because what was put in initially did not meet current requirements, building regulations and fire certs - in other words, exit signs, fire components and all of that sort of stuff. Is that correct?
Alan Kelly (Tipperary, Labour)
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Just so the layman or laywoman among the public know, how many changes are required?
Alan Kelly (Tipperary, Labour)
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It is just a figure that is needed.
Mr. Phelim Devine:
I think it is fair that the public hear the context. There are some late changes required to the ceilings of the hospital and that is to ensure it is fully compliant with fire regulations mainly. There are three principal components of those changes that are required. First, there are smoke detectors. The Irish standards state that a smoke detector must be 500 mm away from a bulkhead or 1,000 mm away from a supply grill. There are cases where they are 480 mm away and we have taken the view that we are going to be 100% compliant and move it by 20 mm.
Alan Kelly (Tipperary, Labour)
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Okay, that is one.
Mr. Phelim Devine:
That is the first thing. There are 1,200 smoke detectors and there are tens of thousands of these in the hospital that have to move. The second issue is that fire exit signs, like the one at the door of the committee room, are located in the centre. As there are so many components in the hospital ceiling, such as sprinklers, smoke detectors, text displays for nurse calls so in a crash they can get them, Wi-Fi points, DAS points, and cameras, some of those are obscured. It is a very hard thing to get right in a drawing. When they are physically put in, you look down and see that the text display is in the way. Therefore, they have to move. To be exact, there are 400 of those that are either moving and there are new ones being introduced-----
Alan Kelly (Tipperary, Labour)
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In total, how many changes have to be made?
Alan Kelly (Tipperary, Labour)
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I asked a question. I apologise but I am caught for time. How many changes in total have to be made?
Alan Kelly (Tipperary, Labour)
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Is it 2,000, 3,000-----
Alan Kelly (Tipperary, Labour)
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Regarding light fittings, has there been any situation with that case or with others where the board made a decision - presumably the witnesses or Mr. Devine himself given his role - that it needed to go after a contractor or a subcontractor for its insurance because it was felt what was done did not meet the requirements or it was unhappy with it. Has the board ever bypassed the contractor and said it needed to go for their insurance in relation to any aspect of the project?
Alan Kelly (Tipperary, Labour)
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That is fine. I return to something that was said earlier on and regarding the whole employer representative, ER, side of things. I understand we have the figures but we need to give a health warning as regards ER, not related to the decisions but on the quantum. There is a huge number of claims that are outstanding. I think it is €600 and something odd million. I am only using sporting parlance by way of explanation but if an award was made by the conciliator of a nine-figure sum - in other words, the contractor won and the board lost - would that raise alarm bells in the Department?
Alan Kelly (Tipperary, Labour)
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I look forward to discussing something like that again with Mr. Quinn.
My colleague has very eloquently stated that the relationship between the contractor and the board is not - and I know it needs to be formal - on the friendliest of terms, for want of a better phrase. Has the Department, which is nearly like a referee itself, engaged any other formats, methodologies or people to try to get to what is going on here in the dynamic?
Alan Kelly (Tipperary, Labour)
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I know that. I used it as-----
Alan Kelly (Tipperary, Labour)
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Okay. I apologise. I should not have used the word "referee". Has the Department used any other mechanisms outside of what we know about? Are there any other mechanisms, people or strategies the Department has used to try to see what is going on here?
Mr. Eamonn Quinn:
Through the revised Government arrangements that were approved following PwC, we now have a project assurance function that is led by my colleague, Mr. Martin McKeith, in the lead director function in the HSE where they then interrogate the functions of the development board and its advisers as well. I know where the Deputy is coming from with the reference to referee. The point I was trying to make is that-----
Alan Kelly (Tipperary, Labour)
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It is probably the wrong word.
Mr. Eamonn Quinn:
I do not protest the word but I am just being very clear on that. The reality is that the National Paediatric Hospital Development Board is statutorily responsible for engaging and contracting to deliver this hospital. There is a contractor who has done everything it can to negotiate directly with Government to get a blank cheque. We cannot allow that.
Alan Kelly (Tipperary, Labour)
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That is fair enough.
Mr. Eamonn Quinn:
In reflection of what the Deputy is saying with the Minister's quote, I am not familiar with the quote but I get that. When due diligence is done and the board has determined what it needs to cover some of the issues that were not addressed in 2018, it is really important that there is a very clear marker laid down here. This money is not going to BAM Ireland.
Alan Kelly (Tipperary, Labour)
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In reality, we have all proven that this is not the case. I have one question for Mr. Gunning. The figures he has given the committee are up to the end April. How many conciliatory decisions or opinions that the board is considering have there been since April? I just want the number. Is it one or up to five?
Alan Kelly (Tipperary, Labour)
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I direct this question to Mr. McKeith, Mr. Quinn or Dr. Curtis. I do not know who will answer it. One of the things that came up at the last committee meeting was that a new patient record system was going to have to be ready to go. Where are we with that? Is that substantially done? Obviously, that would affect the timelines as well.
Alan Kelly (Tipperary, Labour)
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I ask Mr. Quinn to be brief.
Alan Kelly (Tipperary, Labour)
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Is it substantially complete?
Alan Kelly (Tipperary, Labour)
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Will Mr. McKeith just give us a percentage?
Alan Kelly (Tipperary, Labour)
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With training and everything, I expect that but I want to know has the background work been done.
Alan Kelly (Tipperary, Labour)
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My last question is for Mr. Gunning. It is two questions in one in the sense that they overlap. I am not saying this is the right thing to do but was a design freeze at a certain point to finish the hospital ever considered? Based on what Mr. Gunning said previously, I know the board wants to get the hospital to a standard that is best in its class, but was it ever considered? The second half of that question is on whether it was ever considered that this project would be handed over in phases. I am not saying on either of those points that this would be the optimum for me or the right thing to do. However, things change. Perhaps the dynamic of what has happened here has changed. Was there ever a suggestion of a design freeze or was it considered? For people watching the committee meeting, a design freeze is essentially where instead of changing some things, such as Mr. Devine outlined earlier as regards the sprinklers, the job would be finished. Was there ever a consideration of a design freeze in order to get this done because, as my colleague said, there are kids waiting on this hospital across the country. Was it ever considered that it would be handed over in phases?
Mr. David Gunning:
These are two points regularly put forward by the contractor regarding how things might possibly evolve over the coming months. The phasing of a handover or an opening is a matter for the hospital operator, CHI. While I do not speak on its behalf, there is very little appetite for that. The idea that you would have a hospital operating in one part and workers working in another part, just does not work for infection control and other purposes.
Alan Kelly (Tipperary, Labour)
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What about the design freeze?
Alan Kelly (Tipperary, Labour)
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I know, but it is just added on here.
Catherine Murphy (Kildare North, Social Democrats)
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I go back to the issue of substantial completion. At the engagement last time, the board could not get a date for substantial completion. Was funding actually withheld at that stage?
Catherine Murphy (Kildare North, Social Democrats)
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But it did not actually withhold.
Catherine Murphy (Kildare North, Social Democrats)
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We are back at the same point again. It is kind of Groundhog Day-----
Catherine Murphy (Kildare North, Social Democrats)
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-----and it is threatening to withhold. Is the board actually threatening to withhold?
Catherine Murphy (Kildare North, Social Democrats)
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How long with this process take?
Catherine Murphy (Kildare North, Social Democrats)
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Will it be "threaten to withhold", or "withhold"? It is "fool me once", you know.
Catherine Murphy (Kildare North, Social Democrats)
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It seems to me the contract is all one way. Now, the NPHDB did not write the contract-----
Catherine Murphy (Kildare North, Social Democrats)
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It just appears to me to be all one way, and it is not on the public side. Mr. Gunning said there were 1,150 people turning up for work. How many should be turning up for work?
Catherine Murphy (Kildare North, Social Democrats)
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How many?
Catherine Murphy (Kildare North, Social Democrats)
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It is irrelevant if we do not put the numbers on it.
Mr. David Gunning:
The development board has no levers, to use that word, to say to BAM how many people it should have on site. I will put it this way. The progress over the past eight months, which is probably leading to this extension of time, has been in the mid-sixties. That is what I reported to this committee last time - 60% of the plan.
Catherine Murphy (Kildare North, Social Democrats)
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There is 40%. We can add 40% on to the 1,150.
Catherine Murphy (Kildare North, Social Democrats)
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Resources being people.
Catherine Murphy (Kildare North, Social Democrats)
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Is CHI included in any of the contingency?
Catherine Murphy (Kildare North, Social Democrats)
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Is it all included, to the best of Mr. Gunning's knowledge?
Catherine Murphy (Kildare North, Social Democrats)
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Maybe the Department will answer that, because it would have released the €512 million. Is CHI included in that?
Catherine Murphy (Kildare North, Social Democrats)
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That is €106 million of a contingency.
Catherine Murphy (Kildare North, Social Democrats)
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CHI is included in that.
Catherine Murphy (Kildare North, Social Democrats)
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There have not just been expensive lessons learnt from the point of view of patient potential, but also financial. On the national maternity hospital, is there anything that would preclude this contractor from tendering for the national maternity hospital and winning a tender for the national maternity hospital based on the experience here with the national children's hospital?
Mr. Eamonn Quinn:
I will address that, but I first thank the Deputy for bringing up opportunity costs for patients here. That is the biggest thing for us in the Department. As well as the financial costs we need to see patients in this hospital.
Under national EU procurement rules, as I understand them, the answer is "No".
Catherine Murphy (Kildare North, Social Democrats)
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The same contractor could tender and win the contract for the national maternity hospital even given the experience we have had with the national children's hospital.
Mr. Eamonn Quinn:
I believe under procurement rules that is true for any project, not just a construction project. For the record, the national maternity hospital is also well advanced in its tender process. The second stage of the tender process went out last month and we are in that process with the tenderers at the moment.
Catherine Murphy (Kildare North, Social Democrats)
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What levers have they put into that contract?
Mr. Eamonn Quinn:
There was significant engagement by the project team on the national maternity hospital with the NPHDB. There was good engagement from Mr. Devine, Mr. Gunning and his team to inform the issues I mentioned with the contract. The project team took a lot of those on board and took them directly to the GCCC and the Office of Government Procurement to get approval for changes to that contract.
Catherine Murphy (Kildare North, Social Democrats)
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Mr. Gunning said that penalties in the contract cannot be enforced. What has he recommended in terms of penalties that can be enforced?
Mr. David Gunning:
Having the liquidated damages at an appropriate level and making sure it is enforceable. Liquidated damages need to be calculated and are only enforceable if they are a genuine pre-estimate of the loss. It is about thinking through these matters from a legal point of view and making sure they are fully covered in the contract.
Catherine Murphy (Kildare North, Social Democrats)
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In terms of the liquidated loss in this case, we know the project was to be substantially complete and handed over by November 2022. That is not going to happen until 2025. That is what the board will be looking at in terms of an adjudication it thinks will be challenged.
Catherine Murphy (Kildare North, Social Democrats)
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How does it quantify that?
Catherine Murphy (Kildare North, Social Democrats)
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Has that been quantified, per week, at this stage?
Catherine Murphy (Kildare North, Social Democrats)
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Will he just remind us?
Catherine Murphy (Kildare North, Social Democrats)
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Will he come back to us with that before the meeting ends?
Catherine Murphy (Kildare North, Social Democrats)
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Will he come back to us before the end of the meeting? When will the quality control process be complete, or is that an ongoing thing?
Catherine Murphy (Kildare North, Social Democrats)
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Right.
Catherine Murphy (Kildare North, Social Democrats)
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Is the board closing off parts of it?
Catherine Murphy (Kildare North, Social Democrats)
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How many of them have been closed off at this stage?
Mr. Phelim Devine:
The last time we were here, we talked about doing interim room inspections. The rooms were not fully complete. We are now talking about final room completions. There are 5,560 rooms and spaces within the hospital, if you ignore the basement and so on. The contractor has brought about 1,600 of those close to completion standard. They are not at completion standard; they are close to completion standard. There is a process between the contractor and the site inspector team we talked about earlier and the employer's representative to sign off benchmark rooms within the hospital. That states what standards are set out in the contract and that must at least be reached.
Catherine Murphy (Kildare North, Social Democrats)
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Have any reached that threshold?
Catherine Murphy (Kildare North, Social Democrats)
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How many?
Catherine Murphy (Kildare North, Social Democrats)
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That is 60 out of 5,560.
Catherine Murphy (Kildare North, Social Democrats)
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That brings it to approximately 4,000 outstanding.
Mr. Phelim Devine:
There are another 4,000 rooms that are not close to the standard, but they are working on them. From the progress photographs issued ahead of this meeting, the Deputy will see the level of the standard that is already in the hospital. Those rooms are between approximately 80% and 90%, so it is now all about finalising the rooms, doing the final finishes and offering that to the design team. The design team will inspect them to ensure they are at the right standard and then there will be de-snagging or final remedial works required before they are saved, they are complete, and the door is locked. The idea then is that you reduce the hospital down.
You lock the door, you get that finished, and you move on to the next one. It is a process.
Catherine Murphy (Kildare North, Social Democrats)
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It seems like 4,000 out of 5,560, and even at that there are 1,500 that have not got to the threshold that are completed. There are 4,000 rooms where there is still quite considerable work outstanding, even if it is only 10% or 15% of the work. Is February of next year optimistic?
Catherine Murphy (Kildare North, Social Democrats)
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In what context is it achievable?
Catherine Murphy (Kildare North, Social Democrats)
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Is it possible to do that with 40% below the assets on site?
Catherine Murphy (Kildare North, Social Democrats)
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It is not a question. I want an answer. It is a question I am asking.
Catherine Murphy (Kildare North, Social Democrats)
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I am not asking Mr. Gunning about controlling the resources. I am asking him if, in his estimation, it is possible, to achieve that by February when we are 40% below the assets that should be on site.
Brian Stanley (Laois-Offaly, Sinn Fein)
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At the present rate of progress, and I am thinking of the capacity, the number of people on site and progress as it is now and has been throughout this year so far, can Mr. Gunning say that it is possible, according to the current level of progress?
Brian Stanley (Laois-Offaly, Sinn Fein)
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It slipped by 40%.
Brian Stanley (Laois-Offaly, Sinn Fein)
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It slipped by 40%, approximately.
Brian Stanley (Laois-Offaly, Sinn Fein)
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If you are driving a car at 100 km/h and you are going to Cork, you will get there at the set time of what it takes, but if you drive at 60 km/h, it will take longer. Yes? Okay. We will suspend the meeting for ten minutes-----
Catherine Murphy (Kildare North, Social Democrats)
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I think the stick has to be taken out with regard to non-payment or withholding payments in this context. We are only codding ourselves otherwise.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Deputy Munster has told me she has a Dáil engagement later on, so to facilitate her, I am going to allow the meeting to run for ten minutes more before we break. Deputy Munster can go ahead.
Imelda Munster (Louth, Sinn Fein)
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I thank the Chair. I want to come back to that completion date. I think, last year, Mr. Gunning told us it was October and now we hear it is February 2025. Is that February 2025 date including the service activation period? No.
Imelda Munster (Louth, Sinn Fein)
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Mr. Gunning said a few minutes ago that February is achievable.
Imelda Munster (Louth, Sinn Fein)
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It could be done and dusted in February apart from the nine months' service activation.
Imelda Munster (Louth, Sinn Fein)
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Yes, which has to happen before it opens.
Imelda Munster (Louth, Sinn Fein)
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The normal is nine as opposed to six.
Imelda Munster (Louth, Sinn Fein)
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Is Mr. Gunning solely getting his information from BAM with regard to the completion date, February being the achievable one?
Imelda Munster (Louth, Sinn Fein)
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We know that. All I am asking is, when Mr. Gunning looks for a completion date and he is told February 2025, that comes from BAM.
Imelda Munster (Louth, Sinn Fein)
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At any stage did Mr. Gunning engage with or speak to subcontractors?
Imelda Munster (Louth, Sinn Fein)
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It is just that I am curious that, with delay after delay, it is said that subcontractors have said there is not a hope in hell of reaching the target of February 2025. Given BAM's record, and we do not even have to go into that, Mr. Gunning is not liaising with seeking advice from the subcontractors who are dealing with sections A, B and C and are tasked with the completion of it overall in whatever they are subcontracted to do. Mr. Gunning has had no engagement with them. He deals directly with BAM. BAM says February 2025, Mr. Gunning comes in here and tells the Committee of Public Accounts that February 2025 is achievable, yet nobody has had a word with the subcontractors who are saying there is not a hope in hell.
Imelda Munster (Louth, Sinn Fein)
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Sorry, time is of the essence. I just want to know. Mr. Gunning has not engaged with subcontractors regarding a completion date.
Imelda Munster (Louth, Sinn Fein)
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Right, okay.
Imelda Munster (Louth, Sinn Fein)
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When BAM gave that date, did Mr. Gunning ask it for a report from its subcontractors so that board can see first-hand if it is accurate?
Imelda Munster (Louth, Sinn Fein)
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At this stage, you still do not?
Imelda Munster (Louth, Sinn Fein)
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Was Mr. Gunning not curious, when BAM gave the board another date, that he would have asked to see a full report outlining the subcontractors' analysis of when they would be completed? He did not go in for the finer detail. BAM said October 2024, then February 2025, and that was it. Was there no delving into it or no thoroughness?
Imelda Munster (Louth, Sinn Fein)
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So the board has reports from the subcontractors?
Imelda Munster (Louth, Sinn Fein)
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Which has amounted to nothing because the completion date has changed. It is defunct.
Imelda Munster (Louth, Sinn Fein)
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The board does not have it yet.
Imelda Munster (Louth, Sinn Fein)
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When did they direct BAM to supply it?
Imelda Munster (Louth, Sinn Fein)
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The middle of April. Okay.
Imelda Munster (Louth, Sinn Fein)
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I am sorry. What was that? BAM what?
Imelda Munster (Louth, Sinn Fein)
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Did the board chase it up with BAM? Has it a record of chasing it up with BAM since April?
Imelda Munster (Louth, Sinn Fein)
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Just not dates.
Imelda Munster (Louth, Sinn Fein)
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With regard to the non-compliance, I think the last time Mr. Gunning said that 15% could be withheld for non-compliance. He said that the last time. There is a new plan of works. I think Mr. Gunning said earlier that the contractor is still non-compliant. Has the board withheld any percentage?
Mr. David Gunning:
Let me clarify. The 15% withholding is a measure open to the development board in the situation where the contractor has not provided the programme. As I mentioned earlier, this is one of the options currently on the table for us to consider, but there is a process. The ER has written to the contractor. The contractor needs to be given some time to respond. We need to then decide whether there is going to be an input from it, and then we make a decision. As I said, that type of decision is imminent. We are not at that point yet.
Imelda Munster (Louth, Sinn Fein)
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It is just that Mr. Gunning told us last year that this was going to happen, and now it is a year later and it is still imminent.
Mr. David Gunning:
No. Again, to clarify, we did withhold money at the end of 2020 and early 2021. In 2023, when we were here with the committee, we took all the necessary steps to withhold money and, in return, the contractor provided a programme. Once it provided the programme, there were no grounds then upon which to withhold money.
Imelda Munster (Louth, Sinn Fein)
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Has the contractor completed the programme?
Imelda Munster (Louth, Sinn Fein)
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Why the reluctance to withdraw a percentage? There is clearly some sort of reluctance.
Imelda Munster (Louth, Sinn Fein)
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Once, yes.
Imelda Munster (Louth, Sinn Fein)
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Would Mr. Gunning accept the public perception that the contractor is running rings around the NPHDB?
Imelda Munster (Louth, Sinn Fein)
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With all the claims and the date being pushed out further, is there a chance we could be looking at €3 billion by the end?
Imelda Munster (Louth, Sinn Fein)
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Could we be looking at €3 billion?
Imelda Munster (Louth, Sinn Fein)
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Could we be looking at over €2.5 billion?
Imelda Munster (Louth, Sinn Fein)
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I admire Mr. Gunning's optimism. He is probably the only one in the country at this stage who thinks that. It is the most expensive hospital in the world.
Imelda Munster (Louth, Sinn Fein)
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That is one thing I would agree with.
Imelda Munster (Louth, Sinn Fein)
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At the last meeting I asked about the problems the team has had and, in light of the maternity hospital project and others, whether it would issue a report to the Department, the HSE or another body about all of the problems it has encountered. I was told that would happen. Has that process begun?
Mr. Eamonn Quinn:
I thank the Deputy. We developed significant engagement with the project team for the national maternity hospital, as I said previously. There were a number of workshops held last year. Those informed suggestions around contract issues, which were brought to the Government construction contracts committee, GCCC, and the Office of Government Procurement, OGP, earlier this year to inform the tender process that is now under way.
Imelda Munster (Louth, Sinn Fein)
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We probably do not have time now to go into the changes and recommendations that were made and what was implemented. Maybe the witnesses can furnish the committee-----
Mr. Eamonn Quinn:
To be fair, there is a contract and tender process under way. I would not want to make a commitment to the Deputy to say something I will not be able to supply if it would prejudice that tender process. We need a solid and good tender process for the next project, so I will not make that commitment.
Imelda Munster (Louth, Sinn Fein)
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Can the witnesses stand over the entire design of the project?
Imelda Munster (Louth, Sinn Fein)
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It is very strong. Regarding electric window openers, the ceiling runs from the ground to the sixth floor. Subcontractors said windows with electric openers were left out in all sorts of weather for over a year. If a problem arose with the windows in the glass ceiling which need to be opened or closed, whereby they could not be shut, a normal hoist would not suffice and a massive scaffolding operation would have to be brought in to the centre of the hospital to reach the roof, while the hospital remained in operation.
Imelda Munster (Louth, Sinn Fein)
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I am talking about the electric windows and the openers. I am seeking clarification. In a functioning hospital, if there was a problem with the design of those windows, in particular with the openers on the electric windows on the glass roof of the building, a scaffold would need to be set up inside the hospital, reaching to the top of the sixth floor and the glass ceiling, and that could be done without closing sections of the hospital.
Imelda Munster (Louth, Sinn Fein)
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Subcontractors have said it would-----
Imelda Munster (Louth, Sinn Fein)
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In what capacity?
Imelda Munster (Louth, Sinn Fein)
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There was a bags made of the air conditioning. That had to be changed.
Imelda Munster (Louth, Sinn Fein)
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It was an issue in the theatres.
Imelda Munster (Louth, Sinn Fein)
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The witnesses can say categorically that scaffolding will not need to be erected should a problem arise with the electric window openers in the glass ceiling of the roof of the hospital.
Mr. Phelim Devine:
What I am saying is that there is absolutely no issue with the AOVs and that it is the contractor's responsibility to make sure they are installed correctly in accordance with the performance specification. There is a very clear facilities management and maintenance strategy for all components all over the building to maintain it, and that is very clear for the contractor. There may be a location in the biome that could require scaffolding if a motor has to be replaced. I will have to check that. There are holding and support points and rails inside the biome to allow for all the glass to be cleaned and to hang from to replace a component.
Imelda Munster (Louth, Sinn Fein)
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Are we still on target for the 60 ICU beds?
Brian Stanley (Laois-Offaly, Sinn Fein)
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The meeting is suspended for ten minutes. We will come back to this after the break.
Brian Stanley (Laois-Offaly, Sinn Fein)
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We will continue with some of the issues that we were discussing earlier. I have a question for Mr. Devine on the issue with the windows. We have established there is a centralised system and if there is a fire, the windows would have to close automatically. We have established that, in some places, scaffolding might have to be put up to go the whole way up the six storeys. Mr. Devine said that, in some places, there are bridges and supporting mechanisms so it would not be needed for those parts. We do not want to get too technical about it because we are not technical people. As I understand it, it is a computerised system. Is that correct?
Brian Stanley (Laois-Offaly, Sinn Fein)
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That equipment would be very sensitive to moisture and we know it would be very easy to disrupt computers and electrical mechanisms. I saw photographs in recent days of some of the equipment that is being fitted to control the windows which was left out in the rain. I saw photographs where the equipment is damaged, and there is rust and water marks on the equipment. Has Mr. Devine seen that?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I know they are all installed. I will come to that in a minute. Is it correct to say that? My information, which is fairly reliable, is that despite the fact they were damaged - the people who were installing them may or may not have had any control over this - when people pointed out that there might be issues, they were told to install them anyway. Is that correct?
Mr. Phelim Devine:
I do not have information on that, but given that we have a large team of site inspectors, I am very confident that, if there is an issue with any damaged components that were sitting out incorrectly in an exposed environment before they were installed, a snag item will be raised with BAM to replace them and they will be replaced.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I am reliably informed that they were outdoors. I have seen the photographs, including of the damage done to them. I am also reliably informed that the people installing them pointed this out but were told to go ahead anyway.
Mr. Phelim Devine:
That might be an internal matter. Maybe BAM has told its subcontractors something. I do not know and am only speculating, as I do not have information on the issue. If our design team or the employer was aware of any such component, BAM would have been told to take it out and replace it because it would have been unacceptable and not in accordance with the contract.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I am also informed that there could be capacity issues in the overall system. Has anything like that been brought to the board’s attention?
Brian Stanley (Laois-Offaly, Sinn Fein)
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In the overall capacity of the mechanisms controlling the windows.
Brian Stanley (Laois-Offaly, Sinn Fein)
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This information is second-hand.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Would it have serious consequences for the project’s snagging and final completion?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I wish to ask about the snagging. Regardless of the project, be it building a house or something else, there is a snagging time, a warranty time and a bond.
Brian Stanley (Laois-Offaly, Sinn Fein)
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What is the snagging time on this project?
Brian Stanley (Laois-Offaly, Sinn Fein)
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And if it goes beyond that-----
Mr. Phelim Devine:
There is a defects liability period in the contract. In our contract, it is a bit longer than normal at 18 months. The reason we did that is because of the operation and commissioning by CHI. We need approximately a year for the building to be in operation just in case any tweaks are required.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I understand. That is acceptable. At 18 months, the period to address any problems that arise is fairly long.
We discussed the levers. Mr. Gunning mentioned several times that the board is using all of the levers to keep the contractor’s feet to the fire, for want of a better term, and ensure that work is done properly. To date, however, the levers available to the board have not been sufficient. We are nearing the endgame, which is where everyone wants to be. We need to get the hospital open. During what I would call the warranty or bond period of 18 months – the board probably has a technical term for it – what levers will the board possess as the project manager? Let us be honest about it, but faults will arise. The simplest of projects have faults and builders have to come back on site to correct small or large problems. With a large and technical project like this one, there will be many such problems. What levers has the board during the 18-month period?
Brian Stanley (Laois-Offaly, Sinn Fein)
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How much?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I am concerned about this. In the contract that the Department and the OGP oversaw, is it correct to say that there is only retention of €2.5 million?
Mr. Phelim Devine:
It is usually a percentage, but in our contract, the full retention amount is €5 million, of which 50% – the first moiety – gets released on substantial completion. The final moiety – the remaining 50% - gets released after the defects liability period once any outstanding issues are resolved.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Is there a risk that the contractor might see that amount as small change, given the scale of this project?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Does Mr. Devine agree that that is a weak lever, given the history of this project? There has been insufficient capacity, there have not been enough people on site, there have been delays and there is an absence of a programme to bring it to completion. Each time the board has appeared before us, questions have been raised about the work programme. That programme would show what stages would be carried out, what capacity was on site, what subcontractors were in place, how we would meet certain dates and what the potential risks were. I do not want to put words in Mr. Devine’s mouth, but given that the board has not been able to hold the contractor’s feet to the fire and the dates keep slipping wildly down a cliff, is it concerned that it will not have sufficient leverage during the 18-month bond period to ensure that the contractor complies, comes back to fix all the snags and leaves everything in tip-top shape?
Mr. Phelim Devine:
There are two aspects to that. There is a mechanism in the contract – ours is no different than the standard public works contract – in terms of the retention and how much that is. If there is a latent defect that arises afterwards, the contractor will still be under contract. It will be under contract for 12 years, so there is a mechanism whereby, if something occurs or needs to be rectified due to faulty workmanship, we can still contractually pursue the contractor for that.
Brian Stanley (Laois-Offaly, Sinn Fein)
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But the €2.5 million might not be keeping the contractor awake at night, given the scale of the project.
Mr. Phelim Devine:
I agree. The contractor may take a view on that, but in line with our responsibility, what we have in place is a very robust quality management system to police the contractor and ensure that what it offers and the standard of workmanship it provides are the best in class and meet the contract’s specifications.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Has the contractor indicated to the board when it will have the work programme? Mr. Gunning stated that there was a conversation on this matter in the past week. Before attending this meeting, the witnesses would have tried to get as much information on dates and so forth as they could and be briefed on what was happening. Has the contractor indicated when it will have the work programme? It will have to be a fairly good one to get this project substantially completed by next February.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Has the contractor even suggested a date or timeline? Will it be two months or three months?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Please do. There was a substantial completion date of August 2022, but that is history now. We are now in May 2024, and not only do we not have a firm date for substantial completion, never mind dates for commissioning and operation, but we do not have a plan or programme – call it what you like – from the builder setting out when that first date might be. The builder has not offered one, but I am sure-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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I take it that Mr. Gunning spoke to senior people in BAM in the past week.
Brian Stanley (Laois-Offaly, Sinn Fein)
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And he does every week. He must have told them that he was going before the Committee of Public Accounts and that one of the main questions would have to do with when the project would be finished. Was their reply to him that they could not even give him a programme of work?
Brian Stanley (Laois-Offaly, Sinn Fein)
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But Mr. Gunning asked them.
Brian Stanley (Laois-Offaly, Sinn Fein)
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When Mr. Gunning asked them where the evidence was, what did they say?
Brian Stanley (Laois-Offaly, Sinn Fein)
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When?
Brian Stanley (Laois-Offaly, Sinn Fein)
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It is terrible that it has not supplied it, even at this stage.
Mr. David Gunning:
It has provided a series of programmes but because of underperformance it tends to drift out of compliance. The programme is meant to reflect progress. If progress falls behind the programme, the programme becomes non-compliant and it could become non-compliant for other reasons. As I said, as of right now - I am repeating myself - we do not have that information.
Brian Stanley (Laois-Offaly, Sinn Fein)
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As soon as they give the board a programme and things become clearer, will Mr. Gunning come back to the committee with an update?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I welcome back our witnesses this morning and thank them for the information they have supplied. Things have progressed since our most recent engagement. It is clear from the imagery the board has supplied and from our site visit that things have substantially progressed, which is good to see, but so too have the costs and so too has the timeline.
I will take the Cathaoirleach's last point first. It relates to BAM's undertaking to the board that it will be February 2025. It could easily have been December 2023. That timeline has slipped. Is it not the case that there are no assurances at all that come February 2025 BAM will not come to the board and say that it could be February 2026?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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Correct.
Mr. David Gunning:
We have had some discussion around withholding moneys, etc., but in the context of actual compliance with the programme and delivering in accordance with the programme, we have talked about our how our levers in relation to that are liquidated damages. We have gone through that right from the -----
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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In a nutshell, would Mr. Gunning agree that the State is in a true bind here, contract or no contract? Whatever about elements and clauses of the contract, and repercussions of elements not being adhered to in the contract, the State is at the behest of BAM in order to finish this project out. Is that right?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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No, I appreciate that.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I will explain what I am trying to say. When we are sitting here at the Committee of Public Accounts in February 2025, Mr. Gunning might come before us again to say that BAM has now told the board that it will be June 2025 or December 2025 before this is substantially complete. It does not matter when or what year for the purposes of the point I am making. Is Mr. Gunning really telling us that BAM holds all the cards here? If BAM says at some future stage that the relevant date has changed again, must that simply be accepted as the case?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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That is the crux of the position. I know.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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In an ideal world, it would be someone from BAM sitting in Mr. Gunning’s seat. I am sure Mr. Gunning would love if someone from BAM were sitting in his seat, just as we would prefer to have someone from BAM in here. From what I am hearing - we also heard this at our previous engagement, as colleagues said earlier - the number of staff who have been allocated to this project has fluctuated, if I might put it that way. I am sure that is as frustrating for the board as it is for us, and indeed for the public and the Department. Everyone is ad idem here about wanting this hospital complete, but it is dragging on. The costs are extremely worrying. They were worrying when they went up initially. When I was a new Member in this House, I questioned whether we were talking about a children’s hospital costing in excess of €2 billion. I was told at that time that such a proposition could not be verified. We are now well in excess of that figure, which is very concerning.
Earlier on, Mr. Devine made the point following questions from colleagues that the tender put out initially was quite generic. I think this was in relation to exit signs, emergency lighting and other items that are required in the build. Am I correct in saying that when one goes beyond the generic need for product X, Y and Z and gets to specifics, the costs change? Do we have a problem with the State procurement and tendering process? In Mr. Devine’s view, is that ultimately where these costs went out of control?
Mr. Phelim Devine:
I suppose the public works contract has to comply with European law, which says that one cannot specify products and systems. One has to allow for that competition. One cannot really get away from that. That is the same for all public works contracts. The size of the hospital means that there is complexity when you bring all those systems and components together. With the best will in the world, there is a design intent that has a ceiling, a floor, a system, a facade and whatever, and there is a room specification. When you bring it together, ultimately things have to change. A component might be slightly bigger. There might be a slightly bigger box-out when you co-ordinate all the mechanical and electrical services. If that means more partition, that has to be paid for. This happens all the time in public works contracts. The level of change that the employer's representative has determined so far - €23 million, and with settled disputes €27 million - is of the kind of level that is normal. That is normal in a public works contract for these particular elements. While this is an employer-designed contract, the contractor is responsible for a huge amount of design such as the facade and many of the mechanical and electrical systems. It has fire-proofing responsibilities. It is not just about the employer. The employer and the contractor must come together and collaborate and that does cause changes. Some of the changes are initiated by the contractor and some by the employer.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I appreciate that but the costs when this hospital was first mooted are unrecognisable from what they are today. I understand that there are physical changes - we saw this when we were on site - and I accept that needs in the design have changed as well. Mr. Devine made the point earlier about the 23,000 new drawings and so on. I appreciate that things change. Anyone who has been involved in construction projects - big or small, residential or otherwise - will appreciate how things change. In terms of the change of the cost of this build, however, the Committee of Public Accounts has to question the underlying reason for the sizable difference. Even as we sit here, two years on from my own engagement with the witnesses, we still cannot put a final figure on what this project will cost – not even a ballpark figure – because it has just ballooned. That is not to say that this project is not needed or warranted. That is certainly not the case because we all want this, as I have said before. From tendering right through to the initial design, we have got the cost so wrong. Is it our tendering process that is wrong or was it the actual price tag in the initial phase?
Mr. Phelim Devine:
I think we have talked before about the two-stage process and all of that. When we got to the guaranteed maximum price, at the time of the Government decision to proceed with the project in 2019, there was a €909 million contract. That is what you have to measure from. Yes, there are lots of debates about what was right or wrong up to that point. From that point, the employer's representative determined the €23 million or €27 million in total to date. There will be further costs that will increase. There are issues with provisional sums that need to be rectified. We talked about that earlier. There will be additional costs going beyond that. Mr. Gunning talked about this earlier. In terms of the envelope of capital requests which have been sanctioned by the Government, we have run various scenarios which I will not get into. As Mr. Gunning said, we are reasonably confident that we can complete the hospital within that budget.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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We wish you well with that. We hope not to be in this position again with further increases. I have another question for Mr. Gunning. His opening statement referred to the fact that the board is co-ordinating the 52-bedroom Ronald McDonald House.
How does that fit into the project? It is obviously a not-for-profit building and organisation. It is not incorporated into the actual physical site but is across the road from it. In terms of the management of that particular part of the build, how does that fit into the overall project?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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It is not as big as some of the others.
Mr. David Gunning:
No, it is not as big. You can drive by that now and see the steel structures going up. It is proceeding very well. It will comprise 52 family rooms. We turned the sod on that in March and it is progressing. The funding for that was provided jointly through the charity and the State. The charity has provided €10 million and €18 million or thereabouts has been provided by the State. The development board is assisting. Obviously, we are working on behalf of the Department of Health and the HSE but Ronald McDonald House Charities is also involved. It has appointed its own design team but we have appointed, contracted and tendered for the actual building and are project managing the build on behalf the stakeholders, namely, the Department, the HSE and Ronald McDonald House Charities.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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Am I right in saying that there is underground connectivity between the hospital and the house itself?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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Would I also be right in saying that there are approximately 600 car parking spaces allocated at the children’s hospital and the families in those 52 units will be able to avail of car parking spaces?
Mr. David Gunning:
Yes, there will be spaces within the carpark that will be available to them. To be clear on the connectivity, the foundations for this were part of the BAM project. That is built and now Clancy Construction has come along and is building on top of that, but there is an interconnection. People can put on their nightgown, go down, walk through the car park and into the hospital to visit their sick child in his or her room. That is wonderful, in comparison to the situation in Crumlin, for example. People will be familiar with that house which is close to the hospital but this one will be fully connected.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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Yes and it is essential. I am aware of the house and of the necessity of those facilities but I just wanted to see how it linked in. Mr. Gunning has explained that BAM did the underground work, which would tie in the State but the State has also invested €18 million or thereabouts in the project.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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From the perspective of the public accounts committee, there is a lot more in this, as I am sure the development board can appreciate. A number of notes have been requested for today and going forward. I would suggest that the committee engages again with the development board, CHI and the Department of Health in the next couple of months. It is important to do that given where the project is at right now in terms of construction to ensure we are vigilant vis-à-vis the costs, overruns and any other challenges to both costs and the construction.
Brian Stanley (Laois-Offaly, Sinn Fein)
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That will depend on whether we are here in September.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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That is another issue all together.
Brian Stanley (Laois-Offaly, Sinn Fein)
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It is in the hands of the Government as to whether there will still be a public accounts committee then.
Alan Kelly (Tipperary, Labour)
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I concur with Deputy Devlin. The next time we are here, if we are - Deputy Devlin probably knows more about that than the three of us, although I would say the lads here are looking for an election - CHI should be here along with the development board because there is an overlap now.
Before the break I asked Mr. Gunning how many conciliation decisions there have been since the end of April. How many were there?
Alan Kelly (Tipperary, Labour)
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It cannot be a huge number. Mr. Gunning should probably know this.
Alan Kelly (Tipperary, Labour)
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Are we dealing in-----
Alan Kelly (Tipperary, Labour)
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I do not understand why we cannot be told about these decisions. The board knows about them, as does the contractor. I presume Mr. Gunning has full confidence in the conciliator. Does he? For the record, Mr. Gunning is nodding. If the contractor knows, the development board knows and the conciliator knows, then why does the taxpayer or the Houses of the Oireachtas not know?
Alan Kelly (Tipperary, Labour)
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When will it be revealed to us and to the public?
Alan Kelly (Tipperary, Labour)
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Mr. Gunning has told us about others.
Alan Kelly (Tipperary, Labour)
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We might some advice on this because there are huge sums of money involved. I suggest that we ask parliamentary legal counsel or others for advice as regards why we cannot get this information. If the contractor knows, the delivery board knows and the conciliator, in whom Mr. Gunning has full confidence, has made a determination, it seems a bit odd that we cannot get that information.
Brian Stanley (Laois-Offaly, Sinn Fein)
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To clarify, the figure has been settled at this stage. Is that correct?
Brian Stanley (Laois-Offaly, Sinn Fein)
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There are two fairly substantial ones-----
Alan Kelly (Tipperary, Labour)
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The conciliator has made a decision.
Alan Kelly (Tipperary, Labour)
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Has the conciliator made a decision?
Alan Kelly (Tipperary, Labour)
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According to Mr. Gunning's own table, the next step is to go to the High Court.
Alan Kelly (Tipperary, Labour)
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If the conciliator has made a recommendation, that is the final recommendation.
Alan Kelly (Tipperary, Labour)
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If the board does not challenge this, can it reveal to us what the-----
Alan Kelly (Tipperary, Labour)
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I know that. I am just wondering when we are going to find out. It is very important. There is a health warning - pardon the pun - in relation to the figures we have here and in relation to the board's figures versus the conciliator's figures.
Alan Kelly (Tipperary, Labour)
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I did not say that. I was not putting words in Mr. Gunning's mouth at all. That is just my view. Would the Department be aware of the conciliator's recommendations?
Alan Kelly (Tipperary, Labour)
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Would the Department be aware of the conciliator's recommendations over the last month?
Alan Kelly (Tipperary, Labour)
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That is not my question. My question is whether the Department would have been made aware of the status of the conciliation, the recommendation by the conciliator and the amounts involved.
Alan Kelly (Tipperary, Labour)
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So the Department is not aware of any recommendations.
Alan Kelly (Tipperary, Labour)
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Mr. Quinn is not aware of the amount in the recommendation made by the conciliator. Is that right?
Alan Kelly (Tipperary, Labour)
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The Department does not know. If any of that is wrong, I ask the witnesses to revert to me.
On the baseline programme that has been outlined, and we will not go back through the change orders, the design changes and all of that sort of stuff, is it the case that there is no baseline programme out to February or March? How many change orders have been made in the last few weeks or months? If there are changes still happening concurrently, is it not the case that the contractor is not going to provide a final baseline determination as to when this is going to land because it does not know when the changes from the board are going to come? There have been so many changes over the last few months that the contractor is not going to put its head on the block and say it will be February or March.
That is what I am taking from this discussion.
Alan Kelly (Tipperary, Labour)
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I am asking the questions.
Mr. Phelim Devine:
The changes that have been made are final changes that are intended to make the billing compliant. The contractor is well aware of these changes. There has been ongoing communication with the contractor for months now. We give them a list of the changes that are coming. Then there is a process of finalising the changes involved. That goes to the employer's representative, who issues change order. The contractor is well aware of all the changes that come down the line. It is well aware of all the issues with the ceilings, etc. It has been aware of them for months. A tier 1 contractor should be well aware of how to programme for these changes that are coming. That is what it is supposed to do.
Alan Kelly (Tipperary, Labour)
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I understand. I get it. I agree with Mr. Devine.
Mr. Phelim Devine:
There is one final point I need to make. The reason the programme has been moved out has nothing to do with changeovers. We spoke of room completions and of getting rooms to the right standard. Commissioning is four months behind the baseline programme, which is now deemed non-compliant. That is the reason we have gone from October to February-----
Alan Kelly (Tipperary, Labour)
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There is a process by which the board can make changes. Mr. Devine calls it a tier 1 contractor, which I presume-----
Alan Kelly (Tipperary, Labour)
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I will accept his word on that. Is there a situation whereby technically it has to get a change order to do something? It might be aware of this coming down the line, but the development board actually has to formally give the order. I presume that is a standard process. I am not a quantity surveyor or a qualified builder of scale, but I presume that is the process. Until the actual change order with the amounts, volumes, etc., lands in its inbox, it cannot press go. They will not be able to say, “Well, we know this is coming”. Is that a fair assumption?
Has there been any change in the dynamic? I refer to a personnel change, although I will not get into the area of personalities, in the relationship. Has there been any change in the dynamic through personnel changes over the past number of years?
Alan Kelly (Tipperary, Labour)
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Has that been helpful?
Mr. Phelim Devine:
It has changed its team around. That is just one thing, but there has been no real dynamic change associated with that.
If you are well aware of change, you can programme the works. Yes, you might have to wait for the final drawing, but you know what will happen. It is important to say that when a change is issued by the employer, that means we are paying the contractor to bring in additional resources and additional supervision. It will be paid additional prelims in order to carry out the change. Therefore, most of the changes, including the recent change orders - and I have a list of change orders here – are all small. This is apart from the RCPs, which we talked about, and the smoke detectors in ceilings. Even with that change, we sat with the contractor. We said that we could argue over who is responsible for the change, but we said we would pay it a premium rate-----
Alan Kelly (Tipperary, Labour)
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That is fair enough.
Alan Kelly (Tipperary, Labour)
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I have a final point regarding what would be helpful. Since the maximum price was decided on a month-by-month basis, I ask for a spreadsheet - we do not need the full details - containing the number of design changes and change orders that have taken place from the gross maximum price date to today's date. This should contain month-by-month detail on the number of design changes. In other words, the figure of 23,000 should be divided in whatever way. I presume the representatives have all this at their fingertips. Obviously, it would be there. I also ask for change orders to be detailed month by month from that date until now. That should be supplied to the committee and that data would be incredibly useful to tease out all of this.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Can that be supplied to the committee?
Alan Kelly (Tipperary, Labour)
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I ask for the information on the change orders and the design. The figure of 23,000 should be broken down by month and the change orders should be broken down by month. That would be great. I thank the representatives very much for their evidence.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I call Deputy Catherine Murphy.
Catherine Murphy (Kildare North, Social Democrats)
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I ask for the figure in respect of the liquidated damages.
Catherine Murphy (Kildare North, Social Democrats)
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Does Mr. Gunning have a rolling figure for that?
Catherine Murphy (Kildare North, Social Democrats)
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Was that included in the contingency or headroom in the final contract?
Catherine Murphy (Kildare North, Social Democrats)
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Could the legal row cost more than the amount that is collected?
Catherine Murphy (Kildare North, Social Democrats)
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No, it certainly would not.
Mr. David Gunning:
Let us put it that way. Generally, - and I think everybody is aware of this - the way these things work is that at the end of a project like this, there tends to be a significant exchange of final account information. We had a very successful negotiation with the contractor in closing out the satellites. Much of the bluster that was there in advance became very real. Yet, I think we got value and we were happy with it. I will just say that is generally what happens.
Catherine Murphy (Kildare North, Social Democrats)
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We are talking about the 2022 accounts. It is now 2024, not that we should toast that fact. Note 2 in the report by the Comptroller and Auditor General states that at the end of 2022, the amount involved was €1.24 billion. Note 8 indicates further capital commitments of €217 million. We know that €40 million was allocated to get the board through that Christmas. Why were the accounts so late? Was it the case that the board was settling? What was the reason? From the point of view of what we are looking at, this is monetarily the most significant one, and it was late. Why was that?
Mr. David Gunning:
I am not sure that I have a worthwhile explanation other than to say that these things have taken longer. It was later in 2021, and I think it pushed into 2022. I know we are attempting to get 2023 done in a reasonable timeframe. We will commence the work quite soon. I think it will be in the summertime. We will get back to where we were but we did drift out of sync. I know of companies where they have to be turned around within months.
Catherine Murphy (Kildare North, Social Democrats)
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The committee deals with historical figures. When those historical figures have cobwebs on them, it makes matters way more difficult. This is particularly the case for this project because we could not determine whether or not it was going in the way it should have gone. We knew there was slippage all over the place. I will just say how unsatisfactory that was.
Catherine Murphy (Kildare North, Social Democrats)
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On the contract, because tendering is a very expensive process, contractors will only engage if they think they have a fighting chance of winning. There may be a contractor, for example, that went in low and made up the balance in claims. If that was the profile of how a contractor was conducting things, is that considered in the context of tendering for further projects? Is there any analysis in that regard? Can that be counted as a disadvantage to that particular entity when they are tendering? I ask this because there could be a double disadvantage here. In that scenario, others may not tender because they do not have a fighting chance. In that case, it is not a competitive process. It is not a process that should be competitive. Is that taken into consideration? There is no point in talking about learning lessons but then we do not learn the bloody lessons. Is that considered?
Mr. Eamonn Quinn:
I do not profess to be an expert in procurement legislation. I have my own expertise in other areas of law, but not in procurement. Yet, what it would say is that we are playing with the framework that we have to work with. We work within the European national rules. To answer the Deputy’s question, as I understand it, past performance is not a factor that can be considered. A tender must be considered on the presentation of the documents submitted during the tender process.
Catherine Murphy (Kildare North, Social Democrats)
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Even when there is that profile, I just-----
Catherine Murphy (Kildare North, Social Democrats)
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I know. There has to be an opportunity to challenge that. Mr. Quinn is talking about this tendering process being Europe-wide. If there is a significant flaw or a way that people can actually work or warp it to their advantage by the way they exploit loopholes or are very litigious, surely, that has to be challenged, even at European level. Have other countries looked at that? Is there any analysis of that being done?
Mr. Eamonn Quinn:
No, not to my knowledge. I know there is an issue in this regard. Part of the principal of fairness in public procurement is that it is open to competition and that all subjectivity is removed from the process. That is the principal as to why historic performance is not taken on board. However, I understand, from speaking informally to colleagues across Europe, that these are always issues which come up in the procurement processes.
Catherine Murphy (Kildare North, Social Democrats)
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I predict we are going to be repeating these mistakes, including in the building of the new national maternity hospital in the wrong place. While that is a completely different matter, when you look at the census of population and the demographics, babies are being born on the other side of the city, on the west side of Dublin and the M50, where the demographics suggest that a maternity hospital is required but we are building it on the east side. I do not buy this idea that we are learning lessons.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Is there something happening with the birth rate on the west side of the M50? Can Deputy Murphy tell us what is going on?
Catherine Murphy (Kildare North, Social Democrats)
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As the Cathaoirleach knows from his own constituency, there are young and growing populations.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Okay. I will not go into any more detail on it or ask any more questions in that regard.
Catherine Murphy (Kildare North, Social Democrats)
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No.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I have a couple of questions. How many arson attacks have there been on site?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Yes. There were a lot of them. Roughly, how many arson attacks were there?
Brian Stanley (Laois-Offaly, Sinn Fein)
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How many arson attacks were there?
Brian Stanley (Laois-Offaly, Sinn Fein)
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What was the cost of those arson attacks?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Okay, the contractor carried the costs. What is the legal bill to date? Roughly, how much has been spent to date?
Mr. David Gunning:
We were in the good position in that we had a moratorium in place for quite a lengthy period of time in which there were no disputes advancing and High Court cases were on shutdown. Looking at the 2022 year, legal expenses were €584,000 which was slightly up in comparison to 2021.
Brian Stanley (Laois-Offaly, Sinn Fein)
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What is the legal bill since the project started? We are a number of years into it.
Mr. David Gunning:
I will look to see whether I have the accumulative figure. If I do not have it, we can send it to the committee. We break it into two aspects. There are the ongoing legal costs which include administration, rental and other human resources advice and so forth. There are then the claims, defence, litigation, the contract and all the stuff where the big money and the court cases are. We will provide the committee with both of those aspects.
Brian Stanley (Laois-Offaly, Sinn Fein)
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That is fine. Roughly, how much is it? Is it in the millions of euro?
Brian Stanley (Laois-Offaly, Sinn Fein)
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How many millions of euro? Is it above €10 million?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Has the figure exceeded €10 million?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Okay. Does Mr. Devine wish to shed any light on this?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Okay. I ask the witnesses to send that figure to the committee, please.
Brian Stanley (Laois-Offaly, Sinn Fein)
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It is okay. He might be able to slip a note to Mr. Gunning. It is always important to have the person with the money behind you. Can we have that figure before the end of the meeting?
It is a very large building in question and there will be substantial energy costs. Are there projected annual costs for energy for this building?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I know that they fluctuate.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Can Mr. Devine come back to this committee with an estimate of that cost?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Okay. Will it be cheaper than the three hospitals?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I hope it will be because some of them were built in the century before the last century. I hope that, in the last 100 years or so, we have improved on energy. Have the witnesses looked at annual maintenance costs? It is a substantial-looking building. What kind of figures are we talking about for maintenance?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I ask the witnesses to come back to us on the issue of energy costs. That concludes our questioning.
Before I conclude, I wish to note that Deputy Verona Murphy sent her apologies after the meeting began and as a result, it was not acknowledged at the start of the meeting but I wish to acknowledge that now. I thank the witnesses for attending. I also thank the people from the Department, Mr. Quinn and Mr. McKeith, for attending, supplying information and preparing for today's meeting. I thank the Comptroller and Auditor General, Mr. Seamus McCarthy, and his staff for assisting the committee today. Is it agreed that the clerk will seek any follow-up information, as there is some further information witnesses have to come back to us with as well as carry out any agreed actions from the meeting? Agreed. Is it also agreed that we note and publish the opening statements and briefings provided for today's meeting? Agreed.
The meeting is adjourned until 9.30 a.m. on Thursday, 13 June 2024 when the OPW will be before the committee.
Gabhaim buíochas le gach duine.