Wednesday, 10 April 2019
Ceisteanna ó Cheannairí - Leaders' Questions
The PwC report on the very significant overspend on the national children's hospital represents a damning indictment of the Government's stewardship of the entire project. Red flags were missed, the public spending code was not adhered to, the project was poorly co-ordinated and controlled, there was fragmentation, poor communication and poor flow of information. That is all in the report. It also identifies a number of failures in the set-up, planning and budgeting of the national paediatric hospital project. It is a far cry from April 2016, when the then Minister for Health, the present Taoiseach, Deputy Varadkar, announced that it would cost approximately €650 million, including contingency and inflation. That €650 million has now risen to €1.7 billion with significant risks that it will rise further. The report outlines about six significant risks in the project relating to its budget, provisional sums, elements of the design yet to be finalised and inflation. If inflation goes up by 10%, there will be another €97 million increase. Construction inflation is currently at 7.1%. Other issues include schedule adherence and programme realignment.
When I asked the Taoiseach some time ago if he was confident that this would stay within €2 billion, he could not answer the question or give a definite view on that. The question that begs to be asked following the report is where were the Ministers for Public Expenditure and Reform and Health during all of this. They were clearly asleep at the wheel. They, along with the Taoiseach, made the glitzy announcements but challenged very little indeed. There was a change of governance in a letter in appendix G attached to the report. A new governance structure was established in May 2017. It is referred to in a letter, which I presume is from the Secretary General at the Department of Health. What led to that change of structure? Were the Ministers for Health and Public Expenditure and Reform alerted to that change of structure? There were problems emerging which were not shared. Did the Minister for Public Expenditure and Reform know about it? I refer the Tánaiste to recommendation 11 of the report, which now states with regard to all future capital infrastructure projects, that "A central assurance and challenge function should be established within Government to provide consistent challenge to and review of major [public sector infrastructure] projects". That clearly suggests that there was no such challenge in Cabinet relating to this project. Most people would say that that challenge function is the role of the Ministers for Public Expenditure and Reform and Health. It is clear that no one challenged anything about this project. I would argue that there was too much politically invested in the project. The announcements were made but no one asked any hard questions at ministerial or Cabinet level. We see that in other projects too. With this extraordinary revelation of shambolic management of this project, where is the accountability for the Ministers for Health and Public Expenditure and Reform? Is it still their position that they were not alerted at any stage to any of the red flags that the report talks about, or to the range of failings identified in the report?
Yesterday, the Government published the report of the independent review of escalation of costs for the national children's hospital carried out by PwC, and it fully accepts its recommendations. This project is very important for Irish children for generations to come. It is finally under construction and the Connolly urgent care centre element of the project is on target to open this summer. The report acknowledges that the project is unique in scope, scale and complexity, compared with any other health infrastructure project in Ireland's history. It identifies a series of weaknesses in set-up, planning, budget execution and governance. The report states that two thirds of the €450 million cost increase was due to an underestimation of the real cost of the project. It also highlights other factors such as VAT, delays and changes in regulation and building standards. It is recognised that a programme of work of this nature can never be fully de-risked. Nevertheless, the report finds that there were significant weaknesses which led to an escalation of costs, which became known far too late in the process. The report considered the alternative option of retendering the work, as some in this House have suggested we should do, and concluded that this was an unrealistic fallback option and would have increased costs further, in all likelihood resulting in no hospital being built at all.
Our priority now must be to finish the job on time to meet the 2023 opening date, contain further cost increases, and learn from the mistakes made in advance of other major projects such as the metro and the national broadband plan. The Ministers for Public Expenditure and Reform and Health will come back to Government and, I assume, to the House, in a month to outline an implementation plan for the recommendations contained in this report. These include strengthening the rules that govern public sector spending and providing essential assurance and challenge functions, which the Deputy has just referred to, to provide consistent challenge and review of major projects through their life cycle. If the Deputy reads this report, as I am sure he has, he will see that there is a very clear explanation of what happened here. This is not wasted money or an overspend per se. It is a gross underestimate of what it costs to build a hospital of this standard and type.
We need to understand the systems failures that allowed that to happen and to ensure that they are not repeated. That is why the Government is committed and has already started the process of looking at how complex and large capital projects are managed from a procurement perspective-----
I do not know if clocks are read differently in Cork but the reality is that time is prescribed here for questions. Can we please ask the question in the time allowed and answer the question in the time allowed?
Can the Tánaiste state with certainty that this will stay within €2 billion? The idea that it is a gross underestimation does not reflect what the report is saying. The report is saying there was a complete absence of control, incoherence, lack of information, red flags, poor governance and so on. It is similar to other projects. The Government has not learned. With regard to the broadband plan, €550 million is going to go to €2 billion or €3 billion depending on how it is calculated. It has happened with the event centre in Cork. The lesson is that when the Government tells everybody that this project has to happen without due diligence, everybody, including developers, knows they have the Government where they want it.
That is why a former Minister chased down one of the tenderers for broadband desperately to get them over the line because politically the Government has to get them over the line. The costs soar out of control.
The same happened here, there is no control. No one is asking any questions at Cabinet level. I asked the Tánaiste about the letter from the Department of Health of May 2017. What led to that change of governance structure? Why was a new governance structure required? Is it still the Government's position that no one raised these red flags at any stage-----
-----with the Minister for Public Expenditure and Reform or with the Minister for Health? Is that still the Government's position, that right up to December no one raised this? We know the Minister was told in the summer but apparently he told nobody. He told no one in the Cabinet that this thing had ballooned out of control and the Minister for Public Expenditure and Reform says that no one told him, not even the senior public procurement officer. All we heard on radio last night and today are the Ministers of State. The senior Ministers have gone missing on this project-----
The Minister for Health is before a committee as we speak answering questions on whatever people want to ask him. Senior Ministers have not gone missing. I do not have the detail on the May 2017 letter the Deputy refers to but I can get that for him.
I think the public does want to understand what went wrong here. From my initial reading of this report the explanation is pretty clear. Whether through incompetence or something else there was a gross underestimate of what it was going to cost to build a project of this scale, type and complexity. There should have been red flags earlier in the system.
It is not true to say that the mistakes that were made in this project have been repeated over and over with other projects. The Deputy is trying to link it with other projects that he does not even know the detail of in respect of the national broadband plan, for example.
-----from the N17, the Gort to Tuam bypass, Arklow to Rathnew bypass, the north docklands sewerage scheme and the Phoenix Park tunnel, these are all projects that were completed on time and on budget.
Our health service is in a state of perpetual crisis. Overcrowding at our accident and emergency departments and hospitals worsens by the day and yesterday the Midlands Regional Hospital in Mullingar became the latest hospital to announce it was at maximum capacity and to advise patients to stay away. That follows the dangerous level of overcrowding we have witnessed in Cork University Hospital, in University Hospital Limerick, Mayo University Hospital, Castlebar and Kerry and on and on it goes. Hospital waiting lists continue to grow and we now have the worst waiting lists in Europe.
Nurses and midwives have had to engage in industrial action, and general practitioners have protested outside the gates of Leinster House here because of the Government's refusal to adequately invest in primary care. Now to top it all we have the scandalous cost overrun in respect of the national children's hospital. All of this has happened on the watch of the Minister for Health, Deputy Harris.
The PwC report, published yesterday, shows that mistakes were made at every turn and illustrates how a risky and untested two-stage procurement strategy was pursued, which was known to have grave risks in terms of cost escalation. The sole advantage of producing a quick outcome was the opportunity for a Fine Gael Minister to cut a ribbon early.
The report highlights significant issues with governance and oversight and points to the serious matter of non-compliance with the public service spending code. It raises questions about the future of the project and the ability of the development board and the Minister for Health to deliver it within the current expected budget of €1.7 billion. Unfortunately, they have proved time and again unable to navigate this project and are responsible for the €450 million overrun which may grow.
The Taoiseach responded yesterday that the report makes for "grim reading". Ministers have said that they "accept all its findings". The Members of Government need to be reminded that they are not spectators to all of this, they are the authors of this fiasco and the people responsible. I understand that Government has accepted responsibility for this shambles. Who is accountable for the clear and gross incompetence, administrative, professional and political, and who will be held to account?
It is important to be honest about what has happened here. I understand the frustration and anger being expressed this morning and on many occasions in this House. We thought we could build a national children's hospital for much less than it will cost. That is what happened here. We unfortunately have seen a process that, until late last year, was proposing that a national children's hospital of this scale could be built for far less than it is going to cost.
This report makes very clear that most of the cost increase relates to a gross underestimate which should have been flagged much earlier and it does point fairly clearly to who was at fault in that regard and we need to learn lessons to ensure that if there are projects of this complexity, and there will be in the future, that this does not happen again. There needs to be a more proactive oversight of projects like this, that is clear. There needs to be more intense scrutiny of projects as the projects move ahead in terms of estimates, design, bill of quantities and so on. That is where this project primarily has failed to date. We now, I think, have a much clearer picture of what this is going to cost and we need to try to ensure that systems are in place to keep the cost within that final estimate that the Government approved in December. That is what happened here. People keep talking about waste and overspend. This money has not been spent yet.
This is a project that we now have a clear understanding of in respect of costs. This is a project that was grossly underestimated in terms of cost until relatively recently. Yes, the Government and politicians need to take responsibility for that.
-----to make sure we take account of that. The public spending code is being updated and will strengthen the steps required in public investment evaluation and management. As part of the review of the public spending code, the Department of Public Expenditure and Reform is conducting a full assessment of how cost estimation and management for capital projects could be improved. Updating guidance on better cost estimation and management resulting from this will complement and strengthen guidance on preparing all aspects of business cases for capital projects in the future.
This will strengthen the selection, design and delivery of capital projects, which is clearly necessary on the back of this report.
For those of us who live in the real world, let me set out what has happened. There has been a €450 million overrun and counting. Those are public moneys that will have to be found somewhere. This whole fiasco has been overseen by a Minister who is clearly incompetent. At this stage he is a lame duck Minister whom the Government, with the assistance of Fianna Fáil, insists on keeping in office. This fiasco has happened on the watch of an out of touch Government that is only concerned with cutting ribbons and is clearly not capable of managing public - taxpayers' - money. To add insult to injury, the Government refuses to afford any level of accountability. I put a very simple question to the Government. Who is accountable? We know that the Government is responsible, we know that its partners in Fianna Fáil are responsible for allowing a Minister or Ministers who are asleep at the wheel, as Deputy Micheál Martin puts it, to continue in office, but I would like an answer from Government on who is accountable for this fiasco, for these public moneys and for this gross incompetence. Who will be held to account and how will they be held to account?
The Government has been clear. The Minister for Finance and Minister for Public Expenditure and Reform, Deputy Donohoe and the Minister for Health, Deputy Harris, have said repeatedly that the Government takes responsibility for this underestimate and for the cost increase of this project. There have been people who have felt the need to step aside because of accountability. The chairman of the board has stepped aside and there is a new person in charge of leading the board for this project now, so there has already been some accountability.
With respect, the whole point of getting PwC to do the report that is now being published is to understand fully what happened here and who was at fault so that we can have accountability, we can learn lessons from it and we can put structures in place to ensure-----
Of course it is. The money has not been spent yet. Is anybody in this House seriously suggesting that we can build a hospital of this scale and complexity for less than what is currently estimated?
The issue is around how we learn lessons from a process that was flawed in getting us this far while at the same time building a hospital for children in Ireland. That is what we are doing and we have been open about that. We have asked PwC to put a detailed report together so we can act on the recommendations of that. It has done that independently and without fear or favour. Within a month, the two Ministers concerned-----
Today is the sixth day of national strike action in the National Ambulance Service. Two weeks ago, I had an exchange with the Taoiseach at Leader's Questions on this issue. There were the best part of 100 ambulance personnel in the Gallery that day to listen to his reply. I spoke to many of them afterwards. Some told me they thought his comments were arrogant. Others again described his comments as ignorant. These front-line workers took particular exception to the Taoiseach's claim that the Government and the HSE could not tolerate six, seven, eight or nine unions in the National Ambulance Service. There are two recognised trade unions in the National Ambulance Service that represent paramedics. More than 500 ambulance staff have joined a third union, not a sixth, a seventh, an eighth or a ninth. It is their choice, not the Government's choice. That trade union should be recognised.
The Taoiseach tried to close the door on all of that. Maybe he thought he could demoralise the workers and that they might call off their campaign. If so, he was sorely mistaken. Those workers are on strike again today, which as I said is the sixth day of national strike action this year. I ask the Tánaiste the same question I asked the Taoiseach. Will he instruct the HSE to talk to this union? They may not be in the Gallery today but these workers will be paying very careful attention to the Tánaiste's answer. They have asked their union to convene an extraordinary general meeting in eight days, on Thursday, 18 April. I dare say that the decision they make in eight days will be shaped in large measure by the Tánaiste's answer to this question. A reasonable answer is likely to meet with a reasonable response. A hard-line answer is likely to meet with a hard-line response. I would not be at all surprised if that were to mean a significant escalation of this dispute.
Given the refusal of the HSE to negotiate contingency plans face to face with the union for the strike days, a significant escalation of this ambulance strike could bring dangers to public health and to public safety. I do not want that and the paramedics do not want that, but if it happens, the responsibility will lie at the feet of the Government, a Government which has been playing hardball for a long time with a group of key front-line workers who provide a vital service and who are merely demanding a basic democratic right. On the picket lines throughout the country, the Tánaiste's reply to the question will be eagerly awaited.
The Government has not taken a hard or a soft line on this. The Government has largely stayed out of this dispute. It is a dispute between the union concerned and the HSE. The Government's policy on trade unions and management is, where possible, to try to consolidate trade union representation to make it as structured and as functional as possible. There is a dispute here that we all want to bring to an end. Ambulance workers and paramedics do a great job in difficult circumstances. It is a pressurised job and nobody wants to see people taking strike action repeatedly, which is what has happened here. The Taoiseach and I have said that this is a matter between the trade union concerned and management. There are other trade unions involved as well that have a different view from those who are striking, and from a Government perspective we want to see a resolution to this dispute without any further days of strike action because it is causing disruption. Even though people have been responsible in putting contingency plans in place, it is something that we would like to see brought to an end as soon as possible. We also want to make sure that the relationship between trade unions and management is one that makes sense and that is not spread across too many trade unions. I have never talked about six, seven or eight trade unions but there are a number of trade unions that already represent this group, primarily SIPTU, and the relationship between management and the HSE and the existing, recognised trade unions that represent ambulance workers is a relationship that functions well. This dispute is around a proposal that seeks to change those relationships and looks to create another recognised trade union for this cohort of workers.
I encourage both sides to try to find a resolution that can bring this to a conclusion. I do not think the Deputy is going to see a Minister intervene here to instruct the HSE. That is not the way in which these issues get resolved.
The Tánaiste says that the Government has taken neither a hard nor a soft line. That is not true. In this Dáil on 12 March, the Minister for Health indicated a possible softening of the Government line when he said he was hopeful that the dispute could be settled and agreed to requests that the Department would approach the HSE about this matter. I do not believe that any approach ever took place. I think the Minister was possibly overruled on this matter and more hard-line voices have taken over, including the voice of the Taoiseach on 27 March, when he said there would be no such talks. He was standing over the union-busting stance of the HSE in this regard. That is what it is, a union-busting stance. What the Tánaiste has done today is throw out the same mantras, the same robotic approach, the same attempts to distance himself from this dispute.
In reality, the Tánaiste has given a green light to the HSE to continue to refuse to talk to this union and to adopt a union-busting approach. What he has said will have been heard on the picket lines at St. Nessan's Road, Dooradoyle, Limerick, the Kinsale Road, Cork, Davitt Road, Dublin and right around the country. I believe it will inform the choices of those workers who have requested their union to summon an emergency general meeting in eight days' time. Their decisions on that day will be largely informed by the hard-line stance the Tánaiste has taken today. The consequences of that will be at his door and at the door of his Government.
We cannot make policy decisions on the basis of threats. My understanding of what is at play here is that the Psychiatric Nurses Association, PNA, states that its industrial action is in connection with, in the first instance, a dispute over the automated deduction of union subscriptions from members' pay. The HSE is refusing to facilitate payroll deductions at source of union subscriptions to the National Ambulance Service Representative Association, NASRA, as it does not recognise NASRA. Second, there is refusal by the HSE to engage in negotiations with the PNA or to recognise the PNA as union representatives when representing its ambulance personnel members. I can understand that there are people looking to change those structures. The Government's consistent policy has been one of consolidation of trade unions, such as happened recently in the formation of Fórsa. Giving any recognition to NASRA runs totally contrary to this objective and could indirectly lead to conflict with-----
Yes, workers decide what trade unions they want to be part of. That is true. The recognition of trade unions for management in terms of negotiation is a different issue and it is not an issue on which the Government gives an instruction, as the Deputy knows.
-----to ensure that workers get fair representation and to make sure there is an appropriate consolidation there so that the relationship between management and trade union leadership works for everybody. That is the objective.
The Tánaiste says the PwC report gives us a clear explanation of what happened here. I do not agree. The children's hospital problems are about construction contracts, cost management, cost measurement and general construction. I am wondering why the Government gave a crowd of accountants, who know nothing about construction, the job of reviewing it. Why did it not engage a construction and procurement lawyer with international experience and a top professional quantity surveying team from outside the State? Was the Government afraid it might not like the answer?
In the introduction to the report, PwC states that the scope of its work was limited to a review of documentary evidence made available to it and interviews with selected stakeholders and project personnel. It states that PwC has taken reasonable steps to check the accuracy of information provided to it but "we have not independently verified all of the information provided to us relating to the services". That is not to talk about the stuff they did not get. This is not an independent report; the authors are saying so themselves.
The Tánaiste is calling this a special project but it is not actually a very special project. It is a construction project; it is not unique. Hospitals get built every year across Europe. It does not justify an extra €450 million. The report states that the board should be less reliant on external advisers. If the Government is going to hire consultants and pay them, maybe it might hold them to account. I am sure the consultants have professional indemnity. I would be very surprised if the Government hired consultants who did not have that. If the legal people gave poor advice, they should be held to account. What was the legal advice regarding the contract? How did the board deal with the legal advice? The likes of Tim Bouchier-Hayes and Tom Costello were put on the board for their professional competence. Were they competent? The Taoiseach talks of the cost of delays, higher building standards, and the knock-on effect of VAT. Delays and changes are meant to managed. That is what people are paid for. There is always risk involved but the risk should be transferred onto the contractor. The contractor builds that into his price. Why did the price go up? Construction costs have gone up but not by €450 million.
The scary part is that we are only at the start of it. We have not got to the complicated part yet. It has gone up, it is out of proportion and the Government does not know where it is going, where it is going to land or what it is going to finally cost. The Government has the wrong contract in place and is refusing to revisit it. It is a terrible mistake not to revisit this. On page 25 of the report, PwC says that the Government should not revisit the contract. However, the report gives no evidence to back that up. There is no analysis of why it would not make sense to revisit it. PwC tells us that retendering the works would also require the replacement contractor to take on the basement and subsequent structural works and that it would create a number of contractual and legal challenges. It would not. That is nonsense. If I was building a 100-storey building, I would subcontract the piler. The piles would go in. I would not be putting them in; someone else would be putting them in. I would get them tested independently. That is what one does with piles. The contractors would have professional indemnity to back up where they were coming from. This does not make any sense. The Government needs to revisit it, as it is ridiculous.
The issue is what we do about it now. I do not believe, having read this report, that we can reduce the cost of building a national children's hospital by retendering at this stage. I know Deputy Wallace has been consistent in contesting that and I respect his view. PwC specifically tries to deal with this issue in the report. When the Deputy tells me that when we pay money for consultants to do a professional job, we expect them to do it properly, I would respond that I expect PwC to have done this review properly.
When PwC makes a clear recommendation that retendering would likely see an increase in cost or perhaps the hospital not being built at all, we have to take note and that is what we are doing. The Government is not going to shy away from the other failings that are clearly pointed to in this report.
We will change procedures on the back of this in respect of the mistakes that were made, primarily around the underestimation of cost. As someone who has been involved in the building industry, Deputy Wallace will understand the failings that happened there. There should have been red flags earlier in this process to highlight the fact that there were clear failings in the estimate of costs.
When those failings were flagged, the Minister responded by asking for more detail at the end of last summer. When he received the extra details, he came to Cabinet with a series of choices for the Government to make. When this report is read, it becomes clear that the choice we made in December, to move ahead with this project even though it was clearly going to cost a lot more, was the right choice.
This is a serious project and this Government is determined to deliver it. Mistakes were made in terms of the tendering process and the estimate process that gave a false picture of what this was going to cost. We have to ensure that this project concludes in a way that does not involve a significant increase in costs beyond where we are today. The work that the Minister for Health, Deputy Harris, and in particular the Minister for Finance, Deputy Donohoe, will be doing in the next month will help to ensure that is the case.
I do not accept that PwC is in a position to say that this should not be revisited, and I do not see the evidence for that in its report. It has not given us the evidence and has not done the necessary work. It was not the correct organisation to review this. It addressed the peer review issue by saying: "An external perspective, frequently in the form of a peer review, is often needed to help identify potential weaknesses and to provide assurances to the various levels of governance." That is another way of saying that people on the board did not have the competency to mark the design team. Who made the decision that there was to be no peer review team? We need to know.
The Tánaiste has said that there was a gross underestimation that should have been flagged earlier. Public benchmarking is an advanced estimation of what works would cost. I asked a question about whether public benchmarking was done for this project. I was told that no construction benchmarking exercise was carried out prior to the issuing of tenders in 2016. That is unheard of for a project such as this. Who made that decision? Is anyone going to be held to account? I do not understand that. I was provided with the spend on advisers on this project from 2013 to 2019. The quantity surveyors Bruce Shaw got €9.9 million. What has it done? Mr. Robert Watt appeared before the Committee on Public Accounts and said that his Department was given commitments relating to the approximate bill of quantities that underpinned the contract and the accuracy of those estimates. They did not turn out to be accurate. Who gave those commitments? Why will nobody answer these questions? The bill of quantities for the second stage was based on a preliminary design. That is nuts. It is not done in the engineering industry. It is supposed to be based on a detailed design. It is unheard of. Was the board competent? Was the legal advice good? Was it wrong? Are McCann FitzGerald going to be held to account?
The Government must be thanking its lucky stars that the world is currently being exercised by the spending of €100,000 which is being discussed at the Committee on Transport, Tourism and Sport. We have given PwC €450,000 and it has not provided an adequate report as far as I am concerned. We are looking at a loss of €500 million here if the issue is not revisited. I am convinced that this project can be completed for much less. The biggest problem now is that we do not know how high the price will go. The price is estimated at a certain level at the moment, but it will rise way beyond that price. If the final price rises above €2.05 billion it will be the most expensive hospital ever built in the world. It makes no sense not to revisit it.
The Deputy has said many times that we should re-tender and that we would save a fortune that way. I do not see the evidence to back that up. We have a report that was only published yesterday. We will now focus on putting a plan together to deliver on the recommendations of that report. Many of the questions the Deputy has asked are perfectly valid, including how the design team got this so badly wrong, including some of the companies to which the Deputy referred. The recommendation in the report of the need to challenge robustly design teams and stakeholders in projects such as this on an ongoing basis through to project delivery is something we need to factor in to the future management of projects and indeed tendering. That is what is going to happen as we put a plan together in the next month to deliver on the recommendations of this report. Many of the issues the Deputy is frustrated by are real and genuine. Many are consistent with what PwC has pointed to in this report. The Government now has to respond to that and make sure we learn the lessons.