The Committee met at 10 a.m.

Members Present (Deputies)

Deputy D. Foley in the Chair.

Mr. J. Purcell (An t-Árd Reachtaire Cuntais agus Ciste) , Mr. T. Dalton (Secretary General, Department of Justice, Equality and Law Reform) and Mr. B. Murphy (Chairman, Office of Public Works) called and examined.

Acting Chairman: Item No. 6 on our agenda is the 1998 Annual Report of the Comptroller and Auditor General and Appropriation Accounts: Vote 19 - Office of the Minister for Justice, Equality and Law Reform; Vote 20 - Garda Síochána; Vote 21 - Prisons; Vote 22 - Courts; Vote 23 - Land Registry and Registry of Deeds. Item No. 7 is the 1998 Annual Report of the Comptroller and Auditor General and Appropriation Accounts: Vote 10 - Office of Public Works/Vote 44 - Flood Relief.

Witnesses should be made aware that they do not enjoy absolute privilege and should be apprised as follows: attention of members and witnesses is drawn to the fact that, as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, grants certain rights to the persons who are identified in the course of the Committee's proceedings. These rights include the right to give evidence; the right to produce or send documents to the Committee; the right to appear before the Committee, either in person or through a representative; the right to make a written and oral submission; the right to request the Committee to direct the attendance of witnesses and the production of documents, and the right to cross examine witnesses.

For the most part these rights may be exercised only with the consent of the Committee. Persons being invited before the Committee are made aware of these rights and any persons identified in the course of proceedings who are not present may have to be made aware of these rights and provided with a transcript of the relevant part of the Committee's proceedings if the Committee considers it appropriate in the interests of justice.

Notwithstanding this provision in the legislation I remind members of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him identifiable.

We will resume on Vote 21 - Prisons, paragraphs 18 and 19. It has been decided that paragraph 20 which deals with compensation will be dealt with on 3 February when the Committee will hear from the Department and the Office of the Attorney General, the Office of the Chief State Solicitor and the Office of the Director of Public Prosecutions. Do you wish to make an opening statement, Mr. Dalton?

Mr. Dalton: I do not have anything to add to the statement I made on Castlerea on the last occasion.

Acting Chairman: Paragraphs 18 and 19 of the report of the Comptroller and Auditor General reads:

18. Castlerea Prison Perimeter Wall

The original cost estimate of the Perimeter Wall project at Castlerea prison prepared during the design stage in February 1994 was £3.57m while a second cost estimate prepared in April 1994 was £2.5m. Tenders were to be sought from 9 contractors short-listed from 46 firms who had declared their interest in the project. The Government did not agree to this restrictive tender approach and decided that an open tender competition be held.

Following receipt of 36 tenders the lowest one in the sum of £1.18m was accepted in May 1994. The successful tenderer had been declared as unsuitable when the original short listing assessment was carried out.

The completed contract price came to £1.2m and the project was completed in 1995.

In response to my inquiry as to why the cost estimates were so significantly higher than the contract price, the Accounting Officer of OPW stated that the estimates were guided by the cost of the Wheatfield Prison Wall, which although similar, was constructed differently but which was the only like project undertaken by the OPW in the modern era. The disparity between the estimate and the lowest bid reflects the keenness of the tender competition, and in particular the pricing approach adopted by the lowest bidder who, to quote the quantity surveyor's tender report "has adopted a keen price and risk taking method".

As to why a restricted tendering procedure was considered by the OPW to be appropriate in this case, the Accounting Officer stated that the tendering procedure to be used depends on the particular circumstances pertaining to the project. In this instance the size of the project and the nature of the work (i.e. on a security installation) restrictive tendering was appropriate. The Department of Justice Equality and Law Reform concurred with this view.

In the light of experience of this project, I inquired whether criteria for using restricted tendering have been revised to ensure that optimum value for money is achieved in the awarding of contracts. The Accounting Officer informed me that the OPW holds the view that the use of restricted tendering does not inhibit the achievement of optimum value for money. In addition, the existing criteria for using restricted tendering in the prisons context are not solely concerned with economic considerations (although they naturally form a large part) but also deal with issues particular to the security aspects of such projects.

19. Castlerea Prison Project

A design and build contract is one where the building client contracts with a developer/contractor to purchase a building complete in every respect and suitable for the intended purpose, at a fixed price. So as to ensure that design and build contracts are successful from an economic and cost control perspective it is vital that the outline design and specifications for such projects are clearly defined before tenders are sought so as to ensure that changes and/or additional works do not arise once the contract is awarded. However, during audit I noted that the Castlerea Prison design and build project which was contracted to cost £12.7m was completed at a cost of £14.34m.

In March 1994, the Government decided to provide accommodation for 150 male prisoners in Castlerea. The project involved the conversion of the existing hospital building to use as a prison and the construction of some new buildings. It was also agreed that the design and build method of procurement should be used for this project.

During 1994, the Office of Public Works (OPW), acting as contracting agent for the Department of Justice, Equality and Law Reform (Department), invited 19 contractors to apply for inclusion in the pre-qualifying process. Fourteen positive responses were received and, following assessment by OPW, were ranked in order of merit. In March 1995, tender documents were issued by OPW to 7 firms as:

- 4 had been ranked as highly suitable

- I had previous involvement in prison work

- I had previous experience of design and build developments and was located in the area

- I, though ranked 13th in the order of merit, had a design team on board who had experience of prison work in the UK and was classed as a "wild card".

Following discussion with the Construction Industry Federation, OPW reduced the list of invitees from 7 to 4 but no tenders were received as, in June 1995, the Government decided to defer the project. In March 1996, the Department requested OPW to revise the project to effect cost savings, to reduce the prison accommodation from 150 to 120 and to construct a less elaborate prison within the budget of £12-13m.

Tender documents were re-issued in November 1996 to the 4 firms previously selected by OPW and four tenders were received, ranging from £11m (by the firm previously ranked 13th out of 14) to £23.5m. The tender documents issued to the firms included a design brief indicating the extent of the work to be carried out and the costs to be covered in the tender proposal.

Following review by OPW, the lowest tender was increased to £12.7m to adjust for an error of £200,000, the inclusion of VAT at £1.38m and the provision of a bond at a cost of £75,000. It was also agreed that payment of £250,000 to the local authority for a sewerage connection would be paid by the Department, even though the tender documents issued to the four firms required its inclusion.

It was further proposed by the tenderer, prior to the execution of the contract in January 1997, to substitute precast concrete for concrete block work (as proposed by OPW) in the construction of cell walls as this would provide an additional 12 cells. The proposal was accepted, at an extra cost of £247,500, the work to be carried out under a separate contract.

The project was completed in 1998 and the full cost came to £14.34m comprising

£m

12.70 Design and Build contract

0.22 Sewerage Connection

0.25 Extra spaces as a result of change in cell block construction

1.17 Additional costs after work commenced.

In reply to my inquiry as to whether the assessment of contractors was satisfactory given that the contractor who was eventually successful was ranked 13th out of 14 in the order of merit, before being included in the short list of 4 who were invited to tender, the Accounting Officer informed me that:

The OPW have informed him that it is considered that the assessment procedure was satisfactory, given the factors applying at the time. The assessment was based on information and data supplied, on request, by the candidates and which was current and valid at the time the evaluation was carried out. The criteria employed were also considered directly appropriate to this particular project, given the procurement method proposed.

The placing achieved by the successful contractor following the assessment process did not necessarily reflect adversely on either that particular contractor or the assessment method used. The assessment did not, for example, conclude that this contractor, (or indeed any of the other candidate contractors), was incapable of carrying out the work, but merely said that, on an objective analysis based on the requirements of the project, the information supplied by candidates, the accepted criteria employed to evaluate that data and the OPW's own knowledge of the firm in question, this was the appropriate rating.

It should be noted that the successful contractor for the project had already tendered and completed successfully the construction of the prison wall at Castlerea, at a very competitive price. (see paragraph 18).

As a design and build contract should include all costs to provide a suitable prison building, I inquired as to why the proposed sewerage connection estimated at £250,000 and the additional spaces costing £247,500 were not included in the tender proposals received from the successful applicant. In this regard I noted that the contractor expressly excluded any local authority charges from his tender bid price contrary to the tender document requirement.

The Accounting Officer informed me that:

The sewerage scheme as originally designed and tendered for envisaged that there would not be a need for onsite sewerage treatment. The preferred option in dealing with this matter was to connect directly to the public system and this was the solution pursued by OPW. The existing public system did not have the capacity to deal with the volume of effluent from the proposed Prison so this option was not feasible. However, following discussions with the local authority and the Department of the Environment and Local Government, the Department and OPW became aware that there was a proposal, by Roscommon County Council, to construct a new public town sewerage scheme for Castlerea and in that context, it was logical that provision should be made to allow the County Council to connect the Prison directly into this new scheme and thus obviate the need for any arrangements to be made within the contract to deal with this item. An agreement was reached between the County Council and the Department that the cost, to the Department, of this connection and associated works would be £250,000. This would have had the dual benefit of removing a significant element of work from the project and also ensuring that there would not be a need to provide for a continuing expense in future years in maintaining sewerage plant on site. The County Council had no difficulty with this proposal and consented to allow the direct connection to be put in place.

As the project progressed through the construction phase however, it became apparent that, contrary to previous indications the new public scheme proposed for Castlerea was not, in fact, likely to be provided in the timescale previously indicated. The Department of the Environment and Local Government confirmed this to the Department as the contract for the Prison was nearing completion. In this context, the Department was obliged to make separate arrangements for the treatment of sewage. An onsite solution was eventually adopted, since neither of the public options was then feasible. The Department following a separate tender competition entered into a separate contract with a different contractor to install a suitable modern sewerage treatment plant exclusively for the prison at a cost of £220,227.

The proposal to provide additional spaces was not made by the contractor in his tender because his price was based strictly on the tender documentation supplied. The proposal was made separately, later, on his own initiative and was specifically approved by the Inter-Departmental Committee (Departments of Justice, Finance and OPW) overseeing the Accelerated Prison Programme on the basis that it represented good value for money and should therefore be availed of.

In reply to my inquiry as to why £1.17m additional costs arose following the award of the design and build contract the Accounting Officer stated that these arose in order to deal with new requirements arising since the original design and matters which could not have been foreseen at the outset but which were necessary for the proper completion of the works. These included: £768,000 for the inclusion of Palmreaders and Audio Visual Units on doors and gates, the provision of fibre optic cabling between blocks, variations to doors and additional fencing. As the project developed, the Department became aware of the use of Palmreaders and Audio-Visual Units to gates and doors in prisons in Northern Ireland and the UK, where they proved to be very effective and cost-cutting. The installation of these devices in Castlerea has achieved staff savings in the region of 20 staff posts at a saving of £380,000 per annum. This will result in substantial savings over the coming years. The variation on the doors, the fibre optic cabling, additional fencing and other works were items which were identified during the construction period and were necessary for the proper completion of the works and the smooth running of the prison.

£181,000 for sundry work including £78,500 for a water softening system. The water softening system was recommended by the technical engineers to prevent the build up of limescale on all the hot water equipment, which would have caused difficulties to the smooth operation of a working prison. The other principal items of expenditure were the provision of service ducts between Block B and the south west gatelock and the provision of firehose reels and enclosures. These were essential items which were required for the prison.

£114,000 to construct a surface water drain. (Though the tender documents issued to the four firms required the inclusion of such a drainage system in the tender price, I noted that the contractor specifically excluded provision for this in his successful tender proposal). Towards the end of the contract, it became apparent that a scheme of works would be required to rectify a problem which was then becoming apparent in relation to the system of surface water drainage. Historically, since the former hospital had been constructed, the surface and foul water systems had fed into one unified sewerage treatment plant. The system then in place was designed to cope with this. However, when the new prison sewerage system was constructed, it became apparent that this method of mixing foul and surface water would not be possible, since the more modern system proposed required that the two feeds could not be mixed. For this reason, it was necessary to put a project in place to separate the two and provide a separate outfall for the surface water, since it would, if it continued to drain into the sewerage system, interfere with the efficient operation of the sewerage system. The scheme of works to give effect to this proposal was put out to tender and was awarded, after competition, to the on site contractor.

£55,000 for securing and making good the west wing. During the course of the contract, the contractor used the former hospital west wing as his base of operations/site office. This meant that he did not have to set up temporary site office accommodation and thus avoided incurring costs (which would ultimately have had to be borne by the Department under the contract). Since the building had up to recently been occupied, a minimum of work was necessary to bring it up to an acceptable standard. No specific prison related use had been established for the building by the time the contract had been completed and the contractor vacated the site. In the interim, until a final decision was made on the long term use to which the premises would be put, it was decided that, in order to prevent the building from falling into disrepair, a scheme of works should be put in place which would weatherproof the premises and establish a stable environment so that the building fabric would not deteriorate. This was especially relevant given the onset of winter when, unprotected, the building might have been vulnerable to frost and rain damage in particular. The contractor on site was awarded the contract for the works required after a competitive tender process and the necessary protection was duly applied to the building so that it could remain in relatively good condition pending a decision as to its future.

£48,000 for a water main which was a requirement made by Roscommon County Council. The works included the extension and diversion of the water main with appropriate connections and junctions, as well as a 100mm spare duct in one of the trenches for future use.

The Accounting Officer also stated that consideration should be given to the fact that this was the Department's first experience of a design and build project. Because of the experience gained through this project, he has ensured that on current design and build projects underway there is a greater involvement of the Department's technical staff at all stages of the project. This leads to more cost effective and smooth running of the contract.

Mr. Purcell: The committee is resuming on paragraphs 18 and 19. During its examination of capital works undertaken at Castlerea Prison at its meeting of 2 December the committee decided to call in the Accounting Officer of the Office of Public Works in relation to the management of two projects at the prison. The Office of Public Works acts as agent of the Department in this matter. Paragraph 18 relates to the building of a perimeter wall around the old hospital as a prelude to its adaptation for use as a prison. Paragraph 19 relates to its conversion to serve as a prison with the construction of some new buildings.

On paragraph 18, the Office of Public Works estimated the cost of constructing the wall at between £2.5 million and £3.5 million. It decided to go for a restricted tender competition but the Government overruled this decision and directed that an open competition be held. In the event the wall was built at a cost of £1.2 million by the successful tenderer who had been excluded by the Office of Public Works from the earlier restricted list on the basis that he was unsuitable. As I said the last day this seemed to call into question the estimating methods used by the Office of Public Works, the appropriateness of a restricted tender procedure for this type of contract, and the quality of evaluation of contractors' capabilities by the Office of Public Works.

Paragraph 19 relates to a design and build project where the contractor undertakes to provide a building complete in every respect suitable for its intended purpose for an agreed price in line with an outline design brief and specification. It is worth mentioning a few points. Additional expenditure was incurred as a result of the contractor's proposal that precast concrete instead of concrete blocks be used in the construction of the cell walls. This provided 12 extra cells at an additional cost of about £250,000 which represented good value but it was achieved on the initiative of the contractor rather than the Department or the Office of Public Works.

An extra £750,000 or so was incurred in the installation of advanced security features such as palm readers and audio-visual units during construction. Again, this was good value for money as it reduces operating costs but one could question why these modern security facilities were not planned for in the first place.

There was also a problem of co-ordinating plans for sewerage with the local authority which ultimately led to the need to construct a sewage treatment plant exclusively for the prison. This will entail ongoing maintenance costs. A side effect of having the sewage treatment plant on site was that a surface water drain had to be built at an additional cost of approximately £114,000. That is a summary of the issues that arise from the two paragraphs in question.

Acting Chairman: Will you introduce your officials, Mr. Dalton?

Mr. Dalton: I am accompanied by Mr. Ken Bruton, finance officer; Ms Sylda Langford, equality division, and Mr. Seán Alyward, Director General, Prison Service.

Acting Chairman: Will you introduce your officials, Mr. Murphy?

Mr. Murphy: I am accompanied by Mr. Seán Benton, commissioner in charge of the projects and properties services.

Deputy C. Lenihan: I apologise for not being present the last day when an explanation may have been given for this but in relation to paragraph 18 will the Office of Public Works or perhaps the Department of Justice, Equality and Law Reform explain how a contractor who had been excluded from the earlier restricted list ended up being the lowest bidder? Is that usual?

Mr. Murphy: A number of points raised by the Comptroller and Auditor General have to be answered because they do not affect the facts of what actually happened. On the question of exclusion, there are two ways of tendering for a project, the first of which is open competitive competition where anybody can put in a price and set of proposals. Alternatively, there is a restricted method whereby the CIF asks for only four but we have agreed up to six and sometimes more tenderers who are asked by invitation after a kind of prequalifying stage where everybody is first asked if they want to take part in the competition to submit a tender. From that long list a short list is made, the names on which tender. To fail to get on the short list is not an implication of unsuitability. I note that in his report the Comptroller and Auditor General states that one of the tenderers was declared unsuitable. That is not so and we have pointed out this. The tenderer was not unsuitable. It is simply that by limiting the number of tenderers in a restricted competition, somebody has to fall off the table. In this case, we took the nine most suitable. We have a matrix for working out under various headings what the qualifications are to get into the restricted part of the competition. If one does not get into that matrix, it says nothing about one's suitability. This particular firm was quite suitable even though it was outside the restricted list.

The big difference between open competitive tendering and restricted tendering is that once one has a restricted process, the lowest tenderer must be awarded the job because one has gone through the stage of judging whether he is capable. In this case, we went for restrictive tendering in the initial stage because we thought the market conditions were such and the judgment of the office was that that was the correct route.

We were not overruled by Government - again as this report states. The Minister at the time and the OPW commissioners looked at the market conditions as they were changing and decided that it was appropriate at the stage when we went out to open competitive tendering that that was the correct thing to do at that point. It is the policy of the Government, the CIF and the EU Commission and the advice of the forum on the construction industry that restrictive tendering is the preferred route. The reason they think that is that it reduces the costs to the building industry because open competitive tendering is expensive for firms and the industry wishes to reduce the number of firms who have to engage in the preparation of tenders and the costs that go with that.

Deputy C. Lenihan: What year are we discussing?

Mr. Murphy: 1993-94. I will get the exact dates.

Deputy C. Lenihan: It seems there is a direct clash or contradiction. Mr. Murphy is stating that the Comptroller and Auditor General's report is flawed in the assertion of two alleged facts, one being that the candidate who ultimately got the contract on the lowest price basis when it was reopened-----

Mr. Murphy: Yes.

Deputy C. Lenihan: -----was never deemed to be unsuitable.

Mr. Murphy: Never.

Deputy C. Lenihan: Is this a tautology in a sense? They were not deemed to be unsuitable, but they were certainly deemed not to be suitable. Is that correct?

Mr. Murphy: It is not even that. When one is in the pre-selection phase in a two stage tendering process, one will get - I cannot remember the precise number - maybe 20 or more people saying that they are interested in the particular process. They then have to be listed on the basis of a set of criteria in terms of an order of their worthiness. We would then choose only six - in this case it was nine but it is normally six - from that. However, we would not say that any of the people listed were unsuitable. They are suitable to degrees. Can I tell the Deputy what would have put this company down as low as it was?

Deputy C. Lenihan: Yes.

Mr. Murphy: One of the criteria on the matrix in assessing companies is previous experience with that firm or previous experience of that firm in this country. In this case, Henry O'Rourke had not done this kind of work in this country so they would have got a very low score under that heading.

Acting Chairman: Before the Deputy continues, I ask the Comptroller and Auditor General to clarify the position.

Deputy C. Lenihan: Before he does that, the second area of apparent contradiction regarding the suitability was that the Government ordered that it be reopened.

Mr. Murphy: No, there was no such order.

Deputy C. Lenihan: From the Government as a collective entity?

Mr. Murphy: No.

Deputy C. Lenihan: Was it the Minister and the commissioners?

Mr. Murphy: Yes, it was the Minister and the commissioners.

Deputy C. Lenihan: In what sense? What led to the reopening? What market

conditions-----

Mr. Murphy: What led to the reopening?

Deputy C. Lenihan: Yes.

Mr. Murphy: It was time and I really do not want to go into this here. It is not quite relevant to this. We were having certain difficulties or an exchange of views with the CIF over tendering procedures and tendering processes.

Deputy C. Lenihan: There was a row between the OPW and CIF?

Mr. Murphy: I would have said a constructive debate which has led to a constructive and different form of dealings with the CIF. However, at that stage we were having a serious debate with the CIF over tendering methods.

Deputy C. Lenihan: And that led to the OPW's change of heart?

Mr. Murphy: Absolutely.

Mr. Purcell: There are several complexions one can put on this. I tend to rely on official documents and I have a document here which is from the files of the OPW and which gives a schedule of quite a large number - 30 or so - of contractors in the drawing up of the restricted list. The list includes the particular contractor who was successful ultimately. It talks about OPW under a heading - "OPW experience - yes; civil engineering capacity - not proven; financial capacity - no details given", and further comments, "only one civil engineering project undertaken in Ireland to date, unsuitable". If the Chairman wishes, I can have that copied for the Deputies. It was on that basis that I recorded that particular fact in my report.

On the second point, again reading from an official document on the official file which states:

Due to a nine day delay at Cabinet level, where it was decided to proceed with open tendering, after OPW had carried out a pre-selection exercise and investigated all applicants, invitation of tenders actually occurred on 28 April.

There is an earlier reference in the official documents that documents for tender invitation were held because the Taoiseach had expressed concern at the exclusion of a number of the small and locally based firms from the tender list.

The Accounting Officer is right. There were problems with the CIF at the time and they are recorded on file as well. However, it seems that both statements I made are correct and backed up by what is in the official files.

Deputy C. Lenihan: There is a certain amount of conflict here. Is Mr. Purcell saying the Taoiseach expressed reservations at the time and there was a Cabinet decision or that there was a delay in making a Cabinet decision about this matter in 1994?

Mr. Purcell: My reading of it is - I can go only on what is in front of me - that the matter was put before the Cabinet and there was a nine day delay at Cabinet level where it was decided to proceed with open tendering. That to me would suggest-----

Deputy C. Lenihan: What is the date for the nine day delay?

Mr. Purcell: I am reading from a note of a meeting of the steering committee relating to the Castlerea new detention centre which was held on 4 May 1994. In attendance at that meeting were the Accounting Officer, Mr. Murphy, Miss U. Redmond, Miss N. O'Regan, Mr. H. Mitchell, Mr. F. Wall and Mr. J. King. As the meeting was in connection with the perimeter wall only, the presence of the Department of Finance personnel was not necessitated. Perhaps I could make that available to the committee.

Deputy C. Lenihan: What was the subsequent reference to the Taoiseach?

Mr. Purcell: That was at another meeting on 25 April 1994.

Deputy C. Lenihan: Did the Taoiseach express reservations about the tendering system?

Mr. Purcell: Yes. Again it was in reference to the perimeter wall project. It was at a meeting attended by Miss U. Redmond, OPW, Miss N. O'Regan, presumably of OPW, and Mr. H. Mitchell of the Department of Justice, Equality and Law Reform. The document states:

The up to date position is as follows: Documents were ready on 22 April 1994 for tender invitations. These have been held, however, because the Taoiseach has expressed concern at the exclusion of a number of the smaller locally based firms from the tender list. Mr. Mitchell undertook to brief his Minister in the matter and to advise her that the delay with tender invitation could adversely affect the timescale for commencement on site.

It goes on to refer to other matters. That seems to tie in with the nine day delay referred to on 4 May, which was nine days later.

Deputy C. Lenihan: Did any of these locally based firms tender in the open competition?

Mr. Purcell: Perhaps, the Accounting Officer would be in a better position-----

Deputy C. Lenihan: Thank you for that clarification. Before the Accounting Officer replies, it seems there is a clear conflict here, which I hope can be resolved sensibly. His contention is that there was no Cabinet decision but the Comptroller states quite the opposite, that at one of the steering committee meetings on 4 May 1994 the Accounting Officer attributed the delay to the nine day delay or debate - whatever one wants to call it - at Cabinet about the system. According to the Comptroller's reading of the evidence, the Taoiseach became involved because he was worried about the exclusion of locally based firms. Some questions flow from that. First, was there, in Mr. Murphy's understanding, a Cabinet discussion about it, as stated in the minutes quoted by the Comptroller? Second, did the Taoiseach of the day express concern about the exclusion of locally based firms? Were the locally based firms allowed to pitch for the business as a result of the reopening of this tender?

Mr. Murphy: To answer the first question, we got 30 to 39 tenders on the open basis, so I would say every local firm tendered. Six of the firms on the restricted tendering list also tendered. I mention that only because Deputy McCormack asked the last day what the likely bids of the restricted tenderers would have been if they had been allowed go ahead on the basis of a restricted competition. We know the answer to that perfectly well because we had bids from them in the open competition.

The question of unsuitability would be our own OPW shorthand, which I think would have been pointed out to the C & AG's staff. We were simply listing people in a particular order. On the question of the Government, I am not aware-----

Deputy C. Lenihan: There seems to be a conflict about suitability and unsuitability. Mr. Murphy has stated they were not deemed to be unsuitable.

Mr. Murphy: That is right.

Deputy C. Lenihan: Could he clarify that?

Mr. Murphy: If you simply take, Deputy, what the Comptroller said-----

Deputy C. Lenihan: Did Mr. Murphy state that Henry O'Rourke had no experience?

Mr. Murphy: In Ireland.

Deputy C. Lenihan: The Comptroller seems to be suggesting they had experience of one-----

Mr. Murphy: That is all, one item. It was the Drumsna by-pass, as far as I remember.

Deputy C. Lenihan: So they did have experience in Ireland?

Mr. Murphy: On a road building project but not on this kind of project.

Deputy C. Lenihan: So that is why Mr. Murphy said-----

Acting Chairman: I ask the Deputy to conclude. I will let him speak again after we have heard from some other members.

Deputy C. Lenihan: I think the Accounting Officer wants to respond.

Mr. Murphy: I have no information on the Government decision, as such, on the form of tendering. It would unusual for the Government to make a decision formally on such a matter. I know the Government was concerned about the Castlerea project, which it cancelled at one stage. However, the OPW would not have been party to that part of the debate.

Deputy C. Lenihan: He is now saying there was a decision-----

Mr. Murphy: We would not have had any input.

Deputy C. Lenihan: Mr. Murphy is now conceding there was a decision.

Mr. Murphy: No, I am saying we have no information on one. I have never seen a decision from Government that actually said that.

Deputy C. Lenihan: Is the steering committee note, which was quoted by the Comptroller, inaccurate? The Comptroller said the steering committee, of which Mr. Murphy was part and which was steering this project towards some conclusion, that is, the building of the prison, referred to a nine day delay at Cabinet. I know one can be bureaucratic about this and say there was no decision by Cabinet, but there certainly seems to have been a discussion at Cabinet. Is Mr. Murphy distinguishing between a decision and a discussion?

Mr. Murphy: Yes. One normally would not get a formal Government decision, which has a particular kind of existence, on this type of matter. The Government clearly was discussing this particular project from all kinds of angles over a long period, and both started and stopped the project at least once.

Deputy C. Lenihan: But then-----

Acting Chairman: I must interrupt the Deputy, I will let him in later if he wishes.

Deputy McCormack: I am not very clear about the restrictive practices. Following from the point raised by Deputy Lenihan, who took the decision to put the restrictive practice in place in the first instance? According to the information we got on 2 December, only nine tenders out of the 46 that had preliminary offers to tender were accepted in the restrictive practice arrangement. The best contract price there was £3.57 million. That is how much the wall was going to cost under the restrictive practice arrangement. However, when it was eventually put to open tender the wall was built for £1.2 million. Some contractor would have made about £1.5 million on top of his normal profit if the restrictive practice had not been checked. Whose decision was it, in the first instance, to have a restrictive practice arrangement?

Mr. Murphy: I will start at this end of Deputy McCormack's question. There is no question of a restrictive tendering procedure having a price attached to it. It is a tendering procedure. The nine tenderers under the restrictive procedure would have bid in the normal way. When it came to the open competition, six of them bid. I have those bids here and I can tell the Deputy what the difference would have been between the restrictive price and the open price. I cannot give the Deputy names because of-----

Deputy McCormack: Please tell me.

Mr. Murphy: The difference was £37,000. I will be absolutely precise and get the exact figure for the Deputy.

Deputy McCormack: That conflicts with the information we obtained at the meeting on 2 December, where the figure of £3.57 million was mentioned as being the best contract price. That was my understanding.

Acting Chairman: The Comptroller wishes to intervene.

Mr. Purcell: That is not suggested in any way in the paragraph. That refers to the OPW's estimate of what it would cost to build the wall.

Deputy McCormack: Correct, it is my mistake.

Mr. Purcell: That was later revised down to £2.5 million.

Deputy McCormack: Yes, but the Government agency advising on those matters advised that the likely price would be £3.57 million. How did the OPW get it so wrong when a satisfactory job was completed for £1.2 million? We were informed the last day by Mr. Dalton that the work was carried out satisfactorily and on time. They were very satisfied with the contractor which eventually tendered to do the work for £1.2 million.

Mr. Murphy: The prices of £3.5 million and £2.5 million were not estimates of the likely price of the wall in Castlerea. Those estimates referred to Wheatfield. The file shows that clearly. The estimating sheets on the file are headed "Wheatfield" as the starting point. They were regarded by us as reference points, and that is all. However, as the process went on, the specification for the wall around Castlerea prison changed and was not nearly as high as the specification for the wall around Wheatfield prison.

Second, the ground conditions which had been examined at Castlerea, during extremely wet weather, turned out on further investigation to be much better than had been thought. Between both these features - both the ease in doing the foundations and the fact that the specification was somewhat less - we were well aware that the price of the wall would be very much less than the reference prices we had put on file. Equally, the tenderers were well aware of this. The ten lowest tenders are within about 10% of each other. If you like, I will tell you what the lowest of the-----

Deputy McCormack: No. I did not ask that question at all. I am trying to base my question on the reference of the Office of Public Works. I would not accept as a valid reason that wet weather was the cause of the eventual cost of building the wall being more than double the guideline price prepared by the OPW. It is not valid to say that, "We looked at it in wet weather and we thought it might cost £3.57 million", when in fact it only cost £1.2 million.

Deputy Ardagh: There were not any Shannon floods that year.

Deputy McCormack: Yes.

Mr. Murphy: Well, there possibly were. On the question of the reduction in the specification for the wall, that does affect the price. It affected both the foundations, the wall finish, the fact that we were not in an urban setting, and that the requirements of the client were different from the Wheatfield case. We knew that all these factors taken together would reduce the reference value, so we did the redesign to the client's specification. It is the redesigned wall, not the original Wheatfield type wall, that went out to open tender.

Deputy McCormack: Yes, but what was the purpose of the first designed wall?

Mr. Murphy: There was no design for the first price. The first price was a reference price, referenced to Wheatfield. In other words, when somebody asked us what would be the cost of a wall around a prison, we only had experience of one such, which was Wheatfield, and we used the Wheatfield prices to arrive at that reference value, but that is all. There is nothing more scientific to it.

Deputy McCormack: The bottom line is that the reference price was £2.3 million greater than the actual price in the end, as the facts turned out.

Mr. Murphy: The actual design, the wall, turned out to be different. This was at the very start when the client and ourselves had no idea what kind of wall was required, so we priced the reference price by reference to the one wall we knew about.

Deputy McCormack: I will pass on that. I now want to find out about the tendering process for the erection of the prison. I understand the original contract price was £12.7 million, but the completed cost was £14.3 million. That was explained by added costs, etc., but following the completion of the original tendering process there were discussions between the contractors. Did that not give some contractors a better opportunity, knowing what the original contract prices were? Could I get some clarification on that?

Mr. Murphy: There are two different questions there. I will take the second one first. After tendering, discussion with contractors is perfectly normal to clarify elements in their tenders. We do not swap information between tenderers, but we have to get clarification on their tenders. We certainly do not release our estimates or any other information we might have.

Deputy McCormack: Were there two separate tenders then? Was there a first and a second tendering process?

Mr. Murphy: There were two tendering processes. One was incomplete because the Government cancelled the scheme at a particular point and we had to go back out to tender.

Deputy McCormack: At that point, after the first tendering process, would people have been aware of what the tender prices were?

Mr. Murphy: Certainly not from the OPW.

Deputy McCormack: Would they be aware from information that might pass between individual tenderers?

Mr. Murphy: I cannot possibly comment on that. I have no idea, but to reply to the first part of the Deputy's question, that arises from the Comptroller and Auditor General's report, which says that the design/build project was contracted to cost £12.5 million and was completed at a cost of £13.34. In fact, the design/build project at £12.7 million was completed at £12.6 million, not £14.34 million. The £14.34 million is a bundle of contracts - all brought together and brought in on time and under their individual budgets - and are not additions to the original. Originally we had planned to do the sewage treatment system separately. We had planned to do the fit out, that is the security items and so on, separately. I am just looking for the additional contracts we had. There are various contracts there, all of which were planned at the same time as the design/build contract, and that were done separately.

One of these extra elements was a separate contract for the extra 12 cells. That was an offer made by the contractor at a particular stage, to provide 12 cells at a reduced cost. That is not an extra on the contract; this is a new contract for 12 cells being offered to us at only £20,000 each. That is an offer we could not refuse. That was the subject of a separate contract which came in precisely on the price quoted.

Acting Chairman: Please finish up, Deputy. I will let you in again.

Deputy McCormack: It was mentioned that because of the change of the sewage treatment plant, it cost £140,000 to drain the surface water or some other water off the site. That seems an excessive amount. I was involved in a drainage scheme in south Galway where we relieved many people for that type of money.

Mr. Murphy: I cannot comment on the exact price. I am not sure that it was not a local authority requirement. We simply did what the local authority required us to do. I would have to delve into my papers to get the source of that. That cost would arise no matter what we were doing on sewage treatment. It seems to have been a change of mind by the local authority on how to handle foul and surface water drainage.

Deputy McCormack: I would be interested in a break-down of the costs of dealing with the foul and surface water from the site. The sum of £140,000 plus seems extraordinary to me.

Mr. Murphy: I will certainly be able to get that.

Deputy McCormack: For that sum one would certainly drain it through the Shannon from Castlerea.

Deputy Ardagh: Sticking to Castlerea, the major over-expenditure appears to be £768,000 for the inclusion of palm-readers and audio-visual units on the doors and gates. It also states that this has effected staff savings in the region of 20 staff posts - a saving of £380,000 per annum. Will Mr. Aylward say what is the position in relation to these palm-readers and audio-visual units. How do they work? Have they been effective, how long are they in, and have the staff savings actually materialised?

Mr. Aylward: I will respond to that if I may, Chairman.

Acting Chairman: Please identify yourself.

Mr. Aylward: I am Seán Aylward, the Director General of the Prison Service. An important point is that it was only as the project developed that the officials dealing with it in the Department of Justice, Equality and Law Reform, who were liaising with the Office of Public Works, became aware of the existence and the development of this new technology of palm-readers and linked audio-visual units at gates and doors in prisons in Northern Ireland. They had to go and see them. They were still in the process of being installed when they first learned of them. They found from their inquiries that they were very effective in cutting costs.

Turning to the question raised by Deputy Ardagh, I confirm that the installation of the devices referred to in Castlerea has achieved staff savings in the region of 20 staff posts. As a result, a saving of approximately £380,000 per annum is being realised. However, there is a payoff here. Given that it is a relatively small prison, it is necessary to look at trends over several years to be certain that it is being maintained. So far - I have seen them myself - they are working well at that location. We have moved to install them in the new Clover Hill Prison, but the jury is out on that because they will be placed in different locations in that prison. Time will tell.

The additional cost of these additions was a tremendous investment for the taxpayer. It could not have been made sooner, nor specified earlier because the technology did not exist.

Deputy Ardagh: Returning to the perimeter wall and the difference between the reference price and the final conflict price, who compiled the reference price? Was it a junior clerk or a quantity surveyor?

Mr. Murphy: The price was made up by a quantity surveyor within the office, but his instructions at that point were clear: he was to provide a reference price on the basis of our own experience, which is what he did. It was a desk job. The only experience we had was the wall at Wheatfield Prison.

Deputy Ardagh: Without referring to any specific person, do you consider that the quantity surveyor, a person of professional competence, should have taken a more rigorous approach to the pricing of a wall like that?

Mr. Murphy: He could only have done that if there was a design for the wall before him and at that point there was no design. The client's wishes were not fully known at that point and the design had not been done.

Deputy Ardagh: It astounds me that his initial reference cost was three times the final contract price and almost three times what was the final contract price - £1.2 million versus £3.6 million.

Mr. Murphy: The wall was very likely only a fraction of the specification of the Wheatfield wall. In the period between the Wheatfield wall and this wall being built, the technique of port concrete walls had also changed, which can be seen in the midlands prison, if the Deputy visits it. The process and technique involved in preparing port concrete walls has changed in that it is more efficient and much cheaper. All the tenderers in this case are working from the new technology. The technology for the Wheatfield wall is, I would guess, 20 or 30 years old.

Deputy Ardagh: Would it not be expected that a quantity surveyor, who is dealing with the construction of prisons, would be up to date with the technology that is present at that time?

Mr. Murphy: He was given a basic job of simply taking the wall price we had on file and bringing it up to date, to the 1994 prices. That is all he was asked to do.

Deputy Ardagh: You have already said there was not a wall price on file, that there was a mixture at Wheatfield that had not been specifically identified as a wall price.

Mr. Murphy: No, he took the Wheatfield price, which was the only wall we had built in the previous 20 or 30 years.

Deputy Ardagh: Was the wall at Wheatfield specifically priced out of the contract?

Mr. Murphy: Yes, the Wheatfield wall contract was a separate contract also.

Deputy Ardagh: In his report the quantity surveyor said that the lowest bidder has adopted a keen price and a risk taking method. Was this the same quantity surveyor who made the reference price in the first place?

Mr. Murphy: I would not think so. I think at that point we had a full design team on board, but I would need to check on that for you.

Deputy Ardagh: You say that the difference in the bid in respect of the nine people in the restricted contract procedure initially was £37,000.

Mr. Murphy: I have the exact figures before me.

Deputy Ardagh: Could you indicate the exact figures for each of them, from the highest to the lowest?

Mr. Murphy: From the highest to the lowest of the restrictive people?

Deputy Ardagh: Yes.

Mr. Murphy: The contract awarded to Henry O'Rourke was £1.17 million.

Deputy Ardagh: That is correct.

Mr. Murphy: The next lowest was one of the restricted-----

Deputy Ardagh: I am inquiring only about the restricted ones.

Mr. Murphy: They are £1.2 million, £1.42 million, £1.43 million, £1.64 million, £1.67 million, £1.72 million and £1.89 million.

Deputy Ardagh: They were the members of the restricted-----

Mr. Murphy: That is correct.

Deputy Ardagh: Can you indicate the seven lowest tenders you got in the unrestricted category?

Mr. Murphy: In the unrestricted category, the lowest seven include £1.17 million, which is the one that was awarded, £1.2 million that you have, £1.2 million, £1.27 million, £1.36 million, £1.38 million and £1.38 million. The other two - £1.4 million and £1.4 million - follow.

Deputy Ardagh: The prices quoted by members in the restricted contest were significantly higher than the seven lowest bids submitted.

Mr. Murphy: No. Of the lowest nine, three were members of the restricted group.

Deputy Ardagh: Of the lowest seven, only one was a member of the restricted group.

Mr. Murphy: Yes, but eight and nine were members of the restricted group. The tenders in this open competition went as high as £2.49 million.

Deputy Ardagh: Somebody wanted to tender but did not want the job.

Mr. Murphy: No, the prices go up in a gradation from £1.89 million, £1.9 million, £1.99 million, £2.4 million and so on.

Deputy Ardagh: There were 36 people involved.

Mr. Murphy: Yes.

Deputy Ardagh: We only want the first seven. You are aware of the situation with the ODTR and the problems that arose in relation to the third mobile licence, especially the fact that a non-successful bidder went to the High Court on the basis that additional information went to the ODTR, by osmosis or whatever means, before a decision was taken. You say it is normal to clarify tendering information. Surely this would give an unfair advantage to those allowed to clarify tendering information after the tender has been submitted?

Mr. Murphy: If I can be precise on this, the clarifications are never general, they relate to specific things, such as whether VAT has been included - it may not have been indicated - or if there is a doubt by the tenderer or an error. Errors are dealt with in specific ways depending on the kind of error. That would have to be drawn to the attention of the tenderer. However, this is tender by tenderer; there is no sharing of information.

Deputy Ardagh: Has any occasion occurred where the tenderer has changed his tender price as a result of clarification?

Mr. Murphy: No. The thing that is likely to happen if there is some form of an omission from a tender is that the tenderer would be asked to stand over the price with the omission or to withdraw from the competition, but there would be no case where you would allow a tenderer to add to his price.

Deputy Ardagh: Would you allow him to deduct from his price?

Mr. Murphy: No, you would not, unless there were some reason for it that would apply to all those tendering.

Deputy Ardagh: Maybe there was something in the tender which was over-tendered for. If he put an iron railing on the wall which was not required, would that be brought to his attention?

Mr. Murphy: No. The tender must be on the actual specification. If the lowest tenderer gives more than the specification, we will take that from him. I am not absolutely sure of the Deputy's point.

Deputy Ardagh: Is there any opportunity for favouritism to be given or shown to any particular contractor in any way, shape or form?

Mr. Murphy: None whatsoever in this form of tendering.

Deputy Ardagh: In the restricted procedure, Mr. Murphy said that the OPW has a matrix and sees who comes into it.

Mr. Murphy: Yes.

Deputy Ardagh: Does he tell the various contractors exactly what are the criteria for being allowed to tender in a restricted competition?

Mr. Murphy: Yes. The OPW tells them what are the criteria. In tendering competitions where there are EU requirements the OPW is legally required to do so and to stick rigidly to the criteria which it specifies. The specification goes further than simple headings. We must indicate the weightings which we will apply to the various headings. All this is known to the tenderers.

Deputy McCormack: Why was it necessary to have this reference price? The OPW is the agent for the Department of Justice, Equality and Law Reform, which has no clue about costs, and the OPW said it thought it would cost £3.57 million. When the Department of Justice, Equality and Law Reform looked at the tenders it put this as a reference price. Why is that procedure necessary?

Mr. Murphy: We must have some starting point. The Department of Justice, Equality and Law Reform would have been aware of the basis for that particular reference point. That would be required to put together some kind of proposal, particularly to the Department of Finance, in terms of the financial authorities. We could not go with an open-ended proposal.

Deputy McCormack: It is very unsatisfactory information to give to the Department of Finance.

Deputy Durkan: Is there a standard rule of thumb expected cost in respect of the building of a prison, a wall or whatever the case may be and, if so, was this taken into account when vetting the tenders?

Mr. Murphy: Yes. We have cost norms, which are public, and it is possible to give the committee a copy of these. In the case of a prison wall it really does not come into the cost norms because it is such an unusually rare structure to build.

Deputy Durkan: Would that therefore be a complete departure from all normal practices?

Mr. Murphy: No, it would not. It would have to be designed and then costed by a quantity surveyor, but it would not form part of the OPW's cost norms because it is too rare.

Deputy Durkan: Assuming that the wall is ten feet high and one foot wide, for example, and it involves certain foundation works etc., is it possible to estimate the anticipated cost of that before going to tender?

Mr. Murphy: Yes, and that is precisely what was done here.

Deputy Durkan: Is it that nothing showed up which would indicate a variation or that this involved poor value for money?

Mr. Murphy: The restricted tendering group would have been bidding. I read out the bids which they gave in the open competition. I have no reason to believe that they would give any other prices, even in a restricted competition.

Deputy Durkan: In the case of a pre-selected exclusive group who will get preferential treatment in any such situation, is there a danger of building up an understanding within the group regarding how the contract might be priced?

Mr. Murphy: I agreed there is such a danger but it is our job to make sure that there are procedures in place which limit that danger.

Deputy Durkan: What are the mechanism?

Mr. Murphy: The two mechanisms are: having open competition from time to time to test the market fully, and we do that-----

Deputy Durkan: What is meant by "from time to time"? How would Mr. Murphy fully test the market if it did not apply to the specific project?

Mr. Murphy: All it would do would be to put the market on notice that we were measuring what were the underlying prices and costs. In this case, as a matter of interest, the restrictive tendering would have been virtually no different from the open tendering in terms of the lowest price. That is the kind of assurance which OPW gets through the open tendering process.

To finish the answer, the other mechanism is by having wild cards - in other words, into the restrictive tendering process you drop somebody who simply would not qualify in the normal way for the restrictive tendering panel - which is what OPW did in the case of the Castlerea Prison proper.

Deputy Durkan: And the wild card proved to be-----

Mr. Murphy: Absolutely correct.

Deputy Durkan: In response to questions from Deputy Ardagh, Mr. Murphy mentioned the discussions which might take place following submission of a tender, a bid etc. How is the OPW disposed towards the qualification of a tender? My understanding of tendering is that qualifying a tender is completely out of the question. By qualification, entering into negotiations with one party, if not with all parties on the same basis, completely negatives the tender. Is that not the case?

Mr. Murphy: Yes. A tenderer does not have the right to qualify a tender but I will come back to one situation where that does not apply and which has its own problems. In the normal course of events if a tenderer were to qualify his or her tender, it would very likely rule him or her out of the competition. It would depend on the kind of qualification but generally the OPW would not deal with somebody who was qualifying his or her tender. There is one case where the OPW must deal with a qualification, that is, where all the tenderers qualify in the same way.

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