Back to Sub Committee Official Report

Joint Committee on Public Enterprise and Transport.

Sub-Committee on the Mini-CTC Signalling Project.

Dé Luan, 12 Samhain 2001.

Monday, 12 November 2001.

The Sub-Committee met at 10.00 a.m.

MEMBERS PRESENT:

DEPUTY S. DOHERTY IN THE CHAIR

Chairman: The sub-committee on the mini-CTC signalling project is now in public session. Witnesses' attention is drawn to the fact that, as 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 persons who are identified in the course of the sub-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 only be exercised with the consent of the sub-committee.

I call on Mr. David Doyle of the Department of Finance to be seated. You were to be here on an earlier occasion and we had to make appropriate adjustments so I hope you understand.

Mr. Doyle: Yes. No problem.

Chairman: Mr. Doyle, can I ask you about the concept of Oireachtas inquiries as against tribunals of inquiry, what distinctions you make, how you view them and what purposes you perceive that they serve?

Mr. Doyle: On the tribunals first, the tribunals that we have had experience of so far have been asked by the Oireachtas to examine very serious issues affecting more the political forum than the arms of the State, as it were. I suppose one of the big issues that have arisen there is the very significant costs associated with the tribunals and the very lengthy process that's been involved. That's not to be in any way critical of the tribunals. They have been asked to do a particular job by the Oireachtas and they are discharging it appropriately.

In relation to the committee hearings here, the committee has been charged by the Dáil with the task of investigating actions by the various parts of the State machinery, notably in this case CIÉ and its subsidiaries and the relationship between that and the Departments, the Ministers. In terms of the way the process has been operating, I think, as my predecessor, Bob Curran, said about the PAC review on DIRT, the efficiency with which the committee conducts its affairs has been remarkable. The manner in which it has been conducting the affairs has been equally excellent and efficient and, as in the DIRT case, it seems to be hitting all the sweet spots in relation to the responsibilities of all those concerned.

Chairman: Mr. Doyle, in relation to the inquiry that we are engaged in, have you acknowledged or recognised any particular difficulties in the context of a sufficiency of operations, the manner of which could be improved if such improvements were necessary, that is, having regard to the terms of reference as set out?

Mr. Doyle: Yes, the only thing that would strike me, Chairman, and again this is not to interfere at all with the way the committee discharges its work, but it does strike me that in the case of the DIRT inquiry, the C&AG was assigned with a task of doing the basic homework and research, which the committee then took on board and drove forward. In the case of this committee, there has been a large degree of footwork in trying to establish the facts, but-----

Chairman: In the context of the funding of the mini-CTC project and how to proceed with the completion of it, have you any views on how that can be funded? Will EU funding be available to complete it?

Mr. Doyle: The company seems to have spent about £15 million odd - I can't recall now whether it is £20 million - or thereabouts, of which the EU have contributed £10 million. There are issues to be considered now in relation to the fact that the project has not been completed. The EU has transferred that significant resource to the company. There's a clear position that if the project is not concluded that funding that has already been transferred will probably have to be returned to Europe and will be lost to Ireland. That's one aspect.

Another aspect is the original purposes for which the work was undertaken and are they still valid. Those purposes were both financial and safety related against the backdrop that it was Government policy that the particular lines should be maintained. I have heard estimates quoted here that £35 million would be required to conclude the project. I also heard the chairman saying that all that remained to be done was for the Department of Finance to write the cheque, but it seems to me that ... I don't know what has gone on inside the company in relation to finishing the project, I have heard witnesses saying that they have analysed exactly what is required to be done and have decided how it is to be done. I am not aware myself that a full scale analysis and appraisal of what is involved in finishing the work, what is the most economical way of finishing it and whether it is financially appropriate to finish it from the company's point of view ... whether that has been submitted to the board, as one would expect in the normal way. It seems to me if this hasn't already been done, the board needs to get that submission from their management - a complete evaluation and appraisal.

In relation to funding, there are very large sums of public taxpayers' money transferred to CIE. For instance, in the last five years, I think the company would, through subvention and capital grants, have got about £1 billion. In relation to future flows of funding, there are also very significant funds ... will be available to the company, not as large as possibly the company may require, but there will be very large funds available. It will be a matter for the board to evaluate that level of funding overall and the priorities it wishes to give towards addressing the actual project.

Chairman: Does your Department propose to carry out an analysis or evaluation of how the project can be completed, the time within which it can be completed, the cost that will be involved in that and if EU funding will be available?

Mr. Doyle: Yes, Chairman. We will be involved in that, but I am just emphasising the first stage in that is the company internal evaluation and board evaluation and approval. The European Union has made it clear quite recently - I think I send you some recent correspondence in that regard - that they want to see a full report bearing in mind the outcome of these hearings on the whole CTC project. They want to hear from the company and the Departments, both ourselves and Public Enterprise, exactly what the plan is to finish it. We would hope that the project will be finished, subject to the board determining that it is appropriate and desirable that it be finished in the first instance and, secondly, that there would be a question of reconciling actually finishing it against the stream of funds that are available to the company, which, as I say, are very significant.

Chairman: Have you had any discussions with Public Enterprise on this particular question?

Mr. Doyle: Yes. At a meeting about three or four weeks ago, the Commission, the Department of Finance, the Department of Public Enterprise and CIE discussed that matter and we are awaiting a report from CIE and the Department of Public Enterprise as to how the project could be brought to conclusion.

Chairman: You have no idea at this particular time what the actual costs of completing the project would be. Would that be correct?

Mr. Doyle: I have no personal information. I did hear the chairman saying that, in his opinion, it would cost £35 million, I heard other people talking about the possibility of utilising the available fibre, the unused fibres, to link in, so what potentiality that has, I don't know personally.

Chairman: You have heard of the monitoring committee, is that correct?

Mr. Doyle: Yes, I am familiar with it.

Chairman: What do you understand the role of the monitoring committee to mean in the context of this particular project?

Mr. Doyle: In the context of this, it doesn't have a function purely in relation to this particular project; it has a function in relation to the totality of capital projects-----

Chairman: It would have entertained this particular project.

Mr. Doyle: Yes. The EU approved this particular project going back to early 1996, as I recall, as part of an overall integrated approach to work on tracks and signalling generally. It approved a particular line of funding, the £10 million roughly. In that context, over the years since then it received project reports through the company, through the Department of Public Enterprise, which reported on developments in relation to the project. The project, from the point of view of the information flows at the committee, evolved in line with the evidence as already been given by Public Enterprise in terms of time, information and so on.

Chairman: You have heard Public Enterprise say that they do not micromanage projects that are the responsibility of, in this case, CIE and Iarnród Éireann. Do you understand and agree with that approach?

Mr. Doyle: I certainly understand it, in the context of a company which has a statutory brief, a board of directors that's charged by the Oireachtas with the responsibility of running the company and a management structure that's charged by the board with carrying that out on its behalf. I think the role of the Department of Public Enterprise is to evaluate the business case, strategic plans that CIE might have from time to time, to evaluate its overall approach to funding in terms of its cost base, revenue base, use of assets, in terms of an overview. It can never get involved in saying, "This is the type of bus that is to be bought," "These are the number of buses," "This is the type of locomotive" and so on. In that sense, it can't micromanage, but the Department of Public Enterprise does have a significant role as adviser to the Minister for Public Enterprise and, through her, to the Government on the possibilities and requirements of CIE against the backdrop of the overall funding available to it, including Exchequer, EU and its own resources.

Chairman: In the context of the warning signals coming to the Department of Public Enterprise from the mini CTC project, do you think Public Enterprise acted in a mature and responsible way in dealing with these warning signals?

Mr. Doyle: Prima facie, yes, from everything that I have heard so far ... should I emphasise that I haven't been able to track every single day's hearings, but it is fairly clear to me that there were information flow problems both within CIE itself as between the project management of the actual work, reporting to Iarnród Éireann, reporting to the management in Heuston and the main board. It would appear that the information flows there were inadequate and the Department of-----

Chairman: They are both inadequate. Is that what you said?

Mr. Doyle: No, that they were inadequate, the information flows. I think I did ... correct me if I am wrong, but I think I did hear representatives of management within CIE say they weren't aware at an early stage of the problems in the project and I think I heard the board saying similar things, that they weren't aware at an early stage, so it seems to me when the Department of Public Enterprise found out that there was a fundamental problem I think they did act appropriately. They had a very ... as I understand it, they had close contact with the company and the chairman and asked that a full investigation be carried out.

Chairman: Are you saying that on the chain of communication from management to the board and from the board to the Department of Public Enterprise there was an inadequacy or an insufficiency?

Mr. Doyle: Prima facie, the project was going off the rails and it's clear that it wasn't until very late in the day that the Department of Public Enterprise, the board and the management knew about that. I am open to correction on that.

Chairman: You are now going back. The Department of Public Enterprise, the board-----

Mr. Doyle: Yes.

Chairman:-----and the management.

Mr. Doyle: And the management, as I understand it, that's my understanding. I am open to correction.

Chairman: Ultimately, are you saying that the monitoring committee was dependent on what was fed into it by the Department of Public Enterprise and that there was a certain inadequacy in the information they were getting? Is that not what you are saying?

Mr. Doyle: Yes, the monitoring committee was at the end of that chain and it wasn't, I think, until late 1999 that clear signals of a fundamental problem with the project emerged there, or indeed with the Department of Public Enterprise staff.

Chairman: Would you agree that to a great extent there was a complete breakdown in the sense that what it was necessary and correct to communicate was not communicated from management level in the first instance?

Mr. Doyle: I am afraid I am not really in the position to draw definitive conclusions on where the exact failure was. All I am saying is that there were ... there was a clear failure to inform the various levels of responsibility within the company and the Department of Public Enterprise, their Minister, the Cohesion Fund monitoring committee. The information flows were not adequate, in my opinion.

Chairman: You have given in evidence that the Department was not engaging with what bus should have been bought or what timetable should have been followed for the running of trains. Do you consider such micro-management, in the context of the finance, to be an appropriate obligational duty of the Department, or an essential one?

Mr. Doyle: CIE's overall activities are very significant. It is a very significant company with many thousands of employees, many hundreds of millions per annum in expenses and investment. In that sense, I don't think the Department of Public Enterprise could ever get involved in a situation of micro-managing. In terms of reflecting on the hearings it is the case that very significant amounts of taxpayers' money are transferred to CIE - as I intimated, something like £1 billion over the past five years, with the prospect of further significant funds in the years ahead. In that sense it is an atypical commercial State company in that the rest of the State companies do not get those huge tranches of funds, so is it necessary for the Department of Public Enterprise to reflect on how it interfaces with CIE in terms of financial information controls, decision-making, delegations? Yes, I think in the light of the CTC it would be appropriate for it to reflect on that, but not in the sense that I see the Department getting into micro-managing, to use their own phrase and your own repetition of it; but there is a need, given that huge transfer of funds and in terms of accountability to their Minister and to Parliament, to reflect on what has been learned here in the light of the state of the funds. What precisely that would involve, I am not sure.

Chairman: Would you consider that this is something that may very well have to be looked at again to establish what is the better way of ensuring that if anything else happens in the future which is not detected in time, that could be remedied? Would you consider that an important exercise in which to engage?

Mr. Doyle: I think everyone associated with the hearings needs to reflect on what has been learned so far and will need to reflect on the committee's report when it comes out. I am aware that the Department of Public Enterprise now deploys a lot more resources into the whole public transport field. In terms of whether that can be improved on going forward is certainly something to be reflected on.

One of the issues that we ourselves are reflecting on in the light of what has emerged is whether we should encourage a more complete information flow in relation to major capital projects in terms of what is presented to the Dáil, through the Estimates and the Appropriation Accounts in the sense that in most cases all that is presented is a large block figure for financial investment in, say, roads. There is no information published on major projects as between the original budget approved, the amounts spent in a prior year, the amount to be spent in the current year, the amount to be spent in future years and total projected costs on a regular comprehensive basis year by year, both in the original Estimate and in the Appropriation Account. That is something that we are reflecting on in the context of our review of the management information flows in Departments generally. That is one area that I think would be useful to allow the Oireachtas and the public accounts committee, the external auditor and the C&AG to see more obviously where problems are emerging.

That particular process could, in CIE's case, given the huge amount of taxpayer's money it gets, be incorporated in the annual report and accounts which would be presented to the Dáil. It would be a more open flow of information on significant projects in that sense.

Chairman: If Iarnród Éireann can be described as an operational-type board, what do you believe is the purpose and function of the CIE board?

Mr. Doyle: The purpose of the board is to manage the affairs of the public transport companies on behalf of the Government, given the resources the Government makes available to it and the resources the company can discharge. It's a management function. It has got a clear corporate governance role of discharging the duties laid down to it by statute, which is effectively to run the company.

Chairman: In that regard, how do you view the relationship between Iarnród Éireann and CIE? What should be the interaction, the connection, the exchange and the distinctly relating responsibilities between the two?

Mr. Doyle: I did hear the chairman of the CIE group of companies commenting on that and I agreed with what he said, which was that he had felt the need to put in place a new corporate government structure in relation to the subsidiaries in the sense of having non-executive board members as distinct from a purely executive board. He also articulated his view that the boards of the subsidiaries needed to run the companies much more proactively than they might have been seen to be doing in the past and I think the process that he outlined in that regard was appropriate. They have a clear and major role.

In the case of Iarnród Éireann, the major resources, public investment, that takes place is in that particular company. It's also their major cost base and the challenges that are faced in relation to public transport are the greatest in the rail transport area, so it is appropriate to have a very proactive corporate governance regime in charge of that operation and to have an appropriate reporting relationship between the subsidiary and the main board. I understood from the chairman that a non-executive chairperson is now in place who reports to the main board on all the affairs of Iarnród Éireann. I think that's highly appropriate.

Chairman: Mr. Doyle, do you have any departmental views on the appointments of members to these boards and the criteria that should exist in that regard, such as they do not exist at the moment?

Mr. Doyle: I'd have personal views. We're drifting into areas of Government policy now but obviously a Government, in choosing membership of a board, has to have regard to the nature of the board, to its commercial brief. There are very significant issues of investment, industrial relations, financial expertise, broad commercial experience and legal requirements, the whole regulatory forum. I would expect that Ministers, by and large, would review those particular headings and say, right, what broad competency do we require in those particular areas, and you wouldn't be confined to particularly targeting those headings that I mentioned. People with no specific expertise but with broad human experience, as it were, are also very appropriate for membership awards rather than having just a pure selection of people with specific expertise. A balance as between high quality, relevant expertise and day to day knowledge and sound judgment sense would be required.

Chairman: Mr. Doyle, this question may have been put to you previously here or elsewhere. Is there a code of practice for civil servants leaving the service?

Mr. Doyle: There hasn't been up to now, Chairman, and I'm not totally familiar with that in the sense of retiring secretaries, for instance, in relation to----- As far as I know, there is some consideration being given to that particular aspect in relation to the usual process of people leaving the employment of the public service to transfer outside into the commercial sector. The position is (a) we have general employment laws. We have general rights of individuals to their right to choose where they work and what they do. Now, in terms of the contractual relationship that somebody has, let's say myself with the Minister for Finance, if I were to leave, I would personally regard myself as having a duty of responsibility to the Minister and the Department in particular areas, that I would see as appropriate that I should not infringe in any way. I would be automatically covered by the Official Secrets Act in relation to any information that I had gathered. The question of codes of conduct for public service employees generally is under review at the moment and I have a feeling there is a draft document before another committee of the House - I am open to correction on that - on this particular area. My own views are you shouldn't engage in work that conflicts with your previous activities for a relevant period. I think they are referred to in the stock broking trade as "gardening leave," believe it or not, where if somebody is leaving a brokers to go and work in another brokers, they are expected to take time out so that the information they would have in their heads would become out of date and wouldn't be capable of being commercially exploited.

Chairman: Just a final question, do I take it that you would not consider it appropriate - within a certain timeframe at least - for former State employees to join suppliers, customers or competitors of the State companies with which they were previously employed? Are you telling me that you would consider that inappropriate?

Mr. Doyle: I suspect I know what you have in mind there in terms of some of the witnesses, but without commenting in any way on any individual-----

Chairman: No, I do not wish that you would do that.

Mr. Doyle: I personally would regard it as undesirable.

Chairman: Thank you.

Deputy Currie: Mr. Doyle, welcome back to the sub-committee.

Mr. Doyle: Thank you.

Deputy Currie: Since you were last with us a number of questions have arisen from evidence given and I would like to ask you a few questions about those points. The name of the Cohesion Fund monitoring committee obviously suggests that its main role is monitoring. Maybe you would tell us something more about it. To what extent does it go into detail? What is the membership of the committee?

Mr. Doyle: The committee is chaired by the Department of Finance. In fact, currently it is chaired by Mr. Dunning who is physically with us here today. The senior representatives of the Commission come over and join the committee. The main Departments responsible for investment in the areas in which the Community is involved would also turn up. The function of the committee is to evaluate overall progress on how the overall plan that would be approved at the outset is progressing and, where individual projects are approved, how those individual projects are progressing on the basis of reports prepared by the agency directly concerned, be it CIE, the National Roads Authority or whatever, submitted through the Department directly concerned into the Cohesion Fund, so it doesn't have a directive role, but it evaluates progress and if it is not satisfied with the way projects are progressing, it can seek that the agencies concerned would take appropriate action, either to accelerate or, if they felt a project wasn't going to happen at all, it would try and establish that and see is it possible to redirect the originally approved aid into an alternative area. That broadly is its role.

Deputy Currie: Can you tell us when the Cohesion Fund monitoring committee was first informed of the CIE-Esat project?

Mr. Doyle: The Esat project----- I don't think the Cohesion Fund monitoring committee - I am open to correction on this as I am not directly involved in it myself - but from the papers I have read, I don't think anybody rushed into the Cohesion Fund monitoring committee and said, "Here is an Esat project now." The involvement of the Cohesion Fund was with the mini-CTC. There was mention made at another forum of the Esat project and we heard that the Commission instigated an investigation from a competitiveness, competition point of view of the implications of that project. I think that's probably it. I am open to correction on the actual detail of that.

Deputy Currie: In relation to the mini-CTC project, which you were monitoring as part of the committee, surely----- Did nobody say "This proposal in relation to Esat will have some effect on the mini-CTC project and therefore we ought to have a look at this."?

Mr. Doyle: Not to my knowledge, except at the point where significant problems begin to emerge ... began to emerge with the CTC project and the reasons for it started to be explored. One of those problems were - and we are talking about late 1999 - was the fact of the Esat overlay on the-----

Deputy Currie: That is the question I asked you originally. When did the committee become aware of likely problems arising from the Esat project?

Mr. Doyle: I am not explicitly aware now, as I said, that there was a major discussion on the Esat element itself. There were discussions of the Cohesion Fund as the project unfolded. There were minor cost increases and then it ran into significant trouble towards the end of 1999. At that stage, there would have been mention of the fact that one of the problems was the Esat overlay. I can check out the facts for you, Deputy, as to review the papers precisely - as I didn't deal with them myself - precisely when the Esat issue came up for discussion, if at all, in a meaningful way-----

Deputy Currie: With the benefit of hindsight, the benefits of which we are all aware, does it not appear to you now that, at an early stage, the monitoring committee should have looked at the implications for the mini-CTC of the Esat project?

Mr. Doyle: With the benefit of hindsight, there's lots of things one could say, but yes, you're right, with the benefit of hindsight, if we had been aware that the introduction of the Esat element was going to lead to major overruns and delays on the CTC, you're right.

Deputy Currie: Did you become aware of what has been described as the experimental cabling which was undertaken by CIE on behalf of Esat prior to the obtaining of the statutory instrument in 1998? Were you aware of this experimental cabling?

Mr. Doyle: No, Deputy, not to my knowledge - having reviewed the papers, I don't think the Department of Finance was aware of that.

Deputy Currie: Surely this was an honest thing ... If you had become aware of this, warning bells would have rung.

Mr. Doyle: I think, virtually, the Department's sole involvement prior to these hearings with the Esat element of your investigation was the actual statutory instrument where we had a submission from the Department of Public Enterprise, including that CIE document that you examined at length.

Deputy Currie: Okay, can we-----

Mr. Doyle: Certainly, if one had been aware of everything that one knows now, we would have possibly taken a different view, but-----

Deputy Currie: Would this not suggest that there is something wrong with the information flow or co-ordination?

Mr. Doyle: I think we are examining two things now at the moment. One is the Esat issue and the statutory instrument and another is the actual evolution of the CTC project. Specifically on the statutory instrument-----

Deputy Currie: No, we will come to that in a moment. Could we come first to the termination of the mini-CTC contract, something more recent? When did the Cohesion Fund monitoring committee become aware of that decision?

Mr. Doyle: I would have to check out the actual facts on that and give you a note on that, Deputy.

Deputy Currie: Obviously, that decision would have an impact on the status of the EU cohesion funding for the project, but you do not remember when-----

Mr. Doyle: I don't remember when----- I mean, to my knowledge, I think the chairman has given evidence as to when the mini-CTC was - chairman of the company, rather - has given evidence as to when the mini-CTC contract itself was terminated. So it would have been at some point after that the Cohesion Fund would have been aware that the project had been terminated. It had been aware for quite some time that the work had stopped, that it had run into the sand and that there was a significant financial issue in relation to the funds that had been transferred already.

Deputy Currie: But you cannot remember when you became aware of this decision and the implications of it.

Mr. Doyle: No. I can let you have a note on that.

Deputy Currie: Please do. Chairman, might I refer to document FINANCE 007 pages 001-005? This, Mr. Doyle, is a discovery from your Department. In particular, I refer to pages 002-----

Chairman: Publish.

Deputy Currie: -----and 003. This is a note of two meetings held-----

Chairman: Deputy, that document has not been sworn, so I ask Mr. Doyle to confirm on oath that the contents of the document are correct. You are correct in saying that it is a Department of Finance document, 007.001-005. Are you familiar with that document, Mr. Doyle?

Mr. Doyle: I'm afraid I haven't got the large reserve of-----

Chairman: Maybe-----

Mr. Doyle: Yes, Chairman, I'm familiar with these documents.

Chairman: It is a letter from you addressed to me and it is dated 9 November 2001.

Mr. Doyle: Yes. I confirm that those documents are correct.

Chairman: It is free to publish?

Mr. Doyle: Yes.

Deputy Currie: It is headed "Meetings to discuss future of mini-CTC and Heuston Station projects, 18 October 2001". Meeting one was with representatives of the Department of Public Enterprise and CIE. You mention Mr. Dunning being present and quite heavyweight people from the Departments of Finance and Public Enterprise and CIE. Did your Department attend any prior meetings at which the termination of the mini-CTC contract was discussed?

Mr. Doyle: Not to my personal knowledge.

Deputy Currie: Page 002 records -----

Chairman: Publish.

Deputy Currie: -----under the mini-CTC heading that £16.5 million had been spent prior to the termination of the contract and that £35 million would be required to complete the project. Was the Department of Finance happy with this analysis?

Mr. Doyle: I think I touched on that when I was talking to the Chairman earlier, Deputy, in the sense that I had heard the Chairman of the company quoting this figure and on reading these documents when I decided it was appropriate to let the committee see them I saw it. Now, I have intimated to you that I myself have not seen any evaluation of that figure, what basis it is, what technical parameters it covers. I haven't seen any evaluation by the management of Iarnród Éireann or CIE Group of the project nor have I seen anything to suggest that the issue has actually been approved by the board. It may well have been approved by the board. In the absence of seeing an analysis of what it involves going from £16 million to £51 million against the original backdrop of the estimate, I really couldn't comment. Are we happy that something that was supposed to cost £15 million is going to cost £51? No.

Deputy Currie: Yes, but -----

Mr. Doyle: Am I happy that there are no other alternatives? I just don't know.

Deputy Currie: -----there you have it in black and white in front of you, a document from your own Department-----

Mr. Doyle: Yes.

Deputy Currie: -----which says: "It will cost £35 million to complete the project, over and above what has been spent to date, and it will take four years to complete it, i.e. one year on each of the four lines. A final decision on how the project is to proceed will be taken by the CIE Board within one month." That was on 18 October.

Mr. Doyle: Yes

Deputy Currie: I presume you have a view in relation to this.

Chairman: That was October 2000.

Deputy Currie: Yes.

Mr. Doyle: October 2001, Chairman.

Chairman: Is it?

Mr. Doyle: This is a very recent document.

Deputy Currie: Yes, it is a recent document. I did not want to correct you, Mr. Chairman.

Chairman: No, I thought that you needed correction.

Mr. Doyle: Okay, this is a very recent document. The document is recording what CIE officials are saying. It is a report into the two... the monitoring committee official representatives before they meet the Commission to establish what their view of the facts are. Their view of the facts are that it will take this £35 million and so on. I am saying, consistently with what I said to the Chairman earlier in relation to what is going to happen this project, it's going to have to go to the board. The document is recording the fact that it's going to be going to the board and a decision taken within one month. Apart from what the chairman of the board said last week, I'm not aware myself that that process has actually concluded.

Deputy Currie: Yes.

Mr. Doyle: So, am I happy that it's going to cost so much? Personally, no, and I would doubt if the board of CIE or the management of CIE or the Department are either.

Deputy Currie: The meeting which we are discussing took place on 18 October. The following day there was a meeting with EU officials. Was this view discussed with the EU officials on the following day?

Mr. Doyle: Yes. The Commission was fully informed as to the views that had been... I think, in fact, it was the same day. As I understand it, the committee met the same day with representatives of the Commission and the Commission was fully informed as to the views of CIE.

Deputy Currie: And the EU officials would have been informed in relation to the additional £35 million?

Mr. Doyle: That is correct and the Commission, like ourselves, are very anxious to get a full evaluation and justification for the expenditure. The position of the Commission is that the mini-CTC was one element of a broader project - broader signalling and track work. They have transferred roughly £10 million to Ireland, which has been sent to CIE in respect of the £16.5 million they have spent. If the projects are not concluded, and I think that's clear from a separate document that you have in there which incorporates the statement of the Commission representative to the committee, the clear implication there is that if the project is not concluded, then the funds that have already been transferred to the project, they may expect to get those funds back. They have a proposal before them for quite some time that the funds that were approved and haven't been transferred would be transferred to alternative investment projects. They haven't approved that and they're not going to do so until they get the full outcome of the committee's report and a response to the issues they raised at that meeting.

Deputy Currie: May I return to this meeting of 18 or 19 October with the EU officials? If you look at page 3 of that document, there is a reference which says: "The Commission indicated that it wished to regularise the position in regard to the Mini-CTC." What is meant by that term?

Mr. Doyle: What was meant by that... this is their quotation.

Deputy Currie: You can see it there.

Mr. Doyle: I see it now, yes.

Deputy Currie: "The Commission indicated-----

Mr. Doyle: The position, as I've said, is, they approved an original envelope of funds for the project on the basis that the project would be delivered and concluded within the overall gross spend by CIE and their grant towards it. They know the project has not been finished and they transferred funds to Ireland and to CIE on the expectation that the project would have been substantially finished by 2000 or thereabouts. It's clear that it hasn't been and there is an issue of accountability from their side. They have transferred £10 million funds to a project that hasn't been concluded and it would appear substantially hasn't been concluded, so the regularising of it would require a definitive programme action to conclude the project or a decision not to conclude it, in which case I would expect they will be looking for their funds back.

Deputy Currie: What is the present position? Has the Commission endorsed the internal completion plan for the mini-CTC?

Mr. Doyle: No, it hasn't. It's awaiting a full scale report from the Department of Public Enterprise and CIE. I think you have a separate document that Mr. Dunning sent to Public Enterprise on 23 October just pointing out the fact that the Commission requires a credible timetable and an outline of the strategy for completing this project. It awaits that before it can wrap up its attitude.

Deputy Currie: You see that it states: "To this end, it requested the Irish authorities to submit before the end of 2001, an outline of their strategy for completing the project together with a realistic timetable. This was agreed". Has that been done? Has the Commission received an outline of the strategy for completing the project?

Mr. Doyle: No. As I have said, that particular reference there was followed through by Mr. Dunning about five days later and we await from CIE and the Department of Public Enterprise proposals to send to the Commission in that context.

Deputy Currie: You are telling me that despite that agreement, this has not yet been done. It was supposed to have been done before the end of 2001. We are within six weeks of that now. Why is that the case?

Mr. Doyle: With respect, I would say one of the issues that the board and people are considering is the process that's in train right now and the outcome of the committee's conclusions. Also, you will see there from the documentation as you have read out yourself that the board of CIE group of companies was to consider adopting a final position in relation to a conclusion of the project by one month from the middle of October, which is next week.

Deputy Currie: Has that been done?

Mr. Doyle: Not to my personal knowledge, but, as I say, I am not on the board of CIE. I don't know, but I can tell you that the Department of Finance has not got the report in question to send to CIE, but I expect that, as in all these things, the Department of Public Enterprise are in close contact with CIE to actually get the report.

Deputy Currie: We are talking here about an extra £52 million. Will it be secured or will it be lost? In the context of what you are telling me about the delays and agreements that apparently have not been implemented, is there a serious risk that this £52 million will be lost to the country?

Mr. Doyle: Just to clarify, I don't think £52 million per se is at risk. You are adding the £17 million spent to date to the £35 million to spend yet. The amount of aid in question is £10 million or thereabouts. That's already been transferred. From the European Commission's point of view, if the project doubled in cost, their original grant remains. It's not going to vary upwards. If it does cost £50 million to finish it, the aid of £10 million or whatever is outstanding, £2 million or £3 million ... that wouldn't be lost, but if the project is not concluded, the aid that has been transferred to Ireland so far, the Commission may decide to seek a return of the funds if they are not satisfied the project will be concluded as originally intended.

Deputy Currie: How much are talking about - the amount of money that could be reclaimed plus the additional money required to finish the project? How much may be under threat?

Mr. Doyle: The additional amount of money that may be required to finish it isn't an EU issue. The amount of aid of £10 million that I mentioned is definitely in question. We have to satisfy the EU that the project will be concluded. If the board of CIE were to conclude, for whatever reason, that the project would not be finished, that the £35 million would not be spent, then that money wouldn't be spent and CIE would probably be obliged to rebate the £10 million that has been spent. So it's £10 million that's at risk. In terms of not finishing the project, you'd have to ask what would be the consequences from CIE's point of view of not finishing the project - (a) they'd lose the £10 million, (b) issues of safety in relation to these lightly used lines come up, as to whether its possible to maintain them viably if the signalling is not done, and there are financial issues arising out of that plus the original savings that they were supposed to secure from modernising the signalling system, which they put at something like £1 million a year at the time. So there are lots of issues for the board to consider.

Deputy Currie: Yes, a lot of issues for the board to consider. Finally, in view of the evidence that has been given to this committee, including your own this morning, what lessons has the Department of Finance to learn from what has occurred?

Mr. Doyle: I think some of the lessons that we would have to learn from the totality of the hearings is to review overall our follow through in relation to capital expenditure, appraisal guidelines. We have articulated guidelines in the early eighties and again in the mid-nineties, and best practice, if it were followed, should minimise the degree to which these particular problems would emerge. It is an issue for our reflection as to whether our follow up on that is adequate. It is certainly not formalised in a rigorous way in terms of methodical year by year view.

One of the issues that we have been contemplating is to discuss with the Parliament's auditor, the C and AG, a process of, a look back process to observe the extent to which capital expenditure guidelines are being observed and the extent to which significant issues of cost overruns arise on a random basis as part of the C and AG's work programme. That is something that we would like to discuss with him and he is completely independent. That is one thing we would like to reflect on.

Secondly, as I intimated earlier when I was responding to the Chairman, we are also reflecting on the reporting requirements and transparency requirements in relation to the way in which projects evolve. At the moment the Dáil ... the information is presented to the Dáil through the public estimates process. In this context and in many others, I might add, it's quite limited. For instance, if we're ... in relation to any particular major project, let's take the Luas as it's in this area. What is the originally approved budget cost when the contract is authorised? That information is not published regularly to the Dáil in the context of the estimates that would be published elsewhere but what we have been contemplating is that you would publish that by major projects, say projects over £20 million or something, the original approved costs, the amount spent in prior years, the amount to be spent in the current year and the amount to be spent in future years. And then you'd have a projected total final cost, as a project unfolds over the years. This would be, I think, useful both for the management in a Department or in CIE, if we apply it to them. It would be useful to their Minister in evaluating progress overall. It would be useful for the Minister for Finance in evaluating his attitude to the overall envelope and it would be very useful for the external auditor of the Dáil in evaluating the way in which projects are going and it would be very useful to the Dáil itself in evaluating and commenting on the way projects are evolving. They're the two issues that I would reflect on at the moment. There may be others when we consider your report.

Deputy Currie: And we will reflect on them too. Thank you very much, Mr. Doyle.

Mr. Doyle: Thank you, Deputy.

Deputy Rabbitte: Briefly Mr. Doyle, you will recall a document that you opened to us the last time that you were here in respect of overruns generally on projects. Do you remember that?

Mr. Doyle: Personally, I will have to answer "no". I don't think it was myself. I am open to correction on that.

Deputy Rabbitte: It was not you, it was one of your finance colleagues and I thought you were speaking in the corporate person-----

Mr. Doyle: Yes, I have seen it, I don't have a copy with me, but I have seen it.

Chairman: Would you like a copy to be made available to you?

Mr. Doyle: If that's possible.

Deputy Rabbitte: The point is a general one. There are several examples of overruns, are there not?

Mr. Doyle: There is a long history of overruns. I think the last time I was here I adverted to the fact that we had previously a report on cost overruns on capital projects, which I think the committee was given a copy of. It's fairly dated now.

Deputy Rabbitte: I do not want to question you on the detail of it.

Mr. Doyle: Yes, but that report was produced because there were a number of serious cost overruns on major projects. And it certainly is the case that, over the years, we have had significant cost overruns. Now, why do those overruns arise? One - and this is a problem that seems to have been a feature here - the specifications for the original project in question haven't been adequately teased out before going out to tender. Two, then after the tender phase and the specification issue may have been cleared up, the cost may have increased. Does the relevant approval authority, whether that be a line manager, senior manager, a board member, a Minister, or the Minister for Finance, has their approval been sought? As the project unfolds, are issues brought to attention and the whole future of the project reviewed? There is a whole sequence of logical steps that have to be followed in relation to capital expenditure to ensure the cost overruns are minimised.

Now, you will never get a situation where, in my own opinion, cost overruns on complex infrastructural projects are eliminated. First of all, I don't believe you will succeed in having an actual fixed price contract for a very complex infrastructural project. If it were possible to have fixed price contracts you'd have a very expensive initial project in the sense that the contractor and the sanctioning authority would be trying to anticipate everything that could emerge. So, there's pluses and minuses in fixed price contracts but it's not-----

Deputy Rabbitte: There are, but can I just make the macro point, Mr. Doyle? There are, and I am quite sure you are right about the fixed term contract. The point I want to make is this - we have been here for about six weeks, investigating an overrun that, according to the papers opened by Deputy Currie, will provide for a £35 million increase in the original cost. You can add to that £1.5 million from the cost of termination. You can add to that an unspecified figure, I think the chairman suggested it was £6 million ... I think Mr. Cullen gave us different figures regarding the cost of the consultancies. The damage done to the permanent way can be added to that. CarlBro estimated that to be a frightening figure of £340 million, although that is not all due to the case we are investigating. Cost overruns are not unusual. Why is that the case?

Mr. Doyle: Yes, I was trying to lead up to that, Deputy. The first issue is that the original contract, unless it's a genuinely fixed price, you are going to be exposed to cost price increases. It's exceptionally difficult to negotiate a fixed price contract, particularly when the project is complex. Whether this project was complex or not I don't know, I'm not an engineer. In the absence of a fixed price contract you will have...situations will emerge under a number of headings. First of all, you have the normal routine cost increases on wages and materials and you know yourself the scale that they have been over the last couple of years. They've been quite significant given the pressures overall in the construction sector.

Also, as projects unfold and lessons are learned on the original specifications, you will find the client in conjunction with the contractor will be reviewing the specifications to make sure that if mistakes were made at the outset in specifications that they are corrected before you carry through to finality in an incorrect way-----

Deputy Rabbitte: Chairman, will you publish the document to which Deputy Currie referred earlier? Are you satisfied with the monitoring function carried out by the monitoring committee at the moment?

Mr. Doyle: Maybe if you would allow me to continue and I'll come back to it.

Deputy Rabbitte: I will come back to it.

Mr. Doyle: Am I satisfied about that monitoring? Yes, it's satisfactory in the context of the situation that I've outlined-----

Deputy Rabbitte: Can it be satisfactory? For example, I have the minutes of the meeting of 18 May 2001. A total of 35 very diverse individuals attended and they assessed a range of projects. I do not know how long these monitoring committee meetings go on but do you think that once every six months, 35 people sitting around a table representing a number of county councils, CIE, the National Roads Authority, the Departments of the Marine, Public Enterprise, Environment and Local Government and Finance, the European Commission discussing a number of varied, complex projects can do that justice? Do you think that is monitoring? It might be reporting but it is not monitoring.

Mr. Doyle: It may be a valid criticism, Deputy. The purpose of it isn't, to use that famous phrase the Chairman was referring to earlier, to micro-manage. Outside that forum there is a process of monitoring and reporting at the individual project level, at the individual agency level and at the individual departmental level. To get into the sort of detailed, project management control that you're suggesting should be followed by the Cohesion Fund monitoring committee, you're right, it wouldn't meet twice a year, it'd meet every day of the year. It would be a project management committee, not a project monitoring committee.

Deputy Rabbitte: Is there not a balance? I refer back to what you were going to say. One cannot quote from newspapers but some are more reliable than others. The most outrageous we heard from your colleague recently was a water scheme in Cork. I will not repeat the figures but it is crazy how far they are from the original estimate. How does that happen?

Mr. Doyle: As I recall in that particular case, Deputy, the project was related to Cork and related to sewage treatment. As I understand it the original figure that might have been in one column on some piece of paper related to the design costs - the original design costs. Whether that was clear to everyone concerned I don't know, but, as you'll appreciate, the design costs are only a small fraction of an overall construction project, so there may have been a mix up in an interpretation and a presentation there.

Deputy Rabbitte: If that is exceptional let us leave it aside. In general are you saying that the sponsors of these projects originally underestimate the costs in their rush to comply with deadlines for EU submissions or whatever?

Mr. Doyle: I don't think I said that.

Deputy Rabbitte: You did not, but is that what you are saying?

Mr. Doyle: I think the reality is that, in the infrastructural field, it is virtually impossible to have a fixed price contract. When the contracting authority - whether it be a local authority, a Department, a State board, a Minister - is entering a contract like that, if it's not a fixed price contract there would be an expectation that, depending on how cost increases go in the sector, depending on the way specifications were correct, depending on the way in which site conditions vary, there may be - there is a significant possibility of cost increases arising.

Deputy Rabbitte: Is there not a reasonable tolerance that we might expect, as distinct from the hundreds of percentages-----

Mr. Doyle: That are involved here.

Deputy Rabbitte:----that are involved here?

Mr. Doyle: What's reasonable in the context? In the last four years, for instance, you would have had cost price inflation in the construction sector well over 40% given the conditions in that sector. Is that reasonable or unreasonable? You can argue it both ways.

Deputy Rabbitte: Do you think skills shortages, the rate of inflation in the industry, inflation generally in costs and so on during a boom exacerbate the problem?

Mr. Doyle: Yes, very obviously they do. We are talking about the public sector and when the public sector level of investment has been significantly expanded and, at the same time, the private sector investment is also expanding very rapidly, then you have constraints which lead to prices increasing overall. That is a fact.

Deputy Rabbitte: Chairman, can I turn to page 003 of the document on the screen? The next page. You do not seem to have it. I seem to be privileged, Chairman. You will take my word for it, Mr. Doyle. We are talking about the mini-CTC. However, within CIE, for example - the next page of the document - there is a page missing - I am looking at page 007.003 - states that the Heuston proposal had been estimated at £45 million, but is now expected to cost £92 million. That seems to be at least on a scale with what we are talking about here.

Chairman: Deputy, that part of that document has been blacked out.

Deputy Rabbitte: Is that right, Chairman?

Chairman: Yes, because the Heuston project does not form part of our terms of reference.

Deputy Rabbitte: Right, but I was putting a general point to Mr. Doyle about overruns generally and the fact that the mini-CTC is not the only one. It so happens that here is another one within CIE. The general point I am putting to you, Mr. Doyle, is whether it is time that we looked at some system of monitoring and assessment of these projects that is more realistic. I am not talking about a day-to-day project management team second-guessing the public agency doing the job or whatever, but it seems to be a problem.

Mr. Doyle: Yes, Deputy, it certainly is a problem. I think I touched earlier with the Chairman and some of the other Deputies when I was asked to reflect on what lessons we would draw. If you recall, I mentioned that we saw a need to have a discussion, subject to the views of the C and AG himself, as to the role that the external auditor might play in sampling and auditing the manner in which public capital programme guidelines are observed and the manner in which cost overruns emerge. I also said that I saw a need to expand on the information flows available to the Oireachtas, to Departments and to Ministers on individual major projects which would demonstrate and clarify at a much earlier stage the extent to which significant cost overruns are emerging.

Deputy Rabbitte: If I am a contractor, is there not an incentive for me to tender a price that I know to be way below anything that is viable but when I get it there seems to be no limitation on the add-ons? Therefore, I can tender for a water scheme for £5 million and it can turn out to be £30 million. I take your point about fixed-term contracts but when you have that kind of tolerance it is beyond normal commercial practice.

Mr. Doyle: Yes. On the specific point that you raise in relation to a contractor putting in an artificially low tender that would lead inexorably to an explosion in final costs. First of all, I would expect, as I think most professional people would expect, that the original specifications for a contract would be extremely tightly drawn. There would be no lack of clarity of what has actually to be delivered. Plus, usually you will have, or invariably, a professional quantity survey team engaged prior to the award of a tender, who will advise the client as to what a reasonable tender can be expected to come in at. If a tenderer comes in at an artificially depressed price, I would expect that the evaluative process there would expose that for what it is - an artificially low price that doesn't meet the specifications, that doesn't demonstrate an adequate track record in delivering projects at that inadequate-----

Deputy Rabbitte: But we seem to have examples of where that is not happening.

Mr. Doyle: Well, I think that's why we're here, partly, but I would expect that the norm would be that the evaluative process would root that out. Nobody is required under public contract procedures to pick the cheapest tenderer; it is to pick the best tenderer that can do the best price that meets the specifications of the client.

Deputy Rabbitte: Isn't it a fact that the Comptroller and Auditor General will only produce his report 12 or 18 months after the event, and that it is then too late?

Mr. Doyle: It may be late if we are talking about short-term projects. If we are talking about projects that go on over a number of years, which is what we usually are in the case of infrastructural projects, the process that I outlined earlier which would have a yearly clarification to the Departments, the Ministers, the Dáil, of precisely how each major project is going in terms of the total approved budget, what's been spent, what will be spent in the current year and the remaining years, and what the final projected cost is, the C and AG would have that information flow as it emerges during a year and on a yearly basis. It would allow him to get in and review what is going on in relation to significant projects much earlier than the conclusion phase.

Deputy Rabbitte: Yes. We have found, though, on this one, that intervening can be very expensive as well? Isn't that right?

Mr. Doyle: The business of not interfering can be fatal.

Deputy Rabbitte: Yes. It's not much of a choice, though. What did you mean earlier when in reply to Deputy Currie concerning the outstanding costs on this project you used the words "if it is considered appropriate and desirable that it be finished"?

Mr. Doyle: Well, I put myself in as a member of the board of CIE. I presume I am about to be asked to evaluate a proposal from the management that £35 million be expended. I have to satisfy myself that the expenditure of those funds is justified.

Deputy Rabbitte: Are you hinting that you think the entire project was unnecessary in the first place?

Mr. Doyle: No, no, I am not hinting that at all. It was Government policy that these lines be kept open. Once that decision is made, then you either have the tracks maintained and the signalling system maintained at a level that meets safety requirements or else you have the trains going along at two miles an hour. But what I meant was we have a statement there that £35 million is going to be the cost. I heard references over the course of the hearing to the view some people express that the fibre optic cable that was part of the Esat legacy, that that part of the fibre optic cable that CIE have, could be utilised to conclude the project. I don't know-----

Deputy Rabbitte: Would it not be an irony, given the fact that Esat and Mr. Denis O'Brien apparently offered that to CIE in the first instance? Do you think we put down this cable just to get the EU money?

Mr. Doyle: I think I was asked that the last day I was here, Chairman, and I think I said no.

Deputy Rabbitte: You kicked to touch?

Mr. Doyle: No. I think I said that I read from the documentation that CIE produced that the signalling system was 70 years old on those lines, that there were significant safety issues and that-----

Deputy Rabbitte: That is not the issue we are discussing here. We are discussing here the issue of whether it was possible to feed off the Esat cable in the first place.

Mr. Doyle: I was just responding to your question about the... did we simply get involved in the project to draw down EU funds. As to whether there's an irony there in relation to the utilisation of the Esat fibre optic lines or the ones that belong to CIE, I just don't know. I don't know what the facts are. That's my only point on the £35 million. Until I know all the facts, I can't comment on it.

Deputy Rabbitte: Sure. You also told Deputy Currie that, depending on which evidence we believe here, it would appear that the Esat legacy so referred to contributed to this cost overrun and delay and all the rest. You seemed to say to Deputy Currie that that information - information about the Esat project - was not brought to the attention of the monitoring committee. Did I hear that correctly?

Mr. Doyle: I think I said I would establish the precise facts for Deputy Currie in that context as to-----

Deputy Rabbitte: You do not recall it being brought to the monitoring committee?

Mr. Doyle: No. I could explain that I haven't been personally involved and I can't recall from having reviewed all the papers, which I did do.

Deputy Rabbitte: What was the Department of Finance's role on the statutory instrument?

Mr. Doyle: Under the relevant Act of Parliament, which allows the Minister for Public Enterprise to extend the functions of CIE, the consent of the Minister for Finance is required for that.

Deputy Rabbitte: What do you know about it in this case?

Mr. Doyle: In this case, the Department of Public Enterprise put forward a draft of the instrument, which had been cleared by the Attorney General's office. It attached a document outlining the background to the project, which I think the committee has examined at length. I think that was a CIE document and it presented a case that the product had been evaluated, that it had considerable benefits for CIE and that they had gone through a process of contact with a number of different players before arriving at the one they did. So apart from that CIE document, the official submission, and I think the Minister for Public Enterprise also communicated with the Minister for Finance on the basis of the information that that Minister had available, asking that the order be counter-signed. So that was our involvement.

Deputy Rabbitte: Given that testimonial from the Department of Public Enterprise, the Minister would have signed off on it pretty much by rote?

Mr. Doyle: Yes. He was advised by the Department of Finance I should say that it was appropriate for him to sign it.

Deputy Rabbitte: Right.

Mr. Doyle: So it wouldn't be strictly speaking correct to say by rote.

Deputy Rabbitte: Since you were here last, Mr. Doyle, do I understand that a new document on a code of practice for the governance of State bodies was put on the web, on 4 October to be precise?

Mr. Doyle: That's correct.

Deputy Rabbitte: That had nothing to do with this inquiry; you were working on that anyway.

Mr. Doyle: That was being worked on for a long time, yes.

Deputy Rabbitte: In terms of public procurement, what changes does it make?

Mr. Doyle: No great particular change per se in the sense that the public utilities like CIE are subject to the overarching rules of EU law. It does require the boards to follow the principles of public procurement generally, which are to have an open, fair and transparent process. In relation to disposal of assets, it formally requires that any disposal of an asset be done through an open, competitive tendering process.

Deputy Rabbitte: Is the Department concerned that that did not seem to happen here?

Mr. Doyle: I have heard witnesses from CIE expressing both views, that it didn't and it did.

Deputy Rabbitte: We will worry about that, but what is your opinion?

Mr. Doyle: At the time the statutory instrument was signed, there was a statement to the effect, that the process had gone through one of contact with a number of significant players. There is an issue there against the background of a tendering process ... it was the original Esat approach, a proprietorial proposal that was market sensitive and couldn't have been disclosed elsewhere.

Deputy Rabbitte: Do you not think that's true arguably in the case of a joint venture, but it manifestly could not be true in the case of a licence agreement?

Mr. Doyle: Not being a technical person, I wouldn't be in a position to judge myself as to whether their original proposition was a proprietorial one.

Deputy Rabbitte: Let me put it this way, suppose the committee found that the public procurement procedures were not observed - would the Department be concerned about that?

Mr. Doyle: We would expect that if procurement procedures weren't being followed and if the board and CIE hadn't given their consent to those procedures not being followed, yes we would be concerned. But if the board had considered the process by which the contract or the deal would be done, if it had considered that in their view a particular form of process should be followed and that they had valid reasons as to why an open, competitive process wasn't followed, then we'd have a different position.

Deputy Rabbitte: Chairman, to save time ... I had intended, although it would take a long time, asking Mr. Doyle questions about various aspects of this document, on procurement, disposal of assets, diversification, reporting arrangements, tax compliance and that type of thing. To short circuit matters, can I take it Mr. Doyle would agree that this is now a public document on the web and that it might be tendered in evidence in order that the committee could draw on it subsequently as appropriate?

Mr. Doyle: Yes, Chairman.

Chairman: It is just 11.30 a.m. and there is another questioner. We will suspend the proceedings until 11.40 a.m.

Chairman: Deputy Rabbitte to conclude.

Deputy Rabbitte: Thank you, Chairman. I had entered the document code of practice for the governance of State bodies and had a single question for Mr. Doyle. This is new. This is 4 October of this year, and the difference between it and the previous one appears to be that previously this code had the force of exhortation but in this case the very first indent is "State bodies will be required to implement the code's recommendations". If they do not do it, are there any sanctions?

Mr. Doyle: Yes. It is the case that they are obligatory rather than discretionary. The sanctions would be the usual ones in relation to the accountability and governance between chairman and the board and the Minister concerned. The Minister concerned would evaluate the extent to which a particular issue was not observed and take appropriate action.

Deputy Rabbitte: Thank you, Mr. Doyle.

Deputy Higgins (Mayo): Is it not a fact, Mr. Doyle, that in this particular project, the EU was picking up the bulk of the funding? For example, this was a £14 million or £15 million project and the EU had committed £10 million. Is that correct?

Mr. Doyle: Yes, 85% funding.

Deputy Higgins (Mayo): Is it not also correct, therefore, that by not getting the original specification and cost right - for example if the specification for this had shown that the completion cost was roughly £58 million - we are losing a substantial amount of EU funding?

Mr. Doyle: I don't think that would be correct, Deputy, in that the EU had a limited amount of funding available at the time which was spreading over a wide range of projects and what was available was spread over a series of projects. There was no more to be allocated, so if the project had cost £51 million at the time and if the EU was still spreading the same pot of money and if they had given 85% to it, other projects would not have got any funding, so the answer is no, that is not the case.

Deputy Higgins (Mayo): From the point of view of a general principle - for example, if 85% funding is available for projects generally - is it the case that by not getting your specification right, by not getting your figures right, EU funding is lost, or does the EU adjust the figures? For example, if during the roll-out of a project the cost increases, is there an adjustment by the EU in relation to increased funding?

Mr. Doyle: In relation to this project?

Deputy Higgins (Mayo): Or projects generally.

Mr. Doyle: No. It varies depending on what tranche of funds or period of time we are looking at. At this particular period, the EU did not adjust as costs increased but, from CIE's point of view, if they had argued that the project was going to cost £50 million and if that had stood up to scrutiny and if the EU had decided to allocate 85% funding to it, CIE would have got the benefit of that fund, and other projects somewhere else in the system would have lost.

Deputy Higgins (Mayo): Do you think that the fall-out from this project, which has received a very high profile and much publicity in this committee's ongoing work, has damaged the EU's perception of this country's management of EU funding?

Mr. Doyle: I don't think so, Deputy. I think that by and large the Commission have been quite happy with the way in which Ireland has managed investment projects which they are assisting. From the point of the EU, the fact that a particular project is being put through a severe parliamentary scrutiny can only stand to the good of Ireland.

Deputy Higgins (Mayo): Is it not a fact that the mid-term review carried out some years ago actually showed that Ireland, from the point of view of prudent expenditure of EU money, did relatively well? Is that not the situation?

Mr. Doyle: Yes, I think we have a very good standing in terms of the propriety in the way we manage our projects and report to the EU.

Deputy Higgins (Mayo): Is it not unfortunate that a project like this does not meet the generally high standard that was achieved?

Mr. Doyle: It hasn't met it so far.

Deputy Higgins (Mayo): On the completion of the project, should the decision be made to use the Esat cable from the point of view of the signalling project, does that mean that the EU could look askance at this in terms of reclaiming some of the money because this was not originally intended?

Mr. Doyle: I'd say it would mean that they would review their overall attitude to the project. Whether they'd look askance at it, I don't know. I hope it is possible to use the cables without spending the £35 million.

Chairman: Mr. Doyle, you still have a copy of the document comprising a table of Cohesion Fund financial data in respect of live projects. Can you confirm, under oath, the correctness of that table?

Mr. Doyle: Yes. I've asked the Department's officials if this is a correct document and, yes, they've confirmed that it is, so, on that basis, I can.

Chairman: Thank you, Mr. Doyle. Is it agreed to publish the document? Agreed. Mr. Doyle, you are excused. Thank you.

Mr. Doyle: Thank you very much, Chairman.

The witness withdrew.

Chairman: I call Deputy Michael Lowry.

The following witness was sworn in by the Clerk to the sub-committee:

Deputy Michael Lowry.

Chairman: Thank you, Deputy Lowry. You are welcome and we regret that you had to wait some time. Before we proceed with the questioning of Deputy Lowry, I would like to call Mr. Dermot McCarthy.

The following witness was sworn in by the Clerk to the sub-committee:

Mr. Dermot McCarthy.

Chairman: Mr. McCarthy, you have furnished a statement of evidence to the sub-committee.

Mr. McCarthy: I have indeed.

Chairman: Would you confirm on oath that the contents of the statement and the appendices are correct?

Mr. McCarthy: I do.

Chairman: Thank you, Mr. McCarthy. You are excused.

The witness withdrew.

Chairman: Is it agreed to publish that statement? Agreed. The first questioner is Deputy O'Flynn.

Deputy O'Flynn: Deputy Lowry, you are welcome. Have you been following the proceedings of the inquiry so far?

Deputy Lowry: No, not in detail.

Deputy O'Flynn: Would you confirm to the committee when you were appointed Minister for Transport, Energy and Communications?

Deputy Lowry: I served as Minister for Transport, Energy and Communications from December 1994 until November 1996.

Deputy O'Flynn: Who was the chairman of CIE at that time?

Deputy Lowry: When I took over as Minister, the chairman of CIE was Mr. Dermot O'Leary.

Deputy O'Flynn: Would you confirm for the committee when you first met the chairman of CIE as Minister and what was your relationship with him?

Deputy Lowry: Obviously, I can't recollect exactly when I would have met him but certainly I would have met Mr. O'Leary... I think the first time I met him was at a function in the Burlington Hotel. It was something or other to do with a semi-State body. I'm not quite sure if it was CIE.

Deputy O'Flynn: What was your relationship with him during his tenure of office and, indeed, your own?

Deputy Lowry: What was my relationship with him? Well, if you wish to pursue this line of questioning, what I would like to do is to assist the committee and to put in context my relationship with Mr. O'Leary from the time that I went into the Department. So maybe I should take you back a little bit further and to take you to the days when I first entered the Department and the first days in which I took advice from the officials within the Department and proceeded, on foot of that advice, to make a number of decisions for the betterment of the company, CIE group of companies. And to do that effectively it is important that you would be aware, Mr. O'Flynn, that in March 1994 Mr. Brian Cowen, who was my predecessor in the Department, began the process to recruit a new group chief executive for the company and in April of that year - April 1994 - Brian Cowen met the board of CIE and asked the board to bring in new blood. And if you, I'm sure, have access to the minutes of that meeting you will see that he asked for new blood from outside the organisation to supplement the existing management and he wanted that done before the then executive chairman, Paul Conlon, would retire in June 1994.

So in April 1994 we had the then Minister, Mr. Cowen, acknowledging and highlighting the management efficiencies of companies and asking that something would be done to rectify the position of not having a chief executive. So he requested that that would be put in place before Mr. Conlon retired in June 1994. Then in April of 1994 Mr. Conlon set up a board sub-committee of three people and the purpose of that sub-committee was to supervise the recruitment of the group chief executive officer in line with Government policy, in line with the ministerial direction that they had got and in line with the board's own decision that they should proceed in that way. That particular sub-committee of three was chaired by Mr. Robbie Kelleher and that sub-committee included Dermot O'Leary and John Maguire and Craig Gardiner of ... at that stage Pricewaterhouse were engaged to both advertise the post and assess the candidates that they had received for that particular position. Then in June 1994 - we have come from April, we are now in June 1994 - that's when Mr. Dermot O'Leary became chairman of the board of CIE. Noel Kennedy was then appointed acting group chief executive by the CIE board and this was done, if you look at the minutes, on a strictly temporary basis.

The existing committee which already comprised three, sub-committee comprised three, was now expanded under the instructions of the new chairman, Mr. O'Leary, to include all new executive directors, which included Kay Mulrooney. Mr. O'Leary was anxious that it shouldn't be left to the people that were there, that he should expand it and that he should have his own input into that. Now, what happened then is on 14 September 1994 - you will again see from the documentation that you have received - Mr. Robbie Kelleher, who was appointed by Mr. Conlon as chairman of that sub-committee, he resigned from the sub-committee because, and again you have access to his letter----- These letters state quite clearly ... he gave three reasons why ... but effectively he resigned because of his unhappiness with the procedures being followed and the fact that the advice of the consultants was being ignored and he also was unhappy with the fact that from then on the consultants were told to deal directly with Mr. O'Leary. So Robbie Kelleher was now gone at this stage and Mr. O'Leary was in total charge of that particular sub-committee.

Then on 15 December 1994 we had the change of government and I was appointed Minister for Transport, Energy and Communications on that particular date in that Government. In January 1995, Noel Kennedy was reappointed as acting CEO. Now, there was a difficulty in the Department about this and it was brought to my attention. As I said to you earlier on, there was an instruction but now ten months on from when the instruction had been given in relation to a new chief executive - an instruction which hadn't been given by me, but had been given firstly by the then Minister Brian Cowen and that particular Government, but we're on now to January 1995 and we see again where a CEO has been re-appointed despite the fact that the individual was 65 years old and was already receiving a pension from the company, and that led to difficulties within the Department which were brought to my attention.

During this time, Pricewaterhouse approached and interviewed other candidates for the post and, in line with his instructions, Mr. O'Leary was kept informed by the consultants but the record will show and your documentation will show that the sub-committee were clearly annoyed because they had not been informed at any stage of what was happening. The sub-committee were now out of the loop and left out. Then, in April of that year, in 1995, my Department officials in the Department of Transport, Energy and Communications came to me at various times and at the most senior level and expressed to me their grave concerns about the weakness of the management of CIE and its subsidiaries.

Deputy O'Flynn: Who were those officials, Deputy Lowry?

Deputy Lowry: I would have been principally communicating through the Secretary General of the Department, the Secretary at the time, Mr. John Loughrey, and others but mainly Mr. Loughrey, Secretary of the Department. As I said, they were concerned about the weakness of the management of CIE and its subsidiaries and I was advised that this had been communicated on several occasions to directly by the Department and directly by my predecessor, Mr. Cowen. In particular, the officials in my Department were alarmed that the then Chairman, Mr. O'Leary, and the acting group CEO, appointed by the board on the instructions of, at the request of Mr. O'Leary, that they were actively intending to fill all senior management positions in the group in advance of the formal appointment of a new chief executive officer. Now, this was simply going to put the incoming chief executive officer, whenever he would be appointed, at a serious disadvantage because, effectively, any positions of management or any positions where you could...of influence...were, effectively, already filled, and this brought matters to a head to the extent that on 25 April 1995 the Government, on my proposal, decided to restructure the top management of CIE. At that particular stage, the Government appointed Eamon Walsh as executive chairman and his mandate was to recruit a new senior management from outside CIE so as to achieve a blending of the internal and external skills that existed.

Deputy O'Flynn: What sort of relationship did you have with Mr. O'Leary at that stage? What kind of reporting rapport did he have with you? Did he follow the corporate governance rules in relation to reporting of the shareholder?

Deputy Lowry: My relationship with Mr. O'Leary would have been----- You'll appreciate that I had gone into the Department. It was a big Department. There was a considerable number of issues to be dealt with, effectively in the first number of months, and you are only talking about a short time between my arrival in the Department and Mr. O'Leary's decision to stand aside but, effectively, what I was doing at that stage was taking the advice of my officials, being briefed on the issues that needed urgent attention, making a short-term plan, a long-term plan and dealing with policy issues that had previously been negotiated months earlier by that Government.

Deputy O'Flynn: Did Mr. O'Leary come in to see you often in the Department? Did he have discussions with you about CIE, how it was going, the board etc.?

Deputy Lowry: No.

Deputy O'Flynn: Did you appoint Mr. Brian Joyce as the executive Chairman of CIE?

Deputy Lowry: Yes, well, before you get to Mr. Joyce, I think it would be very important that you put Mr. Walsh in the equation, who was the first person that was appointed during my tenure as Chairman of it.

Deputy O'Flynn: I do not need to do that. I am just asking you a specific question in relation to what we are hearing in the inquiry.

Deputy Lowry: Yes, I was Minister when Mr. Joyce was appointed, yes.

Deputy O'Flynn: When was that?

Deputy Lowry: I don't have access to that but I would think that it would have been towards the end of 1995, I think, early 1996.

Deputy O'Flynn: Was it April 1995?

Deputy Lowry: Whatever date.

Deputy O'Flynn: Just let me get this right, Chairman. I am sorry, Chairman, for taking a bit of time.

Chairman: We will probably go back to Mr. Joyce's evidence anyway.

Deputy O'Flynn: On 24 April 1995 you announced the appointment in the Dáil on Question Time. I am sorry, it was on 17 May you announced-----

Deputy Lowry: April-May.

Deputy O'Flynn: It was around that period. Did you have regular meetings then with Mr. Joyce? Did he carry out his reporting functions to you as set out in the corporate governance and the reporting relationships with the shareholder?

Deputy Lowry: Yes, whenever it was ... obviously Mr. Joyce was ... the normal situation would have applied, as it did previously to Mr. Walsh where, certainly, I met him, I informed him of the Government's concerns about the company, I gave him an outline on the Government's position in relation to policies that we wished to see implemented, and he would have been, in terms of governance on those issues, that would have been a matter that he was certainly made aware of by officials within the Department.

Deputy O'Flynn: Mr. Joyce would have been in regular contact with you as the chairman reporting to the shareholder.

Deputy Lowry: No, I wouldn't say on a regular basis. When it was necessary for Mr. Joyce to make contact with me, I was certainly available.

Deputy O'Flynn: Would he have done so on a number of occasions?

Deputy Lowry: He was appointed in May 1995. He wouldn't have had huge opportunities because ... I would have met him on a couple of occasions, yes, in that-----

Deputy O'Flynn: No, that's OK. Did you know Dr. Ray Byrne when he was at the Department when you were Minister?

Deputy Lowry: Yes, I knew Dr. Ray Byrne as a principal officer in the Department, a very competent, efficient and capable individual.

Deputy O'Flynn: He said in evidence that you rang him once when he was a member of the management executive of CIE.

Deputy Lowry: That I rang him once.

Deputy O'Flynn: Yes.

Deputy Lowry: I am sure I did. I could have had. As you know, at Minister level, every Minister is supplied with the names, telephone numbers of the key personnel within the Department. He would have been a key personnel. Actually, probably my contact with him was in regard to the extension of the DART facilities to Greystones.

Deputy O'Flynn: He said that you contacted him when he was an executive manager in CIE.

Deputy Lowry: That I contacted him.

Deputy O'Flynn: Yes.

Deputy Lowry: I don't recall. Maybe I did.

Deputy O'Flynn: You do not recall the conversation or the nature of it.

Deputy Lowry: With Mr. Byrne?

Deputy O'Flynn: Yes.

Deputy Lowry: No. It might have been a routine or constituency matter. I'm not sure.

Deputy O'Flynn: A constituency matter.

Deputy Lowry: Possibly.

Deputy O'Flynn: Is Dr. Byrne in your constituency?

Deputy Lowry: No, but I am sure, Mr. O'Flynn, as a public representative, you know what it's like to contact officials in many Departments-----

Deputy O'Flynn: I understand what you mean.

Deputy Lowry: -----in connection with a constituency problem.

Deputy O'Flynn: I certainly do. Would you have been in regular contact with anybody else working in the management in CIE other than the chairman?

Deputy Lowry: When?

Deputy O'Flynn: As Minister.

Deputy Lowry: What term are you talking about?

Deputy O'Flynn: I am talking about your term as Minister and acting as Minister. Would you have had any contact with any of the executive management in CIE other than the chairman who has a function to report to you?

Deputy Lowry: No. The normal avenue of communication for a Minister is through the chairman, but obviously at various functions or if there was a need for other officials to visit the Department in the company of the chairman, you would obviously be courteous to them and discuss matters with them and ask how things were going.

Deputy O'Flynn: You would not have picked up the phone and rang any of the other line managers or senior managers to discuss anything with them as normal, as part of your everyday business.

Deputy Lowry: My lines of communication would certainly be through the Department officials and then they would make contact with the representative down there.

Deputy O'Flynn: I refer you back to the Dáil debate of 17 May at Question Time when I think some members of the Opposition at the time were asking you a number of questions and you referred to strengthening the existing management team. Could I take it from your outline to the sub-committee that it was your initiative to have the management team of CIE strengthened? Did this lead to the advertisement being placed by CIE looking for six of the best for CIE?

Deputy Lowry: Yes, well, if you ... what actually happened was ... if I take you ... when you get the opportunity, if you read a memorandum, which is on the file in the Department dated 6 April 1995, that clearly-----

Chairman: Is there a number on that, Deputy Lowry, on the bottom right-hand corner?

Deputy O'Flynn: Are you just reading from your own notes, Deputy Lowry?

Chairman: Was it discovered to you?

Deputy Lowry: No, this was discovered to me by the Department.

Chairman: It was discovered to you.

Deputy Lowry: So that I am not at a complete disadvantage with the committee and by virtue of the back-up and information that you have, to assist me to further your inquiries I obviously sought information from the Department. In response to seeking that information, this is one of those documents.

Chairman: And it has been discovered, you believe, to the committee?

Deputy Lowry: I am of that opinion.

Chairman: One of the officials will look at the document to see if it is numbered at the bottom.

Deputy Lowry: Irrespective of that, I don't have to put the document----- What I'm saying is that this-----

Deputy O'Flynn: The initiative, according to your own statement in the Dáil, was to strengthen the management team and, as a result of that - we are just following the sequence of events - the advertisement was placed with the newspapers for the recruitment of "six of the best".

Deputy Lowry: Yes, exactly, and what I want to do, to put that in the proper context and to put it in perspective, that was an initiative which started on 6 April 1995. It was an initiative which was started not by me, but by my predecessor-----

Deputy O'Flynn: Deputy Brian Cowen.

Deputy Lowry: -----my predecessor, Brian Cowen. In actual fact, that was part of the contribution that he made to that particular board meeting. So, yes, the company, at this stage, were now implementing what was, effectively, Government policy and following the encouragement and the advice that they were receiving from the Department officials.

Deputy O'Flynn: Deputy Lowry, did you have any say in the decision to fill those posts in relation to the applicants themselves?

Deputy Lowry: No, absolutely none. As you know, under the Transport Act, that is a matter entirely for the company itself and for the board. My understanding of these particular positions is that they were advertised... that, first of all, discussions took place between consultancy companies and that Pricewaterhouse were chosen to actually engage in that process, to assess the candidates and to bring a report to the board of CIE. So all of the actions in relation to that were initiated by the company, overseen by the company and there was no direct involvement by either Department officials or, indeed, by me as Minister.

Deputy O'Flynn: Did you know the late Mr. McDonnell when he was in your Department?

Deputy Lowry: Did I know him?

Deputy O'Flynn: Yes.

Deputy Lowry: Yes, I knew the late Mr. McDonnell very well. During my time, the late Mr. McDonnell was an assistant secretary in the Department. I would have to say that he was extremely dedicated, extremely committed. I would regard him as one of the senior public servants during my time as Minister and I would have to say I held him in tremendous respect and regard.

Deputy O'Flynn: You have indicated that you would have had discussions on matters in relation to CIE with him after his appointment to that company in the company of his chairman or other officials.

Deputy Lowry: Yes. Michael McDonnell and the chairman certainly would have visited the Department. He, in his position with the company, and the chairman, in reporting directly to us, so in that context, yes, we would have had discussions with him.

Deputy O'Flynn: And you knew Dr. Ray Byrne. Did you know any of the others of the six of the best? Did you know any of the other applicants that were successful in obtaining the jobs at that time?

Deputy Lowry: I had no role or no involvement in it so I wouldn't have met any of them in that context.

Deputy O'Flynn: The names of any of those who were successful that you might have known do not come to mind?

Deputy Lowry: No.

Deputy O'Flynn: When did you first become aware of the liberalisation of the telecommunications market and who briefed you on this development?

Deputy Lowry: The liberalisation of the telecommunications market?

Deputy O'Flynn: Yes.

Deputy Lowry: Obviously, it would have been the responsibility of the officials of the Department to bring a new Minister in the Department up to date. So it would have been shortly after I was appointed Minister.

Deputy O'Flynn: Was this the first occasion on which you became aware of the liberalisation of the telecommunications market?

Deputy Lowry: Well, apart from the knowledge that everyone else would have had. It was common knowledge at that stage that the European Union were moving to liberalise the market, that there was a need for competition and that, ultimately, the consumer wasn't going to benefit unless there was competition in every sector.

Deputy O'Flynn: Were you aware Iarnród Éireann's own permanent way could be exploited for the purpose of laying cable along it for a national backbone fibre network? Would you have been aware of it at that stage?

Deputy Lowry: There was no discussions in relation to that plan whatsoever during my time.

Deputy O'Flynn: When you joined the Department as Minister?

Deputy Lowry: Yes.

Deputy O'Flynn: When did you become aware of it?

Deputy Lowry: I didn't actually become aware of that particular..... you're talking about the arrangement whereby CIE and Esat came to a formal agreement.

Deputy O'Flynn: I am leading up to that. I am asking you when did you become aware of the importance of the permanent way for laying telecommunications cable?

Deputy Lowry: As you know, I had to resign in 1996, so the emphasis on my contribution at that stage would be to try to find a permanent way for myself. So, I wasn't interested in what CIE or anyone else was doing at that stage. So, the first I became aware of the agreement between Esat and CIE was through the media.

Deputy O'Flynn: While you were Minister, did you have any discussions with telecoms operators in relation to the liberalisation of the market?

Deputy Lowry: None.

Deputy O'Flynn: None. No other telecoms operators.

Deputy Lowry: No.

Deputy O'Flynn: Did Mr. Denis O'Brien and Leslie Buckley or his company, Esat Telecom, approach you with regard to the exploitation of Iarnród Éireann's permanent way?

Deputy Lowry: Absolutely not.

Deputy O'Flynn: Were you aware that Mr. O'Brien's staff, in particular Ms Sarah Carey, was in discussions with CIE telecommunications engineers as early as 2 October 1996 in relation to the permanent way?

Deputy Lowry: No, as I said, the only awareness that I had of that has been subsequent to the media coverage of it. I was not aware of anything leading up to it and even since it became an issue, I haven't been totally briefed on it. I simply hadn't had the time to follow it in detail.

Deputy O'Flynn: Did you know Leslie Buckley, when you were Minister?

Deputy Lowry: I knew of him; I didn't know him.

Deputy O'Flynn: You did not meet him at any gathering or anything?

Deputy Lowry: The only time I've ever met Leslie Buckley..... and obviously in anticipation of being asked this question, I reflected back and I think the only recollection I've ever of meeting Leslie Buckley was on my way to a function in Jury's Hotel one evening and he was in the lobby and made himself known to me. We exchanged words and that was it.

Deputy O'Flynn: When was that?

Deputy Lowry: I've no idea.

Deputy O'Flynn: Were you still Minister at the time?

Deputy Lowry: No, I wasn't Minister.

Deputy O'Flynn: Was it before you were Minister or after?

Deputy Lowry: After. After.

Deputy O'Flynn: We heard Mr. Joyce saying that he rang Mr. Buckley personally to recruit him as a consultant for CIE. Were you aware of this at the time?

Deputy Lowry: No. I would have to say that one of the principal difficulties when I became Minister was the level of... how will I put it... the level of independence afforded to people running the company of CIE. I was very conscious of the fact that in Mr. Joyce, we had a very experienced, a very capable senior business individual, who was prepared to take on what was indeed a very daunting task. Mr. Joyce knew that I was available, the Department were available and the Government were behind him in whatever decisions he found were necessary to turn around the company. So, in respect of day-to-day business decisions of the company, they would have been left exclusively to the company and to the executive of the company including the chairman.

Deputy O'Flynn: Was Mr. Joyce a good communicator?

Deputy Lowry: I found Mr. Joyce..... I think Mr. Joyce was an excellent choice as chairman of the company. I think he did exceptional work. I think he's..... I think the principal thing he did was he identified the extent of the problems. He communicated the extent of those problems to the people who mattered most, the people working within the company. He then brought forward plans which in many respects were radical and he had a lot of success in progressing the company towards a position whereby it would be less dependent on the State, more competitive and afford safe and quality and reliable services to the consumers.

Deputy O'Flynn: Given that Mr. Joyce was a good communicator, do you have any comment as to why he never communicated with the current Minister, while he was chairman of CIE?

Deputy Lowry: Why he didn't?

Deputy O'Flynn: Yes.

Deputy Lowry: Well, I always found him to be very approachable, very amenable to having an open discussion in regard to what the difficulties and the problems existed with the company, but I would have to say there's..... you know, my experience of the company is that CIE has been, to an alarming extent, a very politicised company and I think it has worked..... that particular politicisation of the company has worked to the detriment of the company and maybe Mr. Joyce suffered from that.

Chairman: What evidence do you have of that, Mr. Lowry? How do you substantiate that view in order to familiarise the committee with it?

Deputy Lowry: I think that as I saw it - and we left out a very key element of my time in it - you were anxious to find out about Mr. O'Leary and I've given you a background and I'm quite willing and able to go into a lot more detail in respect of that if you wish. Then I had the experience of Mr. Walsh who was appointed by the Government to do a job and there is no point in saying anything else - to put it mildly, his appointment was received with hostility.

Chairman: Mr. Walsh's?

Deputy Lowry: Mr. Walsh's, yes.

Chairman: By whom?

Deputy Lowry: By people within the company who simply resisted change and who felt that the company was ticking along nicely. They were comfortable to retain the status quo. They simply didn't want change and there is plenty of evidence. If you look through your files that you got from the Department and CIE, you will see correspondence from Mr. Walsh to me outlining what was a very difficult position for him which ultimately he found untenable and he resigned and then we came to Mr. Joyce. Ultimately, Mr. Joyce did an exceptional job and I don't know the reasons he resigned, but he also resigned.

And then we had ... we then went down the line a bit further and it was just ... I've been hogged about coincidences of late. We then had another coincidence where I would consider that a very decent, a very honourable, a very efficient public official in the name of Michael McDonnell----- You could question Michael McDonnell's management style, but you could never question that man's integrity. He was the quintessential public official, and the one thing Michael McDonnell would do above all else, he would protect the interests of the Exchequer in relation to the disposal of a State asset. And I have to say that I think that Mr. McDonnell, in my view, he was undermined deliberately. I believe that he was shafted in the company he was in and I believe that he was driven to distraction. That is my personal belief.

Deputy O'Flynn: By whom, Deputy Lowry?

Deputy Lowry: By the system that he was working within.

Deputy O'Flynn: Have you the names of people-----

Deputy Lowry: Pardon.

Deputy O'Flynn: Have you names to give to the committee?

Deputy Lowry: I am not going to speculate on them but | think anybody who was following politics and anybody who has followed the sojourn of CIE in recent times, you could come to your conclusions. I've come to my conclusions. You've asked me in here-----

Deputy O'Flynn: To go back to your tenure in office-----

Chairman: We will not engage in speculation, Deputy.

Deputy Lowry: No. I'm giving you my experience.

Chairman: If you have evidence based on experience, that is fine and it is important that we hear it.

Deputy Lowry: If you wish ... I think it is very important so that ... the committee is doing a good job and it is important that all the facts would be before you. So I think it is also important that you would look at the role of Mr. Eamon Walsh when he was appointed by the Government, but if you wish I'll come back to it if you want.

Chairman: Well if it is within the terms of reference of our inquiry, yes.

Deputy Lowry: The point I'm making to you is I served with two chairmen. I served with three chairmen actually. We've gone through the first one. We skipped the second one and I brought you back to it, so it is important, like, the emphasis seems to be on Mr. Joyce, so if you wish to continue with Mr. Joyce-----

Deputy O'Flynn: That is because we are inquiring into two matters which happened on his watch. I want to return to something that happened on your watch which was the appointment of Mr. Leslie Buckley as a consultant to CIE as a result of a telephone call from Mr. Brian Joyce inviting him in to do some work on cost savings and doing so under the £50,000 limit which would get him in without having to go to tender. Were you aware that this consultancy was given to Mr. Buckley while you were Minister?

Deputy Lowry: I certainly was not aware of that. It's possible that the officials in the Department were aware of it, but, as I've clearly indicated, Mr. Joyce would have had, as chairman, would have had the authority to make that type of decision. That wasn't a decision that would have needed ministerial clearance.

Deputy O'Flynn: For the record, we have heard Mr. Joyce's evidence that he was paid £49, 950, which is under the £50,000 limit before you go out to tender. Subsequently, while he was in the company he was given further assignments without going out to tender which brought the total figure up to - I am open to correction - £380,000. Were you aware that while he was doing this work in CIE he was also a director of Esat Telecom?

Chairman: You are talking about Mr. Buckley rather than Mr. Joyce there, are you not? I think you said Mr. Joyce.

Deputy O'Flynn: Mr. Buckley. Mr. Lowry, were you aware that while Mr. Buckley was working as a consultant in CIE he was also a director of Esat Telecom from 6 June 1996? He carried out consultancy work for CIE with access to sensitive and confidential information up to the date he finished, 19 December 1996. Were you aware of that as Minister?

Deputy Lowry: As I said already, I was not aware that Mr. Buckley was working in a consultancy capacity with CIE, so the second part of the question doesn't arise.

Deputy O'Flynn: Were you aware that he was a director of Esat Telecom from 6 June 1996?

Deputy Lowry: I would have had no contact whatsoever with Mr. Buckley or with Esat Telecom in that regard.

Deputy O'Flynn: Do you have any views on whether there would be a conflict of interest in this regard?

Deputy Lowry: I wouldn't be able to answer that question on the basis that to answer that question - and I am sure it is a question the committee will have to examine and it's a matter for the committee because you will have available to you the full knowledge and the extent of the work involved - I couldn't comment on the basis of, (1) I didn't know Mr. Buckley was working in that capacity, (2) I was not aware, and I am still not aware, of the scope and extent of that work. And certainly I am not aware of other works that you are referring to which may lead to a compromise. I can't comment any further on that.

Deputy O'Flynn: Were you aware of CIE's plans to lay mini-CTC cable when you were in office?

Deputy Lowry: It was never discussed with me at any level.

Deputy O'Flynn: Mr. O'Brien from Esat Telecom would not have discussed any matter in relation to mini-CTC with you?

Deputy Lowry: I have already, at a different forum, outlined in detail the extent of the contacts that I had with Mr. O'Brien and it certainly didn't include any discussion of any nature in relation to any matter in regard to CIE.

Deputy O'Flynn: I was not following the events of other fora, I am just concentrating on this.

Chairman: Deputy O'Flynn, answers in another forum are not necessarily evidence given here. Rather than referring to that, even if you have to repeat it, Deputy Lowry, please do.

Deputy Lowry: Let me repeat that, let me repeat it quite clearly.

Chairman: Let Deputy Lowry continue.

Deputy Lowry: Could I put it on the record here, if it needs to be put on the record, that I had absolutely no contact whatsoever with Mr. Denis O'Brien or with anybody connected with him in respect of this CTC system. Not alone had I no contact with them, I didn't have any discussions or any knowledge of this in the Department. If you look at the record you will see that I resigned in November 1996. Not one penny of the European Union Cohesion or Development Funds, even though they had been approved by me, no money had been spent...nothing had happened in relation to this project. I was long gone before anything happened in regard to this particular project.

Deputy O'Flynn: What kind of relationship did you have with Mr. O'Brien in your Department when you were in office? Were you a personal friend of his? Did he come in to the Department regularly on other matters?

Deputy Lowry: Are we talking here about the CTC?

Deputy O'Flynn: I am talking about your time in office and if Mr. O'Brien came in to see you on occasion to discuss matters about the telecommunications business.

Deputy Lowry: Yes. To put it in perspective, this was a time when we had ... am I to confine myself to the CTC or are we talking here in general terms?

Deputy O'Flynn: We are talking about telecommunications around the time of-----

Chairman: In other words, had Mr. O'Brien and you-----did you know one another well?

Deputy Lowry: My relationship with Mr. O'Brien would have been one of ... Mr. O'Brien at this particular stage was obviously involved in his own company, Esat Telecom. Mr. O'Brien would have been anxious, like other people in that sector, to expedite the liberalisation of the market. Mr. O'Brien would have had a deep concern that the Department were too narrow in terms of their interpretation of liberalisation reports and directives from the European Union. Mr. O'Brien, to put it mildly, would have been on the 'phone every other day to the Department - not necessarily to me. Mr. O'Brien would have been known at that particular stage, as we'd say, in country terms, he would have made a pest of himself on the basis that he was trying to access the Department and the officials to get his point of view across.

As part of that process Mr. O'Brien would have, on numerous occasions, complained to me that the Department were inflexible in terms of their approach to their interpretation of the liberalised market as Europe saw it and in that context he would have asked me to intervene. What I would have done in those cases, if I thought the complaint was worthy of concern, was I would have arranged for some of the officials in the Department to meet with Mr. O'Brien's officials and to see could they come to conclusions in terms of the accuracy of the interpretation of those circulars from Europe. That was the extent of it. I was not a personal friend of his. I dealt with Mr. O'Brien the same as I dealt with others. I was approachable to the extent that I afforded anybody who approached me, irrespective of their background or the company represented...I was approachable on the basis that I afforded them courtesy and as much assistance as we possibly could give them on behalf of the Department.

Deputy O'Flynn: Were you a friend or acquaintance of Mr. O'Brien at that stage?

Deputy Lowry: I would have known Mr. O'Brien through business contacts and, obviously, I would have known Mr. O'Brien's company in the context of being Minister for telecommunications .

Deputy O'Flynn: Were you a personal friend of his at that stage?

Deputy Lowry: No, I wouldn't consider myself a personal friend and in fact I still don't consider myself a personal friend. I've again outlined the extent of my relationship with Mr. O'Brien is that, yes, I dealt with him in a professional, business like way when I was Minister because a lot of his business decisions revolved around the attitude of Government policy and the implementation of that policy by the Department which I was with. So I got to know him from that point of view and later I got to know him through social contact, which I still do.

Deputy O'Flynn: You then left the Department. What was your reaction when CIE opted for Esat as a partner in a joint venture?

Deputy Lowry: Once who?

Deputy O'Flynn: When CIE opted for Esat as a partner in a joint venture in relation to this cable had you any reaction?

Deputy Lowry: Had I any reaction?

Deputy O'Flynn: What is your reaction or what was your reaction at that stage? Did you read about in the newspapers?

Deputy Lowry: I read it in the paper when it became an issue. My reaction is that, first of all, CIE certainly were entitled...if I were in a position I would certainly be encouraging them to maximise the benefits that would accrue to them from a technical relationship that they would have with any company, including Esat. I wouldn't have been privy to the detail or what have you. Now I haven't followed it. I have been busy in other circles but I haven't followed it. But my understanding is that there's one view, a strong view, held that CIE did a very good deal with Esat and there are others who say that because of the cost overrun involved the deal is no longer as good as it looked. Now I don't know the intricacies or the detail of it. That's a matter for the committee.

Deputy O'Flynn: You encouraged good communication and a good flow of information between your officials and CIE while Minister for Transport, Energy and Communications. Did you know the Department was not aware of the deal that was being done until it was announced in the media? Do you consider it best practice for the Department not to monitor what was going on in CIE in regard to this deal or for CIE not to supply the information to the Department?

Deputy Lowry: I would say that that decision was a major decision. I would say that the extent of that decision would...if I was Minister I would expect that that decision would have been brought to my attention and if it was announced without me knowing it I certainly would have felt that it was inappropriate for the company to manage it in that way.

Deputy O'Flynn: Have you followed the evidence where departmental officials have sworn they were not advised about the deal until they read about it in the media and had received a letter dated the same day?

Deputy Lowry: I haven't read that but if that's the evidence, that's the evidence. I don't know was there any evidence to the contrary. I can't adjudicate on that but all I can say to you is you've asked me to give a view and my view would be that had I been a Minister in the Department at that particular stage I would expect to have been informed in advance of it.

Deputy O'Flynn: Are you surprised at the way the deal was announced given that people were quoted, there was a strong management team and chairman, who at the time were reporting to him on a regular basis, yet nobody told the departmental officials about the project until it was announced in the media?

Deputy Lowry: As I say, I cannot confirm the accuracy one way or the other of that but what I would say is that if that is the case I would be surprised.

Deputy O'Flynn: We heard in evidence that Mr. Pádraig Ó hUigínn rang Mr. Tuohy in the Department requesting knowledge of when the Statutory Instrument would be signed and that Mr. Buckley of Esat also made several inquiries? Reflecting on your time as Minister and on how the Department works, would that be viewed as pressure being put on the Department?

Deputy Lowry: Mr. Ó hUigínn's contact?

Deputy O'Flynn: Yes.

Deputy Lowry: Could you just put that again?

Deputy O'Flynn: Do you know Mr. Padraig Ó hUigínn?

Deputy Lowry: I have never met him, I only know of him.

Deputy O'Flynn: You have never met him?

Deputy Lowry: No. Sorry I did meet him once in an airport, but I've never had any discussions with him.

Deputy O'Flynn: From your experience in the Department, would it be normal for someone to ring the Department pressurising it to get a Statutory Instrument signed? Would it be normal for directors of private companies to do something like that?

Deputy Lowry: I certainly would not have any experience of people contacting the Department in relation to Statutory Instruments, but, like every politician, I would be very familiar with everyone and anyone ringing the Department or anyone they could, including the Minister, to pressurise them to make various decisions. It is a fact of life, it happens every other day. That's the way the political system in Ireland works.

Deputy Higgins (Mayo): Deputy Lowry, you probably had one of the busiest portfolios in government by virtue of the fact that you were in charge of all State utilities and semi-State companies. You had, for example, Aer Rianta, Aer Lingus, Bord Gáis, ESB, CIE, An Post, Bord na Mona and so on. From the point of view of the degree of reporting back to you, did you meet the chairmen of the various semi-State bodies fairly regularly?

Deputy Lowry: Yes, it was always your ambition. I think it was important. As I saw it, the chairmen were there to implement overall Government policy. The mechanisms and procedures involved in doing that, and the strategies involved in doing that, were a matter for the chairman to implement with the co-operation and support of his board members. Yes, it is important for a Minister to meet with them to bring them up to date in respect of the level of progress that has been made and obviously to keep in contact with them to be aware of the difficulties that are encountered, or the obstacles that may be there in terms of implementing the policy.

Deputy Higgins (Mayo): From the point of view of the flow of information from CIE, when you became Minister were you getting a flow of information from Mr. Joyce's predecessor or predecessors?

Deputy Lowry: When I went into the Department I was effectively told by the public officials that there was a difficulty in relation to communications with CIE. There was a difficulty in terms that my predecessor had initiated a number of initiatives that hadn't simply been acted upon. There was grave concern that a company that was taking £100 million of subvention every year from the Exchequer that there was a lack of accountability in respect of that. That was a concern that was conveyed to me very strongly.

The second element of it was that here was a company with a very weak management structure. It is ludicrous to think that a company of its size spending multi-millions of pounds left itself in a position where it didn't even have a chief executive officer for ten months. The Department was obviously concerned about that.

We also had a situation where the management itself was so weak that the Department was seriously concerned about giving them another £500 million to expend on various infrastructural improvements, including Luas. Those matters were brought to my attention. My predecessor was very much aware that the reality is that the advertisements that were placed and the beefing up of the management arose from that concern that existed among the officials, not alone officials in my Department at that time, but this was also a concern that was coming through from the Department of Finance as well.

Deputy Higgins (Mayo): You stated that CIE, as you found it, was an organisation which was riven with politics. Are we talking about politics with a small or large "P"? Are we talking about party politics or internal machinations? What are we talking about?

Deputy Lowry: You are talking about a combination of all. I have no point in saying anything else. The company at that stage was polarised to the extent that there were cliques within the company, it was very difficult. CIE at that stage had, and still has, a huge amount of talent at its disposal. There are fantastically dedicated people, particularly what I would call the front line people in the company who have been working under extreme difficulties, in very bad working conditions, performing as best they can in what I would consider really difficult circumstances. Lack of capitalisation was one of the serious difficulties for CIE, in terms that they were expected to provide a service. That service, the public expected of them, was to be safe, efficient, reliable and comfortable, but at the end of the day the Governments, successive Governments, simply didn't have the capital resources to give them to upgrade tracks, to upgrade a signalling system, to upgrade the carriages, and to do the things that were necessary to ensure that the staff's performance was recognised. That led, in itself, to a lot of distrust within the company. It led to resentment between workers and management, and that manifested itself in a very bad industrial relations atmosphere.

Chairman: Are you making the case that there were persons in the company who were divided in a party political context - in other words that there was conflict and confrontation involved in their interaction with one another on the basis of the political affiliations they had or expressed?

Deputy Lowry: What I can say is that I can only go on my own ... what I did was ... you'll recall at the time, one of the major issues during my ministerial term was the fact that I changed, with the approval of the Government, I might add, and with a lot of information available to the Government to base that decision on, we ... one thing that happened was, to enable an executive chairman be appointed, I asked the then Mr. O'Leary to resign his position and to stand aside, which he gracefully did. Following that, Mr. Walsh went in. The documentation will clearly show correspondence between Mr. Walsh and the Department, correspondence between Mr. Walsh and his board, correspondence between Mr. Walsh and I, as Minister. Mr. Walsh's appointment was resisted by a minority of board members and by a number of senior staff within the company. He was totally undermined.

Chairman: For political reasons, was it?

Deputy Lowry: For whatever reasons. Maybe it was that they were afraid of change.

Chairman: I am trying to establish for the purpose of our inquiry, if there were difficulties inside the company based on political connections, political affiliations or a desire to represent a particular political ethos or view. I do not want you to speculate on it but have you any evidence that supports the claim you are making?

Deputy Lowry: What I am saying to you is that - I have already said it - in relation to that change it was strongly resisted, so much so that a man who had been involved in the commercial world for all of his adult life and who was highly regarded and respected, found it necessary to walk from that position. I can't answer the question specifically but I can say there was a combination of factors. When the board was stood down later on, conscious of the fact that this may have been a problem, I went out of my way as Minister on that particular occasion ... I put people of all political persuasions on the board. My record will show clearly that there were people closely identified with the main political party, Fianna Fáil, with the Progressive Democrats at the time and with the Labour Party. I tried to make that board non-political in the event of it being perceived previously as being political. Let's put it this way, I think-----

Chairman: Are you saying that the board was perceived as being political at a time preceding your period as Minister?

Deputy Lowry: I would say that - and it is as far as I am prepared to go in relation to this - I had my concerns. Many people around me had similar concerns. I would have to say that, at that stage, I think a number of people, a small group of people within the company, for whatever reasons, felt that they were the people who should direct the company to the future and that they should retain control of the decision-making process and that led to resentment of any change, particularly change that was imposed upon them.

Chairman: Were they in management, on the board or involved in both?

Deputy Lowry: A combination of all. If you look at the correspondence between Mr. Walsh and the Department, it would indicate clearly that he had concerns of that nature, of all of them.

Chairman: Did that continue in Mr. Joyce's time?

Deputy Lowry: I have already said Mr. Joyce was concerned because of previous experiences and because what he had read and whatever research he had done himself. He was concerned when he took over as chairman that he would not have a board that was perceived as being politicised and for that reason I made-----

Chairman: Being perceived as non-politicised?

Deputy Lowry: Non-politicised. For that reason I made a genuine attempt and I think even the leaders of the desisting parties will confirm that I made an approach as Minister to them and asked them to nominate for me people that they felt had the experience necessary to make a meaningful contribution to the running of CIE because of the problems that it had had in the past. All of the parties... I got names from parties that were outside of my own political party at the time and those people, because of their experience and because of the fact that they had a track record in making contributions at that particular level, were put on the board. So I would say the perception that had existed previous to I taking over, we certainly and I certainly made a very genuine and meaningful contribution to changing that and I think Mr. Joyce as chairman found that to be his experience.

Deputy Higgins (Mayo): From the point of view of the restructuring that was carried out at the instigation and suggestion of the Department when it said there was an urgent need to do something about the weak management in Iarnród Éireann, was it talking about both CIE and Iarnród Éireann?

Deputy Lowry: Yes.

Deputy Higgins (Mayo): I notice that there was no mention in relation to the bus section, either Bus Átha Cliath or Bus Éireann. It was those two companies specifically. Could you go into more detail about that? Obviously, this was put before you as a very serious proposition that, from the point of view of the projects that were coming up, they simply were not up to scratch. Perhaps you could elaborate further.

Deputy Lowry: If I could refer to my own notes on this. Around this time I was advised as Minister of the difficulties within the company and I will just give you a synopsis of the problems that were brought to my-----

Chairman: Have all the documents you have, Deputy Lowry, been obtained from the Department?

Deputy Lowry: No, these are not... these are just my own notes.

Chairman: Your own notes?

Deputy Lowry: Yes.

Chairman: But you did have one document there that you referred to that you got from the Department. Is that correct?

Deputy Lowry: Yes.

Chairman: Do you have any other documents?

Deputy Lowry: Any documents I have from the Department are in this folder here, which is effectively the statement that the Department gave to this inquiry. I obviously asked for the Department to check within its own files in relation to my role involvement in the specific matters under discussion here and I asked for them also to do likewise with the company. In response to that, I received back from the Department an outline of my term as Minster and I have used that for my own notes.

Chairman: I wish the Department's legal team would make available to the sub-committee copies of all the documents that they gave to you because we did not have one particular document. For the purposes of what we are embarking on, it is important that we have those documents.

Deputy Lowry: Probably what has happened here is that -----

Chairman: We can get copies from you.

Deputy Lowry: You can get copies from me. I have no problem or difficulties. I am sure there is plenty of documentation within the company that probably the Department didn't see within the scope and the terms of reference of the committee. There's some excellent documentation in the Department. I think this committee should seek it all.

Deputy Higgins (Mayo): Deputy Lowry was about to elaborate on this particular issue.

Deputy Lowry: Yes, just a synopsis. When I was briefed by the Department, and there was an analysis conducted in July 1995, and effectively I was told that at that particular stage that there was a crisis in CIE and that the crisis was even worse than anticipated and that something had got to be done about it. Now, what involves a crisis? How did they come to that conclusion? What I was told at that particular time was that number one, which was no news to anybody I suppose, but when as Minister these things are put in front of you in stark terms, then you have an obligation and a responsibility to do something about it because other than that, what would happen is if you didn't act on the information you were given, I'd be in front of this committee, accused of sitting on my hands and ignoring the advice I was getting and doing nothing about it.

The advice that I was given in 1995 was that that company was in crisis. I was told that the safety standards in Irish Rail at the time were seriously defective. I was told that the company's information technology system was in imminent danger of collapse. I was told that the resentful industrial relations climate was a serious barrier to progress. I was told that many staff throughout the company were working under intolerable conditions. I was told that the internal audit systems within the company were almost non-existent. I was told that there was serious staff shortages right across the company. Against that background, it was impossible for the company, anybody looking at the company ... it was impossible for this company to provide the kind of services that politicians and the public were demanding from them, which was effectively quality, safe and reliable services for the travelling public. It was impossible for them to do that unless major changes were brought about and those major changes involved change at management level. It involved restructuring the company and it certainly involved an investment in infrastructure. That's what we attempted to do and that's what, I believe, is the current policy at the moment.

Deputy Higgins (Mayo): The former Secretary General, John Loughrey, would have apprised you of this and given you this information.

Deputy Lowry: Yes. John Loughrey would have been my main line of communication from within the Department and obviously it would have come up at management meetings within the Department as well on a regular basis.

Deputy Higgins (Mayo): In relation to the mini-CTC project, when you came into office, the CTC project on the main lines was being completed. Is that not correct?

Deputy Lowry: That's correct.

Deputy Higgins (Mayo): That was on the Cork-Dublin line and the Belfast line. The new mini-CTC project was to upgrade 28 stations on four other lines. How aware were you that this was being mooted at that time?

Deputy Lowry: I had no knowledge of the project other than ... My only knowledge of the actual project was that I recall officials in the Department, in consultation with the Department of Finance, seeking European Union funding for these projects. My understanding of it was that after that had been negotiated I, as Minister of the day, made the official announcement in terms of that investment. That was made on 29 July 1996. What happened then was, as events transpired, I resigned as Minister in November 1996. That project was sanctioned in principle, but the detail of it ... nothing had started. I had no role, involvement or function, I had no connection with it whatsoever after that.

Deputy Higgins (Mayo): Was it ever brought to your attention that there was EU money there that had not been gone after at an earlier stage, which is one of the issues that has arisen?

Deputy Lowry: Yes, there was a concern in the Department at the time. You see, there was a concern in the Department at the time that we weren't benefiting from the funds that were available from Europe and that we should make a determined effort to make sure that all funds were applied for, that all applications for funds was clearly documented, acceptable and that we were in a position where we could avail of these funds. We did make a determined effort at that time. Part of the reason in fairness that it didn't happen as much as it should have had was because we were in ... Our own Exchequer here at home wasn't in a health condition. What happened was because of the need for matching funds, these issues were allowed to drag. In this instance and since that I think that we've done remarkably well in terms of drawing down Cohesion and Development Funds and by and large they have been put to very good use with big benefits to the economy.

Deputy Higgins (Mayo): From the point of view of the restructuring you did on the suggestion of Mr. Loughrey where you beefed up the management, got six of the best, you had the late Mr. McDonnell, Brian Joyce and so on, in hindsight, do you think that you got it right?

Deputy Lowry: Yes, I think that the policy was right. I have absolutely no doubt about it. It was vital at that stage. The CIE company could no longer continue to function or to be ran in the manner in which it had previously. This was a massive, a hugely important company to the State. I think that, you know, you cannot run a company of that enormity effectively in a part-time way. The company needs a hands on approach. It needs skilled, fully professional and qualified people to take it through the challenges that it had then and that it still has. I believe that the company certainly has a bright future on the basis that there is now a recognition that if we, as a nation, and if we, as a political system want CIE to perform, well then we have to give them the way and the means to do that and that certainly involves investment. That level of investment did start in my time and has progressed and we have a big level of investment in the company now. What's important now is ... The reason why we're here, is that that investment is monitored and that we get value for money and good return for the investment that's made.

Deputy Higgins (Mayo): Were you very surprised, therefore, when you read the details of the fallout from this project? This was the management team you put in place. We now have a situation where a project that was to cost £14 million will end up costing between £40 million and £50 million and perhaps more. Not one of the 28 stations has to date been connected and there is a doubt about EU funding. Were you surprised that the management structure you put in place was the management structure that was there when this project went off the rails?

Deputy Lowry: Can I say in relation to that, first of all it's important to get it politically correct. I did not appoint the management team. What we did was, as a Government, we facilitated the appointment of new personnel with the skills and the expertise to do, to correct what we saw were deficiencies at the time. Those people were appointed through the normal open competition process. Those people were actually appointed not by the Minister of the day, not by the Government of the day, they were appointed by the board of the company itself, after they had taken the advice of agencies and consultants. Now, from what I have read of it, what surprises me is not so much the overrun because as a politician I'm reading about overruns since I got involved in politics 20 years ago. This particular overrun is under the microscope but I can assure you, we could look at a multiple of decisions that have been taken and find similar occurrences and probably even worse. We could have done that in the past, we could do it now and I'm quite confident from what I've heard that we'd still do it in the future. That is the reality of the situation. What I'm surprised at in this particular project is - and I'm giving you my view but it's not a professional view, it's a view from what I've read - what surprises me about this particular project is that anybody within the company or outside the company could expect to start doing the specification for a Mini Minor car and finishing up with a Mercedes and then thinking that they could get it for the same price, because that's effectively what happened. The initial project bears no relationship to the specification that they finished up with. So people started adding pieces to the project, they enlarged it and the quantum of the project is totally different when it concluded than it was originally anticipated.

Chairman: Where did you read that, Mr. Lowry?

Deputy Lowry: That's my overview of reading bits and pieces.

Chairman: Was it in the newspapers?

Deputy Lowry: Yes, subsequent to this-----

Chairman: However, you do not have any official knowledge of that.

Deputy Lowry: No, but that's-----

Chairman: It is based on newspaper reporting.

Deputy Lowry: Based on newspaper reporting of the evidence given by various people who have come before the thing. I'm sure, like the rest of you-----

Chairman: Mr. Lowry, you facilitated the appointment of six of the best by the board, right? Six of the best, as described, and some of them are acknowledged as being wonderful people in your evidence this morning. How could it be that the practices which you referred to as having read about in some of the newspapers, on the one hand, and evidence that has been presented to us that there were overruns and delays so we are now in a situation where we do not know what the ultimate outcome is going to be ... How could that have happened with six of the best persons at the core of the company, their appointments having been facilitated by you at the time in the knowledge that it was necessary?

Deputy Lowry: That's obviously a matter for the committee to make a decision on as to what-----

Chairman: Do you have any views yourself?

Deputy Lowry: Well, the only view I would have in relation to it is, I mean I don't have access to all of the information, all I can do is depend on the snippets that I read and, as I said at the outset, I haven't followed in detail, principally because I haven't had the time to do it, but I don't think it's fair for you to attribute whatever difficulties have arisen within the companies to the appointment of six of the best.

Chairman: No, I am not attributing anything to them. I am just asking the question-----

Deputy Lowry: That's the inference.

Chairman: No. With respect, Deputy Lowry, do not presume there is any inference in that. Work on the premise that you have given evidence of great change being necessary as you perceived it at the time, what you did and all the things you said you did. These people were appointed at that time and you facilitated their appointment by the board. You have given evidence of great change being necessary, as you perceived it at the time, and of what you did and of all the things you said you did. You facilitated the appointment of people by the board. Evidence has been given to the sub-committee regarding the difficulties that we faced and the things that failed to happen. I ask if you have a view of how that may have happened, given the presence of six strong and capable people, people of great integrity, as you have described them.

Deputy Lowry: If they are responsible for it and that's a big if, I mean, obviously, if they're responsible for it, my initial reaction would be and then my considered reaction would be I shudder to think what would have happened in that company if we hadn't taken the action we did to put in some people into the company to strengthen the management of it. I shudder to think what the consequences would have been for the company, its workforce and for the services that they were going to provide.

In relation to my reaction to what has happened, I can't say - obviously this is why the committee is sitting - whether it's a combination of fault with CIE, with the people that they employ to do the work, with the reporting system that was there between the Department and themselves and what have you. I can't say, but obviously in my view, I'm giving you my impression of it. My own impression is there was a huge change in the specification involved in the job and that wasn't flagged properly, either within the company or outside of the company or up to the Department level. In other words, wherever it got lost in the system, what was happening was they were effectively adding to it and buying extensions and enlargement of the system without actually getting financial approval for those particular steps. That's as I perceive it. As to who was responsible for that, I can't say. That's a job for the committee to determine.

Deputy Higgins (Mayo): In relation to the situation in Iarnród Éireann during your period in office, were you aware at any stage of what was going on in relation to the spending of public moneys on consultancies, for example?

Deputy Lowry: No.

Deputy Higgins (Mayo): No.

Deputy Lowry: No, not within the company.

Deputy Higgins (Mayo): Not within the company itself. Are you aware that in the period 1997, 1998 and 1999 £4 million was spent on consultancies?

Deputy Lowry: This would have been after my term in office.

Deputy Higgins (Mayo): After your time. Were you aware that during your period in office, the same thing was ongoing?

Deputy Lowry: No.

Deputy Higgins (Mayo): Would you be surprised to learn that £2.6 million was spent on consultancy fees for an appraisal of the mini-CTC project and its consequences?

Deputy Lowry: Well, what I would say to you, I wasn't aware of that, but what I would say is that that money would have been better spent studying the requirements, matching the requirements with ... matching the order with the requirements and then making sure that funds were set aside to pay for what they were getting. It appears to me that the company in actual fact didn't technically understand what it was they had ordered and what it was they were getting and what the ultimate cost was going to be so they would be better off, probably, spending the £2.6 million before they did the overrun, rather than the other way around.

Deputy Higgins (Mayo): We have already referred to the report of Leslie F. Buckley and Associates in relation to cost-saving measures. Did that report arrive on your desk?

Deputy Lowry: No.

Deputy Higgins (Mayo): You never saw that report.

Deputy Lowry: I have no recollection whatsoever of the report.

Deputy Higgins (Mayo): You have no recollection of ever being shown that.

Deputy Lowry: No.

Deputy Higgins (Mayo): That was in the period 1996.

Deputy Lowry: No.

Deputy Rabbitte: I am not entirely clear, Deputy Lowry ... Robbie Kelleher, a financial consultant, was appointed by your predecessor, the Minister, Deputy Brian Cowen, to find and select a chief executive following Mr. Conlon's retirement. Was Mr. Kelleher a member of the trio that was to do the job, or was he advising them on how to do it?

Deputy Lowry: Was who a member?

Deputy Rabbitte: Mr. Robbie Kelleher.

Deputy Lowry: Yes, Mr. Kelleher was one of the three. He was appointed the chairman, to oversee it, of that group.

Deputy Rabbitte: He walked out.

Deputy Lowry: He walked out. He communicated his dissatisfaction directly to the chairman and he later put it in writing to the chairman on 14 September 1994. In three paragraphs he outlined why he was resigning from that committee.

Deputy Rabbitte: Because it is an interesting background to where we came in, what, in a nutshell, were those three reasons?

Deputy Lowry: Effectively - I don't know whether I am allowed to read the letter, but the letter is public in the sense that it's with CIE and with the Department-----

Chairman: You can pass it on to us.

Deputy Lowry: Effectively, in a nutshell, what Mr. Kelleher was saying was very simple, that the recommendations of the consultants were being totally ignored, that he was unhappy with the manner in which the process was being run and that he was unhappy with the interference of the chairman of the day in the process, the chairman of the overall company, Mr. O'Leary. He conveyed that to him in writing and he resigned and said he would have no further part in it.

Deputy Rabbitte: The process did not get under way while Mr. Conlon was there.

Deputy Lowry: The process did get under way while Mr. Conlon was there, under the chairmanship of Robbie Kelleher, but he got frustrated by virtue of the fact that he saw his role being impinged on by others for whatever motivation or whatever reasons.

Chairman: Can you give us that document?

Deputy Lowry: I can, yes.

Deputy Rabbitte: We just have not had too many experiences of consultants being brought into CIE and walking out. We usually have the experience of them bringing in other consultants to help them.

Deputy Lowry: Robbie Kelleher didn't come in as a consultant. Robbie Kelleher was a member of the board, and he was appointed to the sub-committee to oversee this. The consultants were Pricewaterhouse at that particular stage. Pricewaterhouse wanted to expand their area of inquiry in terms of they wanted to attract the best both in Ireland and outside. There were others within the company who felt that it should be confined to one or two and at that stage Mr. Kelleher, knowing the quality and the quantity of candidates who were interested in the job, felt that they shouldn't go that route, that there was no point in having these consultants unless we followed the proposals that they were making. For that reason he resigned that position as chairman of that particular committee. What subsequently happened was that Mr. O'Leary then expanded that committee to include the non-executive directors, including Kay Mulryan, and then he told the consultants of the day in writing that they were to report directly to him and from there on the sub-committee was ignored until such time as the change was effective.

Deputy Rabbitte: At the stage you came into office there was no chief executive in CIE.

Deputy Lowry: For ten months-----

Deputy Rabbitte: There was an acting chief executive.

Deputy Lowry:-----there was an acting chief executive and that acting chief executive, as I understand it or recall it, wasn't even the most senior man within the place, but there was an acting chief executive and the Department were extremely unhappy with that situation. This had been brought to their attention by Brian Cowen and my predecessor. It had been brought to their attention on several occasions by the Department, but nothing had happened, so that was one of the jobs we had to do.

Deputy Rabbitte: What do you say to the proposition that you were the Minister, the late Mr. Michael McDonnell was a very senior civil servant at assistant secretary level, I think, in the Department, and a decision was made to cause him to become chief executive of CIE because of this concern within the Department which was shared by yourself and indeed by your predecessor?

Deputy Lowry: How would I put it? I have read that inference and, first of all, that is not the case. Secondly, it doesn't do justice to the late Mr. Michael McDonnell. Before this decision was made, Pricewaterhouse did get the freedom of choice. They did get the freedom to go out there to interview numerous people who had the qualifications and the interest in this particular job. It was the consultants under the new chairmanship of Mr. Éamonn Walsh who brought the list of candidates to the board and it is a total nonsense for anyone to say that Mr. McDonnell was not the preferred choice. Mr. McDonnell was the unanimous choice of the board of CIE which took place on 3 May 1995.

In fairness to Mr. McDonnell's memory, I think it is important that we put on the record of this particular committee the references that were made at that board meeting to Mr. McDonnell by the managing partner of Pricewaterhouse. As part of his report to the board meeting to assist them in making a decision in relation to him or other candidates - there were three candidates put before the board meeting - the reference to Mr. McDonnell was that he was referred to as an economist, he had had a distinguished career in the public service, Departments of Finance and Communication, and was now assistant secretary of the Department of Transport. He is aged 52. He is a very impressive candidate. He has considerable experience in transport policy, formulation of policy and development. He is also very skilful in strategic planning and implementation. He has both academic and professional qualifications in corporate finance and financial management and has successful experience in personnel management and industrial relations negotiations.

Deputy Rabbitte: Anyway, you are flatly denying that you placed him in the job.

Chairman: Deputy, I must intervene at this stage. Deputy Lowry is reading from documents which we do not have.

Deputy Lowry: Sorry, I thought you had them.

Chairman: No, we do not. We need to get from you a list of the documents you have and any others you intend to introduce in evidence today. Can you confirm that these documents came from the Department?

Deputy Lowry: I have the two cover letters with the documentation from the Department and I'm happy to leave them with the committee now. If the committee would copy them and ensure that I receive a copy back.

Chairman: Yes, we will return them to you. We will do that now.

Deputy Rabbitte: I was asking Deputy Lowry-----

Deputy Lowry: So the answer, Deputy, is-----

Deputy Rabbitte: -----if he, as Minister, put Mr. McDonnell in place because of dissatisfaction in the Department with the way CIE was being run.

Deputy Lowry: No. What the Department ensured and what the new Chairman ensured is that the policy initiatives by Mr. Cowen and by the Department, which had been previously frustrated, were actually implemented under the new Chairman, Mr. Walsh. That competition was an open competition. It was advertised widely, both inside and outside the country. Many people were interviewed and my understanding is that the interviews were not just ten minute interviews. The interviews lasted for up to two and a half to three hours. Arising from that, three names were put before the board by the Pricewaterhouse consultants and from that particular board meeting, Mr. Michael McDonnell was appointed unanimously by that board.

Deputy Rabbitte: Do you not think the question is a fair one in that you have spent some time explaining to us the circumstances that you discovered and that your predecessor was attempting to deal with, and the dissatisfaction that existed in the Department about the state of affairs in CIE at the time and the desirability of putting in an outside chief executive? Could Mr. McDonnell have been described as an outsider? He was in the Department. He-----

Deputy Lowry: Sorry, I have to correct you. It was never specified that the chief executive had to be outside the company. What was specified to the board by Brian Cowen, by the Department and by myself was that there was a need to beef up the management. There was a need to extend the management base of support and in that process, let it be the chief executive or all of the six or what have you, but at least some of that seven or how many people were appointed at the time had to be from outside the group. Now I don't recall that there was any specific instruction that the chief executive had to be.

Deputy Rabbitte: In retrospect, and this does not in any way reflect on the late Mr. McDonnell, do you think that it might have been wiser to have taken in somebody who was completely free of any involvement in either the Department, CIE as it was or whatever?

Deputy Lowry: It's a difficult question in the context of what has transpired since, but I would have to say that whoever took over that role and function certainly faced a daunting task and there were huge obstacles to be overcome along the way. I would have to say that I would have considered Michael McDonnell to be extremely proficient and well capable of doing the job that had to be done.

Deputy Rabbitte: Was it your assessment while you were there that he had overcome the obstacles and that he had managed to straddle this politicisation that was inside the company?

Deputy Lowry: Yes, I felt quite bluntly that Michael McDonnell was doing a very good job and I have had, because of my previous contacts in the company through the workforce and what have you, there were many people in the company who felt he had done an exceptionally good job, but all of a sudden there was an apparent, for whatever reason, the general impression was that he wasn't.

Deputy Rabbitte: In terms of the exchange you have just had with the chairman about documents, you said - I do not know whether this goes back to the Minister, Deputy Cowen's time or yours - that the committee should look for all of the papers. Are you saying that there are papers in the Department describing the difficulties with CIE, as the Department saw them, at the time under discussion?

Deputy Lowry: Yes, I would have to say that the Department were very conscious and very aware of the difficulties and the problems that existed and it was that awareness and it was that desire to plan for the future which led to the management changes within the company.

Deputy Rabbitte: Files came to you on this. Did you suspect from reading them that this kind of commentary had been going on for some time?

Deputy Lowry: Not so much files, but certainly I had a number of discussions with senior people within the Department which led me to the definite conclusion that this had been happening for a considerable period of time, so much so that Mr. Brian Cowen, my predecessor, had moved to correct it. Those efforts were frustrated for approximately ten months and eventually, under a new chairman, we got some proaction.

Deputy Rabbitte: You put in a new chairman and within months he resigned.

Deputy Lowry: Within months he resigned and you probably can, you know, this is part of the documentation I'm sure that's within the Department ... there was certainly correspondence between the then chairman, the man who resigned, and I, as Minister.

Deputy Rabbitte: There was correspondence between you and Mr. Walsh, the resigned chairman?

Deputy Lowry: Yes, and he outlined in that correspondence, you know, his particular difficulties and problems.

Deputy Rabbitte: Do you think that correspondence would be helpful to the committee?

Deputy Lowry: I'm quite sure it would. It would help you to understand. You know, you've started this process in the middle, but you can't just jump to a conclusion, I'm afraid, without looking at the background to it and I tried to fill you in, in respect of the background to it. Now, I'm not, you know, the point I'm making to you is that Mr. Walsh went into that company, he did the best he could to turn it around. He resigned for ... without even knowing the reasons, he resigned. It's peculiar that he resigned so quickly.

Chairman: Mr. Lowry, in what way do you believe that this documentation help the sub-committee?

Deputy Lowry: If you feel it can help you. I can't------

Chairman: We do not know yet. How do you feel it can help? You are the one that is-----

Deputy Lowry: Well, how do I ... it has-----

Chairman: You must have some knowledge of its contents when you are offering it as something that we should examine.

Deputy Lowry: No, no. I don't ask you to examine it on the basis of any other lines of inquiry, but what I'm saying is that the points that I put to you today ... I have been asked in here today as a former Minister. I've been asked to give my views. I'm giving you my views, but I'm not just saying that they are my views, I'm saying that the documentation to support and to substantiate the points that I've made is within the Department. It's there, it exists. Now, I'm not saying that you have to look at it because, effectively, I've put it before you today in a summary form.

Deputy Rabbitte: Did you get similar briefings or documents in respect of the conduct of affairs within any of the other State companies?

Deputy Lowry: Not to the same extent, no.

Deputy Rabbitte: Not to the same extent?

Deputy Lowry: No. I would have had briefings in relation to, obviously, the matters that would have needed attention in the other companies, but certainly this would have been treated as - had to be treated as - a priority.

Deputy Rabbitte: You told Deputy O'Flynn that you were long gone, as you put it, before the mini-CTC business emerged. On the award of the licence to Mr. Denis O'Brien, was it not presumed that a network would be required? It was presumed that, once he got the licence, in order to provide an alternative to Telecom Éireann, as it was at the time, access to or construction of a network was needed. Did you know anything about that?

Deputy Lowry: First of all, I didn't have any involvement in those particular discussions and I would certainly assume, even though I wasn't privy to it, that Mr. O'Brien and any other competitor would have had to satisfy the independent assessment committee that they were in a position to put their infrastructure in place, by whatever means.

Deputy Rabbitte: Were you just concerned about liberalisation and the award of the licence? Did you have any knowledge at all about where the award of that licence was likely to bring the person who had first-mover advantage?

Deputy Lowry: Absolutely not. I wouldn't have had any idea whatsoever.

Deputy Rabbitte: Is it too strong to say Mr. Walsh was driven out?

Deputy Lowry: Let's put it this way. He was uncomfortable while he was there. As to why he left-----

Deputy Rabbitte: Anyway he left. Did you then do a trawl for a successor chairman?

Deputy Lowry: In the circumstances that led to his resignation - obviously, it got a lot of publicity at the time - it wasn't a case of people ringing me as Minister or any other Minister or the Taoiseach of the day saying "I'd like to have that job.". It was a case of us actually finding somebody who had the potential to become a good chairman of the company, so yes we did, obviously, assess who was available and, ultimately, the Government made a decision that Brian Joyce would be the best choice.

Deputy Rabbitte: Was he your first choice?

Deputy Lowry: Was Brian Joyce our first choice? I think it would be unfair for me to speculate in public as to who----- What I am saying to you is that Brian Joyce's appointment had the full approval and confidence of the Taoiseach, of the leader of the two other parties and of the Government.

Deputy Rabbitte: But you think he might not have been the first choice?

Deputy Lowry: I am not saying that. I did not say that, but what I would say to you is that we certainly put a number of names forward and Brian Joyce was the one that was chosen for the job, and we felt he had the credentials to do a good job and I hold to this day that he did do a very good job.

Deputy Rabbitte: Yes. What do you say to the proposition that Mr. Joyce is very much a hands-off chairman and saw himself purely in a non-executive capacity in terms of his tenure of office?

Deputy Lowry: I wouldn't be in a position to comment on that in detail, other that to say that I think Brian Joyce had a lot of skills, and like any personality or any character he is probably stronger in some areas than he was in others, but I think Brian Joyce, his main strength was that he determined at an early stage, irrespective of who was there, I am sure, he would have determined what the policy initiatives were to be pursued.

Deputy Rabbitte: You gave the impression earlier that he was very much involved in turning the liner around.

Deputy Lowry: Yes.

Deputy Rabbitte: For the record, I would have to put it to you that there could be an alternative view suggesting he was a hands-off chairman, a sounding board for the chief executive, but that he did not involve himself in decisions.

Deputy Lowry: That would not be my understanding of his contribution and role. I would see him as----- He saw himself as somebody who, first of all, established what the policy of the day----- Brian Joyce would have been very conscious of the shareholders' involvement and the shareholders' interest. I think once he would have established that, he would then ensure that the team which he led at CIE would implement that strategy and that policy. I would have to say that he would also be very conscious of the fact that he would need to support his chief executive and all his managers, and that in turn that the political establishment would support them.

Deputy Rabbitte: You say you met him a couple of times as Minister. Is there any point in us asking you why he would not have continued that practice with the present Minister?

Deputy Lowry: I have no idea. That is something you would have to take up with Mr. Joyce and the incumbent Minister.

Deputy Rabbitte: One of the early documents that we opened to this inquiry, Deputy Lowry, was document M1F7-023, which will come up on the screen. Perhaps nothing much turns upon it, but it was a document drafted by Dr. Ray Byrne, curiously enough, when he was in the department to the Department of Finance. According to his testimony, it reflects the views in CIE at the time, whereas, in fact, he was seeking a derogation for CIE from the guidelines laid down for State bodies at the time. For example, on "Conflict of interest", which is what you are looking at-----

Deputy Lowry: What year is this document?

Deputy Rabbitte: This is 1993. He said it was the view of the then chairman and the then board. The view was, for example, in terms of conflict of interest, that the general rules applying ought not to apply to CIE in the same fashion. Again, under disclosure of interests on the next page, CIE had a different view. Again, on the question of tendering, it had a view that the guidelines were far too low. Did you find any evidence of this conflict of interest within the board or the company during your time?

Deputy Lowry: Well, arising from my actions in relation to changes that we were effecting at the company, we conducted a detailed study at the time and my understanding - I don't have access to it - but my understanding is that a new set of corporate governance guidelines were introduced and implemented, and many of these-----

Deputy Rabbitte: Just for CIE or-----

Deputy Lowry: The whole of the semi-State but it was initiated as a result of what had transpired at CIE previously.

Deputy Rabbitte: What are you saying now, Mr. Lowry? Are you saying that there was tangible evidence-----

Deputy Lowry: Yes.

Deputy Rabbitte: -----inside CIE of conflicts of interest?

Deputy Lowry: Not so much conflicts of interest but about the whole ... There was evidence to indicate quite clearly that there was a weakness in relation to the adherence to corporate governance guidelines, and those were strengthened at Government level and applied to all of the semi-States, including CIE, from there on.

Deputy Rabbitte: Was there any evidence in the Department during your time as Minister of favoured status being conferred on Mr. Denis O'Brien and the Esat group?

Deputy Lowry: I would say none. I would say on the contrary. I think that the complaints would have been coming the other way, that the Esat group, Esat Telecom, and other small telecommunications companies would have felt - it would have been their strong view - that the Department - this was a perception, as far as I'm concerned, there was no evidence to substantiate it - but the perception among those small companies would have been that the Department were protecting the existing monopoly, and I think that led to frustration and that led to agitation and it led to friction between the Department and these smaller companies. Usually what happened in that case was that they sat down and they found that, you know, the Department were usually ... they may have been rigid in their interpretation but, under law, they didn't have any option.

Deputy Rabbitte: For example, I think it would generally be the view that the Department and the Minister of the day gave a leg up to Ryanair when liberalisation was introduced in a fashion in air transport in terms of, if you remember, the argument about Stansted routes and so on. The Minister of the day justified it on the basis of there being little point in having competition in the market if they did not give some initial advantage to the competitor, the new rival in the business. Is it not fair for us as a sub-committee to presume the same thing was going on in terms of telecommunications?

Deputy Lowry: I would say quite the contrary, actually, the opposite. I think that, if you look at it, the Department at this stage was also the regulator and the Department was pressurised between those who were trying to access the liberalised market and to expedite the widening of that market and, on the other hand, you had Eircom-Telecom who were very conscious of the privileged position that they had and they were putting pressure on from the other side to retain that and to keep it as tight as possible, in other words, not to open up the market, only at the last possible opportunity or only when you had to. They were the conflicts that existed. My reading of the situation was, to be quite honest about it, that on some occasions I would have said that Telecom could be correct in the way they interpreted what the European Union was doing and, in other circumstances, the smaller companies had a genuine grievance in terms that the Department possibly were too rigid.

Deputy Rabbitte: Any question of Denis O'Brien being the fair haired boy in the Department would not be in accord with the facts.

Deputy Lowry: I think, absolutely, not in accord with the facts. I would have to say that my perception of the Department with Denis O'Brien was that, far from doing him any favours, they considered him as a nuisance.

Deputy Rabbitte: Did they not treat him very well? He seemed to have ready access any time he wanted it. In what some people think was a strike against the head he landed the licence and then he did a deal which even he says was a good deal for CIE and for Esat. There is no evidence there of him being regarded as "a pest", as you put it.

Deputy Lowry: There is plenty of evidence to indicate that certainly he would have been putting pressure on the Department on a daily to a regular basis. In relation to any other involvement of O'Brien or his group, the reality is that he made those advances strictly on a commercial basis. There is certainly no evidence - not so much as a scintilla or a shred of evidence - to suggest anywhere that the competition was anything other than open and fair, with equal opportunity to all of the participants. At the end of the day it was an independent group, totally free of any political interference or any other interference, which made an independent decision which was accepted by me, as Minister, and which was accepted collectively by the Government on which I sat.

Deputy Rabbitte: Were you aware, Deputy Lowry, during your time as Minister, that CIE was contemplating entering the telecommunications market?

Deputy Lowry: No, I have no recollection of that. It's possible that they----- When I say I had no recollection of it, I think the likes of CIE, the ESB - nearly all of the semi-States at that stage - certainly would have looked at it in terms of could they form an alignment or an alliance with somebody else who would have had the other skills required, in other words, that their infrastructure could possibly be used to assist a group of other companies to make an application for the particular licence. I would say that that kind of discussion certainly took place within the semi-States, but I would not have been privy to or aware of any of that. I'm not quite sure even if CIE did it, I know that the ESB did.

Deputy Rabbitte: You know it happened in a general way, but you do not know if it happened in CIE.

Deputy Lowry: No. I know it happened in a general way.

Deputy Rabbitte: And if it did happen in CIE you were not involved in it?

Deputy Lowry: No.

Deputy Rabbitte: In terms of CIE going ahead and doing the business and finding itself with a contract before it approached the Minister to obtain the necessary legislative authority, was that not an unusual way - notwithstanding that you have praised all of the people involved on their skills and so on - to do business?

Deputy Lowry: Yes, I accept that, in that circumstance, if I was Minister I would have expected that I would have been made aware of it. I certainly would be surprised that the Department officials weren't aware of it. I-----

Deputy Rabbitte: Is it not more surprising when the people at the helm were former senior eminent civil servants who would have been accustomed to following the scrupulous procedures civil servants generally follow in this kind of matter?

Deputy Lowry: I am not in a position to say who was informed of what at what particular time. All I can give you is my own experience as a Minister. If I had been the Minister in that Department at that particular time, that would be a decision that I would expect I would have been made fully aware of.

Deputy Rabbitte: Thank you, Deputy Lowry. No more questions, Chairman.

Chairman: Deputy Lowry, you described Mr. O'Brien as making a nuisance of himself in the context of liberalisation. If he had not done that would he have been less successful?

Deputy Lowry: If he hadn't-----

Chairman: Made a pest of himself.

Deputy Lowry: Absolutely. In business circles, if you have an objective or if you have an ambition the only way you're going to achieve it is to work at it. As far as O'Brien and others were concerned at that particular stage, they saw that they had a legitimate entitlement to enter the market. They felt that the market wasn't being opened up as quickly or as efficiently as it should be and they were availing of every opportunity to bring it to the attention of the Department officials who----- You have to be conscious of the fact that the Department that I was Minister in, they were still acting as the regulator at that particular time so they were wearing two hats. For that reason, Mr. O'Brien and other people would have seen the Department as the ones to lobby.

Chairman: You said also that there were lesser telecoms operators who made pests or nuisances of themselves. Were there many of these?

Deputy Lowry: At that particular stage you had approximately two to three small companies who were vying for the small share of the market that was there. In commercial terms what happened was that O'Brien's company had effectively cornered the substantial part of that market so the others were left with very little to chase, but they did it successfully. One of the small companies that I'm referring to-----

Chairman: Can you name who they are?

Deputy Lowry: The name doesn't come to..... there's two of them. One of them..... two of them, they don't come to mind, but I know that one of them - the companies that I'm referring to - in actual fact, the principal of the company who formed the company, I think sold out his interest in a very short time for something like £12 million. So, he obviously made a success of it as well.

Chairman: If they come to mind, you might facilitate us with the names of the two.

Deputy Lowry: I will.

Chairman: Was Mr. Joyce your nominee to Government as the person who should be appointed chairman?

Deputy Lowry: Mr. Joyce would have been the nominee of the Government in which I served.

Chairman: Did you nominate his name to Government?

Deputy Lowry: After..... I would have put a number of names to the principals involved in that Government and arising from those, that consultative process, Mr. Joyce would have been the name that was put to Government by me on behalf of the Government.

Chairman: After previous consultation in Government.

Deputy Lowry: After..... in the normal-----

Chairman: But a number of names initially------

Deputy Lowry: Any position of that magnitude, the normal course would have been that you would have a round of consultation and you would put forward the names of those that you deemed to be suitable and arising from that consultative process, then the Minister of the day would bring forward the name and collectively the Government would make a decision on his appointment.

Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.

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