Public Accounts Committee: National Children’s Hospital
Full Transcript:
Deputy Marc Ó Cathasaigh: I want to start with claims. Looking at the
opening statement, it is a bit apples and oranges in terms of how it is expressed. According to
the statement, 2,379 claims have been raised and the employer’s representative has determined
1,610 claims of €16.75 million. Then the language changes and it states that “a further €2.1
million has been agreed through the dispute management process”. If I do very simple subtraction, I can see that that €2.1 million does not touch the sides of the 770 remaining claims. We
have been told that there are two claims before the High Court. Of the 770 claims that are not
accounted for in that metric, how much does that €2.1 million cover and how many outstanding
claims are not included within that?
Mr. David Gunning: I refer the Deputy to the table we provided.
Deputy Marc Ó Cathasaigh: It is not the easiest to decipher.
Mr. David Gunning: I will do my best to try to guide members through it because it does
contain the information required. So, 2,379 claims have been notified, of which 1,937 have
been substantiated. In other words, the contractor has provided explanations that are required
under the contract to justify them. That is where we get the €769 million in claims.
Deputy Marc Ó Cathasaigh: We have 442 then yet to be substantiated.
Mr. David Gunning: That is correct. That is dealt with there.
Deputy Marc Ó Cathasaigh: Have we—–
Mr. David Gunning: Some are withdrawn before they are substantiated, some time out and
some get substantiated. That is, therefore, a constantly evolving number, shall we say.
Deputy Marc Ó Cathasaigh: Okay. That is what we are interested in in terms of the accountability of public money. Have we any sort of metric? Do we know how much the company has made that claim for? Have we any sort of metric?
Mr. David Gunning: Absolutely. Of all claims, 1,937 have substantiation. Therefore, we
know what the money dimension is. I just want to jump to an explanation here. Where is the
money in all of this? There are 17 claims that account for 82% of the €769 million. There are
17 big claims, just to be clear. We have claims for values in excess of €100 million and then
claims right down, as Mr. Devine said. The materiality here is €500 under the public works
contract. Therefore, the contractor can claim for €501. However, the money is in extensions of
time where the contractor is saying the project has been extended and that time is our responsibility. It is holding us responsible. It says it is our responsibility that happened.
An Cathaoirleach: To clarify for the meeting, Mr. Gunning said some claims are so big
they are in excess of €100 million.
Mr. David Gunning: There is at least one claim that is more than €100 million. I do not
want to go into it too much—–
An Cathaoirleach: Okay, that is all right.
Mr. David Gunning: —–but as I said, 17 claims account for 82% of the total. The 17
claims account for €628 million approximately.
Deputy Marc Ó Cathasaigh: However, there has been an enormous disparity between
the size of the claim initially made and the figure that is finally settled on in settlements. Mr.
Gunning gave that figure of €16.75 million—–
Mr. David Gunning: Correct.
Deputy Marc Ó Cathasaigh: —–that had been settled on—–
Mr. David Gunning: Well, that is what the—–
Deputy Marc Ó Cathasaigh: —–but the nature of the claims submitted were in the order
of being ten times larger. Am I right in saying that?
Mr. David Gunning: With the claims submitted in that case, €641 million ends up at €16.7
million. The contractor is claiming €641 million. The employer’s representative in her determinations said that in her assessment, that is €16.75 million. That is correct.
Deputy Marc Ó Cathasaigh: Mr. Gunning might give me a context to understand that
in terms of similar-sized projects. To go from €641 million to an actual figure of €16.75 million—–
Mr. David Gunning: I will just—–
Deputy Marc Ó Cathasaigh: —–seems incredible to me. Is that normal in disputes of
this kind or is it irregular?
Mr. David Gunning: Under the contract, the contractor is entitled to submit claims to the
value it sees and thinks it is entitled to. Whether it is time or money, it can submit those claims
and we have the responsibility, through the employer’s representative, of dealing with those
claims. We do not control what the contractor puts in. It is up to the contractor to put in its
numbers. The Deputy can see the numbers in front of him.
Deputy Marc Ó Cathasaigh: The process should be that if there are disputes of this type,
it should go through the employer’s representative and it should be settled there. From the
company’s point of view, how many has it escalated beyond that in percentage terms? Has Mr.
Gunning found himself in a situation where the employer’s representative made a finding and
he pushed back against that?
Mr. David Gunning: Again, going back to the table, 1,338 are in dispute. That is the total
number that are in the dispute process. The Deputy can see that some of these have been determined. The High Court is mentioned there. Then, of the ones the Deputy mentioned that have
been settled, 28 have been settled. Out of the 2,379 claims, 28 have reached a conclusion.
While we are looking at it, in addition to the contract, the contractor can also use the construction payments Act and refer items to adjudication, which is a separate process. Six items
have gone to adjudication where the contractor claimed approximately €60 million. The total
that has been awarded by adjudication is €1.9 million.
Deputy Marc Ó Cathasaigh: It is important to get clarity about this.
Mr. David Gunning: I appreciate the complexity of what is there. The Committee of Public Accounts recommended this table as the way it wanted to see it. I am open to any improvements and clarifications that would help the committee members. We are absolutely available
to do that.
Deputy Marc Ó Cathasaigh: I want to put this in—–
Mr. David Gunning: It has been an issue with ourselves and the Comptroller and Auditor
General in trying to understand the complexity of the system here.
Deputy Marc Ó Cathasaigh: It is just to get a clear picture in terms of the public purse,
which is our job here. It is difficult to get and I know much of this is still in play, so it is difficult
to arrive at a final figure.
Mr. David Gunning: That is it. I will focus on—–
Deputy Marc Ó Cathasaigh: I want to—–
Mr. David Gunning: Sorry, Deputy. The last thing is that €18.8 million is the increase on
the project liability with the contractor, which started off at €909 million. It is now plus another
€18 million. Therefore, after the five years—–
An Cathaoirleach: And Mr. Gunning added that as a percentage.
Mr. David Gunning: —–that is the score on the board.
Deputy Marc Ó Cathasaigh: I want to direct a question to the Comptroller and Auditor
General around the timelining of the accounts. The National Paediatric Hospital Development
Board 2021 financial statements were certified by Mr. McCarthy in September of this year. By
contrast, the 2021 financial statements of Children’s Health Ireland were certified on 14 October last year. That is nearly 12 months in the difference. Is this usual or unusual? How is it
that it took this long?
Mr. Seamus McCarthy: It is unusual. I would have cleared the 2021 financial statements
in December of 2022. However, there were two areas where additional information needed to
be provided – additional back-up, effectively – for the figures that were in the financial statements. That related to the commitments figure and to these claims. We basically went to and
fro for a significant number of months trying to settle on, if you like, sufficient support for the
information that was being presented in the financial statements.
Deputy Marc Ó Cathasaigh: Considering we are likely to be back at this again before we
have an open and functioning children’s hospital, is that something that needs to be streamlined
so that both the Comptroller and Auditor General and we as a body have better oversight?
Mr. Seamus McCarthy: I hope the process we went through with regard to 2021 will not
need to be repeated in relation to 2022. However, I think we are still waiting for some of the
information with regard to the end-2022 position.
Deputy Marc Ó Cathasaigh: Okay. Will Mr. Gunning be able to commit to working a bit
more proactively with the Comptroller and Auditor General on this?
Mr. David Gunning: Absolutely. Definitely.
Deputy Marc Ó Cathasaigh: It is important because we very much rely on the Comptroller and Auditor General’s expertise to do the job that is in front of us.
I will go back to this programme, which is landing us at 29 October 2024. The poor employer’s representative has been kept incredibly busy by this job. There is a line that states
the programme is currently being evaluated by the employer’s representative. Do we have a
timeline for that piece of work so that we at least get a little bit more clarity on how reliable that
October 2024 date is?
Mr. David Gunning: The guidance we have given in the past is that is a two- to threemonth process. We are already nearly one month into it so it should be another month or so.
Deputy Marc Ó Cathasaigh: It will be another month or two before—–
Mr. David Gunning: Yes.
Deputy Marc Ó Cathasaigh: We are hoping that will firm up—–
Mr. David Gunning: We try to get interim information and not just wait until the very end,
if the Deputy can understand. This is a formal contractual responsibility of the employer’s representative and we certainly cannot interfere in that. That is her job.
Deputy Marc Ó Cathasaigh: In the time remaining I will ask a final question that is different in character. I want to focus on this accounting practice for forecasting future pension
liabilities that was identified as an issue by the Comptroller and Auditor General. We are told
this is done at the direction of the Minister. The material effect of that is to minimise the pension liability. We know there are a considerable number of people who are working in the area
for whom pensions will have to be provided. What is the rationale for reporting it in this way
rather than the standard accounting practice?
Mr. Stephen Flanagan: The rationale for CHI recording it in this way is that it is a direction. Under legislation, the format of the accounts are determined by the Department. We do
not have an option in terms of how we report it.
Deputy Marc Ó Cathasaigh: Okay. CHI is reporting in the way it is told. Does Mr. Tierney wish to comment?
Mr. Derek Tierney: We would probably have to look back into the Act to see what was
behind that provision. I can send the Deputy a note on it.
Deputy Marc Ó Cathasaigh: Okay
