Apologies have been received from Deputies Cannon and McAuliffe, who are unavoidably absent. The witnesses are very welcome. I remind all those in attendance to ensure their mobile phones are switched off or on silent mode.

Before we start, I wish to explain some limitations to parliamentary privilege and the practices of the Houses as regards reference witnesses may make to other persons in their evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected pursuant to both the Constitution and statute by absolute privilege. This means that witnesses have an absolute defence against any defamation action for anything they say at the meeting. However, they are expected not to abuse this privilege and it is my duty as Cathaoirleach to ensure it is not abused. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks and it is imperative that they comply with any such direction.

Members and witnesses are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions of Standing Order 218 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

The Comptroller and Auditor General, Mr. Seamus McCarthy, is a permanent witness and is accompanied today by Ms Olivia Somers, deputy director at the Office of the Comptroller and Auditor General.

This morning, we will engage with officials from the National Pediatric Hospital Development Board, who have appeared before the committee a number of times in the past four years, to examine the financial statements for 2022 for the National Pediatric Hospital Development Board. We are joined by the following officials from the National Pediatric Hospital Development Board: Mr. David Gunning, chief officer; Mr. Phelim Devine, project director; and Dr. Emma Curtis, medical director. We are also joined by the following officials: from the Department of Health, Mr. Eamonn Quinn, principal officer for major capital projects; and from the Health Service Executive, Mr. Martin McKeith, assistant lead director, children's hospital project and programme. They are all very welcome.

I call on the Comptroller and Auditor General, Mr. McCarthy, to make his opening statement.

As the committee members are aware, the National Pediatric Hospital Development Board is a special purpose agency that exists to deliver the planning, design, construction and fit-out of the new children's hospital at the St. James's Hospital campus in Dublin and of two associated paediatric outpatient and urgent care centres located at Tallaght and Connolly hospitals. Children's Health Ireland will operate the services in the completed buildings into the future. Construction and fitting out of the centres at Tallaght and Connolly hospitals have been completed and they are now being operated by Children's Health Ireland. As members are aware, construction of the main hospital at St. James's is ongoing.

The development board is funded by Exchequer capital grants provided via the Health Service Executive. In 2022, the grant funding provided amounted to €316 million, matching the board's expenditure in the year. Note 2 to the financial statements indicates the total accumulated project costs incurred by the board to end 2022 amounted to €1.24 billion, including VAT. In note 8, the board indicates that it also had future capital payment commitments estimated at €217.6 million as at end 2022. Combined with the expenditure already incurred, this implies total committed project expenditure of at least €1.45 billion as at end 2022. This exceeded the budget of €1.433 billion allocated to the board in 2019. Further planned commitments yet to be contracted for will raise the overall expenditure further.

Notes 12 and 13 to the financial statements disclose that the board has also been notified of a large number of payment claims submitted by the main contractor. A small number of claims received have been certified and paid in line with contract terms. The board does not present an estimate of the additional costs it estimates it will incur arising from the remaining claims. However it discloses that a revised budget for the board's deliverables amounting to €1.88 billion was approved by the Government in February 2024. This represents a budget increase of approximately €450 million, or 31%. The budget for the parallel Children's Health Ireland projects was also increased in February 2024, from a previously estimated €300 million to €360 million, a 20% increase. The overall project budget to get all of the plant facilities up and running is, therefore, an estimated €2.24 billion.

The National Pediatric Hospital Development Board's 2022 financial statements were certified by me on 11 April 2024. In my view, except for the manner in which the board accounts for retirement benefit entitlements, the financial statements give a true and fair view of the assets, liabilities and financial position of the board at 31 December 2022.

I thank Mr. McCarthy. As set out in the letter of invitation, Mr. Gunning has five minutes to make his opening statement.

I thank the Chair and Deputies for the invitation to attend this morning. I will skip the introductions and some elements of my opening statement which have already been covered. The NPHDB was appointed by the then Minister for Health in 2013 to design, build and equip the new children’s hospital. This includes the new children’s hospital on the site at St. James’s Hospital as well as the urgent care centres at Tallaght and Connolly hospitals, both of which are currently in operation. We are also overseeing construction of the new Ronald McDonald House, with 52 family bedrooms, at the new children’s hospital. It will be operated by Ronald McDonald House Charities Ireland. That construction commenced in March 2024 and is progressing well.

On the financial accounts, the details are presented in the table in the written opening statement I have provided and relate not just to 2021 and 2022, but also to non-audited figures for 2023, and a year to date figure for 2024. To date, the Comptroller and Auditor General has identified the amount of money already paid. Since 2019, the NPHDB has been reporting to our key stakeholders through established governance structures, including the Department of Health, the Health Service Executive and our client, Children's Health Ireland, that the project is behind schedule. Updates on these timeline changes and challenges and the associated impact on costs have been shared with all key stakeholders. In February, the Government approved enhanced capital and current budget sanctions for the project, bringing the total approved capital budget to €1.88 billion for the NPHDB component.

The Government-approved increase in the capital budget addresses areas not comprehended within the original 2018 budget and subsequently identified in the independent review carried out by PwC. The report said that the new children's hospital was unique in scope, scale and complexity in comparison to any other health infrastructure project in Ireland and was explicit in stating that the project's complexity should not be underestimated or understated.

The PwC 2019 report also noted that a number of risks had the potential to place further cost pressure on the approved capital budget, including contractor entitlements under the contract, the outturn of provisional sums, recovery of construction inflation above 4%, the need for additional capacity and capability in the executive team of the NPHDB and the contractor’s right to claim for additional true costs in line with public works contract provisions. Project costs, like other areas of the construction sector and wider society, have been impacted by other external pressures including the impacts to supply chains arising from the pandemic and other global events such as the war in Ukraine and Brexit. The NPHDB addressed all of that in its engagement with stakeholders on the capital increase. The enhanced budget of €1.88 billion reflects this at an appropriate level.

In terms of the progress update, we have provided a number of photographs and information, which the members can see. I do not propose to read through the bullet points other than to make it clear that the number of individual inpatient rooms being constructed and fitted out is 380. Specialist equipment is progressing very well in terms of MRIs, CAT scanners, X-ray machines, theatre imaging equipment, the central decontamination unit, CDU, and others. The commissioning of all the many hospital systems is well advanced.

On the programme timeline, the contract with BAM states that substantial completion was due in August 2022. Additional time has been awarded by the employer’s representative, which has extended the completion date to November 2022, from a contractual perspective. Since March 2020, BAM has changed its forecast completion date multiple times. The last baseline programme that was deemed compliant by the employer's representative was in quarter 1 of 2021. The latest baseline programme submission was received on 29 September 2023 and included a substantial completion date of 29 October 2024. This was evaluated by the employer's representative and determined as not being compliant with the contract. BAM is not meeting its contractual obligation to provide an updated programme which is compliant with the requirements of the contract. The employer's representative has requested an updated revised baseline programme from BAM that addresses the programme comments issued by the employer's representative, as is required by the contract. In its latest monthly progress report, BAM has indicated a further delay to the substantial completion date. The primary driver of the cost increases on the project has been the ongoing delay to the completion of the project. All possible contractual levers are being applied to secure certainty and the NPHDB continues to engage with BAM to explore mechanisms to deliver programme certainty and the earliest possible date.

We have provided the committee with an overview of the claims and there is a commentary on those in the documentation that has been circulated. I do not propose to read that unless we need to go through it, which I am happy to do. The employer’s representative award to the contractor is approximately €27 million in relation to those claims, which is just under 3% of the overall contract value. In addition, under the contract, an additional of payment of €48.5 million in inflation payments have been made.

In relation to dispute management, there are disputes at project board level currently in conciliation and in all parts of the contract management process. There are currently no adjudications. There have been nine adjudications to date, in which BAM has claimed approximately €63 million and has been awarded €2.3 million in those nine adjudications. There are two proceedings in the High Court: the phase B instruction and the frame claim. In relation to the phase B proceedings, the discovery phase is ongoing and is expected to finish in July, but we do not expect any outcome of the proceedings or the court’s decision until 2025, at the earliest. The frame claim proceedings were initiated in April 2021 and no further action has been taken by the contractor here.

The new hospital will provide 6,000 clinical spaces and 380 state-of-the-art inpatient bedrooms, 20 of which will be part of the new CAMHS unit. Some 60 beds are dedicated to critical care and there are an additional 93 day beds. There will be 22 operating theatres. The building will accommodate five MRIs and 110 outpatient rooms, a hydrotherapy pool, a rooftop helipad, a hospital school for primary and secondary level patients, a third level education centre for postgraduate students and more. I assure the committee that the NPHDB is fully committed to delivering the new children's hospital in as timely a manner as possible, giving the best possible value to the State and to a standard and of the quality that the children of Ireland deserve.

I will add some comments in relation to the programme issues, if I may. The baseline programme, which we received in September 2023, has been deemed non-compliant with the contract by the employer’s representative. The employer’s representative has directed the contractor to provide an updated programme and we have not yet received the updated programme. I wish to inform the committee that BAM’s most recent mostly update has indicated to the development board a substantial completion date of February 2025.

February 2025.

That is the most recent information.

Can Mr. Gunning clarify something before we get into this properly? How much is being paid to BAM in terms of claims at this point? Is the €27 million the total?

Yes, €27 million on claims. Inflation is a separate payment under the contact.

It is over and above. In other words, the board carried that risk over and above the 4%.

Correct. The contract provided that anything over 4% would be taken by the State.

There are many moving parts from Mr. Gunning's opening statement. I call Deputy Kelly.

I thank the Chair and the witnesses. For the public watching, this has been a disaster zone for years. I believe it is the fourth time people involved with the hospital have appeared in front of the committee. For me, this whole project is like a bad episode of "Room to Improve" on speed. That is how bad it is. We collectively need to get into layman's language in setting out where we are at. We have got a national maternity hospital to build. The model used to build the children's hospital cannot be used for that. The idea that the contractor or the builder is separate to the design - the whole phase A and phase B that we have been through historically in this room - is completely nuts and is the baseline for where all the problems are.

I said in 2019 that this would go over €2 billion. The Taoiseach at the time scoffed at it and said I was just creating a bit of chaos. At the last meeting in October, I asked anyone in the room if they believed it would not go over €2 billion. Nobody objected. Would anyone in the room object now? Do any of the witnesses think this will land under €2 billion? I presumed I would get the same answer. When I read back over the transcript from last October, I was reminded that I said "I do not think there is a snowball’s chance of the October deadline [the substantial completion date of October 2024] being met". Mr. Gunning is now saying, without a baseline plan but based on monthly updates, that this will be February 2025. We heard previously from Children's Health Ireland that the commissioning phase would take seven to nine months, which is understandable. If the new date is February 2025 and the commissioning takes seven to nine months, which means approximately 5,000 employees transferring or being recruited, is there a snowball's chance that this will be open in 2025?

The development board's responsibility is get this to substantial completion. With regard to what happens after, we then support CHI through that process. My focus is to get the thing done-----

Does Mr. Gunning believe this will be substantially completed in February 2025?

We do not have a programme. We have a date. We have a single data point from the contract-----

Mr. Gunning does not know exactly-----

We need to see the detail that supports the date so we can express confidence, or not. At the moment, we do not have that.

Mr. Gunning would not die on the ditch over the claim that this will be finished or substantially completed in February 2025.

I do not have the data to-----

Mr. Gunning does not have the confidence to say that here.

I do not have the information from the contractor. The contractor owns the programme and I do not have the detail on that to be able to tell the committee about the-----

Does the Department believe that the hospital will be open in 2025?

It is important to focus on the fact that the contractor said it would be finished in October 2024. The contractor then sought to resile itself from that position. I do not want to focus on the contractor, but it is not standing up to its previous commitments. While it is important that we debate these matters in the public realm, the contractor is the one that keeps moving away from its commitments and is attempting – I am speculating, but it is probably for commercial reasons – to move those dates out so that there is further pressure on us.

Will Mr. Quinn answer my question, please?

The contractor should meet its commitments. If it says the date is February 2025, the Department and the development board expect it to meet that commitment by providing a detailed programme to support it, to resource it, to put the management in place and to substantially complete the project in February 2025 or earlier. It should add resources-----

Will Mr. Quinn answer my question? Including commissioning, does the Department believe that this hospital will be open in 2025? That would probably see it opening in the middle of next winter’s flu season.

CHI has stated that it will take at least six months to be operational.

Six to nine months was the previous target.

Some of that operational commissioning will start before substantial completion. We are working on trying to move on that. It will involve putting some equipment into the systems in addition to the equipment that is already installed. When that crossover is added to February, it means August according to my maths.

I know, but will Mr. Quinn answer the question, please? He is the Department of Health’s representative at this meeting. I accept that he is a principal officer and not the assistant secretary or Secretary General, neither of whom are present, but does the Department believe that our national children’s hospital will be open in 2025?

We have to because we have to hold the contractor to delivering what it committed to doing.

Page 70 of the PwC report went through the risks going forward. One of them had to do with client changes. Since the GMP – for the audience, that means “gross maximum price” – was set, how many new and-or revised drawings have been issued to the contractor?

I will ask Mr. Devine to provide that information.

Remember the phrase “new and-or revised drawings”.

For context so that people understand, there are circa 6,000 drawings on the project. Following the GMP, the drawings for the majority of the project were changed for issues of contract and issues of construction. Members should remember that we had built part of the base for the majority of the project, so those 6,000 drawings were pretty much issued again after the GMP. On average, they have been revised circa three times since. There were 23,283 drawings issued up to the end of April. It is important to understand-----

I understand, but there are people at home watching this. We had a sign-off on the design.

For the purpose of reaching the GMP.

Yes, but we will not get into the history of the disputed phase B. The 6,000 drawings were redone three times plus, given the figure Mr. Devine set out. What was it again?

There have been 23,283 drawings.

That were either put in or revised.

Yes. The Deputy has to understand that this project is----

I know it is a massive project, but for the public watching, 23,000-----

This project is ten times larger than your normal largest hospital project in the country.

But for the public, 23,000 drawings or more after the GMP-----

That is normal for any public works programme. I will explain why.

That is fine. I am sorry, but I need to move on. I have a set time.

In major construction projects, there is always a change process and we understand that nothing will be set in stone. That is obvious. With a project of this scale, no one is suggesting it would be any different. How many change orders have been given to the contractor in the past six months?

I do not have the exact number, but it was probably circa 150. Maybe fewer.

Was that not very late in the day? Is there an issue with ceilings, light fittings, exit signs and so on?

There is. To go back-----

There are many people on that site, so this information is-----

Yes. I will have to go back a little to set out why the changes happened. This is a very important point.

Briefly, please.

The contract does not allow any products or systems to be specified. They have to be generic. When a contractor comes along with its products and systems, those have to be co-ordinated and integrated into the employer’s design intent. That results in many, many changes to the drawings. This is what normally happens with public works contracts. Our job is ten times larger, so that is normal.

Okay. Mr. Devine has made his point. I thank him.

I wish to ask about an important table we received from the board relating to how disputes were dealt with. We have to get to the nub of this. The employer’s representative makes adjudications. The witnesses have been clear as to how those were sorted out and the volume of claims, including the volume that were sorted and paid. I accept the point on inflation. There is then the project board, conciliation, the High Court – there are two proceedings before it – and adjudication. The element I am interested in is conciliation. Mr. Gunning stated that there were no adjudications currently and that there had been nine to date, in which BAM had claimed approximately €63 million but was awarded €2.3 million. In fairness, that is a small percentage of the amount claimed. That information was up to the end of April. Have there been any conciliations or adjudications since then?

There is one significant conciliation active currently.

Is it not settled or adjudicated?

No, it is not conciliated. In a process like this, a recommendation is issued by the conciliator. It is a non-binding recommendation.

Let me tease this out. I understand it is non-binding, but whoever is on the losing side, for want of a better term and just using sporting parlance, would have to go to the High Court to change it. That is according to the board’s table.

Let me clarify. The outcome of any conciliation-----

The conciliator is independent.

There is a standing conciliator in the contract. He is appointed for the duration of the whole project. He makes a recommendation, which the parties have the option to accept or not. In the majority of cases, either the contractor has not accepted recommendations,-----

I see that. It goes over-----

-----the development board has not accepted them or neither party has accepted them.

Fair enough.

Those cases then go to the next phase of the dispute. The current position-----

To be clear, there are currently no adjudications. There have been nine adjudications to date, in which BAM claimed approximately €63 million and was awarded €2.3 million.

Correct.

That is 3% or 4%, which is a small percentage. There have been no decisions of a conciliator since the end of April.

The conciliator issues his decisions. Parties have a period to review those and decide whether to accept them.

Has the conciliator issued any decisions that the board is reviewing at the moment?

Yes.

Are they substantial?

Yes.

Was the board on the winning or losing side?

That is confidential information. I am not in a position to share it. The contents of the conciliation are confidential for all parties.

It is €2.3 million out of €63 million. When will we know the outcome of the recent conciliations that Mr. Gunning just told us about?

To be clear on the legal aspects of this-----

Mr. Gunning has told us of nine. He said €63 million-----

Those were adjudications. Adjudications are outside the contract and happen under the Construction Contracts Act. They are a separate matter. Within the contract, we have conciliations. In a conciliation, either party may accept or reject the outcome.

Whether we accept the conciliation or reject it will depend on the status of it as it goes forward.

Let us say the conciliator decided the contractor should be awarded more than €50 million or more than €100 million. The board has to decide whether it will accept that in the coming weeks.

Correct.

If it accepts it, I presume that the details will become public, like the ones that Mr. Gunning has told us about - the nine.

Not the nine but another row on the table.

Yes. So it will be nine, ten, eleven because there are multiples of these. There is more than one.

The Deputy is referring to adjudications. The conciliation that is agreed is two lines above that.

I respect that. On the conciliations that are currently live, where the board has had the conciliator make decisions, the board now has a period to reflect on those and decide.

Correct.

I presume the board either accepts those or pushes them on to the High Court.

That is a short way of summarising what happens.

That is currently the board's table.

Yes.

And therefore, would it be fair to say, substantial amounts?

The Deputy can see there is €750 million in claims, so there is a substantial amount.

Some of these conciliations would be eight or nine-figure sums.

I am trying to add up all the zeros but, yes, of €100 million.

I am pretty confident that I am right about that. Half a billion extra was allocated recently to the project. I am paraphrasing when I say that the Minister said not a penny would go towards paying the contractor. Is that a substantiated statement Mr. Gunning can stand over? An extra €500-odd million has been given to close off this project and the Minister, Deputy Donnelly, said none of it would go to the contractor. Mr. Gunning is in charge of this. Can he stand over this statement that none of that money, that extra €500 million, will end up with the contractor? I will be honest; I do not think Mr. Gunning can. I would not like to put words in his mouth so I would like him to answer my question. Does he not think, and I do not want Mr. Gunning to get into politics as it is not his role, that surely some of that €500 million extra that was allocated to Mr. Gunning and his team, and I appreciate this is a very complicated project, must be based on settling what we just went through in the disputes?

Mr. Gunning, do you wish to answer that, please?

What I have said previously is that, if the contractor is entitled to payments under the contract, it will be paid. That is what we have been doing and that is what we will continue to do.

If disputes are settled and there is an award for the contractor, whether small or large-----

Settled is one option, as in a negotiated settlement.

Or a court settlement.

Or the court may decide, or there are other arrangements.

The only money that can pay for that is the €500 million that has been awarded to the board. Otherwise it would not be trading properly.

As I have said, if the contractor is entitled to money under the contract, it will be paid.

I take that as meaning some of that funding has to be used for that.

Mr. Quinn, do you want to comment on that. You are the Department representative. The question is whether not a penny more out of that half a billion will go to the contractor.

I am not familiar with the statement per se referred to by the Deputy.

I paraphrased.

I am not doubting that at all. The additional moneys set out are to empower the development board to complete this project and to defend-----

The additional €500 million? What is that for?

That is to finish the project.

Is it substantiated or acceptable to say none of that will go to the contractor?

The additional moneys that were set aside are for the development board to complete the project and to do everything it can to defend the project and ensure value for money.

Yes, so it is not a statement. In my opinion it is a difficult statement to stand over. I call Deputy Murphy.

Thank you. Good morning to the witnesses. We meet again, as Deputy Kelly said. The two things people want to know is when the hospital will open and what it is going to cost. Mr. Gunning told us in his opening statement that the primary driver for the cost increase on the project has been the ongoing delay in the completion of the project. That is the first time that I can recall that he has said that very deliberately in an opening statement.

Mr. Gunning also told us that the board is using all contractual levers. An issue that has repeatedly arisen here is what is described as assets on site. I say that is people on site working rather than just assets on site. The board has no control over that unless there is something in the levers that allows that to happen. What levers has the board that can bring this project to completion?

What springs to mind in relation to that, and what the public works contract provides, is liquidated damages. The application of liquidated damages is really the only mechanism within the contract to encourage the contractor to finish at its earliest time.

Mr. Gunning is using the words "encourage the contractor".

That is a euphemism.

There is a gigantic deficiency in this contract in terms of controls or penalties to bring this contract to a conclusion. The lack of people on site has been an ongoing problem right from the word go.

When the Government announced the extra €512 million, which is a ginormous amount of money, it said it would not be allocating any more money, but this project is not going to be completed within the lifetime of this Government. With court cases, disputes that still have to be settled and new claims that will come in, is Mr. Gunning confident there is sufficient headroom in that €512 million? Would he give us a guarantee on that? I want to hear a guarantee on that.

I certainly cannot give a guarantee. I cannot foretell or forecast what is down the road. What I can say is that our forecasting and scenarios that went in as the underpinning of the capital request and capital increase were very thorough and had provisions, as would be expected, prudently, for some further time movement in relation to project completion. There is provision in there. There is additional contingency in there. Already there is a provisioning within that for all the items in the PwC report: the additional management requirements, systems and provisional sums. Inflation is now within the number. If the Deputy remembers, in the past, inflation was outside the number. We have been very comprehensive in pulling all that together.

I understand inflation is part of the contract. Had the project been completed on time, however, the board would not be in a position where inflation would have impacted to the extent it has.

That is not absolutely correct, to be clear. Our legal position is that the contractor has no entitlement to inflation after the contractual completion date. It does not get incentives for sliding beyond the date, just to address that point.

On the 393 non-conformance reports that were issued by the employer's design team inspectorate, who is on that inspectorate?

Our design team consists of the architectural team, the mechanical and the electrical, and there are inspectors across all-----

So it is across the disciplines.

As they say, CSA: concrete, structural, architectural, mechanical, electrical, systems - all of that.

I just want to drill down here on this. On 26 March, there were 61 non-conformance reports to be closed. Six of the reports are being disputed by the contractor. The reports relate to things like not having a formal cleaning plan and the voids having material in them, which I would have thought was pretty important from the point of view of health and safety, and-----

Clinical.

Yes, particularly given that it is the hospital. Are any of those going to delay the completion of the hospital?

Mr. Devine deals with that and I ask him to respond.

Please give me a brief response.

There is a very robust quality management system in place. The contract demands that BAM put that in place. That is operated by the inspectorate team that Mr. Gunning just explained. Issuing non-conformance reports is part of that system. There are non-conformance reports, which are significant issues that need to be addressed by the contractor, and there are observations, which are minor snags. There are 61 open at the moment - they get raised and they get closed - but they will all be closed, including anything that is in dispute, prior to substantial completion because otherwise the contractor will not reach substantial completion. On a weekly basis, the design team works with the contractor, the contractor makes a submission to say, "This is how I might deal to close this", and that is approved or not. Then the work is done and it is signed off. Therefore, none of those will impact substantial completion. They should not impact substantial completion. The contractor needs to get them closed.

Is there a cost associated with these?

There is not a cost to the employer. There will obviously be a cost to the contractor in remediating those works but not a cost to the employer.

Will the witnesses remind us what the quantum is of the case that is before the court? There is another case where the proceedings have not yet progressed. Is there a value on both of those? It is not an ultimate value that the court will come to but what have they claimed?

The first one was initiated by the development board. That is the phase B and structure. In that situation, the contractor was claiming that the instruction received was invalid. This was an issue which the development board felt it could not allow to sit unchallenged and that is now in front of the High Court. As I said, discovery is ongoing. As to when it will be resolved, it would be optimistic to say 2025. There is a counter claim and money involved in this. I can provide that detail but I just do not have it at my fingers.

If Mr. Gunning would provide it -----

I would be happy to do that. In relation to the other one, it goes back to the conversation with Deputy Kelly earlier. It relates to a disputed matter from a conciliator that has a certain amount of money. Again, I can provide that detail separately.

The board has a date from the contractor but it does not have any of the details that substantiate that date for an additional three months. I heard a comment today that it is definitive there will be a three-month delay and that has been said by the Minister. Is the board confident? I do not believe it could be if it has not seen the detail of the additional three months. When does it expect to get that detail?

There is a process laid out in the contract of how this works in terms of when the ER finds there is a non-compliance, she has to formally direct the contractor. It has a fixed period of time within which to respond. As to whether or not it responds in that timeframe, I would say that it has not happened in that timeframe-----

I was going to say that I have a memory of that and it was months before it complied.

-----then the option is for the development board to take further action in relation to that. We have all options on the table currently in relation to that, one of which is to withhold some money from the contractor. No decisions on actions have been taken on that as yet.

Why would you not be cracking the whip at this stage? Why would you not be withholding money? This is absolutely scandalous. An additional €512 million has been put in to complete this hospital. Mr. Gunning is telling us that the things that are adding to the cost are the delays. Why would you not use that lever of withholding payment to more or less get the contractor to crack the whip and get this hospital completed? Aside from the financial part of it, we need this hospital and we have needed it for a long time. I do not understand why that, at least, would not be used in a robust way to get the contractor's attention to get this hospital completed.

Withholding is about getting a programme. As I said, all options are on the table in relation to that. No decision has been taken. We are in a process that involves the contractor, the ER and the development board. I set out timelines for that and, as I say, all options are on the table.

The secondary point is that once you have that programme, does the contractor comply with that? I think that is the more important issue and as we have-----

But it is not.

As we have already said, our leverage in that area is the application of liquidated damages which is a separate issue. The Deputy brought up penalties. Penalties are unenforceable in a contract, according to our legal advisers.

In this contract - not in a contract - because we see it all the time with road projects that if you do close lanes for a particular number of days, there is a cost. That is clearly not in this contract.

Thank you, Deputy. I will continue on that. On penalties, is Mr. Gunning telling us that no financial penalties have been levied on the contractor to date? Is that correct?

That is correct.

In Mr. Gunning's opening statement, which I read carefully last night again, it seemed to indicate that the board is using all levers. Is that right?

Yes.

We accept that. Those are the tools that they were handed. What the opening statement and what Mr. Gunning has just confirmed to me tells me that the taxpayer, the Government, the State and the board, and Mr. Gunning is the representative of the Oireachtas and the public there, does not have the necessary levers built into this contract to levy penalties against the carry-on that has gone on on that site where less than half the workers who should have been there were there? Mr. Gunning said in his opening statement that delays have driven inflation-----

Cost.

I think some of us in this room have made this point before. It does. We will come back to inflation in a minute. There has not been one penny. This company has not suffered one penalty of loss because of any of this. Can we establish that is the case? From what Mr. Gunning said, that is a fact.

In terms of the application of the liquidated damages clause within the contract, that is correct.

This is outrageous stuff. This is absolutely outrageous stuff. Mr. Quinn is representing the Department here this morning. Was either Mr. Quinn or Mr. McKeith in situ in the Department of Health when this contract was being awarded? Did they have any role in this?

Not in this here.

Who oversaw this in the Department of Health?

I am not familiar with the individuals. It predates my role.

I am trying to figure this out. I want to go back a bit and figure out where the buck stops. As some of the members alluded to earlier, there is also a national maternity hospital to be built. I think we all accept that there has been substantial inflation in the wider economy and in the construction sector given forces beyond our control like war and Covid but the point is about us not being able to stop this from happening in future and us continuing to get into large-scale projects with tens of thousands of moving parts. From previous answers here, and I am trying to depersonalise this, Mr. Gunning has not been able to hold them to account in regard to the number of workers on site, which impacts on timelines, or costs. There will be claims, and I have accepted that here in the past, but my God, I refer to the number of them and the amount they are coming in at. We know there are high value claims, and the witnesses have alluded to that in the past. High value claims could be €10 million or they could be €100 million. I know the witnesses have to be careful and I do not expect them to put a figure on that here today but the taxpayer is left wide open here. We have had no penalties to date. We know the contractor has not complied with the work programme. We know from previous hearings of this committee that only a fraction of the workers who should have been on site were there at any given time. We know the original completion dates have been missed by a country mile. We know the Government has had to put in what is called an enhanced budget of €0.5 billion and now we have a completion date of February 2025 for substantial completion of the building. Given what has gone on, is that date realistic? Be realistic.

I always attempt to be fully honest with the committee in my assessment of these matters. I have already said that in the absence of full detail in relation to the programme, and the fact that we do not have the details to support the date, I am not in a position to convey the certainty that the development board would like to have in respect of that date without that level of detail.

I am sure there are legal advisers and technical people who advise the board. Have the board’s legal advisers and other people who are involved in the technicalities of all of this examined and drilled right down to see if there are any instruments or levers, to use Mr. Gunning's word, that can be used to get the contractor to comply at this point?

We have very strong legal advice. I can absolutely say that. Just to make-----

Let me follow on from that. Does that advice indicate that you are not going to be able to keep the contractor to the commitment in respect of February of next year?

Again, I will not use the word “penalty”. The liquidated damages are the lever for the development board. This is a payment that the contractor would make for the delay, once the level of delay has been decided.

Let us refer to penalties for the sake of the public.

I know. Just to be clear, however, penalties are unenforceable in a legal sense. Again, our legal advice is very clear on that. That is the lever in the contract regarding compliance with the date. Under the contract, the contractor is required to make regular and diligent progress to deliver the project in the earliest possible timeframe. That is what is required. That is in the public works contract, which is what we are implementing.

We know that all of those have been missed.

Mr. Quinn, who is from the Department, is obviously keeping a close eye on this. I ask for his point of view and for those of the Secretary General and the assistant secretary. Is it his assessment and that of the Department that there has been too much risk and that all the risk in terms of timelines and costs has been loaded onto the board, the Department, the State and the taxpayer? This contract was left with too many loose ends and moving parts.

As Mr. Gunning stated, this contract is based on a public works contract. That is what is required of us under the official guidelines. This is what we have to do. To do anything different would be to create an even greater risk because we would be moving into a space with people who are unfamiliar with contractual agreements.

Is Mr. Quinn identifying flaws in this?

There are definitely issues with public works contracts and we have clearly called those out before. We have historically sought to engage with the Government construction contracts committee, GCCC, the Office of Government Procurement, OGP, and the Department of public expenditure to highlight some of those issues.

Careful notes are therefore being taken of this so that lessons can be learned for future contracts.

Absolutely.

It is safe to say that lessons have been learned and flaws have been identified. Substantial flaws have been identified in this contract.

I will not use the term “flaws”, but I will definitely say that there are issues.

That is fine. Mr. Quinn might use different language than I do. In terms of the substantial change to the completion date, what does he think the cost implications will be?

In terms of the movement of the substantial completion date, the fundamental cost relates to the function and running of the development board and how much it costs to keep the experts on the ground to make sure they are-----

I will call on Mr. Gunning in a moment, but Mr. Quinn and the departmental officials are monitoring this. That his job, as CEO. What extra costs are we talking about in respect of the substantial completion date?

The development board and its experts, subject to verification, undertook a thorough analysis of the various scenarios for planning. Those were adequately addressed by the Government in February 2024, when it approved the €460 million increase to the capital budget.

I wish to ask Mr. Gunning about the figure of €2.24 billion. He stated that the board is using all levers but, to date, it has not been able to use those levers stop the runaway train. Is he in a position to say that this may run beyond the figure of €2.24 for construction, commissioning and having patients and doctors in situ?

I can only comment on the figure of €1.88 billion, which is the development board’s element of that. As I stated earlier - I think it was in response to Deputy Murphy's question - we have undertaken many scenarios that fed into the amount of money that we requested from the Government. Those scenarios involved contingencies and various other elements, as well as sweeping up many items that were excluded from the 2018 approval. I cannot take account of a scenario, such as a new Covid pandemic or something that is off the charts. In terms of where we are, however, we are confident that we can deliver the project within the figure of €1.88 billion.

That includes the substantial build. What are the outstanding risks? What are the big retrieving risks Mr. Gunning sees at this point?

The number one risk is a further delay. That is it.

What are numbers two and three?

Delay and delay. This is all about delay.

Are there other factors?

There is a number of issues. We do a full update to our board on a monthly basis through a risk assessment. One of the issues we had-----

Does Mr. Gunning foresee technical problems?

Mr. Devine spoke of the NCRs and the issues involved there. We have a good process in place. It is really important that this hospital that will last for 100 years or more. It is really important that when they hand it over to us, it is as perfect as we need it to be. I do not see issues there. We have a process. Issues are arising, and Deputy Kelly mentioned some of those. The Cathaoirleach will remember that when we were before the committee previously we discussed ventilation. That issue has been addressed. There were numbers thrown around to the effect that it would cost €30 million, but the cost of fixing it was less than €1 million.

There might be a few of a different nature, but I will come back to them later. I call Deputy Ó Cathasaigh.

I apologise that I missed some of the contributions. use I was speaking in the Dáil, so I apologise if I repeat some questions that were put previously.

Deputy Kelly began by citing “Room to Improve”. Unfortunately, a different programme comes to mind here. It is one of the episodes of "Killinaskully" in which the Pat Shortt character is selling concrete frogs. The garda character asks him, “How much are they?” and the Pat Shortt character replies, “Well, that depends, is it for you or is it for the HSE?” There is a real element of that here.

I feel deflated. The Chair was quite forceful in his contribution, but I feel deflated as a taxpayer and a parent because we are in so deep here. Thankfully my children are in good health. I have not had the need to use the services of a hospital for them as yet. Touch wood, I am in a lucky situation. Yet, God Almighty, how would a parent who has a child with complex needs and who needs these kinds of services feel watching these proceedings. We are in too deep. It is not as though we can cut ties and say “Well, do you know what lads? Forget about it”. It is not throwing good money after bad. That would be unfair to say because we need this hospital. Yet, to hear about the dates and the budget slipping in the manner in which they have at meeting after meeting is incredibly dispiriting. I am sure Mr. Gunning and the Department have the exact same feeling, and perhaps to an even greater degree.

The question about penalties for the slippage in date has already been asked. Maybe I am wrong. I had been getting updates on my phone. Are penalties being applied? One contractor is taking part in a slow bicycle race. Will it doing so mean that it will take a hit in the pocket?

I will respond to that. There is a liquidated damages provision within the contract. That provides for what is referred to as a pre-estimate of the loss that the development board will experience. That will arise once we understand the full delay. It is at that point that we can attempt to levy. To be clear, it is not just a question of us taking the money. There is a process to go through. I fully expect the contractor to oppose that process.

Nonetheless, we have a strong position on that. It is not without challenge. That is the liquidated damages clause. That is the significant item we have in the contract relating to non-performance in respect of the timeline.

Regarding that timeline, what is the baseline date? We see it slip and slip. We are now hearing February 2025 for a substantial completion date, which is a difficult date to believe when we do not have a baseline programme. If we are pursuing the contractor for these damages after the fact, what is the baseline against? What was the expected date?

The contractual completion date was originally August 2022. That is the baseline. Covid moved that out to November 2022. The shutdown and some additional time that was awarded by the conciliator pushed that out to November. The contractual stake in the ground is November 2022. I cannot remember the precise date. Dates get counted from there to the substantial completion date, whenever that arises.

Okay, so we can expect the process after the fact, and probably a contested process after the fact, to seek-----

If experience to date is anything to go by, I can guarantee it will be a contested process.

Which will cost time and money, as all of these things do. The last time Mr. Gunning was with us, he was quite sanguine about the number of contractors on site and the substantial completion date we had been given at that time, which has slipped as of this morning. He felt that, through robust engagement with the contractors, he was seeing enough boots on the ground to make that timeline credible. At the moment, we have a shifting date, back to February 2025. We have no updated programme. From Mr. Gunning’s view of the activity on site, are the contractors serious about getting this work completed in the anticipated timeline?

I wish to respond on a couple of points the Deputy raised. This date has been provided and, yes, we need the substantiating data so we can really understand what the position is. It is also important to point out there are about 1,150 people turning up to work every day at the site, and we have to acknowledge their efforts. We are making progress but it is not at the level we would like. The question is whether it will be at the level that will deliver the February 2025 date. I cannot guarantee what the date will be. As you get to the end of the project, the window closes. That is the nature of these things. I cannot say when that window will close, but we are certainly getting closer as the work progresses. Members have seen the photographs of the good and the bad. We submitted to the committee pictures of areas that are finished and we then have areas that are still in progress. We have to eat this one bite at a time to get it closed and done.

Regarding when Mr. Gunning was supplied this, I assume that in preparation for his appearance before the Committee of Public Accounts today, he engaged with the contractors and told them, “We will be answerable to the Oireachtas; please give us updated substantial completion dates,” or whatever it is. When did that process happen? Where my question is going with this is there is no updated programme for Mr. Gunning to be able to validate this. When did the contractor come back to him and tell him the new date was February 2025? Was that plucked out of the air? Did the contractor tell him that earlier this week because he needed to have something to give to us when he came before us today? I refer to the idea that they gave Mr. Gunning a month on a calendar. There is no way for him to respond to the questions Deputy Kelly put to him earlier about the confidence he has in the date unless he has actually had a chance to properly review the updated programme. I ask Mr. Gunning to give us an idea of how the interaction came about whereby this date of February 2025 arrived in his opening statement.

There are two parallel processes here. There is the employer’s representative, who is the independent person acting to look at and examine the baseline programme and the programme on an ongoing basis. I will go back. At the end of September 2023, a new programme, which indicated October 2024, was submitted. In April of this year - I can get the Deputy the specific date - the employer’s representative wrote to the contractor and said the programme is no longer compliant and directed it to submit an updated programme. It is not that they are just writing at each other about these things. There is an ongoing engagement of workshops between the employer’s representative and the contractor’s programming team to move forward and discuss these issues. That is one process.

Separately, under the contract, the contractor is required provide regular progress updates to the employer's representative and the development board. The February date was provided this month in one of those updates.

I know we discussed this at one of these meetings previously. We have not typically communicated publicly every change that happens on a monthly basis because sometimes it goes out and comes back and various other things. We have only provided dates that are an outcome of the baseline programme, if you like - the programme itself. Given where we are today, and this committee, we wanted to share the most recent information we have.

When was that most recent information provided to Mr. Gunning?

In the past week or so.

I am stating the obvious but it becomes clear that the relationship between the development board and the contractor is not the one that we would hope for, whereby Mr. Gunning could pick up the phone to somebody and say, “How are you there, Tom? How are things going? What is the latest?” Of course, it has to be a formalised process because of the amount of money we are spending. Certainly in this committee we see a lot of fly-by-night arrangements that lead to bad outcomes in the long run. However, it speaks volumes about the relationships that exist here.

I wish to comment on that. There are engagements at multiple levels. There is the worker level engagement of people getting on with the job and building the hospital. Issues arise and decisions have to be made, for example, that a switch needs to be moved from there to there, and then it is agreed to move the switch. We are trying to make sure the building and getting it done proceeds and that the contractual processes and the row about the money does not get in the way of it. From my point of view, as well as that of Mr. Devine and other members of the senior team, we have good working relationships with our BAM equivalents. The past four weeks has probably been some of the most intensive engagement with them on all these topics. There is a working relationship. I want to make that point clear.

Good. That is better than what was existing in my head, so I am glad Mr. Gunning clarified it.

I just looked this up. This was covered in the media on 14 February. The Irish Times reported, “Mr Donnelly was adamant was that none of the funds [the €500 million] would go towards claims made by BAM.” I do not think that statement can be stood over. That is just absolute garbage. As a committee we should write to the Minister and tell him to withdraw this. He was either playing games or he is ignorant. This committee has shown that that is the most ridiculous statement the Minister has probably ever said. Obviously a component of the extra €500 million - I would suggest a large component of it - has to be the settling of claims. “Mr Donnelly was adamant that none of the funds would go towards claims made by BAM.”

Given the number of moving parts in this project, I do not think anybody - the Minister or God almighty - is in a position to state that, so we will come back to it.

Exactly. I agree totally. I just wanted to make that point. I also believe we should write to CHI and get an update from it. Mr. Quinn said that some work, which I accept, would have been going on in parallel in respect of the six to nine months commissioning. We might get a status report from CHI on that. How many months has it cut off that nine months? That would be interesting.

I understand a task force was set up recently with regard to reflected ceiling plans, RCPs.

For the members of the public listening in to the committee, essentially this is where there had to be changes to the ceilings across the hospital because what was put in initially did not meet current requirements, building regulations and fire certs - in other words, exit signs, fire components and all of that sort of stuff. Is that correct?

Yes.

Just so the layman or laywoman among the public know, how many changes are required?

I will hand over to my main man-----

It is just a figure that is needed.

I think it is fair that the public hear the context. There are some late changes required to the ceilings of the hospital and that is to ensure it is fully compliant with fire regulations mainly. There are three principal components of those changes that are required. First, there are smoke detectors. The Irish standards state that a smoke detector must be 500 mm away from a bulkhead or 1,000 mm away from a supply grill. There are cases where they are 480 mm away and we have taken the view that we are going to be 100% compliant and move it by 20 mm.

Okay, that is one.

That is the first thing. There are 1,200 smoke detectors and there are tens of thousands of these in the hospital that have to move. The second issue is that fire exit signs, like the one at the door of the committee room, are located in the centre. As there are so many components in the hospital ceiling, such as sprinklers, smoke detectors, text displays for nurse calls so in a crash they can get them, Wi-Fi points, DAS points, and cameras, some of those are obscured. It is a very hard thing to get right in a drawing. When they are physically put in, you look down and see that the text display is in the way. Therefore, they have to move. To be exact, there are 400 of those that are either moving and there are new ones being introduced-----

In total, how many changes have to be made?

That is 1,600. There are also access hatches that the contractor has to put in-----

I asked a question. I apologise but I am caught for time. How many changes in total have to be made?

Okay, but the principal thing is that these movements have to be made-----

Is it 2,000, 3,000-----

There are less than 2,000.

Regarding light fittings, has there been any situation with that case or with others where the board made a decision - presumably the witnesses or Mr. Devine himself given his role - that it needed to go after a contractor or a subcontractor for its insurance because it was felt what was done did not meet the requirements or it was unhappy with it. Has the board ever bypassed the contractor and said it needed to go for their insurance in relation to any aspect of the project?

I am not aware of this happening relating to light fittings.

That is fine. I return to something that was said earlier on and regarding the whole employer representative, ER, side of things. I understand we have the figures but we need to give a health warning as regards ER, not related to the decisions but on the quantum. There is a huge number of claims that are outstanding. I think it is €600 and something odd million. I am only using sporting parlance by way of explanation but if an award was made by the conciliator of a nine-figure sum - in other words, the contractor won and the board lost - would that raise alarm bells in the Department?

When you talk about nine figures, obviously anything would raise alarm bells for us in that respect. It would be foolhardy for me to say otherwise. We are not being flaithiúlach with any of the money involved in this project.

I look forward to discussing something like that again with Mr. Quinn.

My colleague has very eloquently stated that the relationship between the contractor and the board is not - and I know it needs to be formal - on the friendliest of terms, for want of a better phrase. Has the Department, which is nearly like a referee itself, engaged any other formats, methodologies or people to try to get to what is going on here in the dynamic?

First, we are not a referee in this-----

I know that. I used it as-----

-----and we cannot be seen as a referee. The very nature of the contractor-----

Okay. I apologise. I should not have used the word "referee". Has the Department used any other mechanisms outside of what we know about? Are there any other mechanisms, people or strategies the Department has used to try to see what is going on here?

Through the revised Government arrangements that were approved following PwC, we now have a project assurance function that is led by my colleague, Mr. Martin McKeith, in the lead director function in the HSE where they then interrogate the functions of the development board and its advisers as well. I know where the Deputy is coming from with the reference to referee. The point I was trying to make is that-----

It is probably the wrong word.

I do not protest the word but I am just being very clear on that. The reality is that the National Paediatric Hospital Development Board is statutorily responsible for engaging and contracting to deliver this hospital. There is a contractor who has done everything it can to negotiate directly with Government to get a blank cheque. We cannot allow that.

That is fair enough.

In reflection of what the Deputy is saying with the Minister's quote, I am not familiar with the quote but I get that. When due diligence is done and the board has determined what it needs to cover some of the issues that were not addressed in 2018, it is really important that there is a very clear marker laid down here. This money is not going to BAM Ireland.

In reality, we have all proven that this is not the case. I have one question for Mr. Gunning. The figures he has given the committee are up to the end April. How many conciliatory decisions or opinions that the board is considering have there been since April? I just want the number. Is it one or up to five?

I can come back to the Deputy on that.

I direct this question to Mr. McKeith, Mr. Quinn or Dr. Curtis. I do not know who will answer it. One of the things that came up at the last committee meeting was that a new patient record system was going to have to be ready to go. Where are we with that? Is that substantially done? Obviously, that would affect the timelines as well.

I will start that one off and then my colleagues will-----

I ask Mr. Quinn to be brief.

Very quickly, the Government approved the contract with Epic for delivering the new electronic health record system in the summer of 2022. That is well in train as I understand it.

Is it substantially complete?

Work is ongoing with Epic on that and good progress is being made.

Will Mr. McKeith just give us a percentage?

I cannot give a percentage. I can come back to the Deputy on that. There is a certain amount of work on the EHR that is dependent on the completion of the building and can only happen after it finishes up.

With training and everything, I expect that but I want to know has the background work been done.

Progress has been made.

My last question is for Mr. Gunning. It is two questions in one in the sense that they overlap. I am not saying this is the right thing to do but was a design freeze at a certain point to finish the hospital ever considered? Based on what Mr. Gunning said previously, I know the board wants to get the hospital to a standard that is best in its class, but was it ever considered? The second half of that question is on whether it was ever considered that this project would be handed over in phases. I am not saying on either of those points that this would be the optimum for me or the right thing to do. However, things change. Perhaps the dynamic of what has happened here has changed. Was there ever a suggestion of a design freeze or was it considered? For people watching the committee meeting, a design freeze is essentially where instead of changing some things, such as Mr. Devine outlined earlier as regards the sprinklers, the job would be finished. Was there ever a consideration of a design freeze in order to get this done because, as my colleague said, there are kids waiting on this hospital across the country. Was it ever considered that it would be handed over in phases?

These are two points regularly put forward by the contractor regarding how things might possibly evolve over the coming months. The phasing of a handover or an opening is a matter for the hospital operator, CHI. While I do not speak on its behalf, there is very little appetite for that. The idea that you would have a hospital operating in one part and workers working in another part, just does not work for infection control and other purposes.

What about the design freeze?

Design is coming to an end. We are dealing with relatively minor matters. We talked about the changes. We are coming to the end of all the design very shortly.

I know, but it is just added on here.

I go back to the issue of substantial completion. At the engagement last time, the board could not get a date for substantial completion. Was funding actually withheld at that stage?

We withheld funding in 2021 and 2022 and then we got to the point in 2023, which was the last time we were here, where we had initiated the process to withhold 15% of the monthly payment.

But it did not actually withhold.

No, because the basis of the breach on which we were withholding funding was cured by the contractor.

We are back at the same point again. It is kind of Groundhog Day-----

We are almost at that point.

-----and it is threatening to withhold. Is the board actually threatening to withhold?

I think I answered that last time. We are not at that point just yet in terms of the process. There is a process here and we must stick with the contractual process. As I said, all options are on the table and will be considered.

How long with this process take?

It is imminent.

Will it be "threaten to withhold", or "withhold"? It is "fool me once", you know.