From top: Mark Griffin, secretary general at the Department of Communications, Energy and Natural Resources and Fine Gael TD Patrick O’Donovan

You may recall the Comptroller and Auditor General’s Report on the Accounts of Public Services 2014 included a chapter on Eircode.

It raised concerns about “a pattern of non-competitive tenders for consultants” in relation to the project.

This morning, Mark Griffin, the secretary general at the Department of Communications, Energy and Natural Resources fielded questions about Eircode from members of the Public Accounts Committee.

During his appearance, he spoke about the cost of Eircode and the cost of the consultants hired during the project.

He also spoke about a complaint that was made to the European Commission in relation to the procurement process that Eircode used.

From the proceedings this morning…

Patrick O’Donovan: “Mr Griffin, in 2009, when this whole thing started, your department estimated that the cost was €18million over 18 months. Then, in 2013, the cost rose to €31million. And then, in 2015, it rose to €38million. So. Can you tell me what is the actual cost of this project to date?”

Mark Griffin: “So let me go back, maybe to the sort of sequence of events that you’ve described deputy. You’re right in saying that the 2009 memorandum for Government included an estimate of €14.8million which was €18million, including VAT. Now bear in mind that was at the pre-tender stage so, as you will find with a lot of contracts, whether it’s in the public or private sector that it is quite difficult to determine precisely what the cost of a project is likely to be. The 2013 memorandum for Government included costs of €25million, again against excluding VAT. Now that included the €9.5million for encoding public sector body databases which the 2010 consultation we undertook highlighted as an important thing, in terms of gaining traction, visibility and utility around the Eircode and it also included costs for the geo directories, so if you look at that €25million cost, that was €31million including VAT. Now it didn’t include, as the C&AG pointed out, our own internal staffing costs as some additional consultancy costs. So yesterday the cost, as set out in the C&AG’s report, which we wouldn’t dispute, using the methodology which he did, includes staffing costs going back to 2005 when the, when the sort of bulk of the work on this commenced is about €38million including VAT. To date, at the end of December 2015, we’ve spent just short of €21.2million.”

O’Donovan: “Because the figures that are being outlined by the department from 2009 to 2013, they were presumably, the 2009 figure was presumably arrived at during the period 2005 to 2010 when this thing was being designed. So how did you get it so wrong that they, that the 2009 estimate was so wrong based on what actually came in in 2013, what you forecast in 2013. How can you forecast be so wrong given that you spent the previous five years looking at this thing?”

Griffin: “I suppose one of the big changes in terms of cost additions that would have arose in the period between 2009 and 2013 was including the cost of encoding public sector body databases.”

O’Donovan: “Surely that should have been known, I mean..”

Griffin: “We didn’t actually provide for that in the 2009 estimate. There was an analysis done in 2010, following a consultation process and is part of further evaluation in 2012 where the view was expressed that it would be useful and in fact essential for the public sector body databases to be included in the…”

O’Donovan: “Chairman, I’m kind of lost here, how could a postcode system have been developed and taken five years, from 2005 to 2010 without the basic information namely the geo directory issue having been sorted from the start? How did you arrive at an estimated cost without having the basic thing, which was where are the houses in the country? How did ye do that?”

Griffin: “I suppose what I’m trying to say to you is that…”

O’Donovan: “It seems to me Mr Griffin is ye arrived at a cost without having agreed with GeoDirectory as to how much they were going to require for their database. Is that fair?”

Griffin: “No, I suppose what I’m trying to say deputy is, when you look at the evolution of this project, you’re going back to a project that was first studied in substantial detail in 2006 as part of the report of the national postcode project board which settled on, for a variety of reasons, a postal sector model. If you go to the 2007, when we looked at it, we did a very substantial cost-benefit analysis in 2006. We brought it to Government in 2007, the decision taken at that stage not to proceed on the basis that the cost-benefit analysis didn’t stack up. We went to back to Government in 2009 for further consideration of the matter, best estimate at that stage, as we’ve said, is a project that would cost €18million including VAT. We did not provide for two substantial components at that stage, the biggest one being the encoding of pubic sector databases. In the intervening period it was made clear from further evaluations…”

O’Donovan: “Just on that point. Ye arrived at a cost, including the public service databases and you went to Government with a cost that included public service databases for a national postcode system that would have required, as a basic necessity, that level of information?”

Griffin: “No, the decision hadn’t been taken at that time. That, as part of the project, we needed to encode public sector databases. That is why the cost was €18million rather than €18million plus an additional quantum.”

O’Donovan: “How could you have been developing a postcode system at the time, given that it was being changed from locality-based to address-based in 2012? How could you have been developing that kind of a project without the databases that were required and, at the same time, arriving at a sum for the Government which was €20million less than what it was in 2015?”

Griffin: “At the risk of repeating myself, it is not unusual in the evolution of projects, pre-tender, that the project costs that are identified, or the estimated project costs that are identified would be different to the cost that would be part of the outcome of a tender process. I mean I think if you look at projects right across the public sector and private sector, it is not unusual at all for that to happen. If I can mention the 2010 consultation process that we undertook with over 60 stakeholders at that stage. It included 10 to 15 public sector organisations, it included half a dozen postal delivery and courier service organisations including An Post, DHL, FedEx, UPS, Nightline. Other representative bodies like the Irish Exports Association, Ibec, CWU – what clearly came out at that stage, and not earlier, was that pan-Government support and earlier implementation shall provide a major positive stimulus for the dissemination and uptake of the postcode. It was that, it was the outcome of that analysis that drove the decision to provide for the update of public sector databases as part of the implementation of the project… that itself added in a €9.5million net of that.”

O’Donovan: “Because the reason that I’m asking this is the differential so begun in a period of time that also coincides with, you know running along in the same vein, since 2006, huge procurement issues in relation to this. Where procurement rules just seem to have totally gone out the window and I presume that you accept the findings of the Comptroller and Auditor General in relation to procurement?”

Griffin: “So there are two issues that the C&AG has raised in relation to procurement…”

O’Donovan: “Well, there are a number of issues but…”

Griffin: “Well I’ll group them into two. The first one was the EU pilot case, where a complaint was taken by an individual with the European Commission in relation to the procurement process itself and that complaint was concerned with the structure of the postcode request for tenders which required a minimum turnover of €40million for each member of a bidding consortium and a potential conflict of interest, involving members of the project board. So that, I suppose, the first thing…”

O’Donovan: “Can you elaborate on that for me? The potential conflicts of interest and people on the project board?”

Griffin: “Yeah. There were two individuals that have been on the project, the initial project, the national public procurement project board, back in 2006 – one representative from An Post, one representative of a private company.”

O’Donovan: “What company?”

Griffin: “A company called GO Code.”

O’Donovan: “Right.”

Griffin: “And they were part of the national project board, national postcode project board team that assessed the implementation of postcodes back in 2006. I suppose the important thing to point out on this, it wasn’t a formal infringement under the EU treaties, it was what’s termed a pilot complaint. The European Commission found in favour of the approach adopted by us in relation to the procurement process. They did ask that a number of adjustments be made in relation to future procurement process. This involved a subsequent issuing of a circular by the Office of Government Procurement in relation to initiatives to assist small and medium enterprises in public procurement. In April 2015 the European Commissioned notified that the Department that that circular itself didn’t fully address the concerns. We reverted with further information provided to us by the Office of Government Procurement. They’ve taken a number of steps to support SMEs in the procurement process. The OGP published a suite of model tendering and contract documents to make it easier for contracting authorities to comply with the rules and to drive consistency in how procurement functions carried out across the entire public sector. The OGP has also engaged with SME stakeholders who have raised matters in relation to possible barriers for SMEs competing for tender opportunities and, in order to address these issues, have developed a new tendering authority service designed to give an informal outlet for potential suppliers to raise their concerns…”

O’Donovan: “That’s fine…

Talk over each other

Griffin: “The crucial bit is that the European Commission wrote to the Department on the 14th of October last and confirmed that there are no grounds to open and investigation into the matter.”

O’Donovan: “European Commission also said, and I presume  you accept what the Comptroller and Auditor General said, the Irish authorities were requested to adapt measures to avoid similar errors in the future and to inform the EC of those measures.”

Griffin: “Which we have done. ”

O’Donovan: “So I mean everything wasn’t hunky dory then, was it?”

Griffin: “Well the important thing is to say, well first of all, if you’re familiar with the system within the European Union, if a jurisdiction is in serious trouble what the commission will do is launch a formal infringement process, this never reached that stage. It didn’t get anywhere near that stage. They issued a complaint, the complaint was comprehensively dealt with by the department and by the Office of Government Procurement, the commission have written to the department, accepting what we have said, welcoming the changes that have been introduced by the OGP and saying that there is no basis to further the investigation. So…”

O’Donovan: “Just in relation to the what the OGP also require. They also require, don’t they, that contracts of order without a competitive process where the value exceeds €25,000. And in the case of this, seven of the consultancy cases met criteria for inclusion in the department’s statements for 2008, 2013 and 2014 but only two of them were included. Why?”

Griffin: “I can’t give you full answers…”

O’Donovan: “Bearing in mind now that the issue in relation to the European Commission which you’ve just said there earlier, everything was sorted out after it, that was…but yet ye had seven issues with the OGP and you only notified them of two.”

Griffin: “We had what you’re talking about is the obligation of Government departments to provide a return under circular 40.02 where consultants have not been engaged by way of competitive tender process where the value of the contract is in excess of…”

O’Donovan: “I know what I’m talking about, because I can see it here, why didn’t you report that?”

Griffin: “Well looking, maybe deal with some of…”

O’Donovan: “We’ll deal with the individually because the comptroller has outlined them there. Consultant A, a retired public servant. From what department? Or what agency?”

Griffin: “I believe, though I can’t say with absolute certainty that the retired public servant is a former member, a former employee of the ESB.”

O’Donovan: “So a former member of the ESB, at what level in the organisation?”

Griffin: “In the EBS?”

O’Donovan: “Yeah.”

Griffin: “I don’t know but I suspect it was quite a senior level, management level I would have thought given the experience and capability and expertise he brought to the contact.”

O’Donovan: “And, according to this, he was paid €137,000 to date? Up to 2014. What has been paid to that individual since this was reported?”

Griffin: “The total payment to Consultant A was €146,000.”

O’Donovan: “So he’s been paid €146,000 without competitive tendering.”

Griffin: “On Consultant A and Consultant B, it’s not unusual for Government…”

O’Donovan: “No, no, no, can I just stick to..he has been paid €146,000 without competitive tendering is that the case?”

Griffin: “That’s correct, yeah.”

O’Donovan: “Right. Consultant B, a retired civil servant. Where did they work?”

Griffin: “Consultant B was a former senior member of staff of the department of agriculture.”

O’Donovan: “At what level?”

Griffin: “Assistant secretary level.”

O’Donovan: “Assistant secretary? And retired. And they got €145,000. Who appointed him?”

Griffin: “He was appointed by the department, €158,000.”

O’Donovan: “And he’s been paid €158,000 without competitive tendering.”

Griffin: “I suppose it’s important to…”

O’Donovan: “I know..chairman, this is important…”

Griffin: “It is important, you’ll get all the information.”

O’Donovan: “Sorry. Consultant C is a retired civil servant, from what department?”

Griffin: “I believe it’s Jobs, Enterprise and Innovation was the final Government department that he would have been employed by..”

O’Donovan: “Have any of these? Have either A, B or C worked for the Department of Communications, Energy and Natural Resources at any stage?”

Griffin: “Consultant A would have done some work on a earlier project but he was not an employee of the project.”

O’Donovan: “So what is the full payment to Consultant C up to now?”

Griffin: “Consultant C? €44,000.”

O’Donovan: “Without competitive tendering?”

Griffin: “Yes.”

O’Donovan: “These are all now in excess of the €25,000 mark. Consultant D? What’s the total amount paid to him?”

Griffin: “Say again?”

O’Donovan: “Consultant D, what’s the total amount paid to Consultant D, now to date, to 2015?”

Griffin: “Consultant D, which are a private sector company, is €53,000.”

O’Donovan: “E?”

Griffin: “Consultant E is a legal company that were employed by way of an open tender in 2011, five tenders received, the value of that contract, the final value of that contract was €109,000.”

O’Donovan: “And the last one then, Consultant F was engaged by Ervia…”

Griffin: “Seconded in from Ervia.”

O’Donovan: “Right.”

Griffin: “It’s not unusual for the department to second in, from our agencies or commercial semi-States, the final update, €201,000.”

O’Donovan: “Yeah, because one of these consultants, then as well, was expected to be paid on the basis of milestones arrived at weren’t they? But instead were paid just, they were just paid on a monthly basis. And PA Consulting, they’ve gotten €399,000, isn’t it?”

Griffin: “So PA Consulting have done work for the department for the postcode’s project for a number of years now.”

O’Donovan: “They were awarded without a competitive tender?”

Griffin: “No they were awarded by way of competitive tender. The first one, in 2005, there were six bidders for that contract. PA Consulting were the successful tenderer. The second one, in 2010, there were 11 bidders for the contract.”

O’Donovan: “The contract in 2008 for €55,000 was awarded without a competitive process.”

Griffin: “Yeah, correct.”

O’Donovan: “Why was that?”

Griffin: “I beg your pardon?”

O’Donovan: “Why?”

Griffin: “Because I think that, the view was taken at that stage, that PA Consulting were familiar with the project. As I understand it the rules in relation to public procurement allow an extension that brought out the contract and in circumstances up to a value not exceeding 50% of the original tender. So..”

O’Donovan: “But I mean, since then, since the contract was awarded to PA Consulting, and again this is from what the Comptroller said, the contract was awarded to PA Consulting on the basis that payment would be made on receipt of monthly invoices for the support provided in the previous month rather than on the basis of milestones as what was requested under the tender. So while ye engaged in a tendering process, ye didn’t adhere to it.”

More to follow.

Previously: No Honour, No Code