Minister defends handling of Irish Water expenditure controversyWednesday 15 January 2014 07.07
Minister for the Environment Phil Hogan has defended his handling of the controversy over expenditure on consultants at Irish Water.
Speaking on RTÉ's Prime Time Mr Hogan said the company was spending the money putting systems in place.
Earlier Irish Water officials told the Environment Committee that the Department of Environment was given the outline of consultancy costs in March 2013.
The Department of the Environment issued a statement today saying the minister was aware of the overall set up costs of Irish water.
But, the statement states, that arrangements were put in place to monitor the costs by the Department and Irish water.
It added that the minister had asked the energy regulator to review these costs.
Chief executive of Irish Water John Tierney told the Environment Committe he has never spoken to the Minister for Environment Phil Hogan or Minister of State Fergus O'Dowd about the agency's budget.
Mr Tierney also defended consultancy costs including legal services of €85m to the committee, saying since the outset, Bord Gáis had been clear that they were always going to need them to set up Irish Water.
The Committee was told that they had submitted a budget for the setting up of Irish Water to the Department of Environment in September 2012.
That budget was for €150m with a further contingency of €30m. In their submission they also outlined correspondence with the department on expenditure since then.
Fianna Fáil's Barry Cowen and Sinn Féin's Brian Stanley asked if there was ministerial approval for their budget. John Tierney said he had never spoken to Ministers Hogan or O'Dowd about the budget, adding the department would answer about their internal processes.
Labour's Kevin Humphreys asked when the department knew about consultancy fees to which Irish water officials replied it would have been given an outline in March 2013.
Earlier Commissioner at the Commission for Energy Regulation Paul McGowan said they had made an initial review of the establishing costs late last year but the Commission not aware of the amount of the consultancy costs.
Irish Water will spend €85m on external special service providers or consultants, including legal services, by April 2015.
IBM will receive €44.8m, Accenture will receive €17.2m, Ernst & Young will get €4.6m, while KPMG and Financial Panel Works will be paid €2.2m.
Two legal firms will receive €3.87m, while €13.3m will be paid to another 18 contractors.
Read details of consultancy fees here.
During the hearing Irish Water officials confirmed there was an expectation that there will be a fixed element to water bills.
The executives will appear before the Public Accounts Committee tomorrow.
Commission for Energy Regulation unaware of details
A commissioner at the Commission for Energy Regulation has said it was not aware of the amount of consultancy costs for Irish Water.
Paul McGowan said the commission was asked to provide advice to the Minister for the Environment on Irish Water's establishing costs, and the commission had carried out an initial review of a submission provided by Irish Water.
He said the submission gave overall costs for line items such as customer services and billing, and he said the commission believed these costs were reasonable and would deliver benefit to customers.
He said the submission did not indicate consultancy costs and the commission was not aware of them.
Mr McGowan said the commission will carry out a further cost analysis of Irish Water, and will offer advice to the Minister for the Environment on these costs.
Mr McGowan said the minister will ultimately decide if these costs are legitimate, and can be included in the water charges.
He said most of the major costs incurred by Irish Water will be on ongoing operation expenditure and capital investment.
He said legislation providing the commission with regulatory oversight was passed in late December.
FOI legislation to apply to Irish Water
Irish Water will be subject to the Freedom of Information legislation, according to Minister for Public Expenditure and Reform Brendan Howlin.
He said commercial semi-State firms who compete with private sector companies are not subject to FOI legislation in order to ensure that they were operating on a level playing field.
However, Mr Howlin said that as Irish Water would be a monopoly it would be appropriate for it to be amenable to FOI.
He said the same could apply to other semi-State bodies operating in a monopoly situation, including some of the CIÉ companies.
The minister also said the €20 million per annum saving targeted from rationalising State agencies had been achieved.
Meanwhile, Irish Water has rejected any suggestion that the company was not fully compliant with all procurement rules.
The company said that all contracts awarded by Irish Water and Bord Gáis in the establishment of Irish Water are fully compliant with EU public sector procurement guidelines.
A report in today's Irish Independent claims that four contracts were not put to tender.
Irish Water has been under pressure since Chief Executive John Tierney told RTÉ News last week that it had already spent €50m on outside consultants.
In a statement this morning, Irish Water said: "Bord Gáis and Irish Water have been scrupulous in the awarding of contracts.
"To ensure value for money and transparency, all contracts have been awarded in line with the guidelines set out at EU level for public sector procurement."
Irish Water also pointed to the fact the company, as a subsidiary of the Bord Gáis group, had drawn on the skills of an experienced public utility.
It said this means using Bord Gáis's capability running billing, asset management and utility financial systems.
It said it has been set up using the same IT systems and processes as Bord Gáis and this has enabled Irish Water to save at least €58m in software licences.
The company concluded by saying the procurement of software licences with Bord Gáis was subject to a full competitive tender process.