Paul Murphy demands answers over about €50 million rail failure

Thanks very much and thanks for coming before us and thanks for the extensive briefing documents. One of the things that struck me was the diagram of a very long saga which has resulted in about €50 million of public money being effectively flushed down the drain and still us not being very far in terms of what we clearly desperately need in terms of a new traffic management system. I guess my starting question to both of you is who is responsible for this disaster? Where does responsibility lie? If I answer first, obviously we've already clarified in terms of the infrastructure guidelines what the role of each of the organisations are, but both organisations still continue to work together and collaborate for the successful delivery as we do with all of our sponsoring agencies on all of our projects as well. Just to clarify, the delivery of the project and the contract that is in place sits with Irish Rail. That doesn't mean to say that the NTA does not continue to support that work and provide oversight and advice as part of that as well. I don't know if Mary wants to add anything. Thank you Deputy Murphy. I can hear your frustration about where we are and I suppose there is deep regret right across Ayr and Rotheram that we're in this position. But as I've outlined in my opening statement and we've detailed in the joint appendix there, every opportunity has been given to the contractor here to deliver. There's been significant support including third party specialist support to help them and we find ourselves in a really difficult position. But the reality, we need to now move at the earliest to make decisions that will allow us to put in place a traffic control system and minimise any further exposure to the exchequer. Because we know we have a significant role to play in providing public transport, ensuring that we have a reliable service and we want to future proof the future expansion of the railway. And that ultimately is what we want to do in the most cost effective manner. Sure, but effectively what you're saying to me there is INDRA is responsible. I mean fine, I agree from what I can read that INDRA has screwed over Irish Rail, the NTA, the public. But the question is why we signed such a contract that has allowed them to do it. So let's go back to the start. Who made the decision that, there's two bidders for the contract which seems very small, but who made the decision then that INDRA gets the contract? There would have been an extensive procurement process including market research, market consultation, engagement. Ultimately there were seven bidders pre-qualified and two appointed. They would have gone through a technical review by the team and then Iain Rodhering in the determining of that would have hired specialist Ricardo Rail to advise them in the appointment. And separately I understand, not speaking for the NTA, that they would have hired Jacobs to review the tenders. So all of that would have been done. So Ricardo made the decision? No, they would have been advised by Iain Rodhering, but ultimately it would have been Iain Rodhering based on a 242 page compliance document that INDRA supplied that showed they met 96% of the requirements. The board of Iain Rodhering ultimately makes the decision? Yes, subject to the funding of the approving authority. Was there appropriate technical expertise on the board in terms of making that decision, in terms of digital IT expertise, to make the decision that yes, this is the correct one? Or you're just being led by what Ricardo says? I believe there would have been appropriate experience on the board. I wasn't there at the time. I don't know if my colleague can interject, but we would rely on technical expertise to advise. I wasn't in the business at the time either, but I suppose just to say for all the projects in this scenario to go through a standard process, we go through a standard procurement evaluation, we follow set criteria between the project team and any technical outside advisors that team would have on any project. That leads to a recommendation based on a score and system for that bid, and that recommendation goes to the Irish Rail Board for a decision. The membership of the board changes from time to time based on tenure, but there's typically one or two non-exec board directors who've got a technical background and there's other business specialists, so we'd have to go back and check. It's a set process that we follow. When you read through it, what seems to be a key factor is effectively part of the contract is to say you're going to have to, their proposed product solution would meet a minimum of 70% of system requirements without the need for further software. That's part of the compliance matrix. And Indra says don't worry about that, we do 96%, we have the 4% new, but we have this great thing Da Vinci 2 working elsewhere and we can use that. They get the contract on that basis, and then a few months later they say oh no, turns out we're not going to continue to support that product. It's their product, but they're not going to be able to continue to support it, which doesn't seem to make any sense, it seemed to be a choice of obsolescence by themselves, we're going to need this new effectively Da Vinci 3. But then you get, to quote the opening statement, the project team supported by external expert consultant review from Taurus and Ricardo Rail who designed the process in the first place determined that Indra's approach remained compliant with the TMS contract. This seems to be at the heart of the problem, we have a tendering process based on you have to have software already in place, they win the contract on the basis of saying we do, and then they get the contract and then turn around and say we're going to have to develop new software, but yet that is found to be not a breach of the contract. Is that at the core of the problem here? DR FLYNN I might refer, and again I'll hand over to Paul for more detail, but if you refer to 1.18 in our appendix document, it says, you know, they outline the technological as part of their bid, evolution of their Da Vinci 1.0 to 2.0, and again how it would have evolved over the lifetime of that product. So if you take that plus the external advice that our team would have sought from external experts, it would have all led them to believe that they were still compliant with the contract. And I think specific advice was sought at the time from both Ricardo Rail and Taurus to make sure that it was still compliant with the original contract, and that was the advice that was given back to Ian Rotheren. But does that suggest there was a problem with the contract? If they win the contract on the basis of saying they have to have the software and then they're able to win the contract and say actually we're going to need new software and that's going to take a bunch of time and so on, which we still don't have, this new software doesn't exist anywhere in the world from according to the documents, doesn't that indicate there's a problem with the contract? They would have actually given quite an amount of assurances at the time that their generic product was already in development since 2018. They would have got some safety assurance on that and they would have given that back to them. Their assurances clearly are worthless now, so in hindsight is there a problem with the contract? Should we not have signed that contract if it allows them to say, to win the contract on one basis and then to say we need new software? I suppose in reality, Indra are a multi-billion dollar company that provides systems all over the world. They pointed to their 15 year history of 21 successful redeployments all over the rail network globally. So we had no reason to believe, or the team that were there at the time, I wasn't there but I had spoken at length to our team, and there was no reason to believe that the bid put forward that had gone through all the technical scrutiny and was passed by not only ourselves but the specialists that were advising us, there was no reason to believe that they were not in development of their generic product as they led us to believe. But surely we should have had a contract. That didn't mean you have to rely on their good faith and whether you believe things or not, but surely we should have had a contract that said you have to have the software, you have to use the software that you already have, you can't be developing new software. A fundamental flaw here happens right at the start of the development of the contract. You don't agree? The advice to the company at the time didn't agree with that. The advice to Irish Rail didn't support terminating a contract. I'm not saying, yes, but again, doesn't that go back to the point that that suggests there is a problem with the original contract? If the contract allows them to win on the basis of we've got the software and then they're able to say we don't have the software, either they're in breach of the contract or there's a problem with the contract. I would say if we follow an open tender process as in on DOG where we have an open competition, open to the EU market to respond, we have a set of requirements in a contract that allows the open market to respond to the pre-qual and the mid-stage and indirectly the contract where the design authority, so it's a design and build contract, so they've been hired to deploy what is their system but to meet the client's requirements. So I suppose in picking that process, we cannot over-prescribe the solution we want. We have to have a set of output requirements in the contract to make it a compliant EU procurement process and I would say that when Indra, and it was a surprise to the team when they moved from the DaVinci 2.0 to 3.0, that wasn't expected, so before you read that, that wasn't expected to happen but that in the discussions around it, it's seen as a normal product development process for these products because there was a previously DaVinci 1.0, they'd rolled that out in a number of applications, they moved to 2.0 which they'd wanted for about 10 years and they were moving to the next version of it and they were adamant that that next version was effectively going to continue to give you the underlying 96% compliance and that it was going to be a better product than the previous one and the one they're going to support. Now the experience we've had since that clearly says that something has gone wrong between them moving from DaVinci 2.0 to DaVinci 3.0 where we are now because if we got DaVinci 2.0 that other jurisdictions have, we shouldn't be in the position that we're in now, that's fully acknowledged. But I mean, in terms of lessons being learned, if we're just going to repeat the process of having these kind of vague contracts that can be changed by companies that are just interested in maximising their own profit, well then we're going to repeat this again. I mean, is there, you don't have any lessons to be learned in terms of the type of contract that was signed? There's absolutely lessons to be learned and there is... But are there lessons about the contract? I think the contract, I'm just going to say, I think the contract itself does, I don't see anything materially wrong with it. I think we need to consider going forward with the process. Textbook would always say that you try to do for a major engineering or construction project, you do an open tender process and you go out and you seek tenders from the open market and those who can comply with the client requirements that have been put together then have the ability to get into the evaluation process and if they succeed in the evaluation they win and you appoint them, that would be standard. But sometimes that's not always the right way to deliver a major engineering or construction project. Sometimes an open tender process which can sometimes lead to the potential issues we've experienced and sometimes a direct award style or a direct discussion with a particular supplier who has a particular product that meets the needs of the business but that's usually seen as not the default way to run a public procurement for a major engineering project. So there's definitely I think, there's definitely lessons we can take on board around the process but I would say I think the contract and how it was structured is not an unusual contract and I don't think there's a major. Can I ask are we, are you going to attempt to get and do we have any prospect of getting any of the 31 million we've given to Indra back? I suppose, sorry, Deputy, just to be, and I know I'm repeating what I said in my opening statement, we're at a sensitive stage, we're looking at all options under legal advice but we absolutely will be looking at everything to minimise the exposure to the taxpayer. The NTA in their opening statement say, because Indra have another contract, they have the integrated ticketing contract with the NTA, they say there the contracting mechanism is different to that of the NTCC contract with payment due only following the successful delivery of each of 34 key milestones. Does that mean that the payment for this contract wasn't contingent on the delivery of key milestones? So the contract that we have is called an NEC target cost contract which is quite a common contract that's used on major engineering projects in Ireland, UK and Western Europe and also is used on other projects in the public transport sphere including other schemes that NTA would oversee. The nature of that contract is such that it effectively shares any pain gain up to a point, so in other words, if the project is finished below the target price, the gain is shared between the contractor and the client and if the project overruns against the target price, there's a pain share put up to a cap after which the contractor takes all, or the supplier takes all the pain. But it also is a contract that gives full visibility to the client team in terms of the actual resources and costs being incurred on the project and effectively there's interim progress payments that are paid against those fully transparent costs. We did, through commercial reset number two, you might see in the statement in end of 24, we did introduce additional performance milestones given our concerns, so we actually had a bit of a hybrid in the end where we had a combination, so we did have a milestone approach in the end and unfortunately the milestone approach hasn't succeeded obviously in terms of. Just a final question, when you look at this, the amount of private companies involved in it is quite something. So you have a private company required to design the contract, you have tourists, you have obviously Indra themselves, then this engineering company is brought in to look at it. I mean how many private, can you list in total all the private companies that have been involved in this contract in one way or another? Look, it's worth saying that in the major projects that we deliver, we have, inside of Iain O'Byrne, we have a train operations business which is pretty much a directly employed staff model and then we've got an infrastructure engineering business that manages the steady state infrastructure and we also have a mechanical rolling stock business that manages obviously all the train fleets in terms of maintenance and those models are predominantly directly employed models that we have where they're Irish Rail payroll staff. But for major projects, and especially when you look at the cyclical nature of it, I mean we did have a capital investments unit back in the noughties when the recession hit, that unit was closed when no capital was available. We re-established the capital investments business unit as a business in late 2018 as we were coming out of the austerity era and we have 200 staff on our books that work in that business dedicated to developing and delivering major capital infrastructure projects. But when the projects go to the delivery phase, yes we are reliant on, we're much more market facing so we are reliant on the support of the supply chain both in terms of the major contractors but also in terms of professional advisors because we don't have the funding to be able to guarantee employing a level of staff because we're only funded on an annual basis and each year our funding could drop so we can't guarantee the level of work. But isn't this then the consequence of the kind of hollowed out neoliberal state that everything is just outsourced? You're relying on one company to develop a contract and oversee another contract and the end result is the public pays the price. Would it not make the better value for money if you actually had the appropriate staff to be able to do some of this management and so on? It's a balancing act. You do have to try and strike a balance. I would say this is a particularly niche project for the railway, it's a really complex project. The type of skill sets and people that we need, they're not commonly available and therefore this type of project does result in having to lean in more towards bringing in specialists on a temporary basis because we couldn't guarantee that level of work for a niche specialist project.