Official Report: Minutes of Evidence
Public Accounts Committee, meeting on Thursday, 12 November 2020
Members present for all or part of the proceedings:Mr William Humphrey (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Cathal Boylan
Ms Órlaithí Flynn
Mr Harry Harvey
Mr David Hilditch
Mr Maolíosa McHugh
Mr Andrew Muir
Mr Matthew O'Toole
Witnesses:Ms Jacqueline Fearon, Department for Communities
Ms Tracy Meharg, Department for Communities
Mr Stuart Stevenson, Department of Finance
Mr Kyle Bingham, Northern Ireland Audit Office
Mr Kieran Donnelly, Northern Ireland Audit Office
Inquiry into Major Capital Projects: Department for Communities; Department of Finance; Northern Ireland Audit Office
The Chairperson (Mr Humphrey): I invite to the table Tracy Meharg, accounting officer, and Jacqueline Fearon, director of the regional stadia programme and head of capital delivery, from the Department for Communities. The Comptroller and Auditor General (C&AG), Kieran Donnelly, will be in attendance. Stuart Stevenson, Treasury Officer of Accounts (TOA) at the Department of Finance, and Kyle Bingham, Assembly support officer, will join us remotely. Can you both hear and see us OK?
Mr Stuart Stevenson (Department of Finance): Yes, Chair.
Mr Kyle Bingham (Northern Ireland Audit Office): Thank you, Chair. Yes, I can hear you.
The Chairperson (Mr Humphrey): OK. Thank you very much. Good afternoon, Ms Meharg and Ms Fearon. How are you? You are very welcome to the Committee. As you will know, we will open with a presentation from you if you wish, and then members will ask questions. Over to you.
Ms Tracy Meharg (Department for Communities): Thank you very much. Yes, if you do not mind, I would like to set out briefly an update on where we are and give more background on the specific costs that you spoke about.
I was here in July, which seems like a lifetime ago now. We then gave you more information in August and again in September. I understand that the Committee is looking for more information, particularly on the development costs. Of course, since then, there has been some progress on Casement Park. On 13 October, the Minister for Infrastructure announced that she intended to issue a notice of opinion approving the planning application for the Casement Park project. However, contrary to some commentary, the process has not yet, in fact, concluded. The next step is that Minister Mallon will issue a notice of opinion approving the planning application, and that notice of opinion is issued to Belfast City Council for consideration. The council then has 28 days to consider it. During that time, the details of any conditions that are attached to the planning permission are finalised and agreed between the appellant and DFI. Only once those steps have been completed can the final decision on the planning application be issued. We have been advised that that process is not likely to conclude before mid-December. Any conditions that are attached to the planning permission could have a cost or revenue implication that would impact on the final business case. That would also have to be assessed. The review of the final business case is ongoing, and Central Procurement Directorate (CPD) is carrying out a due diligence exercise on project costs.
Therefore, you will appreciate the interdependencies between the planning process, the full business case and the final cost of the project. Those are all activities that are live and ongoing and need to be concluded. Due to the live and commercially sensitive nature of the project at this stage, you will appreciate that there are some issues that I am not in a position to discuss. In particular, that will impact on my ability to answer some questions on current issues of business cases, funding negotiations or estimated costs. However, of course, I will answer as many questions as I can, particularly when following up on previous questions. Of course, we will take those issues to the Committee for Communities in due course as those interdependent work streams continue.
Turning to the development costs, you will recall that the Northern Ireland Audit Office (NIAO) 'Major Capital Projects' report acknowledges the factors that lead to project delays in the development phase and the construction phase. You will also recall that Brett Hannam talked about the things that cause delays and problems in projects, such as complexity and innovation and their impactful nature. The one thing that we can predict is that, the longer that it takes to get a major complex to site, the more it is going to cost. Particularly difficult in that is the development phase. That is the period before construction starts. The PAC report comments on the importance of risk assessment in the early phases of these projects, the benefits of early engagement and the importance of investing at the front end as best we can. We fully acknowledge that, but we also have to acknowledge that there are some risks that are just not foreseeable. The COVID-19 pandemic is a clear example of a risk that we could not foresee.
The development phase of a project is the part of the project from the outline business case (OBC) stage through to full business case, including the development, design, consultation, window for legal challenge, planning application and assessment period. The breakdown of what was £10·5 million costs when we submitted to the PAC was a summary of costs relating to this development phase. Development costs for any construction project in the public sector, and, indeed, in the private sector, are capitalised in line with accounting standards. That allows for all costs that are directly attributable to bringing the asset into working condition to be capitalised. At the hearing in July, I outlined how the regional stadia programme was set up and the governance arrangements for the three projects. Each has the same governance and the same suite of documents setting out the full scope, roles and responsibilities. The assessment and release of grants are exactly the same.
Of course, the scale of the costs differs, reflecting the complexity of the projects, along with the timescales in which they are delivered. However, the specific items of expenditure that are eligible for grant funding in the development phase, as outlined in the breakdown provided for Casement, are similar across all projects. As I said, the longer it takes to get to site, the higher the potential costs will be. With Casement, as you saw the last time, the prolongation included a judicial review (JR), associated legal costs, a second planning application, additional surveys and additional costs to project-related roles.
In the time-related costs that are in the breakdown, you will see that one of the substantial elements is "salaries". It is important to define what we mean by "salaries" in this regard. The term "salaries" relates specifically to the project-related roles that are identified as essential for the delivery of the project, engaged solely for the delivery of the project and only for the lifespan of the project. It is fundamental to the success of any project that the most appropriate people with the required professional expertise and relevant project experience are responsible for delivery of that project. Indeed, that was highlighted in your PAC report.
In DFC, we generally fund construction costs via capital grant allocation, which means that, unlike the Department for Infrastructure, for example, we do not deliver projects directly. That means that the project is effectively delivered by the third party, and that was the case with the three stadia projects. Each governing body was charged with delivering each project. In line with the memorandum of understanding (MOU) on funding arrangements, each stadium had project-specific roles identified as being required to deliver the project. The number of personnel employed was proportionate to the size, complexity and values. The roles funded included project senior responsible owner (SRO), project sponsor, independent technical adviser and financial or administrative costs. I am happy to go into those in more detail in any questions that you ask. The roles that were identified covered the period from 2011 to 2019. As I said, similar roles were funded in the other two stadium projects, albeit for a shorter period.
In planning for that, I just wanted to make sure that there was consistency in what we were doing in other projects, and we understand that there is. The scale and size is also similar to other projects. You will appreciate that, if we do not have the right people in project delivery roles, we put our project delivery at risk.
I assure you that the approval and release of grant for those costs is in line with what was intended. We have a robust payment approval and vouching system. That has been reviewed by our internal audit, most recently in 2019, and I understand that it was also reviewed by a staff member in NIAO.
I am sorry that that took a bit longer, but I thought that it was important to get those things out. In conclusion, it is regrettable that the development costs have increased as they have. However, I assure you that the £10·5 million was expended in line with the accepted guidelines that were designed for the regional stadia programme and in accordance with the other two projects. The capitalised items are in line with the costs capitalised in the other two projects, and the costs expended and the process for expenditure have been subject to robust audit and governance procedures. Thank you.
Ms Jacqueline Fearon (Department for Communities): Nothing at this stage. I am happy to take questions.
Mr Hilditch: You are very welcome this afternoon, ladies. Thank you for your presentation; you have given quite a bit of detail.
On the cost to date, the figure of £10·5 million has been knocking about for some time. You gave a list of all that that was spent on. That £10·5 million figure has been repeated for a number of years. How confident are you that £10·5 million is accurate? To the layperson, it appears that that expenditure has been ongoing.
Ms Meharg: OK. I assure you that £10·5 million was the right figure for development costs when we gave it to you. It is more like £10·6 million at the moment, and, of course, it will continue to move. It is made up by, for example, the salary costs. Salary costs will continue for the lifetime of the project, so there are nine years of salary costs in that. Some of the costs were more up front costs. Some will continue, as I said. If you look at the breakdown that we gave you, you will see that, in phase 1, the design was nearly £1·5 million. There was the ICT contract. There was another £531,000 for the next phase. You will see that the fees for the ICT contract have more than doubled; they went from £2·6 million to £2·8 million.
However, I assure you that we monitor the figures very carefully. They are agreed on an annual basis with the programme. They are included in a letter of offer. There have been six levels of offer purely on the development costs. They are monitored very carefully. As I said, they have been reviewed in detail by internal audit, most recently in 2019. I am very comfortable that the costs that we give you are the correct costs at any moment in time.
Mr Hilditch: Is that historical figure of £10·5 million, or £10·6 million as it may be now, divided as per the agreed 80:20 funding split? Is £8 million of that departmental, with the GAA having paid £2 million? What way does that pan out?
Ms Meharg: On top of the £10·5 million, the GAA has spent about half a million pounds on these types of activities, so it has not been done on a 20:80 split. Basically, what will happen is that those project costs will be capitalised into the full project costs. The 20:80 split will be done on the basis of the absolute costs. These costs will be part of the total costs. The most recent figure that we have for costs is, as I gave you the last time, £112 million. As part of that £112 million, there is the split.
Mr Hilditch: How confident are you about the £112 million? I have spoken to many people in construction who have seen the final plans, and £112 million is a figure that seems a bit on the low side to contemplate, considering what the GAA wants to put in place.
Ms Meharg: You asked me about visuals the last time, so I have brought some if you are interested. I will just leave them here for you; I have printed them out.
The £112 million was an estimate at a moment in time. Time equals money. There is no doubt that the final costs will not be £112 million. We cannot get a final cost until such time as we have clarity on when the planning permission will be finalised, because there is a spectrum of things that could impact the timing before construction happens. The £112 million was the estimate. When was the £112 million estimated? What was the date?
Ms Fearon: The £112 million was live until November 2019. That was the last draft [Inaudible.]
Ms Meharg: Between 2014 and 2019, construction costs alone went up by 50%.
Ms Fearon: Between 2013 and 2021, the estimated increase in construction costs is 56%.
Ms Meharg: We also have COVID-19 to take account of now, so it is uncertain. I cannot stand over —.
Mr Hilditch: Do you have a guesstimate at this stage based on that 56% increase plus COVID?
Ms Meharg: No, that would be completely irresponsible of me. The 56% is included in that £112 million, because that was the period in which we were looking at it.
Ms Fearon: CPD is assisting the GAA with its due diligence on the cost between November 2019 and now, so that is part of the ongoing exercise that will feed into the final full business case (FBC).
Mr Hilditch: Will the uncertainty over the costs not place the likes of the GAA in a very difficult position? On the 80:20 split, I know that if I was in charge of an organisation, I would wonder what the final figure will be and where I will get it from. Of course, the Minister indicated her full support for the project, as she would do, and there did not seem to be any additional cost. That then changed within a week or two, and it became clear that the GAA will be responsible for additional costs. Given that it is such a big project, you can surely see how that will leave the GAA in a very difficult position going forward in how it will financially contribute when it previously said that it would not.
Ms Meharg: We have not yet completed negotiations with the GAA on that, but we all recognise that the increase in cost is challenging.
Ms Meharg: Ultimately, this is a commitment to deliver the project. When the Minister gets the full costs and the negotiation is done, she will have to come back to the Executive.
Mr Hilditch: Optimism bias was a bugbear for me during the capital projects investigation. Some of the projects were running towards 10%. Is that similar to the Casement project? In my mind, the optimism bias running at 10% is another hidden spending pot to be used by contractors as and when required. I have seen fallings-outs between clients and contractors in the past when I have been involved in project teams. It can become quite nasty.
Ms Meharg: Optimism bias is a really difficult one, and I think that we acknowledged the last time that, if you put it too high, it looks like you are inflating the project, but if you do not put it high enough, it looks like you are not anticipating risks.
Mr Hilditch: With this one, it will be £10 million-plus in optimism bias.
Ms Fearon: I can take that one. We discussed optimism bias a lot the last time, and we described how, at the earlier stages of the business case, for example, at the OBC and strategic outline case (SOC) stages, it should be higher. You are right that it should come down as the risks become known, because optimism bias is there to cover the risk profile of the project. The optimism bias needs to be looked at again for this, and it will be looked at again prior to completion of the final business case, but the more risks that can be anticipated in advance, the better.
For example, if you were to do optimism bias at the moment, you would have to allow for the risk of planning and JR etc, but as those risks fall away, the optimism bias should fall. You are right, though: the optimism bias will be looked at again. You do not look and say, "It should be 10%". There are actual industry calculators where you feed in all the risks in order to come up with a number, and CPD and Deloitte will look at that on behalf of the Department. We will also use some other tools to look at risk and optimism bias at that stage, and we are looking at cost and construction risk registers, which the Department of Education uses a lot when it is costing the risks.
With optimism bias, there is a misconception that it is a fund that is to be had on top of any project, and, if it is managed properly, it should not be. There are proper mechanisms to apply for optimism bias through the Department, and it has to be vouched for by the economists in the Department. It is not a pot that is just to be used on top of the budget when it is allocated.
Mr Hilditch: There seems to be a difference between the private sector and the public sector as far as the use of the fund is concerned.
Ms Fearon: I have worked in the public sector as well. You would probably call it contingency in the public sector; you would put a value on the risks. The idea is to do whatever you can during the life cycle of the project in order to mitigate and reduce those risks. Therefore, the need to extract funds from a contingency pot reduces as you go along. It is certainly part of good project management. It is vouched by the economists in the Department as we go along. We will calculate again prior to the finalisation of the FBC.
Mr Hilditch: The other area that I have an interest in is the safety element of the project. What is the current capacity?
Ms Meharg: Thirty-four thousand —.
Ms Meharg: I was going to say the exact number.
Ms Meharg: From 38,000. I think that it was initially going to be 40,000. The design that went for planning permission was 38,000. The most recent one is just over 34,000-plus.
Mr Hilditch: On the back of that, I will certainly look for confidence from the team behind the scenes that will lead on the safety element of things. Previously, a lot of the difficulties lay with the in-house team that Sport NI and the Department had at that time. It had a very high level of expertise. Another group then came in from England that, basically, told us that it was all-singing and all-dancing at that stage, but it was not; its arguments were blown out of the water. I am sure that those people went back across the water with quite a few pounds in their pocket having come over here and given their view. How will the whole safety element of it be dealt with? That is where the difficulties arose the last time.
Ms Meharg: I think that I spoke the last time about the 2015 project assessment review (PAR) and how important it was that it brought over the right level of expertise to give us an assessment. It focused a lot on the safety technical group (STG). I am very confident that, moving forward from 2015, particularly given the input from the Sports Ground Safety Authority (SGSA) in there —.
Ms Meharg: The final design was signed off by Belfast City Council and the blue-light services. That is deemed as best practice, so a lot of learning in the process has gone into that project.
Mr Hilditch: I understand that the Belfast city blue-light group has not met for some considerable time. Has it looked at it from a localised point of view?
Ms Meharg: Certainly, the design was signed off by the blue-light services when it went to planning. It is not surprising, given the focus of the CAL Committee, the PAR and the JR, that safety was seen as a key element of the project moving forward from 2015. That has been one of the big learnings from that period. Northern Ireland, at that stage, had not delivered a stadium of that scale before. There has been a lot of learning and acceptance of what we need to do in those types of projects.
Mr Hilditch: As far as the capital projects report is concerned, it has been very costly.
Mr O'Toole: On the negotiations with the GAA, what is the basis of that 80:20 split? Is that contractual? Is it in the original contract?
Ms Meharg: The 80:20 split is built into a funding agreement. Basically, there was an MOU and a funding agreement that set the parameters for each of the projects. It is built into that. The current agreement is as per the current agreement.
Ms Meharg: That is the £15 million from the GAA.
Mr O'Toole: That is predicated on the original figure of £77 million.
Ms Meharg: That is correct.
Mr O'Toole: Obviously, this is a live discussion, but the position of the Department is that you want the GAA to pay 20% of £112 million or whatever the end point is. The current estimate is that the end capitalised costs will be £112 million.
Ms Meharg: The best current estimate is £112 million. You will have heard the Minister's most recent statement; she said that the GAA needs to increase its contribution.
The position of the Department is not that the GAA has to pay £22·5 million; it is that it should pay a bit more.
Ms Meharg: You will appreciate that we have not yet entered into negotiations. If we are going to negotiate, we need to have some room to do so, and I would rather not get into how we will do that. It is difficult to start that conversation until we have the final costs, and that is why those things are all so interdependent. Until we have clarity on when planning will be finalised and the next steps, we cannot finalise the costs. Until we finalise the costs and the negotiations with the GAA, it is difficult to go back to the Executive and deal with all the other things that need to be done.
Mr O'Toole: Are there live discussions with the GAA, or are you waiting for —?
Ms Meharg: We are in live discussions with the GAA about all aspects of the project.
Mr O'Toole: Do you anticipate that you will get a new number from it or an agreement in principle to move higher?
Ms Meharg: I can only really tell you what is in the public domain on that point, which is my Minister's most recent statement.
Mr Beggs: My question is on the same subject. You said that there is agreement for an 80:20 split, but in a letter from you to the Committee of 24 August about how the current expenditure has occurred, you indicated that there is ring-fenced Executive expenditure of £10·5 million and only £400,000 of GAA expenditure, which is less than 5%. If it is an 80:20 split, why is only 5% being paid by the GAA, even though about 15% of that is for salaries in the GAA?
Ms Fearon: There are a couple of things to clarify there. The figures for the 80:20 split — it was a similar split for the IFA project — were in the funding agreement that happened to pertain to the percentage. It does not say that there is an 80:20 split; it just happens to work out like that. However, the way those projects work —.
Mr Beggs: Sorry. Can you clarify that? I do not understand what you said.
Ms Fearon: What I am saying is that the financial contributions were laid out in each of the funding agreements. It was zero in the Kingspan Stadium because of a previous commitment to a project that had just been completed, £4 million for Windsor Park and £15 million for Casement Park. It was the figure that was put into the funding agreement, which did not pertain to a future figure. That is something that we have to work on.
If we use the contract that has been completed as an example, the way that the funding agreement for Windsor Park was set in 2012 meant that the percentage that was paid by the governing body was paid at the back end of the project. The agreement was that all the initial funding would come from the Department and the partnership funding would kick in at the back end. Therefore, the IFA's £4 million was paid at the very end of the project. Going into the Casement Park project, it was also anticipated that the GAA's £15 million would come in at the back end. However, when the project was going through its second phase in 2017, the Department asked the GAA, by way of good partnership, whether it could start to contribute to the project, and it did. It contributed 10% to each of the annual letters of offer from that point.
It is not that it was meant to be 80:20 throughout the project. It was always set up at the back end. That is something that we would like to look at in funding agreements as we go forward and it is also up for grabs as we go forward. None of the projects has ever been entered into on an annual pro-rata basis.
Mr Beggs: Can you give a further detailed explanation of the funding that you are paying for GAA salaries? What is the public purse paying for that?
Ms Meharg: OK. We are paying for the SRO, the project sponsor, legal costs, finance costs, admin costs, and the independent technical assessor (ITA). Those are the key costs. The SRO in the GAA is not a full-time post, but the project sponsor and the ITA are full-time posts. We have a further breakdown of those costs if you require them.
Mr Beggs: In many capital projects for community groups — even, I believe, for the soccer and rugby stadiums — they had a figure and had to live within their means. In many development projects, as they come near the final stage, if there have been unexpected additional costs, people have to start looking at where refinement in design can occur to live within the budget. Why has there been nothing of that in this project?
Ms Meharg: The original OBC set out the aspirations of the project: a stadium that would host large-scale events that were happening at present largely outside Northern Ireland. A range of options was looked at originally, and this was the option that was deemed most efficient and effective. Therefore, if we are to deliver the options set out in the OBC, this is the project that would deliver them.
Do you want to add anything to that?
Ms Fearon: I am hearing a wee bit about value engineering as the project goes forward. You are right: in any construction project, probably before you start the construction on-site, you would carry out a value engineering exercise. That happened on the previous two projects, and it happened with the current IST, the current main contractor, before they were due to start this construction phase. It is standard practice. A value engineering exercise happened last time and will happen this time.
Basically, you take the final construction and final cost and carry out a suite of workshops to see where savings can be made and where that can be brought into the project. That will happen before construction starts on site, and that is in the construction phase.
Mr Beggs: Will that be based on the £100 million, the £112 million or the £77 million?
Ms Fearon: It will be based on the final contract, whatever that final contract sum comes in at.
Mr Beggs: If the public are expected to pay an additional 80% of the additional £43 million, what other community projects will be missing out? That is public money that will not be able to be used for other projects.
Ms Meharg: Capital prioritisation is something that we have to look at all the time in the Department. It is not just in our Department; it will be in the wider public sector, so it is something that the Executive will have to consider when they look at the total cost of the project.
The Executive made a commitment to this project, so its costs are what they are.
Mr Beggs: There is no commitment as of yet on the breakdown of the final costs, is that what you are saying?
Mr Beggs: You are saying that the split is not necessarily the 80:20 that was originally agreed.
Ms Meharg: They have not concluded negotiations with the GAA, that is correct.
Mr Beggs: Do you see that increasing or decreasing?
Ms Meharg: I have said that I am very reluctant to comment on that. I am not being disrespectful, but you can appreciate that. I cannot.
Mr Beggs: How many social houses would £42 million build?
Ms Meharg: The Minister is keen to increase the build of social houses —
Mr Beggs: But you have to choose where you spend your money, so how many social houses would that build?
Ms Meharg: I appreciate that but, hopefully, it does not have to be between social housing and Casement Park.
Ms Meharg: That will not be my choice. We will be bidding for money to increase social housing as well.
Mr Beggs: How much does it cost to build a social house, typically?
Ms Meharg: How much is a social house? I cannot tell you off the top of my head. I can tell you that our budget for this year is about £170 million, and we are building about 1,800 homes. I cannot work that out in my head.
Mr Beggs: Do you appreciate that there are opportunity choices when you spend money on projects?
Ms Meharg: I do. I totally appreciate that. We have to deal with that all the time because of the size of the Department. We have so many requests for money, whether for the arts, culture or houses. We are spending a lot more time building our expertise so that we can give the right advice to our Minister on the social and economic benefits of our capital spend.
Mr Beggs: Given the escalating costs, including costs to meet the health and safety requirements, which have, no doubt, added cost to the project, was consideration given at any stage to looking at the scale of the project so that you could live within your means?
Ms Meharg: The scale of the project has decreased: it went down from 38,000 to 34,000. However, any further reduction in its scale would effectively mean that it does not meet the original purpose and objective, which was to have a stadium that can host large-scale games.
Mr Beggs: I heard you saying that you never considered that and that additional public money was always being added.
Ms Meharg: We have been asked, through the GAA, to deliver a project that has a specific purpose — to host those games — and that is what we will deliver.
Mr Beggs: I could understand it if it was paying for 100% of the additional money, but that is not what you seem to be saying. Is it not reasonable that the public money that was committed should have been the ceiling?
Ms Meharg: The time frame for the project, never mind the design, always meant that costs would increase. The ultimate questions are these: is the project still worthy of the investment, and do the Executive still want to invest in it? It was committed to again in 'New Decade, New Approach' (NDNA), so I can only refer to it as being an Executive commitment. That is the choice that will need to be made.
Mr Beggs: Have there ever been any discussions in your Department, or are you aware of any discussions at a higher level, about NDNA not being affordable because it has not been funded?
Ms Meharg: The commitments under NDNA are ministerial commitments. I work under the direction and control of my Minister, so if my Minister tells me that she has made a commitment to do something, it is up to me and my team to attempt to deliver it.
The Chairperson (Mr Humphrey): I remind members that Ms Meharg does not make the Department's political policy. That is a matter for politicians. In fact, that applies to all accounting officers who appear before the Committee. I understand the point that you were making, but we need to bear that in mind.
Ms Flynn: Thanks very much, Tracy. I want to go back to the timeline for planning approval. You spoke about the notice of opinion being issued and the fact that Belfast City Council has 28 days to consider it. There are a number of things in the process that then need to take place, and the hope is that it will conclude before, I think, mid-December. You said that the longer it takes to get to the point of on-site construction, the higher the costs will be. Given the process that the planning application still has to go through, does the Department foresee any issues? Should the notice of opinion process with Belfast City Council be pretty straightforward? Are you planning for the possibility that that process may be dragged out? Is mid-December realistic? I am conscious of the points made by other members. The worry is that, if the negotiations with the GAA cannot kick off properly until the planning application has been signed off, there is a cost to all that. Should it be straightforward? Could there be any delays? That is my first question.
Ms Meharg: We are hoping, as I say, that the planning comes through in December. Obviously, the last time round, there was a JR 89 days into the planning. Looking at the various scenarios, we have to consider further potential risks that could befall the project and their impact on the time frame. Clearly, the point at which the project comes on the ground depends on, for example, whether there is a further JR and, if there is, whether it is successful and how long it takes to work through to conclusion. There are a number of issues that we will not know about until the 90-day time frame is completed.
Ms Flynn: OK. Thank you. I represent the community of west Belfast, so I am conscious of all the issues that we faced and the concerns that residents had and, indeed, that some still have. A lot of work has been done to engage with the local community. After the Minister's recent announcement, I spoke to the people whom I represent, and west Belfast is waiting in suspense for that major project. Hopefully, things run smoothly from here on.
I want to bring it back to the GAA and the 80:20 split. I know that all that cannot be worked out properly until the planning is complete. How often is your Department or Minister in contact with the GAA, Tracy? Is that an ongoing conversation, so that, once you get to that point, hopefully, in December, you can get in right away and get down to business without dragging it out further?
Ms Meharg: You are absolutely right. I should say, at this stage, that there is an absolute commitment on behalf of the Department to work closely with the GAA to ensure that, once planning has gone through, there is lots more consultation. We could not agree more about the need to ensure that we stay close to the community.
We have both formal and informal meetings with the GAA. Jacqueline, you are probably the best person to give an update on that. From own perspective, I can say that there is a weekly update to the Minister and me, and I have at least a monthly discussion with the SRO on where the project is. I think that the most recent meeting that we had with the GAA was this week. Do you want to give an update on that, Jacqueline, and how often we speak to the GAA?
Ms Fearon: It is a really intense period. There is a timeline and a critical path. From a project-management perspective, my biggest goal at the moment is to keep the project on that critical path. To do that, I host a weekly meeting with the GAA, both to hold to account and assist, because we plan to do this in partnership. We meet the GAA weekly with the project team. The Minister meets the GAA board every three weeks. I join that meeting. The Minister meets the stadia programme team every two weeks. Our board, the stadia programme board, meets every four weeks. I probably speak to someone in the GAA every other day. There is an awful lot of engagement. I know that Moira Doherty, our SRO, has regular meetings, albeit virtually — obviously, all our meetings are virtual at the moment — with the project SRO, Tom Daly. We do a physical briefing to the Minister every week — we call it a "highlight report" — and I am in constant contact with Tracy as well. We are in a critical phase. It is right that we should have that level of contact at this time in the project.
Ms Flynn: I have one final question. The COVID-19 pandemic has been mentioned. Has the Department put any contingency plans in place in case, if things do get moving over the next couple of months, COVID-19 has an impact on the timeline for getting things on-site for construction? Are you trying to put plans in place at this stage?
Ms Meharg: To be honest with you, it is unlikely that there would be any construction on the site before the far end of next year. We all — I think that everybody here — would hope that, by the far end of next year, with the vaccine and stuff, COVID-19 would not have such a big impact. However, there will be residual impacts from COVID-19 with regard to construction costs, potentially.
Ms Fearon: I think that the industry as a whole is still in flux over COVID-19. I know that the biggest impact that it has had has been on the delivery speed of projects. As you can imagine, sites cannot be fully occupied, so construction programmes slow down. At the moment, because we still have to make a decision about whether to reprocure with the integrated supply team or to remain with the current IST, we are not in full negotiations on that type of detail with the contractor. However, the Central Procurement Directorate (CPD) is doing a lot of work and industry engagement on the construction industry and COVID-19, and we speak to CPD about that regularly. Therefore, we will do everything that CPD advises at the time. As Tracy said, we hope that we will be in a very different place by the time the project gets to site. By the time it does, I think that the industry will have adapted better, and we will certainly be able to replicate what is happening under the advice of CPD at the time.
Ms Meharg: A long time. I suppose that the decision was probably taken in 2009. Was it Gregory Campbell who took the decision in 2009 not to have a single multisport stadium? That is when the three sporting codes were asked to bring forward proposals. The decision was taken in 2009 to have three separate stadiums.
The Chairperson (Mr Humphrey): I make that point because, on a number of occasions, you have invoked the NDNA agreement, and that agreement was made in January of this year.
Ms Meharg: That is correct.
The Chairperson (Mr Humphrey): We need to keep that in perspective.
With the planning, mid-December, there is the potential for a judicial review. Have the Department or the GAA, or people acting on their behalf, been talking to residents? Have there been conversations with the Mooreland and Owenvarragh Residents' Association (MORA)?
Ms Meharg: I know that the plan is to have significant conversations once planning has come through. There have been conversations. I am not certain whether they are having conversations at the moment. Jacqueline, can you tell me?
Ms Fearon: I do not know if they are speaking directly to the groups. There are a few groups. There is the Andersonstown Regeneration Committee (ARC) as well.
The Chairperson (Mr Humphrey): David Hilditch and I are veterans of this, having been on the Committee for Culture, Arts and Leisure, and my recollection is that there are two groups, one broadly supportive and another concerned about the size of the stadium. It gives me cause for concern that we have spent £10·5 million yet we are not really sure whether those conversations are happening. Those people were very vocal, very vociferous and very opposed, not to a stadium but to the scale of the stadium, and, if there have not been meetings, that is the wrong approach.
Ms Meharg: We can let you know whether there have been meetings recently.
The Chairperson (Mr Humphrey): Yes, if you would not mind.
Ms Fearon, you said that the SRO is in regular contact with the GAA. Who is the SRO? I missed the name.
Ms Fearon: Moira Doherty.
Ms Fearon: I would have to speak to Moira, but, certainly, once a month formally through the programme boards, and, informally, I would say every couple of weeks.
The Chairperson (Mr Humphrey): Every couple of weeks? OK.
Ms Meharg, you said that the purpose of the stadium is to hold larger games or whatever. Is there not a dual purpose? Was it not about larger games and potentially holding concerts at the venue?
Ms Meharg: Yes, but that is part of the commercial operation of it. I am not sure about the planning application.
Ms Fearon: The planning application was for three a year.
Ms Meharg: Three a year, so it is not a major part of it.
The Chairperson (Mr Humphrey): Ten and a half million pounds of public money has been spent to date. What has been the benefit to the public purse from that £10·5 million?
Ms Meharg: Ultimately, the £10·5 million will be capitalised into the project, and that is when the benefits will flow. We are still confident that this project can have significant economic and social benefits in the area. We all hope that the project happens and we are still confident that it can deliver benefits, but there have been cases when people have invested in development costs at the front end and projects have not delivered, so it would be wrong for me to suggest that development costs are always capitalised into the project. When we were looking at the prolongation of projects and the impact on costs, we saw, in some places, particularly with stadiums, that inflation had become an issue. I think that Brett Hannam brought evidence that it was decided not to move forward with some very large stadium projects because inflation had got so high.
Ms Meharg: We are about to have planning permission for a major stadium in west Belfast, and we hope to deliver the ambition of that stadium. That is where it has got us to.
The Chairperson (Mr Humphrey): To be honest, I think that people will understandably be perplexed at the use of £10·5 million from the public purse.
What about the negotiations that the Department is having with the GAA?
Is the Department convinced that the GAA will move its Ulster final — I am not an expert but I think that the finals are normally played at Clones — to Northern Ireland?
Ms Meharg: There are probably people in the room with more GAA expertise than me who can answer those questions.
Ms Meharg: My understanding is that the answer is yes, in that that is what the GAA wants to do. I have been down to Clones and seen the condition of the stadium, and it is in very sore need of a better stadium.
Ms Fearon: I will take that, Tracy.
Ms Meharg: Yes, go ahead.
Ms Fearon: In the business case assessment, we had a session in the Department when the business case came in, and these were the types of issues that we raised with the GAA at the time. For us to achieve the benefits, as Tracy outlined, we needed a commitment that there were to be a certain number of maximum capacity games per year that would generate as much revenue as that. The GAA has guaranteed that it will put into its business case the recommendations that the Department makes. I think that the quarter- and semi-finals also get a certain capacity, and the GAA is willing to look at the capacity games and build them into the offering to the Department.
Ms Fearon: They will be in the final business case. The business case is still in draft form.
Ms Fearon: At this stage, it has, verbally. It is in the draft, but a draft is a draft until it is complete. However, the GAA has certainly given commitments that that is its intention.
Ms Fearon: Absolutely. However, in the spirit of partnership, we have to believe that the GAA will deliver in the final draft what we have asked of it in the negotiation.
The Chairperson (Mr Humphrey): I appreciate that, and I am not being pedantic, but 11 years down the line, and £10·5 million more from the public purse, we need to get beyond verbal commitments.
Ms Fearon: The business case does not stack up unless we have that commitment, so it has to be there.
The Chairperson (Mr Humphrey): Some of us have been saying that for some time.
On blue-light services and Belfast City Council, with regard to roads, safety and traffic concerns, are you saying that all of that has been signed off and agreed now?
The Chairperson (Mr Humphrey): Has the provision of blue-light services — the police, fire brigade and Ambulance Service — been agreed? Ultimately, Belfast City Council has to give the certification for the stadium. Also, in relation to the road infrastructure around the stadium, with regard to health and safety, traffic management and pedestrian access and egress, has all of that been agreed and signed off?
Ms Meharg: My understanding is that that was all signed off by the STG in advance of the project going to planning.
Ms Meharg: So, the answer is yes.
The Chairperson (Mr Humphrey): The council has signed that off, OK.
Finally, before I bring other members in, as the director of the regional stadium programme, have you been involved in Ravenhill stadium and Windsor Park?
Ms Fearon: I came in in 2015, which was at the tail end of the Windsor Park stadium.
Ms Fearon: I do not, but there is a programme manager in the Department for the subregional stadia.
Ms Fearon: I am not personally involved at the moment. The programme manager is Shirley Chambers. However, Kathryn Hill, a grade 5 in the Department, is the director of the active communities division, and she is looking after the subregional programme.
The Chairperson (Mr Humphrey): OK. I know that we are slightly straying off the original point, although it is all connected. Can we have something from the Department on how that work is progressing and the projected monies that have been set aside for the subregional stadia going forward?
Ms Meharg: OK. Subregional, as you will be aware, sat for quite some time. Before we got the Executive back, I had started to go out and talk to all of the interested parties, and the Minister has continued that. We now have a regional stadia stakeholder group that is trying to update the position and have input into the way forward. You recommend front-end engagement, and we are very active in that. However, to be frank with you, I cannot give you any update on the amount, because it has not moved.
Ms Meharg: I have that information here somewhere — I know that they have been working with councils and clubs. I will send it to you, if you do not mind. I cannot find it just now.
Ms Meharg: I can send you a list of all of them. They have also surveyed all the clubs. I have something here —.
Ms Meharg: I will give you an update on that.
Mr Muir: Most of my questions have been dealt with by other members. The risk of judicial review looms large, and there is experience of that. I wanted to get an assurance that all that can be done to mitigate that risk has been done. If a judicial review were to materialise, would the cost of the salaries payable still be attributable to the project?
Ms Meharg: The fact that there has been a JR greatly informed the work that was done to come to the new design. That work took account of some of the traffic management issues, the safety concerns of the CAL Committee and the recommendations of the PAR. A lot of front-end work was done on that planning application to address the issues that had come through the previous JR. As to whether there will be a further JR, there is nothing further that we can do about that. Everything that could be done has been done. Clearly, if there is one, we will have to work our way through that. We would continue to pay the salaries and deal with development costs as we worked our way through to take this project to the stage at which it is ready for construction. We have done a multiple critical path analysis on this for when it arrives at various points, depending on questions of JR or not.
Mr Muir: If a JR started, and your salary costs continued to be payable, what would those people be doing? I am conscious that the JR process can take significant time.
Ms Meharg: Those people would continue to do what they do currently, which is planning for the project. Jacqueline, would you like to add anything to that?
Ms Fearon: Ironically, it is when there are activities such as a JR that the project salaries are probably earned more than when there is no difficulty. A JR, like any legal process, takes a lot of work to support. There would be significant input from legal advice colleagues. The project sponsor from the GAA would be in control of managing that process for the project. The independent technical advisor would be responsible for pulling together the technical information required to support the JR from the other end. There would be a lot of work to do in that process. Equally, we would expect a lot of engagement from the SRO with the Department. The GAA would be the lead defender of the JR, so it would have to assure the Department that it was doing everything to defend the JR appropriately. Yes, their roles would continue and be very active.
Mr Muir: Has the clock started on that judicial review? When does the window close? Is it when the decision notice is formally completed with the council, or has that already started? What is the story?
Ms Meharg: My understanding is that, once planning permission is given, there is a 90-day window. Is that correct, Jacqueline?
Mr Harvey: Thank you, Miss Meharg and Miss Fearon. I have a concern about the personnel turnover during a major project. What have you done to limit that?
Ms Meharg: Are you talking about personnel turnover within the Department?
Ms Meharg: To be honest with you, there has been more turnover than we would have liked. I can take you through the detail on that. The first SRO was Cynthia Smith, from 2013-15. Then, following the PAR recommendation to have a full-time SRO, Ian Maye became the SRO. He had significant qualifications in major projects. Unfortunately, Ian passed away in 2017. The decision was taken to skip some time before refilling that post, so there were two temporary SROs between 2017 and 2019. Then, in 2019, Moira came in. Ideally, you would not want that number of SROs on a project, but, unfortunately, that is what happened. Moira is there now. She and I have had this conversation, and she knows that she is here to see this through.
Mr Harvey: What handover training does the Department have for personnel who are managing projects like this?
Ms Meharg: Moira has a project qualification. What is it called, Jacqueline?
Ms Fearon: The project leadership programme (PLP).
Ms Meharg: I always forget the name of those qualifications. She is qualified in projects. Obviously, she is supported by Jacqueline, who is a quantity surveyor. She has a diploma in project management and is qualified in projects in controlled environments (PRINCE) 2, so people in those roles do have the appropriate qualifications.
Mr Boylan: Thank you, Chair, for the clarification. Clearly, as we go through this line of questioning, and to be fair to Tracy, it is not the case of social housing versus Casement Park. That is a different model. I understand the points that Mr Beggs made, but this project has been agreed for a long time.
I have some concerns. My colleagues raised the issue of the time frame now that the project sits with the council. Mr Muir mentioned a JR. I know that the Department and others are trying to reduce the impact of that. Clearly, there is a social capital value to all this as well. The Chair mentioned Clones. If it is not Croke Park on an All-Ireland final day with 80,000 people, the next best game would be the Ulster final at Clones or Casement Park, with close to 40,000 people there. For people who have never experienced it, you want to be there, because it is an excellent day out.
Mr Boylan: I am a keen GAA fan, but the social capital from the GAA in relation to those games is something else. The application has been handed over to the council, and it is the council's issue, but what engagement are you having with the council about the social capital and the five or six years of actual capital value that has been lost due to the delays? I am not arguing the case or making a point about the JRs. Those processes are entitled to go through the issues of safety and all of those things. What are we doing to try to address some of those issues? Will you comment on that, please?
Ms Meharg: There is no doubt that Casement has been missed by many people while not in operation. What have we been doing? The GAA is delivering the project, and we are supporting it. My understanding is that the GAA is continuing to engage with the community, as appropriate. We had a conversation with the GAA this week about the need for more community engagement once the planning permission comes through.
On social capital, the GAA and its members have been particularly active during COVID-19 in supporting the community. I do not know whether that answers your question.
Mr Boylan: It does. Can it be answered in financial terms? What value do you reckon has been lost over the five or six years? Obviously, costs have gone up, and the building costs will be the building costs. However, across the board, there has also been a financial loss from it not operating. Has that been considered at all?
Ms Meharg: At the moment, we are doing a lot of work on the benefits analysis, which will help. When we see what benefits this project has going forward, that will help us to determine what the opportunity is. Significant effort has gone into that.
It is understandable that members have been asking today about what we are getting for our extra money. We are working closely with the GAA on the benefits analysis to determine what are the future benefits, both social and economic. We are looking at the original objectives, which were to make the stadium more sustainable and to have a stadium that has a national and international reputation and that supports the sport itself.
Mr Hilditch: Thanks, Chair, for letting me back in on a point that you raised about the subregional stadia that should be moving along in tandem, because that also is part of an agreement. Football got in and around £63 million, and it cost £18 million to £20 million to build Windsor Park. The rest of that money has not been spent yet, so ordinary football throughout the country is somewhat behind where the main football stadium and the GAA are at, to be honest. Is there a timeline for that money being spent? I will tell you where I am coming from. One club in my constituency has had planning permission sitting there for five years, and that has just run out. It has had match funding sitting there for the same length of time. You can guess the frustration that that club and others are experiencing with these shenanigans over the subregional stadia. What people out there would really like to know is that we are not into another capital project hames with this one. People need answers, because it is not good.
Ms Meharg: No. I have experienced that frustration. I visited a number of different stadiums, and what really struck me was how some of the clubs are so deeply embedded in the communities that they serve, and in the work that they are doing. All of that will be important when we are looking at the subregional stadia. I cannot give you a time frame today, sorry, but what I will do is tell you where we are at. We can update you when I get a better time frame for you.
Mr Hilditch: Similarly, the cost of the GAA project has increased from £77 million to £112 million, or whatever it is, because of the time lapse. That £35 million gap has been there for a long time. The funding for the work will not provide the same value that it would have given eight years ago, or whenever it was. Who will lose out? It will be, as you referred to, the communities in which the clubs are embedded.
Ms Meharg: I appreciate that. That issue has been raised with the Minister on several occasions.
Mr Beggs: I am just looking at the time frame. The original project was tendered for in 2013, and we are being shown a 44% to 45% increase. That is way above inflation. I used to work on the periphery of the construction industry, and something that was commonly known in the construction industry was that many companies made their profit not on the original quote but on the deviations or the extras, for which they were frequently the sole bidder. How can you and we know that there is value for money, given that this was tendered for seven years ago?
Ms Meharg: It is really important that we ensure that that is the case. We have used independent consultants to help us understand that the costs are reasonable and within benchmarks of what we would expect. I do not know whether you want to go into that in more detail, Jacqueline.
Ms Fearon: There are a couple of things to add. You will be aware that, since 2006, CPD has been using a new engineering contract (NEC) for design and build. One of the benefits of the design-and-build contract is the allocation of risk between the contractor and the client, but it also develops what is called a lump-sum, fixed-price contract, and any variations from that are bound up by compensation events. That would have been done at the outset of the last construction project. With any construction project, you get to a point at which you sign your contract and sign up to the terms of that contract. That will be the intention for this one as well. Once the costs are finalised, agreed, signed off and assured by CPD, we will again be entering into a design-and-build fixed-price contract.
The idea is that you get to a point at which, because the contractor has involvement in the late-stage design of the project, unlike a traditional form of contract where the design is totally done before tender, the contractor's design will tie into the strict requirements of the employer, and the design cost is therefore more certain. One of the benefits that CPD sees with that type of contract is cost certainty. It is a mechanism that CPD and projects across government have been using to try to tie that value aspect into the construction stage.
Mr Beggs: OK. To go back to the 44% or 45% increase in cost, a significant part of the cost is the labour involved, by which I mean the builders on site. Wages will not have increased by 44% or 45% in the past seven years, so why is it costing so much?
Ms Meharg: My understanding is that 55% of the increased cost is inflation, while 45% of it is to do with the design. The changes in design were very much made to address the community issues raised. For example, the stadium is now completely enclosed in order to manage noise, I understand. The site also had to be excavated further to reduce the height and scale of the stadium. A number of design changes were made to try to make the stadium accommodate and align better with the community requirements.
Are the 55% and 45% figures correct, Jacqueline?
Mr Beggs: The public are expected to finance at least 80% of the additional costs.
Ms Meharg: The agreement at the moment remains what is in the financial agreement, which is that it is £77·5 million from public funds and £15 million from the GAA.
Mr O'Toole: I have a very brief question on the business case and potential benefits. Given the day that is in it, in which we have Northern Ireland playing an important match this evening and the Republic of Ireland playing a friendly — best of luck to both of them — one of the potential benefits of Casement Park is for it to be an additional venue for the European Football Championship, if there was a joint bid either on an all-Ireland basis or with Scotland. One such bid is in the ether at the minute, between, I think, the South and Scotland. Where are the discussions at on that? Is that specifically going into the potential business case, because Casement will be the biggest stadium in Northern Ireland when it is built?
Ms Meharg: Yes. It will be the biggest stadium in Northern Ireland. Some of those games would require a stadium bigger than that. My understanding is that some of the games being talked about recently would require a capacity larger than even Casement's. Was there anything in the business case about other sports?
Ms Fearon: Not at the moment. Not for that type of —.
Mr O'Toole: It would be a reasonable statement to make that it would massively increase our ability to host —
Mr O'Toole: — major international football tournaments in Northern Ireland if this stadium were built.
Ms Meharg: Yes, if the capacity is up to 34,500.
Mr Hilditch: Perhaps GAA players will know better than me about this, but are other sports allowed to be played there now? Has the situation changed?
Mr McHugh: As I said, Chair, it is pretty obvious, when you consider that Croke Park has already hosted international soccer games. I know that English fans came over and sort of wrecked the stadium when they were there.
Mr Hilditch: That was described as being for initially a one-off period, I think.
Mr McHugh: Croke Park has also held international rugby. I am sure that the GAA will not be found wanting in that respect, not that I am a spokesperson for the GAA.
The Chairperson (Mr Humphrey): I am not an expert or an authority on the GAA's structure or management, but I presume that you are having discussions with Ulster GAA? Is that right?
Ms Fearon: We are having discussions with Ulster GAA, but, in fact, the director general of the GAA sits on the GAA project board.
The Chairperson (Mr Humphrey): I would like to think that, since a considerable amount of public money is going into it, this stadium will be open to all, for all sports, and that that is tied down in your negotiations. It would be completely wrong for something to be used exclusively by one code.
I understand that 50% of the £10·5 million that has been spent was spent on consultants. Why was that, and who appointed the consultants?
Ms Meharg: Do you want to take that one? That would be the integrated consultant team (ICT) and the integrated supply team (IST) designs.
Ms Fearon: Yes. The ICT is effectively the design team: the architects, the engineers, the project managers etc. It is tendered through CPD. That would have been the initial procurement at the time. CPD employed the ICT through the Northern Ireland public procurement route.
The Chairperson (Mr Humphrey): All right. I do not think that any other members have questions.
May I ask you both to come back to us about the subregional stadia and the moneys potentially for them? Will you also let us know who the people on the subregional stadia group are, if you do not mind?
I declare an interest as someone who goes to Irish League games. I make the point that clubs are hugely constrained now in the number of people that they can get in through the turnstiles. If money could be raised from the turnstiles, which I doubt, that could mean an enhancement of stadia. That is not the case now. One of the games that my own club hosted at the start of the season lost £5,000, which is not sustainable going forward, meeting the regulations on health and safety and marshalling in the stadium. In my opinion, and others will have more knowledge of this than me, the subregional stadium stuff has now reached a hugely significant and important point, because those moneys need to start coming through to the clubs, which are all facing huge financial difficulties.
Ms Meharg: Yes. I accept that. We have just put out the COVID funding of £15 million. Hopefully, that will help, but I appreciate your point.
Mr Hilditch: There are all these planning applications sitting there ready to go, and we are trying to help the construction industry recover properly from COVID at some stage . All those stadiums would provide that work.
Ms Meharg: I appreciate that.
The Chairperson (Mr Humphrey): Sorry. Before you go, do any members have questions that they want to ask that might be answered in closed session if they are of a sensitive nature? Everybody is happy enough. OK. Thanks.