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News : Irish Economy Last Updated: Jan 27, 2014 - 7:13 AM

Irish Water: Flinging bucket of cold water in public's face
By Michael Hennigan, Finfacts founder and editor
Jan 15, 2014 - 5:05 AM

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The renowned American baseball player Yogi Berra (b. 1925) once quipped "It's déjà vu all over again" and the controversy about Irish Water brings him to mind again as we have been through all this before: large spending on consultants at prices they charge to some of the biggest companies in the world as a big name while costly for Joe Taxpayer, is a good way of deflecting responsibility. Besides, a smaller firm may lack the crucial connections. Meanwhile, the lack of meaningful transparency is against the public interest; it reflects the enduring Victorian legacy of secrecy in the Irish system and is the equivalent of flinging a bucket of cold water in the public's face.

It's a handy excuse to say IBM or Accenture suggested it; clueless ministers do not micro-manage such projects nor do senior officials, and what's €85m when John Tierney, the new public agency's managing director, could claim to an Oireachtas committee on Tuesday that €100m had been saved by using "Bord Gáis expertise." Anyway, what's the big deal when the agency will save €2bn in public money by 2021?

Wonder if the projected savings by 2021 were tied to salary and consultancy fee clawbacks, would more attention be given to that estimate when cost overruns are the norm for such projects? In the short-term of course it's a useful talking point for policy makers.

IBM gets €44.8m; Accenture €17.2m; Ernst & Young €4.6m; KPMG €2.2m; McCann Fitzgerald solicitors will get €970,000 and its rival, A&L Goodbody, will receive €2.9m while an additional €13.3m is “covered by another 18 contractors who were procured.”

Ernst & Young, the Big 4 accounting firm, picks up some handy business from a public agency while the State is pursuing it in respect of alleged auditing failures at Anglo Irish Bank prior to its nationalisation in January 2009.

Anglo’s accounts for its September 2008 year-end, showed an after-tax profit of €664m. These accounts were published in February 2009, a month after the bank had been taken into State ownership.

Financial accounts for October 2008-December 2009 showed a loss of €12.7bn -- the largest loss in Irish corporate history - - after charging €15bn to cover bad debts.

Ernst & Young used a stock phrase - - "vigorously defend" - - in respect of "any proceedings." 

It's almost history already and in 2012, Michael Noonan, finance minister, in a display of lack of interest or helplessness told Pearse Doherty TD that Anglo's successor IBRC was  “not in a position to positively identify all the principal persons at that company who were responsible for the conduct of the audit.”

KPMG, another Big 4 accounting firm and Irish Water consultant, was the auditor of Irish Life and Permanent, which had provided Anglo with billions of euros in support loans.

An enduring Victorian legacy

Colm McCarthy, the economist, wrote in The Sunday Independent, last month:

The Government has apparently committed itself, outside the actual legislation as proposed, to setting up a brand-new super-quango (Irish Water has already recruited 300 staff) while leaving the pre-existing, and inefficient, structures fully in place for a minimum of 12 years. The local authority staff in this €1.2bn per annum industry will remain in place and will transfer, with all pay and conditions intact, into the new quango 12 years hence. What is going on here?

It would appear that, below the radar, our long-lost friends the Social Partners are back in business.”

UPDATE:The Irish Independent reported on Jan 27:

FAMILIES face the threat of higher charges because Irish Water is being forced to employ double the staff it needs, a leading ESRI economist has warned.

Prof John FitzGerald, senior researcher at the Economic and Social Research Institute (ESRI), said the extra wages and other costs for 2,000 extra staff would amount to around €150m a year – or up to €2bn until the arrangement expires in 2025.

Irish Water will have to take on more than 4,000 local authority staff and employ them on service level agreements (SLAs) until 2025, as part of the deal to transfer water supplies from the authorities to the new state company.

Irish Water executives believe they need less than 2,000 employees.

If the entire €150m cost was passed on to every household, it would add around €90 a year to water bills when they start arriving next January."

Anyone who believed that what became known as the "Croke Park process" involving a group of mainly men meeting in a room in Ballsbridge, South Dublin, over a two-year period, would bring significant change to the Irish public service, was either naive or a fool.

It takes more than line-by-line debate on work practices with the government side in a conflict of interest situation, to bring about significant change.

Brendan Howlin, public reform minister, on Tuesday said he would ensure that Irish Water would be subject to Freedom of Information - - it would be obliged to release information on request that is not considered 'commercially sensitive.'

What Howlin offers is not transparency.

It was only when John Tierney, Irish Water managing director, made what insiders likely regard as a gaffe, ("A gaffe is when a politician tells the truth" - Michael Kinsley, American journalist), by saying on Seán O’Rourke’s radio programme that the agency had spent €50m on external consultants to end 2013, that the information became known to the public.

The plebeians will have no choice to pay the new water charge but in the culture of Victorain secrecy, providing budgetary information and reasons for spending on the agency's website would be revolutionary.

The big accounting, consultancy and law firms in Ireland publish little if any financial information. Their biggest customer maybe the State and it facilitates them to avoid competing on cost by not publishing tender information.

It's not only clueless ministers that are bored by process but the Oireachtas members spluttering with indignation post-event are in the same boat while despite the crash, there is no real appetite for change among a significant number of the conservative society.

We wrote on this four and a half years ago:

Finfacts: The Waste Land - - Bord Snip, Irish Public Spending Transparency and the motto "Never do anything for the first time"

Micheál Martin, Fianna Fáil leader, said last week that the €50m spent on fees was "extraordinary and scandalous."

He added "I think people will be very angry if they feel that their water charges bills which will start next year will go to pay such an extravagant amount of consultancies".

"It's déjà vu all over again," he must have thought to himself!

Micheál Martin had been minister for health when he sanctioned several IT projects.

We wrote in October 2005, a year after he became enterprise minister:

In the Information Technology area, two of the Department of Health's IT projects were suspended earlier this month by the Health Service Executive as estimated costs rocketed towards €400m. The PPARS (Payroll, Payment and Related Systems) was budgeted to cost €8.8m in 1998. If fully implemented, the system may now cost up to €200m. Another project FISP: Financial Information Systems Project was budgeted to cost €30m. It is now estimated that it will cost at least €176m.

Several other IT projects in the public sector were sanctioned with no credible controls and accountability. €3m was spent on a web project, that Micheál Martin, former minister for health, announced but the site literally disappeared in the ether. The project was abandoned.

As for infrastructure projects, several billions have been fritted away with nobody obliged to accept responsibility.

Any lessons learned?

Irish Times:Where the Irish Water consultancy fees are going

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