Friday 31 October 2014

Bord Gais falls far short of €300m in savings pledged for Irish Water

Paul Melia, Environment Correspondent

Published 02/04/2014 | 02:30

Bord Gais lobbied hard to be given control of Irish Water
Bord Gais lobbied hard to be given control of Irish Water

BORD Gais wildly over-estimated the savings it could achieve if it was given responsibility for establishing Irish Water and taking control of the network.

The company told the Government it could reduce annual operating costs by €300m and avoid spending €100m on start-up costs by using its existing computer and billing systems.

But the estimates fall far short of the actual savings to be achieved.

The company has since admitted that just €85m a year will be saved on operational costs between now and 2021, while it has also paid almost €70m to consultants and outside service providers to build IT systems.

CONFIDENTIAL

The details are contained in a confidential document called 'Organisational Capabilities for Irish Water', which was submitted to the Department of the Environment in January 2012 as part of a bid by Bord Gais to win the contract.

It says: "It is reported that the operational costs of water and wastewater public services in Ireland in 2009 were over €780m. It appears to us that this figure is at least €300m higher than would be expected for a utility company of this scale."

It adds that buying goods and services centrally, with other savings, would "significantly reduce operational costs" and lead to lower customer charges.

The company also said that by adopting its existing IT, asset management and billing systems, costs would be reduced.

"It is envisaged that an implementation cost of somewhere in the order of €100m would be incurred for key systems which would be required by Irish Water. This level of expenditure would not be incurred if the existing Bord Gais systems and their latent capacity were leveraged for the purposes of establishing the Irish Water organisation," it says.

The company has since been embroiled in controversy over spending almost €70m on outside consultants. Start-up costs are put at €180m, which includes €30m for contingencies.

Irish Water said figures used in the document were based on "initial high-level assessments in late 2011", and that changes to the model had since occurred.

The document also suggests that operation of the water network could be outsourced to the private sector when 12-year agreements between the company and local authorities expire.

OPTIMAL

City and county councils could bid with private companies for these services, it adds.

The company said the Service Level Agreements were now considered the "optimal" approach rather than the outsourcing model described in the document. But sources said the move could not be ruled out. "If what we're getting is good enough, and we have the efficiencies and the technology has been embraced, there may be no need but we will not know that for a long time," they said.

The Government has also raised concerns about awarding the contract to an existing utility, because it would "increase the bargaining power of the workforce". Bord Gais said Irish Water would be a separate company, and the issue would not arise.

Irish Independent

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