Friday 23 August 2019

Ministers told they were taking 'massive leap of faith' committing to €3bn broadband project with high risk of failing

Budget: Finance Minister Paschal Donohoe. Picture: Mark Condren
Budget: Finance Minister Paschal Donohoe. Picture: Mark Condren
Connections: Broadband speeds will rise across the State’s rural areas. Picture: Steve Humphreys
Kevin Doyle

Kevin Doyle

MINISTERS were told they would be taking “a massive leap of faith” by committing €3bn to a broadband project with a high risk of failure.

Advice from the top civil servant in the Department of Public Expenditure strongly urged against pushing ahead with the National Broadband Plan.

In a letter to the Department of Communications, Robert Watt raised “fundamental concerns”.

He said there were “unprecedented risk that the State is being asked to bear in the event the current NBP contract is recommended for approval by Government”.

Finance Minister Paschal Donohoe went against this advice and was backed up by other ministers at Cabinet yesterday.

They then agreed to give a 25 years contract to a consortium led by Granahan McCourt.

Mr Watt said his advice was being compiled against the backdrop over criticism of the National Children’s Hospital.

“We do not believe this Cost Benefit Analysis justifies the use of scarce public funds on this scale,” he said.

The roll-out of high-speed broadband to every home in rural Ireland will cost around €5,000 per house, a subsidy that Mr Watt said was difficult to defend.

He added that there is “a number of significant risks to the successful completion of the project”.

“New technological advances, or a lack of take-up of the service by intended customers, or a decision by the private operator to abandon the project, for whatever reason, could result in a ‘stranded’ obsolete asset, despite Exchequer investment of up to €2.275bn by 2026 – in an asset that we will not even own.”

Mr Watt stated  the return for the investor “seems very high given the risk profile of their investment”.

“All in all, I find it difficult to see how such a contract represents value for money for the State or is in the best interests of the taxpayer. I also find it difficult to believe that a convincing case can be made for this project, when these facts emerge.”

In response, the Secretary General of the Department of Communications Mark Griffin said his officials had carried out “rigorous analysis over the past three years”.

On April 24, he said the NBP “is very different” from the children’s hospital and there were “very robust due diligence of risk and cost”.

Mr Griffin said his department has presented “what is believed to be the pessimistic scenario in terms of an ultimate cost to the State over the 25 years”.

He said Communications officials had “consistently called into question” the methodology used by DPER in its cost-benefit analysis (CBA).

Minister Richard Bruton’s department cited “significant benefits” in the areas of education, e-health, tourism, regional development and social inclusion “which cannot be captured by the methodology that applies to CBAs under the Public Spending Code”.

“Government investing in a future proofed broadband network over which Irish citizens will access electronic services, many of which have not yet been developed or even contemplated, is not a ‘leap of faith’.

“It is in fact entirely consistent with the strategy of successive Irish Governments in providing the development of Ireland as a digital leader in the EU and growing the high tech sector of our economy,” Mr Griffin wrote.

He cautioned that not intervening in the market would “likely result in the marginalisation of rural communities”.

Mr Griffin said neither department had come up with “any realistic alternatives other than to indefinitely exclude rural Ireland from the benefits of digital connectivity”.

He acknowledged the NBP “comes with risk” but insisted 800 hours of work had ensured “a robust budget model where both construction risks and revenue risks have been captured in advance of any contract being awarded”.

Responding to Mr Watt’s claim that the infrastructure could be stranded, Mr Griffin said this would not be the case.

“Once the fibre is placed on eir pols and in eir ducts (predominantly) it will always be available for use,” he said.

Mr Griffin insisted the Department has “made strong Governance a red line in all its negotiations since 2016 when dialogue was first commenced”.

Sinn Féin finance spokesperson Pearse Doherty called on the Government to publish details of what the preferred bidder will invest in the National Broadband Plan.

These have been redacted from the documents published today.

“The Government has made a complete haems of the NBP,” Mr Doherty said.

“There are now serious questions in relation to the Government’s handling of this. We now will have a €3bn investment in to a piece of important infrastructure that won’t be in the hands of the public at the end of this. We still don’t know the level of investment if any that will be made by the private consortium. What is all documentation needs to be published, everything needs to be put in to the public domain so we can see what the Government has done up until now and what is the best way to proceed.

“One this is clear, we now have a situation where the costs have spiralled six-fold from where it was originally, the timeline has increased three-fold and at the end of this we will have a huge amount of investment but without ownership of the infrastructure and at the mercy of a private fund.”

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