Sunday 18 August 2019

State subsidy for broadband plan was underestimated by €1bn, TDs told

On his own: David McCourt of Granahan McCourt
On his own: David McCourt of Granahan McCourt
Cormac McQuinn

Cormac McQuinn

THE level of State subsidy needed for the National Broadband Plan (NBP) was underestimated by around €1bn during the tendering process, TDs have been told.

A representative of accountancy firm KPMG - which advised the government on the project - has said that two bidders for the NBP contract "projected significantly higher levels of the subsidy than the Department's budget model".

The NBP has been at the centre of controversy over its cost of up to €3bn to the State over the next 25 years.

A consortium led by Granahan McCourt has been selected as the preferred bidder.

It was the only bidder left in the process after Eir and Siro dropped out.

The Oireachtas Communications Committee has today heard from Michele Connolly, the head of corporate finance at KPMG Ireland.

KPMG were appointed in December 2014 as financial and commercial advisers on the NBP.

Ms Connolly outlined how Siro dropped out of the tender process and how the Department of Communications received detailed submissions from Eir and Granahan McCourt in September 2017.

Ms Connolly said: "In their detailed solution submissions, both of the bidders that remained in the procurement projected significantly higher levels of subsidy than the Department's budget model."

Fianna Fáil TD Timmy Dooley asked Ms Connolly to outline the gap between the projected subsidy levels in the budget model developed with the help of KPMG and what was submitted by the two bidders.

She said: "There was a significant difference in the order of €1bn."

Ms Connolly said a key element of this was the costing of the technical solution to be used in the project.

She said additional information came to light around the design of the network required to deliver broadband, the extent that existing infrastructure would be relied upon, the coverage this would provide and the cost to implement the project.

Mr Dooley said there has been a view in the industry that the Department had budgeted a set amount of money and a belief among bidders that this was all that was available.

He said there's a "strong view" that Siro pulled out because it did not think it was possible to put a business model together based on the subsidy the State would provide.

Mr Dooley added: "There’s little doubt and you have confirmed it that the Department's budget model was surpassed very significantly at a later stage.

"That would lead me to believe what has been out there in the ether. The net result is we had one bidder at the end."

He asked if Ms Connolly accepted that there wasn't a competitive environment at the end of the process.

Ms Connolly said: "I do accept there was no competitive tension at the end of the process.

"However, we did have competitive tension for quite some period in the course of the procurement process, right up to and including after we had detailed submissions from the two remaining bidders."

She added: "There was not a considerable difference between the estimates that were coming forward from both parties. We had strong competitive tension until that point."

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