IARNROD Eireann management has defended the company's controversial £40 million signalling system, insisting it was value for money. Mr Joe Meagher, the managing director of the rail company, told the Oireachtas Joint Committee on Public Enterprise and Transport that the company's independent advice was that, if it was put to tender today, the project would cost more than £40 million.
The original price for the new system agreed in 1996 was £15.7 million and the company has been heavily criticised for letting costs spiral out of control. Mr Michael McDonnell, the chairman of Iarnrod Eireann and chief executive of parent company CIE, told the committee the signalling system now envisaged was "far superior" to the one originally planned.
He explained the source of the cost overrun for the committee. He said bringing the new system up to safety standards introduced after it was originally commissioned cost £8 million. Other changes to the original specification cost another £8 million. Inflation accounted for £2 million while delays related to the laying of fibre optic cables for Esat Telecom and other problems accounted for the balance.
The company also confirmed that Mr Brian Powell, the Iarnrod Eireann executive who left to head up Modern Networks - the main contractor for the new system - was the director of procurement at Iarnrod Eireann. Along with the company solicitor, he negotiated the contract with SASIB and Modern Networks. Mr Meagher said the contract was negotiated at a time when the company's resources were very stretched. The specification was loose and the price was not fixed, he conceded. Other defects in the contract included waiving a performance bond in exchange for a guarantee from the parent company of SASIB, the Italian company providing the new system.
Mr Gerry Dalton, the head of engineering at Iarnrod Eireann, said that although there were some engineering reservations about awarding the contract to SASIB, these were all resolved by the time the contract was signed. Senator Shane Ross asked the executives if they had not become suspicious when the man who negotiated the contract left to join MNL, and was subsequently followed by other staff. "Did your suspicion not get aroused when they left? You did not think there was some sort of conspiracy?" he asked. His question provoked a fiery response from Mr McDonnell. "The implication of your question is that we are bunch of luadramans. I don't think out record shows that," he said.
When pressed by Deputy Noel O'Flynn if he felt any executives should resign over the debacle, he replied: "No".
The chief executive said it was the first project of its type undertaken by Iarnrod Eireann. "The specification was not tight. Where we have found gaps in our system, we have plugged them," he said. Mr McDonnell also defended his own handling of the problem. He told the committee, chaired by Deputy Sean Doherty, that he was first made aware of the overrun at an Iarnrod Eireann board meeting in September 1998. "As soon as I found out about it, I took immediate action," he said. This included bringing the matter to the attention of the Department of Public Enterprise and instigating an inquiry of his own.
He added that he told the CIE board of the problem at their next meeting. He said that he did not know if the then chairman, Mr Brian Joyce, brought the matter to the attention of the Minister, Ms O'Rourke.
Mr Meagher was asked why the Iarnrod Eireann board was not told of the overrun until September 1998, by which time the cost of the project had jumped to £40 million. He replied that the extent of the overrun was not "a matter of certainty" until SASIB put in a claim for extra funds. As recently as the previous spring, the company had estimated the full cost of the project including overruns at £20 million.
