Committee Reports > List of Committees > Joint > 1980 > Committee on Commercial State-Sponsored Bodies > Report No. 12 - National Building Agency, Limited

APPENDIX 32

LETTER TO CLERK TO JOINT COMMITTEE FROM NATIONAL BUILDING AGENCY LIMITED CONCERNING SUBMISSION MADE TO JOINT COMMITTEE BY THE CONSTRUCTION INDUSTRY FEDERATION

I refer to your letter and enclosure of the 25th March 1980 about the submission which the Joint Committee received from the Construction Industry Federation in relation to the examination of the National Building Agency Limited.

In the course of oral evidence to the Joint Committee it was acknowledged that there were teething problems in the early days (almost twenty years ago) of the Agency. These problems were almost inevitable, having regard particularly to the nature of the initial commission given to the Agency by the Commissioners of Public Works. This commission called for the construction of 446 dwellings for the Garda Síochana, at locations (151 in all) as far apart as Falcarragh in Co. Donegal and Dingle in Co. Kerry. The geographical spread of the programme can be gauged from the attached Appendix ‘B’, which was extracted from the Agency’s Annual Report for 1970.

No reference to this background is made by the Federation in its comments about the procedures followed by the Agency in those early years. It was a fact of life, for instance, that in many of the isolated locations in the Garda Programme there was no alternative to engaging local small contractors with little or no experience of public contracts.

It should be stated also that the aims of the Federation and those of the Agency did not necessarily coincide. The primary objective of the Federation (which represents, in general, the major builders in the country) naturally is to reserve as great a proportion as possible of public works contracts to its members and to maximise their financial returns from this work. On the other hand, in carrying out the Garda Housing Programme—as with any other programme which it undertakes—the Agency’s concern was to ensure that the capital cost to be met from the Exchequer would be as low as possible, commensurate with achieving good standards of design and construction. There were individual cases where this policy did not work out, but the level of failure was relatively small and certainly was not of the magnitude which the Federation’s submission implies.

An examination of the records of the Agency at the time establishes that during the implementation of the Garda Programme and the carrying out of the programme of 707 industrial houses (listed in the attached Appendix ‘A’) during the period up to the 31st March 1970, less than ten contractors failed to meet their contractual obligations in full. The Agency has not figures available to it to verify whether this record compares unfavourably or otherwise with the failure rate of contractors employed directly by local authorities during that period. Suffice to say that no local authority could have been faced with a programme as widespread as the Garda Programme undertaken by the Agency.

As regards the Federations’s reference to Lakeglen Construction Limited, it should be noted at the outset that this firm had completed over 1100 dwellings—at various centres, including Dublin, Kildare, Ballinasloe and Galway—for the Agency during the period from July 1972 to December 1977. The firm’s performance in the construction of these projects was satisfactory. The standard of workmanship was generally high and the schemes were, in most cases, completed within the periods specified in the contracts. When the company went into liquidation in 1978 it was under contract to the Agency for the following projects:

The insurance bonds were provided by the Insurance Corporation of Ireland Ltd.

The Agency’s decision to proceed with the awarding of the contract for the Ronanstown F project to the firm without a bond being available was endorsed by the Department of the Environment and based on a number of grounds:

—the contractor’s performance had been satisfactory over the previous five years;

—bonds were being made available for the Springfield and Bunree Road Schemes;

—an examination of the company’s final accounts for the previous year and a credit check had indicated a satisfactory position;

and

—the Agency’s professional advisers were satisfied that the scheme could be completed for the price quoted, while the next lowest acceptable tender (more than 10% in excess of Lakeglen’s tender) was considered to be far too high, and could not be recommended for acceptance to the Department of the Environment. The view that Lakeglen’s tender was the “going rate” at the time was borne out four months later when the contract for an adjoining scheme was awarded on the basis of a tender which was only 5% approximately in excess of Lakeglen’s price for the Ronanstown F project. (In fact, if discounted for inflation, the price would have been less than Lakeglen’s tender).

Contrary to what the Federation alleges in its submission, the £859,916 contract was awarded to Lakeglen Construction Limited early in 1978 after a 25% bond (£214,979) had been provided by the Insurance Corporation of Ireland Ltd. after investigation of the financial stability of the firm and supporting accounting information about Lakeglen’s ability to complete the contract had been supplied to the Agency.

It is expected that the bond will be called upon in all instances, but to what extent will depend on the final all-in cost of the projects. These figures are not yet finalised.

The Agency cannot comment on the points raised by the Federation in relation to the Ballymun, Cork and Limerick housing projects, which were set in train in the late sixties. As the Federation should be aware, the matters criticised by them relate to policy decisions which were made by the then Minister for Local Government in consultation with the Government. At no stage was the Agency party to these policy issues, to decisions relating to the selection of contractors for the projects or to the allocation of public capital as between the projects and other sectors of the local authority housing programme. Its function was to manage the projects on behalf of the local authorities concerned.

Following are brief comments on the radical changes which, the Federation propose, should be made in relation to the Agency:

1. The scope and objectives of the Agency are clearly defined in the Memorandum and Articles of Association of the company.

2. Generally, the Agency is engaged by local authorities and other public organisations which have not the facilities to undertake all or part of their housing or other constructional programmes. In such circumstances the Agency normally provides a comprehensive service—professional and administrative—and enters into contracts on behalf of the clients. It would be anomalous and highly impracticable if the Agency’s role were purely of an advisory nature having regard to the legal, contractual and other responsibilities which the Agency takes on on behalf of the clients to meet a need for these services which could not otherwise be fulfilled.

3. The Agency, in certain circumstances, provides house loan facilities in connection with the purchase of non-Agency dwellings to meet the needs of certain categories of persons, e.g. personnel of new industries, workers in the coal and steel industries, etc.

4. It would be inappropriate for me to comment on the criticisms by the Federation of the personnel appointed to be directors of the Agency. The appointment of directors is the prerogative of the Minister for the Environment after consultation with the Minister for Finance.

24th April 1980

Managing Director.

24th April 1980.

Attachments to foregoing Letter:

Appendix ‘A’—Copy of Pages 33 and 34 of NBA Annual Report, 1970.

Appendix ‘B’—Copy of Page 35 of NBA Annual Report, 1970.