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

NATIONAL BUILDING AGENCY LIMITED

CONTENTS OF REPORT

TWELFTH REPORT

NATIONAL BUILDING AGENCY LIMITED

I INTRODUCTION

(a) Background

1. In December 1960 the National Building Agency (or the NBA as it is known) was incorporated as a private limited company under the Companies Act, with a nominal share capital of £100. The Agency was established with the primary object of facilitating the provision of houses and ancillary services required in connection with industrial expansion, where the need could not be met appropriately by local authorities or was not otherwise met by private enterprise. In short, it was set up to carry on the business of a construction agency.

2. In its first three years, the NBA was financed on a temporary basis by the Industrial Credit Company.¹ However, the National Building Agency Limited Act, 1963, put the NBA’s finances on a more regular and firmer footing. The Act empowered the Minister for Finance to take up shares in the Agency to a limit of £100,000 and to make advances out of the Central Fund to the Agency. The Act also empowered the Minister for the Environment (then Local Government) to guarantee the borrowing of the Agency. Subsequent Acts—the National Building Agency Limited (Amendment) Acts of 1969 and 1974—increased the limit of £2 million, on the aggregate unpaid borrowings of the Agency set by the 1963 Act, to £10 million and £15 million respectively.

(b) Organisation

3. Directors of the NBA are appointed by the Minister for the Environment with the agreement of the Minister for Finance. At present, the Board of Directors consists of nine members including the Managing Director. Since the NBA is not a designated company under the Worker Participation (State Enterprises) Act, 1977 there are no worker directors on the Board.

4. The NBA is obliged to submit audited accounts and the report of the directors to the Minister for the Environment each year. Since its inception, the accounts of the Agency have been audited by the Comptroller and Auditor General.

5. The chief officer of the NBA is the Managing Director. Other senior executives, according to the NBA’s Annual Report for 1979, are the Contracts Controller, Financial Controller, Senior Engineer, the three Principal Architects and the Secretary. The average number of staff in the direct employment of the Agency during 1979 was 70—an increase of 4 over the 1978 average level. The Agency retained the services of thirty-four consultancy firms during 1979, as against forty such firms in 1978.

(c) Operations

6. In its early years the NBA’s main functions were to facilitate industrial expansion by providing houses for executives and workers in industry and to construct houses for State employees whose duties involved a transfer of residence. In 1965 the scope of the Agency’s activities was extended by the Government. This enabled the Agency to provide houses for local authorities at their request and to engage in other activities relating to houses and environmental services assigned to it by the Minister for the Environment with the agreement, where appropriate, of any other Minister concerned.²

7. In 1974, the European Coal and Steel Community initiated a programme for assisting—in the form of low interest loans—workers in the coal and steel industries in meeting their housing needs. The NBA was given responsibility for co-ordinating the ECSC programme in Ireland and distributing the monies made available by the Community. The Chairman of the NBA stated in the NBA’s annual report for 1978 that “this aspect of the Agency’s business has been declining to the stage at which, in a comparatively short time, the Agency’s only function in this field will be the collection of the loan instalments”.

8. As part of its role in the provision of housing for industry, the Agency makes available house purchase loans to applicants approved by the Industrial Development Authority. Previous arrangements, between the Agency and the IDA, had involved the actual construction of housing schemes. But, under the present arrangements work in progress on housing for industrial development no longer appears in the NBA’s Balance Sheet.

9. The Agency completed 1,300 houses in 1979. This brought the total number of dwellings completed since the NBA’s inception in December 1960 to 22,748. The building activities of the NBA have included the construction of individual dwellings for persons employed in industry; special schemes for the housing of Garda and Army personnel; co-operative schemes for private groups; European Coal and Steel Community housing for coal and steel workers; special projects for industrial workers generally; and major schemes for local authorities. In evidence to the Committee, the Chairman of the NBA said, “We have always regarded ourselves as a supplement to resources available in the context of either local authority or other public bodies”.³

II COMPANY OPERATIONS AND OBJECTIVES

(a) Areas of Operation

10. The current field of activity of the National Building Agency is limited to the provision of local authority housing and occasional other buildings and the administration of mortgages for industrial employees made available by the IDA. The Memorandum and Articles of Association of the NBA enable a much wider field of operation than that currently engaged in.

11. Although the primary intention, from its inception by the then Minister for Local Government, was for the NBA to act mainly as a house building agency, the terms of reference included in the Memorandum encompass construction of offices, industrial buildings, schools and commercial buildings; the acquisition and development of land; the provision of ancillary services such as water and drainage schemes; and the co-ordination of housing finance.

12. It has not been the policy of the NBA to actively seek to expand its role, nor has it endeavoured to sell its services on a commercial basis to a broader market. The NBA as an agency responds to requests from Government Departments and local authorities for technical and management services.

13. The Joint Committee sees the NBA as building management consultants working largely in the housing field. The NBA offers a complete professional package deal, which includes developing a brief for the building project in consultation with the client local authority or Government Department, bringing together and organising the necessary team of professional experts to implement the design and specification of the project, making planning applications as necessary, obtaining tenders from building contractors, appointing a builder, supervising the construction of the project and its hand-over complete to the client authority.

14. The Government building programme is spread over a wide range of building types including hospitals, schools, offices, telephone exchanges, Garda barracks and factories. These projects are initiated by numerous Government Departments and State-sponsored bodies and are implemented through the Office of Public Works or the respective Departments or bodies. Mr. J. Boland, a member of the NBA Board, stated in evidence “… There is a strong case for considering diversifying and expanding the role of the Agency to such an extent that it might be developed as a State building agency.”⁴ The Committee dwelt on this proposal at some length during the taking of evidence from the NBA witnesses.⁵ The Committee has no objection to the expansion and diversification of the NBA into a State building agency but, as is pointed out in paragraphs 31 to 33, a number of other major matters first need to be tackled. Nevertheless, the Committee does consider that there could be overall savings to the State if the building management expertise of the NBA and its widespread knowledge of building contractors in different parts of the country were availed of by, for example, the Department of Health, the Department of Posts and Telegraphs, the Department of Education, the Office of Public Works and the Industrial Development Authority.

(b) Local Authority Housing

15. The NBA is currently involved in 21 percent of all local authority housing in the State. The Joint Committee has examined arguments in favour of expanding or reducing the activities of the NBA in this area. The Managing Director, in oral evidence, stated “… there are a number of options available to housing authorities. They may utilise their own staff to undertake the work, they may engage a firm of consultants or they may avail of the services of the National Building Agency. This is a healthy situation. It keeps the Agency as a semi-State body on its toes and to some extent in competition. We have to prove ourselves to housing authorities and we know that our services will be retained as long as we produce houses to the standard they seek within the time scale.”⁶

16. It is the view of the Joint Committee that the function of local authorities should not be diminished in favour of centralising housing projects under NBA control. The free choice available to local authorities at the moment encourages democratic response to local housing needs and encourages the NBA to be efficient in the services it provides. If it is efficient, and the housing provided under its jurisdiction is seen to be successful, then more local authorities will seek the package service provided by the NBA to complement or supplement their own building programmes. As stated by Mr. J. Boland, a member of the Board of the NBA who is also Clare County Manager, “… I would not in any way support the view that the local authority should not be engaged in their own housing construction programme.”⁶

17. It is also the view of the Joint Committee that a central organisation such as the NBA cannot efficiently control a large number of small housing projects in dispersed locations throughout the country. This activity would be more appropriate to local authority staff provided that such authorities avail of the wide range of housing designs and standards offered by the NBA.

18. The Chairman of the National Building Agency told the Committee, “One must remember too, that local authority schemes are small, generally speaking … It would not be a desirable undertaking for the Agency to move in there to do work which is being done competently by the local engineers and various supervisory staffs.”⁶ However, the Managing Director also pointed out that “… for a small housing authority we have undertaken a scheme of forty dwellings and gone on to provide a project of four dwellings as part of the redevelopment of a street. Again … we are flexible in the scale and scope of our operations.”⁷

(c) Planning Studies

19. The NBA has recently been expanding its professional services to provide overall action plans incorporating land use planning, zoning, road layouts, sanitary services and recreational facilities. The Managing Director of the NBA explained, “We have prepared a number of land use plans … We prepared one for Dundalk Urban District Council, Dun Laoghaire Borough Corporation and Carlow Urban District Council, and we are now preparing, on behalf of Limerick Corporation, a very important plan covering almost 200 acres extending from where the existing city building ends into the country area in the southern environs of Limerick. This action plan would indicate the broad uses to which the land should be put—housing, open spaces, services, industrial development and so on.”⁸ He also described a major planning study being undertaken for Dublin Corporation in the foothills of the Dublin mountains.

20. The Joint Committee is of the opinion that a broader planning approach along these lines will result in better housing environments, with a more balanced and integrated provision of ancillary facilities, and recommends to the NBA that they consolidate their expansion into this field as a major objective for the immediate future.

(d) Land Acquisition

21. The NBA Memorandum and Articles of Association enable an involvement in the acquisition and development of land for housing and other buildings. Up to seven years ago the NBA, acting at the request of the IDA, purchased land for industrial housing in key locations around the country. This practice has been discontinued due to a change of policy by the IDA away from building industrial housing through the NBA, and in favour of providing house purchase loans to buy houses in the respective areas. The NBA has a land bank in several counties, but is currently committed to transferring this land to the local authority in each location having obtained the consent of the IDA. The NBA has not purchased any land in the past seven years.

(e) Mortgages

22. The NBA has been involved in administering mortgages for private house purchase. At the end of 1979 mortgages outstanding were in the region of £7.5 million, representing 1,260 mortgages. These mortgages have resulted from the industrial housing programme and have been funded by the IDA, and the provision of these mortgages is continuing.

23. Working with the building societies, the NBA has become involved in the negotiation of ‘group’ mortgages for co-operative group housing projects, and the involvement of the NBA in this sector is tied in with its involvement in providing house designs and contract management. The NBA expertise in project management underwrites the group schemes and encourages a building society to provide the funds for the individuals involved. The Joint Committee considers that this is an apposite area of activity for the NBA, but would recommend that it should charge fees sufficient to cover the costs involved and to make a contribution to the surpluses of the Agency.

(f) Housing Co-operatives

24. The NBA has been providing professional services to housing co-operative groups including the design of houses, organising contracts and obtaining finance. The NBA has been working with co-operative groups and has guaranteed final house costs to co-operative members.⁹ The Joint Committee is of the opinion that co-operative housing has, to date, been successful and that the NBA should continue its involvement in this area.

(g) Quality of NBA Services

25. It has been an important part of the inquiry by the Joint Committee to assess the success or otherwise of the services provided by the NBA. The Joint Committee has sought the views of local authorities¹⁰ and Government Departments who have worked with the NBA. Details of the responses received from these bodies are set out in the Appendices to this Report. By and large the experience of the local authorities who offered comments has been that the NBA has provided a satisfactory service. As stated in evidence by the Chairman of the NBA—“In practice the actual proof of that is that the Agency conducts the entire housing operation for a number of fairly large local authorities; Galway Corporation is one, Limerick Corporation is another and, to a large extent, Wexford Corporation.”¹¹

26. Cork Corporation in its written submission to the Joint Committee gave a comprehensive account of its experience with the NBA.¹² Included was an account of the problems arising from early NBA schemes at Togher, Glen and Mayfield, an examination of the defects in which is set out in Section VII below. However, the Cork Corporation submission confirms that more recent experiences of NBA work have been most satisfactory “… the experience of Cork Corporation in regard to the work done by the National Building Agency has been variable. The Corporation is confident that the problems which occurred in the original schemes will not be repeated. We are also of the opinion that the work carried out by the National Building Agency on the two recent schemes are of the highest standard and quality and something of which the National Building Agency and the City can be proud.” Referring specifically to a housing project at Curraheen, the Cork Corporation have stated “The design and standards of construction achieved on this scheme have become a model for the whole city, and the houses are in high demand as a result.” Finally, Cork Corporation referring to the level of consultation and service provided by the staff of the NBA expressed “… the appreciation of the Corporation to the officers of the National Building Agency who have made themselves available at all times to discuss progress and problems arising out of schemes. They have attended meetings at great personal inconvenience and at short notice at the request of Elected Members and of the officers of Cork Corporation.” Wexford County Council in its submission concluded “… the experience of the Wexford local authorities have been that the National Building Agency has provided a satisfactory service to a high standard and has fulfilled its obligations to the various Councils at very reasonable expense.”

27. The NBA has, from time to time, been subject to public criticism arising from shortcomings in the performance of completed housing projects or delays in the completion of housing contracts. The Joint Committee has examined criticisms under the following headings:

—Technical problems in NBA Housing.

—Organisational criticisms from client authorities.

—Criticisms of procedures relating to vetting and appointment of building contractors.

Detailed reports on these matters are set out in the Appendices and in Section VII. As the generally favourable comments received by the Committee from local authorities indicate, the balance of opinion is now strongly with the NBA. Shortcomings of both a technical and organisational nature that may have been encountered in the past appear to the Joint Committee to have been largely eliminated.

(h) Future Level of Output

28. Ninety-eight per cent of the NBA’s current work load is local authority housing and the NBA would therefore be affected if there was a major cut-back in the Government housing programme. The Chairman of the NBA stated in the course of evidence that “The Minister did give his assurance that there would be no cut-back in the local authority programme—that it would be maintained at the same general level, about 6,000 completions in 1980.”¹³ The Managing Director subsequently stated that in January 1980 the Board had adopted a programme whereby the Agency expects to complete 1,500 dwellings in 1980. He went on to state that “… we have orders in hand which will give us six to seven years work based on our average output and that is not even taking into account the normal orders which will accrue, hopefully, over the next six years.”¹⁴ The Joint Committee would hope that every effort will be made to ensure that the optimum output of houses is achieved each year, so that the best possible use is made of the housing skills which the Agency’s management and staff possess.

III STAFF STRUCTURE AND ORGANISATION

(a) The Staff

29. The average number of staff in the direct employment of the NBA was 70 during 1979. In the course of evidence the Managing Director told the Committee that “the turnover of senior staff is very low and the best of relations exist between the board, the managing director and the staff.”¹⁵ In addition to direct employment, the NBA provides indirect employment on housing projects and for consultancy firms. The workforce employed by contractors on Agency projects at the close of 1979 was over 1,600. This represented an increase of over 300 by comparison with the 1978 workforce. The Agency retained the services of thirty-four consultancy firms during 1979, as against forty such firms in 1978.

30. The chief officer of the NBA is the Managing Director. The NBA’s organisation chart¹⁶ indicates that nine officers report directly to him. They are the three Principal Architects, the Contracts Controller, the Financial Controller, the Senior Engineer, the Quantity Surveyor, the Company Secretary and an Administrative Officer. It is evident that the NBA’s organisation structure places a heavy burden of co-ordination on the Managing Director in both the technical and administrative areas of activity. In the course of the giving of evidence, he stated that “… the Board have been looking at this and are conscious of the desirability of making certain changes. That will certainly engage our attention as we move into the eighties. There are certain circumstances and practical difficulties which make changes in these structures somewhat difficult.”¹⁷

31. The Joint Committee recognises that there may be practical difficulties in re-structuring an organisation such as the NBA. Nevertheless, it is of the view that the Agency should have a more tiered structure than it has at present. A structure which had divisional managers in the technical, financial and administrative divisions, would ensure that only three senior managers would be directly responsible to the Managing Director, and the divisional managers would be responsible, in turn, for the running of their own divisions. Under such a structure, direct responsibility for the execution of NBA policy and day-to-day performance would rest with the Managing Director, but he would be supported by three divisional managers, each of whom would have responsibility relating to the main divisions of the Agency. At the very least, the Agency should appoint a divisional manager who would be responsible for the technical operations of architects, engineers and quantity surveyors working on behalf of the NBA, and for the management of contracts being carried out by the NBA. The Joint Committee recommends that the matter of re-structuring the organisation should be examined by the Board of the NBA as a matter of urgency.

32. In the view of the Joint Committee, there is one further lacuna in the staff structure of the Agency, namely, the absence of a senior quantity surveyor.¹⁸ The Joint Committee considers that a senior quantity surveyor should be appointed to take over responsibility for design cost planning and control, the general cost supervision of NBA contracts and the appointment and supervision of quantity surveying consultants. The senior quantity surveyor would be responsible to the divisional manager (technical).

33. The Joint Committee believes that, if the changes suggested in the foregoing paragraphs were implemented, the Agency would be in a position to function more effectively in the future.

(b) The Board

34. The Board of Directors of the Agency is appointed by the Minister for the Environment with the agreement of the Minister for Finance. Up to 1973, the Board had comprised of six members all of whom were senior civil servants representing various Government Departments. However, in July 1973, the Minister for the Environment increased the membership of the Board to nine. In doing so he added directors with practical experience as members or as officers of local authorities or in the professional aspects of housing.

35. In its main submission to this Committee,¹⁹ the NBA described its Board as consisting of three senior civil servants (two from the Department of the Environment and one from the Department of Finance), a county manager, a quantity surveyor, an auctioneer, a trade union official, a retired business manager and the Managing Director of the Agency. The term of office of that Board of Directors expired on 30 June 1980. The Minister for the Environment announced the names of the new Board of Directors on 25 July 1980. The new Board shows some changes in personnel. Only three members of the new Board are from outside the public sector, as against four such members on the previous Board.

36. In a submission to the Committee, the Construction Industry Federation²⁰ suggested that “The Agency should, in its administration, be more technically oriented because it is dealing with technical matters …” The Committee has already set out its views on changes that might be made in the staff structure of the Agency—see paragraphs 31-33. As regards the appointment of the Board, it is the Minister for the Environment, with the agreement of the Minister for Finance, who has the power to appoint and to remove directors. A role of directors is to balance the range of experience of the Agency as a whole. They are people who bring in external qualifications to complement those of the management team.

37. The Joint Committee believes that the inclusion of persons with a commercial background, particularly in the professional and construction sectors of the building industry, would reinforce the efforts of the management team and facilitate the work and the development of the NBA. The Committee recommends that the Minister for the Environment should take these views into account when considering his next appointments.

(c) Relations with the Department of the Environment

38. The NBA has a close working relationship with the Department of the Environment. The Chairman of the NBA, in his evidence to the Joint Committee, stated that since the Agency was set up it had taken its directions from the Minister. He went on to state that “Through me as Chairman, and an officer of the Minister, the Agency can make suggestions to him but policy for the Agency is determined by the Minister.”²¹

39. The Minister for the Environment has stated in the Dáil that he does not exercise day-to-day supervision over the activities of the NBA.²² Insofar as 98 percent of the NBA’s work is local authority housing, the Department of the Environment, which has overall responsibility for such house building, has to be involved generally in the level of standards and costs as well as being involved in the overall activities of the NBA. The Joint Committee believes, as far as supervision of the NBA is concerned, the Department of the Environment should make every effort to ensure that a balance is struck between maintaining an involvement in the general strategy and performance of the NBA, while avoiding involvement in the detailed operations and the day-to-day conduct of the Agency.

40. As previously stated in paragraph 14, the Joint Committee has no objection to the suggestion that the role of the Agency could be expanded and diversified into a State building agency. But before such a proposal is examined, the Committee considers that, first, the NBA would need to review its organisation structure and technical staffing—see paragraphs 31-33. This point was recognised by the Managing Director of the NBA when he stated in evidence that in the event of the NBA “… broadening the scope of our activities and taking on projects which would differ greatly from housing, we would have to look at the permanent technical staff of the Agency with a view to broadening it also for that purpose.”²³ Second, the relationship between the Agency and the Department of the Environment would need to be reviewed in order to ensure that the Agency had sufficient autonomy to facilitate the development of more effective working relationships with other Departments and State-sponsored bodies.

IV FINANCIAL PERFORMANCE AND CAPITAL STRUCTURE

(a) Measures of Performance

41. The Annual Report and Accounts of the NBA provide a number of measures to gauge the performance of the Agency. A first measure is the income of the Agency. Income increased from £1.5 million in 1975 to £2.46 million in 1979. When allowance is made for inflation, this represents a real increase of only 1 percent. However, to an extent the output in 1975 was exceptional, as can be seen from Appendix 3. The Managing Director told the Committee that “… we stepped up our output in that year to over 2,800 completed houses. Our average number of completions per year is of the order of 1,200 to 1,500.”²⁴

42. A second measure of performance is “turnover”. This is the monetary value of the building contracts handled by the NBA in any one year. In the most recent year, namely 1979, the “turnover” of the NBA was £22.2 million and of this, over £20 million represented the construction programme of local authority housing. This compares with a “turnover” of £19.1 million in 1975, which as has been indicated already was an exceptionally busy year for the Agency. This fact must be borne in mind when interpreting the real decrease of over 28 percent which occurred in “turnover” between 1975 and 1979.²⁵

43. A third measure of performance is the actual quantity of housing supplied by the NBA each year. Appendix 3A shows the number and proportion of houses provided by the NBA over the past eight years. The most dramatic feature is the peak in output achieved when 2,847 houses were completed in 1975. This represented over 10 percent of all houses completed in that year. For the most recent year, namely 1979, the NBA output was 1,300 houses which represented just under 5 percent of total output. The output of NBA houses can be looked at another way, namely the relationship between NBA and local authority output. In the peak year 1975, the number of houses built by the NBA represented nearly one-third of the number of houses built by local authorities. For the most recent year, 1979, the NBA share represented just under 21 percent of local authority housing output.

(b) Profitability

44. The NBA does not at present have a formal financial target set by the Government. In evidence to the Committee the Managing Director said that the NBA “do not aim to make a large profit …”²⁶ This certainly was the situation in the past few years (see Table A). However, in 1979 the surplus after taxation did increase to over £35,000. This was more than twice the average surplus achieved in the previous four year period 1975 to 1978.

TABLE A

NBA Profitability, 1975-1979

Source: NBA Annual Reports and Accounts, various issues.

45. Another way of looking at the Agency’s surpluses is to relate them to income. This is a relationship used by many companies to judge their comparative performance over time. Admittedly the ratios obtained will vary from industry to industry but within an industry the profit/sales ratio serves as a useful indicator of performance. The percentages for the NBA over the past five years are set out in Table B. The results for 1975 were quite satisfactory, with computed surpluses to income of 5.4 percent (before tax) and 2.5 percent (after tax). The returns worsened considerably in the following years. For the three years 1976 through 1978, the surplus (before tax) averaged less than 0.8 percent of income and the surplus (after tax) averaged only 0.4 percent.²⁷ There was an improvement in 1979 when the returns increased to 1.7 percent (before tax) and 1.4 percent (after tax). Despite this improvement, it is clear to the Joint Committee that the Agency will have to achieve higher rates of return if it is to build up its reserves in the years ahead.

TABLE B

NBA Surpluses and Income

Source: NBA Annual Reports and Accounts, various issues.

46. The surpluses of the Agency are computed after taking into account the cost of maintenance on completed schemes. The Committee noted that in 1978 maintenance costs on completed schemes exceeded £62,000. When questioned about this expenditure, the Managing Director confirmed that such maintenance was the responsibility of the Agency and that in one case “… it was a matter of having to do a complete roofing job on a scheme we had built under the low-cost programme.”²⁸ The Joint Committee was pleased to note that the expenditure on such maintenance had fallen to £26,000 in 1979. It would recommend that every effort be made by the Agency to ensure that in the future the design standards laid down, and adhered to, minimise the amount of maintenance work required on completed schemes.

47. While the Agency does not have a formal financial target, there has been a move towards setting a target for the future. The Managing Director of the NBA told the Committee that it would be his intention, with the approval of the Board, to work gradually towards a situation where the Agency would have reserves on hand at least equivalent to a year’s fixed overheads.²⁹ The overheads are estimated at around £500,000 in 1980. The reserves at the end of 1979 were just under £200,000. If the target outlined by the Managing Director is to be achieved by say, 1985, then surpluses will have to be over treble those recorded in the past five years. And that assumes no increase in fixed overheads-which is a most unlikely possibility. This represents a daunting target for the Agency. Nevertheless the Joint Committee believes that improved profitability should be a key concern of the NBA Board and management over the next five years.

(c) Monitoring Profitability

48. The income of the Agency emanates mainly from agency fees and mortgage and other interest. The Joint Committee considered how far the Agency’s accounts should be broken down and made specific to each area of operation or type of contract. For management to manage in any company it must not only have information on whether it is operating at a profit or loss, but also information on what contributions the different divisions of a company make to overall profits. The NBA, in its evidence, referred to its financial controls. Annual budgets are prepared and the Agency’s accounting system can show within a week of the close of any month precisely how local authority receipts and payments stand. The Managing Director also stated that the financial controller made available to him “… details of how any particular problem is working out with regard to overheads and so on.”³⁰ The Joint Committee believes that the management accounting systems should embrace the whole range of the NBA’s activities. Such information should not only indicate whether overall profitability is being achieved by the Agency, but should pinpoint what contribution each section of the Agency’s business is making to profits and also whether individual contracts are profitable or not.

49. The Agency charges fees for the services it provides under its building project work, which is its main area of activity at present. In its main submission to this Committee,³¹ the Agency described the range of services which it undertakes for local authorities in the provision of normal suburban housing schemes. The charge to the local authority is five percent of the building cost plus the cost of site supervision. This works out at six percent of the building cost, a percentage which the Managing Director claims “… is still below the cost which a local authority would incur if it engaged outside consultants.”³² While the Joint Committee endorses the efforts of the NBA to keep its charges below what local authorities would incur if they employed outside consultants, it considers that the NBA should charge fees sufficient to ensure reasonable profitability so as to provide reserves for contingencies and overall development.

50. The administration of mortgages is the second area of activity of the NBA. At the end of 1979 the value of mortgages outstanding was close to £7½ million and represented about 1,260 mortgages. These mortgages were created in connection with the NBA’s industrial housing programme.³³ The current lending policy of the Agency is to make loans available at a rate equal to a half per cent higher than the rate at which money is borrowed from the Industrial Development Authority. This, according to the Agency, is sufficient to cover overheads.³⁴ In the future, however, overheads are likely to increase with inflation and interest receivable will fall unless new advances are made. Accordingly, there is a possibility that at some future date expenditure might exceed income in this area of the Agency’s operations unless the situation is monitored very closely. The Joint Committee recommends that the NBA keep the operations of the mortgage division under review in order to ensure its continuing profitability.

(d) Financial Structure

51. As indicated in paragraph I, when the NBA came into being in 1960 it had a nominal share capital of £100. When the finances of the NBA were regularised under the 1963 Act, the Minister for Finance was given power to take up shares up to a limit of £100,000. In fact, the issued share capital has remained at £100.

52. The NBA has accumulated reserves, in the form of general reserve and accumulated surplus, of just under £200,000. The balance of its capital funds is in the form of repayable advances. The bulk of the repayable advances is from the Exchequer. Under the 1963 Act (as amended in 1974) the Agency may borrow from the Central Fund and by way of State guaranteed loans within an overall limit of £15 million. In the balance sheet of 31 December 1979 the repayable advances from the Exchequer were £7.4 million. The repayable advances from the Industrial Development Authority were £2.1 million and those from the European Coal and Steel Community were £0.3 million.

53. In contrast to the mixture of equity capital and borrowings that finance an ordinary private company, the capital of the NBA is almost entirely comprised of borrowings. One of the consequences of such a heavy predominance of borrowings is that the structure is insufficiently flexible to enable less interest to be paid in a difficult trading year. For this reason the Joint Committee reiterates its concern for improved profitability in the Agency over the next five years so as to ensure an increased volume of reserves—see paragraph 47.

54. The Committee noted that the Agency had listed land valued over £1 million in its current assets at the end of 1979. The land had been purchased initially in connection with the industrial housing programme. With the change in the Industrial Development Authority’s policy, the NBA no longer builds houses for industrial workers, but instead distributes house purchase loans to applicants approved by the IDA. Accordingly, the Agency is at present disposing of land it had acquired to local authorities.³⁵ The price being charged for this land is based on two criteria; first, the valuation by the Commissioner of Valuations and second, the original purchase price plus the holding charges. In relation to the holding charges, the Managing Director explained in evidence that the moneys used to purchase the land holdings had been borrowed from the Exchequer and that “we have to repay those moneys and we accumulate the interest charged in the repayments to the Exchequer on the assets.”³⁶ The Joint Committee recognises that as a consequence of a change in IDA policy, the NBA has now got to adopt an alternative policy for its land bank. The Joint Committee is satisfied that the criteria used in arriving at a selling price for land are reasonable, provided that the selling price of any portion of the land bank does not fall below the original price plus holding charges.

55. The Committee noted that according to the Balance Sheet at the end of 1978 the Agency had nearly £2 million in cash at banks. The Managing Director told the Committee that that was an unusual circumstance “… it included an allocation of £1.25 million from the IDA for our mortgage operations in 1979. In addition it included moneys relating to the redemption of mortgages by various mortgagors throughout the country.”³⁷ He did confirm, however, that the Agency ensured that these moneys are invested to give the maximum return. In effect, what is described as “cash in the banks”, in the NBA Balance Sheet, is really “short term funds on deposit”. The Joint Committee recommends that the latter description might be more properly used in future accounts.

V HOUSING POLICY

(a) Provision of Local Authority Housing

56. The provision of housing in urban and rural locations is a complex matter. It embraces environmental and planning considerations and demands for ancillary services and amenities. It has to be implemented within a framework of cost limitations, land availability, local authority regulations and time pressures. The construction of new housing, its location relative to existing towns, the housing layouts and their relationship to the road system are, however, a major contributing factor in the shaping of the future character of our towns and of the living environments of our population. It is, therefore, essential that this most important function of national development receives the maximum degree of pre-planning and attention. The Managing Director of the NBA has stated that the NBA would welcome involvement with the local authorities at the earliest possible stage, even at the land acquisition stage, and it is for this reason that the NBA welcomes its growing involvement in land use planning studies and area action plans.

57. It is the view of the Joint Committee that the NBA should be involved at an earlier stage than at present with local authorities in selecting sites for new housing and planning its relationship with existing towns and villages, the layout of main roads and sewers and the provision of ancillary facilities such as schools, churches, shopping and social amenities.

(b) Design of Housing Areas

58. Considerable progress has been made internationally in recent years in improving the design of new housing to be in keeping with the local character of cities and towns. The NBA considers that much progress has been made in the design of its housing estates to improve their appearance relative to local characteristics. The Managing Director explained “that is one point on which we are very strong. Even though we have produced standard details for our houses, they are produced in such a way that each of our principal architects can indicate his own special elevational treatment. We do not want to flood the country with the same type of elevational treatment for every local authority housing scheme. We pride ourselves that we endeavour to vary, not only from area to area, but from one pocket of houses in a scheme to the next.”³⁸

59. The Joint Committee agrees that there has been much progress in the design area. It feels, however, that there is still room for improvement, particularly in suburban and rural schemes, and the Joint Committee recommends that, through the NBA, research and development work being undertaken by An Foras Forbartha on the design of housing layouts, road standards, densities and the provision of open spaces, should be promoted and brought to the attention of local authorities.

(c) Rehabilitation and Urban Renewal

60. It is now widely considered that renewal of central town and city areas by rehabilitation of old buildings and construction of infill housing may be a more cost-effective way of providing new accommodation, when savings in the provision of infrastructure and services are taken into account. The NBA have experience of both urban renewal and infill and the development of virgin sites and satellite towns. The Joint Committee, therefore, considers that the NBA should, in collaboration with An Foras Forbartha and local authorities, study the comparative advantages of providing housing on virgin sites on the outskirts of cities and towns and urban renewal by rehabilitation and infill developments, taking into account the costs of provision of transport, services and social and ancillary facilities. The outcome of such a study could be central in influencing the shaping of future housing policies at both national and local level.

(d) Energy Saving in Housing Design

61. The recent energy crisis has introduced new problems in housing design in the areas of thermal insulation and heating provision.

62. The most common form of local authority house being constructed by the NBA is the terraced unit. This is in itself relatively energy efficient. The insulation value of external walls and roofs has been improved to the extent that problems of condensation, damp and mould growth should not occur as in the early NBA housing which had poor wall insulation. Improved insulation standards will help reduce the heating costs and all NBA houses are now being provided with an open fire or solid fuel burner. The NBA has reported that it is experimenting with some new forms of turf-fuelled heating systems. In the context, however, of the growing cost of oil, electricity and solid fuel, the Joint Committee considers that a more radical examination of the energy aspects of a local authority house should be undertaken and that the NBA should liaise with the Institute for Industrial Research and Standards and An Foras Forbartha with a view to assessing the long term cost benefits of energy saving design techniques such as double glazing, draught excluding windows and doors, high output fireplaces, mechanical ventilation with heat exchangers and solar heating.

(e) Rationalisation of Building Techniques

63. The Managing Director of the NBA in evidence stated, “In the 1960’s there was a swing towards system-building and prefabrication in construction and contractors tended to argue that if they were given sufficient orders they could produce cheap housing. We had problems which came from the fact of having system building. We find now that if we restrict ourselves to traditional construction our problems fade away”³⁹ and “In addition, it is the form of construction most acceptable to tenants”.⁴⁰ The Joint Committee accepts that experiences with system building some years ago were not favourable and that the more recent policy of the NBA to use traditional construction has been successful in minimising technical problems and tenant complaints.

64. The main failures in the system built houses of the 1960’s and early 1970’s were inadequate wall insulation, inadequate ventilation and costly heating systems which led to internal condensation, dampness and mould growth on walls. There were some other technical problems of a specific nature but these cannot be attributed to system building. An examination of the technical problems of NBA housing is included in Section VII.

(f) House Types

65. The NBA reports that the most economic house type is the two-storey terraced unit and this is the most common type in its housing programme. The next most economic is the semi-detached two-storey house.

66. In designing house types for private sites, it is the experience of the NBA that detached units are the most popular giving the owners complete control of their property. Semi-detached houses can be used in this sector if two people can agree to build a pair of houses simultaneously.

67. Except in urban housing situations, the NBA do not build higher than two storey. In any situation high rise housing, that is over four storeys, is not now being built by the NBA. There is now general resistance to high rise housing and it is considered to be more expensive to construct.

68. The Joint Committee questioned the ability of the NBA to respond to differing family sizes, especially having regard to the use of standardised house plans. The NBA considers that they have a comprehensive range of house plans that can accommodate up to ten people per house.

69. The Joint Committee also questioned the use of standard house plans and the effect this would have on the appearance of housing estates. The NBA has explained that, while standardised plans are used, the design architect for each project has freedom to develop design elevations appropriate to the location and site.

70. While accepting the above points, the Joint Committee is of the opinion that housing layout, house plans and elevational treatment need to be considered as one design concept when dealing with sites in sensitive urban and rural locations.

(g) Use of Irish Materials

71. It has always been a policy to use Irish materials and products in local authority and State housing as far as practicable. The NBA has reported considerable difficulty in obtaining asbestos/cement water mains, clay bricks and concrete tiles and in the sector of services it has experienced considerable delays in obtaining prompt service from the E.S.B. The Joint Committee hopes that the Monitoring and Advice Section—when established—in the Department of Industry, Commerce and Tourism and the E.S.B. will make contributions towards the solution of these problems.

(h) Review Procedures on Housing Policy

72. The NBA has no formal review procedures to assess the success or otherwise of their housing projects and detailed aspects of their housing designs.

73. Inquiries of a general nature, visits to housing sites after completion and natural feedback through local authorities provide a general indication of the tenants’ and occupants’ views on the completed work. The Joint Committee suggests that the NBA should institute a routine review procedure to obtain feedback on the use, running costs and maintenance of completed projects.

(i) Housing Costs

74. The Joint Committee was anxious to establish the relative costs of housing provided by the NBA and provided independently by local authorities. Statistical information supplied by the Department of the Environment showed no appreciable difference in the costs of NBA and local authority housing. In answer to the suggestion that the NBA should, through its large rationalised programme, be able to reduce its construction costs, the NBA has stated that any costs savings that are effected through rationalisation are put back into the projects in the form of better landscaping, screen walls and elevational treatment.

VI PROJECT PROCEDURES

(a) Design Procedures

75. The Joint Committee has considered the procedures employed by the NBA in preparing the brief, project design and contract drawings and specifications for its housing developments. Details of the questions put and the replies received from the NBA are set out in Appendix 2.

76. From the evidence submitted it appears that the procedures now being employed to agree the project brief with the client authority are satisfactory thus ensuring that the NBA produces a scheme that meets with their requirements. For instance, Wexford County Council in its submission has stated “Recent experience has been that consultation between the local authorities and the NBA to agree a brief has been satisfactory, more so than in earlier years”. Current consultative procedures during the development of the project design to allow authorities to comment on the design proposals also appear to be generally satisfactory. Carlow Urban District Council has stated in its submission “there has been full and comprehensive consultation to facilitate agreement on housing design and construction programme. The NBA have co-operated with the Council in this regard in commissioning an Area Action Plan to facilitate determination of construction programme, etc.” Limerick Corporation has stated “the consultation is full, complete and sensitive between both technical and administrative staffs of the Local Authority and the Agency,” and Dublin Corporation has stated “the consultation between the Agency and the Corporation at this stage is also considered adequate”.

77. The views expressed by the local authorities on the recent performance of the NBA indicate that the organisational procedures in this area are now generally satisfactory and that project designs and cost projections can be implemented resulting in satisfactory housing developments.

(b) Use of Consultants

78. The NBA employs architectural, engineering and quantity surveying consultants on many of its projects to supplement full time NBA professional staff. The Chairman of the NBA stated during the hearing of evidence “The use of consultancies generally depends on the kind of projects we get and the number arriving at any particular time… we have 31 consultancy firms engaged in various projects. Some of the input by some of the consultants might be quite small. Others may have a larger project in hands.”⁴¹

79. The Joint Committee is of the view that the use of consultants is a satisfactory arrangement and allows greater flexibility than would be possible if the NBA were to carry a large full time professional team. Waterford Corporation in its submission has made the point “the Corporation will in future schemes seek to have competent local consultants engaged by the Agency. The present method favours too much centralisation in Dublin.”⁴² The Joint Committee concurs with the view of Waterford Corporation that local consultants should be considered for projects in different locations around the country.

80. The Joint Committee notes that over the last three years the lists of architectural and other consultants working for the NBA have not changed appreciably and suggests that the NBA should regularly review the panel of consultants it employs.

(c) Construction Procedures

81. The Joint Committee has looked at the procedures employed by the NBA in appointing building contractors, supervising construction and handing over projects to the respective local authorities. Details of the questions raised and replies received from the NBA are set out in Appendix 2.

82. The Joint Committee questioned the NBA procedures relating to tenders for contracts and selecting builders. The Managing Director in evidence stated “Normally we accept the lowest tender. I prefer open tendering. We are allowed, however, to avail of what is called selective tendering following a public advertisement inviting contractors, who have the necessary expertise, to apply for inclusion on a panel, but I favour open tendering because it gives us the best of both worlds. We are seen to be taking all the necessary steps to protect public finance and, at the end of the day, we still have flexibility”.⁴³ The Joint Committee is of the opinion that the open tendering procedures employed by the NBA to obtain tenders and select contractors are satisfactory.

83. The Joint Committee has also examined the question of awarding building contracts without obtaining an insurance bond from an insurance company to secure completion of the contract in the event of failure by the contractor to complete the works whether it be due to bankruptcy, slow progress, bad workmanship or whatever cause. The Joint Committee agrees with the current policy of the NBA that building contracts should not be awarded unless the contracting builder has obtained an insurance bond for the completion of the works. This procedure should guarantee a thorough financial investigation of the contractor involved. The Committee notes that it is now general practice to accept a bond of 12½ percent, whereas 25 percent was formerly the bond level required; and the Committee, therefore, recommends that the Department of the Environment, the NBA and representatives of the major local authorities should review the bonding procedures with a view to verifying whether a bond of 12½ percent is adequate to cover losses accruing from failure by a contractor to complete a contract.

84. The Joint Committee has obtained the views of local authorities on the procedures adopted by the NBA for the supervision of contracts under construction. Again, the comments have been generally favourable but have suggested room for improvements in this area.

85. Wexford County Council stated “the supervision of construction appears to have been adequate and no undue complaints of defective workmanship have arisen. It is, nevertheless, considered essential that the Council have the facility of liaisoning with the Clerk of Works on each scheme …” Cork Corporation stated “the Corporation is satisfied regarding the supervision of the National Building Agency of constructions and the procedure for taking over completed schemes”. Carlow Urban District Council stated “Supervision of construction by NBA has been of consistently high standard … The Council’s involvement in the construction progress is facilitated by representation at a monthly site meeting …” However, Sligo Corporation has stated “the Corporation are satisfied with the adequacy of National Building Agency supervision on a scheme at present in the course of construction … The procedure for taking over a completed scheme is vague.” Westmeath County Council has stated relative to a recently completed scheme “The experience unfortunately has not been a very happy one. This was perhaps due in the main to the choice of builder …” Dublin Corporation has stated “All supervision is provided by the Agency. There have been some instances of unsatisfactory work which might be attributed to inadequate supervision.”

86. The Joint Committee is generally satisfied with the adequacy of current procedures for supervising contracts under construction, but supports the view of some local authorities that there should be a general involvement of supervisory representatives from the client local authorities and that as many projects as possible should have a full time Clerk of Works. Further, the Joint Committee feels that there may be room for improvement in the procedures relating to NBA/local authority liaison during construction in some areas of the country. Based on the comments received from local authorities, the Joint Committee is of the opinion that procedures for finalising contracts, handing them over to the local authority and remedying defects are not entirely satisfactory and the Committee therefore recommends that the NBA should review its procedures in this area to overcome the criticisms made by a number of local authorities.⁴⁴

87. Dublin Corporation has stated “In summary it may be taken that apart from the exceptions referred to … the operations of the Agency on the Corporation’s behalf have been satisfactory and have made an important contribution to the Corporation’s Housing Programme. The Corporation’s satisfaction is reflected in the recent allocation by the Corporation of three major housing sites to the Agency which will ensure the continuous engagement of the Agency for some years to come.” The Joint Committee notes that the body of opinion at local authority level is generally complimentary towards the NBA.

VII DETAILED TECHNICAL AND ORGANISATIONAL MATTERS

(a) General

88. From time to time the public will be aware that there have been controversial reports of technical problems in NBA housing projects arising from complaints by local authorities and tenants. The Joint Committee has considered reports of technical problems or defects in NBA housing projects. Details of questions raised and the replies received from the NBA are set out in Appendix 2. The Joint Committee has also had available to it a number of reports on technical defects prepared by the Institute for Industrial Research and Standards and the British Building Research Establishment.

89. The Joint Committee has noted that almost all of the technical defects in NBA housing arise from projects initiated during the 1960’s and during the period of the Government’s Low Cost or Guaranteed Order Housing Project between 1970 and 1974. The Joint Committee has also noted that the controversial and much publicised problem schemes represent a small proportion of the large number of houses constructed under the NBA management service, and that most of these houses have been successful and well received by local authorities and their tenants. The favourable comments received from many local authorities and the current work load of the NBA⁴⁵ confirm that the NBA is generally considered by its clients to be doing a satisfactory job.

90. The Joint Committee sets out below a summary of the major and most controversial problem projects together with an appraisal of what the problems were, how they arose and the position of the NBA in each case.

(b) Housing at Mayfield, Glen and Togher, Cork

91. The housing projects at Mayfield, Glen and Togher, Cork were initiated in 1965 at a time when there was a large demand for new houses in the Cork area and Cork Corporation had 260 acres of available land. At that time Cork Corporation were building 200 houses per year and it was felt they could not meet the size of the programme required to develop 1800 dwellings over a 4 year period. The Department of Local Government asked the NBA to undertake the projects and in 1968 a contract was awarded for the construction of the houses and these were completed in 1972.

92. There have been criticisms of the house designs, the layouts of the schemes with no front gardens and other details such as windows and ventilation. There have also been criticisms of the heating systems in the houses which aggravated condensation problems by recirculating air from the kitchen area and which, as systems, proved very expensive to run. In particular, however, major problems arose from mould growth and dampness inside the houses and this has been the subject of major investigations by the IIRS and the British Building Research Establishment.

93. It is claimed that the cause of the problems was inadequate ventilation and the inability of the tenants to maintain an adequate level of heating to avoid condensation and internal mould growth, aggravated by the rising cost of heating. All the houses were built without fireplaces thus eliminating natural flue ventilation and the ability to burn an open fire. However, the causes of the condensation problem cannot ignore the lack of insulation in the structure of the gable walls and the design of the constructional method, using edge-exposed mass concrete cross walls which created “cold bridges” where party walls extended as fins into the outside air. This could be seen as a major “detail” defect, but given the experience in the use of system building methods at the time that the projects were designed and built, the problems that have arisen are in common with similar projects in Britain that were built at the same time.

94. The British Building Research Establishment made recommendations for remedial action to improve the insulation performance of the affected houses. These remedial measures are reported by the NBA to have been carried out at no cost to Cork Corporation, the costs having been borne by the contractors involved and the NBA. The NBA report that since the projects were taken in charge by Cork Corporation they have had no further involvement and as far as they are aware the problems in these houses have been eliminated. Cork Corporation, however, have stated in their submission that “… these structures are a continual problem for Cork Corporation in so far as the whole design does not lend itself to high-density low income occupations.”

95. The statement on 20 February 1974 by the late Patrick Kerrigan (then Senator) in the Seanad sums up the position “In future we should be more than careful with schemes of such a size. Experimentation should be made on small sites and small schemes … This scheme was too large for experimentation and for that reason I am very critical of the National Building Agency … these are not traditional houses. They are system type houses. I do not think we have had enough experience to have tried it out in such a large scheme.”

96. The Joint Committee notes that the NBA do not now use system built structures of this nature, having reverted to more traditional construction, and that major complaints of this nature have not arisen with any of their recent projects.

(c) Movement in roofs at Finglas South, Dublin

97. In early 1978 movements in roof structures were observed in NBA housing at Finglas South, Dublin. These houses were constructed as a design and build package deal under the Government Guaranteed Order Housing Project by a major house building company. Construction of these houses was started in 1972 and completed in 1973.

98. The Institute for Industrial Research and Standards carried out a very detailed study of the roof movements, and their conclusions are set out in the NBA replies to questions in Appendix 2. The reasons for the roof movements related to the application of pre-fabricated trussed rafters that were, and still are, a common form of roof construction. In this instance the trusses were built without diagonal wind bracing or alternative form of lateral stabilisation and some trusses were built off the vertical. The combination of these factors led to horizontal movement in the roofs. The IIRS and NBA consultant structural engineers recommended action involving substantial remedial work in the roof spaces of the houses. This remedial work has been completed at the expense of the contractors involved and the NBA and at no cost to Dublin Corporation.

99. The NBA has stated—see Appendix 2—that “In accordance with general practice at the time, the prefabricated truss rafters had not been fitted with diagonal internal wind bracing”. The Department of the Environment in its submission of 30 June 1980 stated “At the time the 346 houses in Finglas South were built in the section of that development in parts of which roof truss problems arose, there was no Irish Standard Specification for trussed rafters and it was not normal practice to provide for wind bracing of the trusses”.

100. It has come to the attention of the Joint Committee that, as far back as 1968, the NBA had obtained a structural engineer’s advice on wind bracing to prefabricated roof trusses which recommended that diagonal bracing should be included where no alternative bracing could be provided. Design Guide “Timber-lab 29” issued by the Forest Products Research Laboratory in England, in its 1972 revision, in relation to the application of prefabricated trussed rafters stated:—

“Consideration should also be given to the need to provide permanent lateral bracing to the roof. Where walls are of insufficient strength to provide resistance to lateral forces acting on the roof, lateral bracing of the trussed rafters should be provided independent of the walls. This should take the form of a system of members nailed to the underside of each rafter and sloping diagonally from ridge to eaves and spanning at least four trusses at each end of the roof. Where the walls are capable of providing lateral resistance they may be used as fixing points for the lateral bracing of the trussed rafters. This could be done by positioning trussed rafters hard up against the walls and securing the tiling battens to the walls by positive fixings …”

101. The Department of Local Government Standard House Plans for individual dwellings which were designed at the same time and published in 1972 included diagonal wind bracing in their drawings and specifications for trussed rafter roofs. In the case of Finglas South, the roof trusses were built without diagonal bracing and were not located next to or fixed to the party or gable walls. The drawings for the project showed that the trusses were set away from the party walls to allow a vent pipe to pass through the roof space. There were no chimney stacks that could be utilized to stabilise the roofs from lateral movement.

102. The Joint Committee is of the opinion that, although the use of trussed rafters was, at the time of the design and construction of the Finglas South housing, in a state of evolution, there is evidence to suggest that the houses at Finglas South should not have been built without lateral wind bracing or alternative lateral stabilisation in the roofs, having regard to information available at that time. The NBA must share a proportion of the responsibility for not identifying the need for lateral stabilisation in these roofs. The NBA must also share a proportion of the responsibility for allowing these houses to be constructed with roof trusses not in true vertical alignment.

(d) Storm damage to roofs at Corrib Park, Galway

103. On 27/28 January 1974 severe gales caused extensive damage to tiled roofs at an NBA Guaranteed Order housing project at Corrib Park, Newcastle, Galway. The houses had been completed in June 1973.

104. The IIRS were commissioned to prepare a report on the defect and an extract from their conclusions is set out in Appendix 2.

105. The IIRS report states that the tiling complied with the NBA specification (except Headlap), that the specified nailing was insufficient and that the specified nailing did not comply with the tile manufacturers recommended specification for roofs in exposed locations. It apppears to the Joint Committee that an error in specification by the NBA was the cause of the problems in this case. However, the Committee recognises that even if the specification had been right there might still have been some loss due to the severity of the storm but losses would undoubtedly have been much less.

(e) Dampness in houses at Corrib Park, Galway

106. In late 1974 and early 1975, dampness was reported in houses at Corrib Park, Newcastle, Galway. These houses were constructed under the Guaranteed Order Project and were completed in June 1973.

107. The IIRS prepared a report on these problems and an extract from their conclusions is included in the replies supplied by the NBA in Appendix 2.

108. These houses had traditional cavity walls constructed with concrete blockwork and the cause of the damp and resultant mould growth was attributed to condensation caused by inadequate ventilation and heating and aggravated by the absence of traditional fires and chimneys or external wall ventilators.

109. The problems in this project are understood by the Joint Committee to be typical of widespread condensation problems in housing in Britain and elsewhere. There were no defects in the structure, but the usage of the houses, associated with lack of ventilation, rising fuel costs and high local relative humidities, led to excessive moisture inside the structure.

(f) Dampness in houses at Castle Park Estate, Tallaght

110. Similar dampness had earlier occurred in houses at Castle Park Estate, Tallaght and was reported in 1972 before completion of the project.

111. The IIRS report conclusions are included in the NBA answers in Appendix 2. In this instance the walls of the houses were constructed with “no fines” concrete and the houses had no open fireplaces but they did have external wall ventilators. There was no evidence of rain penetration through the walls and again the dampness was attributed to condensation arising from lack of ventilation and inadequate heating. The poor insulation value of the external walls with no cavity and no internal insulated lining meant that the tenants could not sustain adequate heating to avoid condensation on the inner face of the external walls even with permanent ventilation in the walls.

112. The NBA are not using any “no fines” concrete walls in their current housing programme. The Joint Committee understands, however, that “no fines” concrete houses have been and still are widely used but that it is now recognised that an insulated wall lining must be included.

(g) Fire in a house at Carrownreddy, Co. Tipperary

113. At Christmas 1975 a fire in an NBA built house at Carrownreddy, Co. Tipperary, resulted in the deaths of several members of the family sleeping upstairs in the house. The local authority were concerned that the form of construction of these houses was unsafe, and the NBA commissioned the IIRS to investigate the form of construction. This report was commenced in 1976 and was only finalized in 1980 due to the difficulties encountered by the IIRS in procuring the mandatory meetings with the local authority and the Department of the Environment fire adviser.

114. These houses were constructed under the Guaranteed Order Project using a systemised building technique consisting of in-situ concrete cross-walls and infill of lightweight timber framed construction and flat roofs. Similar houses were built in other parts of the country using the same constructional techniques. The inherent lightness of the infill construction had attracted general criticism of these houses by local authorities in the areas where they were built, and an on-site fire during construction of a scheme in Bray, Co. Wicklow, had raised questions on the safety of the construction. The fire at Carrownreddy appeared to bear out the fears of those who had expressed reservations about the form of construction.

115. The IIRS report has examined the construction of these houses having regard to the draft Irish Building Regulations which are based substantially on the British Building Regulations which are the basis for the evaluation of construction of all houses whether traditionally built or system built.

116. The IIRS report has established that in all respects the houses at Carrownreddy, Co. Tipperary, complied with the draft Building Regulations. One minor detailed defect was identified relating to fire stopping at the ends of the upper floors, but it was concluded that this had no relationship with the fire spread through the houses and the resultant loss of life. The IIRS report, therefore, established that, having regard to the proper technical criteria on which to base an assessment of the adequacy of the method of construction, the houses were properly designed and built and there was no evidence to suggest that a traditionally constructed house would have avoided the loss of life of the family under similar fire circumstances.

(h) NBA responsibilities in regard to technical defects of Guaranteed Order Housing Project

117. The Joint Committee has sought to clarify the respective roles of the NBA and the then Department of Local Government in evaluating and supervising the proposals for and the construction of houses under the Government Guaranteed Order Housing Project.

118. The submission from the Department of the Environment of 30 June 1980 sets out the whole background to and workings of the Guaranteed Order Housing Project (See Appendix 4).

119. The Government directives relating to the proposed programme invited building contractors to submit a design and build package deal for low cost houses using whatever industrialised techniques that might be appropriate. Some compromises on constructional standards regarding life span were to be considered if a significant saving could be reflected in capital cost but proposals were to comply with normal specification on matters of stability, insulation and fire risk.

120. The Department of the Environment submission states “there was close and constant liaison between the technical advisers of the Department and the Agency, practically amounting to a pooling of knowledge and expertise”, and “The examination of final contract documents was to be carried out jointly by the Department and the Agency or Local Authority.”

121. The Joint Committee understands from this that the NBA was centrally involved in evaluating the designs and the technical adequacy of the package deal proposals submitted by tendering building contractors under the Guaranteed Order Housing Project.

122. Having regard to the technical complexity of building construction, specification and detailing which necessitates major and time consuming studies by teams of experts to evaluate the technical adequacy of new forms of construction, the Joint Committee considers that the Government Guaranteed Order Project placed the NBA in a position that they would have needed to enlist the services of the specialists at the Institute for Industrial Research and Standards and the various building research laboratories to enable them to thoroughly evaluate all the proposals submitted for system built housing construction techniques.

123. Another important aspect of the role of the NBA in the Guaranteed Order Project is the criticisms that have arisen from projects like Carrownreddy, Co. Tipperary, where, as the IIRS report on these houses has shown, there was no technical defect in the form of construction, but the general nature of the construction was criticised by the local authority and the tenants. There have been other schemes in different parts of the country that have been similarly criticised. As stated by the Department of the Environment in its submission of 30 June 1980, the terms of reference of the Guaranteed Order Project stated “Proposals could be for dwellings having a shorter life span than traditional dwellings but such proposals would have to reflect proportionate savings in capital cost”. This statement underlines the fact that some compromise on standards of construction and specification was to be considered. The Joint Committee is of the opinion that the NBA cannot be held responsible for the form of construction employed in “low cost” housing projects under the Guaranteed Order Project where the relevant regulations governing the construction of houses, that is the draft Irish Building Regulations and the counterpart British Regulations and Codes of Practice, have been met and where the criticisms of the type of construction relate to its inherent “cheapness” which was manifest in the Government policy at the time.

124. While acknowledging that there was Government pressure to build more and cheaper houses during the period, the Joint Committee considers that the NBA must bear a share of the responsibility for some of the technical defects that arose in the Guaranteed Order Housing Project schemes. In some instances, such as roof movements and defective roof tiling, the Joint Committee considers that the problems should have been avoided. In the most troublesome area, however, that of inadequate insulation, heating and ventilation leading to problems of dampness and mould growth, the Joint Committee understands that similar problems occurred in other countries with similar projects constructed at that time using cheap or system built techniques and with no open fires.

125. The Joint Committee is aware that the NBA ceased using systemized construction techniques some years ago and that the NBA housing projects, constructed over the last 5 years, have been constructed using traditional methods and have been favourably received by local authorities and tenants and have been substantially free of technical faults.

(i) NBA position relating to the liquidation of Lakeglen Construction Ltd.

126. In 1978 Lakeglen Construction Ltd. went into liquidation while under contract to build five housing projects for the NBA. There have been allegations in the press and by the Construction Industry Federation that the NBA had inadequately investigated the financial position of Lakeglen Construction Ltd. and that a contract had been awarded by the NBA to Lakeglen Ltd. when the company was known to be in financial difficulties.

127. The system of insurance bonds issued by insurance companies to contractors is to secure completion of contracts undertaken should the contractors fail to complete the works for any reason such as bankruptcy, bad work or slow progress. The insurance company issuing the bond certificate to a contractor undertakes a thorough financial investigation of the contractor in question including bank reports, trade references and an examination of the contractor’s accounts and business performance. It is considered normal that this detailed examination by an insurance company, if favourable, and if a bond certificate is issued, is an adequate testimony as to the financial stability of the contractor.

128. In the case of the NBA and Lakeglen Construction one project was awarded to Lakeglen Construction in May 1977, 10 months before the Company’s liquidation, without an insurance bond. The decision to award the contract without a bond is substantiated in the NBA written submission of 24 April 1980. The Joint Committee considers that, given the stated circumstances of a good previous performance, a very competitive tender price and the fact that 12½ % bonds were being issued at that time for two other concurrent contracts, it was not unreasonable for the NBA to allow this project to proceed without a bond.

129. In January 1978 the NBA awarded a further contract to Lakeglen Construction for a scheme at Shanganagh, Co. Dublin for £859,916. This is the time that it has been alleged that Lakeglen Construction was known to be in financial difficulties. However, the NBA secured from Lakeglen Construction a 25% insurance bond issued by the Insurance Corporation of Ireland, who had issued three other bonds to Lakeglen Construction Ltd. This was a higher bond than had been previously provided.

130. The Joint Committee is satisfied that, having gone through the procedure of obtaining a 25% bond from the Insurance Corporation of Ireland on the contract for the scheme at Shanganagh, Co. Dublin awarded to Lakeglen Construction Ltd. in January 1978, the NBA could not have been reasonably expected to do more to be satisfied that Lakeglen Construction Ltd. was in a sound financial position.

131. With regard to other aspects of the liquidation of Lakeglen Construction Ltd., which involved a major disruption of the housing projects on which it was engaged, Cork Corporation in its written submission has stated “The NBA deserves the highest praise for the manner in which it dealt with the liquidation of the contractor concerned and the employment of another contractor to finish the scheme.” The Joint Committee believes that, from the written evidence submitted by Cork Corporation, the NBA acted in a diligent and responsible manner in resolving the difficulties created by the liquidation and the consequent disruption of the contracts in which Lakeglen Construction Ltd. was involved.

VIII CONCLUSION

132. The Committee took oral evidence from representatives of the National Building Agency Limited. Written evidence, which is reproduced as Appendices to this Report, was received from the National Building Agency Limited, the Department of the Environment, the Department of Defence, the Office of Public Works, twenty-one local authorities, the Confederation of Irish Industry, the Construction Industry Federation and Deputy Michael Keating. The Committee wishes to acknowledge its thanks to all who provided this evidence.

133. Finally, the Committee wishes to express its thanks to Mr. Lindsay N. Johnston, Consulting Architect, and Mr. Thomas P. Ferris, Economist, for their expert help throughout this inquiry.

(Signed) EOIN RYAN

Chairman of the Joint Committee

2 October 1980

¹Dáil Debates, Vol 206, Col. 618.

²Dáil Debates, Vol 241, Col. 2052-2053.

³See Evidence (Question 20).

⁴See Evidence (Question 4).

⁵See Evidence (Questions 1 to 4, 9 to 21 and 43 to 45).

⁶See Evidence (Question 5).

⁷See Evidence (Question 8).

⁸See Evidence (Question 22).

⁹See Evidence (Question 42).

¹⁰See Appendix 5.

¹¹See Evidence (Question 7).

¹²See Appendix 6.

¹³See Evidence (Question 49).

¹⁴See Evidence (Question 51).

¹⁵See Evidence (Question 49).

¹⁶See Appendix 1A.

¹⁷See Evidence (Question 91).

¹⁸See Appendix 1A (Organisation Chart of NBA).

¹⁹See Appendix 1.

²⁰See Appendix 31.

²¹See Evidence (Question 21).

²²Dáil Debates (Vol. 311, Col. 883).

²³See Evidence (Question 15).

²⁴See Evidence (Question 3).

²⁵Having adjusted for inflation.

²⁶See Evidence (Question 114).

* “Surplus after taxation” for 1977 is before adjustment for prior year’s taxation.

²⁷“Surplus alter taxation” tor 1977 is before adjustment for prior years taxation.

* “Surplus after taxation” for 1977 is before adjustment for prior year’s taxation.

²⁸See Evidence (Question 73).

²⁹See Evidence (Question 114).

³⁰See Evidence (Question 123).

³¹See Appendix 1.

³²See Evidence (Question 126).

³³See Evidence (Question 36).

³⁴See Appendix 1.

³⁵See Evidence (Question 28).

³⁶See Evidence (Question 118).

³⁷See Evidence (Question 120).

³⁸See Evidence (Question 85).

³⁹See Evidence (Question 63).

⁴⁰See Evidence (Question 62).

⁴¹See Evidence (Question 127).

⁴²See Appendix 13.

⁴³See Evidence (Question 100).

⁴⁴See Appendices.

⁴⁵See Section II.