MINISTER FOR PUBLIC Expenditure and Reform Paschal Donohoe expressed concerns about the spiraling cost of the National Broadband Plan (NBP) a day before the Government received the final tender for the project, new documents show.
In a meeting on 17 September last year, Donohoe also questioned a decision to grant ownership of the plan to the winning bidder, after it emerged that the Government would pay €2.9 billion for the project over 25 years.
The project, which will see the rollout of a State-subsidised broadband service across the country, has been beset by delays since it was first announced in 2012.
The plan has been an ongoing source of controversy, following a number of rejected proposals, plans for the proposed ownership of the network, and a Ministerial resignation last year.
Several bidders pulled out of contention for the tender for the project, which was awarded to the Granahan McCourt consortium in May, while the escalating cost of the subsidy the government will provide for the plan has also been criticised.
However, documents released to TheJournal.ie under the Freedom of Information Act show how members of the Cabinet were also among those who privately questioned aspects of the plan before the bidding process was even complete.
Last September, Paschal Donohoe raised doubts about the cost of the plan at a meeting attended by the Taoiseach and then Minister for Communications Denis Naughten.
The meeting was held so Naughten could provide an update on the NBP a day before Granahan McCourt submitted the final tender for the project.
Minutes of the meeting released under FOI show how Naughten outlined that the estimated cost of the project to the State had risen by more than €300 million in a month.
Naughten also explained other aspects of the plan, including details of a cost-benefit analysis and the next steps to be taken before the contract was awarded.
However, minutes show that following a presentation by Naughten, both Donohoe and Secretary General of the Department of Public Expenditure and Reform, Robert Watt expressed concerns about the financial cost of the plan to the State.
The two questioned whether the ‘gap funding’ ownership model for the broadband network remained the best option to the Government, particularly as it would be heavily subsidised by the taxpayer.
Under this model, the State will pay €2.9 billion for the design and construction of the broadband network.
However, the network will be owned by Granahan McCourt when the contract ends in 25 years.
Watt told those present at the meeting that there was a case for pausing and reviewing the proposal, and expressed “very serious reservations” about it as it stood.
However, minutes also show that Naughten disagreed with both men’s concerns, and sought to proceed and make a final decision on the plan in October 2018.
Ownership model
According to the minutes, Naughten said that the ‘gap funding’ model had been agreed upon by the Government despite his own previous reservations about it.
He said the ‘gap funding’ model was the preferred choice of the Department of Public Expenditure and Reform, as it was seen as a “less expensive option”.
He pointed out that the decision was made following an exercise by the government to examine different funding ownership models for the network.
However, minutes taken at the meeting also noted that an agreement was made at a previous meeting on 2 May 2018 that this exercise had “not reached any definitive conclusion”.
A report on the plan from 23 August shows that the estimated cost to the government at the time was €2.6 billion over 25 years, which had risen to €2.9 billion by September.
Despite concerns from Donohoe and Watt about the rising cost, the government continued with the ‘gap funding’ model and accepted the tender from Granahan McCourt the following day.
The following month, Naughten quit his ministerial post over a series of controversial meetings with the head of the consortium, David McCourt.
Last month, the Government published a number of memos from by Watt and other civil servants to the Cabinet from earlier this year recommending that the government not proceed with the NBP on grounds of affordability, risk and value for money.
In a statement to TheJournal.ie, a spokeswoman for the Department of Public Expenditure and Reform said that Minister Donohoe was fully supportive of the plan.
The spokeswoman said that Donohoe was satisfied that the cost benefit analysis for the plan was “fully compliant with the public spending code” and that no projects will be delayed as a result of the Government’s decision to proceed with the project.
Conditional subsidy
Other documents released under FOI show how the Government attempted to downplay the potential cost of the broadband plan when announcing the final bid.
A confidential memo to the Taoiseach in September 2018 stated that a subsidy figure of €2.1 billion – excluding VAT – would be used “for the purposes of announcing a contract award”.
However, the memo states that the Department of Communications, Climate Action and Environment had ringfenced €380 million as a ‘conditional subsidy’ to cover “unforseeable and unavoidable costs” associated with the state of Eir’s rural network.
As part of the project, the government will lease poles and ducts owned by Eir in order to roll out the plan, which is estimated to cost up to €1 billion.
The conditional subsidy will potentially be used to repair or replace these poles and ducts, although the memo noted that the bidder would have to meet substantial conditions in order for this to be paid.
“If the assumptions in the bid model transpire to be reasonable, then none of the €380 million will become payable,” it said.
The long-awaited plan will begin to bring high-speed internet to more than 540,000 homes, farms and businesses from next year.
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