Minister gave go-ahead despite deficit forecast

NATIONAL CONVENTION CENTRE:FORMER MINISTER for tourism John O'Donoghue decided to proceed with a national conference centre in 2005 even after being told that the costs would outweigh the benefits by up to €217 million, according to the Comptroller and Auditor General.

“Notwithstanding this, the minister considered that the process should proceed to the next stage given his view that the development of a national conference centre represented an essential component of modern, international tourism infrastructure.”

His department maintained that “nothing in either the capital appraisal or PPP [public-private partnership] guidelines should be taken as precluding Government or ministers from deciding in the national interest to approve projects”, the CAG’s report says.

The department pointed out that the Government had made a firm commitment in its programme to a national conference centre and argued that the absence of a state-of-the-art conference centre was a barrier to the growth of high-value business tourism.

The report notes the Government had decided in principle in June 2003 to proceed with a national conference centre in Dublin so long as the capital cost – estimated then at more than €414 million – “did not impact on the general Government balance”.

In February 2007, following the detailed assessment of tenders, a contract was awarded to the Spencer Dock consortium, led by developers Treasury Holdings, under which it will receive payments totalling €725 million over a period of 25 years.

The contract provided for payments of €47 million per year for the first five years, partially to cover the capital cost, reducing to an annual payment of €23 million for a further 20 years. In return, the developers built the facility, and took charge of its operation.

They also undertook to secure a specified number of delegates over the 25-year life of the contract, which provides for profit sharing for the State in circumstances where profits exceed specified levels as well as penalties for non-performance by the operators.

“Annual targets are now set at 4,660 delegates in the first year, rising to 34,140 delegates in the fifth year. Up to 5 per cent of the unitary payment can be deducted if the required delegate numbers are not secured,” the report notes.

Although the Spencer Dock consortium had “the most expensive proposal”, its selection was based on higher marks for design, construction, operation and maintenance.

Noting the wide gap in the value of tenders, the report suggests the Government might publish public service benchmark estimates of the capital costs of projects to give greater clarity to bidders about the “effective State affordability limit”.