Contracted firms would not have been hired by CIE engineers

Firms contracted to build a rail signalling system that went £36 million over budget would never have got the job if CIE's engineers had had their way, an inquiry heard yesterday.

The accountant who co-wrote a review of the project told an Oireachtas sub-committee that CIE's decision to conclude a deal with the contractors before entering a formal joint venture was "unusual".

Mr Michael O'Neill, a partner at PwC, said a draft paper outlining "very serious problems" with the partners, Modern Networks Ltd (MNL) and Alstom, was changed before it was put to the board of CIE's rail company, Iarnrod Eireann.

The effect of the change was to state that certain technical difficulties with all those tendering for the projects had to be resolved. A sub-committee member, Mr Jim Higgins TD, said that change "tilted the balance" in favour of MNL, then known as Murray Telecommunications, and Alstom, then known as Sasib. MNL went into liquidation last month.

The two groups were hired on July 6th, 1997, after the revised paper was adopted by Iarnrod's board. Mr O'Neill told a subcommittee of the Oireachtas Joint Committee on Public Enterprise and Transport that CIE's engineers wanted to give the work to another company, Westinghouse.

The draft paper was written by an Iarnrod Eireann executive, Mr Rory O'Connor. Mr O'Neill and a colleague, Mr William O'Riordan, had been unable to establish who changed it.

They identified Iarnrod's then head of procurement, Mr Brian Powell, as Mr O'Connor's superior. Mr Higgins said Mr Powell would be questioned by the inquiry. Mr Powell was one of four senior Iarnrod Eireann staff central to the signalling plan that left the rail company to join MNL.

Another, Ms Mary Hand, was the solicitor who drew up the legal elements of the contract. The inquiry heard she was on secondment from the CIE group solicitor's office and did not refer the contract back to that office when it was concluded.

The other two staff who left Iarnrod for MNL were Mr Bernard Kernan and Mr Pat Judge.

A barrister for Mr Powell, Ms Hand and Mr Kernan yesterday sought the right to cross-examine Mr O'Neill and Mr O'Riordan before the inquiry continued. Mr Eoin McCullough said his clients had reservations about the report written by Mr O'Neill and Mr O'Riordan and were keen to vindicate their actions.

A barrister for Alstom, Mr Bill Shipsey SC, also sought to cross-examine Mr O'Neill and Mr O'Riordan. Those applications were opposed by a barrister acting for PwC, Mr Maurice Collins.

The sub-committee's chairman, Mr Sean Doherty TD, said he would rule this morning on the issue.