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Another tender process for broadband plan would take three years, committee hears

Eir’s CEO said last week that it could deliver the NBP for far less than the approved bidder.

Image: Shutterstock/Valentyn Volkov

Updated Jul 3rd 2019, 6:00 PM

THE GOVERNMENT COULD not legally accept any offer from Eir to deliver nationwide broadband for less than €1 billion made outside of the procurement process, Secretary General of the Department of Communications told an Oireachtas committee this evening.

In his opening statement, Mark Griffin said Eir’s statement that it could deliver it for far less than the approved bidder, was not a formal offer, nor could it be considered as such as the company withdrew from the tender process. 

Eir CEO Carolyn Lennon has stated that she was “surprised” that evidence given before committee last week that the company could complete the National Broadband Plan (NBP) for less than €1 billion was seen by the Government as an offer.

The committee heard from correspondence from Lennon following her appearance before it last week, as it continues to investigate the NBP process and how to proceed with the roll-out of rural broadband.

In a letter to the committee on 28 June, Lennon said that comments she made about the cost of the project during the committee were not new, nor were they intended to disrupt the NBP.

It followed her appearance before the committee earlier last week, when she claimed that Eir could complete the roll-out of rural broadband for “under €1 billion”.

The government estimates that the plan, which aims to bring high-speed internet to over 540,000 properties in rural Ireland, will cost the taxpayer around €3 billion.

“Eir was surprised that our evidence to the CCAE Committee was considered by Government as an offer to complete the NBP or an attempt to upset the current process,” Lennon’s letter reads.

It continued:

Eir is a commercial organisation and we remain very open to discussing commercial opportunities, however from a legal perspective I must advise that these views should not be seen as a formal offer designed to replace or supersede the current NBP procurement process.
My statement and this letter represents our expert view on the issue of value for money and our consistent view, if asked, how Eir would have rolled out high-speed broadband to the Intervention Area and what it would cost.

Lennon added that the company had provided the figure as a matter of transparency when asked a specific question by the committee.

She also said that the company wanted to show that there were cheaper ways to complete the NBP if the government’s €3 billion subsidy was an issue, “based upon the public controversy of recent months”.

Speaking about the Eir boss’ appearance before the committee last week, Griffin said that setting up a new procurement process would take at least three years.

In those three years, over a third of the 540,000 premises would be “passed”, ready for connection.

He added 1,000 homes across all counties would be connected to broadband, stating that there is no indication a new tender process would attract new bidders and what the final cost of the project would be.

Speaking about Eir’s comments about the “constraints” that made them withdraw from the process, Griffin said this related to governance issues and State aid rules.
He said the rules were set out in the procurement process so as to “protect the €2 billion of taxpayers money”.

When you are talking about spending €2 billion of taxpayers money “you need greater oversight”, he added.

Fergal Mulligan from the Department of Communications said the government was somewhat “shackled” by State aid rules set out by the EU.

He said if State aid rules were not complied with, they would never get State aid approval again.

No business case

Eir was among the original bidders for the contract but pulled out of the process, and US-based investment firm Granahan McCourt is now the government’s preferred bidder for the contract, which has not been signed yet.

However, the plan will require the installation of around 144,000 kilometres of fibre cable on about 90,000 Eir poles around Ireland to deliver access to broadband.

Fibre cables will also have to be installed on poles owned by the company, which will be leased from Eir at a cost of around €1 billion.

The escalating cost of the government’s subsidy for the plan has been an ongoing source of controversy, and documents seen by TheJournal.ie show that the estimated cost of the plan rose by €300 million in one month last year.

Following Lennon’s comments last week, Taoiseach Leo Varadkar said that the company should explain its proposal, adding that he was “all ears” if the project could be completed for less than the government’s estimate.

He also told the Dáil that he had concerns about the figure proposed by Eir, and questioned whether the customers would end up paying more for the service.

Former Communications Minister Denis Naughten also questioned the €1 billion figure, and explanations as to why Eir pulled out of the tender process in the first place.

In her letter, Lennon reiterated claims she made to the committee that the company would have been unable to complete the project for €1 billion because of the procurement model used by the Department of Communications.

“While Eir could have delivered the NBP programme as specified, we were unwilling to do so because of the complex and onerous provisions that left us with no possibility to develop a business case for the project,” the letter read.

“Eir therefore reluctantly took the logical commercial decision to withdraw.”

She added that the company remained committed to supporting the plan by providing the use of its poles and ducts to allow the project to continue. 

With reporting from Christina Finn.

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