Session 2007/2008

Second Report

Report on Springvale
Educational Village Project

Together with the Minutes of Proceedings of the Committee relating
to the Report and the Minutes of Evidence

Ordered by The Public Accounts Committee to be printed 20 September2007
Report: 4//0708R Public Accounts Committee

PUBLISHED BY AUTHORITY OF THE NORTHERN IRELAND ASSEMBLY

Public Accounts Committee
Membership and Powers

The Public Accounts Committee is a Standing Committee established in accordance with Standing Orders under Section 60(3) of the Northern Ireland Act 1998. It is the statutory function of the Public Accounts Committee to consider the accounts and reports of the Comptroller and Auditor General laid before the Assembly.

The Public Accounts Committee is appointed under Assembly Standing Order No. 51 of the Standing Orders for the Northern Ireland Assembly. It has the power to send for persons, papers and records and to report from time to time. Neither the Chairperson nor Deputy Chairperson of the Committee shall be a member of the same political party as the Minister of Finance and Personnel or of any junior minister appointed to the Department of Finance and Personnel.

The Committee has 11 members including a Chairperson and Deputy Chairperson and a quorum of 5.

The membership of the Committee since 9 May 2007 has been as follows:

Mr John O’Dowd (Chairperson)
Mr Roy Beggs (Deputy Chairperson)

* Mr Micky Brady replaced Mr Willie Clarke on 1st October 2007

Table of Contents

List of abbreviations used in the Report

Report

Executive Summary

Summary of Recommendations

Introduction

The Department for Employment and Learning’s Handling of the Project

Why the Project Failed to Deliver the Main Campus and Applied Research Centre

Other Areas where the Project could have been Better Handled

The Aftermath of the Project

Appendix 1:

Minutes of Proceedings

Appendix 2:

Minutes of Evidence

Appendix 3:

Correspondence

Appendix 4:

List of Witnesses

List of Abbreviations used in the Report

The University           University of Ulster

The Institute             Belfast Institute of Further and Higher Education
                                (now known as the Belfast Metropolitan College)

The Department       Department for Employment and Learning

C&AG                       Comptroller and Auditor General

HEFCE                     Higher Education Funding Council for England

PFI                          Public Funded Initiative

Executive Summary

Introduction

1. The Springvale Educational Village project was aimed at addressing the particular educational, cultural and social needs of West and North Belfast, as well as Northern Ireland in general. With a strong cross community dimension, it also aimed to promote regeneration in an area marked by significant economic and social deprivation and educational underachievement. The project promoters were the University of Ulster (the University) and the Belfast Institute of Further and Higher Education (the Institute) – now known as the Belfast Metropolitan College, with the Department for Employment and Learning (the Department) being the main funder.

2. The project was to have three components, costing a total of £71 million:

• Main Campus: to be shared between 1,500 further and 1,500 higher education students (£59 million).
• Applied Research Centre: to stimulate inward investment and develop local companies in start-up units (£8 million).
• Community Outreach Centre: a hub for community and outreach programmes and a training facility (£4 million).

However, only the Community Outreach Centre (some 6% by value of the overall project) was delivered.

Overall conclusion

3. The Committee’s overall conclusion is that this project was stamped with failure: failure to deliver; failure in the Department; failure in the University; and failure to respond to the needs of the local communities and properly acknowledge the huge voluntary commitment made by them.

4. In the Committee’s view, both the Department and the University lost the will to succeed. There was enormous political goodwill towards this project. It was announced with a great deal of fanfare by the President of the United States and the Prime Minister of the United Kingdom. When the University’s concerns over the governance arrangements and project affordability emerged, it could have called upon the national and international goodwill towards the project, but chose not to do so.

5. The Committee found it particularly disturbing that the Department effectively did nothing to save the project when the University disclosed its reluctance to continue. Had the Department signalled these difficulties at the time, the Committee believes that funds could well have been found to save the project. Regrettably, however, it was a case of the University not asking for more assistance and the Department not offering any. By failing to capitalise on the enormous local, national and international support for the educational complex at Springvale, the Department and the University and the Institute missed what was an unprecedented transformational opportunity for one of the most heavily deprived areas of Belfast.

The Department for Employment and Learning’s Handling of the Project

6. The Committee feels very strongly that the Department failed in its role as Government’s representative on the Springvale project. The evidence clearly shows that the Department did not ensure that the project promoters had a firm grip on the viability of the project, from the start; the Department also failed to foster a balanced and realistic view of the risks of failure among the local communities; its monitoring of the University’s changing financial position was clearly inadequate; its handling of the University’s declaration, in late 2001, that it wished to withdraw was weak and ineffective; and when the University did finally pull out in late 2002, the Department was lacking in its efforts to rescue the project.

Why the Project Failed to Deliver the Main Campus and Applied Research Centre

7. The University said that it was withdrawing from the project primarily because of affordability concerns, but the Committee’s view is that it lost the will and chose not to proceed. While the University’s financial strength appeared to deteriorate, it nevertheless proceeded with a number of other, substantial capital projects, ahead of Springvale. Moreover, the University could have gone back to the Department and the private donor to request additional funding, or considered taking a strategic decision to afford Springvale (the annual deficit in running costs of the project was estimated at between £270,000 and £1.2 million, at a time when the University’s annual income was £120 million). Notably, none of these options appear to have been properly explored.

8. The Committee believes that neither the Department nor the University tackled project viability and affordability at the right time and in the right way. What is particularly disturbing is the failure of the Department and the University to properly communicate on the crucial issue of viability. Even now, in evidence submitted to the Committee after the evidence session, the Department and the University disagree on the requirements for assessing the project’s viability and have provided contradictory information. The Department states that the University could have allocated the income from 1,500 students to Springvale and, therefore, made the project viable. However, the University maintains that this was not its understanding of the funding conditions which the Department had imposed. This divergence of views on such a fundamental issue for the project is appalling. It is little wonder that the project went awry, when there was such a lack of understanding between the principal parties from the outset.

9. The governance arrangements for Springvale were another source of friction and formed the basis for the University’s disclosure to the Department, in November 2001, that it wished to withdraw from the project. Given the leading role of the two promoters in the project, there was an inherent conflict between the relative primacy of the parent institutions and Springvale. Doubts about the suitability of the governance model were first expressed in 1998, when the Department told the University and the Institute that no one had previously succeeded in carrying through such a joint project to a conclusion. This suggests to the Committee that the governance arrangements of Springvale were ill-advised. There is evidence that problems arose at various times between the promoters and there were tensions between the level of community involvement and the University’s academic/institutional independence. Nevertheless, the University had signed the legal contracts which underpinned the governance arrangements and ought, therefore, to have lived up to them. The Department must also bear a measure of responsibility for the flawed governance model; the Accounting Officer told us that it had been closely involved in developing the arrangements.

Other Areas where the Project could have been Better Handled

10. The Committee has serious concerns about the quality of financial planning, management and control exercised by the project promoters. Almost five years after the initial proposal, the Outline Business Case identified many key areas of uncertainty in relation to both capital and recurrent funding.

11. The project appraisal process was also inadequate. Earlier appraisals appear to have provided an unduly optimistic and misleading view as to the viability of the project. From June 2001, however, appraisals came to a very different conclusion, even though the essence of the project had not changed. Such was the contrast with the earlier appraisals; the Committee is concerned about the possible manipulation of results.

12. The University behaved deplorably in its relationships with the Institute and the local communities, its principal partners in this project. Moreover, the Department appears to have acquiesced in this. Not surprisingly, the communities have expressed their outrage at the University’s behaviour. In their view, for the University to "pull the plug" on what was originally its project was the "ultimate example of bad faith and breach of trust". The Committee notes the University’s apology for the manner in which it withdrew from the project and its acknowledgement that it should have been more open and transparent with its partners. While this is welcome, it would have been more fitting had that apology been made directly to the local communities at the time.

The Aftermath of the Project

13. There have been only limited tangible benefits from the project. While the Community Outreach Centre was completed and now provides a valuable resource for the area, there is no Main Campus and no Applied Research Centre. The Committee acknowledges that there have been other initiatives, including the approval of a £13 million Workforce Development Centre. However, these do not amount to a university and so the vast majority of the anticipated educational, cultural, social and economic benefits of the planned project have not materialised. The levels of deprivation within these areas are as high today as when the project was brought to an end in 2002. An opportunity to reduce the ‘brain drain’ from Northern Ireland and respond positively to the findings of the 1997 Dearing Report was also lost.

14. In addition, some £3.6 million of direct funding was wasted and a further substantial, but unquantifiable sum was lost in respect of the enormous amount of time and effort devoted to the project by the local communities and various Government Departments and agencies. Given the long term community effort, the decision not to implement the project in full was a massive blow to West and North Belfast and has left an ongoing legacy in terms of the damage caused to community relations.

15. Both the Department and the University failed to deliver the Springvale Educational Village project, but they are not the ones paying the price of failure. That price is being paid by Northern Ireland in general and in particular by the local communities. It is to the great regret of this Committee that their experience has been one of loss: lost hopes, lost time and effort and, above all, lost opportunities.

Summary of Recommendations

The Department for Employment and Learning’s handling of the project

1. Government needs to recognise that Departments will always have a key leadership role to play in projects where they are the major funder. The Committee considers that a Department must ensure that, where local communities are substantially affected by projects which are wholly or partly funded by it, they are kept fully informed of all significant developments, throughout the life of the project. The Government must never again be party to the raising of community expectations to such a high level, especially in areas of high deprivation, only to dash these at a late stage in the process (see paragraph 7).

Why the Project Failed to Deliver the Main Campus and Applied research Centre

2. The Outline Business Case is a key document in a PFI project and one which forms the basis for a crucial element in the decision making process. Where an Outline Business Case is prepared in respect of a publicly funded project, the Committee expects the funding Department to be a formal recipient of the completed document. Departments must never allow themselves to be sidelined from such a vital part of the decision making process (see paragraph 15).

3. Funding Departments must, in all cases, comprehensively review and, where necessary, challenge the findings of the Outline Business Case. This is especially important where the results point towards a fundamental change in the direction of the project (see paragraph 16).

4. In projects as significant as Springvale and especially where Government’s credibility is involved, the Committee expects Departments to be highly pro-active in examining alternative ways in which projects can be funded and afforded by project promoters (see paragraph 17).

5. In the Committee’s view, the failure to take account, in the decision to withdraw, of the wide range of socio-economic benefits that would have accompanied the completed Springvale project was a serious omission. The Committee considers that the potential value of the loss of wider benefits should always form an integral part of the decision making process in such cases (see paragraph 18).

6. The University used affordability as the pretext for its withdrawal but, in the Committee’s view, the loss of will to make the Springvale project work was the major factor in its failure. Where, in the future, the University is involved in a partnership on a publicly funded project, the Committee expects it to meet the highest standards of full, open and constructive co-operation with its project partners (see paragraph 19).

7. Recipients of substantial grants of public funds must ensure that all significant actions relating to the grant-aided activity are properly documented. This is a minimum standard. Departments should make sure that their clients are aware of the standard required (see paragraph 21).

8. The Department must ensure that the viability of projects is fully assessed at an early stage, with detailed updates carried out as circumstances develop. The aim of a rigorous assessment of viability is not to ‘trip up’ a project; rather, it is a mechanism to ensure that potential weaknesses are identified at an early stage and can be addressed (see paragraph 24).

9. Given the Department’s comments about the adequacy of the guidance for assessing viability in this type of project, the Committee recommends that it liaise with both HEFCE and the Department of Finance and Personnel to determine whether further guidance might usefully be developed (see paragraph 25).

10. The Committee finds it incredible that the Department did not establish, with the University, a clear and shared view on project viability, both at the outset of the project and, later, when crucial decisions were being made on its future. This was a fatal omission and one which indicates an amazing failure of communication at the top of both organisations. The Committee insists that in future projects, the Department and the project promoters work on an open basis, to deal unambiguously with project viability from the outset and throughout the project, fully sharing information on which to base informed decisions (see paragraph 28).

11. The Committee considers that, where a new educational entity is being proposed or supported by two or more autonomous organisations, it is more likely to be successful where the management of the entity is vested in a single body. If, however, the new entity is to be run jointly by two or more institutions, there must be a clear strategic vision from the outset and one which is wholly shared by each of the partners involved. It will also be important for the institutions involved to agree the detail, in practical terms, of the governance arrangements at an early stage and so avoid the type of problems which beset the Springvale project at such a late juncture (see paragraph 32).

12. When a Department is confronted with substantive operational problems on a major project, the Committee expects it to pursue every reasonable means of overcoming the difficulties in order to achieve the project objectives. Failing to tackle the problems in a meaningful is not an option (see paragraph 35).

13. The Committee wants to see the Department adopt a position where it can exert sufficient influence over the management and direction of any project which it is funding. The institutional autonomy of a funded body, such as the University, will not be accepted by the Committee as an excuse for Departmental inaction (see paragraph 37).

Other Areas where the Project could have been Better Handled

14. Effective financial planning and management of projects are pre-requisites for success. The Committee expects funding Departments and project promoters to get a firm grip on these fundamental elements of control, from the outset and throughout the life of a project (see paragraph 40).

15. It is clear that a number of the project appraisals failed to identify what proved to be key issues in relation to viability and affordability at a sufficiently early stage, when they could have been more easily addressed. Departments and project promoters must ensure that project appraisals address all of the relevant issues in a comprehensive and objective manner (see paragraph 44).

16. Where the Department is working on a project in partnership with an external body and providing significant levels of public funding, it must closely monitor the financial position of the funded body, to ensure that it can honour its financial commitments to the project (see paragraph 47).

17. Where a Department is a major funder in a project, it has a responsibility to ensure, as far as possible, that the project promoters are constructive, open and transparent with each of the key stakeholders and that important information is shared on a timely basis. The Committee considers that, where a Department finds that a promoter is not meeting the standards of openness expected, it must take affirmative action to counter this (see paragraph 50).

18. The Committee expects both the Department and the University to learn the lessons from the unsatisfactory way in which the withdrawal from Springvale caused so much upset and damage to the ongoing relationships with the local communities (see paragraph 54).

19. The Committee wants to make clear that it will never again accept any publicly funded body failing to provide essential information to the Audit Office in the exercise of its functions. The Committee expects all such bodies to offer the highest levels of co-operation at all times (see paragraph 56).

20. The Committee was disappointed that the Belfast Institute of Further and Higher Education, a project partner, was not present at the evidence session. Indeed, it seems to the Committee that the exclusion of the Institute has been one of the hallmarks of the latter stages of this project. The Committee expects Accounting Officers to ensure that, when a range of organisations are involved in a significant project, they bring a fully representative team of witnesses to the evidence session (see paragraph 58).

The Aftermath of the Project

21. Against the background of damaged relationships with the local communities and in view of the continuing high levels of deprivation in West and North Belfast, the Committee expects the Department and the University, along with others, to make strenuous efforts to continue to tackle the low levels of further and higher educational attainment there (see paragraph 65).

22. The Committee is also keen that the Department finds ways in which to further reduce the annual level of student outflow to Universities outside Northern Ireland. Currently standing at 28%, this represents a very substantial cost to the local economy (see paragraph 66).

23. The Committee calls on Government to take a fresh look at the potential for establishing a significant educational facility at the Springvale site to complement the existing Community Outreach Centre and planned Workforce Development Centre. Such a facility could, in the Committee’s view, act as a conduit for increased participation in third level education from the area, a bridge for progression from further to higher education and an important catalyst for economic regeneration and increased cross community contact (see paragraph 70).

Introduction

1. The Public Accounts Committee met on 14 June 2007 to consider the Comptroller and Auditor General’s report on the "Springvale Educational Village Project" (HC 40, Session 2006-07). The witnesses were:

• Dr Aideen McGinley, Accounting Officer, Department for Employment and Learning.
• Mr David McAuley, Director of Strategy & Employment Rights Division, Department for Employment and Learning.
• Professor Richard Barnett, Vice Chancellor, University of Ulster.
• Mr John Dowdall, Comptroller and Auditor General (C&AG).
• Mr David Thomson, Treasury Officer of Accounts, Department of Finance and Personnel.

The Committee also took written evidence from Dr. McGinley, Professor Barnett, the Belfast Institute of Further and Higher Education, the West Belfast Partnership Board and the North Belfast Partnership Board.

2. The Springvale Educational Village was to be based in the particularly deprived area of West and North Belfast and contribute to the educational, cultural, economic and social needs of the area. With a planned cost of £71 million, it was to comprise a 3,000 student Main Campus (£59 million), an Applied Research Centre (£8 million) and a Community Outreach Centre (£4 million). However, after five years of effort by a range of Government Departments and agencies, the University of Ulster, the Belfast Institute of Further and Higher Education and the local communities, only the Community Outreach Centre was delivered.

3. In taking evidence, the Committee focused on a number of key issues raised in the C&AG’s report. These were:

• the Department for Employment and Learning’s handling of the project;
• why the project failed to deliver the Main Campus and the Applied Research Centre;
• other areas where the project could have been better handled; and
• the aftermath of the project.

The Department for Employment and Learning’s Handling of the Project

4. The Department is charged with oversight of higher and further education and was Government’s main representative on the Springvale project. It was to be the major funder, having offered £40 million towards the project. The Departmental Accounting Officer is responsible for ensuring value for money for the grants paid to the University and for ensuring good management and sound governance arrangements.

5. The Committee considers that the Department failed to effectively exercise its role as the Government’s representative in the Springvale project. The Department has said that it has a responsibility to fund projects which will maximise benefits to the economy and local community, while on the other hand, as an appraiser of applications for public funding, having a duty of care to ensure value for money and the appropriate handling of projects. In its view, a delicate balance has to be maintained. In this case, however, the Committee feels that the wrong balance was struck, with the Department’s contribution, at times, being woefully inadequate:

• it did not ensure that the project promoters (the University and the Institute) got a firm grip on the viability of the project from the start;
• it failed to maintain a balanced and realistic view, among the local communities, of the risks of failure;
• its monitoring of the University’s financial position was inadequate;
• its handling of the University’s private disclosure, in late 2001, that it wished to withdraw was weak and ineffective; and
• when the University did finally withdraw in late 2002, the Department was decidedly lacking in its efforts to try to rescue the project.

6. The Committee is particularly disappointed by the Department’s failure to maintain effective communications with the local communities over the course of the project, especially in relation to the risk of failure. This was apparent in the latter stages, when it became clear that the project was not going to come to fruition, by which time community expectations of success had been raised to very high levels. In the Committee’s view, the Department had a prime responsibility, as the Government’s main representative in the project, to do all it could to ensure that there was a balanced and realistic view of the risks and prospects for the project, among the local communities. Unfortunately, the Department failed to do so.

Recommendation 1

7. Government needs to recognise that Departments will always have a key leadership role to play in projects where they are the major funder. The Committee considers that a Department must ensure that, where local communities are substantially affected by projects which are wholly or partly funded by it, they are kept fully informed of all significant developments, throughout the life of the project. The Government must never again be party to the raising of community expectations to such a high level, especially in areas of high deprivation, only to dash these at a late stage in the process.

Why the Project Failed to Deliver the Main Campus and Applied Research Centre

8. The project failed to deliver the Main Campus and the Applied Research Centre. Together, these amounted to almost 95%, by value, of the planned development. The Committee’s review has highlighted a number of concerns in relation to the consideration of project affordability, the assessment of project viability, governance arrangements and the efforts made to save the project.

Affordability of the project:

Capital Funding

9. The University announced that it was withdrawing from the project primarily because of affordability concerns. There is, however, a strategic judgement to be made when considering affordability, about whether a body chooses to incur costs involved, through cross-subsidy from the institution as a whole. The University’s assessment in September 2002 that the Springvale project was not affordable. It claimed that this reflected its changed financial position. However, in the preceding four years, it had spent £37 million on other capital projects. The University told the Committee that around 50% of this spend had been ‘earmarked’ funds, which meant that the University had an element of choice on which projects to spend the other £18.5 million. While it is a matter for the University to determine its own priorities, the Committee cannot reconcile the change in its financial position and its overall capital development programme, with its long-standing obligations to Springvale. In the Committee’s view, it was incumbent upon the University to ensure that it could meet its financial commitments to Springvale.

10. The Vice Chancellor also told the Committee that capital funding had not been a major issue and that the University’s £6·5 million capital contribution was not difficult for a university to raise. The Committee finds these comments surprising, given that the difficulty of raising the capital contribution was presented as a significant problem in the draft Outline Business Case and in discussions with the Springvale Board. The inconsistency in the evidence is unsatisfactory and adds to the Committee’s deep sense of unease about the handling of this project.

Outline Business Case

11. The Department said that the 2002 Outline Business Case was never finally completed and not formally submitted to the Department. The Committee finds this astonishing, given that the Outline Business Case was the basis upon which the University stated that it could not afford the project and was therefore withdrawing. Indeed, the Department had even paid for the Outline Business Case. The Department’s failure to formally and comprehensively review the Outline Business Case and challenge the assertions in it was, in the Committee’s view, an astounding omission. Whether this was due to incompetence or indifference is not clear; either way, it was not acceptable.

Recurrent Funding

12. The Vice Chancellor told the Committee that the main issue for the University on funding was the forecast annual recurrent loss which, he said, could not have been sustained. The C&AG reported that the University was forecasting an annual deficit at Springvale of between £270,000 and £1.2 million per year. This was a very small amount, compared with the University’s overall annual income at that time of £120 million. Moreover, the Vice Chancellor also told the Committee that the University has been in surplus in each of the past three years. In light of this, the Committee can only conclude that affordability should not have been allowed to become a ‘make or break’ issue.

13. It is also worth noting that, in making the decision to withdraw from Springvale, no consideration appears to have been given to the loss of the many wider benefits that would have accompanied the project. The Committee finds this astonishing, given the Accounting Officer’s evidence that the Springvale project was chosen for the socio-economic impact that it would have on West and North Belfast.

14. All of the above factors lead the Committee to conclude that affordability was a pretext for the University’s withdrawal from the project and that the real reason was that the University had lost the will to proceed with the project. The Committee is particularly critical of the Department’s failure to mount a meaningful challenge to the University’s assertions on affordability, given that the evidence suggests the difficulties involved were far from insurmountable.

Recommendation 2

15. The Outline Business Case is a key document in a PFI project and one which forms the basis for a crucial element in the decision making process. Where an Outline Business Case is prepared in respect of a publicly funded project, the Committee expects the funding Department to be a formal recipient of the completed document. Departments must never allow themselves to be sidelined from such a vital part of the decision making process.

Recommendation 3

16. Funding Departments must, in all cases, comprehensively review and, where necessary, challenge the findings of the Outline Business Case. This is especially important where the results point towards a fundamental change in the direction of the project.

Recommendation 4

17. In projects as significant as Springvale and especially where Government’s credibility is involved, the Committee expects Departments to be highly pro-active in examining alternative ways in which projects can be funded and afforded by project promoters.

Recommendation 5

18. In the Committee’s view, the failure to take account, in the decision to withdraw, of the wide range of socio-economic benefits that would have accompanied the completed Springvale project was a serious omission. The Committee considers that the potential value of the loss of wider benefits should always form an integral part of the decision making process in such cases.

Recommendation 6

19. The University used affordability as the pretext for its withdrawal but, in the Committee’s view, the loss of will to make the Springvale project work was the major factor in its failure. Where, in the future, the University is involved in a partnership on a publicly funded project, the Committee expects it to meet the highest standards of full, open and constructive co-operation with its project partners.

Additional donor funding

20. In March 1999, the private donor involved in the project asked the University to contact it if there was any difficulty in raising funding. However, in 2001, when the University was expressing affordability difficulties over Springvale, there is no evidence that it asked the donor for additional funding to save the project. Following the Committee’s evidence session, the University wrote to say it understood that, in 2002, the then Vice Chancellor met with representatives of the private donor, but the precise date of the meeting and the substance of the exchange are unknown. The Committee regards it as both extraordinary and unacceptable that a meeting of such significance should not be regarded as sufficiently important to formally record the proceedings.

Recommendation 7

21. Recipients of substantial grants of public funds must ensure that all significant actions relating to the grant-aided activity are properly documented. This is a minimum standard. Departments should make sure that their clients are aware of the standard required.

Viability of the project:

The timing of the consideration of viability

22. It is clear that the Department did not press the project promoters early enough on the issue of project viability. The C&AG’s Report shows that, as early as March 1998, the Department raised questions internally about the viability of the project, if the income from only 600 new student places was used as the basis for assessing viability. Despite Higher Education Funding Council for England (HEFCE) procedures stating that viability should be examined at an early stage, the Department decided to wait until external funding had been secured. External funding was not secured until March 2000 but, even then, a comprehensive assessment of viability was not carried out. Not getting to grips with such a key issue from the start was a serious error of judgement by the Department.

23. The Committee believes it is not enough for the Department to say that there were no HM Treasury requirements to examine viability in economic appraisals, when the first assessment was carried out in 1998. When a major funder, as the Department was in this project, with a potential investment of £40 million, is appraising a project, viability should be fully tested at the earliest opportunity. At the very least, an early assessment of viability would have presented a realistic basis on which to consider the broader issue of affordability. The Committee notes that the Department has since recognised its error and has apologised for this failing.

Recommendation 8

24. The Department must ensure that the viability of projects is fully assessed at an early stage, with detailed updates carried out as circumstances develop. The aim of a rigorous assessment of viability is not to ‘trip up’ a project; rather, it is a mechanism to ensure that potential weaknesses are identified at an early stage and can be addressed.

Recommendation 9

25. Given the Department’s comments about the adequacy of the guidance for assessing viability in this type of project, the Committee recommends that it liaise with both HEFCE and the Department of Finance and Personnel to determine whether further guidance might usefully be developed.

Lack of clarity in the assessment of viability

26. The Department also told the Committee that its February 2000 offer of funding to the project was based on the September 1999 Addendum to the Economic Appraisal. This noted that, in addition to the 600 ring-fenced places for Springvale, the University had been allocated an additional 900 fully-funded places, across all campuses. While the Department has said that it had not expected the viability assessment to be based solely on the income of 600 places, the Committee notes that it failed to challenge the University when this approach was used in the Outline Business Case. There was ample time to do so, between the final draft Outline Business Case in July 2002 and the University notifying the Department of its withdrawal in September 2002. The Committee finds it astonishing that the Department failed to engage with the University on the viability issue, especially when it realised that the University had changed the basis for calculating viability, from the income of 1,500 students to only 600.

27. The failure of the Department and the University to properly communicate on the crucial issue of viability is profoundly disturbing. Even now, in evidence submitted to the Committee after the evidence session (Appendix 3), the Department and the University disagree on the requirements for assessing the project’s viability and have provided contradictory information. The Department states that the University could have allocated the income from 1,500 students to Springvale and, therefore, made the project viable. However, the University maintains that this was not its understanding of the funding conditions which the Department had imposed. This divergence of views on such a fundamental issue for the project is shocking. It is little wonder that the project went awry, when there was such a lack of understanding between the principal parties from the outset. The Committee can only conclude that one of the reasons this flagship project for Northern Ireland has been lost is due to Government’s failure to properly explain to its partners what it required. This is a dreadful indictment of the Department’s handling of the project.

Recommendation 10

28. The Committee finds it incredible that the Department did not establish, with the University, a clear and shared view on project viability, both at the outset of the project and, later, when crucial decisions were being made on its future. This was a fatal omission and one which indicates an amazing failure of communication at the top of both organisations. The Committee insists that in future projects, the Department and the project promoters work on an open basis, to deal unambiguously with project viability from the outset and throughout the project, fully sharing information on which to base informed decisions.

Weaknesses in the governance arrangements

29. Another key factor in the project’s demise was the governance arrangements. The model chosen created an inherent conflict between the relative primacy of the parent institutions and Springvale. Significantly, in 1998, the Department of Education told the promoters that "nobody had so far succeeded in carrying through such a joint project to a conclusion". This suggests to the Committee that the governance arrangements of Springvale were ill-advised.

30. There is evidence that problems arose at different times between the promoters. There were also difficulties, particularly within the University, between the level of community involvement and academic/institutional independence. The Committee notes the Accounting Officer’s comments on the tensions between the University’s academic integrity and the communities’ expectations, which arose out of the first academic planning exercise. The Committee was advised that the local communities wanted the Campus to more closely reflect the community needs, rather than those of the University and this led to some uncertainty about the ability of the site to attract enough students.

31. There is also clear evidence that the governance arrangements for Springvale formed the basis for the University’s disclosure to the Department, in November 2001, that it wished to withdraw from the project. However, the University had signed the legal contracts which underpinned the governance arrangements and ought, therefore, to have lived up to them. The Department must also bear a measure of responsibility for the flawed governance model; the Accounting Officer told us that it had been closely involved in developing the arrangements.

Recommendation 11

32. The Committee considers that, where a new educational entity is being proposed or supported by two or more autonomous organisations, it is more likely to be successful where the management of the entity is vested in a single body. If, however, the new entity is to be run jointly by two or more institutions, there must be a clear strategic vision from the outset and one which is wholly shared by each of the partners involved. It will also be important for the institutions involved to agree the detail, in practical terms, of the governance arrangements at an early stage and so avoid the type of problems which beset the Springvale project at such a late juncture.

The lack of effort to save the project

33. The Committee believes that the Department could have done much more to save the project, especially in view of the very substantial political backing, both domestically and internationally, at the highest levels of Government. What is particularly disappointing is that, when the University informed the Department of its intention to withdraw from the project, the Department was so decidedly lacking in ways to save the project.

34. There is no evidence that the Department ‘bent over backwards’ to rescue the project. Despite the relatively modest sums involved, it did not offer additional funding or make a strenuous effort to find another funder or partner once it realised that the University was going to withdraw. While the Department has claimed it took decisive action in asking the Springvale Board to commission a review of the way forward, the Committee is far from persuaded. Passing the problem on to the Springvale Board can in no way be deemed decisive action. This looks more like an abrogation of the Department’s responsibility and one that led to a £71 million project becoming a £4 million project.

Recommendation 12

35. When a Department is confronted with substantive operational problems on a major project, the Committee expects it to pursue every reasonable means of overcoming the difficulties in order to achieve the project objectives. Failing to tackle the problems in a meaningful way is not an option.

36. The Department also told the Committee that the University is an autonomous body and that, although the Department funds up to 50 per cent of its operations, there are areas of the business over which the Department has no control. It seems to the Committee that the Department’s view of this autonomy, in effect, allowed the University to walk away from the project at a very late stage and was used by the Department as a reason not to act. The Committee readily supports the concept of academic autonomy, but shares the view of the Westminster PAC that, "the purpose of autonomy is to allow a proper level of academic independence for institutions, not laxity in the control of the … public money that institutions … manage each year. Nor should this autonomy be seen as an excuse for the [funding departments] to be anything other than rigorous in their oversight of the way this money is managed and used" (Twenty-Sixth Report 1998-99, Overseas Operations, Governance and Management at Southampton University, July 1999).

Recommendation 13

37. The Committee wants to see the Department adopt a position where it can exert sufficient influence over the management and direction of any project which it is funding. The institutional autonomy of a funded body, such as the University, will not be accepted by the Committee as an excuse for Departmental inaction.

Other Areas where the Project could have been Better Handled

38. There are a number of other areas where, in the Committee’s view, the Springvale project could have been better handled. These relate to the standard of the project promoters’ financial planning and management, the quality of project appraisals and reviews, the Department’s monitoring of the University’s finances and the circumstances surrounding the withdrawal of the University from the project.

The standard of financial planning and management

39. There is ample evidence in the C&AG’s Report to call into question the standards of financial planning, management and control exercised by the project promoters. This is illustrated by the fact that, almost five years after the initial project proposal, there were still so many key areas of uncertainty in relation to both capital and recurrent funding, highlighted by the Outline Business Case. This points strongly towards shortcomings in the promoters’ project planning and financial management. The Committee is left with the impression that this situation was allowed to develop as much through inertia on the part of the Department as failings within the University and the Institute.

Recommendation 14

40. Effective financial planning and management of projects are pre-requisites for success. The Committee expects funding Departments and project promoters to get a firm grip on these fundamental elements of control, from the outset and throughout the life of a project.

The quality of project appraisals and reviews

41. There were seven major appraisals/reviews of the Springvale project. Four of these, carried out in 1998 and 1999, considered the project both affordable and viable. The remaining three reviews, between June 2001 and September 2002, concluded that the project was neither affordable nor viable; yet the essential nature of the project had remained the same. It appears to the Committee that the appraisals and reviews carried out prior to June 2001 may have provided an unduly optimistic and, consequently, misleading view as to the viability and affordability of the project.

42. The variation in the results raised the question as to whether the Committee could have any confidence in them. The Department stated that it operated to the standards at the time, but that current standards are stricter. The Committee is not persuaded by this explanation and feels that the Department should have injected a ‘dose of reality’ into the process.

43. Of particular concern to the Committee was the pattern that, when the University wanted Springvale, it was affordable and viable but, in the later stages when the University clearly had a change of heart, it became unaffordable and unviable. Indeed, the contrast between the early optimism and the later assessments of viability is so great as to raise the concern within the Committee that project appraisals were not only carried out at below the appropriate standard but may even have been manipulated to get the desired results.

Recommendation 15

44. It is clear that a number of the project appraisals failed to identify what proved to be key issues in relation to viability and affordability at a sufficiently early stage, when they could have been more easily addressed. Departments and project promoters must ensure that project appraisals address all of the relevant issues in a comprehensive and objective manner.

The Department’s monitoring of the University’s finances

45. Over the four-year period to September 2002, the University’s finances had changed significantly. It recorded a cumulative deficit of £22.7 million over the period and saw its reserves plummet from £18.5 million to debt of £7.4 million. The Accounting Officer said that, along with HEFCE, the Department had monitored the University’s finances and, in its opinion, the downturn in finances was a "blip".

46. The Committee is unconvinced by the explanations put forward by the Department. If, indeed, it had seen the downturn as a blip, why did the Department not challenge the University on its assessment that Springvale was unaffordable, when this was put forward as the reason for its withdrawal.

Recommendation 16

47. Where the Department is working on a project in partnership with an external body and providing significant levels of public funding, it must closely monitor the financial position of the funded body, to ensure that it can honour its financial commitments to the project.

The University’s withdrawal from the project:

The Department’s lack of action

48. The Department was made aware by the University, in November 2001, of its desire to withdraw from the project. While it rightly urged the University to make its position clear to the Institute and the local communities, the University failed to do so. The Department said that making the University’s intentions public may have led to the project’s demise and that a judgement had to be made about sharing this information.

49. Given that the University’s proposals effectively signalled an end to the project (it later withdrew, in October 2002), the Committee is of the view that the Department should have insisted on the University sharing the proposal immediately with the other stakeholders. The Committee notes that the Department now concedes that it should have done so.

Recommendation 17

50. Where a Department is a major funder in a project, it has a responsibility to ensure, as far as possible, that the project promoters are constructive, open and transparent with each of the key stakeholders and that important information is shared on a timely basis. The Committee considers that, where a Department finds that a promoter is not meeting the standards of openness expected, it must take affirmative action to counter this.

The University’s lack of openness

51. Both the Institute and the local communities felt a strong sense of disappointment at the failure to secure the Main Campus and the Applied Research Centre at Springvale and this was heightened by the manner of the University’s unilateral and unheralded withdrawal from the project. A high level of expectation for Springvale had been built up over several years, much of it by the University itself. In their submissions to the Committee (Appendix 3), the local communities expressed their sense of outrage at the University’s behaviour. In their view, for the University to ‘pull the plug’ on what was originally its project, was the ultimate example of bad faith and breach of trust. Unfortunately, the demise of the project has also reaffirmed, in the minds of many local people, their distrust of Government agencies and this has made the situation more difficult for those currently attempting to promote engagement between Government and the communities.

52. In the Committee’s view, the University behaved deplorably in its relationships with its partners in this project. Moreover, the evidence points towards the Department having acquiesced in this. The local communities told the Committee that they were appalled by the manner in which the Department appeared only too willing to do the University’s ‘dirty work’; knowing that the University had lost the will to make the project work, the Department became, in the communities’ view, a willing pawn in the University’s strategy for getting off the moral and financial hook. The Committee welcomes the Department’s acknowledgement that it could have handled this much better.

53. The Committee also notes the apology from the University’s Vice Chancellor for the way in which it behaved in the later period of the project and hopes that this will help the process of rebuilding relationships and moving forward. It would have been more beneficial and much more fitting, however, had the University made an apology directly to the local communities and the Institute, at the time. This would have gone some considerable way to lessening the hurt caused.

Recommendation 18

54. The Committee expects both the Department and the University to learn the lessons from the unsatisfactory way in which the withdrawal from Springvale caused so much upset and damage to the ongoing relationships with the local communities.

55. The University’s lack of transparency was not confined to its dealings with its project partners. The Committee was displeased to learn that the University had not even provided basic information about its capital programme requested by the Audit Office during its review.

Recommendation 19

56. The Committee wants to make clear that it will never again accept any publicly funded body failing to provide essential information to the Audit Office in the exercise of its functions. The Committee expects all such bodies to offer the highest levels of co-operation at all times.

The absence of BIFHE at PAC

57. The Committee questioned why the Institute was not present at the evidence session. While accepting that the Permanent Secretary of the Department is the Accounting Officer for Further Education and that, in discussion with the Institute, had agreed to represent it at the evidence session, the Committee expected the Institute to be present, as it was the Further Education partner in the project. The Committee welcomes the evidence submitted by the Institute (Appendix 3).

Recommendation 20

58. The Committee was disappointed that the Belfast Institute of Further and Higher Education, a project partner, was not present at the evidence session. Indeed, it seems to the Committee that the exclusion of the Institute has been one of the hallmarks of the latter stages of this project. The Committee expects Accounting Officers to ensure that, when a range of organisations are involved in a significant project, they bring a fully representative team of witnesses to the evidence session.

The Aftermath of the Project

59. The lasting impression of the Springvale project in the minds of the Committee is one of failure: failure to deliver; failure in the Department; failure in the University; and a failure to respond to the needs of the local communities and properly acknowledge the huge voluntary commitment made by them. The aftermath of these failures is one where limited tangible benefits have resulted from the project, substantial levels of time and effort have been wasted and a legacy of upset and distrust has been engendered among local communities. Worst of all, high levels of deprivation continue to exist in the areas most affected by the collapse of the project.

The limited tangible benefits from the project

60. The tangible benefits from the project have been limited. Only the Community Outreach Centre, costing £4 million, was completed. While this provides a valuable resource for the area, there is no Main Campus and no Applied Research Centre. These were, by far, the larger parts of the project. As a result, the vast majority of the anticipated educational, cultural, social and economic benefits of Springvale have not materialised.

61. The failure of the project has also had an effect outside of West and North Belfast. The 1997 Dearing Report estimated that the outflow of students from Northern Ireland to other Universities was costing the local economy £45 million per year. With the failure of Springvale, a real opportunity to reduce the ‘brain drain’ from Northern Ireland was lost. While the level of outflow of students has reduced over past 10 years, it still stands at some 28%, a substantial figure.

62. The Department and the University told the Committee that they have been supporting a range of other initiatives which will have a beneficial effect on West and North Belfast and beyond. Funding of £13 million has been approved for a Workforce Development Centre, to be built on the site that had been earmarked for the Applied Research Centre. The Department also said that it has spent £7.5 million through a series of programmes on the Springvale community outreach initiative, involving some 26,000 participants across 280 projects, addressing such issues as family literacy and suicide prevention. The University has, from 2006, administered the ‘Step-Up Programme’ in the Greater Belfast area. This involves working with schools in areas of educational underachievement and where the proportion of people going into higher education is low. The programme funded 100 places in the last academic year and will grow to 140 places in 2007-08. The Committee welcomes these initiatives as positive developments. However, they do not constitute a university and fall a long way short of what was intended under the Springvale Educational Village.

63. The local communities told the Committee that West Belfast continues to be the most deprived constituency in Northern Ireland. One area of particularly severe deprivation, Shankill Ward, is currently attaining further education enrolments of only 4.4% of its population and higher education enrolments of only 0.9%. Figures provided by the Department and the University show that 1,144 students from West and North Belfast were studying at the University of Ulster in the 2006-07 academic year (Appendix 3). Although this represented a 15% increase on 2001-02, it still amounted to an average of only 0.7% of the West and North Belfast population. While the level of educational attainment has improved in West and North Belfast since 2001-02, it remains disappointingly low. Unfortunately, it will never be known what the improvement might have been, had there been a Main Campus.

64. Given the long term community effort, the decision not to implement the project in full was a massive blow to West and North Belfast and has left an ongoing legacy in terms of the damage caused to community relations. Both the Department and the University failed to deliver the Springvale Educational Village project, but they are not the ones paying the price of failure. That price is being paid by Northern Ireland in general and in particular by the local communities. It is to the great regret of this Committee that their experience has been one of loss: lost hopes, lost time and effort and, above all, lost opportunities.

Recommendation 21

65. Against the background of damaged relationships with the local communities and in view of the continuing high levels of deprivation in West and North Belfast, the Committee expects the Department and the University, along with others, to make strenuous efforts to continue to tackle the low levels of further and higher educational attainment there.

Recommendation 22

66. The Committee is also keen that the Department finds ways in which to further reduce the annual level of student outflow to Universities outside Northern Ireland. Currently standing at 28%, this represents a very substantial cost to the local economy.

The waste of resources

67. The C&AG reported that £3.6 million of the sums spent on Springvale could be regarded as waste. In addition, a substantial, but unquantifiable sum was lost in respect of the enormous amount of time and effort devoted to the project by the local communities and various Government Departments and agencies.

68. The Committee notes the Department’s comments that the £3.6 million was spent on legal, professional and consultancy fees which, it said, was an essential part of the process. In the Committee’s view, this spend could only be considered to have been an essential spend if the project evaluations had been thorough. It is clear, however, that they were not and no tangible benefit has resulted, so the Committee has to conclude that this £3.6 million was wasted.

A way forward

69. Ten years after the Springvale Educational Village project was first proposed by the University and the Institute, the situation in Northern Ireland has changed profoundly. What has not changed, however, is the pronounced level of deprivation within West and North Belfast and the unacceptably low level of educational attainment there. Together with a need for substantial economic regeneration in the area and increased cross community interaction, especially between young people, the case for a major regeneration project is as great today as it was ten years ago. The Committee is strongly of the view that there is a need for positive action.

Recommendation 23

70. The Committee calls on Government to take a fresh look at the potential for establishing a significant educational facility at the Springvale site to complement the existing Community Outreach Centre and planned Workforce Development Centre. Such a facility would, in the Committee’s view, act as a conduit for increased participation in third level education from the area, a bridge for progression from further to higher education and an important catalyst for economic regeneration and increased cross community contact.

Appendix 1

Minutes of Proceedings
of the Committee
relating to the report

Thursday, 14 June 2007
Senate Chamber, Parliament Buildings

Present: Mr John O Dowd (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Willie Clarke
Mr Jonathan Craig
Mr John Dallat
Mr Simon Hamilton
Mr David Hilditch
Mr Trevor Lunn
Mr Mitchel McLaughlin
Ms Dawn Purvis

In Attendance: Mrs Debbie Pritchard (Principal Clerk)
Mrs Cathie White (Assembly Clerk)
Mrs Gillian Lewis (Assistant Assembly Clerk)
Mrs Pauline Hunter (Clerical Supervisor)
Mr John Lunny (Clerical Officer)

Apologies: Mr Patsy McGlone

The meeting opened at 2.00pm in public session.

3. Evidence on the NIAO Report ‘Springvale Educational Village Project’.

Mr Beggs declared an interest as a member of the Court of the University of Ulster.

The Committee took oral evidence on the NIAO report ‘Springvale Educational Village Project’ from Dr Aideen McGinley, Accounting Officer, Department of Employment and Learning (DEL); Mr David McAuley, Director of Strategy and Employment Rights Division, DEL, and Professor Richard Barnett, Vice Chancellor, University of Ulster. The witnesses answered a number of questions put by the Committee.

The Committee requested that Dr McGinley should provide additional information on issues raised by members during the evidence session to the Clerk.

3.52pm Mr Craig left the meeting.

4.16pm Mr Lunn left the meeting.

4.18pm The evidence session finished and the witnesses left the meeting.

[EXTRACT]

Thursday, 20 September 2007
Room 144, Parliament Buildings

Present: Mr John O’Dowd (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Jonathan Craig
Mr John Dallat
Mr Simon Hamilton
Mr David Hilditch
Mr Patsy McGlone
Mr Mitchel McLaughlin
Ms Dawn Purvis

In Attendance: Mrs Cathie White (Assembly Clerk)
Mrs Gillian Lewis (Assistant Assembly Clerk)
Mrs Nicola Shephard (Clerical Supervisor)
Mr John Lunny (Clerical Officer)

Apologies: Mr Willie Clarke
Mr Trevor Lunn

The meeting opened at 2.02pm in public session.

2.20pm The meeting went into closed session.

7. Consideration of Draft Committee Report on Springvale Educational Village Project.

Members considered the draft report paragraph by paragraph. The witnesses attending were Mr John Dowdall, C&AG, Mr Robert Hutcheson, Director of Value for Money, Mr Alan Orme, Audit Manager and Ms Jacqueline O’Brien, Audit Manager.

The Committee considered the main body of the report.

Paragraphs 1 – 6 read and agreed.

Paragraph 7 read, amended and agreed.

Paragraph 8 read and agreed.

3.00pm Mr McGlone left the meeting.

Paragraphs 9 and 10 read, amended and agreed.

Paragraphs 11 – 13 read and agreed.

3.10pm Ms Purvis joined the meeting.

Paragraph 14 read, amended and agreed.

Paragraphs 15 – 22 read and agreed.

Paragraph 23 read, amended and agreed.

Paragraphs 24 – 29 read and agreed.

Paragraph 30 read, amended and agreed.

Paragraphs 31 – 35 read and agreed.

3.25pm Mr McLaughlin left the meeting.

Paragraphs 36 – 44 read and agreed.

Paragraph 45 read, amended and agreed.

Paragraphs 46 – 55 read and agreed.

Paragraph 56 read, amended and agreed.

Paragraphs 57 – 63 read and agreed.

Paragraph 64 read, amended and agreed.

Paragraphs 65 – 69 read and agreed.

Paragraph 70 read, amended and agreed.

3.52pm Ms Purvis left the meeting.

The Committee considered the Executive Summary of the report.

Paragraphs 1 – 14 read and agreed.

Paragraph 15 read, amended and agreed.

Agreed: Members ordered the report to be printed.

Agreed: Members agreed that the Chairperson’s letter and Clerk’s letter to Dr Aideen McGinley requesting additional written information and Dr McGinley’s and Professor Richard Barnett’s responses would be included in the Committee’s report, together with the written submissions from North Belfast Partnership Board, West Belfast Partnership Board and Belfast Institute of Further and Higher Education (now known as Belfast Metropolitan College).

Agreed: Members agreed to embargo the report until 10.00am on Thursday, 11 October 2007, when the report would be officially released at a press conference.

[EXTRACT]

Appendix 2

Minutes of Evidence

14 June 2007

Members present for all or part of the proceedings:

Mr John O’Dowd (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Willie Clarke
Mr Jonathan Craig
Mr John Dallat
Mr Simon Hamilton
Mr David Hilditch
Mr Trevor Lunn
Mr Mitchel McLaughlin
Ms Dawn Purvis

Also in attendance:

Mr John Dowdall CB Mr David Thomson

Comptroller and Auditor General Treasury Officer of Accounts

Witnesses:

Mr David McAuley Dr Aideen McGinley		Department for Employment and Learning
Professor Richard Barnett		University of Ulster

1. The Chairperson (Mr O’Dowd): I remind members and visitors to switch off all mobile phones. Please do not set them to silent mode, as even that will interfere with the sound system.
2. Patsy McGlone has sent apologies. In his absence, I will ask the questions that he wished to raise.
3. Today we will discuss the Comptroller and Auditor General’s report into the Springvale educational village project. I welcome Dr Aideen McGinley, accounting officer of the Department for Employment and Learning (DEL). Dr McGinley, please introduce your colleagues.
4. Dr Aideen McGinley (Department for Employment and Learning): With me today is Professor Richard Barnett, the vice chancellor of the University of Ulster, and Mr David McAuley, who is director of strategy and employment rights in DEL and who was responsible for higher education from 2001 to December 2006.
5. The Chairperson: Is no one from Belfast Institute of Higher and Further Education (BIFHE) with you?
6. Dr McGinley: No. I will be able to cover the information relating to BIFHE in my role as accounting officer.
7. The Chairperson: OK. However, was BIFHE a partner in its own right in the project?
8. Dr McGinley: Yes, but the amount of information on BIFHE in the report is relatively small. That is why I brought representatives of the major players. I am accounting officer for further education and for BIFHE, so I am happy to answer any questions. If any questions should arise that members want BIFHE to answer, I will certainly get that information to the Committee.
9. The Chairperson: Questions on BIFHE may arise during the evidence session, or, as occasionally happens, the Committee may write to you, as the accounting officer, with questions.
10. I will open today’s questions, and each member will have approximately 10 minutes — we will not be too stringent with the timing — in which to explore questions or concerns that they might have. As we want to ensure that all points are covered, the question session might be prolonged: it might not be too long, but I am sure that you will understand that, having studied the report and talked to the Comptroller and Auditor General, members will have many points to address. I hope that you understand those circumstances.
11. Mr Beggs: At the outset, I wish to declare an interest as a member of the court of the University of Ulster.
12. The Chairperson: I will assume that no other member wishes to declare an interest.

The Springvale project aimed to address the educational, cultural and social needs of west and north Belfast. It also aimed to regenerate an area marked by significant deprivation and educational underachievement. However, for the most part, the project was a failure. Do you accept the conclusion of paragraph 3.27 of the report, which states that the Springvale project: "could have been much better handled."

1. Dr McGinley: You are right to point out the unique and important nature of the Springvale project. It was multi-dimensional and complex in its development, and it was a model of partnership working that was unique at that time.
2. One must remember the context of the early 1990s, when west Belfast not only suffered from severe problems associated with the Troubles, but from deprivation, unemployment and educational underachievement. Therefore, the three named objectives were the right ones, and to this day, the positive legacy of the Springvale project — that I will be happy to share with the Committee — reflects those three objectives, which are socio-economic needs, regeneration needs and educational underachievement.
3. The Northern Ireland Audit Office’s (NIAO) report raises two issues that it feels that the Department could have handled better. First, the Audit Office had concerns about the appraisal process and the issue of viability. The process used was rigorous and robust. It complied with HM Treasury guidance and to the standards that prevailed. Admittedly, due to amendments that were made to the green book in 2003, areas such as viability would be examined more robustly if the Springvale project were being undertaken today. Further guidance from the Higher Education and Funding Council for England (HEFCE) that would have applied to the project was published in 2003 and 2004. However, the appraisal and viability process used for the Springvale project met the standards required at that time.
4. Secondly, NIAO raised the issue of community expectation. I fully acknowledge that that was, perhaps, the most disappointing and tragic element of the project, because it was an opportunity to forge links across and within communities and between further and higher education and the Government. There was a huge amount of goodwill and, in reading the related papers, it is evident that everyone, regardless of their sector, wanted the project to work. Although Government were not the promoters — they were very much the funders — they tried their utmost, along with the promoters and the community, to make the project work. Therefore, the manner in which the project became — as you said — a failure, was disappointing. However, every effort was made to give it a chance.
5. The Chairperson: Whether every effort was made to give the project a full chance will be at the centre of the Committee’s report. Dr McGinley, you said that there were positive outcomes of the Springvale project. What were they?
6. Dr McGinley: One positive outcome was the community outreach centre that opened in May 2000 and has been functioning for over five years. Furthermore, in April 2006, funding of £13 million was approved for the workforce economic development centre, which will come to fruition at the end of 2009 or the beginning of 2010. Those are two fundamental pieces of work in west Belfast, and DEL has funded a series of programmes in the Springvale community outreach initiative, which involve over 26,000 people across 280 projects in areas such as schools and literacy, family literacy and suicide prevention. Over the period, some £7·5 million was invested in such initiatives. Although the original campus idea did not go ahead, very solid and sound work is now being done in the community.
7. The Chairperson: Yes, but it is still not a university.
8. Dr McGinley: The initiatives lead people to higher education. Statistics from the most recent census show that there has been a 73% increase in the number of young people from the Springvale area who have gone on to study for a first degree. Admittedly, the area still has huge levels of over-16s — some 51% of that population — with no qualifications, but the proportion has dropped more than 21 percentage points from the previous level of 73%. Many of the community education and training initiatives, which provide a progression path that leads people through further education into higher education, are having an impact.
9. The Chairperson: I may return that point in my concluding remarks.

At paragraph 3.2 of the NIAO report, the Department states that Springvale: "had, from its inception, a significant political dimension."

1. The Department also notes that the project’s inception occurred in the early 1990s and was progressed during 1994-95, which was a period of great hope and was the start of what has become known as the peace process. Does the reference to a "significant political dimension" mean that a political will existed in the Department and in the other political institutions to make the project work? When did that significant political dimension come to an end?
2. Dr McGinley: Again, the evidence shows that, at the highest level — from the Secretary of State down to each Minister who was involved during the lifetime of the project — there was total commitment to achieving the three objectives that I outlined at the start. Indeed, when the withdrawal became evident, the then Minister asked the Springvale board to undertake a review to see what could be done. The review’s terms of reference were very broad, and no change was made to the conditions that were set down. The political will continued through the duration of the project, and continues to this day. There is evidence for that in the recent grant of funds for the workforce economic development centre.
3. The Chairperson: Surely the community and its political representatives could point to the fact that the only physical building to emerge from the project was funded — I think that this is correct — by private funds. That suggests that, at senior level, the Department did not have the political will to complete the project. At the end of the day, it was the Department’s duty to ensure that the political will was carried through to fruition by ensuring that a new educational, cultural and regeneration project was put in place in Springvale.
4. Dr McGinley: There was ministerial commitment. I have read through the evidence in some detail, and I have not come across any negative ministerial or political will, to use your phrase, towards the Springvale project. Indeed, there was genuine insistence by Ministers that this was a project of the right ilk. The Springvale premium is testament to that.
5. Although the Springvale option was the most expensive of the nine options given in the economic appraisal of 1998, it was agreed that the socio-economic outputs from it made it worthy of attention. The Springvale premium was a means of bridging the gap to make the project affordable and to allow it to go ahead. That is just one example of how the Government tried to assist the promoters in ensuring that the project had the maximum impact on socio-economic development.
6. The Chairperson: I am not sure that assisting the promoters goes far enough. In my view, there was a duty on the Government to ensure that the project happened. Did any Minister issue a ministerial directive at any stage in the process?
7. Dr McGinley: There was no need to issue a ministerial directive. At each stage, working closely with the promoters, we identified the hurdles that had been thrown up in the various economic appraisals and we took them through. The process was very much a journey. However, when we reached the outline business case stage, some of those obstacles became insurmountable. The university then had to make a judgement call about whether it had reached a point beyond which it could not proceed.
8. The Chairperson: When did the Department make the decision that the project would not proceed?
9. Dr McGinley: It was not for the Department to make that decision. It was not the promoter of the project; it was the funder. Some 56% of the capital funding came from Government. A very delicate balance had to be maintained.
10. On the one hand, the Department had to maximise the benefits to the community and address the objectives that were set; on the other hand, as the appraisers of an application for public funding, it had a duty of care to ensure value for money and appropriate handling of the project. At all times, the Department worked with the promoters in an enabling way to lever the necessary funding from Government. Indeed, the promoters levered further funding from external sources.
11. It is right to say that a private donor funded the community outreach centre. That was part of the legacy left by the university.
12. The Chairperson: At one point you told me that, in the Department’s opinion, the economic appraisals were OK. I am not disputing that. However, you have also said that when the university approached the Department to say that, for reasons that will be explored later, it could no longer continue with the project, the Department felt that it had no further role in the process. Is that correct?
13. Dr McGinley: The Department did have a role and worked with the Springvale board on the review to see what —
14. The Chairperson: What happened to the enthusiasm of the early 1990s? Did it disappear? At one stage, the communities in north and west Belfast were being shown photographs and images of Bill Clinton, the then President of the United States, and Tony Blair, the Prime Minister of Great Britain. There was great euphoria, with the digging of sods and such like. The political will had to have disappeared somewhere.
15. Dr McGinley: I contend that, in my view, the political will did not disappear. Unfortunately, the achievable aspiration was not as significant without the main campus. However, Government’s intention was that something be done. Something has been done, and what has been achieved will leave a pathway of progression for the people in those communities. The statistics show that it is working.
16. The Chairperson: The NIAO report states that £3·6 million "could be regarded as waste". Is it your view that that money was wasted?
17. Dr McGinley: The word "waste" is open to interpretation. As members can see, the total spend amounts to £9·2 million. Of that money, £5·6 million was spent on the community outreach centre and infrastructural works. The £3·6 million that you mentioned was spent on items including legal and professional fees. The project was very complex, requiring a lot of legal advice, consultancy reports and so on.
18. The legal advice and consultancy reports were a necessary part of the analysis and supporting framework to get the project through the normal Government standards required by the Government Accounting Northern Ireland (GANI) guidelines. Therefore, it is probably inappropriate to say that that money was wasted. It was used for essential elements of the project.
19. Some of the works on the northern part of the site, which are included in the element of the spend that could be considered to be waste, will come to fruition. For example, the Department for Social Development is completing master planning for the northern part of the site. In the longer term, expenditure on that part of the site will be regained.
20. Undoubtedly, because the main campus and the applied research centre were not realised, they, potentially, could be classified as waste. However, the site that was prepared for the applied research centre will be used for the workforce economic development centre.
21. There are reasons for describing certain elements of the project as waste. In theory, it could be said that the money was wasted: because nothing came of it, it was wasted. However, it was spent on an essential part of the appraisal process.
22. The Chairperson: Yes, but, in a sense, it was not an essential spend. It could only be considered to have been an essential spend if there was a will to build a university. The Committee must establish whether such a will existed. If it did not, £3·6 million was wasted.
23. Dr McGinley: In the NIAO report, the Department has stated that there was an issue around the will to continue with the project.
24. Mr Hamilton: I want to touch on what you, Mr Chairman, and the accounting officer referred to as community expectation. The NIAO report — and you also raised this, Mr Chairman — refers to the elaborate ceremony that took place on the site, in the presence of the current Prime Minister and the former President of the United States Bill Clinton. It was an emotional occasion, with sod cutting and the involvement of young children, and it created a real sense of hope in the community. Unfortunately, when the plug was pulled on the project, that hope turned to hurt.

That hurt was more accentuated by the fact that north and west Belfast comprises one of the most deprived areas in the United Kingdom. The plight that that area suffered during the Troubles has been mentioned; and, during President Clinton’s speech, he said that the campus should: "be a living, breathing monument to the triumph of peace."

1. An accusation that might have some founding is that that is very much the way that the project was marketed from start to finish. It was more about peace process PR than the practicalities of delivering a viable educational campus at Springvale.
2. Does the accounting officer admit that the Department handled the expectations of the community badly, particularly in the latter stages, when it became apparent that the project was not going to come to fruition for a community that had invested much time, energy and hope in the project?
3. Dr McGinley: Yes. The Department and the Government were committed to ensuring that a community voice was heard from the outset of the project. That is evident in the conditions of the grant offer of November 1998, when one of three conditions specifically stated that the community voice was fundamental to the success of the project. Governance structures were established, including the Springvale village council, which included representatives of all the partnership boards in the area, along with the university and BIFHE. The community was also represented on the Springvale board. There was a full intent to embed the community’s voice in the project. Ironically, the disappointment that Mr Hamilton describes, and the loss of hope, made the loss of the project more difficult.
4. The Audit Office’s only criticism of the Department concerns the period after the meeting between the Department and the university in December 2001. The Department took the view that the university had identified problems, but that those problems were not insurmountable, and it was important to give the project its fullest chance and to seek any way to resolve those issues.
5. There was a danger that, if the Department spoke out too soon, it would undermine the credibility of the project. Indeed, there were mixed messages. In January 2001, the university took up an option on the north site, the academic planning group was formed, and in April of that year, there was a European tender for the applied research centre. The Department was working closely with the university at the time, but there was a sense that the university was trying to work its way through the issues and problems that it had identified.
6. At that same time, the outline business case was being developed, because the project was to be a PFI venture. The outline business case began to throw up evidence of issues concerning affordability, viability and so on. It was July before it became definitive that the project was not going the way the Department had hoped.
7. In hindsight — and it is wonderful for me to be able to say that, because I was not involved at the time — if the Department had alerted the community to that fact that there were problems, the shock to the community could have been avoided. That situation undermined the basis of trust, and the Department could have handled it better.
8. However, the Department was forceful with the university. It is on record that the Department urged the university to involve BIFHE and the community in the project. Perhaps the Department should have been more forceful, but it was trying to resolve the issues.
9. Mr Hamilton: Some interesting points have been raised, and I am sure that my colleagues will delve into those further.
10. I wish to address some questions to Professor Barnett. The Chairman has said that politics were involved, but there were educational objectives too. Hope was raised that educational underachievement would be overcome in one of the areas in this country — indeed, in the whole of the UK — that suffers most from that problem.
11. The Comptroller and Auditor General’s report states that the university told the board that it would continue to address those problems, and that it would accelerate the process of entering students to university, even after the project collapsed. Has educational underachievement in west and north Belfast improved since the university withdrew from the Springvale project? What proactive measures has the university taken since 2002 to increase participation in higher education?
12. The Committee has already heard from the accounting officer that entry to university has risen by 73%, but I am keen to know how low the base was originally. The University of Ulster has a very good record of admitting students from less well-off backgrounds, but what proportion of students in the university come from north and west Belfast — the areas for which the university promised it would do so much, even after the project collapsed?
13. Professor Richard Barnett (University of Ulster): I first wish to make very clear that the manner in which the University of Ulster withdrew from the project is regrettable. It was wrong that the university was not more open and transparent with our partners — the community, the Springvale board and BIFHE — during the decision-making process. I have already apologised for that, and I am willing to apologise again today. The decision-making process should not have been conducted in the way in which it was.
14. As Mr Hamilton said, however, the University of Ulster is committed to widening access to higher education. For statistical purposes, the university’s performance is measured as part of the UK higher education system. The university came third out of 100-plus universities in the UK for its initiatives to widen access and to provide opportunities for people from families and from neighbourhoods who would not normally be able to go to university. The university continues to be close to the top of that table.
15. To answer Mr Hamilton’s question more specifically, the university has administered the Step-Up programme in the north-west for several years now. We work with schools in areas of underachievement and where the proportion of people who go on to higher education has been relatively low. That programme has worked incredibly successfully with a range of schools in the north-west and has been hailed as an example of best practice.
16. With the support of the Department, the university has extended that programme to the greater Belfast area, including north and west Belfast and, in particular, to east Belfast, where there are also areas of deprivation. The university works with 15 schools in deprived areas across the city to help young people to progress to higher education. The programme, which is in its first year, has funding for 100 places, again with the support of DEL. Next year, 140 young people will go through the programme — private funding has been raised for the 40 additional places. The university remains committed to that project.
17. In partnership with BIFHE and Castlereagh College in east Belfast, the university has developed foundation degrees, which provide ladders of opportunity. That is what the Springvale project was all about; it was not necessarily for kids who would have gone straight into a university degree programme at 18 years of age.
18. The notion at the time was that the project would house the further education element and the higher education element in one building. Those two elements are not together in one building at Springvale, but the concept is being delivered through the strong partnership that the University of Ulster has with BIFHE. The further education element is provided by BIFHE, and students can progress to the campuses at Jordanstown, Magee in Derry, or Coleraine. Those elements are central to the university’s identity and its current policy.
19. About 40% of the University’s admissions — a high figure — come from families that would not normally send their children to university. I will write to Mr Hamilton with details of specific percentage figures for north and west Belfast, if that is acceptable.
20. Mr Hamilton: We may have to ask Professor Barnett to write to the Committee about participation levels. Dr McGinley mentioned that those levels had risen by 73%, but what was the base figure?
21. Professor Barnett: I do not have the precise figures to hand, but participation has increased substantially. As we know, the pockets of real deprivation are in the north and west of Belfast. I will have to provide the precise figures to you in writing.
22. Mr Hamilton: The Step-Up programme for 140 young people that Professor Barnett has described is an admirable achievement. However, do you accept that that number is far short of the number of students pursuing further and higher education for which the original Springvale campus was intended to provide?
23. Professor Barnett: Some opportunities for additional student places that would have been available have been lost as a consequence of the Springvale project not going ahead. However, progression from further education to higher education is still going ahead. From the university’s perspective, it should be borne in mind that, although there were to be 1,500 student places at Springvale, only 600 of those were to be new places. The remaining 900 places would have been transfers from our other campuses. That is the nub of the issue.
24. Six hundred new student places across three-year and four-year degree programmes really represents an additional entry of 150 to 200 students a year. Through the Step-Up scheme, we are reaching a level of 140 new students; however, that is a different type of programme.
25. The university remains committed to the fundamental concept that underpinned the Springvale project, namely widening opportunities for kids from deprived areas to get into higher education. We continue to deliver on that.
26. Mr McLaughlin: Paragraph 2.47 of the Comptroller and Auditor General’s report includes a long list of key areas of uncertainty in both the capital and operational funding of the project, which were highlighted in the outline business case of 2002 — almost five years after the initial project proposal. Does that not point strongly to poor project management and poor financial management? Does it not support the Chairperson’s point about the political climate and will having changed? The political wind had gone out of the sails of the project.
27. It is clear that those problems should not have come as a surprise to those who were involved in progressing the project. Political support and direction were clearly required to reach the planning stage. It would appear that problematic factors were allowed to develop as a result of inertia on the part of the Department.
28. The Government was a primary investor in the project; we have heard an explanation of the constraints on intervention that that meant. However, that did not absolve the Department from its responsibility to deliver on the project as it was presented at the early stages of the peace process, in the context of fostering confidence and hope for the future for the peace-process generation.
29. In a relatively short time, the project was allowed to collapse. There is a paper trail that indicates that the Department was in receipt of information about the changing climate and, particularly, the changing attitude of the university. That information was not acted on. How does the Department explain its management of the project, particularly between 1998 and 2002?
30. Dr McGinley: When the economic appraisal was carried out in 1998, we were never given any grounds not to support the project. The economic appraisal process went ahead, and the Department had to produce an addendum to that appraisal in 1999 due to, as you say, changes of circumstances.
31. Some of those changes were positive: for example, the outcome of the comprehensive spending review (CSR), which allowed for an extra 600 places that were ring-fenced for Springvale. That is one obvious example of a Government commitment to create a significant number of additional ring-fenced student places for the project. That was unique in that CSR settlement.
32. The addendum to the 1998 economic appraisal also took into account the change in context that resulted from the university retaining its York Street campus. In the original economic appraisal, the sale of the York Street campus formed part of the assessment. Subsequently, due to developments in the Cathedral Quarter, the retention of the York Street campus, BIFHE’s city centre campus at Millfield and other initiatives, the Department had to review and take into account those developments and practical changes. Professor Barnett can pick up on that matter.
33. In the addendum, the identified risks had reduced and the figures had improved. It may be a relatively minor change, but the total cost of the project changed from £71 million to £70 million due to a re-examination of aspects of design, etc. The addendum showed that we were reactive to changes in context, some of which were outwith the gift of the Department. The addendum went on to state that the project was still affordable and viable. That is why we then proceeded to the second letter of offer, with the conditions that the project continued. We proceeded with an outline business case to test for PFI. Therefore at every stage, the Department followed due process.
34. Any issues that arose were taken into account, and, after work on the addendum, Government support increased from £40 million of PFI in the first letter of offer to include expenditure for an additional 600 student places.
35. Mr McLaughlin: Therefore in what might be regarded as the honeymoon period, the case actually strengthened. However, by the end of 2001 the Department was getting indications that the University of Ulster was anticipating difficulties and had serious issues. What did the Department do about that, given the political direction involved and that the opportunity to strengthen the social and economic circumstances in the area would be lost? A year later, the university announced that it was pulling out of the project. Did the change of Secretary of State, from Mo Mowlam to Peter Mandelson, or the vice chancellor’s leaving, affect the project? Certainly the circumstances changed.
36. As I read the NIAO report, the questions confronting me are: did the Department go to sleep; was it dragged into the project in the first instance; did it want the project to succeed; and what did it do to try to save the project when it seemed to be under threat?
37. Dr McGinley: In the first instance, as I said, I admit that there was a time lag after the Department received the November 2001 letter, which is in appendix 4 of the NIAO report. The Department immediately met with the university’s representatives. The meeting was robust, and it is on the record that the Department challenged the university and told it that any alternative to, or change in, the proposals would require the consent of the other partners and the assent of the community. The Department also insisted that many of the issues that the university had highlighted could be resolved and asked the representatives to go away and reappraise and rethink.
38. The Department had observer-status on the Springvale board. We attended the council as and when requested; we were involved closely in developing the governance structures; and we worked with the university. However, at the same time as we were producing the outline business case, the university was also looking more closely at its role. That is another element that shows the level of Government support in that although the appraisals were commissioned by different parties, such as Springvale board and Springvale Educational Village Ltd, they were all funded by Government, meaning that there was no economic barrier to the appraisal process for the promoters.
39. The university had to take the bigger picture into account, and Professor Barnett may wish to describe some of the problems that the university was starting to encounter. Again, with hindsight, the Department might have realised that the university was signalling its withdrawal. However, we were genuinely trying to see whether we could resolve the issues and save the envisioned main campus.
40. Subsequently, in July, when it became evident that the project had, unfortunately, run into the sand, the Minister immediately met the parties concerned and contacted the Springvale board as a matter of urgency.
41. Mr McLaughlin: Was that a direct rule Minister?
42. Dr McGinley: No. It was the devolved Minister.
43. Mr McLaughlin: Was it Carmel Hanna?
44. Dr McGinley: That is right. She met the parties involved and wrote immediately to the Springvale board and asked it to conduct a review. As I said, the terms of reference of that review were very open and encouraging. Indeed, in the letter, the emphasis was on the social and economic circumstances. It reiterated the three objectives of the initial vision and said —
45. Mr McLaughlin: What was the date of the letter?
46. Dr McGinley: It was dated 25 September 2002.
47. Mr McLaughlin: The Committee might conclude that the university’s capital assets had not declined in that period — in fact, they had increased quite significantly — but that the resources that it had originally earmarked to support Springvale had either been de-prioritised or had dropped off the table. However, I do not intend to get into that now.
48. Given that reference has been made to poor communication between the various groups, I am intrigued that the Belfast Institute of Further and Higher Education (BIFHE) is not represented today. The stakeholders did not appear to be in the information loop when the university was raising questions about its commitment to the project or its ability to deliver on it. It appears that the Department kept that information to itself and did not accept any responsibility for ensuring that the partners were brought into the loop. That would have had an effect. The community representatives and, I am certain, the BIHFE representatives, might have turned to the political parties to see what could have been done about the situation. However, none of them were given the opportunity to save the project. That must raise serious questions.
49. I have illustrated where I believe the Department fell down significantly. What advice did it give to the Government at the time? Did it tell the Government that it could see a problem with the project and that it might not happen? Did the Department make positive representations to the Government about how the project could be preserved?
50. Dr McGinley: The Minister was made aware of the issues. Officials were working closely with the university, as it was one of the project’s promoters, to find a resolution to those issues.
51. Mr McLaughlin: What suggestions did the Department make to the Minister? You seem to be blaming the Minister.
52. Dr McGinley: The Department certainly does not blame the Minister. Ministers enable Government officials to do what they do. Officials would not have been able to take any course of action without the Minister’s awareness and approval.
53. Mr McLaughlin: It seems that the Department did not embark on any course of action. The Department either fell asleep or, for some reason, did not see any need to try to save the project. That is my basic assertion. Can you respond to that?
54. Dr McGinley: At the time, the Department proceeded with the outline business case that had been agreed and with all the work that was necessary for the PFI tendering to the Official Journal of the European Communities, to cover the applied research centre (ARC), and so on. It was business as usual. The Department wanted to ensure that the university was given the time that it needed to overcome its internal problems. The Department stated that in its report.
55. The credibility of the project was important. The Department’s making those problems known at the time might have led to the project’s demise when it could otherwise have been saved. A judgement call had to be made about whether the information should be shared at that stage. With hindsight, I accept what the vice chancellor said: the Department should have shared the information so that it did not eventually come as a shock. As Mr McLaughlin rightly pointed out, there might have been an opportunity to resolve the issues through other channels. Unfortunately, that was not done.
56. Mr McLaughlin: The shock is one thing: I can testify to that myself. I am concerned — and I am being measured in my language — that there was no attempt to preserve the project or to share the problem and to give others the opportunity to deal with it. I will illustrate that: paragraph 2.47 states that in July 2002 the outline business case raised concerns for the first time about whether 3,000 students could be attracted to Springvale. That was four years into the project. Where did that concern come from? Did the Department validate that concern? Did it do its own research? Is that the Department’s opinion?
57. Dr McGinley: That issue was first raised in the consultants’ economic appraisal in 1998. The issue was not new: it had underpinned the whole project. Initially, when the art college was supposed to be relocated to Springvale as a complete entity, it was felt that it would bring its students with it. When that changed, the situation was re-examined. The issue re-emerged.
58. However, at the time, significant work was being done with the community, the university and BIFHE on academic planning. Community representatives responded to the first academic plan by saying that it did not match their outlook for the college. They wanted the campus to reflect more closely the community’s needs rather than those of the university. That caused tension between the university’s academic integrity and the community’s expectations. That fed into uncertainty about the ability of the site to attract enough students. However, the issue had been addressed in the 1998 appraisal.
59. Mr Beggs: Paragraph 2.40 and the letter at appendix 4 set out the university’s change of heart. There is no mention of financial difficulties, just concerns about the governance arrangements, including the level of community involvement. However, community involvement had been a key requirement since 1998. Bearing in mind that the university had negotiated the legal agreement that supported the governance arrangement, why did community involvement become a problem in 2001?
60. Professor Barnett: That was in February 2000, in accordance with the university’s decision-making process. The project was a complex one for a permanent secretary and, throughout the 1990s, many people were trying to find a way to make the project work, such as by looking at various packages and various means of delivery. For example, the university’s initial plans were for a university campus with 3,750 places, but that was not seen as workable, so the university abandoned that and came up with another plan — a joint further education and higher education plan with BIFHE — which reflected the 1996 Dearing Report, ‘The Report of the National Committee of Inquiry into Higher Education’, and its emphasis on greater integration.
61. That plan was explored, along with the means of funding the project. As the permanent secretary said, that plan was considered as a way of providing higher education places, and Springvale was not the most cost-effective place to do that, hence the Springvale premium — which refers to the additional cost of providing places in that location, rather than somewhere else. The Government’s view was that that premium had to be paid by the university and BIFHE, because the Government would not and could not pay for that. To answer your question, as the project evolved and the final bid came through in February 2000, the Government set three preconditions for the university’s being able to proceed with the Springvale project, as the Audit Office report reflects in paragraph 2.30. One of those preconditions was that project had to be financially viable; it had to pay its own way. Therefore the suggestion that the university could cross-subsidise the project from other campuses no longer was an option. The Government’s stipulation that the project had to be financially viable changed the basis for whether or not it was affordable.
62. Therefore the outline business case posed a question: could the university proceed on the basis of the preconditions that the Government set at the time? The university’s internal analysis suggested that the Springvale project would not be financially viable, and those calculations were confirmed by the Audit Office’s report and are in appendix 8.
63. Mr Beggs: You have talked a lot today about packages, funding and the higher cost of providing higher education places in Springvale, but in your letter, you cited the governance arrangements — there was no discussion about the project’s finance. Was the question of where the Springvale project appeared in the university’s list of funding priorities for capital expenditure important?
64. Is it true that the prospect of annual running-cost losses, which varied between £100,000 and £1 million a year, was the real reason for the failure of the project, rather than governance? You said in your letter that governance was the problem.
65. Professor Barnett: The letter that you refer to was from Professor McKenna, and predates mention of the financial difficulties of the university. In 1999, just before Professor Smith retired, there was a rigorous debate and governance and finance were the two fundamental issues throughout that. Those matters featured in all the letters and discussions of that time, and there was ongoing discussion about the nature of the governance of the project, but we had to meet the precise precondition that the project be financially viable. Clearly, we could not meet one of those conditions. Therefore I put the question back to you: supposing the university had gone ahead, without having met a precondition, what would the Audit Office be saying to us now?
66. Mr Beggs: My next question is for the permanent secretary. The preconditions meant that the project could not go ahead. Would you and the Department not have known that when you set those preconditions? Anyone would have known that a small additional campus would have additional running costs.
67. Dr McGinley: Absolutely. That was taken into account in the support that Government offered. The Springvale premium — the money required to bridge the gap between the most expensive option and the least expensive — was one example of that. That was an accounting treatment. However, if money is also received from sources outside the UK Exchequer, a business case can be made. No Department will support a project that is not financially viable.
68. We also took into account student numbers and the resultant recurring costs that would need to be met. Therefore the Government worked with the promoters to put together the conditions that would make the project viable.
69. Mr Beggs: I address my next question to Professor Barnett. We have seen that the university did not tell the Audit Office how much of its own money has been spent on capital projects since 1997, and it has divulged neither its capital priorities since 1997 nor where Springvale featured in those priorities.
70. Why was that information not provided?
71. Professor Barnett: First, the Audit Office refers to £37 million of capital expenditure on the university over a four-year period. Although that may seem a lot, it is a low level of capital expenditure. Indeed, over the period in question, the university was not spending enough on capital to maintain the viability of its estate.
72. At the moment, the consultant’s report, which considers capital expenditure in all universities, suggests that the University of Ulster should spend approximately £18 million per year to maintain the sustainability of its estate. A few years ago, it would not have taken £18 million per year. If we had spent half of that sum then, which is what would have been required to maintain the existing estate, we could not have added another campus while letting conditions deteriorate at the Magee campus in Derry and the Jordanstown campus in Mr Beggs’s constituency. That would have resulted in poor quality standards for students, and it is especially relevant, given that we now have top-up fees.
73. In a sense, the capital expenditure was low during that period. It was not high. The capital requirements for the Springvale project were not really problematic. The university had to find approximately £8 million for the premium. We were told that we would have to find that money outside the UK; otherwise, it would have been a drain on the public purse. That was not a big issue. Rather, the big issue was the recurrent loss. What would have happened is that income for that campus, in recurrent terms, would have fallen short of recurrent expenditure. The ongoing recurrent loss over the life of the campus and not the capital would have caused the problem for the university.
74. Mr Beggs: Could the issue of recurrent loss not have been identified early on? Was there no discussion between the university and the Department at an early stage, before so much public money was committed?
75. Professor Barnett: There was always ongoing discussion. As I mentioned earlier, the precise nature of the funding package, and the precise nature of the campus, evolved over that 10-year period. It began as wholly a university campus with 3,750 extra places and later changed to a position where there were 1,500 students but only 600 extra places. Still later — until the end of the 1990s — the university planned to sell the York Street campus. Therefore in the 1990s, the university’s intention was not to have a fifth campus, but to have a renewed fourth campus by closing York Street and relocating and developing.
76. Two things happened. First, the additional student numbers and the size of the Springvale campus had been reduced. That meant that if we had sold the York Street campus, we would have had an art and design campus in west Belfast that would not have met the social and economic needs of the city — because York Street has about 1,000 students. Therefore approximately 1,000 to 1,500 student places would have been taken up by art and design. That would not have provided the required spread of skills-related courses.
77. Secondly, at that time, the politics of the city were changing. Laganside was developing, the Cathedral Quarter was being developed, and the university then decided to keep the York Street campus. Therefore the funding changed and evolved over that period. It was not that there was one project that did not change at all and could have been evaluated over 10 years; rather, there were many different projects throughout the period.
78. Mr Beggs: The problem was that from the early stages there was no business plan. Surely the Department had a vital role in liaising with the university to get an acceptable business plan from the early stages?
79. Dr McGinley: The outline business case would have led to a business plan. The sequencing of that, regarding economic appraisals that would have led to an outline business plan, was appropriate.
80. Mr Beggs: Is it appropriate that so much public money had been spent prior to that?
81. Dr McGinley: The member is correct. Again, that was the standard at that time. Nowadays, the issue would be raised at an earlier stage, and that would be picked up in current practice.
82. Mr Dallat: I know that Mr McLaughlin asked Dr McGinley to explain why a representative from BIFHE is not here. Will Dr McGinley accept that we would have a far better report if we had the widest possible access to the partners who were involved in the process? The Committee’s purpose in meeting here today is to ensure that the mistakes of the past are not repeated. We are somewhat restricted by the absence of one of the partners who were involved in the project.
83. I would like to hear the opinion of the Comptroller and Auditor General on this matter before we proceed further. Have the Committee’s enquiries been somewhat neutralised due to a lack of access to the partners?
84. Mr John Dowdall CB (Comptroller and Auditor General): Clearly, this is a case where there are lessons to be learned, and the Committee is already highlighting a considerable number of those lessons — in particular, the need for issues to be fully addressed at an early stage in high profile projects such as this, before enormous impetus builds up. That is not a green book issue with respect to the permanent secretary. That could not have been perfectly well understood in the climate of the early 1990s, as is evident now.
85. It is one of the major lessons that will come out of this report and probably out of the Committee’s findings also.
86. Dr McGinley: I apologise, but when we were preparing to meet the Committee it was our judgement that BIFHE would not be required to attend. Protocol, though not exact, suggests that there should be three witnesses. I am the accounting officer for further education, and I have had significant discussions with BIFHE and its accounting officer about the project. BIFHE was content with the Department’s view that it was not necessary for it to be represented here.
87. The only criticism of BIFHE in the NIAO report was that it did not obtain independent appraisals during the process. The University of Ulster had obtained appraisals through its internal audit. As stated in the report, BIFHE felt that governance processes such as the outline business case would cover any matters relevant to it. BIFHE had no viability issues, but it did have an affordability issue with respect to raising the balance of funding at the outset. Since that was the only matter that affected BIFHE, I felt that I could represent its interests. If the Committee requires more detail on any particular questions, we would be happy to come back.
88. Mr Dallat: I am finding this questioning difficult because I have the highest regard for the University of Ulster, and I was shocked when the university dropped the project. Professor Barnett has already set out the success that the university has had in attracting people from working-class backgrounds. Therefore I was amazed when it walked away from a project that offered opportunities to fundamentally change the lives of thousands of people in north and west Belfast. The project was simply swept aside, without even consulting the partners or the local community. Why did the university not make its position known publicly?
89. Professor Barnett: I cannot answer that question. I have already apologised to Mr Hamilton for the fact that the university did not make its position clear. That was wrong; I regret it, and I apologise for it. A partnership can work only if partners are open and transparent with one another. In this instance, the university was not. During the period concerned, substantial discussions were ongoing in the university, which, perhaps, it felt were necessary to be settled first. At the same time, the outline business case was being considered in some detail. However, the way in which the university behaved was wrong, and I can only apologise for that.
90. Mr Dallat: I thank Professor Barnett for his honesty. It is not easy to cross-examine people who were not in place at the time, and that applies to all of today’s witnesses. It is a weakness in the system that must be examined.
91. The university did not tell other people. Will Dr McGinley explain why the Department did not?
92. Dr McGinley: It was a judgement call as to whether a solution could be found. At the time, a series of actions had already begun — academic planning, taking up land options etc. The Department felt that the university appeared to be getting around to resolving the issues. With hindsight, the Department should at least have had discussions with the other partners. The Committee is right to point out that BIFHE and the community were kept out of the loop. That is the most unfortunate element of what happened.
93. The irony is that it is hypothetical to suggest that, had the problems been made known earlier, the project would have been saved. However, it is quite correct to say that, had the problems been made known earlier, the expectations of the community and the other partners would not have been dashed.
94. Mr Dallat: I have an off-the-cuff question: was the tail wagging the dog? Was the Department in charge or were people in the University of Ulster sitting in their ivory tower, completely aloof from the world below and the problems that the Assembly had inherited? Those problems included an illiteracy and innumeracy rate of 25% and 250,000 people without the proper skills to get work. The proposal was to build the campus right at the heart of one of the areas that suffered as a result of such problems. The university walked away from that plan, and the Department did not say a word. Had the Department lost control of the university?
95. Dr McGinley: It is interesting, and useful, to highlight that the University of Ulster is an autonomous body. It is not like a non-departmental public body (NDPB). As accounting officer, I have three roles with the university: first, to ensure that the funds that are voted to it are appropriately spent; secondly, I must ensure value for money for those funds; and thirdly, I must ensure good management and governance. Furthermore, I have responsibility for taking a wider overview of the university’s financial health. The university is an entity in its own right, and was established by charter in 1984. However, there are areas of its business over which the Department has no control.
96. Mr Dallat: You are absolutely right; we have hit the nail on the head. The university’s autonomy meant that it could walk away from the project any stage without bothering to tell people that it was doing so.
97. Paragraphs 2.51 and 2.65 of the report give reasons as to why the university chose not to continue with its involvement in the project. Those reasons include £8 million of capital funds and recurring expenditure. However, the university was subsequently asked whether it would reconsider its involvement in the project if the money became available. Of course, the answer was no. Was this nonsense about money just wee porkies to enable it to renege on its commitment? Perhaps the university had some other more idealistic or glamorous projects in hand.
98. Given that other campuses were losing money, why was the Springvale site treated differently? Does the Department not accept that democracy allows resources to be spread out in order that deprived areas can benefit from aspects of life where the university was doing well? To isolate the Springvale campus on the basis that it would lose money runs contrary to everything that we believe in. Would the gas pipeline have gone to Derry if such arguments had been used? Would the railway continue? Would anything? It would not.
99. Dr McGinley: The project is an example of how Government opted for the most expensive option in recognition of the socio-economic impact that it would have. Nine options were considered in the 1998 appraisal; two of which were ruled out at an early stage, leaving seven options. The least expensive option combined the Millfield site, the community outreach centre and the applied research centre based at the Springvale site. However, the difference was the Springvale premium. The Department identified how the partners could bridge that in order to enable the project to proceed under the chosen option, which was the most expensive, rather than that offering value for money. That therefore reflects the Government’s intention to support what was best for the area.
100. Mr Dallat: One reason given for the university’s withdrawal was that it had concerns that further education an