The Tánaiste, Ms Harney, expressed serious concern about the contract awarded for the National Aquatic Centre in December last year, according to a memorandum for Government released along with the Attorney General's report.
The memorandum highlights concerns expressed by the Attorney General, Mr Michael McDowell, relating to the contract and the possible legal implications of not granting it to Dublin Waterworld Ltd.
It stated that Ms Harney believed there were serious issues arising from the way the contract was handled, and particularly referred to "the lessons that should be drawn in relation to the main campus project".
Ms Harney expressed concern about the way in which the awarding of the contract had been handled by CSID. The Design/ Build/ Finance/ Operate/ Maintaincontract, she believed, left the Exchequer with a "considerable degree of risk in relation to the operation of the facility, limits the exposure of the contract/operator and provides incomplete security to the Exchequer in the event of default".
She noted that there had been considerable expenditure without the benefit of contracts and she was "disturbed by the parallel situations that the State could be liable to damages if the contract is awarded and could be similarly liable if the contract does not proceed". Despite her concerns the project went ahead. The controversy became public only when it was revealed in The Irish Times earlier this month that CSID had signed heads of agreement to operate the centre with a shelf company, Waterworld UK.
Relating to the procurement process involved, the memorandum said there was a statement in the successful bid that Waterworld UK would establish an Irish company to effect the operation and maintenance of the project.
"According to counsel's advice provided to the Attorney General's office, this might have been satisfied by the establishment of a wholly owned subsidiary of Waterworld UK or a company in which it held a majority interest. In fact Waterworld UK has a very limited involvement or investment in the operating company, Dublin Waterworld Ltd, i.e. a shareholding of 4 per cent and no controlling income."
It went on to say that Dublin Waterworld Ltd was only established on January 31st, 2001, with paid-up share capital of £98 and no proven track record for an operation of the scale involved.
"The office of the AG has advised that this situation, if challenged, could be deemed to fail to meet bid requirements although the period in which an unsuccessful tenderer could challenge the procedure is limited to thee months from the award of the contract."
CSID, it said, had confirmed that the heads of agreement which they were permitted to negotiate and sign specify "that the lease granted is, in accordance with the bid submitted by UK Waterworld, to a special purpose vehicle company called Dublin Waterworld Ltd".
Addressing the experience of those involved in running a facility of this size and scale, "this is offered by two named individuals, also shareholders, who are currently managing pool facilities in Tralee and are considered by CSID to have the requisite technical expertise. Waterworld UK will also be providing technical expertise to the operator."
The memorandum also said that CSID stated that Waterworld UK would "remain a named party to the contract because of its shareholdings in Dublin Waterworld Ltd and its technical role."
The implications of not granting Dublin Waterworld Ltd the contract, were also examined and it was stated that the Attorney General's office "consider that if so decided, Dublin Waterworld might choose to launch legal action. A decision not to grant Dublin Waterworld a contract might also be interpreted as a public acknowledgement that the process was flawed and invite litigation. Finally, the State would still have to find another operator for the pool. In any event if damages were awarded, the AG's office consider that recourse may be sought by the State, through, CSID, against the providers of executive services to CSID, and the legal advisers in negligence."
The EU Commission, it went on, might "also bring legal proceedings for breach of public procurement against the State, but the concessions recently obtained by CSID in relation to the contract have in the opinion of the AG's office to some extent provided some protection in this regard."
Proceeding with the draft contract, it stated, "does not involve an unquantifiable degree of risk". It advised that it was "unable to quantify the risk with precision as the possibilities and permutations are too uncertain".