The Department of Transport, Energy and Communications had to pay £84,000 more than the agreed tender price to consultants who evaluated the applications for the second mobile phone licence.
Applications for the GSM licence, which was awarded to Esat Digifone, were vetted by Andersen Management International, a Danish firm of consultants.
The Department received 21 applications for the contract to evaluate the applicants. The tenders varied from £190,000 to £932,000.
Andersen had submitted a fixed fee of £297,450 and expenses up to £30,000. The Department also approved £17,215 for separate additional work items. The final payment came to £411,574. This comprised fees of £369,205 expenses of £25,154 and additional work expenses of £17,215.
The Comptroller demanded an explanation for the substantial increase in the original tender price.
After the company was engaged, two disputes between the Department and the consultants emerged.
The company said it had a difficulty because it had made an "erroneous exchange rate assumption" in its original tender and there had been an unfavourable rate movement since then. The consultants also raised the question of additional payment for certain additional items.
Following detailed negotiations, in which the Department said the exchange rate risk must be carried by the company, it was agreed that certain defined items which were clearly outside the original contract could be invoiced. A ceiling of £17,215 was put on this.
After applications for the GSM licence were received, it became clear that the company would have difficulty completing the project to the required standard within the £297,450 ceiling.
The company began to cite additional workloads and later formally sought approval to invoice certain elements of the contract as additional work items not covered by the agreed price. The Department said it believed and continues to believe that all of these extra items related to work which could only be "reasonably considered to be within the scope of the evaluation agreed with the company".
However, the Department said it became clear that without revising the payment, it could not have confidence in the consultants' evaluation. It considered engaging a new consultant to complete the project. This could have cost up to £500,000.
The Office of the Attorney General also advised against severing relations.
Although a clause in the contract provided that no payment in excess of £297,450 would be made without the express approval of the then minister, Mr Michael Lowry, the Office of the Attorney General said the contract also referred to the company's tender. The tender foresaw a more flexible payment regime and because the contract specifically provided for payments in excess of the ceiling, the ceiling could not be enforced.
Consequently, a new price ceiling was negotiated. It entailed a payment of £370,000 plus expenses.