Project fee arrangement was changed by Magahy

Magahy & Co changed the fee arrangement it had for the Sports Campus Ireland (SCI) project last year because of concerns it had about how the original arrangement would be perceived, an SCI spokesman said yesterday.

He said the switch from a percentage fee arrangement to a fixed fee arrangement was proposed by Magahy & Co in January 2001, and approved by CSID in May 2001.

The arrangement was submitted to the Department of Tourism, Sport and Recreation. "I don't think the Department ever came back to the board about it, but that didn't matter." He said that although the new deal was never sanctioned, it was implemented.

The new arrangment was that Magahy & Co would be paid €127,000 (£100,000) per month for the supply of executive services by it, Magahy & Co, and the other members of the consortium it led. The other members are: PricewaterhouseCoopers; SIAS Transport Consultants; Bernard McHugh Planning Consultants; Wilson Hartnell Public Relations; and Mr Ronnie Delaney.

The €127,000-per-month fee was then reduced in early March 2002 "in the light of the fact that the project was effectively on hold pending a Government decision on Sports Campus Ireland". Magahy & Co reduced both the executive imput into the project and the payment sought.

The original arrangement, outlined in a contract dated September 1st, 2002, was that the consortium would be paid 1.8 per cent of the eventual cost of the SCI development. "A percentage fee is standard practice in development contracts in relation to professional fees for architects, project managers, etc."

The spokesman said the introduction of the fixed fee "was not to say we don't want the money we deserve, but there was a possibility that people would believe we had an incentive to allow the costs to grow. That was the motivation."

It also came about because by January 2001 a clearer picture had emerged as to what the full development cost was likely to be, the spokesman said.

Asked about the comment on RTÉ radio by Mr Des O'Malley that the contract with Magahy & Co should be terminated, the spokesman said this was a matter for the Government.

The fixed fee introduced in May 2001 would have had little effect on the overall amount paid in fees had the project come in on budget. The original estimate for the SCI project was €444 million, with the campus to be built by 2006. At that price 1.8 per cent would equal €8 million.

At a rate of €127,000 per month over five years, the fees would have totalled €7.6 million.

However a report by consultants High Point Rendel earlier this year estimated that the cost of the campus could be €894 million. At 1.8 per cent this would have made for fees of €16 million and in such a scenario the €127,000 per month fee arrangement would have constituted a significant fee reduction.

The consultants' report led to the overall Sports Campus Ireland project being put on hold. Property development sources said a 1.8 per cent fee was a reasonable one, considering the services being supplied through Magahy & Co.