NORTHERN IRELAND: THE INDUSTRIAL RESEARCH
AND TECHNOLOGY UNIT
ASSISTANCE
FOR
DEVELOPMENT
OF
MAJOR
RESEARCH
FACILITIES
21. IRTU provided £4.2 million assistance to
a company to undertake research into the development of a new
process for the manufacture of a synthetic rubber material. Some
12 months after payment of the final tranche of assistance, the
project was terminated due to technical difficulties. The NIAO
report raised concerns about the technical appraisal of the case,
the non-involvement of IRTU's Casework Committee, the timing of
the appraisal and the delay in formal evaluation of the case following
termination.[22]
Technical Appraisal
22. The technical appraisal was carried out by the
officials in the Technology Division of IRTU who were negotiating
with the company. The reasons given by IRTU were the need to respond
quickly to the decision deadlines set by the company, the need
to handle the project tactfully and the familiarity of one of
Technology Division's officials with the company's approach and
house style.[23]
23. We asked the Department how they had ensured
that their technical appraisers had achieved the necessary objectivity
in this case. The Department said that they believed the technical
appraisal was best conducted by those who were familiar with IRTU's
schemes and objectives, had a thorough knowledge of the company
and technical knowledge of the project in question. The Department
told us that this was consistent with the practice elsewhere in
the Department and in other industrial development agencies. They
also considered that the financial appraisal, which had been carried
out independently of Technology Division, had represented a safeguard.[24]
Non-involvement of the Casework Committee
24. Contrary to its standard appraisal procedures,
IRTU did not submit the project for consideration by their Casework
Committee.[25] In reply
to our questions, the Department accepted that the procedures
should have been followed and that the Casework Committee should
have been involved in the process.[26]
Timing of the Appraisal
25. IRTU had exchanged unqualified letters with the
company, in June and August 1992, on the scale of assistance.
This was before completion of the appraisal in January 1993 and
also prior to approval by the Department of Finance and Personnel.[27]
While the Department told us that they believed the letters were
understood by the company to be indicative offers, they now agreed
that the letters should have been qualified and that that lesson
had been learned. The Department said that procedures were now
in place to ensure that this would not happen again.[28]
Evaluation of the Project
26. In March 1995, the project was terminated, due
to technical difficulties. However, 18 months had elapsed, following
the project's closure, before IRTU commissioned a formal evaluation
of the case.[29] In explanation
for the delay the Department said there was an expectation that
there might be another project which could follow on from the
original project but in fact that did not happen and they now
accepted that the evaluation should have been carried out at an
earlier stage.[30]
Documentation Standards
27. It was apparent in this case, and also several
others which were examined, that IRTU's documentation procedures
were deficient.[31] The
Department agreed that there was some evidence in this examination
that documentation has not always been as good as it
should have been and that it was one of the areas
which they were trying to improve. The Department subsequently
informed us that comprehensive operating manuals were now in place
describing the procedures to be followed with particular emphasis
being given to the importance of full documentation of all aspects
of appraisal, monitoring and evaluation.[32]
Conclusions
28. We have considered the Department's comments
about the technical appraisal very carefully. We appreciate the
Department's desire to utilise, to best effect, the skills which
exist within the organisation, but this must also take account
of the importance of operating procedures which reinforce the
objectivity and independence of the appraisal process. It is established
good practice in other areas of selective financial assistance
that, where the sums involved are large, the appraisal process
should not be carried out by the officials who are directly responsible
for progressing a project with a client company. In our view,
this practice is a sensible safeguard and is as relevant to technical
appraisal as it is to financial appraisal.
29. We found it surprising that the largest project
which IRTU has supported was one which they failed to submit to
the Casework Committee. We note the Department's acceptance that
the Committee should have been involved and their assurance that
they now have procedures in place to ensure that this does not
happen again.
30. It is clear to us that, in failing to spell out
the indicative nature of its offer, IRTU had committed themselves
to assisting the project before it had been fully appraised. The
Department accepted that the letters to the company should have
been qualified by reference to the offer being conditional upon
the successful completion of appraisal. We note their assurance
that they now have procedures in place to ensure that this does
not happen again.
31. It is important to ensure that formal evaluations
are conducted promptly, following termination of projects, to
ensure that any lessons are incorporated into IRTU's procedures
at the earliest opportunity.
32. We note the Department's assurance that revised
procedures have resolved documentation problems.
33. Overall, we take a very serious view of the series
of deficiencies in IRTU's handling of this case. Our concerns
have been heightened by the fact that this is the largest project
ever assisted by IRTU and it should be clearly understood that
the various shortcomings highlighted by the NIAO report are unacceptable.
We note the assurances given by the Department that improved procedures
are now in place.
22 C&AG (NI)'s Report paragraphs 3.2, 3.8, 3.18-3.19 Back
23 C&AG
(NI)'s Report paragraphs 3.4, 3.9-3.12 Back
24 Qs
5-6, 13 Back
25
C&AG (NI)'s Report paragraphs 3.7, 3.13 Back
26 Qs
44-49, 68 Back
27 C&AG
(NI)'s Report paragraphs 3.5-3.7, 3.14-3.16 Back
28 Qs
7-8, 68 Back
29 C&AG
(NI)'s Report paragraphs 3.18-3.24 Back
30 Qs
14, 72-74 Back
31 C&AG
(NI)'s Report paragraphs 2.10-2.12, 3.23 Back
32 Qs
15-18. Evidence, Appendix 1, p 10-11 Back
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