The Government will award a contract to run the first two lines in the LUAS light rail system next autumn. Dublin Bus will tender for the prestigious service on behalf of CIE Group, but the odds on a successful bid seem very long.

The "huge quality deficit" in its existing services - as described in its latest annual report - and a volatile, strike-prone workforce mean it will be difficult indeed to persuade the Government that CIE can make a success of light rail. Its record would suggest the opposite.

With DART drivers poised to walk off the job on November 20th and a Government report suggesting a £14 million rail signalling contract signed in 1995 ultimately cost £25-£40 million, attention has again focused on CIE and its many problems. Solutions seem elusive.

For the Minister for Public Enterprise, Ms O'Rourke, the difficulty is compounded by the traffic crisis throughout the State. A road system built for a much smaller economy can barely cope with increased industrial and private traffic. Long delays are now the norm in Dublin and in other cities and towns.

This is where public transport should come into its own, but decades of under-investment in CIE mean it has little potential to thrive. Habitually poor services and frequent industrial action mean it does not have a reputation for reliability. As a result, motorists are reluctant to take the bus or train.

This is despite the impression on bus queues that Dublin Bus appears to reserve its newest vehicles for routes in affluent suburbs, while passengers in certain deprived areas of the city - many of whom have no alternative transport - are served by dirty, older buses.

Even where CIE has developed improved systems - as with the Stillorgan quality bus corridor (QBC) in south Dublin - it has been unable to implement them on a wider level. It accepts the development of the QBC network in Dublin is "years behind schedule" with target dates constantly slipping.

In an attempt to improve the situation, the Government has agreed to invest £2.2 billion in the group in the National Development Plan, which runs until 2006. However, independent analysis of recent projects suggest the company's ability to deliver on investment is limited.

Despite expenditure of £29.1 million last year on a rail safety programme - which will cost a further £47 million, this year and next - consultants to the Department of Public Enterprise said "very few" previously reported unreasonable risks had been solved. Neither were improvements consolidated "in a methodical and robust manner", according to International Risk Management Services.

The report on the 1995 signalling project raised further concerns last week. In addition to a large cost over-run, it was revealed that four figures who worked on Iarnrod Eireann's contract with Modern Networks. had left the State company to join it.

Accountancy firm PricewaterhouseCoopers concluded the agreement reached with Modern Networks failed to meet "any of the Iarnrod Eireann procurement objectives". It added: "The contract is so unspecific in the context of Iarnrod Eireann's needs as to be no more than a general statement of intent between the parties."

This matter was discussed at a meeting of the Oireachtas Joint Committee on Public Enterprise and Transport yesterday.

Of course, the expenditure on the rail safety and signalling projects is marginal when contrasted with the £2.2 billion promised to CIE in the National Development Plan.

When asked whether the group was concerned about its capacity to implement change, its spokesman cited the PricewaterhouseCoopers report: "That was in 1996. Since then we have been strengthening up on project management."

He added that the construction by CIE of the first two LUAS lines - the Tallaght-Abbey Street and Sandyford-St Stephen's Green links - was proceeding on schedule and within budget.

Yet the development of a metro system in Dublin - as approved in principle by the Government - is likely to be on a public-private partnership model.

In addition, questions about the cost of LUAS were raised last March by Mr Brian Joyce when he resigned unexpectedly as chairman of CIE due to "fundamentally differing views" with Ms O'Rourke over the group's autonomy.

In his letter of resignation to Ms O'Rourke, he wrote: "I did write to you to inform you of the prospect of the project reaching four to five times the amount originally envisaged (up to £1 billion perhaps) . . . It was intended that it would provide the Government with the opportunity to carry out a strategic review on a project that was potentially going to absorb up to 50 per cent of all available capital resources for national public transport in return for carrying less than 10 per cent of peak-hour passengers into the centre."

The Government, however, remains committed to the project - as seen this week when Ms O'Rourke turned the sod at the proposed site of the LUAS depot in the Red Cow area of west Dublin.

Mr Joyce's replacement, Dr John Lynch, is now working as full-time chairman in the group. This is unusual. CIE has a full-time chief executive, Mr Michael McDonnell, so the norm would be for the chairman to work part-time. Mr McDonnell and Ms O'Rourke are not close. But the Minister's spokesman said at the time that Dr Lynch's full-time appointment was not a signal of a lack of confidence in Mr McDonnell. Instead, the concern was about the delivery of infrastructure, which was "not specific" to CIE.

Even so, Ms O'Rourke's spokesman confirmed this week that either Mr McDonnell or CIE's chief financial officer Mr Jim Cullen would be replaced on the board by a senior Department of Public Enterprise official. It is thought this decision was made some months ago. A additional factor here is that Mr McDonnell and Mr Cullen reached the end of the previous term on the board on November 27th, 1999, but were not reappointed until February 1st.

It is thought Mr Cullen has written to the Government to inform it that work stoppages and pay claims will require additional funding of some £30 million to keep the company in business this year. Its subvention in 1999 was £142.1 million. Officials and CIE are also discussing the possibility of securing additional funding next year, it is understood.

Last weekend, Air France said it would withdraw from the Paris-Brussels air route next April. Even those who can afford to fly the route now choose a speedy rail link instead. The prospect of CIE's services receiving such an endorsement seems weak.