Mr. Fred Barry:

Public private partnerships generally transfer financial risks associated with designing, building and operating schemes from the client to the PPP company. The construction of any large civil engineering works - the route in question was an enormous project - carry a high degree of risk that actual costs will be ahead of estimated costs. This is particularly so for construction companies when they are tendering competitively because competitive pressures may constrain their ability to provide fully for contingent risks. The M6 Galway-Ballinasloe contract transferred most but not all of the construction risks to the PPP consortium. It transpired that the construction proved exceptionally difficult and the costs were far in excess of the PPP estimates. Some of the additional costs, to a total of €16 million, were determined to be to our account under the provisions of the contract but most of the cost overruns were paid by the PPP company and its contractors. In 2010, for example, N6 (Construction) Limited, which was constructing the route, published accounts which recorded cumulative losses of €50 million on its part when it would, of course, have expected a profit. This was a huge project which gave rise to a variety of difficulties.

The cost for most of these difficulties stayed with the PPP company but we were responsible for certain matters under the terms of the contract. There was, for example, extensive flooding in Galway in 2009. Members may recall that Galway city was virtually cut off from its hinterland, other than for very limited access. We arranged with the PPP company for sections of the road to be opened earlier to provide access to Galway by land transport. The cost of this was additional to the contract and we paid extra for it. There was a dispute with the PPP company as to how much should have been paid, which is why it was included.