Mr. Declan Dunne:

The first thing to talk about is the definitions of "turnkey". There are different definitions about what is and is not turnkey. In the private housing sector, turnkey usually means that somebody builds something and they finish that out. They finance it, manage the construction and someone else comes in and buys it at the end of the process. In many ways, there is nothing wrong with that if there is value for money and that is a sensible thing to do. We are not criticising that. It is a particular methodology and one that has been used for many years. There have been previous discussions in this committee about different forms of contract. I mentioned particularly the high interest rate that applies that for developers during the construction phase. That is just simply because bankers have to take into account the risk involved. They see a much higher risk during construction than in other parts of the process. The approach we have taken in Respond, and some of our colleagues are doing exactly the same, is that we enter into a site purchase agreement with someone who has land. This is probably a developer who has identified a piece of land, has gotten planning permission and is considering developing it.

At that stage they have discussions with various parties and have many choices, such as the Land Development Agency, LDA, or the local authority directly, following which they decide who they will partner with. In our form of engagement, we give them certainty in terms of finance because we are able to do so, with the support of the Department and the accelerated capital advanced leasing facility, CALF, model. That gives us the money, and it is the State's money we are using, to purchase that land on day one, which also gives us safety by owning that land, and then we make payments at each stage of the development.

This was referred to in the previous committee meeting about oversight of quality control and that we do not end up replicating defects. We have an internal team of more than 20 architects, planners and quantity surveyors, and we use external experts. We check before the payment is made that the work has been done to our satisfaction and there are no defects. We warranty that and ultimately work through the process. Since they do not have to borrow that money from the bank with interest rate involved, we therefore get the houses at a better price. That is the approach we are using. There is nothing magical about it but it seeks to try to address that issue that has been raised.

On the alternative, just to say we do it and local authorities do it, so the public works contract is a very familiar method for local authorities and AHBs and we have done it a number of times. In that situation you have a piece of land that may not have planning and you have a long period to get through the planning process and then go out to tender and get the most advantageous tender. In that process there is a potential escalation clause in it. With Respond it is a fixed-price contract so we have a tied-in price. We can pay more, and if there is a reason and it can be justified, we can look at that but it gives control. We are not in a children's hospital scenario and we have some control over it. We are not saying we are the only one or the perfect one but I am just explaining what our practice is, why we do it and the benefits we see from it.