Seán Fleming (Laois-Offaly, Fianna Fail)

I welcome the opportunity to contribute to the National Development Finance Agency (Amendment) Bill 2006 because it will have immediate and practical benefits for many projects around schools, especially some in my home town of Portlaoise. I look forward to the enactment of the legislation as quickly as possible.

The purpose of the Bill is to establish a centre of excellence in the National Development Finance Agency. It is important to recognise that the National Development Finance Agency has the function of advising Departments and agencies on all major capital investment projects over €20 million. The centre of excellence has the specific function of advising on the procurement of public private partnership projects. Section 3 will enable the National Development Finance Agency to carry out two new functions: to enter into public private partnerships with a view to transferring the rights and obligations under any such arrangement to any State authority, and to act as an agent for any State authority in entering into a public private partnership arrangement. It is expected and envisaged that in most cases, the National Development Finance Agency will act as an agent for the State authority. In reality, we all expect it to happen this way. Line Departments, such as the Departments of Education and Science or Justice, Equality and Law Reform, will have particular projects and when they bring them to a particular point, they will be handed over the National Development Finance Agency for onward procurement through the PPP process.

Section 6 of this Bill deals with the appointment of three additional board members to the board of the National Development Finance Agency, which is very important given the increase in activity as a result of the additional PPP projects and other activities in the agency.

I am also pleased to see that under section 8 of the Bill, there is provision to allow the National Development Finance Agency to disclose confidential information to the appropriate Minister, as well as the Minister for Finance. This is important because since the agency is effectively part of the overall National Treasury Management Agency, there has been a tendency for the reporting structure to go directly to the Minister for Finance. As we are now entering these new PPP projects, the National Development Finance Agency will effectively be acting as an agent in respect of several Departments and it is important the relevant and appropriate Minister receives information from the agency in respect of confidential commercial matters such that he or she can be fully informed and satisfied as well as the Minister for Finance, who, obviously, has an overarching role in respect of this issue.

So far, it has been mentioned that there has not been sufficient debate on the role of PPPs and the reason we are introducing legislation to deal with this matter. I genuinely believe people are getting hung up on issues that are not very important. We should take a pragmatic view on all these matters. I have no problem with a project being delivered by the public or private sector or by a combination of both once the project is delivered effectively and efficiently and carries out the function it was meant to achieve on behalf of the people in an efficient manner.

There are people who wish to have endless ideological debates on which bank the Government has dealings with. People should bear in mind that Governments must borrow from year to year to finance their capital expenditure on many occasions, especially if they are not operating with a major surplus. They go on the international market to borrow money. We do this through the National Treasury Management Agency. Governments borrow money from international banks and institutions so, in many cases, the private sector is advancing loans and finance directly to the Government which then commits money to the capital projects about which we are talking. Therefore, it is no great shakes for the project itself to borrow directly from these large international financial institutions and, in some cases, bypass the middle man in terms of going into the Exchequer, coming through the Vote through the House and the same money being wheeled out to pay for the project in the first place. It was never envisaged that PPPs would be a massive portion of our activity. It is envisaged that they will encompass a small percentage of expenditure under the national development plan.

So far, there has been considerable debate here on schools constructed under the PPP scheme. I am pleased that some time ago, the Government prioritised a number of areas for expenditure under the PPP projects and the Departments of Education and Science and Justice, Equality and Law Reform were among the Departments highlighted. A total of 21 projects were approved by the Department of Education and Science as being suitable for the PPP approach to public procurement. I am very pleased that of the first bundle of those projects, four are in my constituency. There are two new schools in Portlaoise, both secondary schools on Borris Road catering for boys and girls, respectively, and two schools in Offaly. They went to tender on 30 September 2006. I watched the project intimately and closely. I examined how it integrated with the local authority, planning and schools; the planning of the project; how it deals with the Department at local level; and, in particular, how it is operated at national level. I had discussions, particularly in respect of those projects, throughout last year to ensure they met their deadlines with everybody from local to national level.

The essence of the project was to transfer the risk from the public sector to the private sector. This was achieved, as it is in most of these situations, in that outline planning permission was obtained by the line Department in the first instance so that when the project goes to tender under the PPP scheme, there is certainty that it will qualify for planning permission. If the people who were tendering could not be sure of obtaining planning permission for the project, they certainly could not build it and would face enormous risk.

I will explain to the House how these contracts work because they are some of the first projects under the new PPP arrangement out of the traps. I am sure the legislation will be enacted and by the time the contracts come to be finalised and contractors appointed, it will all be under this new legislation. The tender is for final design so the successful tender must then submit a final application for full planning permission on the basis of the outline planning permission already granted. I have seen how the State can be very intelligent in minimising the risk to itself and exposure and making the contract more straightforward and certain for the people who are tendering for it.

In respect of the particular case to which I referred, these types of problems happen everywhere. It will happen in respect of the new prison at Thornton Hall and these schools. There will be issues directly affecting the project in terms of the delivery of services, water and other public services and amenities to service a particular project. There might be boundary issues in respect of Portlaoise, or roads issues. The Department has cleverly taken all aspects of the project outside the site boundary out of the contract and if there is any difficulty in terms of access, roads or services from the local authority to the site, the Department will pay for that separately and directly in the normal manner that it would have always used and the PPP contract will only deal with that element within the site boundary that will be within the control of the contractor once he or she gets the job.

I am a member of the Committee of Public Accounts and was surprised to hear such misquoting of the Comptroller and Auditor General's value for money report on the five school projects to date. Everyone said they were excessively expensive, which I do not think is a full and fair assessment of the report. The Committee of Public Accounts issued a report on the Comptroller and Auditor General's value for money report. It felt that some of the report did not give a fair overall view of everything involved in those five school projects.

The Comptroller and Auditor General's report was generally positive. He stated that he believed the cost was higher by 7% or 8% than the cost of using a traditional method. There is a major caveat here which I will revisit. The project provided for a larger school than would have been provided under the traditional method. The corridors and circulating and recreation areas for people to move about within the school were 15% higher than the normal Department specification so those five schools have got better projects and school buildings than would have been the case traditionally.

It is important that we objectively examine the report of the Comptroller and Auditor General. Some Members of this House quote him as though he was infallible. However, he knows he is not infallible and so do we and he is happy when we have constructive comments to make. One thing he ignored in his report and which must be a factor is that these schools were delivered earlier than they would otherwise have been. There was an educational advantage to all the students in the schools because they occupied the new schools earlier than they would otherwise have done. It is almost impossible to put a cost-benefit analysis on that type of issue, but it is a relevant factor to be taken into account when one is comparing the PPP project to the traditional, slightly slower method. No attempt was made to examine that aspect of it.

Another matter ignored by the Comptroller and Auditor General's report was that one has a contractor who will be responsible for the final design, build and operation of the school. These are what I call practical school issues, rather than pure book-keeping and accounting issues. The operator will be responsible if the electricity goes, if there is a leak, if a door is broken or if the padlock on the shed is broken and the company will, therefore, be responsible for the maintenance and operation of the school. This issue was ignored by the Comptroller and Auditor General. However, this would free up the school principal to do what he or she should do, that is, look after the educational needs of his or her students. All principals spend much of their time overseeing minor Mickey Mouse maintenance issues such as broken windows, leaks, heating breakdowns and so on. The five proposed PPP school projects offer major advantages whereby the principal will be freed from such duties and this has been ignored by the Comptroller and Auditor General. Those factors must be taken into account and not only the cost inputs.

Above all, the Comptroller and Auditor General highlighted this was a contract for the operation and maintenance of the school over 25 years. It is clear the cost of the whole life project of a school is not available in the Department of Education and Science so a comparison can be made between the cost of a PPP and the cost of maintaining a traditional school over 25 years. That is not a criticism of the Department because it could not been expected 25 years ago to anticipate the need to compile annual maintenance costs on a school by school basis. When the Comptroller and Auditor General attempted to compare the whole life costs of a PPP project with a school built under the traditional model, the costs were not accurately available within the Department for understandable reasons. One of his key findings is it is not possible to give an absolute, accurate assessment of the costs under the two models because of the gap in the information. People conveniently forget this when they debate this issue.

I am a member of the Committee of Public Accounts and we believe there is a lack of transparency because of commercial sensitivities and, ultimately, there is a lack of accountability to the House regarding commercial contracts. The committee, which never divides on a party political basis, has suggested an all-party committee should have access to all the necessary confidential information. The Comptroller and Auditor General and relevant Ministers are entitled to this information and perhaps the Committee of Public Accounts could report to the House that it has examined the matter in camera, without disclosing confidential information. At least then the public would be satisfied that 12 Members examined the commercially sensitive aspects of a project and reached a conclusion. A mechanism could be developed whereby that could happen without breaching commercial sensitives. This would generate confidence and address the criticism regarding the vacuum in information.

A number of myths are associated with PPPs. The strangest aspect of the debate is that one would almost think PPPs are being invented under this legislation. However, they have been in existence for as long as I can remember. Local authorities and Government agencies have availed of such projects on the ground for years. However, they are being formalised in legislation and perhaps it is necessary because of our commitments to the EU and EUROSTAT to adopt a formal legal approach regarding such projects. For example, the Midlands Prison in Portlaoise in my constituency was an extensive project commissioned in 1997. It was designed and built by the successful contractor, Henry O'Rourke, and financed by Barclays Banks, which still owns it. The prison is built on State land but the Government will lease it for the remaining 25 years. That was a PPP in every respect. In addition, the Department of Agriculture and Food's office in Portlaoise were leased by a major company to the Government for a number of years but the Government felt it opportune five or six years ago to buy out the lease and the building is fully in State ownership. Throughout Dublin and every other county, there are several examples of the public and private sectors working together successfully on major projects. While such projects did not have the fancy title, they were more or less PPPs in practice. We are giving them their official title, yet some people think they are only coming into being.

I am disappointed PPPs have not been implemented more speedily in recent years. Reference has been made to the Cork School of Music, which will cost €200 million, but that amount relates to maintenance and operation over 25 years. While that is much higher than the original estimate, a number of Members are comparing both figures and saying the ultimate cost is expensive. That is not necessarily the case. The tragedy is figures are not available to verify either side of the argument but the conclusions drawn by certain Members cannot be drawn. One of the reasons the project was held up at EUROSTAT level was its query on how to account for the debt-GDP ratio in the context of the ongoing costs given the State would enter into a financial commitment from day one for expenditure over 25 years, notwithstanding that the liabilities would not mature over the period. Nevertheless, a legal contractual arrangement will be in place from the outset.

Generally, the NDFA and the National Treasury Management Agency should be used more. This legislation is important but I ask the Minister to enhance the role of both agencies to deal with complex commercial contracts in which many Departments and agencies are involved. The job of the Departments of Education and Science, Health and Children, and Justice, Equality and Law Reform is to deliver the services required of them. It is not the function of their senior personnel to be engaged in commercial contracts. Major capital projects only come before a Department on an intermittent basis and, therefore, a cadre of experienced people who have been through the process is not built up. When such projects are negotiated at departmental level, the Department of Finance will stand off from the negotiations, having issued guidelines and provided funding under the relevant Vote. That is not the best way for the State to ultimately ensure value for money. Expertise in PPPs should be developed through the NDFA because the public sector needs to deploy staff in one agency who can match the expertise of those they negotiate with from the private sector.

I welcome the legislation and I hope it is passed quickly. When it is enacted, the school projects in Portlaoise and County Offaly will be among the first to be undertaken. They are at a tender stage and I look forward to the NDFA signing the contracts on behalf of the Department of Education and Science soon.

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