Dáil debates

Wednesday, 21 April 2021

Ceisteanna (Atógáil) - Questions (Resumed) - Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions

Public Private Partnerships

7:20 pm

Photo of Mairead FarrellMairead Farrell (Galway West, Sinn Fein)
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49. To ask the Minister for Public Expenditure and Reform to explain the reason the phase 1 report review of the national development plan identifies the potential for the expanded use of public private partnerships given their poor past performance. [20798/21]

Photo of Mairead FarrellMairead Farrell (Galway West, Sinn Fein)
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Not long ago I made my party's submission to the national development plan review. In one of the sections of my submission I cautioned against the use of public private partnerships because of their poor past performance. In doing so I was simply relaying the strong domestic and international evidence which highlights the risk they pose. The Minister will understand my shock when I saw that the phase 1 report on the NDP identifies the potential expansion of their use.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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Public private partnerships are partnerships between the public and private sectors for the purpose of delivering a project or service. This is an internationally recognised model to design, build, finance, operate and maintain public infrastructure.

Some of the advantages associated with PPPs include the fact that they allow the public sector to avail of private sector expertise and innovation and the private partner assumes responsibility for a considerable portion of the risk. The contracts tend to be long-term arrangements, typically spanning 25 years or more. A senior-level interdepartmental agency group was established to review Ireland's experience of PPPs and make recommendations on the future role of PPPs in the context of the development of the existing national development plan. The key findings and recommendations of the PPP review were made public and summarised in section 2.2 of the NDP and further detailed in section 6.7 of the plan. The full report outlining the findings of the group was published on the ppp.gov.iewebsite in 2018. In essence, the report found that PPPs have proven to be a useful element in facilitating the delivery of important public infrastructure projects.

The new programme for Government was adopted in late June 2020 and included a commitment to review the national development plan. As part of the preparations for the review, the recommendations of the expert group on PPPs, which informed the current NDP, have been revisited and updated. A summary of this updated PPP review has been published in the Phase 1 report and the full findings were published on 16 April. Broadly, the review finds that the PPP policy framework continues to be robust and that the current guidance on the use of PPPs remains fit for purpose with a track record of successful delivery. It includes examples of successful risk transfer to the private partner. Departments will continue to evaluate projects for suitability for PPPs in line with the 2018 review and value for money will remain the main driver of PPPs if they are chosen.

Photo of Mairead FarrellMairead Farrell (Galway West, Sinn Fein)
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It is not that long ago since we had the collapse of Britain's Carillion group. The collapse of this British company led to significant delays in PPP contracts for the construction of schools here and raised serious questions about the whole PPP process. The process has tied the State into a system of large annual payments to PPP contractors for decades.

In 2016 the Comptroller and Auditor General report on PPPs stated that projects are vulnerable to legal challenges that can cause significant delays. Requested variations to a project after the contract has been agreed can lead to additional costs to the public sector partner. In 2018 a report by the Parliamentary Budget Office pointed out that PPPs represent a growing State liability and that they can potentially create private sector monopolies with the service being of poorer quality. Later that year the report of the interdepartmental agency group on PPPs indicated that the main purpose of PPPs was to get around spending rules during downturns. What role do these reports have in helping the Minister to decide whether the existing framework for PPP needs changing?

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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It is important to point out that from a public investment point of view PPPs are subject to the same robust and rigorous project appraisal process as traditionally procured projects. It is essential that projects are judged on their merits. In cases where PPPs can be demonstrated to give better value for money than traditional procurement, it is appropriate that they should be selected on that basis. The central point I am making is that PPPs are but one option. They are an option that should not be ruled out in all circumstances. If it can be demonstrated that better value for money can be secured through the PPP option, then it is one we remain open to.

Making cost comparisons is a valid exercise but can be difficult. Comparing the construction costs of a project with the total payments made by the Exchequer over a 25-year PPP contract does not compare like with like. The Deputy will be familiar with many of the major infrastructure projects in Ireland that have been developed using the PPP model. I believe it is an option that we should retain on the list of delivery mechanisms.

Photo of Mairead FarrellMairead Farrell (Galway West, Sinn Fein)
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I read that in the phase 1 report of the NDP. The report concludes that the framework for PPPs is robust and it should be an option if they represent the best value for money. As the Minister said, the whole concept relates to best value for money. We have seen the 2016 report of the Comptroller and Auditor General stating they are vulnerable to legal challenges and that this can cause significant delay. We know that costly legal fees are then picked up by the taxpayer. The Parliamentary Budget Office observation was that PPPs represent a growing State liability. I take the point the Minister is making but will he commit that there will be increased monitoring of their performance as part of the NDP? As we know, legal challenges represent a cost issue. Of course there is always the quality issue as well.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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I can certainly commit that any proposal to proceed with a project using the PPP model will be subject to the highest standards of examination and rigorous analysis of assessment of value for money. In my area of Cork some of the major projects developed in recent decades, such as the Cork School of Music and the National Maritime College, are fantastic projects. This building, the national convention centre, was developed using a PPP model.

Of course we need to ensure that when we are selecting the most appropriate delivery mechanism we apply all the same standards as to whether a project will be funded by direct Exchequer capital or using PPPs. There are certain advantages. For example, the upfront capital cost does not count as part of the national debt in the sense that it is off-balance-sheet, but that is only one consideration. We have to ensure the legitimate issues raised by the Deputy are fully taken into account when we are examining the possibility of using a PPP for a particular project.