Tuesday, 16 November 2021
Ceisteanna Eile - Other Questions
Public Private Partnerships
73. To ask the Minister for Public Expenditure and Reform the reason for using public private partnerships, PPPs, to deliver capital projects, particularly in relation to the technological higher education sector; and if he will make a statement on the matter. [55903/21]
The technological universities have the ability to deliver high-quality third level education for many people, including in Mayo and the west, and to be a real driver for regional development. They are one of the most important developments in third level education for decades. Why, with almost no public debate, is the Government using controversial public private partnership contracts for the development of our public education system? Will the Minister outline the reason for this drastic change of approach that will see public private partnership contracts used for all building projects in technological universities?
I thank the Deputy for raising this issue. My Department's role in public private partnerships is to maintain and develop the general policy framework, including, where necessary, the legal framework, within which PPPs operate. It also provides central guidance to other Departments and State authorities in that context. My Department has no direct involvement in the procurement or delivery of individual PPP projects. Therefore, the delivery of the technological higher education sector projects, through the use of PPPs is, in the first instance, a matter for my colleague, the Minister for Further and Higher Education, Research, Innovation and Science.
PPPs are partnerships between the public and private sectors for the purpose of delivering a project or service and it is an internationally recognised model to design, build, finance, operate and maintain public infrastructure. Some of the advantages associated with PPPs are 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, with the private provider required to maintain the asset at a suitable standard over that period. At the end of the contract the PPP company must return the asset in year 1 condition.
PPPs continue to provide benefits to the State as a procurement method and, as such, enable the public sector to harness the innovation, commercial and management expertise and efficiencies of the private sector to design, build, finance, operate and maintain State facilities. PPPs will continue to be a procurement method available to the State for appropriately structured projects where they demonstrate value for money over a traditional procurement option. In ensuring Departments obtain the best value for money from public capital investment, 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 and 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.
This Government is spearheading a substantial shift in how the State delivers building projects in third level education. Essentially, PPP is a misleading name for an agreement where a developer delivers a project and the Government agrees to pay every year for 25 years for the right to use the building. It is essentially build to rent for the Government. It is good for the developer, but bad for the public.
We have not seen their use in third level education since the last time Fianna Fáil was in government. Now all new buildings of technological universities and institutes of technology are planned to be delivered exclusively through PPP contracts. Significant questions remain for citizens about value for money, accountability and the long-term impact on public finances. It also relates to the privatisation of public services. These contracts give rights to provide the related services which include building maintenance, cleaning, security, ground maintenance and IT support.
I thank the Deputy. It is important to say that the PPP method should only be used where value for money can be demonstrated. It is one option in terms of the possible financing of a range of projects. There are currently 11 higher education projects in the pipeline for delivery by way of PPP. They are split into two bundles. The Deputy probably has all the details, but I am happy to provide them separately to her if necessary.
It is important to make the point that if one is comparing the cost of a PPP with the Exchequer funded option of delivering a capital project, one has to take account of the fact that the payments made by the Exchequer over the life of the PPP contract include not just the construction costs but also the cost of finance, operations and maintenance and, indeed, the overall lifecycle. It is one option, but it should only be used where value for money can clearly be demonstrated and the interests of taxpayers are protected. There are many examples of pieces of infrastructure that would probably not exist today if we did not choose the PPP option.
The Minister will remember that we discussed in the Joint Committee on Finance, Public Expenditure and Reform the Carillion example and what it cost people. This has major implications for finances for the State for the next 25 years. One contract signed in 2020 was valued at almost €600 million. These contracts typically mean that the public pays a lot for very little control.
We cannot even have a real debate due to the complete lack of transparency and accountability. I cannot access the estimate of the cost of any of the 11 projects due to the commercial sensitivity involved. The value of the contract is only made public after it is concluded. Even then, the Government refuses to provide an estimate of how much it would cost to build under a normal contract. That information is withheld for five years, long enough for any Government to avoid real accountability. Accountability, transparency and value for money are at the core of all of this. We have seen what has happened in the case of Carillion and in other cases. We are not getting value for money with many of these projects and we do not have the transparency that is required.
I want to assure the Deputy that the appraisal process is rigorous. It is worth putting the figures in context. The annual cost of the unitary payment charges in respect of operational PPPs was approximately €320 million in 2020, at a time when the State's public capital investment programme was in the order of €10 billion. The contracted capital value of all PPPs in operation or under construction is over €5 billion. We have now committed to a public capital investment programme out to 2030 of €165 billion.
I agree with the Deputy on the need for accountability and transparency about the metrics, methodology and criteria used to assess what the best channel open to public bodies is to deliver important pieces of infrastructure. As she knows, technological universities have now been given the power to borrow for the first time for capital investment purposes. That is important progress.