Seanad debates

Wednesday, 17 November 2004

Public Private Partnerships: Statements (Resumed).


12:00 pm

Photo of Mary WhiteMary White (Fianna Fail)
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I welcome the Minister of State to the House.

Senator Ryan's observations on the flow of traffic at the Westlink toll bridge are not correct. The extra toll booths and laneways have improved the flow of traffic but a problem persists at the Lucan exit south of the toll bridge. The congestion on this exit road blocks one of the extra routes. The flow of traffic has been improved by the addition of extra toll booths but the congestion on the exit for Lucan and Blanchardstown is extraordinary. This is a major traffic problem.

Deputy Parlon's first public appearance as Minister of State was in the Alexander Hotel when he spoke about the communication strategy for public private partnerships. I congratulate the Minister of State on the progress he has made since his appointment. At that meeting I heard firsthand for the first time what is involved in public private partnerships. The series of meetings held throughout the country were a great help in explaining public private partnerships to people. The meeting in the Alexander Hotel was attended by union members, representatives of IBEC and of the construction industry and members of local authorities and health boards. All of these groups could be involved in building major Government projects.

On 11 October last, a €52 million state-of-the-art national maritime college opened its doors to students in Ringaskiddy, County Cork. The project is the first third level college to be built under the Government's public private partnership scheme. It will serve the maritime education needs of the Cork Institute of Technology and the non-military needs of the Naval Service.

The National Maritime College in Ringaskiddy is a shining example of the success of the public private partnership model and is a dream come true for tutors from the Cork Institute of Technology and from the Naval Service at nearby Haulbowline and for anyone who is interested in a naval career. Focus Education Limited is made up of 50% Bovis Lend Lease and 50% Halifax Bank of Scotland.

The features of the National Maritime College are remarkable and unique. It includes two bridge simulators with 360° screens which can replicate every type of sea and weather condition, including engine shut down and man overboard, on 32 different vessel types, including merchant, liner, ferry, naval and fishing.

Tom Parlon (Minister of State, Department of Finance; Laois-Offaly, Progressive Democrats)
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Would it make one seasick?

Photo of Mary WhiteMary White (Fianna Fail)
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It probably would.

There is a full size engine room with simulators for all ship types from high-tech to basic. There is also a survival training facility with a 5 m deep pool, diving tank, hoist, life raft and a helicopter underwater evacuation trainer. Total darkness, high waves and hurricane-like winds can be generated within the pool giving total reality to emergency and rescue operations. There is an outside jetty and pontoon, including a freefall lifeboat and other maritime equipment.

In addition to eventually providing training for 750 full-time students, the new college will be a major attraction for international trainees, thereby reinforcing Ireland's position as a centre of excellence in maritime training.

The project was managed by, Focus Education Limited. The contract was advertised in the EU Journal in April 2001. It was signed in February 2003 and work commenced that spring. Particularly impressive was the fact that within 18 months a €51 million state-of-the-art facility was ready. Focus Education Ireland will maintain the lease for 25 years.

This morning I spoke to Mr. Pat Mitchell who is the facilities manager for the Bovis Lend Lease. He told me about a fascinating aspect of the college, which is the way of the future for such buildings. The college is available for maritime personnel from 8 a.m. to 5.30 p.m., while the library is available to students until 10 p.m. After 5.30 p.m., however, the college is available to third parties, the income from which will be divided between the college and Focus Education Ireland, which is Bovis Lend Lease and the Halifax Bank. This is a case of using structures and facilities when they are not fully needed, including computers. Currently, the gymnasium is being hired out to local sports groups that can avail of its state of the art facilities.

Teachers employed by the college can provide training in the evenings to people who wish to attend, for example, a yacht master's course. Such courses would be in addition to the full master's degree. I am glad to be able to relate this positive story to the House. There is no question but that the development of this college will increase thenumbers of young Irish people who wish to develop naval careers.

I wish the Minister of State continued good luck. I was always a supporter of his. I saw him operating with the board of Bord Bia and he was well able to get the board's agreement to deal with his number one issue.

1:00 pm

Photo of Joe McHughJoe McHugh (Fine Gael)
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I concur with Senator White that it is good to highlight a success story such as that whereby a public private partnership was sorted out within 18 months. Fine Gael believes the public private partnership system is the way forward. The Senator referred to a figure of €51 million but the former Minister for the Environment, Heritage and Local Government, Deputy Cullen, beat that record by spending €50 million in less than 18 months. That is a story for another day, however.

In the past six or seven years, a combination of buzz words has been used in the debate on public private partnerships. Before that, the letters PPP would have been understood to stand for parish pump politics. Public private partnerships have provided the way forward in recent years and have proved that this manageable system can work within a shorter time period than heretofore. If we were to separate public expenditure from public private partnership expenditure and ask taxpayers if they were getting value for money from the expenditure of their taxes, the answer would be a resounding "No". The public does not have confidence in the way the Government spends its money. Value for money is not obtained from public expenditure.

Taking private investment in isolation, people have confidence in the private sector, including builders and designers, and generally believe the sector does a good job. Where there is a strong demand for housing, there can be murmurings of discontent over problems with snag lists but, in general, people are happy with the private sector. It is, therefore, an ambitious project to amalgamate the public and private sectors in PPP projects. Fine Gael believes PPPs are the way forward and the unions do not have a problem with them. Senator O'Toole mentioned that this was in deference to the rest of Europe.

Since the initiation of the public private partnerships there has been a creation of wealth within a significant breadth of sectors, including accountancy and legal firms, all of which have done well. Through creating wealth, PPPs have sustained businesses in various industrial sectors. The ultimate ethos behind public private partnerships is that of the common good. It is not to help companies or private individuals through a fundamentally profit-driven partnership, rather it is community focused for the common good. It is about efficiency, competence and timing.

There have been problems with the design and build operations for the Westlink and Eastlink projects. Members of the public are having difficulty with certain aspects of these public private partnerships, including user charges. A thorough evaluation and examination is required for all such projects but that is not being undertaken currently.

An interest rate of 2% provides a great incentive for private companies to become involved in the public sector. It is cheap money but that should not be the focus for such companies. The common good and value for money are the aspects that matter.

Transparency issues have arisen as regards obtaining information, feedback, reviews and evaluation. In principle, the National Development Finance Agency is a good idea but the capacity is not there to evaluate PPP projects that have been delivered to date. Perhaps a rethink is required on having one umbrella group as a conduit for feeding information back to the public. Perhaps also there should be a singular focus whereby each Department is responsible, rather than having an umbrella group.

The Minister of State referred to success stories behind public private partnerships for schools. That is a great idea but there are also problems. Issues have arisen concerning private involvement in some of these schools, including the operation of soft drinks machines. These issues need to be teased out so the Minister of State should reflect on the common good. The common good principle applies to serious issues, such as obesity among schoolchildren, which have often been highlighted in the House.

For the past two or three years, design, build and operate, or DBO, plans have been the buzz words flying around the desks of local authority service directors. DBO projects can be leased back to local councils and, in principle, they are a good idea but it is theoretical at present. Simple solutions are being proposed for simple problems in many rural areas, including waste water treatment or pumping water supplies for rural communities. Private companies can play a part in providing such solutions.

A few very successful affordable housing schemes have been built by private developers in County Donegal but the preparations should be made in the beginning. It should not be about developers building houses and the local authority purchasing them. There would be more transparency if the homework was done in the beginning, as it should be. That principle should underpin any public private partnership.

Senators O'Toole and Scanlan referred to school building projects. That area needs to be addressed. The review should consider the tendering, bidding, bonding, design and specification, and financing. We have serious problems with the building of new schools and extensions to schools. Senator Fitzgerald, who is his party's spokesperson on education, knows of the problems to which I refer.

The building work at St. Eunan's College is deemed necessary, as opposed to urgent, and has been stuck at stage 1 since 1999. This is a problem for Letterkenny, which has been designated as a town that should receive priority status in facilitating children in primary and post-primary school. The post-primary school is not receiving priority status. The morale among the teaching staff, board of management and parents is low and their frustration is palpable. Stating that a project is necessary rather than urgent is the language of procrastination to keep a project at a stage nowhere near completion.

Ballyraine national school in Letterkenny is being asked to redesign a comprehensive brief for a school extension, which was originally accepted by the Department of Education and Science in 2000. This again shows procrastination. It is a case where a PPP programme could be operated. The proposal for the extension to Ballyraine national school was first submitted in 1984, when I was in my first year in secondary school. While I am not saying I am that old, I am getting there. One can understand the frustration if an extension first proposed in 1984 has yet to start, when simple solutions could be implemented.

In June 1999, Mr. Cheevers asked the Ballyraine national school to submit requirements to the Department of Education and Science and to refer to the Celtic tiger. Prefabs were offered, but were declined as money could be invested in a proper building. In 2000 the inspector visited and made a list of requests and recommendations etc. The application and inspector's report is with the planners. Jonathan Bliss, the Department of Education and Science architect, visited, making an urgent case. Now, in 2004, the school is being asked to review and offer a comprehensive reappraisal of its application. It is not good enough for schools to experience such frustration and bottlenecks.

It is time for the Department of Education and Science to seriously consider public private partnerships for the schools building programme at primary and post-primary level. Public private partnerships have worked in other areas and for the general welfare of future generations of students this process should be expedited. We need to build an economy around trust and the public is part of the trust process. No member of the community in Donegal believes taxpayers are getting value for the money they pay. We have no train service and it takes us six hours on a Friday evening to get from Dublin to Letterkenny. Considering it is only possible to drive at an average speed of 40 mph, including on the A5 through the North, which is only a donkey track, Donegal taxpayers are not getting value for money.

Photo of Martin ManserghMartin Mansergh (Fianna Fail)
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It is a separate jurisdiction in the North.

Photo of Joe McHughJoe McHugh (Fine Gael)
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While it is a separate jurisdiction, Senator Mansergh has been working very hard regarding it. We are spending considerable money on cross-Border bodies and ministerial councils. Any dummy can spend money. The €50 million, which the former Minister for the Environment, Heritage and Local Government, Deputy Cullen, spent in such a short time, would have been better spent if it had been given to the Northern Ireland authorities to invest on the A5 route between Aughnacloy and Strabane. People do not have confidence in the return from the tax they pay. We believe public private partnerships may represent a way forward and should be explored further.

Liam Fitzgerald (Fianna Fail)
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I welcome the Minister of State and also welcome the positive note on which Senator McHugh ended his contribution. I too believe public private partnerships represent the way forward as they adhere to one of the fundamental principles, value for money. As we develop, refine, re-evaluate and constantly monitor the efficiency and effectiveness of PPPs, we will come to acknowledge that fact. I warmly welcome the application of PPPs in the past 20 years. In some shape or form PPPs have been used as a method of bringing forward the delivery of public services, which lies at the heart of the matter. The skills of the private sector can be harnessed to bring faster delivery of facilities and services and provide value for money for the taxpayer. We are all agreed on that matter. In that context I welcome the positive expressions of support for PPPs across the House. Using a PPP spreads the risk involved in undertaking a project.

The general aim of any Government is to improve the delivery of public services every year. Maintaining the status quo is not an option. We need to continually find ways and means to improve the delivery, including fast tracking it and making it of better quality and greater durability, etc. Surrounding all these aspects is quality and value for money. Reviewing different ways and means of doing things can be challenging, particularly if they are new, as are PPPs. There are problems and these will continue into the future.

We must cast aside naiveté regarding this issue. We are dealing with a new methodology which, by and large, is being operated on a pilot basis, just as there are pilot projects to try to take on the huge challenge of special needs education and in various other areas of community development and child support. In recent years some PPPs have been viewed as ongoing pilot projects. While this has some negatives, it also has significant positives. It is up to the expertise of Government and the public service in partnership with the private partners to evaluate and bring them to greater efficiency and effectiveness.

PPPs contrast with the conventional way of doing things, which was for the public sector to manage projects and deliver the building, facilities, etc. The new approach has been used to varying degrees over the past 20 years, including the buildings provided for Government decentralisation in the late 1980s, and the Eastlink and Westlink toll bridges. We have problems with these and, as they are being addressed, will continue to have some problems to a lesser extent in the future. This does not take away from the principle of the overall merit of the approach.

The quality and extent of communication within this approach is important. The Government has communicated with the social partners on the PPP system and it was heartening to hear Senator O'Toole say that the unions have no difficulty with it. It is important that there is communication with the social partners to help each constituent of the partnership to deal with difficulties as they arise with this new concept and the challenges it presents. The social partners will then be prepared to take on the challenge because of the benefits that accrue in the delivery of public services. PPPs, if properly managed, will deliver improved public services more quickly, as has been done in the five schools, and at a lower long-term cost than the conventional approach.

Every PPP is compared on a cost benefit basis with the conventional method in accordance with strict rules of evaluation. Many people spoke about the quality and extent of evaluation and the need for it to be constantly re-appraised because this is an evolving situation. Where a PPP does not deliver these benefits, it will not be used.

The Government has decided that hundreds of beds will be delivered in community nursing homes to allow older patients who are now in acute hospital beds to get the level of focused care they need and deserve. This will be achieved as a result of the commitment of the Government to PPPs, with the support of the social partners and taxpayers' money. Urgent changes needed within the health service can, be facilitated through PPPs. The Minister for Health and Children recently expressed the view that she has other new initiatives in mind and anticipates that they will be reflected in the Estimates.

PPPs will speed up the delivery of quality motorways, roads, bridges and schools. Years ago the moaning on "Liveline" was about the state of the roads, but that has changed to moaning about road safety, and rightly so. We have moved on and progress has been made.

Everyone has referred to the Comptroller and Auditor General's comments on the project involving the five schools. Those comments set a realistic note for reviewing PPPs. These schools were built in three and a half years when the traditional approach would have taken five years and the time between signing the contracts and completion of the schools was under two years. That is an impressive achievement by any standards, irrespective of the criticisms made by the Comptroller and Auditor General, when one considers how much work is needed to deliver new schools to growing communities and to replace derelict schools that are beyond repair, of which there are many in the school building stock. Senator McHugh mentioned the potential for the use of PPPs on an accelerated basis, bearing in mind the lessons we have learned from the five school projects, a sentiment I support. I urge the Government to look at accelerating the PPP approach throughout the schools building programme. We must renew and provide new school building stock.

A major benefit for anyone interested in education is the manner in which the PPP model removes from principals and schools the drudgery of running the buildings. Their sole function now is the delivery of high-quality education for our children. The PPP model enables them to do that in a focused way and that is one of the system's major benefits.

Photo of Ulick BurkeUlick Burke (Fine Gael)
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I welcome the Minister of State to the House and the opportunity to debate this topic. Some time ago I raised the PPP pilot scheme for school building. Within the Department of Education and Science, the person with responsibility for PPPs outlined that there was an unacceptable overspend of between 8% and 13% when compared with the traditional construction method. The criticism of the pilot project as it bore fruit in the case of the five schools indicates that the Department has done something wrong. I welcome the PPP idea but when individual Departments cannot monitor and evaluate them, the idea must be re-examined.

The Department of Education and Science is not the only Department in this situation. Senator Fitzgerald mentioned the lower long-term costs but I do not see how they can be assessed for the building and running of the schools when there was no prior evaluation. The valuation now stands at €283 million over the 25-year period and the Comptroller and Auditor General has clearly stated that is not value for money. It is time to re-assess the situation.

What is happening with the Cork School of Music? Will the Minister of State indicate if the original company can sell on the contract to others? The original company got into difficulties and it was supposed to sell the contract to a French company but it is now with a German company. If we are going that way, the initial contracting process is at fault. Many aspects of the PPP system must be tightened up.

If we want to identify an area of excessive profiteering we need look no further than the roads. One example, often cited, is the Westlink toll bridge. In saying this I do not refer to traffic delays at certain hours. The bridge opened in 1990 at an estimated cost of £38 million and to date €300 million has been collected in tolls, a return of 790% to the investor. This is proven fact. How can that be justified? What went wrong or who is at fault? It is excessive profiteering in the extreme and it is ongoing for a period of 35 years.

It is proposed that the planned new motorway between Ballinasloe and Galway city will be tolled under a PPP agreement. The Government is again imposing an additional penalty on an already overstretched motoring public. If that is what the Government wants to do, it should be clearly stated. If additional costs are to be added to the motorist, let this be said. The Government should not just introduce another tax by stealth, as it has in the past.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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I thank Senator Ulick Burke for sharing his time with me and I am sorry not to have more time to speak on this issue. While I welcome the Minister of State to the House, I am disappointed with his speech. He should have outlined in greater detail where we stand and what can be done with PPPs. There is great confusion in the public mind between public private partnerships and design, build and operate projects. As regards the latter, the majority if not all of the funding is borne by the taxpayer.

Several Members have outlined the situation in regard to school projects carried out under design, build and operate projects, as distinct from PPPs. In this regard the Comptroller and Auditor General's report outlines the position correctly. Until now, the majority of schools throughout the country were not getting the maintenance funds they needed to carry out the necessary upkeep of their buildings. With regard to design, build and operate projects, the Government enters a contract with the developer for a 20 or 25-year period to give him or her an amount annually, indexed to inflation, to cover the maintenance throughout this period. As was said by Senator Ulick Burke, some of those projects have come in at a cost, which is 13% higher than the conventional method. In view of this, much of the detail regarding these projects has to be investigated, particularly on the operation and maintenance fronts. There is a role here for local authorities, especially as regards public water and sewerage.

I am disappointed that the Minister of State has not provided details of the Ringsend plant. The former Minister for the Environment, Heritage and Local Government, Deputy Cullen, explained to the House that the plant was something of a prototype as regards future public sewerage projects, yet there was not even a reference to this in the Minister of State's speech. The plant is the example being championed throughout the country, yet the Minister of State has not mentioned how it will affect businesses in the capital and greater Dublin area feeding into it. The former Minister for the Environment, Heritage and Local Government, Deputy Cullen, went on the record in the House in insisting that this was the way local authorities would have to go, describing it as "the number one route". However, there has been no reference to how it will affect the business community and those who will have to pay for it under public private partnership. This is a PPP and also a design, build, operate and finance project, yet we do not know how much it will cost.

With regard to some of the roads built under public private partnerships, for example the Kinnegad route, I would have liked the Minister of State to have spelt out how much they will cost and what the projected returns are from the tolls to be put in place. Where are the benefits for the taxpayer and the road user? At this stage, we are at least entitled to some figures on that aspect. I am disappointed the Minister of State did not provide them. This matter should be further debated.

Tom Parlon (Minister of State, Department of Finance; Laois-Offaly, Progressive Democrats)
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I am pleased at the level of support for this issue expressed by Members, except for the last two speakers, who took a more negative line. We all recognise the importance of investing in Ireland's infrastructure for our future social and economic well-being. Experience across Europe would indicate that based on the pilot process, the PPPs have a role to play in delivering that investment. It is also clear that PPPs are just one instrument that may be used. That is clear from some of the instances that were outlined. A key to the success is to employ appropriate procurement options in the optimal way for the right types of projects.

Senator O'Toole asserted that PPPs were almost exclusively for the bigger contractors. He said that in terms of small school projects it was important to have competition involving local operators and so on. In terms of design, build, operate and finance projects, there are options available. The best way to ensure PPPs are used appropriately is to pay attention to how projects work on the ground in the various sectors. In that respect it is useful to hear Senators' comments.

I was heartened by the Comptroller and Auditor General's report, to which most speakers referred. Most reports are critical in terms of cost, but the Senator from Sligo talked about the fabulous school in Tubbercurry where he is a member of the board of management. Likewise, Senator Ryan from Cork and Senator White spoke about the school in Haulbowline-——

Photo of Paddy BurkePaddy Burke (Fine Gael)
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We should get the cost.

Tom Parlon (Minister of State, Department of Finance; Laois-Offaly, Progressive Democrats)
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I will deal with that. The quality of the building is outstanding.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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Of course it is. It is a new school and it should be.

Photo of Terry LeydenTerry Leyden (Fianna Fail)
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The Minister of State will speak without interruption.

Tom Parlon (Minister of State, Department of Finance; Laois-Offaly, Progressive Democrats)
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In terms of the specifications laid down, if a builder has an obligation to maintain the school over the next 25 years, it is clear that he or she will have a much higher stake in the project and that will be reflected in the long term.

No Senator referred to the Comptroller and Auditor General's point that over the 25 year cycle, the value of PPPs would have to be compared with the other more conventional methods. Most Senators would refer to local experience in this regard and Senator McHugh gave a full rundown on the educational deficits in Donegal. In my local area, Birr community school, which has been in place less than 20 years, now requires a new roof. If that project had been a PPP it would not require such a massive expenditure. I have no doubt as regards the issue of value for money over 25 years, nor do I doubt that some of the extra costs, red tape and bureaucracy that deter people from becoming involved are inhibiting the process.

Given the experience gleaned from the pilot project, I believe we can put PPPs to better use. The success of PPPs based on the roads projects in Ireland has been internationally acclaimed. While these projects have been rolled out on a massive scale, the task now is to apply the lessons we have learned to ensure continued use of PPPs in the most effective way going forward with a view to getting the value for money required.

Sitting suspended at 1.30 p.m. and resumed at 3 p.m.