Thursday, 7 February 2019
Department of Public Expenditure and Reform
Public Private Partnerships
29. To ask the Minister for Public Expenditure and Reform if he has carried out a review of the cause of the recent collapse of public private partnership contracts; if he has reconsidered the approach to such contracts to ensure the appropriate protection of subcontractors; and if he will make a statement on the matter. [5804/19]
My Department has already given a commitment to the Oireachtas to review any PPP policy issues that might be highlighted by the impact of the recent collapse of Carillion, and the subsequent liquidation of Sammon, on the Schools Bundle 5 PPP project. The commitment indicated that the review will be timed to take account of the final outcome of that particular PPP project, and as such will take place in the latter part of 2019.
However, as an interim step in that process, a ‘learnings’ workshop involving the NDFA, the Department of Education and Skills and the Department of Public Expenditure and Reform was held in Tullamore, on Tuesday, 15 January 2019, to review the experience to date with the Schools Bundle 5 PPP project and the difficulties encountered with it. (The NDFA had already, previously, conducted its own internal review, specifically in relation to the impact of the Carillion/Sammon liquidation on the project, subsequent to the first three schools being delivered in September 2018, but clearly a wider review with all relevant stakeholders needed to be conducted and the January ‘learnings’ workshop is the first step in that process.)
While the construction process on the remaining schools is now progressing well, the fact is that there are still 3 schools within the Schools Bundle 5 PPP project which have yet to be completed and handed over by the PPP partner. It would therefore be premature to seek to reach any definitive conclusion in relation to learnings from this PPP project at this point. The final review exercise will be completed once these remaining schools have also been delivered and are fully operational. This is currently expected to be in Quarter 2 of 2019 and a final review will be conducted thereafter.
With regard to the Deputy's reference to the collapse of PPP contracts, I am not aware of any Irish PPP contract ever collapsing. In accordance with international best practice, Irish PPP contracts are particularly robust and typically include detailed provisions that apply in the event of the liquidation of a consortium member of the PPP company, or an entity under the contract, to protect the State and ensure that the project proceeds to completion.
Under the terms of such PPP contracts, in the case of the liquidation of a consortium member, or an entity under the contract, the PPP consortium’s funders and remaining shareholders are required to intervene and implement rectification measures to ensure that the project is completed to the satisfaction of the State. Liquidation of a company involved in delivering a public infrastructure project is an unfortunate and unforeseen development but would impact on any project where a supplier became insolvent during the delivery process, regardless of whether the project was being procured by PPP or by traditional means.
Finally, with regard to the issue of protection for subcontractors, this is not a matter that is intended to be addressed in a PPP contract, as the State does not negotiate or hold contracts with subcontractors in relation to such PPP contracts. However, there is already legislation in place which was introduced to protect subcontractors under construction contracts, which is applicable to all contracts entered into since July 2016. The Construction Contracts Act imposes minimum terms on all construction contracts, public or private, whether they be written or oral and provides the tools necessary to enforce payment. While the legislation does not apply to a contract between a State authority and its partner in a PPP arrangement, it does apply to all contracts that are subsequently awarded by the private partner to any subcontractors.