Check against delivery

Information Seminar on the

Framework for Public Private Partnerships

Alexander Hotel, Dublin

3rd June, 2003

Address by

Mr Tom Parlon TD, Minister of State at the Department of Finance

I have great pleasure in bringing the latest in a series of nationwide seminars on the Framework for Public Private Partnerships to Dublin today. It is particularly appropriate that this seminar should be taking place in our capital, in a region where we have seen the initiation of so much PPP activity in recent times. Indeed, many of you will be familiar with pilot projects underway in this region, including

  • The M50 second west link toll bridge;
  • Operation of the Luas line A;
  • The Dublin Waste to Energy project; and
  • Two major affordable housing schemes at Cherry Orchard and Mulhuddart

Most of you will also be familiar with the N4 Kilcock-Kinnegad project on the main route linking east and west. The contract for this first PPP in the roads sector was signed on 24th March last and construction is expected to begin before the end of this month.

This seminar provides us with a welcome opportunity to reflect on the benefits and potential of PPPs and on how much we have achieved in developing the process in Ireland in a relatively short time.

The past year or so has seen significant achievement in the development of Public Private Partnerships. A little over three years ago PPPs were still very much a concept. In a short period of time, we have reached the stage where there are now PPP pilot projects at various stages of procurement in national roads, public transport, environmental services, housing and education and we are actively exploring the scope for initiating PPP pilot projects in other areas including the health sector and the Courts service. Through these and other projects, we are meeting the major milestones we set out for PPP pilots in the National Development Plan.

We have also taken steps to ensure that the statutory basis for the development of the PPP process is as supportive as possible and that where necessary any legal impediments are addressed and dealt with. Again, significant progress has been made in this area. In the Finance Act 2000, tax provisions were made to support consortia in undertaking PPP projects. The Railway Procurement Agency (RPA) Act, 2001 provides a statutory basis for the structures needed to procure projects by means of PPPs in light rail and metro.

On 22 March 2002 the State Authorities Public Private Partnerships Act 2002 was enacted. This enabling legislation ensures that state authorities named in the Schedule to the Act have the power to undertake PPPs and puts in place a legislative foundation for joint ventures.

The most recent legislative development is the enactment of the National Development Finance Agency Act 2002 which provides for the setting up of the new Agency (NDFA) under the aegis of the National Treasury Management Agency. This new agency will assist in providing cost effective finance for public investment projects. The agency will:

  • advise State authorities on the optimal means of financing major public investment projects in order to achieve value for money;
  • advance moneys and enter into other financial arrangements regarding projects approved by any State authority;
  • provide advice to State authorities on all aspects of the financing, including refinancing and insurance, of public investment projects; and
  • form special purpose companies for the purpose of securing finance for public investment projects.

The functions of NDFA represent the laying down of some of the essential building blocks of PPPs and complement the Framework for Public Private Partnerships. This framework which we are presenting here today, confirms the commitment of the social partners to the development of public private partnerships in Ireland. It reflects the Government’s determination to harness the potential of PPPs:

  • to contribute, where possible and appropriate, to the timely delivery of priority economic infrastructure projects under the National Development Plan;
  • to ensure value of money for the taxpayer; and
  • to provide quality public services.

It is also indicative of the commitment of the Government and the social partners to the policies and procedures needed to meet these objectives.

The recognition by the social partners in the Programme for Prosperity and Fairness of the need to agree a framework to support the development of the PPP process demonstrated a wide appreciation of the need for change. The publication of the Framework Document, which we are here to discuss was the culmination of detailed discussions between the social partners on PPPs. These discussions were undertaken within the context of the Public-Private Advisory Group (IAG) which consists of representatives of IBEC, ICTU, CIF, Forfás as well as the PPP Units in the Departments of Finance, Education and Science, Environment and Local Government, Public Transport, and the NRA.

I would like to acknowledge the work of this group in developing the Framework. I want, in particular to mention Mr. Reg McCabe of IBEC who represented employers on the group, Mr. Paddy Keating of IMPACT and Mr. Liam Berney who represented the trade unions and Mr George Hennessy and his predecessor, Mr. Mike Jones, who represented the civil engineering and construction industry. I also want to express my appreciation to the PPP committees in IBEC and Congress and to the top-level group in the CIF for their work in developing the Framework

I know that the issues discussed in the negotiation of the framework touch on many fundamental principles and concerns affecting many of you, the members of the bodies represented in the PPP Advisory Group. And I know from discussions which Ministers had at the Cabinet Committee that there was much “straight talking” in the negotiations about these issues. This is as it should be. The tough questions and the hard choices cannot be avoided. We share a common goal: that is the achievement of the conditions for sustainable growth in output and employment in the Irish economy over the long term. Our future prosperity depends on maintaining our competitiveness and the attractiveness of Ireland as a place in which to invest, create jobs, locate industry and generate incomes. Upgrading our economic infrastructure is an essential element in this strategy.

The adoption of the Framework is also an acknowledgement that the delivery of projects through PPPs gives us all an opportunity to maximize the interaction and co-operation between the public and private sectors. Agreement on shared goals, objectives, principles and the appropriate distribution of risks for public investment and services delivery are fundamental. It is entirely appropriate that the full realisation of the potential benefits of Public Private Partnerships should be pursued under an agreed set of principles and common goals. This is now a reality.

The Framework constitutes an important statement of the high-level principles for the conduct of PPPs at national, sectoral and project level that will help explain the role of PPPs in contributing to the delivery of priority public capital infrastructure and the provision of quality public services.

The main features of the Framework include clear statements of the scope, principles and goals of the PPP programme, the identification of key project implementation issues, including the requirement for central co-ordination of the programme by the Central PPP Unit, as well as a clear recognition of the critical role of social partnership and stakeholder consultation in underpinning the success of PPPs. The Framework also makes provision for monitoring and review by the Public-Private Advisory Group of the implementation of the Framework.

By further strengthening the sense of common purpose and commitment to genuine partnership that has made such a major contribution to progress achieved in the PPP programme to date, this Framework will therefore serve as a key building block for the successful development of PPPs in Ireland in the future.

While the acknowledged benefits of PPPs are many, PPPs can present difficult and complex contractual issues for both public and private sector partners. For the public sector, we have to satisfy ourselves that the business case for proceeding with a project on a PPP basis is sound when compared with the conventional approach of direct build and finance. The NDFA will be able to provide the highly specialised financial advice for State authorities in deciding on funding mechanisms for large infrastructure projects, including PPPs. For the private sector, the costs associated with bidding for PPP projects can be substantial and for the trade unions significant issues can arise where public service staffs are transferred to the private sector under PPPs.

It is important to recognise and deal with these matters. Addressing the complex issues involved will require commitment, dialogue and agreement. I am happy to say that my Department is firmly committed to resolving the issues that will inevitably arise as we work through the pilot projects, learning as we go along. The setting up of NDFA illustrates one facet of this learning process. As a result of lessons learned in early pilot projects it was decided to set up the NDFA to provide advice to State authorities without specialist knowledge on complex financing structures.

Our joint partnership approach aims to ensure that issues are resolved before they become problems; that problems are solved before they pose impediments to PPP projects and that impediments are removed by dialogue and agreement before they obstruct the successful delivery of important PPP projects.

I should also point out that PPPs must not be seen as a means of avoiding more fundamental difficulties in individual projects. A project should stand on its own merits irrespective of the method of procurement. The progress made to date in the PPP process has been grounded in a clear appreciation of the economic case for PPPs and a focus on deliverables, based on a requirement for a sound business case evaluation.

As with any innovative process there are many misconceptions about PPPs. It is unfortunate that some commentators on PPPs in Ireland seem to have difficulties with even the basic principles of the process. For instance, in recent weeks the Beaumont Hospital Car Par project has been described by media and other commentators as a PPP. This project is not, and never was a PPP project. None of the key characteristics of a PPP were either stated objectives or outcomes of the project. This is borne out in the conclusions reached by the C&AG in his recent value for money report on the subject. In order to address these shortcomings and to meet the information needs of the varied audience seeking to know more about Ireland’s PPP process, the Government has given particular support to the development of a comprehensive communications and awareness programme to achieve and maintain a profile for Public Private Partnerships as a public procurement mechanism.

Today’s event is part of the roll-out of this programme which is being co-ordinated by the Department of Finance in co-operation with the social partners. On 14th April last, the Minister for Finance launched the Public Private Partnership National Communications Strategy. Key objectives of the strategy are to:

  • develop a profile for PPPs both nationally and internationally;
  • educate process participants and promote best practice in the development and application of the PPP approach, and
  • provide a comprehensive information resource.

Communication of course is a two-way process. We hope here today to explain to stakeholders and the general public what PPPs are and to counter some of the negative publicity about them. We also want to hear your comments and suggestions which we will be glad to consider in the context of improving Ireland’s PPP process.

The commitment to partnership represented by the PPP process is an expression of shared values and principles that transcends national, sectoral and economic differences and aims at improving the lot of citizens through better delivery of quality public services.

In developing PPPs, the Government’s aim is to equip this country with the best possible administrative structures and systems needed to deliver our priority economic and social infrastructure projects. The PPP Framework and the National PPP Communications Strategy together set out the parameters within which Ireland’s PPP process can progress. With the additional resource provided by the National Development Finance Agency, I am satisfied that we now have the optimum organisational environment and expertise to encourage the further development of PPPs in Ireland.

Thank you.

Page 1 of 7