Report on Public Private Partnerships for Public Sector Infrastructure Projects - Liquidation of the Carillion Group: Motion

I move:

That Dáil Éireann shall consider the Report of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach entitled ‘Report on Public Private Partnerships (PPPs) for Public Sector Infrastructure Projects - Liquidation of the Carillion Group’, copies of which were laid before Dáil Éireann on 22nd October, 2018.

As the Minister of State, Deputy D'Arcy, who is present, is aware, the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach did considerable work on this issue. In my constituency, school building programmes in County Carlow were affected. A significant number of the contractors were based around that area. When the difficulties began and came to light, a number of subcontractors from around the country contacted members of the committee and asked whether it would investigate the matter and try to protect the services and goods the subcontractors had provided to Carillion.

Before the financial crash, subcontractors were regularly caught out by big contractors such as Carillion and often went broke thereafter. Some of the contractors to which I refer are family-run businesses that have been in existence for generations and provide services or goods. When the public private partnership contract came along, the presumption was that greater guidelines and safety would be built into the contract and would extend to covering the subcontractors in question. I am aware that during the contract phase there were checks on the contractor to ensure that payments were being made and were up to date. When the crash happened, it became clear that the payments were not up to date. Subcontractors providing plastering or painting services, as well as those providing school furniture, for example, were caught and they and their businesses took a substantial hit with a resultant impact on the employment levels in those businesses. I would have thought that since these events occurred and, indeed, since the publication of this report which has 19 recommendations, one of which is that the report and the matters raised therein should be debated in the House, there would have been some progress in informing the committee on the action of the Department or Departments regarding the procurement process in order to safeguard future contracts and subcontractors.

The evidence is that large companies outbid everyone else and get the contracts and that there is not enough scrutiny of their financial affairs. An examination of the balance sheets of the companies in question would have shown suspect figures, and that should have come to light. I would have believed, in the context of Carillion, that this would have happened, particularly in view of the scale of the collapse.

On how many of the 19 recommendations is the Government going to act? In response to the committee's report, what action is the Department taking, in the context of the procurement process, to safeguard contracts by vetting the winners to the greatest extent possible, secure in the belief that they will carry out the work from start to finish?

The issue of subcontractors also arises. Considering that a €14 million fund was mentioned, we recommend in the report that the subcontractors be paid. There was quite a hullabaloo at the time, both in the media and at the committee, because we heard from the subcontractors. There was pressure put on for them to be paid part, if not all, of the moneys due. That did not happen. If we are to instil confidence in the sector and the PPP process, we have to take steps to earn the confidence of subcontractors throughout the country and ensure that the State's position is understood. I do not get that sense today.

Subcontractors remain concerned. The subcontractors involved with Carillion and Sammon have still not been paid in the way they should have been. To witness railings being taken down and moved away and subcontractors turning up at the gates of schools to take back the desks at which the children were to sit tells its own story. The Government cannot stand by and just watch that happen. It is damaging the very sector we are relying on to continue to create jobs and that created 1 million jobs in the past. I want to know the safety arrangements in the context of protecting the subcontractors. What did the Government do with the set of subcontractors involved before? Was payment made? What will be done about the big firms that win the contracts in the context of how they are paid and how they pay subcontractors? I hope the Minister of State will put in place a response to each of the recommendations and that the appropriate action will be taken to protect the individual subcontractors who were left skint as a result of the collapse.

I welcome this report. Most of the issues raised in it do not fall within the scope of PPP policy. The focus of much of this report seems to be the impact on subcontractors arising from the liquidation of Sammon, itself a subcontractor working on the schools PPP bundle 5 project. This intrudes on law dealing with the complex situation of company insolvency rather than PPP policy or public procurement policy. The position of any subcontractors engaged by a PPP company is essentially no different from that of subcontractors working on traditionally procured projects, whether in the public sector or private sector.

I absolutely sympathise with anyone who has experienced a financial loss. The State, however, is not to blame for this loss. The State meets its obligations and will pay the PPP company the contracted price for the project delivered. That said, the Government has considered this report in its entirety, and I am happy to set out how we will respond to its recommendations.

Last year, the Government launched its vision for how we can achieve a better future. Project Ireland 2040 includes two core elements, namely, a national planning framework and a €116 billion national development plan that sets out an ambitious and strategic vision for Ireland's investment in public infrastructure over the next ten years. With this plan, investment levels in Ireland will continue to increase at a sustainable rate and, very importantly, our infrastructure investment will be strictly guided by the national planning framework, which creates a single vision for our country as a whole, covering both rural and urban areas. This will deliver modern public infrastructure over the coming years that will improve the lives of people throughout Ireland and allow our companies and economy to continue to compete with the best in the world.

I will briefly explain what PPPs are and their role in the delivery of Project Ireland 2040. A PPP is an arrangement between the public and private sector for the purpose of delivering infrastructure or services that were traditionally provided by the public service. In effect, it is a form of procurement available to the public sector. When referring to PPPs, we generally mean that the asset is funded and constructed by the private partner, following which it is made available for public use and is paid for by the State and-or users over an extended period, typically between 20 and 25 years, following which the asset comes into State ownership. In the meantime, the PPP is regarded as off-balance sheet from a general Government perspective, which means that the initial capital cost of the project does not impact on the general Government balance over the construction period, but rather its cost is spread over the lifetime of the project.

Since the late 1990s, significant infrastructure projects have been delivered on behalf of the State using the PPP approach, including the pilot schools bundle in 2002, the National Maritime College in 2004, Cork School of Music in 2007, the Criminal Courts of Justice complex in 2009, the National Conference Centre in 2010, further schools bundles and a number of major motorway projects from 2005 onwards.

In July 2012, the Government announced plans for a major new €1.4 billion PPP programme, as part of a €2.25 billion stimulus programme of investment in public infrastructure projects. This comprised eight new PPP projects across the health, justice, transport and education sectors, of which schools bundle 5 is one. This was followed up with a second phase of the PPP programme, announced in 2014, to deliver 1,500 social housing units and a third phase, announced in 2015, to deliver projects across the higher education, health and justice sectors. There are now 28 PPP and concession projects that are either operational or in construction, in addition to those in procurement or planning. The annual cost of the unitary payment charges in respect of operational PPPs is some €290 million in 2019. The contractual capital value of all PPPs in operation or construction is over €5 billion.

In order to support value-for-money assessment, an analysis, called the public sector benchmark, is prepared that estimates the full cost of pursuing the project as a traditional procurement. As a general rule, a project proceeds as a PPP only if the tendered cost to the Exchequer is less than the public sector benchmark, which was the case in school bundle 5. The committee has suggested that the public sector benchmark be published before concluding a PPP contract. The public sector benchmark is confidential as it effectively says how much the State should be willing to pay for a particular category of project. However, current practice is already to publish the public sector benchmark, once it is no longer commercially sensitive.

In 2017, I initiated a policy review of the future role of PPPs to ascertain how they would contribute to Project Ireland 2040. The main outcomes of the review are: PPPs should continue to feature as a procurement option for projects that demonstrate value for money over a traditional procurement option; value for money should be the key deciding factor, an approach also recommended by the 2017 IMF review of our public capital investment processes; PPPs that have already been announced and that are in planning or procurement, as announced in budgets 2015 and 2016, will proceed as planned.

There is frequently a degree of misunderstanding regarding what a PPP project entails.

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 payments made by the Exchequer over the lifetime of the PPP contract include not just the construction costs but also those relating to finance and operations and maintenance, including cleaning and caretaking, over the period. The PPP company must provide a fully maintained asset. If the asset is not available or maintenance is not undertaken in accordance with the contract, the State reduces its monthly payment until the required standard is restored. This means that the PPP company has a strong incentive to deliver a high-quality asset and maintain it in good condition. Over the lengthy period of the contract, the PPP company can expect to make substantial investments and significant refits to keep the asset in good order. Residual life requirements are key features of these contracts, which means PPP companies must hand back the assets in good condition and meet specific residual life conditions. In traditionally procured projects, such further costs fall to the Exchequer. All of this is taken into account when designing a PPP. The PPP contract makes explicit the full costs of constructing and maintaining an asset in good quality.

The Department of Education and Skills is undertaking a review of the first pilot bundle of five post-primary schools that were delivered through the PPP model in 2001-2002. The review includes a direct comparison with traditional schools that were procured around the same time. The review will incorporate detailed condition surveys of the buildings and compare the operation and maintenance provision in both PPP and traditional schools. We expect it will provide useful learning for the traditional schools programme and for the PPPs.

Schools bundle 5 is a PPP project that is delivering five schools and an institute of further education across four sites. The bundle includes: Loreto College in Wexford, which is in my constituency; Coláiste Ráithín and Ravenswell primary school in Bray; Eureka secondary school in Kells; Tyndall College in Carlow; and Carlow Institute of Further Education. The bundle will provide for 3,150 post-primary school places, 24 primary school classrooms and 1,000 further education places. The new buildings are replacing infrastructure which is no longer fit for purpose or adequate for student enrolment numbers and are hugely important investments for the school communities involved. This project is managed by the National Development Finance Agency, NDFA, on behalf of my colleague, the Minister for Education and Skills. In 2016, the PPP contract was concluded with a consortium that included Carillion, a British company which had been involved in many PPP projects in the UK. The construction was subcontracted by Carillion, as the works contractor, to Sammon, which was an Irish construction company. Following the financial collapse of Carillion in 2018, Sammon went into examinership and subsequently into liquidation.

The PPP structure transfers delivery risks to the private sector. Therefore, responsibility for completing the construction of schools bundle 5 ultimately rests with the PPP consortium and the private investors funding the project. As with all forms of public procurement, the prime focus is on achieving value for money in delivering the required schools. The three school buildings in Bray and Wexford were handed over in late August and early September of last year in time for the current academic year and are now fully operational. The remaining buildings in Carlow and Kells are scheduled for completion in the second quarter of this year. The NDFA, in consultation with the Department of Education and Skills, is liaising closely with the PPP company and the funders to achieve the delivery of all remaining buildings as soon as possible. The full lessons from schools bundle 5 cannot be determined until all the buildings have been delivered and the final outcome is known. A joint lessons learned exercise regarding schools bundle 5 has commenced and will conclude after all the buildings are delivered. The review involves my Department, the Department of Education and Skills and the NDFA. I intend that this review will publish a summary of findings. This will substantially address the need to identify whether any aspect of the PPP framework needs attention as a result of experience of this project.

The Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach has made a number of recommendations to review and promote the Construction Contracts Act 2013 and potentially implement alternative protections for subcontractors. When the 2013 Act was being developed, extensive research into the approaches taken in other jurisdictions was undertaken and this was reflected in the regulatory impact assessment undertaken at the time by the Office of Government Procurement. This means that potential alternatives have already been evaluated and assessed. The legislation is based on the approach taken by the UK and New Zealand Governments in dealing with similar issues. It is important to appreciate that alternative measures, such as requiring contractors to acquire performance bonds, entail unpredictable costs for the private and public sectors. The balance that was struck in the Construction Contracts Act 2013 represents all that any such measure can do.

Some people have suggested that PPP contracts are exempt from the scope of the 2013 Act. This exemption applies only to top-level contracts with the PPP company - typically, a contract involving equity people and funders rather than the construction sector subcontractors the 2013 Act seeks to protect. The 2013 Act applies to subcontractors further down the supply chain. For example, it would apply to subcontractors working for Sammon on schools bundle 5. The committee recommends the promotion of awareness of this legislation. I agree with this recommendation. It appears that subcontractors are not availing of this framework in situations that could help them. This is best addressed by inviting construction sector representative bodies to promote awareness among their members. To that end, I have arranged for the Department of Business, Enterprise and Innovation to deliver a presentation on the Act to the construction sector subgroup. This group ensures there is regular and open dialogue between the Government and the construction industry on how best to achieve and maintain a sustainable and innovative construction sector which is positioned to deliver successfully on the commitments in Project Ireland 2040. It comprises representatives of key industry bodies, as well as senior representatives of relevant Departments and agencies with responsibility for policy and the delivery of infrastructure. It is chaired by the Secretary General of the Department of Finance. The scope for construction sector bodies to pursue their own initiatives in this space has not been exhausted. The construction sector could give consideration to the establishment of a fund to guarantee payment to subcontractors - not limited to public sector contracts - on the basis of a levy collected and managed by the industry. This might have a positive impact on payment behaviour.

The Companies Act 2014 is the legislation applicable to the winding up of companies. The Act contains detailed provisions relating to the realisation and distribution of assets and provisions to address abuses when companies are being wound up, such as rules on the fraudulent disposition of assets and unfair precedents. The Company Law Review Group is a statutory advisory expert body which advises my colleague, the Minister for Business, Enterprise and Innovation, on the review and development of company law in Ireland. As recently as 2017, the group published a review of company law safeguards for employees and unsecured creditors. Subcontractors are likely to be unsecured creditors under company law. In general, the review found that the existing protections and remedies for employees and unsecured creditors in company law are comprehensive and fit for purpose. As the group's report is of recent vintage, the need for a further review of company law in respect of subcontractors at this stage is unlikely to be productive.

I welcome the joint committee's report. I have drawn it to the attention of the relevant State bodies with an interest in its recommendations. The thrust of its recommendations are already reflected in the actions that have been taken. I refer particularly to my commitment to invite construction sector bodies to promote more awareness of the Construction Contracts Act 2013 and the protections that are already available.

I thank the Minister of State. His timing is superb.

I warmly commend the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach on the production of a valuable report on the use of PPPs for public sector infrastructure projects. I thank the Chairman of the joint committee, Deputy McGuinness, and the committee secretariat for producing this report, which is particularly timely in the context of the liquidation of the Carillion group. The collapse of Carillion has significantly delayed the delivery of the PPP contract known as schools bundle 5 right up to the present. It raises profound questions about the continued use of the whole PPP process, which has tied the State into a system of large annual payments to PPP contractors until the 2050s or 2060s. The informative report before the House may be considered alongside the House of Commons report on Carillion, which is a devastating indictment of the PPP approach. We copied this approach from the UK Government, which refers to it as the private finance initiative, PFI.

At the time of the Carillion collapse, The Guardian responded to a report on the company by the UK National Audit Office by concluding that PFI schemes have "as they have evolved, simply not worked". The leader of the UK Labour Party, Jeremy Corbyn, rightly refers to the dogma of privatisation which he claims has resulted in an outsourcing racket to the detriment of public infrastructure for the British people.

Carillion had approximately 43,000 employees, including 19,000 in the UK, when it collapsed in January 2018. One of the disgraceful results of this collapse was that it left a pension liability of the order of £2.6 billion. It also owed in the region of £2 billion to its 30,000 suppliers and subcontractors. Many of our companies and their workers were exposed in this regard. The liquidation of Sammon Contracting Ireland Limited on foot of the collapse of Carillion led to grave difficulties in the delivery of schools bundle 5 under an Irish PPP, including serious adverse impacts on subcontractors that worked on the project.

The House of Commons report castigates the management and governance of Carillion, the board of which included among its members Mr. Philip Green who was chairperson from 2014. Carillion's business model is described in the report as an "unsustainable dash for cash", with the company "choosing to pay out more in dividends than the company generated in cash". The executives and the board are accused of a chronic lack of accountability. The culture within Carillion is described as "rotten". Yet this company was chosen in July 2016 by the National Development Finance Agency, NDFA, to lead the Inspired Spaces consortium with the Dutch Infrastructure Fund, DIF, to construct schools bundle 5, ultimately funded by €250 million of State payments over a 25-year period. This is the debacle into which we have been led.

The House of Commons report especially emphasises the role of auditors in the Carillion collapse and the fact that KPMG audited Carillion for 19 years, earning £29 million in that time. Deloitte was responsible for advising Carillion's board on risk management. It is clear that the auditors concurred with what the report refers to as the company's "aggressive accounting policies to present a rosy picture to the markets". Accordingly, I greatly welcome the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach's focus in section 4.4 of its report on the role of auditors and due diligence procedures. The chairperson’s and the committee’s request that the NDFA liaise with its counterpart agencies in other jurisdictions on due diligence is timely and important. It is good to read also that the UK Financial Reporting Council, FRC, is conducting an investigation into KPMG’s audit of Carillion’s financial statements. Clearly, the Central Bank and the Office of the Director of Corporate Enforcement must also review the outcome of the UK investigation and its impact on subcontracting companies here.

We have learned from the Financial Times and other newspapers that the UK Government and the FRC are proposing that the so-called big four accountancy companies in the UK be broken up because of their predatory pricing of audits. The UK authorities also wish that financial consultancy work and auditing should be totally separate functions not carried out by the same company through Chinese walls. Will the committee examine the current regulation of auditing, recommend whether similar reforms are necessary and examine the dominance of the auditing market by the big four?

Section 3.3 of the committee's report addresses the PPP policy framework and considers the findings of the 2017 Department of Public Expenditure and Reform’s review that PPPs should continue to be used, with an emphasis on value for money at procurement stage. It also recommends that a new and alternative model should be considered for future PPPs. However, we have not heard any response to this from the Minister of State. The committee correctly concludes that the PPP framework operates without the visibility and transparency required for the State to know whether those along the entire supply chain – including our subcontractors and workers - are paid appropriately for services provided. It also concludes that such full visibility and traceability of payments must be central to any future PPP contracts. The Minister of State did not address the central point about the 2013 legislation.

I strongly support this conclusion and also agree that the Department of Public Expenditure and Reform review prior to the Carillion and Sammon collapses must be revisited as a matter of urgency. Indeed, the whole PPP process is another kind of shadow banking but one in which the State is involved. Deputy Michael McGrath has also raised this issue of shadow banking in the context of car-leasing companies. That is why I believe the State should finance, construct and manage all major infrastructure projects for our people, including those relating to education, health, transport and public housing.

The State refused to take responsibility for regulating the construction of homes during the Celtic tiger property bubble. The role of the clerk of works in public contracts was abandoned. When I worked on Dublin County Council sites as a student, I knew the clerk was there to ensure that work was done properly. However, this model was abandoned by the Government led by Bertie Ahern. It is no wonder that section 3.4 of this report states that the certification of works is arguably the single most contentious issue to emerge in the course of the committee hearings. A certification of works is necessary in order for a completion certificate to be granted by the Buildings Control Authority and this certification is governed by the building control amendment regulations, BCAR, and the code of practice for inspecting and certifying buildings and works. It is striking that, even hearing from subcontractors, the committee felt that the current certification process may expose the State to future liabilities in terms of insurance cover and health and safety regulations. Again, the NDFA has a significant role to play in making this certification process more accountable. The committee supports what it calls a pragmatic and sensible approach whereby the PPP company and the replacement contractor, Woodvale in this case, engage with the original supply chain to secure the necessary certification.

I strongly echo the committee’s view in section 4.1 that there is a lacuna in legislation regarding the protection of payments and entitlements to subcontractors and their workers. Any review of the Construction Contracts Act 2013 will show that new multifaceted legislation is necessary for the proper protection of subcontractors and their staff. The losses in outstanding payments sustained by as many as 400 subcontractors in the schools bundle 5 debacle may total at least €14 million with a profound negative impact on smaller companies, their workers and families.

The in section 4.6 of the committee's report for a contingency fund is crucial. The State should at least take this step to protect subcontractors and front-line workers and suppliers. Any future winning consortium should be obliged to set aside such a contingency fund. This echoes a similar proposal from the House of Commons investigation into any future PFIs in the UK.

I commend Senator Alice Mary Higgins, along with her colleagues in Civil Engagement, Senators Ruane, Dolan, Colette Kelleher and Black, for bringing forward the Public Authorities and Utility Undertakings (Contract Preparation and Award Criteria) Bill 2019. I was delighted to see it pass Second Stage in Seanad Éireann. It will give further effect to the European Parliament Directive 2014/24/EU and Directive 2014/25/EU. It provides for the use of social considerations and best price-quality ratio as criteria in awarding public contracts. It would be a positive step forward if the Government weighed in behind it when it comes to this House.

I commend Deputy McGuinness and my colleagues on the finance committee, as well as the staff who prepared this report. I hope it will start an important debate to which the Government will respond with necessary legislative changes.

I commend the Chairman and members of the finance committee, as well as the staff who supported them in producing this important report.

Unfortunately, PPPs play a significant role in the construction of health facilities. This is despite the fact that serious and grave concerns exist about them, some of which are outlined and highlighted in the report. There are a significant number of primary care centres around the State, built using the PPP model. I can always tell which ones were built this way because they are the ones with no GPs or staff. Last year, I tabled parliamentary questions on the number of primary care centres under construction. The reply was interesting. Of the 32 primary care centres then under construction, 13 were being built using PPPs.

I am sure the Minister of State will say that people do not care who builds the primary care centre, they only want to ensure that it is built. My response to that, however, is that a building is no use if there is no one in it. Several primary care centres which were built using the PPP model are completely devoid of staff. It is pointless to have a building where a GP cannot afford the rent or where there is not a full complement of staff. We need to ensure that our primary care centres belong to the State and can be staffed with directly employed GPs and with rent and other bills covered by the HSE or that they can be offered to a self-employed GP at a rent charged at a fair and affordable rate.

I also wish to make a broader point. Over decades, the failures of privatisation and PPPs became clear and those who promoted them were exposed as they offered false promises. In most cases PPPs are an expensive and inefficient way of financing infrastructure and services since they conceal public borrowing while providing long-term State guarantees for profits to private companies.

Earlier, the Minister of State stated that the committee "made a number of recommendations to review and promote the Construction Contracts Act 2013 and potentially implement alternative protections for subcontractors". I have a particular interest in this area and I urge that in any review he would include protections for workers. The best protection for any worker, of course, is to join a union, however these companies very often do not recognise trade unions. PPPs are effectively State-sponsored privatisation. In many instances they do not honour or acknowledge the third-party machinery of the State or the minimum rates for the job in the relevant sector and ride roughshod over workers' rights. I have seen a PPP in action in a school where I represented workers. It was a design, build and operate contract. They came in and the workers, who had been State employees, were essentially offered an ultimatum that they could switch to become employed by the contractor, and were offered a contract to work in the school once built. There was no union recognition, however, and I do not believe that the State should do business with people who do not recognise trade unions or third-party industrial relations machinery. One cannot rely on the goodwill of employers. Generations of my family would have been out of a job if one could rely on the generosity of employers; one cannot rely on employers' good nature. We must ensure that wherever and however the State spends money and whatever contracts are entered into, workers' rights are protected and are put front and centre.

PPPs originated as an accounting trick as a way around governments' own constraints on public borrowing. This remains the overwhelming attraction for governments and international institutions. A state with the financial clout of this State and the capacity to raise finance of its own should not be forced to engage in PPPs. They are not a solution and merely hoodwink us that they work well. They have been proven time and again not to deliver for those who need them most. There is a better way, which delivers the best interest of the State and the people, namely, direct State investment. That applies to the health service, the education sector and across the public service.

I speak as someone who comes from a construction background. The report refers to subcontractors. There should be a system whereby when payment is made to the main contractor, there is a list of the subcontractors that are on site. It is a problem, not everywhere but here and there, that those subcontractors are owed money. They can find it difficult to do a final sum with some larger firms, and many of these subcontractors need to be paid fortnightly. It becomes a major problem. I refer to small operators who do not qualify under the procurement guidelines as they lack the necessary level of turnover, which is a problem with the procurement rules. We need to ensure there is protection there because these firms are vulnerable; there is no point in saying they are not. We have heard the stories that go around in the different parts of the country. A subcontractor might be owed €24,000 only to be told by the contractor that they would receive €20,000 and that would be it, and they might have their tongue out for it. I would encourage the Government to insert a guarantee that in any project undertaken with the Department of Education and Skills, with Transport Infrastructure Ireland or whatever Department or agency, any list of subcontractors which the main contractor had on site would have to be signed off on before the State would pay the main contractor any money.

I do not have a problem with the principle of PPPs if they are done right, but only if they are done properly which is the problem, for the simple reason that the State is bound by certain constraints when borrowing money. Borrowing is effectively off-balance-sheet if it is done the right way. However, I have a big problem with primary care centres. I know of situations where a deal has been done on a primary care centre - it is usually for a period of 25 years - in which the loan the banks are giving the builder are for a duration of 18 years. The rest have a few pounds out of it. The problem is that we were not smart enough. Had we inserted a clause that we could pay €1 for that building after 25 years we would nail it down, because the contractor had been paid for it. Instead we must enter into a new contract with those people for a further 15 or 20 or years. This is an awful gap in what we are doing and ought to be nailed down. The Minister of State is looking at me but I have checked this with some people who have had such a contract and this is the reality.

There are roads for which we seek funding. I have no problem with this being done by PPP. There is the cost, the interest and must be a bit of space for people to make money because there is no point suggesting they will enter into something to lose money. However we need to nail the process down, whether it is over a 20 or 25-year period, in order that at the end of that period, the asset returns to State ownership for a minimal sum. It cannot be some balloon figure near the end.

Those the two things that I would like the State to examine. There are roads that are planned or that are not even on the cards as yet for which this could be used. There is a budget, say €1 billion or €800 million, and it is impossible to deliver everything one wants from that. No one is codding himself or herself that it is possible. There is a opportunity, however, over a 20 or 25-year period to deliver the infrastructure that is needed through PPPs. However, I emphasise that we need to nail down the process and do it properly. If it is used for roads and insufficient traffic goes through, the State will have to pick up the difference and no one is cribbing about that as that is the agreement entered into by the State. I worry about the system being used for primary care centres, however, because I know some of those builders and it is an open goal for them. We need to go back and look at some of the projects that were done and we should watch what we do in the future.

I suggest that we might be a little innovative, at the risk of putting the officials in a flap. We are meant to go to the Minister of State and then to Deputy Thomas Byrne to wrap up but perhaps it would be better that we hear Deputy Byrne first and then let the Minister of State respond, if the Deputy is amenable.

We would accept that. The Minister of State has already spoken at length and he has heard some of what we had to say.

I am grateful to my colleague, Deputy McGuinness, for affording me the opportunity to speak on behalf of the committee of which I was formerly a member, as was the Minister of State, Deputy D'Arcy. It is an issue I have previously spoken on in the House and on which I have long had an interest, both as Fianna Fáil's education spokesperson and as a Deputy for Meath East where, frankly, many subcontractors were shafted, there is no other word for that. The report's most important recommendation is its last substantive recommendation that a contingency fund be set up. The committee heard in its evidence that about €14 million is owed to subcontractors. I have no doubt that millions of that is owed in Kells, where my constituency office is located, and in the surrounding areas.

I have met many of those subcontractors. When we think of subcontractors, we tend to think of individuals. While many individuals have been badly affected, so too have many businesses, including large local undertakings and family businesses. I remember when the project in Kells was starting an open day was arranged for local business people. I believe it was held in Carlow or wherever the Sammon Group had its office. Business people were invited to meet representatives of the group to find out about the opportunities. When I heard about the open day, I thought it was a wonderful opportunity for local business people. It was fantastic to have a major construction project coming into a rural town like Kells. It could only be good news, we thought, but unfortunately for many local contractors, it was a disaster. There is no other way to describe it. Contractors and businesses, some of which had offices across the road from where the school was being constructed, were delighted to get that stream of business because the economy was at its lowest point at the time.

Before the Sammon Group collapsed, contractors who were looking to be paid got in touch with me asking if I could I do anything about it. I raised the matter in the House with the then Minister for Education and Skills, Deputy Bruton, and whatever happened at the time, whether through embarrassment or something else, moneys were paid. This was before the company collapsed. Many issues arose with this project and they left a sour taste in north County Meath.

If there is a problem with a school building project, it will be resolved at some point. The girls attending Eureka secondary school will get the benefit of the school at some point, even it has been substantially delayed, even beyond initial expectations. However, business people, workers and families in Kells will suffer forever as a result of lack of payment for goods and services. One of the points made to me is that in some cases the goods provided, for example, tarmacadam and blocks, are in the building are on site. The providers have paid for the building, a public service, but are not getting paid for what they have provided. It is scandalous and outrageous that this has been allowed to happen. It is important for the country's economy and the future of public private partnership programmes that the fine recommendations of the committee's report are put into practice and such a case never occurs again.

The committee also pointed out that the Construction Contracts Act 2013, which was initiated by the former Senator, Mr. Feargal Quinn, in the Seanad, has not worked to the level expected. At the same time, people need to know about the provisions of the Act. That is another recommendation of the report.

I worry when I hear the word "learning". I accept there have to be learnings from this. Learning is a new word that has entered into the political and administrative lexicon in recent years. We used to hear that mistakes had been made. Mistakes were clearly made in this case. One of the biggest was the failure to look at what was going on in the UK where the authorities also made the mistake of trusting Carillion too much. They said it was a fine company without looking at the underlying position of the company or asking how on earth it was able to provide all these contracts at rock bottom prices in the public sector. It simply was not possible to do so and it created a bubble that was waiting to burst. Unfortunately, when it burst the consequences were devastating for subcontractors and severe for school children.

Having said that, I am generally supportive of PPPs but only if there are adequate protections for the subcontractors who provide work to the main contractor. If the State is directly contracting a project, some protection will be provided. In this case, where the financial arrangements were extremely complex and involved banks in Japan, a company in England and another company in the Netherlands, the State was removed from the process. The State has been subsidised by local business people in Kells and north Meath. That cannot happen again and Fianna Fáil will not be able to support PPPs if that is allowed to be the case and the recommendations are not looked at with the seriousness they deserve by those in charge of public procurement.

I pay tribute to the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. If the Ceann Comhairle will forgive me, I also pay tribute to Mr. Ken Murray who has done the radio work for five counties, including, I understand, the Minister of State's county, and also on Shannonside FM. Today could be the last day the debates are broadcast on the various local radio stations, which is a great tragedy. This is a matter for the Oireachtas Commission but instead of cutting back, we should be expanding coverage of Dáil proceedings to all of the radio stations that are willing to take it. It is a useful public service and one of a number of ways of following debates. I express my gratitude to Mr. Murray for his work in the Oireachtas over many years, as I am sure will Deputies Fitzmaurice and D'Arcy given that radio stations in their areas are covered by his work.

I agree with Deputy Byrne that Mr. Murray has done a super job on the promotion of the work we do in the Oireachtas. Many Members do not always get the level of coverage they should but Mr. Murray has brought coverage of proceedings to each of the counties he has covered. I support the continuation of that service. It is a good service and this is a matter for the Ceann Comhairle and the Oireachtas Commission, in their wisdom, to consider.

The matter is under deep consideration.

When Deputy Thomas Byrne and I were Senators, a Bill introduced by the former Senator, Feargal Quinn, highlighted the disservice being done to subcontractors. There are also many subcontractors in the private sector who find themselves in difficulty because they are dealing with larger companies. An interaction of unequals is leading to such difficulties. Former Senator Quinn's legislation, which Deputy Byrne and I both discussed in the other House, has improved the sector in its totality. I want to show my appreciation for former Senator Quinn's legislation. There is a difference between a contract between two private companies and one that has been done with the State. There is an expectation that the State will ensure that people get paid, but the State cannot pay for a job twice.

I am pleased to have an opportunity to comment on the joint committee's report. As has been noted, the report is being circulated to relevant bodies to consider its recommendations in light of their respective remits.

As with all forms of public procurement, the prime focus of the PPP framework is to achieve value for money in delivering the required infrastructure. The PPP structure gives a strong incentive to the private sector to deliver the project. The State does not commence unitary charge payments until the works are delivered to the expected standard.

As explained previously, the PPP company must maintain the asset for the duration of the contract, which is over a lengthy period, such as will require substantial continuing investments to be made by the private sector project funders. These are significant benefits, which mean the PPP framework can offer very good value for money for the right project. However, the concerns expressed here do not primarily relate to the PPP framework. If schools bundle 5 had been a traditional procurement, the position would be substantially the same. The same protections apply to subcontractors here as would apply in any project, whether in the public or private sectors. The law still applies. I am sure everyone agrees that the State cannot pay twice for the same works.

A lessons learned exercise into schools bundle 5 has commenced, involving the Departments of Public Expenditure and Reform and Education and Skills and the National Development Finance Agency. It will conclude after the project has been fully delivered. It will chiefly focus on the effectiveness of the PPP framework as a procurement tool.

The issues raised here are probably best considered in the context of the safeguards for employees and unsecured creditors in company law. As pointed out, the Company Law Review Group recently reviewed those safeguards and found that, in general, the existing protections and remedies were comprehensive and fit for purpose. The Construction Contracts Act 2013 drew on international experience to frame a measure that could mitigate the exposure of subcontractors in these cases. Alternative approaches, such as mandatory performance bonds, were considered. That analysis can be found in the regulatory impact assessment completed by the Office of Government Procurement in the context of the development of the legislation. Those alternatives were found to have drawbacks, such as adding considerable administrative and financial overheads to small businesses.

The scope for construction sector bodies to take their own initiative has not been exhausted.

For example, the construction sector could give consideration to the establishment of a fund to guarantee payment to subcontractors, and not limited to public sector contracts, on the basis of a levy collected and managed by the industry, and this might have a positive impact on payment behaviour. There is only so much that can be achieved by legislation. Legislation on any topic typically needs to find a balance in complex matters. That said, I am sure the contents of this report will add to the ongoing policy deliberations in the various areas to which it relates.

The law of the land includes employment law and Deputy O'Reilly seemed to intimate that public private partnership, PPP, projects do not adhere to the law of the land but that is not the case. Whether the project is a public private partnership, a standard project that goes through procurement or is done by a private subcontractor, the law of the land applies. Rates of payment and employment protections apply. It is important to put this on the record as I do not want the idea to go out that PPPs contain a methodology with which companies can work their way around the law of the land. They cannot do it.

Question put and agreed to.
The Dáil adjourned at 5.05 p.m. until 2 p.m. on Tuesday, 9 April 2019.