Seanad Éireann debate -
Tuesday, 12 Feb 2002

Vol. 169 No. 3

State Authorities (Public Private Partnership Arrangements) Bill, 2001: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Minister of State at the Department of Finance (Mr. Cullen)

I am pleased to present the State Authorities (Public Private Partnership Arrangements) Bill, 2001, to the House. The Bill has a pivotal role to play in the development of the PPP process and represents an important element of the Government's strategic approach to the development of public private partnerships in Ireland. The Government is determined to harness the potential of PPPs to contribute positively to priority economic infrastructure projects under the national development plan. The Bill facilitates that process. It is enabling legislation, the main purpose of which is to create the high level of legal certainty sought by investors wishing to embark on the PPP process.

The Government's policy in relation to PPPs envisages the development of pilot projects across a range of sectors. It is, therefore, essential that State authorities wishing to engage in PPPs have the opportunity to do so. The Bill creates the legal certainty to allow them participate in this new method of public procurement and to ensure that its benefits are available to every sector of the community. I hope that when it has considered the provisions of the Bill, the House will support the Government's effort to confirm the ability of State authorities to engage in public private partnerships.

PPPs represent a growing trend across the developed market economies of the world. However, this coming together of public services and private business is not a new phenomenon in this country. Interaction between the private sector to achieve the provision of public services in areas such as health and education has long been part of daily life in Ireland. These services have been funded and provided by a mix of central and local government and private, voluntary and community based organisations. Furthermore, many local authority services have been delivered through contract arrangements with the private sector. PPPs represent a refinement of, and are consistent with, these long-standing practices.

PPPs have developed very quickly. The first pilot project, involving a group of five post-primary schools, was launched in July 2000. Now there are 37 projects at various stages of procurement, ranging from roads to environmental services, public transport and third level education.

International experience shows that real benefits can be gained from PPPs. They can give better value for money compared to traditional procurement by transferring risks from the public to the private sector. They can also deliver improved efficiency in the adoption of whole life costing of services and innovation in the design, building and operation of assets.

PPPs can also provide better quality services through increased competition, incentives to higher standards and performance and an enhanced focus on the customer. PPPs can allow faster deliver of individual projects by linking the provision of the asset or service to payments, particularly in relation to more complex capital projects. PPPs can give us a better utilisation of assets through extended third party usage and can provide the context for better regulation as Government agencies focus on the role of regulator, planner and monitor rather than on day to day service provision. Moreover, PPPs can help maintain competitiveness through the opening up of sectors now sheltered from competition.

While all international experience points to all these benefits, the crucial element of successful PPPs is optimal risk transfer. By this I mean that a good PPP will ensure that project risks are allocated to the party best able to manage them at least cost. Our primary objective is to establish the procedures needed to capture the advantage of effective risk allocation through developing our pilot project programme. A well managed PPP will be based on optimal risk transfer. Effective risk identification, assessment and allocation are crucial to achieving increased value for money for the Exchequer and the taxpayer. For the private sector an opportunity is created to engage in a long-term business relationship.

The PPP unit in the Department of Finance is managing the standardisation of PPP procedures to ensure risks are evaluated in a consistent way across all sectors. For the public sector, this will ensure procuring authorities will have a sound basis for a rigorous qualification of risks to be transferred. The private sector partner will know that risk issues will be dealt with in a transparent and realistic way.

A related benefit is that long-term cost factors are recognised in addition to the initial capital expenditure. There are real incentives to focus on a holistic approach in the amalgamation of the design, construction, finance and operation in the creation of an asset from a whole life perspective. A further advantage of PPPs is that the taxpayer only pays for the services actually delivered. The private sector firms and their bankers take the risk that where they are unable to provide the required level of service, they do not get paid.

For small economies, such as Ireland's, an additional benefit of PPPs is that they can facilitate bigger and more complex infrastructural projects than would have been feasible under other arrangements. These larger design projects become more attractive to major international design, construction and engineering firms. The entry of overseas competition to a smaller market can generate the transfer of competencies and management skills through co-operation and joint ventures.

The Government will weigh the benefits of PPPs and analyse the potential difficulties and problems to be overcome in rolling out the PPP programme. We recognise that there are obstacles that can create disadvantages in adopting PPPs. PPPs can present difficult and complex contractual issues for both public and private sector partners. The public sector has to be satisfied that the business case for proceeding with a project on a PPP basis is sound when compared to the conventional approach.

For the private sector, the costs associated with bidding for PPP projects can be substantial. This is recognised in the Programme for Prosperity and Fairness which specifically provides for negotiation in relation to the question of client contribution to PPP tender bid costs. Discussions on this issue are in progress between the CIF and the central policy unit. For employees, significant issues can arise where public service staff are transferred to the private sector under PPPs. Discussions at the public private advisory group and ongoing regulatory developments in the field of human resources legislation will help to address these complex human resources issues.

It is important to recognise these issues and to deal with them as early as possible in the process. My approach is to ensure 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 PPP projects. However, I stress that PPPs must not be seen as a means of avoiding more fundamental difficulties in individual projects. A project should stand on its merits irrespective of the method of procurement.

The commitment of the Government to the PPPs is critical. Part of the reason we have made such good progress on PPPs has been solid Government support for it at the very highest level. This support is grounded on a clear appreciation of the economic case for PPPs and a focus on deliverables based on a requirement for a sound business case evaluation.

In this regard the structures for delivering PPPs are of crucial importance. The Government established a central PPP unit in the Department of Finance to lead, drive and co-ordinate PPPs. There are also units with responsibility for individual sectors in the relevant Departments. The Cabinet sub-committee on infrastructure and PPPs gives high level direction to the development of PPPs. It includes the Tánaiste, the Minister for Finance, the Attorney General and other senior Ministers. In addition, the head of the central PPP unit in my Department is chairman of two groups managing the PPP process, an interdepartmental group on PPPs which brings together key decision makers to ensure that there is coherence and consistency in developing partnership arrangements with the private sector, and a public private informal advisory group on PPPs which includes the representatives of employers' organisations, the Irish Congress of Trade Unions, the construction and civil engineering sectors and the national enterprise development, science and technology innovation board.

These groups have already advanced the PPP process by helping to address and resolve major legal and financial questions. The IAG negotiated the framework for PPPs which was formally launched by the Minister for Finance in conjunction with the social partners in November 2001. The adoption of the framework is an acknowledgement that the delivery of projects through PPP gives us all an opportunity to maximise the interaction and co-operation between the public and private sectors. Agreement on shared goals, objectives, principles and the appropriate distribution of risk for public investment and services delivery is fundamental. The framework constitutes an important statement of the high level principles for the conduct of PPPs at national, sectoral and project level which will help embed PPP as an important pillar of public capital procurement and the provision of quality public services.

A major communications and awareness raising programme is being rolled out by the central PPP unit of the Department of Finance with the assistance of the social partners. The aim of the programme is to explain to stakeholders and the general public what PPPs are and to allay many of the unfounded concerns about the PPP process.

Although the purpose of the Bill is to verify that State authorities have the statutory powers to enter into new procurement arrangements, it is important to emphasise that these powers are in addition to and in no way replace any of their existing powers already provided under relevant legislation. It is also important to note that traditional outsourcing of contracts or arrangements whereby the private sector designs and constructs an asset for the public sector is not covered in the Bill.

PPPs represent a new option for public procurement. They are not intended to replace traditional methods, but to supplement them. The Bill is a major step aimed at addressing a critical issue which has arisen in other jurisdictions in relation to the PPP process, that of certainty or the vires of public authorities to engage in PPPs. Wherever PPPs are in use as a public procurement option, it is recognised that the issue of legal capacity or vires of public authorities to enter into PPPs is crucial to their overall success. Investors in PPP projects understandably require a high degree of legal certainty regarding the vires of public sector contracting authorities. With this in mind, the Minister for Finance published this Bill which is now presented to the House. The Bill provides legal certainty as to the powers of State authorities to enter into PPPs and gives local authorities the power to enter into joint ventures.

I will now briefly describe some of the specific provisions of the Bill. Section 1 is a standard section containing definitions of certain words and phrases used throughout the Bill. Section 2 provides that the State authorities provided for in the Bill are those named in the Schedule.

Section 3, which deals with public private partnership arrangements, provides for and thus defines what is meant by the term "public private partnership arrangement". It gives statutory underpinning to the concepts of design-build-operate projects and design-build-operate and finance projects. It also provides that a State authority may arrange or provide for payments to a private sector partner and that the State authority has the power to contract with a person who has provided funding for the public private partnership arrangement. One of the benefits of PPP is that the State authority only pays for what it gets. This section allows for those financing the project to intervene or "step in" if necessary where the operator of a contract fails to deliver the required performance. A State authority may also form a company or become a shareholder in a company and may transfer an asset of the State authority to a partner.

This section also ensures that the Minister for Finance has the same degree of control over Exchequer funds used to finance PPP projects as he or she would have over analogous payments such as the borrowings of State agencies to fund infrastructure projects undertaken by traditional procurement methods.

Section 4 provides that the functions specified in the PPP arrangement may be conferred upon the partner. The partner may perform these functions in its own name, subject to the control of the State authority. Notwithstanding this, the functions will continue to be vested in the State authority. The relevant Minister's responsibility for the performance of that function is not affected. Where a number of local authorities or bodies join forces to engage in a PPP, they may agree that their functions will be performed by a lead local authority or body.

Section 5 gives retrospective authority to State authorities in respect of PPPs entered into prior to the entry into force, in due course, of the Bill.

Section 6 authorises the appropriate Minister, either before or at the time of entering into a PPP arrangement, to give written directions to a State authority and to a company formed to undertake a PPP project in relation to the management, accountability, accounting and financial affairs of that company. This section ensures that the appropriate Government accounting procedures are adhered to during the PPP process and that the accounting officer of the relevant Department may, via the relevant Minister, take steps to ensure that this is the case. The section further provides that an appropriate Minister may, after a PPP arrangement begins, give directions to both the State authority and the PPP undertaking on matters of policy relating to the particular PPP arrangement or to such arrangements generally.

Section 7 provides that the Minister for Finance, in consultation with the appropriate Minister, may amend the Schedule by adding or deleting a public authority by way of order to be laid before the Houses of the Oireachtas.

Section 8 is a standard provision allowing expenses incurred in the administration of the legislation to be paid out of moneys provided by the Oireachtas. Section 9 is a standard provision containing the short Title of the Bill and providing that the legislation shall come into operation four weeks after it is passed. The Schedule lists the State authorities covered by the Bill.

The text of the Bill presented to the House today is substantially different from that of the Bill as initiated. Significant changes were made following Committee Stage of the Bill in Dáil Éireann. These changes were made both as a result of Government initiatives and the very constructive and helpful suggestions of a range of interests, including Members of the Houses of the Oireachtas, public representatives generally, the social partners involved in the PPP process, that is, IBEC, the CIF and the ICTU, legal firms, financial institutions and members of the public.

All submissions received were carefully considered and in some cases follow up discussions took place between officials from my Department and relevant individuals and organisations. I thank all concerned for the useful and constructive suggestions that were received, but it has not been possible to accede to all requests for amendments to the Bill. I stress that this does not indicate a lack of Government commitment to dealing with the issues that were raised; on the contrary, the Government plans to deal with them expeditiously in the most appropriate way, with stakeholder consultation where necessary. In particular, it is acknowledged and accepted that the questions of pay, pensions and terms and conditions of public sector employees transferring to PPP undertakings need to be fully addressed and the Government is committed to doing so.

This Bill is enabling legislation. Its purpose is to ensure that the State authorities listed in the Schedule to the Bill have the power to enter into PPP arrangements. There is an extensive body of law and regulations concerning human resources issues. These issues fall properly to be dealt with within legislation and the existing industrial relations framework. It would be legally unwise to attempt to deal with such issues in the Bill.

The Government is trying to strike a balance between the needs and interests of the public sector and, ultimately, of the Exchequer on the one hand and, on the other, of the private sector. Public private partnership is a new departure and the Government is committed to the creation of an environment in which it can develop and flourish as a method of public procurement. I have already said that the Government's main aim in introducing the Bill is to ensure that sufficient certainty is created in relation to the vires of State authorities to become involved in PPPs and I believe that this aim has been achieved. PPPs offer a winning formula for all participants and I am pleased to be associated with the Government's efforts to create an environment in which a new method of public procurement can flourish. I commend the Bill to the House.

Mr. J. Doyle

I welcome the Minister to the House and thank him for his contribution, which has given us some insight into the details of the State Authorities (Public Private Partnership Arrangements) Bill, 2001. The Bill's purpose is to provide enabling legislation to allow State authorities to form companies and to enter into joint ventures for the purpose of public private partnerships. A wide-ranging list of agencies covered by the Bill, including Government Departments, local authorities, health boards, educational institutions, the National Roads Authority and the Courts Service, is included in the Schedule to the Bill.

A public private partnership is a partnership between the public sector and the private sector for the purpose of developing a project or service traditionally provided by the public sector. PPPs come in a variety of different forms, but at the heart of every successful project is the concept that better value may be achieved by exploiting the expertise and confidence of the private sector and, most importantly, by allocating risk to those parties best able to manage it, a point to which I will return.

The development of PPPs is an important element of the national development plan but, with a few exceptions, the major infrastructural projects that have got under way, such as the Dublin port tunnel or Luas, have been directly funded from the public purse. One of the main reasons for the delay is that the Government has engaged in a fairly protracted evaluation of PPPs, as required under the PPF. This requirement resulted from the lukewarm attitude to the concept of PPPs demonstrated by trade unions. Many unions have expressed concern about using PPPs as a substitute for State investment rather than as an addition. The Government was right to proceed with caution in this regard.

The basic argument for public private partnerships is that they enable public sector projects to be delivered with private sector efficiency and at a lower cost. The commission dealing with PPPs examined this argument and looked at the British experience. The commission is dismissive of the lower cost arguments, but supports the concept that PPPs are more efficient and deliver better value for money. That is the reason the measure before the House is worthy of support.

This Bill will allow State bodies such as the National Roads Authority to enter into PPPs. While the economy has made significant progress over the past ten years in comparison with our European counterparts, sadly we have fallen behind regarding the provision of infrastructure. Work has commenced on the port tunnel and the Luas projects, but our infrastructural roads programme is under pressure and leaves much to be desired. The NRA recently announced that it has run out of money for new roads projects. There is considerable potential for the use of PPPs, particularly regarding roads, water and waste.

It is more than likely that some PPPs will be more attractive than others, particularly in the short term. Over the long term the range and depth of PPPs will expand. PPPs are more expensive in the long term than directly funded projects because savings which may be achieved through private sector efficiencies are counterbalanced by the cheaper cost of borrowing incurred by the State. The real value of PPPs is that they are more efficient and deliver better value for money.

There is a need for a formal procedure for selecting and assessing infrastructural projects for the purposes of PPPs. The shift from public sector specification, funding and operation of projects to one in which the private sector may be involved in the design, construction, performance, specification, financing and operation of major infrastructural works is significant and must be accompanied by an appropriate selection and assessment procedure to ensure value for money.

Another significant issue which must be addressed at an early stage in the development of PPPs is the extent to which statutory process risk will be allocated to the private sector. The Minister of State dealt with this issue in detail in his statement and I am glad there will be a unit in the Department of Finance to deal with this matter. The private sector must understand that the issue of risk will be dealt with in a fair and open manner and it is important to establish this fact.

Selection assessment and the allocation of risk are the two crucial elements regarding PPPs. The dramatic growth of the economy, the likely reduction in the level of EU funding which will be available, the higher performance standards set by recent European legislation and the increased pace of global competition underline the need to explore innovative ways of improving efficiency and value for money in the provision of infrastructure. PPPs represent such an approach and will constitute an important element of overall capital investment under the national development plan. That is the reason I am happy to support the Bill.

Mr. Finneran

I welcome the Minister of State and I am pleased with the content of this innovative and welcome Bill. A number of primary school public private partnership projects are in place and a further 37 projects are at the planning stage. This week the Department of the Environment and Local Government announced the use of PPPs for the provision of small sewerage schemes in rural villages in County Roscommon. This is an innovative approach which will provide significant benefits for rural communities.

I compliment the Minister and his staff and everybody who has contributed to this new legislation. It makes sense to have some interaction between the public and private sectors for the provision of services. This legislation allows for the involvement not only of central Government – although many people might think this is as far as it should go – but also of local government, the voluntary sector and the community-based sector. One thing I like about this legislation is that it covers all strata of society. It will present major opportunities for the provision, in a more open and transparent way, of better quality, better priced services.

Senator Doyle mentioned issues that could be dealt with under the local government system from a national perspective, such as roads, water and sewerage schemes and waste, and I agree with him. The public sector does not have all the knowledge required in these areas and although we have been provided with a wonderful service over the years, many people out there have other ideas about how these matters should be addressed. This legislation affords them the opportunity to follow through on these ideas. The opportunity is there not only of building and operating but also of designing new systems. A person may come forward with his own particular ideas about how something should be constructed and there is also the opportunity of providing finance.

The subject of competition has constantly been on people's lips in recent years as every formerly sacred cow is challenged. The Bill contributes to this by allowing for overseas competition, which can do nothing but good. Nobody should be afraid of competition. Every sector opened up to competition has prospered and the public has always benefited. Where a company has monopoly status or there is an arrangement under which the area has not been opened up, there can be problems with financing and costs to the system. This enabling legislation allows for competition here and overseas.

The transfer of staff from the public to the private sector is an issue of some concern. Perhaps the Minister in his reply might reassure people about this. It is important that the status and conditions, for example, of people in the public service is known in advance of any change and is protected. I welcome the establishment of a central PPP unit in the Department of Finance.

I was at a meeting yesterday at which the issue of design, build and operate schemes was being discussed. Some elected representatives and even senior officials from the local authority said that they had little knowledge of the concept and how it would operate in practice. A public awareness programme is of vital importance and there is an opportunity for such a programme under the new local government reform structures. Irrespective of whatever leaflets come from central Government or what public meetings are held to explain a matter they are never as effective as something dealt with through the local authority system. Local papers and radio take a great interest in anything dealt with through the local system and their interest initiates public debate. They are a great way of providing information to the public and of involving the public in discussions that take place.

Generally, people are scared and unwilling to change existing methods of operating and doing business. The tradition has been that people go through the procurement process. That has been the status quo and it is how the system has operated over the years. There is nothing wrong with that and the Minister says that will remain. The public private partnerships are not to replace or take over existing procurement arrangements but are to supplement and complement them. That is the message we need to give.

The provision of services has been done on an ad hoc basis since local authorities divested themselves of many of the services they traditionally provided. In many cases they handed them over to unorganised arrangements and major problems have been created as a result, for instance, the problem of what we will do with our waste. If instead of just involving the private sector in the collection of waste we had asked for people to come forward with new ideas for the disposal and recycling of waste we would not have as much ground to make up as we have now.

There is no great public awareness of the need to segregate and recycle etc. People have got used to dropping everything into the one bin where it then becomes someone else's problem. The real result is that it becomes everybody's problem as we can see by looking at other areas of development and reading the reports as regards ground water quality, river and lake water quality etc. These problems are a result of old practices being in place for modern developments. We have not kept pace with what was happening. I believe that with legislation such as this, Departments, authorities and community and voluntary based groups will be able to seek methods of design-build-operate and finance.

There are people, particularly in the trade union movement, who are opposed to this concept.

Mr. O'Toole

Not on this side. The Senator is reading the wrong papers.

An Cathaoirleach

Senator O'Toole will have his opportunity to make his contribution shortly.

Mr. Finneran

Perhaps not everybody is opposed to it, but people have often been dragged in screaming.

Mr. O'Toole

I do not wish the Senator to misinform the House.

An Cathaoirleach

Order, please, no interruptions.

Mr. Cullen

The Senator's leadership is recognised.

Mr. Finneran

The main thing is that the man at the top is in favour of what is going on and the rest will, I hope, follow. This legislation is a progressive step and it will be embraced by all involved in the provision of services. It is good for the nation that people are delivered a better service in any area where public private partnerships are implemented. I commend the Bill to the House.

Mr. O'Toole

I do not want to say too much on the legislation but to deal with the issue that Senator Finneran mentioned en passant. It is important that the message goes out to people on all sides of the political and the trade union-employers divide that what we are dealing with here is a direct practical manifestation of the importance of partnership. Similar legislation is proving impossible to pass in every other major western country without a major row or argument. Senator Finneran was right that there were a lot of reservations within the trade union movement. In the Irish trade union movement there are still some serious reservations but they tend to be north of the Border because there, unfortunately, they are dealing with a public private partnership regime which has been utterly unacceptable.

It is important that the Government makes the message clear that public private partnership operation is what it is written down to be whereas it means something completely different in the UK.

Mr. Cullen

It is not PFI.

Mr. O'Toole

Exactly, it is not. We made it clear to Government at an early stage that we could not follow the role model of the UK and time has proven us right on that as there has been a breakdown in many areas there. The UK got involved in services but we have focused on the development of infrastructure. There are many ways this can be addressed. There is a major row going on at present between my union, the INTO, and Government about the provision of school buildings. School buildings are a perfect example of how infrastructure could be put in place through this kind of arrangement.

The other important aspect is that this is an added value. The Government has made it clear in negotiations that this is not an attempt to pull back from the levels or amounts of investment but is a practical approach to getting additional and better value and efficiency from investment.

I am sorry my colleague, Senator Ross, is not here to participate in this debate. He informs me that he is completely opposed to public private partnerships in any form. I regret he is not here to learn something.

Mr. Dardis

We are not sorry.

An Cathaoirleach

It is not in order to speak on the absence of any Senator from the Chamber.

Mr. O'Toole

I am sorry and I stand corrected. I will rephrase that. I would like to say to my colleague Senator Ross that I am sorry he cannot agree with me on this matter of public private partnerships and I am glad he is staying so quiet on the matter.

We need to be careful that the Government is not tempted to move this matter into the service area because that would create all sorts of difficulties, such as those seen in the prison sector and many other sectors in the UK. This does not come with an "ism". It is not a question of people taking a principled stand. The trade union movement, the Government and the business sector are sitting down to see how they can get the best quality service and the best value for taxpayers. That is what the partnership process is about and it is something that has come increasingly into focus at this time.

I can recall one of my first meetings with the Minister for Finance when he took up that office. The Minister put it to me, as one who would be negotiating on the trade union side, that he had a huge ambition to get movement in this area. It has taken a couple of years to get people to engage with the process and to convince people in the other partnerships that there were things the trade union movement needed and things it could concede.

On 1 November, the advisory group document on this issue was published. It was important at the launch of that document in Government Buildings that, apart from the Minister for Finance, the two speakers were from the Irish Congress of Trade Unions and IBEC. That is the kind of image this country must put forward – that of a progressive trade union movement, of a business structure that can do business with and engage with the trade union movement, and of a Government that can use the synergy created through that interaction. That is a huge and important step forward. It is why we have recently had contact from governments in many European countries, and other countries such as Australia and New Zealand, to see how they can get this type of partnership going.

It depends on trust. People must understand each other's objectives and identify what I call a "coincidence" of objectives, they must make progress on those issues and address the issues of difficulty last. Progress must also be made on the issue of principle before getting into the pragmatic or practical implications of implementation of the agreed principle. In Irish life, for too long we have seen people objecting to the principle because they see difficulties in implementation. In this type of negotiation on the big issues, we must set that aside. We must determine objectives, agree on the principles and then sort out the difficulties of implementation.

There will be difficulties in implementation, a point that comes up in relation to some of the big contracts. It would be an utter betrayal of the commitment of the trade union movement on this issue if, for instance, workers who were not fully qualified or did not have their cards used, if workers were not paid the proper rate for the job, or if tenders were allowed despite short-cuts being taken in health and safety or in rates paid. There must be full understanding that the payment of the worker is as important as the profit of the contractor. We must focus on getting the best value and an efficient service for the taxpayer. The community wins if that is the case.

This can happen and it is the value of the partnership process. It is not a question of one person skimming off another; it is a matter of having standards, of insisting that those standards are maintained and of ensuring that all the parties are given due deference in the approach to this.

I will deal with other issues and aspects of the Bill at another time. It is hugely important that all sides of the House recognise this as the kind of process that has not been managed properly in other European countries. It still causes rows in France, Belgium and the UK, yet it is something that we can achieve here.

With North-South meetings, and with the 18 December interpretation of the Good Friday Agreement, it is hugely important that the authorities in the North recognise this is the way to make progress, as we have done. The Minister of State, the next time he is in the North, should give the authorities there a copy of the agreed report. I do not blame Senator Finneran for making his earlier point, although I interrupted him. A real difficulty was created by the Northern authorities, in negotiations with some of my colleagues of the Northern Ireland committee of ICTU, by their shoving across the table a suggestion that ICTU is in favour of public private partnerships. That is true but ICTU will never and could never agree with the UK version of PPP.

In terms of coming together, that is the issue that must be put across. I thought that an all-Ireland approach to public private partnership would mean a huge gain both North and South. That point must be made. However, the public private partnership which Members discuss today is something that has been developed, progressed and designed here. It is an Irish model and fulfils the core objectives of all the parties.

Mr. Cullen

That is why the UK is now trying to adopt that model.

Mr. O'Toole

I was going to conclude by saying that. The real lesson to be learnt from this is that the UK is now looking at this model. As in other matters, Northern Ireland will be left until last in being dealt with. I would love to see the Northern Ireland authorities taking this on board and moving it forward. They should recognise that this is how we can do business.

I welcome the legislation. There are aspects with which I am not 100% happy but I will not go through those at this stage. There are issues which none of the parties is happy with. The approach to negotiations of this type is based on the need for agreement; agreement means compromise and it means that progress has been made on core issues. I am happy to support this legislation and hope that it is to the benefit of the community and country and gives better value to the taxpayer.

Mr. Dardis

I welcome the Minster of State at the Department of Finance, Deputy Cullen. It is a measure of how far society has advanced that a Bill of this nature is securing unanimous agreement on all sides of the House. I suspect that if it had been put forward as recently as ten years ago, there would have been a degree of controversy about it. I am also pleased to see the Bill in the House because it is something for which the Progressive Democrats have argued for some time.

I am very encouraged by what Senator O'Toole, a senior trade union leader, had to say about the matter. He is quite correct that it is of a qualitatively different nature from the practice that has come into disrepute in the UK. A fundamental partnership between the private sector, Government, the trade unions and other social partners is what is proposed to advance investment and infrastructure development. Senator O'Toole and his colleagues are to be applauded for the way in which they have approached this issue. It is not my intention to sound condescending when I say that but the approach is to be welcomed.

In a sense, we are coming full circle. When investment was made in canals and railways, that was not done for public private reasons but for private reasons. It was done purely for profit. It is interesting that infrastructure elements such as canals and railways, which are regarded as public property, were very much private enterprises when originally put in place.

I am in the fortunate or misfortunate position of still having share certificates from the Great Northern and Western Railway.

Mr. O'Toole

The Senator should not try to cash them in.

Mr. Cullen

They may have an antique value.

Mr. O'Toole

He should file them with Enron.

Mr. Dardis

They are languishing in a deep box and are probably of greater intrinsic value than any certificates that I might have acquired from Enron, something that I did not do.

We have reached a point in our economic development where the ability of infrastructure to stay in step with development is questionable. If there are resources within the private sector to help us overcome obstacles in solving infrastructural problems, that money should be invested for the benefit of society and private investors who put money into projects.

There should be a requirement of legal certainty for those companies and people who invest in public private partnerships. When they sign contracts, they should be confident that those contracts and their investments are protected by law. I visited Hungary in the early post-Communist period when there was a difficulty for Irish investors in that contract law was at a very early stage of development and, as a result, projects that might have located in Hungary did not do so. We frequently underestimate the value of our stable society and its legal certainty – they have been a major attraction for inward investment.

The scale of projects is such that they require large-scale, international expertise and capacity that does not always exist in this State. In public private partnerships we can attract those with a long history of expertise in these areas. If I wanted to be mischievous, I could stray into the area of the provision of major sporting infrastructure in the State and the capacity of domestic expertise to deliver that infrastructure, but I will resist that temptation.

Mr. Burke

The Senator does not want to go down that road. He might get into a row.

Mr. Dardis

I made no reference to the Minister of State's Department.

Mr. Cullen

I know that.

Mr. Dardis

I might include in my criticism people who were formerly associated with the Department but I will leave that to one side.

The Minister of State made the important point that projects should stand on their own merits irrespective of the method of procurement. That is a critical issue. It is a reason that we were not as successful in the past as we might have been. There was not the same degree of scrutiny and vigilance. I welcome public private partnerships because private companies bring an energy driven by commercial imperatives that is not apparent always within the public sector, particularly in local authorities, where there is a degree of inertia when it comes to getting things done on time. They are done well but not as speedily as they should be done. Public private partnership is not a replacement for public works; it is a supplement to them. There are circumstances where it is appropriate that an enterprise be undertaken by a public body, but there are others where private input is necessary.

The National Roads Authority is mentioned in the Schedule of State authorities. In circumstances where public private partnerships are operating with the National Roads Authority, it is essential that consultation with and advice to communities is maintained at a high level so cynicism, scepticism and alienation of communities from the planning process are overcome and they feel part of the partnership. It is acceptable, however, when the project is being built that the public private partnership carries on without the same degree of consultation, although it should still exist. One of the current difficulties with infrastructural development is that local communities feel left out of the process and that decisions are imposed on them. There is a statutory framework within which motorway development must operate and there is a lead-in phase defining planning and consultation. The Department of the Environment and Local Government has a role, but, notwithstanding that, there is a consultation issue that must be addressed.

Public private partnerships can display a flexibility not always evident in the public service. I welcome the inclusion of the Courts Service because there is a serious delay in the provision of updated courts. It had been the responsibility of local authorities from their own resources to improve the building infrastructure in which courts operated in the past. That led to a situation where judges criticised the facilities in which those attending court were asked to operate. In Naas there is a fine example of what can be done to a courthouse, in which the Office of Public Works was involved, but County Kildare still has difficulties with some of its courthouses. There has been an undue delay with Newbridge District Court in having agreed works carried out. I am also glad that harbour authorities and the Commissioners of Public Works in Ireland are included. They will benefit from private sector input.

Section 3(1)(a)(i) mentions the provision of finance required for design, construction and operation. It is one thing to invite in a private company, but it is another for the State to secure or provide finance. I understand that there must be financial provision for major infrastructural works, but I am puzzled nonetheless. Does this mean that if the company required moneys from the bank the State would secure those moneys for it, or does it refer to the investment the State itself makes in the enterprise?

I have a similar query regarding section 3(1)(c) which states that a State authority may “enter, where appropriate, into an agreement (in this Act referred to as a ‘direct agreement') with a person who has arranged or provided funding for the partner for the carrying out of the public private partnership arrangement”. It would be too strong to say that I have a worry regarding that subsection, but I have queries about it.

Section 3(1)(d) states that a State authority may “transfer the interest of the State authority in an asset [or part of an asset] to the partner by conveyance, assignment, grant of lease or licence or otherwise.” Does that mean that the Office of Public Works could hand over the running of something as spectacularly successful as the Céide Fields to a private enterprise, or am I reading too much into that section by suggesting something like that might happen? Nevertheless, in certain circumstances it might be a good thing.

Under the terms of the Bill and notwithstanding what is contained in the Schedule, the Minister for Finance has wide powers to designate other State authorities as suitable for inclusion in the Schedule. He must then, of course, lay an order before the Houses of the Oireachtas. There is a slight semantic distinction between a public authority as defined under section 7(4) and the Schedule which talks about State authorities, not public authorities. I hope I have not raised a hare that will require the Bill to be amended. There seems to be an inconsistency, however, between the definition of public authority and the list of State authorities in the Schedule. That minor matter should be cleared up.

There is a consistency between this Bill and the Competition Authority Bill which was before the House last week. There is a thread running through the legislation which relates to the philosophy suggesting there should be more competition within the economy and that the private sector should have the capacity to participate with the public sector for the advancement of infrastructure and other investment. Semi-State companies, which I assume fall into the category of public authorities, should be able to participate in both directions. On the one hand, they should be almost the private element of the partnership, participating with the State where they can. On the other hand, they are public and should, therefore, be able to ally themselves with private partnerships. That is the case with Bord na Móna's puraflow system which has been successfully developed as an alternative to septic tanks for individual housing developments. There are such opportunities for partnerships between semi-State companies and the private sector, although I am not sure to what extent that point impinges upon the provisions of the Bill.

A good example is to be found in the development of the eirtricity company which is proposing to build a large-scale wind farm on the Arklow banks. I am a member of the Mid-Eastern Regional Authority to which eirtricity made a presentation some months ago. I was enthusiastic about the proposal the company made and I proposed a motion that the authority should adopt the idea in principle – I am pleased to say it did so. This is another good example of how the private and public sectors can co-operate. There is a requirement that the ESB will co-operate with eirtricity in making sure that the electricity generated by the wind farm can be fed efficiently into the national grid for the benefit of society.

The idea of flexibility in such partnerships is to be applauded. The State should have the flexibility to seek out investment partners for large-scale infrastructural projects where such competence is available either domestically or internationally. I commend the Bill to the House.

Mr. Burke

While I welcome the Minister of State, Deputy Moffatt, I am disappointed that the Minister for Finance is not here. It is a mistake for him to be absent because there needs to be a wide-ranging debate on this matter. I welcome some aspects of public private partnerships but not all of them because nobody can tell us how they will work. Before the Bill is passed, the Minister should spell out in detail how he thinks these public private partnerships will operate. The Courts Service and eirtricity are ideal areas for public private partnerships but I am worried about certain aspects. The Minister should ask his colleague, the Minister for Finance, Deputy McCreevy, or the Minister of State at the Department of Finance, Deputy Cullen, to spell out in detail how some of the proposed public private partnerships will work.

I will cite one example. Castlebar needs a new sewerage system that will cost €40 million. The proposal has been made to the Department of the Environment and Local Government and the sewage treatment plant itself will cost in the region of €20 million. In its wisdom, the Department has decided that the new system should be provided by a public private partnership. Given the polluter pays principle, however, how will this sewerage system be paid for? Nobody can tell me exactly how it will happen so I am asking the Minister to explain.

There are no role models for this, although Senator O'Toole stated that some public private partnerships in England have not worked. We have steered away from the type of public private partnerships that have taken place in Britain. We have no role models for public private partnerships to provide infrastructure. If one looks at the M50 toll road—

Mr. J. Doyle

What about the other one at Ringsend?

Mr. Burke

—the taxpayer is losing a fortune. The business community, however, will pay a fortune for sewage treatment units. It will be another way for the Government to introduce rates by the back door. The local authority in conjunction with the Government will apply for tenders to supply a new sewage treatment system for a town, coupled with its management for 20 years. The developer will build in an annual inflation cost for which there is no model. Every gallon of sewage that goes through the new treatment works will have to be paid for. The local authority will evaluate how many private dwellings are connected to the sewerage scheme and it will estimate the cost. The public private partnership will bill the local authority for the total running costs, taking into account the payback on capital costs. The business community will be left to pay for it – pubs, bars, restaurants, factories, corner shops and supermarkets, for instance. They will pay heavily for PPPs to provide sewage treatment plants. The Government is giving its imprimatur to this.

I ask the Minister of State to explain to this House how it will happen. There is no provision for accountability; at least up to now, local authority members have been accountable. They must go before the electorate every five years and they are answerable to the people. When the PPPs are put in place nobody will be answerable and there is no role model available. While I agree that in some cases PPPs will work, there are certainly some areas where they will not. They will be another form of rates or taxation on the business community who are already paying through the nose for services provided by the local authority. The business community will have to pay a new rate for services provided by the PPPs and there will therefore have to be some form of restructuring of the present rates system. People cannot be taxed out of business and this is what will happen.

I ask the Minister of State to explain how some projects will be selected for PPPs while others will not. Castlebar has been put forward for a public private partnership but other towns of similar size will be allocated funds for capital projects from the Department of the Environment and Local Government. There are anomalies and the only way to resolve them is through debate. As Senator O'Toole said, we must get the best possible deal for both the taxpayer and the investor. In my view, the PPP process is geared towards the investor and all the assurances favour the investor. I do not see many guarantees in place for the taxpayer even though taxpayers' money has funded much of the national infrastructure. The providers of sewage treatment works and toll bridges will be the major beneficiaries.

Deputy Noonan, the leader of Fine Gael, has said that he would favour pension fund investment in the provision of national infrastructure. The Government laughed at this proposal but the more one looks at this proposal, the better it seems. Deputy Noonan is very far-seeing in his proposition. It would make far more sense if pension funds were directly involved in the provision of infrastructure. Both pension funds and the taxpayers would benefit rather than confining the benefits to a few private individuals.

The Minister of State stated, "PPPs can help maintain competitiveness through the opening up of sectors now sheltered from competition." In the case that I have outlined there will be no competition because there is no role model to follow. He continued:

While all international experience points to all of these benefits, the crucial element of successful PPPs is optimal risk transfer. By this I mean that a good PPP will ensure that project risks are allocated to the party best able to manage them at least cost.

The Minister of State did not explain that in any great detail to the House. When the PPP has been in operation for a few years and the private element wants to opt out, will the local authority or the State take over or will this be decided beforehand? I believe that some services such as the Courts Service and eirtricity will be ideally suited to the PPP process. Sewage treatment works can be very complicated. I fear that the public and in particular the business community which is the heart and soul of small towns will be held to ransom.

Dr. M. Hayes

I welcome the Minister of State to the House and I welcome this Bill. I congratulate the Minister of State on having secured in advance such wide cross-party support and the support of both sides in industry for the Bill. That is a remarkable achievement.

I am pleased that the Minister of State is choos ing the way of private schemes and allowing people to develop expertise in this field. I had experience of working under the much maligned PFI. Although I am not as schizophrenic about it as was Senator O'Toole nevertheless there were difficulties on both sides, both for the people who wanted to participate and tender, and for the public authority. By and large they were difficulties of management and of definition. I am glad the Minister of State is concentrating on infrastructural matters. The proposed approach is particularly suited to infrastructural developments. I will be interested in the discussion of design and build; design and build and maintain; design and build and maintain and operate.

The Minister of State describes an asset and the services associated with that asset. I would be concerned at this stage if the organisation of services on this basis extended to what we would recognise as personal services or things like health services. I can see great benefit in providing hospitals in this way and in providing some of the modern heavy equipment that is now needed in hospitals and for allowing that to be maintained and run for a period of years by a provider. I refer to the difficulty this creates for the public sector. These difficulties can, and should, be overcome. Nevertheless, they are real and it is important that competencies within the public sector are built up to deal with them. There is a need to ensure that people specify what they need and in terms that can be responded to.

This represents a shift from a straightforward system prevailing in local authorities, to which people are used, where projects are awarded to the lowest tender. Such tenders apply to a scale of operation within the authority's competence and tendering firms tend to be local and of a kind that can be dealt with. Now local authorities are to be asked to deal with large international conglomerates and highly complex specifying and tendering procedures in which cost is not the only factor. The opportunities for corruption, or for suspicion or charges of corruption, are rife in that context. In view of this, it is hugely important that ground rules are established at the outset under which people know how to operate. They should be compatible with commercial confidentiality requirements and the need to satisfy the public that fair procedures have been followed and the best value obtained for public money.

I do not share Senator Burke's views on the loss of public accountability. Surely, ultimately, the public authority is the commissioning agent and it will, therefore, retain the responsibility to determine what it wants and to see that it is done. However, it is necessary to produce a competence that will level the playing field between, on the one hand, the great international conglomerates and, on the other, small local authorities or a consortium of them within Ireland. I have seen many difficulties arise in this area in other jurisdictions. In view of this, I urge the Minister of State to make a considerable investment in training in the public sector to enable it address this aspect.

I welcome the Bill. As Senator Dardis said, it represents a great opportunity to bring new vigour and new sets of disciplines to these issues. It also provides opportunities to utilise economies of scale. It is not necessary to reinvent the wheel every time a new Garda station, school or hospital is to be built. I hope people will learn from that.

I also hope the legislation will stimulate the public sector. Many good people work in it, North and South. They are often frustrated and held back by the systems in which they work. I hope, therefore, the freedom given to others to participate will also be given to public sector consortia. There is much to be said for importing not people but management and management ideas into the public sector. I wish the Minister of State well with this timely Bill.

Mr. Quinn

I welcome the Bill. It adds another string to the bow of involvement between the public and private sectors. I am not sure when this involvement commenced but State-sponsored bodies started in the 1920s and, in one form or another, there has been an ongoing endeavour to get the benefit of private sector involvement into the public sector. I was chairman of An Post from 1979 to 1989. Part of the challenge then was similar to what Senator Hayes referred to concerning training and securing changes in attitude. Our task was to start to talk about customers because, before then, those using the service were referred to as the public.

One of the first public private partnerships was the East Link toll bridge. I recall crossing the bridge on a wet day in 1984 only to see the late Mr. Tom Roche expressing his thanks to the customers using it. The recognition that the users of the bridge were customers and not merely members of the public represented a change in attitude.

The challenge today is to ensure that attitudes change so that success is assured. All modern states operate partnerships in some form between public and private sectors. At one extreme, the state does everything with no private sector involvement, while at the other extreme the private sector does everything and the Government does nothing other than pay. Neither of these extremes exist in practice today. The trend is for more activity to occur in the form of partnerships of one kind or another between the two sectors. Every country develops its own approach to this based on circumstance and economic history.

Senator O'Toole rightly pointed out that in Ireland, education has long been approached on a partnership basis with the State in the role of paymaster and quality controller of services provided mainly by private contractors. More recently there has been the out-sourcing of public services, both at local and national level. However, we have been slow to adopt the form of partnership the Bill facilitates, namely the design, construction and operation of schemes where the commercial risk of the undertaking is effectively shared between the public and private sectors. One of the reasons for this is that for many of the projects this approach most suits – large infrastructure projects such as motorways – we had ready access to European Union money through Structural Funds. These funds are dissipating and it is necessary to find other ways of paying for these large projects. Therefore, this Bill appears at the right time, albeit a little late since it has been evident for a considerable time that there is a need to replace Structural Funds with other mechanisms.

While I welcome and encourage these arrangements and their use, where appropriate, there is a danger that they may be regarded as a solution to all our problems. It used to be the case that we could say that if the State did not have the resources to pay for projects, the European Union did have them. However, now that EU support is virtually gone, there is a temptation to believe that if the State cannot afford to pay, the private sector will do so. It is important we do not fool ourselves into believing that we are exchanging like for like. Tapping the private sector as a funding partner is a very different matter from seeking Structural Funds from the European Union. It will require a different response from us with regard to national development.

There are three main differences between the kind of funding provided for in the Bill and what we have been used to. First, with public private partnerships, every project stands on its own as far as attracting participation is concerned. A project may form part of an overall national plan but as far as potential partners are concerned, it must stand or fall on its own. This means that some projects will attract much more interest than others, while some may not attract any interest or partners, no matter how generously the terms are priced.

We will not sell these partnerships to a single permanent authority such as the EU which, perhaps, could be persuaded to take the same broadly-based long-term view that Ireland does but to businesses which exist to make a profit and will consider every single project on an individual basis. In those circumstances, it will be a constant struggle for the State to keep in touch with the bigger picture, and in the bigger picture it is essential to do just that.

The second difference, of which we need to be aware, is that these arrangements have a high price. There has to be room in the arrangements for the private partner to make a profit and the larger the share of the commercial risk we expect them to take, the higher the price we must pay for that privilege. By no stretch of the imagination will this be cheap money. It simply cannot be if we are to attract the money into it. The fact that the payment may be deferred down the road and that it may be extracted in small individual amounts such as the €1 tolls should not be allowed to get in the way of reality. We will pay dearly for the advantages of these arrangements but that should not put us off them. We should be aware of what we are getting into rather than howl about it later when somebody points out that somebody has done well on it.

The third difference is the inevitability of conflicts of interest arising between the public and the private partners during the lifetime of the project. An example of this can be found in the area of motorways, an example of which I shall draw from my experience of the French motorways.

In charging for the use of tolled roads it makes sense to charge more for bigger cars than smaller cars and more for trucks than for cars. In terms of the damage each user causes to the road, that makes commercial sense. Every tolled motorway will have a tariff graduating according to the size of the vehicle, with big trucks paying most. However, that approach may conflict with the public interest as happened in France. In that country a significant amount of heavy traffic avoids using the motorways because of the high tolls. That is understandable. This sends heavy traffic along routes and through towns that are not equipped to deal with it. That is where the conflict of interest occurs.

The commercial imperative looks to a charging system directly related to the wear and tear the user inflicts on the motorways but the public interest may look for a way of offering incentives to heavy traffic to travel on roads, such as motorways, that are suitable for that traffic and to discourage them from travelling on the older roads. If all road use was charged for there would be no problem. One could provide the necessary encouragement and discouragement within an overall price tariff but that cannot be done where some roads are free and others are tolled – I am not suggesting all roads be tolled – as people will argue they have a constitutional or, perhaps, a God-given right to travel on the free roads if they wish.

Given that I was aware of the experience in France I immediately foresaw the problem arising when I saw the long-term traffic forecasts for the M50 motorway ring road around Dublin. Apparently, within a short period traffic on the M50 will exceed capacity – it is already exceeding capacity on the West Link bridge. I understand the intention is to restrict the capacity by tolling the road. That was the original intention and I can see it happening.

However, if the tolling is done on a purely commercial basis, which is understandable, it will have the effect of driving off the motorways some of the heavy traffic that, at all costs, should be kept on them so that it is kept off the congested streets of the city centre.

Mr. J. Doyle

There is the three tonne limit factor.

Mr. Quinn

Is that right?

Mr. J. Doyle

Cars and lorries over a limit of three tonnes are prohibited from using—

Mr. Quinn

It is the other way around. I am trying to encourage them.

In drawing up the terms of public private partnerships it will be vital to forecast possible future conflicts of interest that may arise if purely commercial considerations are allowed to obtain. The problem is how to do this while giving to the private partners the degree of certainty of outcome that they quite reasonably demand so that they can properly assess their risk and quantify the likely return of their investment. Unfortunately, the history of such partnerships in other countries does not show us an easy way out. The lesson is that we must enter each of these arrangements with great care and caution, taking into account the long-term public interest just as much as the availability of funding and the convenience of shifting risk on to other parties.

I welcome the Bill with a degree of encouragement and caution.

Minister of State at the Department of Finance (Mr. Cullen)

I thank each Member who contributed to the debate. I am encouraged by how well informed the contributions have been and I hope the debate has proved informative for those who are following it outside the House. As I stated earlier, the text of the Bill before the House is substantially changed from the Bill as initiated. The changes made to date reflect the extensive consultations that have taken place with all the various interested parties. The Bill as it stands is a good one. It achieves the objectives of the Government to provide certainty as to the powers of Irish State authorities to enter into PPPs and gives scheduled State authorities the power to enter into joint ventures.

I welcome the support expressed by Senators for the Bill and I am in agreement with many of them. On Senator Doyle's remarks on what he perceives as the lukewarm support of the trade unions, the unions are fully involved in the process and the UK is looking at what we have done with PPPs in Ireland. If that is the case it is interesting that the PFI process is largely discredited internationally and within the UK. Much of the discussion here was formed by the experience there to ensure we would not go down that road. In other words, it was not a creeping way of privatising everything. As Senators Doyle, Quinn, Hayes and other Senators said, there are great people in the public sector. We need to maximise the abilities and resources that exist within the public sector with the private sector. The marrying of the two can often produce the best results.

This has been a long process which has involved the social partnerships, the NESC report at the beginning, the study by Farrell Grant Sparks and the Government decision of 1999 to proceed with the pilot scheme. We have been putting the structures in place. There is an informal advisory group which includes the social part ners, the interdepartmental group, which crosses all Departments, the Cabinet committee and the framework, as referred to by Senator Hayes. We are now in the final stage which involves communications and the roll-out. I started the communications process before Christmas in Cork. It will continue in Waterford this coming Friday for the south-east region and the process will continue throughout the country. As Members are aware, PPP projects are already up and running.

There are some questions about money and risk allocation. Value for money is a major issue. I tried to say earlier that a PPP cannot be used as a simplistic replica for other forms of procurement. It must have a basis and must stand on its merits as the way to proceed. This does not mean that, suddenly, we have to abandon all the more traditional methods of procurement as there are variations of what can be done. Each pilot project involves developing a value for money comparator and assessment of the risks and costs involved. The process is subject to audit.

The Comptroller and Auditor General has started a value for money audit on the recently signed five schools PPP project. He has taken a specific role in this area and it does not surprise me that he is already in the frame. Clearly the approach is new – the pilot approach is about learning by doing – but it is also new everywhere else. We are taking a pilot approach to see if we have got it right and to tweak or alter it if required. As it is a learning experience, I doubt we will get it absolutely right on the first project we undertake, but I hope we come close. There will be elements which we will learn to do better as we go along, but so far, so good.

Senator Finneran referred to public awareness. We already have a countrywide public awareness campaign in place. Seminars will be held and a new website which includes a newsletter and project tracker is up and running. Senator Hayesraised the important issue of training for officials, unions, employees and others. This, too, is already in place.

Senator Finneran raised the rights of public sector employees who may become part of new companies set up as part of the process and the need to protect their interests. I and my officials have spent a great deal of time on this matter and have also discussed it with the trade unions. It is generally accepted that a substantial issue is at stake here which relates not only to PPPs, but also a wide range of areas. However, given that this is enabling legislation and, therefore, purely technical in nature, it is not the correct forum for dealing with the matter. It needs to be addressed in the context of employer and human resource legislation, which I understand the Tánaiste and Minister for Enterprise, Trade and Employment and the Minister for Justice, Equality and Law Reform are examining.

I particularly welcome Senator O'Toole's views which place in the public domain the attitude of ICTU and the element of social partnership it represents. The Senator was very supportive of the approach taken, the context in which the PPPs are being rolled out and the relationship established between the public and private sectors in so doing, as well as the fact that the social partners, including the trade union movement, employers' organisations and the Government, are all on the same wavelength because of the very good communication channels available to them.

Senator O'Toole also commented on the pay and conditions of the workers employed in PPP undertakings. His point was well made and I assure him and the House that the relevant statutory regulations will be applied to PPP projects in the same manner as they apply elsewhere. Partnerships will ensure there is full consultation.

I agree with him about the potential for North-South contacts on PPPs. Interestingly, a relationship already exists. The head of the PPP unit has given evidence on PPPs to the finance committee of the Northern Ireland Assembly and will speak on the issue in Belfast next week. It is in the interests of the all-Ireland approach that the same methodology for PPPs is used throughout the island. This would benefit everybody, particularly now that the United Kingdom is moving much closer to the Irish model. The Senator and other speakers are correct in the assertion that the PPP initiative here is not the same as the private finance initiative – PFI as it is known – in the United Kingdom. I do not propose to deal with this matter in detail except to state that the argument has been won and fully accepted.

Senator Dardis asked which State authorities are allowed to enter into a PPP to design, build, operate and finance an asset. The process is not about the State providing underwriting finance for the private sector. In a PPP arrangement the private partner may or may not finance a project, depending on the nature of the project and the outcome of the negotiations. Some projects, for example, may be for design and build only, even though finance elements may be involved. Others, for example, could encompass design, build and finance or design, build and operate. The PPP can be at different levels – in other words, the State could pay the full cost of the project, but the risk element could be in its operation. It will vary from project to project and while we need this flexibility to be built in on a case by case basis, the parameters of how this will be done have been set down.

The Schedule lists State authorities. They range from a Minister of the Government to a harbour authority and, as such, the definition is sufficiently wide to cover everything. Section 7 also provides that, where necessary, the Schedule may be amended by adding or deleting a public authority as defined. At any rate, a list of State authorities is defined in the legislation.

Senator Burke asked how PPPs will work. I have dealt with this matter in some detail. There are all sorts of possibilities, including design and/or build, design and/or operate and design and/or finance, which will be decided on a case by case basis. Policy guidelines for all future projects are being developed for various aspects of PPPs, which will ensure that the process contains certain key touchstones which must be part and parcel of the undertaking, notwithstanding the flexibilities we need to have built in to ensure best value.

Obviously, I do not have to hand the information requested by Senator Burke about the sewage treatment facility for Castlebar. I do not want to get involved in the detail of particular PPP projects. From the earliest stage of the process, all projects are subject to rigorous analysis which covers all the key areas of suitability as a PPP. As I outlined, the elements taken into account on every project include value for money and risk allocation.

I reiterate my hope that the Bill can contribute to the creation of an environment which offers the private sector sufficient encouragement to participate in the many opportunities for PPPs across a range of sectors. Crucially, the Bill also safeguards the interests of the Exchequer and, ultimately, citizens. It is my firm belief that PPPs can offer a win-win situation to all concerned. I hope there will be widespread support in the House for the Government's efforts to create an environment in which this new method of public procurement can flourish.

Senator Quinn made an extremely good point about the need to strike a balance between encouraging the use of the new facilities as opposed to free facilities. This is a key issue which will inform thinking on what is commercially viable in terms of the use of a certain facility. Cost in purely monetary terms is not always the main issue. Other costs need to be considered, such as the time saved by reducing congestion or the value of cutting the length of time engines run. With regard to a toll project, for example, a balance needs to be struck to ensure the fee is low enough to encourage people to use the road rather than taking a toll free route where bottlenecks occur.

I thank Members for their contributions and commend the Bill to the House.

Question put and agreed to.

Committee Stage ordered for Thursday, 14 February 2002.

An Cathaoirleach

When is it proposed to sit again?

Mr. Farrell

At 10.30 a.m. tomorrow.