Wednesday, 31 January 2018

Questions (150)

Pearse Doherty


150. Deputy Pearse Doherty asked the Minister for Public Expenditure and Reform the additional safeguards he will put in place following the collapse of a company (details supplied) with regard to PPP contracts to safeguard the public interest; and if he will make a statement on the matter. [4931/18]

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Written answers (Question to Public)

The Public Private Partnership (PPP) model is an internationally recognised model to design, build, finance, operate and maintain public infrastructure. In accordance with international best practice, PPP contracts already typically include detailed provisions that apply in the event of the liquidation of a consortium member of the PPP company, or an entity under the contract, to protect the public interest and ensure that the project proceeds to completion.

Under the terms of such PPP contracts, in the case of liquidation of a consortium member, or an entity under the contract, the PPP consortium’s funders and remaining shareholders are required to intervene and implement rectification measures to ensure that the project is completed to the satisfaction of the State.

This process is underway in the case of the Schools Bundle 5 PPP (as a consequence of the Carillion plc liquidation). Liquidation of a company involved in delivering a public infrastructure project, such as Carillion plc, is an unfortunate development but would impact on any project where a supplier became insolvent during the delivery process, regardless of whether the project was being procured by PPP or by traditional means. The issue, therefore, is not PPP-specific, but where it arises in a PPP project, the provisions of the PPP contract ensure that the public interest is protected.

The contractual mechanisms within a PPP project agreement are designed to limit the State’s financial exposure in such a scenario. An important feature of PPPs (which does not arise in traditional procurement) is that no payments are made until the facilities are handed over to the State and are operational. Once facilities are operational, payments to the PPP company are linked to service performance and availability of the facilities over the lifetime of the contract, with deductions applying when the facilities are not performing or are unavailable. The latter payment mechanism is not a feature of a traditional model which has regular milestone payments during construction.

As the Deputy may be aware I established an Inter-Departmental/Inter-Agency Group last year to review Ireland's experience of using PPP and to make recommendations on the future role of PPPs, in the context of the new 10 year capital plan.  I would expect the Group's deliberations to take account of any implications for future national PPP policy of the development referred to in the Deputy's question.  It is currently intended that the outcome of the review will be published alongside the new capital plan.