Wednesday, 28 February 2018

Questions (91)

Joan Burton


91. Deputy Joan Burton asked the Minister for Public Expenditure and Reform his plans in relation to the public private partnership projects; his further plans to lift the cap PPPs use to fund major public projects in view of the fact that Government direct borrowing is cheaper; and if he will make a statement on the matter. [10321/18]

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Written answers (Question to Public)

An inter-Departmental/Inter-Agency Group was established in 2017 to review Ireland's experience of PPPs and to make recommendations on the future role of PPPs, in the context of the new 10 year National Development Plan (NDP).  The NDP summarises the key findings and recommendations agreed as part of the PPP review and the detailed report of the review will be published shortly.  Once published, the recommendations of the review will be included in the PPP policy guidelines and will apply to all future PPP projects. 

One of the recommendations of the review included in the NDP is that consideration of PPP as a procurement option should be assessed on a level-playing field with the traditional procurement option.  In this context, the cap on PPP costs of 10 per cent of the aggregate Exchequer capital allocation in any particular year is to be discontinued, in favour of re-introducing the original budgetary control mechanism for PPPs.  

To put this into context, following the fiscal crisis when capital envelopes for Departments were significantly reduced, and PPPs offered an opportunity to deliver additional projects to supplement a fiscally constrained Exchequer funded capital investment programme, a new Investment Policy Framework for PPPs was introduced.  In order to secure the long-term affordability and sustainability of PPP commitments this included a limit of 10 per cent of the aggregate Exchequer capital allocation in any individual year on the total financial exposure associated with all PPPs for that year.   

However, following the PPP review, and in light of the very substantial new public capital investment programme contained in the NDP, it is now recommended that the original budgetary control mechanism for PPPs should be re-applied.  This requires that the capital value of PPPs over the construction period should be charged to the Exchequer capital allocation of the sponsoring Department so that PPPs and traditionally procured projects are treated equally in terms of determining which procurement option to adopt.

As the Deputy will be aware, PPPs are subjected to the same robust and rigorous project appraisal process as traditionally procured infrastructure under the Public Spending Code, a key objective of which is to secure the best value-for-money from public capital investment, whether by PPP or traditional procurement and taking into account such issues as the difference in funding costs for PPPs and Exchequer funded investment projects.

The intention is that PPPs will continue to be a procurement option available to Government for appropriately structured projects which demonstrate value for money over a traditional procurement option.  As the PPP Review has concluded, it is essential that projects are judged on their merits and where PPPs offer better value-for-money than traditional procurement in a particular case, they should be selected on that basis.