Dáil Éireann Debate, Wednesday - 31 January 2024
199. Deputy Matt Shanahan asked the Minister for Further and Higher Education, Research, Innovation and Science to provide a statement on the original projected costs and now envisaged final total cost in respect of the Cork School of Music and Cork Maritime College. [4359/24]
View answerContracts for public private partnership (PPP) projects at the National Maritime College of Ireland (NMCI) and the Cork School of Music (CSM) were awarded in February 2003 and September 2005, respectively. Both contracts were for a term of 25 years post construction. The annually published appropriation accounts for my Department contains a section on the payments of PPP projects. This table lists the operational PPPs currently managed by my Department, including for NMCI and CSM, and includes the cumulative expenditure to the previous year, the expenditure during the year as well as the legally enforceable commitments to be met in subsequent years. The table below includes the relevant information for these contracts from the 2022 appropriation accounts. An updated table will be included in the 2023 appropriation accounts.
|
|
Cumulative expenditure to 31 December 2021
€000 |
Expenditure in 2022
€000 |
Legally enforceable commitments to be met in subsequent years €000 |
Envisaged final total cost
€000 |
|
MTU - National Maritime College of Ireland |
147,525 |
6,758 |
41,992 |
196,275 |
|
MTU - Cork School of Music |
126,832 |
8,445 |
88,946 |
224,223 |
The original PPP contracts include the original projected costs of €182.442m for NMCI and €208.364m for CSM. It is important to note that the original projected costs did not include VAT and the appropriation accounts are VAT inclusive.
The original projected cost for each project was based on an estimated inflation rate applied to the annual unitary payment over the life of the contract. During the life of the contract, a portion of the unitary payment is adjusted annually by an inflation factor to reflect changes in a general inflation index specified in the contract (the Consumer Price Index in the case of the NMCI and CSM contracts). This portion is known as the X-factor. As part of the annual indexation process, the X-factor portion is adjusted by the actual inflation rate over the preceding 12-month period. This may differ from the original estimate of inflation and will result in a different overall cost for the project.
The unitary payments made by the State over the life of the PPP contract include not just the cost of design and construction but also the cost of financing, operating and maintaining the facility (including services such as planned and reactive maintenance, grounds maintenance, cleaning, care-taking, security and waste management). The PPP company must provide a fully maintained facility for the duration of the contract and carries the risk in relation to rectification of any construction defects that occur during the term. If a facility is not available or services are not provided in accordance with the standards set out in the contract, the State is entitled to reduce its monthly payment until the required standard is restored. This means that the PPP company has a strong incentive to deliver a high quality facility and maintain it in good condition. Over the period of the contract, the PPP company has committed to make substantial investments and significant refits to keep the facility in good order. In the case of the NMCI and CSM contracts, direct and indirect resources are employed by the respective PPP companies to operate and maintain the facilities and to ensure that they will be handed back in good condition at the expiry of the 25 year PPP contract. The NMCI contract expires at the end of 2029 and the CSM contract expires in 2032.
