SIPTU represents the general operative grades in the local authority system and this includes those who work within the water services. The staff to whom I refer are involved in the production of potable drinking water, in wastewater treatment and in the maintenance of networks. Through our professional-technical body, we also represent the engineering grades.
Our members play a major part in this very important infrastructure of the State. The provision and maintenance of what is an essential, life-sustaining substance - water - continues to be a core activity of local authorities. Our members have, during the entire period in which local authorities have been in existence, developed skills and expertise in the context of maintaining and developing water services for local communities. Water is a substance which is of such vital interest and is an integral part of existence and we have always viewed with caution any attempt to treat it as a simple commodity which could justify a sole economic strategic approach on behalf of society through Government policy. It is against this background and with this motive that we have consistently monitored and tried to influence, where possible, the Government approach to water.
The development of PPPs in Ireland commenced in the late 1990s. On 21 May 2001 the first guidelines - the Framework for Public Private Partnerships - were published. These were followed in 2005 by the Guidelines for Unions on Consultations with State Agencies and Public Authorities in the Republic of Ireland concerning Public Private Partnerships. These documents outlined the mechanism by which the suitability of any infrastructural project would be assessed and tested to ascertain if the PPP model would be used. In principle, they were designed to ensure that the PPP route would only be utilised following what has been repeatedly referred to as a "robust test". Part of that test was to be a comparison between full retention within the State agency structure or via the PPP system. Following ten years of involvement, it is our view that these protections have failed.
Very early in the process, use of the PPP model began to become common in the water sector, particularly in the context of wastewater treatment. There was sudden and strong support from the water services investment unit of the Department of the Environment, Community and Local Government for this model. In other words, it seemed that contrary to the concept of a robust test of the choice of route for the project, there was a developing indication that the Department had a preferred option.
In the area of water services, local authorities have the primary and legal role. Such services include the provision of potable water - which involves treatment and testing - the collection, treatment and disposal of wastewater and the maintenance and provision of effective and efficient networks. These networks consist of pipes which are to water what runways and airports are to airlines and what power lines are to electricity generators and providers. The networks have not been impacted upon by PPPs because the private sector has shown little interest in them. It is at the two ends of the pipe, so to speak, that the private sector has displayed an interest. At one end is the treatment process and at the other, namely, in the non-domestic commercial area, is the water meter.
Through the water services investment programme, the State provides financial support to local authorities in order that its water infrastructure might be upgraded and developed. This has been the first point of decision making in the context of the procurement option. When a local authority submits its requirements for water to the Department, it then proceeds to carry out a consultation in accordance with the approvals indicated within the water services investment programme. In accordance with the 2001 and 2005 guidelines, what is supposed to happen is that a full and even-handed evaluation is carried out and, through this mechanism, that a recommendation is made to the city or county manager on the procurement option. The matter is then referred to the Department via its water services investment unit. The initial move comes in the form of the appointment of a consultant - usually an engineer - and then the process of evaluation commences. The outcome of this process is intended to robustly test all options with particular emphasis on value for money. This should then indicate the procurement option which should apply.
On 26 June 2007 the then Minister described the process by stating:
The PPP approach is employed in the water services sector only where it is clearly established that it provides best value for money overall. Local authorities are required to examine all potential procurement options in an even-handed manner before recommending an appropriate procurement option. The most appropriate procurement option is approved under the Water Services Investment Programme and the same level of Exchequer funding is provided by my Department, irrespective of the procurement route selected. The overriding consideration is that all projects must deliver value for money and to this end, the Public Sector Benchmark and Post Project Review processes are important measures in ensuring value for money.
The evidence from the past ten years does not reflect this statement.
Since 2001 there has been growing concern regarding the manifest evidence that the Department has a clear and biased stance in respect of its preference for the PPP model in general and on the design, build and operate option in particular. The choice of PPP can involve use of a design and build model - which is where a private sector company would, for example, design and build a treatment plant which would then be operated and maintained by the relevant local authority - or a design, build and operate, DBO, model, where the private sector concern would design, build and operate the relevant facility. The design, build, finance and operate model is the one that is most rarely employed and it involves the use by a private sector interest of private sector finance. The use of that model is virtually unknown. All these options must be compared with the equal development of the project by the conventional means, namely by the local authority. We then begin to notice a striking similarity in all the reports across the country in terms of the format and content of the procurement reports produced by the consultants and the small group of consulting companies involved.
The Department engaged the services of PricewaterhouseCoopers to advise on the PPP evaluation of projects and PricewaterhouseCoopers used the term "preferred option" in regard to the DBO-type contract. Local authorities were given a clear signal that if they wished to have any hope of progressing their water projects, it would be via a PPP-model and a DBO proposal in particular as the only option. The procurement reports read like a mantra, all stating that the Department’s position was that it was Government policy, as it has been across a number of Governments, that the preferred option was the DBO and the submitting of any other proposal would not get through the Department.
We saw this development take place at local level throughout the country with senior management telling us privately that if they did not submit a DBO proposal they would not receive funding and the badly needed infrastructural investment at local level. Clearly, the consultants engaged knew this also and the reports produced across the country came up with exact same recommendations. We now see the resulting evidence of a preponderance of PPPs in the water sector in Ireland at complete variance with international practice and evidence. We must ask why this is happening.
Through the involvement of our members in every county we sought information from the Department on the evidence of the performance of PPPs. Where was the evidence that Ireland was unique in the world and that PPPs worked in the people's interest? Where was the database to show the financial benefits of the DBO model over the conventional means?
In specific cases where employees had the opportunity to engage on an equal footing with independent financial advice it was clear that the whole case presented by consultants in their efforts to comply with the Department's "preferred option" policy was a farce. We have no doubt that in future years this will be seen as a scandal and an abuse of public moneys. The run on DBO recommendations using replica templates and arguments became a far cry from a robust test and now no local authority will make any submission unless it is a DBO proposal, and this is now accepted.
Two recent cases, namely, the Lee Road water treatment plant and the Enniscorthy main drainage scheme in Wexford, illustrate this point. In those two cases the staff side had independent financial advice and after an exhaustive and robust test, which included the local authority appointed consultants and senior management, the outcome was that the projects delivered best value for money by conventional delivery. This was signed off by the respective city and county managers. There then followed extensive delays by the Department and very clear indications from it that no funding would follow as long as this was the position of the councils. Now more than four years later the projects have been held up by the Department and only recently, prior to Christmas in the case of Ennniscorthy, the scheme was approved after the Department revised the council's position and it is now to be a DBO proposal in contravention of the evaluation and the manager's recommendation.
I have provided to the committee the correspondence from that local authority illustrating the view of the council. What is most startling in the Department's stance is that it insisted on a DBO proposal because it was only 1% more expensive - that is 1% of €27 million. It acknowledged at the beginning of 2011 that after ten years of PPPs, it could not furnish any local authority with any evidence of the costs to run the projects by PPP. No data could be produced nationally. This correspondence is an absolute indication that the Department has a blind obsession with PPPs, at variance with international evidence and with there being no national longitudinal or empirical evidence as to why this should be the case.
This case is unique in that there is an exchange of correspondence which exposes what we have had concerns about for a long time - it is now time to acknowledge that the emperor has no clothes. There is, particularly in these times, an urgent necessity to investigate how and why this policy has come to be a diktat. We are equally concerned that PricewaterhouseCoopers has now been engaged by the Government to advise on the development of Irish Water.
It can be illustrated also in many other counties that the method of assessment was seriously flawed and that the outcome was preordained to the DBO, and we were informed as such by the council management. In most counties we were not given the opportunity to have independent professional advice. In the cases tested properly, the cracks were clearly illustrated.
This is the third Government with which we are working on this issue and we will continue to stress our view that we are not opposed to PPPs. We see them as an option, not a principle. The original concept contained in the 2001 and 2005 documents enshrined the position that it was fundamental that the PPP model must be suitable; we now fully believe that it is not suitable for water services and that a major error has been made by handing over nearly 70 water services to the private sector for 20 years with the resulting loss of skills and expertise from the local authorities.
We were recently told while meeting Department officials that a value for money report was shortly to be issued and that this would deal with many of our concerns. This was the report on the value for money survey carried out. In that report, which runs to 200 pages, only one page refers to the PPP model and it is simply repeated that it is the preferred option of procurement; there is no analysis or evaluation of it within it. Page 85 of the report states"the DBO model is the preferred procurement option". The report provides no data or evidence in that respect. When questioned on this the Department informed us that since March 2011 it has started to collate information on PPP costs and value for money, after ten years of it being in existence. We are seriously concerned about the future for Irish Water and it being maintained in public control. I have also provided the relevant correspondence.