Richard Bruton
Ceist:7 Mr. R. Bruton asked the Minister for Finance if he has undertaken an evaluation of the performance of PPP projects which have been put in place. [12878/04]
Amharc ar fhreagraThursday, 6 May 2004
Ceisteanna (7)
Freagraí ó Béal (22 píosaí cainte)
The role of the central PPP unit in my Department is to provide guidance on best practice in the appraisal and procurement of PPP projects with a particular focus on establishing and providing value for money. Guidance issued to date, which will be elaborated further over the current year, places a particular emphasis on establishing the business case for a project and on the further steps to be followed to ensure a value for money approach is taken at each critical stage of the procurement of the project. The evaluation of the performance of individual PPP projects is a matter in the first instance for the Minister with primary responsibility for the areas to which these projects relate.
PPPs as a method of public procurement are subject to an open and transparent tendering process in accordance with national and EU procurement rules. The reporting and other accountability arrangements for PPPs fall to be dealt with under the general financial procedures for capital investment. In addition, expenditure on projects is liable to scrutiny by the Comptroller and Auditor General and the Committee of Public Accounts. The Deputy may be interested to note that the Comptroller and Auditor General is currently undertaking a value for money audit of the bundle of schools pilot PPP project. This was the first of the approved pilot PPP projects for which a contract was signed.
PPPs offer a real prospect of enabling Departments to deliver infrastructure projects on a value for money basis by taking a whole-life approach and allocating risks to the party best placed to manage them. For example, the roads PPPs signed so far have demonstrated the potential for real risk transfer-——
There was no risk.
——--and value for money outcomes for the Exchequer. Indeed, from a public sector perspective, the N4-N6 Kilcock-Kinnegad PPP contract was awarded the Project Finance international infrastructure deal of the year for 2003 and the Euromoney-Project Finance transport deal of the year for Europe for 2003.
It comes as a shock to many people that the Department of Finance takes no interest in evaluating whether any of these projects are a success. Is it not the case that the Department of Finance is essentially driving the idea of PPP as best practice? The Minister has given a strong thumbs up to the idea in the House. On what evidence does he do so?
Have the five schools been a success in the Minister's view or has he sought information to ascertain whether this is so? Before deciding to embark on PPPs as the main vehicle for decentralisation, has the Minister sought the views of the Comptroller and Auditor General on the likely success of that approach? If the Minister is working to a three-year limit on decentralisation and has made it a significant political priority for the Government, is there not a danger that by taking the PPP route there will be such political determination to get a result the Minister will agree regardless of what terms are offered? Is it the case that the Government can still borrow money at less than 5% on the markets but that most private financiers will be looking for 15%?
With regard to the last point, the Government will always get the best deal when borrowing. The best public company in Ireland will not be able to borrow at the rate at which the Government can. While it could happen that the Government's financial policies would become daft, that is not expected, despite the requests of those on the left of the House. Therefore, the Government will always be in that position as a borrower.
However, there are many other reasons PPPs should be the approach. The bundle of schools project is being evaluated and the outcome will be available to everyone in due course. Regarding decentralisation, I will quote from the decentralisation implementation group report, chaired by Mr. Phil Flynn, which stated:
It allows for the transfer of significant risks to the developer, such as planning risks and responsibility for any cost and time over-runs: the developer is better placed to mitigate the risk and produce a lower cost solution.
The report continues with many reasons for taking this particular approach.
The Deputy asked the obvious question as to what would happen if the private sector does not provide a value for money solution for the decentralisation programme. He should remember that we measure such performance by taking a public service benchmark in regard to a Department or agency and then comparing this to the private sector. If the private sector does not provide a value for money solution, we will have the option of returning to the traditional approach.
Will it all be open for us to see?
Of course.
Does that include benchmarking?
If we were to make public service benchmarking details available at any particular time, competing private contractors would know of that. Therefore, we do not make such details available.
There is no accountability.
Has the Minister or his Department had an opportunity to review or consult with the National Audit Commission in the UK regarding its recent reports and evaluations on PPPs? I am referring to the reformed UK structure as everybody acknowledges there were problems with the early UK structure and that the Irish model set out to avoid these. Does the Minister have access to the reports? Is he aware of the number of PPP contractors going into liquidation and walking away from the later stages of PPP contracts? What steps has he taken to ensure this will not happen in this country?
The Fine Gael Party has made up its mind on this issue but I do not know if other parties have. Are we in favour of the PPP approach?
It is not an ideological argument.
(Interruptions).
The Minister to continue without interruption.
There will be successes and failures. It is inevitable that some projects will be done better by the PPP approach and that sometimes it will not work very well. We have tried to learn from the failures of the United Kingdom as well as its successes. This is not the only country which has adopted such an approach. Many countries have successes in this regard and many will have failures. What we are trying to do is eliminate the failures.
One of the main criticisms from the private sector about the PPP approach is that the State has been too pernickety and demanding in regard to such contracts. It states we have been so severe in beating companies down that some of them will no longer play the game. We have not left enough jam on the table for them. There is a balance to be struck at all times. In some instances public private partnership is the way to go but on many other occasions it is not. The question of finance is just part of the overall package. There are many reasons for adopting the PPP approach, which we try to incorporate in the value for money approach. There was an article recently in a very reputable magazine in which it was stated the State was taking such a severe approach to PPPs that it was killing it. In striking a balance, there will be successes and failures.
I call Deputy Costello on Question No. 8.
May I ask a brief supplementary question?
I am sorry, Deputy, but we have gone two minutes over time on this question. There are six minutes allotted for each question. There are two minutes allotted for the Minister's initial reply, one minute for a supplementary question, one minute for a reply from the Minister, one minute for a further supplementary question and one minute for a reply from the Minister.
Where did the final minute go? We had one minute. The Opposition has two one minute slots.
I would like to make another point. If Deputies confined themselves to asking brief succinct questions, there would be more time for supplementary questions. However, if they continue to make statements, it will take up time.
At the moment, a Cheann Comhairle, you are giving the Minister four of the six minutes allotted.
(Interruptions).
The reality is that the Minister did not take his two minutes on that question. The Deputy took well over one minute to ask his supplementary questions. Deputy Burton took well over one minute to ask hers and the Minister took two minutes to reply, which brought us over the six minutes allotted. However, we do not want to delay time on questions.