Thursday, 20 June 2013

Ceisteanna (9)

Niall Collins


9. Deputy Niall Collins asked the Minister for Public Expenditure and Reform the reason he is proposing to make compensation payments to unsuccessful tenderers for public private partnership projects; the estimated cost to the taxpayer of this provision in 2013 and 2014; and if he will make a statement on the matter. [29654/13]

Amharc ar fhreagra

Freagraí ó Béal (9 píosaí cainte) (Ceist ar Public)

In July last year, I announced the Government's €2.25 billion infrastructure stimulus package, which included €1.4 billion for the first phase of a new public private partnership, PPP, programme of projects in key areas of infrastructure. Given the very limited PPP activity in the preceding few years coupled with the difficult recent period for the financial and construction sector, it was clear that a range of supporting measures were needed to help reactivate the Irish PPP market, which was moribund, and instil market confidence in the new PPP programme so as to ensure maximum potential participants, both domestically and internationally.

Following advice from the National Development Finance Agency, NDFA, the State's centre of expertise for the specialist procurement of PPP projects, in December 2012 the Government decided that on a temporary and exceptional basis, provision would be made for some reimbursement of bid costs for accommodation projects in the new PPP programme to ensure competitive tension in the tendering process. Competitive tension is essential to ensure we get best value for money for the State. The Government agreed that compliant tender fees would be issued to two unsuccessful final stage bidders. In addition, in the unlikely event that it was decided not to progress any of these projects, payment would be made to the three short-listed tenderers.

The NDFA advised on the level of reimbursement of costs required to deliver market engagement and achieve the results required. Payment amounts will vary from project to project, reflecting the capital value and complexity of the project, as well as the level of any inputs provided by the sanctioning authority, with a cap on the maximum amount to be paid.

That background is a summary of what was in the press release on 5 June, which spoke about investing in infrastructure jobs. The paragraph caught my eye and the Minister can understand why I tabled the question.

This is for total transparency.

This is my third time asking about the cost of this and-----

-----my third time to stand up without getting an exact answer. I understand this is potentially commercially sensitive but to the extent that it is possible, will the NDFA supply a briefing note as to how its advice came about? I know of companies that lost much money on previous PPP arrangements having gone as far as being the preferred bidder. They had gone through the final planning stage at their own cost before the bottom fell out of the market and the projects did not proceed. They did not get a cancellation fee despite speaking to the Office of Public Works and different people who were involved.

The Minister has indicated there are two issues, with one being a cancellation fee. I understand this is for people who have travelled a road but will the Minister address the preferred bidder issue? A cancellation fee could be higher in some respects, and when one narrows the selection to a preferred bidder and the project is into outline or detailed planning and specification, the costs can mount for them. Will the NDFA provide further information to give us more of an understanding of the issue? Will there be an element of retrospection or will this only apply to new projects?

I am afraid retrospection will not be possible as this is to stimulate future interest in PPPs. I do not want to open a can of worms and have people come after us for projects that have been cancelled, particularly when the construction industry collapsed. It looks forward rather than back. I am anxious to get PPPs moving and it was a cause of great frustration that for nearly two years, we did not have PPP projects despite robust PPPs being on offer. We had no takers because people such as architects, designers and construction companies had been burned, having spent good money in making applications for projects that did not go ahead. We needed to bring confidence back to the market, and the strong advice I had from the NDFA was to introduce these measures. I will ask the NDFA to contact the Deputy and perhaps give a direct briefing on the matters, as it might be worthwhile to ensure he understands exactly the rationale and reasoning behind the NDFA's recommendations on the matter.

I appreciate it and I am happy to take up that generous offer. The Minister might comment on why some of the PPPs collapsed, as my understanding is that this happened because of a lack of financing arising from credit market conditions. The projects were good, well priced and ready to go but all of a sudden when the companies tried to borrow money over 20 or 25 years, the international financial market withdrew credit and the cost of finance went through the roof.

In that context, can these projects be given some funding through the European Investment Bank or a similar institution so that finance could be freed up for commercially-viable projects for the private sector which would also be of benefit to the public?

As the Deputy knows, I am always looking for sources of capital to invest in infrastructure in Ireland. The vice president of the European Investment Bank was in Dublin yesterday and I had a very long and fruitful meeting with him. The European Investment Bank has certainly been very helpful in this regard. It has a number of new schemes in progress. It wants to move away from direct lending into creating financial instruments, perhaps of the type the Deputy is talking about. We are exploring how a financial instrument that would leverage money - perhaps State money as well as European Investment Bank money and private capital - would be available to invest in projects in this State, either in the public or private sphere.