review of ppp structures report price waterhouse coopers

7/29/2019 Review of Ppp Structures Report Price Waterhouse Coopers

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ContentsEXECUTIVE SUMMARY........................................................................................................................................1PUBLIC PRIVATE PARTNERSHIPSIN IRELAND.....................................................................................................1

MEETINGTHE PPP CHALLENGEIN IRELAND......................................................................................................2CONCLUSIONS.....................................................................................................................................................3

I. INTRODUCTION..........................................................................................5

CONTEXT.............................................................................................................................................................5I.1 THEECONOMICPROGRESSMADEBY IRELANDDURINGTHELASTFIVEYEARSHASSIGNIFICANTLYEXCEEDEDTHETARGETSSETINTHELAST NATIONAL DEVELOPMENT PLAN. THENEW NATIONALDEVELOPMENT PLAN 2000-2006 SUGGESTSTHATTHE IRISHECONOMYCANCONTINUETOSUSTAINANAVERAGEANNUALRATEOFGROWTHOFFIVEPERCENTINTHEMEDIUMTERM. SIGNIFICANTLY, HOWEVER,THISVIEWISBASEDONTHEASSUMPTIONTHATEXISTINGINFRASTRUCTUREBOTTLENECKSANDLABOURSHORTAGESARETACKLEDTOSUSTAINTHECOMPETITIVENESSOFTHEECONOMYCANBESUSTAINED.............5I.2 THE NATIONAL DEVELOPMENT PLAN 2000-2006 HIGHLIGHTSTHATMUCHOFTHEINFRASTRUCTUREWITHIN IRELANDISINADEQUATETOMEETEXISTINGNEEDSANDTHATITISINCREASINGLYCOMINGUNDER

STRAINASARESULTOFTHERAPIDGROWTHINTHE IRISHECONOMY. FACTORSSUCHASRAPIDECONOMICGROWTH, REDUCTIONSIN EUROPEANFUNDING,NEW EUROPEANLEGISLATIONANDTHEINCREASINGLYCOMPETITIVEGLOBALECONOMY, ALLMEANTHATTHECOUNTRYMUSTFINDFASTERWAYSOFDEVELOPINGINFRASTRUCTURE, WITHGREATEREFFICIENCYANDATOPTIMUMVALUEFORMONEY. PUBLIC PRIVATEPARTNERSHIPS (PPPS) AREEXPECTEDTOPLAYAMAJORROLEINADDRESSINGTHEINFRASTRUCTUREDEFICITIN IRELAND.............................................................................................................................................5I.3 INRESPONSETOTHISNEED, THEPUBLICSERVICEHASESTABLISHEDADMINISTRATIVESTRUCTURESTOLEAD, DRIVEANDCO-ORDINATETHEINTRODUCTIONOFTHE PUBLIC PRIVATE PARTNERSHIPAPPROACHACROSSANDINCONJUNCTIONWITHTHELINEDEPARTMENTSOF GOVERNMENT. THESESTRUCTURESARETHEFOCUSOFTHISREVIEW.................................................................................................................................5TERMSOF REFERENCE........................................................................................................................................5

I.4 INORDERTOBUILDONTHESIGNIFICANTPROGRESSMADETODATEINADOPTINGA PPP APPROACH, THEDEPARTMENTOF FINANCEAPPOINTED PRICEWATERHOUSECOOPERSIN JANUARY 2001 TOUNDERTAKEAREVIEWOFTHEEFFECTIVENESSOFTHE PUBLIC PRIVATE PARTNERSHIPSTRUCTURESCURRENTLYINPLACEWITHINGOVERNMENT. THISREVIEWBUILDSUPONTHELESSONSLEARNTFROMTHE PUBLIC PRIVATEPARTNERSHIPEXPERIENCEOFOTHERCOUNTRIESWHILEATTHESAMETIMEREFLECTINGTHEKEYREQUIREMENTSOFTHE IRISH PUBLIC PRIVATE PARTNERSHIPMODEL. THEEXACTTERMSOFREFERENCEFORTHEREVIEWARE:.................................................................................................................................................5APPROACHAND REPORT STRUCTURE.................................................................................................................6

I.5 THISREPORTISSTRUCTUREDINACCORDANCEWITHTHE TERMSOF REFERENCESETOUTABOVEANDTHEKEYSTAGESOFOURAPPROACHARESETOUTINTHEDIAGRAMOVERLEAFANDSUMMARISEDINTHEPARAGRAPHSTHATFOLLOW................................................................................................................................6I.6 THEREPORTCOMMENCESWITHAREVIEWOFTHESTRATEGICCONTEXTFORPPP WITHIN IRELANDANDINCLUDESADISCUSSIONOFTHEKEYPRINCIPLESANDBENEFITSOF PPP, ASUMMARYOFTHEPOLICYDRIVERSUNDERLYINGTHEADOPTIONOF PPP ANDANOUTLINEOFTHE PPP FORMSTHATWILLBEUTILISEDGOINGFORWARD. THISSECTIONOFTHEREPORTALSOSETS PPP WITHINAWIDERSPECTRUMOFPUBLICSERVICEDELIVERYOPTIONSANDTHECONTEXTOFSOCIALPARTNERSHIP.........................................................6I.7 THEREPORTTHENEXAMINESINTERNATIONALEXPERIENCEOF PUBLIC PRIVATE PARTNERSHIPS. ITDISCUSSESTHEBREADTHOFUSEOF PPPSINOTHERCOUNTRIES, EXAMINESTHEORGANISATIONALSTRUCTURESTHATHAVEBEENESTABLISHEDTODELIVERTHEMANDIDENTIFIESTHEKEYISSUESTHATIRELANDMUSTADDRESSIFTHE PPP PROGRAMMEISTOBEDRIVENFORWARDRAPIDLY..................................6I.8 THEREVIEWOFINTERNATIONALEXPERIENCEISFOLLOWEDBYADISCUSSIONOFTHETHREEPHASESWITHINTHE PPP PROGRAMMEDEVELOPMENTLIFECYCLE,NAMELYPROGRAMMEMOBILISATION, PROGRAMMEEXPANSIONANDPROGRAMMEMATURITY. THEREPORTTHENDESCRIBESTHEPROGRESSTHATHASBEENMADEDURINGTHEPROGRAMMEMOBILISATIONPHASEIN IRELANDINTERMSOFORGANISATIONALSTRUCTURESANDPROJECTDEALFLOWANDSETSOUTTHEAGENDAFORTHENEXTPHASEOFACTIVITY. INPARTICULAR, THISSECTIONIDENTIFIESTHEKEYSUCCESSFACTORSFORTHEPROGRAMMEEXPANSIONPHASEANDSETSOUTAPROFORMAANALYSISOFTHEDETAILEDTASKSTHATGOVERNMENTMUSTUNDERTAKETO

ENSURETHESUCCESSOFTHE PPP PROGRAMME. TAKENTOGETHER, THESEPROVIDEASTRATEGICFRAMEWORKFORTHEFURTHERDEVELOPMENTOF PPPS..................................................................................6


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Department of Finance Review of PPP Structures

I.9 THEREPORTGOESONTOASSESSTHEEFFECTIVENESSOFEXISTINGORGANISATIONALARRANGEMENTSINTHECONTEXTOFBOTHTHEKEYTHEMESASSOCIATEDWITHTHEPROGRAMMEMOBILISATIONPHASEANDTHEKEYSUCCESSFACTORSREQUIREDFORTHETRANSITIONTOPROGRAMMEEXPANSION......................................6I.10 THEKEYSUCCESSFACTORSARESETOUTINGREATERDETAILINTHENEXTSECTIONOFTHEREPORTANDTHESTRUCTURALOPTIONSFORTHEDELIVERYOFANEXPANDEDANDACCELERATEDPROGRAMMEOF PUBLICPRIVATE PARTNERSHIPSIN IRELANDAREDEVELOPEDANDANALYSEDWITHINTHISCONTEXT. THESECTION

CONCLUDESBYIDENTIFYINGTHEPREFERREDSTRUCTURALOPTIONTOTAKE PPP FORWARDIN IRELAND.......6I.11 THENEXTSECTIONOFTHEREPORTDESCRIBESTHEPREFERREDSTRUCTURALOPTIONINTERMSOFITSORGANISATIONALSTRUCTURE, ALLOCATIONOFROLESANDRESPONSIBILITIESANDRESOURCEREQUIREMENTS. THEKEYPERFORMANCEINDICATORSARESETOUTINTHENEXTSECTION. THEREPORTTHENCONCLUDESBYSETTINGOUTOURFINALCONCLUSIONSANDRECOMMENDATIONSON:...........................6

II. STRATEGIC CONTEXT.................................................................................8

INTRODUCTION....................................................................................................................................................8II.1 THE IRISH GOVERNMENTISCOMMITTEDTOUSINGTHE PPP APPROACHTOIMPROVEECONOMICCOMPETITIVENESS, MODERNISENATIONALINFRASTRUCTUREANDDELIVERQUALITYPUBLICSERVICES. PPPSRECOGNISETHATTHEREARESOMEACTIVITIESTHATTHEPUBLICSECTORDOESBESTANDOTHERACTIVITIESWHERETHEPRIVATESECTORHASMORETOOFFER. ONLYBYALLOWINGEACHSECTORTOFOCUSUPONWHATITDOESBESTCANTHE GOVERNMENTPROVIDETHEQUALITYSERVICESTHATTHEPUBLICWANTAND

EXPECT.................................................................................................................................................................8II.2 THEOVERALLAIMOF PPPSISTHEREFORETOSTRUCTURETHERELATIONSHIPBETWEENTHEPUBLICANDPRIVATESECTORSINSUCHAWAYTHATTHEACTIVITIESANDRISKSASSOCIATEDWITHTHESPECIFICATION,DELIVERYANDREGULATIONOFPUBLICSERVICESAREALLOCATEDTOTHEPARTYBESTABLETOMANAGETHEM. THEPRECISEROLESANDRESPONSIBILITIESOFTHEPUBLICANDPRIVATESECTORSINANY PPP WILLDEPENDUPONTHECONTRACTUALTERMSAGREEDANDWILLVARYFROMPROJECTTOPROJECT. HOWEVER,INMOST PPPSPRIVATESECTORCONTRACTORSBECOMELONG-TERMSERVICEPROVIDERSRATHERTHANSIMPLEUPFRONTASSETBUILDERS. ASARESULT, CENTRALANDLOCALGOVERNMENTAGENCIESBECOMEMOREINVOLVEDASREGULATORSANDFOCUSTHEIRRESOURCESUPONSERVICEPLANNING, PERFORMANCEMONITORINGANDCONTRACTMANAGEMENTRATHERTHANUPONTHEDIRECTMANAGEMENTANDDELIVERYOFSERVICES.........................................................................................................................................................8II.3 PPPSCANGENERATESUBSTANTIALBENEFITSFORBOTHCONSUMERSANDTAXPAYERS. DESIGNEDAPPROPRIATELY, THEYALLOWTHEPUBLICSECTORTOBENEFITFROMTHECOMMERCIALDISCIPLINES,INCENTIVESANDEXPERTISEDEVELOPEDINTHEPRIVATESECTOR. THEYALSOENABLETHEPUBLICSECTORTODELIVERITSOBJECTIVESBETTERANDTOFOCUSUPONITSCOREACTIVITIESOFPROCURINGSERVICES,ENFORCINGSTANDARDSANDPROTECTINGTHEPUBLICINTEREST. EXPERIENCEELSEWHEREINTHEWORLDINDICATESTHATTHEMORESIGNIFICANTBENEFITSWHICH IRELANDCANDERIVEFROMTHE PPP APPROACHINCLUDE:..............................................................................................................................................................8II.4 WHILEINCREASEDPRIVATESECTORPARTICIPATIONINTHEPROVISIONOFPUBLICSERVICESHASTHEPOTENTIALTODELIVERBENEFITS, ITSHOULDBENOTEDTHAT PPPSARENOTAUNIVERSALPANACEAORTHEONLYMEANSTODELIVERQUALITYPUBLICSERVICESONAVALUEFORMONEYBASIS. PPPARRANGEMENTSAREONEOFANUMBEROFWAYSOFDELIVERINGPUBLICSERVICESANDUNDERNOCIRCUMSTANCESSHOULDTHEYBESEENASASUBSTITUTEFORSTRONG, ACCOUNTABLEANDEFFECTIVEGOVERNANCE. ENSURINGTHATPUBLICSERVICESAREPROVIDEDINAMANNERTHATISFAIR, SAFE,AFFORDABLE, ANDENVIRONMENTALLYSUSTAINABLEREMAINSTHESOLERESPONSIBILITYOFCENTRALANDLOCALGOVERNMENT...........................................................................................................................................9POLICY CONTEXT................................................................................................................................................9

Overview........................................................................................................................................................9

II.5 THECOMMITMENTOFTHE IRISH GOVERNMENTTOTHEUSEOF PUBLIC PRIVATE PARTNERSHIPSISSETOUTINTHE NATIONAL DEVELOPMENT PLAN 2000-2006. THE PLANINCLUDESAMINIMUMTARGETOF EUR2.35 BILLIONOFPRIVATELYFINANCEDPROJECTSANDTHISREPRESENTSALMOSTTENPERCENTOFTHETOTALPLANNEDINVESTMENTINECONOMICANDSOCIALINFRASTRUCTURE. HOWEVER, THE PLANWASPUBLISHEDIN NOVEMBER1999 ANDSINCETHENTHEREHAVEBEENANUMBEROFMAJORDEVELOPMENTSTHATHAVESERVEDTOEXPANDTHE PPP AGENDA. THESEDEVELOPMENTSINCLUDETHEPUBLICATIONOFINFLUENTIALPOLICYSTATEMENTSBYTHE NATIONAL ECONOMICAND SOCIAL COUNCILANDTHEORGANISATIONFORECONOMIC CO-OPERATIONAND DEVELOPMENT................................................................9II.6 THESOCIALPARTNERSSHARETHECOMMITMENTOFTHE GOVERNMENTTOTHEUSEOF PPPSANDTHISCOMMITMENTISREAFFIRMEDINTHE PROGRAMMEFORPROSPERITYAND FAIRNESS. THECURRENTNATIONALAGREEMENTCALLSFORTHEPREPARATIONOFACLEARFRAMEWORKINWHICHTOASSESSTHEAPPROPRIATENESSOF PUBLIC PRIVATE PARTNERSHIPSFORINFRASTRUCTUREPROJECTSANDTOGUIDETHEIRIMPLEMENTATION, TAKINGINTOACCOUNTTHEWIDERECONOMIC, SOCIALANDENVIRONMENTALOBJECTIVESTHATSHOULDGUIDEINFRASTRUCTUREDEVELOPMENT....................................................................................10


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National Development Plan........................................................................................................................10

II.7 THECURRENT NATIONAL DEVELOPMENT PLAN 2000-2006 PREDICTSTHATTHE IRISHECONOMYCANCONTINUETOSUSTAINANAVERAGEANNUALRATEOFGROWTHOFAROUNDFIVEPERCENTOVERTHEMEDIUMTERM. CRUCIALLY, HOWEVER, THISFORECASTISBASEDUPONTHEASSUMPTIONTHATEXISTINGINFRASTRUCTUREBOTTLENECKSANDLABOURSHORTAGESAREREMOVED, THEREBYENABLINGTHE IRISHECONOMYTOMAINTAINSTRONGANDSUSTAINABLEOUTPUTANDEMPLOYMENTGROWTH. THE PLAN

RECOGNISESTHAT IRELANDHASASIGNIFICANTINFRASTRUCTUREDEFICITANDTHATTHISDEFICITTHREATENSTOINHIBITECONOMICGROWTH ....................................................................................................10II.8 THE NATIONAL DEVELOPMENT PLAN 2000-2006 HIGHLIGHTSTHATMUCHOFTHEINFRASTRUCTUREWITHIN IRELANDISINADEQUATETOMEETEXISTINGNEEDSANDTHATITISINCREASINGLYCOMINGUNDERSTRAINASARESULTOFTHERAPIDGROWTHINTHE IRISHECONOMY. THELEVELOFPRESSUREVARIES, BUTITISESPECIALLYAFEATUREOFTHEMOREDENSELYPOPULATEDURBANAREASANDTHEMAINNATIONALARTERIALCORRIDORS........................................................................................................................................10II.9 ROADSARETHEDOMINANTMODEOFINTERNALTRANSPORTWITHIN IRELAND. HOWEVER, THEROADSNETWORKISINADEQUATEBYREFERENCETONEEDAND EUROPEAN UNIONSTANDARDS. SERIOUSCONGESTIONISNOWAFEATUREOFMANYPARTSOFTHENETWORK, ESPECIALLYINANDAROUNDURBANAREAS. PUBLICTRANSPORTISALSOINNEEDOFSIGNIFICANTMODERNISATIONANDUNLESSTHISISSUEISPROPERLYADDRESSEDPOORPUBLICTRANSPORTSYSTEMSWILLBECOMEACONSTRAINTONECONOMICGROWTH, PARTICULARLYINANDAROUND DUBLIN. INADDITION, WHILESUBSTANTIALINVESTMENTHAS

BEENMADEINWATERANDWASTEWATERTREATMENT, FURTHERINVESTMENTISREQUIREDINORDERTOMEETOBLIGATIONSARISINGFROMRECENT EUROPEAN UNION DIRECTIVES. MAJORCAPITALINVESTMENTISALSOREQUIREDTOADDRESSTHESHORTAGEOFAFFORDABLEHOUSINGIN IRELANDANDTOENABLETHECOUNTRYTOMEETNEWSTANDARDSINRELATIONTOINTEGRATEDWASTEMANAGEMENT. .........................10II.10 INORDERTOADDRESSTHISINFRASTRUCTUREDEFICIT, THE NATIONAL DEVELOPMENT PLAN 2000-2006PROPOSESANAGGREGATEINVESTMENTOFSOME EUR 51.5 BILLIONOVERTHENEXTSIXYEARS. WITHINTHISTOTAL, EUR 22.4 BILLIONISALLOCATEDTOTHEECONOMICANDSOCIALINFRASTRUCTUREPROGRAMMEANDANANALYSISOFTHISINVESTMENTBYCATEGORYORSECTORISPRESENTEDINTHETABLEBELOW................................................................................................................................................................10TABLE 2.1 NDP ECONOMICAND SOCIAL INFRASTRUCTURE PROGRAMME..................................................10

II.11 PUBLIC PRIVATE PARTNERSHIPSAREASIGNIFICANTELEMENTOFTHECAPITALINVESTMENTPLANNEDINTHE NATIONAL DEVELOPMENT PLAN 2000-2006, PARTICULARLYINRELATIONTOTHEECONOMICANDSOCIALINFRASTRUCTUREPROGRAMME. A TOTALOF EUR 2.35 BILLIONOFPRIVATESECTORFINANCEIN PPP

PROJECTSISINCLUDEDWITHINTHE PLAN, OFWHICH EUR 1.78 BILLIONISALLOCATEDTOTHEECONOMICANDSOCIALINFRASTRUCTUREPROGRAMMEAND EUR 0.57 BILLIONISALLOCATEDTOWASTEMANAGEMENTINTHEREGIONALPROGRAMMES. ANINDICATIVEANALYSISOFPRIVATELYFUNDED PPPSACROSSEACHOFTHEPRINCIPALCATEGORIESISSETOUTINTHETABLEBELOW.........................................................................11TABLE 2.2 PPP PROGRAMMEWITHIN NDP...................................................................................................11

II.12 ITISIMPORTANTTONOTETHATTHEOVERALLLEVELOFINVESTMENTPRESENTEDINTHETABLEABOVEISVERYMUCHAMINIMUMINDICATIVETARGETANDTHEOBJECTIVEOFTHE GOVERNMENTISTOMAXIMISETHEUSEOF PPPS, CONSISTENTWITHTHEPRINCIPLESOFBESTVALUEFORMONEYANDEFFICIENCY............11II.13 INADDITION, ITSHOULDBENOTEDTHATTHETABLEDOESNOTREFLECTTHETOTALLEVELOF PPPACTIVITYANTICIPATEDWITHIN IRELANDOVERTHENEXTSIXYEARSASASIGNIFICANTNUMBEROF PPPSCHEMESWILLBEIMPLEMENTEDWITHOUTRECOURSETOPRIVATEFINANCE. FOREXAMPLE, MOSTOFTHEEUR 889 MILLIONOFINVESTMENTREQUIREDTOIMPLEMENTTHE URBAN WASTEWATERTREATMENTDIRECTIVEWILLBEDELIVEREDUNDERDESIGN, BUILDANDOPERATE (DBO) CONTRACTS.............................11

Recent Economic Developments.................................................................................................................12

II.14 SINCETHEPUBLICATIONOFTHE NATIONAL DEVELOPMENT PLANIN NOVEMBER1999, ANUMBEROFMACROECONOMICDEVELOPMENTSHAVEOCCURREDTHATSUGGESTANEVENGREATERNEEDFORPUBLICPRIVATE PARTNERSHIPS. THESEINCLUDEINFLATIONINTHECONSTRUCTIONSECTOR, ASLOWDOWNINECONOMICGROWTHANDCONSEQUENTTIGHTENINGOFPUBLICFINANCE, ANDINCREASEDDEMANDFORINFRASTRUCTUREINVESTMENTOUTSIDEOFTHE NATIONAL DEVELOPMENT PLAN (FOREXAMPLE, THEDUBLIN METRO). ITISPOSSIBLETHATTHEINCREASEDUSEOFPRIVATEFINANCE, ENHANCEDCOMPETITIONANDBETTERVALUEFORMONEYASSOCIATEDWITH PPP WILLPROVIDEANEFFECTIVEMEANSOFDEALINGWITHTHESENEWCHALLENGES..........................................................................................................................12

National Economic and Social Council .....................................................................................................12

II.15 THE NATIONAL ECONOMICAND SOCIAL COUNCIL (NESC) HASINDICATEDITSSUPPORTFORTHEUSEOFTHE PUBLIC PRIVATE PARTNERSHIPAPPROACHINTHEPUBLICATION OPPORTUNITIES, CHALLENGESANDCAPACITYFORCHOICE. THISREPORTMAKESANUMBEROFMAJORPOLICYRECOMMENDATIONSANDCONCLUDESTHAT PPPSHAVETHEPOTENTIALTOPLAYASIGNIFICANTROLEINTHEACCELERATEDDELIVERYOFSTRATEGICNATIONALINFRASTRUCTURE, THEPROVISIONOFQUALITYPUBLICSERVICESANDTHEACHIEVEMENTOFVALUEFORMONEYFORTHE EXCHEQUEROVERTHELONGTERM. INTHISCONTEXT,


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THECONCEPTOFVALUEFORMONEYENCOMPASSESTHEKEYPRINCIPLESOFEFFICIENCY, EFFECTIVENESSANDECONOMYANDDOESNOTMERELYMEANLEASTCOST. .................................................................................12II.16 THEDETAILED PPP POLICYRECOMMENDATIONSMADEBYTHE NATIONAL ECONOMICAND SOCIALCOUNCILARESUMMARISEDBELOW..................................................................................................................12II.17 INTERMSOFTHEEVOLVINGPOLICYCONTEXTFORPPPSIN IRELAND, ONEOFTHEMOSTSIGNIFICANTASPECTSOFTHEANALYSISCONDUCTEDBYTHE NESC ISTHERECOMMENDATIONTHATTHE PPP APPROACH

SHOULDBEAPPLIEDTOAMUCHWIDERRANGEOFINFRASTRUCTUREPROJECTS. INPARTICULAR, ITISRECOMMENDEDTHATTHE GOVERNMENTEXPLORETHEPOTENTIALOF PPP TOPROVIDEELEMENTSOFSOCIALANDCOMMUNITYINFRASTRUCTURE (SUCHASSOCIALHOUSING, SCHOOLS, COLLEGESANDHEALTHCAREFACILITIES).........................................................................................................................................................12

Organisation for Economic Co-operation and Development.....................................................................13

II.18 THE ORGANISATIONFORECONOMIC CO-OPERATIONAND DEVELOPMENT (OECD) HASRECENTLYPREPAREDANANALYSISOFREGULATORYREFORMIN IRELANDANDTHECONCLUSIONSANDRECOMMENDATIONSSETOUTINTHISANALYSISARELIKELYTOHAVEASIGNIFICANTIMPACTUPONTHEDEVELOPMENTOFTHE PPP PROGRAMMEWITHIN IRELAND. THEREPORTADDRESSESABROADRANGEOFECONOMICANDREGULATORYISSUESANDSUGGESTSTHATTHEINTRODUCTIONOFGREATERCOMPETITIONINTOTHEDELIVERYOFPUBLICSERVICESCANRESULTINHIGHERQUALITYPUBLICSERVICESANDSUBSTANTIALCOSTSAVINGS. THEPRINCIPALRECOMMENDATIONSTHATARERELEVANTTOTHEDEVELOPMENTOFTHE PPP PROGRAMMEARESUMMARISEDOVERLEAF..........................................................13

II.19 INPARTICULAR, THEREPORTNOTESTHATLOCALAUTHORITIESCONTINUETOSUPPLYMANYESSENTIALSERVICESIN IRELANDANDTHATTHEPROVISIONOFTHESESERVICESTENDSTOBEINEFFICIENTANDFRAGMENTED. THEREPORTRECOMMENDSTHEINTRODUCTIONOFGREATERCOMPETITIONINTOTHEPROVISIONOFPUBLICSERVICESANDTHE PUBLIC PRIVATE PARTNERSHIPPROGRAMMEISCLEARLYAMECHANISMTHROUGHWHICHTHISCOULDBEDELIVERED...............................................................................13

Framework for Public Private Partnerships...............................................................................................13

II.20 THE PUBLIC PRIVATE INFORMAL ADVISORY GROUPHASIDENTIFIEDANDDEFINEDADRAFTSETOFGOALSFORTHEFUTUREDEVELOPMENTOFTHE PUBLIC PRIVATE PARTNERSHIPAPPROACHIN IRELAND. THEGOALSAREFURTHEREVIDENCEOFTHECLEARCOMMITMENTBY GOVERNMENTANDTHESOCIALPARTNERSTOUSINGTHE PPP APPROACHTODELIVERASTEPCHANGEINTHEQUALITYOFSERVICEANDINFRASTRUCTUREPROVISION. THEDRAFTGOALSIDENTIFIEDBYTHE INFORMAL ADVISORY GROUPARESETOUTBELOW........................................................................................................................................................13II.21 THEGOALSSETFORTHEFUTUREDEVELOPMENTOF PUBLIC PRIVATE PARTNERSHIPSIN IRELANDARE

GENERALLYCONSISTENTWITHTHEOBJECTIVESSETBYOTHERCOUNTRIESSUCHAS AUSTRALIA, CANADA,PORTUGAL, SPAINAND SOUTH AFRICA. HOWEVER, ITISIMPORTANTTONOTETHATTHEGOALSSETFORIRELANDDONOTINCLUDEEITHERAREQUIREMENTFORPRIVATESECTORFINANCETOBEUTILISEDORAREQUIREMENTFORSUCHFINANCETOBEACCOUNTEDFOROFF-BALANCESHEET............................................14II.22 THISREFLECTSTHESTRONGFISCALPOSITIONENJOYEDBY IRELANDATPRESENT, APOSITIONTHATISCHARACTERISEDBYCONTINUINGBUDGETSURPLUSESANDDECLININGLEVELSOFGOVERNMENTDEBT. THEMACROECONOMICCLIMATEIN IRELANDDIFFERSSIGNIFICANTLYFROMTHECLIMATEINTHE UNITEDKINGDOMINTHEEARLYYEARSOFTHE PRIVATE FINANCE INITIATIVEWHEREACCOUNTINGTREATMENTWASAKEYPOLICYDRIVERBECAUSEOFTHENEEDTOACCESSPRIVATEFINANCEANDMANAGETHELEVELOFPUBLICSECTORDEBT.........................................................................................................................................14PROCUREMENT CONTEXT.................................................................................................................................14

Procurement Spectrum................................................................................................................................14

II.23 PUBLIC PRIVATE PARTNERSHIPSAREONEOFANUMBEROFDIFFERENTMECHANISMSTHATTHE IRISH

GOVERNMENTCANUSETOPROCUREHIGHQUALITYPUBLICSERVICESANDINTHISRESPECTTHEYSITWITHINARANGEOFOTHERDELIVERYOPTIONSINCLUDINGTRADITIONALPROCUREMENT, CONTRACTINGOUTANDPRIVATISATION. THE GOVERNMENTHASRECOGNISEDTHATNOTALLPROJECTSORSERVICESARESUITEDTOTHE PUBLIC PRIVATE PARTNERSHIPAPPROACHANDACCORDINGLYTHEREISNOTAREQUIREMENTFORUNIVERSALORMANDATORY PPP TESTING. THEPOSITIONOF PPPSWITHINTHEPROCUREMENTSPECTRUMISILLUSTRATEDINTHEDIAGRAMBELOW.............................................................................................................15II.24 PUBLIC PRIVATE PARTNERSHIPSDIFFERFROMCONTRACTINGOUTINTHATTHEPRIVATESECTORISUSUALLYRESPONSIBLEFORTHEPROVISIONOFANASSETASWELLASASERVICE. PPPSDIFFERFROMPRIVATISATIONINTHATLEGALOWNERSHIPOFANYASSETSCREATEDRESTSWITHTHEPUBLICSECTORANDTHEPUBLICSECTORRETAINSAKEYROLEINSERVICESPECIFICATION, PROCUREMENT, MARKETREGULATIONANDCONTRACTMONITORING............................................................................................................................15II.25 THEEXPERIENCEOFPRIVATISATIONHASSHOWNTHATTHEFREEDOMTOINVEST, COMBINEDWITHPRIVATESECTORMANAGEMENTSKILL, CANBRINGIMPROVEDEFFICIENCY. HOWEVER, ATTHESAMETIMEPRIVATISATIONCANLEADTOPOORPUBLICACCOUNTABILITY, AREDUCTIONINCOMPETITIONANDTHEDEVELOPMENTOFMONOPOLIES. ONTHEOTHERHAND, PPPSCANOFFERALONGER-TERM, SUSTAINABLEAPPROACHTOIMPROVINGPUBLICSERVICES, ENHANCINGTHEVALUEDERIVEDFROMPUBLICASSETSAND


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MAKINGBETTERUSEOFPUBLICMONEY, WHILEATTHESAMETIMERETAININGCONTROLOFCOREAREASOFRESPONSIBILITYINTHEPUBLICSECTOR............................................................................................................15

PPP Forms..................................................................................................................................................15

II.26 A WIDERANGEOFCONTRACTUALFORMSMAYBEADOPTEDBYTHEPUBLICSECTORINESTABLISHINGPARTNERSHIPSWITHTHEPRIVATESECTOR, RANGINGFROMTHOSEWHERETHEREISAGREATDEALOFPUBLICSECTORINVOLVEMENTTOTHOSEWHERETHEREISVERYLITTLEINVOLVEMENT. IN IRELANDTHESPECTRUM

OFCONTRACTUALOPTIONSRANGESFROM DESIGN, BUILDAND OPERATE (DBO) CONTRACTSTO DESIGN,BUILD, OPERATEAND FINANCE (DBOF) CONTRACTSAND CONCESSIONCONTRACTS.....................................15II.27 THEBROADSPECTRUMOF PUBLIC PRIVATE PARTNERSHIPFORMSLIKELYTOEMERGEIN IRELANDISSETOUTINTHEDIAGRAMBELOWANDDESCRIBEDINTHEPARAGRAPHSTHATFOLLOW........................................15II.28 DESIGN, BUILDAND OPERATECONTRACTSAREARRANGEMENTSBETWEENTHEPUBLICSECTORANDTHEPRIVATESECTORFORTHEDESIGN, CONSTRUCTIONANDOPERATIONOFPUBLICFACILITIESANDINFRASTRUCTURE. THEPRIVATESECTORCONTRACTORDESIGNSANDBUILDSTHEFACILITYTOMEETPUBLICSECTORPERFORMANCEREQUIREMENTSANDRETAINSRESPONSIBILITYFOROPERATINGANDMAINTAININGTHEFACILITYFORAPREDEFINEDPERIOD, ATTHEENDOFWHICHITISTRANSFERREDBACKTOTHEPUBLICSECTOR. THECONSTRUCTIONOFTHEFACILITYISFINANCEDBYTHEPUBLICSECTORANDITREMAINSINPUBLICOWNERSHIPTHROUGHOUTTHETERMOFTHECONTRACT.....................................................................16II.29 DESIGN, BUILD, OPERATEAND FINANCECONTRACTSAREARRANGEMENTSBETWEENTHEPUBLICSECTORANDTHEPRIVATESECTORFORTHEDESIGN, CONSTRUCTION, OPERATIONANDFINANCINGOFPUBLIC

FACILITIESANDINFRASTRUCTURE. THEPRIVATESECTORCONTRACTORISRESPONSIBLEFORDESIGNING,BUILDING, OPERATINGANDFINANCINGTHEFACILITYANDRECOVERSITSCOSTSSOLELYOUTOFPAYMENTSFROMTHEPUBLICSECTOR. ATTHEENDOFTHECONTRACT, OWNERSHIPOFTHEFACILITYCOMMONLYTRANSFERSBACKTOTHEPUBLICSECTOR.........................................................................................................16II.30 CONCESSIONCONTRACTSARESIMILARTO DESIGN, BUILD, OPERATEAND FINANCEARRANGEMENTS,EXCEPTTHATTHEPRIVATESECTORCONTRACTORRECOVERSITSCOSTSEITHERTHROUGHDIRECTUSERCHARGESORTHROUGHAMIXOFUSERCHARGINGANDPUBLICSUBVENTION..................................................16PARTNERSHIP CONTEXT....................................................................................................................................16

Statement of Principles ...............................................................................................................................16

II.31 ITISVERYMUCHWITHTHISINMINDTHATTHE PUBLIC PRIVATE INFORMAL ADVISORY GROUPHASDEFINEDADRAFTSTATEMENTOFFUNDAMENTALPRINCIPLESTHATWILLUNDERPINANDGUIDETHEDEVELOPMENTOF PUBLIC PRIVATE PARTNERSHIPSIN IRELAND. THEFUNDAMENTALPRINCIPLESARESETOUTINTHETABLEBELOWANDDRAWUPONTHEWORKOFTHE NESC AND GOVERNMENTPOLICYASSETOUT

INTHE PARTNERSHIPFORPROSPERITYAND FAIRNESS. THEFUNDAMENTALPRINCIPLESARECONSISTENTWITHTHEOVERRIDINGREQUIREMENTSOFSOCIALPARTNERSHIPANDUNIVERSALSERVICEPROVISION.........16

Stakeholder Consultation............................................................................................................................17

II.32 BUILDINGONTHEWORKOFTHE NESC, THE PUBLIC PRIVATE INFORMAL ADVISORY GROUPHASALSORECOGNISEDANDREINFORCEDTHENEEDFORSTAKEHOLDERCONSULTATIONINTHEDEVELOPMENTOFTHEIRISH PPP PROGRAMME. STAKEHOLDERSINCLUDEEMPLOYEESANDTHEIRTRADEUNIONS, THEUSERSOFTHEASSETSANDSERVICESBEINGPROVIDEDBY PPP, LOCALCOMMUNITYGROUPSANDSECTORALINTERESTGROUPS...............................................................................................................................................................17II.33 INPARTICULAR, THE INFORMAL ADVISORY GROUPHASSTRESSEDTHEIMPORTANCEOFENSURINGTHATPUBLICSERVICEEMPLOYEESAREKEPTINFORMEDATTHEEARLIESTPOSSIBLESTAGEOFPROPOSALSFORTHEINTRODUCTIONOF PPPSANDOFSIGNIFICANTDEVELOPMENTSDURINGTHEPROCUREMENTPROCESS. INADDITION, PUBLICSERVICEEMPLOYEESSHOULDBEENCOURAGEDTOMAKEAPOSITIVECONTRIBUTIONTOTHEDEVELOPMENTOF PPP PROJECTS, BUILDINGONTHEPROGRESSMADEINRELATIONTOWORKPLACEPARTNERSHIPSUNDERTHE PARTNERSHIPFORPROSPERITYAND FAIRNESS.....................................................18SUMMARYOF ANALYSIS...................................................................................................................................18

II.34 THEKEYFINDINGSFROMTHISREVIEWOFTHESTRATEGICCONTEXTUNDERLYINGTHEDEVELOPMENTOF PUBLIC PRIVATE PARTNERSHIPSWITHIN IRELANDAREPRESENTEDBELOW. OVERALL, ATAPOLICYLEVELITISALREADYEVIDENTTHAT IRELANDISWITNESSINGABROADENINGANDDEEPENINGOFTHE PPP AGENDAANDASHIFTINTERMSOFTHEPROGRAMMELIFECYCLEFROMMOBILISATIONINTOEXPANSION. ...................18

III. INTERNATIONAL CONTEXT......................................................................19

INTRODUCTION..................................................................................................................................................19III.1 PUBLIC PRIVATE PARTNERSHIPSAREINCREASINGLYBEINGSEENASANATTRACTIVEAPPROACHTOTHEPROVISIONOFINFRASTRUCTUREPROJECTSANDPUBLICSERVICESACROSS EUROPEANDTHERESTOFTHEWORLD. ANEVER-INCREASINGNUMBEROFCOUNTRIESAREEMBARKINGUPON PUBLIC PRIVATEPARTNERSHIPPROGRAMMESTHATARELEADINGTOARADICALREDEFINITIONOFTHEROLESOFTHEPUBLICANDPRIVATESECTORSINTHEFINANCINGANDDELIVERYOFPUBLICSERVICES..............................................19III.2 THEREISAGROWINGACCEPTANCEAROUNDTHEWORLDTHAT PUBLIC PRIVATE PARTNERSHIPSCANBEUTILISEDTOMEETPUBLICSECTORINVESTMENTNEEDSINAWIDERANGEOFSECTORS, INWAYSTHAT


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REPRESENTGOODVALUEFORMONEYTOTHETAXPAYER. FOREXAMPLE, INTHEWATERSECTORINTHEUNITED STATESAND CANADA, PUBLIC PRIVATE PARTNERSHIPSAREESTIMATEDTOHAVEGENERATEDCOSTSAVINGSOFBETWEEN 10 PERCENTAND 40 PERCENT, WHILEIN SCOTLANDTHEAVERAGESAVINGACHIEVEDON PFI SCHEMESISESTIMATEDTOBEOVER20 PERCENT. WITHIN IRELAND, THEEXPERIENCEOFEARLYPROJECTSSUCHAS DUBLIN BAYSUGGESTSTHATSAVINGSOFBETWEEN 25 PERCENTAND 30 PERCENTAREACHIEVABLE. INRELATIONTOPUBLICTRANSPORT, RESEARCHUNDERTAKENBYTHE EUROPEAN

COMMISSIONSUGGESTSTHATTHEINTRODUCTIONOFCOMPETITIONCANGENERATESAVINGSOFATLEAST 10TO 20 PERCENT, WHILEAREVIEWOF PFI INTHE UNITED KINGDOMCONDUCTEDBY ARTHURANDERSENINDICATESTHATANAVERAGESAVINGOF 17 PERCENTCANBEACHIEVEDOVERARANGEOFDIFFERENTSECTORS.............................................................................................................................................................19III.3 ANINDICATIONOFTHEEXTENTTOWHICHTHE PUBLIC PRIVATE PARTNERSHIPAPPROACHHASBEENADOPTEDINOTHERPARTSOFTHEWORLDISSETOUTINTHETABLETHATFOLLOWS......................................19TABLE 3.1 EXTENTOF PPP PROGRAMMES ABROAD.....................................................................................19

III.4 TABLE 3.1 ABOVEDEMONSTRATESTHATTHE PUBLIC PRIVATE PARTNERSHIPAPPROACHISBEINGEXAMINEDANDDEPLOYEDINALARGEVARIETYOFSECTORSANDCOUNTRIESTHROUGHOUTTHEWORLD.THETABLEALSOUNDERLINESTHEPOINTTHATTHEKEYPRINCIPLESBEHIND PUBLIC PRIVATE PARTNERSHIPSARENOTNEW. WITHINTHETRANSPORTSECTOR, PPP MODELSHAVEBEENEVOLVINGFORMANYYEARSANDTHECONCESSIONAPPROACHTOUTILITIESHASBEENEMPLOYEDIN FRANCEFORCENTURIES. HOWEVER, ITISONLYOVERTHEPASTTENYEARSORSOTHATTHEUSEOF PUBLIC PRIVATE PARTNERSHIPSHASEXPANDED

INTOOTHERASPECTSOFPUBLICSECTORACTIVITYSUCHASSOCIALINFRASTRUCTURE (INCLUDINGPRISONS,HEALTHCAREFACILITIESANDEDUCATIONALESTABLISHMENTS). THEMAJORMOVEFORWARDINTHISREGARDSTARTEDINTHE UNITED KINGDOMINTHEEARLY 1990S, WHEN PPP MODELSWEREDEVELOPEDTHATINVOLVETHEPUBLICSECTORPAYINGFORPRIVATELYSUPPLIEDSERVICESINARANGEOFSECTORS....20III.5 INADDITION, ITISIMPORTANTTONOTETHATTHETABLEISNOTCOMPREHENSIVEANDISBASEDONDATAPUBLISHEDASAT JANUARY 2001. ASTHEREAREANUMBEROFDIFFERENTDEFINITIONSOFTHETERMPUBLIC PRIVATE PARTNERSHIP, THETABLEINCLUDESTHOSEPROJECTSWHERETHEPRIVATESECTORHASBEENINVOLVEDINTHECONSTRUCTIONANDOPERATIONOFAFACILITY. ITDOESNOTINCLUDEMORESIMPLEFORMSOFPRIVATESECTORFINANCESUCHASBORROWING, FINANCELEASESORSALEANDLEASEBACKTRANSACTIONS. THEANALYSISALSOFOCUSESONTHOSECOUNTRIESTHATARECURRENTLYMOSTACTIVELYCONSIDERING PUBLIC PRIVATE PARTNERSHIPSANDEXCLUDESANUMBEROFOTHERCOUNTRIESTHATHAVEONLYONEORTWOPROJECTSINDEVELOPMENT................................................................................................20INTERNATIONAL DEVELOPMENTS.....................................................................................................................20

Organisational Structures...........................................................................................................................20III.6 PUBLIC PRIVATE PARTNERSHIPINITIATIVESINOTHERPARTSOFTHEWORLDHAVEINGENERALSTARTEDWITHCHANGESINLEGISLATIONTOFACILITATETHEDEVELOPMENTOF PPPS, THEESTABLISHMENTOFPUBLICSECTORADVISORYGROUPSANDTHESETUPOFDEDICATEDTEAMSINSIDEKEYMINISTRIESORDEPARTMENTS. FOREXAMPLE, IN JAPANAND ITALY, EXTENSIVENEWPRIMARYLEGISLATIONHASBEENIMPLEMENTEDTOFACILITATETHEDEVELOPMENTOF PPPSWHILEIN HOLLAND, ITALY, THE UNITEDKINGDOMAND AUSTRALIA, DEDICATED PPP TEAMSHAVEBEENCREATEDINANUMBEROFGOVERNMENTDEPARTMENTS. A BRIEFDESCRIPTIONOFTHESETEAMSISSETOUTBELOW....................................................20III.7 WHILEANINCREASINGNUMBEROFCOUNTRIESAREEMBARKINGON PUBLIC PRIVATE PARTNERSHIPPROGRAMMES, VERYFEWHAVEEXPERIENCEOF PPP ACROSSALARGE-SCALEPROGRAMME, INAWIDERANGEOFSECTORS, ANDATEVERYSTAGEOFTHEPROJECTLIFECYCLE. THISISASIGNIFICANTOBSERVATIONGIVENTHEDEVELOPINGPOLICYCONTEXTWITHIN IRELAND. .....................................................................................21III.8 TWOCOUNTRIESWITHSIGNIFICANTEXPERIENCEOFDEVELOPING PPP PROGRAMMESANDSETTINGUPNEWINSTITUTIONALSTRUCTURESARETHE UNITED KINGDOMAND CANADA. THEEXPERIENCEOFTHESECOUNTRIESPROVIDESANIMPORTANTINSIGHTINTOTHEPRINCIPALISSUESASSOCIATEDWITHTHEDELIVERYOFALARGE-SCALE PPP PROGRAMMEANDTHEMECHANISMSFORENSURINGTHATTHESEISSUESAREDEALTWITHEFFICIENTLYANDEFFECTIVELY. A DETAILEDREVIEWOFTHEINSTITUTIONALSTRUCTURESWITHINTHEUNITED KINGDOMAND CANADAISSETOUTIN APPENDIX A TOTHISREPORTANDTHEKEYFINDINGSEMERGINGFROMTHISREVIEWARESUMMARISEDATTHEENDOFTHISSECTION.............................................21III.9 INADDITION, AREVIEWOFTHEINSTITUTIONALSTRUCTURESWITHIN PORTUGALFORTHEDELIVERYOFPPP PROJECTSISALSOSETOUTIN APPENDIX A. PORTUGALISSIMILARTO IRELANDINTHATITSMOSTURGENTINFRASTRUCTURENEEDSAREINTHEROADSANDWATERSERVICESSECTORS...................................21

Common Barriers........................................................................................................................................21

III.10 THEUNDERLYINGREASONSFORTHEGRADUALDEVELOPMENTOFTHE PUBLIC PRIVATE PARTNERSHIPAPPROACHVARYFROMCOUNTRYTOCOUNTRY, BUTSOMEOFTHEMOSTCOMMONBARRIERSTHATHAVETOBERESOLVEDTOENABLETHEAPPROACHTOBEIMPLEMENTEDARESUMMARISEDBELOW.............................21

Pilot Projects...............................................................................................................................................22

III.11 INTERNATIONALEXPERIENCEINDICATESTHATANIMPORTANTFEATUREOFTHEDEVELOPMENTOF PPPPROGRAMMESISTHELAUNCHANDPROCUREMENTOFARANGEOFPILOTPROJECTS. THEPURPOSEOFTHE


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PILOTPROJECTSISTODETERMINE, ORREFINE, THEGROUNDRULESANDBESTPRACTICESFORPARTICULARFORMSOF PPP ANDTOPROVIDEAFIRMBASISFORFUTUREDEVELOPMENT....................................................22III.12 PILOTPROJECTSAREVERYOFTENINTHETRANSPORTSECTORANDINANUMBEROFCOUNTRIESTHEAPPLICATIONOFTHE PPP APPROACHHASONLYBEENEXTENDEDTOOTHERAREASOFPUBLICSECTORACTIVITYONCETHESEPILOTPROJECTSHAVEBEENCOMPLETEDSUCCESSFULLY. FOREXAMPLE, INAUSTRALIA, BELGIUM, CANADA, FINLAND, FRANCE, SOUTH AFRICAAND SPAINTHEINITIAL PUBLIC

PRIVATE PARTNERSHIPPROJECTSUNDERTAKENALLINVOLVEDTHECONSTRUCTIONOFMAJORNEWROADSCHEMES. HOWEVER, THELESSONSLEARNEDONAPILOTPROJECTINTHETRANSPORTSECTORDONOTNECESSARILYAPPLYTO PPP PROJECTSINOTHERSECTORS. ASARESULT, THEBESTPRACTICEAPPROACHISTODEVELOPAPROGRAMMEOFPILOTPROJECTSCOVERINGANUMBEROFSECTORSANDTOENSURETHATTHEPILOTPROJECTSARESUCCESSFUL.....................................................................................................................22III.13 THEULTIMATESUCCESSOFAPILOTPROJECTISINFLUENCEDBYARANGEOFFACTORSINCLUDINGTHEEXPERIENCEOFTHECONTRACTINGAUTHORITY, THEABILITYOFPRIVATESECTORTODELIVERBETTERVALUEFORMONEYANDTHEWILLINGNESSOFTHEPRIVATESECTORTOACCEPTANAPPROPRIATEDEGREEOFRISK.ALLOFTHESEFACTORSAREDYNAMICANDWILLBEINFLUENCEDBYEXPERIENCEGAINEDINSIMILARTYPESOFACTIVITYELSEWHEREINTHEWORLD. STRUCTURINGACHALLENGINGBUTDELIVERABLEPILOTPROJECTNEEDSSOMECARE, ANDINSOMEINSTANCESTHEREISEVIDENCETOSUGGESTTHATPILOTPROJECTSHAVENOTBEENSUFFICIENTLYWELLSTRUCTURED (FOREXAMPLE, THE PATHFINDER WASTEANDPRISONSPROJECTSINTHE UNITED KINGDOM). THELEVELOFPROGRAMMERISKHEREISSIGNIFICANTASNOTONLY

DOPOORLYSTRUCTUREDOREXECUTEDPILOTPROJECTSFAILTODELIVERTHEOPTIMUMAMOUNTOFVALUEFORMONEYANDRISKTRANSFER, BUTTHEYCANALSOSERVETOUNDERMINEMARKET, POLITICALANDPUBLICCONFIDENCEINTHE PPP APPROACH.....................................................................................................23III.14 FOREXAMPLE, ANUMBEROFTHEEARLY PFI PROJECTSINTHE UNITED KINGDOMFOCUSEDTOOMUCHONTHEACHIEVEMENTOFANOFF-BALANCESHEETACCOUNTINGTREATMENT (BYSEEKINGTOMAXIMISERISKTRANSFER) RATHERTHANONTHEDELIVERYOFAVALUEFORMONEYSOLUTION (BYSEEKINGTOOPTIMISERISKTRANSFER). EQUALLY, ANUMBEROFEARLYPROJECTSINOTHERPARTSOFTHEWORLDSUCHASTHETOLLROADSIN AUSTRALIAWEREDRIVENENTIRELYBYADESIRETOUSEPRIVATEFINANCEANDNOTBYADESIRETOSECUREBETTERVALUEFORMONEY.................................................................................................23III.15 THEMOSTCOMMONISSUESORPROBLEMSTHATHAVEBEENENCOUNTEREDDURINGTHEPROCUREMENTANDDEVELOPMENTOFPILOT PUBLIC PRIVATE PARTNERSHIPPROJECTSARESETOUTINTHEBOXBELOW. WHERETHESEISSUESHAVEARISEN, THEYHAVECOMMONLYRESULTEDINPOORLYSTRUCTUREDCONTRACTS, LENGTHYANDCOSTLYPROCUREMENTS, HIGHTENDERINGCOSTS, ANDREDUCED

VALUEFORMONEY............................................................................................................................................23III.16 HOWEVER, DESPITETHEFAILURESOFANUMBEROFPILOTPROJECTS, MORERECENTEXPERIENCEHASSHOWNTHAT, BYBRINGINGPRIVATESECTORMANAGEMENTSKILLSTOGETHERWITHPRIVATEFINANCE,PUBLIC PRIVATE PARTNERSHIPSCANDELIVERIMPROVEDVALUEFORMONEYACROSSAWIDERANGEOFPUBLICSECTORACTIVITY. EXAMPLESINCLUDETHEPROVISIONOFWATERSUPPLYIN CANADA, WASTEMANAGEMENT, HEALTHCAREANDPRISONSERVICESIN ENGLAND, ANDROADSERVICESIN SPAIN, PORTUGALAND AUSTRALIA................................................................................................................................................24IMPLICATIONS...................................................................................................................................................24

III.17 THEIMPLICATIONSOFEXPERIENCEELSEWHEREFORTHE PPP PROGRAMMEIN IRELANDARECONSIDEREDINDETAILINTHEFOLLOWINGSECTIONSANDIN APPENDIX A TOTHISREPORT. WHENREFLECTINGUPONTHEEXPERIENCEOFOTHERCOUNTRIES, ITISUSEFULTONOTETHAT IRELANDHASALREADYMADEREALPROGRESSINRELATIONTOTHEESTABLISHMENTOFINSTITUTIONALSTRUCTURESANDTHECREATIONOFASIGNIFICANTNUMBEROFPILOTPROJECTSACROSSARANGEOFSECTORS. INADDITION,THEINCREASINGUSEOF PPP APPROACHESACROSS EUROPE (ANDINTHE UNITED KINGDOMINPARTICULAR)HASRESULTEDINTHEDEVELOPMENTOFAMATUREMARKETFORSUCHPROJECTS.........................................24III.18 THEDEVELOPMENTOFTHE PPP PROGRAMMEIN IRELANDISABOUTTOENTERINTOANEWPHASEOFEXPANDEDACTIVITY. THISMEANSTHATTHEPRIMARYFOCUSATTHISTIMEISTOENSURETHATGOVERNMENTDEPARTMENTSANDPROCURINGAUTHORITIESHAVETHESKILLS, COMPETENCIESANDRESOURCESNEEDEDTOIMPLEMENTANDSUPPORTANEXPANDEDPROGRAMMEINANEFFICIENTANDEFFECTIVEMANNER. INTHISCONTEXT, THEKEYFINDINGSOFTHEREVIEWOFINTERNATIONALEXPERIENCECANBESUMMARISEDASFOLLOWS....................................................................................................................24

IV. CURRENT POSITION................................................................................25

BACKGROUND...................................................................................................................................................25IV.1 WITHIN IRELAND, INFORMAL PUBLIC PRIVATE PARTNERSHIPTYPEARRANGEMENTSHAVEBEENUSEDTODELIVERANUMBEROFSIGNIFICANTINFRASTRUCTUREPROJECTS. THESEINCLUDETHE EASTAND WESTLINKBRIDGES, THEPROGRAMMEFORDECENTRALISEDGOVERNMENTOFFICES, ANDANEWPEAT-FIREDPOWERSTATION. HOWEVER, ITISONLYSINCE 1998 THATATTENTIONHASFOCUSEDONTHEPOTENTIALBENEFITSOFUSINGTHE PUBLIC PRIVATE PARTNERSHIPAPPROACHTOADDRESSINFRASTRUCTURE


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DEFICIENCIESAGAINSTTHEBACKDROPOFDECLINING EUROPEAN UNIONFUNDING. ASARESULT, ANINTERDEPARTMENTAL GROUP (IDG) WASCREATEDTODEVELOPCRITERIAFOR, ANDADVISEON, THEISSUESARISINGINIMPLEMENTINGTHE PPP CONCEPT..................................................................................................25IV.2 INORDERTOASSISTTHESEGROUPSINTHEIRWORK, THE DEPARTMENTOF FINANCECOMMISSIONEDASTUDYINTO PUBLIC PRIVATE PARTNERSHIPS (THEREPORT, ENTITLED PUBLIC PRIVATE PARTNERSHIPS, WASSUBMITTEDTOTHE INTERDEPARTMENTAL GROUPIN JULY 1998 BY FARRELL GRANT SPARKSAND

GOODBODY ECONOMIC CONSULTANTSINASSOCIATIONWITH CHESTERTON CONSULTING). ACTINGONTHERECOMMENDATIONSCONTAINEDTHEREIN, THE GOVERNMENTAGREEDTOADOPTA PUBLIC PRIVATEPARTNERSHIPAPPROACHTOANUMBEROFPUBLICINFRASTRUCTUREPROJECTSINTHETRANSPORT, ROADS,WATER, WASTEANDEDUCATIONSECTORSONAPILOTBASIS...........................................................................25PROGRAMME LIFECYCLE..................................................................................................................................25

IV.3 INTERNATIONALEXPERIENCESUGGESTSTHATTHEDEVELOPMENTOF PUBLIC PRIVATE PARTNERSHIPPROGRAMMESISCHARACTERISEDBYTHREEGENERALPHASESOFACTIVITY,NAMELYPROGRAMMEMOBILISATION, PROGRAMMEEXPANSIONANDPROGRAMMEMATURITY. ANUNDERSTANDINGOFEACHOFTHESEPHASESISESSENTIALTOTHEDEVELOPMENTOFROBUSTORGANISATIONALSTRUCTURESANDPROCESSESIN IRELANDASTHEKEYREQUIREMENTSANDOBJECTIVESOFEACHPHASEAREVERYDIFFERENT.ANOVERVIEWOFTHEPHASESWITHINTHEPROGRAMMEDEVELOPMENTLIFECYCLEISSETOUTBELOW,TOGETHERWITHADESCRIPTIONOFTHEPRINCIPALFEATURESOFEACHPHASE...............................................25IV.4 ASCANBESEEN, THEINSTITUTIONALSTRUCTURESREQUIREDTOSUPPORTTHEDEVELOPMENTOF PPP

PROGRAMMESCHANGEASTHE PPP PROGRAMMEDEVELOPSTHROUGHTHETHREEPHASESSETOUTABOVE.DURINGTHEPROGRAMMEMOBILISATIONPHASE, CONSULTATIVEANDADVISORYGROUPSARESETUPINVOLVINGREPRESENTATIVESOFTHEPUBLICANDPRIVATESECTORSANDDEDICATEDSPECIALISTTEAMSAREESTABLISHEDINKEYDEPARTMENTSANDAGENCIESINORDERTODRIVEFORWARDTHEPILOTPROJECTS.DURINGTHEPROGRAMMEEXPANSIONPHASE, THELEVELOF PPP ACTIVITYISBROADENEDANDDEEPENEDANDASARESULT, THENEEDFORAPROPERLYRESOURCEDCENTRAL PPP UNITINCREASES. THEROLEOFTHISUNITISTODEVELOPACO-ORDINATEDAPPROACHTOCROSS-SECTORALISSUES, TOPREPAREDETAILEDPOLICYGUIDANCEONCROSS-SECTORALISSUES, TOMONITORTHEIMPLEMENTATIONOFTHEPROGRAMMEATANATIONALLEVEL, ANDTODEVELOPSTANDARDCONTRACTUALTERMS. BYTHEPROGRAMMEMATURITYPHASE, THEREQUIREMENTFORCENTRALSUPPORTDECREASESASTHE PPP APPROACHBECOMESEMBEDDEDINDEPARTMENTSANDPROCURINGAUTHORITIES..............................................................................................26IV.5 THECHANGINGPATTERNOFRESOURCEALLOCATIONOVERTHELIFECYCLEOFA PPP PROGRAMMEISILLUSTRATEDINTHEDIAGRAMBELOW. THEDIAGRAMCLEARLYSHOWSTHERESOURCEIMPLICATIONSOF

THETRANSITIONFROMPROGRAMMEMOBILISATIONTOPROGRAMMEEXPANSIONANDTHENONTOPROGRAMMEMATURITY.....................................................................................................................................27IV.6 VERYFEWCOUNTRIESHAVEREACHEDTHEPROGRAMMEMATURITYPHASEOFTHE PPP LIFECYCLE. THEUNITED KINGDOMISPROBABLYTHECLOSEST, ALTHOUGHITISSTILLTOOEARLYTOKNOWWHETHERORNOTTHENEWSTRUCTURESTHATHAVEBEENPUTINPLACEINRECENTYEARSWILLMEETTHENEEDSOFDEPARTMENTSANDPROCURINGAUTHORITIESINTHEMEDIUMTOLONGTERM...............................................27IV.7 IRELANDISCURRENTLYWITHINTHEPROGRAMMEMOBILISATIONPHASEOFTHE PPP LIFECYCLEANDISABOUTTOENTERINTOTHEPROGRAMMEEXPANSIONPHASE. THENUMBEROF PPP PROJECTSINPROCUREMENTISSETTOINCREASESIGNIFICANTLYANDTHERANGEOFPUBLICSERVICESDELIVEREDBY PPPISSETTOBROADENSUBSTANTIALLY. GIVENTHESIZEOFTHEINFRASTRUCTUREDEFICITANDTHEPRESSURESONTHE IRISHECONOMY, ITISIMPERATIVETHATTHE PPP PROGRAMMEREACHESMATURITYASEFFICIENTLYANDEXPEDITIOUSLYASPOSSIBLE. ...................................................................................................................27PROGRAMME MOBILISATION............................................................................................................................27

Current Structures.......................................................................................................................................27

IV.8 THECURRENTINSTITUTIONALARRANGEMENTSFORTHEDELIVERYOFTHE PPP PROGRAMMEWEREESTABLISHEDLARGELYINTHEWAKEOFTHEPUBLICATIONOFTHE INTERDEPARTMENTAL REPORTON PUBLICPRIVATE PARTNERSHIPSIN JULY 1998. THISREPORTRECOMMENDEDTHATAPROPERLYRESOURCEDUNITSHOULDBECREATEDWITHINTHE DEPARTMENTOF FINANCETOOVERSEETHEDEVELOPMENTOF PUBLICPRIVATE PARTNERSHIPSANDTHATTHISUNITSHOULDROLLOUTEXPERTISETOANALOGOUSUNITSINTHERELEVANTDEPARTMENTSANDPROCURINGAUTHORITIES. ATTHESAMETIME, A PUBLIC PRIVATE INFORMALADVISORY GROUP (IAG) ON PUBLIC PRIVATE PARTNERSHIPSWASESTABLISHED. THE INFORMAL ADVISORYGROUPINCLUDESREPRESENTATIVESOFTHE IRISH CONGRESSOF TRADE UNIONS (ICTU), THE IRISHBUSINESSAND EMPLOYERS CONFEDERATION (IBEC), ANDTHE CONSTRUCTION INDUSTRY FEDERATION(CIF)..................................................................................................................................................................27IV.9 SHORTLYTHEREAFTER, A CENTRAL PUBLIC PRIVATE PARTNERSHIP UNITWASESTABLISHEDINSIDETHEDEPARTMENTOF FINANCETOCO-ORDINATETHEDEVELOPMENTOF PUBLIC PRIVATE PARTNERSHIPSINIRELAND. PUBLIC PRIVATE PARTNERSHIP UNITSHAVEALSOBEENSETUPINTHE DEPARTMENTOFTHEENVIRONMENTAND LOCAL GOVERNMENT, THE DEPARTMENTOF PUBLIC ENTERPRISE, THE NATIONAL


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ROADS AUTHORITYANDTHE DEPARTMENTOF EDUCATIONAND SCIENCE. ANANALYSISOFTHERESOURCELEVELSINEACHOFTHE PUBLIC PRIVATE PARTNERSHIP UNITSISSETOUTBELOW.........................................28TABLE 4.1 CURRENT PPP STAFFING LEVELS................................................................................................28

Pilot Projects..............................................................................................................................................28

IV.10 CONSISTENTWITHINTERNATIONALBESTPRACTICE, THE GOVERNMENTDECIDEDTOEXPLORETHEPOTENTIALOFTHE PUBLIC PRIVATE PARTNERSHIPAPPROACHTODELIVERBETTERVALUEFORMONEYBY

BRINGINGFORWARDANUMBEROFPILOTPROJECTS. THEPURPOSEOFTHEPILOTPROJECTSISTODETERMINETHEGROUNDRULESANDBESTPRACTICESFORPARTICULARTYPESOF PPP PROJECTSANDTOPROVIDEASOUNDBASISFORFUTUREDEVELOPMENT.........................................................................................................28IV.11 THE GOVERNMENTANNOUNCEDITSINTENTIONTODELIVERANUMBEROFKEYPILOTPROJECTSINTHEROADS, WATERANDWASTESECTORSUSING PUBLIC PRIVATE PARTNERSHIPSIN JUNE 1999 ANDTHISWASFOLLOWEDBYTHEANNOUNCEMENTOFFURTHERPILOTPROJECTSINTHEEDUCATIONANDPUBLICTRANSPORTSECTORS. SUMMARYDETAILSOFTHEPILOTPROJECTSARESETOUTINTHETABLEBELOW. ITISIMPORTANTTONOTETHATTHEPILOTPROJECTSARECONCENTRATEDWITHINTHE DEPARTMENTSOFTHEENVIRONMENTAND LOCAL GOVERNMENT, PUBLIC ENTERPRISEAND EDUCATIONAND SCIENCE. DETAILSAREFORCONSTRUCTIONCOSTSONLYANDINCLUDE VAT AT 12.5%..............................................................28TABLE 4.2 PILOT PPP PROJECTS...................................................................................................................28

IV.12 ATPRESENT,NINESCHEMESHAVEBEENIDENTIFIEDASPILOTPROJECTSFORTHE PPP APPROACHANDTHETOTALCAPITALVALUEOFTHESEPROJECTSISAROUND EUR 1.4 BILLION. A SIGNIFICANTNUMBEROF

THEPILOTPROJECTSHAVEALREADYENTEREDPROCUREMENTANDTHERESTAREEXPECTEDTOGOTOTENDERINTHENEXTTWELVEMONTHS, SUBJECTTOTHESATISFACTORYCOMPLETIONOFTHEAPPROPRIATESTATUTORYPROCEDURES. THEFIRSTPILOTPROJECTSTOACHIEVEFINANCIALCLOSEWILLBETHE CORKSCHOOLOF MUSICANDTHE POST PRIMARY SCHOOLS BUNDLEWITHCONTRACTAWARDEXPECTEDINTHESUMMEROFTHISYEAR. TODATE, THEPILOTPROJECTSINPROCUREMENTHAVEBEENCHARACTERISEDBYBOTHSHORTPROCUREMENTTIMESCALESANDAHIGHDEGREEOFMARKETINTEREST....................................29

Key Success Factors....................................................................................................................................29

IV.13 THEEMPHASISOFGOVERNMENTACTIVITYDURINGTHEPROGRAMMEMOBILISATIONPHASEMUSTBEONTHEDEVELOPMENTOFMARKETINTERESTANDTHEIDENTIFICATIONANDMANAGEMENTOFANUMBEROFHIGHQUALITYPILOTPROJECTS. THEKEYSUCCESSFACTORSFORTHEPROGRAMMEMOBILISATIONPHASEASAWHOLEARESETOUTBELOWANDWILLBEUSEDASTHECRITERIATOASSESSTHEEFFECTIVENESSOFTHEEXISTINGSTRUCTURESINTHENEXTSECTIONOFTHISREPORT.........................................................................29PROGRAMME EXPANSION.................................................................................................................................29

New Projects...............................................................................................................................................29IV.14 THEPILOTPROJECTSSETOUTABOVEAREONLYTHEFIRSTSECTIONINTHEDEVELOPMENTOF PUBLICPRIVATE PARTNERSHIPSWITHIN IRELAND. A SIGNIFICANTNUMBEROFADDITIONAL PPP PROJECTSHAVEALREADYBEENIDENTIFIEDINTHEWATERANDWASTEMANAGEMENTSECTORSANDITISANTICIPATEDTHATMOREPROJECTSWILLALSOEMERGEINTHEEDUCATIONANDROADSSECTORSOVERTHECOURSEOFTHENEXTFIVEYEARS. THISISLIKELYTOLEADTOTHECREATIONOFASTRONGANDSUSTAINABLEDEALFLOW,ESPECIALLYINTHEROADS, WATERANDEDUCATIONSECTORS........................................................................29IV.15 ONTHEBASISOFTHEINFORMATIONPROVIDEDBYTHE DEPARTMENTOF FINANCE, ITISESTIMATEDTHATANADDITIONALONEHUNDREDANDTHIRTYPROJECTSMAYBEPROCUREDOVERTHENEXTFIVEYEARSAS PUBLIC PRIVATE PARTNERSHIPS. THETOTALCAPITALVALUEOFTHESEPROJECTSISLIKELYTOAROUNDEUR 11.8 BILLIONANDANANALYSISOFTHEPROJECTSBYSECTORISSETOUTBELOW. ITISANTICIPATEDTHATTHEMOSTCOMMONFORMSOF PPP TOEMERGEWILLBE DBO, DBOF AND CONCESSIONCONTRACTS............................................................................................................................................................................29

TABLE 4.3 ESTIMATED PPP PROGRAMMEBEYOND NDP..............................................................................30IV.16 TAKENTOGETHER, THEPILOTPROJECTSALREADYANNOUNCEDANDTHEADDITIONALPROJECTSINTHEPIPELINEAMOUNTTOAMASSIVEUNDERTAKING. ATLEASTONEHUNDREDANDTHIRTYFOURINFRASTRUCTUREPROJECTSWILLBEPROCUREDOVERTHECOURSEOFTHENEXTFIVEYEARSUSINGTHEPUBLIC PRIVATE PARTNERSHIPSAPPROACH. THECAPITALVALUEOFTHESEPROJECTSISEXPECTEDTOBEWELLINEXCESSOF EUR 12 BILLION. ..............................................................................................................30TABLE 4.4 ESTIMATED EXTENTOF FULL PPP PROGRAMME.........................................................................30

IV.17 THEPRINCIPALCHARACTERISTICSOFTHE PUBLIC PRIVATE PARTNERSHIPPROGRAMMEASPRESENTEDINTHETABLEABOVEAREASFOLLOWS:...........................................................................................................30IV.18 ALLOFTHISSUGGESTSTHATTHELEVELOFRESOURCESINEACHOFTHE PPP UNITSWILLNEEDTOBEINCREASEDSIGNIFICANTLYOVERTHECOURSEOFTHECOMINGYEAR. ITALSOSUGGESTSTHATLOCALAUTHORITYENGAGEMENTISCRITICALTOTHEDELIVERYOFTHEOVERALL PPP PROGRAMMEANDTHATTHECOMMODITISATIONOFTHE PPP PROCESSISACLEARPRIORITY, PARTICULARLYATTHELEVELOFLOCALAUTHORITIES......................................................................................................................................................31

International Benchmarking.......................................................................................................................31


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IV.19 THESCALEOFTHE PPP AGENDAFACING IRELANDDURINGTHEPROGRAMMEEXPANSIONPHASEISDIFFICULTTOOVERSTATEANDAMEASUREOFTHESCALEOFTHETASKAHEADCANBEGAINEDBYCOMPARINGTHISAGENDAWITHTHEEXPERIENCEOF SCOTLANDINTHESIXYEARSTO 2001. .......................31TABLE 4.5 COMPARISONWITH SCOTTISH PPP PROGRAMME........................................................................31

IV.20 INTHESIXYEARPERIODTO 2001, ATOTALOFEIGHTY-SIXPROJECTSENTEREDTHE PUBLIC PRIVATEPARTNERSHIPPROCUREMENTLIFECYCLEIN SCOTLANDWITHTHECAPITALVALUEOFTHEPROJECTSBEING

JUSTOVEREUR 4.1 BILLION. IN IRELANDINTHESIXYEARSTO 2006, ITISANTICIPATEDTHATATLEASTONEHUNDREDANDFORTYPROJECTSWILLBEPROCUREDAS PUBLIC PRIVATE PARTNERSHIPS, THECAPITALVALUEOFWHICHISEXPECTEDTOEXCEED EUR 13 BILLION. IFTHISTARGETISTOBEACHIEVEDTHENA PUBLICPRIVATE PARTNERSHIPCONTRACTMUSTBEAWARDEDONCEEVERYTWOWEEKSONAVERAGEFORTHENEXTSIXYEARS..........................................................................................................................................................31

New Markets, New Products.......................................................................................................................31

IV.21 A FURTHERDEFININGFEATUREOFTHEPROGRAMMEEXPANSIONPHASEINTOWHICH IRELANDISNOWMOVINGISTHEDEVELOPMENTOFDIFFERENTFORMSOF PUBLIC PRIVATE PARTNERSHIPANDTHEAPPLICATIONOFTHE PPP APPROACHTODIFFERENTSECTORS. THEANALYSISSETOUTINTHISSECTIONOFOURREPORTHASFOCUSEDLARGELYONTHE PPP AGENDAFROMTHEADOPTIONOFTHE PPP PILOTPROGRAMMETHROUGHTOTHEDEMANDINGTARGETSFORPPP SETOUTINTHE NATIONAL DEVELOPMENTPLAN. THISAGENDARIGHTLYFOCUSESUPONADDRESSINGMAJORINFRASTRUCTUREDEFICIENCIESANDTHESUCCESSFULDELIVERYOFTHEPLANMUSTBETHEFIRSTPRIORITY.................................................................31

IV.22 HOWEVER, THE PPP APPROACHISNOTJUSTABOUTTHECREATIONOFNEWINFRASTRUCTURE. ATITSCORE, ITISABOUTTHEPROVISIONOFHIGHQUALITYPUBLICSERVICES. THEREFORE, PPPSEXISTWITHINALONGER-TERMAGENDATHATMUSTBEACCOMMODATEDINGOVERNMENT. THISAGENDAREACHESBEYONDTHE NATIONAL DEVELOPMENT PLANANDWILLINCLUDETHEPOSSIBLEAPPLICATIONOFTHE PPP APPROACHTOCOMMUNITYNURSINGUNITS, COURTANDPRISONACCOMMODATION, OFFICEACCOMMODATION, LEISUREFACILITIES, ENERGYFACILITIES, ANDSOCIALHOUSING. ITWILLALSOINVOLVETHEDEVELOPMENTOFNEWFORMSOF PPP SUCHASJOINTVENTURES.........................................................................................................32

Key Success Factors....................................................................................................................................32

IV.23 THEEMPHASISOFGOVERNMENTACTIVITYDURINGTHEPROGRAMMEEXPANSIONPHASEMUSTBEONBUILDINGINTERNALRESOURCECAPABILITIESANDDEVELOPINGCONSISTENTPOLICYGUIDANCEANDSTANDARDISEDCONTRACTTERMSSOTHATTHEEFFECTIVENESSOFTHEPROCUREMENTPROCESSISMAXIMISED. THEKEYSUCCESSFACTORSFORTHEPROGRAMMEEXPANSIONPHASEASAWHOLEARESETOUTBELOWANDWILLBEUSEDASTHECRITERIATODEVELOPTHESTRUCTUREOFTHENEWINSTITUTIONAL

ARRANGEMENTS.................................................................................................................................................32Activity Programme.....................................................................................................................................32

IV.24 INMOVINGFROMTHEPROGRAMMEMOBILISATIONPHASEINTOTHEPROGRAMMEEXPANSIONPHASE, ASIGNIFICANTNUMBEROFSPECIFICACTIVITIESWILLNEEDTOBEUNDERTAKENBYCENTRALANDLOCALGOVERNMENT. THESEACTIVITIESARESUMMARISEDINTHEDIAGRAMOVERLEAFANDMAYBEGROUPEDUNDERTHEFOLLOWINGHEADINGS:..................................................................................................................32IV.25 A MOREDETAILEDLISTINGOFTHESEACTIVITIESISPRESENTEDIN APPENDIX B TOTHISREPORT,TOGETHERWITHANINDICATIVEANALYSISOFWHETHERTHEACTIVITIESTYPICALLYOCCURATANATIONAL,DEPARTMENTALORPROCURINGAUTHORITYLEVEL..........................................................................................33............................................................................................................................................................................1

Standardisation...........................................................................................................................................36

IV.26 A KEYASPECTOFTHETRANSITIONFROMPROGRAMMEMOBILISATIONTOPROGRAMMEEXPANSIONWILLBETHESTANDARDISATIONOFTHE PPP PROCUREMENTPROCESSBOTHWITHINANDACROSSSECTORS. 36

IV.27 THEPREPARATIONOFPOLICYGUIDELINESPROMOTINGTHESTANDARDISATIONOFCONTRACTUALTERMSANDTHEDEVELOPMENTOFMODELCONTRACTSSERVESTHREEKEYOBJECTIVESASSETOUTINTHEUK TREASURY TASKFORCEPUBLICATION, STANDARDISATIONOF PFI CONTRACTS:......................................36IV.28 THEREARENOFUNDAMENTALREASONSTOASSUMETHATTHESAMEBENEFITSOFCONTRACTSTANDARDISATIONCANNOTBEREALISEDIN IRELAND. THECREATIONOFACONSISTENTAPPROACHTO PPPACROSSALLPUBLICCAPITALINFRASTRUCTURE-PROCURINGSECTORSMUSTTHEREFOREBEAPRIORITYOBJECTIVEFORTHENEWSTRUCTURES. GREATERSTANDARDISATIONOFAPPROACHHASTHEPOTENTIALTOPROVIDESUBSTANTIALSAVINGSANDVALUEFORMONEYINTHEPROCUREMENTOF PPP PROJECTS..............36IV.29 STANDARDISATIONOFGUIDANCE, PROCEDURESANDCONTRACTTERMSDOESNOTAMOUNTTOAONESIZEFITSALLAPPROACHTO PPP PROCUREMENT, CONSTRAININGTHESCOPEFORINNOVATIONANDEXPERTISEIMPLICITINTHE PPP APPROACHTOPUBLICCAPITALANDSERVICEPROCUREMENT. INSTEADITISANESSENTIALSTEPINAMELIORATINGCONTRACTUALCOMPLEXITYANDREDUCINGTHEHIGHCOSTOFPROCURING PPP PROJECTSTOBOTHTHEPUBLICANDPRIVATESECTORS.........................................................36IV.30 THEADOPTIONOFSTANDARDTERMSWILLREMOVEUNJUSTIFIABLEINCONSISTENCIESBETWEEN PPPDEALSINFUTURE. ITWILLBEESSENTIALFORALLTHOSEINVOLVEDINTHEDEVELOPMENTOFTHE PPPPROGRAMMETOASSESSHOWTHESETERMSWORKINPRACTICE. AS PPP CONTINUESTODEVELOPINTHE


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FUTUREANDTHEPILOTPROJECTSMATURE, ITISLIKELYTHATSTANDARDCONTRACTUALTERMSWILLREQUIREPERIODICUPDATINGTOREFLECTTHECHANGINGMARKETENVIRONMENTFORPPP ANDTHEREQUIREMENTTOMAXIMISETHEVALUEFORMONEYBENEFITSOF PPPS.......................................................36IV.31 ITMUSTALSOBERECOGNISEDTHATTHESECTORALDIVERSITYOFTHE PPP PROGRAMMEMEANSTHATSOMEISSUESWILLNOTBEAMENABLETOAUNIFORMAPPROACH. ALLPROJECTSWILLRAISEISSUESTHATCANNOTBEADDRESSEDBYGENERALGUIDANCE. HOWEVER, BYHIGHLIGHTINGTHEBROADRANGEOF

ISSUESWHEREASTANDARDAPPROACHISWARRANTED, POLICYGUIDANCECANHELPTOENCOURAGEANEARLYFOCUSONTHEKEYPROJECTSPECIFICISSUES........................................................................................36IV.32 VARYINGFORMSOFSTANDARDISATIONOF PPP CONTRACTSANDPROCEDURESFORPROCUREMENTONASECTORALBASISCREATESTHEPROBLEMOFANUNCOORDINATEDAPPROACHTOCONTRACTUALTERMS,WHICHUNDERMINESTHECONFIDENCE, COHESIONANDACHIEVEMENTOFOPTIMALRISKALLOCATIONANDVALUEFORMONEYOFTHEOVERALLPROGRAMME. INSUCHCIRCUMSTANCES, THEREISALSOARISKOFCONTINUALLYCOVERINGTHESAMEISSUEFROMAFIRSTPRINCIPLESSTANDPOINT, WHICHISCLEARLYINEFFICIENTANDCOSTLY. SOMEFORMOFSTANDARDISATIONATACENTRALLEVELISTHEREFOREBOTHDESIRABLEANDNECESSARY..............................................................................................................................37

V. EFFECTIVENESS OF EXISTING ARRANGEMENTS.........................................38

INTRODUCTION..................................................................................................................................................38V.1 THESCOPEANDNATUREOFTHE PPP PROGRAMMEWILLCHANGEOVERTIMEASTHEPROCESSEVOLVES.

ITISESSENTIALTOTAKETHISINTOACCOUNTWHENMAKINGANASSESSMENTOFTHERELATIVEPOSITIONINGOFSTRUCTURESATANYPOINTINTIME.............................................................................................................38V.2 THEFOCUSFORGOVERNMENTSTRUCTURESINTHEMOBILISATIONPHASEHASBEENONDELIVERINGTHEPROJECTSEARMARKEDINTHE NATIONAL DEVELOPMENT PLAN. INESSENCE, THISPHASEHASBEENABOUTPREPARINGTHEGROUNDFORTHEROLL-OUTOFAMAJORPPP PROGRAMME. ASACONSEQUENCE, THEINITIALFOCUSFORPPP HASBEENONESTABLISHINGANDOPERATINGSTRUCTURESTOFACILITATEPROCUREMENTANDPROJECTMANAGEMENT.....................................................................................................38V.3 ASTHE PPP LIFECYCLEMOVESTHROUGHEXPANSIONTOMATURITY, THEFOCUSWILLSWITCHTOCONTRACTMANAGEMENTANDDELIVERYOFEFFECTIVESERVICES. ANYASSESSMENTOFFORWARD-LOOKINGSTRUCTURALREQUIREMENTSMUSTTAKEACCOUNTOFTHISCHANGINGEMPHASIS........................................38V.4 THEKEYASSESSMENTCRITERIAFORTHEMOBILISATIONPHASEOFTHE PPP PROGRAMMEWEREOUTLINEDINTHELASTSECTION. THESEREPRESENTTHEPRIMARYOBJECTIVESFORPPP STRUCTURESDURINGTHEMOBILISATIONPHASEANDTHEREISANEEDTOREFLECTONHOWWELLCURRENTSTRUCTURESHAVEPERFORMEDAGAINSTTHESEOBJECTIVESDURINGTHEMOBILISATIONPHASEIN IRELAND. THESEARESETOUTBELOWASBUILDINGBLOCKSTHATNEEDTOBEADDRESSEDDURINGTHEMOBILISATIONPHASE...................38

Creating Embryonic Structures...................................................................................................................38

V.5 EFFECTIVEMOBILISATIONOFANY PPP PROGRAMMEISASMUCHCONCERNEDWITHENSURINGTHATTHEKEY PPP BUILDINGBLOCKSAREINPLACEASITISWITHACTUALLYMANAGINGAPROGRAMMEOF PPPPROJECTS. BOTHSTRUCTURESANDPROJECTSNEEDTOBEINPLACEIFTHEOVERALL PPP PROGRAMMEISTOHAVETHENECESSARYIMPACT. ........................................................................................................................38V.6 SIGNIFICANTPROGRESSHASBEENMADEINESTABLISHINGTHESTRUCTURALFRAMEWORKREQUIREDTOBRINGTHE PPP PROGRAMMETHROUGHTHEMOBILISATIONPHASE:................................................................39V.7 OURCONSULTATIONSSUGGESTTHATTHEROLEOFTHE OFFICEOF PUBLIC WORKSINTHEMOBILISATIONOFTHE PPP PROGRAMMECOULDBEENHANCED. WEWOULDSUGGESTTHATATBOTHAPOLICYANDRESOURCELEVELTHERESHOULDBESIGNIFICANTENGAGEMENTBY OPW INTHEMOVEMENTTOPROGRAMMEEXPANSION. EXPERIENCEELSEWHEREINDICATESTHATTHEABILITYTOADAPTTOTHECHANGING PPP ENVIRONMENTISCRITICALTOTHEFUTURESUCCESSOFBODIESOFTHISNATURE.................39

Stakeholder Engagement.............................................................................................................................39

V.8 THEEFFECTIVEENGAGEMENTOFSTAKEHOLDERSINTHE PPP PROGRAMMEHASBEEN, ANDWILLCONTINUETOBE, CENTRALTOTHEOVERALLEFFECTIVENESSOFTHEPROGRAMME. PROGRESSTODATEINTHISAREAHASBEENMIXED. ............................................................................................................................39V.9 THENATUREOFTHEINTERVENTIONSREQUIREDTOEFFECTIVELYENGAGESTAKEHOLDERSDIFFERSDEPENDENTONTHENATUREOFTHEDISCRETESTAKEHOLDERGROUP. WITHINTHECONTEXTOFSOCIALPARTNERSHIP, EFFECTIVEENGAGEMENTWITHTHESOCIALPARTNERSATANATIONALLEVELISIMPORTANTFORTHEOVERALLSUCCESSOFTHE PPP PROGRAMME. ATAMOREOPERATIONALLEVEL, EMPLOYEEANDENDUSERSTAKEHOLDERGROUPSMUSTALSOBEEFFECTIVELYENGAGEDINTHEPROCESS....................................39V.10 ATANATIONALLEVEL, MUCHPROGRESSHASBEENMADEINEFFECTIVELYENGAGINGSTAKEHOLDERSSUCHASTHESOCIALPARTNERS, PRIMARILYTHROUGHTHEWORKOFTHE IAG. RELEVANTSTAKEHOLDERSHAVEBEENIDENTIFIED, CONSULTATIONPROTOCOLSANDSTRUCTURESESTABLISHEDANDCOMMUNICATIONSWITHKEYSTAKEHOLDERSHASBEENONGOING. THISHASWORKEDWELLTODATE........................................39V.11 PROGRESSTOOHASBEENMADEWITHINSOMEOFTHEKEYSECTORSINVOLVEDINTHE PPPPROGRAMME. FOREXAMPLE, INTHEEDUCATIONSECTOR, EFFECTIVEONGOINGCONSULTATIONHASTAKEN


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PLACEINVOLVINGKEYSTAKEHOLDERSSUCHASSCHOOLPRINCIPALS, EMPLOYEESANDGOVERNORS.SUCCESSSUCHASTHISHASNOT, HOWEVER, BEENMIRROREDACROSSALLOFTHEPILOTPROJECTS. INPARTICULAR, OURRESEARCHINDICATESTHATTHEREREMAINSASIGNIFICANTGAP, BETWEENTHELEVELOFSTAKEHOLDERENGAGEMENTACHIEVEDNATIONALLYANDTHATEVIDENTATPROJECTLEVEL. THISISESPECIALLYTRUEINRELATIONTOLOCALAUTHORITYOFFICIALSANDLOCALTRADEUNIONREPRESENTATIVES..............................................................................................................................................40

V.12 LEVELSOFUNDERSTANDING, COMFORTWITHTHEPROCESS, AWARENESSOFTHEOVERALLDIRECTIONOF PPP AREMUCHLESSDEVELOPEDWITHINSTAKEHOLDERGROUPSATAPROJECTLEVELINPROCURINGBODIES. WHILETHISISNOTUNEXPECTED, ITWILLBEESSENTIALTOINCREASETHISLEVELOFUNDERSTANDINGANDCOMMITMENTIFTHEPROGRAMMEISTOBESUCCESSFUL. ...........................................40

Market Development...................................................................................................................................40

V.13 ONEOFTHEKEYACTIVITIESDURINGTHEMOBILISATIONPHASEOFANY PPP PROGRAMMEISTHECREATIONANDMAINTENANCEOFPRIVATESECTORINTERESTINTHEPROGRAMME. IN IRELANDTHISHASINVOLVEDMARKETINGANDCOMMUNICATING PPP OPPORTUNITIESBOTHWITHINTHECOUNTRYANDABROAD. THISWORKHASBEENCONDUCTEDBYDEPARTMENTAL PPP UNITSANDTHE DEPARTMENTOFFINANCE PPP UNIT............................................................................................................................................40V.14 DEPARTMENTAL PPP UNITSHAVEBEENINVOLVEDINVARIOUSCONSULTATIONEXERCISESWITHPOTENTIALPRIVATESECTORSERVICEPROVIDERS. THESEINTERACTIONSHAVEPROVEDTOBEUSEFULINRAISINGAWARENESSINTHEPRIVATESECTORASTO PPP OPPORTUNITIESIN IRELAND. THEYHAVEALSO

CONTRIBUTEDTOTHE PPP LEARNINGEXPERIENCEWITHINDEPARTMENTS. ....................................................40V.15 THE DEPARTMENTOF FINANCE PPP UNITHASALSOENDEAVOUREDTOCREATEAWARENESSOUTSIDETHECOUNTRYTHATTHE GOVERNMENTISCOMMITTEDTO PPP SOLUTIONSFORTHEDELIVERYOFQUALITYPUBLICINFRASTRUCTUREANDSERVICES. THEINVOLVEMENTOFTHIS UNITHASBEENANDWILLCONTINUETOBEANIMPORTANTFACTORINPROMOTINGTHEOPPORTUNITIESONOFFERTOINTERNATIONALPRIVATESECTORORGANISATIONS....................................................................................................................................40V.16 MARKETDEVELOPMENTHASALSOBEENASSISTEDBYINTERACTIONSWITHKEYPRIVATESECTORINTERESTSSUCHAS IBEC AND CIF. THISPROCESSAPPEARSTOHAVEBEENGREATLYFACILITATEDBYTHEOPERATIONOFTHE IAG.....................................................................................................................................40V.17 THESUCCESSOFTHERANGEOFMARKETDEVELOPMENTINITIATIVESTHATHAVEBEENUSEDDURINGTHEMOBILISATIONPHASEISEVIDENCEDBYTHENUMBEROFPRIVATESECTORCONSORTIAINVOLVEDINBIDDINGFORPPP PROJECTSTODATE. EXAMPLESINCLUDE:............................................................................40V.18 PROGRESSMADEINTHISAREADURINGTHEMOBILISATIONPHASEHASBEENSIGNIFICANT. THEKEY

CHALLENGEASTHEPROGRAMMEMOVESTOWARDSANDINTOTHEEXPANSIONPHASEWILLBETOMAINTAINANDENHANCELEVELSOFPRIVATESECTORINTERESTIN PPP BOTHIN IRELANDANDABROAD......................41

Ensuring Deal Flow....................................................................................................................................41

V.19 A KEYSUCCESSFACTORINTHEDELIVERYOF PPP PROJECTSANDINTHEDEVELOPMENTOFACOMPETITIVE PPP MARKETISASOLIDFLOWOFPROSPECTIVEPROJECTSBROUGHTFORWARDATANEARLYSTAGEBYDEPARTMENTSANDPROCURINGAUTHORITIES..................................................................................41V.20 IN IRELAND, THECO-ORDINATEDAPPROACHOFTHE NATIONAL DEVELOPMENT PLANFOCUSESONACLEARAGENDAFORINFRASTRUCTUREDEVELOPMENTAND PPP. WEUNDERSTANDFROMOURDISCUSSIONSWITHMOSTOFTHEDEPARTMENTAL PPP UNITSTHATTHEREISASTRONGDEALFLOWANDTHATTHISISAPOSITIVEFEATUREOFTHE PPP PROGRAMMEIN IRELAND................................................................................41V.21 INMEETINGTHEREQUIREMENTFORIDENTIFYINGANDINITIATING PPP PROJECTSDEPARTMENTAL PPPUNITSANDPROCURINGAUTHORITIESHAVELEDTHEPROCESSOFGENERATINGSUFFICIENTPROJECTDEALFLOWTOBUILDANDSUSTAINTHE PPP PROGRAMME. DEALFLOWHASBEENIDENTIFIEDANDISINPLACE,MOREINSOMESECTORSTHANOTHERS, BUTASOLIDSTARTHASBEENMADE:................................................41

Pilot Project Delivery..................................................................................................................................41

V.22 DURINGTHEMOBILISATIONPHASETHEKEYFOCUSINRELATIONTOPROJECTDELIVERYISONINITIATINGPROJECTSFROMWHICHLESSONSCANBELEARNEDANDPOLICYDEVELOPED. ..............................41V.23 INASSESSINGTHEEFFECTIVENESSOFTHESTRUCTURESTODATEINRELATIONTOPROJECTDELIVERYWEWOULDTAKEINTOACCOUNTPROGRESSONTHEPILOTPROJECTSWHICHWEUNDERSTANDAREONSCHEDULEWITHNOSIGNIFICANTDELAYSANTICIPATEDANDALLKEYMILESTONESBEINGMET. SIGNIFICANTPROGRESSINBRINGINGPROJECTSTODELIVERYHASBEENMADE....................................................................41V.24 QUESTIONSARISEHOWEVERINANUMBEROFKEYAREASINRELATIONTOPROJECTDELIVERY, ASOUTLINEDBELOW:.............................................................................................................................................42V.25 THEFIRSTOFTHESEISSUESCONCERNSTHEDEGREETOWHICH PPP UNITSHAVESUPPLEMENTEDTHEIROWNEXPERIENCEBYBUYINGINSPECIALISTPROFESSIONALSERVICESANDPARTICULARLYTHECOSTASSOCIATEDWITHTHIS. TODATETHEINVOLVEMENTOFBOUGHTINSPECIALIST PPP CONSULTINGEXPERTISEINTHEDELIVERYOFTHEPILOT PPP PROJECTSREPRESENTSAVERYSIGNIFICANTCOMMITMENTBYIMPLEMENTINGDEPARTMENTSANDAGENCIESANDBYTHE EXCHEQUER. ......................................................42


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V.26 ITHASALSOMEANTTHATDIFFERENTLEGAL, PROFESSIONAL, TECHNICALANDFINANCIALTEAMSARESERVINGDIFFERENTDEPARTMENTS. THEREISADANGERASSOCIATEDWITHBRINGINGDIFFERENTVIEWSANDINTERPRETATIONSANDIDEASTOBEARINRELATIONTOSOMECONTRACTUALANDPROCUREMENTISSUESASITREPRESENTSATHREATTOTHEDEVELOPMENTOF IRELANDS PPP PROGRAMMEONALONG-TERMSUSTAINABLEBASIS...........................................................................................................................................42V.27 HOWEVER, ITISACKNOWLEDGEDTHATTHEREISASIGNIFICANTNEEDFORTECHNOLOGICAL, FINANCIAL

ANDMANAGEMENTEXPERTISESUPPORTINGTHESECTORAL PPP UNITSINTHESHORTTOMEDIUMTERM,PARTICULARLYASTHENUMBERANDVARIETYOFPROJECTSGROWANDTHESECOSTSMAYBEJUSTIFIEDIFTHEPILOTPROJECTSPROVIDEASUSTAINABLEPLATFORMFORTAKING PPPSIN IRELANDINTOTHEEXPANSIONPHASEOFTHE PPP LIFECYCLE........................................................................................................42V.28 INRELATIONTOTHELATTEROFTHESEISSUES, WEBELIEVETHATINCERTAINPROJECTSTHEREHASBEENTOOMUCHEMPHASISPLACEDONINPUT-TYPESPECIFICATIONISSUESRATHERTHANOUTPUT-BASEDSERVICEPROVISION............................................................................................................................................42

Initial PPP Policy and Procedures.............................................................................................................42

V.29 THEEXPERIENCEOFTHEMOBILISATIONPHASEISTHATINMANYINSTANCESPOLICYDEVELOPMENTISLAGGINGBEHINDPROJECTS. THISIS, TOACERTAINEXTENT, APOSITIVEREFLECTIONONTHEPROGRESSTHATHASBEENMADEATPROJECTDELIVERYLEVELBUTITALSOHIGHLIGHTSTHEREQUIREMENTTOADDRESSTHEPOLICYDEFICITTHATHASDEVELOPED. ............................................................................................................42V.30 PPP GUIDELINESHAVEBEENDEVELOPEDANDISSUEDBYTHE DEPARTMENTOF ENVIRONMENTAND

LOCAL GOVERNMENTANDAREBEINGDEVELOPEDINTHE DEPARTMENTOF PUBLIC ENTERPRISEINRELATIONTOPUBLICTRANSPORT. THESEGUIDELINESPROVIDEABASISFORMOVINGFORWARDINTHESESECTORS.THEREISANEED, HOWEVER, FORACO-ORDINATEDAPPROACHTOTHEDEVELOPMENTOFGUIDELINESACROSSDEPARTMENTS. ....................................................................................................................................42V.31 WEBELIEVETHAT, TOALARGEDEGREE, GUIDELINESALREADYDEVELOPEDINSECTORSCANPROVIDEABASISFORTHEDEVELOPMENTOFNATIONAL PPP GUIDELINESTOAPPLYACROSSTHE PPP SPECTRUM.......42V.32 SOME DEPARTMENTSHAVEADAPTEDEXISTINGCONTRACTDOCUMENTATIONTOMEETTHEIROWNREQUIREMENTS. THISHASFACILITATEDMOVEMENTINRELATIONTOPROGRESSINGINDIVIDUALPILOTPROJECTSBUTTENDSTOINCREASETHERISKOFFRAGMENTATIONINTHEPROCESS. THEREALRISKINTHESECIRCUMSTANCESISTHAT, INTHEABSENCEOFROBUSTNATIONALPOLICYGUIDELINES, INDIVIDUALSECTORSPURSUEANAPPROACHTHATISNOTINTHENATIONALINTEREST.....................................................................43V.33 THEREISALSOCLEARLYAREQUIREMENTFORMORESTANDARDISATIONINTHE PPP PROCESSTHANHASBEENTHECASETODATE. THEIMPACTTHATALACKOFSTANDARDISATIONHASONINFLATINGBIDDING

COSTSISAPOTENTIALDANGERTOTHEPROCESS. UNLESSTHISISSUEISAPPROPRIATELYADDRESSED, THEREISAREALDANGERTHATMANYCONTRACTORSWHOPUTINBIDSFORTHEEARLYPROJECTSMAYBELESSWILLINGTODOSOINTHEFUTURE, GIVENTHEHIGHCOSTSASSOCIATEDWITHBIDDING.................................43

Awareness and Understanding across Government...................................................................................43

V.34 OURCONSULTATIONPROGRAMMEHASREVEALEDAREASONABLELEVELOFAWARENESSOFTHECONCEPTOF PPP. HOWEVER, WIDESPREADTRAININGPROGRAMMESAREONLYATCOMMENCEMENTANDTHEREFOREMUCHFURTHERWORKISTOBEDONEIFTHISISTOALONGWITHTHENEEDSOFANEXPANDEDPROGRAMMEOFPROJECTS.................................................................................................................................43EXPANSION PHASE............................................................................................................................................44

V.35 OVERALL, INTERMSOFTHEREQUIREMENTSOFTHEMOBILISATIONPHASEOFTHE PPP PROGRAMME,THEEXISTINGSTRUCTURESHAVEPERFORMEDRELATIVELYWELLTODATE. MAJORCHALLENGESLIEAHEADHOWEVER. THEREQUIREMENTSOFTHEEXPANSIONPHASEOFTHE PPP PROGRAMME, OUTLINEDEARLIERINSECTIONFOUR, DIFFERFROMTHOSETHATHAVEAPPLIEDTODATE. TOCONCLUDETHISSECTION, WEPROVIDEABRIEFASSESSMENTOFTHECHALLENGEFACINGTHEEXISTINGSTRUCTURESINMEETINGTHEREQUIREMENTSOFTHEEXPANSIONPHASE........................................................................................................44

Accountability..............................................................................................................................................44

V.36 ACCOUNTABILITYARRANGEMENTSTODATEWITHINTHEEXISTINGSTRUCTURESHAVENOTBEENCLEARLYDEFINED. THISHASBEENAPPROPRIATEDURINGTHEMOBILISATIONPHASEWHENALLINTERESTEDPARTIESHAVEENGAGEDINCONCERTEDANDSOMETIMESOVERLAPPINGEFFORTSTOSUCCESSFULLYLAUNCHTHE PPP PROGRAMME. THERELATIVELYLOWVOLUMEOFPROJECTSINTHEMOBILISATIONPHASEHAVEALSOENABLEDKEYPARTICIPANTSINTHEEXISTINGSTRUCTURESTOENGAGEINAWIDERRANGEOFACTIVITIESTHANWILLBEPOSSIBLEDURINGTHEEXPANSIONPHASEWHENTHENUMBEROF PPP PROJECTSWILLINCREASEDRAMATICALLY.................................................................................................................................44V.37 DURINGTHEEXPANSIONPHASEOFTHE PPP LIFECYCLE, THEEFFECTIVEMANAGEMENTOFTHEWIDERPPP PROGRAMMEWILLREQUIRECLEARRESPONSIBILITYANDACCOUNTABILITYFRAMEWORKSTOBEPUTINPLACE. ...............................................................................................................................................................44

Delivery Structures......................................................................................................................................44

V.38 PROJECTDELIVERYSTRUCTURESESTABLISHEDDURINGTHEMOBILISATIONPHASEHAVELARGELYPERFORMEDWELL. THEYHAVEBEENSUCCESSFULINDELIVERINGALIMITEDNUMBEROFPILOTPROJECTSTO


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ANAGREEDMILESTONEPLAN. THEINCREASEINTHENUMBERANDRANGEOF PPP PROJECTSINTHEEXPANSIONPHASE, HOWEVER, WILLREQUIRETHESESTRUCTURESTOBECAPABLEOFASTEPCHANGEENHANCEMENTOFDELIVERYCAPABILITYIFTHEYARENOTTOBEOVERWHELMED........................................44

Securing Resources.....................................................................................................................................44

V.39 THEEXISTINGRESOURCEANDSKILLSPROFILEOFTHE PPP STRUCTURESINPLACEFORTHEMOBILISATIONPHASEHASBEENADEQUATETOMEETTHEREQUIREMENTSOFTHISPHASEOFTHE PPP

LIFECYCLE. THESEARRANGEMENTSARENOT, HOWEVER, WELLPLACEDTOMEETTHECHALLENGESOFTHEEXPANSIONPHASE..............................................................................................................................................44V.40 THEPROSPECTIVESCALEOF IRELANDS PPP PROGRAMMEMOVINGFORWARDISDAUNTING, PEAKINGATTWOPROCUREMENTDEALSONAVERAGESIGNEDPERMONTH, TODELIVERCOMMITMENTSUNDERTHE

NATIONAL DEVELOPMENT PLANALONE. THEREISAWIDESPREAD, ANDINOURVIEWWELL-GROUNDED,CONCERNTHATCURRENTSTRUCTURESANDRESOURCESWILLBEINADEQUATEINMEETINGTHEREQUIREMENTSOFA PPP PROGRAMMEOFTHISMAGNITUDE. .........................................................................44

Value for Money..........................................................................................................................................45

V.41 VALUEFORMONEYWILLBECOMEINCREASINGLYIMPORTANTINRESPECTOFPROJECTTRANSACTIONCOSTSWITHTHEACCELERATIONOFTHENUMBEROFPROJECTSUNDERPROCUREMENT. PROGRESSONSTANDARDISATIONOFCONTRACTTERMSANDDEVELOPMENTOFMODELCONTRACTSWILLBEOFMAJORSIGNIFICANCEINEFFECTINGCOSTREDUCTIONSANDWHILEPROGRESSHASBEENMADEONTHESEISSUES,STANDARDISATIONSHOULDBEAFFORDEDAHIGHERPRIORITYGOINGFORWARD, BASEDONTHEEXPERIENCE

OFTHEINITIALPILOTPROJECTS.........................................................................................................................45Momentum...................................................................................................................................................45

V.42 ITISCLEARTHAT, WITHAFEWAREASOFEXCEPTION, SUBSTANTIALMOMENTUMHASBEENGENERATEDINASUCCESSFUL PPP MOBILISATIONPHASEANDTHETRANSITIONTOTHEEXPANSIONPHASEOF PPP ISALREADYUNDERWAY. THEREISLITTLEDOUBT, HOWEVER, THATMAJORSTEPCHANGEWILLNEEDTOOCCURINANUMBEROFAREASIFTHETRANSITIONTOTHEEXPANSIONPHASEOFTHE PPP LIFECYCLEISTOBESUCCESSFULLYACHIEVED. INTHENEXTSECTIONOFTHISREPORTWEEXAMINETHESPECIFICCHALLENGESINMOVINGTHE PPP PROGRAMMEFORWARDINTOTHEEXPANSIONPHASE..........................................................45

VI. STRUCTURAL CONSIDERATIONS .............................................................46

V.43 WEHAVESETOUTATTHEENDOF SECTION V, THECRITICALSUCCESSFACTORSFORMOVINGASIGNIFICANTPROGRAMMEFROMITSMOBILISATIONPHASEINTOEXPANSION. THESCOPEOFTHECHALLENGEINMOVINGFORWARDTOEXPANSIONISAFUNCTIONOFTHEVOLUMEOFPROJECTS, TIMEFRAME, BREADTHOFAPPLICATIONANDDIVERSITY............................................................................................................................46V.44 ASOUTLINEDIN SECTION TWO, THISISASIGNIFICANTCHALLENGEIF PPP ISTOPLAYITSDESIGNATEDROLEINTHEDELIVERYOFTHE NATIONAL DEVELOPMENT PLANANDASAFOUNDATIONFORGOVERNMENTSPROGRAMMEOFREGULATORYREFORM.............................................................................................................46V.45 THEKEYSUCCESSFACTORSFORMOVING PPP IN IRELANDFROMITSMOBILISATIONTOITSEXPANSIONPHASEARESETOUTINTHEBOXBELOW............................................................................................................46V.46 INTHISSECTION, WEEXAMINETHEOPTIONSBYWHICHTHEKEYSUCCESSFACTORSCANBEADDRESSEDINPROGRESSING PPP IN IRELAND......................................................................................................................46ACCOUNTABILITY.............................................................................................................................................46

V.47 PROPERACCOUNTABILITY, CLEARLYUNDERSTOODANDWITHAPPROPRIATESUPPORTINGPROCESS, ISATTHEHEARTOFTHESUCCESSFULMOVETOTHEEXPANSIONPHASE. ESTABLISHINGACCOUNTABILITYWILLEMBRACE:...........................................................................................................................................................46V.48 OFCENTRALIMPORTANCEINESTABLISHINGACCOUNTABILITYFORPPP ISTHEFITWITHEXISTINGMODELSOFGOVERNMENT. ITISACLEARLESSONFROMINTERNATIONALEXPERIENCETHATATTEMPTINGTOROLLOUTTHEPROGRAMMETHROUGHSTRUCTURESANDPROCESSES, WHICHAREINCONGRUENTWITHPREVAILINGARRANGEMENTS, WILLNOTSUCCEED. ATBEST, ITISLIKELYTORESULTINDELAYSINMAKINGPROGRESSWITHTHEPROGRAMMEROLL-OUT...................................................................................................47V.49 THEDESIRETOSEE PPP ASAMAINSTREAMPROCUREMENTOPTIONFORGOVERNMENTIN IRELANDANDANINTEGRALPARTOFTHEDELIVERYOFPUBLICSERVICES, HIGHLIGHTSTHENEEDTOCLOSELYFIT PPP WITHTHEWIDERMODELOFACCOUNTABILITY. THEACCOUNTABILITYMODELSDEVELOPINGUNDERTHESTRATEGIC MANAGEMENT INITIATIVEAPPEARTOPRESENTAROBUSTFRAMEWORKINSIDEWHICH PPP CANBEIMPLEMENTEDACROSSGOVERNMENT. BYIMPLICATION, THECOREMECHANISMFORTHEROLL-OUTOFTHE PPP PROGRAMMEINTHISCONTEXTWILLBETHEDEPARTMENTALSTRATEGICPLANSORSTRATEGYSTATEMENTS......................................................................................................................................................47DELIVERY STRUCTURES ...................................................................................................................................47

V.50 THEMOSTOBVIOUSDIFFERENCEINMOVINGINTOTHEEXPANSIONPERIODISTHESHARPINCREASEINTHENUMBEROFPROJECTSCOMINGINTOPROCUREMENTANDTHEFOCUSONDELIVERYOFPROJECTS.STRUCTURESACROSSGOVERNMENTSHOULDBEORIENTATEDTOWARDPROJECTDELIVERYANDTHEMECHANISMSANDMARKETSBYWHICHTHEASSOCIATEDSERVICESAREDELIVERED. CRITERIAWHICHARE


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DERIVEDFROMTHEKEYSUCCESSFACTORSANDWHICH, FROMANORGANISATIONALPERSPECTIVE, THESTRUCTURESMUSTMEETARESETOUTINTHETABLEBELOW..........................................................................47V.51 AGAINSTTHESECRITERIA, ITISPOSSIBLETOASSESSFOURMAINORGANISATIONMODELSBYWHICHPPP CANBEDELIVEREDONTHEEXPANDEDANDACCELERATEDPROGRAMMEOFPROJECTS, UNDERTHETERMSOFREFERENCEFORTHEREVIEW............................................................................................................48V.52 THEFIRSTMAJORISSUETOBEADDRESSEDISTHEREQUIREMENTFORANYCENTRALENTITY. THIS

OPTIONCANBESTBEEXAMINEDBYCONSIDERINGTHEFORMANDOPERATIONOFTHEINSTITUTIONALSTRUCTURESINTHEABSENCEOFANYCENTRALENTITYDEFINEDBELOWAS: ................................................48V.53 THEPERCEIVEDADVANTAGEOFTHISAPPROACHISTHATTHERESPONSIBILITYFORALLASPECTSOFTHEDEVELOPMENTOF PPP RESIDESWITHINTHESECTORSBRINGINGFORWARDPROJECTS. THERELEVANTCONTRACTINGAUTHORITYHASAVERYHIGHDEGREEOFAUTONOMYANDINDEPENDENCEINRESPECTOFTHEDEVELOPMENTOFPOLICYINTHESECTORTHATCANBEDESIGNEDTOMATCHCLOSELYTHEREQUIREMENTFORACCELERATEDPROJECTDELIVERY.............................................................................................................48V.54 THEMAINDISADVANTAGEISTHELACKOFCONSISTENCYANDCO-ORDINATIONOF PPP PROCUREMENTACROSSSECTORSANDTHEVERYLIMITEDSCOPEFORDEVELOPINGNATIONALPOLICYPERSPECTIVES. THEREISACLEARRISKTHAT, GIVENTHEHIGHPRIORITISATIONOFPROJECTDELIVERYWITHINSECTORS, THEFULLVALUEFORMONEYADVANTAGESOF PPP WILLFAILTOBEREALISED. MOREOVER, DIVERGENCESINAPPROACHESBETWEENSECTORSMAYTENDTOCONSTRAINCOMPETITIONGIVENTHELACKOFSCOPEOFTHESTANDARDISATIONOFTHEPROCUREMENTPROCESSANDUNDERMINETHECREDIBILITYOFTHE PPP

PROGRAMMEOVERALL. MOREOVER, UNDERANYDECENTRALISEDMODELASOUTLINEDABOVE, ITWOULDBEMOREDIFFICULTTOCONNECTUPEFFECTIVELYTHEMANAGEMENTOFTHEPROGRAMMEOVERALLWITHTHEPOLITICALLEVELWHICHHASBEENHIGHLIGHTEDASAKEYLEVERFORINFLUENCEANDAUTHORITYINMOVINGTHE PPP PROGRAMMEFORWARD. ....................................................................................................48V.55 OURASSESSMENTISTHATTHISOPTIONWHERENOCENTRALENTITYEXISTSCANBEDISMISSEDASASUB-OPTIMALSOLUTIONINTERMSOFTHEREALISATIONOFTHEBENEFITSOFA PPP APPROACH. ALLOFTHEEVIDENCEISTHATTHEREIS ACOMPELLINGNEEDFORCENTRALENTITYATANATIONALLEVEL TOEFFECTIVELYMEETATAMINIMUMTHEREQUIREMENTSFOR:..........................................................................48V.56 INADDITION, OURCONSULTATIONSWITHSTAKEHOLDERSBOTHWITHINANDOUTSIDETHEPUBLICSERVICEHIGHLIGHTEDACLEARRECOGNITIONTHATTHEWORKOFACENTRALBODYHASANIMPORTANTROLETOPLAYINTHEDELIVERYOFTHEPROGRAMMEBUTTHATTHISROLESHOULDENTAILANEXTENSIONOFEXISTINGINSTITUTIONALARRANGEMENTSRATHERTHANSUBSUMINGDEPARTMENTALRESPONSIBILITIES............................................................................................................................................................................49

V.57 OURRESEARCHINOTHERJURISDICTIONSHASHIGHLIGHTEDTHELESSONFROMTHEINTERNATIONALEXPERIENCEOF PPP CONFIRMINGTHEBENEFITSOFACO-ORDINATEDNATIONALAPPROACHTOTHEMANAGEMENTANDDEVELOPMENTOF PPP, DRIVENBYACREATIONOFANADEQUATELYRESOURCEDCENTRALENTITY................................................................................................................................................49V.58 INSUMMARY, THEDECENTRALISATIONOPTIONSCORESAGAINSTTHECRITERIAASSETOUTBELOW....49V.59 ACCEPTING, THEREFORE, THATACENTRALENTITYISDESIRABLE, THESECONDMAJORISSUETOBECONSIDEREDISTHEDEGREETOWHICHTHESWIFTANDEFFECTIVEDELIVERYOFPROJECTSCANBEPROMOTEDTHROUGHACHANGEINTHEEXISTINGDELIVERYMECHANISMSFORPPP PROJECTSANDTHECREATIONOFASPECIFICCENTRALISED PPP AGENCYWHICHWOULDBEALLOCATEDRESPONSIBILITYFORTHEDELIVERYOFALLMAJORINFRASTRUCTURALPROJECTSONA PPP BASISDEFINEDBELOWAS: ............................................49V.60 THISAPPROACH THEPOLAROPPOSITETO OPTION 1 - WOULDSTRONGLYHIGHLIGHTTHEPRIORITYOFACCELERATEDDELIVERYOFINFRASTRUCTURALPROJECTSANDSIGNALTHESIGNIFICANCEOFTHEADOPTIONOFTHE PPP APPROACHTOPUBLICPROCUREMENT. THEESTABLISHMENTOFANAGENCYWOULDHELPADDRESSTHEDIFFICULTIESGENERATEDBYTURNOVEROFKEYPUBLICSERVICESTAFFWORKINGINTHE PPPAREA. ITWOULDALSOSUPPORTTHEBUILD-UPWITHINTHEPUBLICSECTOROFTHESKILLSANDTECHNICALKNOWLEDGE (I.E. FINANCIAL, LEGAL) REQUIREDFORSUCCESSFUL PPP PROCUREMENTANDPOLICYDEVELOPMENT, LARGELYELIMINATINGTHENEEDFORTHEENGAGEMENTOFEXPENSIVECONSULTANCYEXPERTISEBYCONTRACTINGAUTHORITIES. ITWOULDCLEARLYALSOBECONSISTENTWITHTHEREQUIREMENTFORTHECO-ORDINATEDNATIONALDEVELOPMENTOFTHE PPP PROGRAMMEOVERALLBYREMOVINGRESPONSIBILITYFORTHEDELIVERYOF PPP PROJECTSFROMRELEVANTSECTORS. ......................50V.61 SEVERALSERIOUSDIFFICULTIESCAN, HOWEVER, BEIDENTIFIEDINRELATIONTOTHEROLEANDFUNCTIONSOFTHEPROPOSED PPP AGENCY. THESEREVOLVEPARTICULARLYAROUNDTHEROLEOFTHE PPPAGENCYINMAKINGDECISIONSONSERVICEDELIVERYACROSSALLSECTORSINWHICH PPP PROJECTSAREBEINGDELIVEREDCOMPLETELYSEPARATELYFROMEXISTINGACCOUNTABILITYRELATIONSHIPS, THEREBYGIVINGRISETOAVERYCOMPLEXANDDEMANDINGCO-ORDINATIONTASKFORTHE PPP AGENCY. VERYMAJORISSUESALSOARISEINRELATIONTOTHE PPP AGENCYSRELATIONSHIPWITHEXISTINGANDPROPOSEDPPP DELIVERYAGENCIESSUCHASTHE NRA INTHEROADSSECTORANDTHEPROPOSED RAIL PROCUREMENTAGENCY (RPA) INRAIL.....................................................................................................................................50


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V.62 THEROLEOFTHEAGENCYININFRASTRUCTURALDELIVERYCOULDONLYBEREGARDEDASATRANSITIONALMEASUREASULTIMATELYTHEAGENCYSEXISTENCEWOULDPRECLUDESUCCESSFULDELIVERYOFTHEKEYOBJECTIVEOFEMBEDDINGTHE PPP APPROACHASACENTRALELEMENTOFTHEMAINSTREAMPUBLICPROCUREMENTPROCESS. THISOBJECTIVEISCRITICALTOMAXIMISINGTHEPOTENTIALFORPPPSTOBEINSTRUMENTALINTERMSOFTHERAPIDLYDEVELOPINGAGENDAFORTHEMODERNISATIONOFPUBLICSERVICEDELIVERY, WHICHINTURNREQUIRES PPP TOBECOMEACOREPUBLICPROCUREMENT

MECHANISMRATHERTHANREMAINSEPARATEANDDISTINCT..........................................................................50V.63 NEWINSTITUTIONALSTRUCTURESSUCHASTHEPROPOSED PPP AGENCYWHICHWOULDTAKESOMETIMETOPUTINPLACE (E.G. ONACCOUNTOFTHENEEDFORTHEENACTMENTOFALEGISLATIVEBASIS)WOULDNOTBECONSISTENTWITHTHEIMPERATIVEOFACCELERATEDDELIVERYOFPUBLICINFRASTRUCTURE. WEUNDERSTANDTHATA PPP AGENCY, IFCREATEDUNDERSTATUTORYPOWERS, WOULDREQUIRELEGISLATIONWHICHWOULDREQUIREALENGTHYTIMEFRAMETOENACTMENT (INREGIONOFTWELVETOEIGHTEENMONTHS)........................................................................................................................50V.64 THEREFORE, ADISTINCT PPP AGENCYORSTATUTORYBODYFORPPP INFRASTRUCTUREDELIVERY,ALTHOUGHHAVINGTHEPOTENTIALINPRINCIPLETODRIVETHE PPP AGENDA POLICYANDPROJECTSINTANDEM ACROSSTHEWHOLEOFTHEPUBLICSERVICECOULDONLYCOMEINTOEXISTENCEATALATERPOINTINTHEDESIREDTIMELINE, ATWHICHTIMEMOSTOFITSWORKWOULDALREADYBEACCOMPLISHED.50V.65 A KEYFEATUREOFTHESUCCESSFULROLLINGOUTOF PPP IN IRELANDISTHATITSHOULDASMUCHASPOSSIBLECOINCIDEANDBEINTEGRATED, RATHERTHANBEINCONFLICT, WITHOTHERGOVERNMENT

MECHANISMS, STRUCTURESANDPROCESSES. INTHE IRISHCONTEXT, THISMEANSDOVETAILINGTHE PPPINITIATIVEWITHDEPARTMENTALSTRUCTURESANDPROCESSES. THEREFORE, ATAPRAGMATICLEVEL, THECREATIONOFABODYWHICHDOESNOTFITCOMFORTABLYWITHINTHEEXISTINGGOVERNMENTALFRAMEWORKSEEMSILL-EQUIPPEDTOMEETTHEDEMANDING PPP AGENDA. THISVIEWISREINFORCEDBYTHESHORT-TERMRISKSOFSERIOUSDISLOCATIONTOTHECURRENTSTRUCTURESANDPROJECTSWHICHANYMAJORSTRUCTURALCHANGEISLIKELYTOGENERATE. ITISCLEARLYESSENTIALTHATTHEROLL-OUTOFTHEPILOTANDOTHERPPP PROJECTSISNOTIMPEDEDINANYFASHION.........................................................51V.66 THECONCLUSIONMUSTTHEREFOREBETHATTHEESTABLISHMENTOFASEPARATE PPP AGENCYWOULDBEINCONSISTENTWITHBOTHTHEOBJECTIVESOFACCELERATED PPP IMPLEMENTATIONANDAPPROPRIATEINTEGRATIONWITHTHEWIDERMACHINERYOFGOVERNMENT. MOREOVER, ITWOULDNOTSITCOMFORTABLYWITHTHEBROADTHRUSTOFTHE STRATEGIC MANAGEMENT INITIATIVE (SMI) BYLEADINGTOAVERYSIGNIFICANTDILUTIONOFRESPONSIBILITYANDAUTHORITYATDEPARTMENTALLEVELFORTHEDELIVERYOFTHEIROWNSTRATEGIESINSOFARASTHEYRELATETOINFRASTRUCTUREANDSERVICE

PROVISIONINITIATIVES......................................................................................................................................51V.67 INSUMMARY, THEPROCUREMENTAGENCYSCORESAGAINSTTHECRITERIAASSETOUTBELOW:..........51V.68 GIVENTHEREQUIREMENTTHEREFOREFORACENTRAL PPP ENTITYBUTONETHATCLOSELYALIGNSWITHEXISTINGGOVERNMENTALSTRUCTURES, TWOFURTHEROPTIONSSHOULDBECONSIDEREDFORTHEROLEANDFUNCTIONOFTHECENTRAL PPP ENTITYASFOLLOWS:...................................................................51V.69 INSUMMARY, THECENTRALPOLICYUNITOPTION (WITHORWITHOUTARESOURCEUNIT) SCOREAGAINSTTHECRITERIAASSETOUTBELOW:.....................................................................................................52V.70 INESSENCE, BOTH OPTIONS 3 AND 4 PERFORMTHESAMEPOLICYROLEATNATIONALANDSECTORALLEVELWITHTHEKEYDISTINCTIONBEINGTHECENTRALISATIONOFTHEADVISORYFUNCTIONATANATIONALLEVEL. WECONSIDERTHATTHEADVANTAGESANDDISADVANTAGESOFSUCHCONSOLIDATIONARESETOUTINTHETABLEBELOW:........................................................................................................................................53V.71 ONBALANCE, WECONSIDERTHATTHEPOTENTIALOVERLAPWITHDEPARTMENTALROLESTHATAC

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