Going public with private partnerships

21 Jan 2003

PPP is not a new phenomenon. The concept – a partnership between public and private sectors to develop public infrastructure – has been at the heart of US public infrastructure projects from dams to highways for many decades now.

But on this side of the Atlantic it is only now beginning to be accepted as a key enabler of major capital projects.

If governments had unlimited budgets, PPP would not be necessary, but faced with urgently needed capital projects on one hand and dwindling resources on the other, many governments are now wholeheartedly embracing PPP as the way to undertake large-scale projects without breaking the bank.

Our own administration is no exception. In 2000, it established a Central PPP Unit in the Department of Finance to help spearhead the PPP approach to the infrastructure and public services element of the National Development Plan (NDP).

The Unit has been tasked with making PPP a standard part of government procurement methods and creating a sustainable PPP market in Ireland in the long term.

“Local authorities have been outsourcing their IT requirements for years but what we’re trying to do is create a more transparent structure and procedures and also encourage the participation of companies with international experience,” says Dave Walsh, a former official within the Central PPP Unit, now working in the Department of Environment and Local Government.

In addition, the Government has created an important new body, The National Development Finance Agency (NDFA), to oversee the financial aspects of PPPs.

Announced last year by Minister for Finance, Charlie McCreevy, TD the NDFA will be staffed by experts in areas such as risk assessment and corporate finance.

Speaking at the second reading of the NDFA Bill in the Dáil last November, Minister McCreevy described its role as helping “to maximise value for money for the Exchequer in a number of ways, including the identification of the best financing packages and the application of commercial standards in terms of evaluating financial risks and costs for each project”.

The Minister went on: “Of particular importance will be the role of the NDFA in underpinning the development of PPPs. Already there are in excess of 40 PPP projects at various stages of procurement and – where the key objectives of value for money and deliverability are met – these numbers may expand over the next few years.”

Of the 40 PPPs that are underway, only one is in the area of IT: earlier this month the Higher Education Authority issued a request for tender for a €10m e-learning services project. There are, however, several other IT-related PPPs at the pre-tender stage. Two of these are in the area of broadband. Shannon Free Area Development Authority and six local authorities in the southwest have entered a joint venture for the roll-out of fibre loops in the region while Dun Laoghaire-Rathdown County Council is looking for private partners to manage a similar project in the south Dublin region.

There is certainly no shortage of other IT projects ready to be actioned. Potentially any of the projects included in the Government’s New Connections policy document for a networked society could be delivered using a PPP model, so long as there is a way for the private sector to get a return on its investment.

At the same time, not every PPP has to be of large-scale national importance. The recently launched mParking initiative in Dublin was a case in point. A product of a partnership between Dublin City Council and mobile applications developer ItsMobile, the scheme allows the public to pay for parking using their mobile phones. A good example of a relatively modest PPP project helping to deliver a useful public service.

The PPP bandwagon has clearly started to roll but it’s unlikely to be a smooth ride the whole way. According to James Moran, a PPP consultant at systems integrator Logica Ireland, a cultural shift within the public services will have to happen for PPPs to really take off in this country.

“The private sector has been leading so far but the public sector has to get involved in terms of driving projects. In some early PPPs [internationally] the private sector took control and there were some failures. Often the reason was that there was not proper buy-in from the public sector or it wasn’t 100pc sure of what was involved. It’s important to learn the lessons of PPPs that have gone wrong,” said Moran.