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EXECUTIVE SUMMARY........................................................................................................................................1 PUBLIC PRIVATE PARTNERSHIPS IN IRELAND.....................................................................................................1 MEETING THE PPP CHALLENGE IN IRELAND......................................................................................................2 CONCLUSIONS.....................................................................................................................................................3 I. INTRODUCTION..........................................................................................5 CONTEXT.............................................................................................................................................................5 I.1 THE ECONOMIC PROGRESS MADE BY IRELAND DURING THE LAST FIVE YEARS HAS SIGNIFICANTLY EXCEEDED THE TARGETS SET IN THE LAST NATIONAL DEVELOPMENT PLAN. THE NEW NATIONAL DEVELOPMENT PLAN 2000-2006 SUGGESTS THAT THE IRISH ECONOMY CAN CONTINUE TO SUSTAIN AN AVERAGE ANNUAL RATE OF GROWTH OF FIVE PER CENT IN THE MEDIUM TERM. SIGNIFICANTLY, HOWEVER,
THIS VIEW IS BASED ON THE ASSUMPTION THAT EXISTING INFRASTRUCTURE BOTTLENECKS AND LABOUR SHORTAGES ARE TACKLED TO SUSTAIN THE COMPETITIVENESS OF THE ECONOMY CAN BE SUSTAINED.............5 I.2 THE NATIONAL DEVELOPMENT PLAN 2000-2006 HIGHLIGHTS THAT MUCH OF THE INFRASTRUCTURE WITHIN IRELAND IS INADEQUATE TO MEET EXISTING NEEDS AND THAT IT IS INCREASINGLY COMING UNDER STRAIN AS A RESULT OF THE RAPID GROWTH IN THE IRISH ECONOMY. FACTORS SUCH AS RAPID ECONOMIC GROWTH, REDUCTIONS IN EUROPEAN FUNDING, NEW EUROPEAN LEGISLATION AND THE INCREASINGLY COMPETITIVE GLOBAL ECONOMY, ALL MEAN THAT THE COUNTRY MUST FIND FASTER WAYS OF DEVELOPING INFRASTRUCTURE, WITH GREATER EFFICIENCY AND AT OPTIMUM VALUE FOR MONEY. PUBLIC PRIVATE PARTNERSHIPS (PPPS) ARE EXPECTED TO PLAY A MAJOR ROLE IN ADDRESSING THE INFRASTRUCTURE DEFICIT IN IRELAND.............................................................................................................................................5 I.3 IN RESPONSE TO THIS NEED, THE PUBLIC SERVICE HAS ESTABLISHED ADMINISTRATIVE STRUCTURES TO LEAD, DRIVE AND CO-ORDINATE THE INTRODUCTION OF THE PUBLIC PRIVATE PARTNERSHIP APPROACH ACROSS AND IN CONJUNCTION WITH THE LINE DEPARTMENTS OF GOVERNMENT. THESE STRUCTURES ARE THE FOCUS OF THIS REVIEW.................................................................................................................................5 TERMS OF REFERENCE........................................................................................................................................5 I.4 IN ORDER TO BUILD ON THE SIGNIFICANT PROGRESS MADE TO DATE IN ADOPTING A PPP APPROACH, THE DEPARTMENT OF FINANCE APPOINTED PRICEWATERHOUSECOOPERS IN JANUARY 2001 TO UNDERTAKE A REVIEW OF THE EFFECTIVENESS OF THE PUBLIC PRIVATE PARTNERSHIP STRUCTURES CURRENTLY IN PLACE WITHIN GOVERNMENT. THIS REVIEW BUILDS UPON THE LESSONS LEARNT FROM THE PUBLIC PRIVATE PARTNERSHIP EXPERIENCE OF OTHER COUNTRIES WHILE AT THE SAME TIME REFLECTING THE KEY REQUIREMENTS OF THE IRISH PUBLIC PRIVATE PARTNERSHIP MODEL. THE EXACT TERMS OF REFERENCE FOR THE REVIEW ARE:.................................................................................................................................................5 APPROACH AND REPORT STRUCTURE.................................................................................................................6 I.5 THIS REPORT IS STRUCTURED IN ACCORDANCE WITH THE TERMS OF REFERENCE SET OUT ABOVE AND THE KEY STAGES OF OUR APPROACH ARE SET OUT IN THE DIAGRAM OVERLEAF AND SUMMARISED IN THE PARAGRAPHS THAT FOLLOW................................................................................................................................6 I.6 THE REPORT COMMENCES WITH A REVIEW OF THE STRATEGIC CONTEXT FOR PPP WITHIN IRELAND AND INCLUDES A DISCUSSION OF THE KEY PRINCIPLES AND BENEFITS OF PPP, A SUMMARY OF THE POLICY DRIVERS UNDERLYING THE ADOPTION OF PPP AND AN OUTLINE OF THE PPP FORMS THAT WILL BE UTILISED GOING FORWARD. THIS SECTION OF THE REPORT ALSO SETS PPP WITHIN A WIDER SPECTRUM OF PUBLIC SERVICE DELIVERY OPTIONS AND THE CONTEXT OF SOCIAL PARTNERSHIP.........................................................6 I.7 THE REPORT THEN EXAMINES INTERNATIONAL EXPERIENCE OF PUBLIC PRIVATE PARTNERSHIPS. IT DISCUSSES THE BREADTH OF USE OF PPPS IN OTHER COUNTRIES, EXAMINES THE ORGANISATIONAL STRUCTURES THAT HAVE BEEN ESTABLISHED TO DELIVER THEM AND IDENTIFIES THE KEY ISSUES THAT IRELAND MUST ADDRESS IF THE PPP PROGRAMME IS TO BE DRIVEN FORWARD RAPIDLY..................................6 I.8 THE REVIEW OF INTERNATIONAL EXPERIENCE IS FOLLOWED BY A DISCUSSION OF THE THREE PHASES WITHIN THE PPP PROGRAMME DEVELOPMENT LIFECYCLE, NAMELY PROGRAMME MOBILISATION, PROGRAMME EXPANSION AND PROGRAMME MATURITY. THE REPORT THEN DESCRIBES THE PROGRESS THAT HAS BEEN MADE DURING THE PROGRAMME MOBILISATION PHASE IN IRELAND IN TERMS OF ORGANISATIONAL STRUCTURES AND PROJECT DEAL FLOW AND SETS OUT THE AGENDA FOR THE NEXT PHASE OF ACTIVITY. IN PARTICULAR, THIS SECTION IDENTIFIES THE KEY SUCCESS FACTORS FOR THE PROGRAMME EXPANSION PHASE AND SETS OUT A PRO FORMA ANALYSIS OF THE DETAILED TASKS THAT GOVERNMENT MUST UNDERTAKE TO ENSURE THE SUCCESS OF THE PPP PROGRAMME. TAKEN TOGETHER, THESE PROVIDE A STRATEGIC FRAMEWORK FOR THE FURTHER DEVELOPMENT OF PPPS..................................................................................6

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I.9 THE REPORT GOES ON TO ASSESS THE EFFECTIVENESS OF EXISTING ORGANISATIONAL ARRANGEMENTS IN
THE CONTEXT OF BOTH THE KEY THEMES ASSOCIATED WITH THE PROGRAMME MOBILISATION PHASE AND THE KEY SUCCESS FACTORS REQUIRED FOR THE TRANSITION TO PROGRAMME EXPANSION......................................6 I.10 THE KEY SUCCESS FACTORS ARE SET OUT IN GREATER DETAIL IN THE NEXT SECTION OF THE REPORT AND THE STRUCTURAL OPTIONS FOR THE DELIVERY OF AN EXPANDED AND ACCELERATED PROGRAMME OF PUBLIC PRIVATE PARTNERSHIPS IN IRELAND ARE DEVELOPED AND ANALYSED WITHIN THIS CONTEXT. THE SECTION CONCLUDES BY IDENTIFYING THE PREFERRED STRUCTURAL OPTION TO TAKE PPP FORWARD IN IRELAND.......6 I.11 THE NEXT SECTION OF THE REPORT DESCRIBES THE PREFERRED STRUCTURAL OPTION IN TERMS OF ITS ORGANISATIONAL STRUCTURE, ALLOCATION OF ROLES AND RESPONSIBILITIES AND RESOURCE REQUIREMENTS. THE KEY PERFORMANCE INDICATORS ARE SET OUT IN THE NEXT SECTION. THE REPORT THEN CONCLUDES BY SETTING OUT OUR FINAL CONCLUSIONS AND RECOMMENDATIONS ON:...........................6

II. STRATEGIC CONTEXT.................................................................................8 INTRODUCTION....................................................................................................................................................8 II.1 THE IRISH GOVERNMENT IS COMMITTED TO USING THE PPP APPROACH TO IMPROVE ECONOMIC COMPETITIVENESS, MODERNISE NATIONAL INFRASTRUCTURE AND DELIVER QUALITY PUBLIC SERVICES. PPPS
RECOGNISE THAT THERE ARE SOME ACTIVITIES THAT THE PUBLIC SECTOR DOES BEST AND OTHER ACTIVITIES WHERE THE PRIVATE SECTOR HAS MORE TO OFFER. ONLY BY ALLOWING EACH SECTOR TO FOCUS UPON WHAT IT DOES BEST CAN THE GOVERNMENT PROVIDE THE QUALITY SERVICES THAT THE PUBLIC WANT AND EXPECT.................................................................................................................................................................8 II.2 THE OVERALL AIM OF PPPS IS THEREFORE TO STRUCTURE THE RELATIONSHIP BETWEEN THE PUBLIC AND PRIVATE SECTORS IN SUCH A WAY THAT THE ACTIVITIES AND RISKS ASSOCIATED WITH THE SPECIFICATION, DELIVERY AND REGULATION OF PUBLIC SERVICES ARE ALLOCATED TO THE PARTY BEST ABLE TO MANAGE THEM. THE PRECISE ROLES AND RESPONSIBILITIES OF THE PUBLIC AND PRIVATE SECTORS IN ANY PPP WILL DEPEND UPON THE CONTRACTUAL TERMS AGREED AND WILL VARY FROM PROJECT TO PROJECT. HOWEVER, IN MOST PPPS PRIVATE SECTOR CONTRACTORS BECOME LONG-TERM SERVICE PROVIDERS RATHER THAN SIMPLE UPFRONT ASSET BUILDERS. AS A RESULT, CENTRAL AND LOCAL GOVERNMENT AGENCIES BECOME MORE INVOLVED AS REGULATORS AND FOCUS THEIR RESOURCES UPON SERVICE PLANNING, PERFORMANCE MONITORING AND CONTRACT MANAGEMENT RATHER THAN UPON THE DIRECT MANAGEMENT AND DELIVERY OF SERVICES.........................................................................................................................................................8 II.3 PPPS CAN GENERATE SUBSTANTIAL BENEFITS FOR BOTH CONSUMERS AND TAXPAYERS. DESIGNED APPROPRIATELY, THEY ALLOW THE PUBLIC SECTOR TO BENEFIT FROM THE COMMERCIAL DISCIPLINES, INCENTIVES AND EXPERTISE DEVELOPED IN THE PRIVATE SECTOR. THEY ALSO ENABLE THE PUBLIC SECTOR TO DELIVER ITS OBJECTIVES BETTER AND TO FOCUS UPON ITS CORE ACTIVITIES OF PROCURING SERVICES, ENFORCING STANDARDS AND PROTECTING THE PUBLIC INTEREST. EXPERIENCE ELSEWHERE IN THE WORLD INDICATES THAT THE MORE SIGNIFICANT BENEFITS WHICH IRELAND CAN DERIVE FROM THE PPP APPROACH INCLUDE:..............................................................................................................................................................8 II.4 WHILE INCREASED PRIVATE SECTOR PARTICIPATION IN THE PROVISION OF PUBLIC SERVICES HAS THE POTENTIAL TO DELIVER BENEFITS, IT SHOULD BE NOTED THAT PPPS ARE NOT A UNIVERSAL PANACEA OR THE ONLY MEANS TO DELIVER QUALITY PUBLIC SERVICES ON A VALUE FOR MONEY BASIS. PPP ARRANGEMENTS ARE ONE OF A NUMBER OF WAYS OF DELIVERING PUBLIC SERVICES AND UNDER NO CIRCUMSTANCES SHOULD THEY BE SEEN AS A SUBSTITUTE FOR STRONG, ACCOUNTABLE AND EFFECTIVE GOVERNANCE. ENSURING THAT PUBLIC SERVICES ARE PROVIDED IN A MANNER THAT IS FAIR, SAFE, AFFORDABLE, AND ENVIRONMENTALLY SUSTAINABLE REMAINS THE SOLE RESPONSIBILITY OF CENTRAL AND LOCAL GOVERNMENT...........................................................................................................................................9 POLICY CONTEXT................................................................................................................................................9

Overview........................................................................................................................................................9 II.5 THE COMMITMENT OF THE IRISH GOVERNMENT TO THE USE OF PUBLIC PRIVATE PARTNERSHIPS IS SET OUT IN THE NATIONAL DEVELOPMENT PLAN 2000-2006. THE PLAN INCLUDES A MINIMUM TARGET OF EUR 2.35 BILLION OF PRIVATELY FINANCED PROJECTS AND THIS REPRESENTS ALMOST TEN PER CENT OF THE TOTAL PLANNED INVESTMENT IN ECONOMIC AND SOCIAL INFRASTRUCTURE. HOWEVER, THE PLAN WAS PUBLISHED IN NOVEMBER 1999 AND SINCE THEN THERE HAVE BEEN A NUMBER OF MAJOR DEVELOPMENTS THAT HAVE SERVED TO EXPAND THE PPP AGENDA. THESE DEVELOPMENTS INCLUDE THE PUBLICATION OF INFLUENTIAL POLICY STATEMENTS BY THE NATIONAL ECONOMIC AND SOCIAL COUNCIL AND THE ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT................................................................9 II.6 THE SOCIAL PARTNERS SHARE THE COMMITMENT OF THE GOVERNMENT TO THE USE OF PPPS AND THIS COMMITMENT IS REAFFIRMED IN THE PROGRAMME FOR PROSPERITY AND FAIRNESS. THE CURRENT
NATIONAL AGREEMENT CALLS FOR THE PREPARATION OF A CLEAR FRAMEWORK IN WHICH TO ASSESS THE APPROPRIATENESS OF PUBLIC PRIVATE PARTNERSHIPS FOR INFRASTRUCTURE PROJECTS AND TO GUIDE THEIR IMPLEMENTATION, TAKING INTO ACCOUNT THE WIDER ECONOMIC, SOCIAL AND ENVIRONMENTAL OBJECTIVES THAT SHOULD GUIDE INFRASTRUCTURE DEVELOPMENT....................................................................................10

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National Development Plan........................................................................................................................10 II.7 THE CURRENT NATIONAL DEVELOPMENT PLAN 2000-2006 PREDICTS THAT THE IRISH ECONOMY CAN
CONTINUE TO SUSTAIN AN AVERAGE ANNUAL RATE OF GROWTH OF AROUND FIVE PER CENT OVER THE MEDIUM TERM. CRUCIALLY, HOWEVER, THIS FORECAST IS BASED UPON THE ASSUMPTION THAT EXISTING INFRASTRUCTURE BOTTLENECKS AND LABOUR SHORTAGES ARE REMOVED, THEREBY ENABLING THE IRISH ECONOMY TO MAINTAIN STRONG AND SUSTAINABLE OUTPUT AND EMPLOYMENT GROWTH. THE PLAN RECOGNISES THAT IRELAND HAS A SIGNIFICANT INFRASTRUCTURE DEFICIT AND THAT THIS DEFICIT THREATENS TO INHIBIT ECONOMIC GROWTH ....................................................................................................10 II.8 THE NATIONAL DEVELOPMENT PLAN 2000-2006 HIGHLIGHTS THAT MUCH OF THE INFRASTRUCTURE WITHIN IRELAND IS INADEQUATE TO MEET EXISTING NEEDS AND THAT IT IS INCREASINGLY COMING UNDER STRAIN AS A RESULT OF THE RAPID GROWTH IN THE IRISH ECONOMY. THE LEVEL OF PRESSURE VARIES, BUT IT IS ESPECIALLY A FEATURE OF THE MORE DENSELY POPULATED URBAN AREAS AND THE MAIN NATIONAL ARTERIAL CORRIDORS........................................................................................................................................10 II.9 ROADS ARE THE DOMINANT MODE OF INTERNAL TRANSPORT WITHIN IRELAND. HOWEVER, THE ROADS NETWORK IS INADEQUATE BY REFERENCE TO NEED AND EUROPEAN UNION STANDARDS. SERIOUS CONGESTION IS NOW A FEATURE OF MANY PARTS OF THE NETWORK, ESPECIALLY IN AND AROUND URBAN AREAS. PUBLIC TRANSPORT IS ALSO IN NEED OF SIGNIFICANT MODERNISATION AND UNLESS THIS ISSUE IS PROPERLY ADDRESSED POOR PUBLIC TRANSPORT SYSTEMS WILL BECOME A CONSTRAINT ON ECONOMIC GROWTH, PARTICULARLY IN AND AROUND DUBLIN. IN ADDITION, WHILE SUBSTANTIAL INVESTMENT HAS BEEN MADE IN WATER AND WASTEWATER TREATMENT, FURTHER INVESTMENT IS REQUIRED IN ORDER TO MEET OBLIGATIONS ARISING FROM RECENT EUROPEAN UNION DIRECTIVES. MAJOR CAPITAL INVESTMENT IS ALSO REQUIRED TO ADDRESS THE SHORTAGE OF AFFORDABLE HOUSING IN IRELAND AND TO ENABLE THE COUNTRY TO MEET NEW STANDARDS IN RELATION TO INTEGRATED WASTE MANAGEMENT. .........................10 II.10 IN ORDER TO ADDRESS THIS INFRASTRUCTURE DEFICIT, THE NATIONAL DEVELOPMENT PLAN 2000-2006 PROPOSES AN AGGREGATE INVESTMENT OF SOME EUR 51.5 BILLION OVER THE NEXT SIX YEARS. WITHIN THIS TOTAL, EUR 22.4 BILLION IS ALLOCATED TO THE ECONOMIC AND SOCIAL INFRASTRUCTURE PROGRAMME AND AN ANALYSIS OF THIS INVESTMENT BY CATEGORY OR SECTOR IS PRESENTED IN THE TABLE BELOW................................................................................................................................................................10 TABLE 2.1 NDP ECONOMIC AND SOCIAL INFRASTRUCTURE PROGRAMME..................................................10 II.11 PUBLIC PRIVATE PARTNERSHIPS ARE A SIGNIFICANT ELEMENT OF THE CAPITAL INVESTMENT PLANNED IN THE NATIONAL DEVELOPMENT PLAN 2000-2006, PARTICULARLY IN RELATION TO THE ECONOMIC AND SOCIAL INFRASTRUCTURE PROGRAMME. A TOTAL OF EUR 2.35 BILLION OF PRIVATE SECTOR FINANCE IN PPP PROJECTS IS INCLUDED WITHIN THE PLAN, OF WHICH EUR 1.78 BILLION IS ALLOCATED TO THE ECONOMIC AND SOCIAL INFRASTRUCTURE PROGRAMME AND EUR 0.57 BILLION IS ALLOCATED TO WASTE MANAGEMENT IN THE REGIONAL PROGRAMMES. AN INDICATIVE ANALYSIS OF PRIVATELY FUNDED PPPS ACROSS EACH OF THE PRINCIPAL CATEGORIES IS SET OUT IN THE TABLE BELOW.........................................................................11 TABLE 2.2 PPP PROGRAMME WITHIN NDP...................................................................................................11 II.12 IT IS IMPORTANT TO NOTE THAT THE OVERALL LEVEL OF INVESTMENT PRESENTED IN THE TABLE ABOVE IS VERY MUCH A MINIMUM INDICATIVE TARGET AND THE OBJECTIVE OF THE GOVERNMENT IS TO MAXIMISE THE USE OF PPPS, CONSISTENT WITH THE PRINCIPLES OF BEST VALUE FOR MONEY AND EFFICIENCY............11 II.13 IN ADDITION, IT SHOULD BE NOTED THAT THE TABLE DOES NOT REFLECT THE TOTAL LEVEL OF PPP ACTIVITY ANTICIPATED WITHIN IRELAND OVER THE NEXT SIX YEARS AS A SIGNIFICANT NUMBER OF PPP SCHEMES WILL BE IMPLEMENTED WITHOUT RECOURSE TO PRIVATE FINANCE. FOR EXAMPLE, MOST OF THE EUR 889 MILLION OF INVESTMENT REQUIRED TO IMPLEMENT THE URBAN WASTEWATER TREATMENT DIRECTIVE WILL BE DELIVERED UNDER DESIGN, BUILD AND OPERATE (DBO) CONTRACTS.............................11

Recent Economic Developments.................................................................................................................12 II.14 SINCE THE PUBLICATION OF THE NATIONAL DEVELOPMENT PLAN IN NOVEMBER 1999, A NUMBER OF MACRO ECONOMIC DEVELOPMENTS HAVE OCCURRED THAT SUGGEST AN EVEN GREATER NEED FOR PUBLIC PRIVATE PARTNERSHIPS. THESE INCLUDE INFLATION IN THE CONSTRUCTION SECTOR, A SLOW DOWN IN ECONOMIC GROWTH AND CONSEQUENT TIGHTENING OF PUBLIC FINANCE, AND INCREASED DEMAND FOR INFRASTRUCTURE INVESTMENT OUTSIDE OF THE NATIONAL DEVELOPMENT PLAN (FOR EXAMPLE, THE DUBLIN METRO). IT IS POSSIBLE THAT THE INCREASED USE OF PRIVATE FINANCE, ENHANCED COMPETITION AND BETTER VALUE FOR MONEY ASSOCIATED WITH PPP WILL PROVIDE AN EFFECTIVE MEANS OF DEALING WITH THESE NEW CHALLENGES..........................................................................................................................12 National Economic and Social Council .....................................................................................................12 II.15 THE NATIONAL ECONOMIC AND SOCIAL COUNCIL (NESC) HAS INDICATED ITS SUPPORT FOR THE USE OF THE PUBLIC PRIVATE PARTNERSHIP APPROACH IN THE PUBLICATION OPPORTUNITIES, CHALLENGES AND CAPACITY FOR CHOICE. THIS REPORT MAKES A NUMBER OF MAJOR POLICY RECOMMENDATIONS AND CONCLUDES THAT PPPS HAVE THE POTENTIAL TO PLAY A SIGNIFICANT ROLE IN THE ACCELERATED DELIVERY OF STRATEGIC NATIONAL INFRASTRUCTURE, THE PROVISION OF QUALITY PUBLIC SERVICES AND THE ACHIEVEMENT OF VALUE FOR MONEY FOR THE EXCHEQUER OVER THE LONG TERM. IN THIS CONTEXT,

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THE CONCEPT OF VALUE FOR MONEY ENCOMPASSES THE KEY PRINCIPLES OF EFFICIENCY, EFFECTIVENESS AND ECONOMY AND DOES NOT MERELY MEAN LEAST COST. .................................................................................12 II.16 THE DETAILED PPP POLICY RECOMMENDATIONS MADE BY THE NATIONAL ECONOMIC AND SOCIAL COUNCIL ARE SUMMARISED BELOW..................................................................................................................12 II.17 IN TERMS OF THE EVOLVING POLICY CONTEXT FOR PPPS IN IRELAND, ONE OF THE MOST SIGNIFICANT ASPECTS OF THE ANALYSIS CONDUCTED BY THE NESC IS THE RECOMMENDATION THAT THE PPP APPROACH SHOULD BE APPLIED TO A MUCH WIDER RANGE OF INFRASTRUCTURE PROJECTS. IN PARTICULAR, IT IS RECOMMENDED THAT THE GOVERNMENT EXPLORE THE POTENTIAL OF PPP TO PROVIDE ELEMENTS OF SOCIAL AND COMMUNITY INFRASTRUCTURE (SUCH AS SOCIAL HOUSING, SCHOOLS, COLLEGES AND HEALTHCARE FACILITIES).........................................................................................................................................................12

Organisation for Economic Co-operation and Development.....................................................................13 II.18 THE ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (OECD) HAS RECENTLY PREPARED AN ANALYSIS OF REGULATORY REFORM IN IRELAND AND THE CONCLUSIONS AND
RECOMMENDATIONS SET OUT IN THIS ANALYSIS ARE LIKELY TO HAVE A SIGNIFICANT IMPACT UPON THE DEVELOPMENT OF THE PPP PROGRAMME WITHIN IRELAND. THE REPORT ADDRESSES A BROAD RANGE OF ECONOMIC AND REGULATORY ISSUES AND SUGGESTS THAT THE INTRODUCTION OF GREATER COMPETITION INTO THE DELIVERY OF PUBLIC SERVICES CAN RESULT IN HIGHER QUALITY PUBLIC SERVICES AND SUBSTANTIAL COST SAVINGS. THE PRINCIPAL RECOMMENDATIONS THAT ARE RELEVANT TO THE DEVELOPMENT OF THE PPP PROGRAMME ARE SUMMARISED OVERLEAF..........................................................13 II.19 IN PARTICULAR, THE REPORT NOTES THAT LOCAL AUTHORITIES CONTINUE TO SUPPLY MANY ESSENTIAL SERVICES IN IRELAND AND THAT THE PROVISION OF THESE SERVICES TENDS TO BE INEFFICIENT AND FRAGMENTED. THE REPORT RECOMMENDS THE INTRODUCTION OF GREATER COMPETITION INTO THE PROVISION OF PUBLIC SERVICES AND THE PUBLIC PRIVATE PARTNERSHIP PROGRAMME IS CLEARLY A MECHANISM THROUGH WHICH THIS COULD BE DELIVERED...............................................................................13

Framework for Public Private Partnerships...............................................................................................13 II.20 THE PUBLIC PRIVATE INFORMAL ADVISORY GROUP HAS IDENTIFIED AND DEFINED A DRAFT SET OF GOALS FOR THE FUTURE DEVELOPMENT OF THE PUBLIC PRIVATE PARTNERSHIP APPROACH IN IRELAND. THE GOALS ARE FURTHER EVIDENCE OF THE CLEAR COMMITMENT BY GOVERNMENT AND THE SOCIAL PARTNERS TO USING THE PPP APPROACH TO DELIVER A STEP CHANGE IN THE QUALITY OF SERVICE AND INFRASTRUCTURE PROVISION. THE DRAFT GOALS IDENTIFIED BY THE INFORMAL ADVISORY GROUP ARE SET OUT BELOW........................................................................................................................................................13 II.21 THE GOALS SET FOR THE FUTURE DEVELOPMENT OF PUBLIC PRIVATE PARTNERSHIPS IN IRELAND ARE GENERALLY CONSISTENT WITH THE OBJECTIVES SET BY OTHER COUNTRIES SUCH AS AUSTRALIA, CANADA, PORTUGAL, SPAIN AND SOUTH AFRICA. HOWEVER, IT IS IMPORTANT TO NOTE THAT THE GOALS SET FOR IRELAND DO NOT INCLUDE EITHER A REQUIREMENT FOR PRIVATE SECTOR FINANCE TO BE UTILISED OR A REQUIREMENT FOR SUCH FINANCE TO BE ACCOUNTED FOR OFF-BALANCE SHEET............................................14 II.22 THIS REFLECTS THE STRONG FISCAL POSITION ENJOYED BY IRELAND AT PRESENT, A POSITION THAT IS CHARACTERISED BY CONTINUING BUDGET SURPLUSES AND DECLINING LEVELS OF GOVERNMENT DEBT. THE MACROECONOMIC CLIMATE IN IRELAND DIFFERS SIGNIFICANTLY FROM THE CLIMATE IN THE UNITED KINGDOM IN THE EARLY YEARS OF THE PRIVATE FINANCE INITIATIVE WHERE ACCOUNTING TREATMENT WAS
A KEY POLICY DRIVER BECAUSE OF THE NEED TO ACCESS PRIVATE FINANCE AND MANAGE THE LEVEL OF PUBLIC SECTOR DEBT.........................................................................................................................................14 PROCUREMENT CONTEXT.................................................................................................................................14

Procurement Spectrum................................................................................................................................14 II.23 PUBLIC PRIVATE PARTNERSHIPS ARE ONE OF A NUMBER OF DIFFERENT MECHANISMS THAT THE IRISH GOVERNMENT CAN USE TO PROCURE HIGH QUALITY PUBLIC SERVICES AND IN THIS RESPECT THEY SIT WITHIN A RANGE OF OTHER DELIVERY OPTIONS INCLUDING TRADITIONAL PROCUREMENT, CONTRACTING OUT AND PRIVATISATION. THE GOVERNMENT HAS RECOGNISED THAT NOT ALL PROJECTS OR SERVICES ARE SUITED TO THE PUBLIC PRIVATE PARTNERSHIP APPROACH AND ACCORDINGLY THERE IS NOT A REQUIREMENT FOR UNIVERSAL OR MANDATORY PPP TESTING. THE POSITION OF PPPS WITHIN THE PROCUREMENT SPECTRUM IS ILLUSTRATED IN THE DIAGRAM BELOW.............................................................................................................15 II.24 PUBLIC PRIVATE PARTNERSHIPS DIFFER FROM CONTRACTING OUT IN THAT THE PRIVATE SECTOR IS USUALLY RESPONSIBLE FOR THE PROVISION OF AN ASSET AS WELL AS A SERVICE. PPPS DIFFER FROM
PRIVATISATION IN THAT LEGAL OWNERSHIP OF ANY ASSETS CREATED RESTS WITH THE PUBLIC SECTOR AND THE PUBLIC SECTOR RETAINS A KEY ROLE IN SERVICE SPECIFICATION, PROCUREMENT, MARKET REGULATION AND CONTRACT MONITORING............................................................................................................................15 II.25 THE EXPERIENCE OF PRIVATISATION HAS SHOWN THAT THE FREEDOM TO INVEST, COMBINED WITH PRIVATE SECTOR MANAGEMENT SKILL, CAN BRING IMPROVED EFFICIENCY. HOWEVER, AT THE SAME TIME PRIVATISATION CAN LEAD TO POOR PUBLIC ACCOUNTABILITY, A REDUCTION IN COMPETITION AND THE DEVELOPMENT OF MONOPOLIES. ON THE OTHER HAND, PPPS CAN OFFER A LONGER-TERM, SUSTAINABLE APPROACH TO IMPROVING PUBLIC SERVICES, ENHANCING THE VALUE DERIVED FROM PUBLIC ASSETS AND

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MAKING BETTER USE OF PUBLIC MONEY, WHILE AT THE SAME TIME RETAINING CONTROL OF CORE AREAS OF RESPONSIBILITY IN THE PUBLIC SECTOR............................................................................................................15

PPP Forms..................................................................................................................................................15 II.26 A WIDE RANGE OF CONTRACTUAL FORMS MAY BE ADOPTED BY THE PUBLIC SECTOR IN ESTABLISHING PARTNERSHIPS WITH THE PRIVATE SECTOR, RANGING FROM THOSE WHERE THERE IS A GREAT DEAL OF PUBLIC SECTOR INVOLVEMENT TO THOSE WHERE THERE IS VERY LITTLE INVOLVEMENT. IN IRELAND THE SPECTRUM OF CONTRACTUAL OPTIONS RANGES FROM DESIGN, BUILD AND OPERATE (DBO) CONTRACTS TO DESIGN, BUILD, OPERATE AND FINANCE (DBOF) CONTRACTS AND CONCESSION CONTRACTS.....................................15 II.27 THE BROAD SPECTRUM OF PUBLIC PRIVATE PARTNERSHIP FORMS LIKELY TO EMERGE IN IRELAND IS SET OUT IN THE DIAGRAM BELOW AND DESCRIBED IN THE PARAGRAPHS THAT FOLLOW........................................15 II.28 DESIGN, BUILD AND OPERATE CONTRACTS ARE ARRANGEMENTS BETWEEN THE PUBLIC SECTOR AND THE PRIVATE SECTOR FOR THE DESIGN, CONSTRUCTION AND OPERATION OF PUBLIC FACILITIES AND INFRASTRUCTURE. THE PRIVATE SECTOR CONTRACTOR DESIGNS AND BUILDS THE FACILITY TO MEET PUBLIC
SECTOR PERFORMANCE REQUIREMENTS AND RETAINS RESPONSIBILITY FOR OPERATING AND MAINTAINING THE FACILITY FOR A PREDEFINED PERIOD, AT THE END OF WHICH IT IS TRANSFERRED BACK TO THE PUBLIC SECTOR. THE CONSTRUCTION OF THE FACILITY IS FINANCED BY THE PUBLIC SECTOR AND IT REMAINS IN PUBLIC OWNERSHIP THROUGHOUT THE TERM OF THE CONTRACT.....................................................................16 II.29 DESIGN, BUILD, OPERATE AND FINANCE CONTRACTS ARE ARRANGEMENTS BETWEEN THE PUBLIC SECTOR AND THE PRIVATE SECTOR FOR THE DESIGN, CONSTRUCTION, OPERATION AND FINANCING OF PUBLIC FACILITIES AND INFRASTRUCTURE. THE PRIVATE SECTOR CONTRACTOR IS RESPONSIBLE FOR DESIGNING, BUILDING, OPERATING AND FINANCING THE FACILITY AND RECOVERS ITS COSTS SOLELY OUT OF PAYMENTS FROM THE PUBLIC SECTOR. AT THE END OF THE CONTRACT, OWNERSHIP OF THE FACILITY COMMONLY TRANSFERS BACK TO THE PUBLIC SECTOR.........................................................................................................16 II.30 CONCESSION CONTRACTS ARE SIMILAR TO DESIGN, BUILD, OPERATE AND FINANCE ARRANGEMENTS, EXCEPT THAT THE PRIVATE SECTOR CONTRACTOR RECOVERS ITS COSTS EITHER THROUGH DIRECT USER CHARGES OR THROUGH A MIX OF USER CHARGING AND PUBLIC SUBVENTION..................................................16 PARTNERSHIP CONTEXT....................................................................................................................................16

Statement of Principles ...............................................................................................................................16 II.31 IT IS VERY MUCH WITH THIS IN MIND THAT THE PUBLIC PRIVATE INFORMAL ADVISORY GROUP HAS
DEFINED A DRAFT STATEMENT OF FUNDAMENTAL PRINCIPLES THAT WILL UNDERPIN AND GUIDE THE DEVELOPMENT OF PUBLIC PRIVATE PARTNERSHIPS IN IRELAND. THE FUNDAMENTAL PRINCIPLES ARE SET OUT IN THE TABLE BELOW AND DRAW UPON THE WORK OF THE NESC AND GOVERNMENT POLICY AS SET OUT IN THE PARTNERSHIP FOR PROSPERITY AND FAIRNESS. THE FUNDAMENTAL PRINCIPLES ARE CONSISTENT WITH THE OVERRIDING REQUIREMENTS OF SOCIAL PARTNERSHIP AND UNIVERSAL SERVICE PROVISION.........16

Stakeholder Consultation............................................................................................................................17 II.32 BUILDING ON THE WORK OF THE NESC, THE PUBLIC PRIVATE INFORMAL ADVISORY GROUP HAS ALSO
RECOGNISED AND REINFORCED THE NEED FOR STAKEHOLDER CONSULTATION IN THE DEVELOPMENT OF THE IRISH PPP PROGRAMME. STAKEHOLDERS INCLUDE EMPLOYEES AND THEIR TRADE UNIONS, THE USERS OF THE ASSETS AND SERVICES BEING PROVIDED BY PPP, LOCAL COMMUNITY GROUPS AND SECTORAL INTEREST GROUPS...............................................................................................................................................................17 II.33 IN PARTICULAR, THE INFORMAL ADVISORY GROUP HAS STRESSED THE IMPORTANCE OF ENSURING THAT PUBLIC SERVICE EMPLOYEES ARE KEPT INFORMED AT THE EARLIEST POSSIBLE STAGE OF PROPOSALS FOR THE INTRODUCTION OF PPPS AND OF SIGNIFICANT DEVELOPMENTS DURING THE PROCUREMENT PROCESS. IN ADDITION, PUBLIC SERVICE EMPLOYEES SHOULD BE ENCOURAGED TO MAKE A POSITIVE CONTRIBUTION TO THE DEVELOPMENT OF PPP PROJECTS, BUILDING ON THE PROGRESS MADE IN RELATION TO WORKPLACE PARTNERSHIPS UNDER THE PARTNERSHIP FOR PROSPERITY AND FAIRNESS.....................................................18 SUMMARY OF ANALYSIS...................................................................................................................................18 II.34 THE KEY FINDINGS FROM THIS REVIEW OF THE STRATEGIC CONTEXT UNDERLYING THE DEVELOPMENT OF PUBLIC PRIVATE PARTNERSHIPS WITHIN IRELAND ARE PRESENTED BELOW. OVERALL, AT A POLICY LEVEL IT IS ALREADY EVIDENT THAT IRELAND IS WITNESSING A BROADENING AND DEEPENING OF THE PPP AGENDA AND A SHIFT IN TERMS OF THE PROGRAMME LIFECYCLE FROM MOBILISATION INTO EXPANSION. ...................18

III. INTERNATIONAL CONTEXT......................................................................19 INTRODUCTION..................................................................................................................................................19 III.1 PUBLIC PRIVATE PARTNERSHIPS ARE INCREASINGLY BEING SEEN AS AN ATTRACTIVE APPROACH TO THE PROVISION OF INFRASTRUCTURE PROJECTS AND PUBLIC SERVICES ACROSS EUROPE AND THE REST OF THE WORLD. AN EVER-INCREASING NUMBER OF COUNTRIES ARE EMBARKING UPON PUBLIC PRIVATE PARTNERSHIP PROGRAMMES THAT ARE LEADING TO A RADICAL REDEFINITION OF THE ROLES OF THE PUBLIC AND PRIVATE SECTORS IN THE FINANCING AND DELIVERY OF PUBLIC SERVICES..............................................19 III.2 THERE IS A GROWING ACCEPTANCE AROUND THE WORLD THAT PUBLIC PRIVATE PARTNERSHIPS CAN BE UTILISED TO MEET PUBLIC SECTOR INVESTMENT NEEDS IN A WIDE RANGE OF SECTORS, IN WAYS THAT

Department of Finance

Review of PPP Structures

REPRESENT GOOD VALUE FOR MONEY TO THE TAXPAYER. FOR EXAMPLE, IN THE WATER SECTOR IN THE UNITED STATES AND CANADA, PUBLIC PRIVATE PARTNERSHIPS ARE ESTIMATED TO HAVE GENERATED COST SAVINGS OF BETWEEN 10 PER CENT AND 40 PER CENT, WHILE IN SCOTLAND THE AVERAGE SAVING ACHIEVED ON PFI SCHEMES IS ESTIMATED TO BE OVER 20 PER CENT. WITHIN IRELAND, THE EXPERIENCE OF EARLY PROJECTS SUCH AS DUBLIN BAY SUGGESTS THAT SAVINGS OF BETWEEN 25 PER CENT AND 30 PER CENT ARE ACHIEVABLE. IN RELATION TO PUBLIC TRANSPORT, RESEARCH UNDERTAKEN BY THE EUROPEAN COMMISSION SUGGESTS THAT THE INTRODUCTION OF COMPETITION CAN GENERATE SAVINGS OF AT LEAST 10 TO 20 PER CENT, WHILE A REVIEW OF PFI IN THE UNITED KINGDOM CONDUCTED BY ARTHUR ANDERSEN INDICATES THAT AN AVERAGE SAVING OF 17 PER CENT CAN BE ACHIEVED OVER A RANGE OF DIFFERENT SECTORS.............................................................................................................................................................19 III.3 AN INDICATION OF THE EXTENT TO WHICH THE PUBLIC PRIVATE PARTNERSHIP APPROACH HAS BEEN ADOPTED IN OTHER PARTS OF THE WORLD IS SET OUT IN THE TABLE THAT FOLLOWS......................................19 TABLE 3.1 EXTENT OF PPP PROGRAMMES ABROAD.....................................................................................19 III.4 TABLE 3.1 ABOVE DEMONSTRATES THAT THE PUBLIC PRIVATE PARTNERSHIP APPROACH IS BEING EXAMINED AND DEPLOYED IN A LARGE VARIETY OF SECTORS AND COUNTRIES THROUGHOUT THE WORLD. THE TABLE ALSO UNDERLINES THE POINT THAT THE KEY PRINCIPLES BEHIND PUBLIC PRIVATE PARTNERSHIPS ARE NOT NEW. WITHIN THE TRANSPORT SECTOR, PPP MODELS HAVE BEEN EVOLVING FOR MANY YEARS AND THE CONCESSION APPROACH TO UTILITIES HAS BEEN EMPLOYED IN FRANCE FOR CENTURIES. HOWEVER, IT IS ONLY OVER THE PAST TEN YEARS OR SO THAT THE USE OF PUBLIC PRIVATE PARTNERSHIPS HAS EXPANDED INTO OTHER ASPECTS OF PUBLIC SECTOR ACTIVITY SUCH AS SOCIAL INFRASTRUCTURE (INCLUDING PRISONS, HEALTHCARE FACILITIES AND EDUCATIONAL ESTABLISHMENTS). THE MAJOR MOVE FORWARD IN THIS REGARD STARTED IN THE UNITED KINGDOM IN THE EARLY 1990S, WHEN PPP MODELS WERE DEVELOPED THAT INVOLVE THE PUBLIC SECTOR PAYING FOR PRIVATELY SUPPLIED SERVICES IN A RANGE OF SECTORS....20 III.5 IN ADDITION, IT IS IMPORTANT TO NOTE THAT THE TABLE IS NOT COMPREHENSIVE AND IS BASED ON DATA PUBLISHED AS AT JANUARY 2001. AS THERE ARE A NUMBER OF DIFFERENT DEFINITIONS OF THE TERM PUBLIC PRIVATE PARTNERSHIP, THE TABLE INCLUDES THOSE PROJECTS WHERE THE PRIVATE SECTOR HAS BEEN INVOLVED IN THE CONSTRUCTION AND OPERATION OF A FACILITY. IT DOES NOT INCLUDE MORE SIMPLE FORMS OF PRIVATE SECTOR FINANCE SUCH AS BORROWING, FINANCE LEASES OR SALE AND LEASEBACK TRANSACTIONS. THE ANALYSIS ALSO FOCUSES ON THOSE COUNTRIES THAT ARE CURRENTLY MOST ACTIVELY CONSIDERING PUBLIC PRIVATE PARTNERSHIPS AND EXCLUDES A NUMBER OF OTHER COUNTRIES THAT HAVE ONLY ONE OR TWO PROJECTS IN DEVELOPMENT................................................................................................20 INTERNATIONAL DEVELOPMENTS.....................................................................................................................20

Organisational Structures...........................................................................................................................20 III.6 PUBLIC PRIVATE PARTNERSHIP INITIATIVES IN OTHER PARTS OF THE WORLD HAVE IN GENERAL STARTED WITH CHANGES IN LEGISLATION TO FACILITATE THE DEVELOPMENT OF PPPS, THE ESTABLISHMENT OF
PUBLIC SECTOR ADVISORY GROUPS AND THE SET UP OF DEDICATED TEAMS INSIDE KEY MINISTRIES OR DEPARTMENTS. FOR EXAMPLE, IN JAPAN AND ITALY, EXTENSIVE NEW PRIMARY LEGISLATION HAS BEEN IMPLEMENTED TO FACILITATE THE DEVELOPMENT OF PPPS WHILE IN HOLLAND, ITALY, THE UNITED KINGDOM AND AUSTRALIA, DEDICATED PPP TEAMS HAVE BEEN CREATED IN A NUMBER OF GOVERNMENT DEPARTMENTS. A BRIEF DESCRIPTION OF THESE TEAMS IS SET OUT BELOW....................................................20 III.7 WHILE AN INCREASING NUMBER OF COUNTRIES ARE EMBARKING ON PUBLIC PRIVATE PARTNERSHIP PROGRAMMES, VERY FEW HAVE EXPERIENCE OF PPP ACROSS A LARGE-SCALE PROGRAMME, IN A WIDE RANGE OF SECTORS, AND AT EVERY STAGE OF THE PROJECT LIFECYCLE. THIS IS A SIGNIFICANT OBSERVATION GIVEN THE DEVELOPING POLICY CONTEXT WITHIN IRELAND. .....................................................................................21 III.8 TWO COUNTRIES WITH SIGNIFICANT EXPERIENCE OF DEVELOPING PPP PROGRAMMES AND SETTING UP NEW INSTITUTIONAL STRUCTURES ARE THE UNITED KINGDOM AND CANADA. THE EXPERIENCE OF THESE COUNTRIES PROVIDES AN IMPORTANT INSIGHT INTO THE PRINCIPAL ISSUES ASSOCIATED WITH THE DELIVERY OF A LARGE-SCALE PPP PROGRAMME AND THE MECHANISMS FOR ENSURING THAT THESE ISSUES ARE DEALT WITH EFFICIENTLY AND EFFECTIVELY. A DETAILED REVIEW OF THE INSTITUTIONAL STRUCTURES WITHIN THE UNITED KINGDOM AND CANADA IS SET OUT IN APPENDIX A TO THIS REPORT AND THE KEY FINDINGS EMERGING FROM THIS REVIEW ARE SUMMARISED AT THE END OF THIS SECTION.............................................21 III.9 IN ADDITION, A REVIEW OF THE INSTITUTIONAL STRUCTURES WITHIN PORTUGAL FOR THE DELIVERY OF PPP PROJECTS IS ALSO SET OUT IN APPENDIX A. PORTUGAL IS SIMILAR TO IRELAND IN THAT ITS MOST URGENT INFRASTRUCTURE NEEDS ARE IN THE ROADS AND WATER SERVICES SECTORS...................................21

Common Barriers........................................................................................................................................21 III.10 THE UNDERLYING REASONS FOR THE GRADUAL DEVELOPMENT OF THE PUBLIC PRIVATE PARTNERSHIP APPROACH VARY FROM COUNTRY TO COUNTRY, BUT SOME OF THE MOST COMMON BARRIERS THAT HAVE TO BE RESOLVED TO ENABLE THE APPROACH TO BE IMPLEMENTED ARE SUMMARISED BELOW.............................21 Pilot Projects...............................................................................................................................................22 III.11 INTERNATIONAL EXPERIENCE INDICATES THAT AN IMPORTANT FEATURE OF THE DEVELOPMENT OF PPP PROGRAMMES IS THE LAUNCH AND PROCUREMENT OF A RANGE OF PILOT PROJECTS. THE PURPOSE OF THE

Department of Finance

Review of PPP Structures

PILOT PROJECTS IS TO DETERMINE, OR REFINE, THE GROUND RULES AND BEST PRACTICES FOR PARTICULAR FORMS OF PPP AND TO PROVIDE A FIRM BASIS FOR FUTURE DEVELOPMENT....................................................22 III.12 PILOT PROJECTS ARE VERY OFTEN IN THE TRANSPORT SECTOR AND IN A NUMBER OF COUNTRIES THE APPLICATION OF THE PPP APPROACH HAS ONLY BEEN EXTENDED TO OTHER AREAS OF PUBLIC SECTOR ACTIVITY ONCE THESE PILOT PROJECTS HAVE BEEN COMPLETED SUCCESSFULLY. FOR EXAMPLE, IN AUSTRALIA, BELGIUM, CANADA, FINLAND, FRANCE, SOUTH AFRICA AND SPAIN THE INITIAL PUBLIC PRIVATE PARTNERSHIP PROJECTS UNDERTAKEN ALL INVOLVED THE CONSTRUCTION OF MAJOR NEW ROAD SCHEMES. HOWEVER, THE LESSONS LEARNED ON A PILOT PROJECT IN THE TRANSPORT SECTOR DO NOT NECESSARILY APPLY TO PPP PROJECTS IN OTHER SECTORS. AS A RESULT, THE BEST PRACTICE APPROACH IS TO DEVELOP A PROGRAMME OF PILOT PROJECTS COVERING A NUMBER OF SECTORS AND TO ENSURE THAT THE PILOT PROJECTS ARE SUCCESSFUL.....................................................................................................................22 III.13 THE ULTIMATE SUCCESS OF A PILOT PROJECT IS INFLUENCED BY A RANGE OF FACTORS INCLUDING THE EXPERIENCE OF THE CONTRACTING AUTHORITY, THE ABILITY OF PRIVATE SECTOR TO DELIVER BETTER VALUE FOR MONEY AND THE WILLINGNESS OF THE PRIVATE SECTOR TO ACCEPT AN APPROPRIATE DEGREE OF RISK. ALL OF THESE FACTORS ARE DYNAMIC AND WILL BE INFLUENCED BY EXPERIENCE GAINED IN SIMILAR TYPES OF ACTIVITY ELSEWHERE IN THE WORLD. STRUCTURING A CHALLENGING BUT DELIVERABLE PILOT PROJECT NEEDS SOME CARE, AND IN SOME INSTANCES THERE IS EVIDENCE TO SUGGEST THAT PILOT PROJECTS HAVE NOT BEEN SUFFICIENTLY WELL STRUCTURED (FOR EXAMPLE, THE PATHFINDER WASTE AND PRISONS PROJECTS IN THE UNITED KINGDOM). THE LEVEL OF PROGRAMME RISK HERE IS SIGNIFICANT AS NOT ONLY DO POORLY STRUCTURED OR EXECUTED PILOT PROJECTS FAIL TO DELIVER THE OPTIMUM AMOUNT OF VALUE FOR MONEY AND RISK TRANSFER, BUT THEY CAN ALSO SERVE TO UNDERMINE MARKET, POLITICAL AND PUBLIC CONFIDENCE IN THE PPP APPROACH.....................................................................................................23 III.14 FOR EXAMPLE, A NUMBER OF THE EARLY PFI PROJECTS IN THE UNITED KINGDOM FOCUSED TOO MUCH ON THE ACHIEVEMENT OF AN OFF-BALANCE SHEET ACCOUNTING TREATMENT (BY SEEKING TO MAXIMISE RISK TRANSFER) RATHER THAN ON THE DELIVERY OF A VALUE FOR MONEY SOLUTION (BY SEEKING TO OPTIMISE RISK TRANSFER). EQUALLY, A NUMBER OF EARLY PROJECTS IN OTHER PARTS OF THE WORLD SUCH AS THE TOLL ROADS IN AUSTRALIA WERE DRIVEN ENTIRELY BY A DESIRE TO USE PRIVATE FINANCE AND NOT BY A DESIRE TO SECURE BETTER VALUE FOR MONEY.................................................................................................23 III.15 THE MOST COMMON ISSUES OR PROBLEMS THAT HAVE BEEN ENCOUNTERED DURING THE PROCUREMENT AND DEVELOPMENT OF PILOT PUBLIC PRIVATE PARTNERSHIP PROJECTS ARE SET OUT IN THE BOX BELOW. WHERE THESE ISSUES HAVE ARISEN, THEY HAVE COMMONLY RESULTED IN POORLY STRUCTURED CONTRACTS, LENGTHY AND COSTLY PROCUREMENTS, HIGH TENDERING COSTS, AND REDUCED VALUE FOR MONEY............................................................................................................................................23 III.16 HOWEVER, DESPITE THE FAILURES OF A NUMBER OF PILOT PROJECTS, MORE RECENT EXPERIENCE HAS SHOWN THAT, BY BRINGING PRIVATE SECTOR MANAGEMENT SKILLS TOGETHER WITH PRIVATE FINANCE, PUBLIC PRIVATE PARTNERSHIPS CAN DELIVER IMPROVED VALUE FOR MONEY ACROSS A WIDE RANGE OF PUBLIC SECTOR ACTIVITY. EXAMPLES INCLUDE THE PROVISION OF WATER SUPPLY IN CANADA, WASTE MANAGEMENT, HEALTHCARE AND PRISON SERVICES IN ENGLAND, AND ROAD SERVICES IN SPAIN, PORTUGAL AND AUSTRALIA................................................................................................................................................24 IMPLICATIONS...................................................................................................................................................24 III.17 THE IMPLICATIONS OF EXPERIENCE ELSEWHERE FOR THE PPP PROGRAMME IN IRELAND ARE CONSIDERED IN DETAIL IN THE FOLLOWING SECTIONS AND IN APPENDIX A TO THIS REPORT. WHEN REFLECTING UPON THE EXPERIENCE OF OTHER COUNTRIES, IT IS USEFUL TO NOTE THAT IRELAND HAS ALREADY MADE REAL PROGRESS IN RELATION TO THE ESTABLISHMENT OF INSTITUTIONAL STRUCTURES AND THE CREATION OF A SIGNIFICANT NUMBER OF PILOT PROJECTS ACROSS A RANGE OF SECTORS. IN ADDITION, THE INCREASING USE OF PPP APPROACHES ACROSS EUROPE (AND IN THE UNITED KINGDOM IN PARTICULAR) HAS RESULTED IN THE DEVELOPMENT OF A MATURE MARKET FOR SUCH PROJECTS.........................................24 III.18 THE DEVELOPMENT OF THE PPP PROGRAMME IN IRELAND IS ABOUT TO ENTER INTO A NEW PHASE OF EXPANDED ACTIVITY. THIS MEANS THAT THE PRIMARY FOCUS AT THIS TIME IS TO ENSURE THAT GOVERNMENT DEPARTMENTS AND PROCURING AUTHORITIES HAVE THE SKILLS, COMPETENCIES AND RESOURCES NEEDED TO IMPLEMENT AND SUPPORT AN EXPANDED PROGRAMME IN AN EFFICIENT AND EFFECTIVE MANNER. IN THIS CONTEXT, THE KEY FINDINGS OF THE REVIEW OF INTERNATIONAL EXPERIENCE CAN BE SUMMARISED AS FOLLOWS....................................................................................................................24

IV. CURRENT POSITION................................................................................25 BACKGROUND...................................................................................................................................................25 IV.1 WITHIN IRELAND, INFORMAL PUBLIC PRIVATE PARTNERSHIP TYPE ARRANGEMENTS HAVE BEEN USED TO DELIVER A NUMBER OF SIGNIFICANT INFRASTRUCTURE PROJECTS. THESE INCLUDE THE EAST AND WEST LINK BRIDGES, THE PROGRAMME FOR DECENTRALISED GOVERNMENT OFFICES, AND A NEW PEAT-FIRED POWER STATION. HOWEVER, IT IS ONLY SINCE 1998 THAT ATTENTION HAS FOCUSED ON THE POTENTIAL BENEFITS OF USING THE PUBLIC PRIVATE PARTNERSHIP APPROACH TO ADDRESS INFRASTRUCTURE

Department of Finance

Review of PPP Structures

DEFICIENCIES AGAINST THE BACKDROP OF DECLINING EUROPEAN UNION FUNDING. AS A RESULT, AN INTERDEPARTMENTAL GROUP (IDG) WAS CREATED TO DEVELOP CRITERIA FOR, AND ADVISE ON, THE ISSUES ARISING IN IMPLEMENTING THE PPP CONCEPT..................................................................................................25 IV.2 IN ORDER TO ASSIST THESE GROUPS IN THEIR WORK, THE DEPARTMENT OF FINANCE COMMISSIONED A STUDY INTO PUBLIC PRIVATE PARTNERSHIPS (THE REPORT, ENTITLED PUBLIC PRIVATE PARTNERSHIPS, WAS SUBMITTED TO THE INTERDEPARTMENTAL GROUP IN JULY 1998 BY FARRELL GRANT SPARKS AND GOODBODY ECONOMIC CONSULTANTS IN ASSOCIATION WITH CHESTERTON CONSULTING). ACTING ON THE RECOMMENDATIONS CONTAINED THEREIN, THE GOVERNMENT AGREED TO ADOPT A PUBLIC PRIVATE PARTNERSHIP APPROACH TO A NUMBER OF PUBLIC INFRASTRUCTURE PROJECTS IN THE TRANSPORT, ROADS, WATER, WASTE AND EDUCATION SECTORS ON A PILOT BASIS...........................................................................25 PROGRAMME LIFECYCLE..................................................................................................................................25 IV.3 INTERNATIONAL EXPERIENCE SUGGESTS THAT THE DEVELOPMENT OF PUBLIC PRIVATE PARTNERSHIP PROGRAMMES IS CHARACTERISED BY THREE GENERAL PHASES OF ACTIVITY, NAMELY PROGRAMME MOBILISATION, PROGRAMME EXPANSION AND PROGRAMME MATURITY. AN UNDERSTANDING OF EACH OF THESE PHASES IS ESSENTIAL TO THE DEVELOPMENT OF ROBUST ORGANISATIONAL STRUCTURES AND PROCESSES IN IRELAND AS THE KEY REQUIREMENTS AND OBJECTIVES OF EACH PHASE ARE VERY DIFFERENT. AN OVERVIEW OF THE PHASES WITHIN THE PROGRAMME DEVELOPMENT LIFECYCLE IS SET OUT BELOW, TOGETHER WITH A DESCRIPTION OF THE PRINCIPAL FEATURES OF EACH PHASE...............................................25 IV.4 AS CAN BE SEEN, THE INSTITUTIONAL STRUCTURES REQUIRED TO SUPPORT THE DEVELOPMENT OF PPP PROGRAMMES CHANGE AS THE PPP PROGRAMME DEVELOPS THROUGH THE THREE PHASES SET OUT ABOVE. DURING THE PROGRAMME MOBILISATION PHASE, CONSULTATIVE AND ADVISORY GROUPS ARE SET UP INVOLVING REPRESENTATIVES OF THE PUBLIC AND PRIVATE SECTORS AND DEDICATED SPECIALIST TEAMS ARE ESTABLISHED IN KEY DEPARTMENTS AND AGENCIES IN ORDER TO DRIVE FORWARD THE PILOT PROJECTS. DURING THE PROGRAMME EXPANSION PHASE, THE LEVEL OF PPP ACTIVITY IS BROADENED AND DEEPENED AND AS A RESULT, THE NEED FOR A PROPERLY RESOURCED CENTRAL PPP UNIT INCREASES. THE ROLE OF THIS UNIT IS TO DEVELOP A CO-ORDINATED APPROACH TO CROSS-SECTORAL ISSUES, TO PREPARE DETAILED POLICY GUIDANCE ON CROSS-SECTORAL ISSUES, TO MONITOR THE IMPLEMENTATION OF THE PROGRAMME AT A NATIONAL LEVEL, AND TO DEVELOP STANDARD CONTRACTUAL TERMS. BY THE PROGRAMME MATURITY PHASE, THE REQUIREMENT FOR CENTRAL SUPPORT DECREASES AS THE PPP APPROACH BECOMES EMBEDDED IN DEPARTMENTS AND PROCURING AUTHORITIES..............................................................................................26 IV.5 THE CHANGING PATTERN OF RESOURCE ALLOCATION OVER THE LIFECYCLE OF A PPP PROGRAMME IS ILLUSTRATED IN THE DIAGRAM BELOW. THE DIAGRAM CLEARLY SHOWS THE RESOURCE IMPLICATIONS OF THE TRANSITION FROM PROGRAMME MOBILISATION TO PROGRAMME EXPANSION AND THEN ONTO PROGRAMME MATURITY.....................................................................................................................................27 IV.6 VERY FEW COUNTRIES HAVE REACHED THE PROGRAMME MATURITY PHASE OF THE PPP LIFECYCLE. THE UNITED KINGDOM IS PROBABLY THE CLOSEST, ALTHOUGH IT IS STILL TOO EARLY TO KNOW WHETHER OR NOT THE NEW STRUCTURES THAT HAVE BEEN PUT IN PLACE IN RECENT YEARS WILL MEET THE NEEDS OF DEPARTMENTS AND PROCURING AUTHORITIES IN THE MEDIUM TO LONG TERM...............................................27 IV.7 IRELAND IS CURRENTLY WITHIN THE PROGRAMME MOBILISATION PHASE OF THE PPP LIFECYCLE AND IS ABOUT TO ENTER INTO THE PROGRAMME EXPANSION PHASE. THE NUMBER OF PPP PROJECTS IN PROCUREMENT IS SET TO INCREASE SIGNIFICANTLY AND THE RANGE OF PUBLIC SERVICES DELIVERED BY PPP IS SET TO BROADEN SUBSTANTIALLY. GIVEN THE SIZE OF THE INFRASTRUCTURE DEFICIT AND THE PRESSURES ON THE IRISH ECONOMY, IT IS IMPERATIVE THAT THE PPP PROGRAMME REACHES MATURITY AS EFFICIENTLY AND EXPEDITIOUSLY AS POSSIBLE. ...................................................................................................................27 PROGRAMME MOBILISATION............................................................................................................................27

Current Structures.......................................................................................................................................27 IV.8 THE CURRENT INSTITUTIONAL ARRANGEMENTS FOR THE DELIVERY OF THE PPP PROGRAMME WERE ESTABLISHED LARGELY IN THE WAKE OF THE PUBLICATION OF THE INTERDEPARTMENTAL REPORT ON PUBLIC PRIVATE PARTNERSHIPS IN JULY 1998. THIS REPORT RECOMMENDED THAT A PROPERLY RESOURCED UNIT SHOULD BE CREATED WITHIN THE DEPARTMENT OF FINANCE TO OVERSEE THE DEVELOPMENT OF PUBLIC PRIVATE PARTNERSHIPS AND THAT THIS UNIT SHOULD ROLL OUT EXPERTISE TO ANALOGOUS UNITS IN THE RELEVANT DEPARTMENTS AND PROCURING AUTHORITIES. AT THE SAME TIME, A PUBLIC PRIVATE INFORMAL ADVISORY GROUP (IAG) ON PUBLIC PRIVATE PARTNERSHIPS WAS ESTABLISHED. THE INFORMAL ADVISORY GROUP INCLUDES REPRESENTATIVES OF THE IRISH CONGRESS OF TRADE UNIONS (ICTU), THE IRISH BUSINESS AND EMPLOYERS CONFEDERATION (IBEC), AND THE CONSTRUCTION INDUSTRY FEDERATION (CIF)..................................................................................................................................................................27 IV.9 SHORTLY THEREAFTER, A CENTRAL PUBLIC PRIVATE PARTNERSHIP UNIT WAS ESTABLISHED INSIDE THE DEPARTMENT OF FINANCE TO CO-ORDINATE THE DEVELOPMENT OF PUBLIC PRIVATE PARTNERSHIPS IN IRELAND. PUBLIC PRIVATE PARTNERSHIP UNITS HAVE ALSO BEEN SET UP IN THE DEPARTMENT OF THE ENVIRONMENT AND LOCAL GOVERNMENT, THE DEPARTMENT OF PUBLIC ENTERPRISE, THE NATIONAL

Department of Finance

Review of PPP Structures

ROADS AUTHORITY AND THE DEPARTMENT OF EDUCATION AND SCIENCE. AN ANALYSIS OF THE RESOURCE LEVELS IN EACH OF THE PUBLIC PRIVATE PARTNERSHIP UNITS IS SET OUT BELOW.........................................28 TABLE 4.1 CURRENT PPP STAFFING LEVELS................................................................................................28 Pilot Projects..............................................................................................................................................28 IV.10 CONSISTENT WITH INTERNATIONAL BEST PRACTICE, THE GOVERNMENT DECIDED TO EXPLORE THE POTENTIAL OF THE PUBLIC PRIVATE PARTNERSHIP APPROACH TO DELIVER BETTER VALUE FOR MONEY BY BRINGING FORWARD A NUMBER OF PILOT PROJECTS. THE PURPOSE OF THE PILOT PROJECTS IS TO DETERMINE THE GROUND RULES AND BEST PRACTICES FOR PARTICULAR TYPES OF PPP PROJECTS AND TO PROVIDE A SOUND BASIS FOR FUTURE DEVELOPMENT.........................................................................................................28 IV.11 THE GOVERNMENT ANNOUNCED ITS INTENTION TO DELIVER A NUMBER OF KEY PILOT PROJECTS IN THE ROADS, WATER AND WASTE SECTORS USING PUBLIC PRIVATE PARTNERSHIPS IN JUNE 1999 AND THIS WAS
FOLLOWED BY THE ANNOUNCEMENT OF FURTHER PILOT PROJECTS IN THE EDUCATION AND PUBLIC TRANSPORT SECTORS. SUMMARY DETAILS OF THE PILOT PROJECTS ARE SET OUT IN THE TABLE BELOW. IT IS IMPORTANT TO NOTE THAT THE PILOT PROJECTS ARE CONCENTRATED WITHIN THE DEPARTMENTS OF THE ENVIRONMENT AND LOCAL GOVERNMENT, PUBLIC ENTERPRISE AND EDUCATION AND SCIENCE. DETAILS ARE FOR CONSTRUCTION COSTS ONLY AND INCLUDE VAT AT 12.5%..............................................................28 TABLE 4.2 PILOT PPP PROJECTS...................................................................................................................28 IV.12 AT PRESENT, NINE SCHEMES HAVE BEEN IDENTIFIED AS PILOT PROJECTS FOR THE PPP APPROACH AND THE TOTAL CAPITAL VALUE OF THESE PROJECTS IS AROUND EUR 1.4 BILLION. A SIGNIFICANT NUMBER OF THE PILOT PROJECTS HAVE ALREADY ENTERED PROCUREMENT AND THE REST ARE EXPECTED TO GO TO TENDER IN THE NEXT TWELVE MONTHS, SUBJECT TO THE SATISFACTORY COMPLETION OF THE APPROPRIATE STATUTORY PROCEDURES. THE FIRST PILOT PROJECTS TO ACHIEVE FINANCIAL CLOSE WILL BE THE CORK SCHOOL OF MUSIC AND THE POST PRIMARY SCHOOLS BUNDLE WITH CONTRACT AWARD EXPECTED IN THE SUMMER OF THIS YEAR. TO DATE, THE PILOT PROJECTS IN PROCUREMENT HAVE BEEN CHARACTERISED BY BOTH SHORT PROCUREMENT TIMESCALES AND A HIGH DEGREE OF MARKET INTEREST....................................29

Key Success Factors....................................................................................................................................29 IV.13 THE EMPHASIS OF GOVERNMENT ACTIVITY DURING THE PROGRAMME MOBILISATION PHASE MUST BE
ON THE DEVELOPMENT OF MARKET INTEREST AND THE IDENTIFICATION AND MANAGEMENT OF A NUMBER OF HIGH QUALITY PILOT PROJECTS. THE KEY SUCCESS FACTORS FOR THE PROGRAMME MOBILISATION PHASE AS A WHOLE ARE SET OUT BELOW AND WILL BE USED AS THE CRITERIA TO ASSESS THE EFFECTIVENESS OF THE EXISTING STRUCTURES IN THE NEXT SECTION OF THIS REPORT.........................................................................29 PROGRAMME EXPANSION.................................................................................................................................29

New Projects...............................................................................................................................................29 IV.14 THE PILOT PROJECTS SET OUT ABOVE ARE ONLY THE FIRST SECTION IN THE DEVELOPMENT OF PUBLIC PRIVATE PARTNERSHIPS WITHIN IRELAND. A SIGNIFICANT NUMBER OF ADDITIONAL PPP PROJECTS HAVE
ALREADY BEEN IDENTIFIED IN THE WATER AND WASTE MANAGEMENT SECTORS AND IT IS ANTICIPATED THAT MORE PROJECTS WILL ALSO EMERGE IN THE EDUCATION AND ROADS SECTORS OVER THE COURSE OF THE NEXT FIVE YEARS. THIS IS LIKELY TO LEAD TO THE CREATION OF A STRONG AND SUSTAINABLE DEAL FLOW, ESPECIALLY IN THE ROADS, WATER AND EDUCATION SECTORS........................................................................29 IV.15 ON THE BASIS OF THE INFORMATION PROVIDED BY THE DEPARTMENT OF FINANCE, IT IS ESTIMATED THAT AN ADDITIONAL ONE HUNDRED AND THIRTY PROJECTS MAY BE PROCURED OVER THE NEXT FIVE YEARS AS PUBLIC PRIVATE PARTNERSHIPS. THE TOTAL CAPITAL VALUE OF THESE PROJECTS IS LIKELY TO AROUND EUR 11.8 BILLION AND AN ANALYSIS OF THE PROJECTS BY SECTOR IS SET OUT BELOW. IT IS ANTICIPATED THAT THE MOST COMMON FORMS OF PPP TO EMERGE WILL BE DBO, DBOF AND CONCESSION CONTRACTS.

...........................................................................................................................................................................29 TABLE 4.3 ESTIMATED PPP PROGRAMME BEYOND NDP..............................................................................30 IV.16 TAKEN TOGETHER, THE PILOT PROJECTS ALREADY ANNOUNCED AND THE ADDITIONAL PROJECTS IN THE PIPELINE AMOUNT TO A MASSIVE UNDERTAKING. AT LEAST ONE HUNDRED AND THIRTY FOUR
INFRASTRUCTURE PROJECTS WILL BE PROCURED OVER THE COURSE OF THE NEXT FIVE YEARS USING THE PUBLIC PRIVATE PARTNERSHIPS APPROACH. THE CAPITAL VALUE OF THESE PROJECTS IS EXPECTED TO BE WELL IN EXCESS OF EUR 12 BILLION. ..............................................................................................................30 TABLE 4.4 ESTIMATED EXTENT OF FULL PPP PROGRAMME.........................................................................30 IV.17 THE PRINCIPAL CHARACTERISTICS OF THE PUBLIC PRIVATE PARTNERSHIP PROGRAMME AS PRESENTED IN THE TABLE ABOVE ARE AS FOLLOWS:...........................................................................................................30 IV.18 ALL OF THIS SUGGESTS THAT THE LEVEL OF RESOURCES IN EACH OF THE PPP UNITS WILL NEED TO BE INCREASED SIGNIFICANTLY OVER THE COURSE OF THE COMING YEAR. IT ALSO SUGGESTS THAT LOCAL AUTHORITY ENGAGEMENT IS CRITICAL TO THE DELIVERY OF THE OVERALL PPP PROGRAMME AND THAT THE COMMODITISATION OF THE PPP PROCESS IS A CLEAR PRIORITY, PARTICULARLY AT THE LEVEL OF LOCAL AUTHORITIES......................................................................................................................................................31

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

Department of Finance

Review of PPP Structures

IV.19 THE SCALE OF THE PPP AGENDA FACING IRELAND DURING THE PROGRAMME EXPANSION PHASE IS
DIFFICULT TO OVERSTATE AND A MEASURE OF THE SCALE OF THE TASK AHEAD CAN BE GAINED BY COMPARING THIS AGENDA WITH THE EXPERIENCE OF SCOTLAND IN THE SIX YEARS TO 2001. .......................31 TABLE 4.5 COMPARISON WITH SCOTTISH PPP PROGRAMME........................................................................31 IV.20 IN THE SIX YEAR PERIOD TO 2001, A TOTAL OF EIGHTY-SIX PROJECTS ENTERED THE PUBLIC PRIVATE PARTNERSHIP PROCUREMENT LIFECYCLE IN SCOTLAND WITH THE CAPITAL VALUE OF THE PROJECTS BEING JUST OVER EUR 4.1 BILLION. IN IRELAND IN THE SIX YEARS TO 2006, IT IS ANTICIPATED THAT AT LEAST ONE HUNDRED AND FORTY PROJECTS WILL BE PROCURED AS PUBLIC PRIVATE PARTNERSHIPS, THE CAPITAL VALUE OF WHICH IS EXPECTED TO EXCEED EUR 13 BILLION. IF THIS TARGET IS TO BE ACHIEVED THEN A PUBLIC PRIVATE PARTNERSHIP CONTRACT MUST BE AWARDED ONCE EVERY TWO WEEKS ON AVERAGE FOR THE NEXT SIX YEARS..........................................................................................................................................................31

New Markets, New Products.......................................................................................................................31 IV.21 A FURTHER DEFINING FEATURE OF THE PROGRAMME EXPANSION PHASE INTO WHICH IRELAND IS NOW MOVING IS THE DEVELOPMENT OF DIFFERENT FORMS OF PUBLIC PRIVATE PARTNERSHIP AND THE APPLICATION OF THE PPP APPROACH TO DIFFERENT SECTORS. THE ANALYSIS SET OUT IN THIS SECTION OF OUR REPORT HAS FOCUSED LARGELY ON THE PPP AGENDA FROM THE ADOPTION OF THE PPP PILOT PROGRAMME THROUGH TO THE DEMANDING TARGETS FOR PPP SET OUT IN THE NATIONAL DEVELOPMENT PLAN. THIS AGENDA RIGHTLY FOCUSES UPON ADDRESSING MAJOR INFRASTRUCTURE DEFICIENCIES AND THE SUCCESSFUL DELIVERY OF THE PLAN MUST BE THE FIRST PRIORITY.................................................................31 IV.22 HOWEVER, THE PPP APPROACH IS NOT JUST ABOUT THE CREATION OF NEW INFRASTRUCTURE. AT ITS CORE, IT IS ABOUT THE PROVISION OF HIGH QUALITY PUBLIC SERVICES. THEREFORE, PPPS EXIST WITHIN A LONGER-TERM AGENDA THAT MUST BE ACCOMMODATED IN GOVERNMENT. THIS AGENDA REACHES BEYOND THE NATIONAL DEVELOPMENT PLAN AND WILL INCLUDE THE POSSIBLE APPLICATION OF THE PPP APPROACH TO COMMUNITY NURSING UNITS, COURT AND PRISON ACCOMMODATION, OFFICE ACCOMMODATION, LEISURE FACILITIES, ENERGY FACILITIES, AND SOCIAL HOUSING. IT WILL ALSO INVOLVE THE DEVELOPMENT OF NEW FORMS OF PPP SUCH AS JOINT VENTURES.........................................................................................................32 Key Success Factors....................................................................................................................................32 IV.23 THE EMPHASIS OF GOVERNMENT ACTIVITY DURING THE PROGRAMME EXPANSION PHASE MUST BE ON
BUILDING INTERNAL RESOURCE CAPABILITIES AND DEVELOPING CONSISTENT POLICY GUIDANCE AND STANDARDISED CONTRACT TERMS SO THAT THE EFFECTIVENESS OF THE PROCUREMENT PROCESS IS MAXIMISED. THE KEY SUCCESS FACTORS FOR THE PROGRAMME EXPANSION PHASE AS A WHOLE ARE SET OUT BELOW AND WILL BE USED AS THE CRITERIA TO DEVELOP THE STRUCTURE OF THE NEW INSTITUTIONAL ARRANGEMENTS.................................................................................................................................................32

Activity Programme.....................................................................................................................................32 IV.24 IN MOVING FROM THE PROGRAMME MOBILISATION PHASE INTO THE PROGRAMME EXPANSION PHASE, A
SIGNIFICANT NUMBER OF SPECIFIC ACTIVITIES WILL NEED TO BE UNDERTAKEN BY CENTRAL AND LOCAL GOVERNMENT. THESE ACTIVITIES ARE SUMMARISED IN THE DIAGRAM OVERLEAF AND MAY BE GROUPED UNDER THE FOLLOWING HEADINGS:..................................................................................................................32 IV.25 A MORE DETAILED LISTING OF THESE ACTIVITIES IS PRESENTED IN APPENDIX B TO THIS REPORT, TOGETHER WITH AN INDICATIVE ANALYSIS OF WHETHER THE ACTIVITIES TYPICALLY OCCUR AT A NATIONAL, DEPARTMENTAL OR PROCURING AUTHORITY LEVEL..........................................................................................33

............................................................................................................................................................................1 Standardisation...........................................................................................................................................36 IV.26 A KEY ASPECT OF THE TRANSITION FROM PROGRAMME MOBILISATION TO PROGRAMME EXPANSION WILL BE THE STANDARDISATION OF THE PPP PROCUREMENT PROCESS BOTH WITHIN AND ACROSS SECTORS. 36 IV.27 THE PREPARATION OF POLICY GUIDELINES PROMOTING THE STANDARDISATION OF CONTRACTUAL
TERMS AND THE DEVELOPMENT OF MODEL CONTRACTS SERVES THREE KEY OBJECTIVES AS SET OUT IN THE UK TREASURY TASKFORCE PUBLICATION, STANDARDISATION OF PFI CONTRACTS:......................................36 IV.28 THERE ARE NO FUNDAMENTAL REASONS TO ASSUME THAT THE SAME BENEFITS OF CONTRACT STANDARDISATION CANNOT BE REALISED IN IRELAND. THE CREATION OF A CONSISTENT APPROACH TO PPP ACROSS ALL PUBLIC CAPITAL INFRASTRUCTURE-PROCURING SECTORS MUST THEREFORE BE A PRIORITY OBJECTIVE FOR THE NEW STRUCTURES. GREATER STANDARDISATION OF APPROACH HAS THE POTENTIAL TO PROVIDE SUBSTANTIAL SAVINGS AND VALUE FOR MONEY IN THE PROCUREMENT OF PPP PROJECTS..............36 IV.29 STANDARDISATION OF GUIDANCE, PROCEDURES AND CONTRACT TERMS DOES NOT AMOUNT TO A ONE SIZE FITS ALL APPROACH TO PPP PROCUREMENT, CONSTRAINING THE SCOPE FOR INNOVATION AND EXPERTISE IMPLICIT IN THE PPP APPROACH TO PUBLIC CAPITAL AND SERVICE PROCUREMENT. INSTEAD IT IS AN ESSENTIAL STEP IN AMELIORATING CONTRACTUAL COMPLEXITY AND REDUCING THE HIGH COST OF PROCURING PPP PROJECTS TO BOTH THE PUBLIC AND PRIVATE SECTORS.........................................................36 IV.30 THE ADOPTION OF STANDARD TERMS WILL REMOVE UNJUSTIFIABLE INCONSISTENCIES BETWEEN PPP DEALS IN FUTURE. IT WILL BE ESSENTIAL FOR ALL THOSE INVOLVED IN THE DEVELOPMENT OF THE PPP PROGRAMME TO ASSESS HOW THESE TERMS WORK IN PRACTICE. AS PPP CONTINUES TO DEVELOP IN THE

Department of Finance

Review of PPP Structures

FUTURE AND THE PILOT PROJECTS MATURE, IT IS LIKELY THAT STANDARD CONTRACTUAL TERMS WILL REQUIRE PERIODIC UPDATING TO REFLECT THE CHANGING MARKET ENVIRONMENT FOR PPP AND THE REQUIREMENT TO MAXIMISE THE VALUE FOR MONEY BENEFITS OF PPPS.......................................................36 IV.31 IT MUST ALSO BE RECOGNISED THAT THE SECTORAL DIVERSITY OF THE PPP PROGRAMME MEANS THAT SOME ISSUES WILL NOT BE AMENABLE TO A UNIFORM APPROACH. ALL PROJECTS WILL RAISE ISSUES THAT CANNOT BE ADDRESSED BY GENERAL GUIDANCE. HOWEVER, BY HIGHLIGHTING THE BROAD RANGE OF ISSUES WHERE A STANDARD APPROACH IS WARRANTED, POLICY GUIDANCE CAN HELP TO ENCOURAGE AN EARLY FOCUS ON THE KEY PROJECT SPECIFIC ISSUES........................................................................................36 IV.32 VARYING FORMS OF STANDARDISATION OF PPP CONTRACTS AND PROCEDURES FOR PROCUREMENT ON A SECTORAL BASIS CREATES THE PROBLEM OF AN UNCOORDINATED APPROACH TO CONTRACTUAL TERMS, WHICH UNDERMINES THE CONFIDENCE, COHESION AND ACHIEVEMENT OF OPTIMAL RISK ALLOCATION AND VALUE FOR MONEY OF THE OVERALL PROGRAMME. IN SUCH CIRCUMSTANCES, THERE IS ALSO A RISK OF CONTINUALLY COVERING THE SAME ISSUE FROM A FIRST PRINCIPLES STANDPOINT, WHICH IS CLEARLY INEFFICIENT AND COSTLY. SOME FORM OF STANDARDISATION AT A CENTRAL LEVEL IS THEREFORE BOTH DESIRABLE AND NECESSARY..............................................................................................................................37

V. EFFECTIVENESS OF EXISTING ARRANGEMENTS.........................................38 INTRODUCTION..................................................................................................................................................38 V.1 THE SCOPE AND NATURE OF THE PPP PROGRAMME WILL CHANGE OVER TIME AS THE PROCESS EVOLVES. IT IS ESSENTIAL TO TAKE THIS INTO ACCOUNT WHEN MAKING AN ASSESSMENT OF THE RELATIVE POSITIONING OF STRUCTURES AT ANY POINT IN TIME.............................................................................................................38 V.2 THE FOCUS FOR GOVERNMENT STRUCTURES IN THE MOBILISATION PHASE HAS BEEN ON DELIVERING THE PROJECTS EARMARKED IN THE NATIONAL DEVELOPMENT PLAN. IN ESSENCE, THIS PHASE HAS BEEN ABOUT PREPARING THE GROUND FOR THE ROLL-OUT OF A MAJOR PPP PROGRAMME. AS A CONSEQUENCE, THE INITIAL FOCUS FOR PPP HAS BEEN ON ESTABLISHING AND OPERATING STRUCTURES TO FACILITATE PROCUREMENT AND PROJECT MANAGEMENT.....................................................................................................38 V.3 AS THE PPP LIFECYCLE MOVES THROUGH EXPANSION TO MATURITY, THE FOCUS WILL SWITCH TO CONTRACT MANAGEMENT AND DELIVERY OF EFFECTIVE SERVICES. ANY ASSESSMENT OF FORWARD-LOOKING STRUCTURAL REQUIREMENTS MUST TAKE ACCOUNT OF THIS CHANGING EMPHASIS........................................38 V.4 THE KEY ASSESSMENT CRITERIA FOR THE MOBILISATION PHASE OF THE PPP PROGRAMME WERE OUTLINED IN THE LAST SECTION. THESE REPRESENT THE PRIMARY OBJECTIVES FOR PPP STRUCTURES DURING
THE MOBILISATION PHASE AND THERE IS A NEED TO REFLECT ON HOW WELL CURRENT STRUCTURES HAVE PERFORMED AGAINST THESE OBJECTIVES DURING THE MOBILISATION PHASE IN IRELAND. THESE ARE SET OUT BELOW AS BUILDING BLOCKS THAT NEED TO BE ADDRESSED DURING THE MOBILISATION PHASE...................38

Creating Embryonic Structures...................................................................................................................38 V.5 EFFECTIVE MOBILISATION OF ANY PPP PROGRAMME IS AS MUCH CONCERNED WITH ENSURING THAT THE KEY PPP BUILDING BLOCKS ARE IN PLACE AS IT IS WITH ACTUALLY MANAGING A PROGRAMME OF PPP PROJECTS. BOTH STRUCTURES AND PROJECTS NEED TO BE IN PLACE IF THE OVERALL PPP PROGRAMME IS TO HAVE THE NECESSARY IMPACT. ........................................................................................................................38 V.6 SIGNIFICANT PROGRESS HAS BEEN MADE IN ESTABLISHING THE STRUCTURAL FRAMEWORK REQUIRED TO BRING THE PPP PROGRAMME THROUGH THE MOBILISATION PHASE:................................................................39 V.7 OUR CONSULTATIONS SUGGEST THAT THE ROLE OF THE OFFICE OF PUBLIC WORKS IN THE MOBILISATION OF THE PPP PROGRAMME COULD BE ENHANCED. WE WOULD SUGGEST THAT AT BOTH A POLICY AND RESOURCE LEVEL THERE SHOULD BE SIGNIFICANT ENGAGEMENT BY OPW IN THE MOVEMENT TO PROGRAMME EXPANSION. EXPERIENCE ELSEWHERE INDICATES THAT THE ABILITY TO ADAPT TO THE CHANGING PPP ENVIRONMENT IS CRITICAL TO THE FUTURE SUCCESS OF BODIES OF THIS NATURE.................39 Stakeholder Engagement.............................................................................................................................39 V.8 THE EFFECTIVE ENGAGEMENT OF STAKEHOLDERS IN THE PPP PROGRAMME HAS BEEN, AND WILL CONTINUE TO BE, CENTRAL TO THE OVERALL EFFECTIVENESS OF THE PROGRAMME. PROGRESS TO DATE IN THIS AREA HAS BEEN MIXED. ............................................................................................................................39 V.9 THE NATURE OF THE INTERVENTIONS REQUIRED TO EFFECTIVELY ENGAGE STAKEHOLDERS DIFFERS DEPENDENT ON THE NATURE OF THE DISCRETE STAKEHOLDER GROUP. WITHIN THE CONTEXT OF SOCIAL PARTNERSHIP, EFFECTIVE ENGAGEMENT WITH THE SOCIAL PARTNERS AT A NATIONAL LEVEL IS IMPORTANT FOR THE OVERALL SUCCESS OF THE PPP PROGRAMME. AT A MORE OPERATIONAL LEVEL, EMPLOYEE AND END USER STAKEHOLDER GROUPS MUST ALSO BE EFFECTIVELY ENGAGED IN THE PROCESS....................................39 V.10 AT A NATIONAL LEVEL, MUCH PROGRESS HAS BEEN MADE IN EFFECTIVELY ENGAGING STAKEHOLDERS SUCH AS THE SOCIAL PARTNERS, PRIMARILY THROUGH THE WORK OF THE IAG. RELEVANT STAKEHOLDERS HAVE BEEN IDENTIFIED, CONSULTATION PROTOCOLS AND STRUCTURES ESTABLISHED AND COMMUNICATIONS WITH KEY STAKEHOLDERS HAS BEEN ONGOING. THIS HAS WORKED WELL TO DATE........................................39 V.11 PROGRESS TOO HAS BEEN MADE WITHIN SOME OF THE KEY SECTORS INVOLVED IN THE PPP PROGRAMME. FOR EXAMPLE, IN THE EDUCATION SECTOR, EFFECTIVE ONGOING CONSULTATION HAS TAKEN

Department of Finance

Review of PPP Structures

PLACE INVOLVING KEY STAKEHOLDERS SUCH AS SCHOOL PRINCIPALS, EMPLOYEES AND GOVERNORS. SUCCESS SUCH AS THIS HAS NOT, HOWEVER, BEEN MIRRORED ACROSS ALL OF THE PILOT PROJECTS. IN PARTICULAR, OUR RESEARCH INDICATES THAT THERE REMAINS A SIGNIFICANT GAP, BETWEEN THE LEVEL OF STAKEHOLDER ENGAGEMENT ACHIEVED NATIONALLY AND THAT EVIDENT AT PROJECT LEVEL. THIS IS ESPECIALLY TRUE IN RELATION TO LOCAL AUTHORITY OFFICIALS AND LOCAL TRADE UNION REPRESENTATIVES..............................................................................................................................................40 V.12 LEVELS OF UNDERSTANDING, COMFORT WITH THE PROCESS, AWARENESS OF THE OVERALL DIRECTION OF PPP ARE MUCH LESS DEVELOPED WITHIN STAKEHOLDER GROUPS AT A PROJECT LEVEL IN PROCURING BODIES. WHILE THIS IS NOT UNEXPECTED, IT WILL BE ESSENTIAL TO INCREASE THIS LEVEL OF UNDERSTANDING AND COMMITMENT IF THE PROGRAMME IS TO BE SUCCESSFUL. ...........................................40

Market Development...................................................................................................................................40 V.13 ONE OF THE KEY ACTIVITIES DURING THE MOBILISATION PHASE OF ANY PPP PROGRAMME IS THE CREATION AND MAINTENANCE OF PRIVATE SECTOR INTEREST IN THE PROGRAMME. IN IRELAND THIS HAS INVOLVED MARKETING AND COMMUNICATING PPP OPPORTUNITIES BOTH WITHIN THE COUNTRY AND ABROAD. THIS WORK HAS BEEN CONDUCTED BY DEPARTMENTAL PPP UNITS AND THE DEPARTMENT OF FINANCE PPP UNIT............................................................................................................................................40 V.14 DEPARTMENTAL PPP UNITS HAVE BEEN INVOLVED IN VARIOUS CONSULTATION EXERCISES WITH POTENTIAL PRIVATE SECTOR SERVICE PROVIDERS. THESE INTERACTIONS HAVE PROVED TO BE USEFUL IN RAISING AWARENESS IN THE PRIVATE SECTOR AS TO PPP OPPORTUNITIES IN IRELAND. THEY HAVE ALSO CONTRIBUTED TO THE PPP LEARNING EXPERIENCE WITHIN DEPARTMENTS. ....................................................40 V.15 THE DEPARTMENT OF FINANCE PPP UNIT HAS ALSO ENDEAVOURED TO CREATE AWARENESS OUTSIDE THE COUNTRY THAT THE GOVERNMENT IS COMMITTED TO PPP SOLUTIONS FOR THE DELIVERY OF QUALITY PUBLIC INFRASTRUCTURE AND SERVICES. THE INVOLVEMENT OF THIS UNIT HAS BEEN AND WILL CONTINUE
TO BE AN IMPORTANT FACTOR IN PROMOTING THE OPPORTUNITIES ON OFFER TO INTERNATIONAL PRIVATE SECTOR ORGANISATIONS....................................................................................................................................40 V.16 MARKET DEVELOPMENT HAS ALSO BEEN ASSISTED BY INTERACTIONS WITH KEY PRIVATE SECTOR INTERESTS SUCH AS IBEC AND CIF. THIS PROCESS APPEARS TO HAVE BEEN GREATLY FACILITATED BY THE OPERATION OF THE IAG.....................................................................................................................................40 V.17 THE SUCCESS OF THE RANGE OF MARKET DEVELOPMENT INITIATIVES THAT HAVE BEEN USED DURING THE MOBILISATION PHASE IS EVIDENCED BY THE NUMBER OF PRIVATE SECTOR CONSORTIA INVOLVED IN BIDDING FOR PPP PROJECTS TO DATE. EXAMPLES INCLUDE:............................................................................40 V.18 PROGRESS MADE IN THIS AREA DURING THE MOBILISATION PHASE HAS BEEN SIGNIFICANT. THE KEY CHALLENGE AS THE PROGRAMME MOVES TOWARDS AND INTO THE EXPANSION PHASE WILL BE TO MAINTAIN AND ENHANCE LEVELS OF PRIVATE SECTOR INTEREST IN PPP BOTH IN IRELAND AND ABROAD......................41

Ensuring Deal Flow....................................................................................................................................41 V.19 A KEY SUCCESS FACTOR IN THE DELIVERY OF PPP PROJECTS AND IN THE DEVELOPMENT OF A COMPETITIVE PPP MARKET IS A SOLID FLOW OF PROSPECTIVE PROJECTS BROUGHT FORWARD AT AN EARLY STAGE BY DEPARTMENTS AND PROCURING AUTHORITIES..................................................................................41 V.20 IN IRELAND, THE CO-ORDINATED APPROACH OF THE NATIONAL DEVELOPMENT PLAN FOCUSES ON A CLEAR AGENDA FOR INFRASTRUCTURE DEVELOPMENT AND PPP. WE UNDERSTAND FROM OUR DISCUSSIONS WITH MOST OF THE DEPARTMENTAL PPP UNITS THAT THERE IS A STRONG DEAL FLOW AND THAT THIS IS A POSITIVE FEATURE OF THE PPP PROGRAMME IN IRELAND................................................................................41 V.21 IN MEETING THE REQUIREMENT FOR IDENTIFYING AND INITIATING PPP PROJECTS DEPARTMENTAL PPP
UNITS AND PROCURING AUTHORITIES HAVE LED THE PROCESS OF GENERATING SUFFICIENT PROJECT DEAL FLOW TO BUILD AND SUSTAIN THE PPP PROGRAMME. DEAL FLOW HAS BEEN IDENTIFIED AND IS IN PLACE, MORE IN SOME SECTORS THAN OTHERS, BUT A SOLID START HAS BEEN MADE:................................................41

Pilot Project Delivery..................................................................................................................................41 V.22 DURING THE MOBILISATION PHASE THE KEY FOCUS IN RELATION TO PROJECT DELIVERY IS ON INITIATING PROJECTS FROM WHICH LESSONS CAN BE LEARNED AND POLICY DEVELOPED. ..............................41 V.23 IN ASSESSING THE EFFECTIVENESS OF THE STRUCTURES TO DATE IN RELATION TO PROJECT DELIVERY
WE WOULD TAKE INTO ACCOUNT PROGRESS ON THE PILOT PROJECTS WHICH WE UNDERSTAND ARE ON SCHEDULE WITH NO SIGNIFICANT DELAYS ANTICIPATED AND ALL KEY MILESTONES BEING MET. SIGNIFICANT PROGRESS IN BRINGING PROJECTS TO DELIVERY HAS BEEN MADE....................................................................41 V.24 QUESTIONS ARISE HOWEVER IN A NUMBER OF KEY AREAS IN RELATION TO PROJECT DELIVERY, AS OUTLINED BELOW:.............................................................................................................................................42 V.25 THE FIRST OF THESE ISSUES CONCERNS THE DEGREE TO WHICH PPP UNITS HAVE SUPPLEMENTED THEIR OWN EXPERIENCE BY BUYING IN SPECIALIST PROFESSIONAL SERVICES AND PARTICULARLY THE COST ASSOCIATED WITH THIS. TO DATE THE INVOLVEMENT OF BOUGHT IN SPECIALIST PPP CONSULTING EXPERTISE IN THE DELIVERY OF THE PILOT PPP PROJECTS REPRESENTS A VERY SIGNIFICANT COMMITMENT BY IMPLEMENTING DEPARTMENTS AND AGENCIES AND BY THE EXCHEQUER. ......................................................42

Department of Finance

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V.26 IT HAS ALSO MEANT THAT DIFFERENT LEGAL, PROFESSIONAL, TECHNICAL AND FINANCIAL TEAMS ARE SERVING DIFFERENT DEPARTMENTS. THERE IS A DANGER ASSOCIATED WITH BRINGING DIFFERENT VIEWS AND
INTERPRETATIONS AND IDEAS TO BEAR IN RELATION TO SOME CONTRACTUAL AND PROCUREMENT ISSUES AS IT REPRESENTS A THREAT TO THE DEVELOPMENT OF IRELANDS PPP PROGRAMME ON A LONG-TERM SUSTAINABLE BASIS...........................................................................................................................................42 V.27 HOWEVER, IT IS ACKNOWLEDGED THAT THERE IS A SIGNIFICANT NEED FOR TECHNOLOGICAL, FINANCIAL AND MANAGEMENT EXPERTISE SUPPORTING THE SECTORAL PPP UNITS IN THE SHORT TO MEDIUM TERM, PARTICULARLY AS THE NUMBER AND VARIETY OF PROJECTS GROW AND THESE COSTS MAY BE JUSTIFIED IF THE PILOT PROJECTS PROVIDE A SUSTAINABLE PLATFORM FOR TAKING PPPS IN IRELAND INTO THE EXPANSION PHASE OF THE PPP LIFECYCLE........................................................................................................42 V.28 IN RELATION TO THE LATTER OF THESE ISSUES, WE BELIEVE THAT IN CERTAIN PROJECTS THERE HAS BEEN TOO MUCH EMPHASIS PLACED ON INPUT-TYPE SPECIFICATION ISSUES RATHER THAN OUTPUT-BASED SERVICE PROVISION............................................................................................................................................42

Initial PPP Policy and Procedures.............................................................................................................42 V.29 THE EXPERIENCE OF THE MOBILISATION PHASE IS THAT IN MANY INSTANCES POLICY DEVELOPMENT IS LAGGING BEHIND PROJECTS. THIS IS, TO A CERTAIN EXTENT, A POSITIVE REFLECTION ON THE PROGRESS THAT
HAS BEEN MADE AT PROJECT DELIVERY LEVEL BUT IT ALSO HIGHLIGHTS THE REQUIREMENT TO ADDRESS THE POLICY DEFICIT THAT HAS DEVELOPED. ............................................................................................................42 V.30 PPP GUIDELINES HAVE BEEN DEVELOPED AND ISSUED BY THE DEPARTMENT OF ENVIRONMENT AND LOCAL GOVERNMENT AND ARE BEING DEVELOPED IN THE DEPARTMENT OF PUBLIC ENTERPRISE IN RELATION TO PUBLIC TRANSPORT. THESE GUIDELINES PROVIDE A BASIS FOR MOVING FORWARD IN THESE SECTORS. THERE IS A NEED, HOWEVER, FOR A CO-ORDINATED APPROACH TO THE DEVELOPMENT OF GUIDELINES ACROSS DEPARTMENTS. ....................................................................................................................................42 V.31 WE BELIEVE THAT, TO A LARGE DEGREE, GUIDELINES ALREADY DEVELOPED IN SECTORS CAN PROVIDE A BASIS FOR THE DEVELOPMENT OF NATIONAL PPP GUIDELINES TO APPLY ACROSS THE PPP SPECTRUM.......42 V.32 SOME DEPARTMENTS HAVE ADAPTED EXISTING CONTRACT DOCUMENTATION TO MEET THEIR OWN REQUIREMENTS. THIS HAS FACILITATED MOVEMENT IN RELATION TO PROGRESSING INDIVIDUAL PILOT PROJECTS BUT TENDS TO INCREASE THE RISK OF FRAGMENTATION IN THE PROCESS. THE REAL RISK IN THESE CIRCUMSTANCES IS THAT, IN THE ABSENCE OF ROBUST NATIONAL POLICY GUIDELINES, INDIVIDUAL SECTORS PURSUE AN APPROACH THAT IS NOT IN THE NATIONAL INTEREST.....................................................................43 V.33 THERE IS ALSO CLEARLY A REQUIREMENT FOR MORE STANDARDISATION IN THE PPP PROCESS THAN HAS BEEN THE CASE TO DATE. THE IMPACT THAT A LACK OF STANDARDISATION HAS ON INFLATING BIDDING COSTS IS A POTENTIAL DANGER TO THE PROCESS. UNLESS THIS ISSUE IS APPROPRIATELY ADDRESSED, THERE IS A REAL DANGER THAT MANY CONTRACTORS WHO PUT IN BIDS FOR THE EARLY PROJECTS MAY BE LESS WILLING TO DO SO IN THE FUTURE, GIVEN THE HIGH COSTS ASSOCIATED WITH BIDDING.................................43

Awareness and Understanding across Government...................................................................................43 V.34 OUR CONSULTATION PROGRAMME HAS REVEALED A REASONABLE LEVEL OF AWARENESS OF THE CONCEPT OF PPP. HOWEVER, WIDESPREAD TRAINING PROGRAMMES ARE ONLY AT COMMENCEMENT AND
THEREFORE MUCH FURTHER WORK IS TO BE DONE IF THIS IS TO ALONG WITH THE NEEDS OF AN EXPANDED PROGRAMME OF PROJECTS.................................................................................................................................43 EXPANSION PHASE............................................................................................................................................44 V.35 OVERALL, IN TERMS OF THE REQUIREMENTS OF THE MOBILISATION PHASE OF THE PPP PROGRAMME, THE EXISTING STRUCTURES HAVE PERFORMED RELATIVELY WELL TO DATE. MAJOR CHALLENGES LIE AHEAD HOWEVER. THE REQUIREMENTS OF THE EXPANSION PHASE OF THE PPP PROGRAMME, OUTLINED EARLIER IN SECTION FOUR, DIFFER FROM THOSE THAT HAVE APPLIED TO DATE. TO CONCLUDE THIS SECTION, WE PROVIDE A BRIEF ASSESSMENT OF THE CHALLENGE FACING THE EXISTING STRUCTURES IN MEETING THE REQUIREMENTS OF THE EXPANSION PHASE........................................................................................................44

Accountability..............................................................................................................................................44 V.36 ACCOUNTABILITY ARRANGEMENTS TO DATE WITHIN THE EXISTING STRUCTURES HAVE NOT BEEN CLEARLY DEFINED. THIS HAS BEEN APPROPRIATE DURING THE MOBILISATION PHASE WHEN ALL INTERESTED
PARTIES HAVE ENGAGED IN CONCERTED AND SOMETIMES OVERLAPPING EFFORTS TO SUCCESSFULLY LAUNCH THE PPP PROGRAMME. THE RELATIVELY LOW VOLUME OF PROJECTS IN THE MOBILISATION PHASE HAVE ALSO ENABLED KEY PARTICIPANTS IN THE EXISTING STRUCTURES TO ENGAGE IN A WIDER RANGE OF ACTIVITIES THAN WILL BE POSSIBLE DURING THE EXPANSION PHASE WHEN THE NUMBER OF PPP PROJECTS WILL INCREASE DRAMATICALLY.................................................................................................................................44 V.37 DURING THE EXPANSION PHASE OF THE PPP LIFECYCLE, THE EFFECTIVE MANAGEMENT OF THE WIDER PPP PROGRAMME WILL REQUIRE CLEAR RESPONSIBILITY AND ACCOUNTABILITY FRAMEWORKS TO BE PUT IN PLACE. ...............................................................................................................................................................44

Delivery Structures......................................................................................................................................44 V.38 PROJECT DELIVERY STRUCTURES ESTABLISHED DURING THE MOBILISATION PHASE HAVE LARGELY PERFORMED WELL. THEY HAVE BEEN SUCCESSFUL IN DELIVERING A LIMITED NUMBER OF PILOT PROJECTS TO

Department of Finance

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AN AGREED MILESTONE PLAN. THE INCREASE IN THE NUMBER AND RANGE OF PPP PROJECTS IN THE EXPANSION PHASE, HOWEVER, WILL REQUIRE THESE STRUCTURES TO BE CAPABLE OF A STEP CHANGE ENHANCEMENT OF DELIVERY CAPABILITY IF THEY ARE NOT TO BE OVERWHELMED........................................44

Securing Resources.....................................................................................................................................44 V.39 THE EXISTING RESOURCE AND SKILLS PROFILE OF THE PPP STRUCTURES IN PLACE FOR THE MOBILISATION PHASE HAS BEEN ADEQUATE TO MEET THE REQUIREMENTS OF THIS PHASE OF THE PPP LIFECYCLE. THESE ARRANGEMENTS ARE NOT, HOWEVER, WELL PLACED TO MEET THE CHALLENGES OF THE EXPANSION PHASE..............................................................................................................................................44 V.40 THE PROSPECTIVE SCALE OF IRELANDS PPP PROGRAMME MOVING FORWARD IS DAUNTING, PEAKING AT TWO PROCUREMENT DEALS ON AVERAGE SIGNED PER MONTH, TO DELIVER COMMITMENTS UNDER THE NATIONAL DEVELOPMENT PLAN ALONE. THERE IS A WIDESPREAD, AND IN OUR VIEW WELL-GROUNDED,
CONCERN THAT CURRENT STRUCTURES AND RESOURCES WILL BE INADEQUATE IN MEETING THE REQUIREMENTS OF A PPP PROGRAMME OF THIS MAGNITUDE. .........................................................................44

Value for Money..........................................................................................................................................45 V.41 VALUE FOR MONEY WILL BECOME INCREASINGLY IMPORTANT IN RESPECT OF PROJECT TRANSACTION COSTS WITH THE ACCELERATION OF THE NUMBER OF PROJECTS UNDER PROCUREMENT. PROGRESS ON
STANDARDISATION OF CONTRACT TERMS AND DEVELOPMENT OF MODEL CONTRACTS WILL BE OF MAJOR SIGNIFICANCE IN EFFECTING COST REDUCTIONS AND WHILE PROGRESS HAS BEEN MADE ON THESE ISSUES, STANDARDISATION SHOULD BE AFFORDED A HIGHER PRIORITY GOING FORWARD, BASED ON THE EXPERIENCE OF THE INITIAL PILOT PROJECTS.........................................................................................................................45

Momentum...................................................................................................................................................45 V.42 IT IS CLEAR THAT, WITH A FEW AREAS OF EXCEPTION, SUBSTANTIAL MOMENTUM HAS BEEN GENERATED IN A SUCCESSFUL PPP MOBILISATION PHASE AND THE TRANSITION TO THE EXPANSION PHASE OF PPP IS ALREADY UNDERWAY. THERE IS LITTLE DOUBT, HOWEVER, THAT MAJOR STEP CHANGE WILL NEED TO OCCUR IN A NUMBER OF AREAS IF THE TRANSITION TO THE EXPANSION PHASE OF THE PPP LIFECYCLE IS TO BE SUCCESSFULLY ACHIEVED. IN THE NEXT SECTION OF THIS REPORT WE EXAMINE THE SPECIFIC CHALLENGES IN MOVING THE PPP PROGRAMME FORWARD INTO THE EXPANSION PHASE..........................................................45 VI. STRUCTURAL CONSIDERATIONS .............................................................46 V.43 WE HAVE SET OUT AT THE END OF SECTION V, THE CRITICAL SUCCESS FACTORS FOR MOVING A SIGNIFICANT PROGRAMME FROM ITS MOBILISATION PHASE INTO EXPANSION. THE SCOPE OF THE CHALLENGE IN MOVING FORWARD TO EXPANSION IS A FUNCTION OF THE VOLUME OF PROJECTS, TIMEFRAME, BREADTH OF APPLICATION AND DIVERSITY............................................................................................................................46 V.44 AS OUTLINED IN SECTION TWO, THIS IS A SIGNIFICANT CHALLENGE IF PPP IS TO PLAY ITS DESIGNATED ROLE IN THE DELIVERY OF THE NATIONAL DEVELOPMENT PLAN AND AS A FOUNDATION FOR GOVERNMENTS PROGRAMME OF REGULATORY REFORM.............................................................................................................46 V.45 THE KEY SUCCESS FACTORS FOR MOVING PPP IN IRELAND FROM ITS MOBILISATION TO ITS EXPANSION PHASE ARE SET OUT IN THE BOX BELOW............................................................................................................46 V.46 IN THIS SECTION, WE EXAMINE THE OPTIONS BY WHICH THE KEY SUCCESS FACTORS CAN BE ADDRESSED IN PROGRESSING PPP IN IRELAND......................................................................................................................46 ACCOUNTABILITY.............................................................................................................................................46 V.47 PROPER ACCOUNTABILITY, CLEARLY UNDERSTOOD AND WITH APPROPRIATE SUPPORTING PROCESS, IS AT THE HEART OF THE SUCCESSFUL MOVE TO THE EXPANSION PHASE. ESTABLISHING ACCOUNTABILITY WILL EMBRACE:...........................................................................................................................................................46 V.48 OF CENTRAL IMPORTANCE IN ESTABLISHING ACCOUNTABILITY FOR PPP IS THE FIT WITH EXISTING MODELS OF GOVERNMENT. IT IS A CLEAR LESSON FROM INTERNATIONAL EXPERIENCE THAT ATTEMPTING TO ROLL OUT THE PROGRAMME THROUGH STRUCTURES AND PROCESSES, WHICH ARE INCONGRUENT WITH PREVAILING ARRANGEMENTS, WILL NOT SUCCEED. AT BEST, IT IS LIKELY TO RESULT IN DELAYS IN MAKING PROGRESS WITH THE PROGRAMME ROLL-OUT...................................................................................................47 V.49 THE DESIRE TO SEE PPP AS A MAINSTREAM PROCUREMENT OPTION FOR GOVERNMENT IN IRELAND AND AN INTEGRAL PART OF THE DELIVERY OF PUBLIC SERVICES, HIGHLIGHTS THE NEED TO CLOSELY FIT PPP WITH THE WIDER MODEL OF ACCOUNTABILITY. THE ACCOUNTABILITY MODELS DEVELOPING UNDER THE STRATEGIC MANAGEMENT INITIATIVE APPEAR TO PRESENT A ROBUST FRAMEWORK INSIDE WHICH PPP CAN BE IMPLEMENTED ACROSS GOVERNMENT. BY IMPLICATION, THE CORE MECHANISM FOR THE ROLL-OUT OF THE PPP PROGRAMME IN THIS CONTEXT WILL BE THE DEPARTMENTAL STRATEGIC PLANS OR STRATEGY STATEMENTS......................................................................................................................................................47 DELIVERY STRUCTURES ...................................................................................................................................47 V.50 THE MOST OBVIOUS DIFFERENCE IN MOVING INTO THE EXPANSION PERIOD IS THE SHARP INCREASE IN THE NUMBER OF PROJECTS COMING INTO PROCUREMENT AND THE FOCUS ON DELIVERY OF PROJECTS. STRUCTURES ACROSS GOVERNMENT SHOULD BE ORIENTATED TOWARD PROJECT DELIVERY AND THE MECHANISMS AND MARKETS BY WHICH THE ASSOCIATED SERVICES ARE DELIVERED. CRITERIA WHICH ARE

Department of Finance

Review of PPP Structures

DERIVED FROM THE KEY SUCCESS FACTORS AND WHICH, FROM AN ORGANISATIONAL PERSPECTIVE, THE STRUCTURES MUST MEET ARE SET OUT IN THE TABLE BELOW..........................................................................47 V.51 AGAINST THESE CRITERIA, IT IS POSSIBLE TO ASSESS FOUR MAIN ORGANISATION MODELS BY WHICH PPP CAN BE DELIVERED ON THE EXPANDED AND ACCELERATED PROGRAMME OF PROJECTS, UNDER THE TERMS OF REFERENCE FOR THE REVIEW............................................................................................................48 V.52 THE FIRST MAJOR ISSUE TO BE ADDRESSED IS THE REQUIREMENT FOR ANY CENTRAL ENTITY. THIS OPTION CAN BEST BE EXAMINED BY CONSIDERING THE FORM AND OPERATION OF THE INSTITUTIONAL STRUCTURES IN THE ABSENCE OF ANY CENTRAL ENTITY DEFINED BELOW AS: ................................................48 V.53 THE PERCEIVED ADVANTAGE OF THIS APPROACH IS THAT THE RESPONSIBILITY FOR ALL ASPECTS OF THE DEVELOPMENT OF PPP RESIDES WITHIN THE SECTORS BRINGING FORWARD PROJECTS. THE RELEVANT CONTRACTING AUTHORITY HAS A VERY HIGH DEGREE OF AUTONOMY AND INDEPENDENCE IN RESPECT OF THE DEVELOPMENT OF POLICY IN THE SECTOR THAT CAN BE DESIGNED TO MATCH CLOSELY THE REQUIREMENT FOR ACCELERATED PROJECT DELIVERY.............................................................................................................48 V.54 THE MAIN DISADVANTAGE IS THE LACK OF CONSISTENCY AND CO-ORDINATION OF PPP PROCUREMENT ACROSS SECTORS AND THE VERY LIMITED SCOPE FOR DEVELOPING NATIONAL POLICY PERSPECTIVES. THERE IS A CLEAR RISK THAT, GIVEN THE HIGH PRIORITISATION OF PROJECT DELIVERY WITHIN SECTORS, THE FULL VALUE FOR MONEY ADVANTAGES OF PPP WILL FAIL TO BE REALISED. MOREOVER, DIVERGENCES IN APPROACHES BETWEEN SECTORS MAY TEND TO CONSTRAIN COMPETITION GIVEN THE LACK OF SCOPE OF THE STANDARDISATION OF THE PROCUREMENT PROCESS AND UNDERMINE THE CREDIBILITY OF THE PPP PROGRAMME OVERALL. MOREOVER, UNDER ANY DECENTRALISED MODEL AS OUTLINED ABOVE, IT WOULD BE MORE DIFFICULT TO CONNECT UP EFFECTIVELY THE MANAGEMENT OF THE PROGRAMME OVERALL WITH THE POLITICAL LEVEL WHICH HAS BEEN HIGHLIGHTED AS A KEY LEVER FOR INFLUENCE AND AUTHORITY IN MOVING THE PPP PROGRAMME FORWARD. ....................................................................................................48 V.55 OUR ASSESSMENT IS THAT THIS OPTION WHERE NO CENTRAL ENTITY EXISTS CAN BE DISMISSED AS A SUB-OPTIMAL SOLUTION IN TERMS OF THE REALISATION OF THE BENEFITS OF A PPP APPROACH. ALL OF THE EVIDENCE IS THAT THERE IS A COMPELLING NEED FOR CENTRAL ENTITY AT A NATIONAL LEVEL TO EFFECTIVELY MEET AT A MINIMUM THE REQUIREMENTS FOR:..........................................................................48 V.56 IN ADDITION, OUR CONSULTATIONS WITH STAKEHOLDERS BOTH WITHIN AND OUTSIDE THE PUBLIC SERVICE HIGHLIGHTED A CLEAR RECOGNITION THAT THE WORK OF A CENTRAL BODY HAS AN IMPORTANT ROLE TO PLAY IN THE DELIVERY OF THE PROGRAMME BUT THAT THIS ROLE SHOULD ENTAIL AN EXTENSION OF EXISTING INSTITUTIONAL ARRANGEMENTS RATHER THAN SUBSUMING DEPARTMENTAL RESPONSIBILITIES.

...........................................................................................................................................................................49 V.57 OUR RESEARCH IN OTHER JURISDICTIONS HAS HIGHLIGHTED THE LESSON FROM THE INTERNATIONAL EXPERIENCE OF PPP CONFIRMING THE BENEFITS OF A CO-ORDINATED NATIONAL APPROACH TO THE MANAGEMENT AND DEVELOPMENT OF PPP, DRIVEN BY A CREATION OF AN ADEQUATELY RESOURCED CENTRAL ENTITY................................................................................................................................................49 V.58 IN SUMMARY, THE DECENTRALISATION OPTION SCORES AGAINST THE CRITERIA AS SET OUT BELOW.. . .49 V.59 ACCEPTING, THEREFORE, THAT A CENTRAL ENTITY IS DESIRABLE, THE SECOND MAJOR ISSUE TO BE
CONSIDERED IS THE DEGREE TO WHICH THE SWIFT AND EFFECTIVE DELIVERY OF PROJECTS CAN BE PROMOTED THROUGH A CHANGE IN THE EXISTING DELIVERY MECHANISMS FOR PPP PROJECTS AND THE CREATION OF A SPECIFIC CENTRALISED PPP AGENCY WHICH WOULD BE ALLOCATED RESPONSIBILITY FOR THE DELIVERY OF ALL MAJOR INFRASTRUCTURAL PROJECTS ON A PPP BASIS DEFINED BELOW AS: ............................................49 V.60 THIS APPROACH THE POLAR OPPOSITE TO OPTION 1 - WOULD STRONGLY HIGHLIGHT THE PRIORITY OF ACCELERATED DELIVERY OF INFRASTRUCTURAL PROJECTS AND SIGNAL THE SIGNIFICANCE OF THE ADOPTION OF THE PPP APPROACH TO PUBLIC PROCUREMENT. THE ESTABLISHMENT OF AN AGENCY WOULD HELP ADDRESS THE DIFFICULTIES GENERATED BY TURNOVER OF KEY PUBLIC SERVICE STAFF WORKING IN THE PPP AREA. IT WOULD ALSO SUPPORT THE BUILD-UP WITHIN THE PUBLIC SECTOR OF THE SKILLS AND TECHNICAL KNOWLEDGE (I.E. FINANCIAL, LEGAL) REQUIRED FOR SUCCESSFUL PPP PROCUREMENT AND POLICY DEVELOPMENT, LARGELY ELIMINATING THE NEED FOR THE ENGAGEMENT OF EXPENSIVE CONSULTANCY EXPERTISE BY CONTRACTING AUTHORITIES. IT WOULD CLEARLY ALSO BE CONSISTENT WITH THE REQUIREMENT FOR THE CO-ORDINATED NATIONAL DEVELOPMENT OF THE PPP PROGRAMME OVERALL BY REMOVING RESPONSIBILITY FOR THE DELIVERY OF PPP PROJECTS FROM RELEVANT SECTORS. ......................50 V.61 SEVERAL SERIOUS DIFFICULTIES CAN, HOWEVER, BE IDENTIFIED IN RELATION TO THE ROLE AND FUNCTIONS OF THE PROPOSED PPP AGENCY. THESE REVOLVE PARTICULARLY AROUND THE ROLE OF THE PPP AGENCY IN MAKING DECISIONS ON SERVICE DELIVERY ACROSS ALL SECTORS IN WHICH PPP PROJECTS ARE BEING DELIVERED COMPLETELY SEPARATELY FROM EXISTING ACCOUNTABILITY RELATIONSHIPS, THEREBY GIVING RISE TO A VERY COMPLEX AND DEMANDING CO-ORDINATION TASK FOR THE PPP AGENCY. VERY MAJOR ISSUES ALSO ARISE IN RELATION TO THE PPP AGENCYS RELATIONSHIP WITH EXISTING AND PROPOSED PPP DELIVERY AGENCIES SUCH AS THE NRA IN THE ROADS SECTOR AND THE PROPOSED RAIL PROCUREMENT AGENCY (RPA) IN RAIL.....................................................................................................................................50

Department of Finance

Review of PPP Structures

V.62 THE ROLE OF THE AGENCY IN INFRASTRUCTURAL DELIVERY COULD ONLY BE REGARDED AS A TRANSITIONAL MEASURE AS ULTIMATELY THE AGENCYS EXISTENCE WOULD PRECLUDE SUCCESSFUL DELIVERY OF THE KEY OBJECTIVE OF EMBEDDING THE PPP APPROACH AS A CENTRAL ELEMENT OF THE MAINSTREAM PUBLIC PROCUREMENT PROCESS. THIS OBJECTIVE IS CRITICAL TO MAXIMISING THE POTENTIAL FOR PPPS TO BE INSTRUMENTAL IN TERMS OF THE RAPIDLY DEVELOPING AGENDA FOR THE MODERNISATION OF PUBLIC SERVICE DELIVERY, WHICH IN TURN REQUIRES PPP TO BECOME A CORE PUBLIC PROCUREMENT MECHANISM RATHER THAN REMAIN SEPARATE AND DISTINCT..........................................................................50 V.63 NEW INSTITUTIONAL STRUCTURES SUCH AS THE PROPOSED PPP AGENCY WHICH WOULD TAKE SOME TIME TO PUT IN PLACE (E.G. ON ACCOUNT OF THE NEED FOR THE ENACTMENT OF A LEGISLATIVE BASIS)
WOULD NOT BE CONSISTENT WITH THE IMPERATIVE OF ACCELERATED DELIVERY OF PUBLIC INFRASTRUCTURE. WE UNDERSTAND THAT A PPP AGENCY, IF CREATED UNDER STATUTORY POWERS, WOULD REQUIRE LEGISLATION WHICH WOULD REQUIRE A LENGTHY TIMEFRAME TO ENACTMENT (IN REGION OF TWELVE TO EIGHTEEN MONTHS)........................................................................................................................50 V.64 THEREFORE, A DISTINCT PPP AGENCY OR STATUTORY BODY FOR PPP INFRASTRUCTURE DELIVERY, ALTHOUGH HAVING THE POTENTIAL IN PRINCIPLE TO DRIVE THE PPP AGENDA POLICY AND PROJECTS IN TANDEM ACROSS THE WHOLE OF THE PUBLIC SERVICE COULD ONLY COME INTO EXISTENCE AT A LATER POINT IN THE DESIRED TIMELINE, AT WHICH TIME MOST OF ITS WORK WOULD ALREADY BE ACCOMPLISHED.50 V.65 A KEY FEATURE OF THE SUCCESSFUL ROLLING OUT OF PPP IN IRELAND IS THAT IT SHOULD AS MUCH AS POSSIBLE COINCIDE AND BE INTEGRATED, RATHER THAN BE IN CONFLICT, WITH OTHER GOVERNMENT MECHANISMS, STRUCTURES AND PROCESSES. IN THE IRISH CONTEXT, THIS MEANS DOVETAILING THE PPP INITIATIVE WITH DEPARTMENTAL STRUCTURES AND PROCESSES. THEREFORE, AT A PRAGMATIC LEVEL, THE CREATION OF A BODY WHICH DOES NOT FIT COMFORTABLY WITHIN THE EXISTING GOVERNMENTAL FRAMEWORK SEEMS ILL-EQUIPPED TO MEET THE DEMANDING PPP AGENDA. THIS VIEW IS REINFORCED BY THE SHORT-TERM RISKS OF SERIOUS DISLOCATION TO THE CURRENT STRUCTURES AND PROJECTS WHICH ANY MAJOR STRUCTURAL CHANGE IS LIKELY TO GENERATE. IT IS CLEARLY ESSENTIAL THAT THE ROLL-OUT OF THE PILOT AND OTHER PPP PROJECTS IS NOT IMPEDED IN ANY FASHION.........................................................51 V.66 THE CONCLUSION MUST THEREFORE BE THAT THE ESTABLISHMENT OF A SEPARATE PPP AGENCY WOULD BE INCONSISTENT WITH BOTH THE OBJECTIVES OF ACCELERATED PPP IMPLEMENTATION AND APPROPRIATE INTEGRATION WITH THE WIDER MACHINERY OF GOVERNMENT. MOREOVER, IT WOULD NOT SIT COMFORTABLY WITH THE BROAD THRUST OF THE STRATEGIC MANAGEMENT INITIATIVE (SMI) BY LEADING TO A VERY SIGNIFICANT DILUTION OF RESPONSIBILITY AND AUTHORITY AT DEPARTMENTAL LEVEL FOR THE DELIVERY OF THEIR OWN STRATEGIES INSOFAR AS THEY RELATE TO INFRASTRUCTURE AND SERVICE PROVISION INITIATIVES......................................................................................................................................51 V.67 IN SUMMARY, THE PROCUREMENT AGENCY SCORES AGAINST THE CRITERIA AS SET OUT BELOW:..........51 V.68 GIVEN THE REQUIREMENT THEREFORE FOR A CENTRAL PPP ENTITY BUT ONE THAT CLOSELY ALIGNS WITH EXISTING GOVERNMENTAL STRUCTURES, TWO FURTHER OPTIONS SHOULD BE CONSIDERED FOR THE ROLE AND FUNCTION OF THE CENTRAL PPP ENTITY AS FOLLOWS:...................................................................51 V.69 IN SUMMARY, THE CENTRAL POLICY UNIT OPTION (WITH OR WITHOUT A RESOURCE UNIT) SCORE AGAINST THE CRITERIA AS SET OUT BELOW:.....................................................................................................52 V.70 IN ESSENCE, BOTH OPTIONS 3 AND 4 PERFORM THE SAME POLICY ROLE AT NATIONAL AND SECTORAL LEVEL WITH THE KEY DISTINCTION BEING THE CENTRALISATION OF THE ADVISORY FUNCTION AT A NATIONAL LEVEL. WE CONSIDER THAT THE ADVANTAGES AND DISADVANTAGES OF SUCH CONSOLIDATION ARE SET OUT IN THE TABLE BELOW:........................................................................................................................................53 V.71 ON BALANCE, WE CONSIDER THAT THE POTENTIAL OVERLAP WITH DEPARTMENTAL ROLES THAT A CENTRAL RESOURCE UNIT MAY CREATE MAY OUTWEIGH APPARENT OPPORTUNITIES FOR EFFICIENCY ARISING THROUGH CONSOLIDATION. THE USE OF A CENTRAL RESOURCE UNIT MAY CREATE CONFUSION IN THE MODEL OF ACCOUNTABILITY IF IT BEGINS TO STRAY BEYOND THE REMIT OF AN ADVISORY SERVICE BROUGHT IN AS REQUIRED BY DEPARTMENTS. THIS COULD BE PERCEIVED AS AN EXTENSION OF THE POWERS OF THE CENTRE, AN APPROACH WHICH WE HAVE EMPHASISED FITS POORLY WITH THE MODEL OF GOVERNMENT AND OPTIMAL ARRANGEMENTS FOR CLARITY OF ACCOUNTABILITY........................................................................................53 V.72 IT IS ALSO WORTHY OF NOTE THAT OUR CONSULTATIONS REVEALED THAT THERE IS NO ENTHUSIASM AT DEPARTMENTAL LEVEL FOR THE CONCEPT OF A CENTRALISED RESOURCE POOL OF PPP KNOWLEDGE, SKILLS AND EXPERTISE TO OFFER SUPPORT AND ADVICE IN RELATION TO PROJECT DELIVERY. THIS APPEARS TO BE PRIMARILY ON THE BASIS THAT THIS ALTERNATIVE WOULD TEND TO RESTRICT THE SCOPE FOR THE APPROPRIATE DEVELOPMENT OF CAPABILITIES AT A DEPARTMENTAL/SECTORAL LEVEL. HOWEVER, IT SUGGESTS THAT A CENTRAL RESOURCE UNIT WOULD NOT BE CREATED FROM A DEMAND PERSPECTIVE AND MAY PROVE OF LIMITED VALUE UNLESS A MANDATORY INVOLVEMENT IS CREATED FOR ITS STAFF ON PROJECTS. CLEARLY IF SUCH AN OBLIGATION IS IMPOSED, THIS WILL CONFLICT WITH THE ACTUAL CONCEPT OF THE RESOURCE UNIT WHICH IS BASED ON FULFILLING AN ADVICE AND GUIDANCE FUNCTION....................53 V.73 INDEED THERE IS A STRONG PREFERENCE AT DEPARTMENTAL/SECTORAL LEVEL TO CONTINUE TO BUY IN EXTERNAL ADVICE AS NECESSARY TO ASSIST IN THE RESOLUTION OF SECTORAL POLICY OR PROJECT ISSUES

Department of Finance

Review of PPP Structures

RATHER THAN TO SOURCE THIS SUPPORT FROM A CENTRALISED RESOURCE POOL. CLEARLY ISSUES ARISE IN RESPECT OF VALUE FOR MONEY, IF THERE IS A HIGH RELIANCE ON ADVISORS TO UNDERTAKE ROUTINE WORK. THERE IS ALSO POTENTIAL TO CREATE DIFFERING APPROACHES TO COMMON ISSUES. THESE POTENTIAL PROBLEMS CAN BE DEALT WITH WHERE GOOD PROGRESS IS QUICKLY MADE ON:............................................54 V.74 IN RELATION TO VALUE FOR MONEY, WE CONSIDER THAT THERE MAY BE SOME EVIDENCE OF HIGH ADVISORY FEES ON SOME OF THE PPP PILOT PROJECTS. WHILE THIS IS IN PART AN UNDERSTANDABLE FEATURE OF THE CURRENT STAGE OF DEVELOPMENT OF THE PILOT PHASE, IT MAY ALSO BE A REFLECTION OF AN APPROACH THAT HAS NOT YET MOVED AWAY FROM TRADITIONAL PROCUREMENT PRACTICES. THIS IS MANIFESTED IN TERMS OF AN OVEREMPHASIS ON INPUTS RATHER THAN ON OUTPUTS AND IN THE BIAS WITHIN ADVISORY COSTS TOWARDS TECHNICAL INPUT. IN OUR VIEW, THE SCALE AND COMPOSITION OF ADVISORY FEES SHOULD MORE FULLY REFLECT THE OUTPUT-BASED NATURE OF PPP. THIS ASPECT OF ADVISORY FEES SHOULD BE REVIEWED IN ORDER TO ENSURE VALUE FOR MONEY WERE THERE WILL BE CONTINUED RELIANCE ON ADVISORS......................................................................................................................................................54 V.75 THE MAIN CONCLUSION ON THE TYPE OF ORGANISATIONAL MODEL MOST APPROPRIATE TO IRELAND IS THAT OPTION 4, A CENTRAL POLICY UNIT, MATCHES MOST CLOSELY THE MEDIUM-TERM REQUIREMENTS OF IRELANDS PPP PROGRAMME. THIS TYPE OF CENTRAL UNIT WOULD EMBRACE THE FOLLOWING FUNCTIONS IN BROAD TERMS....................................................................................................................................................54 V.76 UNDER THIS ORGANISATIONAL MODEL PPP UNITS WILL ALSO EXIST TO SUPPORT THE SAME BROAD REQUIREMENTS AT A SECTORAL LEVEL WITH A CLOSER INPUT IN PROJECTS THROUGH THE PROGRAMME COORDINATION ROLE. THE ELABORATION OF THESE FUNCTIONS AND THE SPECIFICS OF WHAT THEY MEAN FOR THE STRUCTURES ARE DESCRIBED IN THE NEXT SECTION..................................................................................54 V.77 COMBINING CONSIDERATIONS ON THE KEY SUCCESS FACTORS OF ACCOUNTABILITY AND SUPPORT FOR PROJECTS THEREFORE CREATES THE TYPE OF STRUCTURE SET OUT BELOW:....................................................55

Securing Resources.....................................................................................................................................55 V.78 IT IS CLEAR FROM OUR ASSESSMENT THAT CURRENT RESOURCE LEVELS ARE INADEQUATE, GIVEN THE PROSPECTIVE SCALE AND IMPORTANCE OF THE PPP PROGRAMME OVER THE COMING YEARS AND THE IMPERATIVE OF PUTTING IN PLACE A DETAILED POLICY INFRASTRUCTURE FOR PPPS THAT HELPS DELIVER THE VALUE FOR MONEY BENEFITS OF PPP AND ALSO EMBEDS THE PPP APPROACH TO THE PROCUREMENT OF PUBLIC INFRASTRUCTURE AND PUBLIC SERVICES..............................................................................................55 V.79 SECURING ADEQUATE RESOURCES BOTH WITHIN AND OUTSIDE THE PUBLIC SECTOR HAS BEEN AN IMPORTANT ISSUE HIGHLIGHTED IN OTHER JURISDICTIONS. WHILE THE CURRENT ARRANGEMENTS AND RESOURCES HAVE SERVED IRELAND THROUGH THE MOBILISATION PHASE, THERE IS A STEP CHANGE IN THE INTENSITY OF THE PPP PROGRAMME AND THIS MUST BE REFLECTED IN A MAJOR UPLIFT IN RESOURCES.......55 V.80 IN BROAD TERMS, THE NATURE OF THE RESOURCE STRENGTHENING IS: .................................................55 V.81 THE RESOURCE REQUIRED AT NATIONAL AND SECTORAL LEVELS IS PRIMARILY NEW OR ADDITIONAL IN NATURE, CREATED FOR THE PURPOSE OF PROGRESSING THE PPP PROGRAMME. AT PROCUREMENT AUTHORITY LEVEL, THIS RESOURCE MAY ALREADY EXIST AND BE INVOLVED IN OTHER FORMS OF PROCUREMENT ACTIVITY. PPP WILL BECOME A NEW WAY OF UNDERTAKING THESE PROCUREMENTS. THE
EXTENT OF ADDITIONAL RESOURCE REQUIRED IS A FEATURE OF THE EXTENT OF INFLUX OF NEW PROJECTS WHICH DRAMATICALLY INCREASES THE TOTAL PORTFOLIO UNDER PROCUREMENT BY WHICHEVER PROCUREMENT PROCESS. ..................................................................................................................................56 V.82 HOWEVER, WE WOULD CAUTION ABOUT A SIMPLISTIC VIEW OF RESOURCE NEEDS AT PROCURING AUTHORITY LEVEL IF THIS FAILS TO MEET: ......................................................................................................56 V.83 DETAILS OF THE RECOMMENDED RESOURCE PROFILE ARE SET OUT IN THE NEXT SECTION. IT IS CLEAR THAT THIS MUST COMBINE EFFECTIVELY CIVIL SERVANTS AND EXPERT PRIVATE SECTOR PERSONNEL ON A FIXED-TERM CONTRACT BASIS AND ADVISORY INPUTS MANAGED THROUGH FRAMEWORK AGREEMENTS. THE CHALLENGE OF SECURING THIS RESOURCE MUST BE MET IN THE SHORT TERM ACROSS A RANGE OF INITIATIVES:.......................................................................................................................................................56

Value for Money ........................................................................................................................................57 V.84 AN ESSENTIAL CONSIDERATION OF AN EXPANDED PROGRAMME IS THE OPTIMUM MEANS OF SECURING VALUE FOR MONEY. IN THIS SENSE, THIS REFERS TO THE ISSUE OF THE CO-ORDINATION, MANAGEMENT AND
DELIVERY AT A TRANSACTIONAL LEVEL RATHER THAN THE VALUE FOR MONEY IN COST OF SERVICES THAT PPP SEEKS TO ACHIEVE. KEY TO ENSURING VALUE FOR MONEY IN THE EXPANDED PROGRAMME IS:..............57 V.85 WE SET OUT EARLIER IN THIS REPORT OUR VIEWS ON STANDARDISATION AND THE OPTIMUM MEANS OF USING ADVISORS EFFECTIVELY. THE MAIN ELEMENTS IN SECURING VALUE FOR MONEY IN EXPANDING THE PROGRAMME ARE SET OUT IN THE TABLE BELOW. SUGGESTED TARGETS AT A PROJECT LEVEL FOR ADVISOR COSTS ARE INCLUDED IN OUR CHAPTER ON KEY PERFORMANCE INDICATORS. ...............................................57

Momentum...................................................................................................................................................57 V.86 THE FINAL SUCCESS FACTOR IN MOVING EFFECTIVELY FROM MOBILISATION TO RAPID EXPANSION IS
TRANSLATING THE EARLY INITIAL MOMENTUM FROM THE SMALL CLUSTERS OF PEOPLE DIRECTLY INVOLVED ACROSS THE WIDER CANVASS OF GOVERNMENT AS A WHOLE..........................................................................57

Department of Finance

Review of PPP Structures

V.87 VITAL TO THIS ASPECT, AS SHOWN BY INTERNATIONAL EXPERIENCE IS:.................................................57 V.88 THESE ARE ALL ELEMENTS WHICH HAVE BEEN PROGRESSED UNDER THE MOBILISATION PHASE AND MUST BE MAINTAINED OR ADVANCED. WE EXPLORE THE SPECIFIC ISSUE OF POLITICAL SPONSORSHIP BELOW. ...........................................................................................................................................................................58 V.89 IT IS IMPORTANT THAT POLITICAL SPONSORSHIP FOR AN INITIATIVE, SUCH AS PUBLIC PRIVATE PARTNERSHIPS COMES FROM THE HIGHEST LEVELS OF GOVERNMENT AND THROUGH THE ROLE OF THE CABINET COMMITTEE ON INFRASTRUCTURE AND PPPS, THIS HAS BEEN EVIDENT TO DATE IN IRELAND. EXPERIENCE ELSEWHERE IN RELATION TO THE DEVELOPMENT OF PPP AND INDEED IN RELATION TO ANY OTHER IMPORTANT GOVERNMENT INITIATIVES SUGGESTS THAT STRONG, CLEAR AND VISIBLE ENDORSEMENT AT SENIOR POLITICAL LEVEL IS A KEY CATALYST TO SUCCESSFUL PROGRESS..................................................58 V.90 IN THE IRISH CONTEXT, WE SUGGEST THAT THIS CAN BEST BE FULFILLED WITHIN THE EXISTING STRUCTURAL ARRANGEMENTS IN RELATION TO THE CABINET COMMITTEE AND WITH THE CHAMPIONING OF PPPS BY A SENIOR MINISTER (A ROLE PERFORMED BY THE MINISTER FOR FINANCE TO DATE). AS THE REMIT OF THE CABINET COMMITTEE EXTENDS MUCH WIDER THAN PPP AND AS THE INFRASTRUCTURE PROGRAMME IS ONLY ONE (ALBEIT CENTRAL) ASPECT OF PPP, WE CONSIDER THAT THIS CHAMPIONING ROLE SHOULD BE VISIBLE OUTSIDE THE CABINET COMMITTEE BUT ULTIMATELY WORK THROUGH THE COMMITTEE AS THE BASIS FOR INFLUENCING THE WIDER GOVERNMENT.............................................................................58 V.91 THE CONNECTION PROPOSED BETWEEN THE MINISTERIAL CHAMPION FOR PPPS AND THE CABINET COMMITTEE SET OUT IN THE PRECEDING PARAGRAPH CAN BE ILLUSTRATED AS FOLLOWS:.............................58 V.92 DETERMINATION OF THE APPROPRIATE POLITICAL CHAMPION FOR PPP IS CLEARLY INFLUENCED BY THE STRUCTURING AND LOCATION OF A CENTRAL PPP UNIT AND VICE VERSA. THE CENTRAL PPP UNIT WILL BE THE EXECUTIVE MEANS BY WHICH THE PPP CHAMPION CAN DELIVER INFLUENCE ACROSS THE STRUCTURE OF THE CIVIL SERVICE AND MUST WORK CLOSELY WITH THIS UNIT. A KEY FEATURE IS THE ABILITY OF THE POLITICAL CHAMPION TO DELIVER THE NECESSARY FINANCIAL AND OTHER RESOURCES. ..............................58 V.93 THERE APPEARS NO STRONG CASE FOR CHANGING THE LOCATION OF THE CURRENT PPP UNIT FROM THE DEPARTMENT OF FINANCE GOING FORWARD, NOR THE ROLE OF THE MINISTER OF FINANCE AS PPP CHAMPION. ANY POTENTIAL DISADVANTAGES IN PROFILE ARISING FROM THE MAINTENANCE OF THE STATUS QUO CAN BE ALLEVIATED BY A RENEWED AND STRENGTHENED CLARITY OF PURPOSE, FOCUS, REMIT AND PROCESS FOR THE CENTRAL UNIT AND, IN PARTICULAR, IN ITS CONTINUED PROXIMITY TO VISIBLE SENIOR MINISTERIAL INVOLVEMENT IN PPP..................................................................................................................59 V.94 WHILE THE SPECIAL POSITION OF THE MINISTER FOR FINANCE IN CHAMPIONING THE PPP PROCESS IS RECOGNISED, MINISTERS IN OTHER KEY DEPARTMENTS HAVE ALSO A VITAL ROLE IN ENSURING THAT THE MOMENTUM BEHIND THE PPP PROCESS IS MAINTAINED....................................................................................59 VI. MOVING FORWARD ...............................................................................60 DEFINITION OF THE ORGANISATION MODEL ...................................................................................................60 VI.1 TO MOVE PPP FORWARD FROM THE MOBILISATION PHASE INTO THE SIGNIFICANT EXPANSION OF PROJECTS WILL REQUIRE A NUMBER OF ACTIVITIES, A REORIENTATION OF STRUCTURES AND THE INTRODUCTION OF THE NEW PROCESS...............................................................................................................60 VI.2 THESE HAVE BEEN EXPLORED IN THE EARLIER SECTIONS AND THE CONCLUSION ON THE TYPE OF STRUCTURES BEST SUITED TO MEET IRELANDS AMBITIOUS MEDIUM-TERM TARGETS FOR PPP PROGRAMME IS SET OUT IN THE TABLE BELOW...........................................................................................................................60 VI.3 THE FOCUS AND RELATIONSHIPS BETWEEN THE ELEMENTS IN THE GOVERNMENT STRUCTURES AND STAKEHOLDERS ARE REPRESENTED DIAGRAMMATICALLY OVERLEAF: .............................................................60 VI.4 FROM A PROGRAMME DELIVERY PERSPECTIVE, THIS ILLUSTRATES THAT:................................................61 PROCURING AUTHORITIES ARE AT THE FOREFRONT OF DELIVERY OF THE PPP PROGRAMME. THESE MAY TAKE THE FORM OF SUB-NATIONAL PUBLIC BODIES (E.G. LOCAL AUTHORITIES, HEALTH BOARDS), NATIONAL AGENCIES (E.G. NRA) OR DEPARTMENTS THEMSELVES;...................................................................................61 PROCURING AUTHORITIES ARE SUPPORTED BY SECTORAL PPP UNITS, HOUSED WITHIN DEPARTMENTS;........61 DEPARTMENTS ARE ACCOUNTABLE TO THE CABINET COMMITTEE FOR PPP DELIVERY, THROUGH THE VEHICLE OF THEIR STRATEGIC PLANS; AND.......................................................................................................61 CENTRAL PPP UNIT, FROM WITHIN DEPARTMENT OF FINANCE, REPORTS DIRECTLY TO THE CABINET COMMITTEE ON MATTERS OF NATIONAL POLICY, PROGRAMME MANAGEMENT, MONITORING, REGULATION, REVIEW AND CO-ORDINATION............................................................................................................................61 VI.5 ACCOUNTABILITY FOR PROGRAMME DELIVERY WILL REST WITH THE DEPARTMENTS THROUGH THE VEHICLE OF THE STRATEGIC PLANNING PROCESS. CLEARLY, THE INFRASTRUCTURE DEVELOPMENT DIVISIONS OF EACH STRATEGY DOCUMENT MUST ALIGN WITH THE NATIONAL DEVELOPMENT PLAN AND ANY FURTHER DEVELOPMENT OF POLICY AT A NATIONAL LEVEL.............................................................................................61 VI.6 AS EACH SUBMITTED STRATEGIC PLAN IS REVIEWED AT CABINET COMMITTEE LEVEL, THE CENTRAL PPP UNIT WILL ADVISE ON THE DOCUMENTS:..........................................................................................................61 ADHERENCE TO THE PPP ASPECTS OF THE NATIONAL DEVELOPMENT PLAN;.................................................61

Department of Finance

Review of PPP Structures

COMPLIANCE WITH OTHER AREAS OF NATIONAL POLICY ON PPPS; AND..........................................................61 ADEQUATE USE OF THE PPP OPPORTUNITIES IN DEVELOPING INFRASTRUCTURE OR OTHER AREAS OF PUBLIC SERVICES............................................................................................................................................................61 VI.7 APPROVAL OF THE STRATEGY DOCUMENT WILL BE CONDITIONAL UPON THESE CRITERIA BEING ADEQUATELY ADDRESSED..................................................................................................................................62 VI.8 THE OPERATION OF THIS MODEL OF ACCOUNTABILITY WILL BE RELATIVELY CLEAR WHERE DEPARTMENTS HOLD DIRECT LINE AUTHORITY OVER THE PROCUREMENT OF PROJECTS AGREED UNDER THE STRATEGIC PLAN. IN THIS INSTANCE, THE DEPARTMENT HAS THE POWER BOTH TO CEASE A PROJECT, WITHHOLD FUNDING UNTIL CERTAIN CRITERIA ARE MET OR HOLD TO ACCOUNT THOSE RESPONSIBLE FOR DELAYS IN PROCUREMENT. THE POSITION IS MORE COMPLEX WHERE THERE ARE A NUMBER OF PROCURING AUTHORITIES WITHIN A DEPARTMENT WHO HAVE A LESS STRAIGHTFORWARD RELATIONSHIP OF LINE ACCOUNTABILITY TO THAT DEPARTMENT. THE RELATIONSHIP BETWEEN THE DEPARTMENT OF THE ENVIRONMENT AND LOCAL GOVERNMENT AND LOCAL AUTHORITIES IS AN EXAMPLE OF THIS SITUATION.....62 VI.9 WHERE THIS MORE COMPLEX RELATIONSHIP EXISTS THE DEPARTMENT AND ITS PPP UNIT CAN ACT TO HALT THE PROGRESS OF A PROJECT AND ULTIMATELY WITHHOLD FUNDING IF IT IS CONSIDERED UNSUITABLE. HOWEVER IT CAN ONLY PROMOTE ADVANCEMENT OF THE PROCUREMENT PROCESS BY MEANS OF INFLUENCE AND SUPPORT RATHER THAN BY DIRECT EXECUTIVE AUTHORITY. WE CONSIDER THAT IN THE NEW ORGANISATIONAL MODEL, THE CENTRAL UNIT CAN PLAY AN IMPORTANT ROLE IN UNLOCKING SUCH PROJECT DELAYS. ACTING ON BEHALF OF THE PPP CHAMPION AND WITH THE AUTHORITY OF THE CABINET COMMITTEE, THE CENTRAL UNIT CAN INVESTIGATE THE REASONS FOR SUCH DELAY AND USE ITS GOOD OFFICES TO OVERCOME ANY IDENTIFIED BARRIERS OR REASONS FOR DELAY. THE CENTRAL UNITS ABILITY TO REPORT ITS FINDINGS DIRECTLY TO THE CABINET COMMITTEE SHOULD BRING THE NECESSARY PROFILE AND AUTHORITY TO ANY SUCH INVESTIGATION........................................................................................................62 VI.10 BROADENING THE FOCUS TO STAKEHOLDERS OUTSIDE GOVERNMENT AND PLACING MORE EMPHASIS ON RELATIONSHIPS AT THE CENTRE, THE DIAGRAM ON THE PREVIOUS PAGE ALSO HIGHLIGHTS A NUMBER OF KEY POINTS:.......................................................................................................................................................62 VII.10 WE BELIEVE IT IS ESSENTIAL THAT THE CENTRAL PPP UNIT RETAINS ITS CLOSE REPORTING RELATIONSHIP AND DIRECT AND READY ACCESS TO THE MINISTER IN ORDER TO AUTHORISE AND COPPER FASTEN ITS ROLE AS LEADING AND MANAGING THE PROGRAMME, DEVELOPING THE POLICY AND COORDINATING THE PPP PROGRAMME OVERALL...................................................................................................63 VI.11 THE RELATIVE STANDING/POSITIONING OF THE CENTRAL PPP UNIT WITHIN THE DEPARTMENT OF FINANCE MUST BE SUFFICIENT TO SUPPORT THIS ROLE IN ORDER TO ENSURE THE PROPER CO-ORDINATION OF THE VALUE FOR MONEY OBJECTIVE OF PPPS WITH THE OVERALL MANAGEMENT OF PUBLIC EXPENDITURE. THIS ESSENTIAL CO-ORDINATION IS BEST ACHIEVED BY THE RETENTION OF THE CENTRAL PPP UNIT WITHIN THE PUBLIC EXPENDITURE DIVISION OF THE DEPARTMENT OF FINANCE AND THE FURTHER STRENGTHENING OF REPORTING RELATIONSHIPS TO SENIOR MANAGEMENT LEVEL IN THE DEPARTMENT. ................................63 VI.12 IT SHOULD BE CLEAR THAT THERE IS A STRONG COMPLEMENTARITY BETWEEN THE ROLE OF THE CENTRAL PPP UNIT IN PROMOTING THE PPP CONCEPT AND THAT OF THE DEPARTMENT OF FINANCES WIDER REMIT AS CUSTODIAN OF PUBLIC EXPENDITURE, PROVIDING PROCEDURES AND POLICY GUIDANCE ARE IN PLACE TO ENSURE THAT PPP PROJECTS ARE SELECTED APPROPRIATELY AND DEVELOPED ACCORDING TO GUIDELINES AND REGULATIONS THAT REALISE THE VALUE FOR MONEY ADVANTAGES OF PPP......................63 VI.13 IN THIS LIGHT (AND GIVEN PROGRESS IN THE PILOT PROJECTS TO DATE), ESTABLISHMENT OF PROCEDURES WITHIN THE DEPARTMENT OF FINANCE TO ENSURE THE EFFECTIVE AND EFFICIENT MANAGEMENT OF THE PUBLIC EXPENDITURE ASPECTS OF THE PPP PROGRAMME ON A VALUE FOR MONEY BASIS A CONCEPT EMBRACING EFFICIENCY, EFFECTIVENESS AND ECONOMY RATHER THAN JUST LEAST COST - IS A PRIORITY...................................................................................................................................................63 VI.14 IN THIS CONTEXT, THE CORE RESPONSIBILITIES OF THE CENTRAL PPP UNIT SHOULD RELATE SOLELY TO ENSURING THAT PPP PROJECTS ARE DEVELOPED ON A VALUE FOR MONEY BASIS, ASSESSED IN TERMS OF A PPP VALUE FOR MONEY TEST. THIS AUDIT SYSTEM FOR PPP PROJECTS SHOULD PERMIT CONTRACTING AGENCIES TO ASSESS WHETHER PPP PROJECTS PROVIDE VALUE FOR MONEY AND SHOULD PROCEED TO PROCUREMENT...................................................................................................................................................63 VI.15 THIS REVIEW MECHANISM WOULD COMPRISE A CENTRAL PART OF THE PROCESS WHEREBY PROJECTS ARE SELECTED AND DEVELOPED BY PROCURING ORGANISATIONS. THE FORMULA UNDER WHICH SUCH ASSESSMENTS ARE MADE MUST BE CONSISTENT WITH THE HIGH-LEVEL PRINCIPLES SET OUT IN THE FRAMEWORK FOR PPPS UNDER THE PROGRAMME FOR PROSPERITY AND FAIRNESS (PPF)............................63 VI.16 CONSISTENT WITH OUR MODEL OF ACCOUNTABILITY, RESPONSIBILITY WILL REST WITH INDIVIDUAL DEPARTMENTS TO ASSESS THE AFFORDABILITY OF INDIVIDUAL PROJECTS IN THE CONTEXT OF PUBLIC EXPENDITURE AND PUBLIC EXPENDITURE PRIORITIES OVERALL AND OVER TIME IN THEIR SECTORS. AS THE PPP PROGRAMME DEVELOPS, PUBLIC EXPENDITURE DIVISION IN THE DEPARTMENT OF FINANCE SHOULD PLAY AN INCREASINGLY IMPORTANT ROLE IN REVIEWING THE AFFORDABILITY OF THE PPP PROGRAMME

Department of Finance

Review of PPP Structures

OVERALL. DEPARTMENTS SHOULD ALSO BE REQUIRED TO INCORPORATE DETAILS OF THEIR PPP PLANS AND COMMITMENTS FULLY INTO THEIR LONG-TERM STRATEGIC PLANNING PROCESS..............................................64 VI.17 IN REPORTING TERMS AS SET OUT IN THE DIAGRAM AT PARAGRAPH 7.3, THE HEAD OF THE CENTRAL PPP UNIT CAN BE HELD ACCOUNTABLE IN RELATION TO THE PERFORMANCE OF THE CENTRAL PPP UNIT AND ITS KEY OBJECTIVES AND PROGRAMME OF WORK THROUGH A NUMBER OF DISTINCT BUT LINKED RELATIONSHIPS:.................................................................................................................................................64

Roles and Responsibilities...........................................................................................................................64 VI.18 THE SPECIFIC ROLES AND RESPONSIBILITIES OF THE KEY GOVERNMENTAL PARTICIPANTS IN THE ABOVE MODEL ARE SET OUT BELOW..............................................................................................................................64 Cabinet Committee on Infrastructure and PPPs.......................................................................................64 VI.19 THE CABINET COMMITTEE HAS A FOCUS ON THE DELIVERY OF THE NATIONAL DEVELOPMENT PLAN, WHICH IS CONSIDERABLY BROADER THAN PPP BUT IN WHICH PPP CLEARLY SERVES AS A KEY ENABLER.....64 VI.20 IN THE CONTEXT OF PPP, THE COMMITTEES ROLE WILL BE:.................................................................64 Minister for Finance...................................................................................................................................65 VI.21 THE MINISTER FOR FINANCE WILL CONTINUE TO FULFIL THE ROLE WITHIN THE CABINET COMMITTEE AND AS POLITICALLY ACCOUNTABLE FOR THE DEPARTMENT OF FINANCE. .....................................................65 VI.22 AS MINISTER FOR FINANCE AND MEMBER OF THE CABINET COMMITTEE, THE MINISTER WOULD CONTINUE TO BE THE PPP CHAMPION BY ACTING AND BEING CLEARLY IDENTIFIED BOTH DOMESTICALLY AND INTERNATIONALLY AS THE FOCAL POINT FOR PPPS IN IRELAND. THE MINISTER FOR FINANCE MUST CONTINUE TO NURTURE A STRONG SENSE OF THE IDENTITY OF PPPS IN IRELAND AND ARTICULATE THE MINISTERIAL LEVEL STRATEGY AND OBJECTIVES OF THE PPP PROGRAMME....................................................65 VI.23 AS PPP CHAMPION, THE MINISTER WOULD AUTHORISE AND REQUIRE THE HEAD OF THE CENTRAL PPP UNIT ON THE MINISTERS BEHALF TO:..............................................................................................................65 VI.24 NATURALLY, WHILE IDENTIFYING A SENIOR MINISTER AS THE VISIBLE CHAMPION FOR PPP, THIS DOES NOT PRECLUDE OTHER MINISTERS FROM ACTIVELY PROMOTING AND SUPPORTING THE PPP PHILOSOPHY AND APPROACH. THEY WILL HAVE A DIRECT OPPORTUNITY TO INFLUENCE ALONG THIS AGENDA IN AGREEING PLANS AND PRIORITIES WITHIN THEIR OWN SPENDING DEPARTMENTS..............................................................65 Departments ..............................................................................................................................................65 VI.25 THE DEPARTMENTS WILL BE RESPONSIBLE FOR DEVELOPING PPP PROJECTS IN LINE WITH NATIONAL POLICY AND THEIR OWN STRATEGY...................................................................................................................65 VI.26 DEPARTMENTAL OR SECTORAL PPP UNITS WILL ACT IN SUPPORT OF THE DELIVERY OF THE DEPARTMENTS STRATEGY IN ITS DIMENSIONS THAT RELATE TO PPP. AT THIS LEVEL, THE UNITS ROLES ARE: ...........................................................................................................................................................................65 TO ASSIST IN THE DEVELOPMENT OF THE PPP ASPECTS OF DEPARTMENTAL STRATEGIES; AND......................66 TO ACCESS AND INCORPORATE OPPORTUNITIES FOR PPP IN THE FORMULATION AND DELIVERY OF THE STRATEGIC PLANS..............................................................................................................................................66 VI.27 WITH A HIGH FOCUS ON SUPPORTING AND ENABLING PROJECT PROCUREMENT AND DELIVERY, THE UNITS WILL ALSO: .............................................................................................................................................66 DEVELOP PPP POLICY AND GUIDANCE AT A SECTORAL LEVEL;.......................................................................66 DEVELOP AND INITIATE INTERVENTIONS WHICH WILL PROMOTE THE WIDESPREAD USE OF PPP AS A PROCUREMENT TOOL, WHERE APPROPRIATE ACROSS THE DEPARTMENT;..........................................................66 UNDERTAKE MARKET MANAGEMENT, DEVELOPMENT AND DEAL FLOW AT A SECTORAL LEVEL;....................66 SELECT AND DEVELOP PROJECTS IN LINE WITH NATIONAL ELIGIBILITY CRITERIA AND THE FRAMEWORK FOR PPPS UNDER THE PROGRAMME FOR PROSPERITY AND FAIRNESS;...................................................................66 PROGRAMME MANAGE THE PORTFOLIO OF PROJECTS WITHIN THE DEPARTMENT OR SECTOR;.........................66 CO-ORDINATE THE FLOW OF RELEVANT INFORMATION FOR ANY NATIONAL PROJECT TRACKING SYSTEM;.....66 CONTRIBUTE TO THE KNOWLEDGE MANAGEMENT PROCESSES AT SECTORAL AND NATIONAL LEVELS;...........66 CO-ORDINATE PARTICIPATION PROGRAMMES OF AWARENESS AND TRAINING FOR THOSE POTENTIALLY INVOLVED IN THE DELIVERY OF PPP PROJECTS; AND........................................................................................66 OVERVIEW AND QUALITY CONTROL USE OF ADVISORS AT EACH STAGE OF PROCUREMENT............................66 VI.28 OVER TIME, THE DEPARTMENTAL PPP UNITS WILL EXTEND THEIR ROLE BEYOND THE INFRASTRUCTURE PROJECT PHASE ITSELF TO THE DELIVERY OF THE SERVICE CONCERNED, TAKING ON BOARD THE NEED TO MONITOR SERVICE STANDARDS, TO ENCOURAGE COMPETITION IN THE DELIVERY OF SERVICES AND TO ENSURE
THAT THE APPROPRIATE REGULATORY CONTROLS ARE IN PLACE TO GUARANTEE COMPLIANCE WITH QUALITY STANDARDS........................................................................................................................................................66 VI.29 THERE IS NO COMMON OR UNIFORM MODEL, WHICH DEPARTMENTS SHOULD ADOPT AS A DELIVERY MECHANISM FOR PPP. THE STRUCTURAL APPROACH ADOPTED WILL VARY DEPENDING ON THE PROFILE, SCOPE AND SIZE OF PROJECTS LIKELY TO BE PROCURED. PROCUREMENT AND PPP ACTIVITIES MAY MERGE IN A SINGLE ENTITY SUCH AS THE NATIONAL ROADS AUTHORITY (NRA) AND THE PROPOSED RAIL PROCUREMENT AGENCY (RPA) OR MAY BE SEPARATE, WHERE, FOR EXAMPLE, THERE ARE A VARIETY OF CONSTITUENT PROCURING AUTHORITIES (SUCH AS IN THE LOCAL GOVERNMENT OR HEALTH SECTORS).........66

Department of Finance

Review of PPP Structures

VI.30 TO THE EXTENT THAT STRUCTURAL/ORGANISATIONAL CHANGES IN THE FUTURE MAY DIMINISH THE DIRECT ROLE OF GOVERNMENT DEPARTMENTS AS PROCURING AGENCIES FOR PPP PROJECTS, THE DEPARTMENTS WILL STILL BE REQUIRED TO FOCUS ON SECTORAL POLICY DEVELOPMENT. THE DEPARTMENTS
THEMSELVES ARE BEST EQUIPPED TO RESOLVE THESE SECTORAL ISSUES IN THE CONTEXT OF THE BROADER NATIONAL POLICY FRAMEWORK FOR PPPS. ....................................................................................................66 VI.31 THERE ARE, HOWEVER, TWO PRINCIPAL TEMPLATES AGAINST WHICH THE DIFFERING SECTORAL NEEDS CAN BE DETERMINED.........................................................................................................................................67 VI.32 THE FIRST MODEL IS WHERE THE DEPARTMENT IS ITSELF THE CONTRACTING AUTHORITY AND WHERE THE OPPORTUNITY EXISTS TO CREATE AN INTEGRATED PPP ADVISORY AND PROCUREMENT BODY. THIS TYPE OF BODY WOULD BE RESPONSIBLE FOR THE ACTIVITIES SET OUT IN THE TABLE OVERLEAF.............................67 VI.33 THE CONTRASTING MODEL, WHERE THE DEPARTMENT IS DISTINCT FROM A NUMBER OF ITS PROCURING AUTHORITIES, REQUIRES A MORE COMPLEX ORGANISED ARRANGEMENT. IN ESSENCE THE DEVELOPMENT AND CO-ORDINATION OF PPP REQUIRES A SEPARATE ADVISORY UNIT WITH PROCUREMENT ACTIVITIES RESTING WITH THE APPROPRIATE AUTHORITY.................................................................................................................67 VI.34 THESE SEPARATE BODIES AND THEIR RESPECTIVE RESPONSIBILITIES ARE SET OUT IN THE TABLE BELOW................................................................................................................................................................67

Social Partners Public Private Informal Advisory Group (IAG)................................................................68 VI.35 THE NEW STRUCTURES DETAILED IN THE REVIEW WILL NOT REQUIRE ANY SIGNIFICANT REFORMULATION OF THE ROLE OF THE SOCIAL PARTNERS IN THE PPP PROGRAMME THROUGH THE IAG
WHICH WILL CONTINUE TO PROVIDE A FORUM FOR THE ENGAGEMENT AND PARTICIPATION OF THE SOCIAL PARTNERS IN THE DEVELOPMENT OF THE NATIONAL PPP PROGRAMME AND THE MONITORING AND REVIEW OF THE FRAMEWORK FOR PPPS UNDER THE PPF...................................................................................................68

Inter-departmental Group on PPPs (IDG).................................................................................................68 VI.36 THE INTER-DEPARTMENTAL GROUP ON PPPS WILL CONTINUE TO PLAY AN IMPORTANT ROLE IN THE MANAGEMENT OF THE PROGRAMME. HOWEVER, THERE SHOULD BE SOME RECASTING OF THE CO-ORDINATING AND CONSULTATIVE ROLE OF THE IDG TO REFLECT THE NEW CLARITY IN THE RESPONSIBILITIES AT NATIONAL AND SECTORAL LEVEL......................................................................................................................68 Central PPP Unit .......................................................................................................................................68 VI.37 THE CENTRAL PPP UNIT WOULD ADVISE AND ACT ON BEHALF OF THE MINISTER FOCUSING SHARPLY ON ITS CORE RESPONSIBILITIES. ITS WORK WOULD BE EXPECTED TO REVOLVE PRIMARILY AROUND THE FOLLOWING BROAD AREAS IN RELATION TO WHICH, IN ORDER TO STRENGTHEN ACCOUNTABILITY RELATIONSHIPS, AN ANNUAL REPORT SHOULD BE PREPARED AND PRESENTED TO THE OIREACHTAS AND THE CABINET:............................................................................................................................................................68 VI.38 THE POLICY ROLE OF THE CENTRAL PPP UNIT WILL BE TO CREATE AND DEVELOP NATIONAL AND HIGH-LEVEL PPP POLICY, REQUIRED FOR THE DEVELOPMENT OF THE POLICY FRAMEWORK FOR THE SUCCESSFUL DELIVERY OF PPP AT A SECTORAL LEVEL....................................................................................69 VI.39 THIS POLICY ROLE HAS THREE DIMENSIONS:...........................................................................................69 VI.40 THE CENTRAL PPP UNIT WILL TAKE A LEAD IN SETTING OUT THE AGENDA FOR POLICY DEVELOPMENT AND UNDERTAKING APPROPRIATE PROGRAMMES OF WORK. HOWEVER, THIS LEADERSHIP ROLE SHOULD NOT
BE DISCHARGED ON A DIRECTIVE OR MANDATORY BASIS BUT SHOULD SEEK TO FULLY ENCOMPASS SECTORAL PERSPECTIVES THROUGH:...................................................................................................................................69 VI.41 PRIORITY AREAS FOR NATIONAL DEVELOPMENT INCLUDE:.....................................................................69 VI.42 A CORE FUNCTION OF THE CENTRAL PPP UNIT IS ITS ROLE IN MONITORING AND REVIEW OF PPP IMPLEMENTATION ON THE CLEAR AUTHORITY OF THE MINISTER OF FINANCE AND THE CABINET COMMITTEE. IN ESSENCE, THIS AIMS AT ENSURING AND EMBEDDING BEST PRACTICE IN PPP PROCUREMENT IN THE LIGHT OF NATIONAL AND HIGH-LEVEL PPP POLICY AND THE NEED FOR A CONSISTENT AND COHERENT APPROACH TO PPP PROCUREMENT ACROSS THE SECTORS. .....................................................................................................70 VI.43 THE MONITORING AND REVIEW FUNCTION WILL BE DELIVERED THROUGH A VARIETY OF MECHANISMS AS FOLLOWS:......................................................................................................................................................70 VI.44 WE CONSIDER THAT THESE POWERS AND THE BASIS ON WHICH THEY CAN BE USED CREATE AN ADEQUATE LOCUS FOR THE CENTRAL BODY WITHOUT DILUTING OR CONFUSING THE LINES OF ACCOUNTABILITY SET OUT ABOVE. IN PARTICULAR, THEY ARE CONSISTENT WITH A CLEAR DELINEATION OF RESPONSIBILITIES AS BETWEEN THE CENTRE AND THE SECTORS. IT WILL HELP SECURE THE COHESION AND CONSISTENCY OF THE PPP PROGRAMME OVERALL. ..........................................................................................71 VI.45 ANOTHER FUNCTION IS THE CONTINUED INTENSIVE PROMOTION OF THE PPP AGENDA IN IRELAND AND ELSEWHERE, BOTH WITHIN GOVERNMENT AND TO THE PRIVATE SECTOR. COMMUNICATION OF IRELAND'S PPP PROGRAMME BOTH TO POTENTIAL PARTICIPANTS DOMESTICALLY AND OVERSEAS SHOULD INCLUDE THE CONTINUED DEVELOPMENT OF NEW MARKETS AND THE BOLSTERING OF CONSTRUCTION CAPACITY AND CAPABILITIES BY ATTRACTING INTERNATIONAL PPP CONTRACTORS. THIS RESPONSIBILITY WILL INCLUDE:. 71

Department of Finance

Review of PPP Structures

VI.46 THE CENTRAL PPP UNIT WILL TAKE PRIMARY RESPONSIBILITY IN LOOKING FORWARD TO PLAN FOR THE CHANGING PROFILE OF PPP ACTIVITY AS EMPHASIS SHIFTS FROM MOBILISATION THROUGH STANDARDISATION TO PROCUREMENT AND ULTIMATELY CONTRACT MANAGEMENT. THE DEVELOPMENT ROLE WILL EMBRACE:71 VI.47 OUR REVIEW HAS FOCUSSED, AS SET OUT IN THE TERMS OF REFERENCE, ON THE STRUCTURAL REQUIREMENTS IN MOVING PPP IN IRELAND FROM THE MOBILISATION TO EXPANSION PHASE OF MATURITY.72 VI.48 IN LOOKING TO THE LONGER TERM, FURTHER ALONG THE MATURITY CURVE, THE STRUCTURES RECOMMENDED FOR CURRENT NEEDS ARE LIKELY TO CHANGE AGAIN.............................................................72 VI.49 WHILE PROJECTS WILL CONTINUE TO COME FORWARD INTO PROCUREMENT, THE EMPHASIS WILL SHIFT TOWARD CONTRACT MANAGEMENT AS THE MEANS OF ENSURING DELIVERY OF THE PROCURED SERVICES. OVER THE MEDIUM TERM, WE CONSIDER THAT IT IS ESSENTIAL THAT DETAILED CONSIDERATION IS GIVEN TO THE BEST MEANS OF MEETING THE REQUIREMENT FOR CONTRACT MANAGEMENT ON A COHERENT AND COORDINATED BASIS. IT IS AT THIS STAGE IN THE DEVELOPMENT OF PPPS THAT THE BENEFITS OF PPP IN DELIVERING QUALITY PUBLIC SERVICES WILL BE REALISED..............................................................................72 VI.50 THE MOVE TOWARD A FOCUS ON CONTRACT MANAGEMENT MAY PROVIDE A FRESH REMIT FOR THE CENTRAL UNIT, WHICH IN ITS PROPOSED FORM WE CONSIDER WILL HAVE A LIFE-SPAN OF AROUND FOUR YEARS. THERE ARE A NUMBER OF OPTIONS FOR ITS SUBSEQUENT EVOLUTION: .............................................72
RETRACT GRADUALLY AND ULTIMATELY DISAPPEAR WITH ITS FUNCTIONS SUBSUMED WITHIN THE

DEPARTMENT OF FINANCE; OR..........................................................................................................................72 CONTINUE PRINCIPAL ACTIVITIES IN NEW SECTORS; OR...................................................................................72 BECOME A CENTRAL CO-ORDINATING BODY FOR CONTRACT MANAGEMENT...................................................72 VI.51 DIRECT RESPONSIBILITY FOR DEVELOPING SKILLS/COMPETENCIES TO EMBED/MAINSTREAM PPP WILL FALL IN THE FIRST INSTANCE TO LINE DEPARTMENTS/PROCURING AGENCIES IN LINE WITH THE ACCOUNTABILITY RELATIONSHIPS SET OUT IN THE REVIEW. THE CENTRAL PPP UNIT WILL HAVE COORDINATING FUNCTION IN RELATION TO SKILLS/TRAINING DEVELOPMENT (AS IS THE CASE FOR FRAMEWORK FOR PPP AWARENESS AND TRAINING)..............................................................................................................72 VI.52 HOWEVER, IT WOULD BE ERRONEOUS TO SUGGEST THAT SUBSEQUENT TO THE PEAK OF PROCUREMENT GROWTH UNDERWAY THAT THE PRESSURE ON PROCURING AUTHORITIES WILL RELENT. ENSURING PROJECTS
ARE MANAGED EFFECTIVELY AND THAT SERVICES ARE DELIVERED THROUGHOUT THE CONTRACT PERIOD IS AT THE HEART OF THE PPP PHILOSOPHY, TO WHICH THE PROCUREMENT PHASE IS IN EFFECT AN ENTRY POINT.

...........................................................................................................................................................................72 VI.53 MAXIMISING THE SCOPE FOR EFFECTIVE CONTRACT MANAGEMENT WILL EMBRACE: ...........................72 VI.54 THIS ROLE WOULD BE DISCHARGED AT A NATIONAL LEVEL OR THROUGH SECTORAL/REGIONAL CENTRES OF EXCELLENCE, OFFERING HANDS-ON SUPPORT NOT JUST AT A HIGH LEVEL BUT IN ACTIVE CONTRACT MANAGEMENT, OFFERING ADVICE ON TECHNICAL, LEGAL OR FINANCIAL ISSUES. A PARTICULAR
ADVANTAGE OF SOME FORM OF CONSOLIDATED ENTITY OR ENTITIES WOULD BE THE CONTINUITY WHICH THIS CAN OFFER, GIVEN THE LENGTH OF CONTRACTS AND LIMITED LIKELIHOOD OF PRESERVING STAFF CONTINUITY WITHIN THE CONTRACTING AUTHORITY.............................................................................................................73 VI.55 HOWEVER, USE OF SUCH BODIES SHOULD NOT BE VIEWED AS AN ABROGATION OF RESPONSIBILITY BY THE CONTRACTING AUTHORITIES WHO MUST REMAIN THE DRIVING FORCE BEHIND ENSURING DELIVERY OF QUALITY SERVICES TO THEIR CUSTOMERS.........................................................................................................73 VI.56 IT IS CRITICAL THAT ALONGSIDE ESTABLISHING THE APPROPRIATE STRUCTURES TO ADVANCE PPP IN IRELAND, THAT THE MAJOR ISSUE OF RESOURCING IS ALSO ADDRESSED. AS EVIDENT FROM THE CONSULTATIONS UNDERTAKEN IN THE CONTEXT OF THIS REVIEW, LACK OF RESOURCES IN THE PPP AREA HAS THE POTENTIAL TO GENERATE SIGNIFICANT BOTTLENECKS IN THE OVERALL DELIVERY OF THE PPP PROGRAMME IN MOVING FROM THE MOBILISATION TO THE EXPANSION PHASE................................................73 VI.57 A PRELIMINARY INDICATION OF THE LIKELY RESOURCES REQUIRED DISTINGUISHING BETWEEN THE SECTORAL AND CENTRAL UNITS IS SET OUT IN THE TABLES BELOW.................................................................73 SKILLS REQUIRED.............................................................................................................................................73 VI.58 THE ROLE PROFILES, SKILLS AND COMPETENCIES REQUIRED FOR THE STRUCTURES ARE SET OUT IN THE NEXT SECTIONS..................................................................................................................................................74 DEPARTMENTAL/SECTORAL RESOURCES..........................................................................................................74 VI.59 AS ALREADY OUTLINED, THERE IS NO SINGLE PRESCRIBED STRUCTURE FOR DEPARTMENTAL ARRANGEMENTS IN DELIVERING PPP................................................................................................................74 VI.60 THE KEY COMMON POINTS ARE:..............................................................................................................75 VI.61 THE LEVEL OF RESOURCE REQUIRED WITHIN EACH DEPARTMENTAL UNIT WILL VARY BETWEEN ORGANISATIONS FROM DEPARTMENT TO DEPARTMENT AND WILL BE A FUNCTION OF SEVERAL DISTINCT FACTORS, INCLUDING IN PARTICULAR THE NUMBER AND COMPLEXITY OF PPP PROJECTS BEING UNDERTAKEN, THE EXISTING BASE OF PPP KNOWLEDGE, SKILLS AND EXPERTISE AND THE EXTENT TO WHICH ADVICE IS PURCHASED EXTERNALLY THROUGH THE APPOINTMENT OF CONSULTANTS.....................................................75 VI.62 THE NEW ORGANISATIONAL MODEL, DEALING WITH A GREATLY EXPANDED RANGE OF PROJECTS, RECOGNISES A SHIFT BY THE CENTRAL UNIT AWAY FROM THE PROVISION OF PPP EXPERTISE AND ADVICE AT

Department of Finance

Review of PPP Structures

A PROJECT LEVEL. AS THE PILOT PHASE CONTINUES TO DEVELOP, IT IS ESSENTIAL THAT SECTORAL PPP UNITS TAKE A LEAD IN ENSURING SUFFICIENT NUMBERS OF PERSONNEL AVAIL OF PPP TRAINING WHICH CONFORMS WITH THE INTERDEPARTMENTAL GROUPS FRAMEWORK ON PPP AWARENESS AND TRAINING, PUBLISHED IN DECEMBER 2000. SECURING ADEQUATE PPP SKILLS AND EXPERTISE IS VITAL IF PPPS ARE TO BE DELIVERED ON A VALUE FOR MONEY BASIS......................................................................................................75 VI.63 A NUMBER OF HIGHLY SPECIALISED AND TECHNICAL ROLES CAN BE EXPECTED TO ARISE IN THE SECTORAL UNITS IN RESPECT OF WHICH IT WILL BE DIFFICULT TO FIND APPROPRIATELY EXPERIENCED CIVIL SERVANTS. IN THESE CIRCUMSTANCES, EMPLOYMENT OF PPP EXPERTS ON A FIXED-TERM CONTRACT BASIS SHOULD BE CONSIDERED. THE STANDARDISATION OF CONTRACT TERMS AND POLICY GUIDELINES WILL ENABLE A SIGNIFICANT REDUCTION IN THE LEVEL AND EXTENT OF BOUGHT-IN EXPERTISE.............................75 VI.64 A COMMON REQUIREMENT ACROSS DEPARTMENTS, BOTH WITHIN PPP UNITS AND AT PROCURING AUTHORITY LEVEL, WILL BE A NEED TO ENSURE ADEQUACY OF PROJECT MANAGEMENT. THIS IS BOTH AT A SKILLS LEVEL AND IN RESPECT OF MANAGEMENT FRAMEWORKS.....................................................................75 VI.65 AN EFFECTIVE PPP PROJECT TEAM WILL CONSIST OF PEOPLE:...............................................................75 VI.66 PRICEWATERHOUSECOOPERS HAVE DEVELOPED COMPETENCY FRAMEWORKS FOR CREATING EFFECTIVE PPP PROJECT TEAMS ON BEHALF OF THE UK TREASURY TASKFORCE. A COPY OF THIS FRAMEWORK IS INCLUDED AT APPENDIX C................................................................................................................................76 VI.67 IN THE FOLLOWING PARAGRAPHS, WE SET OUT FOR ILLUSTRATIVE PURPOSES THE PRINCIPAL ROLES IN A PPP PROJECT TEAM AND HOW THESE CAN BE RELATED TO THE COMPETENCY FRAMEWORK. WE HAVE SOUGHT TO ADAPT THE APPLICATION TO AN IRISH CONTEXT WITH THE PURPOSE OF OFFERING A TEMPLATE AGAINST WHICH PROJECT TEAMS CAN BE FORMED. USE OF THE TEMPLATE WILL PROMOTE THE INCLUSION OF THE REQUIRED COMPETENCIES RATHER THAN SOLELY FOCUSSING ON TECHNICAL EXPERTISE........................76 VI.68 WHEN ADVISERS WITH SPECIFIC KNOWLEDGE AND EXPERTISE ARE NEEDED, THE TEAM MUST HAVE SUFFICIENT EXPERTISE TO SELECT AND MANAGE THEM EFFECTIVELY. AN EFFECTIVE TEAM WILL ALSO BE ABLE TO PLAN A COMPLEX PROCUREMENT PROCESS AND MANAGE SUCCESSFULLY THE DELIVERY OF SERVICES WITHIN A PPP CONTRACT..................................................................................................................76 VI.69 THERE ARE DIFFERING ROLES WITH A PPP PROJECT TEAM AND IT CAN BE DIFFICULT TO ESTABLISH ANY ONE GENERIC TERM FOR A ROLE. IN PARTICULAR, ANY ROLE MAY BE SHARED BY SEVERAL INDIVIDUALS, OR DIFFERING ASPECTS OF A ROLE BE COMPLETED BY DIFFERENT INDIVIDUALS. WE SET OUT THE COMPETENCIES REQUIRED FOR THREE BROAD ROLE DESCRIPTIONS...........................................................76 VI.70 THE FOLLOWING TERMS ARE USED TO DEFINE THE THREE GENERIC ROLES TO BE FOUND IN MOST PPP PROJECTS............................................................................................................................................................76 STRATEGIC........................................................................................................................................................76 VI.71 ONE OR MORE PEOPLE MAY FILL EACH OF THESE ROLES. ON THE OTHER HAND, IN SMALLER PROJECTS ONE PERSON MAY FULFIL MORE THAN ONE OF THESE ROLES; IN PARTICULAR, THE PROJECT LEADER MAY ALSO OFFER SUBJECT MATTER EXPERTISE.........................................................................................................76

Strategic Project Sponsorship and Promotion Role...............................................................................76 VI.72 THE PROJECT SPONSORSHIP AND PROMOTION ROLE MAY BE DIVIDED INTO TWO LEVELS IN PRACTICE: ...........................................................................................................................................................................76 VI.73 THE INVESTMENT DECISION MAKER WILL PROBABLY CHAIR THE PROJECT BOARD AND CAN MAKE DECISIONS ON HOW THE PROJECT FITS INTO DEPARTMENTAL/AUTHORITY CORPORATE AND SPENDING PLANS. THEY HAVE ULTIMATE ACCOUNTABILITY FOR THE PROJECTS DELIVERY. IN IRELAND WITH ALL FUNDING DERIVING FROM THE DEPARTMENT RATHER THAN AT A LOCAL PROCUREMENT AUTHORITY LEVEL, THE ISSUE OF SPENDING APPROVAL MAY BE OF LESS SIGNIFICANCE TO THIS ROLE. HOWEVER, WE CONSIDER IT ESSENTIAL THAT UNLIKE A NUMBER OF THE PILOT PROJECTS, THIS ROLE IS AT A SENIOR LEVEL. THE ROLE
SHOULD BE FILLED BY AN INDIVIDUAL WITH OVERALL RESPONSIBILITY FOR THE SERVICE BEING PROCURED RATHER THAN THE ASSET. THEREFORE, IT IS UNLIKELY TO BE THE SENIOR TECHNICAL SPECIALIST...............77 VI.74 THE PROJECT SPONSOR WILL BE THE FOCUS OF THE AUTHORITY ON THE PROJECT BEING ABLE TO APPROVE THE DEFINITION OF THE PROJECT REQUIREMENTS AND AUTHORISE ANY VARIATIONS. THEY AUTHORISE THE FINANCIAL EXPENDITURE AND ENSURE THAT FUNDS ARE AVAILABLE. THEY ALSO MONITOR CONTROL PROCEDURES FROM THE FEASIBILITY THROUGH TO THE IMPLEMENTATION STAGE. IN IRELAND, THIS COULD BE THE REPRESENTATIVE OF THE DEPARTMENT, A ROLE LIKELY TO BE FILLED FROM WITHIN ITS PPP UNIT...................................................................................................................................................................77 VI.75 THEREFORE, OVERALL THE PROJECT SPONSORSHIP AND PROMOTION ROLE PROVIDES STRATEGIC MANAGEMENT FOR THE PROJECT, HIGH-LEVEL AND HEADQUARTERS ADVOCACY AND ACCOUNTABILITY FOR THE OUTCOME....................................................................................................................................................77 VI.76 THE CAPABILITIES REQUIRED FOR THIS ROLE ARE SIMILAR AT BOTH THE LEVELS OF INVESTMENT DECISION-MAKER AND PROJECT SPONSOR, ALTHOUGH SPECIFIC ASPECTS OF THE COMPETENCY FRAMEWORK MAY MORE ACCURATELY APPLY TO ONE OR THE OTHER WHEN THIS DIVISION INTO LEVELS IS MADE.............77

Executive Project Leadership and Management Role............................................................................77

Department of Finance

Review of PPP Structures

VI.77 THE PROJECT LEADERSHIP AND MANAGEMENT ROLE HAS RESPONSIBILITY FOR DELIVERING THE PROJECT AND ITS REQUIRED RESULTS ON A DAY-TO-DAY BASIS. THE ROLE REQUIRES BOTH PEOPLE
MANAGEMENT AND PROJECT MANAGEMENT CAPABILITIES AND WIDER STAKEHOLDER MANAGEMENT SKILLS. IN ADDITION, FOR PARTICULARLY LARGE OR COMPLEX PROJECTS, A SUBJECT MATTER EXPERT SKILLED IN PROJECT MANAGEMENT SHOULD BE APPOINTED AND BE ACCOUNTABLE TO THIS ROLE. AGAIN IT IS EXPECTED TO EMPHASISE THAT THIS ROLE IS NOT AUTOMATICALLY ALLOCATED TO A SENIOR TECHNICAL PERSON FROM THE PROCURING AUTHORITY BUT IS FILLED BY SOMEONE WITH COMMERCIAL AND MANAGEMENT CAPABILITIES......................................................................................................................................................77 VI.78 THE ROLE ALSO REQUIRES THE SKILLS TO APPOINT AND MANAGE EXTERNAL ADVISERS AS PPP PROJECTS TEND TO REQUIRE SPECIFIC EXPERTISE WHICH MAY ONLY BE AVAILABLE FROM OUTSIDE THE PUBLIC SECTOR. THIS REQUIRES THE ABILITY TO BE AN INTELLIGENT CUSTOMER ABLE TO:........................77

Support Subject Matter Expert Role........................................................................................................78 VI.79 THERE IS A REQUIREMENT FOR A WIDE RANGE OF SUBJECT MATTER EXPERTISE IN ORDER TO DELIVER PPP PROJECTS. THE SUBJECT MATTER EXPERTISE WILL USUALLY INCLUDE:...................................................78 VI.80 IN IRELAND AS ELSEWHERE, THE SUBJECT MATTER EXPERTISE WILL BE DRAWN FROM COMBINED INHOUSE AND ADVISORY RESOURCES. IT IS IMPORTANT TO UNDERSTAND THE CONTRIBUTION IN THIS AREA WHICH ARE TO PROVIDE TECHNICAL ADVICE RATHER THAN TO LEAD AND DIRECT THE PROJECT....................78 VI.81 THIS GUIDANCE FOCUSES ON THE GENERIC EXPERTISE REQUIRED BY THE SUBJECT MATTER EXPERT IN ORDER TO FUNCTION EFFICIENTLY AS PART OF A PPP TEAM............................................................................78 Project Stages..............................................................................................................................................78 VI.82 PPP PROJECTS FALL INTO THREE BROAD PHASES:...................................................................................78 VI.83 THE FEASIBILITY PHASE IS CONCERNED WITH THE PREPARATION OF THE BUSINESS CASE. THE PROCUREMENT PHASE EXTENDS FROM PRE-QUALIFICATION THROUGH TO FINANCIAL CLOSE. CONTRACT
MANAGEMENT RUNS FROM THE AWARD OF THE CONTRACT THROUGH TO THE DELIVERY OF THE REQUIRED SERVICES DURING THE LIFE OF THE CONTRACT WHICH MAY BE 25 YEARS OR LONGER....................................78 VI.84 MOST GENERIC COMPETENCIES ARE NEEDED ARE NEEDED AT ALL STAGES, ALTHOUGH SOME SKILLS WILL BE PARTICULARLY REQUIRED AT PARTICULAR TIMES IN THE PROCESS. THE FRAMEWORK GIVES SOME INDICATION OF THIS...........................................................................................................................................78 VI.85 THE CONTRACT MANAGEMENT STAGE REQUIRES FURTHER STUDY, PARTICULARLY IN RESPECT OF COMPETENCE NEEDS DURING SERVICE DELIVERY STAGE OVER THE LIFE OF THE CONTRACT...........................78 VI.86 THE NATURE OF THE PROJECT MAY ALSO REQUIRE SECTOR COMPETENCE (E.G. HEALTH, ROADS, PRISONS) OR PROJECT TYPE COMPETENCE (E.G. IT PROCUREMENT), AS INDICATED IN THE PROFESSIONAL EXPERTISE CATEGORY FOR THE SUBJECT MATTER EXPERT ROLE....................................................................79

Competence Clusters...................................................................................................................................79 VI.87 THE FRAMEWORK GROUPS THE COMPETENCIES INTO THREE CLUSTERS:................................................79 VI.88 THIS GROUPING REFLECTS THE MAIN FOCUS OF EACH OF THE COMPETENCIES. HOWEVER, ALL OF THE COMPETENCIES ARE NECESSARILY LINKED AND ARE OFTEN DEMONSTRATED AT THE SAME TIME...................79 Uses.............................................................................................................................................................79 VI.89 THE COMPETENCE FRAMEWORK HAS BEEN DESIGNED SO THAT IT CAN BE USED IN A NUMBER OF DIFFERENT WAYS:..............................................................................................................................................79 VI.90 THE COMPETENCY FRAMEWORK ASSUMES A PARTNERSHIP BETWEEN THE PUBLIC AND PRIVATE SECTOR, A CO-OPERATIVE APPROACH NOT A LEGAL ENTITY, WHICH REQUIRES UNDERPINNING WITH PROCESS TRAINING FOR ALL PARTNERS TO ENSURE EFFECTIVE COLLABORATION. THE PRIVATE SECTOR COULD USE THE
COMPETENCE FRAMEWORK TO IDENTIFY THOSE COMPETENCIES THEY MAY NEED TO IMPROVE TO MATCH THE STANDARDS REQUIRED TO PRE-QUALIFY FOR PPP PROJECTS............................................................................79 VI.91 IT IS IMPORTANT TO NOTE THAT THE APPROACH TO DEFINING COMPETENCIES INCLUDES THE IDEA OF STRETCH. HENCE THE DEFINITIONS INCLUDE AN ASPIRATION ELEMENT, TO ENCOURAGE BOTH PERSONAL CAPABILITY GROWTH AND CONTINUALLY IMPROVING BUSINESS PERFORMANCE. WE SUGGEST THAT THIS CAN PROVIDE A VALUABLE TOOL FOR DEPARTMENTS AND PROCURING AUTHORITIES IN SELECTING AND TRAINING THOSE WHO WILL PLAY KEY ROLES IN THE FRONT LINE OF PROJECT PROCUREMENT.......................................79

Project Management Frameworks..............................................................................................................80 VI.92 ALONGSIDE ADEQUACY OF PROJECT MANAGEMENT AND DELIVERY EXPERTISE, IT WILL BE IMPORTANT FOR DEPARTMENTS TO ENSURE APPROPRIATE PROJECT FRAMEWORKS ARE IN PLACE BY WHICH:-...................80 VI.93 IN OUR EXPERIENCE OF PPP PROJECTS, WE CONSIDER THAT DEPARTMENTS MUST ENSURE THAT ADEQUATE COMMITMENT OF RESOURCE IS GIVEN, OTHERWISE TIMESCALES WILL NOT BE MET. THIS WILL
GENERALLY INCLUDE CONSTRUCTING TEAMS WITH INDIVIDUALS WHO ARE COMMITTED TO THE PROJECT ON A FULL-TIME BASIS................................................................................................................................................80 VI.94 WHILE SUCH RESOURCING WILL REQUIRE ADDITIONAL STAFFING TO DELIVER THE PROJECT PROGRAMMES IN DEPARTMENTS, CONSIDERATION MUST BE GIVEN TO MAKING USE OF THOSE WHO MAY HAVE BEEN HIGHLY INVOLVED IN TRADITIONAL CAPITAL PROCUREMENT AND WHO WITH APPROPRIATE TRAINING CAN BE REDEPLOYED TO PROJECTS DELIVERED VIA PPP..................................................................................80

Department of Finance

Review of PPP Structures

CENTRAL UNIT..................................................................................................................................................80 VI.95 THE CENTRAL UNIT MAY BE STRUCTURED ALONG THE FOLLOWING LINES AS A BASIS FOR DRAWING TOGETHER THE RELEVANT SKILLS.....................................................................................................................80 VI.96 IN THE MODEL SET OUT ABOVE, THE CENTRAL PPP UNIT COMPRISES A HEAD OF UNIT, A PPP POLICY MANAGER, A PPP PROGRAMME MANAGER, A PPP MARKETING & COMMUNICATIONS MANAGER AND A PPP KNOWLEDGE MANAGER. THE PPP POLICY MANAGER AND PPP PROGRAMME MANAGER ARE SUPPORTED BY FINANCIAL, LEGAL AND ECONOMIC ADVISORS, WHO WILL APPLY THEIR SPECIALIST SKILLS TO THE POLICY AND PROGRAMME-RELATED ACTIVITIES, UNDERTAKEN BY THE UNIT AS AND WHEN REQUIRED......................81 VI.97 THE RESPONSIBILITIES AND LEVEL OF EXPERIENCE ASSOCIATED WITH EACH POSITION ARE SET OUT IN APPENDIX D.......................................................................................................................................................81 UNDERPINNING COMPETENCIES........................................................................................................................81 VI.98 WHILE THE PROFILE OF EACH JOB VARIES IN THE CENTRAL UNIT, THERE ARE A NUMBER OF UNDERPINNING COMPETENCIES WHICH EACH ROLE DEMANDS TO AT LEAST SOME EXTENT. THESE ARE AS FOLLOWS:...........................................................................................................................................................81 VI.99 THESE MUST BE DEMONSTRATED AT A PARTICULARLY HIGH LEVEL FOR THE MORE SENIOR ROLES......81 VI.100 AS CAN BE SEEN FROM THE DIAGRAM AT PARAGRAPH 7.93, WE ENVISAGE THAT THE RESOURCING OF THE CENTRAL UNIT WILL REQUIRE AN EXPANSION OF THE UNIT FROM 6 PERSONNEL AT PRESENT (3 EXPERTS) TO ABOUT SOME NINE TO TWELVE PERSONNEL (4-5 EXPERTS). THE STAFFING OF THE CENTRAL UNIT SHOULD ENTAIL A MIXTURE OF CIVIL SERVANTS BROUGHT TOGETHER ON A CROSS-DEPARTMENTAL BASIS (DRAWING WHEREVER POSSIBLE ON EXISTING STAFF EXPERIENCED IN THE PPP AREA) AND PRIVATE SECTOR TERM CONTRACT EMPLOYERS......................................................................................................................................81 VI.101 THE HEAD OF THE CENTRAL PPP UNIT SHOULD BE AT A SENIOR LEVEL CONSISTENT WITH THE
RESPONSIBILITIES OF THE POST AND POSSESS THE COMPETENCIES REQUIRED TO MEET THE DEMANDING SPECIFICATIONS OF THE POSITION. THE CENTRAL PPP UNIT MAY BE HEADED BY A CIVIL SERVANT, ALTHOUGH CONSIDERATION SHOULD BE GIVEN TO APPOINTING A HIGH PROFILE INDIVIDUAL FROM THE PRIVATE SECTOR ON A CONTRACT BASIS. THIS COULD GIVE SOME NEW PROFILE TO PPP AND VISIBILITY TO THE MARKETPLACE. HOWEVER, THIS ROLE MUST BE SUBORDINATE TO THE ROLE AND PROFILE OF THE MINISTER FOR FINANCE AS PPP CHAMPION IN ORDER TO GUARANTEE THE OVERALL CONSISTENCY AND COHERENCE OF THE FUTURE DIRECTION OF THE PPP PROGRAMME..................................................................81

VII. REALISING THE BENEFITS OF PPP..........................................................82 INTRODUCTION..................................................................................................................................................82 VII.1 DETERMINING THE SUCCESS OF PPP IMPLEMENTATION IN IRELAND AND MEASURING THE BENEFITS IS OBVIOUSLY AN IMPORTANT AREA OF POLICY EVALUATION AT GOVERNMENT LEVEL. IT ALSO PROVIDES THE
FRAMEWORK INSIDE WHICH THE PERFORMANCE TARGETS AND RESPECTIVE CONTRIBUTIONS OF THE VARIOUS DELIVERY AREAS CAN BE ADDRESSED...............................................................................................................82 VII.2 DEVELOPMENT OF MEANINGFUL PERFORMANCE INDICATORS IN THIS CONTEXT IS NOT STRAIGHTFORWARD AND OUR REVIEW OF INTERNATIONAL EXPERIENCE IN PPP DID NOT YIELD SIGNIFICANT INSIGHTS INTO CONSTRUCTION OF ROBUST MODELS. AS A CONSEQUENCE, IN COMMON WITH OUR ASSESSMENT OF ORGANISATIONAL MODELS IN OTHER JURISDICTIONS, OUR FOCUS HAS BEEN ON THE SPECIFICS OF THE IRISH SITUATION WITH NO STRAIGHTFORWARD APPLICATION OF POLICY EVALUATION FRAMEWORK......................................................................................................................................................82 VII.3 FOCUSSING FIRSTLY ON THE MACRO LEVEL, IRELANDS OBJECTIVES MUST BE TO REALISE THE OPPORTUNITIES AND BENEFITS, WHICH PPP AS A PROCUREMENT MECHANISM AFFORDS, SET IN THE CONTEXT OF THE NATIONAL DEVELOPMENT PLAN. WE DEFINE THE BENEFITS OF PPP IN SECTION TWO OF OUR REPORT AS: .....................................................................................................................................................................82 BETTER VALUE FOR MONEY;.............................................................................................................................82 BETTER QUALITY SERVICE;...............................................................................................................................82 FASTER PROJECT DELIVERY;.............................................................................................................................82 MORE PROJECT DELIVERY;................................................................................................................................82 GREATER CERTAINTY;.......................................................................................................................................82 BETTER ASSET UTILISATION;.............................................................................................................................82 BETTER REGULATION; ......................................................................................................................................82 ENHANCED COMPETITIVENESS; AND.................................................................................................................82 ENHANCED MANAGEMENT OF PUBLIC SERVICES..............................................................................................82 VII.4 THIS BENEFIT LIST EMBRACES IN A SLIGHTLY DIFFERENT FORM THE DRAFT GOALS FOR PPP IN IRELAND AS DEFINED BY THE PUBLIC PRIVATE PARTNERSHIP INFORMAL ADVISORY GROUP AND SET OUT IN PARAGRAPH 2.19 OF OUR REPORT. AS A CONSEQUENCE, THIS LIST APPEARS TO OFFER A ROBUST FRAMEWORK IN WHICH TO MEASURE THE SUCCESS OF THE PPP APPROACH IN IRELAND.......................................................82 VII.5 THE MEASURES ALSO ALIGN WITH RECOMMENDATIONS IN THE RECENT OECD REPORT THAT SUGGESTS A CHANGE TO THE REGULATORY AND COMPETITION ENVIRONMENT IN RESPECT OF PUBLIC SERVICES IN

Department of Finance

Review of PPP Structures

IRELAND AND HIGHLIGHTS THE INEFFICIENT AND FRAGMENTED SUPPLY OF PUBLIC SERVICES AT LOCAL AUTHORITY LEVEL. USE OF PPPS AND THE REALISATION OF THE BENEFITS AND OPPORTUNITIES THIS PRESENTS WOULD HELP TO ADDRESS THE UNDERLYING CONSENSUS SET OUT IN THE OECD REPORT.............83 VII.6 WHILE THIS BENEFIT LIST PRESENTS A FRAMEWORK FOR ASSESSMENT, WE HAVE EMPHASISED THROUGHOUT OUR REPORT THAT THERE ARE A NUMBER OF PHASES IN THE PPP PROGRAMME MATURITY CYCLE. THE OPPORTUNITY TO REALISE THE BENEFITS OF PPP AT A PROJECT LEVEL OR PROGRAMME LEVEL IS HEAVILY INFLUENCED BY THE STAGE OF THE PROJECT OR OVERALL MATURITY CYCLE. AN ASSESSMENT OF THE BENEFIT POTENTIAL AT THE DIFFERENT STAGES OF MATURITY IS SET OUT IN THE TABLE BELOW:...........83 * INSOFAR AS THIS RELATES TO PROCUREMENT COSTS, RATHER THAN SERVICE DELIVERY COSTS................83 VII.7 IT IS CLEAR FROM THE ABOVE ANALYSIS THAT REALISATION OF PPP BENEFITS IS PRINCIPALLY A FEATURE OF THE MATURITY PHASE. THEREFORE, FOCUSSING ON DEFINING SUCCESS CRITERIA IN MOVING FROM MOBILISATION INTO EXPANSION MAJORS ON THE FOLLOWING TWO AREAS:...........................................84 COST OF PROCUREMENT COMPARED TO OTHER PROCUREMENT METHODS; AND.............................................84 TIMELINESS OF PROCUREMENT PROCESS COMPARED TO OTHER PROCUREMENT METHODS. THIS CONSTITUTES THE ENTIRE PROCUREMENT PROCESS AND THE CONSTRUCTION PHASE.............................................................84 VII.8 WHILE THIS MAKES IT DIFFICULT TO EVALUATE THE SUCCESS OR OTHERWISE OF THE PPP PROGRAMME IN THE SHORT TO MEDIUM TERM, IT IS IMPORTANT TO IDENTIFY THE FUTURE SUCCESS MEASURES IN ORDER THAT THE DATA CAPTURE REQUIREMENTS CAN BE DETERMINED AT THIS STAGE. THIS WILL PROVIDE THE MECHANISM TO MAKE THE EARLIEST POSSIBLE MEASURE OF SUCCESS. POTENTIAL MEASURES OF SUCCESS IN EACH AREA OF PPP BENEFIT ARE SUGGESTED IN THE TABLE BELOW. IT SHOULD BE RECOGNISED THAT THE MEASURES OF SUCCESS, LIKE THE BENEFITS THEMSELVES, ARE NOT WHOLLY DISCREET AND THERE IS SOME DEGREE OF OVERLAP..........................................................................................................................................84 VII.9 THE FIRST MILESTONE ASSESSMENTS SHOULD TAKE PLACE AROUND THE COST OF PROCUREMENT AND TIMELINESS OF THE PROCUREMENT/DELIVERY PROCESS. AT AN INDICATIVE LEVEL, AND IN OUR OPINION WE SUGGEST THAT THE FOLLOWING TYPES OF TARGET MEASURES COULD BE ADOPTED:......................................85 TRANSACTION COSTS........................................................................................................................................85 (EXCLUDING LEGAL .........................................................................................................................................85 APPROVALS).....................................................................................................................................................85 ON ACCOMMODATION PROJECTS, PUBLIC SECTOR ADVISOR FEES SHOULD BE NO MORE THAN 2% OF THE CAPITAL VALUE OF THE PROJECT.......................................................................................................................85 ON CIVIL ENGINEERING PROJECTS, PUBLIC SECTOR ADVISOR FEES SHOULD BE NO MORE THAN 3-4% OF THE CAPITAL VALUE OF THE PROJECT.......................................................................................................................85 PROJECT TIMESCALES.......................................................................................................................................85 ON ACCOMMODATION PROJECTS, ELAPSED TIME FROM OJEC TO FINANCIAL CLOSE SHOULD BE NO LONGER THAN 15 MONTHS...............................................................................................................................................85 ON CIVIL ENGINEERING PROJECTS, ELAPSED TIME FROM OJEC TO FINANCIAL CLOSE SHOULD BE NO LONGER THAN 20 MONTHS...............................................................................................................................................85 Data Capture...............................................................................................................................................85 VII.10 IN ORDER TO ASSESS PPP AGAINST THE BENEFIT CRITERIA, WE CONSIDER THAT THERE NEEDS TO BE EARLY ATTENTION GIVEN TO THE CAPTURE OF APPROPRIATE DATA. THIS DATA CAPTURE EXTENDS NOT ONLY TO PPP PROJECTS BUT ALSO TO PROVISION OF EXISTING SERVICES BY THE PUBLIC SECTOR, WHICH WILL OFFER FUTURE BENCHMARK COMPARISONS.......................................................................................................85 VII.11 INFORMATION FOR CAPTURE WILL INCLUDE:.........................................................................................85 MONITORING OF EXISTING SERVICE STANDARDS ON AN ONGOING BASIS;.......................................................85 PROCUREMENT AND CONSTRUCTION TIMES FOR INFRASTRUCTURE PROJECTS OF ALL TYPES;.........................85 TRANSACTION COSTS OF INFRASTRUCTURE PROCUREMENTS;..........................................................................85 COSTS ASSOCIATED WITH PILOT PROJECTS;......................................................................................................85 BID COSTS; AND................................................................................................................................................85 USE AND LEVEL OF PROJECT FINANCE IN PPP CONTRACTS..............................................................................85 Performance Measures...............................................................................................................................86 VII.12 THE OVERALL KEY PERFORMANCE INDICATORS AND MEASURES PROVIDE A CONTEXT FOR THE TARGETS FOR THE BODIES INVOLVED IN DELIVERING AND SUPPORTING THE DELIVERY OF THE PPP PROGRAMME.......................................................................................................................................................86 VII.13 TARGETS FOR DEPARTMENTS WILL DERIVE FROM THEIR STRATEGIC PLANS WHICH IN TURN MUST BE LINKED TO THE NATIONAL DEVELOPMENT PLAN AND WIDER PPP AGENDA OF THE CABINET COMMITTEE....86 VII.14 FOR THE CENTRAL UNIT, THE PERFORMANCE TARGETS CAN BE BROKEN DOWN INTO THE AREAS OF ACTIVITY DESCRIBED IN THE PARAGRAPHS BELOW. THESE SHOULD BE CONSOLIDATED AT AN EARLY STAGE FOR AGREEMENT BY THE CABINET COMMITTEE................................................................................................86 Business Plans ............................................................................................................................................86 VII.15 THE CENTRAL UNIT MUST SET OUT BUSINESS PLANS AS TO WHAT IT WILL DELIVER IN EACH YEAR. THIS WILL INCLUDE:..........................................................................................................................................86

Department of Finance

Review of PPP Structures

VII.16 BUSINESS PLANS MUST BE DEVELOPED ANNUALLY IN THE CONTEXT OF THE DEPARTMENTS STRATEGY STATEMENTS AND AGREED BY THE CABINET COMMITTEE. THIS SHOULD BE PUBLISHED AS A CLEAR AGENDA FOR THE PPP STAKEHOLDERS TO UNDERSTAND................................................................................................86 VII.17 THE EARLY THRUST AROUND BUSINESS PLANS WILL FOCUS ON DEVELOPING A PPP PROGRAMME WHICH IS COHERENT AND STRUCTURED. KEY ASPECTS OF THIS ACTIVITY WILL INCLUDE:.............................86 Assessment of Process Effectiveness and Views of Stakeholders................................................................87 VII.18 WE CONSIDER THAT, AS THE ROLE OF THE CENTRAL UNIT IS ESSENTIALLY ONE OF ENABLING AND FACILITATING PROJECT DELIVERY, IN ITS ROLE OF LEADING, DRIVING AND CO-ORDINATING THE PPP PROGRAMME, A RANGE OF QUALITATIVE MEASURES IS APPROPRIATE..............................................................87 VII.19 THIS CAN BEST BE EFFECTED BY MEANS OF ONGOING SURVEYS. THIS SHOULD INCLUDE:...................87 Context of Deal Flow and Value for Money...............................................................................................87 VII.20 THE QUANTIFIABLE NUMBER OF DEALS CLOSED AND VALUE FOR MONEY ARE NOT THE SOLE MEANS BY WHICH THE CENTRAL UNIT SHOULD BE ASSESSED. HOWEVER, THEY DO PROVIDE IMPORTANT INSIGHTS INTO THE OVERALL EFFECTIVENESS OF PPP IN IRELAND AND AS SUCH THE CENTRAL UNIT MUST CONTRIBUTE TOWARDS THIS SUCCESS....................................................................................................................................87 VIII. RECOMMENDED ACTIONS.....................................................................88 CONCLUSIONS...................................................................................................................................................88 VIII.1 OUR REPORT HAS IDENTIFIED THAT IRELAND IS FACING SIGNIFICANT CHALLENGES IN MOVING FORWARD FROM MOBILISING THE PPP AGENDA INTO RAPID EXPANSION OF THE PROGRAMME. WE HAVE IDENTIFIED THAT THE ISSUES RELATING TO EXPANSION INCLUDE:...................................................................88 DEVELOPING STRUCTURES AND PROCESSES UNDERPINNED BY CLEAR ACCOUNTABILITY;..............................88 FOCUSSING EFFORTS TOWARD DELIVERY OF PROJECTS;...................................................................................88 SECURING RESOURCES NEEDED TO PROGRESS THE EXPANDED PROGRAMME;..................................................88 ENSURING VALUE FOR MONEY AT A TRANSACTIONAL LEVEL AND IN CO-ORDINATING THE PROGRAMME IN GOVERNMENT; AND...........................................................................................................................................88 CREATING MOMENTUM ACROSS THE WIDER GOVERNMENT ADMINISTRATION.................................................88 VIII.2 TO DELIVER ON THESE ISSUES, WE HAVE CONCLUDED THAT THE FOLLOWING ORGANISATIONAL ARRANGEMENTS ARE MOST APPROPRIATE:........................................................................................................88 VIII.3 WE SET OUT OVERLEAF THE RECOMMENDED ACTIONS THAT SHOULD BE TAKEN AS THE MEANS BY WHICH THESE NEW ARRANGEMENTS CAN BEST BE IMPLEMENTED....................................................................88 Recommended Actions.................................................................................................................................89 VIII.4 TO IMPLEMENT THE STRUCTURAL MODEL BEST SUITED TO EXPANDING THE PPP PROGRAMME IN IRELAND, WE RECOMMEND THE FOLLOWING STEPS:.........................................................................................89 ENDORSE THE PREFERRED ORGANISATIONAL MODEL THAT:............................................................................89 PROMOTES THE DELIVERY OF PPP PROJECTS THROUGH A SECTORAL FOCUS MANAGED BY DEPARTMENTAL / AGENCY PPP UNITS; AND.................................................................................................................................89 LEADS THE EXPANSION, DEVELOPMENT AND CO-ORDINATION OF PPP POLICY AND THE PPP PROGRAMME THROUGH AN ENHANCED CENTRAL POLICY UNIT LOCATED IN THE DEPARTMENT OF FINANCE.......................89 IN OUR OPINION THIS WILL SUSTAIN BOTH TRANSITION INTO THE EXPANSION PHASE AND THE MEDIUM / LONGER TERM MOVE TOWARDS PROGRAMME MATURITY;................................................................................89 BUILD UPON THE VISIBLE AND SIGNIFICANT CONTRIBUTION MADE TO DATE AT MINISTERIAL LEVEL BY FURTHER PROMOTING THIS LEADERSHIP ROLE AS PPP CHAMPION, SUPPORTED BY THE CENTRAL UNIT FOR PPPS;................................................................................................................................................................89 REINFORCE THE POLITICAL COMMITMENT TO PPP THROUGH ENDORSEMENT OF THE CONTINUING ACTIVE ROLE OF THE CABINET COMMITTEE; AND.........................................................................................................89 EDUCATE STAKEHOLDERS WITHIN AND OUTSIDE GOVERNMENT AS TO THE DISTINCTIVE ROLES OF THOSE INVOLVED IN SECTORAL POLICY AND THE PROCUREMENT OF PROJECTS AND OF THE CENTRAL PPP UNIT. IN
PARTICULAR CLARIFY THE ACCOUNTABILITY OF DEPARTMENTS FOR DELIVERING THE PROGRAMME AND THE ROLE OF THE CENTRAL UNIT, ITS RELATIONSHIP TO THE CABINET COMMITTEE AND ITS NATIONAL REMIT WHICH IS NOT CONFINED BY ITS LOCATION WITHIN A SINGLE DEPARTMENT; ..................................................89 VIII.5 THESE STRUCTURAL ELEMENTS MUST BE MATCHED BY THE INTRODUCTION OF SIGNIFICANT NEW RESOURCES AND WE RECOMMEND THE FOLLOWING:.........................................................................................89 A CLEAR DEFINITION OF THE APPROPRIATE MODEL FOR EACH DEPARTMENT / AGENCY;...............................89 MOVE SWIFTLY TO STRENGTHEN THE RESOURCING OF THE CENTRAL UNIT IN LINE WITH THIS REPORT;........89 ADVANCE THE RESOURCE REQUIREMENTS FOR THE PPP UNITS IN DEPARTMENTS WHICH HAVE ALREADY DEVELOPED A FORMAL WORK PROGRAMME AND BY WHICH RESOURCE REQUIREMENTS CAN BE IDENTIFIED;.89 ENCOURAGE OTHER PPP UNITS TO UNDERTAKE SUCH AN ASSESSMENT IN ORDER THAT AN ASSESSMENT OF RESOURCE REQUIREMENTS CAN BE MADE;........................................................................................................89

Department of Finance

Review of PPP Structures

UTILISE THE FRAMEWORK ON COMPETENCIES FOR A PPP PROJECT TEAM (INCLUDED AS AN APPENDIX) AS A TEMPLATE AND ENSURE ALL CURRENT AND FORTHCOMING PROJECTS ARE ASSESSED IN THIS CONTEXT AND RESOURCE REQUIREMENTS IDENTIFIED; AND.....................................................................................................90 PROGRESS THE RECOMMENDED ARRANGEMENTS FOR EFFECTIVE SELECTION AND MANAGEMENT OF ADVISORS AT AN EARLY STAGE.........................................................................................................................90 VIII.6 THE RECOMMENDED STRUCTURES MUST BE SUPPORTED AND UNDERPINNED BY SOME ESSENTIAL CORE PROCESSES WHICH MUST BE ENACTED, INCLUDING:..........................................................................................90 INCLUSION OF THE NATIONAL DEVELOPMENT PLAN TARGETS AND PPP DIMENSIONS INTO DEPARTMENTAL STRATEGIC POLICY PROCESSES;.........................................................................................................................90 ESTABLISHMENT OF APPROPRIATE MECHANISMS FOR THE CENTRAL PPP UNIT TO ENSURE ADEQUATE INCLUSION IN DEPARTMENT STRATEGY PLAN OF THE PPP APPROACH AS A CORE ELEMENT IN DELIVERING INFRASTRUCTURE AND PUBLIC SERVICES;.........................................................................................................90 DEVELOPMENT OF A FORMAL PROGRAMME BY THE CENTRAL PPP UNIT EMBRACING:...................................90 AWARENESS OF NEW STRUCTURES ACROSS GOVERNMENT;.............................................................................90 ARTICULATION OF A CLEAR POLICY AGENDA AT NATIONAL AND SECTORAL LEVELS AND DEVELOPMENT OF STANDARDISATION AND GUIDELINES IN SUPPORT OF THIS AGENDA TO ADVANCE PROJECT DELIVERY;...........90 ESTABLISHMENT OF ARRANGEMENTS FOR NETWORKING AND KNOWLEDGE MANAGEMENT CAPTURING AND ILLUSTRATING LESSONS FROM PROJECTS AND SHARING OF THESE LESSONS ACROSS SECTORS AND DEPARTMENTS;..................................................................................................................................................90 PUTTING IN PLACE PROCESSES SPECIFYING THE APPROPRIATE ROLE OF ADVISORS AND ARRANGEMENTS FOR THEIR MANAGEMENT..........................................................................................................................................90 CREATION OF MECHANISMS TO EXTEND STAKEHOLDER ENGAGEMENT, PARTICULARLY AIMED AT INCLUDING THOSE INVOLVED OR INTERESTED AT A PROJECT LEVEL. THIS INCLUDES THE POLITICAL LEVEL IN LOCAL AUTHORITIES; AND............................................................................................................................................90 EXTENSION OF THE AWARENESS AND TRAINING PROGRAMMES ON PPP ACROSS GOVERNMENT. ..................90 VIII.7 FINALLY, WE RECOMMEND THAT, AS A BASIS FOR EVALUATING THE EFFECTIVENESS OF PPP, THE ADOPTION OF THE TYPE OF TARGET MEASURES OUTLINED FOR A PERIOD OF PROGRAMME EXPANSION. IT IS RECOGNISED THAT A FULLER PROGRAMME-LEVEL EVALUATION IS ONLY POSSIBLE DURING THE LATER MATURITY PHASE BUT WE RECOMMEND THAT THE DATA COLLECTION ARRANGEMENTS NECESSARY TO FACILITATE THIS MEDIUM-TERM EVALUATION ARE ESTABLISHED AT AN EARLY STAGE..................................90 IX. APPENDIX A: INTERNATIONAL CASE STUDIES ..........................................92 UNITED KINGDOM.............................................................................................................................................92 Policy Drivers.............................................................................................................................................92 IX.1 THE PRIVATE FINANCE INITIATIVE (PFI) WAS LAUNCHED IN NOVEMBER 1992 AS A NEW WAY FOR GOVERNMENT TO DELIVER BETTER QUALITY AND MORE COST-EFFECTIVE PUBLIC SERVICES. THE KEY DRIVERS BEHIND THE PRIVATE FINANCE INITIATIVE WERE:.............................................................................92 IX.2 THE PRIVATE FINANCE INITIATIVE OFFERED AN ATTRACTIVE MEANS OF INVESTING IN PUBLIC INFRASTRUCTURE AND PUBLIC SERVICES WITHOUT COMPROMISING THE GOVERNMENTS WIDER ECONOMIC OBJECTIVE OF REDUCING THE PUBLIC SECTOR BORROWING REQUIREMENT. IT ALSO SIGNIFIED A RADICAL CHANGE IN THE WAY PUBLIC INFRASTRUCTURE AND SERVICES ARE DELIVERED. ...........................................92 Institutional Structure.................................................................................................................................92 IX.3 IN ORDER FOR THE PRIVATE FINANCE INITIATIVE TO BE SUCCESSFUL, A CULTURAL CHANGE WAS
REQUIRED WITHIN THE PUBLIC AND PRIVATE SECTORS IN RELATION TO THEIR FUTURE ROLES IN THE DELIVERY OF PUBLIC INFRASTRUCTURE AND SERVICES. FOR THIS REASON, THE TREASURY ESTABLISHED IN 1993 AN INDEPENDENT PRIVATE FINANCE PANEL COMPRISING REPRESENTATIVES FROM BOTH THE PUBLIC AND PRIVATE SECTORS TO PROMOTE THE PRIVATE FINANCE INITIATIVE AND TO PROVIDE GUIDANCE ON ITS USE. THE SPECIFIC BRIEF GIVEN TO THE PRIVATE FINANCE PANEL WAS TO PROMOTE THE INTRODUCTION OF PRIVATE MANAGEMENT AND FINANCE INTO AREAS OF CAPITAL INVESTMENT AND SERVICES TRADITIONALLY UNDERTAKEN BY THE PUBLIC SECTOR BY:........................................................................................................92 IX.4 THE INDEPENDENCE OF THE PRIVATE FINANCE PANEL WAS IMPORTANT DURING THE EVOLUTION OF THE PRIVATE FINANCE INITIATIVE TO PROVIDE CREDIBILITY TO THE INITIATIVE AND TO GENERATE ACCEPTANCE AND MOMENTUM WITHIN THE PUBLIC AND PRIVATE SECTORS. HOWEVER, ONCE GENERAL ACCEPTANCE AND UNDERSTANDING OF THE PRIVATE FINANCE INITIATIVE WAS ACHIEVED AND MOMENTUM HAD BEEN DEVELOPED IN TERMS OF DEAL FLOW, THE MAIN STUMBLING BLOCKS TO THE SUCCESSFUL ROLL-OUT OF THE INITIATIVE WERE IDENTIFIED AS BEING PRIMARILY INTERNAL TO GOVERNMENT, INCLUDING:........................93 IX.5 IN 1997, THE GOVERNMENT ABANDONED THE UNIVERSAL TESTING RULE AND COMMISSIONED SIR MALCOLM BATES, CHAIRMAN OF THE PEARL GROUP, TO CARRY OUT A REVIEW OF THE PRIVATE FINANCE INITIATIVE. THE CONCLUSIONS OF THE BATES REVIEW WERE PUBLISHED IN JUNE 1997 AND ACCEPTED IN FULL BY THE GOVERNMENT. THE REVIEW RECOMMENDED A NUMBER OF KEY PROCESS IMPROVEMENTS, WHICH CAN BE SUMMARISED AS FOLLOWS:.......................................................................................................93

Department of Finance

Review of PPP Structures

IX.6 THE BATES REVIEW CONFIRMED THAT, STRUCTURED APPROPRIATELY, THE PRIVATE FINANCE INITIATIVE HAD THE POTENTIAL TO DELIVER IMPROVED VALUE FOR MONEY. IT CONCLUDED THAT THE INDEPENDENT PRIVATE FINANCE PANEL HAD ACHIEVED ITS ROLE OF PROMOTING THE CONCEPTS OF PFI THROUGHOUT THE PUBLIC AND PRIVATE SECTORS, AND THAT THE ASSISTANCE NOW REQUIRED BY GOVERNMENT DEPARTMENTS AND AGENCIES WAS ONE OF TRANSACTION SUPPORT.......................................94 IX.7 THE REVIEW CONCLUDED THAT IN THE MEDIUM TO LONG TERM, THE MOST APPROPRIATE INSTITUTIONAL STRUCTURE TO DELIVER THE PRIVATE FINANCE INITIATIVE WOULD BE THE USE OF SPECIALIST UNITS WITHIN GOVERNMENT DEPARTMENTS AND AGENCIES WITH THE NECESSARY SKILLS AND EXPERIENCE TO PROCURE PUBLIC PRIVATE PARTNERSHIP PROJECTS WITHOUT CENTRAL SUPPORT. A SMALL CENTRAL UNIT IN THE TREASURY WOULD BE REQUIRED TO ACT AS A GUARDIAN OF POLICY PRINCIPLES AND A PROMOTER OF BEST PRACTICE...........................................................................................................................94 IX.8 HOWEVER, THE REVIEW ALSO CONCLUDED THAT, AT THAT TIME, GOVERNMENT DEPARTMENTS AND AGENCIES DID NOT HAVE THE NECESSARY LEVELS OF COMMERCIAL KNOWLEDGE AND PROJECT MANAGEMENT EXPERIENCE TO DELIVER BEST VALUE UNDER THE PRIVATE FINANCE INITIATIVE. THE REVIEW THEREFORE RECOMMENDED THAT, AS AN INTERIM MEASURE, A TASKFORCE SHOULD BE ESTABLISHED WITHIN THE TREASURY TO PROVIDE STRONG CENTRALISED SUPPORT TO GOVERNMENT DEPARTMENTS AND AGENCIES IN DELIVERING GOOD QUALITY TRANSACTIONS...............................................................................94 IX.9 IN SEPTEMBER 1997, THE GOVERNMENT REPLACED THE INDEPENDENT PRIVATE FINANCE PANEL, WITH A NEW TREASURY TASKFORCE, WHICH WAS PART OF THE TREASURY AND WAS TO BECOME THE FOCAL POINT FOR ALL PFI ACTIVITIES ACROSS GOVERNMENT. THE TREASURY TASKFORCE WAS STRUCTURED IN TWO PARTS: A TASKFORCE POLICY TEAM AND A TASKFORCE PROJECTS TEAM. ...................................................94 IX.10 THE ROLE OF THE TASKFORCE POLICY TEAM WAS TO ESTABLISH THE RULES, PROCEDURES AND BEST PRACTICE GOVERNING THE PRIVATE FINANCE INITIATIVE AND OTHER FORMS OF PUBLIC PRIVATE PARTNERSHIP. IT WAS ALSO RESPONSIBLE FOR DEVELOPING AND IMPLEMENTING A PROGRAMME OF PFI AND PPP ORIENTATED TRAINING FOR PUBLIC SECTOR EMPLOYEES. .......................................................................94 IX.11 THE POLICY TEAM COMPRISED SIX POLICY EXECUTIVES, DRAWN FROM THE PUBLIC AND PRIVATE SECTORS. WORKING IN CONJUNCTION WITH THE TASKFORCE PROJECTS TEAM, THE POLICY TEAM DEVELOPED DETAILED GUIDANCE ON THE KEY STAGES OF PRIVATE FINANCE INITIATIVE TRANSACTIONS AND ALSO ON THE STANDARDISATION OF CONTRACT TERMS TO BE USED IN PFI DEALS. LEGISLATION RECOGNISED TO BE NECESSARY TO DELIVER PPP PROJECTS WAS ENACTED, COVERING THE RESPONSIBILITIES OF CENTRAL GOVERNMENT IN RELATION TO NHS TRUSTS, PROVIDING PROTECTION TO THE PRIVATE SECTOR IN THE EVENT OF LOCAL AUTHORITIES NOT HAVING LEGAL POWERS TO ACT, AND INTRODUCING CHANGES TO THE CAPITAL FINANCE REGULATIONS FOR LOCAL AUTHORITIES.......................................................................94 IX.12 THE TASKFORCE PROJECTS TEAM WAS A GROUP OF 18 LEADING PFI EXPERTS, RECRUITED FROM THE PRIVATE SECTOR ON FIXED TERM CONTRACTS, AND OPERATING UNDER THE DIRECTION OF THE CHIEF EXECUTIVE OF THE TASKFORCE. THE ROLE OF THE TASKFORCE PROJECTS TEAM WAS TO PROVIDE SUPPORT FOR INDIVIDUAL DEPARTMENTS AND AGENCIES ON SIGNIFICANT TRANSACTIONS. THE PROJECTS TEAM WAS
RESPONSIBLE FOR TESTING THE COMMERCIAL VIABILITY OF SIGNIFICANT PROJECTS PRIOR TO THEIR ADVERTISEMENT IN THE OFFICIAL JOURNAL OF THE EUROPEAN COMMUNITY, AND FOR MONITORING THE PROGRESS OF PROJECTS DURING PROCUREMENT. ............................................................................................95 IX.13 THE TASKFORCE PROJECTS TEAM WAS DESIGNED TO HAVE A LIFE OF TWO YEARS, DURING WHICH TIME GOVERNMENT TASKED INDIVIDUAL DEPARTMENTS AND AGENCIES TO DEVELOP THEIR OWN PFI AND PPP SKILLS THROUGH A COMBINATION OF RECRUITMENT, TRAINING AND PROJECT EXPERIENCE...........................95 IX.14 IN NOVEMBER 1998 THE PAYMASTER GENERAL ANNOUNCED THAT SIR MALCOLM BATES WOULD UNDERTAKE A SECOND REVIEW OF THE PRIVATE FINANCE INITIATIVE. THE PRIMARY PURPOSE OF THE REVIEW WAS TO ADVISE ON THE ARRANGEMENTS THAT SHOULD BE PUT IN PLACE TO PROVIDE PROJECT ADVICE AFTER THE TREASURY TASKFORCE HAD COMPLETED ITS REMIT. .......................................................95 IX.15 THE RECOMMENDATIONS OF THE SECOND REVIEW WERE PUBLISHED IN JULY 1999 AND INCLUDED A WIDE RANGE OF ACTIONS TO IMPROVE THE SUPPORT AND GUIDANCE AVAILABLE TO PROJECTS PROCURED UNDER THE PRIVATE FINANCE INITIATIVE. CENTRAL TO THE SECOND REVIEW WAS THE CONCLUSION THAT PARTNERSHIPS WITH THE PRIVATE SECTOR REQUIRE A RANGE OF PRIVATE SECTOR SKILLS THAT HAD PROVED DIFFICULT TO NURTURE WITHIN THE CIVIL SERVICE, SUCH AS COMMERCIAL NEGOTIATING SKILLS, PROJECT MANAGEMENT AND PROJECT STRUCTURING. IN ADDITION, THE REVIEW RAISED THE CONCERN THAT INSUFFICIENT RESOURCES WERE BEING DEVOTED BY PUBLIC BODIES TO THE DEVELOPMENT PHASE OF PRIVATELY FINANCED PROJECTS, WITH CONSEQUENT DELAYS TO THE PROCUREMENT PROCESS AND FAILURE TO SECURE BEST VALUE FOR MONEY. ...............................................................................................................95 IX.16 THE REVIEW CONCLUDED THAT GOVERNMENT COULD ADDRESS THESE PROBLEMS BY CREATING A NEW PUBLIC PRIVATE PARTNERSHIP, MANAGED ON PRIVATE SECTOR PRINCIPLES, THAT WOULD ALIGN ITSELF WITH THE PUBLIC SECTOR PROCURING AUTHORITIES TO HELP IMPROVE THE QUALITY AND PROGRESS OF PFI DEALS.

...........................................................................................................................................................................95

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IX.17 IN JUNE 2000 THE GOVERNMENT LAUNCHED PARTNERSHIPS UK (PUK) AS THE SUCCESSOR TO THE TASKFORCE PROJECTS TEAM. PUK IS A PLC WITH A PUBLIC SECTOR MINORITY SHAREHOLDING. ITS PRIMARY ROLE IS TO ACT AS CO-SPONSOR OF PFI/PPP PROJECTS, PROVIDING COMMERCIAL AND PROJECT MANAGEMENT SKILLS AT PROJECT BOARD LEVEL. PUK IS ALSO ABLE TO ASSIST WITH THE COSTS OF DEVELOPING AND DELIVERING PPP AND PFI PROJECTS IN RETURN FOR A ONE-OFF OR ON-GOING PAYMENT FOLLOWING CONTRACT AWARD. PUK CHARGES GOVERNMENT DEPARTMENTS AND AGENCIES FOR ITS ADVICE, AND DEPARTMENTS AND AGENCIES ARE NOT OBLIGED TO USE ITS SERVICES....................................95 IX.18 PUK IS A NEW AND INNOVATIVE INITIATIVE, WHICH WILL HAVE TO JUSTIFY ITS POSITION ALONGSIDE GOVERNMENT DEPARTMENTS, FINANCIAL, LEGAL AND TECHNICAL ADVISORS AND FINANCIAL INSTITUTIONS IN BRINGING FORWARD PUBLIC PRIVATE PARTNERSHIP PROJECTS. THERE REMAINS SOME SCEPTICISM WITHIN THE PUBLIC AND PRIVATE SECTORS REGARDING THE REAL NEED FOR, AND ROLE OF, PUK. IT IS A DEVELOPMENT THAT MAY HAVE A ROLE TO PLAY IN THE CONTEXT OF A MATURE PPP PROGRAMME, BUT IN OUR VIEW IT IS LESS LIKELY TO BE SUITABLE FOR AREAS IN WHICH THE PPP PROGRAMME IS STILL DEVELOPING.......................................................................................................................................................96 IX.19 IN PARALLEL WITH THE SECOND BATES REVIEW, THE GOVERNMENT ASKED MR PETER GERSHON, THEN MANAGING DIRECTOR OF GEC MARCONI, TO EXAMINE CIVIL PROCUREMENT IN CENTRAL GOVERNMENT. HIS REPORT, PUBLISHED IN JULY 1999, RECOMMENDED THAT AN OFFICE OF GOVERNMENT COMMERCE SHOULD BE CREATED WITHIN THE TREASURY TO ENSURE CONSISTENCY OF PROCUREMENT STRATEGY AND PROMOTION OF BEST PRACTICE ACROSS THE PUBLIC SECTOR..................................................96 IX.20 THE OFFICE OF GOVERNMENT COMMERCE (OGC) WAS ESTABLISHED IN FEBRUARY 2000, BRINGING TOGETHER THE TASKFORCE POLICY TEAM, THE TREASURY PROCUREMENT GROUP, THE BUYING AGENCY, THE CENTRAL COMPUTER AND TELECOMMUNICATIONS AGENCY (CCTA) AND THE PROPERTY ADVISERS TO THE CIVIL ESTATE (PACE). WITHIN THE CONTEXT OF PUBLIC PRIVATE PARTNERSHIP PROJECTS, THE ROLE OF THE OGC INCLUDES ISSUING GUIDANCE ON PFI AND PPP ISSUES, ADVISING ON THE BUNDLING OF PROJECTS, DEVELOPING NEW COMMERCIAL RELATIONSHIPS WITH SUPPLIERS AND LIASING WITH PUK ON POLICY DEVELOPMENT AND STANDARDISATION. ..............................................................................................96 IX.21 DURING THE TWO-YEAR PERIOD COVERED BY THE TREASURY TASKFORCE, EFFORTS WERE MADE TO ESTABLISH AND DEVELOP SPECIALIST PPP UNITS WITHIN GOVERNMENT DEPARTMENTS. THE QUALITY AND AUTHORITY OF THE PPP UNITS THAT HAVE BEEN ESTABLISHED IS HOWEVER VARIED. IN A NUMBER OF DEPARTMENTS (E.G. HEALTH), THE PPP UNITS HAVE DEVELOPED AN EFFECTIVE ROLE, INCLUDING THE PUBLICATION OF SECTOR SPECIFIC GUIDANCE, THE MANAGEMENT AND DISSEMINATION OF PPP INFORMATION, AND THE APPROVAL OF PPP PROJECTS. IN MANY OTHER DEPARTMENTS, HOWEVER, THE ROLE AND STATUS OF PPP UNITS REMAINS UNCLEAR. ..................................................................................................................96 IX.22 THE ESTABLISHMENT OF DEPARTMENTAL PPP UNITS IS LESS CRITICAL WHERE PPP PROCUREMENT EXPERIENCE AND EXPERTISE IS WELL DEVELOPED AND IT IS DISSEMINATED WITHIN THE ORGANISATION (E.G. THE HIGHWAYS AGENCY AND THE PRISON SERVICE). HOWEVER, THE ESTABLISHMENT OF DEPARTMENTAL PPP UNITS IS CRUCIAL IF PPP PROCUREMENT EXPERTISE IS NOT WELL DEVELOPED AND/OR NOT RECYCLED WITHIN THE ORGANISATION. THE MINISTRY OF DEFENCE, FOR EXAMPLE, IS TAKING FORWARD A LARGE NUMBER OF PUBLIC PRIVATE PARTNERSHIP PROJECTS, BUT ITS PROJECT TEAMS ARE DIVERSE AND THERE IS NO CENTRALISATION OR RECYCLING OF EXPERIENCE AND EXPERTISE. THE CONSEQUENCE HAS BEEN SLOW AND EXPENSIVE PROGRESS, AND INCONSISTENCY BETWEEN PFI DEALS. .........................................................96 IX.23 IN APRIL 1996, THE LOCAL AUTHORITY ASSOCIATIONS IN ENGLAND AND WALES ESTABLISHED THE PUBLIC PRIVATE PARTNERSHIPS PROGRAMME (4PS). THE 4PS IS A CONSULTANCY SERVICE, ESTABLISHED TO HELP LOCAL AUTHORITIES TO DEVELOP AND DELIVER PFI AND PPP SCHEMES IN AREAS SUCH AS IT, SCHOOLS, WASTE MANAGEMENT, TRANSPORT AND SOCIAL HOUSING. IT IS FUNDED BY GOVERNMENT GRANT AND, TO A LESSER DEGREE, CONSULTANCY FEES, AND ITS BOARD COMPRISES COUNCILLORS APPOINTED BY THE LOCAL GOVERNMENT ASSOCIATION AND REPRESENTATIVES OF THE PRIVATE SECTOR............................97 IX.24 THE 4PS ASSISTS LOCAL AUTHORITIES TO DEVELOP AND IMPLEMENT PUBLIC PRIVATE PARTNERSHIPS IN THREE KEY WAYS:.........................................................................................................................................97 IX.25 THE NEED FOR THE 4PS REFLECTS THE LARGE SCALE AND STRONG AUTONOMY OF LOCAL GOVERNMENT IN THE UK. THE 4PS HAS BEEN VERY EFFECTIVE AS A PROJECT PRIMER FOR THOSE AUTHORITIES THAT ARE NEW TO PFI, ALTHOUGH ITS ROLE HAS TO A LARGE EXTENT DUPLICATED THAT OF THE TREASURY TASKFORCE. IN TERMS OF PROJECT SUPPORT, THE 4PS HAS NEITHER THE RESOURCE NOR THE EXPERTISE TO PROVIDE DETAILED PROCUREMENT ADVICE, AND THEREFORE EXTERNAL ADVISORY FIRMS STILL HAVE A MAJOR ROLE TO PLAY IN THE DEVELOPMENT AND DELIVERY OF LOCAL AUTHORITY PUBLIC PRIVATE PARTNERSHIP PROJECTS......................................................................................................................97 CANADA............................................................................................................................................................97 Policy Drivers.............................................................................................................................................97 IX.26 IN APRIL 2000, THE GOVERNMENT OF CANADA LAUNCHED A NEW $2.65 BILLION SIX-YEAR PROGRAM TO RENEW AND ENHANCE CANADAS PHYSICAL INFRASTRUCTURE. THE PROGRAMME, WHICH IS CALLED INFRASTRUCTURE CANADA, HAS TWO KEY COMPONENTS:...............................................................................97

Department of Finance

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IX.27 THE FIRST PRIORITY OF INFRASTRUCTURE CANADA IS THE IMPROVEMENT OF GREEN INFRASTRUCTURE, INCLUDING WATER AND WASTEWATER TREATMENT AND SOLID WASTE MANAGEMENT. SECONDARY PRIORITIES INCLUDE TRANSPORT, CULTURE AND TOURISM, RECREATION, TELECOMMUNICATIONS AND HOUSING. ON AVERAGE, THE FEDERAL GOVERNMENT WILL CONTRIBUTE ONE THIRD OF THE COST OF ELIGIBLE MUNICIPAL INFRASTRUCTURE PROJECTS. THE REMAINING FUNDS ARE EXPECTED TO COME FROM PROVINCIAL AND MUNICIPAL GOVERNMENTS, AND FROM THE PRIVATE SECTOR THROUGH THE USE OF PUBLIC PRIVATE PARTNERSHIP ARRANGEMENTS. WHEN CONTRIBUTIONS FROM PROVINCIAL AND MUNICIPAL GOVERNMENTS ARE INCLUDED, IT IS EXPECTED THAT THE INITIATIVE WILL GENERATE AT LEAST $6 BILLION IN INFRASTRUCTURE INVESTMENT.....................................................................................................................98 IX.28 OVER RECENT YEARS, PUBLIC PRIVATE PARTNERSHIPS HAVE BECOME AN INCREASINGLY COMMON METHOD OF INFRASTRUCTURE DELIVERY IN CANADA. TO DATE, PUBLIC PRIVATE PARTNERSHIP
ARRANGEMENTS HAVE BEEN USED TO DELIVER HIGHWAYS PROJECTS FOR FEDERAL AND PROVINCIAL GOVERNMENTS AND PUBLIC TRANSPORT, WATER/WASTEWATER AND WASTE MANAGEMENT PROJECTS FOR PROVINCIAL AND MUNICIPAL GOVERNMENTS. .................................................................................................98

Institutional Structures................................................................................................................................98 IX.29 THE INSTITUTIONAL STRUCTURES USED TO IMPLEMENT PUBLIC PRIVATE PARTNERSHIP PROGRAMMES IN CANADA ARE DIFFERENT AT FEDERAL AND PROVINCIAL GOVERNMENT LEVELS. AT THE FEDERAL LEVEL, THE MAIN AREA OF PUBLIC PRIVATE PARTNERSHIP ACTIVITY IS IN THE HIGHWAYS SECTOR AND IS MANAGED BY TRANSPORT CANADA. AT THE PROVINCIAL LEVEL, A VARIETY OF DIFFERENT ORGANISATIONAL STRUCTURES HAVE BEEN ESTABLISHED TO DEVELOP AND IMPLEMENT PPP PROGRAMMES. TWO OF THE PROVINCES THAT ARE MOST ADVANCED IN THE CONSIDERATION AND USE OF PUBLIC PRIVATE PARTNERSHIPS ARE BRITISH COLUMBIA AND ONTARIO. A DESCRIPTION OF THE ORGANISATIONAL STRUCTURES ESTABLISHED IN THE HIGHWAYS SECTOR, BRITISH COLUMBIA AND ONTARIO IS PROVIDED IN THE PARAGRAPHS THAT FOLLOW..............................................................................................................................98 IX.30 IN RELATION TO THE NATIONAL HIGHWAY PROGRAM, A JOINT FEDERAL AND PROVINCIAL WORKING GROUP WAS TASKED IN JUNE 1997 TO ASSESS THE MERITS AND LIMITATIONS OF THE PUBLIC PRIVATE PARTNERSHIP APPROACH. THE MAIN FINDINGS OF THE WORKING GROUP WERE PUBLISHED IN APRIL 1999 IN THE FORM OF A MAJOR FIVE-PART STUDY. ......................................................................................................98 IX.31 THE WORKING GROUP CONCLUDED THAT CONCESSION, DBFO, DBO AND DB CONTRACTS WOULD APPEAR TO OFFER SIGNIFICANT POTENTIAL FOR BROAD-BASED APPLICATION ON PROJECTS INVOLVING NEW
HIGHWAY CONSTRUCTION OR MAJOR HIGHWAY UPGRADING AND WITH A VALUE IN EXCESS OF TEN TO TWENTY MILLION DOLLARS. ............................................................................................................................98 IX.32 THE WORKING GROUP RECOMMENDED THAT THE PPP PROCUREMENT PROCESS SHOULD BE INSTITUTIONALISED WITHIN TRANSPORT CANADA AND STREAMLINED THROUGH THE ADOPTION OF RECOMMENDED PRACTICE, WELL ENUNCIATED POLICIES AND RULES, AND THE DEVELOPMENT OF STANDARD PPP MODEL CONTRACTS, INSTRUMENTS, CLAUSES AND DEFINITIONS. OTHER RECOMMENDATIONS TO FACILITATE GREATER USE OF PUBLIC PRIVATE PARTNERSHIPS INCLUDED AN EDUCATION AND AWARENESS CAMPAIGN AND THE DISSEMINATION OF INFORMATION ON PPP PROCUREMENT APPROACHES AND EXPERIENCES......................................................................................................................................................99 IX.33 ON THE BASIS OF THE FINDINGS OF THE WORKING GROUP, A FURTHER STUDY WAS COMMISSIONED IN SEPTEMBER 1999 TO DEVELOP AND ADOPT A STANDARD PPP MODEL, SPECIFYING PERFORMANCE BASED OUTPUT REQUIREMENTS, ANALYTICAL TECHNIQUES, PROCEDURES AND PROCESSES FOR THE USE OF PUBLIC PRIVATE PARTNERSHIPS ON HIGHWAYS PROJECTS. THE REPORT PREPARED FOR THE WORKING GROUP DURING 2000 REPRESENTS A HOW TO GUIDE ON THE INNOVATIVE FINANCING AND PROCUREMENT OF HIGHWAY INFRASTRUCTURE USING A PUBLIC PRIVATE PARTNERSHIP APPROACH. IT PROVIDES GUIDANCE ON SUCH ISSUES AS PROJECT SELECTION, LEGAL STRUCTURE, CONTRACTUAL ARRANGEMENTS, RISK ALLOCATION, PROCUREMENT MANAGEMENT, AND THE ROLES AND RESPONSIBILITIES OF THE PUBLIC SECTOR. ...................99 IX.34 IN APRIL 1995, THE PROVINCIAL GOVERNMENT FOR BRITISH COLUMBIA ESTABLISHED A JOINT INDUSTRY-GOVERNMENT TASK FORCE TO INVESTIGATE THE VIABILITY OF PUBLIC PRIVATE PARTNERSHIPS AS A MEANS OF PROCURING PROVINCIAL PUBLIC INFRASTRUCTURE. THE TASK FORCE WAS PROVIDED WITH THE FOLLOWING MANDATE:...............................................................................................................................99 IX.35 MEMBERS OF THE TASK FORCE WERE CHOSEN TO ENSURE REPRESENTATION OF KEY STAKEHOLDERS, INCLUDING BUSINESS LEADERS FROM THE PRIVATE SECTOR, SENIOR OFFICIALS FROM GOVERNMENT, EXPERIENCED LABOUR REPRESENTATIVES, FINANCE, LEGAL AND ECONOMICS PROFESSIONALS, AND SENIOR ACADEMICS WITH SPECIFIC EXPERIENCE OF PPPS. ..........................................................................................99 IX.36 THE MAIN FINDINGS OF THE TASK FORCE WERE PUBLISHED IN OCTOBER 1996. THE TASK FORCE CONCLUDED THAT PUBLIC PRIVATE PARTNERSHIPS OFFER THE POTENTIAL FOR REAL AND SUBSTANTIAL BENEFITS AND THAT THEY SHOULD BE PURSUED FOR PROJECTS THAT ARE LIKELY TO OFFER IMPROVED VALUE FOR MONEY. IN ADDITION, THE TASK FORCE PRESENTED A NUMBER OF KEY RECOMMENDATIONS TO GOVERNMENT ON THE ADVANCEMENT AND PROMOTION OF PPPS, WHICH CAN BE SUMMARISED AS FOLLOWS:

...........................................................................................................................................................................99

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IX.37 THE RECOMMENDATIONS OF THE TASK FORCE WERE ACCEPTED IN FULL BY THE PROVINCIAL GOVERNMENT, AND SUBSEQUENTLY THE MINISTER OF EMPLOYMENT AND INVESTMENT WAS ASSIGNED LEAD RESPONSIBILITY FOR THE PROMOTION AND DEVELOPMENT OF PUBLIC PRIVATE PARTNERSHIPS IN BRITISH COLUMBIA........................................................................................................................................................100 IX.38 DURING 1997, THE MINISTER OF EMPLOYMENT AND INVESTMENT APPOINTED AN ADVISORY COMMITTEE ON PUBLIC PRIVATE PARTNERSHIPS, COMPRISING SENIOR REPRESENTATIVES FROM BUSINESS, GOVERNMENT AND ACADEMIA TO ADVISE GOVERNMENT ON THE IMPLEMENTATION OF PPP PILOT PROJECTS AND TO MONITOR THE PROVINCES PROGRESS IN THIS REGARD. THE MINISTER ALSO ESTABLISHED THE ECONOMIC PARTNERSHIPS BRANCH WITHIN THE MINISTRY OF EMPLOYMENT AND INVESTMENT TO PROVIDE A FOCAL POINT FOR THE PUBLIC PRIVATE PARTNERSHIP PROGRAM AND TO ACT AS THE SECRETARIAT TO THE ADVISORY COMMITTEE. THE BRANCH IS RESPONSIBLE FOR DEVELOPING GOVERNMENT POLICY AND PROCESSES PERTAINING TO THE PLANNING AND IMPLEMENTATION OF PPP PROJECTS, AND FOR PROVIDING A CENTRAL INFORMATION RESOURCE FOR PPP PRACTITIONERS.........................................................................100 IX.39 IN TERMS OF PROJECT DELIVERY, THE CAPITAL EXPENDITURE REVIEW UNDERTAKEN BY THE PROVINCIAL GOVERNMENT IN 1997 RECOMMENDED THAT LINE MINISTRIES AND TAX-SUPPORTED CROWN CORPORATIONS SHOULD CONSIDER THE PUBLIC PRIVATE PARTNERSHIP APPROACH ALONG WITH TRADITIONAL PROCUREMENT METHODS WHEN PREPARING THEIR CAPITAL PLANS. THE MINISTRIES AND CROWN CORPORATIONS ARE RESPONSIBLE FOR IMPLEMENTING PPP PROJECTS IN ACCORDANCE WITH GOVERNMENT POLICY, AND FOR INVOLVING OTHER APPROPRIATE PROVINCIAL AGENCIES (E.G. PROVINCIAL TREASURY) IN THE PLANNING AND IMPLEMENTATION PROCESS.....................................................................101 IX.40 IN THE 1999 ONTARIO BUDGET, THE MINISTER OF FINANCE ANNOUNCED THE SUPERBUILD INITIATIVE, WHICH IS A FIVE YEAR $20 BILLION INITIATIVE TO IMPROVE ONTARIOS PUBLIC INFRASTRUCTURE, INCLUDING TRANSPORTATION, EDUCATION, HEALTH-CARE, UTILITIES AND TECHNOLOGY INFRASTRUCTURE. THE PROVINCIAL GOVERNMENT WILL INVEST $10 MILLION IN CAPITAL INFRASTRUCTURE THROUGH THE SUPERBUILD INITIATIVE BETWEEN 1999/2000 AND 2004/2005. ANOTHER $10 BILLION OR MORE OF
INVESTMENT WILL BE LEVERAGED FROM THE PRIVATE SECTOR AND OTHER PARTNERS OVER THE SAME PERIOD..............................................................................................................................................................101 IX.41 THE SUPERBUILD INITIATIVE IS DELIVERED THROUGH THE ONTARIO SUPERBUILD CORPORATION, A NEW AGENCY THAT REPORTS TO ONTARIOS MINISTER OF FINANCE AND DEPUTY PREMIER. THE CORPORATION HAS A PRESIDENT AND CHIEF EXECUTIVE OFFICER, WHO IS ASSISTED BY VICE PRESIDENTS RESPONSIBLE FOR PUBLIC PRIVATE PARTNERSHIPS AND CAPITAL INFRASTRUCTURE STRATEGIES. THE CORPORATION HAS A 14 MEMBER BOARD OF DIRECTORS, DRAWN FROM BOTH THE PUBLIC AND PRIVATE SECTORS, WHICH PROVIDES THE CORPORATION WITH STRATEGIC DIRECTION AND ADVICE...........................101 IX.42 THE ONTARIO SUPERBUILD CORPORATION HAS BEEN ESTABLISHED TO CO-ORDINATE ALL GOVERNMENT CAPITAL INFRASTRUCTURE INVESTMENT AND TO SPEARHEAD THE DEVELOPMENT OF PUBLIC PRIVATE PARTNERSHIPS IN ONTARIO. THE CORPORATION HAS TAKEN OVER THE RESPONSIBILITIES OF THE OFFICE OF PRIVATISATION AND ITS MANDATE IS TO:......................................................................................101 IX.43 THE ONTARIO SUPERBUILD CORPORATION MAKES RECOMMENDATIONS TO THE NEW CABINET COMMITTEE ON PRIVATISATION AND SUPERBUILD ON STRATEGIC CAPITAL AND PRIVATISATION OPPORTUNITIES. ALL PROVINCIAL INFRASTRUCTURE POLICY, INVESTMENT AND CAPITAL PLANNING DECISIONS ARE CONSOLIDATED UNDER THIS NEW CABINET COMMITTEE. THE COMMITTEE, WHICH IS CHAIRED BY THE MINISTER OF FINANCE, IS RESPONSIBLE FOR DEVELOPING THE PROVINCIAL CAPITAL PLAN. THE COMMITTEE MAKES RECOMMENDATIONS TO THE CABINET, WHICH IS ULTIMATELY RESPONSIBLE FOR MAKING ALL CAPITAL INVESTMENT AND PRIVATISATION DECISIONS..............................................................102 IX.44 IN JANUARY 2001, ONTARIO SUPERBUILD CORPORATION PUBLISHED A GUIDE TO PUBLIC PRIVATE PARTNERSHIPS FOR INFRASTRUCTURE PROJECTS. THE GUIDE PROVIDES ADVICE FOR ASSET MANAGERS, PLANNERS AND DECISION-MAKERS IN THE PUBLIC AND NOT-FOR-PROFIT SECTORS TO SELECT AND IMPLEMENT INFRASTRUCTURE PROJECTS IN PARTNERSHIP WITH THE PRIVATE SECTOR. IN TERMS OF ORGANISATIONAL STRUCTURES, AND IN A SIMILAR FASHION TO THE GUIDANCE PROVIDED FOR HIGHWAY PROJECTS, THE GUIDE RECOMMENDS THAT THE PUBLIC SECTOR SHOULD ESTABLISH, AS A MINIMUM, THE FOLLOWING TEAMS TO MANAGE THE DELIVERY OF INFRASTRUCTURE PROJECTS USING A PUBLIC PRIVATE PARTNERSHIP APPROACH:

.........................................................................................................................................................................102 Canadian Council for Public Private Partnerships..................................................................................102 IX.45 THE CANADIAN COUNCIL FOR PUBLIC PRIVATE PARTNERSHIPS WAS ESTABLISHED IN 1993 AS A NONPROFIT BODY. IT IS NATIONAL IN SCOPE, AND IT DRAWS ITS MEMBERS FROM BOTH THE PUBLIC AND PRIVATE SECTORS IN ALMOST EQUAL NUMBERS. AS PROPONENTS OF THE CONCEPT OF PUBLIC PRIVATE PARTNERSHIPS, THE COUNCIL CONDUCTS RESEARCH, PUBLISHES RESEARCH FINDINGS, FACILITATES FORUMS FOR DISCUSSION, PROVIDES EXPERT ADVICE, AND SPONSORS AN ANNUAL NATIONAL CONFERENCE ON DOMESTIC AND INTERNATIONAL PUBLIC PRIVATE PARTNERSHIPS. ...............................................................102 IX.46 THE COUNCIL IS A RECOGNISED VOICE ON THE TOPIC OF PUBLIC PRIVATE PARTNERSHIPS, AND ON THIS
BASIS IT MAKES REPRESENTATIONS TO FEDERAL AND PROVINCIAL GOVERNMENTS ON THE POTENTIAL USE OF

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Review of PPP Structures

PUBLIC PRIVATE PARTNERSHIPS IN THE PROVISION OF PUBLIC INFRASTRUCTURE AND SERVICES. THE COUNCIL FOR PUBLIC PRIVATE PARTNERSHIPS HAS PLAYED A KEY ROLE IN THE INCREASED USE OF PUBLIC PRIVATE PARTNERSHIPS IN CANADA, INCLUDING:..........................................................................................102 PORTUGAL.......................................................................................................................................................103 Policy Drivers...........................................................................................................................................103 IX.47 PORTUGAL IS CURRENTLY ONE OF EUROPES MOST ACTIVE PUBLIC PRIVATE PARTNERSHIP MARKETS, AND IT IS EXPECTED THAT ITS HIGH LEVEL OF PPP ACTIVITY WILL CONTINUE FOR THE FORESEEABLE FUTURE. THE REASONS FOR THIS ARE GENERALLY CONSIDERED TO BE:.......................................................................103 IX.48 THE KEY DRIVER UNDERPINNING PORTUGALS PUBLIC PRIVATE PARTNERSHIP PROGRAMME IS A VERY STRONG POLITICAL COMMITMENT TO DELIVER IMPROVED TRANSPORT INFRASTRUCTURE. AT THE TIME OF THE LAST ELECTION, THE DELIVERY OF NEW ROADS WAS A KEY ISSUE FOR THE GENERAL PUBLIC, AND IT WAS
THE PROMISE OF THESE NEW ROADS THAT WAS A KEY FACTOR IN THE ELECTION VICTORY BY THE CURRENT PRIME MINISTER..............................................................................................................................................103 IX.49 TO DATE, PUBLIC PRIVATE PARTNERSHIPS HAVE PRIMARILY BEEN USED IN PORTUGAL FOR INFRASTRUCTURE PROJECTS IN THE ROADS AND WATER/WASTEWATER SECTORS. HOWEVER, THE GOVERNMENT IS NOW CONSIDERING THE USE OF PUBLIC PRIVATE PARTNERSHIPS FOR PROJECTS IN THE PORTS, AIRPORTS, RAIL, HEALTH, SCHOOLS, PRISONS, POWER, DEFENCE AND LEISURE SECTORS...................103

Institutional Structure...............................................................................................................................104 IX.50 PORTUGALS CURRENT ROADS PROGRAMME COMPRISES 14 ROADS, ALL OF WHICH WILL BE IMPLEMENTED USING A PUBLIC PRIVATE PARTNERSHIP APPROACH INVOLVING REAL OR SHADOW TOLLING MECHANISMS. THE CAPITAL VALUE OF THE PROGRAMME IS IN EXCESS OF 8 BILLION. PROCUREMENT OF THE PROJECTS CONTAINED WITHIN THE ROADS PROGRAMME IS ON-GOING. PROJECTS ARE DEVELOPED, PROCURED AND MONITORED UNDER THE AEGIS OF THE JUNTA AUTONOMA DE ESTRADAS (JAE), WHICH IS THE NATIONAL GOVERNMENT AGENCY RESPONSIBLE FOR ROADS..................................................................104 IX.51 THE PROVISION OF WATER AND WASTEWATER INFRASTRUCTURE IS THE RESPONSIBILITY OF EACH INDIVIDUAL MUNICIPALITY. TO DATE, FIVE WATER/WASTEWATER CONCESSIONS HAVE BEEN PROCURED IN PORTUGAL, AND A FURTHER THREE ARE APPROACHING CONTRACTUAL CLOSE. WHEN MUNICIPALITIES ARE TOO SMALL TO ATTRACT PRIVATE INVESTORS, THE USUAL PROCEDURE HAS BEEN TO BUNDLE PROJECTS WITHIN A SYSTEM OF MUNICIPALITIES.............................................................................................................104 IX.52 NO SPECIFIC STRUCTURES OR MECHANISMS WERE PUT IN PLACE TO ASSIST AND CO-ORDINATE THE DELIVERY OF THE INITIAL PUBLIC PRIVATE PARTNERSHIPS IN THE ROADS AND WATER SECTORS. HOWEVER, NOW THAT THE PUBLIC PRIVATE PARTNERSHIPS PROGRAMME IS BEING EXTENDED INTO OTHER SECTORS, THE GOVERNMENT HAS RECENTLY DECIDED TO CONVENE AN INFORMAL TASK FORCE. THE TASK FORCE WILL COMPRISE MEMBERS OF BOTH THE PUBLIC AND THE PRIVATE SECTORS, AND ITS ROLE WILL BE TO IDENTIFY AND ADVISE ON ISSUES SUCH AS PPP DELIVERY MECHANISMS, CONTRACTUAL FORMS, LEGAL OBSTACLES, INSTITUTIONAL STRUCTURES AND EXPERIENCE IN OTHER COUNTRIES............................................................104 APPENDIX B: NATIONAL LEVEL ACTIVITIES..................................................................................................105 DEPARTMENTAL LEVEL ACTIVITIES...............................................................................................................108 CONTRACTING AUTHORITY............................................................................................................................111 APPENDIX C: COMPETENCY FRAMEWORK OVERVIEW..................................113 Communicates...........................................................................................................................................115 PPP Knowledge.........................................................................................................................................122 Professionalism.........................................................................................................................................122 Relationship Management.........................................................................................................................125 Strategy Communication...........................................................................................................................127 Project Management ................................................................................................................................129 Personal Development..............................................................................................................................130 Team Development....................................................................................................................................130 Determination............................................................................................................................................131 Relationship Management.........................................................................................................................135 Strategy Development...............................................................................................................................137 PPP Knowledge.........................................................................................................................................138 APPENDIX D: HEAD OF CENTRAL PPP UNIT....................................................................................................29 Responsible for:...........................................................................................................................................29 Experience required:...................................................................................................................................29 Skills............................................................................................................................................................29 PPP POLICY MANAGERS...................................................................................................................................30 Responsible for: ..........................................................................................................................................30 Experience required:...................................................................................................................................30 PPP PROGRAMME MANAGER............................................................................................................................30

Department of Finance

Review of PPP Structures

Responsible for:...........................................................................................................................................30 Experience required:...................................................................................................................................31 PPP FINANCIAL ADVISOR.................................................................................................................................31 Responsible for:...........................................................................................................................................31 Experience required:...................................................................................................................................31 PPP LEGAL ADVISOR........................................................................................................................................32 Responsible for:...........................................................................................................................................32 Experience required:...................................................................................................................................32 PPP ECONOMIC ADVISOR.................................................................................................................................33 Responsible for:...........................................................................................................................................33 Experience required:...................................................................................................................................33 PPP MARKETING AND COMMUNICATIONS MANAGER......................................................................................33 Responsible for:...........................................................................................................................................33 Experience required:...................................................................................................................................34 PPP KNOWLEDGE MANAGER............................................................................................................................34 Responsible for:...........................................................................................................................................34 Experience required:...................................................................................................................................34

Department of Finance

Review of PPP Structures

Executive Summary
1 Public Private Partnerships (PPPs) are central to meeting one of the biggest challenges presently facing Ireland: overcoming the significant infrastructure deficit. Whilst growth forecasts remain high, the National Development Plan 2000 2006 recognises that this growth is conditional upon, inter alia, removing infrastructure bottlenecks in the economy. The Plan commits to using Public Private Partnerships as a core mechanism to deliver on the infrastructure agenda with, in our estimate, some EUR 13 billion worth of projects procured under this approach over the next five years. This is equivalent to the award of a PPP contract on average once every two weeks. International experience reveals a range of benefits, which the use of Public Private Partnerships can bring. In the short term, these relate to better value for money over the lifetime of the project, more efficiency in procurement, faster project delivery and a capability to deliver more projects in a defined timeframe. These are clearly issues of major importance to Ireland at this time. Over the longer period, PPPs offer opportunities to improve the quality of public services, provide long-term value for money, transfer risk to the private sector and enhance competitiveness through the opening of competition and the better utilisation of assets. At the same time Public Private Partnerships are an essential element of an emerging model of effective government, which views the State as the regulator rather than provider of certain public services. Recent major studies by the National Economic and Social Council and the Organisation for Economic Co-operation and Development point toward this approach, which can be seen developing in the European Community and elsewhere. It is clear that the application of PPPs in Ireland will extend far beyond the delivery of targets in the National Development Plan.

Public Private Partnerships in Ireland


4 To date, Government activity in Ireland to develop PPP has focused primarily on programme mobilisation. Progress has been made in some crucial areas including market development initiatives to create interest amongst national and international private sector providers, creation of a deal flow - stronger in some sectors than in others - engagement of national shareholders, establishment of embryonic management structures, development of policy and guidance in a number of important areas and initiation and progression of a range of pilot projects. Progress has been made against a backdrop of a highly visible political commitment to the Public Private Partnership approach with the clear backing of the Taoiseach, the Minister for Finance and senior Ministers and the creation of the Cabinet Committee on Infrastructure and Public Private Partnerships. International experience indicates that top-level political leadership is essential to the development of PPP as a mainstream approach to public procurement.

Department of Finance

Review of PPP Structures

In our experience, the development of a PPP programme at national level is characterised by three general phases of activity, namely mobilisation, programme expansion and programme maturity. Ireland has been effective in the mobilisation phase and is currently seeking to move quickly into a rapidly increasing programme expansion phase. The activities and challenges in each phase differ in content and emphasis and there are significant new requirements if this transition is to be met effectively and within the timescale inherent in the National Development Plan.

Meeting the PPP Challenge in Ireland


7 We have defined the key success factors in moving from mobilisation to programme expansion. These form the core of the organisational challenge for the Irish Government. The transition requirements are for clear accountability, structures which focus on delivery of projects, the securing of adequate resources, value for money in respect of the procurement and co-ordination of projects and momentum to move toward widespread involvement in PPPs. Our report assesses the options by which these criteria can best be met and makes recommendations as to how the preferred model can best be implemented in practice. To deliver on the transition agenda and as a basis for embedding PPPs over the longer term, we recommend that an organisational model based on a sectoral focus for project delivery is the appropriate way forward. This coincides with existing departmental structures and fits with the existing model of Government, an essential factor in ensuring early and sustained progress. While the model we are recommending is based on current arrangements, it does not represent a simple expansion of existing structures. Specifically the model provides greater clarity of remit at departmental/sectoral level and at central PPP unit level in addition to a new focus on accountability for PPP as a mainstream part of the departmental strategy formalisation process. At the same time, new processes are set out whereby the central unit can get involved at project level or review adherence to PPP best practice without infringing the accountability model. We highlight the critical need for expanded resource at central unit, departmental and procurement authority levels. We also suggest frameworks for measuring effectiveness of PPP and supporting measures for those engaged in delivery. In line with the sectoral focus of the recommended model, we recommend that PPP units within departments will advise their own department on the PPP dimensions of the departments statement of strategy and act as a co-ordinating and sectoral policy body for the procurement of projects. It is recognised that differing departmental structures, procurement arrangements and project profiles means that no single form of PPP unit is appropriate in every circumstance. The expanded central unit for PPPs should remain in the Department of Finance with close links to the Minister who will act as the visible PPP champion. Acting on the Ministers behalf and with the authority of the Cabinet Committee, the central unit can perform a key role in ensuring adherence to PPP best practice, mandating national issues and resolving problems at a project level without impinging on the responsibility and accountability of departments as the deliverers of the projects. 2

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Review of PPP Structures

Departments should be held to account by means of the strategic planning processes established under the Strategic Management Initiative. 13 Implementing the PPP programme can only succeed if there is swift progress in securing resources to address the range of policy and procurement issues which are highlighted in our report. The central unit should be resourced to a level commensurate with its role and responsibilities and the requirement for expert personnel from the private sector in relation to technical PPP issues. Assessment of specific needs at departmental level can be made following development by departments of more detailed work programmes. It will be particularly important to strengthen resource and expertise at the project procurement level. This internal resource will continue to be supported by external advisers and it will be important to drive forward the accessing of advice on a value for money basis. We suggest improving this aspect through greater use of framework agendas, extension of the standardisation agenda and a clear emphasis on the PPP philosophy and concentration on output rather than input-based specifications.

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Conclusions
15 In our assessment Ireland has moved effectively through the mobilisation phase harmonising the key requirements of visible political leadership and commitment to deliver progress on market development, deal flow and stakeholder engagement. Embryonic structures have been established which have advised policy development and actioned a range of pilot projects. This provides a solid platform for moving into the programme expansion phase, a transition which will present specific new challenges in clarifying accountability, achieving value for money and securing resources. We suggest that an enhanced extrapolation of the current organisational structure is appropriate in moving forward. This model should be underpinned by the continued political leadership, so vital to creating and maintaining the momentum necessary for a successful PPP programme. This will be a vital context in which to address the key and emerging issue of stakeholder engagement at levels below the national arrangements, both within and outside government. Our report contains a number of specific recommended actions which form the basis of the programme for moving from mobilisation to expansion. The details can be distilled as follows: use the current organisational model as a basis for progress into the expansion phase and also to deliver the maturity phase; provide leadership for the organisational structures through a continued role for the Cabinet Committee and the Ministerial championing of Public Private Partnerships;

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Department of Finance

Review of PPP Structures

secure the additional resources necessary to deliver rapid expansion by strengthening the central unit in the Department of Finance, policy units in Departments and at project procurement level; use processes being developed under the Strategic Management Initiative to embed PPP as a procurement method across Government allowing the mechanism to play a full role in a changing environment for the delivery of public services; and use both political influence and Government resource to actively address engagement of stakeholders at levels below national frameworks, particularly with those directly impact at procurement level.

19 These actions will be important in moving Ireland through to the next phase of PPP development and toward realisation of the potential benefits which the PPP approach can offer. It must be noted, however, that the most significant elements of these benefits will not be yielded until the final maturity phase of PPP development.

Department of Finance

Review of PPP Structures

I.

Introduction

Context
I.1 The economic progress made by Ireland during the last five years has significantly exceeded the targets set in the last National Development Plan. The new National Development Plan 2000-2006 suggests that the Irish economy can continue to sustain an average annual rate of growth of five per cent in the medium term. Significantly, however, this view is based on the assumption that existing infrastructure bottlenecks and labour shortages are tackled to sustain the competitiveness of the economy can be sustained. The National Development Plan 2000-2006 highlights that much of the infrastructure within Ireland is inadequate to meet existing needs and that it is increasingly coming under strain as a result of the rapid growth in the Irish economy. Factors such as rapid economic growth, reductions in European funding, new European legislation and the increasingly competitive global economy, all mean that the country must find faster ways of developing infrastructure, with greater efficiency and at optimum value for money. Public Private Partnerships (PPPs) are expected to play a major role in addressing the infrastructure deficit in Ireland. In response to this need, the public service has established administrative structures to lead, drive and co-ordinate the introduction of the Public Private Partnership approach across and in conjunction with the line departments of Government. These structures are the focus of this review.

I.2

I.3

Terms of Reference
I.4 In order to build on the significant progress made to date in adopting a PPP approach, the Department of Finance appointed PricewaterhouseCoopers in January 2001 to undertake a review of the effectiveness of the Public Private Partnership structures currently in place within government. This review builds upon the lessons learnt from the Public Private Partnership experience of other countries while at the same time reflecting the key requirements of the Irish Public Private Partnership model. The exact terms of reference for the review are: to assess the appropriateness and the effectiveness of existing Public Private Partnership structures in the context of the ongoing pilot project phase and the objectives for Public Private Partnerships set out in the National Development Plan of securing accelerated infrastructure delivery and value for money; to identify the appropriate structures required to deliver on an expanded and accelerated programme of Public Private Partnership projects and to make recommendations, if deemed necessary, on the future institutional framework for the Public Private Partnership process at a central level; and to identify appropriate performance indicators and the skills and competencies required to achieve them by drawing on international best practice in relation to Public Private Partnership structures. 5

Department of Finance

Review of PPP Structures

Approach and Report Structure


I.5 This report is structured in accordance with the Terms of Reference set out above and the key stages of our approach are set out in the diagram overleaf and summarised in the paragraphs that follow. The report commences with a review of the strategic context for PPP within Ireland and includes a discussion of the key principles and benefits of PPP, a summary of the policy drivers underlying the adoption of PPP and an outline of the PPP forms that will be utilised going forward. This section of the report also sets PPP within a wider spectrum of public service delivery options and the context of social partnership. The report then examines international experience of Public Private Partnerships. It discusses the breadth of use of PPPs in other countries, examines the organisational structures that have been established to deliver them and identifies the key issues that Ireland must address if the PPP programme is to be driven forward rapidly. The review of international experience is followed by a discussion of the three phases within the PPP programme development lifecycle, namely programme mobilisation, programme expansion and programme maturity. The report then describes the progress that has been made during the programme mobilisation phase in Ireland in terms of organisational structures and project deal flow and sets out the agenda for the next phase of activity. In particular, this section identifies the key success factors for the programme expansion phase and sets out a pro forma analysis of the detailed tasks that government must undertake to ensure the success of the PPP programme. Taken together, these provide a strategic framework for the further development of PPPs. The report goes on to assess the effectiveness of existing organisational arrangements in the context of both the key themes associated with the programme mobilisation phase and the key success factors required for the transition to programme expansion. The key success factors are set out in greater detail in the next section of the report and the structural options for the delivery of an expanded and accelerated programme of Public Private Partnerships in Ireland are developed and analysed within this context. The section concludes by identifying the preferred structural option to take PPP forward in Ireland. The next section of the report describes the preferred structural option in terms of its organisational structure, allocation of roles and responsibilities and resource requirements. The key performance indicators are set out in the next section. The report then concludes by setting out our final conclusions and recommendations on: the appropriateness and effectiveness of existing PPP structures; the institutional framework that is necessary to deliver an expanded and accelerated programme of Public Private Partnership projects in Ireland; and the skills, competencies and performance indicators that are required, together with the mechanisms that should be used to manage institutional change. 6

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Department of Finance

Review of PPP Structures

Overview of Approach and Report Structure Introduction


Context Terms of reference Approach and report structure

Strategic Context
Policy context Benefits, principles and forms Irish approach and objectives

International Context
International use of PPPs Stages of PPP development Organisational structures Key findings

Current Position
Programme lifecycle Programme mobilisation Programme expansion Key success factors

Review of Existing Arrangements


Effectiveness in context of mobilisation Readiness for programme expansion

Structural Considerations
Review of key success factors Structural options for delivery Identification of preferred structure

Moving Forward
Preferred organisational structure Roles and responsibilities Resource requirements

Key Performance Indicators


Performance Measures Programmes of Work Context of Deal Flow

Conclusions and Recommendations


Recommendations Way forward Change management

Department of Finance

Review of PPP Structures

II. Strategic Context


Introduction
II.1 The Irish Government is committed to using the PPP approach to improve economic competitiveness, modernise national infrastructure and deliver quality public services. PPPs recognise that there are some activities that the public sector does best and other activities where the private sector has more to offer. Only by allowing each sector to focus upon what it does best can the Government provide the quality services that the public want and expect. The overall aim of PPPs is therefore to structure the relationship between the public and private sectors in such a way that the activities and risks associated with the specification, delivery and regulation of public services are allocated to the party best able to manage them. The precise roles and responsibilities of the public and private sectors in any PPP will depend upon the contractual terms agreed and will vary from project to project. However, in most PPPs private sector contractors become longterm service providers rather than simple upfront asset builders. As a result, central and local government agencies become more involved as regulators and focus their resources upon service planning, performance monitoring and contract management rather than upon the direct management and delivery of services. PPPs can generate substantial benefits for both consumers and taxpayers. Designed appropriately, they allow the public sector to benefit from the commercial disciplines, incentives and expertise developed in the private sector. They also enable the public sector to deliver its objectives better and to focus upon its core activities of procuring services, enforcing standards and protecting the public interest. Experience elsewhere in the world indicates that the more significant benefits which Ireland can derive from the PPP approach include: Better value for money - the cost of a service delivered under a PPP is usually lower than that achieved under traditional procurement, reflecting the benefits of competition, whole life costing, design innovation, improved efficiency and risk transfer; Better quality services - the quality of service delivered under a PPP is usually higher than that achieved under traditional procurement, reflecting the benefits of competition, service innovation, performance incentivisation and customer focus; Faster project delivery - the speed of project delivery under a PPP is usually faster than that achieved under traditional procurement as the linkage between service availability and payment provides a clear incentive to deliver complex capital projects within short construction timeframes; More project delivery - by using private sector finance where it is considered appropriate, PPPs can promote the accelerated delivery of the public capital programme by enabling more infrastructure projects to be carried out within a defined period of time; 8

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Department of Finance

Review of PPP Structures

Greater certainty - the allocation of risk to the private sector that underpins a PPP can provide for greater certainty and predictability in relation to the cost and quality of public service delivery, reflecting the dynamic linkage between standards of performance and payment; Better asset utilisation - by allowing the private sector to generate third party revenues from the commercial utilisation of public sector assets, PPPs can reduce the cost of public service provision, while maximising the wider social and economic benefits associated with third party use; Better regulation - by transferring responsibility for delivering public services to the private sector, PPPs enable officials within central and local government to act as regulators and to focus upon public service planning and performance monitoring rather than on the management of day-to-day service delivery; and Enhanced competitiveness - by exposing the provision of public services to competitive tendering, PPPs enable the quality and cost of such services to be benchmarked against market standards, thereby helping to secure productivity improvements within the economy as a whole.

II.4

While increased private sector participation in the provision of public services has the potential to deliver benefits, it should be noted that PPPs are not a universal panacea or the only means to deliver quality public services on a value for money basis. PPP arrangements are one of a number of ways of delivering public services and under no circumstances should they be seen as a substitute for strong, accountable and effective governance. Ensuring that public services are provided in a manner that is fair, safe, affordable, and environmentally sustainable remains the sole responsibility of central and local government.

Policy Context
Overview II.5 The commitment of the Irish Government to the use of Public Private Partnerships is set out in the National Development Plan 2000-2006. The Plan includes a minimum target of EUR 2.35 billion of privately financed projects and this represents almost ten per cent of the total planned investment in economic and social infrastructure. However, the Plan was published in November 1999 and since then there have been a number of major developments that have served to expand the PPP agenda. These developments include the publication of influential policy statements by the National Economic and Social Council and the Organisation for Economic Cooperation and Development.

Department of Finance

Review of PPP Structures

II.6

The social partners share the commitment of the Government to the use of PPPs and this commitment is reaffirmed in the Programme for Prosperity and Fairness. The current national agreement calls for the preparation of a clear framework in which to assess the appropriateness of Public Private Partnerships for infrastructure projects and to guide their implementation, taking into account the wider economic, social and environmental objectives that should guide infrastructure development.

National Development Plan II.7 The current National Development Plan 2000-2006 predicts that the Irish economy can continue to sustain an average annual rate of growth of around five per cent over the medium term. Crucially, however, this forecast is based upon the assumption that existing infrastructure bottlenecks and labour shortages are removed, thereby enabling the Irish economy to maintain strong and sustainable output and employment growth. The Plan recognises that Ireland has a significant infrastructure deficit and that this deficit threatens to inhibit economic growth The National Development Plan 2000-2006 highlights that much of the infrastructure within Ireland is inadequate to meet existing needs and that it is increasingly coming under strain as a result of the rapid growth in the Irish economy. The level of pressure varies, but it is especially a feature of the more densely populated urban areas and the main national arterial corridors. Roads are the dominant mode of internal transport within Ireland. However, the roads network is inadequate by reference to need and European Union standards. Serious congestion is now a feature of many parts of the network, especially in and around urban areas. Public transport is also in need of significant modernisation and unless this issue is properly addressed poor public transport systems will become a constraint on economic growth, particularly in and around Dublin. In addition, while substantial investment has been made in water and wastewater treatment, further investment is required in order to meet obligations arising from recent European Union Directives. Major capital investment is also required to address the shortage of affordable housing in Ireland and to enable the country to meet new standards in relation to integrated waste management. In order to address this infrastructure deficit, the National Development Plan 20002006 proposes an aggregate investment of some EUR 51.5 billion over the next six years. Within this total, EUR 22.4 billion is allocated to the economic and social infrastructure programme and an analysis of this investment by category or sector is presented in the table below. Table 2.1 NDP Economic and Social Infrastructure Programme
Category National Roads Public Transport Total Allocation EUR m 5,968 2,837

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Department of Finance Water and Waste Water Coastal Protection Energy Social and Affordable Housing Health Capital Total 3,168 45 185 7,619 2,539 22,361

Review of PPP Structures

II.11

Public Private Partnerships are a significant element of the capital investment planned in the National Development Plan 2000-2006, particularly in relation to the economic and social infrastructure programme. A total of EUR 2.35 billion of private sector finance in PPP projects is included within the Plan, of which EUR 1.78 billion is allocated to the economic and social infrastructure programme and EUR 0.57 billion is allocated to waste management in the regional programmes. An indicative analysis of privately funded PPPs across each of the principal categories is set out in the table below. Table 2.2 PPP Programme within NDP
Category PPP Investment EUR m 1,270 381 127 571 2,349 PPP Investment As % of Total Investment 23% 60% 9% 69% 28%

National Roads Public Transport Water Services Waste Management Total

Note: The percentage for Water Services represents the Public Private Partnership funding as a percentage of the estimated water supply component of overall investment in water and waste water services under the economic and social infrastructure programme.

II.12

It is important to note that the overall level of investment presented in the table above is very much a minimum indicative target and the objective of the Government is to maximise the use of PPPs, consistent with the principles of best value for money and efficiency. In addition, it should be noted that the table does not reflect the total level of PPP activity anticipated within Ireland over the next six years as a significant number of PPP schemes will be implemented without recourse to private finance. For example, most of the EUR 889 million of investment required to implement the Urban Wastewater Treatment Directive will be delivered under design, build and operate (DBO) contracts.

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Recent Economic Developments II.14 Since the publication of the National Development Plan in November 1999, a number of macro economic developments have occurred that suggest an even greater need for Public Private Partnerships. These include inflation in the construction sector, a slow down in economic growth and consequent tightening of public finance, and increased demand for infrastructure investment outside of the National Development Plan (for example, the Dublin Metro). It is possible that the increased use of private finance, enhanced competition and better value for money associated with PPP will provide an effective means of dealing with these new challenges.

National Economic and Social Council II.15 The National Economic and Social Council (NESC) has indicated its support for the use of the Public Private Partnership approach in the publication Opportunities, Challenges and Capacity for Choice. This report makes a number of major policy recommendations and concludes that PPPs have the potential to play a significant role in the accelerated delivery of strategic national infrastructure, the provision of quality public services and the achievement of value for money for the Exchequer over the long term. In this context, the concept of value for money encompasses the key principles of efficiency, effectiveness and economy and does not merely mean least cost. The detailed PPP policy recommendations made by the National Economic and Social Council are summarised below.

II.16

NESC Recommendations
A clear framework should be established to assess the appropriateness of PPP for infrastructure projects and to guide its implementation; The framework should take into account the wider economic, environmental and social objectives that should be embedded in the assessment of any procurement method; PPP projects should be conducted in an open and transparent manner, helping to create a more certain environment for everyone involved; and The benefits of PPP in terms of innovation and efficiency should not be limited to economic infrastructure and the role of PPP in providing for social and community infrastructure should be more actively explored.

II.17

In terms of the evolving policy context for PPPs in Ireland, one of the most significant aspects of the analysis conducted by the NESC is the recommendation that the PPP approach should be applied to a much wider range of infrastructure projects. In particular, it is recommended that the Government explore the potential of PPP to provide elements of social and community infrastructure (such as social housing, schools, colleges and healthcare facilities). 12

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Review of PPP Structures

Organisation for Economic Co-operation and Development II.18 The Organisation for Economic Co-operation and Development (OECD) has recently prepared an analysis of regulatory reform in Ireland and the conclusions and recommendations set out in this analysis are likely to have a significant impact upon the development of the PPP programme within Ireland. The report addresses a broad range of economic and regulatory issues and suggests that the introduction of greater competition into the delivery of public services can result in higher quality public services and substantial cost savings. The principal recommendations that are relevant to the development of the PPP programme are summarised overleaf.

OECD Recommendations
Strengthen the implementation of regulatory reform policy within departments and agencies by creating stronger disciplines and assessing regulatory performance; Strengthen the accountability of regulators by building the capacity for scrutiny by parliamentary committees; Enhance the current programme of restating and consolidating existing laws and regulations with a target review programme based on pro-competition criteria; Expand competition in the supply of public services at local authority level through the introduction of competitive tendering within a framework of quality standards and performance monitoring; and Encourage better regulatory practices at regional and local levels of government.

II.19

In particular, the report notes that local authorities continue to supply many essential services in Ireland and that the provision of these services tends to be inefficient and fragmented. The report recommends the introduction of greater competition into the provision of public services and the Public Private Partnership programme is clearly a mechanism through which this could be delivered.

Framework for Public Private Partnerships II.20 The Public Private Informal Advisory Group has identified and defined a draft set of goals for the future development of the Public Private Partnership approach in Ireland. The goals are further evidence of the clear commitment by Government and the social partners to using the PPP approach to deliver a step change in the quality of service and infrastructure provision. The draft goals identified by the Informal Advisory Group are set out below.

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Department of Finance

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Goals
Speedy, efficient and cost effective delivery of projects; Value for money for the taxpayer, inter alia, through optimal risk transfer and risk management; Efficiencies from integrating design and construction of public infrastructure with financing, operation and maintenance/upgrading; Creation of added value through synergies between public authorities and private sector companies, in particular through the integration and cross-transfer of public and private sector skills, knowledge and expertise; Alleviation of capacity constraints and bottlenecks in the economy through higher productivity of labour and capital resources; Competition and greater construction capacity (including the participation of overseas firms, especially in joint ventures and partnering arrangements); Accountability for the provision and delivery of quality public services; Innovation and diversity in the provision of public services; and Effective utilisation of state assets to the benefit of all users of public services.

II.21

The goals set for the future development of Public Private Partnerships in Ireland are generally consistent with the objectives set by other countries such as Australia, Canada, Portugal, Spain and South Africa. However, it is important to note that the goals set for Ireland do not include either a requirement for private sector finance to be utilised or a requirement for such finance to be accounted for off-balance sheet. This reflects the strong fiscal position enjoyed by Ireland at present, a position that is characterised by continuing budget surpluses and declining levels of government debt. The macroeconomic climate in Ireland differs significantly from the climate in the United Kingdom in the early years of the Private Finance Initiative where accounting treatment was a key policy driver because of the need to access private finance and manage the level of public sector debt.

II.22

Procurement Context
Procurement Spectrum

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II.23

Public Private Partnerships are one of a number of different mechanisms that the Irish Government can use to procure high quality public services and in this respect they sit within a range of other delivery options including traditional procurement, contracting out and privatisation. The Government has recognised that not all projects or services are suited to the Public Private Partnership approach and accordingly there is not a requirement for universal or mandatory PPP testing. The position of PPPs within the procurement spectrum is illustrated in the diagram below.

Contracting Out

Public Private Partnerships

Less Risk Transfer

Traditional Procurement

Privatisation

More Risk Transfer

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Public Private Partnerships differ from contracting out in that the private sector is usually responsible for the provision of an asset as well as a service. PPPs differ from privatisation in that legal ownership of any assets created rests with the public sector and the public sector retains a key role in service specification, procurement, market regulation and contract monitoring. The experience of privatisation has shown that the freedom to invest, combined with private sector management skill, can bring improved efficiency. However, at the same time privatisation can lead to poor public accountability, a reduction in competition and the development of monopolies. On the other hand, PPPs can offer a longer-term, sustainable approach to improving public services, enhancing the value derived from public assets and making better use of public money, while at the same time retaining control of core areas of responsibility in the public sector.

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PPP Forms II.26 A wide range of contractual forms may be adopted by the public sector in establishing partnerships with the private sector, ranging from those where there is a great deal of public sector involvement to those where there is very little involvement. In Ireland the spectrum of contractual options ranges from Design, Build and Operate (DBO) contracts to Design, Build, Operate and Finance (DBOF) contracts and Concession contracts. The broad spectrum of Public Private Partnership forms likely to emerge in Ireland is set out in the diagram below and described in the paragraphs that follow.

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Design, Build, Operate and Finance

Less Risk Transfer

Design, Build and Operate

Concessions

More Risk Transfer

II.28

Design, Build and Operate contracts are arrangements between the public sector and the private sector for the design, construction and operation of public facilities and infrastructure. The private sector contractor designs and builds the facility to meet public sector performance requirements and retains responsibility for operating and maintaining the facility for a predefined period, at the end of which it is transferred back to the public sector. The construction of the facility is financed by the public sector and it remains in public ownership throughout the term of the contract. Design, Build, Operate and Finance contracts are arrangements between the public sector and the private sector for the design, construction, operation and financing of public facilities and infrastructure. The private sector contractor is responsible for designing, building, operating and financing the facility and recovers its costs solely out of payments from the public sector. At the end of the contract, ownership of the facility commonly transfers back to the public sector. Concession contracts are similar to Design, Build, Operate and Finance arrangements, except that the private sector contractor recovers its costs either through direct user charges or through a mix of user charging and public subvention.

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Partnership Context
Statement of Principles II.31 It is very much with this in mind that the Public Private Informal Advisory Group has defined a draft statement of fundamental principles that will underpin and guide the development of Public Private Partnerships in Ireland. The fundamental principles are set out in the table below and draw upon the work of the NESC and Government policy as set out in the Partnership for Prosperity and Fairness. The fundamental principles are consistent with the overriding requirements of social partnership and universal service provision.

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Statement of Principles
PPPs should be progressed within the context of national policy, particularly in relation to the timely and cost-effective delivery of infrastructure priorities and quality public services; PPPs should yield value for money for the Exchequer, which includes: Allocating risks to the party best able to control and manage them; and Maximising the benefits of private sector efficiency, expertise, flexibility and innovation., ;

The adoption of a PPP approach should be determined by factors including: The likelihood of it providing value for money, particularly as compared to conventional public capital procurement; Long-term affordability in the light of overall budgetary sustainability, forward commitments in relation to public expenditure and the potential for returns on private sector investment; Willingness of the private sector to participate in the project (i.e. financial viability considerations) ; and The balance between economic and social benefits and costs (including the opportunity costs of the Exchequer contribution required);

Private finance in PPPs should be additional to public finance, complementing Exchequer (and EU) resources in funding investment in public infrastructure and public services; The introduction and development of PPPs should take place within the overall processes and structures of social partnership and should be managed in an open and transparent manner. PPPs should be consistent with relevant EU requirements and with best industry and business practices and social partnership agreements; and As recommended by NESC, the role of PPPs in providing social and community infrastructure should be actively explored.

Stakeholder Consultation II.32 Building on the work of the NESC, the Public Private Informal Advisory Group has also recognised and reinforced the need for stakeholder consultation in the development of the Irish PPP programme. Stakeholders include employees and their trade unions, the users of the assets and services being provided by PPP, local community groups and sectoral interest groups.

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II.33

In particular, the Informal Advisory Group has stressed the importance of ensuring that public service employees are kept informed at the earliest possible stage of proposals for the introduction of PPPs and of significant developments during the procurement process. In addition, public service employees should be encouraged to make a positive contribution to the development of PPP projects, building on the progress made in relation to workplace partnerships under the Partnership for Prosperity and Fairness.

Summary of Analysis
II.34 The key findings from this review of the strategic context underlying the development of Public Private Partnerships within Ireland are presented below. Overall, at a policy level it is already evident that Ireland is witnessing a broadening and deepening of the PPP agenda and a shift in terms of the programme lifecycle from mobilisation into expansion.

Summary of Analysis
The Government is committed to using the PPP approach to improve economic competitiveness, modernise national infrastructure and deliver high quality public services; The commitment of the Government to PPP is shared by the social partners and has been reinforced by the reports prepared by NESC and the OECD; The initial focus of PPP development within the National Development Plan is on the provision of items of economic infrastructure such as roads, water treatment plants, waste management facilities and public transport systems; However, at a policy level the focus has already started to shift towards the use of PPPs to provide a range of other elements of social and community infrastructure such as social housing, schools, colleges and healthcare facilities; PPP is one of a number of different public service delivery mechanisms available to the Government and the definition of PPP encompasses a range of different contractual forms including DBO, DBOF and Concessions; PPPs must be developed and advanced within the context of social partnership and provide for proactive consultation with project stakeholders; and The broadening and deepening of the PPP agenda together with the development of different forms of PPP will have a significant impact on the structures, skills, processes and resources within the public sector.

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III. International Context


Introduction
III.1 Public Private Partnerships are increasingly being seen as an attractive approach to the provision of infrastructure projects and public services across Europe and the rest of the world. An ever-increasing number of countries are embarking upon Public Private Partnership programmes that are leading to a radical redefinition of the roles of the public and private sectors in the financing and delivery of public services. There is a growing acceptance around the world that Public Private Partnerships can be utilised to meet public sector investment needs in a wide range of sectors, in ways that represent good value for money to the taxpayer. For example, in the water sector in the United States and Canada, Public Private Partnerships are estimated to have generated cost savings of between 10 per cent and 40 per cent, while in Scotland the average saving achieved on PFI schemes is estimated to be over 20 per cent. Within Ireland, the experience of early projects such as Dublin Bay suggests that savings of between 25 per cent and 30 per cent are achievable. In relation to public transport, research undertaken by the European Commission suggests that the introduction of competition can generate savings of at least 10 to 20 per cent, while a review of PFI in the United Kingdom conducted by Arthur Andersen indicates that an average saving of 17 per cent can be achieved over a range of different sectors. An indication of the extent to which the Public Private Partnership approach has been adopted in other parts of the world is set out in the table that follows. Table 3.1 Extent of PPP Programmes Abroad
Healthcare

III.2

III.3

Education

Defence

Prisons

Rail

Deals closed Deals contemplated Australia Belgium Canada Finland France Germany Greece Holland Ireland Italy Portugal South Africa Spain United Kingdom United States

Offices

Water

Power

Roads

Waste

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III.4

Table 3.1 above demonstrates that the Public Private Partnership approach is being examined and deployed in a large variety of sectors and countries throughout the world. The table also underlines the point that the key principles behind Public Private Partnerships are not new. Within the transport sector, PPP models have been evolving for many years and the concession approach to utilities has been employed in France for centuries. However, it is only over the past ten years or so that the use of Public Private Partnerships has expanded into other aspects of public sector activity such as social infrastructure (including prisons, healthcare facilities and educational establishments). The major move forward in this regard started in the United Kingdom in the early 1990s, when PPP models were developed that involve the public sector paying for privately supplied services in a range of sectors. In addition, it is important to note that the table is not comprehensive and is based on data published as at January 2001. As there are a number of different definitions of the term Public Private Partnership, the table includes those projects where the private sector has been involved in the construction and operation of a facility. It does not include more simple forms of private sector finance such as borrowing, finance leases or sale and leaseback transactions. The analysis also focuses on those countries that are currently most actively considering Public Private Partnerships and excludes a number of other countries that have only one or two projects in development.

III.5

International Developments
Organisational Structures III.6 Public Private Partnership initiatives in other parts of the world have in general started with changes in legislation to facilitate the development of PPPs, the establishment of public sector advisory groups and the set up of dedicated teams inside key ministries or departments. For example, in Japan and Italy, extensive new primary legislation has been implemented to facilitate the development of PPPs while in Holland, Italy, the United Kingdom and Australia, dedicated PPP teams have been created in a number of government departments. A brief description of these teams is set out below. Holland - a PPP Knowledge Centre has been established within the Ministry of Finance. It is staffed by full-time appointees from both the private sector and the Ministry of Finance and Economic Affairs. Its role is to develop Public Private Partnership policy in Holland, promote the use of Public Private Partnerships, and disseminate knowledge and best practice. Responsibility for the implementation of projects remains with the relevant department, agency or local authority. Italy - a temporary government body (the Unita Finanza di Progretto) has been established within the Economic Policy Committee to encourage private sector involvement in the provision of public sector infrastructure. The body is a joint initiative involving both representatives of the private sector and the Ministries of Public Works, Finance and Treasury. Its role is tightly defined and involves addressing the deficiencies in the current legal framework and advising procuring authorities in taking projects forward, thereby helping to promote the use of Public Private Partnerships. 20

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The United Kingdom - in the United Kingdom, the Government has established a succession of bodies dedicated to the expansion of the role of the private sector in public service provision. The process started with the establishment of the Private Finance Panel outside of government and was followed by the creation of the Treasury Taskforce inside Treasury. More recently, the Treasury Taskforce has given way to Partnerships UK and the Office of Government Commerce. While the specific roles of these organisations has changed over time to best meet the needs of the developing PPP programme within the United Kingdom, the key objectives of the bodies has remained relatively consistent. These include supporting government departments in delivering good quality transactions, establishing standard contract terms and conditions and providing guidance on the selection and procurement of Public Private Partnership projects. Australia - the Government of Victoria has pioneered the use of Public Private Partnerships in a range of sectors including roads, rail, hospitals and prisons. The PPP programme within Victoria is co-ordinated centrally by the Treasury, with responsibility for project delivery resting with the departmental project teams. In general, the institutional and organisational structures adopted in Victoria are very similar to those developed in the United Kingdom.

III.7

While an increasing number of countries are embarking on Public Private Partnership programmes, very few have experience of PPP across a large-scale programme, in a wide range of sectors, and at every stage of the project lifecycle. This is a significant observation given the developing policy context within Ireland. Two countries with significant experience of developing PPP programmes and setting up new institutional structures are the United Kingdom and Canada. The experience of these countries provides an important insight into the principal issues associated with the delivery of a large-scale PPP programme and the mechanisms for ensuring that these issues are dealt with efficiently and effectively. A detailed review of the institutional structures within the United Kingdom and Canada is set out in Appendix A to this report and the key findings emerging from this review are summarised at the end of this section. In addition, a review of the institutional structures within Portugal for the delivery of PPP projects is also set out in Appendix A. Portugal is similar to Ireland in that its most urgent infrastructure needs are in the roads and water services sectors.

III.8

III.9

Common Barriers III.10 The underlying reasons for the gradual development of the Public Private Partnership approach vary from country to country, but some of the most common barriers that have to be resolved to enable the approach to be implemented are summarised below. Structural barriers - many countries devolve a significant amount of public sector responsibility to regional and local government. Establishing the right organisational structures within which to develop Public Private Partnerships can therefore take some time and can require significant intervention and support on the part of central government or centralised 21

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facilitators. Public sector reform to enable the wider use of Public Private Partnerships is patchy in mainland Europe, but is now starting to develop. Legal barriers - while there are significant differences in legal environments across the world, the legislative frameworks governing responsibility for the delivery of public services are commonly complex and restrictive. In addition financial control mechanisms within the public sector do not, by and large, anticipate public services being financed and delivered by the private sector. As a result, many countries have had to introduce new legislation to facilitate the delivery of public services by the private sector under a PPP contract. For example, legislative changes have already taken place in the United Kingdom, Italy and Japan. Political barriers - the utilisation of the Public Private Partnership approach in the public transport and utilities sectors has been politically acceptable to some extent for a number of years. However, there is much greater sensitivity, regardless of any structural or legal difficulties, about the role of the private sector in the delivery of other public services. As Public Private Partnership forms evolve there is increasing evidence supported by independent scrutiny that Public Private Partnerships can provide better value for money if properly structured. This has renewed interest in the application of the PPP approach to many aspects of public service provision, but political sensitivities still remain.

Pilot Projects III.11 International experience indicates that an important feature of the development of PPP programmes is the launch and procurement of a range of pilot projects. The purpose of the pilot projects is to determine, or refine, the ground rules and best practices for particular forms of PPP and to provide a firm basis for future development. III.12 Pilot projects are very often in the transport sector and in a number of countries the application of the PPP approach has only been extended to other areas of public sector activity once these pilot projects have been completed successfully. For example, in Australia, Belgium, Canada, Finland, France, South Africa and Spain the initial Public Private Partnership projects undertaken all involved the construction of major new road schemes. However, the lessons learned on a pilot project in the transport sector do not necessarily apply to PPP projects in other sectors. As a result, the best practice approach is to develop a programme of pilot projects covering a number of sectors and to ensure that the pilot projects are successful.

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III.13 The ultimate success of a pilot project is influenced by a range of factors including the experience of the contracting authority, the ability of private sector to deliver better value for money and the willingness of the private sector to accept an appropriate degree of risk. All of these factors are dynamic and will be influenced by experience gained in similar types of activity elsewhere in the world. Structuring a challenging but deliverable pilot project needs some care, and in some instances there is evidence to suggest that pilot projects have not been sufficiently well structured (for example, the pathfinder waste and prisons projects in the United Kingdom). The level of programme risk here is significant as not only do poorly structured or executed pilot projects fail to deliver the optimum amount of value for money and risk transfer, but they can also serve to undermine market, political and public confidence in the PPP approach. III.14 For example, a number of the early PFI projects in the United Kingdom focused too much on the achievement of an off-balance sheet accounting treatment (by seeking to maximise risk transfer) rather than on the delivery of a value for money solution (by seeking to optimise risk transfer). Equally, a number of early projects in other parts of the world such as the toll roads in Australia were driven entirely by a desire to use private finance and not by a desire to secure better value for money. III.15 The most common issues or problems that have been encountered during the procurement and development of pilot Public Private Partnership projects are set out in the box below. Where these issues have arisen, they have commonly resulted in poorly structured contracts, lengthy and costly procurements, high tendering costs, and reduced value for money.

Common Pilot Project Issues


Structural Issues Lack of public sector commitment to Public Private Partnerships; Lack of commercial skills and expertise within the procuring authority; Poorly defined procurement methodologies and a lack of standardisation; Poor co-ordination between government departments and agencies; Reluctance to make appropriate use of professional advisers to augment lack of relevant commercial skills in the public sector; and Inappropriate legal codes.

Project Issues Inappropriate levels of risk transfer (either too little or too much); Continued focus on input specifications rather than output specifications; Late involvement of financiers in the procurement process; and Over-optimism with regard to third party revenues.

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III.16 However, despite the failures of a number of pilot projects, more recent experience has shown that, by bringing private sector management skills together with private finance, Public Private Partnerships can deliver improved value for money across a wide range of public sector activity. Examples include the provision of water supply in Canada, waste management, healthcare and prison services in England, and road services in Spain, Portugal and Australia.

Implications
III.17 The implications of experience elsewhere for the PPP programme in Ireland are considered in detail in the following sections and in Appendix A to this report. When reflecting upon the experience of other countries, it is useful to note that Ireland has already made real progress in relation to the establishment of institutional structures and the creation of a significant number of pilot projects across a range of sectors. In addition, the increasing use of PPP approaches across Europe (and in the United Kingdom in particular) has resulted in the development of a mature market for such projects. III.18 The development of the PPP programme in Ireland is about to enter into a new phase of expanded activity. This means that the primary focus at this time is to ensure that government departments and procuring authorities have the skills, competencies and resources needed to implement and support an expanded programme in an efficient and effective manner. In this context, the key findings of the review of international experience can be summarised as follows.

Key Implications
Fast and efficient delivery of a new PPP programme requires: Strong political commitment; A Minister to champion and promote the PPP process within government; The establishment of a centralised support unit which: has a cross-government mandate; is positioned where it will have greatest authority; draws on the experience and expertise of the public and private sectors; combines policy formulation and project support functions; establishes a consistent and co-ordinated approach to PPPs; develops policy guidance and standardised contract terms; assists departments to select, prioritise, scope and procure projects; and recycles knowledge and experience within and between departments;

Ultimately, the aim should be to develop the skills and experience of departments so that Public Private Partnerships become a standard approach to delivery; and The role of the central unit is greatest in the early stages of the programme and declines over time as policy and procedures are defined and capabilities developed.

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IV. Current Position


Background
IV.1 Within Ireland, informal Public Private Partnership type arrangements have been used to deliver a number of significant infrastructure projects. These include the East and West Link bridges, the programme for decentralised government offices, and a new peat-fired power station. However, it is only since 1998 that attention has focused on the potential benefits of using the Public Private Partnership approach to address infrastructure deficiencies against the backdrop of declining European Union funding. As a result, an Interdepartmental Group (IDG) was created to develop criteria for, and advise on, the issues arising in implementing the PPP concept. In order to assist these groups in their work, the Department of Finance commissioned a study into Public Private Partnerships (The report, entitled Public Private Partnerships, was submitted to the Interdepartmental Group in July 1998 by Farrell Grant Sparks and Goodbody Economic Consultants in association with Chesterton Consulting). Acting on the recommendations contained therein, the Government agreed to adopt a Public Private Partnership approach to a number of public infrastructure projects in the transport, roads, water, waste and education sectors on a pilot basis.

IV.2

Programme Lifecycle
IV.3 International experience suggests that the development of Public Private Partnership programmes is characterised by three general phases of activity, namely programme mobilisation, programme expansion and programme maturity. An understanding of each of these phases is essential to the development of robust organisational structures and processes in Ireland as the key requirements and objectives of each phase are very different. An overview of the phases within the programme development lifecycle is set out below, together with a description of the principal features of each phase.

Programm e Mobilisatio n Projects in Procurement

Programm e Expansion

Programm e Maturity

Time
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Programme mobilisation - during this phase of activity initial organisational structures are established to give momentum to the Public Private Partnerships programme. Commonly, these organisations take the form of small dedicated PPP teams in key departments and independent advisory groups comprising representatives of the public and private sectors. The programme mobilisation phase is also characterised by ad hoc policy development, legislative reform, intense market development and the launch of a programme of pilot projects to establish best practice models. In addition, the skills and experience needed to deliver rapid project or deal flow do not typically exist within central and local government agencies and as a result there is significant reliance upon support from external advisors. Programme expansion - during this period, the initial organisational structures are revised and expanded in order to harvest the experience gained from the pilot projects and to facilitate the development of the PPP programme into new sectors and new types of contractual arrangement. Normally, this phase of activity involves the expansion of the central support unit and the development of well resourced PPP teams across a wide range of government departments. The programme expansion phase is also characterised by more co-ordinated policy development, the preparation of standard contract terms at a national and sectoral level, the roll-out of an extensive programme of PPP training and the launch of a significant number of projects in new and existing sectors. Furthermore, the overall focus of government activity and concern shifts to the minimisation of transaction costs and the delivery of projects in an effective and efficient manner. Programme maturity - during this phase of activity, permanent organisational structures are put in place with the necessary skills to deliver a steady stream of projects across a range of sectors. Commonly, the requirement for a central support unit decreases as the appropriate competencies have been embedded in procuring departments and agencies. The programme maturity phase is also characterised by the development of a capability for contract monitoring and market regulation, the refinement and updating of existing policy guidance, and the establishment of a consistent high quality deal flow. By this phase in the programme lifecycle, PPPs should be an accepted and established form of procurement across both central and local government agencies.

IV.4

As can be seen, the institutional structures required to support the development of PPP programmes change as the PPP programme develops through the three phases set out above. During the programme mobilisation phase, consultative and advisory groups are set up involving representatives of the public and private sectors and dedicated specialist teams are established in key departments and agencies in order to drive forward the pilot projects. During the programme expansion phase, the level of PPP activity is broadened and deepened and as a result, the need for a properly resourced central PPP unit increases. The role of this unit is to develop a co-ordinated approach to cross-sectoral issues, to prepare detailed policy guidance on cross-sectoral issues, to monitor the implementation of the programme at a national level, and to develop standard contractual terms. By the programme maturity phase, the requirement for central support decreases as the PPP approach becomes embedded in departments and procuring authorities. 26

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IV.5

The changing pattern of resource allocation over the lifecycle of a PPP programme is illustrated in the diagram below. The diagram clearly shows the resource implications of the transition from programme mobilisation to programme expansion and then onto programme maturity. Program Mobilisatio me n Program Expansio me n Program Maturit me y

Departments and Contracting Authorities

Resource s Required
Central PPP Unit

Time IV.6 Very few countries have reached the programme maturity phase of the PPP lifecycle. The United Kingdom is probably the closest, although it is still too early to know whether or not the new structures that have been put in place in recent years will meet the needs of departments and procuring authorities in the medium to long term. Ireland is currently within the programme mobilisation phase of the PPP lifecycle and is about to enter into the programme expansion phase. The number of PPP projects in procurement is set to increase significantly and the range of public services delivered by PPP is set to broaden substantially. Given the size of the infrastructure deficit and the pressures on the Irish economy, it is imperative that the PPP programme reaches maturity as efficiently and expeditiously as possible.

IV.7

Programme Mobilisation
Current Structures IV.8 The current institutional arrangements for the delivery of the PPP programme were established largely in the wake of the publication of the Interdepartmental Report on Public Private Partnerships in July 1998. This report recommended that a properly resourced unit should be created within the Department of Finance to oversee the development of Public Private Partnerships and that this unit should roll out expertise to analogous units in the relevant departments and procuring authorities. At the same time, a Public Private Informal Advisory Group (IAG) on Public Private Partnerships was established. The Informal Advisory Group includes representatives of the Irish Congress of Trade Unions (ICTU), the Irish Business and Employers Confederation (IBEC), and the Construction Industry Federation (CIF).

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IV.9

Shortly thereafter, a Central Public Private Partnership Unit was established inside the Department of Finance to co-ordinate the development of Public Private Partnerships in Ireland. Public Private Partnership Units have also been set up in the Department of the Environment and Local Government, the Department of Public Enterprise, the National Roads Authority and the Department of Education and Science. An analysis of the resource levels in each of the Public Private Partnership Units is set out below. Table 4.1 Current PPP Staffing Levels
Department or Agency Department of Finance Department of Environment & Local Government Department of Education & Science Department of Public Enterprise National Roads Authority Total Staff Numbers 6 4 2 4 3 19

Pilot Projects IV.10 Consistent with international best practice, the Government decided to explore the potential of the Public Private Partnership approach to deliver better value for money by bringing forward a number of pilot projects. The purpose of the pilot projects is to determine the ground rules and best practices for particular types of PPP projects and to provide a sound basis for future development. IV.11 The Government announced its intention to deliver a number of key pilot projects in the roads, water and waste sectors using Public Private Partnerships in June 1999 and this was followed by the announcement of further pilot projects in the education and public transport sectors. Summary details of the pilot projects are set out in the table below. It is important to note that the pilot projects are concentrated within the Departments of the Environment and Local Government, Public Enterprise and Education and Science. Details are for construction costs only and include VAT at 12.5%. Table 4.2 Pilot PPP Projects
Category Cork School of Music Post Primary Schools Bundle M50 Second Westlink Bridge N4 Kilcock to Kinnegad N25 Waterford Bypass N7 Limerick S.Ring 11 Dublin Light Rail Ballymore Eustace Water Works Dublin Thermal Treatment Plant Total Sector Education Education Roads Roads Roads Roads Transport Water Waste Form of PPP DBOF DBOF DBOF Concession Concession Concession Concession DBOF DBOF Procurement Start Dates 2000 2000 2000 2000 2000 2001 2000 2001 2001 Capital EUR m 40 60 25 270 155 257 400 60 130 1,397

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IV.12 At present, nine schemes have been identified as pilot projects for the PPP approach and the total capital value of these projects is around EUR 1.4 billion. A significant number of the pilot projects have already entered procurement and the rest are expected to go to tender in the next twelve months, subject to the satisfactory completion of the appropriate statutory procedures. The first pilot projects to achieve financial close will be the Cork School of Music and the Post Primary Schools Bundle with contract award expected in the summer of this year. To date, the pilot projects in procurement have been characterised by both short procurement timescales and a high degree of market interest. Key Success Factors IV.13 The emphasis of government activity during the programme mobilisation phase must be on the development of market interest and the identification and management of a number of high quality pilot projects. The key success factors for the programme mobilisation phase as a whole are set out below and will be used as the criteria to assess the effectiveness of the existing structures in the next section of this report. Key Success Factors: Programme Mobilisation
The establishment of the Embryonic Structures needed to kick start the process; The creation of the Stakeholder Engagement needed to drive the process on; The development of a high level of Market Interest in the pilot projects; The identification and establishment of a high quality Deal Flow; The commitment of the resources required to ensure effective Project Delivery; The preparation of Initial Policies and Procedures to support the process; and The raising of PPP Awareness and Understanding across government.

Programme Expansion
New Projects IV.14 The pilot projects set out above are only the first section in the development of Public Private Partnerships within Ireland. A significant number of additional PPP projects have already been identified in the water and waste management sectors and it is anticipated that more projects will also emerge in the education and roads sectors over the course of the next five years. This is likely to lead to the creation of a strong and sustainable deal flow, especially in the roads, water and education sectors. IV.15 On the basis of the information provided by the Department of Finance, it is estimated that an additional one hundred and thirty projects may be procured over the next five years as Public Private Partnerships. The total capital value of these projects is likely to around EUR 11.8 billion and an analysis of the projects by sector is set out below. It is anticipated that the most common forms of PPP to emerge will be DBO, DBOF and Concession contracts. 29

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Table 4.3 Estimated PPP Programme beyond NDP


Sector Form of PPP Estimated Project Numbers 17 11 1 86 10 125 Capital Values EUR m 1,015 1,778 6.400 1,020 550 10,763

Education National Roads Public Transport Water Services Waste Management Total

DBOF Concession Concession DBOF DBOF

IV.16 Taken together, the pilot projects already announced and the additional projects in the pipeline amount to a massive undertaking. At least one hundred and thirty four infrastructure projects will be procured over the course of the next five years using the Public Private Partnerships approach. The capital value of these projects is expected to be well in excess of EUR 12 billion. Table 4.4 Estimated Extent of Full PPP Programme
Sector PPP Unit DES NRA DPE DOELG DOELG Unit Staffing 2 3 3 3 3 Estimated Project Numbers 19 15 2 87 11 134 Capital Values EUR m 1,115 2,485 6,800 1,080 680 12,160

Education National Roads Public Transport Water Services Waste Management Total

IV.17 The principal characteristics of the Public Private Partnership programme as presented in the table above are as follows: responsibility for the delivery of the expanded programme of PPP projects is focused entirely within four Government departments with the most significant concentration of projects arising within the Department of the Environment and Local Government. The greatest concentration of projects by value arises within the Department of Public Enterprise and the National Roads Authority; over 80 per cent of the projects in the expanded programme will be awarded by local authorities and during the next six years, each local authority within Ireland will be required to deliver two to three PPP projects on average; the largest single project in the expanded PPP programme is the Dublin Metro and the largest average project values are to be found in the roads sector. The lowest average project values are to be found in the water services sector; and 30

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the most common form of PPP in the water services is likely to be DBO while DBOF and Concession contracts will be more common in the other sectors.

IV.18 All of this suggests that the level of resources in each of the PPP Units will need to be increased significantly over the course of the coming year. It also suggests that local authority engagement is critical to the delivery of the overall PPP programme and that the commoditisation of the PPP process is a clear priority, particularly at the level of local authorities. International Benchmarking IV.19 The scale of the PPP agenda facing Ireland during the programme expansion phase is difficult to overstate and a measure of the scale of the task ahead can be gained by comparing this agenda with the experience of Scotland in the six years to 2001. Table 4.5 Comparison with Scottish PPP Programme
Project Phase Operational phase Construction phase Procurement phase Appraisal phase Total Scotland Total Ireland Project Numbers 22 30 15 19 86 140 Value EUR m 620 2,130 610 750 4,110 13,005

IV.20 In the six year period to 2001, a total of eighty-six projects entered the Public Private Partnership procurement lifecycle in Scotland with the capital value of the projects being just over EUR 4.1 billion. In Ireland in the six years to 2006, it is anticipated that at least one hundred and forty projects will be procured as Public Private Partnerships, the capital value of which is expected to exceed EUR 13 billion. If this target is to be achieved then a Public Private Partnership contract must be awarded once every two weeks on average for the next six years. New Markets, New Products IV.21 A further defining feature of the programme expansion phase into which Ireland is now moving is the development of different forms of Public Private Partnership and the application of the PPP approach to different sectors. The analysis set out in this section of our report has focused largely on the PPP agenda from the adoption of the PPP pilot programme through to the demanding targets for PPP set out in the National Development Plan. This agenda rightly focuses upon addressing major infrastructure deficiencies and the successful delivery of the plan must be the first priority.

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IV.22 However, the PPP approach is not just about the creation of new infrastructure. At its core, it is about the provision of high quality public services. Therefore, PPPs exist within a longer-term agenda that must be accommodated in government. This agenda reaches beyond the National Development Plan and will include the possible application of the PPP approach to community nursing units, court and prison accommodation, office accommodation, leisure facilities, energy facilities, and social housing. It will also involve the development of new forms of PPP such as joint ventures. Key Success Factors IV.23 The emphasis of government activity during the programme expansion phase must be on building internal resource capabilities and developing consistent policy guidance and standardised contract terms so that the effectiveness of the procurement process is maximised. The key success factors for the programme expansion phase as a whole are set out below and will be used as the criteria to develop the structure of the new institutional arrangements.

Key Success Factors: Programme Expansion


Accountability - ensuring that appropriate accountability models are in place to manage a much expanded programme and extended breadth of involvement; Delivery Structures - ensuring that organisational structures are focused on the development and procurement of a large number of projects in an effective and efficient manner and that there is clarity in respect of areas of contribution; Securing Resources - ensuring that a sufficient level of resource is on hand to meet the challenge of a significantly expanded programme and that this resource is adequately trained; Value for Money - ensuring that projects are procured in an effective manner that helps to minimise transaction costs; and Momentum - ensuring that momentum is maintained as the process is broadened and deepened. Visible leadership, branding and engagement of stakeholders are core aspects.

Activity Programme IV.24 In moving from the programme mobilisation phase into the programme expansion phase, a significant number of specific activities will need to be undertaken by central and local government. These activities are summarised in the diagram overleaf and may be grouped under the following headings: Programme management; Market development; Project delivery; Project support; 32

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Policies and procedures; Knowledge management; Stakeholder management; and Regulation and monitoring.

IV.25 A more detailed listing of these activities is presented in Appendix B to this report, together with an indicative analysis of whether the activities typically occur at a national, departmental or procuring authority level.

33

PPP Activity Matrix


Strategy
Programme Management
Programme development Programme management Resource planning Organisational structures Project selection Deal flow Accountability Sign-off

Management
Stakeholder Management
Identify stakeholders Establish protocols Consult with stakeholders Communicate with stakeholders

Market Development
Creating private sector interest Maintaining private sector interest Identifying new opportunities Developing new opportunities Identifying new products Developing new products

Regulation and Monitoring


Establish regulatory framework Management of contracts Management of performance

Delivery
Project Delivery
Establish Steering Group Establish Project Team Appoint external advisers Appraise PPP Projects Procure PPP Projects

Knowledge
Policy and Procedures
Policy Development Guidance Notes Procedures Standardisation Removing barriers

Project Support
Provision of finance Provision of seed funding Participation in Steering Groups Ad-hoc advice

Knowledge Management
Inter-Department liaison Skills development Databases and web-sites Benchmarking Knowledge sharing

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Standardisation IV.26 A key aspect of the transition from programme mobilisation to programme expansion will be the standardisation of the PPP procurement process both within and across sectors. IV.27 The preparation of policy guidelines promoting the standardisation of contractual terms and the development of model contracts serves three key objectives as set out in the UK Treasury Taskforce publication, Standardisation of PFI Contracts: promotion of a common understanding of the risks that are encountered in PPP projects; facilitation of consistency of both approach and pricing across a range of similar projects; and reduction in the time and costs of negotiations by enabling all parties concerned to agree a range of areas, following the position set out in the policy guidelines, without extended negotiations.

IV.28 There are no fundamental reasons to assume that the same benefits of contract standardisation cannot be realised in Ireland. The creation of a consistent approach to PPP across all public capital infrastructure-procuring sectors must therefore be a priority objective for the new structures. Greater standardisation of approach has the potential to provide substantial savings and value for money in the procurement of PPP projects. IV.29 Standardisation of guidance, procedures and contract terms does not amount to a one size fits all approach to PPP procurement, constraining the scope for innovation and expertise implicit in the PPP approach to public capital and service procurement. Instead it is an essential step in ameliorating contractual complexity and reducing the high cost of procuring PPP projects to both the public and private sectors. IV.30 The adoption of standard terms will remove unjustifiable inconsistencies between PPP deals in future. It will be essential for all those involved in the development of the PPP programme to assess how these terms work in practice. As PPP continues to develop in the future and the pilot projects mature, it is likely that standard contractual terms will require periodic updating to reflect the changing market environment for PPP and the requirement to maximise the value for money benefits of PPPs. IV.31 It must also be recognised that the sectoral diversity of the PPP programme means that some issues will not be amenable to a uniform approach. All projects will raise issues that cannot be addressed by general guidance. However, by highlighting the broad range of issues where a standard approach is warranted, policy guidance can help to encourage an early focus on the key project specific issues.

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IV.32 Varying forms of standardisation of PPP contracts and procedures for procurement on a sectoral basis creates the problem of an uncoordinated approach to contractual terms, which undermines the confidence, cohesion and achievement of optimal risk allocation and value for money of the overall programme. In such circumstances, there is also a risk of continually covering the same issue from a first principles standpoint, which is clearly inefficient and costly. Some form of standardisation at a central level is therefore both desirable and necessary.

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V. Effectiveness of Existing Arrangements


Introduction
V.1 The scope and nature of the PPP programme will change over time as the process evolves. It is essential to take this into account when making an assessment of the relative positioning of structures at any point in time. The focus for Government structures in the mobilisation phase has been on delivering the projects earmarked in the National Development Plan. In essence, this phase has been about preparing the ground for the roll-out of a major PPP programme. As a consequence, the initial focus for PPP has been on establishing and operating structures to facilitate procurement and project management. As the PPP lifecycle moves through expansion to maturity, the focus will switch to contract management and delivery of effective services. Any assessment of forwardlooking structural requirements must take account of this changing emphasis. The key assessment criteria for the mobilisation phase of the PPP programme were outlined in the last section. These represent the primary objectives for PPP structures during the mobilisation phase and there is a need to reflect on how well current structures have performed against these objectives during the mobilisation phase in Ireland. These are set out below as building blocks that need to be addressed during the mobilisation phase.

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Key Building Blocks for PPP Mobilisation

Initial PPP Policy & Procedures Awareness & Understanding Across Government Embryonic Structures Stakeholder Engagement Pilot Project Delivery Ensuring Deal Flow Market Development

Creating Embryonic Structures V.5 Effective mobilisation of any PPP programme is as much concerned with ensuring that the key PPP building blocks are in place as it is with actually managing a programme of PPP projects. Both structures and projects need to be in place if the overall PPP Programme is to have the necessary impact.

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Significant progress has been made in establishing the structural framework required to bring the PPP programme through the mobilisation phase: the core building blocks of the PPP programme required to advance the PPP agenda Central PPP Unit, Departmental PPP Units, Contracting Authority PPP Units, IAG, IDG, etc. have been established and have met the requirements of the mobilisation phase of the programme; PPP structures for the management of the PPP programme have been established at a national and sectoral level to co-ordinate the development of the national PPP programme; programme management structures and protocols have been put in place to monitor progress across the PPP programme, e.g. project trackers, monitoring and reporting mechanisms, etc. resource levels required for the mobilisation of the programme are in place; and the required skills to deliver the Programme during the mobilisation phase have been secured and are in place.

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Our consultations suggest that the role of the Office of Public Works in the mobilisation of the PPP programme could be enhanced. We would suggest that at both a policy and resource level there should be significant engagement by OPW in the movement to programme expansion. Experience elsewhere indicates that the ability to adapt to the changing PPP environment is critical to the future success of bodies of this nature.

Stakeholder Engagement V.8 The effective engagement of stakeholders in the PPP programme has been, and will continue to be, central to the overall effectiveness of the programme. Progress to date in this area has been mixed. The nature of the interventions required to effectively engage stakeholders differs dependent on the nature of the discrete stakeholder group. Within the context of social partnership, effective engagement with the social partners at a national level is important for the overall success of the PPP programme. At a more operational level, employee and end user stakeholder groups must also be effectively engaged in the process. At a national level, much progress has been made in effectively engaging stakeholders such as the social partners, primarily through the work of the IAG. Relevant stakeholders have been identified, consultation protocols and structures established and communications with key stakeholders has been ongoing. This has worked well to date.

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Progress too has been made within some of the key sectors involved in the PPP programme. For example, in the education sector, effective ongoing consultation has taken place involving key stakeholders such as school principals, employees and governors. Success such as this has not, however, been mirrored across all of the pilot projects. In particular, our research indicates that there remains a significant gap, between the level of stakeholder engagement achieved nationally and that evident at project level. This is especially true in relation to local authority officials and local trade union representatives. Levels of understanding, comfort with the process, awareness of the overall direction of PPP are much less developed within stakeholder groups at a project level in procuring bodies. While this is not unexpected, it will be essential to increase this level of understanding and commitment if the programme is to be successful.

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Market Development V.13 One of the key activities during the mobilisation phase of any PPP programme is the creation and maintenance of private sector interest in the programme. In Ireland this has involved marketing and communicating PPP opportunities both within the country and abroad. This work has been conducted by departmental PPP units and the Department of Finance PPP Unit. Departmental PPP units have been involved in various consultation exercises with potential private sector service providers. These interactions have proved to be useful in raising awareness in the private sector as to PPP opportunities in Ireland. They have also contributed to the PPP learning experience within departments. The Department of Finance PPP Unit has also endeavoured to create awareness outside the country that the Government is committed to PPP solutions for the delivery of quality public infrastructure and services. The involvement of this Unit has been and will continue to be an important factor in promoting the opportunities on offer to international private sector organisations. Market development has also been assisted by interactions with key private sector interests such as IBEC and CIF. This process appears to have been greatly facilitated by the operation of the IAG. The success of the range of market development initiatives that have been used during the mobilisation phase is evidenced by the number of private sector consortia involved in bidding for PPP projects to date. Examples include: eleven consortia involved in bidding for NRA PPP projects; twelve consortia involved in bidding for the bundle of post-primary schools projects in Department of Education and Science; eleven consortia involved in bidding for the Cork School of Music project in Department of Education and Science.

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Progress made in this area during the mobilisation phase has been significant. The key challenge as the programme moves towards and into the expansion phase will be to maintain and enhance levels of private sector interest in PPP both in Ireland and abroad.

Ensuring Deal Flow V.19 A key success factor in the delivery of PPP projects and in the development of a competitive PPP market is a solid flow of prospective projects brought forward at an early stage by departments and procuring authorities. In Ireland, the co-ordinated approach of the National Development Plan focuses on a clear agenda for infrastructure development and PPP. We understand from our discussions with most of the departmental PPP units that there is a strong deal flow and that this is a positive feature of the PPP programme in Ireland. In meeting the requirement for identifying and initiating PPP projects departmental PPP units and procuring authorities have led the process of generating sufficient project deal flow to build and sustain the PPP programme. Deal flow has been identified and is in place, more in some sectors than others, but a solid start has been made: in the Department of Environment and Local Government, there is a significant deal flow and new projects have been identified, especially in the water services sector; in the Department of Education and Science, significant progress has been made on existing projects (but no future deal flow appears to have been identified by the Department as yet); in the NRA, there is a significant deal flow and new projects have been identified; and in the Department of Public Enterprise, major rail procurement projects, including the operation of the light rail network and the procurement of the Metro for Dublin, have been identified as PPP projects. This will create significant deal flow.

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Pilot Project Delivery V.22 V.23 During the mobilisation phase the key focus in relation to project delivery is on initiating projects from which lessons can be learned and policy developed. In assessing the effectiveness of the structures to date in relation to project delivery we would take into account progress on the pilot projects which we understand are on schedule with no significant delays anticipated and all key milestones being met. Significant progress in bringing projects to delivery has been made.

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Questions arise however in a number of key areas in relation to project delivery, as outlined below: a heavy dependence on external advisers largely engaged on a consortium basis by individual projects; and too great a bias in favour of a technical/engineering approach to project delivery.

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The first of these issues concerns the degree to which PPP units have supplemented their own experience by buying in specialist professional services and particularly the cost associated with this. To date the involvement of bought in specialist PPP consulting expertise in the delivery of the pilot PPP projects represents a very significant commitment by implementing departments and agencies and by the Exchequer. It has also meant that different legal, professional, technical and financial teams are serving different departments. There is a danger associated with bringing different views and interpretations and ideas to bear in relation to some contractual and procurement issues as it represents a threat to the development of Irelands PPP programme on a long-term sustainable basis. However, it is acknowledged that there is a significant need for technological, financial and management expertise supporting the sectoral PPP units in the short to medium term, particularly as the number and variety of projects grow and these costs may be justified if the pilot projects provide a sustainable platform for taking PPPs in Ireland into the expansion phase of the PPP lifecycle. In relation to the latter of these issues, we believe that in certain projects there has been too much emphasis placed on input-type specification issues rather than outputbased service provision.

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Initial PPP Policy and Procedures V.29 The experience of the mobilisation phase is that in many instances policy development is lagging behind projects. This is, to a certain extent, a positive reflection on the progress that has been made at project delivery level but it also highlights the requirement to address the policy deficit that has developed. PPP guidelines have been developed and issued by the Department of Environment and Local Government and are being developed in the Department of Public Enterprise in relation to public transport. These guidelines provide a basis for moving forward in these sectors. There is a need, however, for a co-ordinated approach to the development of guidelines across departments. We believe that, to a large degree, guidelines already developed in sectors can provide a basis for the development of national PPP guidelines to apply across the PPP spectrum.

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Some Departments have adapted existing contract documentation to meet their own requirements. This has facilitated movement in relation to progressing individual pilot projects but tends to increase the risk of fragmentation in the process. The real risk in these circumstances is that, in the absence of robust national policy guidelines, individual sectors pursue an approach that is not in the national interest. There is also clearly a requirement for more standardisation in the PPP process than has been the case to date. The impact that a lack of standardisation has on inflating bidding costs is a potential danger to the process. Unless this issue is appropriately addressed, there is a real danger that many contractors who put in bids for the early projects may be less willing to do so in the future, given the high costs associated with bidding.

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Awareness and Understanding across Government V.34 Our consultation programme has revealed a reasonable level of awareness of the concept of PPP. However, widespread training programmes are only at commencement and therefore much further work is to be done if this is to along with the needs of an expanded programme of projects.
Overview of Performance to Date Ireland has been effective in moving swiftly through the mobilisation phase of PPP, building a strong profile for the programme, creating the management structures to successfully mobilise the programme and achieving good progress towards delivery of the first phase of the pilot PPP projects; Market development initiatives have been successful as evidenced by the number of private sector consortia involved in bidding for PPP projects to date; Deal flow has been identified and is in place, more in some sectors than others, but a solid start has been made; At a national level, much progress has been made in effectively engaging stakeholders. Work remains to be done however, in engaging stakeholders at project implementation level; Structures have been effective in bringing the initial tranche of pilot projects to current status with no significant delays anticipated and all key milestones being met; Structures have enabled development of areas of sectoral guidance, identification of national and high-level policy issues, an effective sharing of knowledge and an engagement with social partners; and The Irish model at present is firmly aligned and integrated to the departmental structures and processes generally in operation.

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Expansion Phase
V.35 Overall, in terms of the requirements of the mobilisation phase of the PPP programme, the existing structures have performed relatively well to date. Major challenges lie ahead however. The requirements of the expansion phase of the PPP programme, outlined earlier in section four, differ from those that have applied to date. To conclude this section, we provide a brief assessment of the challenge facing the existing structures in meeting the requirements of the expansion phase.

Accountability V.36 Accountability arrangements to date within the existing structures have not been clearly defined. This has been appropriate during the mobilisation phase when all interested parties have engaged in concerted and sometimes overlapping efforts to successfully launch the PPP programme. The relatively low volume of projects in the mobilisation phase have also enabled key participants in the existing structures to engage in a wider range of activities than will be possible during the expansion phase when the number of PPP projects will increase dramatically. During the expansion phase of the PPP lifecycle, the effective management of the wider PPP programme will require clear responsibility and accountability frameworks to be put in place.

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Delivery Structures V.38 Project delivery structures established during the mobilisation phase have largely performed well. They have been successful in delivering a limited number of pilot projects to an agreed milestone plan. The increase in the number and range of PPP projects in the expansion phase, however, will require these structures to be capable of a step change enhancement of delivery capability if they are not to be overwhelmed.

Securing Resources V.39 The existing resource and skills profile of the PPP structures in place for the mobilisation phase has been adequate to meet the requirements of this phase of the PPP lifecycle. These arrangements are not, however, well placed to meet the challenges of the expansion phase. The prospective scale of Irelands PPP programme moving forward is daunting, peaking at two procurement deals on average signed per month, to deliver commitments under the National Development Plan alone. There is a widespread, and in our view well-grounded, concern that current structures and resources will be inadequate in meeting the requirements of a PPP programme of this magnitude.

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Value for Money V.41 Value for money will become increasingly important in respect of project transaction costs with the acceleration of the number of projects under procurement. Progress on standardisation of contract terms and development of model contracts will be of major significance in effecting cost reductions and while progress has been made on these issues, standardisation should be afforded a higher priority going forward, based on the experience of the initial pilot projects.

Momentum V.42 It is clear that, with a few areas of exception, substantial momentum has been generated in a successful PPP mobilisation phase and the transition to the expansion phase of PPP is already underway. There is little doubt, however, that major step change will need to occur in a number of areas if the transition to the expansion phase of the PPP lifecycle is to be successfully achieved. In the next section of this report we examine the specific challenges in moving the PPP programme forward into the expansion phase. Summary of the Challenge of the Expansion Phase During the expansion phase of the PPP lifecycle, the effective management of the wider PPP programme will require clear responsibility and accountability frameworks to be in place. The increase in the number and range of PPP projects will require existing structures to be capable of a step change enhancement of delivery capability if they are not to be overwhelmed. Current structures and resources are inadequate in meeting the requirements of the expansion phase. Cost of transactions must be reduced through standardisation.

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VI. Structural Considerations


V.43 We have set out at the end of Section V, the critical success factors for moving a significant programme from its mobilisation phase into expansion. The scope of the challenge in moving forward to expansion is a function of the volume of projects, timeframe, breadth of application and diversity. As outlined in Section Two, this is a significant challenge if PPP is to play its designated role in the delivery of the National Development Plan and as a foundation for Governments programme of regulatory reform. The key success factors for moving PPP in Ireland from its mobilisation to its expansion phase are set out in the box below. Key Success Factors
Accountability which is ensuring that appropriate accountability models are in place to manage a much-expanded programme and extended breadth of involvement. Delivery Structures are focussed on delivery of projects in an effective and efficient manner and ensuring that there is clarity on respective areas of contribution. Securing Resources which is a key element in moving to meet the challenge of a significantly expanded programme. Value for Money is important, not in this context as an objective of the PPP programme, but at a transactional level in respect of the efficiency by which it is co-ordinated and delivered. Momentum is vital in moving from the relatively small numbers directly involved in mobilisation to widespread involvement through expansion. Visible leadership, branding and engagement of stakeholders are core aspects of creating and maintaining momentum.

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In this section, we examine the options by which the key success factors can be addressed in progressing PPP in Ireland.

Accountability
V.47 Proper accountability, clearly understood and with appropriate supporting process, is at the heart of the successful move to the expansion phase. Establishing accountability will embrace: definition of clear roles and responsibilities within the different areas of involvement in PPP delivery;

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determination of interface and networking arrangements; creation of appropriate mechanisms to set and review performance measures at a corporate and individual level; and creation of a clear policy context in which delivery will take place.

Of central importance in establishing accountability for PPP is the fit with existing models of government. It is a clear lesson from international experience that attempting to roll out the programme through structures and processes, which are incongruent with prevailing arrangements, will not succeed. At best, it is likely to result in delays in making progress with the programme roll-out. The desire to see PPP as a mainstream procurement option for Government in Ireland and an integral part of the delivery of public services, highlights the need to closely fit PPP with the wider model of accountability. The accountability models developing under the Strategic Management Initiative appear to present a robust framework inside which PPP can be implemented across government. By implication, the core mechanism for the roll-out of the PPP programme in this context will be the departmental strategic plans or strategy statements.

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Delivery Structures
V.50 The most obvious difference in moving into the expansion period is the sharp increase in the number of projects coming into procurement and the focus on delivery of projects. Structures across government should be orientated toward project delivery and the mechanisms and markets by which the associated services are delivered. Criteria which are derived from the key success factors and which, from an organisational perspective, the structures must meet are set out in the table below. Success Criteria for Organisational Structures
Oriented to project delivery; Offer optimum opportunities to achieve value for money; Promote accountability; Fit with model of government; Clarity of responsibility/contribution; Meet sectoral requirements; Reduce overlap; and Focus adequately on distinctions between national and sectoral requirements.

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Against these criteria, it is possible to assess four main organisation models by which PPP can be delivered on the expanded and accelerated programme of projects, under the terms of reference for the review. The first major issue to be addressed is the requirement for any central entity. This option can best be examined by considering the form and operation of the institutional structures in the absence of any central entity defined below as: Option 1: Decentralisation In this option, the centralised model is not followed and PPP policy, management, implementation and procurement is vested within the PPP procuring departments/agencies. There is complete decentralisation of PPP policy development and each sector develops its own approach to crucial PPP issues more or less in isolation from other sectors engaging in PPP procurement.

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The perceived advantage of this approach is that the responsibility for all aspects of the development of PPP resides within the sectors bringing forward projects. The relevant contracting authority has a very high degree of autonomy and independence in respect of the development of policy in the sector that can be designed to match closely the requirement for accelerated project delivery. The main disadvantage is the lack of consistency and co-ordination of PPP procurement across sectors and the very limited scope for developing national policy perspectives. There is a clear risk that, given the high prioritisation of project delivery within sectors, the full value for money advantages of PPP will fail to be realised. Moreover, divergences in approaches between sectors may tend to constrain competition given the lack of scope of the standardisation of the procurement process and undermine the credibility of the PPP programme overall. Moreover, under any decentralised model as outlined above, it would be more difficult to connect up effectively the management of the programme overall with the political level which has been highlighted as a key lever for influence and authority in moving the PPP programme forward. Our assessment is that this option where no central entity exists can be dismissed as a sub-optimal solution in terms of the realisation of the benefits of a PPP approach. All of the evidence is that there is a compelling need for central entity at a national level to effectively meet at a minimum the requirements for: (a) (b) (c) (d) (e) (f) national/high-level policy development including standardisation and value for money assessment; national communications strategy; cross-sectoral facilitation of knowledge/experience sharing; market co-ordination and development; programme co-ordination; and project review and monitoring.

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In addition, our consultations with stakeholders both within and outside the public service highlighted a clear recognition that the work of a central body has an important role to play in the delivery of the programme but that this role should entail an extension of existing institutional arrangements rather than subsuming departmental responsibilities. Our research in other jurisdictions has highlighted the lesson from the international experience of PPP confirming the benefits of a co-ordinated national approach to the management and development of PPP, driven by a creation of an adequately resourced central entity. In summary, the decentralisation option scores against the criteria as set out below.
Option One Decentralisation Oriented to project delivery Offer optimum opportunities to achieve value for money Promote accountability Fit with models of government Clarity of responsibilities/contributions Meet sectoral requirements Reduce Overlap Focus adequately on distinctions between national and sectoral requirements Yes No Yes Yes Yes Yes No No

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Accepting, therefore, that a central entity is desirable, the second major issue to be considered is the degree to which the swift and effective delivery of projects can be promoted through a change in the existing delivery mechanisms for PPP projects and the creation of a specific centralised PPP agency which would be allocated responsibility for the delivery of all major infrastructural projects on a PPP basis defined below as: Option 2: Procurement Agency This agency would assume sole responsibility for driving PPP policy and procurement in a highly centralised manner. Such a PPP agency would be at arms length from Government and existing departmental structures and current governance and accountability relationships and would be allocated statutory

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responsibility for the delivery of PPP projects currently being developed at departmental/sectoral level. V.60 This approach the polar opposite to Option 1 - would strongly highlight the priority of accelerated delivery of infrastructural projects and signal the significance of the adoption of the PPP approach to public procurement. The establishment of an agency would help address the difficulties generated by turnover of key public service staff working in the PPP area. It would also support the build-up within the public sector of the skills and technical knowledge (i.e. financial, legal) required for successful PPP procurement and policy development, largely eliminating the need for the engagement of expensive consultancy expertise by contracting authorities. It would clearly also be consistent with the requirement for the co-ordinated national development of the PPP programme overall by removing responsibility for the delivery of PPP projects from relevant sectors. Several serious difficulties can, however, be identified in relation to the role and functions of the proposed PPP agency. These revolve particularly around the role of the PPP agency in making decisions on service delivery across all sectors in which PPP projects are being delivered completely separately from existing accountability relationships, thereby giving rise to a very complex and demanding co-ordination task for the PPP agency. Very major issues also arise in relation to the PPP agencys relationship with existing and proposed PPP delivery agencies such as the NRA in the roads sector and the proposed Rail Procurement Agency (RPA) in rail. The role of the agency in infrastructural delivery could only be regarded as a transitional measure as ultimately the agencys existence would preclude successful delivery of the key objective of embedding the PPP approach as a central element of the mainstream public procurement process. This objective is critical to maximising the potential for PPPs to be instrumental in terms of the rapidly developing agenda for the modernisation of public service delivery, which in turn requires PPP to become a core public procurement mechanism rather than remain separate and distinct. New institutional structures such as the proposed PPP agency which would take some time to put in place (e.g. on account of the need for the enactment of a legislative basis) would not be consistent with the imperative of accelerated delivery of public infrastructure. We understand that a PPP agency, if created under statutory powers, would require legislation which would require a lengthy timeframe to enactment (in region of twelve to eighteen months). Therefore, a distinct PPP agency or statutory body for PPP infrastructure delivery, although having the potential in principle to drive the PPP agenda policy and projects in tandem across the whole of the public service could only come into existence at a later point in the desired timeline, at which time most of its work would already be accomplished.

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A key feature of the successful rolling out of PPP in Ireland is that it should as much as possible coincide and be integrated, rather than be in conflict, with other Government mechanisms, structures and processes. In the Irish context, this means dovetailing the PPP initiative with departmental structures and processes. Therefore, at a pragmatic level, the creation of a body which does not fit comfortably within the existing governmental framework seems ill-equipped to meet the demanding PPP agenda. This view is reinforced by the short-term risks of serious dislocation to the current structures and projects which any major structural change is likely to generate. It is clearly essential that the roll-out of the pilot and other PPP projects is not impeded in any fashion. The conclusion must therefore be that the establishment of a separate PPP agency would be inconsistent with both the objectives of accelerated PPP implementation and appropriate integration with the wider machinery of government. Moreover, it would not sit comfortably with the broad thrust of the Strategic Management Initiative (SMI) by leading to a very significant dilution of responsibility and authority at departmental level for the delivery of their own strategies insofar as they relate to infrastructure and service provision initiatives. In summary, the procurement agency scores against the criteria as set out below:
Option Two Procurement Agency Oriented to project delivery Offer optimum opportunities to achieve value for money Promote accountability Fit with models of government Clarity of responsibilities/contributions Meet sectoral requirements Reduce overlap Focus adequately on distinctions between national and sectoral requirements Yes Yes No No No No Yes Yes

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Given the requirement therefore for a central PPP entity but one that closely aligns with existing governmental structures, two further options should be considered for the role and function of the central PPP entity as follows: Option 3: Central Policy & Resource Unit This entity, located within a central government department, would sit inside rather than at arms length to existing government structures. Its role would embrace central

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development and monitoring of policy and an advisory role in relation to PPP project delivery through provision of a central resource pool. The central resource pool (which would be an addition to the resources needed for the policy role) would enable a consolidation of PPP expertise within the public service as a whole, which would be shared across departments and procuring agencies. In this model, PPP expertise would be sourced from the central resource pool primarily to support project procurement but also to assist in implementing PPP policy.

Option 4: Central Policy Unit As with Option 3 above, this body would sit within Government but in this case would fulfil a smaller more selective PPP advisory and support role in relation to project delivery. While the central policy unit would have some project involvement particularly in relation to pathfinder projects or those experiencing serious problems - its main focus would be on the development of national or high-level PPP policy, the monitoring of policy implementation at sectoral level and the regulation and co-ordination of the programme overall. In this model, departments or sectors would continue to be the main focus for policy development in relation to sectoral issues and would become the primary source of sectoral and project expertise.

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In summary, the central policy unit option (with or without a resource unit) score against the criteria as set out below:
Options Three & Four Central Policy Unit Oriented to project delivery Offer optimum opportunities to achieve value for money Promote accountability Fit with models of government Clarity of responsibilities/contributions Meet sectoral requirements Reduce overlap Focus adequately on distinctions between national and sectoral requirements Yes Yes Yes Yes Yes * Yes Yes Yes

* provided properly defined roles are in place

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In essence, both Options 3 and 4 perform the same policy role at national and sectoral level with the key distinction being the centralisation of the advisory function at a national level. We consider that the advantages and disadvantages of such consolidation are set out in the table below:
Creation of a Central Resource Unit (Option 3) Advantages Opportunities to consolidate expertise in a single entity Disadvantages Potential confusion of roles between sectoral/departmental team and central advisory bodies Central resource unit likely to structure sectorally in any case Inconsistency of central resource unit with the emphasis on departmental accountability and sectoral focus Apparent lack of demand at a sectoral/project level for such a service

Potential to achieve some efficiencies

Some enhanced career opportunities for staff

Additional support for new or emerging sectors

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On balance, we consider that the potential overlap with departmental roles that a central resource unit may create may outweigh apparent opportunities for efficiency arising through consolidation. The use of a central resource unit may create confusion in the model of accountability if it begins to stray beyond the remit of an advisory service brought in as required by departments. This could be perceived as an extension of the powers of the centre, an approach which we have emphasised fits poorly with the model of government and optimal arrangements for clarity of accountability. It is also worthy of note that our consultations revealed that there is no enthusiasm at departmental level for the concept of a centralised resource pool of PPP knowledge, skills and expertise to offer support and advice in relation to project delivery. This appears to be primarily on the basis that this alternative would tend to restrict the scope for the appropriate development of capabilities at a departmental/sectoral level. However, it suggests that a central resource unit would not be created from a demand perspective and may prove of limited value unless a mandatory involvement is created for its staff on projects. Clearly if such an obligation is imposed, this will conflict with the actual concept of the resource unit which is based on fulfilling an advice and guidance function.

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Indeed there is a strong preference at departmental/sectoral level to continue to buy in external advice as necessary to assist in the resolution of sectoral policy or project issues rather than to source this support from a centralised resource pool. Clearly issues arise in respect of value for money, if there is a high reliance on advisors to undertake routine work. There is also potential to create differing approaches to common issues. These potential problems can be dealt with where good progress is quickly made on: (a) (b) Standardisation of contract terms and development of model contracts; and Clarity of understanding on the appropriate use of advisors.

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In relation to value for money, we consider that there may be some evidence of high advisory fees on some of the PPP pilot projects. While this is in part an understandable feature of the current stage of development of the pilot phase, it may also be a reflection of an approach that has not yet moved away from traditional procurement practices. This is manifested in terms of an overemphasis on inputs rather than on outputs and in the bias within advisory costs towards technical input. In our view, the scale and composition of advisory fees should more fully reflect the output-based nature of PPP. This aspect of advisory fees should be reviewed in order to ensure value for money were there will be continued reliance on advisors. The main conclusion on the type of organisational model most appropriate to Ireland is that Option 4, a Central Policy Unit, matches most closely the medium-term requirements of Irelands PPP programme. This type of central unit would embrace the following functions in broad terms. policy development at national level; programme management and co-ordination; programme monitoring, regulation and review; and communication, awareness and market development.

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Under this organisational model PPP units will also exist to support the same broad requirements at a sectoral level with a closer input in projects through the programme co-ordination role. The elaboration of these functions and the specifics of what they mean for the structures are described in the next section.

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Combining considerations on the key success factors of accountability and support for projects therefore creates the type of structure set out below:
Features of Structure Accountability to be established through the departmental strategy statement process PPP projects delivered through a sectoral focus, which in priority areas fits the departmental structures Sector-specific PPP support to be available which will enable creation of departmental strategies Responsibility for project delivery will rest in sectors that must be adequately resourced with specialist skills and expertise Enhancement of a central unit which will deal with issues of programme management, national policy, monitoring, regulation, co-ordination and review Continuance of the role of Public Private Informal Advisory Group with a clear remit of engaging social partners Recasting of the co-ordinating body the Interdepartmental Group on PPPs to reflect new clarity in the responsibilities at national and sector level

Securing Resources V.78 It is clear from our assessment that current resource levels are inadequate, given the prospective scale and importance of the PPP programme over the coming years and the imperative of putting in place a detailed policy infrastructure for PPPs that helps deliver the value for money benefits of PPP and also embeds the PPP approach to the procurement of public infrastructure and public services. Securing adequate resources both within and outside the public sector has been an important issue highlighted in other jurisdictions. While the current arrangements and resources have served Ireland through the mobilisation phase, there is a step change in the intensity of the PPP programme and this must be reflected in a major uplift in resources. In broad terms, the nature of the resource strengthening is: National Level/Central Unit: increasing capability to meet the extended demands of the new agenda. Additional resources required from public and private sector to progress policy development, market PPP, consolidate knowledge management, regulate best practice and link to projects at a programme level.

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Departmental Level/Sectoral Level: support the major uplift in projects with sectoral policy and guidance, project selections, market management and project advice. Also input on PPP dimension to departmental strategy. Primarily, resources will be from the public sector. Procurement Authority/Project Level: directly procure and deliver projects. Private sector resource will be needed in project delivery management, together with increased technical resources from either inside or outside Government.

V.81

The resource required at national and sectoral levels is primarily new or additional in nature, created for the purpose of progressing the PPP programme. At procurement authority level, this resource may already exist and be involved in other forms of procurement activity. PPP will become a new way of undertaking these procurements. The extent of additional resource required is a feature of the extent of influx of new projects which dramatically increases the total portfolio under procurement by whichever procurement process. However, we would caution about a simplistic view of resource needs at procuring authority level if this fails to meet: recognition that PPP is a different form from traditional procurement with emphasis on output-based specifications for services rather than input-based technical specifications for infrastructure; and our experience that dedicated project resource is more likely to deliver within the anticipated timeframe than a resource involved as an adjunct to day-to-day responsibilities elsewhere.

V.82

V.83

Details of the recommended resource profile are set out in the next section. It is clear that this must combine effectively civil servants and expert private sector personnel on a fixed-term contract basis and advisory inputs managed through framework agreements. The challenge of securing this resource must be met in the short term across a range of initiatives: early implementation of new structures to attract civil servants from within government; active targeting (perhaps in the UK) of those with private sector experience who may be interested in contracts in Ireland; and active pursuit of potential secondees from professional firms in Ireland.

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Value for Money V.84 An essential consideration of an expanded programme is the optimum means of securing value for money. In this sense, this refers to the issue of the co-ordination, management and delivery at a transactional level rather than the value for money in cost of services that PPP seeks to achieve. Key to ensuring value for money in the expanded programme is: V.85 standardisation; and arrangements for use of advisors.

We set out earlier in this report our views on standardisation and the optimum means of using advisors effectively. The main elements in securing value for money in expanding the programme are set out in the table below. Suggested targets at a project level for advisor costs are included in our chapter on key performance indicators.
Value for Money Clear emphasis on rationale for PPPs philosophy, combining design and build with finance operate and maintain elements, focussing on output rather than input-based specifications; Appropriate risk transfer; Use of standardisation of contract terms at national level and model contracts and guidance at sectoral level; and Use of framework agreements for advisors.

Momentum V.86 The final success factor in moving effectively from mobilisation to rapid expansion is translating the early initial momentum from the small clusters of people directly involved across the wider canvass of Government as a whole. Vital to this aspect, as shown by international experience is: creating and maintaining a strong brand identity for PPP; engaging stakeholders and the market at international, national and sectoral level; effective education and, in particular, training for those involved; and championing at a political level to provide visible leadership and direction.

V.87

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V.88

These are all elements which have been progressed under the mobilisation phase and must be maintained or advanced. We explore the specific issue of political sponsorship below.

Political Sponsorship V.89 It is important that political sponsorship for an initiative, such as Public Private Partnerships comes from the highest levels of Government and through the role of the Cabinet Committee on Infrastructure and PPPs, this has been evident to date in Ireland. Experience elsewhere in relation to the development of PPP and indeed in relation to any other important government initiatives suggests that strong, clear and visible endorsement at senior political level is a key catalyst to successful progress. In the Irish context, we suggest that this can best be fulfilled within the existing structural arrangements in relation to the Cabinet Committee and with the championing of PPPs by a Senior Minister (a role performed by the Minister for Finance to date). As the remit of the Cabinet Committee extends much wider than PPP and as the infrastructure programme is only one (albeit central) aspect of PPP, we consider that this championing role should be visible outside the Cabinet Committee but ultimately work through the Committee as the basis for influencing the wider Government. The connection proposed between the Ministerial Champion for PPPs and the Cabinet Committee set out in the preceding paragraph can be illustrated as follows:

V.90

V.91

PPP Ministerial Champion

Cabinet Committee on Infrastructure & PPPs

PPP Central Body

Civil Service Departments/Agencies

V.92

Determination of the appropriate political champion for PPP is clearly influenced by the structuring and location of a central PPP unit and vice versa. The central PPP unit will be the executive means by which the PPP champion can deliver influence across the structure of the Civil Service and must work closely with this unit. A key feature is the ability of the political champion to deliver the necessary financial and other resources.

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V.93

There appears no strong case for changing the location of the current PPP unit from the Department of Finance going forward, nor the role of the Minister of Finance as PPP champion. Any potential disadvantages in profile arising from the maintenance of the status quo can be alleviated by a renewed and strengthened clarity of purpose, focus, remit and process for the central unit and, in particular, in its continued proximity to visible senior Ministerial involvement in PPP. While the special position of the Minister for Finance in championing the PPP process is recognised, Ministers in other key departments have also a vital role in ensuring that the momentum behind the PPP process is maintained.

V.94

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VI. Moving Forward


Definition of the Organisation Model
VI.1 To move PPP forward from the mobilisation phase into the significant expansion of projects will require a number of activities, a reorientation of structures and the introduction of the new process. These have been explored in the earlier sections and the conclusion on the type of structures best suited to meet Irelands ambitious medium-term targets for PPP programme is set out in the table below. Structure
Accountability to be established Strategy/Strategy statement process. through the departmental

VI.2

PPP projects delivered through a sectoral focus, which in priority areas fits the departmental structures. Sector-specific PPP support to be available which will enable creation of departmental strategies. Responsibility for project delivery will rest in sectors that must be adequately resourced with specialist skills and expertise. Enhancement of a central unit which will deal with issues of programme management, national policy, monitoring, regulation, co-ordination and review. Continuance of the role of Public Private Informal Advisory Group with a clear remit of engaging social partners. Recasting of the co-ordinating body the Interdepartmental Group on PPPs to reflect new clarity in the responsibilities at national and sector level.

VI.3

The focus and relationships between the elements in the Government structures and stakeholders are represented diagrammatically overleaf:

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Government Cabinet Committee Cross Departmental Team

Minister

Departments PPP Units Inter Departmental Group Procurement Bodies Informal Advisory Group Social Partners

Advisors

Central PPP Unit

Department of Finance Advisors

PPP Market Suppliers

PPP Project Delivery


Contractors

VI.4

From a programme delivery perspective, this illustrates that: Procuring authorities are at the forefront of delivery of the PPP programme. These may take the form of sub-national public bodies (e.g. local authorities, health boards), national agencies (e.g. NRA) or departments themselves; Procuring authorities are supported by sectoral PPP units, housed within departments; Departments are accountable to the Cabinet Committee for PPP delivery, through the vehicle of their strategic plans; and Central PPP unit, from within Department of Finance, reports directly to the Cabinet Committee on matters of national policy, programme management, monitoring, regulation, review and co-ordination.

VI.5

Accountability for programme delivery will rest with the departments through the vehicle of the strategic planning process. Clearly, the infrastructure development divisions of each strategy document must align with the National Development Plan and any further development of policy at a national level. As each submitted strategic plan is reviewed at Cabinet Committee level, the central PPP unit will advise on the documents: adherence to the PPP aspects of the National Development Plan; compliance with other areas of national policy on PPPs; and adequate use of the PPP opportunities in developing infrastructure or other areas of public services.

VI.6

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VI.7 VI.8

Approval of the strategy document will be conditional upon these criteria being adequately addressed. The operation of this model of accountability will be relatively clear where departments hold direct line authority over the procurement of projects agreed under the strategic plan. In this instance, the department has the power both to cease a project, withhold funding until certain criteria are met or hold to account those responsible for delays in procurement. The position is more complex where there are a number of procuring authorities within a department who have a less straightforward relationship of line accountability to that department. The relationship between the Department of the Environment and Local Government and local authorities is an example of this situation. Where this more complex relationship exists the department and its PPP unit can act to halt the progress of a project and ultimately withhold funding if it is considered unsuitable. However it can only promote advancement of the procurement process by means of influence and support rather than by direct executive authority. We consider that in the new organisational model, the central unit can play an important role in unlocking such project delays. Acting on behalf of the PPP Champion and with the authority of the Cabinet Committee, the central unit can investigate the reasons for such delay and use its good offices to overcome any identified barriers or reasons for delay. The central units ability to report its findings directly to the Cabinet Committee should bring the necessary profile and authority to any such investigation.

VI.9

VI.10 Broadening the focus to stakeholders outside Government and placing more emphasis on relationships at the centre, the diagram on the previous page also highlights a number of key points: the Cabinet Committee remains the key link in political accountability (although not interface) terms between the PPP champion, the Minister for Finance, and the Central PPP Unit in the Department of Finance and the delivery strategies of individual Ministers and their departments; departments are responsible and are held accountable for the delivery of strategic plans which will include delivery of infrastructure and services; the central PPP unit will have a separate but linked accountability to the Minister for Finance for the execution of its functions for the wider promotion and programme management of PPP. These will clearly have a strong overlap with project procurement and delivery by departments. The co-ordinating and integration processes of the PPP structures are central to effectively managing these interfaces; it is also important to note that the model reflects the key reporting relationship between the central PPP unit and the Minister of Finance and top-level Department of Finance management in ensuring the effective and efficient operation of the accountability structures overall;

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the head of the central PPP unit will continue to be a member of the CrossDepartmental Team, promoting the overall co-ordination of the national PPP programme and its integration within the broader national policy framework for infrastructure development; and in the interface between the central PPP unit and prospective PPP contractors/operators, the proposed model also reflects the critical role of the central unit in communicating the PPP agenda/message in order to create a vision and enhanced awareness of PPP in Ireland.

VII.10 We believe it is essential that the central PPP unit retains its close reporting relationship and direct and ready access to the Minister in order to authorise and copper fasten its role as leading and managing the programme, developing the policy and co-ordinating the PPP programme overall. VI.11 The relative standing/positioning of the central PPP unit within the Department of Finance must be sufficient to support this role in order to ensure the proper coordination of the value for money objective of PPPs with the overall management of public expenditure. This essential co-ordination is best achieved by the retention of the central PPP unit within the Public Expenditure Division of the Department of Finance and the further strengthening of reporting relationships to senior management level in the Department. VI.12 It should be clear that there is a strong complementarity between the role of the Central PPP Unit in promoting the PPP concept and that of the Department of Finances wider remit as custodian of public expenditure, providing procedures and policy guidance are in place to ensure that PPP projects are selected appropriately and developed according to guidelines and regulations that realise the value for money advantages of PPP. VI.13 In this light (and given progress in the pilot projects to date), establishment of procedures within the Department of Finance to ensure the effective and efficient management of the public expenditure aspects of the PPP programme on a value for money basis a concept embracing efficiency, effectiveness and economy rather than just least cost - is a priority. VI.14 In this context, the core responsibilities of the Central PPP Unit should relate solely to ensuring that PPP projects are developed on a value for money basis, assessed in terms of a PPP value for money test. This audit system for PPP projects should permit contracting agencies to assess whether PPP projects provide value for money and should proceed to procurement. VI.15 This review mechanism would comprise a central part of the process whereby projects are selected and developed by procuring organisations. The formula under which such assessments are made must be consistent with the high-level principles set out in the Framework for PPPs under the Programme for Prosperity and Fairness (PPF).

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VI.16 Consistent with our model of accountability, responsibility will rest with individual departments to assess the affordability of individual projects in the context of public expenditure and public expenditure priorities overall and over time in their sectors. As the PPP programme develops, Public Expenditure Division in the Department of Finance should play an increasingly important role in reviewing the affordability of the PPP programme overall. Departments should also be required to incorporate details of their PPP plans and commitments fully into their long-term strategic planning process. VI.17 In reporting terms as set out in the diagram at paragraph 7.3, the head of the central PPP unit can be held accountable in relation to the performance of the central PPP unit and its key objectives and programme of work through a number of distinct but linked relationships: to committees of the House of the Oireachtas, as provided for under the Public Service Management Act (1997 ); to the Cabinet Committee; to the Minister for Finance within the overall framework of assignment under the Public Service Management Act; and to Department of Finance management.

Roles and Responsibilities VI.18 The specific roles and responsibilities of the key governmental participants in the above model are set out below. Cabinet Committee on Infrastructure and PPPs VI.19 The Cabinet Committee has a focus on the delivery of the National Development Plan, which is considerably broader than PPP but in which PPP clearly serves as a key enabler. VI.20 In the context of PPP, the Committees role will be: to hold departments/agencies accountable for project delivery including in relation to strategic objectives and adherence to national high-level PPP policy; using appropriate evaluation criteria to review the performance of the central PPP unit in relation to its objectives and work programme and the management of the PPP programme overall, through the Minister for Finance acting with the Cabinet Committee. We shall comment later in this section on the establishment of key performance indicators to measure performance;

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to determine the ongoing requirements for political engagement with the PPP process, particularly at local government level; to determine the need for any change in arrangements for the interface with social partners; and to relate and to integrate PPP with any broader government policy perspectives and objectives.

Minister for Finance VI.21 The Minister for Finance will continue to fulfil the role within the Cabinet Committee and as politically accountable for the Department of Finance. VI.22 As Minister for Finance and member of the Cabinet Committee, the Minister would continue to be the PPP champion by acting and being clearly identified both domestically and internationally as the focal point for PPPs in Ireland. The Minister for Finance must continue to nurture a strong sense of the identity of PPPs in Ireland and articulate the Ministerial level strategy and objectives of the PPP programme. VI.23 As PPP champion, the Minister would authorise and require the Head of the Central PPP Unit on the Ministers behalf to: promote as a highly visible, influential and persuasive advocate the adoption of PPP as a central element in the procurement procession for infrastructure and services; take a close interest in the progress of projects and intervene to determine issues of delay or other difficulties; and examine any matters of PPP policy implementation, compliance and adherence with best practice or other areas of interest and make recommendations to the Cabinet Committee accordingly.

VI.24 Naturally, while identifying a Senior Minister as the visible champion for PPP, this does not preclude other Ministers from actively promoting and supporting the PPP philosophy and approach. They will have a direct opportunity to influence along this agenda in agreeing plans and priorities within their own spending departments. Departments VI.25 The Departments will be responsible for developing PPP projects in line with national policy and their own strategy. VI.26 Departmental or sectoral PPP units will act in support of the delivery of the departments strategy in its dimensions that relate to PPP. At this level, the units roles are:

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to assist in the development of the PPP aspects of departmental strategies; and to access and incorporate opportunities for PPP in the formulation and delivery of the strategic plans.

VI.27 With a high focus on supporting and enabling project procurement and delivery, the units will also: develop PPP policy and guidance at a sectoral level; develop and initiate interventions which will promote the widespread use of PPP as a procurement tool, where appropriate across the department; undertake market management, development and deal flow at a sectoral level; select and develop projects in line with national eligibility criteria and the Framework for PPPs under the Programme for Prosperity and Fairness; programme manage the portfolio of projects within the department or sector; co-ordinate the flow of relevant information for any national project tracking system; contribute to the knowledge management processes at sectoral and national levels; co-ordinate participation programmes of awareness and training for those potentially involved in the delivery of PPP projects; and overview and quality control use of advisors at each stage of procurement.

VI.28 Over time, the departmental PPP units will extend their role beyond the infrastructure project phase itself to the delivery of the service concerned, taking on board the need to monitor service standards, to encourage competition in the delivery of services and to ensure that the appropriate regulatory controls are in place to guarantee compliance with quality standards. VI.29 There is no common or uniform model, which departments should adopt as a delivery mechanism for PPP. The structural approach adopted will vary depending on the profile, scope and size of projects likely to be procured. Procurement and PPP activities may merge in a single entity such as the National Roads Authority (NRA) and the proposed Rail Procurement Agency (RPA) or may be separate, where, for example, there are a variety of constituent procuring authorities (such as in the local government or health sectors). VI.30 To the extent that structural/organisational changes in the future may diminish the direct role of government departments as procuring agencies for PPP projects, the departments will still be required to focus on sectoral policy development. The departments themselves are best equipped to resolve these sectoral issues in the context of the broader national policy framework for PPPs.

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VI.31 There are, however, two principal templates against which the differing sectoral needs can be determined. VI.32 The first model is where the department is itself the contracting authority and where the opportunity exists to create an integrated PPP advisory and procurement body. This type of body would be responsible for the activities set out in the table overleaf. Integrated PPP and Procurement Agency
Advice to Minister on PPP policy. Sectoral market management. Development of suitable projects. Co-ordination of project tracker information. Management of advisory services. Knowledge management. Development of project output specifications. Management of procurement process and negotiations with bidders. Bidder selection. Project management.

VI.33 The contrasting model, where the department is distinct from a number of its procuring authorities, requires a more complex organised arrangement. In essence the development and co-ordination of PPP requires a separate advisory unit with procurement activities resting with the appropriate authority. VI.34 These separate bodies and their respective responsibilities are set out in the table below. PPP Advisory/Co-ordinating Unit
Advice to Department on PPP policy. Sectoral market management. Development of suitable projects. Co-ordination of project tracking information. Development of policy guidance. Development of framework for the management of advisors. Knowledge management. Programme management of projects. Co-ordination of awareness with training. Provision of project advisory support.

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Procurement Authority
Development of project output specifications. Creation of project team. Management of procurement process and negotiation with bidders. Management of advisory services. Bidder selection.

Social Partners Public Private Informal Advisory Group (IAG) VI.35 The new structures detailed in the review will not require any significant reformulation of the role of the social partners in the PPP programme through the IAG which will continue to provide a forum for the engagement and participation of the social partners in the development of the national PPP programme and the monitoring and review of the Framework for PPPs under the PPF. Inter-departmental Group on PPPs (IDG) VI.36 The Inter-departmental Group on PPPs will continue to play an important role in the management of the programme. However, there should be some recasting of the coordinating and consultative role of the IDG to reflect the new clarity in the responsibilities at national and sectoral level. Central PPP Unit VI.37 The central PPP unit would advise and act on behalf of the Minister focusing sharply on its core responsibilities. Its work would be expected to revolve primarily around the following broad areas in relation to which, in order to strengthen accountability relationships, an Annual Report should be prepared and presented to the Oireachtas and the Cabinet: PPP Policy formulation; monitoring, review and regulation of PPP project development; communications and awareness; PPP programme management and co-ordination; PPP market development; and

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Policy

identification and resolution of problems affecting the national or high-level PPP programme.

VI.38 The policy role of the Central PPP Unit will be to create and develop national and high-level PPP policy, required for the development of the policy framework for the successful delivery of PPP at a sectoral level. VI.39 This policy role has three dimensions: technical agenda including in relation to the standardisation of key contractual terms, the development of model PPP contracts and standardised tendering procedures, requiring a cross-sectoral approach; contextual agenda, managing the interface between PPP policy and other policy areas (e.g. public procurement including e-procurement, European Union requirements and legal issues) and the co-ordination and resolution of issues brought forward by procuring authorities of cross-sectoral significance; and strategic agenda, creating a strategic policy framework for PPPs guiding the future development of the programme and the identification and achievement of the long-term goals of the programme.

VI.40 The Central PPP Unit will take a lead in setting out the agenda for policy development and undertaking appropriate programmes of work. However, this leadership role should not be discharged on a directive or mandatory basis but should seek to fully encompass sectoral perspectives through: affording a high priority to the resolution of cross-cutting sectoral issues raised by departmental units/procuring agencies; consulting closely and working through inclusive processes with relevant sectoral units and the successor arrangements to the Interdepartmental Group; seconding or otherwise involving staff from sectoral units to contribute to national policy development, using a project-based approach; and where particular expertise/experience exists, delegating responsibility to departmental units for the development of national policy perspectives.

VI.41 Priority areas for national development include: establishing working procedures and issuing policy guidance facilitating the successful identification and development in the sectors of value for money

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PPP projects (i.e. project eligibility) by means of the preparation of an outline business case/value for money review framework; ensuring clarity and certainty in relation to relevant tax issues including for example, VAT, capital allowances and rates; ensuring full consistency of the overall PPP programme in relation to State aid (with the relevant department) and national/EU procurement rules; client contribution to PPP bid costs in the context of the work of the Forum on the Construction Industry; and treatment of pensions for state sector employees potentially affected by Transfer of Undertakings (Protection of Employees) Regulations.

Monitoring and Review VI.42 A core function of the Central PPP Unit is its role in monitoring and review of PPP implementation on the clear authority of the Minister of Finance and the Cabinet Committee. In essence, this aims at ensuring and embedding best practice in PPP procurement in the light of national and high-level PPP policy and the need for a consistent and coherent approach to PPP procurement across the sectors. VI.43 The monitoring and review function will be delivered through a variety of mechanisms as follows: appraisal of the conduct of individual projects in the light of national policies, directives, guidelines and regulations; establishment of project eligibility frameworks and guidelines; conduct of best practice and value for money audit and review across and within Departments and sectors; monitoring and tracking of project progress at a programme and individual level through processes and technology established for the purpose; involvement in individual pilot projects through membership of the project board on high profile or pathfinder projects, investigation of project status or involvement to help unlock project problems or delays; and establishment of overall framework agreements for advisors by which departments/sectors can procure external advice and support.

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VI.44 We consider that these powers and the basis on which they can be used create an adequate locus for the central body without diluting or confusing the lines of accountability set out above. In particular, they are consistent with a clear delineation of responsibilities as between the centre and the sectors. It will help secure the cohesion and consistency of the PPP programme overall. Communication VI.45 Another function is the continued intensive promotion of the PPP agenda in Ireland and elsewhere, both within Government and to the private sector. Communication of Ireland's PPP programme both to potential participants domestically and overseas should include the continued development of new markets and the bolstering of construction capacity and capabilities by attracting international PPP contractors. This responsibility will include: public information on project progress; updating Ministers and Cabinet Committee on issues of programme and project management; brand management of PPP and the stream of projects arising under its banner which fall into the definition of the Framework for PPPs under the PPF; liaison with social partners, in particular through the Public-Private Informal Advisory Group on PPPs as outlined below; promotion of skill/knowledge enhancement across the public service under the Framework for PPP Training and Awareness; and promotion of knowledge sharing across sectors, where appropriate, and acting as an expert knowledge resource.

PPP Development VI.46 The central PPP unit will take primary responsibility in looking forward to plan for the changing profile of PPP activity as emphasis shifts from mobilisation through standardisation to procurement and ultimately contract management. The development role will embrace: assessment of ongoing structural, resource and role requirements; determination of resource needs over time; and development of processes and infrastructure commensurate with contract management plans.

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Structures for Delivery of PPP in the Medium/Longer Term VI.47 Our review has focussed, as set out in the Terms of Reference, on the structural requirements in moving PPP in Ireland from the mobilisation to expansion phase of maturity. VI.48 In looking to the longer term, further along the maturity curve, the structures recommended for current needs are likely to change again. VI.49 While projects will continue to come forward into procurement, the emphasis will shift toward contract management as the means of ensuring delivery of the procured services. Over the medium term, we consider that it is essential that detailed consideration is given to the best means of meeting the requirement for contract management on a coherent and co-ordinated basis. It is at this stage in the development of PPPs that the benefits of PPP in delivering quality public services will be realised. VI.50 The move toward a focus on contract management may provide a fresh remit for the central unit, which in its proposed form we consider will have a life-span of around four years. There are a number of options for its subsequent evolution:
-

retract gradually and ultimately disappear with its functions subsumed within the Department of Finance; or continue principal activities in new sectors; or become a central co-ordinating body for contract management.

VI.51 Direct responsibility for developing skills/competencies to embed/mainstream PPP will fall in the first instance to line departments/procuring agencies in line with the accountability relationships set out in the review. The central PPP unit will have coordinating function in relation to skills/training development (as is the case for Framework for PPP Awareness and Training). VI.52 However, it would be erroneous to suggest that subsequent to the peak of procurement growth underway that the pressure on procuring authorities will relent. Ensuring projects are managed effectively and that services are delivered throughout the contract period is at the heart of the PPP philosophy, to which the procurement phase is in effect an entry point. VI.53 Maximising the scope for effective contract management will embrace: benchmarking; best practice and knowledge sharing; and monitoring value for money and achievement of PPP objectives.

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VI.54 This role would be discharged at a national level or through sectoral/regional centres of excellence, offering hands-on support not just at a high level but in active contract management, offering advice on technical, legal or financial issues. A particular advantage of some form of consolidated entity or entities would be the continuity which this can offer, given the length of contracts and limited likelihood of preserving staff continuity within the contracting authority. VI.55 However, use of such bodies should not be viewed as an abrogation of responsibility by the contracting authorities who must remain the driving force behind ensuring delivery of quality services to their customers. Resourcing VI.56 It is critical that alongside establishing the appropriate structures to advance PPP in Ireland, that the major issue of resourcing is also addressed. As evident from the consultations undertaken in the context of this review, lack of resources in the PPP area has the potential to generate significant bottlenecks in the overall delivery of the PPP programme in moving from the mobilisation to the expansion phase. VI.57 A preliminary indication of the likely resources required distinguishing between the sectoral and central units is set out in the tables below.

Skills Required Departmental/Sectoral Units


Sectoral policy. Programme management. Project advice. Project finance. Legal and Contractual. Commercial negotiation. Knowledge management.

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Central PPP Unit


Policy development. Policy co-ordination. Programme management, co-ordination and review. Project finance. Legal and contractual. Economic analysis. Knowledge management.

VI.58 The role profiles, skills and competencies required for the structures are set out in the next sections. Departmental/Sectoral Resources VI.59 As already outlined, there is no single prescribed structure for departmental arrangements in delivering PPP.

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VI.60 The key common points are: a need to recognise that significant resource must be allocated to projects on a full-time basis. Efforts to resource projects by part-time or temporary means are ineffective; need to recruit externally for people with project expertise; and need to ensure that extensive training is made available to the internal staff involved in PPP projects.

VI.61 The level of resource required within each departmental unit will vary between organisations from department to department and will be a function of several distinct factors, including in particular the number and complexity of PPP projects being undertaken, the existing base of PPP knowledge, skills and expertise and the extent to which advice is purchased externally through the appointment of consultants. VI.62 The new organisational model, dealing with a greatly expanded range of projects, recognises a shift by the Central Unit away from the provision of PPP expertise and advice at a project level. As the pilot phase continues to develop, it is essential that sectoral PPP units take a lead in ensuring sufficient numbers of personnel avail of PPP training which conforms with the Interdepartmental Groups Framework on PPP Awareness and Training, published in December 2000. Securing adequate PPP skills and expertise is vital if PPPs are to be delivered on a value for money basis. VI.63 A number of highly specialised and technical roles can be expected to arise in the sectoral units in respect of which it will be difficult to find appropriately experienced civil servants. In these circumstances, employment of PPP experts on a fixed-term contract basis should be considered. The standardisation of contract terms and policy guidelines will enable a significant reduction in the level and extent of bought-in expertise. VI.64 A common requirement across departments, both within PPP units and at procuring authority level, will be a need to ensure adequacy of project management. This is both at a skills level and in respect of management frameworks. VI.65 An effective PPP project team will consist of people: with the necessary range of competencies and depth of knowledge; who learn from earlier projects; who maximise the value of their competence and knowledge and match groups in in-house skills by recruiting advisers who are accepted as members of the team; and

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who understand the needs of the users of the services being procured.

VI.66 PricewaterhouseCoopers have developed competency frameworks for creating effective PPP project teams on behalf of the UK Treasury Taskforce. A copy of this framework is included at Appendix C. VI.67 In the following paragraphs, we set out for illustrative purposes the principal roles in a PPP project team and how these can be related to the competency framework. We have sought to adapt the application to an Irish context with the purpose of offering a template against which project teams can be formed. Use of the template will promote the inclusion of the required competencies rather than solely focussing on technical expertise. VI.68 When advisers with specific knowledge and expertise are needed, the team must have sufficient expertise to select and manage them effectively. An effective team will also be able to plan a complex procurement process and manage successfully the delivery of services within a PPP contract. VI.69 There are differing roles with a PPP project team and it can be difficult to establish any one generic term for a role. In particular, any role may be shared by several individuals, or differing aspects of a role be completed by different individuals. We set out the competencies required for three broad role descriptions. VI.70 The following terms are used to define the three generic roles to be found in most PPP projects. Strategi c Executive Support Project Sponsorship and Promotion Role Project Leadership and Management Role Subject Matter Expert Role

VI.71 One or more people may fill each of these roles. On the other hand, in smaller projects one person may fulfil more than one of these roles; in particular, the project leader may also offer subject matter expertise. Strategic Project Sponsorship and Promotion Role VI.72 The Project Sponsorship and Promotion Role may be divided into two levels in practice: the top management or strategic role; the Investment Decision Maker; and the focus of the authority on the project role or the Project Sponsor.

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VI.73 The Investment Decision Maker will probably chair the Project Board and can make decisions on how the project fits into departmental/authority corporate and spending plans. They have ultimate accountability for the projects delivery. In Ireland with all funding deriving from the department rather than at a local procurement authority level, the issue of spending approval may be of less significance to this role. However, we consider it essential that unlike a number of the pilot projects, this role is at a senior level. The role should be filled by an individual with overall responsibility for the service being procured rather than the asset. Therefore, it is unlikely to be the senior technical specialist. VI.74 The Project Sponsor will be the focus of the authority on the project being able to approve the definition of the project requirements and authorise any variations. They authorise the financial expenditure and ensure that funds are available. They also monitor control procedures from the feasibility through to the implementation stage. In Ireland, this could be the representative of the department, a role likely to be filled from within its PPP unit. VI.75 Therefore, overall the project sponsorship and promotion role provides strategic management for the project, high-level and headquarters advocacy and accountability for the outcome. VI.76 The capabilities required for this role are similar at both the levels of Investment Decision-Maker and Project Sponsor, although specific aspects of the competency framework may more accurately apply to one or the other when this division into levels is made. Executive Project Leadership and Management Role VI.77 The project leadership and management role has responsibility for delivering the project and its required results on a day-to-day basis. The role requires both people management and project management capabilities and wider stakeholder management skills. In addition, for particularly large or complex projects, a Subject Matter Expert skilled in project management should be appointed and be accountable to this role. Again it is expected to emphasise that this role is not automatically allocated to a senior technical person from the procuring authority but is filled by someone with commercial and management capabilities. VI.78 The role also requires the skills to appoint and manage external advisers as PPP projects tend to require specific expertise which may only be available from outside the public sector. This requires the ability to be an intelligent customer able to: appoint the right advisers by having sufficient knowledge to draft a clear and comprehensive specification, and properly appraise the quality of potential suppliers during interviews, etc; manage advisers (using in-house knowledge to determine if performance by advisers is inadequate); and

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understand the issues sufficiently so that when the authority has taken advice from its advisers, it can make the necessary decisions in a timely and efficient manner.

Support Subject Matter Expert Role VI.79 There is a requirement for a wide range of subject matter expertise in order to deliver PPP projects. The subject matter expertise will usually include: Specialist project management; Financial; Legal; Project specific technical specialisms; and User group representation.

VI.80 In Ireland as elsewhere, the subject matter expertise will be drawn from combined in-house and advisory resources. It is important to understand the contribution in this area which are to provide technical advice rather than to lead and direct the project. VI.81 This guidance focuses on the generic expertise required by the Subject Matter Expert in order to function efficiently as part of a PPP team. Project Stages VI.82 PPP projects fall into three broad phases: Phase 1 Phase 2 Phase 3 Feasibility Procurement Contract Management

VI.83 The feasibility phase is concerned with the preparation of the business case. The procurement phase extends from pre-qualification through to financial close. Contract management runs from the award of the contract through to the delivery of the required services during the life of the contract which may be 25 years or longer. VI.84 Most generic competencies are needed are needed at all stages, although some skills will be particularly required at particular times in the process. The Framework gives some indication of this. VI.85 The contract management stage requires further study, particularly in respect of competence needs during service delivery stage over the life of the contract.

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VI.86 The nature of the project may also require sector competence (e.g. health, roads, prisons) or project type competence (e.g. IT procurement), as indicated in the professional expertise category for the Subject Matter Expert Role. Competence Clusters VI.87 The framework groups the competencies into three clusters: People; Task; and Self.

VI.88 This grouping reflects the main focus of each of the competencies. However, all of the competencies are necessarily linked and are often demonstrated at the same time. Uses VI.89 The Competence Framework has been designed so that it can be used in a number of different ways: to act as a tool when selecting individuals required to form part of a PPP project team; to help individuals understand what will be required of them to work effectively as a PPP project team member, and which should be reflected when setting personal objectives; to assess the whole teams strengths and weaknesses in each of the competencies, allowing capability gaps to be identified. This assessment will assist in the choice of how to fill these gaps by widening the team, through training or by appointing external advisers.

VI.90 The competency framework assumes a partnership between the public and private sector, a co-operative approach not a legal entity, which requires underpinning with process training for all partners to ensure effective collaboration. The private sector could use the competence framework to identify those competencies they may need to improve to match the standards required to pre-qualify for PPP projects. VI.91 It is important to note that the approach to defining competencies includes the idea of stretch. Hence the definitions include an aspiration element, to encourage both personal capability growth and continually improving business performance. We suggest that this can provide a valuable tool for departments and procuring authorities in selecting and training those who will play key roles in the front line of project procurement.

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Project Management Frameworks VI.92 Alongside adequacy of project management and delivery expertise, it will be important for departments to ensure appropriate project frameworks are in place by which: adequate stakeholder (including political) engagement can be achieved; proper accountabilities can be fixed, including those at senior levels; and planning, monitoring and review arrangements can be effected.

VI.93 In our experience of PPP projects, we consider that departments must ensure that adequate commitment of resource is given, otherwise timescales will not be met. This will generally include constructing teams with individuals who are committed to the project on a full-time basis. VI.94 While such resourcing will require additional staffing to deliver the project programmes in departments, consideration must be given to making use of those who may have been highly involved in traditional capital procurement and who with appropriate training can be redeployed to projects delivered via PPP. Central Unit VI.95 The central unit may be structured along the following lines as a basis for drawing together the relevant skills.

Head of Central PPP Unit

PPP Policy Manager

PPP Programme Manager

PPP Marketing & Communications Manager

PPP Advisors Financial Advisor Legal Advisor HR Advisor Economic Advisor

PPP Knowledge Manager

PPP Administrators

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VI.96 In the model set out above, the central PPP unit comprises a Head of Unit, a PPP Policy Manager, a PPP Programme Manager, a PPP Marketing & Communications Manager and a PPP Knowledge Manager. The PPP Policy Manager and PPP Programme Manager are supported by financial, legal and economic advisors, who will apply their specialist skills to the policy and programme-related activities, undertaken by the unit as and when required. VI.97 The responsibilities and level of experience associated with each position are set out in Appendix D. Underpinning Competencies VI.98 While the profile of each job varies in the central unit, there are a number of underpinning competencies which each role demands to at least some extent. These are as follows: Public representation within and beyond government; Presentational skills; Analytical capabilities; Policy review and assessment; and Negotiating.

VI.99 These must be demonstrated at a particularly high level for the more senior roles. VI.100 As can be seen from the diagram at paragraph 7.93, we envisage that the resourcing of the central unit will require an expansion of the unit from 6 personnel at present (3 experts) to about some nine to twelve personnel (4-5 experts). The staffing of the central unit should entail a mixture of civil servants brought together on a crossdepartmental basis (drawing wherever possible on existing staff experienced in the PPP area) and private sector term contract employers. VI.101 The head of the central PPP unit should be at a senior level consistent with the responsibilities of the post and possess the competencies required to meet the demanding specifications of the position. The central PPP unit may be headed by a civil servant, although consideration should be given to appointing a high profile individual from the private sector on a contract basis. This could give some new profile to PPP and visibility to the marketplace. However, this role must be subordinate to the role and profile of the Minister for Finance as PPP champion in order to guarantee the overall consistency and coherence of the future direction of the PPP programme.

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VII.Realising the Benefits of PPP


Introduction
VII.1 Determining the success of PPP implementation in Ireland and measuring the benefits is obviously an important area of policy evaluation at government level. It also provides the framework inside which the performance targets and respective contributions of the various delivery areas can be addressed. VII.2 Development of meaningful performance indicators in this context is not straightforward and our review of international experience in PPP did not yield significant insights into construction of robust models. As a consequence, in common with our assessment of organisational models in other jurisdictions, our focus has been on the specifics of the Irish situation with no straightforward application of policy evaluation framework. VII.3 Focussing firstly on the macro level, Irelands objectives must be to realise the opportunities and benefits, which PPP as a procurement mechanism affords, set in the context of the National Development Plan. We define the benefits of PPP in Section Two of our report as: Better value for money; Better quality service; Faster project delivery; More project delivery; Greater certainty; Better asset utilisation; Better regulation; Enhanced competitiveness; and Enhanced management of public services.

VII.4 This benefit list embraces in a slightly different form the draft goals for PPP in Ireland as defined by the Public Private Partnership Informal Advisory Group and set out in paragraph 2.19 of our report. As a consequence, this list appears to offer a robust framework in which to measure the success of the PPP approach in Ireland.

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VII.5 The measures also align with recommendations in the recent OECD report that suggests a change to the regulatory and competition environment in respect of public services in Ireland and highlights the inefficient and fragmented supply of public services at local authority level. Use of PPPs and the realisation of the benefits and opportunities this presents would help to address the underlying consensus set out in the OECD report. VII.6 While this benefit list presents a framework for assessment, we have emphasised throughout our report that there are a number of phases in the PPP programme maturity cycle. The opportunity to realise the benefits of PPP at a project level or programme level is heavily influenced by the stage of the project or overall maturity cycle. An assessment of the benefit potential at the different stages of maturity is set out in the table below: Benefit Opportunities in the PPP Cycle
Benefit Better value for money Better quality service s Faster project deliver y More project deliver y Greater certaint y Better asset utilisati on Better regulati on Enhanc ed compet itivenes s Yes (on a limited basis only) Yes Mobilisation Expansion Yes * Maturity Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

* insofar as this relates to procurement costs, rather than service delivery costs

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VII.7 It is clear from the above analysis that realisation of PPP benefits is principally a feature of the maturity phase. Therefore, focussing on defining success criteria in moving from mobilisation into expansion majors on the following two areas: Cost of procurement compared to other procurement methods; and Timeliness of procurement process compared to other procurement methods. This constitutes the entire procurement process and the construction phase.

VII.8 While this makes it difficult to evaluate the success or otherwise of the PPP programme in the short to medium term, it is important to identify the future success measures in order that the data capture requirements can be determined at this stage. This will provide the mechanism to make the earliest possible measure of success. Potential measures of success in each area of PPP benefit are suggested in the table below. It should be recognised that the measures of success, like the benefits themselves, are not wholly discreet and there is some degree of overlap. Measures of the Realisation of PPP Benefit Benefit
Better value for money

Indicators
Reducing trends of transaction costs both to the public sector and for bidders. Average savings by sector against alternative procurement methods and/or selected benchmarks. Average valuation of transferred risk. Service standards which can be benchmarked against other providers and over time. Customer satisfaction measures. Staff surveys. Level of deductions under payment mechanisms. Average project procurement durations. Average construction durations. Additionality of project numbers and by value supported through private finance. Monitoring incidents of price variations from contract (except for indexation, change control or benchmarking. Level of change control as indicator of how well specification is contending with change. Level of 3rd party revenue. Levels of asset use from social perspective.

Better quality services

Faster project delivery

More project delivery

Greater certainty

Better asset utilisation

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Better regulation

Volume of public services delivered by private sector subject to modern regulatory code. Reducing cost of public sector services. Volume of public services opened to competition.

Enhanced competitiveness

VII.9 The first milestone assessments should take place around the cost of procurement and timeliness of the procurement/delivery process. At an indicative level, and in our opinion we suggest that the following types of target measures could be adopted:
Transaction Costs (excluding legal approvals) Project Timescales On civil engineering projects, public sector advisor fees should be no more than 3-4% of the capital value of the project. On accommodation projects, elapsed time from OJEC to financial close should be no longer than 15 months. On civil engineering projects, elapsed time from OJEC to financial close should be no longer than 20 months. On accommodation projects, public sector advisor fees should be no more than 2% of the capital value of the project.

Data Capture VII.10 In order to assess PPP against the benefit criteria, we consider that there needs to be early attention given to the capture of appropriate data. This data capture extends not only to PPP projects but also to provision of existing services by the public sector, which will offer future benchmark comparisons. VII.11 Information for capture will include: Monitoring of existing service standards on an ongoing basis; Procurement and construction times for infrastructure projects of all types; Transaction costs of infrastructure procurements; Costs associated with pilot projects; Bid costs; and Use and level of project finance in PPP contracts.

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Performance Measures VII.12 The overall key performance indicators and measures provide a context for the targets for the bodies involved in delivering and supporting the delivery of the PPP programme. VII.13 Targets for departments will derive from their strategic plans which in turn must be linked to the National Development Plan and wider PPP agenda of the Cabinet Committee. VII.14 For the central unit, the performance targets can be broken down into the areas of activity described in the paragraphs below. These should be consolidated at an early stage for agreement by the Cabinet Committee. Business Plans VII.15 The central unit must set out Business Plans as to what it will deliver in each year. This will include: areas of policy development and documents which will be produced to put this into effect; areas of policy evaluation and studies to be conducted; activities to promote PPP awareness and capability across government in Ireland; and activities to encourage market interest at an overall level within and beyond Ireland.

VII.16 Business Plans must be developed annually in the context of the departments strategy statements and agreed by the Cabinet Committee. This should be published as a clear agenda for the PPP stakeholders to understand. VII.17 The early thrust around Business Plans will focus on developing a PPP programme which is coherent and structured. Key aspects of this activity will include: establishment of management and co-ordinating infrastructure; setting up project tracking mechanisms; and enabling PPP to be included in departmental strategic plans.

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Assessment of Process Effectiveness and Views of Stakeholders VII.18 We consider that, as the role of the central unit is essentially one of enabling and facilitating project delivery, in its role of leading, driving and co-ordinating the PPP programme, a range of qualitative measures is appropriate. VII.19 This can best be effected by means of ongoing surveys. This should include: representative consulting of private sector bodies who can assess responsiveness, consistency and the overall approach to PPP by the Irish Government; key stakeholders within government, both specialising in PPP and involved in wider procurement activities; and IBEC, ICTU and the CIF

Context of Deal Flow and Value for Money VII.20 The quantifiable number of deals closed and value for money are not the sole means by which the central unit should be assessed. However, they do provide important insights into the overall effectiveness of PPP in Ireland and as such the central unit must contribute towards this success.

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VIII.

Recommended Actions

Conclusions
VIII.1 Our report has identified that Ireland is facing significant challenges in moving forward from mobilising the PPP agenda into rapid expansion of the programme. We have identified that the issues relating to expansion include: Developing structures and processes underpinned by clear accountability; Focussing efforts toward delivery of projects; Securing resources needed to progress the expanded programme; Ensuring value for money at a transactional level and in co-ordinating the programme in Government; and Creating momentum across the wider government administration.

VIII.2 To deliver on these issues, we have concluded that the following organisational arrangements are most appropriate: Structure
Accountability to be established through the Departmental Strategy/Strategy statement process. PPP projects delivered through a sectoral focus, which in priority areas fits the Departmental Structures. Sector specific PPP support to be available which will enable creation of departmental strategies. Responsibility for project delivery will rest in sectors that must be adequately resourced with specialist skills and expertise. Enhancement of a central unit which will deal with issues of programme management, national policy, monitoring, regulation, co-ordination and review. Continuance of the role of Public Private Informal Advisory Group with a clear remit of engaging social partners. Recasting of the co-ordinating body the Interdepartmental Group on PPPs to reflect new clarity in the responsibilities at national and sector level.

VIII.3 We set out overleaf the recommended actions that should be taken as the means by which these new arrangements can best be implemented.

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Recommended Actions VIII.4 To implement the structural model best suited to expanding the PPP programme in Ireland, we recommend the following steps: Endorse the preferred organisational model that: promotes the delivery of PPP projects through a sectoral focus managed by Departmental / Agency PPP Units; and leads the expansion, development and co-ordination of PPP policy and the PPP programme through an enhanced central policy unit located in the Department of Finance.

In our opinion this will sustain both transition into the expansion phase and the medium / longer term move towards programme maturity; Build upon the visible and significant contribution made to date at Ministerial level by further promoting this leadership role as PPP champion, supported by the central unit for PPPs; Reinforce the political commitment to PPP through endorsement of the continuing active role of the Cabinet Committee; and Educate stakeholders within and outside government as to the distinctive roles of those involved in sectoral policy and the procurement of projects and of the central PPP unit. In particular clarify the accountability of departments for delivering the programme and the role of the central unit, its relationship to the Cabinet Committee and its national remit which is not confined by its location within a single department;

VIII.5 These structural elements must be matched by the introduction of significant new resources and we recommend the following: A clear definition of the appropriate model for each Department / Agency; Move swiftly to strengthen the resourcing of the central unit in line with this report; Advance the resource requirements for the PPP units in departments which have already developed a formal work programme and by which resource requirements can be identified; Encourage other PPP units to undertake such an assessment in order that an assessment of resource requirements can be made;

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Utilise the framework on competencies for a PPP project team (included as an Appendix) as a template and ensure all current and forthcoming projects are assessed in this context and resource requirements identified; and Progress the recommended arrangements for effective selection and management of advisors at an early stage.

VIII.6 The recommended structures must be supported and underpinned by some essential core processes which must be enacted, including: Inclusion of the National Development Plan targets and PPP dimensions into departmental strategic policy processes; Establishment of appropriate mechanisms for the central PPP unit to ensure adequate inclusion in Department strategy plan of the PPP approach as a core element in delivering infrastructure and public services; Development of a formal programme by the central PPP Unit embracing: awareness of new structures across Government; articulation of a clear policy agenda at national and sectoral levels and development of standardisation and guidelines in support of this agenda to advance project delivery; establishment of arrangements for networking and knowledge management capturing and illustrating lessons from projects and sharing of these lessons across sectors and Departments; putting in place processes specifying the appropriate role of advisors and arrangements for their management.

Creation of mechanisms to extend stakeholder engagement, particularly aimed at including those involved or interested at a project level. This includes the political level in Local Authorities; and Extension of the awareness and training programmes on PPP across Government.

VIII.7 Finally, we recommend that, as a basis for evaluating the effectiveness of PPP, the adoption of the type of target measures outlined for a period of programme expansion. It is recognised that a fuller programme-level evaluation is only possible during the later maturity phase but we recommend that the data collection arrangements necessary to facilitate this medium-term evaluation are established at an early stage.

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IX. Appendix A: International Case Studies


United Kingdom
Policy Drivers IX.1 The Private Finance Initiative (PFI) was launched in November 1992 as a new way for Government to deliver better quality and more cost-effective public services. The key drivers behind the Private Finance Initiative were: a high public sector borrowing requirement, which was restricting the governments ability to invest public funds in infrastructure improvements; the need to accelerate the flow of public infrastructure projects, to improve the quality of public services and provide support to the construction industry during a time of recession; and a requirement to deliver best value for money in the provision of public infrastructure and services.

IX.2

The Private Finance Initiative offered an attractive means of investing in public infrastructure and public services without compromising the Governments wider economic objective of reducing the public sector borrowing requirement. It also signified a radical change in the way public infrastructure and services are delivered.

Institutional Structure Private Finance Panel IX.3 In order for the Private Finance Initiative to be successful, a cultural change was required within the public and private sectors in relation to their future roles in the delivery of public infrastructure and services. For this reason, the Treasury established in 1993 an independent Private Finance Panel comprising representatives from both the public and private sectors to promote the Private Finance Initiative and to provide guidance on its use. The specific brief given to the Private Finance Panel was to promote the introduction of private management and finance into areas of capital investment and services traditionally undertaken by the public sector by: Promoting a wider understanding and acceptance of the principles of PFI; Identifying areas where immediate progress was possible; Helping government departments to use the initiative; and Developing good practice in the selection of partners and managing contracts.

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IX.4

The independence of the Private Finance Panel was important during the evolution of the Private Finance Initiative to provide credibility to the initiative and to generate acceptance and momentum within the public and private sectors. However, once general acceptance and understanding of the Private Finance Initiative was achieved and momentum had been developed in terms of deal flow, the main stumbling blocks to the successful roll-out of the initiative were identified as being primarily internal to Government, including: The requirement for universal testing of the suitability of PFI for all new capital investment, which was over-stretching the resources of both the public and private sectors, and was resulting in significant delays to projects; A lack of project management skills, commercial knowledge and experience to manage complex PPP projects within the public sector; Uncertainty in relation to the vires of public bodies, including local authorities, to enter into PFI agreements; A continued focus on input specifications (rather than output specifications) which reduced the scope for private sector innovation and greater synergy between the design and operation of assets. This was compounded by inadequate models for effective output specifications being available; and The poor prioritisation and resourcing of PPP projects.

IX.5

In 1997, the Government abandoned the universal testing rule and commissioned Sir Malcolm Bates, Chairman of the Pearl Group, to carry out a review of the Private Finance Initiative. The conclusions of the Bates Review were published in June 1997 and accepted in full by the Government. The review recommended a number of key process improvements, which can be summarised as follows: Model contract conditions should be developed; Schemes should be prioritised, and appropriate levels of resources applied; Pathfinder projects should be developed to provide a model for future projects; Grouping of schemes should be encouraged; Government should clarify the vires of public bodies to enter into PFI/PPP arrangements; Technical guidance and case studies should be developed; Problems with the capital finance regulations should be resolved; and

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IX.6

Mechanisms should be introduced to minimise private sector bidding costs.

The Bates Review confirmed that, structured appropriately, the Private Finance Initiative had the potential to deliver improved value for money. It concluded that the independent Private Finance Panel had achieved its role of promoting the concepts of PFI throughout the public and private sectors, and that the assistance now required by Government Departments and Agencies was one of transaction support. The Review concluded that in the medium to long term, the most appropriate institutional structure to deliver the Private Finance Initiative would be the use of specialist units within Government Departments and Agencies with the necessary skills and experience to procure Public Private Partnership projects without central support. A small central unit in the Treasury would be required to act as a guardian of policy principles and a promoter of best practice. However, the Review also concluded that, at that time, Government Departments and Agencies did not have the necessary levels of commercial knowledge and project management experience to deliver best value under the Private Finance Initiative. The Review therefore recommended that, as an interim measure, a Taskforce should be established within the Treasury to provide strong centralised support to Government Departments and Agencies in delivering good quality transactions. Treasury Taskforce

IX.7

IX.8

IX.9

In September 1997, the Government replaced the independent Private Finance Panel, with a new Treasury Taskforce, which was part of the Treasury and was to become the focal point for all PFI activities across Government. The Treasury Taskforce was structured in two parts: a Taskforce Policy Team and a Taskforce Projects Team.

IX.10 The role of the Taskforce Policy Team was to establish the rules, procedures and best practice governing the Private Finance Initiative and other forms of Public Private Partnership. It was also responsible for developing and implementing a programme of PFI and PPP orientated training for public sector employees. IX.11 The Policy Team comprised six policy executives, drawn from the public and private sectors. Working in conjunction with the Taskforce Projects Team, the Policy Team developed detailed guidance on the key stages of Private Finance Initiative transactions and also on the Standardisation of Contract Terms to be used in PFI deals. Legislation recognised to be necessary to deliver PPP projects was enacted, covering the responsibilities of central government in relation to NHS Trusts, providing protection to the private sector in the event of local authorities not having legal powers to act, and introducing changes to the capital finance regulations for local authorities.

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IX.12 The Taskforce Projects Team was a group of 18 leading PFI experts, recruited from the private sector on fixed term contracts, and operating under the direction of the Chief Executive of the Taskforce. The role of the Taskforce Projects Team was to provide support for individual Departments and Agencies on significant transactions. The Projects Team was responsible for testing the commercial viability of significant projects prior to their advertisement in the Official Journal of the European Community, and for monitoring the progress of projects during procurement. IX.13 The Taskforce Projects Team was designed to have a life of two years, during which time Government tasked individual Departments and Agencies to develop their own PFI and PPP skills through a combination of recruitment, training and project experience. Partnerships UK and the Office of Government Commerce IX.14 In November 1998 the Paymaster General announced that Sir Malcolm Bates would undertake a second review of the Private Finance Initiative. The primary purpose of the review was to advise on the arrangements that should be put in place to provide project advice after the Treasury Taskforce had completed its remit. IX.15 The recommendations of the second review were published in July 1999 and included a wide range of actions to improve the support and guidance available to projects procured under the Private Finance Initiative. Central to the second review was the conclusion that partnerships with the private sector require a range of private sector skills that had proved difficult to nurture within the Civil Service, such as commercial negotiating skills, project management and project structuring. In addition, the review raised the concern that insufficient resources were being devoted by public bodies to the development phase of privately financed projects, with consequent delays to the procurement process and failure to secure best value for money. IX.16 The review concluded that Government could address these problems by creating a new Public Private Partnership, managed on private sector principles, that would align itself with the public sector procuring authorities to help improve the quality and progress of PFI deals. IX.17 In June 2000 the Government launched Partnerships UK (PUK) as the successor to the Taskforce Projects Team. PUK is a plc with a public sector minority shareholding. Its primary role is to act as co-sponsor of PFI/PPP projects, providing commercial and project management skills at Project Board level. PUK is also able to assist with the costs of developing and delivering PPP and PFI projects in return for a one-off or on-going payment following contract award. PUK charges Government Departments and Agencies for its advice, and Departments and Agencies are not obliged to use its services.

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IX.18 PUK is a new and innovative initiative, which will have to justify its position alongside Government Departments, financial, legal and technical advisors and financial institutions in bringing forward Public Private Partnership projects. There remains some scepticism within the public and private sectors regarding the real need for, and role of, PUK. It is a development that may have a role to play in the context of a mature PPP programme, but in our view it is less likely to be suitable for areas in which the PPP programme is still developing. IX.19 In parallel with the second Bates Review, the Government asked Mr Peter Gershon, then Managing Director of GEC Marconi, to examine civil procurement in central Government. His report, published in July 1999, recommended that an Office of Government Commerce should be created within the Treasury to ensure consistency of procurement strategy and promotion of best practice across the public sector. IX.20 The Office of Government Commerce (OGC) was established in February 2000, bringing together the Taskforce Policy Team, the Treasury Procurement Group, the Buying Agency, the Central Computer and Telecommunications Agency (CCTA) and the Property Advisers to the Civil Estate (PACE). Within the context of Public Private Partnership projects, the role of the OGC includes issuing guidance on PFI and PPP issues, advising on the bundling of projects, developing new commercial relationships with suppliers and liasing with PUK on policy development and standardisation. Departmental PPP Units IX.21 During the two-year period covered by the Treasury Taskforce, efforts were made to establish and develop specialist PPP Units within Government Departments. The quality and authority of the PPP Units that have been established is however varied. In a number of Departments (e.g. Health), the PPP Units have developed an effective role, including the publication of sector specific guidance, the management and dissemination of PPP information, and the approval of PPP projects. In many other Departments, however, the role and status of PPP Units remains unclear. IX.22 The establishment of Departmental PPP Units is less critical where PPP procurement experience and expertise is well developed and it is disseminated within the organisation (e.g. the Highways Agency and the Prison Service). However, the establishment of Departmental PPP Units is crucial if PPP procurement expertise is not well developed and/or not recycled within the organisation. The Ministry of Defence, for example, is taking forward a large number of Public Private Partnership projects, but its project teams are diverse and there is no centralisation or recycling of experience and expertise. The consequence has been slow and expensive progress, and inconsistency between PFI deals.

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Public Private Partnerships Programme (4Ps) IX.23 In April 1996, the Local Authority Associations in England and Wales established the Public Private Partnerships Programme (4Ps). The 4Ps is a consultancy service, established to help Local Authorities to develop and deliver PFI and PPP schemes in areas such as IT, schools, waste management, transport and social housing. It is funded by Government grant and, to a lesser degree, consultancy fees, and its Board comprises Councillors appointed by the Local Government Association and representatives of the private sector. IX.24 The 4Ps assists Local Authorities to develop and implement Public Private Partnerships in three key ways: Knowledge sharing the 4Ps plays a vital role in the dissemination of PPP know-how and best practice through publications, conferences and other networking activities. In particular, the 4Ps has published technical guidance for Local Authorities on key PFI concepts such as Outline Business Cases and Output Specifications, and detailed case studies on completed Local Authority projects including the key lessons to be learned. Project support the 4Ps provides direct advice to Local Authorities at every stage of the development, procurement and implementation of PPP projects. It also advises Local Authorities on how to secure PFI credits or other funding from Government. Liaison with Government the 4Ps plays a key role in terms of representing Local Authority interests within central Government on policy issues pertaining to Public Private Partnerships. In particular, the 4Ps worked closely with the Treasury Taskforce to maintain consistency on Public Private Partnership policies and procedures.

IX.25 The need for the 4Ps reflects the large scale and strong autonomy of local government in the UK. The 4Ps has been very effective as a project primer for those authorities that are new to PFI, although its role has to a large extent duplicated that of the Treasury Taskforce. In terms of project support, the 4Ps has neither the resource nor the expertise to provide detailed procurement advice, and therefore external advisory firms still have a major role to play in the development and delivery of Local Authority Public Private Partnership projects.

Canada
Policy Drivers IX.26 In April 2000, the Government of Canada launched a new $2.65 billion six-year program to renew and enhance Canadas physical infrastructure. The programme, which is called Infrastructure Canada, has two key components:

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a municipal infrastructure component of $2.05 billion, the administration of which is described in the paragraphs that follow; and a highways infrastructure component, which will be administered by Transport Canada, the federal authority responsible for developing and administering national transportation policies, regulations and services.

IX.27 The first priority of Infrastructure Canada is the improvement of green infrastructure, including water and wastewater treatment and solid waste management. Secondary priorities include transport, culture and tourism, recreation, telecommunications and housing. On average, the federal government will contribute one third of the cost of eligible municipal infrastructure projects. The remaining funds are expected to come from provincial and municipal governments, and from the private sector through the use of Public Private Partnership arrangements. When contributions from provincial and municipal governments are included, it is expected that the initiative will generate at least $6 billion in infrastructure investment. IX.28 Over recent years, Public Private Partnerships have become an increasingly common method of infrastructure delivery in Canada. To date, Public Private Partnership arrangements have been used to deliver highways projects for federal and provincial governments and public transport, water/wastewater and waste management projects for provincial and municipal governments. Institutional Structures IX.29 The institutional structures used to implement Public Private Partnership programmes in Canada are different at federal and provincial government levels. At the federal level, the main area of Public Private Partnership activity is in the highways sector and is managed by Transport Canada. At the provincial level, a variety of different organisational structures have been established to develop and implement PPP programmes. Two of the provinces that are most advanced in the consideration and use of Public Private Partnerships are British Columbia and Ontario. A description of the organisational structures established in the highways sector, British Columbia and Ontario is provided in the paragraphs that follow. Highways Sector IX.30 In relation to the National Highway Program, a joint federal and provincial Working Group was tasked in June 1997 to assess the merits and limitations of the Public Private Partnership approach. The main findings of the Working Group were published in April 1999 in the form of a major five-part study. IX.31 The Working Group concluded that concession, DBFO, DBO and DB contracts would appear to offer significant potential for broad-based application on projects involving new highway construction or major highway upgrading and with a value in excess of ten to twenty million dollars.

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IX.32 The Working Group recommended that the PPP procurement process should be institutionalised within Transport Canada and streamlined through the adoption of recommended practice, well enunciated policies and rules, and the development of standard PPP model contracts, instruments, clauses and definitions. Other recommendations to facilitate greater use of Public Private Partnerships included an education and awareness campaign and the dissemination of information on PPP procurement approaches and experiences. IX.33 On the basis of the findings of the Working Group, a further study was commissioned in September 1999 to develop and adopt a standard PPP model, specifying performance based output requirements, analytical techniques, procedures and processes for the use of Public Private Partnerships on highways projects. The report prepared for the Working Group during 2000 represents a how to guide on the innovative financing and procurement of highway infrastructure using a Public Private Partnership approach. It provides guidance on such issues as project selection, legal structure, contractual arrangements, risk allocation, procurement management, and the roles and responsibilities of the public sector. British Columbia IX.34 In April 1995, the provincial government for British Columbia established a joint industry-government Task Force to investigate the viability of Public Private Partnerships as a means of procuring provincial public infrastructure. The Task Force was provided with the following mandate: to assess the feasibility of PPPs and their applicability to British Columbia; to select a number of specific projects that the government should look at on a pilot basis; to offer strategic advice on critical factors that create barriers to the effective application of PPPs; and to make recommendations to government on the ongoing advancement and promotion of PPPs beyond the terms of the Task Force.

IX.35 Members of the Task Force were chosen to ensure representation of key stakeholders, including business leaders from the private sector, senior officials from government, experienced labour representatives, finance, legal and economics professionals, and senior academics with specific experience of PPPs. IX.36 The main findings of the Task Force were published in October 1996. The Task Force concluded that Public Private Partnerships offer the potential for real and substantial benefits and that they should be pursued for projects that are likely to offer improved value for money. In addition, the Task Force presented a number of key recommendations to government on the advancement and promotion of PPPs, which can be summarised as follows:

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The government should designate a Ministry, and Minister, with the mandate to pursue the feasibility and implementation of PPPs; Within the Ministry, a Division should be established as the focal point for implementing PPPs. It should be headed by a senior government official and be given cross-government mandate and the necessary resources, and be charged with developing policies, guidelines, evaluation criteria, training programs and procedures to implement PPPs; An independent Public Private Partnerships Advisory Board should be established, reporting to the Minister responsible. The Board would consist of representatives of key stakeholder groups and be mandated to promote wider use of PPPs, facilitate the transfer of knowledge and skills between the private sector and government, and provide on-going advice to government on the future development and use of Public Private Partnerships. The Advisory Board should have direct links with the Ministry responsible and draw on its staff resources and expertise. The government should move expeditiously to develop PPP experience by implementing pilot projects in specified sectors. A public consultation and education process is critical to the successful implementation of pilot projects. Government ministries and Crown corporations should be directed to review their capital plans and submit candidates for pilot PPP projects. For each project, including the pilot projects, a project champion should be identified both at the political level and within government; and A comprehensive policy framework should be developed to guide the implementation of PPP projects.

IX.37 The recommendations of the Task Force were accepted in full by the provincial government, and subsequently the Minister of Employment and Investment was assigned lead responsibility for the promotion and development of Public Private Partnerships in British Columbia. IX.38 During 1997, the Minister of Employment and Investment appointed an Advisory Committee on Public Private Partnerships, comprising senior representatives from business, government and academia to advise government on the implementation of PPP pilot projects and to monitor the Provinces progress in this regard. The Minister also established the Economic Partnerships Branch within the Ministry of Employment and Investment to provide a focal point for the Public Private Partnership program and to act as the secretariat to the Advisory Committee. The Branch is responsible for developing government policy and processes pertaining to the planning and implementation of PPP projects, and for providing a central information resource for PPP practitioners.

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IX.39 In terms of project delivery, the Capital Expenditure Review undertaken by the provincial government in 1997 recommended that line Ministries and tax-supported Crown Corporations should consider the Public Private Partnership approach along with traditional procurement methods when preparing their capital plans. The Ministries and Crown Corporations are responsible for implementing PPP projects in accordance with government policy, and for involving other appropriate provincial agencies (e.g. Provincial Treasury) in the planning and implementation process. Ontario IX.40 In the 1999 Ontario Budget, the Minister of Finance announced the SuperBuild initiative, which is a five year $20 billion initiative to improve Ontarios public infrastructure, including transportation, education, health-care, utilities and technology infrastructure. The provincial government will invest $10 million in capital infrastructure through the SuperBuild initiative between 1999/2000 and 2004/2005. Another $10 billion or more of investment will be leveraged from the private sector and other partners over the same period. IX.41 The SuperBuild initiative is delivered through the Ontario SuperBuild Corporation, a new agency that reports to Ontarios Minister of Finance and Deputy Premier. The Corporation has a President and Chief Executive Officer, who is assisted by Vice Presidents responsible for Public Private Partnerships and capital infrastructure strategies. The Corporation has a 14 member Board of Directors, drawn from both the public and private sectors, which provides the Corporation with strategic direction and advice. IX.42 The Ontario SuperBuild Corporation has been established to co-ordinate all government capital infrastructure investment and to spearhead the development of Public Private Partnerships in Ontario. The Corporation has taken over the responsibilities of the Office of Privatisation and its mandate is to: Lead the Government of Ontarios capital planning and policy development processes; Evaluate and make recommendations to the Cabinet Committee on Privatisation and SuperBuild on infrastructure partnership, privatisation and commercialisation proposals; Develop new strategies to strengthen the capacities of the Ontario Government (and its broader public sector partners) to attract private sector financing and support for public infrastructure projects; Co-ordinate the Provinces capital infrastructure investment program, including the Infrastructure Canada program in Ontario (see above); and Report publicly on SuperBuild investment priorities, capital plans and results, including the submission of an annual report to the Minister of Finance.

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IX.43 The Ontario SuperBuild Corporation makes recommendations to the new Cabinet Committee on Privatisation and SuperBuild on strategic capital and privatisation opportunities. All provincial infrastructure policy, investment and capital planning decisions are consolidated under this new Cabinet Committee. The Committee, which is chaired by the Minister of Finance, is responsible for developing the provincial capital plan. The Committee makes recommendations to the Cabinet, which is ultimately responsible for making all capital investment and privatisation decisions. IX.44 In January 2001, Ontario SuperBuild Corporation published A Guide to Public Private Partnerships for Infrastructure Projects . The Guide provides advice for asset managers, planners and decision-makers in the public and not-for-profit sectors to select and implement infrastructure projects in partnership with the private sector. In terms of organisational structures, and in a similar fashion to the guidance provided for highway projects, the Guide recommends that the public sector should establish, as a minimum, the following teams to manage the delivery of infrastructure projects using a Public Private Partnership approach: Project team - a dedicated full-time team that designs and administers the procurement process with the assistance of relevant government departments and external advisors; Steering committee a steering committee, staffed largely by senior staff from the relevant government departments, that oversees the procurement process and provides recommendations to the Executive; Process auditor a team (or individual) that will audit the procurement process and provide written independent opinion on its integrity; and Executive for major projects, provincial cabinet, municipal councils or boards of directors will receive and ratify the recommendations made by the steering committee.

Canadian Council for Public Private Partnerships IX.45 The Canadian Council for Public Private Partnerships was established in 1993 as a non-profit body. It is national in scope, and it draws its members from both the public and private sectors in almost equal numbers. As proponents of the concept of Public Private Partnerships, the Council conducts research, publishes research findings, facilitates forums for discussion, provides expert advice, and sponsors an annual national conference on domestic and international Public Private Partnerships. IX.46 The Council is a recognised voice on the topic of Public Private Partnerships, and on this basis it makes representations to federal and provincial governments on the potential use of Public Private Partnerships in the provision of public infrastructure and services. The Council for Public Private Partnerships has played a key role in the increased use of Public Private Partnerships in Canada, including:

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Providing a clearing house for knowledge and information with respect to Public Private Partnership projects and developments in Canada; Promoting dialogue between public and private sector participants and interest groups; Advocating the use of Public Private Partnerships with decision makers at all levels of government in Canada; and Sponsoring conferences, seminars and publications designed to increase the awareness of the benefits of Public Private Partnerships.

Portugal
Policy Drivers IX.47 Portugal is currently one of Europes most active Public Private Partnership markets, and it is expected that its high level of PPP activity will continue for the foreseeable future. The reasons for this are generally considered to be: The need for Portugal to develop its infrastructure, both to keep pace with economic development and to promote further growth; The need for Portugal to remain competitive in Europe, and in particular the Euro zone; and The advent of the Euro, which is less constrained than the Escudo in its ability to fund large amounts of capital expenditure for very long periods. Nevertheless, it should be noted that a number of very large deals (e.g. the Tagus Bridge) took place before the introduction of the Euro, on which the government to currency risk against US$ finance. The Euro market is still very much in its infancy when compared with the US$ and the .

IX.48 The key driver underpinning Portugals Public Private Partnership programme is a very strong political commitment to deliver improved transport infrastructure. At the time of the last election, the delivery of new roads was a key issue for the general public, and it was the promise of these new roads that was a key factor in the election victory by the current Prime Minister. IX.49 To date, Public Private Partnerships have primarily been used in Portugal for infrastructure projects in the roads and water/wastewater sectors. However, the government is now considering the use of Public Private Partnerships for projects in the ports, airports, rail, health, schools, prisons, power, defence and leisure sectors.

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Institutional Structure IX.50 Portugals current roads programme comprises 14 roads, all of which will be implemented using a Public Private Partnership approach involving real or shadow tolling mechanisms. The capital value of the programme is in excess of 8 billion. Procurement of the projects contained within the roads programme is on-going. Projects are developed, procured and monitored under the aegis of the Junta Autonoma de Estradas (JAE), which is the national government agency responsible for roads. IX.51 The provision of water and wastewater infrastructure is the responsibility of each individual municipality. To date, five water/wastewater concessions have been procured in Portugal, and a further three are approaching contractual close. When municipalities are too small to attract private investors, the usual procedure has been to bundle projects within a system of municipalities. IX.52 No specific structures or mechanisms were put in place to assist and co-ordinate the delivery of the initial Public Private Partnerships in the roads and water sectors. However, now that the Public Private Partnerships programme is being extended into other sectors, the government has recently decided to convene an informal task force. The task force will comprise members of both the public and the private sectors, and its role will be to identify and advise on issues such as PPP delivery mechanisms, contractual forms, legal obstacles, institutional structures and experience in other countries.

Appendix B: National Level Activities


Domain

Objective Programme Management

Activities Co-ordinate the development of a national PPP programme Monitor and facilitate progress in relation to programme implementation Review the efficiency and effectiveness of the national PPP programme Review the economic impacts of the national PPP programme Identify the skills and resources required in the Central PPP Unit Establish the Central PPP Unit and secure the necessary resources Market and communicate the national PPP programme Generate and maintain private sector interest in the national PPP programme Assist Departments to identify new PPP products and opportunities Identify national stakeholders such as CIF, ICTU and IBEC Establish protocols for consulting with national stakeholders Consult and communicate with national stakeholders No significant role at the central level in relation to regulation or contract monitoring

Strategy

Market Development

Management

Stakeholder Management

Regulation and Monitoring

Domain

Objective Project Delivery Project Support

Activities No significant role at the central level in relation to project delivery Provide support to a number of significant or representative projects Participate in Steering Group meetings for significant or representative projects Provide financial, legal or procurement advice to projects on a call-off basis Identify and define the scope of the national policy agenda for PPP Develop national policy guidance on Public Private Partnerships in relation to matters such as financial comparators, value for money assessments and risk quantification Manage the interface between national PPP policy and sectoral PPP policy Manage the interface between PPP policy and other policy areas Develop guidance on technical issues that are common to all sectors such as staff transfers, direct and indirect taxation, capital allowances and accounting treatment Develop guidance on legal issues that are common to all sectors such as procurement procedures and procurement management Identify and define the scope of the standardisation agenda for contract terms

Delivery

Knowledge

Policy and Procedures

Domain

Objective

Activities Develop standardised contract terms and tendering procedures Develop and maintain a database and web-site of national PPP experience Recycle knowledge and experience between Departments Establish a national programme of PPP training courses Benchmark projects with other national and international projects Identify trends and issues relating to the PPP programme in Ireland Examine international best practice Provide an expert knowledge resource on PPP

Knowledge Management

Departmental Level Activities


Domain

Objective Programme Management

Activities Develop sector specific PPP programmes Establish and implement procedures for identifying and selecting PPP projects Establish and implement procedures for the approval and sign-off of PPP projects at key stages within the project life-cycle Maintain a continuous flow of PPP deals Monitor and facilitate progress in relation to programme implementation Assess the efficiency and effectiveness of the PPP programme Identify the skills and resources required in the Departmental PPP Unit Establish the Departmental PPP Unit and secure the necessary resources Market and communicate the sector specific PPP programme Generate and maintain private sector interest in the sector specific PPP programme Identify new PPP products and opportunities Identify sector specific stakeholders

Strategy

Market Development

Management

Stakeholder Management

Domain

Objective

Activities Establish protocols for consulting with sector specific stakeholders Consult and communicate with stakeholders Review the suitability for PPP of the regulatory/legislative framework in the sector Implement changes to the regulatory/legislative framework as required Establish appropriate regulatory frameworks at a sectoral level Participate in PPP projects through membership of the Steering Group Approve and sign-off of PPP projects at key stages of the project life-cycle Provide finance for PPP projects as appropriate Provide ad hoc advice to procurement teams as and when required Provide seed funding for PPP projects as appropriate Establish sector specific policy on Public Private Partnerships Develop sector specific guidance on policy, procedural, technical and legal issues Develop model contract documents and tender evaluation methodologies Identify skills requirements within the Department

Regulation and Monitoring

Delivery

Project Delivery

Project Support

Knowledge

Policy and Procedures

Knowledge Management

Domain

Objective

Activities Establish and implement a programme of sector specific PPP training if required Develop and maintain a database and web-site of PPP experience in the sector Identify, derive and publish benchmarks from information held on the database Identify trends and issues relating to PPP projects in the sector Examine international best practice in the sector Provide an expert knowledge resource on PPP in the sector Recycle knowledge and experience within the Department and to the Central PPP Unit

Contracting Authority
Domain

Objective Programme Management Market Development

Activities No significant role for contracting authority No significant role for contracting authority Identify stakeholders for the project in question Establish protocols for consulting with stakeholders Consult and communicate with stakeholders Monitor and manage the PPP contract Monitor and manage the performance of the contractor Appraise the project for its suitability for PPP Identify the most appropriate PPP form and structure Establish a PPP Project Team Appoint financial, legal and technical advisers Procure project using the PPP approach No significant role for contracting authority

Strategy

Management

Stakeholder Management

Regulation and Monitoring

Delivery

Project Delivery

Project Support

Domain

Objective Policy and Procedures Knowledge Management

Activities No significant role for contracting authority Participate in national and sectoral PPP training programmes Provide data on procurement progress and contract performance to departmental units

Knowledge

Appendix C: Competency Framework Overview


All the competences in this framework are considered to be important, however, the competences marked with an X are considered to be essential.
PROJECT SPONSORSHIP AND PROMOTION ROLE PEOPLE A1 Builds Relationships, Communicates and Negotiates Relationship Management (including management of advisors) Communication PPP Negotiation A2 Sponsors Project Sponsorship and Leadership Delegation TASK A3 Establishes Strategy Strategy Development and Project Appraisal A4 Identifies and Solves Problems Problem Solving Creative Thinking Decision Making A5 Achieves Results X X X X

PROJECT SPONSORSHIP AND PROMOTION ROLE Project Management Resource Allocation (including finance) Quality Management, Risk Management, Change Management Monitoring SELF A6 Development of Self and Others Contribution to Development of PPP Knowledge Personal Development Team Development Career Development of Self and Others A7 Is Resilient and Motivates Determination Motivating A8 Applies Professional Knowledge and Expertise PPP Knowledge Experience Professionalism X X X X X

PROJECT SPONSORSHIP AND PROMOTION ROLE


A1 BUILDS RELATIONSHIPS, COMMUNICATES AND NEGOTIATES Relationship Management 1. Develops partnering relationships based on achieving outputs and joint resolution of issues 2. Networks to connect and sustain the relationships the Project requires 3. Adjudicates when PPP process generates conflict of principle and balances priorities 4. Manages and sets the tone of the relationship between the public and private sectors, to help both sides understand each other 5. Influences others at strategic and political levels. Is politically astute 6. Is honest in dealing with all stakeholders, creating and sustaining trust over all Project phases 7. Manages diversity Communicates 8. Understands and can communicate succinctly to sell the Project to all audiences. Presents convincingly 9. Actively listens to and makes use of the advice of consultants and experts 10. Communicates clearly to the team, to stakeholders and to the private sector giving a consistent message PPP negotiation 11. Monitors negotiation and steps in at key points to close deals, lays down the law if required and agrees fair deals with all parties 12. Has an overview of the likely cost of the deal over its life and the more immediate budget cost for negotiating the deal

PROJECT SPONSORSHIP AND PROMOTION ROLE


A2 SPONSORS PROJECT Sponsorship Leadership 1. Takes ownership of the Project to lead it forward and accepts overall responsibility for the contract 2. Effectively creates and transmits a strong positive view of and buy-in to the project plus a clear sense of its purpose internally to the PPP team and externally to Private and Public sectors 3. Authoritative. Transmits confidence by being consistent in actions and words 4. Is supportive and accessible at problem times. Responds in a timely manner Delegation 5. Gets the balance of intervention and delegation right 6. Provides safety net for Project Leader

PROJECT SPONSORSHIP AND PROMOTION ROLE


A3 ESTABLISHES STRATEGY Strategy Development and Project Appraisal 1. Visionary. Considers the wider picture and a variety of options for meeting the business need. Defines Project goal and purpose 2. Has a clear idea of fit of the Project with other business objectives and activities 3. Project stakeholders 4. Chooses the right user focus 5. Applies commercial and business awareness taking into account the motivation and concerns of the public and private sector. Ensures Projects essentials including budget are defined by Project Leader and ensures the outline Business Case is approved before procurement commences completes sign-off: knows where they want the Project to get to and when 6. Ensures provision of funding 7. Communicates strategy effectively to team members and stakeholders to sustain buy in and ensure stakeholders are on side 8. Draws on their experience of other PPP Projects, Taskforce and Departmental guidance to steer the Project effectively 9. Contributes to building and managing unified PPP knowledge across all Government Services

PROJECT SPONSORSHIP AND PROMOTION ROLE


A4 IDENTIFIES AND SOLVES PROBLEMS Problem Solving 1. Has the foresight to recognise potential problems and intervenes at the right time in the PPP Project to prevent or solve them 2. When necessary intervenes to help Project Leader to bring together the resources and people needed to solve major issues and to bring the Project back on track 3. Objectively chooses the right methods for resolving major problems 4. Is willing to be briefed by Project Leader and challenges briefing constructively. Tests conclusions in a supportive manner Creative Thinking 5. Is adaptable/flexible in approach 6. Uses logical, analytical and innovative thinking. Decision Making 7. Foresees the implications of proposed solutions and decides the most appropriate solution 8. Is sensitive to and works with stakeholders to resolve issues in all phases of the Project

PROJECT SPONSORSHIP AND PROMOTION ROLE


A5 ACHIEVES RESULTS Problem Management 1. Sets clear overall objectives and parameters for the PPP Project and tracks performance against them 2. Takes full accountability for sign off at each stage of the procurement phase 3. Presents realities formally and informally to superiors, team and externally at all phases of the PPP Project Resource Allocation (including Finance) 4. Overcomes blockages to resources for the PPP Project Quality Management 5. Ensures that PPP Project objectives are met to an acceptable standard Risk Management 6. Determines the level of risk associated with delivering the defined Project and meeting its objectives, that will be acceptable to work within on the Project 7. Understands and identifies the risks which the PPP Project faces in delivering the defined Project and meeting its objectives. Monitors overall risk management performance Change Management 8. Identifies, instigates and encourages the major changes necessary for the Project to succeed Monitoring 9. Actively monitors overall procurement process taking when required

PROJECT SPONSORSHIP AND PROMOTION ROLE


A6 DEVELOPES SELF AND OTHERS Contribution to Development of PPP Knowledge 1. Investigates, shares and transfers best practice in respect of PPP Projects 2. Is committed to providing PPP training and ensures training budget is available Personal Development 3. Learns quickly from others experience and applies it to the present Project 4. Further develops and applies own political astuteness Team Development 5. Provides supportive coaching to Project Leader and other stakeholders Career Development of self and others 6. Resolves major career development issues for PPP Project members

PROJECT SPONSORSHIP AND PROMOTION ROLE


A7 IS RESILIENT AND MOTIVATES Problem Solving 1. Demonstrates drive, stamina and persistence in order to achieve results 2. Has stress resilience and mental toughness. Says no when necessary and sustains focus on major Project needs at times of confusion and doubt 3. Communicates commitment to the Project via own time and energy and backs words with deeds 4. Displays self esteem, confidence and clout Motivating 5. Sustains motivation over the life of the Project 6. Provides coherence and stability across all Project phases 7. Gives valid praise and encouragement to improve and gives constructive criticism and warnings where necessary

PROJECT SPONSORSHIP AND PROMOTION ROLE


A8 APPLIES PROFESSIONAL EXPERTISE AND EXPERIENCE PPP Knowledge 1. Experience. Knows the organisation and how it can assist or hinder PPP Projects 2. Is part of the internal power structure and is sufficiently credible to get things done 3. Finds others with the power to sustain Project progress and success 4. Is a competent business manager with a personal track record of leading and delivering complex Projects Professionalism 5. Works to a high standard of integrity and objectivity

PROJECT LEADERSHIP AND MANAGEMENT ROLE PEOPLE B1 Builds Relationships, Communicates and Negotiates Relationship Management (including management of advisors) Communication PPP Negotiation B2 Leads and Manages Teams Leadership and Management Delegation TASK B3 Implement Strategy Strategy Development Strategy Implementation Strategy Communication B4 Solves Problems Problem Solving Creative Thinking Decision Making B5 Achieves Results Project Management X X X X X X X X

PROJECT LEADERSHIP AND MANAGEMENT ROLE Resource Management Quality Management, Risk Management, Change Management Contract Management Monitoring SELF B6 Develops Self and Others PPP Knowledge Personal Development Team Development Career Development of Self and Others B7 Is Resilient and Motivates Determination Motivating Self Motivating Others B8 Applies Professional Expertise and Experience PPP Knowledge Comparable Project Experience Professionalism X X X X X X X X X X X

PROJECT LEADERSHIP AND MANAGEMENT ROLE


B1 BUILDS RELATIONSHIPS, COMMUNICATES AND NEGOTIATES Relationship Management 1. Develops partnering relationships based on achieving outputs and joint resolution of issues 2. Networks to connect and sustain the relationships the Project requires 3. Builds support from within the organisation; ensures the organisation appreciates the full time nature of the role. Gives clear commitment to the team and the Project 4. Minimises conflict at all stages and levels throughout the life of the Project Communication 5. Initiates and sustains dialogue with users, teams and Project partners 6. Communicates clearly in all directions giving a consistent message PPP Negotiation 7. Assigns clear team roles in negotiation undertaking clear and supportive delegation of the negotiating role where necessary 8. Follows an effective negotiation strategy, creates balanced negotiating teams to deliver it 9. Negotiates by being a skilled influencer and effective persuader within Project and externally 10. Knows whether they have a good deal and how to get to one including understanding pricing and how the contract will work

PROJECT LEADERSHIP AND MANAGEMENT ROLE


B2 LEADS AND MANAGES TEAM Leadership and Management 1. Establishes realistic parameters for the PPP Project to achieve and defines clear team roles 2. Selects, builds and manages rounded team through all phases giving them enough direction to progress the Project 3. Creates and sustains credibility within the team and the Project sponsor Delegation 4. Leads and supports the team without doing everything themselves 5. Creates and co-ordinates sub-groups, delegating authority depending on Project phase 6. Involves team without making them feel exposed 7. Is clear on how they want the team to run, including clarifying to the team their roles during negotiations 8. Acts proactively

PROJECT LEADERSHIP AND MANAGEMENT ROLE


B3 IMPLEMENTS STRATEGY Strategy Development 1. Contributes to development of overall PPP strategy and aligns Project work with strategy. Knows and communicates where overall Project should go throughout all phases 2. Applies commercial and business awareness taking into account the motivation and concerns of the public and private sector Strategy Implementation 3. Ensures the output specification meets the business needs 4. Implements PPP process drawing on detailed knowledge of all of the PPP Project stages Strategy Communication 5. Is focused on user requirements: manages their expectations during the Project ensuring they are aware of the implications of joint public and private sector working throughout all phases of the Project 6. Develops, maintains and communicates full understanding of implications of PPP Project to the private sector, the team and all other stakeholders so that all see the bigger picture 7. Identifies how much it would cost to deliver strategy and identifies budgetary sources

PROJECT LEADERSHIP AND MANAGEMENT ROLE


B4 SOLVES PROBLEMS Problem Solving 1. Objectively chooses the right method for solving from a range of possible methods 2. Detaches from Project to help self and team understand Project problems and circumstances, to improve performance 3. Identifies and seeks help keeping project sponsor informed of important problems Creative Thinking 4. Demonstrates open mindedness; brings in and applies fresh ideas 5. Is adaptable and flexible in approach makes time for unforeseen occurrences 6. Uses logical, analytic and innovative thinking Decision Making 7. Proactively applies PPP knowledge to foresee and manage the implications and risks of proposed solutions and assists in making the right decision 8. Acts pro-actively and decisively in complex situations with speed and expresses decisions well to others

PROJECT LEADERSHIP AND MANAGEMENT ROLE


B5 ACHIEVE RESULTS Project Management 1. Demonstrates good Project management skills. Creates Project plans with realistic timings and adapts them when changing circumstances dictate 2. Sets clear objectives and priorities as well as realistic time scales and outputs for the Project and manages Project performance against these 3. Works within set parameters consistently for the duration of all Project phases 4. Communicates clear ideas of what team members, contractors and others need to do to deliver the PPP Project goals Resource Management 5. Obtains the right input at the right time. Assesses the situation drawing in the appropriate consultants, experts and other resources as required 6. Is financially astute and ensures financial management against budget occurs Quality Management 7. Ensures the quality of the processes, using modern Project and quality management techniques Risk Management 8. Demonstrates a clear understanding of risk in the procurement phase and how to manage it, including informing Project Sponsor of Project threatening issues in good time. Contract Management 9. Manages the contract in accordance with its terms, and in the light of Taskforce guidance on Long Term PPP Contract Management Monitoring 10. Is responsible for achieving specific Project results, adapting plans if necessary when changes occur before every sign off 11. Creates audit trail demonstrating clear accountability

PROJECT LEADERSHIP AND MANAGEMENT ROLE


B6 DEVELOPS SELF AND OTHERS PPP Knowledge 1. Investigates, shares and transfers best practice in respect of PPP Projects 2. Actively seeks to attend PPP training events and encourages team to undertake appropriate training 3. Develop own, teams and advisors understanding of the PPP process Personal Development 4. Has strong self knowledge and uses sit in moving own skill base forward 5. Is willing to learn, to raise and engage personal effectiveness Team Development 6. Is concerned about and acts to develop team and team members capabilities via coaching, sharing etc. 7. Develops sufficient knowledge and skills to understand the advice they receive and astutely challenge other team members and stakeholders Career Development of self and others 8. Works to develop own and team members careers before, during and after the Project. Includes optimising of team members knowledge on future Projects

PROJECT LEADERSHIP AND MANAGEMENT ROLE


B7 IS RESILIENT AND MOTIVATES Determination 1. Shows dedication to the Project with full time commitment where necessary 2. Demonstrates the strength of purpose to remain independent of parochial views and pursue the goal of the Project itself 3. Has drive and enthusiasm to commit to foreseen and unforeseen opportunities 4. Has stress resilience, can be hard edge and say no when necessary Motivating Self 5. Enjoys and manages the scale and complexity of the Project Motivating Others 6. Demonstrates belief in self, team and Project 7. Demonstrates energy and persistence in moving the team forward. Motivates different types of people 8. Gives valid praise, encouragement to improve and criticism where necessary

PROJECT LEADERSHIP AND MANAGEMENT ROLE


B8 APPLIES PROFESSIONAL EXPERTISE AND EXPERIENCE PPP Knowledge 1. Brings to bear an in-depth understanding of PPP policies and procedures 2. Ensures private sector advisors know their roles within the PPP Project and what they should and should not do Professionalism 3. Works to a high standard of integrity and objectivity 4. Attains high standards in own professional area 5. Is organised and keeps a clear record of how key decisions have been taken at all stages of the Project Comparable Project Experience 6. Has relevant expertise in and understanding of PPP policy 7. Has a track record of getting things done in comparably complex and demanding Projects 8. Is part of the power structure which gets things done within agreed policy

SUBJECT MATTER EXPERT ROLE PEOPLE` C1 Builds Relationships, Communicates and Negotiates Relationship Management Communication PPP Negotiation C2 Team Member Team Working TASK C3 This Element is Covered Within C5 C4 Solves Problems Problem Solving Creative Thinking C5 Achieves Results Strategy Development Delivering Results Risk Management Monitoring SELF C6 Develops Self and Others X X X X X

SUBJECT MATTER EXPERT ROLE PPP Knowledge Personal Development Team Development C7 Is Resilient and Motivates Determination Motivating Self C8 Applies Professional Expertise PPP Knowledge Expertise in Own Discipline Professionalism X X X

Please note that no Strategy competence has been included for Subject Matter Expert. The important Subject Matter Expert capabilities of contributing to strategy definition and its implementation have been included in the Achieves Results competence (C5).

SUBJECT MATTER EXPERT ROLE


C1 BUILDS RELATIONSHIPS, NEGOTIATES AND COMMUNICATES Relationship Management 1. Creates good one-to-one relationships with the leaders of the private sector team 2. Networks to build and maintain effective relationships based on trust and overcomes differences to working well together 3. Treats different parties without favouritism Communication 4. Communicates clearly in all directions giving a message consistent with the rest of the PPP Project team, but raises concerns directly with the Project Leader so as not to weaken collective responsibility PPP Negotiation 5. Works within given parameters, actively listening during negotiations. Advises the leader using their subject matter expertise on the risks and implications before making commitments 6. Works out the implications that agreements in specific areas will have on the Project as a whole and feeds them back to the team 7. Uses their professional skills and tactical awareness to build trust and sell ideas to potential users and other parties to the Project 8. Has questioning and interviewing skills and uses them to do effective evaluations against criteria 9. Thinks in advance how to deal with questions they may be asked on a wide range of issues

SUBJECT MATTER EXPERT ROLE C2 Team Member


C2 TEAM MEMBER Team Working 1. Works effectively in team with other experts and is happy to accept that they are one of a number of experts needs on the PPP Project 2. Adapts themselves to work in the team and be prepared to adopt the specific role required for the PPP Project 3. Has a clear grasp of team roles and of the teams technical competence for this Project 4. Confidently participates when their expertise adds value. Informs Project Leader when their expertise is insufficient

SUBJECT MATTER EXPERT ROLE


C4 SOLVES PROBLEEMS Problem Resolution 1. Challenges existing methods of operation and provides alternative solutions 2. Is aware of the commercial and business features of PPP and uses them to assist decision making and Project realisation Creative Thinking 3. Is open minded to PPP process. Sees the benefits of joining in and adopting different ways of working 4. Is open to ideas from within and outside the team 5. Thinks in a logical, analytic way without the constraint of old patterns and with benefits of lessons learned 6. Thinks creatively to provide a clear vision of the future, embracing changed ways of service delivery

SUBJECT MATTER EXPERT ROLE


C5 ACHIEVES RESULTS Strategy Development 1. Buys into PPP Project strategy up front, contributing to its formulation. Delivering Results 2. Focuses on the specification of requirements, distinguishing outputs from inputs to clearly define required results. 3. Sees beyond the immediate phase to longer term practicalities of the Projects on-going implementation and delivery of contracted service. 4. Works from a clear grasp of what the operational requirements for the project are, now and in the future. 5. Understands what needs to be done and contributes their part to ensure it is achieved. 6. Delivers on commitments made, works within and contributes to teams delivery of project to defined quality, quantity, time and budget targets. Risk Management 7. Completes risk assessments, taking into account private sector attitudes to risk and ensuring all risk is priced and allocated for control 8. Mitigates public sector risk in the PPP project within their knowledge area Monitoring 9. Sets clear evaluation criteria in combination with other experts.

SUBJECT MATTER EXPERT ROLE


C6 DEVELOPS SELF AND OTHERS PPP Knowledge 1. Spends time to bring up to their knowledge of the PPP process and their expected role in it. 2. Actively seeks to attend PPP training events at the right time. 3. Shares best practice with other PPP projects. Personal Development 4. Is willing and able to learn quickly from others experience and apply it to the present project. Team Development 5. Transfers knowledge and experience gained on the Project to team members and successors as project phases come along.

SUBJECT MATTER EXPERT ROLE


C7 IS RESILIENT AND MOTIVATES Determination 1. Shows dedication to the project and is prepared to put in a realistic amount of time to deliver results 2. Has the courage of their convictions and the confidence and resilience to insist on meeting standards and where necessary rejecting out of date guidance. 3. Copes with pressure working quickly and accurately and within agreed parameters. 4. Has self-esteem and confidence. Motivating 5. Enthusiastically buys into project themselves and seeks support from others

SUBJECT MATTER EXPERT ROLE


C8 APPLIES PROFESSIONAL EXPERTISE AND EXPERIENCE PPP Knowledge 1. Easily applies own understanding of the relevant industry to their subject area. Expertise in Own Discipline 2. Extracts and distils their professional knowledge and skills to apply to the different PPP context Professionalism 3. Works flexibly to applicable regulations. 4. Sustains professional expertise throughout the project. 5. Works to a high standard of integrity and objectivity.

Department of Finance

Review of PPP Structures

Appendix D: Head of Central PPP Unit


Responsible for:
Establishing the Central PPP Unit and securing and leading the necessary resources Delivering the objectives of the Central PPP Unit in relation to: Developing PPP policy in Ireland Monitoring, reviewing and co-ordinating the overall programme of PPP projects Marketing and communicating the PPP programme

Reporting PPP progress to the Department of Finance management, the Minister of Finance, the Cabinet Sub-Committee, and the committees of the House of Oireachtas Representing the Central PPP Unit on the Cross-Departmental PPP Team Developing and delivering programmes of work on a rolling basis for the PPP central unit

Experience required:
Minimum of five years experience of Public Private Partnerships or project finance Minimum of five years experience in a senior position in the public or private sectors Detailed understanding of the structure and operation of government in Ireland Credibility in the private sector PPP market

Skills
It is also important to emphasise the importance of the leadership and management skills of this jobholder. The role demands management of a diverse group of staff, brought together to deliver on a common purpose tight knit body

Revised Draft Report

4 May 2001

Department of Finance

Review of PPP Structures

PPP Policy Managers


Responsible for:
Creating and developing PPP policy in Ireland Managing the interface between PPP policy and other policy areas Developing a standardisation agenda for government Providing technical guidance in relation to the standardisation of key contractual terms and the development of model contract documents and standardised tendering procedures Providing guidance on technical issues such as staff transfers, direct and in-direct taxation, and capital allowances Creating a strategic framework for PPPs including the identification of future opportunities Promoting a consistent approach to PPPs within and between Departments Identifying requirements for legislation Ongoing assessment of PPP programme effectiveness Leading or commissioning policy best practice reviews

Experience required:
Minimum of five years experience of policy development in the public sector Knowledge and experience of Public Private Partnership projects

PPP Programme Manager

Responsible for:

Monitoring, reviewing and co-ordinating the overall PPP programme Assisting Departments to select, prioritise, scope and procure projects Establishing project eligibility frameworks and guidelines Appraising projects in the light of national policies, directives, guidelines and regulations Monitoring and tracking the progress of individual projects and the overall programme Revised Draft Report 4 May 2001

Department of Finance

Review of PPP Structures

Advising on high-profile projects through representation on the Project Board Reviewing PPP Assessments for individual projects Establishing overall framework agreements for advisors

Experience required:
Minimum of five years experience of project delivery and programme management in the public or private sectors Knowledge and experience of Public Private Partnership projects, including the use of project finance

PPP Financial Advisor

Responsible for:
Developing policy guidance on financial issues including:
-

Financial Comparators Direct and indirect taxation Accounting treatment Forms of finance Bankability issues Advising on the above issues as and when required on specific projects Review of financial related issues in PPP Assessments On-going liaison with the banking market

Experience required:
Qualified accountant with a minimum of five years project finance experience Credibility in the banking market Knowledge and experience of Public Private Partnership projects

Revised Draft Report

4 May 2001

Department of Finance

Review of PPP Structures

PPP Legal Advisor


Responsible for:
Developing policy guidance on legal issues including:
-

Procurement procedures Procurement management Standardised terms and conditions of contract

Advising on legal issues as and when required on specific projects, including:


-

Contractual capacity /vires User charging Property issues including leases, licenses and the Landlord and Tenant Act TUPE

Addressing legal issues through the drafting of changes in legislation Review of legal issues in PPP Assessments

Experience required:

Qualified lawyer with a minimum of five years relevant project experience Knowledge and experience of Public Private Partnership projects

Revised Draft Report

4 May 2001

Department of Finance

Review of PPP Structures

PPP Economic Advisor


Responsible for:
Developing policy guidance on economic issues including:
-

Financial Comparators Value for money assessments Risk quantification Macro economic costs and benefits

Advising on the above issues as and when required on specific projects Reviewing the economic impacts of PPP policies and the overall PPP programme Advising on other technical economic matters (e.g. discount rates, differential inflation etc)

Experience required:

Economist with a minimum of five years experience of providing economic advice and conducting economic analysis for the public sector in Ireland Knowledge and experience of Public Private Partnership projects

PPP Marketing and Communications Manager

Responsible for:

Promoting the PPP agenda within the public and private sectors Communicating Irelands PPP programme both domestically and internationally Liaising with the social partners through the Public-Private Informal Advisory Group on PPPs (or its successor body) Promotion of skill/knowledge enhancement across the public service Provision of PPP training for the public sector

Revised Draft Report

4 May 2001

Department of Finance

Review of PPP Structures

Experience required:

Minimum of five years experience in a senior public relations or marketing role Detailed understanding of the structure and operation of government in Ireland Credibility in the public and private sectors in Ireland

PPP Knowledge Manager

Responsible for:
Developing and maintaining a database of local and international PPP experience Promoting knowledge sharing across sectors Recycling knowledge and experience within and between Departments Providing an expert knowledge resource

Experience required:

Minimum of five years experience of knowledge management and database development

Revised Draft Report

4 May 2001