What is a PPP?
A PPP is a contractual arrangement between the public and private sectors (consistent with a broad range of possible partnership structures) with clear agreement on shared objectives for the delivery of public infrastructure and/or public services by the private sector that would otherwise have been provided through traditional public sector procurement.
What types of PPP are there?
A variety of PPP procurement options have been utilised, the most common examples being:
- Design, Build and Operate (DBO) e.g. Waste Water Projects;
- Design, Build, Finance, Operate Maintain (DBFOM) e.g. Bundle of 5 Schools and National Maritime College;
- Concession e.g. Toll Roads.
For more information on each of these PPP types see our Glossary.
What are the benefits of PPPs?
For appropriate projects, the advantages associated with the “classic” DBFOM PPP arrangement can include:
payments linked to performance over the lifetime of the project;
long term contracts whereby bidders focus on the whole life-cycle cost of projects and not just on the upfront capital costs;
construction times post contract close tend to be faster as the private sector is incentivised to complete the project in order to begin to receive the ongoing regular payments;
private sector innovation and commercial and management expertise;
a contractual framework to allocate risk to the party that can manage it best;
the PPP approach allows for a number of appropriate projects to be developed simultaneously as the capital costs can be spread over the longer term.
Can public bodies in Ireland enter into PPP arrangements with the private sector?
It is widely recognised in countries where PPPs are in use as a public procurement option, that the issue of legal capacity, or vires, of public authorities to enter into PPPs is seen as being crucial to their overall success. The State Authorities (Public Private Partnership Arrangements) Act 2002 is enabling legislation providing this certainty in Ireland.
Which bodies currently have or are developing PPP projects?
The National Roads Authority; the Courts Service; the Department of Education and Skills; the Grangegorman Development Agency; the Department of Health; the H.S.E.; the Department of Justice & Equality; the Department of Arts, Heritage and the Gaeltacht; the Office of Public Works; and the Department of Transport, Tourism and Sport. A project tracker is available here listing projects at various stages of the procurement process.
What role has the National Development Finance Agency (NDFA) in the development of PPPs?
The National Development Finance Agency was established in 2003 under the National Development Finance Agency Act 2002. The role of the NDFA is to advise State Authorities on the optimum means of financing public investment projects in order to achieve value for money and to provide advice in relation to all aspects of financing, refinancing and insurance, including risk analysis, of public investment projects. All PPP projects involving the use of private finance must be referred to the NDFA. In addition, all projects valued at €30 million or above, whether traditional or PPP, must be referred to the NDFA for advice.
In addition to its advisory role, the NDFA has the vires to advance moneys and to enter into other financial arrangements in respect of projects approved by any State authority. To date, the Agency has not exercised the option of raising finance itself.
In July 2005, the role of the NDFA was expanded to include a specialised PPP procurement delivery function. This role was given a statutory basis with the enactment of the National Development Finanace (Amendment) Agency Act 2007. The Act expanded the role of th NDFA to enable it to:
- enter into a PPP arrangement with a view to transferring the rights and obligations under such an arrangement to any State authority;
- act as agent for any State authority in connection with the entry or proposed entry by that State authority into a PPP arrangement.
These arrangements do not apply to the roads and rails sectors, where existing procurement arrangements will continue. Similarly, existing arrangements remain in place in the local government sector.
When the NDFA is procuring a PPP project on behalf of a State authority, Sponsoring Ministers continue to be responsible for all aspects of the assessment and approval of the project. The NDFA is responsible for procuring the projects within the parameters set out by the sponsoring Department/Agency. The NDFA hands responsibility for the operational phase of projects over to Departments after construction is complete and the asset is ready for use.