Bernard McNamara's blow to Public Private Partnership
The much-heralded Public Private Partnerships (PPP) initiative has taken quite a knock with the reported collapse of five of Dublin City Council's PPP Social Housing Regeneration Projects in Dublin's inner city.
The appointed developer for the projects, Bernard McNamara, recently informed Dublin City Council (DCC) that changing economic circumstances and new Government building regulations mean that, in his opinion, the projects are no longer economically viable. The PPPs involved Dublin City Council handing over a local housing estate to the developer to demolish and re-build a specified number of social housing units, community facilities and provide a community dividend. The developer is paid for this by being granted the majority of the site upon which he builds private apartments for sale.
Up to now Government and private sector spokespeople have lauded the success of PPPs in delivering roads, waste infrastructure, regeneration and schools. However, evidence from research on the origins and outcomes of PPPs in Ireland and internationally suggests caution, especially when it involves a social equality function.
PPPs are not necessarily cheaper than the direct public route. The Comptroller and Auditor General found that schools provided under the PPP route cost between 8 to 13 per cent more than the traditional route.
PPPs that depend on private sector providing funding are subject to market fluctuations. This means that if the private sector cannot identify the required profitability in a project then projects simply will not happen, or in the worst case scenario collapse leaving communities and those needing the services in a very vulnerable position. For instance, the roll out of the cancer strategy has been delayed, reportedly, because the HSE has found it difficult to get the private sector to take on the projects.
This is also happening with the five PPPs in Dublin where the communities have been informed the projects are no longer viable because of the decline in the property market. Their estates continue to be engulfed by social problems as the projects are put on hold. Residents and workers from the five estates protested outside a recent Dublin City Council meeting and called on Dublin City Council and the Government to provide the necessary investment.
The Department of Environment and Dublin City Council have, up to now, made it clear to communities that the only way their estate would undergo regeneration would be through the PPP route. The apparent failure of PPP in these projects demonstrates that handing over the responsibility for the provision of vital public services such as housing to the private sector has not worked.
PPPs are a form of privatisation of public services and assets. In the Social Housing Regeneration PPPs, significant amounts of public land is transferred over to private developers.
That land could, with state investment, be used to address the extensive housing waiting lists and tackle the vital long-term issue of social regeneration.
While there is evidence in the case of the five 5 PPP schools of good quality buildings and equipment, there is also evidence of poor design, maintenance, management, poor monitoring of contract fulfilment by the Department of Education, poor consultation, the commercialisation of schools and a reduction in the community use of the schools.
There was also evidence of the worsening of worker's conditions in the schools and waste sectors who transferred from public or not-for profit sectors to the private-for profit partners.
In a tighter economic climate PPPs will become even more attractive, even though it costs more in the long term and as the PPP regeneration projects has shown is a highly risky model that is dependent on profit and risk estimations of the private sector. The recent PPP episode adds to the increasing body of evidence both in Ireland and internationally that is critical of the extended use of PPPs. It is important, therefore, that a rigorous debate and informed analysis be undertaken of the effectiveness and appropriateness, from both a value for money and social perspective, of PPPs in the delivery and management of public services and infrastructure.