Public Private Partnership Scheme: Five schools built under a pilot Public Private Partnership Scheme (PPP) could end up costing up to 13 per cent more than if built by the State, according to a report from the Comptroller and Auditor General.
The report is sharply critical of the Department of Education and Science, which had estimated a cost saving of 6 per cent for the State.
The separate Value for Money Report on the scheme by the C&AG was published yesterday at the same time as the Comptroller's 2003 annual report.
In 2001, the Department agreed a contract with Jarvis Plc to build, maintain and operate five new schools on publicly owned sites at Ballincollig, Clones, Dunmanway, Shannon and Tubbercurry. Jarvis staff operate the accommodation and facilities at these schools.
The Department agreed a monthly payment to the company over 25 years. The total cost to the State has been estimated at €283 million. The C&AG says the true value for money of the projects can only be established over their 25-year cycle. But he is critical of many aspects of the Department's management in his findings, which include:
· "The Department did not at any stage set a budget or spending limit for the project. This meant that, at the time it went to the market seeking proposals, the Department had no reliable benchmark against which to judge the affordability of what the bidders were offering.
· "Before the deal with Jarvis was finalised, the Department estimated that it would result in a cost saving to the State of around 6 per cent when compared to the traditional approach. Our analysis found shortcomings in the Department's estimation. It is likely that the final deal with Jarvis could be between 8 per cent and 13 per cent more expensive than conventional procurement and operation."
The report recommends that the Department undertake a retrospective evaluation of the project after five years, so that the costs and benefits can be reassessed in the light of operational experience.
Yesterday, the Minister for Education and Science, Mr Dempsey, welcomed what he termed the "constructive and generally positive tone of the report". The Minister also said that many of the issues highlighted in the report have already been implemented in other PPP projects, such as the National Maritime College due to open next month.
"The Government decided to enter into a PPP pilot programme in 1998 in order to determine if this, then untried, procurement process could be used in remedying the country's infrastructural deficiencies. Clearly, both in terms of speed and quality this Department has proved that PPPs can deliver."
He said the PPPs allow principals and managers to concentrate on their core educational and management functions instead of focusing on maintenance and other issues. He said the five schools in the first PPP were built within 3½ years, compared to up to five years for traditional construction.
Responding to the report, Mr Jim Dorney, general secretary of the Teachers' Union of Ireland, said the miscalculation by the Department of the cost to the State was worrying.
"Like all the major education partners, we believe it vital that not a cent of Exchequer funding for education is wasted, especially when the latest OECD report showed that we spend a lower percentage of GDP on education than all our EU neighbours."
The Green Party said the report asks serious questions about how the Department of Education and Science has failed to put in place proper assessment procedures on costs.
"These criticisms could have a serious impact on the future use of Public Private Partnerships in this country," said Mr Dan Boyle TD.
"What this report does not address, and was not asked to address, was the danger of relying on the long-term viability of private-sector companies. Jarvis Plc, the company who won the grouped schools project and is responsible for other yet to be completed projects, are undergoing significant problems within its British parent company.
"As a Cork city TD I have particular concerns on the effect that this report might have on the Cork School of Music development. If difficulties are seen to exist with the Public Private Partnership approach, the Government should guarantee that this project will be completed using full Exchequer funding."
