Dublin City Council would be left exposed to "another Carillion-type collapse" if it uses Public Private Partnerships (PPPs) to regenerate dilapidated flats, according to a report by senior housing officials.
Earlier this year British construction giant Carillion collapsed, scuppering hundreds of local government contracts in the UK, as well as PPP deals to build schools in Carlow, Meath, Wexford and Wicklow.
The assessment by Dublin City Council’s housing department that it would be too risky to use PPPs to rebuild its 6,400 outmoded flats runs contrary to Government policy, which is currently seeking private developers to build thousands of social houses in Dublin and other major cities.
The report, to be published this week, has analysed the best options for funding the redevelopment of 6,391 of the council’s oldest flats, all of which are in blocks more than 40 years old.
A range of development models could be used depending on the nature of different sites, the report said, but it ranked PPPs as one of the riskiest, slowest and most expensive ways of delivering housing.
Public Private Partnerships have been formally recognised in the UK through the National Audit Office as being high-risk and are not recommended to be entered into by local authorities
The report notes the council has had “mixed fortunes” with PPPs.
A deal with developer Bernard McNamara collapsed in mid-2008, leaving several Dublin flat complexes vacant and undeveloped, although Fatima Mansions had earlier been successfully redeveloped using a PPP.
Local authority areas
In October 2015 the Government announced a €300 million plan to revive the PPP process, building at least 1,500 units in five local authority areas. “Two-and-a-half years later, the contract for the first batch of 500 units – valued at €100 million – is still under negotiation with a short list of contractors,” the report notes.
“Public Private Partnerships have been formally recognised in the UK through the National Audit Office as being high-risk and are not recommended to be entered into by local authorities,” the report said.
It said in terms of procurement, PPPs were “the slowest and most expensive way to build housing”.
“The bigger the contracts the longer they take. In large outsourced contracts, the government department or agency may have little if any control over who those subcontractors are and weighing up their record on safety, or employment practices, or construction quality or their local labour policies.
“When control of the supply chain is outsourced it is often entirely driven by price. This leaves us exposed to another Carillion-type collapse.”
This is an evidence-based report which shows that funding from central government is the most efficient and comprehensive way of providing housing
While PPPs may still be suitable for a roads contract, they were not suitable for housing. “What the Carillion experience shows is that risk is never really outsourced because ultimately it can fall back on the taxpayer.”
Joint ventures
According to the report, direct State funding was the “optimal” option, but other options such as joint ventures with adjacent landowners, and the transfer of some complexes to Approved Housing Bodies should also be considered.
The chair of the council's housing committee, Sinn Féin's Daithí Doolan, said the report showed the importance of a "thorough interrogation" of all models.
“This is an evidence-based report which shows that funding from central government is the most efficient and comprehensive way of providing housing. We’ve had two Ministers for Housing tell us that money is not the problem, and this is the option that’s come out on top.”
The regeneration programme could triple the number of homes on council sites, Mr Doolan said.
