Irish reflections

Brian Murphy, Director, National Development Finance Agency

The current Irish PPP pipeline is now well on its way to delivery. All projects are in procurement with two already in construction. The remainder will be in construction within 12 months.

The detailed pipeline was launched in March 2013. Ireland was then in the IMF/EU support programme with all budgetary initiatives subject to the associated restrictions. The stimulus was targeted at the struggling indigenous economy.

Understandably the pipeline was greeted with scepticism, given that many PPPs had been recently cancelled. Against this background, a vigorous dialogue was initiated with the market and the detailed feedback helped to shape the procurement strategy. A consequence of this was the introduction of ‘market activation measures’. These included: partial (or in some cases total) bid cost reimbursement for accommodation PPPs; bid cost reduction; reduction in procurement timelines and complexity; and a revision of some elements of risk transfer.

The pipeline was launched with ambitious delivery timelines to a still somewhat disbelieving market.

With respect to funding there were two positive mitigating factors – the National Pensions Reserve Fund (now the Irish Strategic Investment Fund or ISIF) had ringfenced €750m to support the PPP market and the EIB was making  positive noises with respect to the programme. While deliverability was a genuine concern, there was still a group of well capitalised construction players in the market, a number of overseas contractors were starting to look at Ireland and there were several ambitious midsized domestic players looking to access public procurement.

Today all projects are in procurement with two, the N17/18 and Schools Bundle 4, in construction. Six deals are scheduled to close before the end of 2015. The programme has been remarkably successful to date, well supported and competitive, enabling the NDFA to drive value for money. Our timing, proactive and positive engagement with the market and a dedicated team determined to stick to a demanding schedule were critical elements for this success. Our timing was fortunate also – there was a lack of European pipeline at a time of emerging liquidity surpluses seeking long-term, quality assets. Furthermore the Irish economy was showing signs of recovery and exited the IMF programme in late 2013.

A major lesson is the value of proactive and open dialogue with the market, a willingness to listen and act on constructive feedback, all essential elements of true partnership. Also essential is a procurement process that is robust, rigorous, fair, transparent and trusted.