THBonneagar lompai r Eireann Ms Margaret Falsey Committee Secretariat Committee of Public Accounts Houses of the Oireachtas Kildare House Dublin 2 Data IDate Ar dTag I Our Ref. Bhur dTag IYour Ref. 25th July 2018 PAC32-l-769 Dear Ms Falsey, Circular 06/2018 from the Department of Public Expenditure & Reform allows for the publication of completion reports (post project reviews) which have been undertaken in respect of national roads PPP projects. Tll has completed these reports on ten PPP schemes and these consolidated reports are now being made available. A briefing note outlining the origins of Tll's PPP Programme, the scheme evaluation process undertaken and the main findings from the completion reports has been prepared and also included. Please note that the post project reviews represent internal Tll reports and as such, they were not prepared to a publication standard. These reports have now been checked with errata sheets inserted where required. For reasons of transparency the original completion reports have not been modified, save for redactions made for continuing commercial reasons. Tll has no objection to the publication of attached document on the Committee Oireachtas website. Yours sincerely, Michael Nolan Chief Executive eonneagar tompalr !:lreann Transpon Infrastructure Ireland lonad Ghn6 Gheata na Pairce Parkgate Business Centre cm [email protected] l) www.tii.ie g +353 (0)1 646 3600 ~ +353 (0)1 646 3601 Snlid Gheata na Pairce Parkgate Street Balle Atha Cliath 8 Dublin 8 D08DK10 D08DK10 Public Private Partnership Post Project Reviews 25th July 2018 Page 1 of 5 For Information Table of Contents 1. Introduction .................................................................................................................................... 1 2. Government Policy .......................................................................................................................... 1 3. PPP Contract Payment Mechanism ................................................................................................ 2 4. Post Project Reviews ....................................................................................................................... 2 5. TII Investment Decisions ................................................................................................................. 3 6. Public Private Partnership Procurement ........................................................................................ 4 7. Purpose of TII Post Project Reviews ................................................................................................ 5 8. Completed Post Project Reviews - Lessons Learned ....................................................................... 5 9. Initiatives Enhancing the Investment Appraisal Process ................................................................ 7 9.1 Enhanced Data Collection ....................................................................................................... 7 9.2 Development of TII National Transport Model ....................................................................... 7 9.2.1 Update of the National Transport Model ....................................................................... 7 9.2.2 National Transport Model projections............................................................................ 8 9.3 Current Project Management & Business Case Processes ..................................................... 8 10. Conclusions ............................................................................................................................... 10 APPENDIX 1 PPP ROAD SCHEMES ..................................................................................................... 11 APPENDIX 2 GLOSSARY OF TERMS .................................................................................................... 13 APPENDIX 3 PPP ROAD SCHEMES..................................................................................................... 16 Page i For Information 1. Introduction Commencing with the National Development Plan 2000-2006 and through to the current National Development Plan 2018-2027 the Government has identified a role for Public Private Partnerships (PPPs) as a means of delivering critical public infrastructure. In line with Government policy, TII has entered into fifteen PPP Contracts including two PPP contracts for the provision of motorway service areas. As part of the ongoing appraisal and evaluation of its PPP investments, TII has to date completed Post Project Reviews (PPRs) on ten of the PPP Contracts1. These PPRs are now being published pursuant to Circular 06/2018 from the Department of Public Expenditure & Reform. This note provides an overview of the origins of TII’s PPP Programme, the scheme evaluation process undertaken, the main findings from the completed PPRs along with ongoing TII initiatives to strengthen the scheme appraisal process. 2. Government Policy TII’s procurement of projects through a PPP2 mechanism originates from June, 1999, when the then Minister for Finance announced three pilot PPP roads projects for implementation using the PPP mechanism. Those projects were: the N25 Waterford By-Pass, the Limerick Southern Ring Road Phase II, and the construction of a second bridge at West-Link on the M50 in Dublin. In December 1999, the Government published the National Development Plan 2000-2006 which identified additional PPPs as an essential component in contributing to the financing and delivery of a significant programme of national road improvement schemes. Subsequent National Plans including the Infrastructure and Capital Investment 2012-16, the Stimulus Plan 2012 and Building on Recovery: Infrastructure and Capital Investment 2016-2021 all identified road schemes to be progressed using PPP as the delivery mechanism. The current National Development Plan 2018 – 2027 acknowledges the role PPPs have played in delivering important infrastructure particularly in times of constrained Exchequer resources. The Plan also provides that: “All large-scale projects included in the new National Development Plan should, therefore, continue to be assessed in terms of suitability for procurement by PPP and/or alternative financing, in particular projects which involve user charges or which offer the potential to generate significant third party income.” In response to Government policy, TII entered into fifteen PPP Contracts including two PPP contracts for the provision of motorway service areas. Of the thirteen road PPPs, eleven are in operational phase while two are currently under construction (i.e., the M11 Gorey-Enniscorthy scheme and the N25 New Ross Bypass Scheme both of which are due to open in 2019). PPP operated roads currently comprise 1 PPRs will be completed on the four remaining PPP schemes following a suitable period of operations - two schemes opened to traffic relatively recently (N11 Arklow/Rathnew (including N7 Newlands Cross upgrade) in July 2015 and N17/N18 in September 2017) and two are currently in construction stage. 2 An overview of PPPs in Ireland is available from the Parliamentary Budget Office: An overview of Public Private Partnerships in Ireland, PBO Briefing Paper 5 of 2018 Page | 1 For Information some 33 per cent of the State’s c.1270km of motorway/dual carriageway network. Of the motorway service contracts, one is operational and the other is at construction stage. 3. PPP Contract Payment Mechanism Each of the roads in the TII’s PPP roads programme is the subject of Design Build Finance Operate Maintain (DBFOM) contracts. However, within the thirteen roads, there are different payment methods (otherwise known as the payment mechanism) contemplated by the contracts. Eight of the schemes are toll roads and the PPP Companies’ income is largely derived from toll revenues generated by the road with the PPP Companies also receiving certain payments from TII)3. In the case of the other five road schemes user charges do not apply with the PPP Companies receiving payments from TII (referred to as availability payments) in consideration for its obligations under the relevant PPP contracts. (See Appendix 1 for complete list of PPP contracts entered into by TII.) 4. Post Project Reviews In line with the Public Spending Code4 and Common Appraisal Framework5 PPR reports are to be completed where schemes have been in operation for a number of years. The PPRs completed on TII’s PPP schemes to date are listed in Table 1 below. Table 1. TII Post Project Reviews Subject of Post Project Review6 Date Completed N25 Waterford Bypass December 2012 Dundalk Western Bypass April 2014 N4 Kilcock Kinnegad April 2014 N8 Rathcormac to Fermoy Bypass April 2014 M50 Upgrade January 2015 M7-M8 Portlaoise to Cullahill-Castletown January 2015 M6 Galway to Ballinasloe January 2015 M3 Clonee to Kells January 2015 Limerick Tunnel May 2015 Tranche 1 Motorway Service Areas November 2013 3 In the case of six of the toll concession PPPs, traffic risk rests entirely with the PPP Co. In the case of two of the PPP Contracts, i.e. the M3 Clonee-Kells Scheme and the N18 Limerick Tunnel, the relevant PPP Contract provides for a sharing of downside traffic risk (referred to as Variable Operation Payments or traffic guarantees) between the PPP Co and the Authority. All toll concession contracts include revenue sharing with TII in the event that traffic volumes exceed traffic volumes specified in the particular PPP Contract. 4 Department of Public Expenditure and Reform “Public Spending Code”,