Ø New €150m Exchequer Works Programme 2013-2014;
Ø New PPP Pipeline; and
Ø Phase 1 PPPs on track for delivery during 2013/2104
Following on from last year’s
Infrastructure Stimulus Plan, the Minister for Public Expenditure and Reform, Brendan Howlin TD, today announced an additional investment of €150 million in Exchequer capital funding for 2013 to 2014. This represents the first phase of the Exchequer element of the Stimulus Plan.
Minister Howlin also provided details on the extensive preparations being made on the Phase 1 PPP Programme, which comprised the larger part of the Stimulus Plan. The Government has also agreed a new PPP Pipeline of projects valued at up to €250m.
The new programme of projects announced by the Minister today will include a mix of small scale essential works and some larger projects with roll out beginning over the summer. Minister Howlin said: “We are targeting additional Exchequer resources on smaller scale capital works mainly aimed at maintaining or improving existing assets.”
Projects will be delivered in the areas of schools, energy efficiency and roads repairs. Ongoing maintenance of capital stock in these sectors is essential to help keep them in good repair and helps prevent more costly replacement of dilapidated buildings and roads. For these reasons, a total of €150 million will be invested in 28 school projects, local road maintenance and repairs, and a Local Authority Energy Efficiency Scheme.
Speaking today, the Minister said, “although the public finances are severely constrained, it is important that we build for the future. It is absolutely vital for our long-term well-being and prosperity that children have proper school buildings in which they can learn, that our roads are safe and well-maintained and that local authority housing is as energy efficient as possible. I am delighted to be able to make this funding available”.
Minister Howlin emphasised that this investment is additional to the capital allocations already provided for the relevant Departments (€414m for Education; €900m for Transport & €726m for Environment in 2013). The additional Exchequer investment will be funded through some of the proceeds from the Lottery licence and/or State asset disposals.
As well as maintaining our assets, the works proposed will help create jobs throughout local communities as minor works tend to be more labour intensive than major new build projects with figures rising in some instances to 17-19 jobs created per €1m expenditure.
While this new Programme is relatively modest in scale, Minister Howlin pointed out that “this is the first time that there has been an increase to the capital budget since the budget cutbacks began in 2008.” He added that, “since I launched the Medium Term Exchequer Capital Framework in November 2011 we have been able to maintain the ceilings announced in that Framework and have not had to make any further cuts to capital.
This modest level of additional investment represents a turning point for capital investment which will hopefully gain momentum as the economy improves.”
Projects to be delivered
In Education, work will be carried out on 28 schools to either replace school buildings or carry out large scale extension or refurbishment projects. The overall cost of progressing these 28 school projects will be in the region of €90m; €50m of which will be provided in additional Exchequer funding and the remainder will be found from within the Department of Education’s existing capital envelope.
Discussing the Education projects, Minister for Education and Skills, Ruairi Quinn, TD, noted, “This announcement highlights the Government’s commitment to prioritising investment in school buildings. Despite our economic difficulties, the need to replace inadequate educational infrastructure remains, and this stimulus package means that we can continue to deliver for our growing school communities. These projects will see over 10,000 students and their whole communities benefit from state-of-the-art accommodation, not to mention the economic boost to the construction industry.”
In the roads sector, moneys will be allocated to local roads to carry out much needed surface restoration and road reconstruction works. An additional €50 million in 2013 will allow an extra 600 km of roadway to be rehabilitated to a high standard. The proposed funding would be allocated to the 29 local authorities for use primarily on restoration works.
Minister for Transport, Tourism and Sport, Leo Varadkar, TD, said, ““My Department is very conscious that two successive severe winters have taken their toll on the road network. While resources are limited, there is a risk that roads can deteriorate quite rapidly and are expensive to repair if repairs and maintenance are not carried out. This additional funding will help to address the shortfall in this area. The work will be carried out this summer and autumn. This funding will be provided directly to local authorities, which can start work on the repairs as soon as they receive the grants.”
In the energy efficiency area, a new retrofitting scheme for local authority houses will target up to 25,000 older local authority dwellings and aim to ensure that adequate wall and attic insulation is provided in all occupied properties.
Minister for Housing and Planning, Jan O’Sullivan, TD, said, “Beginning this year the energy insulation measures will target the 25,000 least energy efficient local authority homes. This will result in warmer homes and lower energy bills for thousands of families and will also create more than 1000 jobs in the sector. The lower carbon emissions flowing from the measure are also a significant benefit.”
Public Capital Investment
The investment announced today is additional to that being delivered through the Medium Term Exchequer Capital Framework. That Framework includes investment of €17bn over the period 2012 – 2016 with €3.4bn being invested in 2013. There will be direct employment benefits in the delivery of the infrastructure proposed in the Investment Framework which focuses on school building, health care facilities, local transport schemes and road maintenance and retrofitting schemes, all of which have a high labour content.
It is important to note, however, that the most important contribution capital investment can now make is in providing the capacity for the economy to grow, which will in turn create employment. In this context, supports to the enterprise sector primarily through agencies such as Enterprise Ireland and the IDA were protected in the five year Framework.
While €3.4bn in Exchequer capital investment will take place in 2013, an additional €2bn in Public Capital investment will also take place (mostly through State agencies) bringing the total level of investment through the Public Capital Programme up to €5.6bn in 2013.
New PPP Pipeline
We are happy with the momentum building up around the Phase 1 PPP Programme which was announced last July. We are keen to build on that momentum which is why we have decided to announce our intention to roll out a new PPP pipeline as a continuation of the Phase 1 Programme. These will be in the areas where we have an established track record and where further infrastructure is still needed such as schools and roads.
The Minister for Public Expenditure and Reform will be engaging with his colleagues the Minister for Education and Skills and the Minister for Transport, Tourism and Sport in order to bring forward these additional PPPs.
A pipeline of around €250m is envisaged at this stage.
Update on Phase 1 PPP projects
The projects included in Phase 1 of the Stimulus Package are progressing well and extensive preparations are underway in the public sector.
Education: The schools bundles were the first to market as this is one of the sectors where we have a well-established track record. The OJEU notice was issued today. These are due to be followed by the Grangegorman project in September 2013.
Health: There will be two bundles of Primary Health Care Centres with approx. 10 centres in each. Preparation of these bundles is on-going and they are due to issue to market in August.
Justice: Technical preparations for the Justice Bundles (Garda and Courts) are well advanced. The target is to be ready to proceed to tender in Q4 2013.
Roads: The tender has issued for the New Ross bypass and the next tender will issue by end June. Competitions are underway for the appointment of technical advisers for the projects. The final negotiations on Financial close for the Gort-Tuam N17/N18 are underway.
Job creation
It is expected that up to 13,000 jobs will be created as these projects are being delivered. A number of technical advisors including architects, quantity surveyors and engineers and legal advisors have now been appointed to the PPP Programme so jobs are already being created. Activity will increase in the coming months as project preparations
advance.
The NDFA have put in place a reporting structure to show the exact level of jobs created on Schools Bundle 3. A similar structure will be used to track job creation on all PPP projects.
Contract clauses have also been introduced to ensure maximum impact on the long-term unemployed. The Department of Social Protection will provide assistance to identify suitable potential employees.
NDFA is also working with Enterprise Ireland on a number of initiatives to facilitate the participation of SME businesses in this Programme. This may take the form of “meet-the-buyer events” organised by NDFA/Enterprise Ireland in respect of the programme and/or individual contract Bundles. Tenderers appointed will be required to participate in these measures.
A number of measures have been taken to instil confidence and maximise market participation:
There is a lengthy process involved in preparing PPP projects to deliver to the market through to contract award. The normal timeframe is generally around 21 months. NDFA, the advisors on the PPP programme are working with the Department of Public Expenditure and Reform to compress the timeframe to 15 months – in line with what is permitted under the PPP guidelines and procurement rules.
The Government agreed in 2012 to introduce the reimbursement of bid costs in the context of the roll out of Phase 1 of the new PPP Programme on a limited and temporary basis. A fixed amount will be paid as compensation for cancellation and a compliant tender fee would also be paid to a max. of 3 short listed tenders. A cap at the capital value of €100m will be applied.
The Department of Public Expenditure and Reform has reduced the level of construction performance bonds required on public works contracts (Circular 07/13). The tightening in the market is leading to tendering delays where it is proving increasingly difficult to award contracts should the performance bond level required in the tender exceed 12.5%. Revised requirements now mean that performance bonds are capped at 12.5%.
PPP market sentiment has improved over the past few months and a positive market response to the project tender competitions is anticipated.
The Department of Public Expenditure & Reform is also actively engaging with EIB in relation to their support for projects. Engagement has also commenced with the Council of Europe Bank.
The successful closing of Schools Bundle 3 PPP in November 2012 and the N11/Newlands Cross PPP in April are important confidence building measures for the Irish PPP market.
Investing in Infrastructure & Jobs
Exchequer Stimulus Projects 2013/2014
Department/Sponsor/ Project Name/ Project Summary/ Value
Education and Skills: Schools replacement, extension and refurbishment Replacement of 10 schools and 18 large scale extension/refurbishment projects: €50m
Environment, Heritage & Local Government: Retrofitting for Local Authority Housing Energy efficiency grant scheme for 25,000 Local Authority houses with low levels of energy performance: €50m
Transport, Tourism & Sport: Regional and Local Road Repairs Repairs and maintenance of 600 km of local roads: €50m
TOTAL €150m