Business Irish

Monday 18 November 2019

Taxpayers are on the hook for €1.4bn of Irish Water contracts

Sum is owed over coming years as part of public-private partnerships

Minister Alan Kelly told the Dail that €1.4bn was owed on 115 contracts
Minister Alan Kelly told the Dail that €1.4bn was owed on 115 contracts
Gavin McLoughlin

Gavin McLoughlin

Taxpayers are on the hook for €1.4bn owed to private companies as part of the 'Design, Build, Operate' (DBO) contracts that have been transferred from local authorities to Irish Water.

As is clear from their name, such contracts see private firms charged with designing, building and operating water infrastructure, usually for a period of 20 to 25 years. When the contract is completed the assets revert to State ownership.

Environment Minister Alan Kelly told the Dail late last week that €1.4bn was owed on 115 contracts across 232 sites. The figures show the average length of time remaining on the contracts is 15 years.

The involvement of the private sector in water provision is likely to provoke controversy given protester's fears that Irish Water could be privatised in future.

The 2014 statutory orders that transferred the contracts from local authorities to Irish Water provide lists of the private companies that had DBO contracts. The list reads as follows: EPS Group; Malachy Walsh & Company; Nicholas O'Dwyer Ltd; WS Atkins Ireland; Causeway Geotech; Severn Trent Response; Byrne Looby Partners; SDD Shanganagh; TJ O'Connor & Associates; Veolia Water Ireland; Patrick J Tobin & Co; Response Engineering; Coffey Water; Michael Punch & Partners; Mott MacDonald Ireland; JB Barry & Partners; Aecom/Liquidator for John Fleming; Aecom/Craddock Joint Venture; Jennings O'Donovan & Partners; Aecom; Brent Consortium; and Marine Specialists.

The idea behind a public-private partnership (PPP) is that involving the private sector in procurement will help to deliver a service in the most economically efficient manner.

However, in 2012, University of Limerick senior lecturer Dr Eoin Reeves told the Oireachtas Environment Committee that the partnerships can be problematic.

"There is potential for greater transfer of risk to the private sector compared to traditional procurement methods...

"The importance of risk transfer as an argument in favour of PPP cannot be overstated but a number of important points merit attention. First, there is a significant difference between 'agreed' risk transfer and 'de facto' risk transfer," said Dr Reeves.

"The early experience with schools public-private partnerships in Ireland illustrate this point with available evidence indicating that private contractors were not penalised over the first three years of the contract despite evidence of underperformance.

"The de facto enforcement of risk transfer requires adequate flows of information and strong management of contracts by the public sector. These are by no means guaranteed.

"In summary, the value for money-based case for Public-Private Partnership/ Design, Build, Operate is debatable. There is no guarantee that the main drivers of value for money will work effectively and the advantages of PPP over traditional procurement are open to question."

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