Three infrastructural projects delivered in Ireland through an EU co-financed Public Private Partnership (PPP) displayed signs of inefficient delivery and benefits, a new report shows.
The report, produced by the European Court of Auditors, finds that EU co-financed PPPs cannot be regarded as an economically viable option for delivering public infrastructure. It also states that the PPPs audited suffered from widespread shortcomings and limited benefits, resulting in €1.5 billion of ineffective spending.
“Between 2000 and 2014, the EU provided €5.6 billion for 84 PPPs, with a total project cost of €29.2 billion. The auditors assessed 12 EU co-financed PPPs in Ireland, France, Greece and Spain in the areas of road transport and information and communication technology (ICT), with a total cost of €9.6 billion and an EU contribution of €2.2 billion,” explained Brian Hayes MEP.
“The Irish projects which were audited include the National Broadband Scheme, the construction of the N17/N18 and the Metropolitan Area Networks (MAN) project. Combined, these three operations received €81 million of EU funding.
“The auditors found that prior analyses had been based on overly optimistic scenarios. In Ireland, actual usage was as much as 69 % lower than forecast in ICT projects. With specific regard to the National Broadband Scheme, this was found to have generated less revenue than expected as compared to the original tender on account of the significantly lower than expected customer uptake.
However, the Commission acknowledges that with regard to the MAN project, Irish authorities undertook a thorough review process to reconsider the 95 towns selected for the MANs project, following very significant changes in the telecoms markets and availability of broadband in Ireland. The outcome of these reviews was that MANs were built in 66 towns instead of 95. As a result, the higher than projected cost per MAN was derived from the decision to construct more effective fibre networks instead of wireless solutions in a number of these 66 towns.
Other findings include:
- Value for money and transparency were widely undermined in particular by unclear policy and strategy, inadequate analysis, off-balance-sheet recording of PPPs and unbalanced risk-sharing arrangements.
- Increased risk of insufficient competition and therefore put the contracting authorities in a weaker negotiating position.
- The majority of PPPs audited were subject to considerable inefficiencies during their construction, with seven of the nine completed projects – corresponding to €7.8 billion – project cost incurring delays of up to 52 months and major cost increases.
- Most of the six audited ICT projects were not easily compatible with long contract durations as they were subject to rapid technological change
“The auditors have recommended that the promotion and use of PPPs should not continue until the problems identified have been identified and I think this is prudent. Into the next phase of funding approvals, there’s a need to base PPP selection on sound comparative analyses of the best procurement option. Member states have a duty to ensure they have the necessary administrative capabilities to implement successful EU-supported PPPs. Overall, the EU framework needs improvement for better PPP effectiveness, so that the choice of this option is justified by value-for-money considerations.”