Presentation to the Joint Oireachtas Committee on Transport Assessment, Approval, Public Sector Benchmark and Procurement of PPPs 23rd September 2003

Key PPP Procurement Steps 1.Preliminary Project Appraisal/Cost-Benefit Analysis 2.NDFA Assistance 3.PPP Assessment 4.Approval Points 5.Optional Market Consultation 6.Public Sector Benchmark 7.Affordability Cap 8.Procurement Process 9.Value for Money Comparison 10.PSB: why confidential?

Preliminary Assessment Responsibility of Sponsoring Agency Follow Guidelines Establish the business need Appraise options for delivery of service or asset Assess costs and benefits

National Development Finance Agency: Main Functions Recommend to State authorities the optimal financing mechanisms for major capital projects AdviseAdvise State authorities in respect of financial aspects of infrastructure projects To provide financing directly for projects or through the creation ofTo provide financing directly for projects or through the creation of Special Purpose Companies (SPC’s)

Benefits of NDFA Increased Value for Money Application of commercial standards to public procurement projects Underpinning PPP approach to public service provision Centralising expertise

NDFA Advice State Authorities have a statutory obligation to seek NDFA advice for: Major projects and grouped projects –With a capital cost in excess of €20 million NDFA will support State Authority in all finance, risk or insurance project issues.

PPP Assessment Sponsoring Agencies must determine appropriate procurement mechanism: Has Sponsoring Agency necessary statutory power or vires? Is there potential for VFM with a PPP? Is there potential for user-charges? Is there potential for 3 rd party income? What form of PPP delivers best VFM for the Exchequer?

Approval Points Sanctioning Authority considers 1.Priority of project 2.Preliminary Appraisal 3.PPP Assessment Sanction is given –To proceed with the project –To appoint client advisors

Optional Market Consultation Market Consultation may be needed to Establish market interest & capacity to deliver the project Identify & clarify suitable options or solutions Determine bankability of project Evaluate risks Assess private sector appetite for risk transfer

Public Sector Benchmark Definition PSB is a key management tool used in the quantitative assessment of VFM during the procurement process and in the evaluation and comparison of bids

Public Sector Benchmark Public Sector Benchmark: validates continuation of the procurement process Sets out cost of project using traditional procurement PSB must be –Comprehensive –Detailed –Risk-adjusted PSB must focus of whole-life costs

Public Sector Benchmark (contd.) Costs must be derived from detailed output specifications Historic data should be used where available Shadow bid may be required Sanctioning Authority must compare PSB with Preliminary Assessment: do benefits outweigh project costs? PSB does not change: any material change necessitates review of original CBA & affordability

Affordability Cap Set by Sanctioning Authority Absolute limit on outturn cost Usually the PSB +/- agreed % margin Used to evaluate tenders Must: –Not be exceeded by Sponsoring Agency –Remain unchanged

Procurement Process Must not commence before Affordability Cap is agreed: Request for Expressions of Interest Pre-qualification evaluation Shortlisting of consortia Tender Invitation EU Directives: negotiated procedure BAFO Stage Tender Evaluation Selection of Bidder

Value for Money Comparison Project Board evaluates preferred tender against PSB & Affordability Cap: Focus on VFM Criteria to evaluate all tender elements More/less risk may be transferred compared with PSB Signing of contract sets & seals public sector outturn costs

PSB: Why Confidential? Incentivises Competition Key in allowing innovation Safeguards commercially sensitive information Enabled bidders to use professional expertise in identifying best approach to delivering outputs Encourages approaches to service delivery that span traditional boundaries

PSB: Why Confidential? (Contd.) Incentivises different, improved design and service solution to those in the PSB If PSB made public then output-based tenders can become input based contracts Incentivises flexibility Focuses supplier on re-engineering business to reduce costs

Central PPP Unit Department of Finance