On the right road with public-private partnerships

A healthy economy needs a strong, modern infrastructure to support it. Every pothole in the road, every congested town without a bypass and every city-centre traffic jam represents a crack in the system, a barrier to efficient trade and to the Republic's ability to attract overseas investment.

To avoid the lack of an up-to-date State-wide road network or adequate public transport system becoming a drag on economic growth, the Government is pursuing strategic alliances with private companies - known as public-private partnerships (PPPs) - that are said to speed up the construction of vital infrastructure projects.

Across Europe, railways, motorways, ports and airports have been built by PPPs, where a consortium of private companies bids for contracts to design, build, finance and operate a service, which is usually regulated by an independent public body. These groups consist of project managers, equipment suppliers, contractors, operators and financial backers.

In the Republic, PPPs will design, construct and maintain 11 road projects as part of the national roads element of the National Development Plan 2000- 2006. But public transport infrastructure is next in line for a PPP approach to funding, with the announcement last month by the Minister for Public Enterprise, Ms O'Rourke, of the beginning of the tendering process for the first line of Dublin's new metro system.

The new Rail Procurement Agency is seeking expressions of interest for phase one of the 70- kilometre metro line, which consists of a line from Dublin Airport to the city centre and Shanganagh near Bray, and a link to Blanchardstown. The Luas line to Sandyford will be ultimately upgraded to a metro. This is most significant, as Dublin is one of few capital cities in the EU without a rail link to its airport.

Phase two involves the extension of the Blanchardstown line through Clondalkin and Tallaght to the City Centre, a line from Citywest to Tallaght and the extension of the Airport line to Swords. Between 12 and 14 kilometres of the system will run underground.

"The PPP approach allows us to combine the traditional strengths of the public sector with the efficiencies of the private sector. I believe it will result in the speedy delivery of the metro and will achieve greater value for money," Ms O'Rourke said.

Mr Reg McCabe, director of PPPs at employers' group IBEC, agrees that public transport infrastructure, as well as road-building, is particularly suited to PPP funding.

"IBEC supports maximum involvement from the private sector, not just because of private sector expertise, know-how and innovation, but private sector appetite for risk as well," he says.

The metro project, as outlined in the Dublin Transportation Office's plan, A Platform for Change, represents the biggest infrastructure project ever undertaken by the State. With an estimated construction cost of €7.2 billion (£5.7 billion), it also involves the most financial risk. This risk can be partly passed on to private companies through PPP schemes.

The less control the private partner has over the design and operation of the infrastructure project, the less attractive that risk may seem.

"In the Dublin context, the private operator has had no influence on route selection and that can create problems going forward," says Mr McCabe. "It seems there will also be very limited scope for the operator to set their own fare structure."

Public transport fares, like toll charges on PPP motorways, will provide a means for the successful bidder to recoup the investment, but tariffs on tickets are likely to be set by a regulating State agency.

"The Government is trying to maximise private sector involvement but they are making it difficult. They're trying to have it both ways, really," Mr McCabe says.

One report submitted to an Inter-Departmental Group on PPPs suggested that although they could deliver badly-needed infrastructure projects more quickly than the public sector, there may also be a "learning curve" with the introduction of PPPs.

It is hoped phase one of the metro will be completed by 2007, but while Dublin is waiting, there are fears traffic headaches will get worse before they get better.

The Dublin Chamber of Commerce this week issued a report on the problem. Its idea for a water taxi service in the Dublin Bay area attracted the most attention, but the report also includes calls for a part-time policing unit to direct traffic during peak times, an integrated ticketing system for bus and rail, and investment in the Dart/ suburban rail service that could increase passenger capacity by 40 per cent.

"At the moment, there's the construction of the port tunnel as well as the metro and the two Luas lines," says Mr Declan Martin, director of policy at the Dublin Chamber of Commerce. "These are all projects that have been agreed. The problem is they won't be in operation for three to four years, but we'll all die of congestion in the meantime."

Mr Martin believes PPPs are "the only way" to approach large-scale infrastructure projects, but the "very easily do-able" projects suggested by the Chamber could collectively "provide enough tweakings in the system to take some of the steam out of the traffic problem" with small amounts of public financing.

Although he has "some reservations" about water taxis because of their limited carrying capacity, Mr McCabe at IBEC agrees that some interim measures are needed while construction of the Luas lines is completed and the planning process for the metro gets under way.

Compared to European countries such as Britain, the Republic is starting from scratch in terms of public transport infrastructure and how to finance it, but Mr McCabe believes this will allow the country to escape some of the teething problems. "We have a great opportunity now to get it right and learn from the mistakes made in other countries," he says.

Consortiums bidding for the PPP contract will have studied how metro and other light-rail projects have increased commercial activity in cities around the world and learnt that flexibility is the key to coping with spiralling numbers of passengers.

"There has to be traffic in order to justify building a metro but the actual existence of a metro can generate more traffic," he explains. "There will be intense levels of investment in the metro because of its carrying capacity - up to 50,000 people an hour. That will mean commercial opportunities at metro stations and station precincts too. Everyone will want to be close to the new services."