Public-private metro schemes can go off rails

So all is well with the Dublin metro project. In fact things could hardly be better, according to sources at the Department of Public Enterprise. Not only will the contract for the first stage of the £5.7 billion (#7.24 billion) project be signed by the end of the summer, it looks as though the whole thing - all 70 kilometres - will be built by 2010, some six years ahead of schedule.

This bit of good news emerged last week. Its publication was no doubt unrelated to the release the previous week of a review of the National Development Plan by Mr Jim O'Leary of Davy Stockbrokers. Mr O'Leary concluded that the plan was significantly behind schedule and likely to remain so because the construction industry simply could not work any faster.

Mr O'Leary went on to suggest that if the Government was serious about meeting its commitments to the electorate under the plan it should cancel both the Dublin Metro project and the Stadium Ireland project. Neither of these huge construction projects are actually in the plan and will put further strain on the construction industry and the labour market, both of which are at full stretch.

Anyway, back to the good news. The reason why the metro will come in ahead of schedule is because the Government is opting for the public-private partnership (PPP) model. The 30 or so companies and consortiums talking to the Department of Public Enterprise are offering either to fully or partially finance the project, as well as build and operate it.

The PPP approach has a number of advantages. The main one being that financial risk is carried by the private sector and not the state. The second is that the projects are run commercially and as a result are likely to be more efficient and cost effective. This, no doubt, explains the ability of several of the bidders to promise to complete the project - including 14 kilometres of underground tunnels under the centre of Dublin - well ahead of schedule.

PPPs look very attractive for projects such as the metro, but before the Government makes its final decision it might want to look at a report published last week by the Institute for Public Policy Research (IPPR), the London-based centreleft think-tank.

Building Better Partnerships is the final report of the Commission on Public-Private Partnerships. The commission is drawn from the public, private and voluntary sectors and has spent the last two years looking at how well the PPP approach has worked in Britain. Although it is generally positive about them, particularly in areas such as roads and prisons, it attaches a number of health warnings to their use in public transport.

The commission looked in some depth at the proposals to part-privatise the London Underground. The plan currently being pursued by the British government is to sell off the tube infrastructure to three separate private consortiums, but leave the operation of the trains with the public sector.

The commission had two problems with this proposal. The first is that separating ownership of the infrastructure - and the responsibility to maintain it - from the business of operating the trains that run on it is prejudicial to safety and also inefficient. The report does not specifically mention it, but the dreadful safety record of the British mainline rail system - where such an approach has been adopted - underlines the point.

The more general issue raised by the commission is that such is the popularity of PPPs at the moment that other alternatives - such as traditional public procurement - are not adequately explored. It points to the dangers of a "private good, public bad" mindset and a situation of "private sector-default" arising in which alternatives to PPPs are not even considered.

The report also states that PPPs will not "achieve public legitimacy if they are perceived to be a backdoor way of cutting the terms and conditions of workers".

Referring specifically to the London Underground the commission said that "a determination to use a PPP model has led to shortcomings in the proposed models".

It suggests that the Government should consider the transfer of ownership of the underground to a not-for-profit trust which would have the power to raise private capital - independent of the Treasury - and contract out management.

It also warns that PPPs must improve the standard of services, not just lower the cost, for them to be fully justified.

There is a limit to the extent to which comparison can be made between the London Underground and the proposed Dublin metro. The most significant - and obvious - being that the metro does not yet exist. But the Department of Public Enterprise would be foolish to ignore the IPPR's views when weighing up the various proposals being put to it.

The caveats that the IPPR attaches to PPPs also have a bearing on the plan currently being mooted to split Iarnrod Eireann - the operator of the mainline or heavy rail system - into two companies. One would be responsible for the permanent way and another for operating the trains. This would not be a million miles away from the situation proposed for the London Underground and the one that pertains on British mainline rail. The word from the Department is that this proposal has been quietly shelved. Someone in Kildare Street would appear to be keeping an eye on what is going on across the Irish Sea.

jmcmanus@irish-times.ie