Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697750699452.pdf (Ireland)
TITHE AN OIREACHTAIS An Comhchoiste um Airgeadas, Caiteachas Poibli agus Athchóiriú, agus Taoiseach Tuarascáil maidir le Comhpháirtíochtai Poibli Príobháideacha (CPPanna) le haghaidh Tionscadail Bhonneagair Earnala Poiblí – Leachtú Ghrúpa Carillion Deireadh Fómhair 2018 _________________________________________________ HOUSES OF THE OIREACHTAS Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach Report on Public Private Partnerships (PPPs) for Public Sector Infrastructure Projects - Liquidation of the Carillion Group October 2018 32-FPERT-015 1 Contents Chairman’s Preface .................................................................................... 3 1.
Introduction ...................................................................................... 5 2.

Background ...................................................................................... 7 3.
Key Themes .................................................................................... 11 3.1 Legislation .................................................................................. 11 3.2 Due Dilligence ............................................................................ 12 3.3 Public Private Partnership (PPP) Policy Framework .................... 14 3.4 Certification of Works ................................................................ 15 4.
Recommendations of the Joint Committee .......................................... 19 4.1 Legislation .................................................................................. 19 4.2 Public Private Partnership (PPP) Framework and Government Policy ......................................................................................... 19 4.3 Certification ............................................................................... 21 4.4 Role of Auditors and Due Dilligence Procedures ........................ 22 4.5 Engagement with Stakeholders .................................................. 22 4.6 Contingency Fund ...................................................................... 23 4.7 Debate ....................................................................................... 23 Appendix 1 - Orders of Reference ............................................................ 25 Appendix 2 - Members of the Joint Committee .......................................... 30 Appendix 3 - Links to Official Meeting Transcripts ...................................... 31 1 2 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach CHAIRMAN’S PREFACE On the surface, the liquidation of a major construction firm based in and primarily servicing the United Kingdom seems to have little resonance in terms of impacting Irish public infrastructure projects.
Unfortunately, this has not proved to be the case with the collapse of Carillion plc, a UK based Construction Company contracted under the Public Private Partnership Project Framework, to deliver educational facilities, the Schools Bundle 5 project (SB5) for the State.

The Department of Public Expenditure and Reform and the National Development Finance Agency which have particular responsibilities under the Public Private Partnership framework, fall within the scope of this Committee.
This Public Private Partnership contract for public infrastructure has served to highlight a number of areas of concern that require careful consideration and future-proofing in terms of dealing with similar matters in the future.

In particular, the Committee sought to understand how the collapse of a construction firm, with little tangible presence in Ireland, could lead to difficulties including the non-payment of subcontractors and delays in delivering the schools.
It also highlights other matters including weaknesses in the legislation enacted to protect subcontractors, a lack of clarity regarding certification of works under the building regulations and flaws in assessing the financial status of tenderers for public contracts.

The Committee hearings raised issues regarding the broader Public Private Partnership (PPP) policy framework.
The rationale underpinning the use of the framework is the transfer of risk from the State to private third parties in the delivery of large scale, complex infrastructure projects.

However, the Committee heard that the current relationship framework means the State does not have full visibility of payments made to the entire supply chain, including to subcontractors.
The Committee recommends that the State must have full oversight in that regard to ensure that those who carry out works or supply services to the State are paid.

Indeed, the Committee is of the opinion that 3 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach there is an onus on the State to set an example and to be the benchmark for best practice in this regard.
The evidence presented to the Committee demonstrates that current legislation governing the protection of subcontractors requires urgent review.

The evidence highlights that subcontractors are not sufficiently protected and in reality have very little clout or standing in the event of a liquidation.

The hearings have also raised concerns as regards auditing standards as the Committee has heard in evidence that Carillion’s signed audited financial statements were “flawed”.
The Committee proposes that state agencies broaden the metrics used to assess the financial well-being of tenderers for public contracts.

The Committee considered the key issue of certification of works and the potential for the State to incur future liabilities arising from disputed certification and the Committee heard contradictory evidence from different parties regarding the legal position on certification.
The Committee is of the opinion that definitive clarification of the legal requirements is essential and that the State seek such clarification immediately to ensure the works undertaken comply with health and safety and insurance requirements.

Finally, I wish to thank all the witnesses who attended hearings and provided background and supporting documentation in assisting the Committee in its examination.
The hearings have highlighted legislative issues and concerns about the efficacy of the policy framework itself.

It is imperative that all parties review how improvements can be made to the existing framework and to ensure subcontractors are adequately protected against the fallout from liquidations.

This may involve reviewing operations in other jurisdictions and implementing international best practice in an Irish context.

John McGuinness, TD.

Chairman 18 October, 2018.


4 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach 1.

INTRODUCTION 1.

In this Report, the Joint Committee highlights the difficulties emerging, in an Irish context, from the liquidation of Carillion plc in January 2018.

Whilst most of the attention and media commentary has focused on the effects of the liquidation in a UK context, the fallout from the collapse has also been felt in Ireland.

2.
2.

The subsequent liquidation of Sammon Contracting Ireland Ltd (Sammon), arising from the collapse of Carillion, has led to difficulties in the delivery of public infrastructure projects under the Public Private Partnerships (PPP) framework, namely Schools Bundle 5.

3.
3.

These series of liquidations have impacted adversely on a significant number of subcontractors involved in the delivery of goods and services and whose livelihoods and family businesses now face severe challenges as a result of non-payment for supplies and services provided and works rendered.

4.
4.

In addition to the delayed delivery of projects, the liquidations have raised serious questions as regards the effectiveness of the existing PPP policy framework employed by the State, whether the framework serves the public interest and whether such a model represents value-for-money.

This is particularly pertinent in the context of the delivery of future planned PPPs under the Government’s Project Ireland Plan 2040.

5.
5.

The Committee notes that a review of the PPP model was conducted and published by the Department of Public Expenditure and Reform in February 2018 as part of the development of the 2018-2027 National Development Plan.

The review did not include an analysis of the Schools Bundle 5 project.

In follow-up correspondence to the Committee, the Department states that it plans “to review any policy issues that might be highlighted by the Carillion collapse”.

The review is expected to take place in 2019.


The Department also states that the “review will not change the contractual 5 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach situation for current projects being pursed as PPPs, such as Schools Bundle 5”.

6.

The Committee also considered the implications arising from the Carillion liquidation in terms of legislative provision.
The deliberations expose deficiencies in the existing legislation offering protections to subcontractors and indeed a lack of knowledge regarding the application of the provisions of the legislation.

The Committee recommends an urgent review of the current legislation with a view to introducing amending legislation that ensures greater protection of subcontractors and calls for dissemination of information regarding the rights of subcontractors under the legislation.

7.
7.

The Committee notes that in recent weeks three schools have been completed and are now open to students, namely, Loreto College, Wexford, Coláiste Ráithín, Bray and Ravenswell Primary School, Bray.

The Committee notes construction works are ongoing for the remaining three schools with a target for completion by end 2018 or in early 2019.
The Committee notes that the original schedule for delivery of these projects was between November 2017 and January 2018, and that the impact of the Carillon liquidation has meant a significant delay in terms of project delivery.

6 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach 2.

BACKGROUND 8.

Carillion plc (Carillion) was a British multinational company that provided facilities management and construction services.
Carillion was declared insolvent in January 2018, which led to the liquidation of its assets and contracts.

At the time of liquidation, it employed approximately 18,200 people in the UK and had 420 contracts with the UK public sector.

Contracts included services for schools, hospitals, prisons, transport and the armed forces.
The group was liquidated with debts of £1.5billion, had extensive pension liabilities of £2.6billion and the UK National Audit Office estimates the collapse will cost the UK taxpayer an estimated £148 million1.

9.

In April 2018, Sammon Contracting Ireland Ltd (Sammon) entered examinership following the collapse of Carillion.
The High Court was told the Irish business got into financial difficulties due to the “devastating collapse”2 of Carillion plc for which it was working on a number of projects in Ireland.

Sammon was subsequently put into liquidation on 5 June, 2018.

10.

Sammon was hired by an entity that included Carillion Construction Ltd to build several education facilities in Ireland.
These include: Tyndall College Campus in Carlow; Eureka Secondary School in Kells, Co. Meath; Loreto College in Wexford; and Coláiste Ráithín and St Philomena’s National School which are both located in Bray, Co. Wicklow.

Collectively, this contract tendered by the State is known as “Schools Bundle 5”.

The contract was worth approximately €87 million to Sammon which was paid on a monthly basis after works commenced in 2016.
The High Court was informed by Counsel for Sammon that payments from the Special Purpose Vehicle (SPV) to Sammon ceased in December 20173 and consequently, the group had 1 UK National Audit Office Report by the Comptroller and Auditor General entitled: ”Investigation into the government’s handling of the collapse of Carillion” dated 7 June 2018. https://www.nao.org.uk/wp- content/uploads/2018/06/Investigation-into-the-governments-handling-of-the-collapse-of-Carillion.pdf 2 Irish Times Article: “Carillion collapse pushes Sammon into examinership”, Thursday April 5, 2018.
3 The Department of Education and Skills has confirmed in correspondence to the Committee that its information is that Sammon had been paid 98% of its contract value by the end of December 2017.

7 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach been unable to pay its suppliers and subcontractors working on those projects.

11.

The National Development Finance Agency (NDFA) is the statutory financial adviser to certain public bodies on all public investment projects of scale.
Its responsibility also extends to the procurement and delivery of public private partnership (PPPs) projects in sectors other than transport and the local authorities.

The NDFA managed the Schools Bundle 5 (SB5) project on behalf of the Department of Education and Skills.

12.

Public Private Partnerships (PPPs) are described as partnerships between the public and private sectors for the purpose of delivering an asset or a service traditionally provided by the public sector.
PPPs are characterised by a more complex contractual relationship between the parties than in the case of a conventional infrastructure project.

Their overall aim is to exploit private sector skills and competencies in order to achieve increased value.

The transfer of risk to the private sector actor should encourage it to act efficiently as it will only recoup its investment by identifying and managing the risks inherent in the project.
PPPs also allow the public sector to raise finance for the provision of infrastructure off-balance sheet and in compliance with fiscal rules.4 13.

Following a competitive procurement process, the contract was awarded to the Inspired Spaces Consortium PPP, comprising of Carillion Private Finance and Dutch Infrastructure Fund (DIF), in July 2016.

Funding for the project took the form of 90:10 debt/equity ratio.
Construction works were subcontracted by the PPP company to Carillion Construction Ltd with post- construction services being awarded to Carillion AMBS.

Following the collapse of Carillion plc, DIF took responsibility for the management of Carillion’s stake in the project.

On foot of a re-tendering process, Woodvale was announced as the replacement contractor on 28 June 2018.
4 https://data.oireachtas.ie/ie/oireachtas/parliamentaryBudgetOffice/2018/2018-03-16_an-overview-of- public-private-partnerships-in-ireland_en.pdf 8 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach 14.

The NDFA informed the Committee that to date, the State has not made payments in respect of the schools’ construction other than a sum in respect of preparatory site advance works.
The NDFA also confirmed that upon completion of the works, and as per contract terms, the State will make monthly unitary payments.

Whilst the official figures have not been disclosed and will not be made publicly available for a further two years, the hearings confirmed that the total contract involves a capital outlay of circa €100million with unitary payments of €10million per annum over a 25 year period totalling €250million.
9 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach 10 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach 3.

KEY THEMES 3.1 LEGISLATION 15.


The existing legislation affording protection to subcontractors is the Construction Contracts Act 20135and that objective was clearly articulated in the course of Second Stage debate in Dáil Éireann, “The Bill before the House seeks to address the issue of non-payment to construction sector contractors, subcontractors and subcontractors of subcontractors who have completed work to the required standard on construction projects.
The Bill will address these issues by providing statutory arrangements for payments under construction contracts, including providing for interim payments, thus reducing a payee's exposure to non-payment.”6 16.

The Committee heard conflicting views as to the applicability of the provisions of the legislation as regards protecting the subcontractors involved in the Schools Bundle 5 project.

Some members held a view that the legislative provisions did not apply in the case of a PPP contract.

17.
17.

The NDFA stated that the legislative provisions do not apply at a ‘higher level’ in terms of the State’s relationship with the PPP company but that the protections did filter downwards at a ‘lower level’ and would apply in the contractual relationship between Sammon and its subcontractors.
The NDFA was clear in its assessment that: “As of now, the legal position is that when the State enters into contracts, it does not manage the relationship between the main contractor and subcontractors ” 7 5 Link to Construction Contracts Act 2013: http://www.irishstatutebook.ie/eli/2013/act/34/enacted/en/html 6 Link to Second Stage, 3 May 2012: https://www.oireachtas.ie/en/debates/debate/dail/2012-05-03/5/ 7 Meeting Transcript of 3 July, 2018.
Pg.20 https://data.oireachtas.ie/ie/oireachtas/debateRecord/joint_committee_on_finance_public_expenditure_and _reform_and_taoiseach/2018-07-03/debate/mul@/main.pdf 11 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach 18.

In follow-up correspondence to the Committee, the Department of Public Expenditure and Reform explains why the legislation does not apply to PPPs.
It states: “the high level PPP contract entered into between the State authority and its partner in a PPP arrangement, which covers much more that just the construction of the asset, extending to the management and operation of the asset for a period of up to 25 years, could not meet the requirements for a ‘construction contract’ as set out in the Construction Contracts Act.
However the subsequent construction contract entered into by the private partner in a PPP with the main contractor, and any subcontracts arising thereunder, are subject to the Act”.

19.

The Department drew attention to other relevant legislative provisions and stated that the matter of paying the subcontractors would be subject to multiple legislative codes, including those governing company law and insolvency law.
In that context, implementing effective legislation to address the difficulties confronting subcontractors will require a multi- faceted review of different legislative frameworks cutting across several Departments.

20.

The Carillion and Sammon liquidations and the impact on Irish subcontractors clearly demonstrate shortcomings in the existing law protecting subcontractors.
The Committee is of the opinion that an urgent review by relevant Government Departments of all the legislation is required to address this issue.

3.2 DUE DILLIGENCE 21.

The issue of due diligence and the vetting of Carillion plc in advance of its selection as preferential contractor featured prominently in Committee hearings.

22.

The NDFA stated that it employed multiple processes in reviewing the suitability of Carillion plc to undertake and deliver the contract requirements.
The NDFA took into consideration the audited financial 12 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach accounts, stock announcements and share price as the company was listed on the London Stock Exchange.

The NDFA told the Committee that Carillion “ticked all the boxes in best practice”8 in that it had a market capitalisation of €1.5bn and an annual turnover of between €5 and €6 bn.
Carillion plc was not a rated company so the NDFA did not have the option of considering the assessments of Credit Rating Agencies.

23.

The NDFA informed the Committee that it would review its due diligence processes with a view to broadening the scope and finding different ways to improve its analysis of prospective contractors.
The NDFA referred to possibly widening the analysis to include detailed Director’s statements, reports on the solvency of the company and reviewing banking covenants and the cash position to try and obtain a clearer view of a company’s true position.

However, the NDFA warned that these additional actions are based on information that would still come from the company and would be without independent verification.
In that regard, the NDFA stated “in short, there are not many viable options outside the audited financial statements.” 24.

The Committee notes that the NDFA informed it that the audited financial accounts in respect of Carillion plc were “flawed”.

The Committee acknowledges that the NDFA is monitoring closely a number of investigations in the United Kingdom.
Notwithstanding these reviews, the Committee is of the opinion that the audit company should be accountable for its role in approving the financial statements of Carillion plc.

25.

The Committee is of the opinion, that at the very minimum, the auditors should be reported to the relevant regulatory authority overseeing operations and practices within the industry.

26.
26.

The Committee also requests that the NDFA consult with counterparts in other jurisdictions to ascertain whether any insights can be gleaned in improving due diligence procedures currently in operation.

8 Meeting Transcript of 3 July, 2018.


Pg.11 https://data.oireachtas.ie/ie/oireachtas/debateRecord/joint_committee_on_finance_public_expenditure_and _reform_and_taoiseach/2018-07-03/debate/mul@/main.pdf 13 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach 3.3 PUBLIC PRIVATE PARTNERSHIP (PPP) POLICY FRAMEWORK 27.

As part of its examination, the Committee considered the PPP framework model in delivering public sector infrastructure.
The Committee heard in evidence that the Department of Public Expenditure and Reform had completed and recently published the findings of a interdepartmental review on the operation of the PPP model.9 The review was commissioned in the context of the new 2018-2027 National Development Plan.

28.
28.

The main findings of the review include that: (i) PPPs should continue to feature as a procurement option; (ii) Value-For-Money (VFM) should be the deciding factor when assessing the procurement option; (iii) that this arrangement will apply to all new PPPs but will not affect PPPs which have already been announced and are in planning and procurement and (iv) that consideration is also being given to the development of a new alternative PPP model to complement the existing model.

29.
29.

The main rationale provided for opting for the PPP route is that the State benefits from transferring risks associated with delivering the project to private third parties.

In the case of Schools Bundle 5 project, it is arguable that the State will continue to bear risk in having to deal with the consequences of the fallout from the liquidations.
There is a cost to the State in terms of foregone revenue and taxes from the small businesses that may cease to trade and the associated unemployment supports that will follow.

The Committee proposes that the Public Service Benchmark Reports be made public before any PPP is entered into as opposed to the traditional procurement model and any legislative changes required to accompany this proposal be prioritised.

30.
30.

It is of particular concern to the Committee that the PPP framework operates without the visibility and transparency required for the State to 9 Report of the INTER-DEPARTMENTAL Agency Group on PPPs, July 2018.

Prepared by the Department of Public Expenditure and Reform.
http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=2ahUKEwj33binhZXdAhWiA8AK Hc2yDjIQFjAAegQIABAC&url=http%3A%2F%2Fwww.per.gov.ie%2Fwp-content%2Fuploads%2FReport-of-the- Expert-Group-on-PPPs-July-2018.pdf&usg=AOvVaw1foyNO9VBKq1DUFZZmREh4 14 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach know whether the entire supply chain are paid appropriately for services provided.

31.
31.

The Committee is of the opinion that the State should have full visibility and traceability of payments made throughout the entire supply chain as part of entering any PPP contract.

The State should have knowledge of and make it a condition of final payment that all subcontractors involved in the delivery of PPP projects are paid in full in accordance with the terms of employment.

32.
32.

The Committee also notes that the interdepartmental review occurred in 2017 and the report dealt with matters prior to the Carillion and Sammon liquidations.

The Committee recommends that the Department of Public Expenditure and Reform revisit its assessment of the PPP policy framework to take into account the impact of recent events with a view to addressing the policy implications and improving the PPP framework to respond to such circumstances occurring in the future.
3.4 CERTIFICATION OF WORKS 33.

Certification of works completed is arguably the single most contentious issue to emerge in the course of the Committee hearings.

Certification of works is required in order for a certification of completion to be granted by the Buildings Approval Authority.

The schools cannot open without this approval.


The requirements are laid out in both legislation and regulations including the Building Control (Amendment) Regulations (BCAR)10 and the Code of Practice for Inspecting and Certifying Buildings and Works (the Code of Practice)11.

10 S.I.
10 S.I.

No.9/2014 – Building Control (Amendment) Regulations 2014 http://www.irishstatutebook.ie/eli/2014/si/9/made/en/print 11 Code of Practice for Inspecting and Certifying Buildings and Works, Building Control Regulations 1997 to 2015, September, 2016 https://www.housing.gov.ie/sites/default/files/publications/files/2016-10- 21_code_of_practice_for_inspecting_and_certifying_buildings_and_works_final_version.pdf 15 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach 34.
It is the opinion of the subcontractors that only the subcontractors who undertook works can provide the necessary legal certification for that work.

The NDFA and the PPP company appointed an “independent” assigned certifier to provide ancillary certification of works.

The subcontractors expressed serious reservations as to the legal capacity of the assigned certifier to certify work completed.

35.
The subcontractors stated that they, as specialists in their field, ”…strongly question the ability of any certifier to ensure that all relevant building regulations have been met, that the works have been carried out as designed and that all the building products are compliant without the support of ancillary certification from the specialist subcontractors who carried out the works”.12 The subcontractors added that, in their opinion, the code clearly states that the role of the certifier does not include responsibility for the certification of any builder.
36.

The Committee, therefore, has concerns in regard to the certification process in terms of exposing the State to future liabilities in respect of both insurance cover and health and safety regulations.

The Committee emphasises the importance of the certification process and wishes to highlight these concerns that potentially may present a future liability to the State.
Should certification be granted but subsequently removed at some future date, the Committee was informed that the buildings occupants would have to leave and services re-sited.

37.

The Committee engaged with the NDFA on how the requirements as set out in the certification process can be adhered to.
The NDFA provided additional information to the Committee confirming that…”the replacement main contractor will engage new third party subcontractors to complete any outstanding works for the relevant elements and to provide ancillary certificates covering both their own works and the works carried out by 12 Meeting Transcript of 5 July, 2018.
Pg.3 https://data.oireachtas.ie/ie/oireachtas/debateRecord/joint_committee_on_finance_public_expenditure_and _reform_and_taoiseach/2018-07-05/debate/mul@/main.pdf 16 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach previous subcontractors”.13 The NDFA further informed the Committee that this alternative approach will work within the parameters of the Building Control Regulations and the Code of Practice and that “Our legal advice is that this is a valid and viable approach”.

38.
38.

The NDFA further clarified its approach towards certification in written correspondence to the Committee.14 The NDFA reiterated its view that the Code of Practice, in line with BCAR, does not preclude the replacement or substitution of contractors, designers, subcontractors, or specialists for the purposes of certification.

The NDFA referenced section 4.7 of the Code of Practice which it deems expressly addresses the position and scenario regarding a change in the builder during a project.

39.
39.

The Committee understands that conflicting views are held by parties in addressing the certification issue.

Ultimately, it may be that the Courts will have to adjudicate on this matter in time and the Committee cannot prejudge the outcome of any future ruling in that regard.

However, the Committee recommends that it is in the interest of all parties to work together to adopt an approach that satisfies the regulatory and legal requirements.

40.
40.

The Committee supports a pragmatic and sensible approach whereby the PPP company and the replacement contractor (Woodvale) engage with the original supply chain to secure the necessary certification.
Such an approach would assist the subcontractors in receiving payment and also provide additional comfort to the State in knowing that those responsible for carrying out the works have provided certification, hence, providing assurance and comfort to the State that those with specialist expertise have validated the works undertaken.

13 Supplementary information supplied to the Committee by the NDFA dated 4 July, 2018.
14 Supplementary information supplied to the Committee by the NDFA dated 28 August, 2018.

17 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach 18 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach 4.

RECOMMENDATIONS OF THE JOINT COMMITTEE 4.1 LEGISLATION 1.

The Committee considers that the Construction Contracts Act 2013, whilst laudable in its objectives, has not protected subcontractors in this instance.
The Committee notes the view of the Department of Public Expenditure and Reform that the matter of payment of the subcontractors is subject to multiple legislative codes, including those governing company law and insolvency law.

In that context, implementing effective legislation to address the difficulties confronting subcontractors will require a multi- faceted review of different legislative frameworks cutting across several Departments.
The Committee therefore recommends that an immediate review by relevant Government Departments of all the legislation be undertaken to identify deficiencies in existing legislation and that appropriate amending legislation be brought before the Oireachtas as soon as possible to ensure adequate protection for subcontractors.

2.
2.

The Committee further recommends that, with reference to Recommendation 1, the Department moves to raise awareness of subcontractors to the provisions of the Construction Contracts Act 2013 in the interim period.

4.2 PUBLIC PRIVATE PARTNERSHIP (PPP) FRAMEWORK AND GOVERNMENT POLICY 3.

The Committee notes that the 2017 Interdepartmental review of the PPP policy framework pre-dates the liquidation of both the Carillion Group and subsequent liquidation of Sammon Contracting Ireland Ltd.
The Committee recommends that the Department update that review undertaken of the PPP framework to take into consideration lessons learnt from the impact of these liquidations and make policy changes on that basis.

19 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach 4.
In the interests of transparency, the Committee recommends that the relevant government Department undertake an assessment to quantify the full impact of the liquidations of both Carillion and Sammon Construction Ltd as regards job losses and cost to the exchequer in terms of revenue foregone.

5.
5.

The Committee recommends that the Department of Public Expenditure and Reform and all other public agencies involved in the PPP process undertake a review of procedures so as to ensure that contracts are designed in a fair manner.

The Committee further recommends that all subcontractors contracted to provide goods or services under PPP arrangements are paid in full, in compliance with the contractual arrangements, with complete visibility and oversight throughout the entire supply chain.

6.
6.

The Committee recommends that the State have knowledge of and make it a condition of final payment under PPPs that all subcontractors involved in the delivery of PPP projects are paid in full in accordance with the terms of contract.

7.

The Committee recommends that the Department of Public Expenditure and Reform re-examine the transposition of EU Directive 2014/24/EU to assess whether subcontractors can be paid directly by the main contracting authority.
The Committee recommends that the protections afforded to subcontractors under the Directive be fully transposed in the domestic legal framework.

8.

The Committee recommends that the Department of Public Expenditure and Reform examine the legislation and regulations governing the protection of subcontractors in other jurisdictions to ensure that this jurisdiction is in line with international best practice in that regard.

9.
9.

The Committee recommends that the Department of Public Expenditure and Reform examine the policy operating in some American states whereby a performance bond is required to be taken out by the main contractor to ensure subcontractors are paid in the event of liquidation.

The Committee 20 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach also recommends that the Department conduct a feasibility test as to whether the above policy can be applied in this country.

10.
10.

The Committee notes the C&AG’s Report on the Accounts of the Public Services 2016 published in September 201715 included an overview of the use of Public Private Partnerships (PPPs) in implementing public investment projects.

The Committee also notes that the Committee of Public Accounts (PAC) has considered this part of the C&AG’s report in public session16 but has not closed its examination of the matter.

11.
11.

The Committee is of the opinion that the issues raised in this report in regard to PPPs would be of assistance to the PAC in the context of any future deliberations it may have on this matter.

4.3 CERTIFICATION 12.

The Committee expresses reservations as regards the proposed strategy to employ alternative methodologies for satisfying the building certification requirements in relation to the Schools Bundle 5 projects.
In view of the contradictory evidence presented to the Committee regarding the legal and regulatory requirements for valid certification of works under the (BCAR) regulations and the Code of Practice for Inspecting and Certifying Buildings, the Committee recommends that Government ensure that all school facilitates are compliant in that regard to ensure the health and safety of members of the public using these facilities, as it is imperative that the pupils, teachers and the State are legally protected from any future claims that may arise from incidents arising where valid certification of works is disputed.
15 http://www.audgen.gov.ie/documents/annualreports/2016/report/en/Chapter4.pdf 16 https://www.oireachtas.ie/en/debates/debate/committee_of_public_accounts/2018-03-22/4/ Discussed on Thursday, 22 March 2018.

21 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach 4.4 ROLE OF AUDITORS AND DUE DILLIGENCE PROCEDURES 13.
The Committee recommends that the National Development Finance Agency (NDFA) undertake a review of its due diligence procedures and processes as a matter of urgency in the wake of the Carillion and Sammon liquidations and publish the results of that review.

14.
14.

In that regard, the Committee recommends that the NDFA liaise with its counterpart agencies in other jurisdictions in an effort to enhance the due diligence measures and to learn from best international practice in assessing the financial profile of prospective contractors.

15.
15.

The Committee notes that the UK Financial Reporting Council (FRC) is conducting an investigation in relation to KPMG’s audit of the financial statements of Carillion plc., under the Audit Enforcement Procedure and is considering whether the auditor has breached any relevant requirements, in particular the ethical and technical standards for auditors.
Several areas of KPMG’s work will be examined including the audit of the company’s use and disclosure of the going concern basis of accounting, estimates and recognition of revenue on significant contracts, and accounting for pensions.
The Committee recommends that consideration be given by the competent authorities in Ireland to reviewing the outcome of this UK based investigation, in view of the impact of the collapse of Carillion in this jurisdiction, and to make recommendations, as appropriate, to Government arising from that investigation.

4.5 ENGAGEMENT WITH STAKEHOLDERS 16.


The Committee recommends that all parties continue to engage in constructive dialogue in an effort to resolve the outstanding matters in relation to the subcontractors and the Schools Bundle 5 Project.

17.

The Committee recommends that the PPP Company (DIF) instruct the re- tendered contractor (Woodvale) to engage with the subcontractors who have supplied materials and completed works.
22 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach 4.6 CONTINGENCY FUND 18.

In evidence, the Committee heard that as many as 400 subcontractors may be impacted with outstanding payments estimated at €14million.
The Committee recommends that Government establish a contingency fund to ensure that the subcontractors who have completed works to the required standards and supplied both materials and services are paid accordingly to ensure the viability of these small businesses and to protect jobs.

The Committee makes this recommendation, in this instance, as it is the opinion of the Committee that subcontractors must be paid for works completed on a public infrastructure project commissioned by the State.
4.7 DEBATE 19.

The Committee recommends that this report and the issues raised therein be debated in both Houses of the Oireachtas.

23 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach 24 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach APPENDIX 1 Orders of Reference a.
Functions of the Committee – derived from Standing Orders [DSO 84A; SSO 70A] (1) The Select Committee shall consider and report to the Dáil on— (a) such aspects of the expenditure, administration and policy of a Government Department or Departments and associated public bodies as the Committee may select, and (b) European Union matters within the remit of the relevant Department or Departments.
(2) The Select Committee appointed pursuant to this Standing Order may be joined with a Select Committee appointed by Seanad Éireann for the purposes of the functions set out in this Standing Order, other than at paragraph (3), and to report thereon to both Houses of the Oireachtas.
(3) Without prejudice to the generality of paragraph (1), the Select Committee appointed pursuant to this Standing Order shall consider, in respect of the relevant Department or Departments, such— (a) Bills, (b) proposals contained in any motion, including any motion within the meaning of Standing Order 187, (c) Estimates for Public Services, and (d) other matters as shall be referred to the Select Committee by the Dáil, and (e) Annual Output Statements including performance, efficiency and effectiveness in the use of public monies, and 25 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach (f) such Value for Money and Policy Reviews as the Select Committee may select.
(4) The Joint Committee may consider the following matters in respect of the relevant Department or Departments and associated public bodies: (a) matters of policy and governance for which the Minister is officially responsible, (b) public affairs administered by the Department, (c) policy issues arising from Value for Money and Policy Reviews conducted or commissioned by the Department, (d) Government policy and governance in respect of bodies under the aegis of the Department, (e) policy and governance issues concerning bodies which are partly or wholly funded by the State or which are established or appointed by a member of the Government or the Oireachtas, (f) the general scheme or draft heads of any Bill, (g) any post-enactment report laid before either House or both Houses by a member of the Government or Minister of State on any Bill enacted by the Houses of the Oireachtas, (h) statutory instruments, including those laid or laid in draft before either House or both Houses and those made under the European Communities Acts 1972 to 2009, (i) strategy statements laid before either or both Houses of the Oireachtas pursuant to the Public Service Management Act 1997, (j) annual reports or annual reports and accounts, required by law, and laid before either or both Houses of the Oireachtas, of the Department or bodies referred to in subparagraphs (d) and (e) and the overall performance and operational results, statements of strategy and corporate plans of such 26 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach bodies, and (k) such other matters as may be referred to it by the Dáil from time to time.
(5) Without prejudice to the generality of paragraph (1), the Joint Committee appointed pursuant to this Standing Order shall consider, in respect of the relevant Department or Departments— (a) EU draft legislative acts standing referred to the Select including the Committee under Standing Order 114, compliance of such acts with the principle of subsidiarity, (b) other proposals for EU legislation and related policy issues, including programmes and guidelines prepared by the European Commission as a basis of possible legislative action, (c) non-legislative documents published by any EU institution in relation to EU policy matters, and (d) matters listed for consideration on the agenda for meetings of the relevant EU Council of Ministers and the outcome of such meetings.
(6) Where a Select Committee appointed pursuant to this Standing Order has been joined with a Select Committee appointed by Seanad Éireann, the Chairman of the Dáil Select Committee shall also be the Chairman of the Joint Committee.
(7) The following may attend meetings of the Select or Joint Committee appointed pursuant to this Standing Order, for the purposes of the functions set out in paragraph (5) and may take part in proceedings without having a right to vote or to move motions and amendments: (a) Members of the European Parliament elected from constituencies in Ireland, including Northern Ireland, (b) Members of the Irish delegation to the Parliamentary Assembly of the Council of Europe, and (c) at the invitation of the Committee, other Members of the 27 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach European Parliament.
(8) A Select Committee appointed pursuant to this Standing Order may, in respect of any Ombudsman charged with oversight of public services within the policy remit of the relevant Department or Departments, consider— (a) such motions relating to the appointment of an Ombudsman as may be referred to the Committee, and (b) such Ombudsman reports laid before either or both Houses of the Oireachtas as the Committee may select.

b.
b.

Scope and Context of Activities of Committees (as derived from Standing Orders) [DSO 84; SSO 70] (1) The Joint Committee may only consider such matters, engage in such activities, exercise such powers and discharge such functions as are specifically authorised under its orders of reference and under Standing Orders; and (2) Such matters, activities, powers and functions shall be relevant to, and shall arise only in the context of, the preparation of a report to the Dáil and/or Seanad.
(3) (4) (5) The Joint Committee shall not consider any matter which is being considered, or of which notice has been given of a proposal to consider, by the Committee of Public Accounts pursuant to Standing Order 186 and/or the Comptroller and Auditor General (Amendment) Act 1993; and any matter which is being considered, or of which notice has been given of a proposal to consider, by the Joint Committee on Public Petitions in the exercise of its functions under Standing Orders [DSO 111A and SSO 104A].
The Joint Committee shall refrain from inquiring into in public session or publishing confidential information regarding any matter if so requested, for stated reasons given in writing, by— (a) a member of the Government or a Minister of State, or (b) the principal office-holder of a body under the aegis of a Department or which is partly or wholly funded by the State or established or appointed by a member of the 28 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach (6) Government or by the Oireachtas: Provided that the Chairman may appeal any such request made to the Ceann Comhairle / Cathaoirleach whose decision shall be final.
It shall be an instruction to all Select Committees to which Bills are referred that they shall ensure that not more than two Select Committees shall meet to consider a Bill on any given day, unless the Dáil, after due notice given by the Chairman of the Select Committee, waives this instruction on motion made by the Taoiseach pursuant to Dáil Standing Order 28.

The Chairmen of Select Committees shall have responsibility for compliance with this instruction.
29 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach APPENDIX 2 Members of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach Deputies: John McGuinness (FF) (Chairman) Peter Burke (FG) Joan Burton (Lab) John Deasy (FG) Pearse Doherty (SF) Michael McGrath (FF) Paul Murphy (Sol- PBP) Senators: Gerry Horkan (FF) (Vice-Chairman) Paddy Burke (FG) Rose Conway-Walsh (SF) Kieran O’Donnell (FG) 30 Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach APPENDIX 3 Links to Official Meeting Transcripts Transcripts of all Committee Meetings can be accessed at the following links: 3 July 2018 – Meeting of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach: (National Development Finance Agency) https://data.oireachtas.ie/ie/oireachtas/debateRecord/joint_committee_on_finan ce_public_expenditure_and_reform_and_taoiseach/2018-07- 03/debate/mul@/main.pdf 5 July 2018 – Meeting of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach (Impacted Construction Subcontractors): https://data.oireachtas.ie/ie/oireachtas/debateRecord/joint_committee_on_finan ce_public_expenditure_and_reform_and_taoiseach/2018-07- 05/debate/mul@/main.pdf 26 July 2018 – Meeting of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach (National Development Finance Agency and Department of Public Expenditure and Reform) https://data.oireachtas.ie/ie/oireachtas/debateRecord/joint_committee_on_finan ce_public_expenditure_and_reform_and_taoiseach/2018-07- 26/debate/mul@/main.pdf 31