PPP Bundles: Update

With the beginning of construction on Social Housing Public Private Partnership (PPP) Bundle 1 in March 2019, the PPP programme began its long road to the delivery of around 1,500 social housing units spread across three bundles.

PPPs play a notable role in the delivery of new build social housing as envisioned in Rebuilding Ireland, although the three bundles currently being progressed date back to before the publication of the plan, having been announced by then Minister for Public Expenditure Brendan Howlin TD in 2015. Envisioned as a social housing investment of €300 million, the bundles involve the partnering of government and private enterprises.

The developments, when complete, will comprise services and maintenance for the first 25 years following construction, after which they will return the assets to the Government, who will hand them over to local authorities, in prime condition. The Department of Housing, Local Government and Heritage acts as the sanctioning authority over the project, with the National Development Finance Agency (NDFA) acting as financial advisor, procuring authority and project manager.

Contracts put out to tender are for the design, build, finance and operation of the social homes, the first Irish ones to be provided under the PPP model, which has previously been utilised to deliver the construction of public projects such as schools. The contract also includes the provision of tenancy management services, which must be provided by an approved housing body (AHB), meaning that every consortium bidding for tender must have an AHB in its midst.

The PPP contract is a fixed price contract, meaning that the traditional construction standard of upfront instalments is avoided. Payments under the PPP structure are made monthly over the 25-year post-construction period and are contingent on the availability of homes and the service performance of the tendered consortium, meaning that deductions will be made from the payment if predefined standards are not met. After the 25 years, the local authority retains ownership of the homes, which are to be returned in accordance with hand back requirements set out in the contract.

Bundle 1

Bundle 1 of the PPP bundles features the building of 534 homes on six sites in Coolock, Corkagh Grange, Finglas (all in Dublin), Dunleer (Louth), Wicklow Town and Naas (Kildare). The Contract Notice for the bundle was published in May 2017, with expressions of interest submitted by five candidates. After evaluation, three of these were invited to tender. Meet the Buyer events targeted at SMEs were held in March and November 2018 in order to allow suppliers to meet with those tendering for the contract to discuss sub-contracting opportunities.

After tenders were received in July 2018, the Comhar Housing consortium was awarded the contract in March 2019. The consortium is made up of Macquarie Capital, John Sisk and Sons, Choice Housing Ireland Ltd and Oaklee Housing serves as the consortium’s required AHB. The consortium is supported by the European Investment Bank, Bank of Ireland and Korea Development Bank.

The bundle has progressed into the construction stage, with sod turnings taking place at Ayrfield in Coolock and Corkagh Grange in March and April 2019 respectively. Upon the announcement of the tender award, then Minister for Housing Eoghan Murphy TD said that the PPP model was “an important and innovative delivery mechanism within Rebuilding Ireland”. The houses are expected to be complete for 2021, although like all construction projects, it is unclear how the Covid-19 slowdown has affected this delivery date thus far.

Social Housing Bundle 2’s housing provision.

Bundle 2

Bundle 2 features the building of 465 homes in Roscommon, Waterford, Galway, Clare, Kildare and across three sites in Cork. The Contract Notice for the project was published in February 2018, with four candidates eventually shortlisted and invited to tender. A Meet the Buyer event similar to that of Bundle 1’s was held in July 2019, allowing for the tendering parties to connect with suppliers to discuss sub-contracting opportunities.

With tenders received in February 2019, the contract was awarded to the Torc Housing Partnership in November 2019. The Torc Housing Partnership is a consortium comprised of Equitix, Kajima Partnerships, JJ Rhatigan, Orbascón Huarte Lain (OHL), Derwert FM and Tuath Housing Association. Construction will be undertaken by a partnership of JJ Rhatigan and OHL, the Spanish developer currently building the National Forensic Mental Health Hospital in Portrane. Construction began immediately upon announcement of the tender award and is scheduled to take between 14-18 months depending on the site, although these estimates do also come with the Covid-19 caveats for now. The German bank Nord/LB is providing the debt funding for Bundle 2.

Tim Lucey, Chief Executive of Cork County Council, said that the Council’s collaboration with Torc for their three sites “will have a real and meaningful impact in social housing provision” in both the Cork area and nationwide.

Bundle 3

Bundle 3 will deliver circa 441 homes across sites in Sligo, Wicklow, Kildare and three sites in north Dublin. As this is the least developed of the three bundles thus far, numbers of homes are given as indicative rather than definite.

Of the six sites outlined, the largest is currently projected to be on the Shangan Road in Ballymun, Dublin. The site’s projected 100 homes are all currently designated as senior citizen homes, as are 50 of the 150 homes being built in Coolock as part of Bundle 1.

Bundle 3 is currently in the stage of initial planning for the procurement of advisory services. The NDFA’s website says that it is “intended to utilise a multi-party framework which was established for the programme for a number of the required advisory services” as was done with the first two bundles. It is said to be anticipated that the required advisors will be appointed to the project in quarter three of 2020.

Cost

The cost of the PPP programme was revealed to break down to “availability” payments of €1 million per month for the 25-year post-construction period, which breaks down to €1,900 per month per unit. These costs came under scrutiny from the opposition within the last Dáil, with Sinn Féin housing spokesperson Eoin Ó Broin TD saying they were “exorbitant” and six times the cost of standard social housing.

It has been stressed by those in support of the model that value for money is intrinsic to the work of the NDFA, who use the public sector benchmark (PSB) framework to calculate the cost of the project as if it was delivered through traditional procurement method.

The PPP model has nonetheless been referred to as “high risk” by housing experts such as University College Dublin’s Orla Hegarty. For Fine Gael, the model and the greater Rebuilding Ireland strategy presents the chance for its approach to be vindicated as it enters government once again.