GREEN PAPER ON PUBLIC-PRIVATE PARTNERSHIPS AND COMMUNITY LAW ON PUBLIC CONTRACTS AND CONCESSIONS

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1 COM(2004) 327 final GREEN PAPER ON PUBLIC-PRIVATE PARTNERSHIPS AND COMMUNITY LAW ON PUBLIC CONTRACTS AND CONCESSIONS Observations by the Central PPP Unit, Department of Finance of IRELAND Introduction 1. The Central PPP Unit in the Department of Finance is responsible for leading, driving and coordinating the Public-Private Partnership process in Ireland, which is a significant element of Ireland s National Development Plan/Community Support Framework The principal role of the Central PPP Unit is to provide guidance on best practice in the appraisal and procurement of PPP projects with a particular focus on establishing and providing value for money. 2. The Central PPP Unit welcomes the Green Paper as a positive response to recent development in the European Union and as a constructive contribution by the Commission to the Initiative for Growth in relation to increased investment in infrastructure. General Comments 3. The Irish authorities are committed to the use of Public-Private Partnerships (cf Framework for Public Private Partnerships, November 2001, attached). 4. As well as continuing to develop guidance for Government and other public agencies in the use of PPPs, through the Central PPP Unit and groups established on both a cross-departmental and social partnership basis, the Irish Government has set specific targets for projects financed through Public Private Partnership. These amount to 3.6 billion in total public funding for PPPs, in addition to a target of 1.3 billion for PPPs funded by user charges over the same period, giving a total target for PPP investment of almost 5 billion by The Government has also established the National Development Finance Agency to advise public bodies on the financing of all capital projects, including PPPs, and, where appropriate, to provide financing. 5. Ireland has gained valuable experience in the use of PPP arrangements, including both public and private funding. Examples which have been procured include development and maintenance of schools, development and operation of toll roads and bridges, development and operation of environmental infrastructure, and operation of light rail. Our observations on the Green Paper are based on this experience. 6. Generally, we do not consider that there is a need for additional legislative initiatives to facilitate the use of PPPs - while ensuring the Treaty principles of equality of treatment, transparency and non-discrimination. We note that if the Commission were minded to consider such action, it would be subject to regulatory impact assessment and we would urge the Commission to ensure any such assessment would be thorough and comprehensive, having regard to the complexity of the sector.

2 Responses to Questions Question 1. In broad terms, the types of purely contractual PPPs in Ireland include: (a) Concessions, which may include a capital injection from the Exchequer towards part of the capital costs or contributions to operational costs (e.g.roads, waste treatment/recovery); (b) Design, Build, Finance and Operate (e.g. schools, colleges) (c) Design, Build and Operate (waste water treatment, water supply). There are also some service contracts, in relation to the operation of a specific asset or set of assets, for a minimum of five years. Less complex examples that are or have been used in some sectors include Design and Build, and Design, Build and Finance. It is not clear what is meant by these set-ups being subject to specific supervision (legislative or other) in Ireland. In relation to competition and public procurement, they are subject to the provisions of the Guidelines on Procurement Competitive Process (the latest version was issued by the Department of Finance in June 2004). More generally, the State Authorities (Public Private Partnership Arrangements) Act, 2002 was enacted to provide legal certainty regarding the powers of State authorities to enter into PPP arrangements for the performance of functions of the State authority. The National Development Finance Agency Act, 2002 established the Agency of the same name to advise State authorities of what are the optimal means of financing public investment projects, to advise authorities on all aspects of financing of projects by means of PPP, and where appropriate to provide financing. Question 2 At this time, we do not have a conclusive view as to whether, in the context of a purely contractual PPP, the transposition of the competitive dialogue procedure into national law will provide interested parties with a procedure which is particularly well adapted to the award of contracts designated as public contracts, while at the same time safeguarding the fundamental rights of economic operators. We consider that we do not have a sufficient basis on which to form a view at this time. We are aware that there are concerns in the private sector regarding the possible implementation of the new directive, in terms of possible difficulties with the operation of the competitive dialogue procedure and also in relation to the basis for selection of procedure. The challenge of clearly resolving all issues relating to PPPs at a sufficiently early stage could mean that the competitive dialogue may not be flexible enough to address these issues satisfactorily (as against, say, a transparent, non-discriminatory and competitive negotiated procedure). Following the transposition, we will have to consider whether the use of the competitive dialogue is so well adapted, having regard to the requirements of other policies and legislation for example, provisions for the protection of employees; and also to the requirements of private finance. (It is noted that, for certain issues, it may be feasible to resolve them at pre-tender stage but at significant additional cost to the bidders which may be a disincentive to bid and so have negative implications for the overall competitiveness of the tender process.) We note that the procedures already applied in Ireland for PPPs, in advance of the introduction of the competitive dialogue procedure, have worked well without prejudice to these fundamental rights, in our view.

3 Question 3 On the basis of our experience, we are not aware that there are any other points which may pose a problem in terms of Community law on public contracts. Question 4 The Central PPP Unit does not directly organise awards of concessions, which are the responsibility of the procuring agencies. However, the Central PPP Unit has been involved with procuring agencies in the development of procedures and the management of awarding concessions which have consistently been carried out on a competitive basis. It is clear from our experience that these arrangements generally operated satisfactorily, in terms of providing equality, transparency and competition. Question 5 On the basis of our experience, we consider that the current legal framework is satisfactory to allow concrete and effective participation of non-national companies or groups in the procedures for award of concessions. Concessions of which we are aware in Ireland have frequently been awarded to non-national companies or groups. The existing framework clearly guarantees competition, in our view. Question 6 A Community legislative initiative to regulate the procedures for awards of concessions does not appear to be desirable or necessary. Question 7 In our opinion, the Commission does not need to propose legislative action. In addition, it is our view that there are no objective grounds for any action that may be considered to cover all contractual PPPs, irrespective of whether these are designated as contracts and concessions. Identical award arrangements would not appear appropriate for such different contractual arrangements in terms of risk transfer. Question 8 We do not have sufficient experience of private initiative projects in Ireland to be in a position to comment. Question 9 We have no comment. Question 10 Our experience of the phase following the selection of the private partner, so far, is that the contractual framework has ensured the principles of equality of treatment and transparency by setting out clearly the terms and conditions for performance, without any direct or indirect discriminatory impact. It is standard practice to make the contract terms available in the descriptive documents, which terms set out clearly the distribution of risks and performance criteria. (Of course, a criterion by which the

4 value for money of the PPP bids is appraised before award of contract, generally known as the Public Sector Benchmark, is not released as this might prejudice competition as well as the optimum distribution of risks between the public and private sectors.) The duration of contracts has generally been set by reference to the requirements for remuneration of the capital and is typically 20 to 30 years. It is not clear to us why transparency would also require that the elements employed to establish the duration be communicated in the descriptive documents a clear statement of the duration would appear to be sufficient for open competition. Question 11 We are not aware of cases where the conditions of execution may have had a discriminatory effect or provided an unjustified barrier to the freedom to provide services or freedom of establishment. Question 12 We are not aware of practices or mechanisms for evaluating PPP tenders which have a discriminatory effect. The comments of the enterprises may be of more interest to the Commission in this regard. Question 13 We do not consider that step-in arrangements, as provided for in Irish PPPs, may present a problem in terms of transparency and equality of treatment. The provisions are set out clearly at the stage of competing for tender and parties are free to take part in tenders. In so far as they may be exercised in the course of a contract, having regard to the nature of the risk transfer, such arrangements are taking place between private actors. Finally, step-in arrangements, by their very nature, are effected in unforeseen circumstances and are incorporated in contracts on grounds of public policy, public security or public health because the cessation of service which could arise in the absence of step-in would pose an unacceptable risk to policy, security or health. We are unaware of other standard clauses which are likely to present similar problems. Question 14 We do not consider that there is a need to clarify certain aspects of the contractual framework of PPPs at Community level. Question 15 We are not aware of specific problems encountered in relation to subcontracting. (The issue of a project company being itself in the role of contracting body has not arisen, to our knowledge, as a relevant issue in the context of PPPs in the Irish administrative framework.)

5 Question 16 We do not consider that the phenomenon of contractual PPPs, involving the transfer of a set of tasks to a single private partner, justifies more detailed rules and/or a wider field of application in the case of subcontracting. Question 17 We do not consider that there is a need for a supplementary initiative at Community level to clarify or adjust the rules on subcontracting. Question 18 and Question 19 We do not have sufficient recent experience of institutionalised PPPs to comment on these questions. Question 20 We have not identified specific measures or practices that act as barriers to the introduction of PPPs at the European level. The complexity of PPPs as a means of procurement does, of course, present a series of challenges in terms of the skills and knowledge of the public sector, the interaction of various public policies, and the capacity of the private sector. Question 21 We are aware of developments in a number of countries outside the European Union (e.g. South Africa, Canada, Australia). In general, the PPP models are broadly similar to the kinds of structures used in the EU. However, it is not possible to apply models directly from other jurisdictions as the administrative, legal and socio-economic contexts are substantially different. Consequently, the principal lessons to be learnt in terms of good practice are relevant to the overall approach rather than to specific measures or practices. Question 22 We are open to the suggestion of collective consideration of questions relating to PPPs among the actors concerned, which would also allow for the exchange of best practice. However, if the Commission were to establish such a network, careful consideration should be given as to the appropriate lead Directorate, in so far as the questions to be considered may not be primarily questions of procurement, and other Directorates (e.g. TREN, REGIO) may also have an interest. For example, DG TREN already organises an informal PPP exchange.