the German experience

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he European t initiative of the OECD and t A joint Union, principally financed by the EU The Development of a National PPP Unit: the German Experience Bernhard Müller Federal Ministry of Finance

1 he European t initiative of the OECD and t A joint Union, principally financed by the EU The Development of a National PPP Unit: the German Experience Bernhard Müller Federal Ministry of Finance Germany bernhard.mueller@bmf.bund.de Regional Conference on Concessions and Public-Private Partnerships Zagreb 3-4 December 2009 OECD Regional Conference on PPP and Concessions Zagreb, 3-4 December 2009 The development of a national PPP Unit: the German experience Bernhard Müller Federal Ministry of Finance Germany bernhard.mueller@bmf.bund.de Slide 2 1

2 What is PPP? Contractual agreement on Planning + Building + Financing + Operation (+ Post-contract life) between public and private partners PPP sectors: construction, infrastructure Slide 3 PPP market structure in Germany More PPP More private capital for public tasks More cos. in the provision of public services Framework More/bigger projects Laws Regulations Models Admin. building Transport Education & Research Defence Health Slide 4 Municipal supply & disposal Energy IT 2

3 History of PPP at federal level in Germany Oct 2003 PPP federal study published Dec 2003 Steering Committe: recommendations for framework conditions Sep 2005 PPP Acceleration Act comes into force Sep 2006 Conference of State Finance Ministers decision: standard guidelines on economic feasibility examinations Sep 2007 Sep 2008 Federation/federal states working committee and Federal Ministry of Finance publish recommendations on PPP in the federal budget system Publication in the EU Official Journal: Sale of shares in the holding company of ÖPP Deutschland AG Jan 2009 Operational start of ÖPP Deutschland AG / Reorganisation within Federal Government Jan 2009 First meeting of the Federal and State Government Network Nov 2009 Deadline for the submission of bids for an additional 9.9% stake to the private sector Slide 5 Progress of framework legislation on federal level Foreign trade Foreign Trade Act O O Private investment Investment Act O Budget PPPs Acceleration Act O Health Social affairs Taxes PPPs Acceleratio Act O Procurement PPPs Acceleration Act Act against Restraints of Competition O O Private finance of road-building PPPs Acceleration Act Act on the private construction and financing of federal highways O O Financial statements Act to Modernise Accounting Law O Slide 6 3

Federal PPP organisation in 2008 Ministry of Transport Ministry of Economics Ministry of Finance Ministry of Defence Construction Transport Civil Defence Task Force Project working group on PPP g.e.b.

4 Federal PPP organisation in 2008 Ministry of Transport Ministry of Economics Ministry of Finance Ministry of Defence Construction Transport Civil Defence Task Force Project working group on PPP g.e.b.b. Roads Federal states East West Rail, sea, air Deges VIFG Deges = Deutsche Einheit Fernstraßenplanungs- und -bau GmbH VIFG = Verkehrsinfrastrukturentwicklungsgesellschaft mbh g.e.b.b. = Gesellschaft für Entwicklung, Beschaffung und Betrieb mbh Slide 7 Lessons learned It is desirable to have a central consulting service for public-sector clients in all PPP sectors, which serves as a national PPP unit. It is essential that individuals from the private and public sectors come together in the consulting process. The majority of public-sector clients are more apt to abandon their reticence towards PPP if they have access to individual, neutral and credible project advice. They will not do so simply because of a greater depth of information about PPP in networks. An administrative unit at the Finance Ministry must direct the consulting service s work and assess and guide the projects from an economic point of view. It is vital that the interested federal states and local authorities take part in the consulting process formally and materially, on a voluntary basis. They should also be informally involved in the checking process. The quickest implementation of PPP in all sectors, regions and local authorities will be achieved if all the public-sector stakeholders work together willingly. Slide 8 4

b. Deges Slide 9 Structural improvement of public sector: Finance Ministry: Setting tasks for PD groundwork to improve PPP framework

5 Federal PPP organisation in 2009 Ministry of Transport Ministry of Economics Ministry of Finance Ministry of Defence A 21 I A 2 V C 6 II B 6 PDPT M I 1 Transport Construction VIFG g.e.b.b. Deges Slide 9 Structural improvement of public sector: Finance Ministry: Setting tasks for PD groundwork to improve PPP framework conditions. Systemised PPP audit procedure at national level. Competition for funds available globally for investments in infrastructure. Therefore: Enhance international presence of Germany s PPP initiative. Slide 10 5

Creating 2007 Informal circle of companies analyses problems and suggests solutions. Dialogue with government representatives about political acceptance and feasibility.

Combined tender with the following selected as procedure: - Framework agreement and - Bid for private participation 2008 Search for contracting authorities: Search for partners from public sector to

6 Creating 2007 Informal circle of companies analyses problems and suggests solutions. Dialogue with government representatives about political acceptance and feasibility. 12/2007 Cabinet decision to establish a PPP advisory company for all sectors. Combined tender with the following selected as procedure: - Framework agreement and - Bid for private participation 2008 Search for contracting authorities: Search for partners from public sector to join framework agreement Information about framework agreement and search for partners publicised: - Federal states informed - Central municipal associations informed - Survey interest among all federal level contracting authorities - PR work (website, participation at trade fairs, press) 09/2008 Publication in the EU Official Journal: Sale of shares in the holding company 11/2008 PD s first general meeting (founders meeting) and first supervisory-board meeting 01/2009 Operational start of ÖPP Deutschland AG / Reorganisation within the Federal Government 09/2009 Tendering procedure for the sale of further shares in the holding company 11/2009 Deadline for the submission of bids to buy shares in the holding company Slide 11 PD is the central institution for the promotion of PPP in Germany. PD is itself a PPP project. All parties interested in the development of the PPP market in Germany had opportunity to take stake in PD. Slide 12 6

7 Organisation and ownership structure as of January 2009 Public-sector shareholders Private-sector shareholders Federation Fed. states, municipalities PPP sectors 35 % Holding company 65 % 60 % 40 % General meeting Supervisory Board Management board ÖPP Deutschland AG Slide 13 Combined tendering Tender process Framework agreement ÖPP Deutschland AG and public sector Stake in holding company private sector involvement Selection criteria: Performance Reliability Award criteria: Price of stake Quality of participation in core work C(2007) 6661 COMMISSION INTERPRETATIVE COMMUNICATION on the application of Community law on Public Procurement and Concessions to institutionalised PPP (IPPP), 5 February 2008 Slide 14 7

Folie 15 Avoiding the adviser / tenderer problem and conflicts of interest Avoiding the adviser / tenderer conflict and direct holdings through the interposition of the holding company and avoiding

from Partnerschaften Deutschland for project work As the holding company is not dedicated to a specific purposes and is not dominated by one company (or industry) either, steps have been taken to

8 Folie 15 Avoiding the adviser / tenderer problem and conflicts of interest Avoiding the adviser / tenderer conflict and direct holdings through the interposition of the holding company and avoiding overlap between representatives of private shareholders and bodies or employees of Partnerschaften Deutschland Delegation of staff from the private shareholders of the holding company are excluded from Partnerschaften Deutschland for project work As the holding company is not dedicated to a specific purposes and is not dominated by one company (or industry) either, steps have been taken to ensure that the operative activities of Partnerschaften Deutschland cannot be influenced by the particular interests of its shareholders Slide 15 Our groundwork: Establishment of a project pipeline. A range of contracting authorities have given a (non-binding) indication of their willingness to commission PD to provide consulting services in connection with projects already in the planning stage. Volume of investment: approx. 500m Slide 16 8

Broad public-sector participation. 10 federal states over 80 municipalities and over 30 further contracting authorities signed framework agreement.

Office for Building and Regional Planning in Berlin Institute for Federal Real Estate 3 Site for Federal Ministry of Health in Berlin Institute for Federal Real Estate 4 Duispont bridge Town of

9 Broad public-sector participation. 10 federal states over 80 municipalities and over 30 further contracting authorities signed framework agreement. Slide 17 Framework agreement s project pipeline Project Contracting authority: 1 Site for Federal Ministry of Education and Research in Berlin Institute for Federal Real Estate 2 Site for Federal Office for Building and Regional Planning in Berlin Institute for Federal Real Estate 3 Site for Federal Ministry of Health in Berlin Institute for Federal Real Estate 4 Duispont bridge Town of Duisburg 5 Leonberg tunnel Leonberg District Town 6 Federal Foreign Office IT project Federal Foreign Office 7 New laboratory and office building Helmholtz Centre Berlin for Materials and Energy 8 New research institution Schleswig-Holstein 9 German Meteorological Service Center Federal Ministry of Transport, Building and Urban Affairs 10 Project D115 uniform authority telephone number Federal Ministry of the Interior 11 Biomass Research Centre in Leipzig German Biomass Research Centre 12 Federal Police Headquarters Institute for Federal Real Estate 13 Site for the headquaters of Federal Cultural Foundation Francke Foundations Slide 18 9

Wide-ranging offer from future shareholders obtained to support groundwork of ÖPP-Deutschland AG.

10 Results of tender: Industry participates through more than 70 companies and associations with approx. 7m. Clearly achieved objective of gaining broad shareholding encompassing all PPP sectors despite financial i crisis. i SMEs strongly represented. Wide-ranging offer from future shareholders obtained to support groundwork of ÖPP-Deutschland AG. Slide 19 ÖPP Deutschland AG s areas of work Contracting authority Standardisation project advice di Phasebased Projectspecific advice on idiid individual issues Framework agreement ÖPP Deutschland AG Process optimisation Involving SMEs Developing areas of use Knowledge transfer Slide 20 = Project work = Core work 10

Current consulting gprojects: New Federal Ministry of Education and Research building in Berlin

Institute of Marine Sciences (IFM-GEOMAR) in Kiel (mainly construction) New building for the

contracts for PPP groundwork: Helpdesk for the entire public sector Evaluation and refinement

schools projects Project database PPP in IT and services PPP and day-care centres for children

11 Current consulting gprojects: New Federal Ministry of Education and Research building in Berlin University Medical Center Schleswig-Holstein (construction / extension / renovation) Leibniz Institute of Marine Sciences (IFM-GEOMAR) in Kiel (mainly construction) New building for the Dresden State Operetta Regional road construction in North Rhine-Westphalia Slide 21 Current contracts for PPP groundwork: Helpdesk for the entire public sector Evaluation and refinement of financing models for PPP projects in the context of the financial crisis Evaluation of schools projects Project database PPP in IT and services PPP and day-care centres for children PPP for public-sector lighting projects PPP for hospitals PPP and local / regional road construction. Slide 22 11

Helpdesk Result 2009 24 Enquiries i 50 % project specific advise on individual issues concerning data base framework agreement financial modelling 50 % phase based

tests 2 orders for a market test Conclusions: Helpdesk has success duration of each PPP phase not less than several months first results not before end of 2010 Slide 23

sector: 1. Federation and federal states identify need for groundwork 2. Federal Government obtains an opinion from ÖPP Deutschland AG 3.

12 Helpdesk Result Enquiries i 50 % project specific advise on individual issues concerning data base framework agreement financial modelling 50 % phase based project advise against 5 projects for 5 projects reasons: issues: not suitable requirement specification less volume project design unefficient 2 offers for PPP aptitude tests 2 orders for a market test Conclusions: Helpdesk has success duration of each PPP phase not less than several months first results not before end of 2010 Slide 23 Federal and State Government PPP Network Procedure in the Federal and State t Government PPP Network under framework agreement between ÖPP Deutschland AG and public sector: 1. Federation and federal states identify need for groundwork 2. Federal Government obtains an opinion from ÖPP Deutschland AG 3. Finance Ministry agrees proposed course of action with other ministries 4. Proposal for contracting to ÖPP Deutschland AG is put forward to the Federal and State Government PPP Network 5. Contract is awarded Slide 24 12

13 Annual development of the volume of investment in PPP projects (building & road construction) in million since projects 27 projects projects projects projects projects 2 projects / Sep 09 Slide 25 Source: ÖPP Deutschland AG Development of the annual number of PPP projects (building & road construction) / Sep 09 5 projects consulted by Slide 26 Source: ÖPP Deutschland AG 13

Second Annual Meeting on Public-Private Partnerships OECD Conference Centre, Paris, 5-6 March 2009

Bernhard Müller Second Annual Meeting on Public-Private Partnerships OECD Conference Centre, Paris, 5-6 March 2009 Session 1: PPP units, overviews for Germany Slide 1 What is PPP? Agreement on Planning