that these standards can only be delivered effectively by devolution of responsibility to the frontline;

Transcription

1 UK GOVERNMENT RESPONSE TO THE EUROPEAN COMMISSION S GREEN PAPER ON PUBLIC-PRIVATE PARTNERSHIPS AND COMMUNITY LAW ON PUBLIC CONTRACTS AND CONCESSIONS, MAY 2004 The UK Government welcomes the debate on the suitability of the existing Community framework on specific characteristics of PPPs and the valuable contribution of the European Commission s Green Paper on public-private partnerships (PPPs) and community law on public contracts and concessions to this debate. The UK Government s objective is to deliver world-class public services whilst laying the foundation for a flexible and productive economy. Achieving that objective requires the right public infrastructure through investment, accompanied by a reform of public services, and a pragmatic, flexible approach to how they are delivered. The UK PPP/Private Finance Initiative programme plays an important role in the delivery of the Government s investment plan for public services. The UK Government's approach to public service reform is based on four key principles: that it is the Government s job to set standards, designed to ensure that citizens have the right to high quality services wherever they live; that these standards can only be delivered effectively by devolution of responsibility to the frontline; that more flexibility is required for public service organisations to deliver the diversity of service provision needed to respond to the wide range of customer aspirations; that public services need to offer expanding choice for the customer. The current UK approach to PPPs is based on equity, efficiency and accountability; ensuring that we secure the most cost effective infrastructure over the long term. Effective competition and a flexible approach have an essential role to play in ensuring the delivery of public service investment through PPPs meets these criteria. The UK believes that there is an important Community role in: simplifying, clarifying and modernising the current EC legal framework for public procurement through two new directives on public works and utilities; policing the Single Market and competition rules which apply to the procurement of public services The UK also recognises the value of disseminating best practice and guidance at Community level, as a catalyst in ensuring that PPPs in Member States are developed in a transparent and competitive manner. However it remains unconvinced of the value to be 1

2 added by a common legislative framework and obligations for PPPs at EU level. Currently Member States are in the process of implementing the two new procurement directives (2004/18/EC and 2004/17/EC), which recognises concepts discussed in the Green Paper e.g. competitive dialogue. Separate legislation to create a uniform approach in the EU would result in a resource intensive task with compliance burdens for businesses, reducing the competitive market appetite for competing for public service contracts, as well as undermining the flexibility needed to develop successful PPPs within the context of national circumstances. A cautious approach should be taken to expanding the Community s role in setting the legislative framework for PPPs. The Green Paper does not put forward a compelling case that an enhanced Community role would provide greater clarity and greater benefit for Member States and their citizens. Deleted: 2

3 UK RESPONSE TO QUESTIONS SUBMITTED FOR DISCUSSION (Q1) What types of purely contractual PPP set-ups do you know of? Are these setups subject to specific supervision (legislative or other) in your country? 1. The most commonly used form of contractual PPP in the UK is the Private Finance Initiative (PFI), where the public sector contracts to purchase quality services on a longterm basis so as to take advantage of the private sector management skills incentivised by having private finance at risk. This includes concessions and franchises, where a private sector partner takes on the responsibility for providing a public service, including maintaining, enhancing or constructing the necessary infrastructure. 2. There is no specific law for PPPs in the UK and where appropriate PPPs will be subject to EC procurement rules following the UK Regulations implementing the public procurement directives. Where the procurement directives do not cover PFI projects, such as for service concession contracts, these projects will be advertised in OJEU. 3. UK PPPs are managed through the dissemination of best practice and guidance. Contract standardisation is rigorously enforced to reduce the burden of bid costs, helping ensure the promotion of competition and transparency. A value for money appraisal is also carried out at three key stages of the procurement process with the aim of ensuring that there is no inherent bias between procurement options, and that the flexibility exists to choose alternative procurement routes where they offer better value for money. This ensures in particular that the most economically advantageous procurement option is undertaken. 4. The National Audit Office (NAO) and other UK audit bodies are the primary bodies charged with assessing the Government s PFI programme. In this capacity they audit procurement policy, the conduct of procurement and the value for money of selected projects. The Public Accounts Committee (PAC) frequently follows up on reports produced by the NAO placing Government policy under parliamentary scrutiny. (Q2) In the Commission s view, 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. Do you share this point of view? If not, why not? 5. The competitive dialogue procedure will provide a suitable framework for the award of such contracts, as indeed it was designed to do, replicating many of the features of a competitive negotiated procedure. The Commission, in the Green Paper points to the flexibility of the competitive dialogue procedure, which it was instrumental in ensuring. 3

4 The successful application of the procedure is dependent upon the broad interpretation of this flexibility. 6. In contrast, in paragraph 24, the Commission gives an unusually narrow interpretation of the circumstances in which a competitive negotiated procedure can be used for Works contracts. The UK believes that the narrow interpretation of provisions, whether concerning the use of the existing negotiated procedure for works contracts or the new competitive dialogue procedure would unnecessarily hamper good procurement of PPPs without delivering benefits in terms of transparency, openness or minimising barriers to trade. (Q3) In the case of such contracts, do you consider that there are other points, apart from those concerning the selection of the tendering procedure, which may pose a problem in terms of Community law on public contracts? If so, what are these? Please elaborate. Deleted: 7. No, we are not aware of any problems. (Q4) Have you already organised, participated in, or wished to organise or participate in, a procedure for the award of a concession within the Union? What was your experience of this? 8. Yes, both works and services concession contracts have been awarded as part of the UK's PFI/PPP programme. The award of these contracts have followed a fully competitive route in line with UK policy of achieving value for money and following the EC Treaty and the EC procurement rules, where appropriate. (Q5) Do you consider that the current Community legal framework is sufficiently detailed to allow the concrete and effective participation of non-national companies or groups in the procedures for the award of concessions? In your opinion is genuine competition normally guaranteed in this framework? 9. The UK experience has been that the provisions of the Treaty regarding nondiscrimination, together with UK national requirements of obtaining value for money and contract standardisation have been sufficient to ensure genuine competition and participation from non-national companies. Concessions have been awarded to nonnational companies such as Skanska (Swedish) and Bouygues (French). (Q6) In your view, is a Community legislative initiative, designed to regulate the procedure for the award of concessions, desirable? 10. While the UK Government agrees with the Commission s intention to bring service concessions into the existing procurement framework, separate legislation in this area would be redundant. As UK procuring authorities are required to adopt a fully competitive award procedure (principles of transparency and equal treatment of tenders) for concessions, the current situation has not caused practical problems in the UK context. Separate legislation would also have the drawbacks of causing legal uncertainty as to which set of rules would apply where, taking a long time to negotiate and 4

5 implement, during which time the PPP market would have developed and changed considerably. 11. However the UK does not strongly support the differential treatment of works and service concession contracts and if there were to be any legislative action, it could be sensible to align the provisions for works and services concession contracts. This would be achieved more effectively by amending the public sector public procurement directive, rather than by introducing a new legislative measure. (Q7) More generally, if you consider that the Commission needs to propose new legislative action, in your opinion are there objective grounds for such an act to cover all contractual PPPs, irrespective of whether these are designated as contracts or concessions, to make them subject to identical award arrangements? 12. The flexibility that drives innovation afforded at present would be hindered if all contractual PPPs were subject to identical award rules. The need for distinction between contracts and concession contracts is essential, as in the former, the economic operator is fully exposed to market forces, which is not necessarily the case for concessionaires. Therefore a moderate approach needs to be taken in the award of concession contracts and on the award of contracts by concessionaires, not themselves subject to the Directive. As already mentioned this would be achieved more effectively by amending the public sector public procurement directive, rather than by introducing a new legislative framework (Q6). (Q8) In your experience, are non-national operators guaranteed access to private initiative PPP schemes? In particular, when contracting authorities issue an invitation to present an initiative, is there adequate advertising to inform all the interested operators? Is the selection procedure organised to implement the selected project genuinely competitive? 13. The UK is not aware of any particular problems caused by selection procedures in the UK as they are designed to observe the Treaty rules and promote competition. 14. The UK does not normally undertake private initiative PPP schemes. (Q9) In your view, what would be the best formula to ensure the development of private initiative PPPs in the European Union, while guaranteeing compliance with the principles of transparency, non-discrimination and equality of treatment? 15. Private initiative PPPs are already subject to the principles of transparency, nondiscrimination and equality of treatment. The best formula for ensuring their further development is for the Commission to continue to play its role as catalyst, transferring knowledge of best practice in PPP structuring and procuring. 5

6 (Q10) In contractual PPPs, what is your experience of the phase which follows the selection of the private partner? 17. UK experience of the phase following the selection of the private partner has not shown up any significant problems and PFI market participants and public authorities are generally content with existing procedures. 18. The phase following the selection of the private partner, prior to contract award, provides the contracting authority with the opportunity to discuss and develop precise solutions to meet its output requirements. The focus on public sector output requirements and private sector total costing in delivering those outputs is an integral part of developing PPPs, as both parties are required to focus on the long-term need for and implications of investment. 19. By defining services as outputs, the public sector can take advantage of the private sector s capacity to innovate in competing to meet those requirements. This allows the public sector to harness some of the increased efficiency that can come from contestability in service delivery. Balancing competitiveness and transparency with the need to maintain bid costs at a manageable level is imperative in order to make it more appealing to potential bidders to enter the competition process. Any change to this process would have a negative impact on attaining best value for money by procuring [contracting] authorities, and any increase in bid costs, as a result would tend to damage rather than improve access by private operators and competition for procurements. (Q11) Are you aware of cases in which the conditions of execution including the clauses on adjustments over time may have had a discriminatory effect or may have represented an unjustified barrier to the freedom to provide services or freedom of establishment? If so, can you describe the type of problems encountered? 20. Paragraph 46 refers to the need to fix the length of contracts to ensure that the private partners investment is paid off and a reasonable return on the invested capital is secured. The lengths of PPP contracts should be set to take into account the benefits of whole life costing of assets provided, rather than to ensure a set level of financial reward for the private sector. As a result, fixing contract lengths to financial returns would diminish the flexibility individual PPPs require, and diminish their value for money for the public sector. 21. We agree strongly with the Commission s statement advocating the evolution of PPP relationships, and we would reiterate the need for flexibility in contracts to allow genuine partnership working and innovation over the contract period. Two key factors in the development of PPPs: structure/clauses of the contracts and the advertisement of the contract ensure that there are no barriers to effective competition. Community level control over the relationship aspect of PPPs is not pertinent as the level of advancement appropriate is best determined by the circumstances of individual projects. 6

7 (Q12) Are you aware of any practices or mechanisms for evaluating tenders which have a discriminatory effect? 22. No. Tenders are evaluated in accordance with community law and Treaty principles. 23. The current UK approach to PPPs is based on equity, efficiency and accountability; ensuring that we secure the most cost effective infrastructure over the long term. The National Audit Office (NAO) and other audit bodies, and the Public Accounts Committee (PAC) ensure accountability and effective competition by investigating, reporting and making recommendations based on their investigations of significant individual PFI projects. They also conduct systematic reviews of important PFI policy areas or other aspects of the PPP/PFI programme. Deleted: (Q13) Do you share the Commission s view that certain step-in type arrangements may present a problem in terms of transparency and equality of treatment? Do you know of other standard clauses which are likely to present similar problems? 24. The UK Government does not believe that step-in arrangements present problems in terms of transparency and equality of treatment; on the contrary, they are intrinsically linked to the rationale for PPP. The fundamental premise behind a PPP is the transfer of risk to the private sector. With the private sector s capital at risk and not just its profit, there is a powerful incentive to build and maintain assets so that high service standards are delivered throughout the contract life with assets more likely to be built on time, as payments only begin when they are available. Contractors also have the incentive to build with an asset s whole-life cost in mind, as it is they who will bear those costs during the operational phase of the project. Deleted: 25. Step-in rights form an integral part of a funders security over any project, allowing the private sector consortium as a whole to become comfortable with placing their finance at risk to service delivery. As such they are an integral part of PPP, and of the approach a bidding consortium proposes to meet service delivery requirements over the long term. Such rights are for use in exceptional circumstances and to ensure that services continue to be provided. Where financial institutions exercise step-in rights this would not lead to any undue discrimination as these arrangements do not contradict the edicts of transparency and equality of treatment, and the financiers involved will act to secure the most economically advantageous proposal to continue meeting service delivery requirements. Step-in rights are established in the contract when competed and it is not the contracting authority that is responsible for exercising these rights. If this security were not to be provided, it would jeopardise the participation of financial institutions. (Q14) Do you think there is a need to clarify certain aspects of the contractual framework of PPPs at Community level? If so, which aspects should be clarified? 7

8 26. No, we do not feel that are any gains from further Community level intervention on aspects of contractual PPPs. (Q15) In the context of PPPs, are you aware of specific problems encountered in relation to subcontracting? Please explain. 27. No, we are not aware of problems. (Q16) In your opinion does the phenomenon of contractual PPPs, involving the transfer of a set of tasks to a single private partner, justify more detailed rules and/or a wider field application in the case of the phenomenon of subcontracting? 28. No. It should not be necessary to interfere in the relationship between the private sector partner and its sub-contractors. 29. Treaty principles are observed when all PPP/PFI contracts are awarded to a project company by a public sector contracting body. Any subsequent sub-contracting conducted by the private sector entities should not be subject to further regulation beyond the initial competition. The private sector entity should be free to operate on a commercial basis without prejudice to public sector procurement rules. The Commission statement in Paragraph 52 private partners are free to sub-contract part or all of a public contract supports this view and we do not feel there are any gains from applying further rules to contractual PPPs and subcontracting. (Q17) In general, do you consider that there is a need for a supplementary initiative at Community level to clarify or adjust the rules on subcontracting? 30. No. Proper application of existing rules should enable effective competition to operate, and it should not be necessary to have extra regulation. (Q18) What experience do you have of arranging institutionalised PPPs and in particular, in the light of this experience, do you think that Community law on public contracts and concessions is complied with in such cases. If not, why not? 31. The NATS (National Air Traffic Services) PPP would probably be regarded by the European Commission as an institutionalised PPP. The UK Government sold a controlling shareholding in NATS to the Airline Group (a consortium of seven airlines) in July 2001, with BAA also taking a minority shareholding in Community law on public contracts and concessions was not applicable to the process for selecting the strategic partner for NATS. However, the process for selecting the Airline Group followed the principles of freedom of establishment, i.e. the Airline Group were selected following an open competitive tendering process and on the basis that their offer was the most economically advantageous when assessed against pre-determined selection criteria. 8

9 (Q19) Do you think that an initiative needs to be taken at Community level to clarify or define the obligations of the contracting bodies regarding the conditions requiring a call for competition between operators potentially interested in an institutionalised project? If so, on what particular points and in what form? If not, why not? 32. Paragraphs could potentially be interpreted as covering a very wide variety of institutions and contractual arrangements and we regard it as important that any proposals for change very clearly define the circumstances in which they would apply. Bearing in mind that caveat, we regard it as important in circumstances where the framework cannot be described as a procurement that we should be free to choose a PPP partner without having to negotiate with other firms or to auction involvement in the PPP company. 33. However, we have read the Green Paper as primarily concerned about a Government entering a JV which then participates in a procurement, on the grounds that it leads to a favoured bid. We recognise that this could be an area for concern but would be reluctant to approve of any initiative at Community level to deal with what the Green Paper refers to as "institutionalised PPPs" outside of the normal procurement framework. In our view, if an "institutionalised PPP" is accompanied by the award of a contract then the relevant procurement regime (whether works, services, supply etc) should apply and should provide safeguards against discrimination, unequal treatment etc. If the procurement rules do not apply to the conferring of a task upon the JV e.g. because it is a sale of an undertaking to the PPP company rather than a procurement of a service then, in our view, general Treaty principles (e.g. non-discrimination, freedoms of movement of capital and services) should be sufficient to guard against abuse by Member States. (Q20) In your view which measures or practices act as barriers to the introduction of PPPs within the European Union? 34. Uncertainty, whether about legal aspects or changes to contractual practices, creates market difficulties and therefore slows down the development of PPPs. The Commission will need to consider whether the impact of any proposals it might make would reduce uncertainty, or have the potential to increase it. It is also important to ensure that inflexibility does not become a barrier to the adoption of PPPs within the European Union, and particularly their adaptation to national circumstances. (Q21) Do you know of other forms of PPPs which have been developed in countries outside the Union? Do you have examples of good practice in this framework which could serve as a model for the Union? If so, please elaborate. 35. There are a wide variety of PPP-type contracts or institutions employed both within and outside the Union. Many structures are adapted to fit particular national circumstances or individual projects, and so they are unlikely to be very broadly 9

10 applicable standard frameworks. However, the UK has noted the successful adoption of PFI-type structures in several Australian states, and in Canada. (Q22) More generally, given the considerable investments needed in certain member states in order to pursue social and sustainable economic development, do you think a collective consideration of these questions pursued at regular intervals among the actors concerned, which would allow for the exchange of best practice would be useful? Do you consider that the commission should establish such a network? 36. Sharing of knowledge and experience of successful structures between different national circumstances would be a positive step in furthering development of PPPs in the different member states. The existing Advisory Committee on Public Contracts or the European Public Procurement Network might well be a suitable vehicle for such exchanges. 10