SOUTH-EAST EUROPE TRANSPORT OBSERVATORY PPP Workshop, Ohrid, 22-23 March 2007 Presentation designed by, PPP Consultant the European Commission / DG Regional Policy, 2002-2006
Introduction Limited capacity of both national governments and EU/ISPA budgets finance the vast infrastructure needs in the accession countries of Central and Eastern Europe Efforts were made introduce private secr participation by encouraging PPP approaches were retained by DG Regional Policy assist in knowledge building and dissemination work in furthering the acceptance and understanding of PPP s
Role Team produced several practical/operational ols for developing PPP structures: Guidelines for successful PPP s in March 2003, and Resource Book on PPP Case studies in June 2004 Two International Workshops on PPP s were held in Brussels (July 2002 and July 2004); a set of regional training seminars in Warsaw, Budapest, Prague, Vilnius, Bucharest and Sofia throughout 2002-2004 The Guidelines assist the PPP practitioners on how identify, design and develop a PPP The Resource Book complement the Guidelines with project examples in order better understand the practical issues arising during PPP structuring and implementation process
Our Guidelines Vision for successful PPP s Aim at addressing three key issues: how support efforts increase financing options and available financial resources in Candidate Countries how support the PPP development process and ensure value for money how ensure appropriate inclusion of grant financing and adherence with EU financing objectives in PPP schemes Note: EC Guidelines are not designed be exhaustive or present a suggested common working methodology
Our Guidelines Vision for successful PPP s 1. Alternative PPP Approaches: Why PPP? Main drivers of public secr: Overcome financing shortfall in infrastructure requirements; increased efficiency in use of resources; generation of commercial value from public assets, delivery of improved quality services the general public, etc Benefits of private secr: accelerated project implementation; reduced whole life costs; better risk allocation; enhanced public secr management; performance incentives; additional revenues A successful PPP requires an active partnership and early identification of each parties objectives and needs PPP is an evolving concept. There is no unique model but it must be suited and tailored each specific situation and partners EC interpretation: no specific definition of PPP but specific rules governing procurement and operating structures. All types must adhere the rules and spirit of the EC Treaty
2. Legal and Regulary Framework PPP s are defined and governed by a complex interaction of national and local legislation and specific project contractual documents EC involvement during the association/accession process add the EU Acquis Communitaire and certain conditionalities the existing legal environment As a first step, a legal due diligence is crucial define national and local constraints PPP s and their forms. EU Member States experience indicate a need for creation of PPP support structures (PPP Task Force or PPP Knowledge / Excellence Centres) and structural changes. Institutional issues: successful PPP s require strong and sustained political commitment - politicians must be realistic about what PPP can achieve Must include the civil society the PPP consultation process in order ensure the PPP is influenced from both p and botm
Legal Hierarchy
EU Policies: Ensure Open Market Access: Fair and open competition and Transparent Public Procurement procedures (Refer EU Public Procurement Directive and its principles: full competition, nondiscrimination, proportionality, transparency, mutual recognition) Adherence the principles governing State Aid rules (analysis of public financed investment contribution the operating costs, the concept of over-compensation for service rendered, analysis of unfair advantages provided one player) Protection of the general public interest (improved service delivery and quality) Public participation and control ensuring long-term project sustainability Demonstration of Value for Money Avoidance of undue benefits for the private secr
3. Financial and Economic Implication of PPP PPP projects present a different risk profile conventional projects PPP Risk allocation principles: Reduce long term cost of a project by allocating risk the party best able manage it in a most cost effective manner Provide incentives the private secr deliver projects on time, required standard and within the budget Improve the quality of service and increase revenue through more efficient operation Provide a more consistent and predictable profile of public expenditure
4. Integrating EU Financing and PPP Characteristics EU funds (if available under the country/regional programme) could be sought for PPP s only after all alternative financing sources have been explored. Optimize use of limited funds for marginal viable projects that bring an added value the project especially social benefits the collectivity Use of EU funds must be matched actual project needs Use of EU funds is associated strong conditionalities alongside sufficient safeguards protect the EC s interests which may limit their application The length of concession contracts is an issue of particular interest the EC and must correspond the spirit of the Procurement Directives
OPEN MARKET & PUBLIC PROCUREMENT PROTECTING THE PUBLIC INTEREST COMMISSION PPP INTERACTION RESPECT OF STATE AID REGULATIONS EFFICIENT GRANT ALLOCATIONS
5. PPP Conception, Planning and Implementation Deciding whether a PPP is feasible and beneficial effective regulary structures are in place capability and capacity of the public secr implement PPP s suitability of PPP approach, sufficient private secr interest, sufficient demand, revenue generation whether PPP is the best delivery method, faster implementation, improved service quality, etc Selecting the most appropriate PPP structure define the deliverables of each party Risk analysis and allocation availability of financing duration of the partnership assets ownership, profit and cost sharing provisions, etc
Designing the PPP Agreement consider the needs and objectives of all parties pay particular attention the design of procurement/ tendering procedures contract management, moniring systems, oversight function, contract renegotiation clauses early involvement of the EC for consultation and approval Implementing the PPP project a degree of flexibility is required throughout implementation accommodate different needs of all parties project structures need however be sufficiently robust allow effective moniring and ensure the public interest is guaranteed Output specification, dispute resolution, financial performance, contingency for default, end of contract conditions, change management, etc
PPP Road Map CAN PPP BE IMPLEMENTED What are the objectives What are the cabailities and capacities needed Is there private secr interest ENSURE YOU ARE READY BEFORE STARTING WHAT IS TO BE PROVIDED What infrastructure services are needed What are the risks who takes them What are the costs and benefits What type of PPP is suitable KEEP IT SIMPLE AND MATCHED TO REAL NEEDS WILL A PPP DELIVER VALUE FOR MONEY AND THE BEST USE OF RESOURCES ONLY USE A PPP IF REAL BENEFIT IS DEMONSTRATED AND ACHIEVABLE
Resource Book on PPP Case studies Transportation 9 case studies Water / Waste Water 10 case studies Solid Waste Management 7 case studies
Resource Book on PPP Case studies Case studies are not statistically representative but they reflect the three secrs in which the EC has provided funds Candidate Countries through ISPA The presented case studies include successes and failures gether as valuable lessons can be learned from both. Transportation case studies include: M1-M15 Morway, Hungary M5 Tolled Morway, Hungary Beiras Liral and Alta Shadow Toll Road, Portugal International Airport Hamburg AG, Germany Local Airport Kassel-Calden, Germany International Airport Warsaw, Poland Wijkertunnel Randstad, The Netherlands Perpignan Figueras Rail Concession, France & Spain Channel Tunnel Rail Link (CTRL), UK
Consulting is the preferred provider of management consulting and advisory services the infrastructure industry worldwide. Ted Sheldia Project Manager / Consulting 4 Rue de la Presse, Brussels, B-1000, Belgium +32.2.223.2243 +32.2.223.2242 (fax) sheldia@pbworld.com