EU Funds are already a major source of European infrastructure finance with EUR 347 billion of cohesion funding and EUR 8 billion of Trans-European Networks-Transport (TEN-T) funding for the current budgetary period 2007-2013. Although co-financing rules differ across these instruments, all require matching co-finance, more of which could come from private sources.
In some circumstances PPPs may deliver better grant-funded projects than classical procurement. A European Investment Bank (EIB) evaluation report on PPP projects in different regions of the EU found that PPPs tend to be characterised by professional project management and implementation, project delivery on time and on budget, an improved asset and service quality as well as a life-cycle approach defined performance standards throughout the contract period. It also highlighted that the key impact of the PPP mechanism was that the projects were implemented at all. In all of the projects evaluated in-depth, public-sector budgetary constraints meant that the alternative to a PPP project was no project, or at least no project within the foreseeable future, rather than a public procurement2.This is an important aspect as private finance can help to raise the necessary co-financing in EU grant-funded projects. It should be noted that the potential advantages of PPPs vary with the Member State and sector and the value for money aspect of the options available requires careful scrutiny in all cases.
But while PPPs can help grant funded projects to happen, the converse is also true: In some cases, EU funding programmes have been used to improve the risk profiles and strengthen the contractual arrangements of PPPs, so increasing their marketability.
Even though using EU Funds for PPPs is feasible, relatively few projects that have used this opportunity have come to market since 2007. One of the main reasons is that the majority of grant schemes has been designed for capital contributions, which may sit uneasily with some types of PPP models. This issue is further elaborated later in this note. The Commission and EPEC have agreed to undertake work during 2011-12 in preparation for the next budgetary period with the aim of facilitating the combination of PPPs with Structural Funds. By then conventional government co-financing may be even more difficult to find and there may be a wider political recognition of the benefits of PPP and its whole-life approach to project design, delivery and management.
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2 The Report can be found at http://www.eib.org/attachments/thematic/eib_ppp_en.pdf