In the EU, PPPs have developed in the transport sector (road, rail)6, in the area of public buildings and equipment (schools, hospitals, prisons)7 and the environment (water/waste treatment, waste management)8. The experience varies greatly between sectors and from one country to another. Many Member states only have a limited experience of PPPs or none at all. In terms of overall management of public services or the construction and operation of public infrastructure at global EU level, the spread of PPPs is still very limited and they represent a small part of total public investment9. As far as energy or telecommunication networks are concerned, there is already significant service provision in the private sector, but there could be scope for the development of more PPPs, for example in the development of necessary energy infrastructure where commercial interests provide insufficient investment incentives10 or in PPPs for broadband - both fixed and wireless- in order to overcome the digital divide and promote a rapid transition to high speed internet broadband services. There is now considerable evidence that PPPs can:
- Improve delivery of projects. PPPs have a track record of on-time11, on-budget12 delivery. PPP projects in the Trans-European Transport (TEN-T) network prove that partnership structures may be successfully applied to various projects in all modes of transport. Examples include the Perpignan - Figueras 50-year rail concession including a cross-border tunnel, the Oresund fixed railway link between Sweden and Denmark, and a high speed railway line in the Netherlands. Several cross-border PPP projects are currently planned under TEN-T. These include a rail/road bridge between Denmark and Germany, the Seine-Nord Canal, and a cross-border inland waterways project in France and Belgium.
- Better value for money from infrastructure, by exploiting the efficiency13 and innovative potential of a competitive private sector to either costs, or achieve a better quality ratio.
- Spread the cost of financing the infrastructure over the lifetime of the asset, thus reducing immediate pressures on public sector budgets and allowing the completion of infrastructure projects - and the benefits they deliver - to be brought forward by a number of years.
- Improve risk sharing14 between public and private parties. Provided it is properly apportioned, more efficient risk management reduces the overall costs of projects.
- Boost sustainability, innovation and research and development efforts for delivering the breakthroughs needed for new solutions for society's socio-economic challenges : this is linked to the basic mechanism underpinning a PPP:
● It is a competitive process; innovation (in terms of hardware or systems) that provides a competitive edge will be promoted.
● It is based on undertakings by the private party to deliver a performance that can be linked to technical as well as environmental and social criteria.
- Give the private sector a central role in developing and implementing long-term strategies for major industrial, commercial and infrastructure programmes.
- Enlarge EU companies' market shares in the field of government procurement in third country markets. Through the award of Build, Operate and Transfer (BOT) work and service concessions as well as the setting up of special vehicle solutions, European public works and utilities companies can gain important contracts in certain markets of major trading partners as regard e.g. airport construction and management, motorways and water supply and treatment.
In addition, PPPs offer capacity to leverage private funds and pool them with public resources. These benefits are of particular importance in the present economic conditions as Member States are seeking to accelerate investments in response to the crisis, whilst being acutely aware of the need to preserve budgetary discipline.
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5 Based on work within EPEC, UNECE, IMF, WB, and OECD.
6 Greece, Ireland, Netherlands, Spain, the United Kingdom: Guidebook on Promoting Good Governance in Public-Private Partnerships, UNECE 2007, p. 20.
7 France, United Kingdom idem.
8 The prevailing model for private sector involvement in the environmental sector has been that of public service concessions.
9 According to a global survey by Siemens in 2007, PPPs only account for about 4% of all public sector investment.
10 For instance in the case of market interconnectors, projects contribution to the security of supply objectives and energy research cooperation
11 A recent report (October 2009) by the National Audit Office (NAO) in the UK updates the earlier 2003 "PFI construction performance report". This report confirms the overall better performance of PPP vis a vis conventional procurement in respect of on budget (65 % of PFI projects) and on-time delivery (69 %). When costs over-run were incurred, they were caused by the authority or third party requests in 90 % of cases. In addition, 91 % of completed projects were rated by key users as very or fairly good in term of construction quality and design.
12 These conclusions are upheld by an EIB internal review published in 2005, based on a detailed review of 15 PPP" Evaluation of PPP projects financed by the EIB", http://www.bei.europa.eu/projects/publications/evaluation-of-ppp-projects-financed-by-the-eib.htm.
13 Results of a global study on the impact of private sector participation in water and electricity distribution (May 2009) show that private sector delivers on expectations of higher labour productivity and operational efficiency, http://www.ppiaf.org/content/view/480/485/.
14 Canoy et al. (2001) underscore that risk sharing arrangements within PPP provide an instrument to create incentives for both parties to increase efficiency of the project.