4.3.2.  Proposals on the best formula to encourage private initiative PPPs in the European Union

Question 9 of the PPP Green Paper

A large number of stakeholders recognise the need for some sort of encouragement for private initiative PPPs; most of them present ideas. Conversely, a substantial number of contributors explain that the application of existing EC rules, in particular the EC Treaty principles, provides sufficient encouragement for operators to embark on private initiative PPPs. Many stakeholders acknowledge that any measure encouraging private initiative PPPs needs to strike a balance: motivating operators to invest in such initiatives, while not distorting fair competition. Some stakeholders believe, however, that encouraging private initiative PPPs necessarily conflicts with the principles of transparency and equal treatment.

The majority of those contributors who express themselves in favour of some sort of encouragement for private initiative PPPs consider financial compensation as the appropriate instrument to promote such initiatives, in particular as this incentive appears to be the least damaging to competition. Some argue that such financial compensation should only be granted if, at the end of the procurement procedure launched subsequent to the private initiative, the operator concerned does not obtain the contract or the concession. Such compensation should at least cover the development costs of the project.

A substantial number of contributors consider granting a "right of first refusal" as the most pertinent way of encouraging private initiative PPPs. This would require the contracting authority to offer the contract or concession first to the private initiator. Several contributors add that if the initiator does not take up the offer, he should be granted financial compensation for his work. Other stakeholders argue that granting the "right of first refusal", rather than financial compensation, renders private initiatives more attractive as operators usually initiate PPPs in order to obtain a PPP contract or concession. Other advantages proposed by various contributors include setting relatively short time limits for competitors to respond to the tender, granting the private initiator an exclusive right to a negotiated procedure and introducing a fast-track process to deal with litigation initiated by competitors of the first mover, if the latter wins the contract. According to a large number of contributions the protection of the initiator's intellectual property is a key issue in promoting private PPP initiatives. One contributor suggests awarding part of the overall PPP contract/concession directly to the private initiator. Another stakeholder deplores the fact that most of the really innovative proposals come from medium-sized companies, who - due to their structure - have hardly any chance of winning a PPP competition.

Other contributors express the opinion that tackling overregulation and amending existing national stipulations which impede private initiatives would substantially encourage them. In this context, two contributors cite existing national provisions which exclude from the tendering procedure companies that have - however indirectly - contributed to preparing the specifications of the invitation for tender. One stakeholder draws a parallel between a private PPP initiator and an operator who assists the respective contracting authority in drawing up the specifications for a tendering procedure.

A substantial number of stakeholders explicitly refer to the Italian Merloni Law10 as an example of a specific procedure for unsolicited PPP proposals. The incentive of giving the private initiator the "right of first refusal" and the right to have his costs repaid if the project is awarded to a competitor are considered to be key elements of this Italian law. Another concrete proposal to encourage private initiative PPPs is to launch a formal public procurement procedure based on a private initiative proposal and to exclude the initiating private party from the procedure. If no better solution comes up in the course of the procurement procedure, the contract should be awarded to the initiating party. If a better solution than the initial proposal comes up, the initiating party should be compensated.

Referring to the trade-off between providing incentives for private initiative PPPs and encouraging competition, one contributor suggests that - subsequent to a private PPP initiative - public authorities should be entitled to award the contract to the private initiator without launching a formal procurement procedure if they expect that - due to the intellectual property rights of the private initiator - competition would produce limited benefits only; conversely, if greater benefits could be expected from competition, a proper public procurement procedure should be carried out.

One stakeholder argues that PPPs should in any case be initiated by the public side and follow a regular public procurement procedure. If the contracting authority is interested in exploring the interest of private parties in the envisaged PPP or in obtaining ideas on alternative solutions for a project before formulating the technical annex to the invitation for tenders, it can undertake "market research" or hold an "ideas competition", which follows precise rules to ensure adequate transparency and equal treatment.

As regards the method of promoting private initiatives, various contributors are opposed to the legislative route. Some fear that new legislation might constrain the establishment of PPPs. Conversely, a substantial number of stakeholders prefer PPP legislation or at least guidance on this issue. In addition to encouraging private initiatives, the legal framework would have to ensure transparency, non-discrimination and equal treatment. Other instruments to promote private initiative PPP schemes mentioned in the consultation included the provision of guidance, the exchange of best practice and the creation of a task force on this subject at EC level.

Some stakeholders argue that private initiative PPPs are attractive enough under existing rules, citing the Competitive Dialogue procedure as particularly suited to encouraging innovative thinking. The know-how acquired in the course of preparing the initiative puts the private initiator in an advantageous position vis-à-vis his competitors. Thus, any additional advantage granted to the respective operator could seriously distort competition. Along these lines, a number of stakeholders argue that the competitive advantage of operators initiating a PPP needs to be "neutralised", for example by making the studies and analysis done by the operator available to competitors.

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10  Framework law No 109/94 (G.U. No 41, 19.2.1992) modified by Law No 166/2002 (G.U. No 181, 3.8.2002).