European Policy Forum

9 novembre 2005

1)      Political importance of the issue

a)      The EU lacks investments which are essential to achieve the Lisbon Strategy

-         large transeuropean networks

-         national networks

-         equipments for  “services in the community” (hospitals, universities, justice)

Assessment of the needs: more than 600 billion euros

b)      Why such a deficiency?

-         On the public authorities side : 

Debt and rising deficits demand curbing down spendings

Moreover, spendings are far from being efficient, given the complexity of investiments required

Finally, local and regional administrations capacity of action is not acquired

-         On the private providers side :

Huge public insecurity on existing PPPs

Problems of profitability of invested funds

Lack of guarantees for the money-lender (for example, when a political decision breaks down the equilibrium of the project)

c)      National PPPs provide heterogeneous solutions, and the European framework is not helpful

-         Many Member States use PPPs or envisage it: GB (PFI), France (Public utilities delegations, concessions, “new PPPs”). Spain and Italy , Poland and Hungary

-         Experiences are quite heterogeneous and use different legal tools

-         New MS are far more handicaped than old “rich” members, particularly due to a lack of fundings

-         The implementation of government procurements directives in January 2006 will entail a wave of complaints, foster serious legal insecurity and delay a multitude of investments

-         Answers to the Green Paper are divided on the need for a European common framework (half in favour, half against). And yet, indecisiveness and status quo, as there is an emergency, are not acceptable

2)      The Commission’s approach is unilateral and inadequate as regards the need for complex PPPs that are in fact companies binding partners for a long period of time

a)      The Green Paper logic inscribes itself in a government procurements approach, whereas PPPs are not public procurements (nor, by the way, privatisations).

-         Its n°1 preoccupation: refusing favoritism in the partner’s choice. No discrimination and a healthy organised competition . A legitimate preoccupation, but inadequate solution.

-         The Commission wants to impose tenders to public entities, each time they call upon the private sector. It irritates state-managed offices (in Germany , austria …), hits the « free local public administration » principle, and above all, it is costly and diterrent. Indeed : public procurement rules can be  conceived for « simple » PPPs  - public service delegation type - , but as regards contracts for and over 20 years, « complex », or « taylor-made PPPs », they are inapplicable. Since it is impossible to know in advance what would be the best solution. 

The public authority (PA) cannot draw up alone the schedule of conditions, it needs a partner. The “competitive dialog” procedure, included in the new directive ‘government procurement”, is not fit to do it in good conditions :

� Negociations are duplicated (they require 6 to 18 months), therefore prohibitive  costs and delays (the schedule of conditions must be extremely-detailed; teams who lost must be largely compensated ).    

‚ Risk of violation of the innovation secret (eventhough, protected by competition laws).

ƒ Lack of State aids specific solutions  : according to Altmark jurisprudence, their amount must be justified on the whole duration of the partnership. However, this is impossible in practice

„ Unforecastable elements cannot be inscribed in the schedule of conditions : an unfortunate applicant can therefore complain about a change in the rules of the game. And the capacity to innovate during the exploitation is thus blocked.

… The principle of the « prudent investor » absolutely does not fit the situation of public authorities committing themselves with a company for a project of general interest.

b)      A proper Community framework is therefore desireable – it is not simple given the heterogeneity of national situations.  We suggest to distinguish  between :

-         PPPs to which the European Union participates itself (large networks, cohesion policy…), and that benefit from European fundings and guarantees. There, a European framework is absolutely required

-         PPPs from Member States. Single market and competition rules should not block initiatives, creativity and efficiency. This requires an adapted market framework, a State aid ruling (note that the Commission already envisages such a ruling for innovation ).

c)      Yet, the PPP concept should be well clarified.

-         The PPP is a company relying on a limited-term partnership contract. Its efficiency depends on a sustainable understanding between public authorities and private operators, with a distribution of tasks (including in the exploitation) and risk mutualisation, private and public financings, coordination and assessment.

-         Cooperation and regrouping override delegation to private sector, because they better unable to solve coordination, externalities and financing problems.

-         Advantages of this definition : precising the PPP concept, answering the local municipalities needs

-         Please note that a too radical distinction between contractual and institutional PPPs does not give appropriate answers to these situations.  

3)      Concrete proposals

� Authorise immediately the British « preferred bidder » procedure

The « construction permit » is attributed to the « prefered applicant », after a call for tender corresponding to precise criterion. A long negotiation starts. It can fail : the preferred applicant is not automatically the winner.

‚ Draw up a State-aid/PPP ruling

An infrastructure (airport, bridge, etc…) generates positive externalities for the development environment. A State aid can be « non profitable » directly, but the public community will recover its initial  placing with fiscal revenues on implied activities. It should not be treated as  « aid », provided that the private investment remains in the realm of a «  sensible profit ».

ƒ Extend the EBI guarantee instrument

Let’s remind that for New Member States, the EBRD only takes upon sovereign risks in very precise conditions. The EBI status does not enable it to position itself. It has a guarantee instrument only for TransEuropean Networks.

„ Develop a specific task-force «  Capacity Building  » for public authorities.

There are huge needs for training and engineering in the field of contract montages, financial engineering and law mastering, etc…).

Additional question : should a specific legal common framework be designed for  local public companies?

-         The Green Book does not elaborate the « principle of local free administration ». It examines for the first time « institutional PPPs » but it forgets the territorial PPPs with SMEs and public-public partnerships.

-         Conflicts arising in general interest sectors (such as urban transports).

-         The Teckal judgement is not respected. For example, a private participation in a Mixed Economy Entreprise of 5% takes one out of the « in house » status and could entail calls for tender.

-         Yet, public and private actors are divided. And the subsidiarity requirement very important. The Commission should organise a consultation on common principles.