According to a new report published today by PricewaterhouseCoopers, the EU should adopt a more structured, comprehensive approach to the development of public private partnerships (PPPs). This will assist Member States to take full advantage of alternative approaches to procurement, which are essential for tackling infrastructure challenges across Europe. "Developing Public Private Partnerships in New Europe" argues that while prime responsibility for PPP policies lies with Member States, there is an important role the EU must play in the development and procurement of PPPs.
The report analyses how PPPs have developed in the EU and evaluates their effectiveness as a means of procuring public service and infrastructure projects. It also examines PPP activity by country and sector, and offers an update on the state of PPP legislation in Member States. Key findings include:
- Experience from the UK and the Netherlands shows that PPPs can provide efficiency savings in the region of 15% or more over the results of traditional forms of procurement, if they are properly procured.
- One reason why the PPP market in Europe as a whole is under-developed is that officials both within EU institutions and Member States are not always comfortable with the complexity of PPPs. Although there are a variety of EU directives, regulations and legislation which affect PPPs, there is no discernable EU PPP policy. Furthermore, considerable uncertainty exists as to how PPPs interact with current EU policy, especially procurement policy.
- At Member State level, there are few examples EU funding being successfully combined with private finance, with governments instead choosing to co-finance EU grants with public funds while keeping PPPs and grant funded projects separate. Although the EU wants to encourage greater use of private funding, uncertainty about how to procure such projects, the additional complexity of combining PPP and grant funded project requirements, and the lack of precedents have combined to make governments wary of such “hybrid” procurements.
- In contrast to the previous beneficiaries of Cohesion and Structural Funds, co-financing requirements in the New Member States – together with the debt restrictions faced by some of these countries – may mean that some governments will need to use private finance as a source of co-financing in order to make full use of the increased EU funds now available.
Given the impact that the EU’s actions and regulations have on the development of PPPs, the report makes the following recommendations:
- To improve understanding of PPPs in the EU institutions, the Commission should set up a cross-EU PPP Group, supported by a small central unit, to coordinate activities affecting PPPs and assess the impacts which EU actions have on their development.
- The EU should address the poor level of public sector institutional capacity and knowledge about PPPs in many Member States by funding several initiatives, including studies on the actual benefits PPPs can deliver, the provision of training, and the secondment of civil servants to and between PPP units of Member States.
- The EU should clarify the way that its directives, regulations and legislation interact with PPP procurements, although since PPPs are hard to define and vary greatly across Europe, a legislative approach from the Commission is neither practical nor desirable. Rather, the Commission should provide guidance to the Member States on how to construct, procure and account for PPPs.
- As the EU has stated that private finance can be a useful form of co-financing, it should assist Member States to address the challenging issues involved in combining EU funding with private sector finance and PPPs, helping Member States to implement pilot projects, from which practical guidelines can be produced.
Richard Abadie, partner, PricewaterhouseCoopers commented:
"The significant levels of uncertainty and confusion now surrounding how EU legislation applies to PPPs adds to the overall risks of undertaking such projects. The risks apply to both the public and private sectors, and inevitably result in higher costs.
The EU has rightly stated that PPPs should be a viable alternative to more traditional forms of procurement, and can offer enhanced value for money. The EU needs to act as a catalyst to support its vision for PPPs.
Given the potential importance and scope of PPPs in the New Europe, a more holistic, proactive approach by the EU is vital to allow Member States to make the most effective use of PPPs as part of the huge task they face in closing Europe’s infrastructure gap."
Notes to Editor:
- "Developing Public Private Partnerships in New Europe" is published today by PricewaterhouseCoopers. Full copies are available by emailing heidi.taylor@uk.pwc.com or can be downloaded from www.pwc.com/igu.
- A consultative Green Paper "On Public-Private Partnerships and Community Law on Public Contracts and Concessions" was published by the European Commission on 4 May 2004. This report was written prior to the release of the EU’s Green Paper and therefore does not directly address the issues raised there. PricewaterhouseCoopers will be submitting a response to the Commission on the Green Paper in due course.
- PricewaterhouseCoopers (www.pwc.com) is the world's largest professional services organisation. Drawing on the knowledge and skills of more than 120,000 people in 139 countries, we build relationships by providing services based on quality and integrity.
