Lobbyist: Regional funds ‘discriminate’ against PPPs

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National governments are holding back EU regional funding from local authorities that work with private contractors to deliver transport, waste and water services, according to Jean-Pierre Tardieu, chairman of E3PO, a group which promotes public-private partnerships (PPPs).

Jean-Pierre Tardieu is chairman of E3PO.

He was speaking to Gary Finnegan.

To read a shortened version of this interview, please click here.

Do you expect Public Private Partnerships (PPPs) to become an increasingly common feature of public service and infrastructure provision in the EU?

Companies as well as governments and the general public observe that the needs for public equipment and services are immense, both to rehabilitate existing facilities – particularly for adapting them to new environmental requirements – and to build new ones or develop new services to meet public expectations. The constraints on public services are increasing, and public authorities will have to give more and more importance to sustainability objectives in the delivery of those services.

The severe financial crisis has resulted in greatly reducing the investment capacity of public authorities, and experts agree that they will have to either raise taxes or cut expenditure, or more probably apply both remedies to restore their accounts and get out of debt.

Other actors will thus have to be present in order to innovate, take risks, and find new sources of funding. In particular, if Europe wants to avoid the risk of losing its lead in the quality of its public services – which now constitutes a competitive advantage worldwide – it must invite its member states to use new financial resources, by attracting the available savings towards these investments, in addition to operators' capacities.

Besides, experience also shows that the use of various forms of PPP contributes to better control of deadlines and cost objectives, while enabling effective and transparent monitoring of operators' actions by public authorities. For these various reasons, PPPs are an essential element of the European policy of innovation and adaptation to the environment and globalisation challenges.

What kinds of projects are best suited to PPPs?

Because of the large variety of contracts covered by the PPP concept, they can be used for the most varied projects, with the exception of areas of national sovereignty. Thus, in addition to traditional areas such as road facilities, public transport, water and sanitation, waste management and catering, new areas are opening to PPP in various manners from one country to another: construction and operation of sports facilities, hospitals, childcare centres, ports, airports, prisons, and so on.

As has been done in Canada, discussions are under way in several European countries to look for the optimum allocation – with an approach of "best value for money" – between publicly-run activities and those that can be assigned to companies. In all cases the public authorities keep complete power of defining the objectives and controlling performance.

In November 2009, the European Commission published a communication on the contribution of PPPs to delivering public services and infrastructure in Europe. What is your response to this document?

E3PO welcomed with great interest the 19 November 2009 communication, the findings and diagnosis of which it fully shares. It also supports the five key actions set for the year 2010 and is ready to work in cooperation with the European Commission services to implement them.

In particular, our organisation is pleased that the Commission has identified the difficulties and barriers to the development of PPPs and stands ready, with the support of its members, to assist the European Commission in seeking what remedies are most appropriate.

How can EU structural funds be used in this context?

The role of structural funds is to contribute through joint funding to the construction of key infrastructure and to improve public services available to citizens in regions of the EU. E3PO has been informed by its members about procedural difficulties in the allocation of structural funds to local authorities interested in a private operator. It is in the interest of member states and EU citizens that structural funds are allocated solely on the basis of the objectives pursued, in a transparent manner and without discrimination on grounds of the public or private nature of the operator. E3PO welcomes the commitment made by the Commission to sort out problems in that respect.

Do you expect PPPs and public procurement to be a feature of the forthcoming European Innovation Act, which is currently being drafted by the Commission?

Firstly, I would like to welcome the strong signal of the creation of a portfolio dedicated to research and innovation in the new composition of the European Commission.

In public services management, innovation is expected at two levels:the construction and adaptation of equipment; the service provided to the final customer.

In both cases, the customer is legitimately expecting benefit from the latest technological innovations in 'hardware' as well as in 'software', and demanding that his personal needs or desires are taken into account. In particular the customer expects precise and real-time information on topics like the exact schedule and route of the next bus, or the risk of congestion on highways, or compliance with dietary preferences in catering.

When taking decisions on infrastructure and services, public authorities have to consider more and more their economic, social and environmental impacts. Beyond technology, innovation must be boosted with respect to management systems adapted to such multiple constraints. As an example, multimodality will help not only to improve the quality of mobility, but also to limit greenhouse gas emissions by increasing public transport and reducing car traffic.

Innovation also has a social dimension. Thus, the growing participation of citizens in waste separation reflects their awareness of environmental issues and meets the advocacy carried out jointly by government and business operators.

In all aspects, innovation in public services will be greatly enhanced by the commitment of companies and their ability to allow each community to benefit by the mutualisation of experience and their research outcomes.

How can SMEs play a bigger role in PPPs?

Regarding access of SMEs to PPP, because of the diversity of legislation from one member state to another, it is difficult to have an overview of the situation.

Management of SGEI is most generally organised at the level of local communities: related contracts are therefore more accessible to SMEs, either alone or associated with other companies.

For PPPs entrusted by states or large communities, SMEs can value their local rooting and the quality of their staff in order to be associated to larger companies in win-win co-contracting partnerships. Besides, for service activities, operations are often more important than investments, thus mitigating funding problems and enhancing opportunities for SMEs.

E3PO is quite favourable to the adoption of measures compatible with the principles of the Treaty and facilitating SMEs' access to PPP, such as: rationalising supports for tenders by geographical areas or relevant sectors, developing pre-qualification, and developing the best offer criteria.

On the other hand, all measures increasing the administrative burden and cost of procedures – competitive dialogue, for example – would be particularly detrimental to SMEs.

Critics of PPPs say involving the private sector is an expensive accounting 'trick' used by public authorities to keep debt off their balance sheets (EURACTIV 25/09/09). It has been argued that it costs more for the private sector to borrow for infrastructure projects than for the public to borrow, and that private operators are, by definition, profit-driven. What is your response to such criticism?

This presentation is a simplistic caricature of PPPs, just as their assimilation to a simple outsourcing or subcontracting. PPPs are a true "co-production" of public services provided to citizens, in which public authorities and operating companies play different and complementary roles: the public authority decides, delegates and controls, the company implements, taking the risks inherent to any economic activity.

Comparisons cannot be reduced to the cost of financing investments alone; the costs of investment, maintenance and operation should be included, as well as the fulfilment of quality and performance objectives of equipment assigned and the contribution to health, social welfare and sustainable development. It is the constant experience of our members that competition over the holistic provision of construction and operation creates efficiency gains that would more than compensate for any differential in the cost of finance.

Besides, in the future, access of public authorities to preferential financing rates could be reduced, in consideration of levels of public debt, and as a result of the extension of credit rating practices to them.

More broadly still, and as mentioned in the Communication of the European Commission, the acknowledged effectiveness of PPPs is due to meeting deadlines and respecting budgets, economic efficiency, optimisation of risk-sharing and companies' innovation capacity. All this can be summarised in one word: competition.

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