EU Commission to promote best practices in PPPs

European Commission proposals regarding PPPs, 19-November-2009
The Commission's analysis shows that the regulatory framework governing PPPs needs to be better enforced and completed.
The Commission is proposing 5 core actions:
1. increased funding for PPPs through working with the European Investment Bank (EIB), by re-focusing existing Community instruments and by developing guarantee instruments for PPP financing;
2. in cases involving EU funding, better rules and procedures in order to ensure a level playing field between wholly publicly managed projects and those managed under PPPs;
3. a more effective framework for innovation, including the possibility for the EU to participate in private law bodies and directly invest in specific projects;
4. consider creating an EU legislative instrument on concessions, based on the ongoing Impact Assessment ;
5. improved information dissemination and exchange of best practices, including the creation of a new PPP group in which relevant stakeholders can share their concerns and further ideas with regard to PPPs.

The Communication of the EU proposes that EPEC provides long term support to those Member States that seek to use PPP to optimise their use of structural and cohesion funds. EPEC should develop into a platform for the exchange of information and best practices and act as a focal point for a European network of national bodies established to support PPPs
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What are the challenges and risks inherent to PPPs?
They may require committing significant resources at the preparation and bidding stage and often involve important transaction costs.
They are complex instruments which, in order to ensure the public interest is properly served, require a set of specific skills within the public sector, which in turn requires training.
PPPs are "long-term marriages" requiring long-term commitment on all sides: in particular the possibility of future changes in policy may introduce uncertainty into the procurement process and can increase costs.
They need to be designed in a way that balances two requirements
a) ensure the taxpayer receives genuine benefits in terms of value for money and/or transfer of risk to the private sector
b) allow private partners to generate a return.

...What is the impact of the crisis on PPPs?
Various market observers suggest that around 65 PPP transactions closed during the first 10 months of 2009 with a value estimated at €12billion. Those closely involved with the market estimate that a decrease of around one third from the same period last year has taken place.
Banks' recent risk adverse conduct has meant a marked reduction in the availability of credit for PPPs, and a significant worsening of the financial conditions. National governments and regional authorities have reduced or put on hold their PPP programmes. Lending for PPP transactions is competing with corporate lending opportunities for the scarce funding resources available. Traditional key players in the PPP market have disappeared and no viable market solution has emerged to replace them.
Current signs of economic recovery should ease the situation to some extent.

What has the EU done to mitigate this impact?
Improving the environment for PPPs is a key objective of the work set out in the Communication published today. Meanwhile, the European Council in December 2008 endorsed a Commission proposal for the use of accelerated public procurement procedures during 2009 and 2010. The Commission has also put in place a Temporary Community framework for State aid measures to support access to finance’, which contains a number of relevant provisions for PPPs. It provides a flexible complementary instrument allowing Member States to intervene where general measures, interventions in line with market conditions and interventions under the normal state aid rules are insufficient to respond to the exceptional conditions created by the crisis.

Sources: http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/09/509
http://www.eib.org/attachments/efs/efr_2007_v03_en.pdf