Informal EU Transport Council 15 September 2011
Issues and questions regarding the use of public-private partnerships.
The Polish Presidency of the EU held an informal meeting of EU Transport ministers in Gdansk and Sopot on 5 and 6 September. The UK was represented by officials. The theme was: ‘Mobilizing private financing for transport infrastructure’. The debate was based on a number of questions put by the Presidency, which were principally about the use of public-private partnerships (PPP).
The key points conveyed by the UK are as follows:
For the UK, the primary factor determining PPP use is whether it offers the best value for money compared to alternative delivery options. The features that impact on the value for money decision include: public sector access to private sector capital and expertise and the transfer of financial risk from the public to the private sector. A key feature of the UK public sector comparator process is that it is not entirely based on a quantitative calculation of the respective delivery outcomes. The calculation is supported by a qualitative assessment of the respective delivery routes in terms of their viability, desirability and achievability.
The UK set out several examples of the use of PPP in the transport sector, which included contracts for street lighting, highway maintenance and London Underground. We reported that that the experience of PPP in this sector has been mixed. While PPP programmes have helped secure significant infrastructure investment and, in a number of cases, achieved an improved record on the delivery of projects to time and budget, this has only been achieved by repeated interventions.
Work has recently been undertaken to achieve a stronger focus on flexibility. Project reviews are being undertaken to improve the delivery of cost reductions and value for money. New PPP projects are subject to tougher approval and assurance processes. The UK no longer uses the PPP format to source projects for which there is an insufficient capital requirement or continuing lifecycle maintenance/service obligation, or for lower value projects.
The UK emphasised that while PPP remains a useful procurement option, it is not suitable for every project and should only be selected when it can demonstrate that it provides a better value for money outcome than conventional procurement processes.
The UK noted that a fundamental feature of PPP structures is that they provide for availability payments over the life of a long-term service contract. However, EU regulations only provide for availability payments that are linked to development and construction pre-payments. If operational availability payments are not permitted, this could distort the decision-making process on the type of PPP structure that is adopted and unnecessarily constrain the options available to member states.