REVIEW ON PPP IN

LOCAL AND REGIONAL

DEVELOPMENT
Handbook for considerations on
Public Private Partnership

CONTENT
Foreword
Links to worldwide PPP experiences
PPP in Germany
PPP in Latvia
PPP in Lithuania
PPP in Poland
PPP in Sweden
PPP in Norway

Page 2
Page 3
Page 9
Page 17
Page 21
Page 26
Page 32
Page 35

FOREWORD
In the Project Data Form it is stated that we should make a review on PPP in local and
regional development. Lead partner is responsible for this task, but as stated in the approved
Data Form we should do this based on open resources from the project partners.
The texts presented in this publication are only partly input from our partners. However, the
web has been helpful, and the open sources are many and diverse.
Useful EU links are:
Resource book on PPP case studies
From the EU Commision
June 2004
Green paper on public-private partnerships and community law on public contracts and concessions
From EU Commision:
April 2004
Guidelines for successful public-private partnerships
From the EU Commision
March 2003
Risk Allocation and Contractual Issues
From Partnerships Victoria
June 2001

Other links will be found on the next pages and in the texts for each partner country.
Notodden, October 18. 2011
Bjrn Frode Moen
Project manager

Country

Name

Link

National PPP Forum

www.pppforum.gov.au

Infrastructure
Partnerships Australia

www.infrastructure.org.au

Partnerships Victoria

www.partnerships.vic.gov.au

Belgium

Flemish PPP
Knowledge Centre

www2.vlaanderen.be/pps/english

Bulgaria

Public-Private
Partnership

www.eufunds.bg/?cat=229

The Canadian Council

for PPP

www.pppcouncil.ca

Partnerships British
Columbia

www.partnershipsbc.ca

Canadian Health
Coalition - PPPs (P3s)

www.healthcoalition.ca/realitycheck5.html

Efficiency Unit The

Hong Kong Special
Administrative Region

www.eu.gov.hk

PPP Sector, Trade and

Investment Promotion
Agency

www.apiu.hr/Home.aspx?PageID=88

Agency for PPP

www.ajpp.hr

PPP Knowledge Centre

www.himk.hr

PPP Association

www.asociaceppp.cz

PPP Center

www.pppcentrum.cz

PPP Regulation and

Methodology Unit

www.mfcr.cz

Public-Private
Partnership

http://www.deaca.dk/publicprivatepartnership

Australia

Canada

China

Croatia

Czech
Republic

Denmark

Estonia

France

Germany

Greece

Public Procurement
Centre

www.riigihangetekeskus.ee

PPP Unit of the

Ministry of Economy,
Finance and Industry

www.ppp.minefi.gouv.fr

Centre dExpertise
Franais pour
lObservation des
Partenariats PublicPriv

www.cefoppp.org

L'Institut de la Gestion
Dlgue - The French
Institute for PPP

www.fondation-igd.org

Public Private
Partnership Task Force

www.bmvbs.de/Bauwesen/Bauwirtschaft-,1521

PPP in Niedersachsen

www.ppp.niedersachsen.de/master/C13274395_L20_D0.html

PPP Task Force

Nordrhein-Westfalen

www.ppp-nrw.de

Partnerschaften
Deutschland

www.partnerschaften-deutschland.de

PPP BadenWuerttemberg

www.wm.baden-wuerttemberg.de/sixcms/detail.php/64030

PPP Bayern

www.ppp.bayern.de

PPP Brandenburg

www.ilb.de/ppp

PPP Hessen

www.hmdf.hessen.de/irj

PPP Sachsen

www.sib.sachsen.de/cms/de/projekte/oepp_projekt

PPP Sachsen-Anhalt

www.sachsen-anhalt.de/LPSA/index.php?id=13299

PPP SchleswigHolstein

www.ib-sh.de/ppp

PPP Rheinland-Pfalz

www.per-rlp.de/index.php?id=6

PPP Thueringen

www.ppp-nrw.de

PPP Task Force

Nordrhein-Westfalen

www.thueringen.de/de/tmbv/shkv/ppp/ag

The Special Secretariat

www.ppp.mnec.gr/en
5

for PPPs
PPP Committe

www.sdit.mnec.gr/en/press_office/PPPCommittee/

Hungary

Inter-Departmental
PPP Committee

www.khem.gov.hu/en

India

Ministry of Finance,
PPP Unit

www.pppinindia.com

The Irish Government

Public Private
Partnership

www.ppp.gov.ie

National Roads
Authority

www.nra.ie

Railway Procurement
Agency

www.rpa.ie/en/Pages/default.aspx

Centre of Expertise

www.finance.gov.ie

Ministry of Finance,
PPP

www.ppp.mof.gov.il/mof/ppp/mofppptopnavenglish

Technical Unit for

Project Financing Italian PPP Task Force

www.utfp.it/default_eng.htm

Cassa Depositi e Presiti

Spa

www.cassaddpp.it/cdp/index.htm

Private Finance
Initiative Promotion
Office

www8.cao.go.jp/pfi/e/home.html

Japan PFI Association

www.pfikyokai.or.jp/english_v/new_v/03.html

Kazakhstan

PPP Center

www.ppp-center.kz

Korea

Public and Private

Infrastructure
Investment
Management Center

www.pimac.org

Ireland

Israel

Italy

Japan

Publisk un privt
partnerba

www.ppp.gov.lv/en/

LIAA

www.liaa.gov.lv/?object_id=789

Malta

Ministry of Finance The PPP Unit

www.finance.gov.mt

Mauritius

Ministry of Finance
and Economic
Development - PPP
Unit

www.gov.mu/portal/sites/ncb/ppp

Public Private
Partnership and Asset
Management

www.minfin.nl/english

PPP Unit

www.verkeerenwaterstaat.nl/

Northern
Ireland

Strategic Investment
Board

www.sibni.org

Norway

EMCC

http://www.eurofound.europa.eu/emcc/erm/studies/tn1010012s/no1010019q.htm

Poland

PPP Institute

www.ippp.pl/instytut

Portugal

A Parpblica
Participaes Pblicas,
SGPS, SA

www.parpublica.pt/parpublica.html

Romania

Central Unit for the

Coordination of PPP

www.mfinante.ro/engl/index.jsp

RPA

National Treasury, PPP

Unit

www.ppp.gov.za

Russia

PPP Centre

www.veb.ru/en/PPP/pppserv

Latvia

Netherlands

Schweiz

PPP Competence
Center

www.ppp-schweiz.ch/sections/8

Singapore

Ministry of Finance,
PPP Policies

www.mof.gov.sg/policies/ppp.html

Partnership for
Prosperity

www.p3.sk

Ministry of Finance
PPP

www.finance.gov.sk/EN/Default.aspx?CatID=418

Asocicia PPP

www.asociaciappp.sk

Slovenia

PPP Unit

www.mf.gov.si/angl/index.htm

Spain

Spanish Centre for

Excellence and
Knowledge on PPP's
(CECOPP)

www.cecopp.com

Partnerships UK

www.partnershipsuk.org.uk

PPP Forum

www.pppforum.com

4ps

www.4ps.gov.uk

HM Treasury - The
Private Finance
Initiative (PFI)

www.hm-treasury.gov.uk

National Audit Office PFI and PPP

Recommendations
Database

www.nao.org.uk

The PPP Arbiter

www.ppparbiter.org.uk/output/Page1.asp

Highway Agency

www.highways.gov.uk

Partnerships for
Schools

www.partnershipsforschools.org.uk

Community Health
Partnerships

www.communityhealthpartnerships.co.uk

Private Finance Unit

www.mod.uk

HM Prison Service

www.hmprisonservice.gov.uk

Slovakia

UK

Ukraine

Ukrainian PublicPrivate Partnership

Development

www.ukrppp.com/en

PPP in GERMANY
1. LEGISLATION
There are a lot of specific rules depending on the kind of PPP, the area of PPP as well
as the State where the PPP shall be implemented. Two Federal Ministries of Germany
have introduced a consulting company for supporting PPP (in German: PP). Their
website you can see here: www.partnerschaften-deutschland.de/wer-wir-sind/ (sorry
in German only). Also there is a German Association for PPP as well see in English,
please: http://www.bppp.de/bppp.php/cat/27/title/Home
2. SUPPORT - Is there a support system for those who want to engage in PPP national,
regional or local? Please support us with link to the support organization. Their
organizational structure if not mentioned in the open source.
The support is given by business development organizations of the Federal States: e.g.
the ZAB Brandenburg (Brandenburg Economic Development Board - see
www.zab-brandenburg.de/en/18.aspx) is responsible for supporting respective
stakeholders in the State of Brandenburg.
Additional there is a Business Development Bank for supporting business activities in
the State of Brandenburg including service for PPP (see:
www.ilb.de/rd/services/1738.php and links to other states as well)
Also some large cities (e.g. City of Potsdam) and counties have business development
supporting departments for finance and PPP consulting.
3. REGIONAL AND LOCAL EXAMPLES please support us with links to relevant
PPP experiences from your region. Preferably by means of links, but also written
examples, e.g. as done in the Note on PPP from LP in the coordinator meeting in Riga.
Some interesting German examples you can find here (see this webpage below,
please): http://de.wikipedia.org/wiki/Public_Private_Partnership
On local levels in rural area there are some PPP for schools (a private school in
Baruth), for administration offices (e.g. city hall of Ludwigsfelde) and for hospitals
(e.g. Johanniter hospital in Belzig and in Treuenbrietzen). Also many small PPP take
place in frame of projects and marketing issues - as daily business mostly not
contracted separately.
4. ADDITIONAL RELEVANT OPEN SOURCES ON PPP IN LOCAL AND
REGIONAL DEVELOPMENT.
Open sources used in frame of TiF: Involvement of private and companies into rural
town profiling and marketing as well as into implementation of specific town actions
but as daily business mostly not contracted separately.
Finally I like to send you two pdf-files from German Institute of Urbanistics (Deutsches
Institut fr Urbanistik DifU). It is working in many fields of development issues for a lot of
local and regional administrations in Germany. Please find attached their papers about
Principles, opportunities and riscs of PPP as well as a Survey on projects on at Federal,
State and Municipal levels both in English for your use.

10

Key points
In Germany, there is no single body of laws governing Public Private Partnerships (PPPs).
Instead, a plethora of acts, rules and regulations applies. However, the federal and state
legislators now appreciate the importance of PPPs for future development in the public sector.
They have enacted a series of laws to facilitate PPPs in Germany, the most notable being the
PPP Acceleration Act. The federal government has also created institutions that are
responsible for co-ordinating and facilitating the development of PPPs in Germany.
Currently, more than 100 PPP projects are in the planning or implementation phase in
Germany. They range from big infrastructure projects such as the extension of motorways
worth billions of euros to smaller projects such as the extension and renovation of schools,
hospitals and prisons.
To facilitate the planning and implementation of PPPs, the federal government and some
federal states have passed legislative measures ranging from rules and obligations for the cooperation of public and private partners to the specific promotion of such a co-operation.
We expect, especially in the face of the current financial crisis, that both the number and the
value of PPPs in Germany will increase. Additional legislation to facilitate the planning and
implementation of PPPs is in the making.
Framework for PPPs
Legal framework
In Germany, PPPs are usually based on an agreement governed by private law and concluded
between a public partner and a private entity. The public partner can be the Federal Republic,
a federal state or one of its authorities or a local community. In general, the private partner is
a legal entity or consortium consisting of several companies as shareholders.
There is no specific law providing a comprehensive framework for PPPs. Instead, PPPs are
subject to a number of legal regimes in federal and state laws. These include constitutional
and administrative law, the law of public procurement, budget law, tax law, investment and
finance law, the law on public subsidies, contract law and corporate law.
The first step towards a more comprehensive regulation on PPPs was made when the federal
PPP Acceleration Act (PPBeschleunigungsgesetz) was enacted in 2005. This act is a
framework law, which has changed a number of previously existing provisions relevant to
operating PPPs, including the Act Against Restraints of Competition, the Public Procurement
Ordinance, the Federal Budget Law, the Federal Law on Investment and tax laws.

Phases of a PPP project in Germany

The laws described below apply during the typical phases of a PPP project.
Phase I: identification of possible projects
In phase I, the public partner needs to identify possible projects and to assess the economic
demand for PPPs, as well as the economic, technical and legal feasibility of a project.

11

Federal or state constitutional law may necessitate full public authority over a certain
institution or service, or at least certain levels of public control over the process. For example,
article 33 paragraph 4 of the Basic Constitutional Law stipulates that only civil servants may
exercise administrative authority. Therefore the constitutional and administrative framework
of a PPP may require a certain corporate structure for the private partner.
Tax, budget and investment laws and the laws on public subsidies may have an important
effect on a project's financial feasibility.
The project must also comply with the provisions on state aid in articles 87 and 88 of the EC
Treaty. For example, it has to be determined whether public contributions to the financing of a
PPP project, either in the form of direct payments or as state guarantees, constitute illegal
state aid.
According to the Federal Budget Law and state budget laws, the economic efficiency of a
project has to be substantiated. This requires an economic analysis of the PPP project and its
comparison with the implementation of the project on a 'conventional' procurement basis.
Moreover, budget laws may set certain limits for the sale or use of public property and require
a clearance procedure. Since such limits and provisions may impede the implementation of
PPPs, a couple of federal states have introduced special legal provisions to promote the
development of PPPs. For examples, please see 'Recent developments' below.
Phase II: preparation and planning
In phase II, the public partner has to develop a contract as well as performance-related
specifications. It needs to determine a project's fundamental characteristics for example, the
duration, the suitable contract model and the level of public control. In this phase, contract
and corporate law play an important role. This concerns, inter alia, the applicable type of
contract, which defines the parties' mutual rights and obligations, various models of financing
and the project's corporate design. In Germany, a variety of contract types may apply to PPP
projects (eg concession agreements or leasing agreements) and models include supply-andmanagement contracts, turnkey projects, various lease and concession models, models of
private ownership or use of assets. For example, in the case of concession models, legal
advice is required to ensure that the fees charged by a private entity comply with laws and
regulations on taxes and public fees.
Phase III: award procedure
In phase III, the public partner usually carries out a contract award procedure and invites the
submission of applications from interested private entities. According to section 2 of the
Procurement Ordinance, the PPP project is subject to a formal award procedure if its volume
exceeds a certain threshold (eg in 2008 412,000 for supplies and services for drinking water,
energy or transport; 133,000 for general supplies and services for federal government
institutions; 206,000 for all other supplies and services; and 5,150,000 for construction
projects). Budget laws may require a tender even if the project remains below the thresholds
in the Procurement Ordinance. Procurement law often requires a Europe-wide tender and
entitles the applicant to seek legal remedies before a public procurement tribunal under
section 107 et seq of the Federal Act on Restraints on Competition. The public partner needs
to prepare and publish an award notice and performance-related specifications and conduct an
awards procedure in accordance with procurement law. At this stage, legal advice is regularly
needed to ensure that the procedure complies with all applicable laws and that the bidders'
rights are duly observed.

12

Phase IV: implementation and controlling

In phase IV, the project is implemented. Depending on the subject matter, a significant range
of laws may apply during this phase eg in the case of a construction or transport project, the
provisions of public and private building law, transport law, environmental law, civil law and
other laws. If the project needs to take over a service that has so far been publicly run, the
private entity may be obliged to employ public servants. This requires the application of
public service law and the relevant provisions of individual and collective labour law.
The PPP Acceleration Act
Some of the above-mentioned laws have been modified by the PPP Acceleration Act to
facilitate PPPs. For example, the meaning of 'public contracts' has been clarified to facilitate
the determination of applicable law.
Moreover, a new procedure for public procurement called 'competitive dialogue'
(Wettbewerblicher Dialog) has been introduced. This is a procedure for the award of
particularly complex contracts by public contracting entities. An invitation to participate is
made and selected persons or companies are invited to negotiate all the details of the contract.
Furthermore, the Federal Budget Law has been modified. The amended section 7 paragraph 2
allows entities to take into account the assumption of risk in assessing the economic
efficiency of a project as a condition for compliance with the Federal Budget Law. This is
particularly relevant for PPPs because the risk allocation can be a major element of a PPP's
economic balance. Section 63 paragraph 2 of the Federal Budget Law now allows the sale of
federal real estate even though there is a public demand for such property. Before this
amendment, the prohibition of sale rendered sale-and-leaseback contracts impossible.
Other amendments concern inter alia tax laws and the Federal Law on Investments. The latter
one allows mutual real estate funds to hold a number of shares in a PPP project company.
PPP institutions in Germany

A number of institutions have been established to facilitate PPPs. They include the
Federal PPP Task Force, which is a part of the Federal Ministry for Transport,
Building and Urban Affairs in Berlin. A number of federal states have their own PPP
commissions or task forces. These institutions have advisory and information
functions and are not involved in the decision-making processes for individual PPP
projects. They serve as knowledge databases and offer assistance to communities
considering setting up a PPP. They also play an important role in informing the public
and in developing common standards on the treatment of PPPs. The Federal PPP Task
Force publishes a database of all PPP projects in Germany (www.pppprojektdatenbank.de /).

In December 2007 the federal government decided to establish a corporation called

'Partnerships Germany' (Partnerschaften Deutschland; PDG) to provide qualified and
neutral advice on PPP-related issues to all public entities. PDG shall pool significant
expertise and knowhow in the field. It will offer remunerated advice to public partners
on specific projects, especially during the early stages of a PPP. For this purpose, PDG
concludes framework agreements with public partners interested in receiving advice
from it. PDG will also be involved in basic groundwork with regard to the
development of the legal framework for PPPs in Germany. It plans to employ
approximately 50 members of staff from sectors such as finance, industry, consulting
13

and public service. PDG merely aims to cover its costs but is not profit-oriented. It
complements the market for PPP consulting in Germany. Its shares are held by the
federal government, 10 federal states and 82 municipalities (approximately 70 per
cent) and private investors from various countries and all sectors dealing with PPP
(approximately 28 per cent). PDG began its operational activity in early 2009.
Freshfields Bruckhaus Deringer acted as a principal adviser to the government in the
process of establishing PDG.
Risks for potential investors
The German parliament has recently adopted a reform of the German procurement law. In
particular, the new law tightens the obligation to procure large quantities of goods and
services in several lots rather than in one comprehensive package. It was argued that this
reform could have negative effects on future PPPs by forcing the contracting authority to split
PPP contracts, which could reduce the projects' efficiency. However, the new law allows
public authorities to award several lots in a single package if economic or technical reasons
necessitate this. This provision gives ample room for manoeuvre to preserve the
implementation of comprehensive PPP projects in Germany. Moreover, there are various
cases in which a separation into 'vertical' quantity lots may be reasonable. For example, if 60
school buildings in one region are to be renovated and operated, a separation into two or three
lots of 30 or 20 buildings may be efficient.
On the level of each individual PPP project, the question of who is going to bear the risk of a
reduction in demand is probably the most controversial issue within the negotiation leading
towards a PPP contract. The public partner often attempts to shift the risk to the private
investor. This can force the private investor to bear the negative consequences if the actual
demand does not meet the expectations. For example, the current economic crisis could lead
to a reduction in heavy goods vehicle (HGV) traffic on motorways. The revenue generated by
the HGV tolls could therefore be lower than expected. Or the number of patients frequenting a
medical institution run under a PPP scheme could be lower than estimated. This could bring
the private investor into dire straits because it relies heavily on the revenues generated by the
project in order to finance the project. If the numbers do not add up, the result could be the
investor's insolvency. It is therefore vital for the private investor to insist that the public
partner bears the risk of a reduction in demand. The private investor should bear this risk only
if the reduction in demand can be directly attributed to its own performance eg if a
comparable facility attracts more customers than the one run by the private investor simply
because it is better maintained or offers a better deal to customers.
Current PPP projects
Extension of motorways (so-called 'A-models')
Some of the most important PPP projects in Germany concern the extension of parts of
German motorways (Autobahnen). In these socalled A-models ('A' as an abbreviation for
Autobahnausbau; motorway extension), the private partner takes over responsibility for
extending the number of lanes as well as for paying the costs of maintenance and operation of
both the existing and new lanes in certain parts of existing motorways. In return, the private
partner gets the revenues from the HGV tolls (tolls paid for the use of the motorways by
HGVs). Additionally, the federal government may pay an initial subsidy to get the project
started. The details of these A-models are governed by a concession contract. Currently, the
following A-models are in the process of being executed:

14

A1 between Bremen and Buchholz in Lower Saxony: extension from two to three
lanes in each direction (72.5km long); contract period for maintenance and operation:
30 years;

A4 in Thuringia: construction of a 22.5km-long section of the motorway as well as

extension of existing sections; contract period for maintenance and operation: 30
years;

A5 between Malsch and Offenburg in Baden-Wrttemberg: extension from two to

three lanes in each direction for a 41.5kmlong section of the motorway as well as
maintenance and operation of a 59.7km-long section of the motorway for 30 years; the
contract volume amounts to approximately 600m; and

A8 between Munich and Augsburg in Bavaria: extension from two to three lanes in
each direction for a 37km-long section of the motorway as well as maintenance and
operation of a 52km-long section of the motorway for 30 years.

Other PPP projects

Additionally, approximately 100 other PPP projects are in the planning or implementation
phase. Most of these concern the renovation, extension or construction of public buildings
ranging from schools, hospitals, barracks and prisons to castles and gardens. For example, the
city of Nuremberg awarded the contract to renovate and rebuild some of its schools to a
private consortium within a PPP scheme. The overall worth of this contract is 50m. Similar
projects for renovating and reconstructing schools in PPP schemes can be found in numerous
cities and administrative districts all over Germany.
PPPs in the health sector are increasing, too. For instance, the university hospital of
Schleswig-Holstein is building a new centre for particle therapy for curing cancer patients in
Kiel. This new centre, worth 250m, is the largest PPP project in the health sector in
Germany.
Recent developments
In the past few years, both the federal and the state legislators have passed or are still
working on a number of legislative measures that directly concern the feasibility and
implementation of PPPs in Germany. On the federal level, the most important developments
are the reform of the public procurement law and the new Investment Act.
Furthermore, the reform of the Federal Investment Act in 2007 (the
Investmentnderungsgesetz) introduced a new class of funds, the PPP funds. Investment
companies can now invest in PPP project companies. Thus, this new act enables the use of
private capital for PPP projects. Even individual private investors can now participate in the
opportunities offered by the PPP market.
At the same time, the federal states have developed legislative measures to further the
development of PPP projects.
One example is section 35a of the law on hospitals of the federal state of Hesse. This section
extends the eligibility of state-owned hospitals for subsidies. Under the new scheme, hospitals
can obtain state subsidies not only for construction or renovation projects run by themselves,
but also for those implemented within a PPP. As long as the PPP is economically efficient, it

15

gains the same rights of access to state funding as completely state-run hospital extension,
renovation or reconstruction projects.
Another example for the promotion of PPP projects in the health sector is the 'lump-sum
construction subsidy' for hospitals in the state of North Rhine-Westphalia (NRWBaupauschale). Instead of approving and financing specific construction or renovation
projects of stateowned hospitals, the state now gives each and every state-owned hospital a
lump-sum subsidy of 460,000 per year. The individual hospital is able to choose the projects
it wants spend the money on. It is also possible to use the money for acquiring private
financing for larger projects or to pool the subsidies of several years and/or hospitals to realise
larger projects. As a consequence, many hospitals are expected to use their newly gained
freedom for renovating, reconstructing or extending their buildings and institutions with the
help of PPPs.
Outlook
Legal developments
In 2006, a new parliamentary working group was established to draft a second federal
framework law, the PPP Simplification Act (PPVereinfachungsgesetz). This shall cover
several economic sectors of relevance for the PPP market in Germany, including healthcare,
social infrastructure, transport and defence. The act is still being debated within the working
group and will presumably not enter into force before 2010.
In March 2009, the German parliament started the initiative 'Fair competitive conditions for
PPP in Germany', which aims to increase the attractiveness of PPP solutions. As part of this
initiative, the implications of value added tax (VAT) for PPP projects shall be assessed and
potentially modified. So far, the provision of services by public authorities themselves is not
subject to VAT. By contrast, VAT has to be paid if a private partner provides the same
services in a PPP. Consequently, PPPs may be disadvantaged by comparison with the
provision of services by public authorities. The new initiative shall serve to reduce or
eliminate this disadvantage. Moreover, the parliament plans an amendment of the Federal
Budget Law. This shall ensure that projects are implemented by private entities or on the basis
of PPPs if an economic assessment has proven the efficiency of such an implementation.
Finally, the parliament has asked the government to amend the Act on the Private Financing
of Long-Distance Roads (Fernstraenbauprivatfinanzierungsgesetz) to facilitate the
construction of special buildings on roads, such as bridges or tunnels.
New PPP projects
Various PPP projects will be executed within the next few years. In particular, the
government's measures to support the German economy in the face of the financial crisis will
probably lead to faster execution of planned projects. Among those projects are several
extensions of motorways within the A-models scheme. The German Ministry of Transport has
launched the planning and procurement process for the A8 between Ulm and Augsburg in
Bavaria. This project worth 280m comprises a lane extension as well as maintenance and
operation of a 58km-long section of the A8. Moreover, the A9-project between Hermsdorf
and Schleiz in Thuringia has been launched. In a second wave, four other A-projects will be
launched, probably in 2009 or 2010 at the latest: the A1 between Lotte and Mnster together
with the A30 Rheine-Lotte autobahn in North Rhine-Westphalia; the A6 between WieslochRauenberg and Weinsberg in Baden-Wrttemberg; the A7 between Bordesholm and Hamburg
in Schleswig-Holstein; and the A7 between Salzgitter and Drammetal in Lower Saxony.

16

Additionally, parts of the A45 near Gambach and the crossing of the A60 and A643 near
Mainz shall be restored within PPP projects. No timeline has yet been set for these projects.
Partnerships Germany has become operative by advising the City of Dresden on a PPP project
in the culture sector. Furthermore, it shall play an important role in providing advice on
opportunities for PPPs under the 'rescue packages' for the German economy.
PPP is a institutionalized form of cooperation between public and private actors in which
both sides invest different resources, in order to pursue complementary goals and to split
gains and losses between them. From this definition we can identify the three important
dimensions (Vogel, Stratmann):
- Institutionalization: Institution as form of regulated cooperation; the degree of
institutionalization could be from informal to formal (e.g. informal networked
relationships, contractual agreement, social law-form (gesellschaftsrechtlich)
- Resource pooling: Resource as capital, building, equipment, right, know-how etc.:
putting together complementary resources for the mutual utilization: controlling resources
according to the degree of formalization
- Complementary goals: economy: primary financial goals, science: primary basic research;
PPP pursue equally public and commercial goals which the both sides can not reach alone.
Gains and losses are split between the both sides.
2. Types of PPP in Germany
Since the nineties PPP has been seen in Germany as attractive alternative for the previous
division of task between public and private sectors. There are many different types of PPP in
Germany. The following list gives an overview: PPP are being build:
- in community or city development and renewal
- in tapping financial sources in communities
- in traffic area
- in housing construction
- in management of cultural institutions
- in environmental protection
- in research
- in municipal supplying and waste disposal
- in security
- in forestry
- in education
- in training

17

PPP in Latvia

http://www.ppp.gov.lv/en/

The notion of PPP first was introduced in late 1990s when working group drafted a Concession Law
which was approved by the Parliament in January 2000. Despite this fact, no transactions were signed
for two years after the Law was adopted, and in April 2002 Cabinet of Minister adopted the The
Concept on Concession Promotion that resulted in establishing a dedicated PPP unit in the Ministry of
Economics and Latvian Investment and Development Agency (LIDA), an institution reporting to the
Ministry of Economics.
The tasks were divided according to the mandate approved by the Government, where Ministry of
Economics were in charge of promoting PPP policy, LIDA provide for project support.
In 2005, Cabinet of Ministers adopted the PPP Policy Framework Document 2005 2009, and the
PPP Action Plan 2006 2009, to achieve the goals set by the PPP Policy Framework Document.

Contractual PPPs
In Latvia similar as in other EU member states, we can talk of two kind transactions of PPP contractual and institutionalised. This classification is propped on European Commission
2004 published Green book of PPP, where Contractual PPPs is collaboration between the
public partner and private partner, concluding an agreement for performance of constructionworks or for rendering services.
Contractual PPPs can divide thus:

PPP Procurement agreements, what assign according to the Public Procurement Law
in open, restricted or negotiated procedures.

Concession agreements, what assign according to the Law of Concession.

PPP Procurement agreement

PPP Procurement agreement - agreement, which is concluded between the public partner and
private partner for a time, that is longer than five years and, where largest part of economic
risks undertakes the private partner, which designs, builds, finances, operates and at the end of
the contract term delivers an object to the partner of public sector.
The public partner pays the annually payments, which depend on quality of the given service.
The Contractual PPP in Latvia is regulated by the law of the Public Procurement.

18

Those kinds of agreements can also be called as incorporated planning, building, financing
and operating agreements or DBFO ("Design - Build - Finance - Operate").
DBFO projects have various modifications, for example, if the public sector has already
designed the technical project and the private partner is attracted only for object building,
financing and operation then it is BFO project ( Build Finance Operate). However if the
private partner renovates existent object (for example, school or kindergarten) of the public
sector, finances renovation and afterwards operates this object, but the public sector pays
annually (monthly) payments then it is RFO project (Renovate Finance Operate).

Concession agreement
Concession agreement - agreement, which the public partner concludes with the private
partner on a fixed time (to 30 years), and a concessionaire (the private partner) within the
framework of concession agreement undertakes all or a great part of economic risk.
Concession the transferring of rights to provide services or exclusive rights to utilise
concession resources, which are transferred for a specified time period pursuant to the
entering into of a concession agreement between a conceder and concessionaire in regard
thereto;
Transferring of rights and liabilities can be assigned:

In a case of building concession to built new infrastructure objects or systems or this

works make together with project designing, modernization or extending being
infrastructure object or the systems for a compensation getting rights to exploit
building, which is formed according to conceder (the Public partner) requirements;

In a case of concession of services to provide the public services, for compensation

getting rights to give services.

Concession agreement according to law concludes for a time to 30 years, grounded on

competitive, opened and clear competition conditions.
Using concession model ownership of current and new assets keeps public sector. For using
and operating assets in concession period is responsible private partner. At the end of
concession period all assets need to be transmitted to public sector in good condition.
Examining experience of other member states of EU to providing Contractual PPP there is
created special purpose entity. The main task of this entity is to provide a services or building
and operating of object under arrangement of PPP.The public sector pays payments in
accordance to quality of given service or buildings availability.
Institutionalized PPPs
In Latvia similar as in other EU member states, we can talk of two kind transactions of PPP contractual and institutionalised. This classification is propped on European Commission
2004 published Green book of PPP, where Institutionalized PPPs is collaboration between
the public partner and private partner in basis of participant agreement creating Joint venture, where participants and shareholders are public partner and private partner.

19

The Joint-venture can create:

Founding new capital company in accordance with requirements of Commercial law;

Transforming public capital company to private capital company with public capital
investments in accordance with requirements of law On state and municipal capital
(common) stock and capital companies.

Institutionalised PPPs involve the establishment of an entity held jointly by the public partner
and the private partner.
Public partner when forming a joint venture entity with private partner shall comply with the
basic principles or the EU Treaty, - Equality of treatment, Transparency, Proportionality and
Mutual recognition.
Although, currently there is no special regulation on how to select a private partner in
institutional PPP, but are many laws which shall be taken into account.
Law On prevention of squandering state and municipal financial resources and property.
The objective of the Law is to prevent illegal and unsuitable use of state and municipal
financial resources and property.
Legal usage means that the action shall be in accordance with the respective normative acts,
not allowing the approach what is not forbidden is allowed.
Principle of suitability incorporates three components:

action shall be driven to achieve the objective of using less state and/or municipal
financial resources and property;

selling of property should be done for the highest possible price;

property can be purchased or used for the lowest possible price.

Law On Order of Public Administration of the Republic of Latvia, Section 88

stipulates cases, when a public person may perform commercial activities:

if the market is not able to ensure the implementation of the public interest in the
relevant field;

in a sector in which a natural monopoly exists, thus ensuring public availability of the
relevant service;

in a strategically important sector;

in a new sector;

in a sector, for the development of the infrastructure of which large capital

investments are necessary; or

in a sector, in which, in conformity with the public interest, it is necessary to ensure

higher quality standards.

20

Law On state and municipal capital (common) stock and capital companies and
Commercial Law sets procedures on how joint-ventures are established, how they are
managed, etc.

21

PPP in LITHUANIA
The issue of publicprivate partnerships is especially relevant nowadays. Despite the
economic crisis and undergoing reforms in the public sector, problems require a long-term
solution and not just one
certain reform according to the state programme at a specific period in time. Political,
economic, institutional and other social aspects must be harmonized. Legal instruments can
guarantee consistency in all of these actions. The informational and legal issue of the reform
in administrative and public sectors arises because of the changing sociallegal values, norms
and principles. They are expressed in new ways, and an objective need of dissemination
emerges. Reacting to the needs and fulfilling these needs are the features of a value-oriented
public administration. However, the state alone (the public sector) cannot solve all of these
questions without participation of social partners from the private, public and third sectors.
Thus, the need for a social partnership emerges.
The understanding of publicprivate partnership later underwent various changes and
tendencies due to many social factors. A decade ago, the analysis of problems of partnership
between the private and
the public sectors in Lithuania could be relevant only on a theoretical level. In Lithuania, like
in many other countries of Eastern and Central Europe, implementation of publicprivate
partnerships is still a novelty. However, in recent years the institutions of these countries have
undertaken many business projects in collaboration with the private sector, and attempts have
been made to legally regulate the field of public and private sectors contractual relations.
What is the nature of these contractual relations? At the moment, it may be claimed that
publicprivate partnerships are implemented in the
practice of public administration in Lithuania and the significance of such partnerships is also
growing in the field of the administrative law. An analysis of scholarly and legal sources leads
to the conclusion that since the adoption of the Law on Concessions, all legal subjects need a
more accurate and unified concept of the public and private sectors. This concept must be
legally used in the process of implementing public administrative functions. The analysed
documents show that the necessity to use this concept had occurred prior to adoption of the
Law because the laws applicable in the field of public administration had been inadequate and
the concept itself has not been clear. In the authors opinion, results can be satisfactory only
with the involvement and connection of science, technocracy, and legal regulationsrational
actions, strength-based improvement, neutralising and compensating business threats, etc.
When a publicprivate partnership, a social object of multifaceted research and assessment, is
not sufficiently recognized in the practice of public administration, favourable conditions for
corruption and misuse of official positions are created, and the state suffers great losses; for
instance, termination of publicprivate partnerships and similar cases identified by the
National Audit Office of the Republic of Lithuania in 2008. During the last decade, in many
member states of the European Union and third countries the public sector has been
increasingly more involved in the funding and implementation of state and municipalities
investment projects for the creation of public infrastructure, development of public services,
and the improvement of public services provision. Only in 2009, with the modification and
supplementing of certain legal acts analysed in this article, the significance of privatepublic
partnerships has been brought to light. Important legal acts were adopted which established
the concept of publicprivate partnership, defined the objectives, identified inter-sectoral
activities, principles, features and content of publicprivate agreements. Therefore,
considering the relevance of the discussed problem, the object of the study focuses on the
22

understanding of publicprivate partnerships in Lithuania. The author broadly discusses the

use of the concept of publicprivate partnerships. The concept must reflect the objective
possibilities of such cooperation, considering social economic processes that have an effect on
the implementation of publicprivate partnerships and consequently on the legal definition of
the term. One of the fundamental pillars of
understanding inter-sectoral partnership is the identification of practical objectives of
cooperation, making the necessary decisions, and a clear system of values and goals in the
partnership. The parties interested in partnership must have a common vision and harmonize
their actions for the purpose of maximum cooperation. Unfortunately, the nature of public and
private sectors differs, and this impedes cooperation. Sometimes
the private sector is chosen carelessly based on the opportunity to receive funding for the
project. This distorts the essence of the partnership itself. The final result of cooperation may
leave the parties unsatisfied, and furthermore, fail to meet the expectations and needs of
targeted consumers.

PPP pilot project: framework project scheme

23

The objectives of the paper are the following:

1. to reveal the interrelations of the legislative process and the public-private partnership
issues that require regulation;
2. to present the interrelation between the strategy of privatepublic sectors partnership and
changes in the understanding of this partnership;
3. to outline the authors position on the spread of publicprivate partnerships.
Hypothesis. Attempts to find the meaning and essence of publicprivate partnerships solely
through legal analysis, without regard to the social inter-disciplinary connections, has
impeded the understanding of the concept and possibilities to rely on useful integral
information of other social sciences. The formation of the publicprivate partnership concept
has been impacted by the lack of an integral approach. Researchers have failed to identify
connections between the legal and other social ideas and therefore, the spread of partnerships
in Lithuania has been impeded.
Description of the used methodology.
The method of document analysis was used to find information and quantitative analysis was
used to investigate the concepts (frameworks), programs, applicable legal acts, documents of
various institutions, and scholarly publications. These data allowed to evaluate,
retrospectively, the tendencies of change in publicprivate partnerships.
The method of systemic analysis was used to identify the reasons for forming publicprivate
partnerships and possibilities for the spread of such partnerships. The problems of
administrative law are discussed as part of the general social environmental system, revealing
their relation with other problematic social situations.
The method of meta-analysis was applied in analysing the development of publicprivate
partnerships on the basis of the civil, administrative law, legal theory, and sociological,
philosophical, and historical point of view.
The historical method was used to analyse the genesis of publicprivate partnerships and
change in the relevant legislation in Lithuania.
Case study analysis was based on the results of a social network intervention method. The
author analyses publicprivate partnerships as a social phenomenon in the city of
Druskininkai.

Conclusions
1. The author concludes that the research conducted affirms the papers hypothesis.
The analysis of the origin and change of the publicprivate partnerships content reveals
the objective need for this cooperation in Lithuania. The amendment and supplementation
of the Law on Investments with the category of publicprivate partnership and
supplementation and adoption of new laws demonstrates the need to clarify the concept
of publicprivate partnerships. At first publicprivate partnership was interpreted
much broader than its purpose allowed, related in many cases with undertaking of joint
economic risk and mutually important financial obligations. The legal category of public
private partnership was included belatedly, only on 16 June 2009, while the Law
was adopted a decade ago.

24

2. Implementation of publicprivate partnerships is still a novelty in Lithuania, like

in many countries of Eastern and Middle Europe, although in recent years public institutions
of these countries implement a larger number of business projects in cooperation
with the private sector. On the one hand, there is a lack of a uniform and consistent policy
on the strategy of implementation of publicprivate partnerships in Lithuania.
On the other hand, legal acts are being adopted one after another and systemic direction is
lost, even if one of the first legal acts establishing guidelines for publicprivate partnership,
was adopted in 1996 (the Law on Concessions). for a more precise and uniform concept of
publicprivate sectors for all legal subjects and the necessity of its legal use in implementing
public administration functions.
Publicprivate partnership is not sufficiently recognized as a social object of multifaceted
research and assessment, thus corruption and misuse of powers is fostered in
public administration practice and the state suffers great losses. In Lithuania, publicprivate
partnership is impeded by laws and negative public view of joint project implementation
as a method for non-transparent privatization. The analysis of the cooperation
problem shows that in the nearest future it is important to conceptually draft and adopt a
strategy on the implementation of publicprivate partnership in which the directions and
limitations of activities aimed at harmonizing the actions of relevant institutions would
be clearly defined, and their functions and responsibilities firmly established.
The strategy must be in line with changes in social policy, the market situation and must
incorporate the possibility to adjust to any further changes in this field. The strategy should
include the mission of the main activities, its purposes and objectives. The principle of the
rule of state that state institutions shall serve the people, which is established in the
Constitution, must be respected. Thus, drafting of the strategy must be public and proper
conditions should be established for discussion on all possible publicprivate partnership
initiatives and limitations thereof.
3. Upon legitimizing the publicprivate partnerships concept by law, all applicable
legal acts must be evaluated. The point of reference should be the grounding of this
concept and harmonization with other terms included in other legal acts. All terminology
must be revised in order to avoid inaccurate use of the publicprivate concepts
content.
4. After an analysis of the positive and negative aspects of publicprivate partnerships, the
need and the state of legitimizing of publicprivate cooperation, the author suggests
considering the possibility of legally regulating certain forms of publicprivate partnership in
Lithuania in more detail. We should take note of the opinion shared by many researchers, who
underline the legal contractual relations of partnership: concession, shareholders, investment
services, contract of works, sub-contract, supply contract, service contracts, as a minimum
between the awarding institution and concessionaire (project developer).
Thus, these two sectors should cooperate by undertaking infrastructure development projects,
supported by state aid and private funding and at the same time sharing a certain risk and
responsibility.

25

5. The IPPP practice in the Republic of Lithuania has shown both positive and negative
aspects. However, it is important to take into account both the mistakes of negative practice
and the advantages of good practice with the view of developing the IPPP in Lithuania into a
strong legal institute that fosters the effective establishment of a publicprivate cooperation
system. Properly drafted IPPP projects would help maintain the states competitive abilities
and facilitate a positive public view.

26

PPP in POLAND
The PPP Act and the Concession Act
http://www.centrum-ppp.pl/templates/download/ppp_act_19.12.2008_eng.pdf
The PPP Act resolved by the Parliament on the 19th December 2008 and the Concession Act
resolved by the Parliament on the 9th January 2009 were announced in the Officiel No.19 on
the 5th February 2009.
The Concession Law came into force on the 20th February 2009, the PPP Law came into
force on the 27th February 2009.
There is a strict relation between the PPP Act and the Concession Act; the PPP Act refers to
the Concession Act in the field of private partner selection process.
The work plan for the 2010 adopted by Centrum PPP includes:

Continuing trainings for the Regional Chambers of Auditors and Supreme Chamber of
Control, as well as start training for the other control bodies (Central Investigation
Bureau supervisory organs (Central Anticorruption Bureau, Central Investigation
Bureau, Prosecution, Police) - in cooperation with the Ministry of Economy,

Launching the PPP projects database in Poland - in cooperation with the Ministry of
Economy,

Developing and promoting PPP good practices - standards and procedures,

Trainings aimed at territorial authorities and central government,

Trainings directed to the PPP project funders and financing institutions,

Organizing conferences and seminars on the topics of cooperation under PPP,

Cooperation with the Ministries: the dissemination of the PPP strategy, the definition
of the rank of the PPP in strategic government documents, CSO reporting, creation of
units within the ministries of the PPP, the creation of individual "certifying" decisions
of the PPP, international cooperation at government level,

Cooperation with foreign PPP entities,

Cooperation with the Public Procurement Office,

Increasing the role of the www.centrum-ppp as a platform connecting sides of PPP

contracts,
European projects.
Public-private partnership is used to carry out public functions in many countries around the
world. It is increasingly difficult to find a region of the world, in which the PPP model has not
been, or is not used. Over the last 14 years in 1994 - 2007 has been realized almost 1,200
contracts PPP medium for the amount of almost 290 million EURO.
27

The value of projects completed during the period 1994-2007 in the various geographic
regions the world.

Source: development based on Dealogic data ProjectWare and PricewaterhouseCoopers

In most countries around the world the existence of a central processing unit dealing with
public-private partnership was deemed to be reasonable. Such institutions already exist in the
United Kingdom, Ireland, Germany, the Czech Republic or France. In most cases, these units,
even if they are not part of the public administration, is subject to its supervision - most
effected by the Ministry of Finance or the Treasury. But beyond this common element, form
and structure of the central units for the PPP is very diverse.
http://pppinstitute.com
Governmental and Public Administration Zone
IPPP is the first non-governmental organisation in Poland supporting the local and central
public administration as well as representing external diplomacies and international
organisations in regards to the development of the PPP market. Our primary focus is the
public investments market of Poland and the surrounding countries especially from Central,
Eastern and Southern Europe.
Our goal is to support public entities in driving regional development through PPP which we
believe is the right answer to the demand of meeting public needs in todays economy.
Making Things Happen is the statement of ours that gives us will and determination in being
substantially beneficial to societies both locally and nationally.

28

At IPPP we understand that it is the public side that initiates public-private partnerships and
that there are fundamental rules that must be followed at any time such as concern for people,
meeting the public demand, transparency, securing a sustainable development or minimizing
financial risk and exposure.
In order to help local and national governments as well as their bodies in bringing successful
PPP projects to the market, we are taking a calm approach and are strict in following some
crucial requirements:

bankability of PPP projects regardless of how tempting visions a development

strategy or plan may have,

transparency as public investments are open and competitive by definition,

trust which is a function of things well done in time,

complementarity of our expertise through accurate recognition of public and private

sectors needs,

reliability as decisions should only be made basing on proven information.

Accessing Poland through IPPP

What kind of support can IPPP offer to external governments and bodies of international
public organisations?

Precise insight into the public investments market in Poland in regards to PPP
projects including:
o

up-to-date PPP projects database and market researches,

networking with relevant parties from the PPP market (from both public and
private sectors),

full legislative expertise and analysis,

PPP markets development forecasts.

Local representation of your organisation on the Polish market in a way suiting

your needs:
o

up-to-date and unique information feed about the PPP market,

a remotely set up business development outsourcing of your organisation in

either an open or a discrete manner including a confidentiality agreement
securing your interests if required,

support in establishing of a subsidiary branch in Poland.

PPP stands for Public-Private Partnership. It is also known as P3 and is basically an

alternative method for the public administration to meet public infrastructures needs and
deliver quality public services. PPP is often described as value for money. The British Local
Government Improvement and Development (formerly IDeA) defines best value for money
as the optimum combination of whole-life costs and benefits to meet the customers
requirement and this is indeed what PPP is.
29

Challenging the future

Todays world stands in front of challenges such as globalisation, climate change, waste
utilization, population ageing, the need for renewable energy and infrastructural and
technological progress. Social services such as education, healthcare or social housing are not
less important. All these require intelligent and effective investing and public means wont be
sufficient to meet the worlds demand in the foreseeable future.
Therefore it is vital to pursue additional means in order to let the world continue its
development. These means can be gathered from all of the potential the private sector has to
offer including financing as well as effective managing and operating.
Our mission
At IPPP we trust in what we believe. We do care about sustainable development and aim to
keep investments secure for both parties the public and the private one. We invest not only
in PPP projects but also in relationships between people and organisations. The key values
that has brought IPPP to its unique position on the market are trust, reliability, hard work and
the pioneering role we have been playing in creating, exploring and driving the PPP market in
Poland.
IPPP can be defined as a PPP for PPP. As a private partner we are promoting the idea of PPP
and are driving PPP projects for the public administration. At the same time we are enabling
development and profits to those of the private sector who are willing to be part of the
constantly growing PPP market.
On the high level PPP projects are the most strategic fields of human kinds development:
waste management, green energy, infrastructure, telecommunication, housing, social needs,
transport, defence, urban revitalization and other public domains. PPP is an intelligent
solution for delivering cost effective and high quality public services and we see the
cooperation of the public and the private sectors as a way to make the world a better place to
live in.
Most wanted in PPP

projects bankability which is key to make the project come true,

value for all stakeholders this means achieving the public sectors core objectives
and giving profit to the entrepreneurs,

transparency and fairness of all processes leading to PPP-transaction close,

transaction safety in a changing economic environment guaranteed by national

governments,

flexibility PPP project can be launched in a wide range of public domains,

professionals driving PPP projects,

true partnership which means sharing of risks as well as profits between both sides
of the PPP agreement the public administration and the private sector.

Choosing IPPP as a partner for PPP investments in Poland is a sort of a profitable investment
in itself. Our activity is namely not only profit oriented but also dedicated to the development
30

of the Polish PPP market. Because of this we want to bring only bankable PPP projects to the
market suiting both sides of a PPP agreement: the private and the public sector.
At the same time, because of our attitude and orientation we have the ability to keep
our expenses under control and to offer you attractive pricing for services which are of a
unique high quality and accuracy as performed by first-class specialists with the longest
experience in PPP on the market. IPPP has been building its unique position as an
independent body since 2003 and is now a trusted partner with outstanding references in the
field of PPP/concession public investments.
IPPPs mission is Making Things Happen and while working with our clients our main focus
is to continuously deliver a satisfactory and high quality result that is exactly as expected and
whats important that is delivered for an affordable prize being a good example of the
value-for-money rule.

What can your organisation gain by choosing IPPP?

Securely and confidently leading through the complexity of public investments in

a professional, approachable and timely manner.

Playing a prominent role on the PPP public investments market.

Accelerating business through opening to PPP investments which are profitable and
safe as guaranteed by the public administration.

Strategic settlement in this part of the world or, looking more locally, inCentralEastern Europe (CEE).

Not missing any investment opportunity coming from the promising Polish PPP
market through up-to-date and reliable source of information.

First-class specialist having your goals set as theirs helping you to drive profitable
investments on the PPP market.

Flexible approach and respect to your habits and views on ways of doing business.

A wide range of investment areas such as: waste management, transportation &
logistics, renewable energy, gas & power, healthcare, housing, education, tourism,
telecommunication, sport & entertainment, military defence, water systems and other
types of infrastructure and services being a public domain.

Receiving best practise solutions resulting from the longest experience of IPPP on the
Polish PPP market.

Access for your goods and services to offers brought to the market by the public
sector.

Advisory services delivered by individuals with relevant practical experience in their

areas of expertise.

Membership in the Chamber of Private Partners giving your organisation unique and
fair advantages on the PPP investment market.
31

Opportunity to advertise your company in the only hard-copy public investments

magazine issued in Poland which is dedicated to PPP.

Minimizing of risk and financial exposure within investment strategy through

outsourcing of services.

POSSIBLE PROJECTS FOR PPP

parking projects strongly desired by the Polish local

governments: basing on the most recent PPP markets report
published by IPPP parking infrastructure is the 2ndmost often
chosen investment area for a project in the PPP formula,

public transport & outdoor, which are very well suited fields for
PPP agreements also with a strong interest from the side of Polish
local governments in developing such type of contracts there is
also an already signed and valid concession contract in Poland
whose scope is providing public transport services and another for
outdoor advertising on bus shelters which is currently in
procurement phase,

revitalization projects and lighting, whose objective is rising the

quality of public infrastructure and adjusting it to new functions
and challenges especially in regards to destroyed and forgotten
city areas or on the other hand to the most representative city parts adored by tourists
and vital interchange stations,

Road and transport infrastructure projects which are playing

one of the most important roles in cities development making
urban areas more approachable and capable of being a good place
for doing business for both domestic and foreign companies.

The Forum PPP Magazine. It is the only hard

copy public investments magazine dedicated to
PPPs and concessions issued on the Polish
market. The magazine is issued since 2008 and is
distributed exclusively and be name among more
than 5000 individuals the most influential
representatives from the public administration
(both governmental and local), financial
institutions, universities, foreign diplomacies and
private sector companies from such industry
sectors as construction and engineering,
transportation, power and energy, real estate,
legal advisory, lightning, IT, transportation and
many more.

32

PPP in SWEDEN
The context for local employment development (LED) and
joint publicprivate partnerships
This section aims to collect information about the context for LED and publicprivate
partnerships in place prior to the onset of the economic crisis. The aim is to provide a general
impression of LED and public-private partnerships rather than a full picture of LED
initiatives.

1.1 A description of local employment development in your country before the

onset of the financial crisis
The system of local partnerships in Sweden is built around collaborations between companies,
municipalities, government agencies and social partners. The municipalities and government
agencies provide a basic support structure and funding for special projects. The system is built
around a mix of bottom up and top down measures, in which the main goals and operations of
government agencies are decided centrally by the government. These decisions are then
adapted to fit the local situation, often in collaboration with local actors.
The same system applies to the social partners. The demarcation of collective agreements is
national, but local agreements and negotiations also take place in order to adapt to a specific
situation. With regards to local partnerships and LED, this means that while there are national
collective agreements, if there are specific local issues these can be solved using local
negotiations.
The geographical demarcation for a local partnership is often a municipality. Sweden is
divided into 290 municipalities, who in turn are divided into 20 county councils. The
municipalities in Sweden are responsible for the educational system within their geographical
demarcation, and to ensure that the supply of educations corresponds to the needs of the
individual, the needs of society and the needs of the local economy. They are also responsible
for providing employment for the disabled and for those with special needs. In 2008 35,5% of
the municipalities stated that they are part of a public-private partnership.
LED in Sweden are fairly flexible, and the types of activities that are provided will depend on
the local context. However, the Public Employment Service (Arbetsfrmedlingen) provide a
wide range of active labour market programmes (ALMPs) which can be utilised and adapted
in a local context. This will include training and educational activities, as well as mentoring
and coaching activities. During the crisis Arbetsfrmedlingen has worked closely with
companies in sectors that were hard hit, for example by setting up a local desk at firms with a
large number of notices.
Support to businesses are generally provided by the municipalities or by the Swedish Agency
for Economic and Regional Growth (Tillvxtverket), which provides funding for local
partnerships, for specific programmes and also administers the projects within the European
Regional development fund.
The social partners have an important role in the Swedish labour market model, and LEDs are
no exception. Collective agreements in some sectors include employee security agreement
(trygghetsavtal), which provides help, active brokering services and financial support to

33

workers who are dismissed. Trygghetsrden (Job Security Councils) can help redundant
workers find new employments or help them start an enterprise. During the crisis some unions
have signed agreements on decreased working time to decrease layoffs, and some of those
included educations schemes as well.
Another partner in the LED are arbetsgivarringar (authors translation: employer rings).An
employer ring is a network of employers and other organisations that help employees to
overcome different adjustment processes. An employer ring operates in a local or regional
context, and provides assistance for employees that require vocational rehabilitation or help
finding new work. Through the network employees can switch between different work places
and assignments in order to adapt to a new situation.
In order to strengthen the collaboration between the actors listed above the government
created the position of regional coordinators (authors translation: regionala samordnare),
which were filled by county governors. The regional coordinators assignment is to facilitate
the collaboration between the various agencies involved in the local partnerships in sectors
and regions more affected by notices and layoffs.
In theory, the logic behind partnerships is simple: All organisations have strengths, but no
organisation has all the strength required to do everything. Triggered by global perspectives
and challenged by sustainability objectives, the United Nations Conference on Environment
and Development (UNCED) in Rio de Janeiro in 1992 pointed out needs for corporate
responsibility. In this conference, Private-public partnership, PPP, was identified as a
potential way to work towards sustainability, especially as a way to emphasize a corporate
responsibility commitment. Nowadays, organizations exist to satisfy the needs and interests of
all their stakeholders, such as customers, markets, shareholders, as well as secondary
stakeholders such as media, NGOs, and society at large. Addressing all stakeholders and
working towards a sustainable business development makes PPP a potential solution, but also
a source of challenges. Therefore, PPP has been also described as a form of art, given that
todays leaders have to manage their businesses in a world of complicated issues and
uncertainties. So the question arises, what are the challenges and motivators from a corporate
perspective? And within this context, what are the perceived conditions for PPP to be a part of
SBD strategy?
Food retailers have a special function given that they are the link between consumers and food
producers and therefore have somewhat a negotiating and influencing role. The focus of this
project is to describe different conditions for a perceived successful PPP from a retailers
perspective. It is based on a comparative case analysis of three major retailing companies in
Sweden (ICA, COOP and Axfood). Given that these retailers combined own more than 85%
of the Swedish retail market for Fast Moving Consumer Goods, the findings in this project
carry importance in the future development of the industry. NGO perspectives from Rdda
Barnen, WWF and Naturskyddsfreningen have been taken into account to provide a holistic
analysis. Further, this project is based on an exploratory and qualitative research ethodology,
aiming at understanding underlying rationale and reasons beyond what a quantitative study
could provide. Interviewees were chosen with representative persons in each organization.
After the theoretical framework was developed in a careful review, we decided on a
stakeholder and network theory, Charter & Polonksys (1995) concept of motivators and
challenges and Sustainable Business Development strategies by Rainey (2006).
This study aimed at understanding why and how PPP is approached, what are the motivators
and challenges perceived. The findings are similar to the ones pointed out in previous

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literature, yet it seems that PPP is used rather as an operational tool than as part of a holistic
management strategy such as Sustainable Business Development (SBD). Access to
knowledge was found to be the main common motivator for PPP, whereas on the challenges
side there was a wider confusion. The governance and structure of the organization seem to
have a significant impact on how and why the PPP is managed, where network ties are rather
weak. Further, it seems that long-term perspectives are not in the immediate stakeholder
analysis, where private organizations need to be more inclusive and actively addressing
stakeholders interests. PPP can be constructive and effective way to address sustainability
issues, yet it should be taken seriously as the concept that it is; a holistic approach that
requires respect, commitment, trust, transparency and reciprocity. Yet, this is highly
dependent on time, assuming that the concept of time exists and is valid. Finally, clear
objectives and constant dialogues with all stakeholders are key factors for a successful PPP.

Motivations & challenges for PPP

Mendleson & Polonsky (1995) argue that the willingness to enter into an external
collaboration, both companies and non-profit organizations, has increased due to the fact that
they realized that both parties benefit from these associations. Comprehension of these
motivations is important as the authors stated forming an alliance assumes both parties
cooperate, mutually beneficial and are not adversial (Mendleson & Polonsky, 1995, p. 15).
The authors come up with five motivations for businesses; which emerge from strategic
collaborations with NGOs (Mendleson & Polonsky, 1995, p. 9). This kind of cooperation is
considered to increase marketers credibility of its products and their associated claims.
Nongovernmental
organizations also hold access to huge information or information networks as
well as access to new markets. Hence this attribute can play an important role to benefit
organizations with which they establish collaborations. Forming collaborations with NGOs
may also trigger increased publicity, where meanwhile leading to better publicity and less
criticism. In addition, non-profit organizations constitute important sources of education
information and materials. Figure 6 illustrates the motivations and challenges arising from
private-public partnerships facing businesses and non-profit organizations.

PPP Motivations and challenges

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PPP in NORWAY
In February 2001, the Parliament in Norway discussed a white paper on transport. The
Parliament then decided to find out whether PPP is a suitable model for financing and
building roads in Norway. Three road projects have been selected to test if the PPP-model
will lead to greater efficiency in road projects, and at the same time give the public sector the
required control of the projects and political flexibility. The Government is also positive to
test the PPP concept in the railway sector, but for the time being no project has been
proposed. I will therefore focus on the road sector.
The Norwegian road network is comprehensive because of long distances and a scattered
distributed population. Norway has approximately 27.000 km state roads and 64.000 km
regional and local roads. The total investments in the state road network in the 2003-budget is
6,7 billions Norwegian kroner (about 850 mill Euro). Road toll financing makes up about 25
% of the total investments.
The Ministry of Transport and Communications is at present preparing a revised white paper
on transport, the National Transport Plan, that is scheduled for presentation to the Parliament
in January 2004. Here, the total investments and the distribution among projects will be set for
the next 10 years, both for the road and the railway sector.
The Norwegian PPP-model
The PPP-company in the Norwegian PPP-model will receive an annual unitary payment, but
with the actual level of payment being varied according to performance against a number of
pre-defined criteria. These criteria are related to our political goals of good accesibility, high
performance and a high level of traffic safety on the road network. The annual payment
consists of both government funding and toll money.
The payment mechanism will be based on four separate elements:
1. Availability payment for the road being accessible to certain standards
2. Performance payments based on the operation and maintenance of the road being of a
specified standard
3. Safety payments based on the safety record of the road in comparison to other comparable
roads in Norway
4. Traffic payments relating to traffic that is significantly higher than the estimated forecasts
The most important difference from the traditional model for road construction in Norway is
that in the PPP-model the private sector will have the entire responsibility to deliver a service,

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while today the private sector is a supplier of single, specified tasks. In PPP-projects the
authorities will place orders and make demands on what to be delivered, as opposed to
demands on how to deliver it.
The PPP-contract will give the PPP-company full responsibility to ensure that the project road
is perceived by the users and the surrounding population to have good aesthetic and
environmental standards over the life of the contract.
The PPP-model assures a value for money allocation of risk between the public and private
sectors. The risk allocation will be clearly defined in the PPP-contract. The Norwegian PPPmodel assures that risk is allocated to the party best able to manage the different risk
elements. Risk factors over which the PPP-company has little or no influence will be allocated
to the public sector. The traffic risk will neither in form of toll collection nor shadow toll
be allocated to the PPP-company.
The first PPP-project in Norway
The Norwegian Public Roads Administration has just finished the process of awarding the
PPP-contract for the first of the three state highways which are to be developed as PPPprojects in Norway. This contract is the first PPP-contract ever in Norway, and the project
serves as a pilot scheme for the whole country. The PPP-contract has been awarded to
Orkdalsvegen AS after the candidates have gone through a tender period and after
negotiations according to public procurement regulations have been carried out between the
state and the selected PPP-company. The candidates have been competing on the annual
payments and the economically most advantageous tender from the states point of view has
be awarded the project.
This first project (E39 Klett-Baardshaug) is situated in Soer-Troendelag County in the middle
of Norway. The distanse between Klett and Baardshaug is 27 kilomter. The estimated value of
the construction element of the contract is 1-1,2 billion Norwegian kroner. Orkdalsvegen AS
will be responsible for building, operating and keeping the road in repair for a defined period
of time (20-25 years). In addition, the company will be responsible for handing over the road
to the Government in a predefined technical condition at the end of the concession period.
The road shall at the end of the concession period comply with pre-defined functional
requirements.
As I mentioned earlier, the traffic risk will not be allocated to the company. The toll company
for the first project is a state owned non-profit company which has entered into a separate
agreement with The Directorate of Public Roads. The agreement regulates how the toll
funding will be used to partly finance the road development. The PPP-company will be paid
solely based on the PPP-contract and the payment mechanism and a payment profile specified
in this contract. The Norwegian Parliament agreed to this project in June last year. The
contract was with Orkdalsvegen AS was signed in March 2003. Orkdalsvegen AS is owned
by the Swedish Skanska BOT and the British Laing Investments.

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The two other road projects to be procured as PPP-projects in Norway are E39 LyngdalFlekkefjord in Vest-Agder County and the E18 Grimstad-Kristiansand in Aust-Agder County,
both in the southern part of Norway. The pre-qualification for the former started earlier this
year. The latter project has not yet been defined, but it will be the most extensive of the three
projects, and the pre-qualification for this project will most likely start in 2003.
The Norwegian government has plans for extensive investments in the transport network in
the years to come. We regard the PPP-model as one of several measures to increase the
efficiency of our investments, and thereby give people and industry and trade better public
services. The government has recently also got the Parliaments approval to another extensive
reform which involves setting out all the construction, operation and maintenance of public
roads to open competition in the market. This means that from 1 January 2003 all new
projects previously conducted by the Public Roads Administration are to be presented to the
private market. In addition, the production department of the Public Roads Administration is
from 1 January 2003 organised as a state owned limited company, that will have to compete
on equal terms with private companies.
Recent years experience abroad has revealed that realisation of transportation projects by the
private sector has led to savings, access to new sources of funding and the moving ahead of
high-priority projects. Hopefully we will experience these benefits from using PPP in Norway
too.
In Norway (unlike in EU) there are no limitations to public loans. To prove the efficiency of
infrastructure building and maintenance an elaborate PPP model was developed to be applied
on the test projects. The experience from the three Norwegian test projects is not given a full
social evaluation, but it is evaluated within the scope of socioeconomic efficiency. Data from
comparable traditionally funded projects and interviews with stakeholders and leaders in
government and private organisations have been used in the analyses.
Among the questions asked are the following.
1) Has the construction process been more efficient due to the incentives of the PPP model?
2) Has the PPP process lead to innovative solutions and to optimisation of life cycle costs?
3) Has the model lead to the transference of risk different from traditional models?
4) Has the valuing of increased risk lead to a higher price compared to traditional projects?
5) Have the private loans been more expensive than similar public financing?
6) Has competition in the bidding and negotiation process been fair and efficient?
Although Norwegian experience is quite limited we hopefully may give some answers of
general interest.

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Concluding remarks
The test projects have provided a number of positive experiences, which can be brought into
existence as PPP projects or under other contract forms. The PPP model that was tested in the
Norwegian test projects implies private financing and transference of cost responsibility to the
PPP company. The efficiency gains, which are due to treating of the project as one, the
coupling of planning, construction, operation and maintenance together with increased project
size, can be carried out independently of private financing. The most important positive asset
of private financing is the independency of the annual public budgets, which in some cases
can ruin the continuity of a conventional project. This may also be realised in other ways, e.g.
through project financing. By this the government will make the total building budget
available for the private concessioner from the start.
However, there are some efficiency drives that will not be realised in this way, like the role of
banks and professional investors making demands towards the SPV concerning the
management of the project. Financing by tolls is not necessary for a PPP project even if it is
frequently a part of it. In many cases it can be quite disadvantageous since it might reduce the
social benefits, especially if tolling does not have a positive effect on traffic concerning
congestion or other external costs.

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