Restoring the Past U.E.P.C. Building the Future
GREEN PAPER ON PUBLIC PRIVATE PARTNERSHIPS
UEPC represents more than 30,000 developing and house building companies, affiliated
with its 13 member federations. Directly or indirectly the activities of these developers
and house builders represent 10% of gross national product and employment
in Europe. Together, they annually build and develop several millions m² of offices
and shopping centers as well as more than 1.000,000 new homes.
UEPC wishes to emphasize the need to improve delivery in PPP, ensuring at
the same time value for money and flexibility in privately financed projects.
Therefore the Commission should stimulate/facilitate EU Member States :
- to ensure the development of effective legislative and regulatory
provisions before developing PPP relationships;
- to improve efficient organization and transparent frameworks to
streamline the process of delivering PPP projects;
- in improving the general procurement skills of the public sector
to deliver value for money in investment;
- to put in place an information resource, accessible to all public
authorities and private partners, providing accreditation of PPP
advisers to ensure the PPP-partners appoint experienced and
qualified advisers who have performed well on other procurements;
- to enforce the standardization of PPP contracts across the public
sector to reduce the length and cost of PPP procurements;
- to promote the sharing of best practice;
- to promote the communication with stakeholders
By improving the role of the public sector client, the EU will help to:
UNION EUROPEENNE DES PROMOTEURS-CONSTRUCTEURS
EUROPEAN UNION OF DEVELOPERS AND HOUSE BUILDERS
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- enable authorities to focus more effectively on securing overall
value for money, taking in whole-of-life costs, allowing scope for
innovative design and using discretion and good judgment in
evaluating procurement options;
- increase the speed with which investment is delivered to the public
by reducing time spent in procurement;
- reduce the cost to the public sector of procuring PPP projects,
improving their value for money; and
- by being a better client, encourage the private sector to bid for
PPP projects, strengthening competition and innovation in PPP
According to UEPC, the Commission should clarify the principles of transparency,
equality of treatment, proportionality and mutual recognition in relationship
with the award arrangements of all kind of PPP-projects, whether institutional
or pure contractual. A clarification of these principles should itself respect
the principles of non-discrimination and equal treatment, meaning that a
different approach is only accepted if there are enough objective reasons for a
separate treatment and in respect of the principle of proportionality.
According to UEPC, PPP projects can only be successful if the partners can
negotiate in a sufficiently flexible manner, regardless the (final) formal juridical
structure of these projects. Therefore, negotiations should be considered as
the standard rule for PPP-projects.
In principle there is no need to petrify such clarification through purely legislative
action. However, an informal clarification document could lead to the necessity
of modifying existing regulations that are considered to be too restrictive
for successful PPP.
Finally, if the EU considers it necessary to establish itself a contractual framework,
such a framework should only cover the basic issues and certainly not
all the aspects of the contractual PPPs. This framework may determine some
measurable standards such as technical capacity, human resource capacity,
financial ability, experience, bidding process (costs), and confidentiality of innovative
1. UEPC AND THE GREEN PAPER ON PUBLIC PRIVATE PARTNERSHIPS
UEPC is a European association created in 1958. It represents the national federations
of developers and house builders and is recognized by the European
Authorities. UEPC is a Non-governmental Organisation with consultative status
in the Economic and Social Council of the United Nations. It is also a member of
the European Construction Forum, the Construction Contact Point and one of
the founding members of the European Housing Forum. UEPC is also a member
of the Working Group on Sustainable Construction in the Framework of the
European Commission Study on the Competitiveness of the Construction Sector
as well as of the Expert Group on Accessibility (DG Employment of the European
The Green Paper of the Commission analyses the phenomenon of PPPs with
regard to Community law on public procurement and concessions. Under Community
law, there is no specific system governing PPPs. The aim of this Green
Paper is to launch a wide ranging debate to find out whether the Community
needs to intervene to ensure that the economic operators in the Member States
have better access to the various forms of public private partnership in a situation
of legal certainty and effective competition.
The Green Paper does not propose any particular option or set of options for
Community intervention. The instruments available for improving the opening of
PPP operations to competition are in fact very diverse: Community legislative instruments,
interpretative communications, measures aimed at better coordination
of national practice, or the exchange of best practice between Member
States. In fact, The Commission has no wish to prejudge the outcome and will
take the fullest possible account of the results of the debate.
The Green Paper contains a list of 22 questions. UEPC decided to elaborate
some general considerations and to answer, thereafter, some specific and general
questions regarding the experience of UEPC, the need for clarification of
the principles of equal treatment, transparency and non-discrimination in relationship
with PPP projects, mainly concerning the award arrangements and the
2. GENERAL CONSIDERATIONS
2.1. PRIVATE SECTOR PARTICIPANTS SEEK TO FIND REASONABLE PROFITS
UEPC wishes to emphasize that, for private sector participants, the first requirement
for any type of involvement is the potential to derive a reasonable
profit. In addition, in return for greater risk exposure, the private sector will also
require the potential for commensurate increases in profit potential. Similarly,
before committing its own capital in the development of projects, it will require
clear legal and regulatory structures, and will want to see the potential for future
economic growth, together with reasonable levels of political support and stability.
Some procuring authorities are pursuing an approach to risk transfer that is unsustainable,
seeking to transfer too much risk to the private sector. The Government’s
approach to risk sharing in PPP should be to seek to transfer only
those risks that the private sector can more effectively manage. It should not
seek to maximise risk transfer, as this would offer poor value for money.
2.2. POLICY INITIATIVES AND MEASURES
According to UEPC, the EU needs to put in place policy initiatives and measures
designed to make the public sector a better client in all PPP procurement. UEPC
supports the initiatives already taken on the EU-level (guidelines for successful
PPP, adoption of the statute for a European Company, Eurostat’s recent recommendation
that the assets involved in a PPP should be classified as nongovernment
assets, and therefore recorded off balance sheet for government if
both of the following conditions are met : 1. The private partner bears the construction
risk, and 2. The private partner bears at least one of either availability
ord demand risk.).
EU should further stimulate/facilitate all Member States:
1. to ensure the development of effective legislative and regulatory provisions
before developing PPP relationships
In this respect UEPC supports the Commission’s point of view set forth in its
“Guidelines for successful Public-Private Partnerships” of March 2003.
UEPC thinks it would be wise for Member States to institute an assessment of
the potential value for money of procurement options when overall investment
decisions are being made in the context of the Spending Review, to ensure
PPP is only used when it is the best option and has a good prospect of offering
value for money. By making a value for money assessment of all procurement
options at an early stage, as investment programmes are being considered,
this new initial stage will allow maximum flexibility in the choice of procurement
options in these areas.
It is wise to use PPP only where it represents the best procurement option.
This is unlikely to be the case for projects with a small capital value. It is important
then that local authorities have the flexibility to develop such projects
through a wide range of procurement routes, choosing the most appropriate
option that delivers the best value for the project. This flexibility is part of a
wider commitment to devolve responsibility to local councils to meet local priorities,
increase local choice and improve performance by removing unnecessary
controls that stifle local innovation.
Delivery of the Member States’ objectives for housing are dependent on significant
programmes of capital investment. In some States PPP is already contributing
to delivery of that objective, but its role could also be expanded. Affordable
housing provision could benefit from PPP investment because:
- it involves the provision of capital assets where effective project management
incentivised by appropriate risk-sharing would bring significant
- because of their long life, these assets could benefit from design, construction
and costing made on a whole of life basis by private sector
parties incentivised to ensure best value.
2. to improve efficient organization and transparency to streamline the
process of delivering PPP projects
The private sector should be provided with the confidence to invest in the additional
capacity necessary to facilitate several public plans to increase investment
in new public sector infrastructure. Local authorities in several Member
States have encouraged to bring PPP projects forward, as a limited amount of
central government revenue support has been available, but there has been
no (clear) basis for allocating such support between different local authority
schemes. Projects have therefore been taken forward at considerable risk to
the local authority, incurring development costs on the procurement process,
with no assurance about the availability of revenue support. Bidders, similarly,
have had to bid on schemes whilst uncertain whether they would receive necessary
Government support or not. A framework to streamline the allocation of
the of central government revenue support should therefore be established.
To ensure value for money and flexibility in privately financed projects, the different
governments should explore the provision of framework funding, to
make available a faster, cheaper funding solution for bundled small schemes.
UEPC also promotes the establishment of public sector procurement centres
specialized in structuring and delivery of PPP projects, which will work with local
public sector managers in certain suitable areas to procure such projects,
to increase the quality of specifications and reduce delays in the process.
These procurement centres can then support local procuring authorities in particular
markets. By increasing the public sector’s ability to procure quickly robust
and effective PPP projects, these supporting centra will also allow the introduction
of PPP into new areas as well as offer a way to increase the number
of PPP projects in existing areas. However, there is no need for these centra
to become themselves PPP partners. Their task should be limited to support
(local) procuring authorities.
These specialized centres could design a range of new procurement models
to bring all the necessary expertise and experience to locally procured PPP
projects, providing procuring authorities with the support they need to obtain
value for money, while maintaining local control and local accountability in the
delivery of public services and public service investment. These models are
therefore likely to be most applicable where small projects can be grouped together,
and there is no obvious centralized procuring authority.
3. in improving the general procurement skills of the public sector to deliver
value for money in investment
It should be an overall EU priority to improve general procurement skills across
the public sector. A lasting step-change in the quality of public services in the
EU can only be achieved if the public sector has the skill sets necessary to
ensure that public investment projects deliver value for money improvements
in frontline public service facilities. Improvements in this area need to focus on
both the quality of public sector procurement skills and on the way in which
they are used. Public sector managers need to:
- be skilled enough to assess procurement options over the long
- effectively identify the value for money option, not simply opt for
the least-cost option, including taking full account of the quality of
design in bids;
- negotiate effectively with the private sector;
- apply skills with sufficient confidence to ensure that appraisal is a
real test of procurement, and not an exercise in fulfilling set criteria
without regard to a wider view of which option is in the public
- carry out the evaluation and management of investment delivery
in a way that ensures that the public sector is accountable for
both the public money which it spends and the public services
which it provides.
4. to put in place an information resource, accessible to all public authorities
and private partners, providing PPP advisers to ensure the PPPpartners
appoint experienced and qualified advisers who have performed
well on other procurements
UEPC believes that it is important that public sector managers are well advised,
especially when undertaking complex procurement projects such as
PPP. Poor advice contributes to slowing the procurement process, can inflate
procurement costs, and will impair the ability of the public sector to identify
value for money in options appraisal and negotiation.
To assist in meeting these objectives, the EU could seek to put in place a single
information resource, covering advisers who have demonstrated their expertise
and performance in PPP projects in fields such as law, commercial
structuring or finance. This resource will be developed over time, reflecting the
experiences of PPP-partners, thus also departments and public sector managers.
It is crucial to its successful implementation that this single point of information
and experience in hiring and managing professional advisers reflect
the qualitative judgment of PPP clients on the standard of the advice they
have received, rather than representing simply a list of potential advisers in different
areas of expertise.
5. to enforce the standardization of PPP contracts across the public sector
to reduce the length and cost of PPP procurements
The European Commission should stimulate Member States to implement
general and specific guidance for public authorities on a standardized contractual
approach to the most common issues likely to feature in PPP schemes.
Standardized Contractual Guidance (as in the UK) should intend to enable
public authorities to strike a balanced contractual position that is commercially
deliverable for the private sector and can provide value for money for the public
sector. In providing a common understanding and approach to common issues,
it is also hoped that it will help further reduce the time and cost of negotiations
of PPP contracts. This will enable the focus of negotiations to be on
the deal specific issues rather than on issues that are generic to PPP projects
UEPC believes that he process of standardizing PPP contracts helps spread
best practice, improving PPP procurements across the public sector, and significantly
reduces the length and cost of PPP procurement. However, these
standard terms should maintain the individual flexibility of a particular pro-
curement to set its needs and requirements, but provide a standard form for
those aspects of PPP common to all its procurements. Member States should
also be stimulated to produce a ‘procurement pack’ for different contractual
PPP projects, such as a “Procurement Pack housing PPP”. The Pack should
be intended to provide a guide for public authorities procuring contractual PPP
projects and should include template or model documentation.
There should also be a regular dialogue with the private and public sectors
over how successfully the standardized PPP contract is being applied.
6. to promote the sharing of best practice
European Centre for Public-Private Partnerships
UEPC believes there is a need for a European Centre for Public-Private Partnerships.
The mission of this Centre is to advocate and facilitate the formation
of public-private partnerships and to raise the awareness of governments and
businesses of the means by which their cooperation can cost effectively provide
the public with quality goods, services and facilities.
The objective of the European Centre for Public-Private Partnerships is to foster
innovative forms of cooperation between the public sector and the private
sector, for the benefit of all Europeans.
The Centre's vision is to influence the way in which public services are financed
and delivered in Europe by:
- Encouraging public-private partnerships
- Providing information on public-private partnerships
- Sponsoring conferences and seminars on partnerships
- Stimulating dialogue between public and private sector decisionmakers
on the financing and delivery of public services
- Educating the public
- Conducting objective research on key issues that influence the
effective use of partnerships
The Centre should concentrate on the following activities :
- Promotion and facilitation of public-private partnerships across
- Compilation of a resource library on PPP issues and projects
- An annual conference and regional events on a wide variety of
- Informative newsletters (Public-Private Bulletin) on Centre activities,
news and issues discussed at the national conference
- Workshops and seminars that allow participants to share innovative
ideas and solutions through a national network
- Centre-sponsored publications, including research ong>paperong>s, case
studies, guidelines, opinion surveys and national inventories on
key public-private partnership subjects
Supporting Authorities Through Project Networks
In the UK, “4ps” supports local authorities developing and delivering housing
PFI projects in part through project networks. Networks are seen as an important
way of facilitating an exchange of information between project staff. The
project networks also have access to 4ps’ hosted ‘extranets’ through which local
authority project staff can share, electronically, project documentation. This
practice should be stimulated in all EU countries.
Consulting the Market European Housing Practitioners Group
UEPC and the Commission could convene a small working group or ‘practitioners
group’ from the housing bidding side as a consultative forum to discuss
‘technical’ and commercial issues related to large housing PPP projects.
7. to promote the communication with stakeholders
More people will be affected by a partnership than just the public officials and
the private-sector partner. Affected employees, the portions of the public receiving
the service, the press, appropriate labour unions and relevant interest
groups will all have opinions, and frequently significant misconceptions about
a partnership and its value to all the public. It is important to communicate
openly and candidly with these stakeholders to minimize potential resistance
to establishing a partnership.
2.3. THE DISTINCTION BETWEEN PURELY CONTRACTUAL PPS AND PPS OF AN INSTITU-
The distinction made in the Green Paper between PPP of a purely contractual
nature and PPP of an institutional nature makes sense only to a certain point.
In fact, institutional PPS is commonly set up on the basis of contracts. A distinction
that is made in function of the procurement requirements, and thus based
on a purely formal criterion, does not take into account the practical side of different
projects. Intrinsically, and apart from the procurement methods, an institutional
PPP is more complex as a formula than an contractual PPP (such as a
combination of Design-Build-Finance-Maintain-Operate-Transfer), for the public
partner can always discuss on the role and the risk sharing as a participant in a
juridical vehicle. Moreover, as the public partner is subject to other regulatory
measures than private partners, this could create problems in the management
of the vehicle.
3.1. QUESTIONS REGARDING THE EXPERIENCE OF UEPC
1. What types of purely contractual PPP set-ups do you know of
In its “guidelines for successful public-private partnerships” the European
Commission distinguishes four main groupings of PPP relationships: (1) DB
and variant forms; (2) BOT and variant forms; (3) DBFO and variant forms (4)
Concession (page 28). In its actual Green Paper on PPP, the Commission
also refers to PFI-contracts and concessive models (DBFOMT). UEPCmembers
have experience with these PPP relationships.
Assessing the mean features of this four groupings set out by the Commission
in the above mentioned EU guidelines, UEPC concludes that, according to the
Commission, those four groupings have all in common that the public facility
remains in public ownership or is handed back to the public sector after a period.
However UEPC has also experience with relationships where public facilities
do not necessarily have to be transferred to the public authority, but remain in
private ownership. According to UEPC these relationships can also be defined
as “contractual” :
A public agency contracts with a private investor/vendor to design and build a
complete facility in accordance with specified performance standards and criteria
agreed to between the agency and the vendor. The private developer
commits to build the facility for a fixed price and absorbs the construction risk
of meeting that price commitment. Generally, in a turnkey transaction, the private
partners use fast-track construction techniques (such as design-build)
and are not bound by traditional public sector procurement regulations. This
combination often enables the private partner to complete the facility in significantly
less time and for less cost than could be accomplished under traditional
In a turnkey transaction, financing and ownership of the facility can rest with
either the public or private partner.
Buy/lease, develop / renovate, operate
The private sector buys or leases an existing asset from the public authority,
renovates, modernizes and/or expands it, and then operates the asset
with/without obligation to transfer the ownership back to the government.
The private sector finances, builds, owns and operates a facility or service in
perpetuity. The public constraints are stated in the original agreement and
through on-going regulatory authority.
The contractor constructs and operates a facility without transferring ownership
to the public sector. Legal title to the facility remains in the private sector,
and there is no obligation for the public sector to purchase the facility or take
A BBO is a form of asset sale that includes a rehabilitation or expansion of an
existing facility. The government sells the asset to the private sector entity,
which then makes the improvements necessary to operate the facility in a profitable
Transfer of a public asset to a private or quasi-public entity usually under contract
that the assets are to be upgraded and operated for a specified period of
time. Public control is exercised through the contract at the time of transfer.
This is a financial arrangement in which the owner of a facility sells it to another
entity, and subsequently leases it back from the new owner. Both public
and private entities may enter into a sale/leaseback arrangements for a variety
of reasons. An innovative application of the sale/leaseback technique is the
sale of a public facility to a public or private holding company for the purposes
of limiting governmental liability under certain statues. Under this arrangement,
the government that sold the facility leases it back and continues to operate it.
Finally, UEPC wishes to point out that Member States often select a DBFOMT
or concession contract for highway infrastructure, meaning the private partner
bears the risk associated with traffic demand, whilst after a certain regulatory
measures are taken to stimulate public railway traffic and discourage the use
of the motor highway on the basis of environmental considerations.
21. Do you know of other forms of PPPs which have been developed in
countries outside the Union
United Nations Development Program - www.undp.org/ppp/
UNDPs Public-Private Partnerships for the Urban Environment (PPPUE) facility
supports the development of innovative partnerships between public and
private actors at the local level. Focusing on assisting small and medium-sized
cities, PPPUE works with all potential stakeholders to meet the challenge of
providing basic urban environmental services.
USA National Council for Public-Private Partnerships - www.ncppp.org
The national organization on PPP in the U.S., the NCPPP website contains
up-to-date news, publications, case studies, issue ong>paperong>s and upcoming
events south of the border.
Privatisation Centre - www.privatization.org
Provided through the Reason Public Policy Institute, this is an excellent resource
on the issue, including: definitions; statistics and trends; practices and
strategies; over 20 specific service areas at three levels of government; details
of comprehensive government programs; and the pros and cons of privatisation.
It also includes a long list of studies, publications and a directory of private
providers in the U.S.
Partnerships Victoria - www.partnerships.vic.gov.au
This site, provided by the State of Victoria Government in Australia, includes
guidance materials, information on projects and details of contacts in departments.
Republic of South Africa National Treasury – www.treasury.gov.za
Tenders, manuals, reports and project summaries related to PPP in South Africa
(Hint: click on “public-private partnerships” from the homepage).
Japan - www8.cao.go.jp/pfi
Private Finance Initiative Cabinet Office for the Government of Japan
Korea Research Institute for Human Settlements – www.krihs.re.kr
Activities, news and publications from South Korea’s main centre of economic
promotion and PPP activity (Hint: English version available by clicking link on
top navigation bar).
The Canadian Council for Public-Private Partnerships :
Do you have examples of “good practice” in this framework which could
serve as a model for the Union If so, please elaborate.
The main law for the PPP projects in Turkey is known as “Concerning the Provision
of Certain Investment in the Build-Operate-Transfer Model” (Published
June 8, 1994, Law No: 3996). More detailed information can be found in enclosure
n°1 of this UEPC- report.
8. In your experience, are non-national operators guaranteed access to private
initiative PPP schemes In particular, when contracting authorities
issue an invitation to present an initiative, is there adequate advertising
to inform all the interested operators Is the selection procedure organised
to implement the selected project genuinely competitive
The actual regulations provide few opportunities for the private candidate
launching the innovative idea to really execute his proper idea.
Our Turkish member wishes to stress that, Turkey, especially after the 1980’s,
has liberated almost all sorts of in and out capital movements radically. Therefore,
one can easily say that Turkey has a fully liberal regime for the nonnational
candidates for the PPP’s in hospitals, schools, bridges, rail networks,
tunnels, airports, water and sanitation plants etc. and access to the private initiative
PPP for a foreign entity is easy. In their application a request for qualification
is distributed mostly in a national newsong>paperong>. After receiving applications,
the contractual body selects a few companies or consortia to get their
proposals and amongst these a company or consortium is chosen. After this
step, the High Planning Council approves the bid.
11. Are you aware of cases in which the conditions of execution – including
the clauses on adjustments over time – may have had a discriminatory
effect or may have represented an unjustified barrier to the freedom to
provide services or freedom of establishment If so, can you describe
the type of problems encountered
UEPC has no bad experience regarding this issue.
With certain PPP/PFI, the contract entered into at the outset recognizes that
there will be a need for changes over the 15-30 year life of the contract. The
key flexibility rights given to the public sector are:
- the public sector has a right to change any aspect of the building
or service provision, subject to agreement with the PPP/PFI contractor
- to ensure that value for money is maintained, for changes over a
certain amount in value the public sector can require a competitive
tender for any works; and
- where there is a requirement to change service configuration,
there is a similar right for the public sector to change any aspect
of service provision, subject to agreement on costs, with the ability
to require a competition as set out above.
It is important for the public sector to retain flexibility in delivering services. For
example, if there is new technology which could improve service delivery, a
desire to change the service configuration of the facility such as a shift from inpatient
to out-patient care or an expectation that the volume of support services
required may change, the public sector needs to retain the flexibility to
manage such changes efficiently.
There will always be constraints on the public sector in facilitating such
changes whichever procurement method is employed in delivering new infrastructure.
Once complete, a new building inevitably presents a degree of inherent
inflexibility by its very design.
UEPC therefore recognizes that the public sector client should have the ability
to incorporate flexibility mechanisms into (standard) PPP contracts. However
this flexibility should never result in juridical uncertainty and loss of reasonable
profit for the private partner. In fact, any change is also likely to require new
funds to finance any new construction work needed, so affordability could also
3.2. QUESTIONS REGARDING THE NEED TO CLARIFY THE TREATY PRINCIPLES IN RELA-
TIONSHIP WITH THE AWARD ARRANGEMENTS OF ALL KINDS OF PPP
5. Do you consider that the current Community legal framework is sufficiently
detailed to allow the concrete and effective participation of nonnational
companies or groups in the procedures for the award of concessions
In your opinion is genuine competition normally guaranteed in
6. In your view, is a Community legislative initiative, designed to regulate
the procedure for the award of concessions, desirable
7. More generally, if you consider that the Commission needs to propose
new legislative action, in your opinion are there objective grounds for
such an act to cover all contractual PPPs, irrespective of whether these
are designated as contracts or concessions, to make them subject to
identical award arrangements
19. Do you think that an initiative needs to be taken at Community level to
clarify or define the obligations of the contracting bodies regarding the
conditions requiring a call for competition between operators potentially
interested in an institutionalised project If so, on what particular points
and in what form If not, why not
2. In the Commission’s view, in the context of a purely contractual PPP, the
transposition of the competitive dialogue procedure into national law will
provide interested parties with a procedure which is particularly well
adapted to the award of contracts designated as public contracts, while
at the same time safeguarding the fundamental rights of economic operators.
Do you share this point of view If not, why not
UEPC first wishes to point out that any act, whether it be contractual or unilateral,
whereby a public entity entrusts the provision of an economic activity to a
third party must be examined in the light of the rules and principles resulting
from the Treaty, particularly as regards the principles of freedom of establishment
and freedom to provide services, which encompass in particular the principles
of transparency, equality of treatment, proportionality and mutual recognition.
UEPC further wishes to emphasize that the EU legislative framework governing
the choice of private partner is based on the distinction between different
types of contracts, defined at the EU-level. The contracts denoted as public
works or public services contracts, defined as having priority, are subject to
detailed provisions of Community Directives. The concessions of so-called
“non-priority” works and public services contracts are governed only by some
sparse divisions of secondary legislation. Lastly, some projects, and in particular
services concessions, fall completely outside the scope of secondary legislation.
The same is true of any assignment awarded in the form of a unilateral
According to UEPC, the Commission should clarify the principles of transparency,
equality of treatment, proportionality and mutual recognition in relation-
ship with the award arrangements of all kind of PPP-projects, whether institutional
or pure contractual.
A clarification of these principles should itself respect the principles of nondiscrimination
and equal treatment, meaning that a different approach is only
accepted if there are enough objective reasons for a separate treatment and in
respect of the principle of proportionality.
According to UEPC there are no objective reasons to provide in Directive
2004/18 particular rules on “subsidised” housing schemes, thus excluding the
non-subsidised housing schemes. In fact in the case of public contracts relating
to the design and construction of a housing scheme, - whether subsidised
or not - the size and complexity of which, and the estimated duration of the
work involved require that planning be based from the outset on close collaboration
within a team comprising representatives of the contracting authorities,
experts and the contractor to be responsible for carrying out the works, a special
award procedure may be adopted for selecting the contractor most suitable
for integration into the team.
According to UEPC, PPP projects can only be successful if the partners
can negotiate in a sufficiently flexible manner, regardless the (final) formal
juridical structure of these projects. Applying negotiations into the bidding
process is a good idea since the dialogue process will lead to a clear understanding
between the parties, avoids misunderstandings, gives a great
chance to see the real abilities and approaches of the construction companies,
in turn, both contracting authority and contractors and the consumers enjoy
the benefits of well established PPP projects based on this clear understanding.
This process will also give a great chance to the authority not the finalize
the tender by evaluating only tender documents which may lead to wrong decisions.
Having negotiations would be an important step to choose the best
In principle there is no need to petrify such clarification through purely
legislative action. However, an informal clarification document could
lead to the necessity of modifying existing regulations that are considered
to be too restrictive for successful PPP.
Since the adoption of Directive 2004/18/EC, criteria for the award of the contract
should also be indicated in the contract notice. It is clear that to comply
with the new regulations, public authorities will have to develop award and selection
criteria much further in advance of the contract notice than is the current
practice, which is to define criteria during the award procedure.
The negotiated procedure allows contracting entities to discuss contract terms
and conditions with tenderers on receipt of their offers, and is intended to allow
for flexibility and cost savings in the preparation of tenders. However, the use
of this procedure is restricted to strictly defined circumstances, and is an exception
to the rule that contracting authorities should award their contract under
either an open or restricted procedure. It is still uncertain as to whether
PPP contracts qualify for the negotiated procedure.
Actually the discussion will start whether to apply the competitive dialogue or
the negotiated procedure. UEPC wishes to stress that there is a major problem
in defining the scope of application between the negotiated procedure and
the competitive dialogue.
In its « guidelines for successful Public-Private Partnerships » the Commission
stated that the case for the use of the negotiated procedure is difficult to make
in a Design and Build or BOT contract. According the Commission there will
usually be adequate project definition and the nature of the works or the risks
attaching to them will usually permit overall pricing. According to the Commission
the factors which influence a decision in favour of the use of the negotiated
procedure tend to exist in those projects where it is intended to utilise private
finance or to achieve a greater degree of risk transfer than is normally anticipated.
The Commission also stated that, where private finance is involved,
the use of the negotiated procedure is likely to be appropriate for major projects
so that optimal value for money proposals are received.
However in the « ong>greenong> ong>paperong> on public private partnerships » the Commission
seems to consider that the use of private finance is no longer a valid argument
for the negotiated procedure, as the latter is, according to the Commission,
« to cover solely the exceptional situations in which there is uncertainty a priori
regarding the nature or scope of the work to be carried out, but is not to cover
situations in which the uncertainties result from other causes, such as the difficulty
of prior pricing owing to the complexity of the legal and financial package
put in place.” In a footnote the Commission states that the negotiated procedure
may apply when the works are to be carried out in a geologically unstable
or archaeological terrain and for this reason the extent of the necessary
work is not known when launching the tender procedure.
The Commission seems to be determined that the scope for the negotiated
procedure is not to be extended. UEPC wants to point out to the Commission
that there is a great difference between an unregulated negotiated procedure
without a call for competition and a regulated competitive negotiated procedure
with a call for competition in which there are rules on equal treatment,
transparency, debriefing, etc.
According to UEPC, PPP projects can only be successful if both parties
can negotiate through the PPP-process on the basis of flexible general
principles. Therefore, negotiations should be considered as the standard
rule for PPP-projects.
3.3. QUESTIONS REGARDING THE NEED TO CLARIFY THE CONTRACTUAL FRAMEWORK
PPP PROJECT AND SOME SPECIFIC ASPECTS OF IT (APART FROM THOSE CONCERING
THE SELECTION OF THE TENDERING PROCEDURE)
3. In the case of such contracts, do you consider that there are other
points, apart from those concerning the selection of the tendering procedure,
which may pose a problem in terms of Community law on public
contracts If so, what are these Please elaborate.
The cost of bidding for PPP projects can be a consideration as important as
the funding of an investor’s equity and subordinated debt investments. In funding
such costs, a key consideration for the private sector is its success rate in
winning bids. Irrespective of success, however, the aggregate level of bid
costs expensed in a year does limit the number of bids a company can undertake
in that year, usually determined by the overall financial capability of the
UEPC wishes to warn for increased bidding costs by using the “competitive
dialogue”-procedure. Since the contracting entity will have to keep up to 3 bidders
in the “race” until the final award, unless there is only one compliant bid
after the Competitive Dialogue, the new process may result in increased bidding
costs. It was initially proposed that contracting entities would pay a contribution
of up to 15% towards the cost of tendering, so as to keep bidders in
reserve and allow more competition, but this was rejected. The text is now extremely
vague, stating that contracting entities may provide for a “price or
payment” for participation to the competition. Potential tenderers should therefore
assess whether the contribution to bid costs offered by the contracting entity
is sufficient and does not create a risk of unrecovered expenses and costs.
More equitable cost sharing deals should become increasingly common in the
Some Member States are providing budget facilities for bid costs, others do
not reimburse these costs. UEPC believes the Commission should provide
Member States with common basic rules regarding the reimbursement of bid
UEPC is quite aware that reimbursing the bid costs of losing bidders will in
effect subsidise less successful PPP companies or artificially discourage them
from redeploying resources to other PPP opportunities where this could be
more successful. Therefore, Member States should priorly aim to reduce
these costs by improving public sector capacity : (improve the enforcement of
standardisation, develop new procurement models and reinforce procurement
expertise to the public sector, to ensure all departments operate as best practice
clients, improve the transparency of future PPP programmes to encourage
private sector investment, and continue to encourage new entrants into
the PPP market, including non-national operators)
A further risk is that the contracting authority will cherry-pick the best ideas of
tenderers from their Outline Submission for incorporation into an optimum set
of output specifications in the invitation to negotiate. Why would potential bidders
take the risk that someone else may implement the innovative technical/artistic
solution they put forward during the Competitive Dialogue Under
Article 29 of Directive 2004/18, the Competitive Dialogue must be carried out
without disclosing the solutions proposed or any confidential information to any
candidates without the participant's consent (Article29(3)). However, it is debatable
as to whether this includes any information in the outline proposal.
UEPC finds a clarification necessary. Innovative technical/artistic solutions
should not be transferred to concurrent parties without the consent of the party
that established the innovation.
14. Do you think there is a need to clarify certain aspects of the contractual
framework of PPPs at Community level If so, which aspects should be
The Commission has already published a standard lexicon of common terms
for drafting and advertising the award of a contract.
The European Commission should further stimulate Member States to implement
general and specific guidance for public authorities on a standardised contractual
approach to common issues likely to feature in PPP schemes. Guidance
should intend to enable public authorities to strike a balanced contractual position
that is commercially deliverable for the private sector and can provide value for
money for the public sector. In providing a common understanding and approach
to common issues, it is also hoped that it will help further reduce the time and cost
of negotiations of PPP contracts. This will enable the focus of negotiations to be
on the deal specific issues rather than on issues that are generic to PPP projects
If the EU considers to establish itself a contractual framework, such a framework
shoud only cover the basic issues and certainly not all the aspects of the
contractual PPPs. This framework may determine some measurable standards
such as technical capacity, human resource capacity, financial ability, experience,
bidding process (costs) and confidentiality of innovative solutions.
13. Do you share the Commission’s view that certain “step-in” type arrangements
may present a problem in terms of transparency and equality
of treatment. Do you know of other “standard clauses” which are
likely to present similar problems
UEPC refers to the Commission’s “Guidelines for successful Public-Private
Partnerships” in which the Commission states that main contractual documents
also should include collateral warranties, allowing the contracting Authority
for step-in rights.
UEPC also believes that “lenders” step-in clauses will enhance financial aspects
of certain PPP projects. The concern of the lenders is that they have financed
the project on the basis of projected cash flows and if the Contract
(under which these cash flows are agreed to be paid) is terminated, they will
not, typically, have any rights to sell the Assets, as would be the case in many
types of secured financings. Where direct agreements are required such
documents are increasingly seen as advantageous to the public sector, in that
they give lenders an opportunity to “revive ” the Project and, therefore, to avoid
the disruption that invariably follows termination. If the Project can be restored
with minimal disruption to the Service and there is no need for the Authority to
get involved to ensure that this occurs, then both the Authority and the lenders
In some Member States, step-in clauses are part of a standardised contractual
approach to common issues likely to feature in PPP schemes. In this context
transparency and equal treatment can be secured.
16. In your opinion does the phenomenon of contractual PPPs, involving the
transfer of a set of tasks to a single private partner, justify more detailed
rules and/or a wider field application in the case of the phenomenon of
17. In general, do you consider that there is a need for a supplementary initiative
at Community level to clarify or adjust the rules on subcontracting
The Authority often has the perception that it must retain a large degree of
control of a subjective nature over Sub-contractors. An Authority may feel it
needs to use the contract to allow it to intervene at Sub-contractor level to protect
its interest if a Sub-contractor is underperforming (e.g. the Authority may
want the right to direct or require the replacement of the Sub-contractor).This
approach is not recommended as it should be for the Contractor to manage its
Sub-contractors and intervention by the Authority will affect the degree of risk
transfer achieved. The Authority should instead rely on the payment mechanism
and its termination rights to address sub-standard performance.
UEPC ’s wishes to stress that the private partner who originally selected these
Sub-contractors and has taken risk on their performance, should be entitled to
change them at will (for example, if they are not performing).
In general, any attempt by the Authority to control Sub-contractors is to be discouraged
as it is in most cases unnecessary and may dilute the level of risk
transfer achievable by the Authority.
Only in certain limited cases, there may be overriding reasons why the Authority
should have a degree of control over Sub-contractors. For example, there
may be national security issues (particularly in some defence projects), other
public interest issues (e.g. regarding who should be allowed to be involved in
schools), or the Authority may have a statutory duty that it needs to carry out.
In such cases, the criteria that a replacement Sub-contractor must satisfy
should be reasonable (for example, they should require that the potential Subcontractor
is not a threat to national security or other relevant aspect of the
public interest).Any judgment that the potential Sub-contractor does not satisfy
the criteria should be based on objective evidence.
In cases in which there is no specific reason to control Sub-contractors, the
Authority may still want some control on the basis that it placed reliance on the
original Sub-contractor ’s identity and ability to perform in awarding the Contract
to the Contractor. In such cases, satisfaction of a limited set of objective
criteria should prove an acceptable level of control to the Authority and the
Contractor. Any such criteria should include:
- technical ability and competence; and
- financial strength (including any willingness to give guarantees to
Rarely will further criteria be needed.
3.3. GENERAL QUESTIONS
9. In your view, what would be the best formula to ensure the development
of private initiative PPPs in the European Union, while guaranteeing
compliance with the principles of transparency, non-discrimination and
equality of treatment
20. In your view which measures or practices act as barriers to the introduction
of PPPs within the European Union
22. More generally, given the considerable investments needed in certain
Member States in order to pursue social and sustainable economic development,
do you think a collective consideration of these questions
pursued at regular intervals among the actors concerned, which would
also allow for the exchange of best practice, would be useful
Do you consider that the Commission should establish such a network
We do not think there is a magic or best formula to develop the private initiative
PPPs, however, a harmonization of the following items will help to have far
better results :
- PPP should be promoted as an instrument to enhance quality
and should not be presented as an approach to risk transfer that
is unsustainable, seeking to transfer too much risk to the private
- Under a PPP approach, a cooperation between government and
private parties is achieved where the government works “together”
with the private sector, not “over” or “against” the private
sector. Therefore political commitment is essential.
- The classical procurement regulations are not established on the
basis of a private initiative but on the basis of a public’s initiative
and strict procedures, giving few opportunities for innovative action.
However, the main issue of PPP is to seek for innovative actions
- As a result of these classical procurement rules, governements
and procuring bodies think too much in terms of
“product”-specifications instead of “service”-specifications.
- Good governance, and economic stability seem as preconditions
for the success of PPP programs. Any uncertainty leads to more
risky environment which makes difficult the long-term business
- Together with this, an appropriate legislative framework is essential
if PPP’s are to succeed. Probably most of the authorities accept
as a general rule that, challenges in the developing coun-
tries would be greater than the developed EU countries to prepare
such appropriate legislation.
- Both foreign and national investor must know that the government
will be fair in the deal and meet the commitments.
- The responsibilities of both private sector and the government
must be pre-determined clearly and objectively.
- Transparency and accountability must be accepted by all the parties
as a must.
- A proper communication way must be set-up.
In general, the EU needs to put in place policy initiatives and measures designed
to make the public sector a better client in all PPP procurement. UEPC
refers to its general considerations.
Enclosure N° 1 :