Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

ANNEX GEVALUATION OF PPP PROJECTSIt is possible to define as PPP any project in which the investment (or part thereof) is contributed by the privatesector and where there is a regulatory contract between the private and public sectors in terms of risk allocation forthe provision of the infrastructure and/or the services. The level of PPP complexity will differ according to thesector, the type of project and country, as a function of the risk mitigation mechanisms and the use of projectfinance to fund the project. The participation of the private sector in the provision of public assets and servicesassumes that, whatever the contractual arrangement between the two parties, adequate returns on investment - froma strictly financial perspective - must be allowed to occur.Definition of PPPAcknowledging the growing importance of the PPP solution at the Community level, the European Commission isprogressively working towards the clarification of the PPP concept, the specification of the policies to be adopted inthis domain as well as promoting the dissemination of good practices 124 .The 2003 EC Guidelines for successful Public–Private Partnerships 125 , defines PPP as ‘a partnership between thepublic sector and the private sector for the purpose of delivering a project or a service traditionally provided by thepublic sector…By allowing each sector to do what it does best, public services and infrastructure can be provided inthe most economically efficient manner’.The Green Paper on Public-Private Partnerships 126 refers to PPPs as ‘forms of cooperation between publicauthorities and the world of business, which aim to ensure the funding, construction, renovation, management ormaintenance of an infrastructure or the provision of a service’. The Green Paper singles out the following elementsthat normally characterize PPPs:- the relatively long duration of the relationship, involving cooperation between the public partner and the privatepartner on different aspects of a planned project;- the method of funding the project, in part from the private sector, sometimes by means of complexarrangements between the various players. Nonetheless, public funds - in some cases rather substantial - may beadded to the private funds;- the important role of the economic operator, who participates in different stages of the project (design,completion, implementation, funding). The public partner concentrates primarily on defining the objectives to beattained in terms of public interest, quality of services provided and pricing policy, and it takes responsibility formonitoring compliance with these objectives;- the distribution of risks between the public partner and the private partner, with the risks generally borne by thepublic sector transferred to the latter. However, a PPP does not necessarily mean that the private partnerassumes all the risks, or even the majority of the risks linked to the project. The precise distribution of risk isdetermined case by case, according to the respective abilities of the parties concerned to assess, control and copewith this risk.124The main documents reflecting initiatives taken by the EC in this specific domain are: Commission Interpretative Communication onConcessions under Community Law (Official Journal C 121 of 29/04/20009); Guidelines for Successful Public – Private Partnerships; Directives2004/17/EC and 2004/18/EC of the European Parliament and of the Council Coordinating the Procedures for the Award of Public Contracts;Green Paper on Public-Private Partnerships; Communication from the Commission on Public-Private Partnerships and Community Law onPublic Procurement and Concessions (COM (2005) 569 final, issued on 15.11.2005).125EC DG Regional Policy, Guidelines for Successful Public–Private Partnerships, January 2003126EC Green Paper on Public-Private Partnerships and Community Law on Public Contracts and Concessions (COM (2004) 327 final).230