1 public-private partnership in france mexico – 17 may 2007 by patrick mousnier-lompré

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Public-Private Partnership in France

Mexico – 17 May 2007

By Patrick Mousnier-Lompré

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Outline

PPP in France – overview

Why opting for PPP? illustration with urban transport

Contractual options & procedures

Best practice guidelines : Charters for the Local Utilities and for the Competitive Dialogue

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PPP in France - overview (1)

A broad definition of Public-Private Partnerships

« Forms of cooperation between public authorities and the world of business which aim to ensure the funding, construction, renovation, management or maintenance of an infrastructure or the provision of a service »

(Green Book of the European Commission – COM (2004) 327)

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PPP in France - overview (2)

A longstanding experience XVIIth C. Construction of River Canals

XIXth C. Railways, Water, Electricity, Eiffel Tower,…

XXth C. Motorways, Waste management, District Heating,…

Last decade: Stadiums, Museums, Hospitals, Prisons, Courts,

Police Stations, Railways…

Water & Wastewater: 12.000 contracts (2/3 of population served by private operators)

Motorways: 75% of the over 10.000 km network built as concessions

More than 20.000 contracts currently in force withprivate operators

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A comprehensive legal framework

A large range of contractual options: O&M, Lease, DBFO, BOT, Concessions,…

Based on three basic types (Conventional public procurement, partnership contracts, delegated management) which can be combined in individual projects

Civil law system / administrative law

PPP in France - overview(3)

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Large and small projects

PPP in France – overview (4)

Domain Contract Type Location Project Cost (€ million)

Duration (years)

Railways Concession

Perpignan-Figueras 950 50

Bridge Concession

Millau 400

Police Station

DBFO

Meaux 15

Hospital DBFO Ste-Ménéhould 12 25

Water Lease Tigy 4 5

Street lighting

O&M

2.3 6 Auvers-sur-Oise

50-70

30

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PPP in France – overview (5)

19

81

37

63

38

62

5

95

7

93

9

91

44

56

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Public & private urban utility operators in France (2004)

Private

Public

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PPP in France – urban transport (1)

Latest trends in transport…

I n 2005, for the first time in France since 1974, global road traffic has decreased (-1,4% ) while demand for collective transportation has increased (+3% )

…with an uptake of investissement

Creation or extension of tramways is accelerating (6,3 km in 2005, 83,3 km in 2006 and 98,9 km in 2007) …in view of next municipal elections (2008)

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Evolution of urban transport resources over 5 years (excl. Paris region)

982 998

22611862

1275

1699

78

257

0

1000

2000

3000

4000

5000

6000

2000 2005

(eu

ro m

illio

n)

State

Localgovernments

Transportcontribution

Commercialincome

+ 21,4%

+ 33,3%

- 69,6%

+ 1,6%

+16,0%


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Financial constraints are not the only reason for choosing public-private partnership Other motivations include, i. a.:

Expertise of specialised enterprises (technical, legal, financial)

Economical Optimisation through global contracts

Avoid delays and drift in cost

More flexible personnel management

Risk sharing

I ncentive for increased efficiency and improvement of service quality

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Contractual options & procedures (1)

A) Traditional (short-term) Public procurement contracts (hereafter referred to as “Public Procurement - PP” contracts: Contracts to procure equipment or services; For the conception (design), construction, of infrastructure, purchase of equipment, operation, but NOT FOR FINANCING (because deferred payment is forbidden by law);

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B) Partnership contracts - PC Partnership contracts are administrative contracts through which a public body entrusts to a third party, for a given duration a global undertaking, relating to

the financing of intangible investments, works or equipment necessary to the public service,

the construction or transformation of public facilities or equipment, as well as their maintenance, operation or management,

and possibly also other services that contribute to the public service mission of which the public body is in charge;

Contract duration is a function of the investment amortisation period or of the financing modalities, Payment by the public body takes the form of periodical instalments, along the whole duration of the contract, linked to performance targets; Partnership contracts are exceptions to normal public procurement rules and allowed only in case of complex or urgent projects;

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C) Delegated Management contracts (Public Service Delegation) - DM A public service delegation is a contract by which a public body entrusts the management of a public service, of which it is responsible, to a concessionaire (public or private entity), whose remuneration is substantially linked to operation results. The concessionaire may be in charge of works construction or purchasing assets necessary for the service; Delegation may be partial or global (possible split between design-build-maintain / operate)

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Main differences between contract types

Criteria

Contracts

Differred payment of investment

Remuneration risk of the

private partner

Management of public service by

the private partner

Public procurement (conventional)

No No No

Partnership contract

Yes

Yes

(linked to performance)

No

Delegated Management

-

Yes

(linked to operation)

Yes

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« Public-Private Partnership » means that the private partner plays a significant role in the design of infrastructure (« Maîtrise d’ouvrage » ). Decisions always result from a dialogue between partners. I n the case of the Partnership contract, this dialogue takes place before submission of tenders. I n case of Delegated Management, this dialogue takes place after this submission. Award procedures are prescribed by: PP : Public Procurement Code - decree of 7 J anuary 2004 PC : Ordinance of 17 J une 2004 DM : « Sapin » law of 29 J anuary 1993

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PP lots – in-house or PP

design PP lots

build PP lots

maintain MP

operate I n-house

PP for design-build / in-

house or PP design

build

MP

maintain MP

operate I n-house

PP-DM

design

build

PP

maintain

operate

DM

Public

Private

RISK

Public design

PC – in-house

design

build

maintain

PC

operate I n-house

PC – PP

design

build

maintain

PC

operate PP

Single PC

design

build

maintain

operate

PC

PP - DM

design

build

maintain

PC

operate DM

Single DM

design

build

maintain

operate

DM

double DM

design

build

maintain

DM

operate DM

Public

Private

RISK

Public-Private Partnership (PPP)

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Guidelines for best practice – Local Public Service (1)

Clarifying the roles of the parties

Leading role of local authorities

The Responsible Body defines the missions of the public service and its general rules of organisation

The user plays a central role – as public utilities contribute to social and territorial cohesiveness

The sustainability of the utility calls for an integration of Economic, Social and Environmental dimensions. This includes also Security and Health concerns;

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Responsible and informed decisions

The choice of an organizational mode must rely on an assessment (technical, social, legal, economical) of the service and its environment;

Characteristics of the service will depend on the needs that must be met

Service regulations must be established

Forecast of the needs

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Free choice of management modality

Reversibility of the choice

Systematic contractual relationship between Responsible body and operator (public/private);

In case of Public-Private Partnership, the choice of the partner must be based on sound and fair competition;

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Stimulation of performance through benchmarking

Sets (or systems) of performance indicators are defined at national level for each type of utility.

Each responsible body selects the most relevant ones according to its own needs;

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Trust & partnership

Independent networks of expertise are established to support political authorities and their administrative services;

Qualification of experts should be assessed and certified;

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Transparency & Equity

The responsible body determines the objectives and performance targets (levels), in a balanced manner, taking into account tariff affordability and the regulations in force;

Responsible body and operator are jointly responsible for the sustainability of the utility

Performance improvement must benefit to all parties: users (through tariffs, local government (reinvestments), and the operator (financial incentive);

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Evaluation & local democracy

Responsible bodies establish Local Public Service Consultative Committees

Regular reports are published on service quality, tariffs, as well as user complaints follow-up;

Public debates are organised on the basis of pluralistic assessments, when major decisions are taken;

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Guidelines for best practice (8)

Charter of Competitive Dialogue (18 J anuary 2007) The charter has been signed by the concerned Ministries and Local Government associations (Municipalities, Departements, Regions). I t takes into account the early lessons from negotiating partnership contracts. The main concerns were for excessive costs (i. a. due to too long procedures) and intellectual property rights. Key recommendations:

Appropriate capacity and expertise of public bodies

Clarity of the rules from the start

Specifications in “performance” terms

Appropriate assignment of risks (to the party best able to manage them)

Confidentiality (intellectual property)

Avoidance of unncessary discussions (with contenders obviously “out of track”)

Indemnification of unsuccessful contenders

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Final remarks (1)

Each country develops its own PPP model, according to its specific political, institutional and legal context. There is sometimes a need for an impetus (France has created a Mission to support the launch of the Partnership contract). The legal framework is in constant evolution. The development of a fully fledged EU market for PPP will result in further changes. In overall, the system has proved successful, but there has been failures, in particular in the transport sector (e. g. Eurotunnel).

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Final remarks (2)

Value for Money cannot be taken for granted. I t depends largely on the competitiveness of the market and the ability of the public sector to ensure that competitive will play its role. PPP has however also a positive impact on the performance of traditional public procurement (“global” thinking). PPP is not privatisation. Responsible bodies have a control duty. Trust must be based on a balance of competence. France has no central regulator (except for national networks: telecom, energy). Solutions can be found with independent expertise and information sharing (cf. benchmarking)

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Sources

Mission d’Appui à la réalisation des contrats de partenariat (MAPPP) – Mission to support the implementation of the partnership contract www.mapp.minefi.gouv.fr I nstitut de la Gestion Déléguée – French PPP I nstitue www.fondation-igd.org Ministère des Transports, de l’Equipement, du Tourisme et de la Mer / DAEI – Ministry of infrastructure, transport, tourism and the Sea / I nternational and Economic affairs Division www.equipement.gouv.fr Groupement des Autorités Responsables de Transport – Grouping of Transport Responsible Bodies www.gart.fr

1 public-private partnership in france mexico – 17 may 2007 by patrick mousnier-lompré

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