PPPs
I do not need to highlight the economic importance of PPPs as a tool to inject efficiency and quality control into the delivery of public services. BSA members well know that from their own experience.
In the area of PPPs, the consultation launched in 2004 with the Green Paper underlined the urgent need to clarify the application of the EU procurement rules to the setting up of joint companies by the public and private sectors to deliver public tasks.
Thus, after extensive consultations with Member States, stakeholders, practitioners and the Parliament, we published early this year, a Communication on Institutionalised Public-Private Partnerships (IPPPs). The Communication reiterated the principle that any share of private capital in a publicly-held company excludes the in-house status of that entity. This means that EU procurement rules apply to the selection of the private partner and to the award of public contracts to the joint company. The Communication then explains that only one tender procedure is required, either when selecting the private partner, or at the time of awarding a public contract or concession to the joint public-private entity. This method is equally applicable in the case of an existing public company that is looking for a private partner to deliver a public task. IPPPs call for a long-term view of the task to be delivered so that the contract caters for a mechanism to adapt itself to a changing legal and economic environment.
Another recent development in the area of PPPs is the launch of the European PPP Expertise Centre (EPEC) by the Commission and the European Investment Bank.
The objective of the EPEC is to enable public authorities in the EU Member and Candidate Countries to become more effective participants in PPP transactions. Its main task is to help the public sector to overcome shortfalls in PPP expertise. Despite considerable knowledge and experience in parts of Europe’s public sector, the failure to share lessons and best practice is limiting the economic efficiency and growth of the European PPP market.
The newly-established European PPP Expertise Centre will share experience and synthesise information from across the EU on requirements for effective transactions and skill-sets required to handle these. Good practical guidance will then be disseminated among the EPEC’s members with the aim of enhancing public sector management, reducing PPP costs and increasing deal flow.
Concessions
Let me now turn to concessions.
By concessions, we mean procurements in which the consideration from contracting authorities consists in the award to the contractor of the right to exploit a work or service, or where this right is accompanied by some sort of payment. A well-known example of these is toll roads, where the contractor builds and operates a motorway and charges tolls on users. Another example is contracts for the management of public services, where contractors set up and/or operate the service and receive fees from users. Concessions are very prominent in the field of PPPs. A study carried out by Price Waterhouse Coopers concluded that approximately 60% of all PPPs take the legal form of concessions.
Following a broad public consultation with the Green Paper on PPP in 2004, we realised that we needed further data on how this worked in practice before considering any further action. This is what we are currently doing. We are studying carefully the concessions market in the EU. After consultations with Member States and stakeholders on this initiative, we are working, therefore, to gather more practical data on the award of concessions in the EU, including in strategic sectors. I also personally see the benefits of service concessions for expanding markets to many new EU Member States where service concessions and other forms of PPPs are infrequently used. Whether or not EU action is needed to facilitate this opening up of new markets is still a more open question.
Given the experience of BSA members with public services, in the UK and abroad, I encourage you to send my services your opinions and experience with concessions.
Defence Procurement
Another important EU initiative is the proposal for a Defence and Security Procurement Directive. This proposal was tabled in December 2007 as part of the so-called “defence package”, together with a proposal for a Directive on Defence Transfers. Only 12 months later, we are very close to finalising the legislative procedure with a first reading adoption by the European Parliament in January 2009.
This Directive is a politically important instrument which will help strengthen Europe’s defence capabilities, make public spending more efficient and enhance the security of our citizens. The principles of the Internal Market – transparency, openness and non-discrimination – will, finally, apply to defence and security markets as well. Fair and transparent procurement rules will allow BSA members to tender more easily in other Member States. European industries will get a much larger “home” market with longer production runs and economies of scale. This, in turn, will reduce costs and lead to lower prices.
At the end, we will achieve greater openness of defence markets between Member States to the benefit of all: industries will get new business opportunities and become more competitive; armed forces will get better value for money; and taxpayers will benefit from more efficiency in public spending.
