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Adrian Howcroft PricewaterhouseCoopers
UNECE PPP Conference – 25 October 2005
Delivering the PPP Promise
© 2005 PricewaterhouseCoopers LLP. All rights reserved.
Government and Public Sector PricewaterhouseCoopers1
Delivering the PPP Promise
PPPs in Context
PPP Progress in Europe
Realising the Promise
Conclusions
PPPs in Context
Government and Public Sector PricewaterhouseCoopers3
What is the aim?
Need to know why you are doing it
• various reasons for using PPPs– value for money– lack of public funding/speed of delivery– off balance sheet investment
• clarity of objectives– at programme and project level– often lacking
Judge success against objectives
Government and Public Sector PricewaterhouseCoopers4
Why are you doing it?
demand (GDP-led)
time
supply (netinvestment)
value ofinfrastructurein real terms
infrastructure gap
Government and Public Sector PricewaterhouseCoopers5
How are you going to do it?
Many different forms of PPP
• revenue generating projects
• availability based schemes
• PPPs with an element of public sector guarantee
• partnering techniques
Government and Public Sector PricewaterhouseCoopers6
How are you going to do it?
Many different forms of PPP
• revenue generating projects
• availability based schemes
• PPPs with an element of public sector guarantee
• partnering techniques
Need to ask
• is a PPP the right approach?
• what form should be used to achieve stated objectives?
Government and Public Sector PricewaterhouseCoopers7
PPPs Progress in Europe
Government and Public Sector PricewaterhouseCoopers8
Increasing use of PPPs across Europe
Summary of PPPs by country and sector
Government and Public Sector PricewaterhouseCoopers9
Increasing use of PPPs across Europe
Summary of PPPs by country and sector (cont’d)
Acceding Countries
Candidate Countries
New Member States
… and increasing institutional development
Government and Public Sector PricewaterhouseCoopers10
EIB PPP Signatures Per Year(MEUR)
0500
100015002000250030003500
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
/06
Source: EIB
EIB involvement in PPPs
Government and Public Sector PricewaterhouseCoopers11
PPPs and the EU
PPPs identified as a means of delivering EU objectives
• PPPs “fit” with EU principles
• Increasing interest in PPPs– funding instruments– Green paper – 2004
But…
• No “policy” on PPPs– procurement regulations and state aid– PPPs and EU grants
Government and Public Sector PricewaterhouseCoopers12
PPPs and the EU
“PPPs are booming. They can be an important tool for improving the quality of public services and supporting growth in Europe. The EU needs a suitable regulatory framework for developing these partnerships in order to apply transparency and fair competition for the benefit of the taxpayer. There is a lot at stake, and I call upon all interested parties to respond to this consultation –we will listen to what you have to say.”
Frits Bolkestein - Internal Market Commissioner
… but still awaiting a response to the Green Paper
Realising the Promise
Government and Public Sector PricewaterhouseCoopers14
PPPs can make projects affordable
Figure 2: Profile of a PPP Transaction
Road Transaction Revenues / Costs
0
20,000
40,000
60,000
80,000
100,000
1 5 9 13 17 21 25 29 33
Year
£'000s Annual PaymentOperating CostsCapital Costs
Direct costs v PPP Annual Payment
Government and Public Sector PricewaterhouseCoopers15
PPPs can maximise the use of private sector skills
• Under traditional procurement the private sector is expected to deliver an asset to time and budget
• PPPs require the private sector to:– deliver assets on time and budget– ensure these assets deliver the services required over
the long term– project manage project delivery– undertake integration risk– maintain and refurbish assets– take life-cycle risks
Government and Public Sector PricewaterhouseCoopers16
PPPs can allocate risks to the party best able to manage or absorb risks
• Private sector can manage some risks better than the public sector– construction risk– delivery risk– project management
• However where the private sector cannot manage risks, they will price it badly – carefully consider – revenue/traffic risks– level or nature of services (flexibility)– labour issues
Government and Public Sector PricewaterhouseCoopers17
PPPs
• PPPs force the public sector to focus on outputs and benefits – fundamental change
• Whole life costing approach
• Quality of service has to be maintained over the PPP’s life
• PPPs deliver budgeting certainty - only pay a pre-determined amount when services are delivered
• PPPs can deliver better value for money:– but there must be strong competition, private sector
expertise and sensible risk allocation
Government and Public Sector PricewaterhouseCoopers18
But…
• PPPs cannot absorb unlimited risk – realistic allocation
• PPPs entail a loss of public sector management control
• The private sector has a higher cost of finance
• PPPs are long-term and relatively inflexible
• PPPs require enhanced capacity and capability – private sector – public sector
Government and Public Sector PricewaterhouseCoopers19
Conclusions
Government and Public Sector PricewaterhouseCoopers20
Conclusions
• Growing use of PPPs across Europe
• PPPs are a procurement approach the public sector should consider for major capital projects and services
• With the right expertise and competition, PPPs have the potential to deliver good value for money compared to traditional public sector alternatives
• But the qualitative factors that argue for a PPP approach need to be considered and bids need to be competitive
• Need for much better public sector understanding, capability and capacity
Government and Public Sector PricewaterhouseCoopers21
Conclusions
PPPs are not a panacea
They require skill, knowledge and understanding
Government and Public Sector PricewaterhouseCoopers22www.ppptransportsummit.com/
PPP is not the answer to every solution – but
used and managed properly, it is a
mechanism through which we can deliver a step change in public
services across Europe.
Rt Hon Alistair Darling MPSecretary of State for Transport.
Government and Public Sector PricewaterhouseCoopers23
Government and Public Sector PricewaterhouseCoopers24
Coffee Break until 11.00Coffee Break until 11.00
Rooms C4 and C6Rooms C4 and C6