Talking Point

Talking Point Connecting Europe 2012
Talking Point Compendium 2008-2012
Talking Point Compendium 2005-2007

Connecting Europe – Choices, challenges and opportunities

PPP have the potential to play a key role in the development of European infrastructure in the future and, more generally, in the achievement of the Europe 2020 aims of smart, sustainable and inclusive growth. This infrastructure development forms the basis of the “Connecting Europe” agenda to modernise transport, energy networks and digital connections. Some estimates point to investment needs of between €1.5 trillion and €2 trillion up to 2020.

What then are the main issues faced in delivering this agenda successfully?

The rapidly expanding degree of reliance on PPP to deliver this agenda, using a wider range of funding models (eg Europe 2020 Project Bonds) than has been the case in the past, creates particular challenges. Experience has shown that the greater the need of the public sector for private finance for investment programmes, the greater the power which lies with the private sector – both service providers and lenders. And significant political capital has been invested in this agenda. Thus a balancing force is needed to the influence on decisions of the short term thinking of some politicians – thinking about the next election – or officials – thinking about their time in post, whereas PPP are long-term transactions with inter-generational implications for fiscal sustainability and maintaining public sector control over future policy choices.

The main elements of the management of these challenges are the need to ensure that, from a European perspective:

  • There are appropriate mechanisms for further prioritisation of the highest value added projects even within the priorities currently set, for example, by the TEN-T Executive Agency through standardised approaches to financial and economic appraisal.
  • There is a rigorous ex ante assessment of whether or not PPP is the appropriate procurement route for a project, based on common standards for comparison of options and the development of a common a priori value for money model for use by public sector bodies.
  • There are appropriate mechanisms for Europe-wide co-ordination of the procurement of infrastructure projects, such as the development of an assessment of markets in particular PPP sectors (supplier capability and interest, likely availability of finance, demand from other public bodies, extent of competition etc) which could be shared across public bodies, the management of the timing of bringing opportunities to market and an assessment of the number and scale of projects which public authorities have the capacity to simultaneously procure.
  • Sufficient emphasis is given to appropriate planning and implementation of complex and high value procurements, including development in advance of a procurement of an assessment of the strengths, limitations, costs and risks of different technical solutions likely to emerge, the development of more standardised technical solutions for commonly procured infrastructure, standardised models for contract conditions and standardised approaches to procurement processes (including short listing of candidates and evaluation of offers), all of which could be shared across public entities.
  • Sufficient emphasis is given to ensuring that the value for money secured in the procurement process is realised in the execution of projects by effective contract management ie by definition of common standards for the resources, skills, information and authority needed for effective contract management.
  • Sufficient emphasis is given to ensuring that the value for money in the implementation of PPP projects is subject to regular ex post audit in gathering information about whether or not actual performance and actual costs matched what was agreed at the time of the contract, based on common approaches to audit of PPP transactions.

The consequences of not addressing these issues effectively are likely to be failure to obtain value for money in individual projects (and thus an even larger funding requirements for the implementation of the Connecting Europe agenda), the potential risk to the reputation of PPP by its use when it is not appropriate and its implementation without due regard to considerations of value for money in the procurement process and a missed opportunity for the EU institutions to enhance their reputation in demonstrating accountability for limited EU resources.

In summary, the needs and opportunities are wide-ranging and the challenges are also significant, all of which keeps PPP firmly on the European public sector agenda and makes for an exciting time for those involved in it.

Michael Burnett – May 2012

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