The next generation of Public Private Partnerships (PPPs) might soon see an entirely new framework, depending on the outcome of a Commission impact assessment on a new EU Directive on concessions.

Discussions on PPPs show a new urgency, particularly against the background of benchmarking the competitiveness of procurement in Europe. 

A strong driver is the ambition to deliver European public services, which are marked by enormous project costs, such as the €600bn to be spent on the trans-European transport networks, and the €300bn for the EU water framework directive.

PPPs are seen as a tool to ease budgetary pressures as they generally mean massive private sector investment in the delivery of public services.  

But what is the relationship between public procurement and PPPs and do the documents in the procurement package (see below) apply?

While some EU stakeholders view PPPs as a complex form of public procurement, what is certain is that general public procurement principles apply.

However, there are only a few provisions of secondary Community legislation that co-ordinate the procedures for awarding works concessions, and the provisions on the award of service concessions apply only by reference to certain principles (derived from Articles 43 and 49 of the EC Treaty), especially those on:

• transparency
• equal treatment
• proportionality
• mutual recognition.

The Achilles heel
A recent European Parliament (EP) draft described EU public procurement rules as the “Achilles heel of the common market”, given the lack of legal certainty and clarity in the body of rules stemming from the existing legal framework.

This is essentially the procurement package of 31 March 2004, i.e. the ‘traditional’ Directive 2004/18/EC on public works contracts, public supply contracts, and public service contracts, as well as the ‘special sectors’ Directive 2004/17/EC on water, energy, transport, and postal services.

Their purpose is to modernise and simplify the existing legal framework.

The EP draft opinion makes a first stab at a general definition of PPPs, describing their characteristics as being:

• co-operation continues over quite a long period
• funding is provided (though not necessarily exclusively) by the private sector
• the economic operator is involved at different stages, for instance when the project is drawn up etc
• the risk, both commercially and financially, is borne to some extent by the private partner.

It welcomes potential legislation on concessions, because it would make them fall within the scope of the Community directives on review procedures concerning the award of public procurement contracts, thus increasing the protection of bidders.

The opinion criticises the existing rules governing PPPs as “flawed”, especially regarding concessions and institutionalised PPPs.

Contracting authorities are seen to have too much latitude on the selection of private partners, which could jeopardise equal treatment of companies across the EU.

A difficulty for the private sector, in areas where only general EC Treaty principles apply, is that it is difficult to argue before a national court that an award procedure has been conducted illegally.

This is because the EU principles have been found to be incapable of affording the necessary assistance to victims of discrimination seeking redress. 

Deterrent rules
The public sector is not happy with existing rules either, as the rigid assessment of public procurement contracts by the European Court has deterred local authorities from entering into partnerships for running certain public services.

If a Directive is put in place, a proper balance should be struck between the needs of municipal councils and the Community interest in transparency and healthy competition.

Given the current costs, the application of Community law to partnerships between municipal councils can reduce the gains and economies of scale to be had from co-operation.

This is a problem that RICS has already highlighted at EU level.

Send in your views
RICS will address a position to the EU institutions highlighting the challenges and giving advice on the future direction of PPPs, so this is your chance to make your views heard.

Contact Sander Scheurwater at sscheurwater@rics.org to share your views.