RICS, the Royal Institution of Chartered Surveyors, calls for a modernised and simplified EU framework for Public Private Partnerships (PPPs), and welcomes the European Parliament’s initiative as a first step in this direction.

The future regime should provide targeted and clear rules, which give public authorities best value for money and allow service providers throughout the EU to reap the benefits of the internal market.

Depending on the outcome of the Commission’s impact assessment on concessions, next generation PPPs might soon see a revised framework. The discussions on PPPs show a new urgency, particularly against the background of benchmarking the competitiveness of procurement markets in Europe, as shown in a recent comparative study by the RICS Education Trust.  

A strong driver for PPPs is the ambition to deliver European public services, which are marked by enormous project costs, such as the €500bn to be spent on the trans-European transport networks, and the €300bn for the EU water framework directive. Public authorities are therefore keen for the private sector to be involved at the earliest possible stage.

Although PPPs mean massive private sector investment into public services, the financing aspect is not alone decisive in making them attractive for contracting authorities.

A major benefit lies in tapping into the private sector’s expertise, skills and innovative technology, thus providing higher quality and efficiency. These outweigh by far any cost advantage public enterprises may have due to reduced interest rates for public sector credits.

Moreover, PPPs are appreciated by both public and private sector because of the better risk spread. Risk evaluation and allocation are crucial to the success of a PPP project, but are often not well understood and managed in the contract.

Problems remain in member states where budget pressures are so high that the successful creation of a PPP decides over the life and death of a project, leaving public authorities in a weak bargaining position which does not allow them to negotiate beneficial risk allocation terms. On the other hand, enough incentives need to remain for the private partner to enter the PPP. 

At present, neither the public nor the private sector are happy with the existing rules. The ECJ’s rigid jurisprudence prevents efficiencies of public-public cooperation. At the same time, contracting authorities, be they purchasers or delivery consortia,

are unclear on the amount of discretion applied to transactions; different criteria apply in various member states and this 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.

As the leading voice of property professionalism worldwide with a broad experience providing advice on construction procurement in the public interest, RICS calls for a new simplified and impartial legal framework governing PPPs at EU level.

Michael Byng, Chairman of the RICS Quantity Surveying & Construction Faculty, said:

 “We need to ensure that a new framework clarifies the discretion of procuring authorities in the selection and evaluation process across the EU. Such an initiative would go a long way towards meeting the needs of municipal councils, and remove uncertainty from the minds of bidding contractors. This maintains the flexibility which makes PPPs so attractive to both the public and private sector.”