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GERMANY – B. Müller What is PPP? Planning + Building + Financing + Operation (+ Post-contract life) = PPP PPP-Sectors: PPP – construction, PPP – infrastructure.

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Presentation on theme: "GERMANY – B. Müller What is PPP? Planning + Building + Financing + Operation (+ Post-contract life) = PPP PPP-Sectors: PPP – construction, PPP – infrastructure."— Presentation transcript:

1 GERMANY – B. Müller What is PPP? Planning + Building + Financing + Operation (+ Post-contract life) = PPP PPP-Sectors: PPP – construction, PPP – infrastructure

2 Movement of selected public sectors towards private structures Public administrationPPPPrivate sector RailPost WaterwaysTelecommunications RoadEnergy supply Defence Water supply Health care Social services Waste disposal Sewage disposal Folie 2

3 Folie 3 Types of PPP contracts - in German law - Differences and core content Acquisition model Hire-purchase of facility/asset Owner model Planning, construction, financing, operation under ownership of the principal Leasing model Rent with option to buy Rent model Contract for rent extending beyond 10 years Contracting model Contract to operate the facility/asset Licence model Operation of facility/asset with user fees collected privately Company model Operation by way of project group

4 Folie 4 PPP project structure - example - Advisor Licenser Fed / Land / Municipality Loan provider Licensee Project company General contractor Construction planning Banks/capital market Shareholder Investors Maintenance Public sector or private sector use Operator Operation Rent or fee Provision of service Concession Grant Interest/re- payment Maintenance Return Equity capitalLoan Remuneration Operation Service Construction Construction at agreed price and timeframe Remuneration

5 Folie 5 History of PPP at EU level 07 May 2003Commission publishes Internal market strategy – priorities 2003 – 2006, which highlights the need to clarify legal issues relating to PPP. The publication of a green paper on PPP is announced. 21 May 2003Commission publishes Green Paper on services of general interest. This paper entails a substantial review of the Commission's service policy and asks whether a general legal framework should be created at Community level for services of general interest. The Commission plans top publish a green paper on public procurements and on PPP in the second half of the year. 30 Apr 2004 Commission adopts Green Paper 30 Apr 2004Forwarded to the Council 30 Apr 2004 Forwarded to the European Parliament (EP) 27 Oct 2004 Opinion by the European Economic and Social Committee 17 Nov 2004 Opinion by the Committee of the Regions End 2005Commission announces resolution on further PPP legislation for the end of 2006 26 Oct 2006 Resolution by EP

6 Folie 6 History of PPP at federal level in Germany Apr2001Federal Chancellor sets up Kanzler-AG Jun2002Federal Chancellor announces PPP competence centre Jul2002Steering committee (SC): PPP in public construction works Feb2003PPP federal study commissioned Jul2003Bundestag adopts motion for PPP resolution Dec2003Agreement by federal states ministers responsible for building Dec2003SC: Recommendations for framework conditions Nov2004Members initiative PPPs Acceleration Act Dec2004Agreement by federal state ministers responsible for finance (FMK) Jul2004PPP Task Force set up May2005Creation of federal PPP competence network Sep2005PPPs Acceleration Act comes into force Sep2006FMK decision: Standard guidelines on examining profitability Source: PPP Task Force, Federal Ministry for Transport, Building and Urban Affairs

7 Folie 7 Market structure of PPP in Germany More PPP FrameworkMore/bigger projects LawsRegulations Admin. building Defence Education Research TransportModels Provision amendments: Competition law Tax law Accounting law Statistics law Change in rules on awarding contracts modify: Contracts PC PSC Budget issues System of NA Double entry bookkeeping More private capital for public tasks More co.s in the provision of public services Health PB = Profitability calculations PSC = Public Sector Comparator NA = National accounting

8 Folie 8 PPP organisation of the govt in Germany Ministry of Finance Construction Transport Civil Defence Project working group PPP Roads Rail, Sea, Air Federal states East West Task Force VIFGDeges Ministry of Defence Ministry of Transport Ministry of Economics Project development co. = Project management co.s Deutsche Einheit Fernstraßenplanungs- und -bau GmbH Verkehrsinfrastruktur- entwicklungsgesellschaft mbH g.e.b.b., Dept. M / Group M I Gesellschaft für Entwicklung, Beschaffung und Betrieb mbH

9 Folie 9 The PPP procurement process in Germany Agreed procedure between central and regional government Phase I Determining needs, financeability and profitability of measures Final profitability analysis Provisional examination of profitability Determining the maximum amount to be appropriated in the budget (budget readiness) Drawing up conventional comparative values (Public Sector Comparator – PSC) PPP test for suitability Steps in examining PPP profitability Phase II Appropriation in budget and call for tender Preliminary decision for or against continuing to pursue varies PPP options Final decision on awarding and signing of contract Project controlling Phase III Phase IV The phases in the PPP procurement process Preliminary decision for or against publishing call for tender

10 Folie 10 An example for possible risk allocation – traditional procurement vs. PPP Traditional procurementPPP Public sector Private partner deficient construction unavailability bad service insufficient usage obsolescence residual value below forecast deterioration of commercial basis (framework) force majeure changing legislation deficient construction unavailability bad service insufficient usage obsolescence residual value below forecast deterioration of commercial basis (framework) force majeure changing legislation

11 Folie 11 ABC modules of tender I Module A: Construction Mostly invitation to tender as a general contractor subject to the provisions of the guidelines on awarding contracts; to be built, for example, on a piece of land owned by the party issuing the invitation to tender Module B: Financing part A B1: conventional lease financing via the budget B2: pure finance leasing (no equity capital of private investors, thus no tax effects), sometimes with forfeiting. B3: tax-optimised fund leasing models with equity capital of private investors. Module C: Investor model Same-source construction and financing on the basis of the conditions of modules A and B with a fixed-price model without disclosing the details of the calculation.

12 Folie 12 ABC modules of tender II In addition to parts A, B und C, additional tenders can be invited in suitable cases: Module D: Similar to Module C, but using functional description of construction and with the bidders own planning, possibly also on a piece of land owned by the party inviting tender. Module E: Offers to buy, hire-purchase of simply rent suitable objects which have already been built or which are in the process of being built.

13 Folie 13 Overview of the current status of the PPP Simplification Act Project working group consisting of the majority parties in the German Bundestag and including representatives of German industry As of May 2007 Folie 13

14 Folie 14 Overview of standardisation work of central and regional governments in Germany Field of competenceDraftAgreementPublishing 1 Guidelines on examining profitability of PPP projects O 2Guidelines on awarding public contracts O 3 PPP and government support legislation study O 4 PPP and budget appropriation O 5Guidelines on PPP and SMEs* O 6PPP School study O 7A-model awarding of contracts O * SME = Small and Medium sized Enterprises

15 Folie 15 Table of PPP Projects I

16 Folie 16 Table of PPP Projects II

17 Folie 17 Table of PPP Projects III Landesprojekte Bundesprojekte

18 Focus of PPP investments in public construction works in Germany Projects awarded Projects in the pipeline KnownEstimated Amountamountamount for in million projects in million * Schools / training centres8508301.400 Administrative buildings345300780 Prisons20050200 Hospitals1351701.030 Sports / cultural facilities4854501.075 Car parks / logistics centres / miscellaneous50230525 Federal buildings (barracks)25070140 Total2.3152.1005.150 Source: Die Deutsche Bauindustrie * projected Folie 18

19 Folie 19

20 Plans for the foundation of a company called Partnerschaften Deutschland Folie 20

21 Starting point for PPP Germany: 2% to 4% of public sector investment as PPP Target:15% PPP share in public sector investment A consultancy with the public and private sectors as stakeholders###, Partnerschaften Deutschland Aktiengesellschaft (PDG) (Partnerships Germany Incorporated) should become a catalyst to further realise the PPP potential in Germany PPP to be used whenever private providers can perform government functions as well or better. (Draft of Section 7 II of the Federal Budget Code) Advantages of efficiency achievable through: - Life-cycle approach - Right distribution of tasks and risks - Improved incentives For many administrative bodies this first means: - New ways of thinking – output instead of input - Tasks of greater complexity - More responsibility Folie 21

22 PPP in Germany – Approach A consultancy with the public and private sectors as stakeholders, Partnerschaften Deutschland should become a catalyst to tap into the potential for PPP in Germany Germany: 2% to 4% PPP quota in public-sector investment Target: 15% PPP quota in public-sector investment Folie 22

23 What Partnerschaften Deutschland represents Partnerschaften Deutschland is conceived as a broadly positioned quality service provider offering comprehensive consulting services on PPP matters for the public sector – with a focus on the early stages. What Partnerschaften Deutschland offers: –Objectivity, independence and credibility –Cost savings (optimisation of processes, standardisation, know-how) –Speed (especially easy to engage its services) But: Public authorities can continue to procure consulting services on the open market Folie 23

24 Partnerschaften Deutschlands areas of activity Specific investment projects Providing highly qualified, professional advice for the public sector when examining the use of PPP for investment projects as well as when scoping and implementing specific PPP projects Framework conditions Advising the public sector in further developing standards and the institutional basis for PPP Dual mission Systematic knowledge transfer Promoting knowledge transfer between all involved in PPPs, targeted build-up of PPP know-how within the public administration Market development Highlighting areas of priority for PPP and supporting policymakers and the administration in creating a sustainable PPP pipeline Project advisory service Basic PPP advisory service on behalf of public sector Areas of activity Folie 24

25 Shareholdings Companies/ executive bodies Advisory bodies 50.1% Private-sector shareholdersPublic-sector shareholders 49.9% 99%1% Advisory board FederationLänderLocal authorities General meeting Supervisory Board Management board Partnerschaften Deutschland Organisation and ownership structure of Partnerschaften Deutschland Industry, banks, etc. Holding company Folie 25

26 Avoiding the adviser/tenderer conflict and direct holdings through the interposition of the holding company and avoiding overlap between representatives of private shareholders and bodies or employees of Partnerschaften Deutschland Delegation of staff from the private shareholders of the holding company are excluded from Partnerschaften Deutschland for project work As the holding company is not dedicated to a specific purposes and is not dominated by one company (or industry) either, steps have been taken to ensure that the operative activities of Partnerschaften Deutschland cannot be influenced by the particular interests of its shareholders Avoiding the adviser/tenderer problem and conflicts of interest Folie 26

27 AwardBidding competition Lots to include different PPP industries Selection of applicants qualified for PPP Selection criteria PPP experience / references Ability Procedure for selecting private shareholders Acquisition of share in holding company / Partnerschaften Deutschland Criteria for the award of holding Price for the share Quality of the concept for participation Informal survey of markets interest Examine markets interest in participation Formal award procedure Assessment criteria Qualitative Financial Folie 27

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