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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIA. Why the public-private partnership Immense needs for infrastructures and public utility remaining unsatisfied - PowerPoint PPT Presentation
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Moscow,Marsh 3-4, 2005Moscow,Marsh 3-4, 2005Moscow, March 3-4, 2005Moscow, March 3-4, 2005
SEFI - French Contractors AssociationSEFI - French Contractors Association 11
ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
Why the public-private partnership
Immense needs for infrastructures and public utility remaining unsatisfied
Conscience of the limits of the States and the Public bodies (Local States, Provinces, Large Cities, etc) to carry them out
quickly effectively and economically within the traditional budgetary framework and constraints
Moscow,Marsh 3-4, 2005Moscow,Marsh 3-4, 2005 SEFI - French Contractors AssociationSEFI - French Contractors Association 22
ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
Capacity of the private sector to:
bring their know-how propose innovate solutions :
technical financial commercial, etc.
speed up the process decrease the costs for an equivalent or better service delivered
Moscow,Marsh 3-4, 2005Moscow,Marsh 3-4, 2005 SEFI - French Contractors AssociationSEFI - French Contractors Association 33
ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
Improvement of conceptsImprovement of concepts
I- Define the Service of General InterestI- Define the Service of General Interest Public/Private: Boundaries and limits for analysis Public/Private: Boundaries and limits for analysis The hierarchy of needsThe hierarchy of needs Who has to pay?Who has to pay? The treatment of debtThe treatment of debt
Public deficit and indebetenessPublic deficit and indebeteness Impact on the geavingImpact on the geaving
II – The 2 grand categories of public procurementII – The 2 grand categories of public procurement
A) Public works or public services contractA) Public works or public services contractPurchase of a property or servicePurchase of a property or service Limited duration of the contractLimited duration of the contract Payment upon deliveryPayment upon delivery
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT
SECTOR IN RUSSIASECTOR IN RUSSIA
Improvement of concepts (II)Improvement of concepts (II)
B) Public-Private PartnershipsB) Public-Private Partnerships
4 grand categories4 grand categories The concessionThe concession The hire-purchase systemThe hire-purchase system The partnership agreementThe partnership agreement The lease contractThe lease contract
The characteristic differencesThe characteristic differences Framework contract over the life-cycle of the property Framework contract over the life-cycle of the property Significant risk transfer to the private sectorSignificant risk transfer to the private sector Payment from different sources linked to performancePayment from different sources linked to performance Complex contract with a multitude of interfacesComplex contract with a multitude of interfaces
Moscow,Marsh 3-4, 2005Moscow,Marsh 3-4, 2005 SEFI - French Contractors AssociationSEFI - French Contractors Association 55
ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
Improvement of concepts (III)Improvement of concepts (III)
III – A conducive legal and contractual environmentIII – A conducive legal and contractual environment
Readable, clear, stable but adaptableReadable, clear, stable but adaptable A clearly proven type of contract: public or privateA clearly proven type of contract: public or private Common contractual clauses Common contractual clauses
General clauses: nature, objective, etc. General clauses: nature, objective, etc. Task to design and build Task to design and build Task to operate and maintainTask to operate and maintain Evolution of the contract over the life cycleEvolution of the contract over the life cycle Economic and financial clauses Economic and financial clauses Sanctions et Termination clauses Sanctions et Termination clauses Dispute settlement Dispute settlement
Moscow,Marsh 3-4, 2005Moscow,Marsh 3-4, 2005 SEFI - French Contractors AssociationSEFI - French Contractors Association 66
ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
Project preparation Project preparation
I - The spirit of the proceduresI - The spirit of the procedures Exploit and improve the available information Exploit and improve the available information Evaluate and et hierarchise the needs Evaluate and et hierarchise the needs
Systematise an advantageous cost or approach Systematise an advantageous cost or approach Assess the capacities and the willingness of beneficiaries to payAssess the capacities and the willingness of beneficiaries to pay Dynamic principles of evaluation in order to anticipate the futureDynamic principles of evaluation in order to anticipate the future Organisation of broad consultationsOrganisation of broad consultations Give preference to transparencyGive preference to transparency
of analyses of analyses of choiceof choice of organisation modesof organisation modes
Moscow,Marsh 3-4, 2005Moscow,Marsh 3-4, 2005 SEFI - French Contractors AssociationSEFI - French Contractors Association 77
ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
Project preparation (IV)Project preparation (IV)
IV – Comparison between public and partnership proceduresIV – Comparison between public and partnership procedures
Prime objective : Value for Money drives the resort to the private Prime objective : Value for Money drives the resort to the private sector sector
Effective Risk shavingEffective Risk shaving
The obstacle:The obstacle: insufficient bookkeeping and budgetary insufficient bookkeeping and budgetary procedures of the public sector procedures of the public sector
Recourse to off-balance sheet measuresRecourse to off-balance sheet measures
Maintain the interest of enterprises to bid for projects despiteMaintain the interest of enterprises to bid for projects despite uncertainties uncertainties
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
Preparation of the project (V)
V - Principle to implement for an effective risks sharing The sharing of the risks: the heart of the PPP - 3 stages 1° stage: principles of rigorous analysis
To leave from a detailed inventory
needs to satisfy functionalities of the work
performances requested from the private operator
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To introduce the draft contract
To count the events being able to affect negatively each part by the realization of trees diagrams of
adverse events
causes of failure
Fusion in a double matrix of the risks according to:
chronology of the project
cost and nature of the risks encounter
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
Preparation of the project (VI) 2° stage: the quantification of the risks
To collect relevant informations
To establish and to check the interactions between the variables
To select different scénarii: to call upon a probabilistic model methods of Monte Carlo.
When quantification is not possible to use qualitative approaches:
treated on a hierarchical basis implementing techniques of weighting and scoring
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
Preparation of the project (VI) 3° stage: the risks sharing 3 main categories of assignment
transfer to the private partner conservation by the public body share the risks out between the parties
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
Principal criteria of decision-making aid
nature and characteristics of the risks
attitude of the financial and reinsurance markets
expectations of the authorities
users’ demand
figuring of the costs/advantages
research of the optimum
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
Particular mention for financial risks
Important distinction :
Payment by the concession-granting authority : PFI ;
Payment by users coupled to financial participation of the concession-granting authority : concession ;
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
PFI-Type projects :
New trend : payment of the operator by public bodies varies, mainly linked to performance and availability rather from traffic level. Dual character of payment :
Payment covering senior loan(s) financing investment ;
Payment remunerating :
The risk-laden component of financing -capital and quasi- capital, junior loan ;
Operating / maintenance costs.
Lenders and investors support risks associated with construction and operation : maintenance attenuated by performance guarantees.
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
Concession-type projects
Financing is based on the users’ capacity to pay for the service they directly benefit from : time savings, fuel savings, reduced maintenance costs, etc…
This source of income is often insufficient to finance the project. The supplement is brought by the concession-granting authority.
The lender(s) takes risks relating to :
Future payment from the concession-granting authority ;
The results of the traffic / tariff element of the toll. This risk is mitigated by :
A tariff set at the optimum level acceptable by the users (cf. Bitterness Theory)
Reasonable traffic forecasts.
In return, the concession-granting authority is part of a profit-sharing mechanism.
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
Economic and financial equilibrium Postulate: reintroduction in the financing of the surpluses generated by the realization of the project captured by
Users
State and/or Local Communities Allows to ensure a sustainable financing over the time.
capture of a part of the surplus profiting to users trough the tariff
assignment of a part of the surplus profiting to the State or the Local Communities thank to socio-economic benefits
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
TariffingTariffing
I – Previous workI – Previous work
Secure the capacity and the willingness of the user to pay the tariffSecure the capacity and the willingness of the user to pay the tariff
II – Define the socially acceptable tariffII – Define the socially acceptable tariff
Empirical for the developing countriesEmpirical for the developing countries The theory of bitterness once statistics are exploitableThe theory of bitterness once statistics are exploitable Rely on local enterprisesRely on local enterprises An evolutionary vision of tariffsAn evolutionary vision of tariffs
Moscow,Marsh 3-4, 2005Moscow,Marsh 3-4, 2005 SEFI - French Contractors AssociationSEFI - French Contractors Association 1818
ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
Tariffing (VII)Tariffing (VII)
VII – The tariff as an instrument of regulationVII – The tariff as an instrument of regulation
Steer, encourage, restrain the demand and the modes of utilisationSteer, encourage, restrain the demand and the modes of utilisation The tariff as an instrument of adjustment: sub urban water supply inThe tariff as an instrument of adjustment: sub urban water supply in Morocco Morocco
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT
SECTOR IN RUSSIASECTOR IN RUSSIA
Socio-economic benefit (I) This is the measurement of the utility coming from the implementation of an equipment and/or the delivery of a public utility. Economic calculation allows the determination of it The principal obstacle the unsuitability of the public accounts
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT
SECTOR IN RUSSIASECTOR IN RUSSIA
Principal sources of the socio-economic benefit
saving of time brought to the user. It based the tolling
acceleration of the delivery of the infrastructures and/or the public utility
additional economic growth resulting from the project
additional effectiveness/productivity
additional budgetary savings
nevertheless to take into account negative aspects of the project disutility - (pollution, social costs, etc)
The socio-economic benefit are mainly collected through the taxation, direct and indirect, national or local
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Socio-economic benefit (II)
Add-back of a part of the socio-economic benefit in the financing of the project
the most rustic form: the subsidy A new approach of the role of the State: an economic actor producing commercial public goods This new approach opens the door with:
a new public financial engineering transposing the methods of the private sector in the choice and the financing of the investments
a significant development of the Public-Private Partnership
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
Require a deep reform of the public GAAP and the revision of the traditional budgetary principles of:
budgetary annuity
non assignment of the receipts to the expenditure
methods of determination of the deficits and national debt
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
First lessons of the experiment of the Public-Private Partnership The PPP has a very important field of application:
infrastructures of transport (road, rail, ports, airports, channels, etc) ;
Schools and Universities building ;
Prisons, Police and fire stations, etc.
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SECTOR IN RUSSIASECTOR IN RUSSIARequire a major change of the governmental culture of the States
To ask third party to do rather to do by itself. Becomes a regulator and not an actor.
To think in terms of delivered services and not in terms of production of physical equipment
Research of the long-term optimum within a global framework (design, construction, operation and maintenance)
Another approach of the national indebtedness: fundamental difference between:
financial commitments associated the investment in productive infrastructures
debts subscribed for the operation running of the State or the social welfare
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A new division of the rolesA new division of the roles
Public action Private action
Census of the needs Research of the total effectiveness in the long run (design, construction, etc.)
Definitions of the functionalities Allows to avoid on over or under investments
Determination of the performances to be reached
Obligation of quality and effectiveness of the delivered service
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
A new division of the rolesA new division of the roles
Regulation of the sector, choices of the tariff policies
Development of a culture of project to optimize the tripod cost/quality/effectiveness
Evaluation of the utilities and the negative externalities
Permanent partnership dialog with the Public Bodies
Control of public financial engineering and budgetary regulation
Seek optimum division of risks
Set up of the framework legislative, lawful, tax, etc
Mechanism of sharing profits with the public person
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ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT ESTABLISHING PUBLIC-PRIVATE PARTNERSHIPS IN TRANSPORT SECTOR IN RUSSIASECTOR IN RUSSIA
A new division of the rolesA new division of the roles
Project control and final mastering of the project
Cross fertilization coming from foreign experiences
Contribution of the users to the financing trough the toll fare justified by direct benefits they withdrawn from the project
Incentive to perform
Justification of the rationality of the decisions with respect to the users, taxpayers
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SECTOR IN RUSSIASECTOR IN RUSSIAConditions of success
Cultural changes and adoption of a new institutional framework adapted to
the Public-Private PartnershipNeed for a careful preparation of the project right from the start
creation of steering committees with participation of the whole of the parties concerned, while taking care of competition fairness
together engineering departments, operational agents and
financial staff, etc. staff representatives representatives of the users
validation of the principle of the project and the procedure of Public-
Private Partnership
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SECTOR IN RUSSIASECTOR IN RUSSIA
adoption of a policy of communication allowing to decrease
concerns
To use well fitted procurement methods for complex projects: the competitive dialog
To avoid entering into too complicated calculations: the hyper rationality does not increase the chances of success
Not to retain allowance of the risks based on purely mechanical criteria
To approach the procedure without ideological a priori
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SECTOR IN RUSSIASECTOR IN RUSSIA
Cardinal importance of the preliminary training of all categories of public actors concerned
A new approach of the role of the State: a producing economic actor of commercial public goods
Perennial add-back of the economic social benefit in the financing of the project