PPP involves different forms of longterm
cooperation between parties in the private and public sector. Great Britain has been using such forms of agreements since the 1990s, not only for building roads, but also for hospitals, prisons etc. In Sweden, interest in different forms of partnership solutions is growing and especially in the case of partnerships dealing with infrastructure projects such as new roads and railways.
A step towards increased cooperation
The Swedish Road Administration is
responsible for building and maintaining
Sweden’s state roads. The contracting of
private companies to carry out construction
has been going on for many years, and
since the beginning of the 1990s also maintenance has been outsourced. PPP involves a further step towards increased cooperation. Jan-Eric Nilsson, head of VTI’s department of Transport economics, explains:
– Instead of procuring the building and
maintenance separately, a complete package
is put out for tender. The consortium that wins the contract should also finance the construction. Those responsible will be
paid for the duration of the contract. One
part of an annual payment is in return for
running and maintaining the new facility
and another part is down payments for building costs.
PPP has been tested in three road projects
in Norway and two in Finland, but the only actual example from Sweden is Arlandabanan, a railway connecting Arlanda
Airport and downtown Stockholm. Arlandabanan is owned by the state, but is run by the company A-Train AB, who also built the railway. A-Train financed Arlandabanan and will, until 2045, be reimbursed for their investment through ticket proceeds from the trains that use the railway.
Contracts are a challenge
VTI’s recent assignment from the government
is to investigate the prerequisites for public private partnerships in infrastructure investments.
– It is something our government wants to be doing. Now they just wanted to know how to best go about doing it, says Jan-Eric Nilsson. |
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The challenge lies in drawing up the contract that will regulate the agreement. Both parties should benefit and the road or railway in question should not suffer in terms of quality. An analysis has therefore been made of which contractual obligations that should apply. For example, one must set standards with regards to the road surface’s condition and the environment, i.e. by setting limits for particle and noise levels. One must also consider the risk of accidents. If, after a certain number of years, it can be shown that fewer accidents occur on the new road compared to an equivalent road one should consider giving a bonus to the company responsible. This is a model that has been used in countries such as Finland.
Jan-Eric Nilsson believes that PPP can be one way to develop the cooperation between the public sector and commercial enterprises,
but emphasises the importance of a properly drafted contract.
– I do believe PPP is an interesting concept,
but if applied badly it can cause problems
and we see examples of such mistakes in other countries.
Over the past fifteen years, the building and maintenance of roads has been contracted to external companies. PPP is a further step towards cooperation.
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He tells of a Hungarian privately financed
road procured in accordance with PPP.
The road was, after being built, to be financed by means of tolls, but since the old tollfree roads remained, drivers chose those
instead.
– Öresundsbron, the bridge that connects
Sweden and Denmark, is also financed by tolls, but in that case there were only
poor alternatives, and for that reason, the
idea of using tolls has worked out much
better. It is precisely these types of issues
that have to be considered in beforehand.
PPP internationally
VTI will also conduct another PPP study
commissioned by the Committee on Transport and Communications. The study is an overview of information that systematically
compares PPP to other procurement methods. The analysis looks at cost efficiency and how one chooses the “right” project and finance it in the “right” way. It will also show how PPP has been handled internationally. Research material in the area is relatively scarce compared to the number of projects carried out. This is largely a result of the fact that no PPP projects have, to date, been completed as the contract period is normally at least 20 years. The overview will function as a base when the Committee on Transport and
Communications deal with an upcoming
proposition from the government.
– The Ministry of Finance has said no to
PPP once before. In that case there was a
failure in demonstrating how the work on
infrastructure could become more efficient
if handled in the right way, says Jan-Eric
Nilsson. PPP is not a means of financing but a way to make building and maintenance more efficient, which we will try to show in these projects.
Sandra Johansson, VTI, Sweden
Contact
Jan-Eric Nilsson |
