Public Private Partnership model for infrastructural work in Belgium no unqualified success
'The third P of PPP is often where it goes wrong.'
Over the past few years a number of large infrastructural projects in Belgium have been placed in market in the form of public-private partnerships -- the so-called PPP projects. To date these models have not appeared to be very successful. The added value one hopes to find through collaboration between public and private partners has so far seldom materialised.
Illustrative of the difficulty of getting PPP projects off the ground in Belgium is the tender for the Oosterweel connection. This infrastructural project has a value of more than 2 billion Euro and has to solve the traffic snarl-up around Antwerp. Since 2000 all political and technical authorities have been in agreement about the economic and logistical necessity of this project. It was then decided to implement this project as quickly as possible and a PPP model was chosen. In the year 2009, 9 years later, the balance of the situation might be described as extremely poor; public and private partners have already spent more than 150 million Euro on research costs, but no ground has yet been broken and nobody yet dares to predict when this project will finally be implemented.
The Oosterweel connection tender is not the only example. A number of other tender processes are also progressing very laboriously.
The question therefore presents itself why Belgium does not appear to be a fertile breeding ground for PPP infrastructural projects. An analysis of the snags which crop up in the above mentioned documents take us closer to the heart of the problem. It is not enough to bring public and private partners together, they must also work together. In other words: the third P of PPP is often where it goes wrong. Why?
The problem often already starts with the choice of the tender process. In choosing between a classic tender formula and a PPP model, government seems to be influenced more by financial arguments (budgeting) and less by technical considerations. Once the authorities have settled on the PPP tender model, they must go in search for the most suitable private partners. A point of criticism often heard in Belgium is that the PPP model is cut out for large international construction groups. The government is said to place too much emphasis on financial capacity and references based on achievements, without paying sufficient attention to the relevance of these references to the Belgian market. This has led to tensions between government and private partners: relatively smaller Belgian companies were excluded, while it is precisely these companies that will ultimately carry out the work (but then as subcontractors of international groups) and carry the most risk.
Ultimately it became clear that the interests of private and public partners do not always match. The fact that Belgium is a very densely populated country with an excess of legislation and regulation probably has something to do with this. The private partners want to maximise the design freedom offered to them in the tender process and thereby often introduce innovative solutions which could produce significant added value for government.
But government, which should be welcoming this creativity, acts as a brake on creative solutions and in so doing goes against one of the most important reasons why PPP models exist in the first place. The reason why government seems to stifle creativity is that it has often gone through a long preparatory process—because of the excessive legislation, regulation and preconditions. In many instances government would rather have no innovative solutions because it is worried that it will have to repeat the preparatory process with much loss of time as a result. Government creates a tight straitjacket of preconditions, while the private partner prefers to challenge the preconditions in order to make its design freedom as wide as possible. So government shoots itself in the foot: it creates PPP models to gain added value by means of creative solutions, but at the same time it stifles that creativity.
One can pose the question whether PPP models for infrastructural projects in Belgium still offer added value. In its present form not much, except by making the budget look good.
Involving the private partner at an earlier stage could be an alternative. The disadvantage, however, would be that the already lengthy preliminary phase for the private partner would be extended even further. Another solution could be to locate design responsibility with government to a larger extent. After all, the design freedom which the private partners expect to derive from the PPP model is in fact so limited that it only leads to wasted investment, futile hope and wasted energy. It is better to face up to reality; only this can lead to a rewarding collaboration between private and public partners.
About Dirk Van Rompaey
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