Opinion of the European Economic and Social Committee on the ‘Green Paper on public-private partnerships and Community law on public contracts and concessions’(COM(2004) 327 final)
Date: 2004-10-27
Institutions: European Economic and Social Committee
Subjects: ESC opinion, EU Member State, EU office or agency, exchange of information, private sector, public contract, public sector, service concession

20.5.2005

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Official Journal of the European Union

C 120/103

Opinion of the European Economic and Social Committee on the ‘Green Paper on public-private
partnerships and Community law on public contracts and concessions’

(COM(2004) 327 final)

(2005/C 120/18)

On 30 April 2004, in accordance with Article 262 of the Treaty establishing the European Community,
the Commission decided to consult the European Economic and Social Committee on the ‘Green Paper on
public-private partnerships and Community law on public contracts and concessions’.

The Section for the Single Market, Production and Consumption, responsible for preparing the Committee's
work on the subject, adopted its opinion on 8 September 2004. The rapporteur was Mr Levaux.

At its 412th plenary session of 27 and 28 October 2004 (meeting of 27 October), the European Economic
and Social Committee adopted the following opinion by 96 votes to 2, with 2 abstentions.

1. Introduction

1.1
On 30 April 2004 the Commission published a Green
Paper on public/private partnerships (PPP). Its aim is to launch
a debate on the application of Community law on concessions
and PPP.

In its own-initiative opinion of October 2000 (1), the
1.2
EESC made recommendations that are still relevant today. The
PPP phenomenon is growing and remains a strategic question
for an enlarged EU after the adoption of the new directives of
30 April last (2).

1.3
In the meantime experience has also been gained with
PPP projects in a number of countries. The results have been
mixed. It would therefore be advisable to assess such experience
systematically in terms of a variety of criteria such as costs,
access to services, service quality, impact on employment, etc.
Points to examine in particular are whether and how PPPs can
help maintain Europe's competitiveness vis-à-vis the rest of the
world and what their advantages and disadvantages are in rela-
tion to conventional ways of providing services.

teenth century the European railway network was built using
concession contracts. These were very widely used not only on
the railways but also for municipal public services such as
water, gas, electricity, rubbish disposal and telephones.

2.2
Overall contracts have long been used throughout the
world to cover the funding, design, construction and manage-
ment over time not only of motorways and car parks but also
of such projects as water-supply networks, museums, airports,
trams, underground railways, urban redevelopment and the
modernisation of schools and hospitals.

2.3 Countries with new legislation on PPP. The descriptions
that follow are based only on facts noted in a small number of
countries: Italy, Spain, Great Britain and France.

2.3.1 In It a ly

The framework law of 1994 (the Merloni Act)
2.3.1.1
defines construction and management concessions. In this
type of concession the concession holder carries out a project
using his own resources,
invested
through the economic exploitation of
the project when
completed (Article 19(2) of Law 109/94) (3).

recovering the capital

2. National laws and PPP use have developed greatly in

Europe

The aim of the infrastructure recovery programme is to carry
out 220 projects considered to be of strategic importance:

All European countries have used or are currently using
2.1
the system of PPPs and concessions. But so far the Commission
has not been able to draw up an inventory. The EIB has incom-
plete statistics on a hundred or so projects. Let us not forget
that the ‘first Europe’ of Roman times two thousand years ago
was already using a system of concessions. During the nine-

— from 2002 to 2011 investment is estimated at EUR 125

billion;

— half is to come from the state and the other from private

funding.

(1) OJ C 14 of 16.1.2001.
(2) OJ L 134 of 30.4.2004.

(3) Framework law L 109/94 (G.U. no41 of 19.2.1994) modified by the

Law of 2.6.1995 n. 216 (G.U. no127 of 2.6.1995).

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The law has created specially adapted legal frameworks: the
general contractor, the concession holder, farming-out and the
promoter.

To avoid delivery delays and make construction more efficient,
a new law of 2001 has created the ‘general contractor’. He
delivers the turnkey project and is responsible for maintenance.
He is also responsible for the advance funding of the project.

2.3.1.2 The concession holder

regulation of the different types of administrative contracts —
The public works concession contract — which provides the
legal basis for this contract, which is now commonplace, and
focuses on its unusual features and on upholding Spanish legal
traditions.

The new definition of

2.3.2.2
fundamental
‘public works’,
balance in the concession’ and ‘diversification of financing’.

the contract covers four
issues that characterise this type of contract:
‘economic

‘risk to the concession holder’,

A construction and management concession is the alternative
to having a general contractor: lack of funding generally leads
to the use of
this arrangement based on total or partial
payment by the user, because with a ‘general contractor’ the
public authority has to stagger payments.

2.3.3 In Gr e a t B r i t a i n

2.3.1.3 Farming out or management concessions

Concessions are also used for managing existing projects, such
as hospitals, schools and prisons. A recommendation from the
Treasury has to enable management to be refocused on essen-
tial tasks and to benefit from innovations in the private sector.

2.3.1.4 The promoter's contract

This allows a bid for carrying out a project to be made by
anyone under the three-year investment programme of the
local authority concerned. The public authority is free to accept
or reject the idea proposed and if it accepts, a call for tenders is
organised. The promoter has a right of pre-emption and writes
the contract.

There has been a big increase in the number of projects using a
promoter in this country:

— 1 163 projects submitted in three and a half years (January

2000-June 2003);

— 660 from promoters (concessions resulting from private-

sector initiatives, including 302 in 2003!);

— 503 from concessions resulting from public-sector initia-

tives.

In 1993-1994 the government

launched a wide-
2.3.3.1
ranging policy of farming out public services and public works
known as the ‘Private Finance Initiative’. This enabled private
companies to be given responsibility for public works projects,
including:
finance, construction, management and
maintenance’. Since its introduction the PFI has been used for:

‘design,

— more than 650 PPP projects started, including 45 hospitals

and more than 200 schools;

— 400 projects underway;

— commitments worth GBP 48 billion (EUR 60 billion);

— one programme still to come;

— around 12 % of

the national annual capital

investment

budget.

The British Treasury has used two principles to
2.3.3.2
govern use of the PFI: ‘the private sector must really take on
the risk’ and ‘the public sector must obtain services at the best
price by applying the best-value-for-money principle’. The aim
of this is to optimise the costs of using the facilities that have
been built, because since the manufacturer himself is respon-
sible for exploiting the facilities, it is in his interest to design
and build a work of quality that will be cheaper to run and
have a longer lifetime.

2.3.3.3
Current contracts cover all areas: water, sanitation,
public transport, the army, hospitals, schools, public buildings,
roads and motorways …

2.3.2 In Sp a i n

In Spain, Law 13/2003 of 23 May regulates
2.3.2.1
contracts for public works concessions. This Law has amended
the Law on State Contracts, a consolidated text adopted by
Royal Decree-Law 2/2000 of 16 June, giving a new title to the

2.3.3.4
Due to the high number of PPP projects in the
United Kingdom, a considerable amount of experience has
been obtained there, which has given rise to very mixed results.
A systematic analysis and assessment of this experience should
be carried out and used in further developments.

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2.3.4 In F r a nce

authorities. These PPPs help safeguard regional
regional economy.

jobs and the

The right

2.3.4.1
to draw up concession contracts with
payment by the user was organised by the so-called ‘Sapin Law’
of 29 January 1993, and use of these contracts is widespread:

— for urban services such as water, waste disposal and public

transport,

— for major

infrastructures

such as motorways, bridges,

stadiums and tunnels.

2.3.4.2
spreading fast in France.

PPP contracts with public sector payment are

2.3.4.2.1
Since the Law of 5 January 1988, France has had
long-term contracts for public spending: administrative long
leases (known as Baux Emphytéotiques Administratifs or BEAs).
These contracts are used for public buildings, especially
schools, as a variant of the leasing used by the French state (1).
The state has also developed the practice of lease options in the
buildings and infrastructure sector (laws of 29 August 2002 for
‘the police’ and the beginning of 2003 for ‘the army’).

2.3.5.3
Such PPPs are underpinned by local authorities'
constitutionally guaranteed powers to decide for themselves the
nature of concession-based SGEI provision in their respective
areas and how that should be organised. They can choose to
set up their own companies, to conduct PPPs with appropriate
partners or to award the SGEIs to private operators. PPPs of
this kind are not subject to procurement law.

2.4 Comments on the promoter's contract

2.4.1
The system comes from the tradition of concessions in
Europe. It is growing fast in Europe and it raises the question
of whether or not it should have a harmonised framework or
be covered by European law.

Finally, a law of 2 July 2003 has made provision
2.3.4.2.2
for the adoption of orders for long-term contracts including
‘design, construction, financing and management using public
funds’. A first order for the hospital sector was published in
September 2003, and another has been adopted by the French
state and local authorities. This is the ordonnance sur les contrats
de partenariat du 17 juin 2004 (2).

2.4.2
France and Spain are adopting it after Italy, where the
law in this area is very meticulous. In Italy the authority orga-
nises a call for tenders referring to the preliminary draft of the
promoter, possibly modified by itself, and to its financial plan
(proposed duration, price required, etc.).

2.3.5 In Ge r ma ny

As

2.3.5.1
in the other Member States, Germany has
detailed legal provisions governing public procurement (works
contracts) in which public and private undertakings and PPPs
can take part on a non-discriminatory basis.

A basic distinction must be made between that and
2.3.5.2
the procedure for securing services of general interest. German
local authorities often opt for public-private partnerships to
provide such services of general economic interest (SGEI) in
fields such as supply and disposal, i.e. energy provision, water/
waste water and waste removal. That is done using all manner
of contracts.
In addition to widespread service concessions,
public contracts are also found in fields such as electricity
supply, and institutionalised PPPs are also in place in local

(1) Some of the construction of the Ministry of Finance at Bercy (Paris)

was carried out using this financial tool.

(2) Ordonnance sur les contrats de partenariats no 2004-559, published in

the Journal Officiel of 19 June 2004.

It awards the concession after a negotiated procedure
2.4.3
the two best offers
either to the promoter or to one of
submitted during the call
for tenders. The promoter and
bidders have to provide a guarantee of 2.5 % of the total value
of the investment.

If

2.4.4
the authority does not keep the promoter, he
the guarantee from the successful
receives the amount of
bidder as compensation for his expenditure including intellec-
tual property. If the promoter is awarded the contract, his guar-
antee of 2.5 % is paid to the other two bidders (60 % to the
best one and 40 % to the second best).

In the same way as contracts may be reserved for
2.4.5
organisations where most of
the workers are handicapped
persons, as in Article 19 of Directive 2004/18/EC of the Euro-
pean Parliament and of the Council of 31 March 2004 on the
coordination of the procedures for the award of public works
contracts, public supply contracts and public service contracts,
the EESC thinks that certain social criteria should mitigate in
favour of the promoter, or of one of the contractors, when
setting up this type of public-private partnership.

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2.5 Countries where the use of PPP and concessions is
rare. The descriptions that follow are based only on facts noted
in a limited number of countries.

public works and public service PPPs and concessions in Euro-
pean law are either non-existent or flawed. Criticism of the
current concept covers:

2.5.1 In B e lg i u m

— treating concessions as public works contract (point 3.1.1);

2.5.1.1
A concession is defined in Articles 24 and 25 of the
Law of 24 December 1993 and in Articles 123 et seq. of the
Royal Decree of 8 January 1996 (1). In addition to the execu-
tion and possible design of work, these articles provide for
exploitation of the work by the concession holder. However,
the promotion contract in Belgian law does not seem to
be very common.

The promotion contract (2) covers

2.5.1.2
the funding,
execution and, sometimes, the design of a work for which the
contracting authority will be the user in return for the payment
of rents (3).

— the lack of differentiation between long-term and short-
term contracts, which is the dividing line for funding from
outside the administrative authority and therefore the
support of the delegation (point 3.1.2);

— the lack of machinery for dealing with proposals for
concessions made at the initiative of the private sector
(point 3.1.3).

2.5.2 In Por t u g a l

2.5.2.1
To improve its road network this country has set up
the SCUT contract, a delegation scheme enabling a private
builder to receive a public sector licence fee. The SCUT is
modelled on the ‘shadow toll’ system set up on British roads.
Calls for tenders relating to these SCUT contracts were made in
1997. They seem less used today.

3.1.1 T r e a t i ng PPPs a nd conce ssi ons a s p u bli c w or ks

c ontr a c ts

3.1.1.1
The question of concessions is rooted in Community
law on the one hand, in the principles and rules of the Treaty
and, on the other hand,
in the directives which implement
these principles.

2.5.3 In Hu n g a r y

2.5.3.1
There is no specific law governing PPP projects,
although the rules governing financial commitments by the
state described in Decision No. 2098/2003 (V29).

3.1.1.2
The directives drawn up by the EU aim to ensure
transparency of competition in all areas relating to public
contracts and their
scope is sometimes confused when
complex concession or PPP contracts are involved.

2.5.3.2
In 1997, the country took the initiative of launching
a programme in partnership with the private sector concerning
the development of industrial parks, the number of which had
reached 165 at the beginning of 2004.

3. How to define a concession or PPP?

3.1
European law has not been able to give realistic and
useful definitions of PPPs and concessions. The concepts of

(1) Law of 24.12.1993 – Public works contracts – Moniteur Belge of
22.1.1994, Royal Decrees of 8 and 10.1.1996 – Moniteur Belge of
26.1.1996 Royal Decree on public works supply and services
contracts and concessions.

(2) Idem.
(3) Law of 24.12.1993 (Article 9) - Royal Decree of 8.1.1996 (Article
21) - Royal Decree of 26.9.1996 Maurice-André Flamme, The Law
of 24.12.1993 Journal des Tribunaux 1994, Rules covering
construction.

Only Directive 93/37 (4) coordinating the procedures
3.1.1.3
for awarding public works contracts defined public works
concession contracts in its Article l(d). Unfortunately, it did so
by referring to ordinary public works contracts (5). Directive
92/50 (6) on public service contracts did not include any defini-
tion of a concession. Finally, Directive 93/38 (7) dealt with
neither the definition nor the awarding of concessions, and
simply regulated the awarding of all contracts through conces-
sion-holders in so-called ‘special’ sectors, thus replacing other
directives. The EESC regrets such a laconic and unrealistic
approach, which has unfortunately been retained in Directives
2004/17 and 2004/18 (8).

(4) OJ L 199 of 9.8.1993.
(5) A ‘public works concession’

is a contract possessing the same
features as those referred to in point a), except for the fact that the
quid pro quo for the work consists only of the right to exploit the
work or of this right accompanied by a price.

(6) OJ L 209 of 24.7.1992.
(7) OJ L 199 of 9.8.1993.
(8) OJ L 134 of 30.4.2004.

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3.1.1.4
The Commission, aware of the increasing use of PPP,
published an interpretative Commission communication on
concessions under Community public contracts law in
April 2000 (1). This communication aimed to remove the
fundamental legal ambiguity connected with the absence of a
correct definition of concessions and PPP in the directives on
public contracts.
It should be remembered that the current
treatment of concessions and PPP under national laws varies
enormously.

3.1.1.5
The EESC considers that there is a lack of defini-
tions that clearly lay down the content and scope of
concessions and PPP or delegation contracts. Concessions
and delegation generally cannot be summed up by one feature:
risk or payment, as considered by Directive 93/37 and then the
interpretative communication; it is defined by a whole series of
factors.

3.1.1.6 How to come up with a better definition for a conces-

sion or a PPP?

3.1.1.6.1
The contract, or unilateral act by which a public
authority confers specific rights to an outside organisation to
‘design, construct, finance, maintain and manage’ an infrastruc-
ture or service for a long and pre-determined period:

— is called a concession when a company is paid by a price

paid in the main by users;

— is

called a public/private partnership contract when

payment is made in the main by a public authority.

3.1.1.6.2
criteria connected with these types of contract:

From these definitions, we need to focus on two

— the need for a transfer of

liability from the public

authority to the contract holder;

— the concept of

the globality of the contract, which
includes a number of functions (construction, financing,
exploitation, maintenance, etc.) over a long period (aver-
aging from 10 to 75 years).

3.1.1.6.3
The EESC feels that there is no reason to do as the
interpretative communication of April 2000 does and just
consider that the (concession) contract boils down to simply
assuming the exploitation risk; this would be too partial and
restrictive a view of this type of contract.

(1) OJ C 121 of 29.4.2000.

3.1.2 T h e ne e d to di ffe r e nt i a te be tw e e n sh or t a nd

long -t e r m contr ac ts

3.1.2.1
Following the Green Paper published by the Euro-
pean Commission in November 1996 (2), the EESC adopted an
opinion on 28 May 1997 (3), in which it asked the Commission
to review its approach to concessions with a view to making
them more autonomous with respect to the definition of a
public works contract: ‘The question of concessions should be exam-
ined in depth, given that their award must be transparent and subject
to objective criteria. There are fundamental differences between a
financing,
concession and a contract: object, duration,
management methods and the extent of liability. To encourage the
spread of such contracts the EU Commission could study what form
of legal tool should be used for their implementation.’ (4)

terms for

3.1.2.2
The EESC thinks that if one is to consider the nature
of contracts and their classification, one needs to recognise
what job they are intended to do.

3.1.2.3
A concession or PPP contract cannot be summed up
as a transfer of exploitation risk, without any mention of dura-
is a transfer of the
tion, when what it involves, above all,
design, construction, financing and management-maintenance
of a work or service to the candidate selected.

3.1.3
As regards the promoters' contracts mentioned
earlier, several countries have set up a specific branch of law
recognising the possibility of private sector operators proposing
a project to the responsible public authorities. This practice,
which is now quite normal in Italy, should be made available
in other Member States which currently do not have similar
procedures.

3.2 Different applications of European law giving rise to legal differ-

ences

3.2.1
There is no one concept of public contracts in Europe;
in one country they will be considered as an agreement and in
another as a concession. The same contract will therefore be
subject to two types of awarding procedures depending on the
country where it is drawn up. The United Kingdom, which is
less sensitive to the classification of contracts than countries
with a Roman tradition and system of administrative law, has
always considered PPPs to be simply public works contracts,
when they could have been considered as public works conces-
sions.

(2) COM (96) 583 final.
(3) OJ C 287, 22.9.1997.
(4) Other points in the opinion are also worth quoting:

‘The use of
long-term contracts to provide private financing for public
works is growing in several countries. These are not the same as public
procurement contracts.’
‘The ESC desires that concessions be the subject of a specific regime, espe-
cially as regards trans-European networks.’
‘The ESC proposes that the EU Commission encourage the promotion of
new contractual arrangements based on private investment in public infra-
structures.’

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3.2.2
The emergence, in several states, of a specific branch
of law relating to PPPs shows that these types of arrangement
on the borderline between contracts
and administrative
management are of a specific nature that makes any a priori
regulation difficult.

3.4.3
Any contractual solution for attributing the manage-
ment of public sector facilities is based on compliance with the
social obligations of
the country concerned and with the
performance obligations set out in the contract. In the event of
non-compliance with such social or performance obligations,
termination of contract clauses will have to apply.

3.3 Can European law be satisfied with classifying contracts solely in
terms of their conclusion, while leaving the delegation of public
service in the institutional sense of the term in the shade? Are the
rules covering conclusion of the contract so important?

The scope of the directives far exceeds harmonisation
3.3.1
of the drawing-up of public works contracts. The definitions
adopted by the directives have been incorporated in their
entirety into several national laws involving an establishment of
common contractual concepts in several countries in Europe.

3.3.2
But directives 2004/17 and 2004/18 leave the legal
arrangements governing national contracts up to the national
laws on contract performance. The question then arises of the
place granted to the private sector in public sector manage-
ment.

3.4 On the basis of the market economy principle, the order of prece-
dence of standards attaches particular importance to services of
general interest and to safeguarding social concerns

3.4.1

The EESC reaffirms that:

— in line with the future constitution adopted by the Council,
these objectives include sustainable development on the
basis of balanced economic growth and price stability,
together with a highly competitive social market economy,
which targets full employment and social protection, as
well as a high degree of environmental protection and a
better quality of the environment;

— if they are used, PPPs must contribute to achieving the

Union's goals;

— the strategy adopted at the Lisbon summit endorsed the
principle of an open market economy by supplementing it
with a goal of strong growth while respecting the social
dimension of Europe (education, training, jobs etc., ...).

3.4.2 While respecting the principle of subsidiarity in order
to achieve this objective of an open market economy, the
competent public authority must take account of the possibili-
ties for competition and decide on the most appropriate solu-
tion.

4. Proposals to improve and clarify the law regarding

PPPs and concessions

4.1
If a harmonised framework is to be created at European
level, the EESC considers it desirable that the development of
such contracts should be accompanied by one or more inter-
pretative communications which would track the diversity and
complexity of the phenomenon over time, rather than rush out
a directive immediately which could soon turn out to be inade-
quate.

4.2
In addition, the EESC calls upon the Commission to
consider the issue of PPPs in an overall context and, within the
framework of its communications, (after a survey among the
Member States) draw up a list of criteria that the public autho-
rities could take into consideration for the social and environ-
mental aspects. The public authorities could then use these
criteria to amplify existing legislation and thus prepare a code
covering the performance of contacts.

4.3

The EESC considers that:

— the PPP is a flexible and dynamic economic tool which can
be used as a catalyst for the integration of certain economic,
social and environmental objectives, such as sustainable
development, employment and social integration;

— the PPP enables the respective cultures of the public and

private sector partners to be improved.

Directive 2004/18 settles

4.4
several major questions
concerning the conclusion of public contracts which could be
adapted to PPPs and concessions, namely: criteria, the competi-
tive dialogue procedure and the confidentiality of bids. It seems
worthwhile to clarify the following points:

4.4.1 M a i nta i ni ng th e op e n a p p r oa c h for conc e ssi ons

4.4.1.1
2004/18 should be maintained, especially as not all
Member States use the concessions procedure.

The open approach in the wording of Directive
the

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4.4.2 Pr ovi di n g a h a r moni se d le g a l de fi ni ti on of

conce ssi ons a nd PPP i n E u r ope

4.4.4.2
therefore:

The competitive dialogue procedure adopted should

4.4.2.1
There should be a unified definition of these two
contracts in the Member States. The one proposed above by
the EESC (see point 3.1.1.6) may make it possible to confirm
the special place that these contracts have on the borderline
between the concept of a market and that of public administra-
tion.

4.4.3 R e sp e c t for i nnov a ti on

Community

4.4.3.1
concessions
imposes no obligation on the licensor to specify in the public
works concession notice if he accepts innovative alternatives.

on works

legislation

4.4.3.2
The EESC considers it desirable that alternatives of
any kind should be accepted whenever there are consultations
on these types of contract, with encouragement being given to
innovation.

4.4.3.3
Indeed, the answer of a candidate being sounded out
for a concession may have an original character comprising
major and essential
innovations in all technical, financial or
commercial fields, which can be used for economic and social
improvements to the living and working conditions of the
consumers and employees concerned.

4.4.3.4
Such an incentive to candidates to invest a consider-
able amount of intellectual energy in consultations enabling
such innovations is consistent with the spirit of the Lisbon
strategy.
It is therefore necessary to prevent the intellectual
property of original proposals from such candidates from being
made available to other competitors. This is a question of
ethics and of providing incentives for innovation, which should
be transposed into Member States' national laws under the new
PPP-linked ‘competitive dialogue’ procedure.

4.4.4 N e g oti a te d p r oc e du r e

A proposal for a concession contract has to obey
4.4.4.1
the service objective defined by the licensor, but the greatest
possible freedom must be allowed in choosing the ways of
achieving this goal: design, scheduling of work, assumption of
risks, etc. After one or more candidates have
technical
submitted proposals,
to see a dialogue
the EESC wishes
between the licensor and potential concession holders aimed at
finalising the concession or PPP contract according to the
choices proposed for fulfilling the needs of the public authority.
The old Directive 94/37 reserved the negotiated procedure for
exceptional cases. From now on, the competitive dialogue has
adopted the principle of negotiation for so-called complex
contracts.

— clearly specify that cases of opening-up (difficulty of asses-
sing replies from the private sector or the exact nature of
the needs or the financial arrangements) are to be under-
stood in a very broad and liberal sense;

— state that each firm can make its own proposal, with the
intellectual property of each contender being safeguarded.

4.4.4.3
Finally, it must be pointed out that the conclusion of
a contract between the contracting public authority and the
concession holder is mandatory by establishing the responsibil-
ities of each of the parties in line with what is proposed by the
law of the countries concerned.

4.4.5 St a te me nt of ov e r a ll p r i nci p le s

It is particularly important that a legal framework
4.4.5.1
which is properly adapted to concessions and PPPs be embo-
died in the adoption of principles relating to the implementa-
tion of such contracts.

4.4.5.2
The possibility of concluding partnership contracts
depends basically on the possibility of achieving a contractual
balance and respecting it over a period of time.

4.4.5.3
The EESC recommends that the Commission draw
up an interpretative communication encouraging a balanced
distribution of risks between licensor and concession holder by
allowing each state to choose the means to be used, which may
evolve over time. To this end, several ideas should be included
among the principles in such a communication:

— the risks of an infrastructure or PPP concession must be
identified, quantified and clearly assigned to the party best
able to assume them;

— an appropriate contractual agreement on sharing the risks
involved should be concluded at the outset between the
licensor and the concession holder in the event of an excep-
tional risk: an unforeseeable event which increases the cost
(unexpected modification of public
contract
of
constraints, unforeseeable
conditions during
construction, short-term changes in consumer behaviour,
etc.);

technical

the

— compensation must be provided by concession holders who

do not respect the clauses of the contract;

— the concession holder providing funding must be able to
assume, as when concluding any civil
law contract, that
legal and tax changes by legislators will not affect contracts
currently in application;

C 120/110

EN

Official Journal of the European Union

20.5.2005

— provision must be made for the holder of the contract to
receive immediate compensation when the contract
is
modified following a new requirement
imposed by the
licensor without there being any modification of the initial
conditions of the contract;

— the concession holder must be allowed sufficient flexibility
to carry out the task assigned to him by the licensor, with
the latter handling all regulatory or public order questions.

substantial

4.4.5.4
The successful introduction of a system of conces-
sions, as a form of efficient partnership between private
management and funding with public investment for the provi-
sion of services of general interest, requires an appropriate legal
and accounting framework, geared to the particular nature of
concessions. The
investments and expenditure
shouldered by the private business in the initial years in order
to set up the infrastructure and launch the service must be
the concession period. The
spread over
proposal to harmonise European accounting rules in its present
form makes
the award of concessions unviable. Spanish
accounting rules, and the way they treat new concessions,
could be an example worth considering if we wish to achieve
forms of public-private partnership for construction and/or
service projects in the European Union.

the duration of

5. Clarify appreciably the rules of competition between

public or quasi-public entities and private entities

5.1
Concessions or special or exclusive rights are often
awarded directly to joint ventures, who may in certain cases
extend their field of activity outside their core area by simply
modifying their articles of association. As a result, any competi-
tion that does occur is sometimes distorted. In this case they
must keep separate accounts, so that checks may be performed to
ensure that they do not practise cross-subsidies which would distort
competition.

5.2 The EESC recommends that the rules be clarified as follows:

5.2.1
Before a joint entity is set up, the competent authority
must take account of the possibilities of competition in the
marketplace and decide on the most appropriate solution.

In the interests of transparency and efficiency,

5.2.2
the
procedures for setting up joint entities must be announced
before calls for tenders and clearly call upon private competi-
tors to be able, if necessary, to participate in the setting-up of
quasi-public companies. Finally, when a public authority puts

Brussels, 27 October 2004

out a new project for tender by a local joint entity, it must
ensure, when doing so, that:

— this entity is obliged, if it goes outside its original area, to
keep separate accounts, so that checks may be performed
to ensure that it is not practising cross-subsidies which
would distort competition;

— Community procedures are respected,

including those

relating to state aid;

— checks are made to ensure that the terms of competition
with the private sector are fair (tax status and operating
costs of the joint venture).

6. Conclusions

The EESC considers that in many states a specific body of law
on PPPs is now emerging and that, on the basis of present
experience, it is preferable to:

— allow PPPs to evolve in various forms for several years;

— get the Member States to issue systematic communications
on the various types of PPP and the difficulties encountered
(advantages and disadvantages compared with conventional
forms);

— set up an observatory for studying the evolution of PPPs,
with representatives from the Member States, the Commis-
sion and civil society, including the EESC (to assess experi-
ences in relation to a variety of criteria such as costs, access
to services, the impact on employment, competitiveness,
the environment etc.);

— stress that European publication thresholds (e.g. on labour
and services) apply for PPPs and concessions; below these
European thresholds each Member State will apply its own
rules so as to avoid unnecessary red tape,

— publish a interpretative communication before 2007 clari-

fying:

— the definition of concessions and PPPs,

— the competitive position of joint or quasi-public entities,

— the procedure for competitive dialogue and publication,

— the treatment of ‘promoters’ who facilitate innovation,

— the relevance of state aid for joint or quasi-public

entities.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND