Opinion of the Committee of the Regions on the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on Public-Private Partnerships and Community Law on Public Procurement and Concessions
Date: 2006-10-12
Institutions: European Committee of the Regions
Subjects: EU law, provision of services, public contract, public-private partnership, service concession

6.3.2007

EN

Official Journal of the European Union

C 51/27

Opinion of the Committee of the Regions on the Communication from the Commission to the
European Parliament,
the European Economic and Social Committee and the
Committee of the Regions on Public-Private Partnerships and Community Law on Public Procure-
ment and Concessions

the Council,

THE COMMITTEE OF THE REGIONS,

(2007/C 51/05)

Having regard to the Communication from the Commission to the European Parliament, the Council, the
European Economic and Social Committee and the Committee of the Regions on Public-Private Partnerships
and Community Law on Public Procurement and Concessions (COM(2005) 569 final);

Having regard to the decision of the European Commission of 15 November 2005 to consult the
Committee on this matter, under the first paragraph of Article 265 of the Treaty establishing the European
Community;

Having regard to the decision of its President of 22 February 2006 to instruct its Commission for
Economic and Social Policy to draw up an opinion on this subject;

Having regard to its opinion on the Green Paper on Public-Private Partnerships and Community law on public
contracts and concessions (COM(2004) 327 final CdR 239/2004 fin);

Having regard to the 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 CESE
1440/2004 fin);

Having regard to the opinion of the European Economic and Social Committee on the role of the EIB in
public-private partnerships (PPPs) and their impact on growth (CESE 255/2005);

Having regard to its Draft Opinion CdR 41/2006 rev. 2 adopted on 3 July 2006 by its Commission for
Economic and Social Policy (Rapporteur: Mrs Bożena Ronowicz, Mayor of Zielona Góra, PL/UEN-AE);

Whereas:

1.

2.

3.

economic globalisation and the accompanying intensification of competition which public and
private sector enterprises are exposed to, one of the issues which the Lisbon strategy was intended to
address, clearly call for close cooperation between the public and private sectors in the form of
public-private partnerships, benefiting both sides and above all the public, the users of the services
provided;

through public-private partnerships, public-sector (national, regional or local government) and
private-sector partners participate in mutually beneficial joint activities, using their own resources not
only for commercial purposes but also to achieve the social objectives of the project, in particular the
delivery of higher-quality services;

local and regional authorities should become more involved in public-private partnerships, bearing in
mind that grassroots involvement in partnership projects in keeping with the principles enshrined in
the Treaties, will primarily benefit the people for whom the services are provided;

adopted the following opinion at its 66th plenary session of 11–12 October 2006 (meeting of
12 October):

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1. The Committee of the Regions' views

The Committee of the Regions

of a particular infrastructure or service can determine whether
local or regional authorities should undertake tasks themselves
or contract them out to third parties, in compliance with the
public procurement legislation of the Member State concerned,
perhaps by awarding concessions or through an institutionalised
public-private partnership;

1.1
given that a precise definition of a public-private part-
nership does not yet exist, that adequate legislation is not yet in
place, and — most importantly — the new Member States in
particular lack experience in the field, considers that there is a
need to develop an interpretative communication covering all
forms of PPP agreements;

1.2
points out that local and regional authorities are closest
to the people who will use public services, and that they deter-
mine how services are to be financed, the form to be assumed
by a public-private partnership, or alternatively whether to
provide the services themselves;

1.3
notes that when opting for a public-private partnership,
the primary consideration must be to improve the quality of
public services in the context of a specific project; it does not
automatically follow that such partnerships will always be
chosen as the best solution;

1.7
is of the opinion that public-private partnerships should
be acknowledged as an issue which must be approached not
only from a legal, economic or technical angle, but also from a
political perspective, given that decisions on cooperation
between the public and private sectors are subject to democratic
voting procedures, as well as monitoring by supervisory bodies,
as a result of which such decisions are publicised and evaluated
by members of the public who are actual or potential users of
the services concerned;

1.8
points out that in some cases the following benefits may
accrue to the public-sector partner from the execution of a par-
ticular project through a public-private partnership (provided
that such a partnership is identified as the best option for the
provision of services or infrastructure to the public):

— involving private capital in financing projects for the public
good, thus generating budget savings and reducing invest-
ment costs;

1.4
notes that public-private partnerships tend to shift risk
to the party which is best able to manage such risk, while
providing appropriate safeguards in the event of unfavourable
conditions arising from the completion of a particular project;

— transferring aspects of

investment risk which the private

partner is better able to deal with than the public partner;

points out that public-private partnerships are based on
1.5
the public sector assuming responsibility for the provision of
appropriate infrastructure and a particular type of service, while
actively cooperating with the private sector on the implementa-
tion of a particular project; as for the private sector, its role is to
secure financing for work on the project, to ensure technology
transfer and to perform tasks in order to achieve public-sector
goals; on completion or modernisation of the facility in ques-
tion, the private sector operates it, providing a public service in
return for remuneration. Thus, the aim of public-private part-
nerships is to define relations between the two parties in such a
way as to ensure that the risk associated with a given aspect of a
project is borne by the party best able to monitor it;

— accelerating planned investment and the associated provision
of public services, due to the greater flexibility and speed of
the private sector;

— expanding the range of

financing sources for

the local

public sector;

— guaranteeing reliable completion of projects, given that the
facility which has been designed and constructed or reno-
vated will be run or maintained by a private operator, who
should therefore have an interest in reliable and punctual
completion of the project concerned, under the supervision
of the public partner;

1.6
points out that public-private partnerships can be an
advantageous option for providing infrastructure or services to
the public. However, only a detailed analysis of the specific aims

— ensuring long-term provision of quality public services,

based on multi-annual contracts;

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emphasises that in public-private partnerships mutual
1.9
trust between the partners and transparency in their dealings
with one another are necessary,
in order to ensure free and
unfettered development consistent with the fundamental princi-
ples of the European Treaties, such as the principles of equal
the
opportunities, mutual
following are essential conditions for the compliance of public-
private partnerships with these principles:

recognition and proportionality;

— there must be a stable local and regional government

system;

— there must be confidence on the part of

the financial

markets and the respective partners;

2. The Committee of the Regions' views

The Committee of the Regions

2.1
should the Commission retain the idea to launch a legis-
lative proposal on service concessions, the Committee of the
Regions pleads for the recognition of the specificity of service
concessions or of services of general economic interest conces-
sions. Any Commission proposal should ensure flexible, trans-
parent and non-discriminatory procedures on how to select the
service provider combined with a flexible set of horizontal
criteria for the final award;

— the public and private partners must be in sound financial

condition;

2.2
considers that the debate on public-private partnerships
should be continued at Commission level, given that coopera-
tion between municipalities/regions and the business world has
become increasingly important in the European Union;

— the terms of the contract must be transparent, specific and
include a review mechanism and provisions for cases of
force majeure;

— there must be an accurate financial estimate of the project;

— legal protection must be in place for both partners.

1.10
highlights the fact that both contractual PPPs and insti-
tutionalised PPPs must make it a priority to guarantee citizens
high quality, safe and continual facilities or services. To this end,
the public authorities cannot fail to prioritise the provision of
services above the provider's economic interests and must retain
certain powers, such as that of imposing quality and safety stan-
dards, amending these unilaterally in the public
interest
throughout the duration of the partnership, being able to save
the facility or service, and once the partnership has ended,
receiving the resources from the provider
the public
authority considers necessary to the maintenance of the facility
or service;

that

considers

that even though most of

1.11
the agents
consulted by the Commission have not supported the Com-
munity initiative to clarify and harmonise the rules on subcon-
tracting in public-private partnerships, the Community institu-
tions must not forget that the citizen who uses these services is
the main beneficiary of this partnership and that the success of
a PPP project can be jeopardised if the holder of the PPP does
not respond appropriately to the subcontractors and suppliers
carrying out part or all of the provision of services. Further-
more, local and regional bodies are interested in boosting small
and medium-sized businesses which, most of the time, act as
subcontractors or suppliers. Therefore, it must be made compul-
sory for the contractor or the concessionaire to fulfil their
economic obligations to subcontractors or suppliers under the
same economic conditions as those governing the fulfilment of
to the
authority's
the
contractor or concessionaire.

economic obligations

contracting

2.3
calls for a precise definition of public-private partner-
ships and a clarification of the terminology, such as the precise
meaning of terms like ‘contractual PPP’ or ‘institutionalised PPP’,
and a possible distinction between European level PPPs from
national and sub-national PPPs;

2.4
considers, following on from the previous point, that
interest’
the terms ‘public services’ and ‘services of general
should be avoided, since they are defined differently in different
legislation. A valid concept that could be studied in order to
define institutionalised PPPs, which are being covered by Euro-
pean legislation, would be that of partnerships which are
designed to carry out a project or to provide services to citizens
in return for payment in full or in part by users;

encourages moves to also address the question whether
instruments are available at European
to guarantee European-wide PPPs (re-insurance, public

2.5
the necessary financial
level
guarantees);

2.6
values the efforts of the Commission to safeguard at EU
level the fundamental principles of the Treaty establishing the
European Community, such as transparency, equal opportu-
nities, proportionality and mutual recognition, in the award of
public contracts and concessions;

2.7
considers that competitive dialogue can be effective for
complex public contracts but that there is still little experience
of the implications of competitive dialogue;

2.8
recommends that Member States develop concessions
award procedures based on transparent and consistent rules
taking account of any common European-level definitions and
standards which might be proposed by the European Commis-
sion;

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considers that, in order to ensure greater legal certainty
2.9
for public-private partnership initiatives, public service providers
could be established with public and private-sector participa-
tion;

points out that only in the case of bidders (contractors)
2.10
to supervision by the public body
which (1) are subject
awarding the contract as departments of
that body and
(2) simultaneously carry out the majority of their activities in
that public body need the public procurement procedure not be
applied. In view of the CoR, ‘internal operator’ means a legally
distinct entity over which the competent authority exercises
control similar to that exercised over its own departments. For
the purposes of determining whether such control exists, factors
such as the degree of representation on administrative, manage-
ment or supervisory bodies, specifications relating thereto in the
articles of association, ownership, effective influence and control
over strategic decisions and individual management decisions
have to be taken into consideration. The status of
internal
operator precludes all participation by a private undertaking in
the capital of the service provider of more than 33 %; in par-
ticular, the CoR believes to be erroneous the assumption that
directly awarding concessions to joint public-private enterprises
incorporated by means of public procedures results in all cases

Brussels, 12 October 2006

in direct or indirect advantages for these enterprises; it therefore
refutes the idea that direct awards automatically constitute a
competitive advantage which is in conflict with the provisions
of
the Treaty, and also the principle that any additional
constraint on operating on the market would be incompatible
with the above framework;

points out that

2.11
interpretive communication on the
award of concessions or institutionalised PPPs could provide
further guidance on how to comply with the principles set out
in the TEC concerning equal treatment, transparency, propor-
tionality and mutual recognition, thus enhancing the prospects
of PPP projects and facilitating the completion of more projects
in future on the basis of European Investment Bank (EIB) loans;

2.12
emphasises that high-quality public services are guar-
anteed by the democratic system in each EU Member State,
which puts citizens first and provides protection by the authori-
ties which manage — or provide input into management, super-
vise and monitor the provision of services;

considers that when granting EU funding, priority

2.13
must be given to the financing of PPP projects.

The President

of the Committee of the Regions

Michel DELEBARRE