Public Private Partnerships (PPPs) & the Greek Legislative Approach

Among them, one could include pure economic benefits, as the public sector is able to proceed with a greater number of infrastructure projects, even at times when public funding may be significantly constrained and, especially, the better allocation of risks, which is a core element of every PPP project, to the party (public or private) most efficient to manage it at the least possible cost. On the other hand, however, the implementation of PPPs entails some significant risks, as the inappropriate design and structure of PPPs may ultimately result in poor performance. Also, due to the fact that PPPs typically involve projects of a relatively high budget, it is essential that procurement is efficiently managed within well-defined and legitimate procedures which minimize the risk of legal challenges from the losing bidders and that there is a guarantee that public bureaucratic delays and deficiencies will not jeopardize the implementation of the whole scheme within its estimated timeframe and/or cost.

In Greece, a number of PPPs have already been implemented since early 90’s as a form of procurement for projects mainly in the public transport sector (including the new Athens International Airport and the Athens Ring Road). However, all such PPPs projects undertaken till 2005 needed to be implemented only after their parliamentary ratification, due to the lack of a general and coherent PPP legislative framework. The Greek Government elected in March 2004 had declared its intention to establish a comprehensive legal and economic framework that would ease the way for the implementation of PPPs. Given Greece’s post-Olympics budget constraints, the importance of introducing private finance into the provision of public-sector infrastructure and services had been increased even further. Those intense and pressuring needs led eventually to the adoption of the relatively recent Law no. 3389/2005.

The new legislation attempts to set a comprehensive procedure regarding the planning, approval, award and implementation phases of the whole range of PPPs by clearly defining the scope and minimum requirements of such projects. Its ultimate aim is to ensure the attainment of the most efficient outcome by supporting the positive aspects of the whole scheme on one hand and by minimizing the possibilities for occurrence of potential risks on the other.

Regarding the role of the legislation on enhancing and promoting the beneficial attributes of PPP projects, it is important that the Law gives a clear definition of the term “Public Private Partnership”, in the sense that it is explicitly defined firstly, which public entities are entitled to proceed to such partnerships with the private sector; secondly, that the partners from the private sector are eligible to participate in PPP projects only through special-purpose-vehicles (SPVs), i.e. limited companies established exactly for the purpose of implementing a public private partnership; thirdly, that PPPs may be related to the provision of both services and infrastructure; and fourthly, that, as a negative precondition, areas of competence which according to Greek Constitution belong to the core authority of the State (e.g. national defence, law enforcement, etc.), cannot be delegated to private corporations.

In financial terms, which represent a significant and lucrative incentive for the wider adoption of PPP projects, it is also established that the two necessary prerequisites for the approval and implementation of a PPP project are (a) the undertaking by the private sector/partner in the proposed PPP of a substantial part of the risks related to the finance, construction, availability and demand of the subject-matter of the PPP, and (b) the obligation imposed to the private sector to undertake, in full or partially alongside the public sector, the finance of the provision of service/infrastructure.

The role of the new legislative instrument on the risk-related duty of establishing a solid environment for the implementation of PPPs in Greece is equally acknowledged. The strategic planning and hierarchy of any proposed PPPs is assigned to a Joint Ministerial Committee, which is the final authority responsible for the approval of PPP proposals and their accession into the provisions of the PPP law. The Joint Ministerial Committee is supported by a Special Secretariat (PPP Task Force) which is organised within the Ministry of National Economy and Finance. The ratio behind this organizational structure is that firstly, there will be a close scrutiny of any proposed PPP in order to guarantee the proper design and structure and the efficient management and implementation of such PPP projects. Secondly, the Task Force, being specialised, well-equipped and market-oriented, will be the driving-force for ensuring the successful introduction of PPPs with the necessary ability to surpass the bureaucratic obstacles which will be faced in Greece, as in all countries making the switch to PPP as an alternative and efficient approach to the provision of services and/or infrastructures. Thus, the Task Force will scrutinize any proposal for a PPP received from public and/or private entities, as well as be able to submit similar proposals on its own initiative. It will present its own opinions on any PPP project to the Joint Ministerial Committee which will retain the final decision-making power, and in more general terms it will be the central monitoring and coordinating agency for the efficient implementation of any PPP project. Following the international experience (mainly, the UK experience), it is stipulated in advance that the Task Force will be entitled to issue Guidelines and Standard Form Agreements, which have been proven as substantially beneficial for both the public and private sector in any initiative to launch PPPs. Having been finally approved by the Joint Ministerial Committee, any PPP project will be placed under the regulatory authority of the Task Force which will be the “one-stop-shop” agency regarding all the subsequent phases of tendering, awarding, contracting and implementing PPPs.

Regarding the important issue of the procedure for the award of such Public Private Partnerships (PPPs), it must be noted that the provisions and the methodology of the relevant EC Directive 2004/18 on public procurement are mainly adopted which guarantee, if properly implemented by the awarding authorities, the establishment of an open, fair and competitive “level playing-field” and the legitimate award of any PPP project to the most efficient and beneficial private sector partner.

Finally, there is a significant recognition of the risk which emanates from the possibility of facing either reluctant and uncooperative or bureaucratic public bodies which may refuse to abide with the strict timetable of a Public Private Partnerships (PPPs) project in issuing any necessary licenses (in particular, environmental or archaeological permits); thus, it is stipulated that in the event that there has been a delay of more than 60 days in issuing the required licenses (or in refusing officially to issue such licenses within the same time frame), the relevant licenses will be regarded as automatically obtained. Also, some of the technical legal problems faced by banks in funding previous projects in Greece (such as e.g. the doubts over whether one bank could act as security holder on behalf of all banks to a syndicated loan) have been also specifically resolved.

No legislative initiative can or should automatically cover any scenario or solve all the surrounding issues that may be confronted during the design and implementation of a PPP project. Equally self-evident, however, is the fact that the existence of a comprehensive legal framework is a crucial parameter which influences the strategic choice of implementing such innovative initiatives. Combined with the expressed intention on behalf of the Greek Government to support local and regional authorities on the design and implementation of PPP projects, the Law represents a significant step in providing the basis for the successful and gradual introduction of PPP projects in the Greek reality and will allow the development of pivotal projects, so that the benefits can be clearly demonstrated and the most significant teething problems addressed.

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Public Private Partnerships (PPPs) in Action

INTRODUCTION

Public Private Partnerships (PPPs) are in general defined to be a form of collaboration between the public sector (i.e. the government, local authorities, etc.) and the private sector (i.e. private companies etc.) aiming at providing various works and services required by the public through partnerships with one or more sectors of private economy.

THE NECESSITY FOR REGULATION

The European Union, while regulating a number of issues relating to the public sector, did not provide any specific legislation in reference to PPPs. Before Law 3389/2005 each concession agreement in Greece relating to the provision of works and services, had to be individually granted by the Parliament. Each agreement was to be decided upon on an ad hoc basis. As such, two problems arose from this procedure. Firstly, the whole process was time consuming, and secondly there were no defined set of rules. Parliament decided when and why approval was to be granted. Following the implementation of Law 3389/2005 the aforementioned requirement was abolished. Therefore, the new law filled the legal gap and as such a more accessible and comprehensive legislative regime was enforced.

BENEFITS OF LAW 3389/2005 ON PPPs

The new Greek law described the manner under which PPP’s were to be awarded and governed, thus providing a concise legal framework that had not been present in the past. According to the Special Secretariat for PPPs “via the implementation of PPPs, the public sector intends to make use of the most modern means for providing services to clients, enhancing existing framework of public procurement. With the implementation of PPPs, a new boost will be given to the development of the economy, prompt efficient delivery of necessary infrastructure will be guaranteed, while more public funds will be made available.”

The Law established two new state bodies (the Interministerial PPP Committee and the Special Secretariat for PPPs) which are both of administrative nature. Therefore, a complete legislative and administrative framework exists so as to regulate PPPs in Greece.

The Law also provides practical benefits for the public sector. Firstly, the public sector can rely on said projects being financed by private entities. Due to the fiscal restrictions, PPPs cover the need of the public sector for private finance. The State prefers the option of PPPs as it does not itself want to be involved in the undertaking of said projects due to the fact that any loan taken out by the public sector would be included in the public- deficit.

Secondly, the public is alleviated from a large portion of the risk relating to various issues surrounding the partnership, since from the conclusion of the agreement until the conclusion of the project a great portion of all possible risks involved is allocated to the private entity. As such, the private sector undertakes a big part of the risk of the whole project. Usually the Constructor covers all the risks related to the construction and the operation of the project in relation to technical problems.

Moreover the Constructor may undertake the risk of the preparation of the project in relation to the time-frame, the financing risk, the operative- technical risk, the risk of the potential demand- availability of the project and the risk of paying off the loan.

Greek Law 3389/2005 establishes a special administrative license status and a special compulsory expropriation status in relation to the areas where the project will be constructed.

Finally, another important issue is that the payment of the agreed price of the project may be accomplished by the collection, on behalf of the Constructor, of certain use/charges from the final users of the project. Furthermore, the State can pay off the agreed price by paying rent to the private Constructor. This occurs in cases where the State assigns to the Constructor the construction of the project and the Constructor then rents out the specific construction to the State.

RELATIONSHIP WITH EU PUBLIC PROCUREMENT DIRECTIVES

The European Union legislated, in 2005, on the issue of Public Procurement in the form of EU Directive 2004/17 (on coordinating the procurement procedures of entities operating in water, energy, transport and postal services) and EU Directive 2004/18 (on coordination of procedures for the award of public work contracts, public supply contracts and public services contracts). Law 3389/2005 has adopted procedures similar to those of the Directives in relation to the awarding of the public works and services. All three documents provide for open, restricted and negotiated procedures (with the former and latter also providing for a competitive dialogue procedure). In each case, a publication of a call for tenders is published which sets out the needs and requirements of the specific project.

RECENT EXAMPLES OF PROJECTS WHICH ARE TO BE IMPLEMENTED UNDER THE LAW 3389/2005

Recent examples of PPP’s which are to be implemented under the provisions of law 3389/2005 in Greece are:

• Construction of underground parking stations
• Construction of schools in Peloponnesus, Crete, North and South Aegean
• Construction of buildings for the Police Administration
• Construction of halls of residence for the students of ”Dimokritio University of Thrace”
• Construction of a drainage system in the municipality of Rafina in Athens
• Technical Management of the ”Army Academy of Evelpidon”
• Prototype Center for flight simulation
• Creation of an Administration Center in the Prefecture of Achaia
• Construction of a children’s General Hospital in Thessalonica
• Construction and preservation of seven fire brigade stations
• Construction of two court buildings in Athens
• Management of the building infrastructure of the Greek Police Station
• Construction of administrative park in Alexandropoulis

CRITICISM OF THE IMPLEMENTATION OF LAW 3389/2005 IN GREECE

Although Greece has taken advantage of Law 3389/2005 by making use of the PPP procedure in works covering a wide range of areas including educational institutions, the health and transportation sector, as well as administrative institutions, it must be underlined that so far no PPP project has been completed.

CONCLUSION

PPPs have a lot to offer the national economy in so far as they constitute a new model of public- private collaboration. This allows for a balance between the public and private sector allowing all parties to have an equal portion of the Public-Private Partnership pie.

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