PPPs and Public Works - Grazia Sgarra, Giovanni Coletta, Giovanni Rizzo, Italy

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PPPs and Public Works

The standardisation of build-and-operate Concession contract

&

the Monitoring System of Public Works in Italy

The activities of the WG on PPPs

Grazia Sgarra - Coordinator of the WG on PPPs

Giovanni Coletta and Giovanni Rizzo – Members of the WG on PPPs

Ministry of the Economy and Finance – State General Accounting Department (RGS)

Agenda

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The draft of a standardized PPP contract

- Main purpose and essential features

The new Monitoring System of Public works in Italy (MOP)

The data set on PPPs

All these things are connected!

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Annual Meeting of Senior Infrastructure and PPP Officials – Paris, 1 March 2016

The Standard Model Agreement

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What type of contracts has been standardized?

- Build-and-operate Concession contract with a SPV

- PPP infrastructure projects mainly intended for the

direct use by the PA

What are the key objectives pursued by the WG?

The usual goals plus…

- the consultation with all stakeholders

(http://www.mef.gov.it/focus/article_0017.html)

- the control of public finances

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http://www.mef.gov.it/focus/article_0017.html













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PPPs from a public finance point of view

ON/OFF GOVERNMENT BALANCE SHEET

(% distribution)

The total value of the on-balance-sheet transactions is € 5.7 billion.

The total value of the 7 off-balance-sheet infrastructures is €500 million.

Source: Italian National Statistical Institute


24%

76%

Off On

Providing a reference tool to be used by both public and

private agents in order to ensure a proper allocation of risks

between parties.

The Main objective of the Standard Model Agreement

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5 Annual Meeting of Senior Infrastructure and PPP Officials – Paris, 1 March 2016

The Standard Model Agreement

a composite structure

ANNEXES

CONTRACTUAL DOCUMENTS

DEFINITIONS

RISK MATRIX

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Document Structure

RISK MATRIX - AN EXTRACT

RISK OF DEMAND

Risk related to changes in demand for services, not dependent on the quantity and quality of the service provided by the private partner.

Specific type of risk

Descrizione Effects Allocation to public subject

Allocation to private

subject

Not allocat

ed

Main references in the

convention

Risk of declining demand

Risk of a contraction in demand in the case of premium-rate services on the user/business

Decrease in revenues

X

Art. 15.1, paragraph 2

Art.23

Risk of offer

Risk that arises a competitive offer of other operators

Decrease in revenues

X

Art.15.1, paragraph 2

Art. 23

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This report has been prepared in order to provide a guideline for public and private operators, to the reading of the highlights of the Articles, and to explain the rationale of the choices made by the WG in the development of the articulated same.

Document Structure

EXPLANATORY REPORT CHAPTER 3: EXPLANATORY REPORT

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MAIN FEATURES OF THE STANDARDIZED CONTRACT

Provide a clear system of rules on parties’ obligations, responsibilities and benefits;

Identify the Concessionaire with a special purpose vehicle (SPV), a private entity;

Specify conditions and indicators ensuring Economic and Financial Equilibrium. The rebalancing hypothesis is strictly limited;

Regulate the Management phase;

List the items to be quantified in case of termination of Contract, due to a “pathological” contractual relationship

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- Meeting deadlines, starting from

the planning

- Penalty for delays, but also

incentives for recovery

- Certainty on the availability of

resources

- Automatic reductions of availability fees and

structured system of penalties

OBLIGATIONS OF THE CONCESSIONAIRE

Designing Construction

Management

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Service’s requirements


TYPE OF SERVICES DESCRIPTION AND CHARACTERISTICS REFERENCE DOCUMENT

DISC

IPLIN

AR

Y O

F MA

NA

GEM

ENT

SERVICES RELATED TO THE AVAILABILITY OF THE ASSET (Planned maintenance, energy service, etc.)

Services to be performed respecting precise levels of performance (optimum and minimum).

Scheduled automatic deduction of the Availability Fee in proportion to the reduction in the level of performance, from a optimal level to the minimum level.

Below the minimum level are applied penalties and if the breach persists, can get to the resolution of the concession.

TECHNICAL

MANAGEMENT SPECIFICATIONS

ADDITIONAL SERVICES IN CONNECTION WITH THE AVAILABILITY (laundry, canteen, etc.)

These are services that can even be managed separately from the construction and management concession contract.

The amount of the remuneration is predetermined and the fee is paid only at the achievement of the optimum level of performance. If the service provided does not reach that level, penalties are applied.

TECHNICAL MANAGEMENT SPECIFICATIONS

TARIFF SERVICES. (parking)

These are services that may be subject to tariff and as such included in the Economic and Financial Plan.

TECHNICAL RATE SERVICE

SPECIFICATIONS

COMMERCIAL SERVICES (bar, refreshments, etc.)

Normally these services are not paid by the Grantor (but leased to third parties) and subject to demand risk.

TECHNICAL COMMERCIAL

SERVICE SPECIFICATIONS

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Authorizations Controls Payments

PECUNIARY OBLIGATIONS OF THE GRANTOR

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1 Certainty in the availability of resources


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THE NEW

MONITORING SYSTEM OF PUBLIC WORKS IN ITALY

The Ministry of Economy and Finance launched a new monitoring system (MOP) in October 2014. This system is aimed at collecting and prospecting detailed data on all public works in Italy. The collection of data is part of a whole mechanism designed in Legislative decrees 228/2011 and 229/2011.

Evaluate

Public Accounts

Monitoring System

Plan


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THE NEW


The goal is to collect data from any subject in charge of a public work in Italy. Hence, we deal with about 10.000 users, ranging from big entities (e.g. ANAS, RFI) to little municipalities.

# Users 9.560

# Public works 97.157

Value € 154.995mln Last update 24/02/2016


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THE NEW


The dataset is growing and the Italian NSI (ISTAT) is exploring a subset of data to use the system as a potential source in the estimation of investment of local municipalities according to the accrual principle.


Financial close

Analisys of risks

Feasibility study

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1 The system integrates data from several sources (payments, public tenders, ect.) in order to minimize the administrative burden on monitored subjects and guarantee coherence between databases. The current dataset will be implemented within the year with a specific set of data for PPPs.

Financement

Payments

Timing

Total cost

Current dataset

Specific PPPs


THE DATA SET ON PPPS

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Feasibility

study

The PPPs dataset is designed to collect data from the beginning to the phase of management of the Public Work.

Collecting standard data will help detecting crucial information about on-off balance classification of operations.

Choose

partner

Subscribe

contract Build Release

Management

phase



Ris

ks

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1 Allocation of risks is a multidimensional variable, we will collect data all along the lifecycle of the PPP in order to insure transparency and guarantee the correct classification of the operation.

Construction

Demand

Availability

Other

Feasibility

study Contract Financial

close

Management

phase



EXPECTED RESULTS

Standard

PPP

contract

Monitor

PPPs

Evaluate &

Decide


Thank you very much!


PPPs and Public Works - Grazia Sgarra, Giovanni Coletta, Giovanni Rizzo, Italy

Government & Nonprofit