POLICY OF THE CZECH REPUBLIC PUBLIC PRIVATE PARTNERSHIP

PRESENTATION FOR THE LONDON PRIVATE PANEL

7. OCTOBER 2003

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TIMETABLE

7 8 9 10 11 12 1 2 3 4 5 6 7

2003 2004

Final report to Minister of Finance

Legislative preparation

PHASE 1 – IMPLEMENTATION STRATEGY

PHASE 1 – IMPLEMENTATION STRATEGY

PHASE 2 – APPROVAL BY GOVERNMENT

PHASE 2 – APPROVAL BY GOVERNMENT

Action plan

PHASE 3 – OPERATIONAL RULES AND LEGISLATION

PHASE 3 – OPERATIONAL RULES AND LEGISLATION Implementation of steps

independent on legislation

PHASE 4 - IMPLEMENTATION

PHASE 4 - IMPLEMENTATION

Set up of the TEAM

Legal analyses

Preparation of the implementation strategy

Amendments and comments

Communication with stakeholders

Optimisation in relation to new budget rules

Inside government workshop on PPP

Implementation of steps dependent on legislation

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TEAM AND ORGANIZATION

PROJECT STEERING COMMEETEE

• Jiří Volf (MFCR)• Jan Juchelka (NPF)• Kateřina Helikarová (MFCR)• Filip Drapák (NPF)

PROJECT MANAGEMENT• Methodology and regulation

(MFCR )• Implementation (FNM CR)

Legal counsel and legislators

Allen Overy

Communication to public• Petra Krainová (FNM)

Team of professional support-Partnerships UK-IPFA-WB

• Project overall management (organization, time, planning)

• Supervision of the performance of project management teams and team of solution providers, feedback on the key conclusions

• Providing key decisions and solutions • Provide feedback to advisors and to

third party stakeholders

• Manage daily the project• Lead analytical and methodical teams• Identify problems and solutions• Submit recommendation to Steering

committee

• Communication plan• Legal support

TEAM OF SOLUTION PROVIDERS (MINISTERIES)

• Co-ordinate the PPP taskforce among public administration bodies

• To evaluate and approve documents submitted by Steering Committee

• Ensure amendments and comments by the government offices

Communication to private sector

• Information and communication support– International

experience– Recommendations

by private sector

• Conference calls • Papers• Training

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WORK PLAN FOR THE PHASE 1 (AUGUST)

Setting up the team• Steering Committee• Press announcement (MFCR a NPF)• Opening of WEB side• Letter by Minister of Finance• Setting up the team of solution providers

Organizational set up• Building private sector contacts• Legal and legislative counsel • Building the contact list• Specific timetables • Planning of the tasks and deliveries

Preparation of implementation strategy• Legal analyses• Policy for Czech republic

• Regulation and methodology• Institutional set up• Analyses of private sector opinions,

recommendations and analyses• Identification of pilot projects• Manual for PPP task force set up on

Ministries• Analyses of the deal flow, bottle necks

and approval processes

TASKS 27 28 29 30 31

JULY

2 3 1413121110987654

AUGUST

15 16 17 18 2625242322212019 292827 31301262524

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Preparation of the policy

• Legal analyses

• Policy framework paper

• Reccommendation on legislative changes

• Regulation

• Institutional set up of PPP

• Analyses of private sector recommendations

• Pilot projects analyses

• Analyses of PPP transactions and teams on relevant public bodies

• PPP processes and approvals – model for Czech republic

• Paper for the government

TASKS 2 3 1413121110987654

SEPTEMBER

15 16 17 18 2625242322212019 292827 31301

Training PUK UK

WORK PLAN FOR THE PHASE 1 (SEPTEMBER)

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Amendments and discussions on PPP policy

• Approval within Ministry of Finance

• Decision by the Ministry of Finance

• Comments by the interministrial PPP group

• External amendments procedure

• Discussions with private sector– Private PPP panel in London– Private PPP panel in Prague

• Publlic PPP panel in Prague

• Final amendments to the Policy

• Policy being delivered to the Czech government

TASKS 2 3 1413121110987654

OCTOBER

15 16 17 18 2625242322212019 292827 31301

WORK PLAN FOR THE PHASE 1 (OCTOBER)

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POLICY DRAFT

 

 THIS POLICY PAPER HAS NOT BEEN APPROVED BY THE GOVERNMENT AND IS FOR THE DISCUSSION WITH THE PRIVATE AS WELL AS PUBLIC STAKEHOLDERS.

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WHAT SHOULD PUBLIC PRIVATE PARTNERSHIP BRING TO CZECH REPUBLIC (Introduction to the Policy)

Real financial benefit and a better utilisation and allocation of public funds;

Development of efficient public infrastructures in shorter terms than otherwise;

Ensure of good quality public services;

Economic growth and boosted direct international investments by giving Incentives to private investment in public infrastructure and public services;

Efficient control over the formation of long-term private sector liabilities;

Limitation of negative impact of non-systematic execution of PPP projects;

Increased possibility of drawing on EU funds by a higher co-financing share taken by the private sector in projects of public interest.

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SUPPORT TO PPP

It is the Czech Government's policy to support the introduction and application of PPP anywhere that can bring any advantages to the public sector in the provision of public services and infrastructure,

both at the level of the central government and in regions.

In respect of PPP, the Government acts in the capacity of a partner and a customer of the private sector while purchasing services from it.

The private sector would provide public infrastructure (services) at its own cost and the Government, in the capacity of its client, would pay

regular fee in exchange for such investment until the expiration of their PPP-based contract(s).

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PRECONDITIONS FOR PPP APPLICATION (A)

 The introduction of PPP is conditioned by its programme and systematic

application that makes known the PPP fiscal concept and that guarantees compliance with (inter alia) the following fundamental principles set out by the Czech Government: (a)       Value for Money – It is the main requirement that the resulting economic value of a PPP project should be lower than if implemented in a traditional manner of public sector funding. Since PPP represents a long-term and comprehensive concept, the total resulting economic value should also be viewed in a comprehensive manner (total costs of the public sector and opportunity costs) rather than solely from the sum of the cash payable from public budgets. The total economic value of a PPP project must be determined prior to launching the relevant PPP tender. (b)      Risk Transfer – That party best capable of managing risk should be that party to bear it; any material risks should be transferred to the private sector. 

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PRECONDITIONS FOR PPP APPLICATION (B)

  (c)       Specification of Public Service Standards – The public sector in the capacity of a client must define standards applicable to public services, both in order to guarantee optimum public services and taking into account the economics of such standards. (d)      Maintenance of Public Assets Value – Since public assets would not be usually transferred to the PPP operator or they should come back to the public sector upon the expiration of the contract, it is essential to define clearly the relevant rules applicable to the maintenance of the value of such public assets managed by the private sector under PPP contracts (as a rule, 5-60 years). (e)       Ensuring Innovation and Competition – PPP contracts must not result in a monopoly of a single contractor; rather, PPP should manage competition so that it brings about utmost innovations in the given public service.

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GENERAL REVIEW OF PPP FEASIBILITY

 The Government expects the public sector to take into consideration PPP when assessing its investment goals.

 The Government expects UNIVERSAL CONSIDERATION not UNIVERSAL TESTING.

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AUTHORITY

 

 The Government wishes to declare that the authority to decide on a PPP application, the determination of any expected outcome of PPP projects in the form of public services, and their implementation, will remain with the relevant state administration and self-administration bodies (the "Beneficiary") in charge of the provision of the public services or infrastructure in question. The Ministry of Finance would set up a body to manage PPP implementation (the "PPP Centre").

It is the Government's intention that the PPP Centre should assist the Beneficiaries in the implementation of their PPP projects.

The Government further expects all components of the public sector to draw on resources available at the PPP Centre when implementing PPP.

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EXPERT BACKING AND COSTS

          The Ministry of Finance would ensure that the PPP Centre should draft certain standard PPP procedure and provide a methodology support to individual PPP Beneficiaries.

The Government appreciates that PPP would require higher transactional costs at its outset than in the event of standard tenders but it is convinced that such higher costs would be more than balanced by the advantages from implemented PPP projects.

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STATE REGULATION

The Government would propose that any mandatory disbursements on account of future budgets in excess of certain limits should be subjected to an approval by the Ministry of Finance in respect of all components of the public sector.

The Ministry of Finance has been requested to draft a methodology serving the assessment and approval of PPP, as well as the approval of launching preparatory work for specific PPP projects. The Ministry of Finance, having been requested to define unequivocally the scope of PPP projects to be subjected to regulation, provided: 

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PPP DEFINITION

 Those contracts between the public and private sectors will be considered PPP if they would bind the private sector to supply and/or operate public services or infrastructure projects that have typically been the realm of the public sector. They will mainly be projects or services that meet any of the following features:

1) Shared responsibility for the supply of infrastructures or services

whereby the private sector accepts higher risk, typically combining the design, construction, funding, management and maintenance elements.

 2) A long-term commitment (at least 3 years) by the private sector to

provide good quality public services defined by the public sector.

3) Shared expertise and capabilities by the private and public sectors so that the public sector may optimise the exposure and guarantee a higher value of public expenditure application, mainly while making use of qualities inherent to the private sector in the technical, financial, management, and innovation fields.

 

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PAYMENTS BY CUSTOMERS

The Government is aware that certain public infrastructure projects could not be implemented without the introduction of payments for such infrastructure use (e.g., toll paid for crossing a specific bridge).

The Government wishes to declare that currently no introduction of such specific payments has been considered.

If it should be introduced in future it will be preceded by careful assessments and consideration of any social and economic effects.

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TRANSPARENT IDENTIFICATION OF PRIVATE PARTNERS

 The Government expects PPP contracts to be executed in compliance with the rules in force in the Czech Republic and the European Union, and that the associated processes will be both transparent and just.

The Government is aware of the specific and exacting manner of identification of PPP partners and execution of PPP contracts.

Therefore, it will support flexibility on the part of the Beneficiaries subject to compliance with the above-described criteria.

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REQUIRED LEGISLATIVE CHANGES

 The Government is prepared to support certain amendments to the legislation required in order to facilitate PPP implementation. Also, the Government will strive to adopt amendments to the legislation required for the protection of the public sector against risks of indiscriminate application of PPP.

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LEGISLATIVE ENVIRONMENT

1) Scope of authority

2) Fiscal regulation

3) Transactions involving public property

4) Public procurement

5) Concession agreements

6) Clarity of cash flows

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SCOPE OF AUTHORITY / FISCAL REGULATION

• Uncertainty regarding authority of public bodies to delegate rights /

responsibilities

• Uncertainty regarding the avoidance of budget - approval rules by way of

indirect creation of future liabilities

• Recommended clear authorisation subject to approval by Ministry of Finance

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LIMITATIONS IN TRANSACTIONS WITH PUBLIC PROPERTY

• Very limited disposal, acquisition and leasing at state level

• Pledges and guarantees by state prohibited

• Some limitations on regions and municipalities

• Recommended relaxation of the rules, subject to approval by Ministry of

Finance.

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PUBLIC PROCUREMENT

• EU - compliant legislation underway

• No room for negotiated approach

• No exemptions for public works concessions

• Recommended inclusion of all options available under EU Directives

(including the new Directives)

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CONCESSION AGREEMENTS

• New concept to Czech law

• Recommended:– Open approach (no “list of approved types of concessions”)– Court jurisdiction– Limited right of rescission on the grounds of public interest

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CASH FLOWS

• Payments by users will in most cases require special law

• Specific projects may require adjustment to rules of cash flow

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Ladies and gentlemen, thank you for your attention

Ladies and gentlemen, thank you for your attention