22 february 2007 analysis of european road organization and infrastructure funding cedr conference...
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22 February 2007
Analysis of European road organization and infrastructure funding
CEDR Conference of European Directors of Roads
Paris, 22 February 2007
22 February 2007
Topics
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
22 February 2007
Road ownershipIn most countries, the road network is owned by public authorities.
However, in Italy, the ownership of 5.593 km of the main road network belongs to a private entity.
→ The questionnaires are not complete. More in-depth knowledge regarding the CEDR members’ current and future policy about the ownership of their road network is desirable.
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
22 February 2007
Mandates 1The questionnaire does not define the concept of “mandate”. Usually it includes the power to amend legislation. However, here it seems to indicate who is in charge of a certain activity.
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Ministry State authority /administration
Local authority /administration
Other public authority /administration
Public - private agency /corporation
Private agency / corporation
Legislation Administration Contract agreement Other
Bases of mandates
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
The mandates given to public authorities are mostly based on legislation and the mandate of a ministry mostly cover issues related to funding and financing and investments.
22 February 2007
Mandates 2The mandates given to the administration, public-private or private entities mostly cover issues related to maintenance, investments and traffic operations.
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Ministry State authority /administration
Local authority /administration
Other public authority /administration
Public - private agency /corporation
Private agency / corporation
maintenance investments traffic operations funding and financing
Issues covered by mandates
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
→ Regarding mandates, it is advisable to investigate deeper whether CEDR members have legislation dedicated to PPP and/or concessions. If so, which subjects are covered by these laws and regulations?
22 February 2007
Operation of road network (1)
Traffic operations/traffic (94%) management, network planning (74%) and capital investment planning (63%) are performed most by the road authority.
Rehabilitation/construction (97%), project design (80%), periodic maintenance (73%) and daily maintenance (68%) are performed mostly by (public-)private entities.
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20%
30%
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50%
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Network planning Project design Daily maintenance Periodicmaintenance
Rehabilitation /reconstruction
Project (capitalinvestment)
planning
Project (capitalinvestment) design
Traffic operations /traffic
management
Other
Road authority Competitive tendering Delegated management
Division of road work
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
22 February 2007
Operation of road network (2)The activities performed by public-private or private entities are procured mostly by competitive tendering.
Procurement methods/contracts are to a large extent different per country. But most contracts are performance/output based. This means that the contractor is free to use its own materials/methods to reach the quality levels set by the contract.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Network planning Project design Daily maintenance Periodicmaintenance
Rehabilitation /reconstruction
Project (capitalinvestment)
planning
Project (capitalinvestment) design
Traffic operations /traffic
management
Other
Road authority Competitive tendering Delegated management
Division of road work
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
22 February 2007
Supervisory AuthoritiesIn most countries directorates/departments of the central governmental administration supervise the road network.
In Austria, Italy, Iceland and Hungary, however, independent public organizations are dedicated to supervising the road network.
→ Further inquiries regarding the scope of the supervision activities could provide new learning experiences.
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
22 February 2007
PPP in infrastructure projects• Countries in which PPP is used most frequently:France (concessions for real toll motorways): Italy (concessions/general contractor schemes); Spain (concessions for (shadow) toll roads); Portugal (shadow toll concessions); and the UK (concession, DBFM(O) (Portugal and the UK did not complete a questionnaire)).
• Countries where interesting projects are on the way: Austria (concession/DBFMO); Greece (concessions).
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
22 February 2007
Scope of PPPThe questionnaires did not provide detailed information as to the scope of PPP.
→ Although we may conclude that for PPP a concession based scheme is leading, we need more information regarding the scope of the different PPP’s (i.e. which activities fall under PPP).
→ Profounder knowledge is possible if information is gathered regarding the reasons why CEDR members do or do not include the “O” (operation) in an infrastructure PPP.
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
22 February 2007
Scope PPP / Outsourcing
As mentioned, the extent to which the countries operate their road networks themselves or outsource activities, differs significantly.
→ Further research requires information regarding the road management policy in the CEDR countries. In other words, which activities the state performs itself and which not?
Self Outsource
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
This chart demonstrates an approach to scale the degree in which countries take care of various road related activities themselves (The Road Authority) or outsource that (to Private Enterprises).
22 February 2007
Basic Principles for using PPP (1)Making systematic use of business economic tools assessing the value for money of PPP’s is still a limited practice in Europe.
The UK and the Netherlands use a PPC (Public Private Comparator) and a PSC (Public Sector Comparator) to demonstrate the potential merits of a PPP project.
In other European countries, the choice between traditional public options and PPP’s for the development of transport infrastructures is often based on more practical considerations with a variable degree of public consultation.
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
22 February 2007
Basic Principles for using PPP (2)The questionnaires do not provide information regarding the principles for using PPP. Although we know that some countries started to use benchmark methods, for example:• France: a specialized body, whose main role is to carry out a prior evaluation for the public sector;• Portugal: a special team of the Ministry of Finance, dedicated to analyze and compare the advantages of the proposed PPP methods over alternative methods of funding. A clear benefit has to be shown for using PPP.→ Deepening the knowledge regarding the basic principles underlying the choice for PPP in the different countries is advisable.
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
22 February 2007
Asset value calculationReplacement value, depreciated investment costs and original investment costs are the asset value calculation methods used most.
Market value is not used. It appears that the calculation method severely affects the calculated asset value.
→ What is the relationship between the duration of PPP contracts and the choice for an asset value calculation method in the CEDR countries?
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Depreciated investment costs Original investment costs Replacement value Book value of assets
Asset value calculation methods
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
22 February 2007
Methods of fundingAll countries use their state budget for at least part of their road funding, except for Austria.
General and earmarked taxes are the funding methods used most.
6 countries charge toll fees and 3 countries use vignettes.→ which % of PPP funding is public and which % is private?→ In case of public funding, how is this brought into the project?
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FIN IT
SL
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AU
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WA
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FR
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GE
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SP
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HU
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GR
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LIT
Taxes Other
Methods of funding
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
22 February 2007
Road fundsRoad funds are designed to address inadequate levels of funding for road construction and maintenance in the form of a dedicated income stream. They ensure that the funding of infrastructure projects is not subjected to political decision making for each individual project.
→ The questionnaire did not provide information as to whether CEDR members have such ring-fenced income streams and if so, in which way these funds are financed?
→ What is the relationship between the method of funding and the use of PPP?
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
22 February 2007
Future developmentsDevelopments concern the extension of the road network and a shift in the ownership of the road network mostly.
→ What extension % foresees each CEDR member for the coming 20 years?
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Extention road network Shift of ownership Toll No
Future developments
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
→ Regarding pricing policy, do countries consider tolls or a (nation-wide) kilometer charge? In case of the latter, is this seen as general income stream or is this a traffic management tool?
22 February 2007
Conclusions• PPP is an umbrella term for different contractual arrangements;
•PPP is developing with substantial road programs coming on stream - such as the German A-model roads, the Austrian Ostregion road projects and Spanish regional roads, by value 60% of the whole market;
• Concession based schemes are used most frequently;
• States are developing structures which suit their own environment - being everything from the legal framework, public expectations to commercial practice;
• This variation may result in entry barriers for foreign competitors.
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
22 February 2007
Further Actions• In this presentation, we formulated several additional questions that could provide the CEDR members with learning opportunities regarding the different PPP policies in their countries;
• Some additional questions for countries individually. (Presented on a separate form);
• Other themes to be investigated? For example: step-in arrangements, rules for sub-contracting.
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments
22 February 2007
Brussels …Besides the mutual learning experience the questionnaires also provide guidance as to the themes CEDR could promote in Brussels, for example:
• Common European rules on concessions;• Relationship European road pricing and local PPP’s;• Other themes?
1. Road governance
2. PPP developments
3. Asset value calculation
4. Funding and financing
5. Future developments