possibilities to implement ppp within the operational programme enterprise … · 2012-02-14 ·...
TRANSCRIPT
Possibilities to implement PPP
within the Operational Programme
Enterprise and Innovations 2007 – 2013
(Final Report)
2
Contents
Contents ..................................................................................................................................................... 2
1. Executive summary – abbreviated version of the Methodology ....................................................... 6
1.1. Introduction – summary of the commissioned analysis ............................................................ 6
1.2. Analysis of PPP issues ................................................................................................................. 7
1.3. Specific issues related to state aid ............................................................................................. 8
1.4. Reasons to combine PPP methods and financing from OPEI ..................................................... 8
1.5. Risks and obstacles of combinations of PPP with OPEI financing .............................................. 9
1.6. Analysis and evaluation of PPP principles application within the framework of OPEI ............ 10
1.7. General recommendations and model example ...................................................................... 10
1.8. Market survey ........................................................................................................................... 11
1.9. Recommendations.................................................................................................................... 11
1.9.1. Recommendations for the current programming period ................................................ 11
1.9.2. Recommendations for the next programming period ..................................................... 12
2. List of Definitions and Abbreviations ............................................................................................... 13
3. Introduction ...................................................................................................................................... 16
3.1. Theme of the Methodology, context ....................................................................................... 16
3.2. Summary of the commissioned analysis and its accurate definition ....................................... 17
3.2.1. Specific model of a science and technology park, innovations center, business incubator
or an R&D center under OPR&DI ..................................................................................................... 19
3.2.2. Subject of the commissioned analysis in relation to the specific model of an Innovations
center 21
4. PPP – analysis of the current regulation .......................................................................................... 22
4.1. Regulation and concept of PPP in the European and national legal and extra-legal framework
22
4.1.1. PPP – concept, definition ................................................................................................. 22
3
4.1.2. Types of PPP ..................................................................................................................... 23
4.1.2.1. PPP in the broader and the narrower sense (concession) ........................................... 23
4.1.2.2. Distinguishing between contractual and institutional PPP .......................................... 24
4.1.2.3. Types of PPP according to their content ...................................................................... 25
4.1.3. Types of payment mechanisms within the framework of PPP ......................................... 27
4.1.3.1. Payment for concession ............................................................................................... 27
4.1.3.2. Accessibility payment ................................................................................................... 28
4.1.4. Advantages and disadvantages (obstacles) of the PPP ................................................... 29
4.1.4.1. Advantages of the PPP ................................................................................................. 29
4.1.4.2. Disadvantages and obstacles related to PPP ................................................................ 32
4.1.5. European regulation of PPP.............................................................................................. 34
4.1.5.1. Fundamental sources of regulation ............................................................................. 35
4.1.5.2. Implementing regulation .............................................................................................. 35
4.1.5.3. Soft law ......................................................................................................................... 35
4.1.6. National regulation of PPP ............................................................................................... 36
4.1.7. Regulation of concessions under Czech law ..................................................................... 37
4.1.8. Typical stages of a PPP project: ........................................................................................ 40
4.1.9. Legislative outlook with respect to the Czech law ........................................................... 45
4.1.10. Current development of situation in PPP in the Czech Republic ..................................... 45
4.1.10.1. Pilot and other significant projects .............................................................................. 46
4.1.10.2. Concession contracts deposited with the Register of Concession Contracts (RCC) .... 47
5. Selected issues related to stat aid – situation which do not constitute state aid............................ 50
5.1. Aid granted in accordance with Community framework ......................................................... 50
5.2. Compensation payments .......................................................................................................... 51
5.2.1. Altmark decision - situations which do not constitute state aid ...................................... 52
5.2.2. Decision on compensation payments – exemption from notification duty ..................... 53
5.2.3. Community framework of public service compensation ................................................. 53
5.3. Private investor principle (private creditor) ............................................................................. 54
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5.4. Public assets sales..................................................................................................................... 54
6. Reasons to combine PPP and funding from OPEI (or a similar operational programme in the next
programming period) and the possibilities of support of PPP projects under OPEI ................................ 56
6.1. Risks and obstacles of combination of PPP project with funding from OPEI ........................... 58
6.1.1. Scheduling, organization and technical problems............................................................ 58
6.1.2. State aid ............................................................................................................................ 59
6.1.3. Issues related to revenue-generating projects in accordance with Article 55 of
Regulation 1083/2006/EC ................................................................................................................ 61
6.1.3.1. PPP project or a quasi-PPP project with payment by end users directly to the public
partner based purely on accessibility payment provided to the private partner ............................ 64
6.1.3.2. PPP project with end user payments to private partner based purely on accessibility
payment to the private partner ....................................................................................................... 66
6.1.3.3. PPP projects with end users payment to private partner based on concession
payment (“profitable projects”) ....................................................................................................... 69
6.1.4. Issues relating to the integration of the concession proceedings with OPEI application 73
6.1.4.1. Model concession proceedings followed by application for support ......................... 75
6.1.4.2. Model application for support first, then concession proceedings ............................. 76
6.1.4.3. Potential synchronicity of both processes ................................................................... 77
6.1.5. Sustainability and compliance with other OPEI terms ..................................................... 83
6.1.6. Impact of legislative amendments, considerations de lege ferenda ................................ 85
6.1.7. Situation on the Czech aid ‘market’ (OPEI, OPR&DI, OPEC) in relation to a typical
solution of economics of Innovations center ................................................................................... 86
6.1.8. Current development in the area of PPP in the Czech Republic ...................................... 86
6.2. Analysis and evaluation of the application of PPP principles within the framework of OPEI to
date 87
6.3. General recommendations and Model example ..................................................................... 94
6.3.1. General description .......................................................................................................... 94
6.3.2. Points for the Call within PROSPERITY programme ......................................................... 96
6.3.3. Consultations and potential notifications of the Call ....................................................... 97
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6.3.4. Evaluation of the obstacles in relation to the model example ........................................ 98
6.4. Market survey ........................................................................................................................... 99
6.4.1. Methodology of the survey .............................................................................................. 99
6.4.2. Evaluating the survey ..................................................................................................... 100
6.4.3. Analysis of reasons for lack of interest on the market ................................................... 104
7. Recommendations.......................................................................................................................... 106
7.1. Recommendations for the current programming period: ..................................................... 106
7.2. Recommendations for the next programming period ........................................................... 106
8. Conclusion ...................................................................................................................................... 108
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1. Executive summary – abbreviated version of the Methodology
1.1. Introduction – summary of the commissioned analysis
This Methodology is concerned with analysis of the potential combinations of PPP and financing from
OPEI, including analysis of the existing obstacles of such combination and the verification of absorption
capacity for support of the PPP projects from z OPEI.
Within the framework of the commissioned analysis and its more exact specifications, the elaborators
focused on the model example of a PPP project co-funded from OPEI which is based on:
adaptation of an existing R&D Center with facility management outsourced to a
private partner; or
completion of an existing R&D Center with facility management outsourced to a
private partner; or
development of a new science and technology park, innovations center, business
incubator with facility management outsourced to a private partner.
These models always count on a private partner taking over the administration / management of the
innovations center, which should lead to improved efficiency of its operations and improvement
quality of the services provided to the end users of the given support.
With regard to these models the elaborators of the Methodology were commission to:
analyse obstacles and risk of the model itself;
survey of interest on the market for the given model;
formulate recommendations in connection with OPEI.
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1.2. Analysis of PPP issues
One of the significant chapters of this Methodology is a broader discussion of the selected aspects of
PPP, which are related to the analysed theme, and contained in Chapter 4 hereof.
Chapter 4 deals primarily with:
explanation of the PPP definition and its relatively broad interpretation in the Green
Paper and other relevant documents;
analysis of the basic types of PPP, namely of:
o PPP in its broader and narrower sense;
o PPP as a contractual or institutional instrument;
Survey of the basic types of PPP projects according to the contents of the
implemented activities by the private partner;
discussion of general advantages a disadvantages (obstacles) of PPP;
description of the basic payment mechanisms within PPP projects, i.e.:
o concession payments, and
o accessibility payments;
analysis of the national and European regulation of PPP, both within the compass of
the Czech EU legislation, as well as in the relevant case law and soft law;
description of the PPP situation in the Czech Republic, which is characterized by:
o low confidence and insufficient political support of the PPP;
o small number of implemented project, mostly on the regional level;
o hitherto profiling of PPP projects, which are implemented in other sectors than
those supported under OPEI;
o a number of cancelled or not implemented pilot projects, which increases the
general lack of confidence in the PPP projects;
discussion of the basic phases of PPP projects according to the national regulation.
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1.3. Specific issues related to state aid
Chapter 5 of this Methodology contains a brief analysis of the selected intervention sectors, which
includes justification of the significance of the given issues to the analysed theme. Discussed are
primarily those situations when these are not considered to constitute state aid, in accordance with
European legislation and soft law, even though the distinctive attributes of state aid have been
seemingly fulfilled.
The subject of the analysis is:
mode of provision of subsidy outside the framework of state aid in compliance with
Community framework;
issues related to compensations granted;
principles of private investor;
issues related to sales of public assets.
1.4. Reasons to combine PPP methods and financing from OPEI
Chapter 6 explains the reasons why consider combinations of PPP and financing from OPEI. These
reasons include:
PPP = partnership and/or cooperation of the private and public sectors which, by its
very nature, fulfil goals of some of the OPEI priority axes (namely the indirect,
mediated support of the business sector);
PPP almost always leads, thanks to the synergy of the private and public potential, to
improved support and development of business, which allows both the private and
public partners (from the viewpoint of the goals and focus of the OPEI) to receive
support (which is, from the viewpoint of PPP, often more appropriate);
PPP – entrusts a public service (a service of a fundamentally economic interest) to a
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private partner – often incorporates elements of needed improvement or innovation
of the existing operation; in material extent thus, to some degree, substantiates
application of support from OPEI;
PPP - the generally accentuated issue related to implementation are the relatively
higher initial costs for the preparatory phases of projects (consulting services,
feasibility studies, concession projects, management, which applies both to the public
partner and to the applicants), which the OPEI is able to partially resolve by suitable
subsidy policies applicable to public partners as well as to potential applicants;
PPP often excludes SMEs, thanks to the usual pre-sets of concession proceedings, due
to their lower economic strength (lower ability to obtain loan facilities) – a suitable
financial instrument within OPEI could, in marginal extent and under condition of strict
adherence to the requirements of anti-discrimination in concession proceedings,
provide the necessary comparative advantage to participate in the concession
proceedings, and thus to support a real chance to a successful partnership in a PPP
project, and to break the existing actual preference of larger enterprises, at least for
the smaller PPP projects.
1.5. Risks and obstacles of combinations of PPP with OPEI financing
Chapter 6.1 analyses the individual risks and obstacles to the financing of project in the form of PPP
combined with OPEI funding. The analyses already reflect the more exact specifications of the
Methodology, i.e. aims at the possibilities to fund PPP projects under within the PROSPERITY
programme.
The following risks and obstacles of PPP and OPEI funding combinations are considered:
Scheduling and organizationally-technical issues;
State aid;
Issues related to revenue-generating projects as set forth in Article 55 of the
Regulation 1083/2006/EC, and within this sphere the following models are discussed
in more detail:
o PPP project/quasi PPP project with end user payments going directly to public
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partner based entirely on accessibility payments going to the private partner;
o PPP project with end user payments going to the private partner based entirely on
accessibility payments going to the private partner;
o PPP projects with end user payments going to private partner on the basis of paid
concession payment (“profitable” projects);
Issues related to integration of the concession proceedings with OPEI application
process, where the following three basic models were considered:
o Model 1 – concession proceedings taking place prior to application for support;
o Model 2 – application support prior to concession proceedings;
o Potential synchronicity of both processes;
Sustainability and compliance with a other conditions under OPEI;
Impact of legislative amendments, considerations ‘de lege ferenda’;
Situation on the subsidies “market” in the Czech Republic (OPEI, OPR&DI, OPEC) in
relation to a typical solution of innovations center economy;
The actual developments of the PPP sphere in the Czech Republic.
1.6. Analysis and evaluation of PPP principles application within the
framework of OPEI
Chapter 6.2 contains a simple chart and text evaluation analysing application of PPP principles within
the framework of OPEI with a view to the possibilities offered by the programme. The elaborators of
the Methodology primarily accentuate the support offered to institutional forms of PPP within the
broader sense of the COOPERATION programme.
1.7. General recommendations and model example
Chapter 6.3 contains general recommendations yet without taking into account market survey and a
more detailed analysis of a model example.
This Chapter focuses primarily on:
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More detailed description of the model example;
Proposed fundamental theses for a potential Call with the PROSPERITY programme;
Recommendations for consultations or potential notification of such Call;
Assessment of obstacles in relation to the model example, primarily of:
o Obstacles related to state aid;
o Obstacles related to economic disadvantage of the private partners within the
framework of his chances to be recipient of support to cover potential operational
losses of the innovation center.
1.8. Market survey
Chapter 6.4 contains the results of the market survey conducted by the elaborators of the
Methodology.
The conducted market survey confirmed the insufficient absorption capacity for the support of PPP
projects from OPEI, and this conclusion is based on:
relatively low rate of return of the questionnaire;
the declared lack if interest for implementation of PPP projects in combination
with OPEI funding.
1.9. Recommendations
1.9.1. Recommendations for the current programming period
Chapter 7. 1 contains the recommendations arrived at by the elaborators of the Methodology:
not to implement, for the time being, specific Calls focused on support of PPP
projects, due to the discovered insufficient absorption capacity, and due to unrealistic
timely resolution of issues related to state aid, so that a Call with sufficiently long
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deadlines could be announced due to the specifics of PPP projects’ preparatory phases;
to consider, before the end of the current programming period, on the basis of
development of innovations centers under the PROSPERITY programme, to
announce a specific Call to support consulting, which could include consultations on
the possibilities of resolutions of existing problems centers within the PPP form. The
potential specifications of such Call should reflect the actual development of theses
centers and their current needs. A pre-requisite for the announcement of such Call is
sufficient absorption capacity and interest on the market. Its more detailed contents
cannot be, in the current situation, expounded upon, nor meaningful to speculate.
1.9.2. Recommendations for the next programming period
Chapter 7.2 contains recommendations for the next programming period:
to select such approach in drawing up of OP, which would allow the OP aimed at the
support of industry and innovations, to support innovative PPP projects, which will
profile those PPP projects which have a cross-section impact on more than one sector;
to continue in the support offered to the institutional partnerships in the sphere of
innovation (support clusters and other similar groupings);
to consider the possibility to support institutional forms of PPP in the financial
engineering sector – support to establishment of venture-capital funds to support
innovative activities of those entities that are active within the existing innovations
centers.
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2. List of Definitions and Abbreviations
Innovations center – a science-and-technology-park-type of center, innovations center, business
incubator, potentially, in marginal cases in the future also research and development-type of centers,
established under OPEI, if such is carried out within the framework of cooperation with business
sphere or, as the case may be, within the framework of technology transfers, such center expanded its
activities to innovations-related activities.
EIB – European Investment Bank
EIF – European Investment Fund
Facility management – administration and management of infrastructure entrusted by a public
partner to a private partner for the sake of providing public service
Institutional PPP – a form of PPP cooperation implemented through a subject with participation of a
private and a public partner (sometimes also denoted as an SPV – “special purpose vehicle”)
concession – legal relationship between a private and public partner, under which a provision of public
service is entrusted to the private partners who thus accepts the material portion of risk related to the
implementation of the said service
Commission – the European Commission
CA – Act No. 139/2006 Coll., on concession contracts and concession proceedings, as amended
CMF – Ministry of Finances of the Czech Republic
CMRD – Ministry for Regional Development of the Czech Republic
CMIT – Ministry of Industry and Trade the Czech Republic
SME – small and medium enterprises
1083/2006/EC - Council Regulation 1083/2006/EC laying down the general provisions on the ERDF, ESF
and the CF and repealing Regulation (EC) 1260/1999.
General Block Exemptions Regulation - Commission Regulation (EC) No 800/2008 of 6 August 2008
declaring certain categories of aid compatible with the common market in application of Articles 87
and 88 of the Treaty (General block exemption Regulation)
OPR&DI – Operational programme research and development for innovation
OPEI - operational programme enterprise and innovation
OPE – operational programme environment
OPIRC – Operational Programme Interregional Co-operation.
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Accessibility payment – payment made by public partner to private partner (concessionary) within the
concession in connection with implementation of a public service. Accessibility payment usually
comprises of a payment of investment provided by the concessionary and a payment covering
operational loss of the project along with a payment of a reasonable profit margin
Concession payment – payment made by the private partner to the public partner for the possibility to
implement public service and to collect fee from end users
PPP - Public Private Partnership, partnership of the private and the public sector which is characterised
long-term contractual relationship,
method of project financing (partially by the private partner),
significant participation of the economic operator, who participates in several
phases of the project (proposal, preparation, financing) while the public
partner focuses on the definition of goals and supervision of compliance with
the set goals,
distribution of risk – acceptance of risk by the private partner
PPP in the broader sense – all forms of cooperation, fulfilling at least in part the defining attributes of
PPP above the framework of concessions
PPP in the narrower sense – form of cooperation with PPP including primarily concessions
Community framework - Community framework for state aid for research and development and
innovation (2006/C 323/01, 30. 12. 2006)
Decision on Public Service Compensation - Commission Decision of 28 November 2005 on the
application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation
granted to certain undertakings entrusted with the operation of services of general economic interest
ECJ - The European Court of Justice (officially the Court of Justice)
TFEU - Treaty on the Functioning of the European Union
SPV - Special purpose vehicle, an entity established for a PPP project (usually with participation of both
partners) to implement a part or entire PPP project
Directive 17 – Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004
coordinating the procurement procedures of entities operating in the water, energy, transport and
postal services sectors
Directive 18 - Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004
on the coordination of procedures for the award of public works contracts, public supply contracts and
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public service contracts
Contractual PPP – partnership of the public and the private sector established on the basis of a
contract, usually concession contract
soft law – documents issued and published by the EU, which are not in the form of legally binding
regulation, but usually enjoy large authority and possess interpretive significance
structural funds – European Regional Development Fund (ERDF) and European Social Fund (ESF)
public/state aid – aid within the meaning of Article 107 at seq of the TFEU
compensation payment – compensation granted by the public contracting authority to the private
partner (often as accessibility payment) in connection with the provision of services of general
economic interest under the terms and conditions of the Decision on compensations granted
VfM (Value for Money) – one of the factors which determine suitability to implement the project in
the form of PPP
PPP Green Paper – Green Paper on public-private partnerships and Community law on public contracts
and concessions dated 30. 4. 2004 COM (2004) 327
Public Procurement Act (PPA) – Act No. 137/2006 Coll., on public procurement, as amended
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3. Introduction
3.1. Theme of the Methodology, context
The theme of this Methodology are two very significant and in the Czech Republic progressively
developing sectors, i.e. the partnership of the public and private sectors (PPP) and the sector dealing
with financing from structural funds. Both of these sectors display a number of specifics, which usually
arise from the EU legislation. Both of these phenomena have been used by the European institutions
as instruments to resolve the economic crisis1.
In relation to the theme of this Study there exist significant reasons for a broader application of the
PPP, and that is within the framework of projects which are funded through OPEI. PPP, as a
partnership of the private and public sectors, does meet the goals of some of the priority axes under
OPEI (primarily the indirect, mediated support of the business environment). PPP contributes, thanks
to the synergies of the potential of the public and private sectors, to the support and development of
enterprise, which makes it possible (from the point of view of the goals and focus of the OPEI) for both
the public and private sector to become recipients of support (which is itself, from the point of view of
the PPP, often the more suitable model). PPP in the form of an entrusted service (service of general
economic interest) to a private partner often comprises of elements that lead to the need to innovate
the existing operation of the service; in material respect this does to a certain degree substantiate
application of support from OPEI. Moreover, support to PPP from structural funds is one of the
declared priorities of the European Union2.
There are however certain significant risks and obstacles that arise from the very nature of these two
institutes alone (such as the issues related to revenue-generating projects, law related to public aid
1 COM (2009) 615 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: “Mobilising private and public investment for recovery and long term structural change: developing public private partnerships”. 2 COM (2009) 615 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: “Mobilising private and public investment for recovery and long term structural change: developing public private partnerships”.
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and similar), and also from the current specific situation in the Czech Republic (for instance, the
general lack of confidence in PPP, insufficient political support given to PPP and the resulting lack of
positive experience with the application of the PPP methods in practice, and similar).
The purpose of this Methodology is to describe th reasons for the support of PPP from the OPEI funds,
to delimitate those types of PPP projects, which are suitable for funding from OPEI, to point out the
individual risks and obstacles and to recommend further action, both for this programming period and
those that might be considered in drawing op operational programmes for the next programming
periods.
3.2. Summary of the commissioned analysis and its accurate definition
Within the framework of the first working draft of this Methodology an analysis was prepared of those
potential PPP projects which could be co-financed from OPEI. During the discussions of these
suggestions generated by the elaborators of this Methodology, the contracting authority
recommended that in the further stages of preparation of the Methodology the elaborators focus
solely on the verification of models that combine PPP and funding under the PROSPERITY programme
specifically for models supporting consulting and models for investment and operations are to be
especially considered. The elaborators however were advised to continue to hypothesize away from
the currently active Calls under the PROSPERITY programme. Text below summarizes the development
of the course of Methodology preparation as well as what the individual Chapters of this Methodology
focus on.
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Figure 1: Implemented process of more exact definition of the Methodology
Source: HOLEC, ZUSKA & Partneři
Within the framework of these discussions it was agreed that the Methodology will focus on the
specific model of an innovations center, as described in the subchapter below. Furthermore, it was
made clear that the commissioned thesis is not to contain a general analysis of the issues related to
state aid, nor a legal analysis or description of the existing system under which support is provided by
OPEI and specifically, under the PROSPERITY programme, on the European or national levels.
Intial Analysis
- general reflection on the application of PPP method within the activities supported under OPEI
Models/types/examples of PPP projects andactivities which may be supported under OPEI
- broad focus
Verification of models
- normative documents (OPEI + legal regulation)
- CMIT preferences
- interest on the market (several questionanaire actions tailor-made to the indicated models)
Formulation of recommendations towards OPEI
- changes in the programme?
- modifications/new Calls?
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3.2.1. Specific model of a science and technology park, innovations center, business
incubator or an R&D center under OPR&DI
It is a well-known fact that a number of science and technology parks, innovations centers, business
incubators, and in the future also a number of R&D centers built within the framework of the
Operational programme research and development for innovation are supposed to be built in the
Czech Republic (partially because a large volume of funding is available for support of such institutions
(these will be referred to together as the “Innovations center(s)”). Future existence of a certain
number of these institutions may already today pose questions on whether these may not have
problems with their sustainability.
In those instances, when such institutions or sites are operated by a public entity, their future
“commercialization” by involving a private partner in the form of PPP, or potentially their long-term
facility management by a private partner could be one of the possible solutions as to their
sustainability. There is a possibility that the private partner, by using a part of the infrastructure, would
improve the overall efficiency of operation of such facility, as well as its meaningful administration,
while a payment from the private to the public partner could be considered, for instance in the form of
a payment for concession, which would enable the public partner to further develop its R&D and
innovation activities realized on the given infrastructure, as well as to maintain the required
sustainability of the project. The involvement of the private partner could also lead to the overall
improvement in the quality of the services provided to the end users.
The implementation of the “commercialization” project for such institution and/or facility would
obviously bring about increased expense which could funded from the OPEI.
A generally conceivable support from OPEI would be support provided for consulting, to be provided
primarily to the public partner (to fund preparation of the feasibility study – analysis of the private
partner’s involvement in the project – analysis of the limits of cooperation arising on the basis of the
financing from the structural funds and similar).
Another conceivable support would be support directed towards infrastructure, namely further
innovations of the institution on behalf of the public partner in order to increase the appeal of the
institution for the potential private partner or support provided to the private partner for the
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innovation or equipment and start-up of the facility operations.
Figure 2: A diagram of a specific PPP model with indication of potential sources of funding from OPEI
and the considered main contributions of the private partner into the project
(Source: HOLEC, ZUSKA & Partneři)
In relation to the above described model of Innovations center the following three sub-models may be
considered:
adaptation of an existing R&D Center with facility management outsourced to a
private partner; or
completion of an existing R&D Center with facility management outsourced to a
private partner; or
development of a new science and technology park, innovations center, business
incubator with facility management outsourced to a private partner.
A more detailed analysis of these models by the elaborator shall focus, within the framework of the
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present Methodology, on provision of support to the public partner outside the ambit of state aid, in
the position of an entity financing adaptation, completion or development of the center.
3.2.2. Subject of the commissioned analysis in relation to the specific model of an
Innovations center
The subject of the hereby commissioned Methodology in relation to the model described in the
preceding subchapter shall be namely:
the analysis of risks and obstacles facing the model itself;
marker survey focusing on interest in the described model;
recommendations toward OPEI.
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4. PPP – analysis of the current regulation
4.1. Regulation and concept of PPP in the European and national legal and
extra-legal framework
This Chapter will briefly summarize some of the basic aspects of the issues related to PPP. As the PPP
has been addressed in sufficient detail in current up-to-date and available methodologies, this Chapter
shall focus only on those aspects which are important for the theme of this present Methodology.
4.1.1. PPP – concept, definition
The term ‘PPP’ (Public Private Partnership, partnership of the public and the private sector) has no
been specifically defined, whether on the European or national level. Within the framework of this
Methodology the team of its authors is of the opinion that it would be conceivable to approach this
field on the basis of the relatively broad definition of the PPP as presented in the PPP Green Paper. The
Green Paper “usually defines” the term PPP as being characterised by:
the long-term duration of the relationship between the partners;
the method of funding the project (partially by the private partner;
the significant role of the economic operator who is involved in the various stages of
the project (proposal, design, completion, implementation, and funding), while the
public partner focuses on definition of objectives and supervision of their fulfilment;
the distribution of risks – which are effectively taken over by the private partner;
The development of PPP is related to change in the conception of public administration and represents
in many cases a bilaterally more advantageous and effective model of cooperation between the public
and private sectors.
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4.1.2. Types of PPP
The following number of subchapters contains the various distinguished of PPP project types from
several perspectives.
4.1.2.1. PPP in the broader and the narrower sense (concession)
The theory in general, and the relevant national and EU documentation distinguishes PPP in its
narrower sense and PPP in its broader sense. The line between these two groups of PPP projects is not
entirely clear, nevertheless for the purposes of this Methodology we shall base our division on:
PPP v in the narrower sense, which includes primarily concessions, as defined in
Directive 18 (within the framework of concessions for construction and concessions
for services, as further developed by ECJ case law3), i.e.:
Concession for construction works is defined as a contract of the same type as public
tender for construction work (e.g. public tender, subject of which is performance or
design and performance of construction work related to activities defined in the Annex
I to the Directive 18, or construction or performance of construction according to
requirements defined by the public contracting authority, by any means), with the
exception, that the consideration for the performance of the construction of lies
exclusively in the right to use such building, or in this right together with a payment.
Concession for services is a contract of the same type of a public tender for services
(e.g. public tender other than public tender for construction work or supply, whose
subject is provision of services defined in Annex II to the Directive 18), with the
exception, that the consideration for the provision of services exclusively lies in the
use of these services, or in this right together with a payment.
3 For example C – 206/08 Wasser- und Abwasserzweckverband Gotha und Landkreisgemeinden (WAZV Gotha) v. Eurawasser Aufbereitungs- und Entsorgungsgesellschaft mbH dated 10.09.2009
24
The ECJ case law added to this definition an accentuated emphasis of another two
defining attributes of concession, which is on one hand the existence of the so-called
“public service” and on the other the acceptance of the significant portion of risk,
which were borne, in relation to the provided public service, by the public partner.
PPP in the broader senses, which includes all other forms of cooperation with the
private sector, which mostly meet the attributes of PPP as defined by the PPP Green
Paper, or potentially some of the other forms (such as some of the forms of
institutional PPP, as well as some of the public procurement activities).
This Methodology considers PPP project funding in both in the narrower and broader sense.
4.1.2.2. Distinguishing between contractual and institutional PPP
Another significant division of PPP projects from the point of view of the present Methodology is their
division between:
Contractual (or purely contractual) PPP
contractual or purely contractual PPP is denoted as cooperation between a private and
public partner which is realized on the basis of a contract, and usually this contract is a
concession contract with a defined term of 5 or more years. Cooperation does not
include a formation of a special entity, in which the public and private partners would
participate.
purely institutional PPP (IPPP)
purely institutional PPP is usually denoted as cooperation between a private and public
partner which is realized on the basis of a jointly established entity such as, for
instance, a commercial corporation. This form of cooperation is delineated by the
business activities of such entity, and usually such cooperation is not limited by specific
25
term.
(partially institutional) hybrid PPP
partially institutional, hybrid PPP is normally defined as cooperation between a private
and public partner which mixes elements of the contractual and institutional PPP. Such
cooperation is usually implemented on the basis of a concession contract for a definite
term which however also regulates formation of the so-called “SPV” (special purpose
vehicle), which is a special kind of entity, in which one or both partners participate,
which is entrusted with the implementation of the part or of the entire PPP project.
SPV is usually formed in order to implement the operational part of the PPP project.
4.1.2.3. Types of PPP according to their content
Another relevant division of PPP project within the framework of the present Methodology is their
division according to their content, i.e. according to the scope and extent of the obligations and
authorizations involved which are accepted in the project by the private partner. These include the
obligation to design, build, finance, operate and transfer the subject. These obligations and their
combinations are usually denoted by their equivalents in the English language – Design, Build, Finance,
Operate a Transfer, and abbreviations based on the initial letters of these terms, i.e. D, B, F, O, T, or
potentially other terms.
Design – Build – Finance – Operate – Transfer
Figure 3: individual distinguishing components for the various PPP projects according to their content
26
(Source: HOLEC, ZUSKA & Partneři)
Combinations of these obligations and authorizations represent a number or possible alternatives
however, typically the following types of PPP are usually applied:
O&M/FM (Operation & Maintenance Contract / Facility management) – these are also denoted as
contract for the lease of assets in public ownership) – the private partner operates and manages, on
the basis of a contract, public assets which remain in the ownership of the public partner. The public
partner usually bears the risk of demand. The economic bonus of such project is the authority of the
private partner to use the asset, under specific terms and conditions, for the provision of both the
public services and for its own commercial goals.
BOT (Build Operate Transfer) – the private partner implements the construction, operates the facility
after its completion for a specific term, and then the asset is transferred to the public partner. In the
majority of the cases the private partner ensures partial funding of the project, which however does
not remove the obligation of the public partner to eventually pay for the investment (usually in the
form of accessibility payments). The advantage of the BOT approach is that it combines the
responsibilities for normally separate activities into one entity – the concessionary – private partner.
DBFO (Design Build Finance Operate) – the public partner defines the objectives that the private
partner is to implement, and he then assumes the responsibility for all four components of the PPP
project, i.e. designs the facility / asset, obtains financing and erects the specific asset, and
subsequently operates the asset and provides related (public) service. The complexity of the provided
services by the private partner should reflect itself in the improved efficiency of the provided service.
The disadvantage of the DBFO approach is the significantly demanding preparatory phase of the
project, from organizational, technical, scheduling and financial aspects.
BOOT (Build Own Operate Transfer) – this model is characteristic for those forms of project that are
based on a concession. It is typical that the private partner obtains from the public sector the right to
implement the project in a specific sector of public services and then funds, builds, owns and operates
the built-up infrastructure. At the end of the concession term the concessionary transfers the
infrastructure to the public partner. The interests of public partner are usually overseen by a
regulatory authority or maintained in the form of contractually established competences of the public
27
partner.
BOO (Build Own Operate) – this model is rather near to privatization of public assets. The private
partner funds, builds and operates infrastructure indefinitely. The interests of public partner are
usually overseen by a regulatory authority or maintained in the form of contractually established
competences of the public partner. This project is differentiated from pure privatization by the fact
that the private partner usually has the right, under specific terms and conditions, to withdraw from
the project, and by the regulatory role entrusted in such project to the public partner.
The above defined types of PPP projects are in practice often combined and the classic most complex
type partnership is D-B-F-O-T where, after the passage of the concession term, the infrastructure
originally designed, built, funded and operated by the private partner is transferred to the public
partner under agreed upon terms.
4.1.3. Types of payment mechanisms within the framework of PPP
The majority of the PPP projects feature a system of payments between the three basic entities in the,
which are the public partner, private partner and end user (recipient of the public service). The
configuration of these payments is based on a number of factors; the most important include the
objectives of the project as well as the economic possibilities of the private and public partner and the
situation on the market. Most of the PPP projects have more than one payment mechanism active
between the said entities. This Methodology primarily deals with the most significant payment
mechanisms and these are payment for concession and accessibility payment.
4.1.3.1. Payment for concession
In cases where the economy of the PPP project rests on the revenue of the concessionary from the
end users, or potentially for the use of the managed infrastructure by the concessionary or other
entities within the framework of their commercial activities, the typical payment mechanism between
the public and private partner is the so-called payment for concession. This payment is made by the
28
private partner to the public partner in connection with the use of the given infrastructure and the
revenues generated by it. Payment for concession thus appears rather similar to a “rent” for the use of
the entrusted assets. Typically, it has a form of a fixed payment, or withholding from funds collected
during the operation of the concession, or possibly, a combination of a fixed payment plus a flexible
payment potentially reduced by the expended investment. Payment for concession (as the sole
payment mechanism between the private and public partner) is most commonly used in projects
where the private partner does not fund the investment and where the project generates sufficient
revenue from end users and third persons which cover operational costs and a reasonable profit for
the operator.
4.1.3.2. Accessibility payment
Accessibility payment or payment for the accessibility of public service is a payment that is the
opposite of the payment for concession. This payment is made by the public partner to the private
partner in exchange for the provision of the public service. The payment It is usually subject, within the
framework of the concession contract, to a faultless provision of the public service. The accessibility
payment does in fact comprise of several basic elements:
(partial or full) payment (instalment) of investment funded by the private partner;
coverage of operational losses arising during the provision of the public service;
compensation of reasonable profit of the private partner.
The existence of the necessity to make such payment to the private partner also determines what are
the typical PPP projects featuring accessibility payments. These are primarily:
projects which do not generate revenue for the private partner;
projects with high investment funded by the private partner;
projects with distinctively regulated prices for final users of the public service;
projects based on immanent loss generated by operation and suffered by the private
partner.
29
The existence of accessibility payment also establishes the necessity of resolution of issues related to
state aid within the framework of the so-called compensation payments, please see below.
4.1.4. Advantages and disadvantages (obstacles) of the PPP
Even though the cooperation based on the PPP method has been historically advantageous, referring
to the foreign experience and experience from the projects implemented in the Czech Republic, in
comparison to the traditional method of cooperation between the private and public sector, it is
necessary to realized that the PPP does not represent universal solution to all spheres of cooperation
of the public and private sector. As emphasized in numerous relevant documents, PPP does not
provide some sort of a universal “medicine” which could resolve problems faced by the state
administration. When deciding whether to choose the PPP path it is necessary to assess all advantages
and disadvantages of both (all) alternatives. This approach was even officially declared in 2007 by the
Czech government, which charged the individual state departments and other central authorities of
state administration to continuously evaluate use of PPP as one of the alternatives for provision of
public services.4
4.1.4.1. Advantages of the PPP
Complex implementation of a project by one partner – the responsibility of the
private partner for the supply of the required investment and for the provision of all
required services.
Improved distribution of risks and substantial transfer of risk to the private partner,
who is able to better manage the risks, and which may lead to the reduction of the
costs of the entire project. The aim is not to transfer all of the risks associated with the
project onto the private partner, but only of those which the private partner has a
better chance to influence and manage.
Reduction of costs related to the life-cycle of the project – by merger of the
construction and operation the private partner is highly motivated to innovate and
4 Government Resolution No.. 536 dated 23.05.2007 to the Analysis of pilot PPP projects
30
choose such methods, materials and technology, and approaches to organization of
construction and operation that lead to the reduction of operational costs and
analogically of the total costs of the project. The motivation of the private partner is
based on his effort to achieve the contractually defined reasonable profit.
Planning of costs related to the project life-cycle – contrary to projects implemented
in traditional ways, the concession contract represents a detailed overview of costs
during the implementation of the project and its operation. The guarantee of the
unexceedable contractual prices and the payment amounts represents effective
planning instrument for the costs borne by the public partner during the entire life-
cycle of the project.
Increased quality of service – application of innovations and greater flexibility of the
private partner in critical situations leads to the overall improvement in the quality of
the services.
100 % payment only for 100% results – the public partner pays the private partner
only after the final completion of the project in the required quality and on the basis of
provision of services fully in compliance with the contractually agreed terms and
requirements of the public partner. Payments due to the private partner are reduced
in the event the performance provided has any defects (delay, insufficient quality, etc.).
Uniform distribution of payments– in those cases where the project is funded by the
private partner, the public budget does not bear the brunt of construction, but the re-
payment of the investment made is distributed (sometimes only partially) in the form
of pres-set payment in defined amounts, and that usually only when the operations
commence.
31
Figure 4: Advantages of the PPP
(Source: HOLEC, ZUSKA & Partneři)
Use of the private financial resources, no increase of public indebtness – PPP projects
allow for a temporary use of sources of funding secured by the private partner and
concurrently, provided that the Eurostat terms are observed, the PPP projects do not
add to public indebtness.
Additional revenue – the expenses of the public partner may be reduced in cases
where the project generates additional revenue, for instance from third persons
within the framework of the supplemental utilization of the administered
infrastructure for commercial purposes by the concessionary.
Savings on scale – merger of several independent project, as well as expansion of the
existing activities of the private partner by activities related to the implementation of
the PPP project may bring savings due to scale of operations.
Higher Value for Money – as a consequence of the number of herein described and
other benefits the PPP project often provides a higher value for money - VfM.
32
Figure 5: Quantitative expression of Value for Money for PPP in comparison with a series of public
tenders
Source: HOLEC, ZUSKA & Partneři
4.1.4.2. Disadvantages and obstacles related to PPP
While the above described advantages of PPP are universally valid, any objective evaluation of
suitability of PPP methods within the framework of this Methodology must also consider the existing
obstacles:
Intensity of preparation of PPP projects –PPP projects are often demanding in terms
of time and cost in comparison with projects implemented in traditional ways. Their
preparation is often very complex economically (financial modelling for the entire
duration of the project), technically (definition of the required objectives, preparation
of technical documentation), as well as legally (preparation of a functional concession
contract which is concluded often for decades) and intensive stage of the project. With
regard to the unfortunate precedents set by cancellation of several important pilot
PPP projects in the Czech Republic in stages where the public partner as well as the
33
applicant expended significant sums of money for consulting, the “lack of public
confidence” with regard to PPP projects in the Czech Republic appears to form one
significant risk related to the preparation of PPP (refer to similar risk below).
Higher costs of funding provided by private sector – cost of financing secured by the
private partner are often premium than of financing secured by the public partner
(this does not apply universally, as a number of international companies are able to
fund smaller projects from their own sources; a number of public partners also needs
to solve funding by commercial loans).
High transaction costs – cost of preparation of PPP projects (for the public and private
partner) are quite high and may be a block and demotivating element for the
preparation and participation of the private partner in a PPP project.
Problems with flexibility of contracts – a serious problems and obstacle of concession
contracts which are drafted in some instances for several decades into the future is
their flexibility. It is an universally acknowledged principle that the concession contract
should stipulate more or less constant rules of cooperation of the public partner and
the concessionary selected through the concession proceedings. Excessive flexibility of
such contract would negate the import to approve it vie intensive concession
proceedings, as well as the transparency principles and equal access for all applicants.
On the other side, it is very difficult to foresee all potential changes, both in the legal
environment and in social and economic spheres.
Complexity of concession contracts, limited experience of public contracting
authorities and lack of confidence in PPP projects in the Czech Republic - the
elaborators of this Methodology are of the opinion that the sheer number of
methodologies and sample documentation prepared in the Czech Republic is to some
degree contra-productive especially in relation to smaller PPP projects. Considerable
complexity5 of these de facto recommended sample and methodological documents
which are drafted primarily for large pilot projects (which were however mostly not
implemented) contribute, in the opinion of the authors of the present Methodology,
to sometimes entirely not clear perception of the complexity of PPP and add to the
lack of confidence in this instrument to provide effective solution to needs and
5 Například Vzorová koncesní smlouva vypracovaná pro Ministerstvo financí v roce 2006 má včetně příloh celkem 173 stran
34
problems facing the public administration. This situation is assisted by a not entirely
ideal regulation of concession within the framework of the Czech law, where the
concessionary proceedings are often more tightly regulated and demanding in terms
of standards of documentation than public procurement, and that without regard to
the scope and importance of the project. Problems are also posed by a large number
of ambiguous interpretations related to the PPP method in terms of application of PPA
on Concession Act.
Figure 6: Confidence in PPP projects in the Czech Republic – Opinions on the suitability of application of
PPP to projects
Source: Louda, Gospič and collective of authors: Partnership of the private and public sector. Legal and
economic aspects, Ústav Práva a státu AV ČR, Praha – Plzeň 2010 (data)
4.1.5. European regulation of PPP
This Chapter contains a brief overview of PPP regulation in normative, interpretative and political
documents of the EU.
29%
67%
4%
Opinion on the appropriateness of application of PPP projects
yes not sure no
35
4.1.5.1. Fundamental sources of regulation
Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004
on the coordination of procedures for the award of public works contracts, public
supply contracts and public service contracts, as amended;
Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004
coordinating the procurement procedures of entities operating in the water, energy,
transport and postal services sectors, as amended.
Both Directives address the field of public procurement, as well as concessions. Their importance for
PPP lies primarily in them defining the term ‘concession’ for services and for construction works, and
providing leads for differentiations between situation where public contracts and concession are
available, as well as in stipulating fundamental principles of public commissions, which are applied
both on concessions and public contracts.
4.1.5.2. Implementing regulation
Commission Regulation (EC) No 1564/2005 establishing standard forms for the
publication in the Official Journal of the European Union of notices in the framework of
public procurement procedures according to Directives of the European Parliament
and the Council 2004/17/EC and 2004/18/EC;
2005/15/EC: Commission Decision of 7 January 2005 on the detailed rules for the
application of the procedure provided for in Article 30 of Directive 2004/17/EC of the
European Parliament and of the Council coordinating the procurement procedures of
entities operating in the water, energy, transport and postal services sectors (notified
under document C (2004) 5769).
4.1.5.3. Soft law
Among the most important documents falling in the area of the so-called soft law, which are not in the
form of legally binding regulation, but usually enjoy large authority and possess interpretive
36
significance belong the following:
Commission interpretative communication on concessions under Community law, 2.
2000/C 121/03);
Green Paper on public-private partnerships and Community law on public contracts
and concessions [COM(2004) 327] (Brussels 2004);
Decision of Eurostat on deficit and debt Treatment of public-private partnerships
STAT/04/18 z 11.2.2004.
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 dated 15.11.2005 COM(2005) 569
2008/C 91/02 Commission interpretative communication on the application of
Community law on Public Procurement and Concessions to institutionalised PPP (IPPP)
COM (2009) 615 Communication from the Commission to the European Parliament,
the Council, the European Economic and Social Committee and the Committee of the
Regions: “Mobilising private and public investment for recovery and long term
structural change: developing public private partnerships”;
ECJ case law:
o C – 206/08 Wasser- und Abwasserzweckverband Gotha und Landkreisgemeinden
(WAZV Gotha) v. Eurawasser Aufbereitungs- und Entsorgungsgesellschaft mbH
dated 10.09.2009;
o C – 300/07 ESD Hans & Christophorus Oymanns GbR, Orthopädie Schuhtechnik v.
AOK Rheinland/Hamburg dated 11.06.2009.
4.1.6. National regulation of PPP
The fundamental legislation regulating PPP in the Czech Republic include:
Act No. 137/2006 Coll., on Public procurement
37
Act No. 139/2006 Coll., on Concession contracts and concession proceedings
(Concession Act);
Decree No. 217/2006 Coll., which implements the Concession Act;
Decree No. 238/2006 Coll., laying down essentials of the application for prior opinion
on conclusion of a concession contract or a contract under Concession Act
Government Decree No 78/2008 Coll., amended by No. 474/2009, laying down the
financial limits for the purposes of the Concession Act (CA).
The core of the regulation is contained in the Concession Act. Regulation laid down by the Concession
Act has several specifics in comparison with regulation abroad:
CA does not regulate the term ‘concession’, the definition of concession and of the
concession proceedings subject is given by the definition of the type of concession
contract. CA also does not regulate some of the pivotal terms in the concession area
such as the definition of the public service;
Definition of the concession via the definition of the concession contract is insufficient
in the sense of laying down clear line between the application of CA and PPA;
Definition of the concession is not very accurate in relation to Directive 18 and ECJ
case law;
Regulation provided by the Act is relatively terse, most of the aspects related to
individual phases of the concession proceedings are addressed only in the form of a
legislative reference to PPA;
In connection with the published methodologies the Concession Act stipulates, also for
the less important concessions, far more stringent formal requirements on the
organization of proceedings than for public procurement (for instance the obligation
to prepare concession project, two-stage proceedings etc.).
4.1.7. Regulation of concessions under Czech law
Regulation of concessions and concession proceedings in the Concession Act is based on three types of
38
contracts and proceedings which are differentiated on the basis of the anticipated revenue of the
concessionary.
The anticipated revenue of the concessionary comprises of all assumed revenue obtained by the
concessionary in connection with implementation of the concession during its entire term. In practice
however it is not entirely clear what all revenue shall be included in this category. The authors of this
Methodology are of the opinion that this term should be interpreted extensively and that the
anticipated revenue of the concessionary should include, besides the standard payment mechanisms
such as accessibility payments and payments from end users, also those values that were provided
free-of-charge (such as energies and media paid for by the public partner, workforce) but also all
subsidies provided in connection with the concessionary’s activities according to the concession
contract. The anticipated revenue is determined in the preparatory phases of the concession
proceedings as a qualified estimate. For overruns on this estimate no specific sanctions are stipulated,
however its significant undervaluation could be viewed, in concrete cases, evasion of the law.
The following three types of contract are differentiated on the basis of the anticipated revenue:
Concessions contract with anticipated revenue lower than CZK 20 million. These
contracts do not require concession proceedings to be initiated, and the public
contracting authority is only required to observe principles stipulated in Sec 3a of the
CA;
Ordinary concession contracts. These contracts anticipate revenue exceeding CZK 20
million, but do not reach value which would classify the project to fall with the so-
called “major” concession contracts.
Major concession contracts. These are concession contracts where the anticipated
revenue of the concessionary would reach the specific limit defined for a given type of
public contracting authority. The fundamental difference in comparison with the
ordinary concession contracts is that the prior to the conclusion of the major
concession contracts the public contracting authority is required to prepare a
concession project and have this approved by the competent body for the given type
39
of that public contracting authority.
Figure 7: Limits for major concession contract for the given types of public contracting authorities and
their superior bodies which approve the concession project
Source: HOLEC, ZUSKA & Partneři
Concession project is a project documentation containing certain elements of feasibility study, which
should include, besides the economical and legal analysis (and besides requirements defined in CA and
in the implementing Decree) also the comparison of alternative solutions for the implementation of
the public service including the comparison with public tender. The concession project needs to be
approved at the very beginning of the concession proceedings which, in the more complex projects,
and especially in cases when the concession dialogue would be applied, calls for the need to update
the project during the proceedings.
40
4.1.8. Typical stages of a PPP project:
This subchapter briefly deals with individual phases of a PPP project. The meaning of this overview is
to offer a general orientation into the individual phases of concession proceedings especially with
regard to the below analysed issue of sequence of the concession proceedings to the “process” of
application for support.
Preparation of the project
The preparatory phase of the project is the pivotal phase for any PPP project. Its complexity generally
lies in the fact that within the framework of this stage the basic parameters of the project need to be
determined for the entire duration of the concession term (several years to decades).
In this stage the economic, financial and technical model of the project is elaborated which creates
significant cost fro the public contracting authority related to consulting in these three sectors,
without any guarantee that the project will eventually be implemented.
As the practice related to several pilot and smaller PPP projects in the Czech Republic shows this is the
critical stage, specifically with the view of appropriate distribution of responsibilities and risks between
the private and public partner within the compass of the future PPP project – i.e. of the rights and
obligations arising from the concession to be granted. Excessive overburdening of the private partner
by liability and risk may lead to difficulties in finding suitable or any private partner who would be
willing to submit a bid. For this reason it is often necessary to undertake market survey, which shall
indicatively verify potential interest of private partner in the project and the terms under which they
would be willing to present their bids.
The result of this preparatory stage is, besides the approved concession project, also the approved
qualification documentation which, besides the qualification criteria, needs to contain also criteria for
the evaluation of bids.
41
In cases where it is not possible to define in sufficient detail the basic parameters of the project within
the framework of the preparatory stage, it is possible to initiate the so-called concession dialogue,
within which the objectives of the PPP project may be accurately determined during a moderated
discussion with applicants6.
Commencement of proceedings (qualification proceedings)
Concession proceedings are commenced by their publication in the Public Procurement Information
System (PPIS); that initiates the first phase of the proceedings, the co-called qualification proceedings
which is in practice a call to an unlimited number of applicants to submit applications for qualification
in the concession proceedings according to the defined qualification criteria.
Qualification proceedings end by the decision of the contracting authority on who of the applicants
have met the qualification criteria, which follows opening of the sealed bids on the basis of which the
commission communicates to the contracting authority its standpoint.
The minimum length of the qualification proceedings is 52 days.
Concession dialogue
The concession dialogue is an optional phase of the process. This phase is subject to a prior express
specification in the qualification documentation. Concession dialogue commences by a call to
participate in the dialogue issued to the applicants who qualified.
The aim of the concession dialogue is to arrive at one or more potential solutions to the concession
project on the basis of a moderated dialogue with the applicants, i.e. to de facto define in more
accurate detail the objectives of the approved concession project, by interacting with the qualified
applicants.
6 The authors use, for the purposes of this Methodology, the simplified and universal term “applicant“, even though, in the qualification phase of the concession proceedings the term “interested party“ would constitute the accurate use.
42
This is a very useful instrument, especially in projects that are not entirely standardized, such as
potential PPP projects that could be co-financed from OPEI.
The result of the concession dialogue is usually the updated concession project and the contracting
documentation, which forms a part of the call to submit bids.
Approval of the concession documentation (call to submit bids)
As indicated above, the concession contracting documentation had been prepared and approved in
the preceding phases, which further specified the given PPP project, by defining rules for the
organization and submission of the bids, as well as the evaluation criteria to be used on the submitted
bids.
The contracting documentation also defines the deadlines for the submission of bids, which shall not
be shorter than 40 days.
Bid negotiations
Bid negotiation is the second facultative phase of the concession proceedings during which it is
possible to negotiate with the applicants on their bids. Again, this optional phase needs to be expressly
pre-defined in the concession documentation
The bid negotiation process may again serve as an effective tool to fine-tune some of the non-
standardized projects such as projects supported under OPEI or similar programmes. This phase could
be potentially used, within the framework of the link between the concession proceedings and the
approval process for applications submitted within OPEI or similar programme.
The result of this phase is the corrected bid of one or more applicants.
43
Selection of the applicant(s), approval and execution of the concession contract
The preceding phases lead to the selection of the winning bid, after the applicable deadlines for
objections expire, and after the CMF issues its standpoint, which is a stepping stone for the approval
and execution of the concession contract.
The issue of the CMF standpoint is the necessary pre-requisite to validity of the concession contract.
Even thought the standpoint itself is not binding (the condition of the validity is only its issue, not the
condition that this standpoint agrees) it represents, from the viewpoint of the concession proceedings,
a certain practical obstacle. In the past, in connection with the very first implemented PPP projects in
the Czech Republic, the CMF issues the standpoint already at the stage when the draft concession
contract was prepared, but the selected applicant was not yet known. That had certain advantages in
connection with the scheduling of the entire concession proceedings, as in practice the standpoint was
requested immediately after the approval of the concession contracting documentation so that even
the CMF decided on its standpoint at the very end of the two-month period available to it, this caused
no delay in the concession proceedings. However, the recent experience of the authors of the present
Methodology shows that the CMF now requires that the request for the standpoint is submitted only
when the concessionary is known, and when the amounts of applicable payments have been known as
well. The available experience of the authors shows that in the case of a prior request and additional
provision of information on the specific concessionary and the applicable prices, the CMF is able to
issue their standpoint practically immediately, before the periods reserved for filing objections expire;
however if this requirement is observed there exists a risk of a nearly two-month delay in the
concession proceedings if the request for the standpoint is filed only after the winning bid was
selected.
Another obstacle that would be applicable to the subject of this Methodology is the question of what
degree of influence would a negative standpoint of the CMF pose (even though the concession
contract could be validly executed) with respect to the eligibility of the costs under OPEI or under a
similar operational programme. The authors are of the opinion that a negative standpoint of the CMF
would in the least create a significant risk for the public as well as the private partner and could thus
serve as a factual obstacle against execution of the concession contract.
44
Implementation of the investment phase of the PPP project
Another typical phase of any PPP project, which lies in the implementation of the investment, is the
investment phase. The import of this phase from the viewpoint of the theme of this Methodology is
that it will often overlap with the implementation phase of the project in the terms used under OPEI,
however this does not need to happen in all instances (for instance, if the OPEI co-financed only
certain sub-phases of the investment phase, or in case the OPEI would co-finance the pilot operations
and the implementation phase would itself overlap, under OPEI, also with the operational phase of the
PPP project).
Operational phase of the PPP project
The final phase of the PPP project is usually its operational phase. This is normally the pivotal stage, as
in this phase the private partner – concessionary provides the public service. At the end of the
operational phase, there may be the transfer from the ownership of the private partner to the public
partner, or vice versa.
Figure 8: Typical phases of a PPP project
Source: HOLEC, ZUSKA & Partneři
Project preparation(approval of the
concession project)
Qualification proceedings(min 52 days) (publication
in the PPIS)Concession dialogue
Approval of the concession documentation and the
call to submit bids (min 40 days)
Bid negotiation
Selection of the winning bid, approval and execution of the
concession contract
Investment phase of the PPP project
Operational phase of the PPP project
45
4.1.9. Legislative outlook with respect to the Czech law
Due to political changes taking place in 2010 it is not clear what way the legal regulation of the PPP in
the Czech Republic could take. The Programme Declaration of the Czech government mentions the
PPP sphere only marginally7, however it focuses rather intensively on public procurement, where it is
planned that certain instrument will be strengthened especially with respect to an improved
transparency and limitation of abuses. Due to a degree of linkage between CA and PPA (the above
mentioned method of legislative references from CA to similar applications in the PPA) it can be
expected that some of the amendments will also have effect on concessions.
Among other discussed and anticipated changes also belong the following:
More accurate definition of the link between CA and PPA (including exact definition
and differentiation between public contract and concession and removal of certain
conflicts, such as the heightened stringency of the concession proceedings vis-à-vis the
public procurement proceedings etc.);
More accurate definition of concession in compliance with the European legislation
and the recent development of the ECJ case law8.
4.1.10. Current development of situation in PPP in the Czech Republic
The following sub-chapters generally maps the planned and implemented PPP projects in the Czech
Republic.
7 Programme Declaration of the Czech government dated August 4, 2010, p. 37 8 Specifically C – 206/08 Wasser- und Abwasserzweckverband Gotha und Landkreisgemeinden (WAZV Gotha) v. Eurawasser Aufbereitungs- und Entsorgungsgesellschaft mbH dated 10.09.2009
46
4.1.10.1. Pilot and other significant projects
The Table summarizes the significant and significant considered and prepared pilot projects.
Project Commencement
Form of PPP Value Status
AirCon – railway link Prague - Ruzyně airport.
Modernisation, operation and maintenance of the existing railway and construction of the new railway link to the airport and the town of Kladno
01/2005 Combination of BOT/DBFO and O&M operational contract
CZK 20 billion Concession project in
preparatory phase
Hotel-type accommodation and parking facilities for the Prague Central Military
Hospital; 300 beds and parking
01/2005 DBFO CZK 1 billion Completed 24. 05. 2010
approval of the concession
contract
Justice center in Ústí na Labem Courts, state attorney, mediation
08/2005 DBFO/BOT CZK 1.5 billion Concession project approved
(05/2008) Modifications
requested in line with the
National Audit Bureau (2009)
State penitentiary Rapotice (500 inmates)
08/2005 DBFO/BOT CZK 1.5 billion Concession project approved
(05/2008) tender for contractor
D3/R3 Motorway (Tábor- Bošilec) 08/2005 BOT CZK 59 billion Concession project approved
(10/2008) tender for contractor
Removal of environmental damage created prior to privatization
2008 ? CZK 101 billion
Concession project approved
(2008) suspended
47
Hospital ‘Na Homolce’ construction of a 7-floor facility and
parking
12/2005 DBFO CZK 0.6 billion Cancelled
Overall modernization of regional hospital in Pardubice
Renovation, new construction, funding, maintenance and provision of certain
selected services (meals, logistics)
07/2006 DBFO CZK 2.5 billion Project cancelled
Regeneration of the Brno Ponava brownfield
01/2006 DBFO CZK 2.5 billion Project cancelled
Figure 9: Survey of significant and pilot PPP project in the Czech Republic
Source: HOLEC, ZUSKA & Partneři
With the exception of one, all above listed PPP projects were either terminated, suspended or
implemented using traditional methods (public procurement proceedings) and in some of the cases
this interruption came at the worst of times, when significant expenses were accrued by several
parties in connection with the required consulting services. The above listing reflects, in the opinion of
the authors, the present general lack of confidence and lack of political support of the PPP methods.
4.1.10.2. Concession contracts deposited with the Register of Concession Contracts (RCC)
According to publicly available data provided by the CMRD the following concession contract have so far been executed i the Czech Republic for the following projects:
14.11.2007 –Tachov (construction and operation of a multi-functional sports facility)
09.11.2007 –Bohumín (infrastructure for heat and hot water distribution)
18.04.2008 –Lysá nad Labem (school canteens)
21.10.2008 –Bruntál (operation of sewer system and water treatment plant)
16.03.2009 –Litoměřice (operation of social services )
31.03.2009 – Obec Velká Hleďsebe (heat and hot water distribution)
48
25.06.2009 – Plzeň (operation of a sports and recreation facility)
17.12.2009 – Liberec (operation of the municipal stadium)
01.01.2010 – Ostrava (operation of the municipal curative facility Ještěrka)
19.05.2009 – Ostrava (operation of a water management infrastructure)
29.04.2010 –Říčany u Prahy (operation of school canteens)
08.07.2010 – Ústí n. Labem (operation and commercial use of bus stops)
25.02.2010 - Písek (operation of a water management infrastructure)
Figure 10: Percentual representation of types of PPP projects, where contract has been executed
according to RCC
Source: HOLEC, ZUSKA & Partneři using RCC data as of 30. 8. 2010
The above makes it obvious (in connection with the projects which saw the concession proceedings to
their successful end), that the PPP environment in the Czech Republic can be characterized, taking
into account the theme of the present Methodology, as follows:
23%
23%
15%
15%
8%
8%8%
Areas of implementation of PPP projects in CR according to Concession contracts
registry
leisure activities
water management
public catering
energy sector
mass transport
social services
healthcare
49
Overall small number of PPP projects;
Smaller, municipal PPP projects make up majority of the projects;
Focus of the listed PPP projects falls under other state departments (Ministries) than
CMIT and into other operational programmes than OPEI.
50
5. Selected issues related to stat aid – situation which do not constitute
state aid
With respect to the fact that the issues related to state aid represent on of the main limits for funding
from structural funds, as well as for PPP, it will be necessary to discuss these selected issues in a
dedicated chapter. The subject of this chapter is however not a general discussion of state aid, but
specific discussion of its aspects which have direct impact on the given theme.
From the viewpoint of the present Methodology the pivotal significance is contained in those
situations, as defined by the European case law, or potentially in the soft law, when the attributes of
state aid may be seemingly and at the first said fulfilled, but when the interpretation by the central EU
authorities ruled that state aid is not involved.
5.1. Aid granted in accordance with Community framework
The herein analysed themes require a brief discussion of the Community framework related to state
aid provided to research, development and innovations (Community framework for state aid for
research and development and innovation (2006/c 323/01). Its importance lies in its Section 3 entitled
“State aid within the meaning of Article 87(1) of the EC Treaty” in which the interpretation of the
Commission defines some of the examples which are not considered to constitute state aid, or which
do not simultaneously fulfil all attributes of state aid, specifically the attribute of an “enterprise” as the
recipient of state aid.
The Community framework thus does not represent a block exemption, but an interpretative
document, in which the Commission expresses its approach to how it will consider the individual
concrete cases of state aid.
From the viewpoint of themes contained in this Methodology the central provision is represented by
sub-section 3.1., which defines two fundamental situations where support may be granted outside the
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regime of state aid:
Situation described in s.3.1.1., which addresses the so-called public funding of non-
economic activities of research organizations; and
Situation where funding is granted to the so-called not-for-profit innovation
intermediaries9. According to the second paragraph of 3.1.2 this does not need to
constitute state aid in cases that these intermediaries (i) can prove that the totality of
the State funding that it received to provide certain services has been passed on to the
final recipient, and (ii) that there is no advantage granted to the intermediary.
The significance of this provision lies, in relation to this Methodology, in the fact that it makes it
possible to grant support to the not-for-profit innovation intermediaries without the need to make
notification, if the conditions defined in 3.1.2 of the Community framework have been simultaneously
met, or possibly, this regulation could be referred to by analogy within the framework of the
notification of the potential call.
5.2. Compensation payments
In relation to the present Methodology the important part is played by the block of exemptions from
the prohibition of state aid, and potentially from application of Article 107 TFEU dealing with the so-
called compensation payments (implementation of services of general economic interest)10 . This
addresses specifically those model examples of PPP projects, which comprise of regular payments
from the public to private partner in connection with implementation of a PPP project (in compliance
with PPP terminology these would be called ‘accessibility payments’). As described in more detail
elsewhere, these payments usually carry a certain portion which is in fact a repayment of the
investment made by the private partner, nevertheless these contain also a portion which serves which
9 Zde je nutno upozornit na zjevnou chybu v překladu české verze Rámce Společenství, který v první větě druhého odstavce zmiňuje „neziskové výzkumné organizace“ namísto „neziskoví zprostředkovatelé v oblasti inovací“ 10 Význam této problematiky pro analyzované téma spočívá také v tom, že většina představitelné spolupráce v rámci PPP modelu popsaného níže by v praxi byla realizována právě na bázi plateb za dostupnost.
52
is intended to cover operational losses of the project and the reasonable profit of the private partner.
The size of these payment is usually subject to bidding within the framework of the concession
proceedings, however with regard to the long-term nature of the relationship in a PPP project and
with regard to the difficulty to foresee economic development of PPP projects (such as changes in
operational costs versus changes of collected payments from end users or generated by commercial
activities) this could lead, in absence of a further contractual regulation, to advantage offered to the
private partner and which would thus constitute prohibited state aid in the sense of Article 107 of
TFEU.
The European case law and soft law defines those categories where the Commission and ECJ
interpretation concluded that state aid is not involved (even though some of its attributes were
seemingly fulfilled), and when such support does not need to be notified.
5.2.1. Altmark decision - situations which do not constitute state aid
In the Altmark11 decision the ECJ interpreted the issues related to the so-called compensation
payments in the sense that if the following conditions are met, the compensations payment does not
constitute state aid:
Entity which is the recipient of the compensation payment needs to be clearly obliged
to provide public service;
Indicators for the calculation of the compensation payment must be set prior in an
objective and transparent way;
The amount of the compensation payment shall not exceed costs accrued by the
entity during the provision of the public service after the corresponding revenues were
deducted and reasonable profit was added;
Entity entrusted with provision of public service was selected in compliance with
public contract proceedings on the basis of an open and transparent proceedings, or
on the basis of cost analysis, which would be expended on provision of such public
11 ECJ decision in the Altmark case (C-280/00)
53
service by an ordinary, properly managed enterprise, which possesses corresponding
technical equipment to provide such public service.
5.2.2. Decision on compensation payments – exemption from notification duty
Another group of cases where the four conditions formulated in the Altmark case do not need to be
fully met and where it is understood that the compensation payments represent state aid compatible
with internal market, and which do not require notification, have been defined in the Commission
Decision dated November 28, 2005 on the application of Article 86(2) of the EC Treaty to State aid in
the form of public service compensation granted to certain undertakings entrusted with the operation
of services of general economic interest (Decision on compensation payments).
Exemptions granted by the Decision are based on the factor of the total size of payment and the sector
in which the public service is provided. From the viewpoint of the present Methodology this is material
in allowing payments to cover potential operational loss and reasonable profit of the operator12.
5.2.3. Community framework of public service compensation
Complementary regulation of the above situations is then contained in the Community framework for
State aid in the form of public service compensation. (2005/C 297/04)(Community framework for
public service compensation).
Community framework for public service compensation formulates conditions under which the
Commission shall declare, within the framework of its notification, the potential compensation
payment to be compatible with internal market.
12 Art 5 of the decision on public service compensations
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5.3. Private investor principle (private creditor)
Another situation, which could typically be viewed as provision of state aid, has been addressed within
the framework of interpretation what constitutes the so-called private investor principle, respectively
private creditor. This principle applies to cases where the public entity is a creditor, or has a share in a
private entity and provides this entity with certain benefit, typically in case where such entity would be
in a economically difficult position. Such ”benefit”, in the view of state aid terminology, could take the
form of a portion of debt being remitted, agreement on an instalment schedule, settlement agreement
etc. Czech case law13 contains an interpretation that if such benefit would be comparable with a
hypothetical behaviour of a private investor (i.e. that the public entity does behave in a similar manner
a private investor would – as a prudent manager protecting its economic interests), such conduct
would not constitute state aid.
The private investor principle could however be applied to an entire range of other cases, typically also
to institutional PPP and to potential subsidies to establish a legal entity. In this sense this would be
material for the theme of the present Methodology.
5.4. Public assets sales
Another situation which would potentially pose a risk of constituting state aid, or which would
seemingly meet its attributes, would be a situation where the public entity would transfer ownership
title, namely to real estate, to a private entity. Such method would be typical for some of the above
described most common PPP models.
This issue was also addressed previously by the ECJ. The conclusions contained in its rulings were
summarized and formulated by the Commission in its communication on state aid elements in sales of
lands and buildings by public authorities (97/C 209/03).
The communication contains definition of methods which, if observed, would not trigger the need to
13 For instance SPI decision in the grouped cases T-129/95, T-2/96 and T-97/96 Neue Maxhütte *1999+ ECR II-17 and ECJ decision in the C-342/96 Tubacex [1999] ECR I-2459 case
55
notify such transfer transactions. In simplified for, the main criterion for pronouncing such transaction
as not containing elements of state aid, is that such transfer was made for a market price, which was
verified in an open and unqualified bidding procedure by selecting the best or the sole bid, which was
in turn verified by an expert’s appraisal.
56
6. Reasons to combine PPP and funding from OPEI (or a similar
operational programme in the next programming period) and the
possibilities of support of PPP projects under OPEI
The authors of this Methodology are, on the basis of the analysis of the above mentioned facts and
documents, of the opinion that there exists a number of reasons to combine PPP method and
processes with funding from OPEI, and that both for the reasons of the necessary support to PPP in the
existing environment related to PPP in the Czech Republic, and also from the point of view of
suitability of support to PPP projects from OPEI with respect to the fulfilment of goals in the individual
priority axes. These reasons can be formulated as follows:
PPP = partnership and cooperation of the private and public sectors which in its nature
fulfils the aims of some of the priority axes of OPEI (specifically the indirect, mediated
support of the entrepreneurial sector);
PPP almost always leads, thanks to the synergy of the private and public potential, to
improved support and development of business, which allows both the private and
public partners (from the viewpoint of the goals and focus of the OPEI) to receive
support (which is, from the viewpoint of PPP, often more appropriate);
PPP – entrusts a public service (a service of a fundamentally economic interest) to a
private partner – often incorporates elements of needed improvement or innovation
of the existing operation; in material extent thus, to some degree, substantiates
application of support from OPEI;
PPP - the generally accentuated issue related to implementation are the relatively
higher initial costs for the preparatory phases of projects (consulting services,
feasibility studies, concession projects, management, which applies both to the public
partner and to the applicants), which the OPEI is able to partially resolve by suitable
subsidy policies applicable to public partners as well as to potential applicants;
PPP often excludes SMEs, thanks to the usual pre-sets of concession proceedings, due
to their lower economic strength (lower ability to obtain loan facilities) – a suitable
financial instrument within OPEI could, in marginal extent and under condition of strict
57
adherence to the requirements of anti-discrimination in concession proceedings,
provide the necessary comparative advantage to participate in the concession
proceedings, and thus to support a real chance to a successful partnership in a PPP
project, and to break the existing actual preference of larger enterprises, at least for
the smaller PPP projects.
In general, it is possible to envisage a support of a model PPP project under the PROSPERITY
programme in all its basic phases, i.e. in its initial preparatory stage (covering primarily the cost of
consulting), but also in the investment stage (subsidy aimed at the investment) and marginally also on
some parts of operations; the potential recipient may either be the private or the public partner.
PPP project with OPEI elements
Concessionary
Support to consulting
Feasibility study for PPP project
Support of consulting to
SME
Support of investment/opera
tions
Support of ‘innovative’ investment
Subsidy of start-up of innovated
operations
Support of SME investment
Concedent / public partner
Support to consulting
Support of feasibility study
Support to consulting
Support of investment
Support of ‘innovative’ investment
Public partner
Planned innovation of operationsi
Need to invest into operations
Planned cooperation with private partner
operations –public service
Figure 11: Alternatives of providing support to a PPP project from OPEI
Source: HOLEC, ZUSKA& Partneři.
58
As summarized in the introduction of the present Methodology, the authors focus on potential
support of the PPP projects within the framework of the PROSPERITY programme.
6.1. Risks and obstacles of combination of PPP project with funding from
OPEI
This chapter summarized the specific risks and obstacles to funding of PPP projects from OPEI. Within
the framework of analysis of these obstacles the authors focus on the more exact definition of the
commissioned analysis which has been requested to reflect funding of PPP projects under the
PROSPERITY programme.
6.1.1. Scheduling, organization and technical problems
One of the generally known obstacles to combination of funding of PPP projects from structural funds
is the problem of scheduling. This problem is based on the fixed time-frame of the programming
period, the actual availability of funds to be disbursed and on the actually insurmountable rule of ‘n+2;
on one hand and the typical length of PPP projects, which may extend to decades, on the other hand.
A significant scheduling and organizational (technical) obstacle is also posed by the temporal intensity
necessary to prepare PPP project, not only with respect to deadlines defined for individual steps within
the specific call issued under the programme, abut also with respect to the duration of the
programming period.
In the given situation, when the current programming period enters its second half and there are only
three years before the current programming period ends, bearing in mind that the last eligible cost
may be disbursed before the end of 2015, this particular obstacle gains further significance.
Evaluation of the obstacle vis-à-vis the Methodology:
The scheduling issue needs to be viewed on two levels:
59
Specific call within the framework of OPEI supporting PPP projects should stipulate
longer deadlines namely for the submission of project applications (in order to allow
for a sufficient time to prepare a new or revised PPP project). In this sense, it is
necessary to refer to available experience according to which the preparatory phase
of a larger PPP project may take more than one year.
The scheduling issues also applies to a large degree on the potential sectors of eligible
costs, where:
o Nothing would bar specific support provided in connection with consulting related
to PPP, or possibly other activities within the framework of preparatory phases of
a PPP project;
o Support of the investment phase of a PPP project could be considered more or
less only in case of an already prepared or currently contemplated PPP project;
o Support of the operational phase of a PPP project would be (if we look away from
the general limitation of funding of operational costs from structural funds) in
reality rather limited.
6.1.2. State aid
State aid represents one the fundamental barriers in interaction between the public and private sector,
both in connection with PPP and OPEI.
State aid issues need to be resolved on the level of the funds grant, as well as on the level of
interaction of the recipient with other entities, and on the level of disposition with the assets acquired
with the assistance of the grant (here, the issues related to the so-called hidden or indirect forms of
state aid arise)
In the introduction to this sub-chapter is should be noted that under the PROSPERITY programme,
there exist two basic regimes under which grants are provided:
A grant may be provided “within the regime constituting stat aid”, in compliance with
60
the so-called aid intensities under regional aid maps in accordance with Regulation
800/2008/EC;
Or in the form of a grant provided within the framework of the PROSPERITY
programme where the grant is provided outside the regime of state aid, which is
provided on the basis of conditions formulated by the Commission within the
framework of the pre-notification procedure within the PROSPERITY programme. Aid
granted in this regime does not constitute public aid, as its recipient acts as a not-for-
profit innovations intermediary and the received aid is passed, in the de minimis
regime to the end users in the forms of advantage in providing services in comparison
with market prices. The subject of consultations within the framework of pre-
notification procedure, nor in the approved conditions, did not include accession of a
third subject – concessionary acting as the provider of public service, in the form of
cooperation based on PPP.
Evaluation of obstacles in relation to the focus of this Methodology:
State aid represents significant obstacle to the analysed possibility of supporting PPP
projects from OPEI, and that is mainly due to the fact that the current conditions
formulated by the Commission outside the regime of state aid under the PROSPERITY,
in the opinion of the authors, do not allow potential private partner to act as the entity
which would pass on the represented by the aid to the end users. The contents of the
call of the support programme, which would include this specific support – aid
provided to public partner outside the regime of the state aid, with the option to
implement the project in the form of PPP, should be discussed within the pre-
notification procedure, or possibly notified to the Commission.
Due to prohibition of indirect state aid a call realized under OPEI, or in the next
programming period, should formulate binding parameters for concession
proceedings, specifically the mandatory contractual mechanisms ensuring reasonable
profitability for the concessionaries (including the method of definition what
reasonable profit entails), and also for the observance of conditions related to the
passage of the aid value so as to maintain the regime of the not-for-profit innovations
intermediary in compliance with Article 3.1.2. of the Community framework, i.e.
separate records which would draw clear division between benefits obtained from the
61
implemented investment, and the value passed onto the end user in compliance with
the conditions formulated by the Commission.
State aid issues are also a determining factor in relation to who would be the
appropriate recipient of the aid between the public and the private partner. In order
that the granted aid under OPEI maintains the motivating element from the viewpoint
of support provided to PPP, it would be advisable that the aid provided in connection
with the investment made would be directed, in the regime not constituting state aid,
to the public partner, who would then take over the management of infrastructure
under conditions primarily prohibiting occurrence of indirect forms of state aid.
6.1.3. Issues related to revenue-generating projects in accordance with Article 55 of
Regulation 1083/2006/EC
Another specific obstacle for funding of PPP projects from OPEI is related to the so-called revenue-
generating projects in the sense of Article 55 of Regulation 1083/2006/EC.
These issues related to Article 55 have impact on:
projects funded from the European Regional Development Fund or from the
Cohesion Fund, whose total cost exceed EUR 1 million;
and which are simultaneously not funded in the regime that would constitute state
aid according to Article 107 TFEU et seq.
A revenue-generating project is defined by the above provisions as
any operation involving an investment in infrastructure the use of which is subject to
charges borne directly by users; or
any operation involving the sale or rent of land or buildings; or
any other provision of services against payment.
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The basic rule for revenue-generating projects is that the eligible costs shall be deducted pro rata to
the generated net revenue, respectively only by the part corresponding to the amount of co-financing
from the structural funds.
This can be simplified by saying that the need to calculate funding gap and the net revenue in the
sense of Article 55 arises:
during the period before the grant for projects where the revenue is possible to
estimate with its potential impact on the deduction of eligible costs at the time of their
disbursement;
subsequently, for the purposes of corrections of the estimates, or in the cases where
the estimates do not exist – with the potential impact of the subsequent deduction of
costs.
In this connection it should be noted that any PPP project preparation will involve preparation of the
concession project, whose always integrates an estimate of the concessionary’s anticipated revenue.
As a rule, it will always be possible, using the documentation prepared for PPP project, to estimate
such revenue, and thus to resolve the issue related to eventual deduction of the eligible costs pro rate
to the net revenue already in the preparatory phase of the project.
These issues were addressed by a number of methodologies, and this Methodology considers relevant
primarily the Commission Recommendation for COCOF dated 18. 6. 2008 - note on application of State
aid rules (Article 55 of Regulation 1083/2006/EC) and the Methodology on deductions of revenue
issues within the framework of OPEI.
Several basic models may be considered in connection with combination of PPP methods with funding
from the structural funds, in terms of regulation of financial flows for the purposes of calculation of
the funding gap and net revenue.
Within these models, it may however be often debatable how to figure in the individual financial flows
in a PPP project into the calculation of the funding gap, and that often in dependence on the
63
regulation of financial flows within the framework of a PPP project (for instance, payments from end
users directly to the public partner, or through the private partner acting as intermediary etc.).
This present a question on what level (what level of which entity) it is necessary to calculate the
funding gap, i.e. whether on the level of the public partner who is the recipient of support, (who does
not need to be the recipient of the generated revenue), or on the level of the private partner, for
whom the payment for the concession represents a cost, while for the project the same payment
represents revenue generated in exchange for the use of infrastructure.
With regard to the fact that the available methodologies do not address these issues, it would be
advisable to consult them within the framework of preparation of operational programme or of the
individual calls, in connection with preparation of relevant methodology with the Commission.
This Methodology presents in the text below an outline or relevant approaches to the calculation of
funding gap and its possible alternatives. Taking into account the prevalent interpretation of Article 55,
we base these models exclusively on financial flows based on revenues and expenses. For the sake of
simplicity, this involves a listing of several typical models from the viewpoint of their financial flows.
The diagrams and the text assume that the individual financial flows in place within the framework of a
PPP project fully coincide with the financial flows that are relevant from the viewpoint of a concrete
project under OPEI, however in practice the situation may become more complex. For this reason, it
may be necessary in specific projects that the private partner would be obliged, in reporting to the
public partner, to separate their records of financial flows falling under specific projects under OPEI
and having effect on the calculation of the net revenues and on the funding gap from the other
financial flows achieved within the given PPP project.
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6.1.3.1. PPP project or a quasi-PPP project with payment by end users directly to the public
partner based purely on accessibility payment provided to the private partner
Figure 12 - Model of financial flows for combination of PPP and OPEI funding based on accessibility
payment and payments of end users directly to the public contracting authority
Source: HOLEC, ZUSKA & Partneři
This model counts on the implementation of the investment phase by the public partner using OPEI
funding and its own funding, or potentially, using additional funding provided by private partner. The
investment phase may or may not be implemented by the private partner.
The operational phase counts on all services provided within the concrete OPEI project by the private
partner, who will be, in compliance with the current definition of OPEI, entrusted to pass the full value
onto the end user.
65
This model counts on the fact that the negative operational balance of costs including the reasonable
profit of the operator will be compensated by an accessibility payment.
In the initial phase it will be necessary to consider also some of the other costs accrued by the public
contracting authority besides the accessibility payment (such as administrative overhead).
End users pay, within the framework of this model, directly to the public contracting authority, which
uses this revenue to fully cover operational costs and the reasonable profit, in the form of accessibility
payment, to the private partner.
This model is based on the negative difference between the operational costs and revenues collected
for the provided of the service, which is, in the experience of the authors with existing project, a rather
typical situation.
The advantage of this model is its greater exactness and simplicity of calculation of the funding gap.
From the point of view of PPP theory, this model is however problematic as the risk of due payment
from end users remains to be borne by the public contracting authority, which does not necessarily
offer an advantage, and moreover, it may be debatable whether there would be any material
handover of the risk to the private partner, which is necessary to fulfil an important attribute of a PPP
project in its narrower sense. From the accounting point of view, this model would be acceptable only
in situations where infrastructure is being leased and/or technical services.
Within the framework of this model it would be possible to calculate the funding gap exclusively on
the level of revenues and costs on the part of the public contracting authority, where the material
portion of the accessibility payment (covering the operational loss and reasonable profit of the private
partner) would represent a cost expended in order to generate revenue in the form of payment from
end users.
Available methodologies and the wording of Article 55 however permit also a different interpretation
(which seems to the authors of the Methodology somewhat absurd), under which the accessibility
payment (or the portion corresponding to the reasonable profit) could not be counted, for the sake of
calculation of the funding gap, against the revenue generated from the end users.
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6.1.3.2. PPP project with end user payments to private partner based purely on accessibility
payment to the private partner
Figure 13 - Model of financial flows for combination of PPP and OPEI funding based on accessibility
payment and payments of end users directly to the private partner
Source: HOLEC, ZUSKA & Partneři
This model counts on implementation of the investment phase by the public contracting authority
using funding from OPEI, and on complementary funding secured by the public contracting body,
potentially with sources provided by the private partner.
In operational phase, all services provided within the framework of a concrete OPEI project will be
provided by the private partner, who will be, in compliance with the current definition of OPEI,
entrusted to pass the full value onto the end user. The potential negative operational balance between
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revenues and costs on the part of the private partner shall be compensated by the public partner in
the form of the accessibility payment.
From the viewpoint of regulation of the involved financial flows this model features, in comparison
with the previously discussed model, a larger degree of attributes of a PPP project, where the collected
revenue is administered directly by the concessionary, and thus bears the risk of collection of
payments form the end users.
Using this model, the obstacles related to calculation of the funding gap may be well illustrated in case
of accession of a private partner into the project. The following approaches to calculation of the
funding gap and net revenues may be simply considered:
Calculation on the level of the public contracting authority
In those cases, where the sole financial flow in the operational phase would be the payment of the
public contracting authority to the private partner, it might seems that the project does not generate
any revenue at all. Such approach would however not be correct, because the wording of Article 55, as
well as other available methodologies implies, that it is not a decisive factor who is the recipient of the
revenue from the infrastructure users.
Calculation on the level of the private partner
This approach would be more appropriate for the sake of calculation of the net revenues, because it
does take into considerations the financial flows in the form of gross revenues for the use of
infrastructure, as well as of the total operational costs on the part of the infrastructure operator;
however, these cannot be use for calculation of the funding gap, as they do not reflect potential
financial flows on the part of the public contracting authority, who would be the recipient of the aid
and the primary party responsible for the calculation of the funding gap.
Complex calculation – combined balance of revenues and costs
The third possible approach is the more complex calculation based on the inclusion of revenues and
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costs on the part of both participants, i.e. the public contracting authority and the private partner,
provided that:
A portion of the concession payment corresponding to pro rata coverage of the
negative operational balance and reasonable profit of the concessionary would be
calculated as a cost of the public contracting authority and a revenue of the private
partner;
Operational costs on the part of the private partner would be calculated as cost of the
project;
Other potential operational costs on the part of the private partner would be
calculated as cost of the project;
Cost of provision of services subject to the project would be costs of the private
partner;
Revenue form the end users would be calculated as revenue of the private partner;
and
The net revenue for the calculation of the funding gap would be calculated as the sum
of the operational balance of revenue and costs of the private and the public partner.
This approach, notwithstanding its complexity, appears to represent the most appropriate approach,
because it reflects economic specific of the cooperation in the form of PPP, as well as the logic of the
regulation of revenue-generating projects contained in Article 55 of the Regulation 1083/2006/EC and
the published methodologies.
The following model example of calculation of net revenues in one operational cycle of the project
follows:
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As shown in this calculation above, the net revenue in this model will be as a rule negative, and as such
it will not influence eligible costs of the project (OPEI) in the sense of Article 55.
6.1.3.3. PPP projects with end users payment to private partner based on concession payment
(“profitable projects”)
70
Figure 14 - Model of financial flows for combination of PPP and OPEI funding based on concession
payment and payments of end users directly to the private partner
Source: HOLEC, ZUSKA & Partneři
This model differs from the previous models in the fact that the payments from the end users will
exceed the cost of providing the service to the aid recipients to such a degree that even if reasonable
profit of the private partner is covered it will allow the so-called concession payment by the private
partner to the public contracting authority.
Even here the net revenue will need to be calculated, in the sense of Article 55, on the basis of
combination of revenues and costs, as given above.
The following model example of calculation of net revenues in one operational cycle of the project
follows:
As shown by the above model calculation, this model will generate positive net revenue, a thus the
deduction of eligible costs will need to be carried out, whether during the preparatory phases of the
project or subsequently when the funding from the structural funds is added. This may appear as a
certain demotivating element, both for the private partner and the public contracting authority; in the
given example the otherwise economically logical efforts of the private partner aimed at achieving of
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positive net revenue (by making the operations more effective) may lead to the project becoming
more expensive. On the part of the public contracting authority this will lead to the increased own cost
of the investment itself, which may negatively reflect itself in the reduction of the concession payment.
Figure 15 – Model of financial flows for combination of PPP and OPEI funding based on concession
payment in the form of deductions from end users directly to the public contracting authority.
Source: HOLEC, ZUSKA & Partneři
For this model the above remains valid, with the difference that the operational costs of the project
implemented by the private partner would be covered, including his reasonable profit, in the form of
deductions from the payments made to the public contracting authority. This model thus differs from
the above model only by the technical difference in processing the payments.
Evaluation of obstacles vis-à-vis the Methodology:
The issues related to revenue-generating projects represent several obstacles for funding of PPP
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projects from OPEI on the two following basic levels:
These issues increase with the accession of the private partner into the project by his
intentions to achieve a profit for himself, or to increase the net revenues of the project
while, from the viewpoint of the PPP project as a whole, further generation of profit
on the part of the concessionary reduces eligible costs of the project, which may have
demotivating effect within the framework of regulation of relations in the PPP project,
which is in contract with the traditional implementation of projects under PROSPERITY
programme, for instance, which are typically, according to the experience of the
authors of the present Methodology, loss-making with regard to net revenues.
The issues related to deductions in eligible costs represent another obstacle in the
sense that in typical projects, within the framework of contractual relationship
established between the public and private partner, there occurs a certain fusion of
economic factors, such as of, for instance, investment costs, operational costs,
financing costs, risk-related costs etc. into one uniform system of payments, which is
usually based on one periodic accessibility payment or concession payment. A PPP
project funded from OPEI will need to ensure rigorous separation of accounting and
reporting in the sense required by funding standards from OPEI (project application,
decision on the grant of aid) and in the sense of PPP project standards (concession
proceedings, concession contract) and to regulate economic relations in the
concession contract as required, in order to clearly separate these two spheres, so
that the funding gap may be at all calculated. That however leads to increased
intensity during the preparation of the PPP project and on the documentation for the
concession proceedings.
Within the framework of support of PPP project from OPEI or a similar future
programme it may be necessary that a separate methodology addresses the funding
gap calculation itself, which would specifically reflect particulars of PPP projects
funded from structural funds.
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6.1.4. Issues relating to the integration of the concession proceedings with OPEI
application
Another significant obstacle, which is related to scheduling and technical and organizational aspects,
would be the integration of the OPEI application submission and its approval within a project realized
under OPEI with the process of preparation and implementation of a PPP project. The problems of
combining PPP and funding from OPEI arise mainly due to the complexity and time-related intensity of
both processes, as well as from practical need to maintain certain degree of flexibility during the
preparation and implementation of the PPP project. This stands against the need to flexibly react, by
individual calls within the framework of OPEI, to the status of individual projects being implemented
under OPEI and to the disbursement of allocated funds.
Another important problem that needs to be resolved within the framework of this obstacle is the fact
that PPP projects often require modifications of their objectives during the concession proceedings,
which is true especially for and larger more complex projects, where it is difficult to accurately assess
the preferences and possibilities of the private partners. These modifications do usually take place
during the qualification proceedings in the so-called concession dialogue stage or during the optional
stage during the so-called bid negotiations. The authors of the present Methodology are of the opinion,
based on their experience with PPP projects, that it will be necessary to use these two institutes in the
sphere of innovations, which will lead to modifications of the PPP projects on the basis of interaction
with the applicants.
The last important problem, which will need to be addressed within this obstacle, is the application of
selection criteria in those phases when the private partner has not yet been identified and in cases
when the final shape of the project is not yet known.
Here, one needs to consider that contrary to traditional situations where the infrastructure is operated
directly by the aid recipient, who is able to define the objectives at the very beginning on the basis of
an internal analysis of his possibilities (which can then be subject of evaluation), the situation in
eventuality that project would be realized in the form of PPP would be rather different. In PPP, the
project is often finalized only on the basis of interaction with the applicants during the concession
proceedings. Such need for later finalization may be less evident in smaller sectors, where there is a
large competition and where conditions can be easily monitored (for instance in the highway
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construction sector). However, in the innovative services sector, such need to finalize the project later
with the benefit of interaction with applicants may be significantly larger.
Selection criteria may also include parameters that are wholly in control of the person who
implements the project (such as its history, experience, qualifications of the team members etc.). In
traditional projects, these are usually the aid recipients, or their colleagues, who are known in advance.
In PPP projects the majority of such parameters may be discovered only at the moment when the best
bid was selected in concession proceedings.
In relation to the two problems noted above, it will be necessary to resolve, which of these criteria
having direct influence on the quality of the project, will need to be applied
as selection criteria within the framework of ‘procedure’ for support form OPEI;
as criteria applied during potential regulated influence of the Managing Authority
during concession proceedings;
as criteria, conditions or binding parameters of the concession proceedings or binding
terms of the concession contract.
The answers to these questions are tied to the contemplated role of the Managing Authority (MA) in
the individual phases of the concession proceedings:
without MA’s participation;
with passive participation – MA as observer;
as an entity authorized to wield its binding influence into the concession proceedings, i.e. such
as entity authorized to assess qualifications of applicants, or to submit or not submit
documentation used in evaluation of the bids.
The definition of potential involvement of MA would need to be regulated within the framework of the
general conditions of the programme for individual calls or its annexes, and their specifications could
not obviously be modified ad hoc. The authors of the present Methodology are of the opinion that the
current regulation of concession proceedings does in principle allow for interaction of MA into the
process of private partner selection. It can be imagined, for instance, that a mandatory condition
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within the framework of the concession proceedings / qualification proceedings would be inserted in
the form of an approving standpoint of the MA to the qualification of the applicant, or within the
framework of the contracting documentation which would require that the execution of the
concession contract would be subject to an approval by MA. Such procedure would constitute a
mandatory regulation of concession proceedings stipulated by MA and implemented voluntarily by the
contracting authority within the framework of certain freedom of concession proceedings authorized
by the Concession Act. Any such influence effected by MA during concession proceedings would need
to be regulated beforehand by detailed conditions (for instance for the standpoint relating to
qualification) similar to the existing binary exclusion criteria so that such influence could not be
contested as discriminatory14.
In this sense, three basic alternatives could be considered as analysed in the following three
subchapters.
6.1.4.1. Model concession proceedings followed by application for support
The first alternative considers a model where the concession proceedings selecting the concessionary
will take place first, then the concession contract will be signed and only subsequently the application
for support from OPEI will be submitted (in order to finance the investment, implemented within the
PPP project by the selected concessionary as the general contractor of the building, or by the public
partner as its contribution into the PPP project on the basis of a separate tender to implement the
investment provided that the concessionary’s role with be, for instance, facility management).
The advantage of this model is its greater suitability from the viewpoint of the current regulation of
OPEI. The authors of the present Methodology are of the opinion that this model is, with reservations
to certain other herein described obstacles and illegibility of some of the costs, in most instances
supportable already within the existing calls under the PROSPERITY programme. The private partner is
already known at the time of submission of application for support, as well as the complete team and
all other parameters of the project that are necessary for the evaluation on the basis of current criteria
14 In this connection, it should be noted that the decision-making practice of the Anti-monopoly office in the area of discrimination is interpreted relatively extensively.
76
and for the approval of the application.
The disadvantages of this model lie in the practical obstacles linked to the implementation of the
concession proceedings. This model does create a large degree of uncertainty within the concession
proceedings on how the PPP project will be financed. As shown by experience with PPP projects
implemented abroad with support from the structural funds, in these cases the private partners
demanded contractual guarantees for cases when the application for structural fund support would
not be successful. This would trigger the need to work with two funding alternatives during the
concession proceedings and in the concession contract. Such model, which would require that public
guarantee of alternative source of funding be obtained during within the concession proceedings in
case the OPEI support did not materialize, would also reduce the motivating effect of such aid.
Conclusion: This model would be, in the current situation of PPP projects in the Czech Republic, only
very difficult to envision, due mainly to its high demands on the concession proceedings and due to
the uncertain fate of the future project application under OPEI.
6.1.4.2. Model application for support first, then concession proceedings
The second potential model is a model where the application for OPEI would be submitted, evaluated
and approved first, and then, if successful, and if the MA would issue an assurance (containing at the
same time binding parameters for concession proceedings and concession contract), the PPP project
would be implemented through concession proceedings which would select the private partner.
The most obvious advantage of this model is its greater attraction for the PPP project (to be
implemented on the basis of the assurance for funding from OPEI) for the potential private partners,
improved certainty within the framework of the concession procedure, simplified concession
proceedings (within which no alternative source of financing would need to be secured, and to two
alternative solutions prepared) including maximalization of motivating effect for PPP projects in the
Czech Republic.
A disadvantage of this model would be a more complicated definition of potential call namely with
77
respect to a narrower room for evaluation criteria, where the identity of the private partner would not
be known on the date of submission of the project application (nor the identity of all key members of
the project team, etc.), nor would be the exact terms of cooperation between the private and public
partner.
Other disadvantages of such model would include no possibility of subsequent modifications of the
(PPP) project during the concession dialogue, or during bid negotiations. The concession dialogue itself
could however form an essential step in many PPP projects of the analyzed kind, due to the difficult
monitoring of the market during the preparation of the concession proceedings.
A possible solution to this disadvantage would be a definition of binding parameters for applicant
selections (for instance, by defining the qualification criteria) and conditions of cooperation between
the private and public partner (binding conditions in the concession contract).
Conclusion: This model of cooperation is also only very difficult to envision with regard to the
regulation of specific call within the framework of OPEI. From this viewpoint, any expansively (i.e.
broadly formulated call in the sense of application of selection criteria) formulated call for the support
of PPP projects could be viewed as discriminatory in relation to evaluation of projects which were
approached traditionally.
6.1.4.3. Potential synchronicity of both processes
The last imaginable alternative is the model under which both processes would run parallel with
possible element of influence of MA within the concession proceedings.
It is possible to imagine for instance the following synchronicity of individual steps in both processes,
with a certain degree of simplification in the following phases:
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Preparatory phase
Figure 16 Combination of preparatory phase of PPP and OPE processes
Source: HOLEC, ZUSKA & Partneři
At this stage, approximately during the first 6-month period, the primary stage of contemplating the
feasibility of the project with support from OPEI and with application of the PPP method would take
place. If these contemplations would lead to a potentially positive decision on the part of the public
contracting authority, it would submit a registration application within a concrete programme with
definition of the basic parameters (i.e. primarily identification of the applicant, maximum budget and
possibility of implementation in the form of PPP).
In the subsequent phase the preparation of the project application for support from OPI and the
preparation of the concession project for PPP would be carried out in parallel, including concession
documentation and draft concession contract. The preparation of the PPP project could form, from the
viewpoint of OPEI, an independent project with independent project application (in the Figure
denoted as Project application 1) with the possibility of the aid being granted only under the condition
79
of proper approval of concession documentation by the competent authorities (entities). The result of
this phase would be the approved concession documentation, which would define the basic
parameters of the concession proceedings (in the concession documentation) and the basic conditions
of cooperation with the private partner (within the framework of the draft concession contract).
Project application evaluation phase
Evaluation Evaluation /
selection criteria
Application 2 (innovations center)
Eval
uat
ion
of
Ap
plic
atio
n 2
an
d
com
men
cem
ent
of
con
cess
ion
pro
c.
3-4
mo
nth
s
Commencement of the concession
proceedings
Interlocutory decision on aid grant
Figure 17: Project evaluation phases under OPEI
Source: HOLEC, ZUSKA & Partneři
This phase, taking approximately 3-4 months, would comprise of the evaluation of the project
applications for the preparation of the PPP project and of the implementation of the project within the
framework of OPEI. In the phase the MA would apply those selection and evaluation criteria which
would enable project evaluation in the given phase (i) without knowing the identity of the private
partner and (ii) with the assumed definition of objectives of the PPP projects with the perspective for
certain modifications of the project at the concession dialogue phase or in the bid negotiation phase.
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The result of such evaluation should be the relatively binding interlocutory “decision” (in the Figure
denoted as “ID”) by the MA on the grant of aid with potential definition of conditions under which the
aid will be granted, and possibly with definition of binding parameters for the concession proceedings
and terms of the concession contract. Such decision may trigger the need to approve up-to-date
version of the PPP project and of the concession documentation. The purpose of such a decision would
be to provide, for the sake of the concession proceedings, the necessary degree of certainty that
funding from OPEI will be granted as long as certain conditions or certain criteria are met. From the
formal point of view, it would be up to the Managing Authority to select the appropriate legal and
procedural of such a “decision”. This may include an entire spectrum of acts, starting with a non-
binding promise, or declaration of general interest to support the project, up to interlocutory decision
or partial decision in accordance with Sec 148 of Act No. 500/2004 Coll., on Administrative Proceedings,
as amended.
Following onto the pervious steps, the public contracting authority and the future recipient of aid
would announce concession proceedings and commence its first phase – qualification proceedings.
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Concession proceedings stage
evaluation/ selection criteria
Imp
lem
enta
tio
n o
f th
e co
nce
ssio
n p
roce
edin
gs
5-8
mo
nth
s
Commencement of the concession proc.
Interlocutory decision to grant aid
Qualification proc.
Concession dialogue
Bid evaluation
Bid negotiations
Selection of applicant/ execution of
concession contract
Ch
anges in
the p
roject
Final decision to grant aid
Figure 18: Concession proceedings phase
Source: HOLEC, ZUSKA & Partneři
This phase, with estimated duration of 5-8 months, the concession proceedings would take place; this
opens a room for MA to influence the proceedings in instances previously defined in the
documentation to the operational programme.
Generally, it can be imagined that the MA would now have the chance to apply selection criteria
related to the person(s) entrusted to implement the project within the framework of the qualification
proceedings, for instance in the form of a binding approval of the MA in terms of programme
conditions being met of the private partner, as a condition for the qualification of the applicant within
the concession proceedings.
It could also be imagined, that the MA would participate in evaluation of the bids, for example by
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issuing a standpoint to certain part of the bids, which could have an impact (could serve as a binding
document for the assessment of the bids) on the points allocated to the bid (while preserving the
principle that the bids are independently evaluated by the public contracting authority), or by personal
representation on the part of MA in the commission evaluating the bids, etc. Direct involvement of the
MA in this phase of the proceedings would clearly be somewhat more problematical than involvement
in the qualification phase, specifically due the need to maintain the principle of impartiality in
evaluation of the bids.
During this phase, some modifications of the PPP project would be possible, especially during the
concession dialogue or, marginally, during bid negotiation. The concession documentation should
define that any of these changes would be at least notified to the MA.
The final result of any PPP project is the selection of applicant and execution of the concession
contract. In this phase, on the basis of the submitted decision on the selection of the best bid and on
the basis of an executed concession contract (including the standpoint issued by the CMF) the MA
would issue the final decision granting the aid.
Conclusions: the synchronous model alternative
The main advantage of this solution is the minimization of disadvantages illustrated in the previously
formulated alternatives.
Obstacles of this solution include:
greater complexity – the need of the specific detailed regulation for the support of PPP
projects under OPEI, including regulation on the level of procedural mechanisms;
the need to address modifications, for instance modification to the concession
contract which arose on the basis of the concession proceedings (a mechanisms for
granting approvals to such modifications by the MA would need to established);
the existence of a standpoint form the CMF constitutes a condition to validity of the
concession contract and the CMF currently issues such standpoint only once the
applicant was already selected.
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Conclusion: even this model represents a formidable task with respect to the OPEI regulation. It may
therefore be envisioned (in the next programming period) for instance within the framework of
implementation of the more individually evaluated major pilot projects (for instance in the form of
support of Major project for large infrastructure under OPR&DI).
Evaluation of the obstacles from the viewpoint of focus the present Methodology:
It would be necessary, within the framework of the potential specific call for support of PPP projects,,
to analyse the concrete possibilities of integration of the aid application process with the process of
preparation and implementation of PPP project, specifically in relation to the current legislative
regulation of the concession proceedings.
The authors of this Methodology are of the opinion that the most appropriate form will most often be
the synchronous run of both processes provided that it appears workable that the operational
programme documentation would also define certain binding parameters for the concession
proceedings, including potential influence of the MA during the individual phases of the concession
proceedings, as illustrated above.
6.1.5. Sustainability and compliance with other OPEI terms
Another obstacle to the support of PPP projects under OPEI is the issue related to compliance with
OPEI conditions, primarily in connection with the sustainability of the project and specifically, in case
of the PROSPERITY programme, with passing the value to end users.
This obstacle arises from the very nature of the contemplated project, where the private partner
within the framework of PPP takes over a material portion of tasks of the public partner in connection
with facility management of science and technology park, innovations center, business incubator or,
potentially in the future, the innovations center of the existing OPR&DI center (Innovations center).
This creates a situation where, in accordance with decision granting the aid, the public partner, as the
recipient of the aid, is responsible to the MA for compliance of terms stipulated by operational
programme documentation, but where the actual implementation of these terms is in the hands of a
third party – private partner (concessionary).
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With regard to issues relating to operation of Innovations-center-type-of-facility, another obstacle may
also be created by one of the motivating factors of the private partner in the sense of making the
operations of the center more effective and minimizing operational loss. Should the private partner
handle the operations of the center conservatively, in order to minimize its operational losses, such
approach may lead to the reduction of value passed onto the end users, to the smaller number of
supported riskier project, and eventually lead to a situation where the aims of the project would not
be fulfilled, which is, among other, elimination of market failure which lies in the conservative
approach of developers and other lessors. On the other hand, it is necessary to realize that the reason
for invitation of a private partner does not rest with the reduction of the financial losses (financial
benefit), but also in overall improvement of the provided services, and improved management of the
infrastructure, which should have positive impact within the given region.
Evaluation of the obstacles in relation to the focus of the Methodology:
Within the framework of solution of this obstacle the following measures could be considered by the
MA:
The OPEI documentation of another similar programme to define certain basic
requirements of the concession proceedings and concession contract (among other,
besides the general liability of the private partner for compliance with conditions
under which aid was provided, also compliance with the entire OPEI documentation,
specifically in the area allowing supervision of the private partner);
Within the framework of approval of the project application, the MA to define other
binding principles of cooperation which should e reflected in the correct adjustment of
motivating mechanisms contained in the concession contract, so that the
concessionary is primary economically motivated to fulfil the conditions of the
operational programme.
In this sense, it is up to the MA to consider, in accordance with the concrete regulation of the
programme, to what degree it will influence, or maintain control over the regulation of relations
between the aid recipient and its private partner who is entrusted with the actual provision of the
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public service. There is no doubt that in certain cases it will be possible to proceed under the
assumption that compliance with the programme terms is the matter of the public partner, as the aid
recipient, and that it is up to him to secure such contractual terms with the private partner, which will
lead to such compliance. In the more complex cases, with higher threat of risk tied to the accession of
the private partner, posed for the MA as well as for the aid recipient it would make sense that the MA
would influence, at least in some minimum degree, these relations. The purpose of such interventions
would not need to be limited to efforts preventing risks, but also a general attention of the MA to
improve the quality of the implemented project, among other in connection with the integration of
processes related to evaluation of project applications seeking aid, and the concession proceedings,
where the room for evaluation of the project narrows down due to the fact that the application is
being evaluated when the private partner is not yet known.
6.1.6. Impact of legislative amendments, considerations de lege ferenda
Other general obstacles for combinations of PPP and funding under OPEI may be created by the future
legislative amendments. This is a problem that would need to be addressed in PPP projects with
concession terms exceeding horizon of 10 year, for example. Within the framework of such projects
the legislative factors enters the frame as well as other economic and social changes. One of the
possibly applicable and comparatively effective approaches is to maintain a certain flexibility of the
contractual relation within the framework of PPP cooperation. Such approach might not however be in
compliance with the need to regulate, relatively rigidly, these relations from the viewpoint of
implementation of the project under OPEI.
A certain mechanism that could assist in resolving this problem would be the contractual mechanism
for amendment of the concession contract with involvement of the MA. This obstacle might not be
relevant in all cases – operational programme documentation may for instance generally exempt
changes to the concession contract, which would not affect the programme terms in terms of
sustainability, from the regime of mandatory approval by the MA.
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6.1.7. Situation on the Czech aid ‘market’ (OPEI, OPR&DI, OPEC) in relation to a typical
solution of economics of Innovations center
Another obstacle, which the authors of the Methodology discovered during their market survey, is
related to the current situation in the system of granting aid in the Czech Republic in connection with
the typical economical arrangement of a typical innovations center in the Czech Republic.
According to the experience of the authors of the present Methodology, the majority of the existing
and future projects contemplating creation of science and technology parks operated by the public
(not-for-profit) entity maintain an immanent, approximately 30%, operational loss. A part of these
projects is thus the effort to cover these losses from own, public, sources, and potentially with the
assistance of funding from the existing and planned aid programmes.
A certain problem, which was communicated to the authors during their consultations in connection
with the questionnaire investigation, was the anxiety that at the moment the private partner joins a
project as a manager of the Innovations center, such private partner will find himself at a significant
economic disadvantage which lies in the generally fewer possibilities available to the private partner to
cover the immanent loss of the center from these ‘public’ sources, because he will not be eligible to
receive aid, or if eligible, then with a significantly lower percentage of compensation of eligible costs.
A possible solution of this obstacle would be to adjust the PPP project so as to make the public partner
the recipient of aid. The authors of the present Methodology are however of the opinion that this
might not be always possible.
6.1.8. Current development in the area of PPP in the Czech Republic
The final obstacle to combination of PPP and funding under OPEI would be the general lack of
confidence in PPP projects in the Czech Republic, and insufficient political support of PPP. Besides that,
the ongoing PPP projects in the Czech Republic are typically implemented in areas falling under other
operation programmes than OPEI. Political support is usually granted to transportation projects, which
would as a rule not be eligible, due to the arrangement of operational programmes in the Czech
Republic, to receive aid under OPEI.
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6.2. Analysis and evaluation of the application of PPP principles within the
framework of OPEI to date
Within the framework of this Methodology the authors thoroughly investigated which of the aid
programmes would be appropriate for support of PPP projects taking into account the PPP situation in
the Czech Republic, and whether there are instances where the OPEI already effectively support
projects and PPP methods. The results of this investigation are summarized in the following table.
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Priority axis
Area of intervention Programme Programme aims Possibility of application of PPP model
1. Creation of enterprises
1.1 Aid to starting entrepreneurs
START Promote implementation of business plans for starting entrepreneurs for the first time or after a longer break by providing support in the form of interest-free loans or preferential guarantees with financial contributions on top of the guaranteed loan.
In principle NO, the possibility to apply PPP in start-up is minimal
1.2 use of new financial instruments
2. Development of enterprises
2.1 Banking instruments supporting SMEs
‘ZÁRUKA’ [GUARANTEE] Using preferential guarantees and preferential guarantees with financial contribution on top of guaranteed loan to facilitate implementation of business projects of small and mid-sized enterprises, focusing on investment and improved competitiveness of such businesses. Emphasis is placed on the support of projects submitted by SMEs in regions enjoying concentrated support of the state.
In principle NO, the possibility to apply PPP in start-up is minimal
‘Rozvoj’ [Development] Supporting increased output and competitiveness (flexibility) of SMEs leading to their improved position on the market and in this connection also the sustainability or increase of jobs. Support within the ‘Development’ programme will be channelled into regions enjoying concentrated support of the state, as defined in the Annex to the Government Decree No. 560/2006, Government Decree No. 829/2006, and into region with higher unemployment rates defined by methodology for the selection of these regions, which is attached as Annex 1 to this programme.
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‘PROGRES’ [PROGRESS]
a) Using support in the form of subordinated loans to strengthen capital facilities of entrepreneurs up to the period of 6 years, to allow implementation of development business projects for SMEs, which face the barriers of external funding due to lower own capital funds or limited availability of security for loans. The programme also seeks to motivate entrepreneurs to increase employment, by providing a financial contribution on top of the subordinated loans; b) using support in the form of preferential loans and preferential guarantees with financial contribution to the guaranteed loan to allow implementation of project by SMEs in energy sector, which seek to reduce energy consumption and improved energy efficiency of energy production (see annex to programme for more details).
2.2 support of new production technologies , ICT and selected strategic services
‘ICT V PODNICÍCH’ [ICT in Enterprises]
Supporting competitiveness of SMEs through qualitative increases of their potential in the area of acquisition and utilization of modern information and communication technologies (ICT), respectively supporting ICT in order to increase efficiency of SMEs.
In theory, YES, but in practice the potential PPP projects would rather fall under OPE, OPIRC, OP transportation and similar.
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‘ICT A STRATEGICKÉ SLUŽBY’
[ICT AND STRATEGIC SERVICES]
Supporting competitiveness and growth of the ICT sector in CR, supporting new information systems, ICT solutions, new software and services. Programme also focuses on development of information knowledge society. Promoting availability of information on ICT products. Furthermore, the programme supports selected strategic services which are narrowly tied to information and communication technologies with significant international focus, which could lead to reduction of cost intensity of processes and improved efficiency of enterprises, thus increasing their competitiveness. Development of human resources (mobility) and creation of qualified of service sector jobs
3. Effective energy
3.1 Energy savings and renewable sources of energy
‘EKO-ENERGIE’ [ECO ENERGY]
Using aid or subordinated loans with financial contribution in order to stimulate entrepreneurial activities, especially of SMEs in the sphere of reductions of energy intensity of production, consumption of primary energy sources and increased use of renewable and secondary sources and their sustainable growth. Support is provided to projects which aim: • to reduce energy intensity on production unit while maintaining long-term stability and availability of energy for business sphere, • to limit dependence of the Czech economy on imports of energy commodities, • to reduce consumption of fossil (primary) fuels, • to increase use of renewable energy sources (RES), • to exploit the potential of energy savings and use or RES in large enterprises, • to sue available potential of secondary sources of energy.
In theory, YES, but in practice the potential PPP projects would rather fall under OPE
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4. Innovations
4.1 Improving innovative production of enterprises
‘INOVACE’ [INNOVATIONS]
Increase of innovation potential of the business sector using aid aimed at implementation of innovative projects by enterprises (chiefly by SMEs) and for projects of public research institutions, universities, natural persons and SMEs leading to IP protection.
In theory, YES, but in practice the potential PPP projects would rather fall under OPE, OPIRC, OP Transportation etc.
‘POTENCIÁL’ [POTENTIAL]
Supporting introduction and increase of capacities of companies in terms of implementation of research, development and innovative activities and increase of companies which carry out their own research, development and innovations. Programme also aims to improve cooperation between companies and research organizations, creation of qualified jobs and development of knowledge economics, improvement of conditions for integration of companies into national and European R&D programmes, sustainable improvement of Czech economy competitiveness.
4.2 Capacities for industrial research and development
INOVACE – Projekt na ochranu práv
průmyslového vlastnictví [INNOVATIONS – project
for the protection of industrial rights]
Using aid to support increased intensity of use of instrument protecting IP by SMEs, R&D organizations, universities and citizens.
5. Environment for business
and innovation
5.1 Cooperation platforms ‘SPOLUPRÁCE’ [COOPERATION]
Supporting creation and development of cooperative clusters, technological platforms and cooperation projects on the regional, supra-regional and international level, as na instrument of development of economic competitiveness economic growth. Th general aim of the programme is to continuously create favourable entrepreneurial environment, improve conditions for business and innovations and development of competitive edge by strengthening the link between research, universities and business.
YES, here OPEI already effectively supports specific forms of the so-called institutional PPP in the broader sense
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5.2 Infrastructure for development of human resources
‘ŠKOLICÍ STŘEDISKA’ [TRAINING CENTERS]
Increasing competitiveness of enterprises in pre-defined business sectors by securing high quality facilities to carry out, organize and manage education, personal activities and other activities related to development of human resources, as well as increasing employability of individuals in relation to needs triggered by introductions of new technologies and innovations, production processes, increase capacities and professional growth of employees in relation to efficiency and quality of production or services.
From the viewpoint of aims of the given priority axis in principle YES; indirect support of training in the PPP sphere , however the current focus of the programme is currently entirely different (infrastructure construction)
PROSPERITY Using aid to support establishment and further development of infrastructure for industrial research, technological development and innovations focused on implementation of new technologies and product and service competitiveness. The programme further focuses on support aimed at infrastructure for newly created innovations firms, creation, activities and further development of business incubators. Special attention is paid to the Business Angels network which supports SMEs.
In principle YES, however the market research shows that there is a general lack of interest of in PPP projects in this area
5.3 Infrastructure for business
‘Nemovitosti’ [REAL ESTATE]
Stimulating creation and development of business real estate and connected infrastructure and contributing to creation of functional real estate market and improvement of investment environment and environment. The programme focuses on the support of project implemented in all main phases of real estate life-cycle, i.e. on preparation, construction, development, and renovations of real estate. The programme focuses on support to knowledge and information bases for the development of regional business infrastructure and support of business real estate.
in principle YES.
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6. Services for
business development
6.1 Support for consulting services
‘PORADENSTVÍ’ [CONSULTING]
Improving quality and accessibility of consulting, information and education services for SMEs which will thus lead to their increased competitiveness thru comprehensive concept of consulting services, where the individual parts of the programme mutually support each other and follow up on. The programme further creates environment of global and Czech development trends having influence on innovative activities in the Czech economy and its competitiveness. The programme has 4 specific activities: 1. Creation, maintenance and development of National register of consultants (NRC) as a source of competent professional consultants who are able to provide quality consulting services to businesses in the Czech Republic; 2. Support to consulting services for SMEs provided primarily by NRC consultants; 3. Provision of subsidized informative, consulting and education services to SMEs thru the Regional information and consulting infrastructure (RICI); 4. Analyses of Czech and global development trends (Trends) having an influence on innovation activities in the Czech Republic and its competitiveness.
In principle YES, support to training in the area of PPP, however the current focus of the programme is different.
6.2 Support for marketing services
Marketing Strengthening of the international competitiveness of SMEs located in the Czech Republic thru individual participation at trade fairs abroad, exhibitions, presentation of the Czech Republic as specialized trade fairs and exhibitions abroad with individual participation of enterprises, organized by the CzechTrade and support of alliance activities for SMEs.
From the viewpoint of aims of the given priority axis in principle YES; indirect support of training in the PPP sphere , however the current focus of the programme is currently entirely different (export)
7. Technical assistance
7.1 TA in managing and implementation of OPEI
NO
7.2 Other TA NO
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As shown above, most of the existing programmes under OPEI would not be suitable, from the
viewpoint of their focus and with regard to the development of PPP to date, for the support of PPP
methods; this is complemented by the fact that imaginable PPP projects in areas which are served by
the corresponding programme already fall under other operational programmes in the Czech Republic,
or would not be appropriate for the support of the PPP thanks to the current focus of the individual
programmes under OPEI (especially consulting and training in the PPP sector, which also fall under
different OPs).
Areas where OPEI already effectively supports PPP is the COOPERATION programme which supports
creating and development of clusters, technological platforms and cooperation projects on the
regional, supra-regional and international level, as an instrument of development of economic
competitiveness and economic growth. The general aim of the programme is to continuously create
favourable entrepreneurial environment, improve conditions for business and innovations and
development of competitive edge by strengthening the link between research, universities and
business. This represents support to institutional forms of PPP in the broader sense15.
6.3. General recommendations and Model example
This chapter presents a model example, which verifies the interest of the market and analysis of
specific obstacles and which corresponds to the more exact definition of the focus of this Methodology.
6.3.1. General description
As indicated in the introduction to the present Methodology, the authors have focused, as requested,
on the specific model of construction, completion, or adaptation of an Innovations Center in the form
of a PPP project with the subsequent facility management performed by a private partner.
15 PPP in its “broader sense“ is here so defined due to a less distinct fulfilment of the attribute of provision of public service which in this specific case is “create favourable entrepreneurial environment, improve conditions for business and innovations and development of competitive edge by strengthening the link between research, universities and business“. The authors are however convinced that even this attribute is sufficiently fulfilled in these projects to be able to speak of PPP, even in its broader sense.
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The reason for selecting such model is its suitability especially for some of the existing, or potential
future Innovations centers which may have problems in the future with the maintenance of
sustainability and other conditions stipulated for such projects, provided that the invitation of the
private partner into the project could to a certain degree solve some of the potential problems.
In order that support provided from OPEI would have motivating effect for PPP project it is necessary
that the public partner is the recipient of aid, if at all possible outside the regime of state aid, or
possibly in the corresponding regime pro rata compensating eligible costs, or at least in the regime
ensuring a higher pro rate compensation of eligible costs than the existing call does for the regime
constituting state aid. In the opposite case it may be assumed that he private partner would not be
motivated to joint the PPP project, but would prefer to submit a separate application within the
regime constituting state aid for its own project, without the interaction of the public sector.
In relation to the analysed model of the Innovations center, the following three basic conditions may
be imagined:
PPP model focusing on adaptation of an existing Innovations Center with facility
management outsourced to a private partner; or
PPP model focusing on completion of an existing Innovations Center with facility
management outsourced to a private partner (within the framework of this model the
potential integration with OPR&DI center will be verified); or
PPP model focusing on construction of a new center similar to science and technology
park, innovations center, business incubator with facility management outsourced to a
private partner.
It is not necessary that the private partner – concessionary would simultaneously carry out the
investment – to be the general contractor and technology supplier (BFO model), although that
alternative would be more convenient for the public partner from the viewpoint of risk distribution.
An alternative may be allowed, under which the selected partner – concessionary would participate
within the framework of the PPP project on the funding of the necessary investment (i.e. participates
in payment of the remaining portion of eligible costs of the investment not covered by OPEI).
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Figure 19: financial flows within the illustrated model
Source: HOLEC, ZUSKA & Partneři
6.3.2. Points for the Call within PROSPERITY programme
Potential Call should specifically address the points following below in excess of the framework of the
existing regulation
Mandatory selection of the private partner by concession proceedings in compliance
with the Concession Act;
Eligible costs – as eligible the following cost should allowed:
o Cost of concession proceedings incl. costs of preparation of the PPP project (i.e.,
among other costs, also the cost of legal, economic and technical consulting
during the preparatory phase) – potentially as an independent part of the project;
o That particular part of the accessibility payment which serves to cover the
investment provided by the private partner under a BFO model (obviously, with
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time limitation by 31.12.2015);
Separate records for the OPEI project and PPP project, in particular mandatory
separate records of payment mechanisms on the investment implementation level
(payment mechanisms related to the passing of value to the end users need to be
separated from the potential aid to the private partner covering operational losses and
compensation of reasonable profit) so that the net revenues may be calculated within
the meaning of the wording or Article 55 of the Regulation 1083/2006/EC;
A system of mandatory (defined in the OPEI documentation) contractually-economical
motivation mechanisms aimed at the private partner for the purposes of fulfilling the
aims of the project (not only the profitability of the center, but also the number of
projects and passing of the value to end users, etc.);
A system of contractual mechanisms limiting profit raised by the private partner,
definition of the reasonable rate of profit directly in the Call primarily for the purposes
of preventing state aid being constituted;
Other mandatory requirements for the concession contract, in particular the
obligation to contractually bind the concessionary to allow control (supervision);
A system of integration of the concession proceedings into the aid application process,
provided that the synchronous model described above could be recommended;
A system of potential interventions by the MA during the concession proceedings. The
following mandatory consultations with MA on the below defined subjects can be
entirely recommended:
o Qualifications of the participants;
o Selection of the concessionary
o Final wording of the concession contract;
o Subsequent modification of the concession contract.
6.3.3. Consultations and potential notifications of the Call
As indicated above, it would be advisable that such a Call is consulted, for the sake of legal certainty,
with the Commission as a regime not constituting state aid, on the basis of the similar scheme, which
the Commission allowed for the PROSPERITA programme – regime not constituting state aid, i.e.:
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The aid recipient does not receive state aid because he is a no-for-profit innovations
intermediary in compliance with Section 3.1.2 of the Community framework (received
value is passed onto the end users of the aid in the form of preferential treatment);
End users receive the aid in the de minimis regime with obligation to report such aid
on the part of the public as well as the private partner (specific procedure would be
defined in the concession contract) within PPP, and on the part of the end users of the
aid;
The private partner receives the potential accessibility payment to cover operational
losses and / or reasonable profit in the regime of public service compensation in
compliance with the Altmark decision, and this aid does not form an eligible cost of an
OPEI project.
On the basis of consultation results the decision whether to notify the aid regime or not would be
taken.
6.3.4. Evaluation of the obstacles in relation to the model example
Regardless of the potential interest on the market for such model there are two basic obstacles to this
model:
Obstacle related to state aid which does, among other, trigger the need to consult and
potentially notify the future Calls to the Commission. The potential need to notify,
taking into account the length of notification proceedings before the Commission,
practically makes implementation of this model within the current programming
period nearly impossible, with possible exception of PPP projects in the advanced
stage of preparation;
Economic obstacles – taking into account the current situation, the entry of the private
partner into the project conceptually limits and reduces the possibility of the project
to obtain additional aid for the center operation. It can be then assumed that the
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feasibility study, or concession project, would eventually show that from the financial
point of view the more suitable method of funding would be to realize the project by
the public partner and the question remains whether additional economic benefits
(such as the anticipated improvement in quality of the provided services) would in
specific cases would outweigh these disadvantages.
6.4. Market survey
6.4.1. Methodology of the survey
A part of the commissioned work to be carried out under this Methodology was the survey of interest
on the market for the model example, or potentially for support of another type of PPP project within
the PROSPERITY programme.
On the basis of experience gained by the authors of the present Methodology the following approach
was selected:
A simple and brief questionnaire;
containing only a limited number of questions;
focusing on professional s active in the field.
Selecting the addressees of this questionnaire the authors followed the basic thesis that due to the
considerable specificity of the analyzed issues it was necessary to contact only those professionals with
sufficient professional background in the innovations sector, which is the subject of the analysed
model. Following this thesis, a list of respondents was drawn up, including entities in the field and the
current applicant under the PROSPERITY programme. The contacted entities could act as the public
partners, as aid recipients, as well as some potential private partners within the framework of PPP.
With regard to the fact that there are only several dozen entities in the innovations sector the list of
the 37 respondents is without doubt sufficiently representative.
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The questionnaire form, the lost of the contacted recipients and the returned questionnaires are
attached hereto.
6.4.2. Evaluating the survey
Rate of questionnaire’s return
contacted questionnaire returned no reaction
37 7 30
19% 81%
We have received 7 filled in questionnaires from the total of 37 contacts directed at public and private
entities in the innovations sector.
This fact was evaluated by the authors as an expression of general lack of interest in PPP projects in
this field. This conclusion is also supported by the results of the follow-up calls that were placed in
order to increase the rate of the questionnaire’s return respectively to check on reasons for its low
rate or return. The responses to these calls made it clear that there is little or no interest in the
analysed type of project, or in other types of PPP project funded from OPEI, as well as subjectively
perceived unreality of such PPP projects.
Figure 20: Reaction to the questionnaire
Source: HOLEC, ZUSKA & Partneři
19%
81%
Reaction to the questionnaire
returned unreturned
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Potential interest in support and implementation of the project illustrated by model example
returned questionnaire interest in support of the
model example of PPP
project YES
NO
7 2 5
in per cent 28% 75%
in percent from the total
questionnaires sent
5%
From the 37 sent out questionnaires and seven received properly filled in, only two indicated interest
in the support of the model example. The commentary received in the questionnaire however
indicates that in both cases the expressed interest does not specifically relate to the implementation
of the project in the form of PPP, but more to the support of a specific contemplated and prepared
project, one which is being realized with the support from OPEI and the second related to the 2013-
2020 programming period.
In the received commentaries the respondent expressed their conviction that implementation of such
projects in the form of PPP are viewed as contra-productive, because the “system would gain yet
another intermediary”, or that the operations of these institution are by their nature a loss-making
and entry of a private partner would either trigger the need to subsidize his activities, or it would lead
to a reduced rectifying effect on market failure in this filed, and that its economics and approaches to
innovations in SMEs would resemble more the private institutions of the similar type which function
on purely commercial basis.
Respondent, who expressed interest in the support of PPP project in the future programming period
mention the area of “support of energy development in the sector of renewable resources” and this
aspect has been addressed in the recommendations for the next programming period given below.
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Figure 21: Interest in the support of the model PPP project
Source: HOLEC, ZUSKA & Partneři
With respect to the model PPP project the questionnaire confirmed a completely minimum interest in
the support of the model or similar PPP project from OPEI.
Potential changes in the PROSPERITY programme, which would be viewed as motivating to
implement the project in the form of PPP
Commentaries returned to this question express primarily the future need for aid to Innovations
centers directed to the operational costs, or funding of applied research and innovations (purchases of
services, human resources etc.). Respondents also expressed the need for the support of consulting.
81%
14%
5%
Interest in the support of the model PPP project
unreturned returned - no interest returned - interest expressed
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Potential interest in support directed at consulting in relation to the implementation of the model or
similar project
returned questionnaire interest in support of the model
example of PPP project YES
NO
7 2 5
in per cent 28% 75%
in percent from the total
questionnaires sent
5%
From the seven returned questionnaires only two respondents expressed interest in a specific support
of consulting services. In one case the interest relates to the support of a feasibility study for further
development of a science and technology park, business incubator and TTC (Technology Transfer
Centre), which however relates to an existing project, where the respondent already filed the
registration application. In the second case the respondent expressed interest in the support of the
consulting services related to the model example in the future programming period.
Figure 22: Interest in the specific support of consulting in relation to the model PPP project
Source: HOLEC, ZUSKA & Partneři
81%
14%
5%
Interest in the specific support of consulting in relation to the model PPP project
questionnarie not returned
returned - no interest in specific forms of support expressed
expressed interest in specific support of consulting
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The questionnaire confirmed also in this case that there exists only entirely minimum interest in the
specific support of consulting in relation to the model or similar PPP project under OPEI.
Potential interest in support for a different PPP project from OPEI
From the seven returned questionnaires only two respondents expressed their interest in support of
another, different type of PPP project, and in both cases in relation to an institutional PPP. In one case
the expressed interest relates to an existing project in Northern Moravia and in the second case to a
more general model of institutional cooperation.
The concept of institutional PPP raised an interest in the authors of the present Methodology and
therefore this concept was additionally discussed with the selected survey participants. These
discussions gave rise to a thought, that in the next programming period there will be significantly
lower demand for new investment, but there will be a need to fund in particular the innovation
projects. In this connection, the respondents referred to the conservative approach of the Czech
financial institutions, which do not posses sufficient know-how to evaluate innovations projects. In this
connection a though was voiced to consider the possibilities of support to institutional PPP in the form
of an institution of the venture-capital fund with participation of a public body active in the field of
innovations and a private financial institution, where the aim of such fund would be to support
innovative activities of entities that are active in Innovations centers following the inspiration of the
existing supported financial engineering instruments (JESSICA, JEREMIE and JASPERS).
6.4.3. Analysis of reasons for lack of interest on the market
Generally, it can be summarized that the questionnaire as well as the follow-up telephone
consultations with the respondents confirmed a general lack of interest in support of PPP projects
from OPEI, both in relation to the analysed model example and in relation to other PPP projects. The
only meaningful support was expressed in relation to institutional PPP.
As the undertaken analysis of the model example shows, the form of cooperation on the basis of PPP
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would not, especially in short-term outlook, resolve problems related to sustainability of operations of
the Innovations centers. On the contrary, the public entity operations a center of this type will have a
comparatively better position due to its ability to received funding to operate the center from other
available sources with, as a rule, a larger pro rata portion of eligible costs.
Another reason of the expressed lack of interest ion support of PPP projects from OPEI is, in the
opinion of the authors, a general current lack of interest and confidence in PPP projects in the Czech
Republic which is based from insufficient (small number of projects in the Czech Republic, usually not
in areas supported from OPEI), or negative experience (large number of cancelled projects) with PPP
projects in the Czech Republic.
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7. Recommendations
7.1. Recommendations for the current programming period:
With regard to the above, the authors of the present Methodology wish to make the following
recommendations to the OPEI programming period 2007-2013:
Not to implement, for the time being, a specific Call aimed at the support of PPP
projects, due to the verified insufficient absorption capacity, and due to the
impossibility to timely resolve issues related to state aid so that a Call with sufficiently
long deadlines could be announce, which would accommodate specifics of PPP project
preparation;
To consider, before the end of the current programming period, with reference to
the development of innovations centres under the PROSPERITY programme, a
specific Call to support consulting, that also would include consulting focused on
possibilities to solve potential issues of innovation centers by the application of the
PPP form of cooperation. Potential definitions of such Call should reflect the actual
development of these centers and their actual needs. A sufficient absorption capacity
and interest on the marker in such support should be a pre-requisite to such Call. The
contents of such Call is not possible, nor meaningful, to specify at this point of time.
7.2. Recommendations for the next programming period
With regard to the minor increase in the number of PPP projects recently, the authors of the present
Methodology assume that in the future there could be a greater development in cooperation in the
form of PPP. Following up onto such development it would perhaps be appropriate to consider, within
the framework of preparation of the operational programme similar to OPEI for the next programming
period, to build in a concept of a specific support for PPP projects.
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We are of the opinion that in drafting of the future operational programme with focus similar to OPEI
it would be appropriate to:
Choose such approach to drafting of the new OP, that would enable such OP, aimed at
the support of industry and innovations, to support innovations in innovative PPP
projects, including those which have a cross-section effect on more areas, and
including regional PPP projects, which would contain a material innovative elements
(such as regional catering establishment which would provide catering to more public
entities within the region, with application of innovative production and logistical
technologies, innovative ecological regional enterprises processing bio-waste and
producing bio-fuels, i.e. with distinct elements introducing innovative technologies),
which would constitute indirect support of the industry and innovations in the given
areas and where the implemented PPP projects would profile themselves;
Continue in the support of the institutional partnership in the innovations sphere
(support offered to clusters and other similar groupings);
Consider the possibilities of support to the institutional forms of PPP in the area of
financial engineering – support of the creation of the venture-capital funds supporting
innovative activities of entities active in the existing innovations centers.
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8. Conclusion
It is possible to conclude that the present Methodology confirmed the insufficient absorption capacity
for the support of the PPP projects under OPEI. A minimum amount of interest was expressed in
relation to investment into infrastructure within the framework of the model or similar example PPP
project, as well as in connection to the specific support of consulting. This expressed lack of interest is
in material extent related to the general lack of interest and lack of confidence in PPP projects in the
Czech Republic, which arises due to an insufficient number (small number of PPP project in the Czech
Republic, which usually do not fall within areas supported by OPEI), or negative experience (large
number of cancelled projects) with PPP projects in the Czech Republic.
The reasons why there is little interest in the market for such kind of support are also tied to certain
economic obstacles related to the entry of the private partner into activities supported under the
PROSPERITY programme, which was the focus of analysis carried out by the authors of the present
Methodology. The analysis of the model example showed that entry of private partner into the project
does not need, in every instance, to bring the typically higher value for money in relation to operation
of the innovations center due to the private partners reduced ability to cover operational losses for
various sources of available aid. As the analytical part of the Methodology verified, the entry of the
private partner may create obstacles in the area of fulfilling the purposes of the supported activities,
when a potentially conservative approach of the private partner could lead to the suppression of
function of the managed infrastructure and to reduction of the remedial effects on the failure of the
market in the area (i.e. that the park operations would be brought closer to the mode of operation of
the existing developer’s center of the logistic parks type, etc.).
The Methodology also points out to obstacles which relate to the law regulating state aid, where there
would be a need to consult the support to the PPP projects, or potentially the need to notify the
individual specific Calls, which would, in relation to the average length of the notification proceedings,
and in relation to the intensity of preparation of PPP projects and the a ‘n+2’ rule, would make any
specific support of PPP projects under OPEI impossible to implement, in practical terms.
Notwithstanding the described obstacles, it should be emphasized that in the authors’ opinion the
Czech Ministry of Industry and Trade already does the maximum that is possible, within the framework
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of the current regulation of OPEI in the area of support of PPP, and in relation to the current situation
surrounding PPP in the Czech Republic, and that within the framework of the COOPERATION
programme it does provide support to the institutional forms of PPP by supporting innovative
groupings of the cluster type.
Regardless of the particular obstacles the authors of the present Methodology are of the opinion, that
specific support of PPP under OPEI, or similar programme during the next programming period, does
without doubt have substance, specifically in the filed of support provide to consulting in the PPP area,
as well as support of innovations and indirect support of industry in the form of PPP projects with
cross-section focus and effect and with innovative potential.