ΕΙΔΙΚΟ EPPPL 2024: Η Αναγέννηση των ΣΔΙΤ στην Ελλάδα

SPECIAL EPPPL/PPPs 2024:

Public Private Partnerships’

Regeneration in Greece

Dr. Stelios Tsevas

Lawyer at Court, PhD Public Law (University of Athens),

PgD Public Procurement (King’s College London)

Angeliki Konstantara

Trainee Lawyer, LLM (Pantheon-Assas, Paris)

A. Introduction

1. This article aims at shedding light on the regime of PPPs in Greece, by presenting the existing legal framework, the procedure and the different models followed by national public authorities. After describing the fundamentals, we try to deepen in more sophisticated matters that arise in PPPs projects, and that cannot be overlooked by lawyers. In the end, we present our final remarks on PPPs in Greece.

B. Typology

2. Public Private Partnerships (PPPs) are long-term contracts between private and public sector entities, aiming at delivering public works and public services.[1] By using PPPs, public sector aims at taking advantage of the expertise and the efficiency of the private sector,[2] while whithholding strong supervisory and a regulatory role[3] suitable for maintaining the affordability of the respective public goods. In Greece, PPPs are categorized in two main types: reimbursable and non-reimbursable PPPs. This distinction is also followed by some countries that distinguish between “concession” and “non-concession” PPP models, with the former being those supported by direct user charges, and the latter being projects that are reliant upon government revenue streams.[4] In the next paragraphs we dive further into the understanding of the two types of PPPs in Greece.

3. Reimbursable PPPs look very much like concessions; private undertakings take over the operation of the project. This type of PPPs includes the responsibility of the private partner to manage the use of the constructed public work or public service for a predetermined amount of time. Just like in concessions, the private partner undertakes some financial risk related to the use of the project by citizens. Yet, unlike concessions, even in “concessional” PPPs, the public partner undertakes the responsibility to cover the costs of private partner. for the timeframe of the contract.[5] In order to fully cover expenditure and  financial risk, the private partner would then collect revenue from the project using various means, usually through the fee paid by users. In any case, in “concessional” PPPs, private contractors have to manage the work or service by means of private sector, meaning that they have to rely on their own funds and therefore they might opt to minimise maintenance and operation costs. This is why, in such PPP contracts, the description of quality standards of the project is crucial, so that the quality cannot be undermined by the private partner when risks rise.

4. Having said the above, we have also to make clear that even “concessional” PPPs are not concessions. This is primarily because they are governed by different legal texts: Concessions are namely regulated by law 4413/2016, transposing Directive 2014/23/EU on the award of concession contracts into the Greek legislation, while PPPs are governed by law 3389/2005. Another substantive difference between the two regimes is that exploitation of the project by the private entity is not a key element of law 3389/2005 whereas under law 4413/2016, the private undertaking also assumes the functional risk of the project, entailing exposure to unexpected market risks, being granted a right to exclusive exploitation of the project in return.

5. On the other hand, in non-reimbursable PPPs services are provided by private operators without any kind of profitable exploitation in their part.[6] In this respect, private partner is responsible for rendering and maintaining the service available for public use, whereas the public partner buyes the service through availability payments. Non-reimbursable PPPs take often the form of a clasic public procurement with critical leasing-contract characteristics; private partners lease either public infrastructrue or its maintanance, or even its upgrade, while public partners leases them back for a fixed fee over a set period of time.[7]

6. However, non-reimbursable PPPs are not public procurement contracts. This is, again, due to the distribution of risks: In operational lease, payment is made by the lessee to use an asset, but it’s the lessor that bears the risks related to ownership. On the opposite, in financial lease such risks are assumed by the lessee.[8] Given that the greek law requires the private undertaking to assume a substantial part of the risks associated with the project,[9] it seems that the identity of Greek PPP contracts is closer to operational leasing.

C. Background

7. For the abovementioned to be understood better, it is useful to notice that according to the European Investment Bank[10], the following requirements apply to PPPs:[11]

Ø  The object of the partnership shall be the provision of works or services that fall within the competence of public authorities,

Ø  The private entities shall assume a substantial part of the risks associated with the financing, construction, availability or demand of the object of the Partnership and the associated risks,

Ø  The construction of the works or the provision of the services will be carried out with funds and resources provided by private operators,

Ø  The total estimated cost of construction for achieving the scope of the Partnership does not exceed a threshold of two hundred million euros, excluding VAT.

8. The law 3389/2005 is silent on the aforementioned typology of PPPs. Thus, even in the absence of risks associated with the demand of the service,[12] this legal regime may still be applicable upon approval by the Joint Ministers’ Committee for Public-Private Partnerships.[13] So, we now get to understand the importance of the administrative procedure that gives birth to PPP projects. As prescribed by the law 3389/2005, this is mainly inspired by public procurement directives of the EU, adopting also their fundamental principles: equal treatment, transparency, proportionality, freedom of competition, protection of the environment and sustainable development.

9. Speaking procedurally, the public authority wishing to implement a PPP project may submit a proposal to the Government’s PPP Unit, which then evaluates the feasibility of the specific project under a PPP scheme. This proposal should include, inter alia, a detailed description of the project that will be provided as a PPP and its technical characteristics, the indicative budget of the proposed PPP project and the operation and maintenance cost, as well as the timeline of the scheduled activities. The proposal shall also be followed by the presentation of the proposed PPP scheme, as well as a Value for Money (VfM) evaluation, which justifies the implementation of the project under a PPP scheme.[14] The proposal shall also take into account issues that might have an impact on carrying out the project, such as legal or environmental concerns. Following the submission, the PPP unit analyses the public authority's proposal and determines whether it can be implemented as PPP under the provision of Law 3389/2005. In case of a positive evaluation, the PPP unit includes it in the "List of Proposed Partnerships" and notifies the public entity of this decision. If a public authority submits an "Application for Inclusion", within no more than two months after the date of notification, the Minister of Finance invites the Inter-Ministerial Committee for Public-Private Partnerships to reach a decision either approving or rejecting each request for PPP. If the Committee decides to approve a partnership, the PPP Unit proceeds to coordinate and monitor all contract award procedures, as defined in Law 3389/2005, so as to select the proper private partner.

D. Final Remarks

10. PPPs are presumed to enhance the quality of the public infrastructure, while stimulating economic growth.[15] After financial crisis, the use of PPPs in Greece was not self-evident. Rather, it is more of a conquest, which is connected to a series of subtle economic parameters, like the credibility of public sector, as well as with the bankability of each project. PPPs do not show up as public-sector borrowing, nor does their cost show up as public budget’s expenditure.[16] Thus, the wide time margin of repayment for the lease would allow public authorities to award PPPs even if they do not afford to financially support such projects. Besides that, for the project to be funded via PPP schemes, lenders need to be confident that the government ensures its technical and financial viability and that the risk is properly allocated among the parties.[17] It’s mostly due to such considerations that Greece PPPs’ framework operates with a financial threshold that excludes very large infrastructure projects.[18] Despite this constraint, conditions for the development of PPPs seem favourable nowadays,[19] allowing for ambitious PPP projects,[20] such as the construction of a central governmental park that is planned to house 9 Ministries[21].

15^th September 2024