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Confederation of International Contractors’ Association Paris November, 17-18, 2014 Presentation...
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Transcript of Confederation of International Contractors’ Association Paris November, 17-18, 2014 Presentation...
Confederation of International Contractors’ AssociationParis
November, 17-18, 2014
Presentation by Vincent Piron (PIRON Consulting)
02/3-7/2014 PIRON Consulting 1
Public-Private Public-Private PartnershipPartnership
Usefulness and socio economic Usefulness and socio economic benefitsbenefits
GENERAL ECONOMICS
• Global GDP worldwide is growing slowly• In OECD countries it is growing more slowly than in
Asia• But the GDP is not a adequate parameter:
• Ex: USA, where GDP increases and median salary decreases• Ex: China, where pollutuion and housing are masking reality• Ex: the global problem of urban development• Ex: the environmental question, sea level in cities nearby seas
• Interest rates cannot anymore decrease because they are around zero
• So we have now a new model to develop
02/3-7/2014 PIRON Consulting 2
WHERE THE MONEY FOR INVESTMENT MAY COME FROM
• It is usually said that the States have no money to invest in housing and infrastructures (I hear this since 45 years)
• But it is a matter of allocation of money because money is there, it has been printed by the central banks
• The Juncker Plan (300 billion €) is just a reallocation of existing budgets, and further support from EIB and private sector. In USA it is the same music.
• But what is new is the idea of coordination and profitability of investment
• « further support » means « profitable investment » in order to reimburse the « additional debt»
02/3-7/2014 PIRON Consulting 3
WHICH TYPE OF INVESTMENT
• Digital economy, Energy, Transport Infrastructure• Social infrastructure and environment• These last two items practically mean « housing » and
organisation of urban development• Digital economy and Energy are paying the
investment directly through invoicing directly the final client
• For Transport Infrastructure and housing the final client will never repay directly the investment and the State should provide support.
02/3-7/2014 PIRON Consulting 4
ECONOMIC INDEXES VERSUS TRAFFIC
02/3-7/2014 PIRON Consulting 5
Household consumption GDP
Manufactured goods
HOW TO PROVIDE SUPPORT
• There are two ways to evaluate the profitablility of a project: financial and socio-economical
• Financial profitability is a clear and well known notion• Socio-economical profitability means that benefits to
be considered are not only monetary benefits but also wellfare, safety, social amenities, better housing,…
• These socio-economic benefits generate indirect GDP growth,
• In there is GDP growth, there is additional renevues from taxes and thus increase of budget
02/3-7/2014 PIRON Consulting 6
02/3-7/2014 PIRON Consulting 7
WHICH INFRASTRUCTURE FOR WHICH SERVICE
• Transportation• Water supply• Waste management• District heating• Telecommunications• Education• Health• Recreation
• Roads, airports, rail …• Dams, reservoirs, plants• Incinerator compost u.• Plant, network• Tel exchanges & lignes• Schools, University• Hospitals• Stadia, theatres …
CONDITION TO HAVE WELL PREPARED PROJECTS (CONCESSIONS AND PFI)
• In order to develop this process:• The States have to choose the relevant projects• The States have to be convinced of the fact that additional
revenues « in cash » for their budget will come from the implementation of the project
• Then they will accept to provide grants and subventions, or guaranties for loans
• To help to develop this virtuous process, CICA is working since many years on documents describing the way to select, prepare and implement good projects
02/3-7/2014 PIRON Consulting 8
9 02/3-7/2014 PIRON Consulting
THE VARIOUS ASPECTS OF PPP’S
• Financial : the most evident and the most spoken of.
• Accounting : difficult, changing and conditioning the very existence of the PPP
• Legal : the most complicated, and often the main issue
• Technical : assumed to be easily solved by contractors
• Economical : supposed to be solved previously by the grantor, but never really discussed and checked
• Political : has always been managed as a matter of feeling and seldom with a scientific approach
TOO MUCH IS TOO MUCH
02/3-7/2014 PIRON Consulting 10
PPP’S DEFINITION AND EVALUATION
• « PPP » does not cover any legal reality.
• Existence of 2 families of contracts (typology):• Concessions:
• More (concession contract) or less (lease, affermage or service contracts) investment is made by the private party
• The private operator bears demand and industrial risks• PFIs
• Investment is made by the private party• But he does not bear the demand risk. It bears only an availability
risk for which he receives a guaranteed revenue.
• In fact, families are not entirely separate. There is a Continuum of contractual provisions.
02/3-7/2014 PIRON Consulting 11
PPP’S DEFINITION AND EVALUATION The vertical and horizontal continuum of PPPs
02/3-7/2014 PIRON Consulting 12
STAKEHOLDERSAND NOTION OF NON WRITTEN AGREEMENTS
02/3-7/2014 PIRON Consulting 13
POPULATION
FINAL CUSTOMER/END USER(Motorists, truckers, airlines companies, railway companies, airline passengers)
SHAREHOLDERSPurely-financial investorsProject builders investors
OPERATORCONTRACTORConstruction company
CONCESSION-GRANTING AUTHORITY(State, regional/local authority)
LENDERSAllocation of funds
TAXESMinistry of Finance
Concessionaire3
5 6
7
4
12
WHO PAYS, UNDER WHICH STRUCTURE?
Administrative and Contractual Structure Funding
Taxes only Taxes + Toll
Toll only (higher rate)
Public Authority operates by itself
Traditional procurement
Traditional procurement
Contracted out to a public company
Traditional procurement Concession
Concession
Contracted out to a private company
PFI, Contrat de
Partenariat
Concession or PFI or C.
de partenariat Concession
14
15 02/3-7/2014 PIRON Consulting
REVENUES FROM SOCIO-ECONOMICS
• Revenue generated by the utility of the project• An economically viable construction will generate activity and
therefore fund flows. Such flows will be split between the private-sector actors, commercial or industrial companies, and the public-sector actors.
• Recent research, notably that directed by Professor Rémy Prud’homme have shown it to be possible to estimate budget revenue for the State, which collects taxes and social contributions, at 20% of the annual surplus.
• In the case of local government in France this percentage falls to approximately 3%.
16 02/3-7/2014 PIRON Consulting
ROLE OF A REAL TOLL POLICY
• On a real tolled infrastructure there is a strong interaction between utility and financing : the toll policy
• Maximizing socio economic benefits is achieved by a low toll level
• This eases the political problem created by the real toll
• But the optimum of revenues for the concessionaire is reached with a rather high toll level
• This minimizes the grant that is requested from the authorities but decreases the socio economic benefits and makes more difficult the political acceptability of the toll
02/3-7/2014 PIRON Consulting 17
HOUSEHOLD INCOMEDistribution of household income Whole of France
(1994 figures)
0
10
20
30
40
50
60
70
80
90
100
0 100 200 300 400 500 600 700 800
Annual income in FF. (x 1000) for 1994
Dis
trib
uti
on Distribution
Accumulative total (lognormal model)
Cumulated total (INSEEfigures)
02/3-7/2014 PIRON Consulting 18
COST / VOLUME RELATIONSHIP
Relation entre Trafic et Coût généralisé
0
5
10
15
20
25
30
0 5 10 15 20 25 30 35
Trafic journalier en milliers
Co
ût g
énér
alis
é en
eu
ros
Série1ACi
Ti Tg
Cg C
BCp
Tp
E D
B'
Tp'
MCp'
Surplus
Bitterness
Toll proceeds
Daily traffic in thousands
Generalized costs in euros
ACTIONS BY CICA
• Developing with UNECE a methodology to prepare and implement efficient projects
• Create a « center of excellence » for training decision makers to these rather complicated process of project evaluation, selection, tender and implementation
• Studies with economists about the link between socio-economic development linked to a new project and budgetary resources
• Consider how to developing maintenance of the works already build(main part of the activity now).
02/3-7/2014 PIRON Consulting 19
EXCELLENCE CENTER
02/3-7/2014 PIRON Consulting 20