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PPPs and Public Works
The standardisation of build-and-operate Concession contract
&
the Monitoring System of Public Works in Italy
The activities of the WG on PPPs
Grazia Sgarra - Coordinator of the WG on PPPs
Giovanni Coletta and Giovanni Rizzo – Members of the WG on PPPs
Ministry of the Economy and Finance – State General Accounting Department (RGS)
Agenda
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The draft of a standardized PPP contract
- Main purpose and essential features
The new Monitoring System of Public works in Italy (MOP)
The data set on PPPs
All these things are connected!
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Annual Meeting of Senior Infrastructure and PPP Officials – Paris, 1 March 2016
The Standard Model Agreement
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What type of contracts has been standardized?
- Build-and-operate Concession contract with a SPV
- PPP infrastructure projects mainly intended for the
direct use by the PA
What are the key objectives pursued by the WG?
The usual goals plus…
- the consultation with all stakeholders
(http://www.mef.gov.it/focus/article_0017.html)
- the control of public finances
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Annual Meeting of Senior Infrastructure and PPP Officials – Paris, 1 March 2016
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PPPs from a public finance point of view
ON/OFF GOVERNMENT BALANCE SHEET
(% distribution)
The total value of the on-balance-sheet transactions is € 5.7 billion.
The total value of the 7 off-balance-sheet infrastructures is €500 million.
Source: Italian National Statistical Institute
Annual Meeting of Senior Infrastructure and PPP Officials – Paris, 1 March 2016
24%
76%
Off On
Providing a reference tool to be used by both public and
private agents in order to ensure a proper allocation of risks
between parties.
The Main objective of the Standard Model Agreement
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5 Annual Meeting of Senior Infrastructure and PPP Officials – Paris, 1 March 2016
The Standard Model Agreement
a composite structure
ANNEXES
CONTRACTUAL DOCUMENTS
DEFINITIONS
RISK MATRIX
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6 Annual Meeting of Senior Infrastructure and PPP Officials – Paris, 1 March 2016
Document Structure
RISK MATRIX - AN EXTRACT
RISK OF DEMAND
Risk related to changes in demand for services, not dependent on the quantity and quality of the service provided by the private partner.
Specific type of risk
Descrizione Effects Allocation to public subject
Allocation to private
subject
Not allocat
ed
Main references in the
convention
Risk of declining demand
Risk of a contraction in demand in the case of premium-rate services on the user/business
Decrease in revenues
X
Art. 15.1, paragraph 2
Art.23
Risk of offer
Risk that arises a competitive offer of other operators
Decrease in revenues
X
Art.15.1, paragraph 2
Art. 23
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7 Annual Meeting of Senior Infrastructure and PPP Officials – Paris, 1 March 2016
This report has been prepared in order to provide a guideline for public and private operators, to the reading of the highlights of the Articles, and to explain the rationale of the choices made by the WG in the development of the articulated same.
Document Structure
EXPLANATORY REPORT CHAPTER 3: EXPLANATORY REPORT
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8 Annual Meeting of Senior Infrastructure and PPP Officials – Paris, 1 March 2016
MAIN FEATURES OF THE STANDARDIZED CONTRACT
Provide a clear system of rules on parties’ obligations, responsibilities and benefits;
Identify the Concessionaire with a special purpose vehicle (SPV), a private entity;
Specify conditions and indicators ensuring Economic and Financial Equilibrium. The rebalancing hypothesis is strictly limited;
Regulate the Management phase;
List the items to be quantified in case of termination of Contract, due to a “pathological” contractual relationship
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9 Annual Meeting of Senior Infrastructure and PPP Officials – Paris, 1 March 2016
- Meeting deadlines, starting from
the planning
- Penalty for delays, but also
incentives for recovery
- Certainty on the availability of
resources
- Automatic reductions of availability fees and
structured system of penalties
OBLIGATIONS OF THE CONCESSIONAIRE
Designing Construction
Management
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Service’s requirements
10 Annual Meeting of Senior Infrastructure and PPP Officials – Paris, 1 March 2016
TYPE OF SERVICES DESCRIPTION AND CHARACTERISTICS REFERENCE DOCUMENT
DISC
IPLIN
AR
Y O
F MA
NA
GEM
ENT
SERVICES RELATED TO THE AVAILABILITY OF THE ASSET (Planned maintenance, energy service, etc.)
Services to be performed respecting precise levels of performance (optimum and minimum).
Scheduled automatic deduction of the Availability Fee in proportion to the reduction in the level of performance, from a optimal level to the minimum level.
Below the minimum level are applied penalties and if the breach persists, can get to the resolution of the concession.
TECHNICAL
MANAGEMENT SPECIFICATIONS
ADDITIONAL SERVICES IN CONNECTION WITH THE AVAILABILITY (laundry, canteen, etc.)
These are services that can even be managed separately from the construction and management concession contract.
The amount of the remuneration is predetermined and the fee is paid only at the achievement of the optimum level of performance. If the service provided does not reach that level, penalties are applied.
TECHNICAL MANAGEMENT SPECIFICATIONS
TARIFF SERVICES. (parking)
These are services that may be subject to tariff and as such included in the Economic and Financial Plan.
TECHNICAL RATE SERVICE
SPECIFICATIONS
COMMERCIAL SERVICES (bar, refreshments, etc.)
Normally these services are not paid by the Grantor (but leased to third parties) and subject to demand risk.
TECHNICAL COMMERCIAL
SERVICE SPECIFICATIONS
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Authorizations Controls Payments
PECUNIARY OBLIGATIONS OF THE GRANTOR
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1 Certainty in the availability of resources
12 Annual Meeting of Senior Infrastructure and PPP Officials – Paris, 1 March 2016
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THE NEW
MONITORING SYSTEM OF PUBLIC WORKS IN ITALY
The Ministry of Economy and Finance launched a new monitoring system (MOP) in October 2014. This system is aimed at collecting and prospecting detailed data on all public works in Italy. The collection of data is part of a whole mechanism designed in Legislative decrees 228/2011 and 229/2011.
Evaluate
Public Accounts
Monitoring System
Plan
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THE NEW
MONITORING SYSTEM OF PUBLIC WORKS IN ITALY
The goal is to collect data from any subject in charge of a public work in Italy. Hence, we deal with about 10.000 users, ranging from big entities (e.g. ANAS, RFI) to little municipalities.
# Users 9.560
# Public works 97.157
Value € 154.995mln Last update 24/02/2016
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THE NEW
MONITORING SYSTEM OF PUBLIC WORKS IN ITALY
The dataset is growing and the Italian NSI (ISTAT) is exploring a subset of data to use the system as a potential source in the estimation of investment of local municipalities according to the accrual principle.
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Financial close
Analisys of risks
Feasibility study
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1 The system integrates data from several sources (payments, public tenders, ect.) in order to minimize the administrative burden on monitored subjects and guarantee coherence between databases. The current dataset will be implemented within the year with a specific set of data for PPPs.
Financement
Payments
Timing
Total cost
Current dataset
Specific PPPs
16 Annual Meeting of Senior Infrastructure and PPP Officials – Paris, 1 March 2016
THE DATA SET ON PPPS
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Feasibility
study
The PPPs dataset is designed to collect data from the beginning to the phase of management of the Public Work.
Collecting standard data will help detecting crucial information about on-off balance classification of operations.
Choose
partner
Subscribe
contract Build Release
Management
phase
THE DATA SET ON PPPS
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Ris
ks
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1 Allocation of risks is a multidimensional variable, we will collect data all along the lifecycle of the PPP in order to insure transparency and guarantee the correct classification of the operation.
Construction
Demand
Availability
Other
Feasibility
study Contract Financial
close
Management
phase
THE DATA SET ON PPPS
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EXPECTED RESULTS
Standard
PPP
contract
Monitor
PPPs
Evaluate &
Decide
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Thank you very much!
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