Concessions, both old and new, are emerging more rapidly today than ever before, prompting a strong desire for analysis. Characteristic of concession agreements is the public nature of the service for the obligation undertaken by the operator. State policy is to provide infrastructure-related services to the public, regardless of the party’s identity providing these services. In this study topic are presented concessions as part of PPPs, but which is the most beautiful and challenging part of this topic at the same time. The difficulty lies in both theory and practice. Although used for centuries, the laws and regulations for them are new and evolving, and remain unconsolidated.
Difficulties are encountered in both directions: public and private. Standards are lacking in both directions. This study will address legal issues for both partners. Some of the objectives of this paper are:
Recognition and presentation of public-private agreements, as one of the pillars on which the world economy is relying today. The effects that these agreements bring to the economy and society. We are introducing best practices along with the advantages and disadvantages of each course.
The reasons for the use of concessions in the economy and their effects constitute another purpose of this paper. Another objective of the study is to illustrate the impact of benefits on the economy, both in developing and reconstructing the sectors where they are used. To explain these effects, we will study Mother Teresa International Airport.
The need to improve infrastructure is a necessary precondition for sustainable economic development. Therefore, the lack of infrastructure projects can negatively affect overall economic growth and job creation. This has happened in recent years in the European Union member states and other countries in the world. It often happens that the central and local government have limited sources of financial means for investment in infrastructure projects and the realization of quality public services.
As a result, the critical question arises of finding new ways of financing cost-effective infrastructure projects and improving the quality of public services. Public-private partnerships (PPPs) are emerging as a growing element of “supplying” and improving public services. In this sense, instead of the usual practice where infrastructure projects and public services are financed only from central and local budgets, different PPP models enable financing and implementation involving the private sector.
What are Public-Private Partnerships?
There is not just one definition accepted by all different purposes. PPPs often have different meanings for other people, making it difficult to evaluate and compare with international experiences. However, Public-Private Partnerships, in general, according to the Green Paper on Public-Private Partnerships and European Union legislation on public contracts and concessions (Green Paper on Public-Private Partnerships and Community Law on Public Contracts and Concessions), published in 2004 by the European Commission, refer to forms of cooperation between public authorities and the private sector that aim to provide financing, construction, renovation, management, operation and maintenance of infrastructure and provision of public services. PPPs are widely used to provide various types of public services and infrastructure projects, such as transport (roads, railways, airports), telecommunications, water supply and sewerage network, waste management, medicine, educational facilities (schools and internet), social protection and environmental protection.
Another set of definitions characterizes PPPs as an agreement between a public sector entity and a private sector entity to transfer an asset (usually infrastructure or public services) or public sector service. In this way, PPPs offer traditional public procurement sector methods an alternative to fulfilling their duties and responsibilities. Essentially, all Public-Private Partnerships involve some form of risk-sharing between the public and private sectors in infrastructure or service provision. Risk-sharing for the intimate partner is the primary determinant in the difference between PPP and the traditional public sector service delivery model.
Features of PPPs
Even though there is no universal consensus on the definition of public-private partnerships, the following elements mainly characterize PPPs:
PPPs are typically contractual or institutional arrangements between the public and private parties to provide infrastructure services and other essential public services. The infrastructure or service is financed, in whole or in part, by an intimate partner;
The private sector prepares project documents, finances the construction of infrastructure (wholly or partially), and further manages and maintains it and carries out public interest activities (public service). It receives appropriate compensation from the general partner end-users. (third parties) of public services;
The general partner reserves the right to determine the goals to be achieved, in terms of the quality of public services, the prices of public services and control over their realization;
The contract duration for PPPs is relatively long; Risks are divided between the public and the private partner, determining the party, which is better positioned to
manage each risk. But PPPs do not in themselves mean that it is Private partner the one who always assumes all or most of the risk. The risk distribution is explicitly determined for each case. Public-Private Partnerships are a procurement tool, in which the focus is on the payment for the successful provision of services (transfer of performance risk to the private partner). PPPs are output / performance-based arrangements (the traditional public service delivery model is “input-based”).
PPPs usually include “batch” services (e.g. design, construction, maintenance and operation) to maximize synergy and not encourage low capital / high operating cost proposals. Overall, PPPs provide a new and dynamic approach to risk management in providing infrastructure and services. “PPPs keep their promise to increase the supply of infrastructure without burdening the public finances of the state. An infusion of capital and private management can facilitate fiscal constraints and increase efficiency…” MFI, Finance and development.
Main advantages, benefits and challenges of PPPs
It is important to note that not all projects are suitable for PPP. Public-Private Partnerships should provide equal or better value for money compared to 100% public sector access. Value for money is the primary driver in public-private partnerships. Value for money does not merely mean selecting the cheapest bid or the lowest asset price, but it means finding the best long-term choice for service delivery. It includes analyzing the total long-term cost (life cycle cost) of service delivery and assessing associated benefits to the general public. When compared to the public sector approach, the additional benefits of PPPs can come from the Faster implementation of infrastructure projects better services and coverage; Service delivery life cycle focus / lower life cycle cost (long term);
Improved efficiency and innovation; AND Risk-sharing designed to create impetus towards success.
But what does partnership provide?
An innovative approach to the challenges of developing and eradicating poverty.
I. new mechanisms to enable each sector to demonstrate competencies and capacities to achieve common and complementary goals more effectively, legitimately and sustainably.
II. Access to more resources using technical, human, physical, financial resources of all sectors.
III. Better perception of each sector’s values and features to build a more integrated and sustainable society.