EU Public Private Partnerships suffer from widespread shortcomings and limited benefits, say Auditors

Press Release, Luxembourg, 20 March 2018, Eurodad | EU co-financed Public Private Partnerships (PPPs) cannot be regarded as an economically viable option for delivering public infrastructure, according to a new report from the European Court of Auditors. The PPPs audited suffered from widespread shortcomings and limited benefits, resulting in €1.5 billion of inefficient and ineffective spending. In addition, value for money and transparency were widely undermined in particular by unclear policy and strategy, inadequate anaysis, off-balance-sheet recording of PPPs and unbalanced risk-sharing arrangements.

Between 2000 and 2014, the EU provided €5.6 billion for 84 PPPs, with a total project cost of €29.2 billion. The auditors assessed 12 EU co-financed PPPs in France, Greece, Ireland and Spain in the areas of road transport and information and communication technology (ICT), with a total cost of €9.6 billion and an EU contribution of €2.2 billion. Overall, they found that PPPs allowed public authorities to procure large-scale infrastructure through a single procedure, but these increased the risk of insufficient competition and therefore put the contracting authorities in a weaker negotiating position.

Moreover, the majority of PPPs audited were subject to considerable inefficiencies during their construction, with seven of the nine completed projects – corresponding to €7.8 billion – project cost incurring delays of up to 52 months and major cost increases.

“Almost €1.5 billion extra in public funds was needed to complete the five motorways audited in Greece and Spain. Some 30 % of this (€422 million) was provided by the EU”, said Oskar Herics, the Member of the European Court of Auditors responsible for the report. “This was spent ineffectively in terms of achieving the potential economic benefits.”

In Greece (by far the largest recipient of EU contributions, with €3.3 billion or 59 % of the total), the cost per kilometre of the three motorways examined rose sharply by up to 69 %, while the scale of these projects was considerably reduced by as much as 55 %. The main reasons for this ineffective spending were that financial gaps caused by the renegotiation of PPP contracts had to be covered, projects were poorly prepared by public partners and, most crucially, contracts with private concessionaires were signed before relevant issues had been solved.

The purpose of this press release is to convey the main messages of the European Court of Auditors’ special report.

The full report is available at https://www.eca.europa.eu/en/Pages/NewsItem.aspx?nid=9700

Read also:

Auditors expose the failure of public-private partnerships (PPPs) and slam EU’s support  (Eurodad website)

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