This content is from: Local Insights

Public-private partnerships

Public-private partnership (PPP) projects have existed for many years in European countries such as the UK, France, Italy and Spain. In the Nordic region, PPP projects have been carried out in Finland and Norway. In Sweden, though, there has been only one genuine PPP project – the railway between the centre of Stockholm and Arlanda Airport. The main reason for the slow progress is that Sweden has a strong tradition of public responsibility for services such as hospitals and prisons, and also for infrastructure. Various social democratic governments, which have been in power for many years, have upheld this tradition. But since the election in Sweden in September 2006 the four centre right parties have formed a new government. It has a far more positive attitude towards private financing and supply of services and facilities traditionally financed and supplied by the public sector, though no concrete decision to start a Swedish PPP scheme has been made. The new government has appointed a joint working group comprising representatives from the Swedish Road Administration (SRA), the Swedish Rail Administration (Banverket) and the Nordic Road and Transport Research (VTI) to analyse the legal, financial and technical prerequisites for PPP in the road and rail sectors. The joint working group's report was published in June 2007. No specific PPP legislation is in force in Sweden and none is planned. But in the report, the legal analysis focused on the legal consequences of a proposed Swedish PPP model for road and railroad investments and how the Swedish Public Procurement Act could affect the procurement of PPP infrastructure projects.

Typically a private partner finances the PPP project. But the report suggests that a Swedish model should be flexible so that it can have different combinations of state and private financing. Constructions with user fees should be carefully designed to stop any undesired impact on traffic control. In cases where the state is responsible for final financing, payments to the project company should be made as a fixed annual payment. In cases where users are responsible for all or part of the final financing through user fees, the Norwegian procedure, in which user fees are paid to the state, can serve as a model.

One disadvantage of PPP projects is that the costs for the actual procurement procedure (including costs for legal and financial advice) are high. The Swedish model should therefore use a much simpler procedure (as in Norway), based on the Swedish tradition of standardised contracts and procurement processes. The contract format should be simple and clear and it is suggested that a special contract format for PPP projects should be drawn up. Experience shows that negotiated procurements with a prequalification system should be used.

Swedish banks and large industrial companies have shown a big interest in participating in future PPP projects. The size of the identified projects is such that international actors will probably find it attractive to enter into the Swedish PPP market when the first projects are decided. Given the turbulence in the international financial market, long-term investments with low risk and public guarantees, such as PPP projects, should have appeal.

SRA and Banverket have identified a number of road constructions that are suitable PPP projects to be carried out in accordance with the proposed model. These are infrastructure projects with an expected investment volume of between Skr1 billion and Skr3 billion each (between $147 million and $515 million), to attract both foreign and domestic competition.

A Swedish PPP model now exists, which can be implemented as soon as the government decides to start the first project. With the experience from PPP projects carried out in Europe and the typical characteristics of the Swedish model there is no reason not to introduce PPP to the Swedish market. With the help of foreign advisers, combined with local expertise, the mistakes already made in other projects could be avoided.

In Sweden both investors and construction companies are waiting for the government to decide to introduce PPP. Foreign actors are also watching, to be ready when Sweden says yes to PPP.

Gustaf Reuterskiöld

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