Berlin Despite empty state coffers, the traffic light coalition only wants to enter into public-private partnerships (PPP) in highway construction in justified cases. “The coalition agreement stipulates that state implementation and financing of core state tasks, such as road construction, is the clear rule,” said the budgetary spokesman for the Greens in the Bundestag, Sven-Christian Kindler, to the Handelsblatt. “The hurdles to realize PPP projects have become significantly higher with this contract.”
In their coalition agreement, the SPD, the Greens and the FDP stipulated that the “core tasks of the state”, which include infrastructure, are to be “fundamentally” implemented and financed by the state. As a rule, the state puts the construction of motorway sections out to tender. Since 2007, however, there have been so-called public-private partnership projects, which have been entered into under CSU ministers since 2009.
In the case of a PPP, a private construction company, now usually with a strategic investor, takes over the financing, the construction and, later, the operation of the route for 30 years and receives remuneration from the truck toll every year and, under certain circumstances, start-up financing from the federal government. There are now 20 such projects. According to the draft budget, the federal government has reserved 20 billion euros for this until 2050, more than 800 million in 2022 alone.
Seven projects are still pending
Seven projects of the so-called “new generation” are actually still to be implemented, one has meanwhile been discarded. In addition to motorways, federal highways are now also part of it. Now, however, the coalition agreement states that “selected individual projects and procurements can be implemented within the framework of public-private partnerships (PPP)” – but only under certain conditions: all risks must be taken into account and an investigation according to the rules of the Federal Court of Auditors must be transparent and show that a project in the form of PPP is more economical. Parliament and the public should be able to understand this.
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“We have strengthened Parliament in terms of controls and improved transparency,” clarified Kindler. All profitability calculations and contracts awarded would be published on the Internet. The “secrecy” of the past is now over.
“Transport Minister Wissing has the task, together with the Federal Audit Office, to develop a new method for calculating the profitability of PPP projects in road construction, which depicts the actual costs for the federal government and finally fully priced in risks.” Kindler announced that the budget committee will examine the new calculation methodology.
The President of the Court of Auditors, Kay Scheller, welcomed the coalition’s plans. “Above all, it is important that the results of the profitability analysis are transparent and accessible to everyone,” he told the Handelsblatt.
The federal government pays – “one way or the other”
The Federal Audit Office has been criticizing the federal government’s PPP projects for many years because even its auditors are hardly able to check the profitability calculations and thus classify them as meaningful in accordance with the federal financial regulations. PPP could be a way of financing projects “if the profitability of the projects has been proven beyond doubt,” said Scheller.
He pointed out that PPP projects “only relieved the budget for a short time”. The federal government does not have to shoulder the large investment at the beginning of the project. “In return, the state then has to pay the private companies involved over a longer period of time – with a premium on the return,” Scheller clarified. The federal government has to pay for the project “one way or the other”.
The President of the Court of Auditors supports the coalition’s plans to only award contracts for highways to private companies in exceptional cases.
(Photo: dpa)
The idea for PPP projects arose in the second half of the 1990s within the construction industry, after the economy had collapsed and the federal government was continuously investing less in infrastructure. Since federal funds were tight, but roads were to be built, there was great sympathy for this type of financing in both the finance and transport ministries.
First there was classic pre-financing. Then the construction industry agreed to operate the routes and thus be more economical than the state road construction administration over the life cycle of 30 years.
Construction industry no longer insists on PPP
However, several projects got into difficulties because risks were incorrectly assessed. The companies initially only received as much truck toll as the amount of trucks that drove on the section of the route. The traffic volume risk has now been replaced by the so-called availability model, which is based on the quality of the route. There was also harsh criticism from the auditors from the outset, as well as legal disputes. The contracts for the first models were more than 1000 pages.
The construction industry reacted calmly to the new development, especially since the transport budget has increased year after year in recent years. 8.4 billion euros are planned for 2022. “PPP is one of many procurement options,” said the general manager of the Main Association of the German Construction Industry, Tim-Oliver Müller. The public authorities decide which model they want to tender and how.
PPP were “never intended for the broad mass of road construction projects”. The advantages included “a high level of deadline and cost security and a holistic life cycle view, which is particularly important in view of the debate about more climate protection in construction,” said Müller to the Handelsblatt.
His association has been demanding transparency for more than ten years – provided that business secrets are kept. Only in this way could there be a quality competition instead of a pure price competition. “More transparency should not only apply unilaterally to PPPs, but should fundamentally determine the actions of the public sector, which has not been the norm in terms of contract disclosure up to now,” Müller clarified. He advocated further developing PPP projects in such a way that “medium-sized construction companies are also able to implement projects as PPP – for example through a mix of smaller and larger project volumes”.
Criticism of the fact that PPP projects are primarily reserved for the large construction companies such as Hochtief, Vinci, Bouyges or BAM, was in the past primarily the Central Association of the German Building Industry (ZDB). The association represents medium-sized companies in the industry. So far, however, the ZDB has rejected alternative models because medium-sized companies are not in a position to take on such pre-financing.
More: “Wishful thinking prevails” – Why the traffic light rail plans will miss the climate targets