In 1999 the Dutch PPP-scheme was launched. Several months ago Parliament asked more insight in the development in PPP in the Netherlands. Therefore the government prepared an evaluation [1]of PPP since the scheme was launched.

The general conclusion is that the Dutch PPP program is gaining speed. The Netherlands is, after the United Kingdom and together with Ireland and Portugal, one of the European frontrunners in developing a market for Public-Private Partnership. Not only on DBFM/BOT-contracts, but also on combination projects (urban and rural development, infrastructure combined with real estate etc.).

There is no doubt that a lot of progress has been made in the past three years. The first deals are signed. A well-known project, which caught a lot of attention within Europe, is the High Speed Rail Link (HSL) from Amsterdam to Brussels. The deal for the HSL-South Infraprovider won two awards [2]. The HSL Operations concession is awarded to a consortium of Dutch Railways and KLM. Another deal was closed for the redevelopment of the Old Dockyard Willemsoord in Den Helder. Several other projects, like the wastewater treatment plant Delfland and two roads project (A59 and N31) are in the tendering phase. The tendering for two schools, two government buildings, a big rail project (the Zuiderzeelijn), a big road project (the A4 corridor) and a sludge treatment plant (Koegorspolder) are coming up.

The objective of the Dutch government is to stimulate PPP and to make it an accepted alternative for more traditional approaches towards public spending in a few years time. The principal method to reach this goal is demonstrating the benefits of PPP in several concrete projects. As we all know prove of the pudding is the eating. The number of concrete projects is yet to be enlarged to build up broad PPP experience and to decrease the transaction costs. Therefore, government has committed itself to start more concrete PPP’s, with good potentials in order to create a deeper PPP-market in the Netherlands for the national and international private sector.

We will start by sketching the objectives and the strategy of the Dutch PPP-scheme that started in 1999. Then we will describe the outcomes of the evaluation. Subsequently we describe the scala of  PPP opportunities for the Dutch and international business community to engage in commercially attractive PPP-contracts. We will end with a conclusion regarding the actions the government has taken to speed up PPP in the Netherlands.

Objectives of the PPP-program and strategy

The PPP Knowledge Centre at the Ministry of Finance - comparable to the former UK PFI Task Force - has been set up in 1999 to stimulate the use of PPP and advise public sector project owners on the development of suitable PPP-arrangements.

As a start it must be noticed that PPP’s in the Netherlands are not budget driven. PPP’s in the Netherlands follow from the debate on the core-business of government: setting and monitoring the rules, but let the actual delivery of some public services be done by private parties. The opinion is that involving the private sector can result in more value for money: the same quality at lower costs or a higher quality at the same costs. PPP is not a goal in itself, it is way of efficiently carrying out public investments. It is just one of the tools the government can use for realizing public investments. This strategy differs from the United Kingdom, where PPP is made the basis for public investments, unless one can prove that PPP is not beneficiary.

Accordingly, we have set a strategy of gradually developing the PPP concept in various sectors by starting with a limited number of concrete PPP-projects. The main reason for this is to give public and private parties the opportunity to build up the required PPP-knowledge and experience. This will result in a gradually developed, broad and profound PPP-market. In close co-operation with the responsible ministries and other layers of government, the PPP-Knowledge Centre’s strategy is to select several pilot projects from various sectors.

In the process of bringing the projects to the market, standards are set for the process and the contracts, while government officials and market parties learn the tricks of the trade. This sets the right stage for a broader introduction of the PPP concept.

Evaluation

The main objective of the evaluation was to evaluate the progress of the PPP-scheme over the last three years. The general conclusion of the evaluation is that the Netherlands belongs to the European frontrunners in developing a market for Public-Private Partnership. To support the development of the PPP market, the PPP-Knowledge Centre has created an excellent instrumental basis (e.g. a Public Private Comparator for screening the PPP potential of a project and the Public Sector Comparator to verify value for money), started a PPP course at the Erasmus University Rotterdam, writes brochures and reports regarding sector opportunities, process architecture etc.

The evaluation shows that there is a distinction in the progress of PPP-projects in the different fields:

PPP projects by local government in the field of urban and rural development. Due to long experience with these kinds of projects both local government and private parties consider these PPP’s as an accepted alternative to the traditional realization of public projects. PPP by combination projects e.g. a combination of a real estate development with new government infrastructure. In spite of the high complexity of these projects progress is made. PPP concessions; DBFM/BOT. This field also shows progress. Eye catcher is the before mentioned High Speed Rail Link from Amsterdam to Brussels. In December 2001 the ministers of Transport and Finance signed the contracts for the HSL-Infraprovider, with a value of about 1.2 billion Euros (DBFM-contract to build and maintain the HSL infrastructure for a period of in total 30 years), and the HSL Operations. In the utility sector the wastewater treatment plant Delft is in the tendering stage.  In the road sector the A59 is at a final stage. The negotiations with the two selected bidders will start on a short term. Commercial close is anticipated coming October. The N31 tender started last March. The value of the contracts for the two above mentioned roads is about 500 million Euros. This tender is now in the pre-qualifications phase and three to four bidders will be selected at the end of May. Commercial close is expected early next year.

The evaluation states that the progress in relation to realizing concrete PPP-projects, despite of the signing of several successful PPP deals, is a bit lagging behind the (too) high expectations of some parties. It is useful to analyze why on one hand some projects are already realized as a PPP, while on the other hand some projects are still in the PPP cradle. Two types of causes can be distinguished. The first types of causes are not specific for PPP-projects, but apply to big and complex projects:

Government projects, especially investments in infrastructure, take time to be realized. This is due to decision making processes within the government, spatial procedures like public hearings, the opportunity to raise objections etc. The normal procedures which have to be followed in every project, PPP or not, can take years. Lack of sufficient reserved budget. PPP is not the way to overcome a budget problem. In the case of insufficient reserved budget, the private bid will always be higher than the reserved budget. 

The second kinds of causes are PPP-specific causes:

PPP means a fundamental change of the mindset and working methods within the government. For the public workers this means that they have to make themselves familiar with a new way of working and thinking. As in other countries it takes time to get full support for the transfer of tasks. The strategy to start with a limited number of concrete projects means that experiences are gradually being build up and the transaction costs for both government and private parties are relatively high. This makes it more difficult to prove the value for money of PPP.

In order to change the working methods and mindset within the government and to overcome the relative high learning costs the number of concrete projects is yet to be enlarged.

PPP-opportunities in the Netherlands 

As stated above more concrete projects are necessary. The next years the Dutch government will focus on the rail and road sector, the utility sector, schools and government buildings. Besides this, the government has the ambition to focus on a broad an integrated approach from a conceptual vision on projects. For example combination projects (urban and rural development and the combination of infrastructure with real estate), road pricing, traffic management and the mobility market.

Already there are a several concrete projects that have lots of PPP-potential. The PPP-opportunities related tot infrastructure can be distinguished in the rail sector, the road sector and combination projects.

Rail sector

There are good opportunities for follow-up DBFM/BOT projects in the rail sector and to build on the knowledge and the skills acquired in the HSL-project. One is the connection between Amsterdam/Schiphol Airport and the Northern provinces, the so called Zuiderzeelijn. This is a public investment of approximately Euro 2,5 - 7 billion. Another potential PPP project is the Hanzelijn, a new rail connection between Lelystad and Zwolle (about 50 km).

Road sector:

A new promising project is the A4 corridor. This project is very attractive due to the huge size of the project. The A4 is one of two major highway routes from Amsterdam to the Belgian border. The project considers: roads, tunnels and urban development. Estimates of the total value of the projects add up to about Euro 1,7 billion. The government has decided to procure those road-projects as PPP contract. The start of the tendering is expected at the end of 2003 or early 2004. Many more projects are coming up.

Relevant in this respect is the government decision to go ahead with introducing road pricing. The aim is to replace present taxes on the ownership of cars by a tax on the actual mileage of cars in 2006. This concept will provide ample market opportunities for the development and installation of the systems required (a combination of GPS and GSM technology) and the back-office services. In turn, this might create a new market for additional services like route and traffic information, travel arrangements and mobile phone services. Obviously, close co-operation between the public and the private sector can create substantial value added for this concept. Possibly, the system for road pricing will also facilitate the operation of tolling systems on part of the Dutch highway network.

Combination projects:

Eye catchers are the so called New Key Projects for the realisation of the (re)development of train stations to accommodate the HSL in combination with the redevelopment of city centres and real estate development. Examples are Amsterdam Zuidas, Rotterdam CS and The Hague CS. These projects are in the final stages of spatial planning procedures. Due to the limited space in the Netherlands road construction is likely to go more and more hand in hand with real estate (re)development. Combination projects of roads and industrial estates by means of PPP are coming up (e.g. the A4 Midden Delfland and the N201). These kinds of projects have great PPP-possibilities.

Conclusion

Based on the evaluation the government has taken several steps to polish the way for further PPP-projects. First the ministries have to make sure that the PPP knowledge is institutionalized in their own organization. Some ministries have already created their own internal PPP-units that work closely together with the PPP Knowledge Centre. Furthermore the PPP knowledge Centre is still needed as a catalyst for some years to stimulate the acceptance of PPP for public investments. The last, probably most important step, is that the ministries have committed themselves with new promising PPP projects in the short term and develop a pipeline of projects. This new pipeline of projects is to prove for once and for all that PPP provides value for money and should lead to general acceptance of PPP as an alternative for public investments. 

[1]The evaluation was send to Parliament on May 7th and will be available in English this July. 

[2]The awards of Euromoney/ Project Finance magazine are; ‘European PPP-deal of the Year’ and ‘Overall Deal of the Year’.