In a difficult budgetary environment, Public Private Partnerships (PPPs) propose a model of co-operation and a potentially effective solution for the design, financing, construction, management and exploitation of a country's infrastructures and public services (see paperJam 02.2006).

On 12 October 2005, Prime Minister Juncker announced, as confirmed by Luc Frieden, the Minister for the Treasury and Budget, that the Government would be looking into PPPs (Public Private Partnerships) as a means of financing a certain number of public infrastructures- specifically, buildings.

The perceived advantage of the PPP structure lies in the possibility of combining the advantages and knowledge of experts in various trades, thus obtaining a better spread of the risk, a considerable reduction in costs, a generally shorter period of realization, and a quality implementation and follow-up, within a framework that offers managerial transparency.

In paperJam 02.2006, it was announced that with "the creation of Inovia, Luxembourg is engaging in a PPP for the realization and management of the Grand Duchy"s public services and infrastructures." In fact, although Inovia was created to take advantage of the opportunities inherent in the announcement made on 12 October 2005, Claude Wiseler, Minister of Public Works, points out that, "Inovia is only one of the companies that is interested in obtaining PPP relationships with the government. There is no special relationship with Inovia," as might be concluded from the news item. "We do not yet have a first PPP in place. At the present time, we are collecting information from any interested party. In addition, Luc Frieden, the Treasury Minister, is of course also involved in this process. In fact, we have to find out what can be realized by PPP and we have to decide how to do it."

"Yes, there are plans to implement PPPs," Wiseler confirms. "Our first envisaged projects will involve new school buildings." (A list of potential projects can be found directly on the web site of the Ministère des Travaux publics www.etat.lu/MTP).

Wiseler says that they will start with just one project, and that it will absolutely be done through a public (submission) tender process, but that before this can occur they must ensure there is a legal framework in place.

How will the government decide which projects have the potential to be Public Private Partnerships? "We look at the projects we want to do now and we try to identify which buildings will be the easiest," he says (i.e. which buildings will present the least problems). "For example, a new Lycée Technique in Ettlebruck has no relationship (legal, permit, or property rights) with any other school building. The "Neie Lycée Luxembourg" is another potential project - with new ground and a brand new building. We want to be absolutely sure there are no legal problems."

Why is the government looking at PPPs now? "We are looking for alternative methods to finance projects. It allows us to take 15 - 25 years to pay for a project," Wiseler says.

Ensuring a legal framework

Wiseler says that PPPs offer a more global way to manage and budget a project from start to finish. "We have so many projects over the next 10-15 years. Using PPPs for building projects instead of handling everything by ourselves (i.e. through the government) gives us a way to manage the concept, the financing, the building and the maintenance as a whole. This allows us to understand the financing of projects as a whole."

However, before the government can engage in a first PPP, they must ensure a legal framework. Studies conducted on thousands of foreign PPP projects have shown a significant reduction in total project costs and time frames. While PPPs have been used in many E.U. Member States with a good deal of success, they exist in a variety of forms, and are implemented in different ways, as, for example, concession agreements in France. PPPs rest somewhere between neither the public nor private partner assuming 100% of the financing, but models vary. Examples of PPP legal frameworks that the government is currently looking at are from Germany, the Netherlands and France.