Ratifying concession agreements by Law cannot be considered as a viable solution or deemed
necessary, although in the past this was proven useful for the resolution of legal issues.
Before Law 3389/2005, the ratification of concession agreements by the Parliament was needed
to validate the result of the tender award procedure, to establish the rights of the contractor
and, often, to include deviations from special clauses, in order facilitate and accelerate the
implementation of a project (for example precipitation of licenses, special tax status, etc). Of
course, the legislatitative ratification had certain drawbacks. It caused both legal issues (for
example, the twofold legal character of concession agreement: is it a contract or legal framework?
How is it modified?) and practical issues as well (for example important delays in the contract
According to Law 3389/2005, the legislatitative ratification is no more necessary
- the minimum content of a Partnership Contract is clearly determined (article 17),
- the new legal framework is explicit and flexible and limits the need for deviations and
hence the need for ratification by the Parliament, (the contracts are subject to the terms of the
Partnership Contract and also the Greek Civil Code) and
- chapters 5 and 6 resolve issues that in the past required special legislatitative
regulations (granting of permits, archaeological finds, protection of the environment,
It is difficult to determine in advance the time required between the invitation to tender and
finalisation of the contract award procedure, because of the complexity of each project. However,
it has been observed in other European countries that the usual time required ranges between 9 to
12 months. This is because of the fact that the invitation to tender is in line with the Community
Law, which determines specific periods of invitation to tender, submission of tenders, judicial
According to article 17 of Law 3389/2005, the Partnership Contracts have clear and detailed
descriptions of the rights and obligations of both Parties (Public - Private Entities) for the
Partnership object. The method of monitoring the performance and operation of the project is agreed
in the contract and can be done either by independent companies recruited for this purpose by the
Public and Private Entities acting in common, or by the competent State authorities.
Concession agreements are a subset of PPPs. Law 3389/2005 creates a simplified legal framework
which encodes the provisions that up to now constituted the base for the implementation of
concession projects and includes new legal provisions so as to cover other forms of partnerships,
beyond that of concessions.
The implementation of PPPs has been the issue of consultation for many years in our country.
Many people who, because of their involvement in the concession projects or because they had
monitored the developments in other European countries and internationally, had pointed out the
need to establish a legal framework, which would allow the wider implementation of PPPs. It was
necessary to overcome a legal gap in Greece, which led each contractual agreement for a project
co-financed by the private sector for ratification by the Parliament. Furthermore, lot of issues,
hindering the negotiations for the financing of the projects and causing delays in their
implementation, had to be settled.
It was also necessary to create a framework, through which private entities would be able to
implement projects and services, in which the end users are not charged. This is the case of public
schools, hospitals, prisons and more, the implementation of which as PPPs, presupposes their future
payment directly by the State on an annual base. Such projects could not be tendered in the
Law 3389/2005 covers the existing legal gap and outlines many issues and problems. It does not
regulate all the issues because of the individual character and complexity of each PPP. A single
treatment of these issues would create more problems than the ones it comes to solve.
One of reasons for the ratification of Law 3389/2005 was the settlement of many issues that caused
problems in the financing and implementation of PPP projects co-financed in Greece. The effort to
overcome problems in implementing projects co-financed by Private Entities led to the ratification
by the Parliament of special regulations for each contractual agreement. Law 3389/2005 deals with
issues such as licenses, archaeological findings, expropriations as well as tax incentives,
creating the conditions for the successful and unhindered wider implementation of PPP projects in
Law 3389/2005 does not define a minimum limit for the implementation of PPP projects, since
the Government, via this new legal framework, aims at the implementation of PPP projects, which
will strengthen the regional development and the social cohesion. Even if the majority of projects
implemented by Local Authorities are of a lower budget, these projects still constitute important
infrastructure necessary to the citizens of these regions. Therefore, on no occasion should the
proposals for low budget PPP projects be excluded a priori, but they should be examined in terms of
However, based on the international experience, it has been proven that the State benefits from
PPP projects with a significant budget, since the cost of the invitation to tender is considerable
because of the involvement of external advisors and of the inelasticity of their total budget. The
cost for the invitation to tender of one school is exactly the same as that of 25 schools, since
the tender documents and the contract award procedures are the same in both cases. For this reason,
it's to the State's interest to group similar projects and launch a single Invitation to
In cases of projects where the end user pays a fee directly to the private partner, the Special
Purpose Vehicle (Private Entity) has undertaken both the responsibility for constructing the
project infrastructure and the demand risk. In case that the fees paid by the end users are not
sufficient enough to cover the cost of the project, the SPV cannot sustain the forecasted
contractual revenues. This issue also concerns the banks that provide big long-term loans to the
SPV and expect to be paid off from the project's revenues. In case the Private Entity cannot deal
with this problem, it might be substituted by another Private Entity indicated by the banks. In
cases of projects with a social character, the Public Sector is always safeguarded for their smooth
There are partnerships where the private partner constructs the project and upon its completion
has the right to collect fees (e.g. tolls) from the end-users for the services provided. There are
also other types of partnership with a social character, where the end-users are not directly
charged and their cost must be covered by the State, such as the construction of schools.
The State pays availability payments (payments to the private partners for the availability of
infrastructure, so that the State can provide its services to the citizens) to the private partners
that undertake projects reimbursed directly by the Public Sector. Services, such as education,
health and a number of others, are still provided to citizens for free, although the private
partner constructs the infrastructure and caters for the efficient operation and proper maintenance
of the project. As in the case of traditional procurements, the profit of the Private Entities is
included in the availability payments paid by the State.
The Private Entities that undertake the implementation of a PPP project also bear the
construction, availability and / or demand risks. In this way, the State avoids possible budget
overruns that could result from problems and delays during the construction phase and which could
lead to budget overruns. On signing the Partnership Contract, the annual payments of the Private
Entity for the implementation of the project are arranged.
The repayment of PPP projects by the State or by the end users begins once the project is
operational. This means that the Private Entities are motivated to deliver the project to the
public sector in time and with no delays, so as to start receiving the availability payments.
The role of banks in the implementation of PPPs is important. The obligation of Private Entities to
secure the financing of the projects, in whole or in part, leads them inevitably to bank loans, as
proven internationally. Indicatively, the usual ratio of equity and bank loans for financing PPP
projects ranges from 10-20 to 90-80.
The involvement of banks in PPP projects contributes to their prompt implementation, as banks
will monitor Private Entities which have undertaken their implementation. This monitoring keeps the
cost of the project low and helps to meet the deadlines set in the Contract. Moreover, the
monitoring continues throughout the Contract (25 years for instance). In this way the quality of
the offered services according to pre-determined output specifications is ensured. Private Entities
have to be consistent with their contractual obligations in order to get repaid by the Public
Authorities and pay off their bank loans.
PPPs will not cover additional needs of the Public Authorities. Via PPPs, the existing needs
for additional infrastructure and services, already included in the strategic planning of each
Authority, can be implemented more rapidly.
Let's take for example the schools project. We are all aware of the need for new school
buildings in Greece. The total cost of the implementation of this project amounts to 2.5 billions.
The School Building Organisation receives from the Public Investments Programme about 150 - 200
million euros each year. If the needed school buildings are procured in the traditional way,
it will take 15 - 20 years to build them. Through PPPs, we can shorten this period and construct
more school buildings without extra direct cost by using private funds.
However the State must be careful. We cannot approve the implementation of such a great number
of school buildings, the repayment of which would suspend the future planning of the School
Buildings Organisation. Our aim should be that PPP projects cover 15-20% of the annual budget of
OSB, like in other countries. Therefore, the future payments for school projects should not exceed
this percentage. By using public and private funds, we can abolish double shifts, replace leased
schools and upgrade school buildings in a faster way.
Small contractoring companies can submit a tender and undertake the implementation of a PPP
project, since the new legal framework does not include any such restriction, but also since the
maximum limit of 200 million euros for a PPP project, shows the intention to include small and
medium size projects under its provision.
Normally, Private Entities are responsible for the delivering and finalizing the required design
studies. Of course, the determination and the settlement of the technical specifications (or the
functional requirements) or the elaboration of the preliminary designs (when this is required) will
be made by the Public Entity that acts as the Contracting Authority.
The payments of the Public Sector to Private Entities are linked with the pre-determined output
specifications for the provision of infrastructure and services of high quality. In each PPP
contract, there is a number of parameters that determine the quality and performance of the
project, so as to quantify whether the contractual obligations of the Private Sector are fulfilled.
Low quality services result in reduced payments by the Public Authorities. This way, the quality of
a project throughout the contractual period is ensured.
Even though many people believe that Public Authorities cannot monitor the quality and the safety
of construction projects, this is not true. Public Authorities can do so, through the terms and
regulations that are obligatorily set in the contractual agreements. The monitoring of the Private
Entities by the financial institutions (banks) is an additional guarantee for the Public
Authorities and the end users. Banks want to ensure that the Private Entity delivers the PPP
project according to the quality specifications set out in the contractual agreement. In this way
the payment mechanism, which is linked to the agreed quality specifications, is activated and with
these payments, the Private Entity repays its loans. It is emphasised, however, that the monitoring
by the banks (for example via technical advisors) offers an additional safety feature that cannot
substitute the monitoring by the Public Authorities.
Engineers will not be affected by PPPs or by the monitoring of the Private Entity by the banks.
The implementation of PPP projects requires the participation of engineers, to the same or even
bigger extent, as in every public work. Indeed, the participation of engineers or technical
companies is necessary:
- for the preparation of proposals, which the Public Authorities submit to the Special
Secretariat for PPPs for the approval of a project that falls under Law 3389/2005
- for the preparation of tender award documents
- during the implementation of the contractual agreement, acting as technical advisors to
banks, or as independent engineers or engineers of Public Authorities.
The time required to tender a PPP project depends on its maturity and the actions already taken by
the Contracting Authority (the public institution) to ensure the successful implementation of the
project. The main characteristic of this procedure, according to the international practice and due
to lack of specialised staff in PPP projects, is the recruitment of external advisors, financial,
technical and legal advisors. These advisors assist the authorities to carry out the projects
faster and in a more effective way, since the invitations to tender differ from those of
traditional Public Procurements.
The establishment of a legal framework constitutes the basic condition for the wider
implementation of PPPs, but the way they will be implemented and the organisational preparation of
the Public Authorities is the basic element for their success.
The implementation of PPPs requires particular know-how and staff in a broad range of
disciplines, as well as extensive experience and expertise in their respective specialization
fields. It is not possible, however, for all the Public Authorities to be staffed accordingly at
once. Because the contracting authorities of the PPPs are the public institutions themselves, the
Ministry of Economy and Finance has to assist them so that they can cope with the new projects that
they will implement via PPPs. For this reason the State, like other countries already implementing
PPPs, via setting up a Special Secretariat, has created a central mechanism with experienced staff,
ensuring in this way that everyone will have access to that knowledge.
On a technical level, the Inter Ministerial PPP Committee approves PPPs and integrates the
annual payments in the Public Budget, according to Law 3389/2005. Therefore, it needs to ensure
that the services provided by the private sector are viable and that the financial data are
realistic and for the benefit of the State, in relation to the results they produce. The Special
Secretariat when approving PPPs or launching tenders it evaluates a lot of parameters that prove
the necessity for implementing such projects.
The implementation of PPP projects where the Public sector reimburses directly the private
sector creates future obligations for the State. The Special Secretariat, in collaboration with the
respective departments of the Ministry of Economy and Finance, monitors all the financial
obligations undertaken by Public Entities, so that the State knows precisely the future burden on
the Public Investments Programme, resulting from the implementation of PPPs and the payments to be
In the first projects the initial investment of the private partner is reimbursed via the fees
that the end-users pay directly to the SPV for the use of the infrastructure or service provided.
Under such schemes, the private partner constructs the project and following its completion has the
right to collect fees from the end-users for the services provided. The amount of these fees, the
conditions and their collection mechanism are clearly defined in the contractual agreement between
the Contracting Authority and the selected private partner. At the end of the contractual period,
the infrastructure is transferred to the public entity. In case the fees paid by the end-users are
not sufficient enough to cover the whole cost of the project, the public sector may support this
venture, either through lump sum contributions during the construction phase or through
availability payment during the operational period.
In the projects where the public sector reimburses the private sector, the initial investment of
the private partner is reimbursed by the Contracting Authority through regular availability
payments, linked with pre-determined output specifications criteria for the provision of quality
infrastructure and services. Under such schemes, the private partner constructs the infrastructure
of the project and upon its completion receives availability payments from the public partner,
based on the provision of pre-agreed quality services. In order for the availability payments to be
made in full (without any penalty or even full probation) the private partner should cater for the
efficient operation and maintenance of the infrastructure or the services that it provides. The
private partner undertakes the management and operation of the project throughout the contractual
period and upon its termination, the infrastructure is transferred to the public entity.
The form of PPP that will be implemented depends on the allocation of the risks between the two
contracting parties and on the extent of the involvement of the private sector, which is a decision
to be made by the Contracting Authorities, depending directly on the optimum allocation of risk.
Key for their success is that risk is undertaken by the party that can better deal with it.
PPP schemes are complementary not only to the traditional public works but also to other forms of
partnerships between the public and the private sector, such as the concession agreements of the
Ministry of the Environment and Public Works or the collaborations of Local Authorities with
private partners, that will of course continue to be implemented. Anyhow, the Ministry of Economy
and Finance intends to offer to Public Authorities a new additional financial tool (PPPs), the use
of which is upon them.
Law 3389/2005 defines that only Public Authorities may submit proposals to the Special Secretariat
for PPPs. The Private Entities can propose ideas for PPP projects either to Public Authorities or
to the PPP Unit. However, it must be stated that if a project proposed by a Private Entity does get
approved to be implemented as PPP, this Private Entity has to participate in the contract award
procedure, so as to be eligible to implement the project.
No. Partnerships may be subject to the provisions of Law 3389/2005 provided that all the necessary
procedures are followed. Firstly, the Inter Ministerial PPP Committee has to approve the project
and then the Contracting Authorities may start the tendering processes according to Community Law.
Nevertheless, the collaboration between Public and Private Entities is beneficial for the
elaboration and preparation of proposals for PPP projects.
With the wider implementation of PPPs, Greek companies now have new, greater opportunities. They
can participate in contract award procedures for projects, which will be implemented both in Greece
and internationally, since the PPP market is constantly developing globally. Beyond UK, where PPPs
were first implemented in the early 90s, other countries of Western Europe, such as Portugal,
Germany, and Spain, have been implementing PPP projects as well. Countries such as France, the
Netherlands, Belgium and the Czech Republic have recently set up specialised units and, where
necessary, as in the case of France, ratified a special legal framework to accelerate the promotion
of these partnerships. The fact that countries of the Eastern Europe and the Balkans are now in
this process is indicative that this institution is booming.
On no occasion will PPP projects substitute the public works implemented through the Public
Investments Programme. PPP schemes are complementary to these projects, aiming at offering to the
citizens more infrastructure and better services, that are financed by private funds, complementary
to the public ones.
The main reasons for the implementation of PPP projects in the U.K. were the budget overruns and
the delays in the implementation of the projects procured in the traditional way. It has been
proven that in the U.K. 88% of the projects procured as PPPs are delivered both in time and within
initial budget, whereas their cost is usually less than that of similar projects procured in the
traditional way. Anyhow, the State benefits, since the payments start after the operation of the
project and depend on the efficiency and performance of the operation. These are reasons why other
countries such as Portugal, Spain Italy, Netherlands, and France have been also implementing
PPPs, beyond being a reliable alternative for the financing of public works, are also used for:
- the efficient maintenance of the construction projects (as Private Entities cater for the
operation or performance of the project and their repayment depends on its good maintenance)
- ensuring the quality of services provided during the contractual period (via availability
payments depending on the quality specifications set out in the contractual agreement). PPPs ensure
that the public budget will not be burdened by overruns and delays that have increased the cost of
projects in the past. Finally, PPPs constitute a tool, which can be used by Public and Local
Authorities to implement projects, which have not so far been implemented because of lack of