Concessionaire’s Performance Assessment in Public-Private Partnerships:

Abstract

This article describes the authors’ experience with Public Private Partnerships (PPPs) being dealt with by the Italian Autonomous Province of Bolzano/South Tyrol. All PPPs considered by the Province and other local authorities must be compulsorily envisaging the enforcement of an effective performance control system during operations, in order to provide a timely assessment of key performance indicators (KPIs) and, in case of non-compliance, to levy relevant penalties to the private partner. Measuring a concessionaire’s performance during operation stage in PPP arrangements is an essential requirement set forth by European standards, in order for PPPs to be accounted off public balance. In the Guide to Statistical Treatment of PPPs, Eurostat sets out that PPP contracts must contain provisions that allow for the Operational Payments to be adjusted for unavailability of the asset and poor service performance by the private partner. Unlike concessions, where the private party bears most of the risks and the majority of revenues come directly from user charges, in PPPs the public party is the major purchaser of the services provided by the operator. The investment repayment is assured for the greatest part by regular availability-based payments granted by the acquiring administration throughout contract duration. In the latter case, it is essential to ensure that a substantial risk portion is transferred to the private party, by contractually defining a clear set of performance levels to be matched during Operations, and making sure that an efficient and sound performance control system is in place to check if requirements are met. Keywords: PPP; concession; PAB; KPI; performance indicator