In public private partnership projects private sector bodies 's i.e., construction companies 's invest in a capital project to design, build and fund the construction of a public building and usually also operate this facility. The risk relating to the project is transferred to the private sector. Investors, in return, receive a proportion of an annual fee payable by the public authority commissioning the project for the normal 25 's 30 years duration of the project. The core PPP projects fall into transport, education and health sectors.
PPP projects have gained a lot of popularity in Europe and parties involved have been satisfied with the progression and performance of these projects. HM Treasury in the U.K. commissioned one of the most extensive surveys recently and found that:
* 79 percent of projects reporting that service standards are delivered always or almost always; and
* in 89 percent of projects, services are being provided in line with the contract or better.
There have only been very few "proper PPP projects" in Estonia where risks have been transferred to the private sector. Some examples are a municipal housing project in Tallinn and an analysis of transportation between Saaremaa and the mainland.
In addition, Tallinn City Council announced last month that it is interested in finding a private sector partner for a major schools project. This project entails private sector responsibility to renovate, finance and maintain 10 schools. In return, Tallinn City Council will pay rent to the private sector partner for 30 years. This is the first "proper PPP project" in the schools sector in Estonia.
There have been so few PPP projects in Estonia due to a lack of knowledge and legislation in this area. PPP project procurement is regulated in the Public Procurement Act; however, this act does not contain all the provisions necessary for PPP projects 's i.e., a services concession. This situation will change soon after a new Public Procurement Act incorporating EU directives 2004/17/EC and 2004/18/EC enters into force. The new act will not only contain a services concession but also competitive dialogue that enables the parties to consult over technical solutions before invitation to tender.
It is already possible to see a slight increase regarding PPP project initiatives in Estonia. Wider knowledge and the new Public Procurement Act will probably increase the popularity of PPP projects further.
Kristi Lehtis is an attorney at Teder, Glikman & Partners, a leading Estonian law firm and a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms including Kronbergs & Cukste in Latvia and Jurevicius, Balciunas & Bartkus in Lithuania.
