Public-Private Partnerships: Framework and Evaluation of Railway Concessions in Portugal

Abstract

The public-private partnerships (PPP), who had their origin in Britain in the early 90’s of XX century, are a mechanism that enables the execution of public projects with private responsibility, allowing the state to provide services and infrastructure in a context of strong budget- ary constraints. By using the PPP, the state involves the private sector in providing public services. PPP can in- volve the provision of public work, or take the form of a management contract, where the private is engaged to manage a specific public service. In Portugal, the PPP began in the transport sector, and they adopted the form of concession in the railway sector. In this study we dis- cuss the railroad concessions in Portugal, in order to determine whether they are advantageous. We identify and characterize the railway concessions, as a form of public-private partnership (PPP). We examine its legal framework, the UE legislation and the Portuguese law, particularly the relationship between the Código dos Con- tratos Públicos (CCP) and the legal framework of PPP, its institutions and also the audits of the Court of Auditors. We examine several projects of railway infrastructure in Portugal, to determine if the general principles of effi- ciency and economy were completed, through a careful evaluation of the possible distribution of risks. We find that the insufficient preparation of cases, released before the entry into force of Decreto-Lei 86/2003, of April 26, amended by Decreto-Lei 141/2006, and the inadequate contract management led to constant requests for finan- cial recovery that transformed financially self-sustainable projects in projects “endorsed” by the state. We conclude that, given the complexity of railway concessions and the large amounts involved, a project cannot succeed with- out a careful advance preparation of procedures, proper management and a tight monitoring of contracts. So, it is therefore essential the creation of structures for monitor- ing, management and control of PPP.