Speaking notes for Melanie Schultz van Haegen, Minister of Infrastructure and the Environment, at the opening of the international seminar ‘PPP Auditing 2012’ on 26 November 2012 in the Spaansche Hof, The Hague

Toespraak | 26-11-2012

Good morning, ladies and gentlemen,

I, too, would like to welcome you all to The Hague.

Over the next two days you will be discussing a concept with a short history but a big future.
A concept that takes many different forms in different countries. Today and tomorrow you’ll all be sharing your different experiences. And that’s a very good thing. That way, we all benefit.

Because despite individual differences, all countries share a common interest in PPPs. An interest that’s growing in importance. Because PPPs provide scope for smart investment in infrastructure at a time when money is in short supply.

We owe it to taxpayers to find creative solutions to this shortfall. So that we can go on making the investments that are needed. Investments in roads, bridges and canals, as well as schools, hospitals and other public buildings.

PPPs are in the common interest.

And that’s why I greatly appreciate this initiative by the Court of Audit.

Because the more knowledge and experience is exchanged on PPPs, the better their quality will be.

 

How do we approach PPPs in the Netherlands, and what opportunities and risks do I see?

Let me start off by saying that I’m a great fan of PPPs. And I’m not alone in that. The Dutch government, which was formed only this month, embraces this approach.
This ties in with what we see as our main mission. We want to make sure that the Netherlands emerges from the financial crisis equipped to face the future.

As Minister of Infrastructure I can do my bit by ensuring good access by rail, road and water. Despite the crisis we will continue to invest, because to stand still is to fall behind. So the government needs to be creative. For one thing, we need to be open to market innovation. We also need to find ways of funding that get maximum value out of every euro or dollar or yen or whatever currency you are using.

In the last five years, a lot has happened with innovative tendering in the Netherlands.

As one of the biggest contracting authorities in the field of infrastructure, our people at Rijkswaterstaat have built up a lot of expertise. [And it’s good that they’re here to talk about that today.]

I can tell you that PPPs are becoming common in the Netherlands. They’re not yet as common as they might be, but we’re getting there!

Let me give a few concrete examples:

–     We’re currently involved in 30 PPPs infrastructure running up to 2020. They vary from highway construction – like the A15 near Rotterdam – to the construction of a second Coen Tunnel in Amsterdam, or a large sealock near Amsterdam.

We’re also involved in housing PPPs, like the new premises for my ministry, and a prison in Zaanstad. And provincial and local authorities are getting in on the act too. Take projects like the construction of a school in The Hague or the extension of a runway at Eelde airport.

–     Also, this year, the first pension fund invested in this new approach. Last week, we reached financial close on the N33 – a provincial road - together with the largest Dutch pension fund. 

–     And a financial fact: PPPs cut the cost of traditional contracts by 10 to 15%.

–     Our Ministry of Finance registered for this, €700 million. It’s difficult to make calculations of this kind, especially for a 30-year period, but I’m basing on figures provided by our Ministry of Finance.

In my view, PPPs have two big advantages.

I’ve already mentioned the first. PPPs can deliver better quality for less money.

The second is that PPPs can also give market players greater scope to innovate. Not just at the construction stage, but also in maintenance and management.

Our experience shows that PPPs-projects are often completed on time on an innovative way, and within budget . Take the work on the N31 – a road in Friesland – where far fewer road closures have been needed. That’s reduced inconvenience to road users to a minimum.

Or take the A12 - a highway construction project near Utrecht - which is nearing completion almost two and a half years ahead of schedule.

PPPs have great potential. Dutch pension funds alone administer funds amounting to 800 billion euros. It’s not unrealistic to think in terms of five to ten per cent investment potential.

I believe my main task is to exploit the potential of PPPs more effectively.

So I’ve taken measures to make sure that happens.

–     We need sufficient projects, so last year I selected 32 of them for the upcoming years.

–     We need sufficient expertise, so a national help desk has been opened where private parties and local authorities can go with questions.

–     And we need an attractive financial framework, for instance for pension funds. So, I’m starting with the Ministry of Finance a system of index-linked loans.

It is my ambition to extend PPPs. But only under certain conditions.
The key words here are caution and reliability. We don’t want our public amenities to become dependent on private parties.
We don’t want to lose control of public works.

So in the Netherlands, in order to qualify for a PPP, projects must be budgeted for. Once the budget is there we make a solid judgement whether to use PPP or to use more traditional methods.
We are not dependent on PPPs.
This situation is quite different in many other countries.

Let me say that the Netherlands has not yet fine-tuned its approach to PPPs.
For instance the issue of flexibility.

How can you build sufficient flexibility into a 25 to 30-year contract, so that you can respond to changing circumstances, like technical developments or a shift in political thinking?
And how do you respond to changes without taking a loss for the tax payer?
These are issues where Courts of Audit can help.

Ladies and gentlemen, this brings me to my conclusion.

I’m delighted with the spotlight our Court of Audit is shining on PPPs.
And it’s good to see so many of you here today with knowledge and experience of PPPs. I see it as a sign that the importance of PPPs is growing.

I believe that PPPs have become part and parcel of modern society. At the same time it’s up to you to keep us sharp.

Our Court of Audit is currently investigating the Dutch approach to PPPs. I’m happy to be helping the Court with this investigation and can’t wait to hear its findings.

Not because there is any doubt about PPPs as a general approach, but because there’s always room for improvement.

Thank you.