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  • Dear Readers!

    Public private partnerships create a win-win situation. There is no better way to sustainably safeguard jobs, create new jobs or use efficient innovations for public services and so help keep local fees and charges stable. And yet one might occasionally get the impression here in Germany that there is currently a kind of trench warfare going on between the public and private sectors. People are talking about the current trend of some local authorities to renationalise services. Something that is threatening to eliminate fair competition. There are a number of impartial studies around that have looked in detail at the pros and cons of nationalisation. The international economics research institute, e.ca economics, for example, discovered that this trend towards nationalisation is one that is catching. On the one hand, districts that have renationalised services in the past are more likely to do so again in the future. Consequently, this effect is seen more often in districts where a large percentage of the services are already being delivered by municipal businesses. On the other hand, there is also a noticeable trend towards local authorities trying to drive private sector competition out of their market, in particular in districts with a low population density.


    Having worked together with local authorities for many years, REMONDIS is, of course, critical of these trends. Each and every day, REMONDIS shows that things are so much better when the public and private sectors work together. Being a partner in 50 PPP companies and delivering services via numerous third party contracts, we have perfected the concept of public private partnerships for all those involved – both when it comes to public services and water management. All in all, REMONDIS and its public sector partners serve over 12 million people. The local authorities and their residents are provided with high quality services at a fair price. At the end of the day, they are the ones who finance the public services via the fees and charges they must pay. At the same time, the municipal partners must keep a close eye on their budgets and economise where necessary. Having a reliable source of income from taxes can also help here. It is well worth taking a look at the way the different tasks are allocated in Germany.

    Around 35% of waste management services are provided by the local authorities themselves via their own municipal companies, which means no VAT is charged on these services. More than one third of the people living in Germany, therefore, do not pay VAT on these public services; and yet at the same time they benefit from the payments made by other local inhabitants as a result of funds being allocated between districts. The local authorities themselves lose out as they receive less tax. An unfair tax situation that ends up hurting everyone. Councils are deliberately choosing not to open up their markets even though this would enable them to cut costs. They are effectively holding back the private sector economy rather than making the most of the opportunity available to them to improve their situation and work together with the private sector to take the pressure off the public purse, increase their workforce, stabilise fees and charges and ensure they have a steady and reliable source of income.


    Both we and our long-standing municipal partners agree that the best solution is to work together as partners. This special edition of our company magazine focuses entirely on the subject of public private partnerships and aims to provide a more detailed picture of the various PPP business models, the advantages they bring for local authorities and their residents as well as the positive impact they have on jobs, on the local economies and on the environment. And, as self-praise is no praise, we are more than happy to give our partners the opportunity to speak about their PPPs here. Local authorities, which would like to have a stable and sustainable budget, to provide their residents with high quality services and to achieve the highest possible levels of sustainability in their waste management and recycling sector, will find some valuable suggestions and experiences here to help them in their decision-making process. Here’s to future collaborations!


    Yours

     

    Thomas Conzendorf

Distinguishing between two models

There are many different types of public private partnerships around. Fundamental differences can primarily be found in the way services are exchanged and how the cooperation work is actually organised. For the most part, however, such collaborations are one of two basic versions: the concession model or the institutional model.

  • The PPPs, in which REMONDIS owns a share, provide services for more than 12 million local inhabitants in Germany.

CONCESSION MODEL: cooperation work for more complex tasks

Perfect for clearly defined projects

  • PPPs based on the concession model are often used for tasks that need to be carried out for a limited period of time – especially in the water management sector. This is particularly the case for clearly defined projects where it is not possible to predict in detail beforehand how they will develop. Concession PPPs that are based on an exchange of services can be finalised and adapted to changing conditions.

    Local authorities benefit greatly when their collaboration work with REMONDIS is based on the operator model – especially when the work involves treating wastewater and supplying drinking water.

    A concession PPP is very similar to the classic procurement or assignment contract. In principle, this involves a task that is awarded by the public sector partner and carried out by the privately owned company. A joint venture company is not set up – the public private cooperation is based exclusively on the contractual terms drawn up between the partners.



The advantages of the concession model

Concession models are primarily used in REMONDIS’ water management division – in particular as operations management or operator models. Acting as the local authorities’ partner, REMONDIS is solely responsible here for carrying out all the various tasks. The company bears the operational risks, makes all the necessary investments and guarantees that all quality targets will be met. Besides operating a facility, such collaborations can also include planning, building, maintaining and financing such plants. The public sector partner benefits in a variety of ways, no matter what the specific details are. With the operator model, for example, it bears no financial risks and can plan its exact costs over a period of 20 to 30 years. Furthermore, it has unrestricted access to REMONDIS’ wealth of knowledge – a cornerstone for high levels of efficiency and reliable services.

INSTITUTIONAL MODEL: a partnership with a joint venture business

Perfect for long-term collaboration work

Institutional PPP projects are based on a joint venture company in which both the local authorities and the private sector firm own a share. Both parties bring resources with them into the joint venture and both are responsible for the business. A contract is drawn up stipulating the exact details of the collaboration, for example regarding the organisation, focus and fundamentals of the business.

Institutional collaborations are primarily used for long-term cooperation work. Rather than being an exactly defined project, their original area of activity is more of a general task. All conditions relating to this are set out in detail and regulated in the partnership agreement and any supplementary framework agreements.


The subject of finances

If the PPP company delivers public services, then these are reimbursed by the authority responsible which passes on the fees or charges paid by the taxpayer. The PPP invoices private sector clients directly if it has provided them with services. Should the PPP’s activities that do not involve public services generate profits, then these can – depending on the regulations agreed on – be distributed, ploughed back into the business or credited to capital accounts. The amount of dividends paid to the shareholders depends on their share in the business.



A wide range of services

No matter whether a PPP is set up for new business activities or to improve existing services: the public sector partner transfers its business supplies and assets to the PPP. Further­more, the employees who had previously worked for the local authority are officially taken over by the PPP company, which becomes their employer. The private sector partner brings with it its capital and management know-how. Both parties bear the business risks in line with company law.

The range of services provided by an institutional PPP involving REMONDIS can be as wide and varied as the group’s portfolio. The selection of services depends on the actual requirements of the public sector partner and of the region. Whenever REMONDIS works with a public sector partner, it always makes the very most of its 30 years of experience of working in a wide range of PPPs.

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