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People looking to set up a cooperation agreement between the public and private sectors can choose from a whole range of different models. There are a number of reasons why effective PPP projects are a success and these can primarily be put down to the intensity of the collaboration work, the length of the project, joint development activities and secure financing. While the level of commitment of the private sector partner differs from model to model, responsibility for the fees and charges always remains in the hands of the local authorities.
When a local authority opts for the operations management model, it commissions REMONDIS to act as one of the plant operations managers. The company is then responsible for ensuring all of a plant’s technical processes work smoothly and for carrying out all necessary maintenance work. Additional commercial tasks can also be provided if needed, up to and including customer service activities. The local authority remains the owner of the plant and its assets throughout. REMONDIS is also able to give it advice on possible investments as and when required. Such collaboration work is based on a bespoke contract – agreed on between the parties – and lasts between five and twenty years. The operations management model can be used as a stand-alone agreement or linked to a cooperation model. In this case, the contract is not concluded with the local authority but with the public-private joint venture.
Both the range of services delivered in an operator model and the intensity of the cooperation work are much greater than in an operations management agreement. The greatest difference is the level of REMONDIS’ financial commitment. In this case, the private sector partner is not only in charge of running a plant’s operations but also for designing and building the infrastructure – and, crucially, financing it as well. As all investments are carried out by REMONDIS, the local authority benefits from having state-of-the-art technical standards without actually having to take any financial risks itself. What’s more, it can also plan its costs well into the future as such contractual agreements run for 20 to 40 years. Contractual performance is determined by the quality targets set out in the cooperation agreement. REMONDIS alone bears all business risks.
The hallmark of the cooperation model is the long-term collaboration work set up as a joint venture (JV). Either a new JV is founded or REMONDIS acquires a share in an established municipal company. Both parties bring resources to the table and both are responsible for the business. The local authority normally owns a majority share in the company to secure influence and oversight. Being the owner of the plant and its assets, the PPP company is in charge of both running the operations and financing any investments. Any profits made from delivering services that are not essential public services are distributed as dividends. This gives the local authority greater financial leeway and provides it with additional funds that can be ploughed into other public sector projects.
Local authorities can also procure the services they need by commissioning a third party. By definition, this classic type of cooperation work also falls into the category of public private partnerships. Having said that, though, third-party service provision agreements should really be in a category of their own as there is very little cooperation work in this model. Everything focuses on a service contract here that often lasts for five years. This means that the local authorities transfer one of their tasks to REMONDIS for this relatively short period of time, which the company then delivers – normally using its own equipment. Focus is entirely on the provision of the service. Other factors, such as financing, investments and future strategies, play no role whatsoever.