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Risk in Public-Private Partnerships and Critical Infrastructure

Published online by Cambridge University Press:  20 January 2017

Christopher H. Bovis
Christopher H. Bovis*
Affiliation:
Hull University Business School, University of Hull
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Abstract

The process risk allocation is essential for effective PPP contracts, depending on the scope of defined tasks and responsibilities between the parties in their quest to deliver public services. However, risk in critical infrastructure is sui generis risk which could not be treated contractually and transferred by the public sector to the private sector or retained by the party to an arrangement which is suited best to borne such risks.

Risk in critical infrastructure, being either internal or external, is endemic to the relevant services andwhen critical infrastructure is delivered by public-private partnerships or owned by private actors, the treatment of such risk merits a third-party approach. Such third-party could be an industry in itself, such as insurance, re-insurance or hedge fund insurance bond finance, or a sector / industry approach which related to the owners/operators of the relevant infrastructure, by means of collective apportioning and mitigation of risks associated with the failure of providing services fromsuch infrastructure. The most innovative way of treating risk of critical infrastructure remains in the discretion of EU Member States, in the form of integrating costs related to risk assessment and security measurers to protect critical infrastructure into tariff arrangements of relevant services. In such manner, the enduser / consumer of services ensures and collectively insures their delivery against any type of risk which is not quantified and determined as part of corporate arrangements between the state and the private sector provider of services.

Type
Symposium on Critical Infrastructures: Risk, Responsibility and Liability
Information
European Journal of Risk Regulation , Volume 6 , Issue 2 , June 2015 , pp. 200 - 207
Copyright
Copyright © Cambridge University Press 2015

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References

1 See European Commission, Report to the Laeken European Council: Services of General Interest, COM (2001) 598; European Commission, Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on the Status of Work on the Examination of a Proposal for a Framework Directive on Services of General Interest, COM (2002) 689; European Commission, Green Paper on Services of General Interest, COM (2003) 270; European Commission, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: White Paper on Services of General Interest, COM (2004) 374.

2 See European Commission, Green Paper on Public-Private Partnerships and Community Law on Public Contracts and Concessions, COM (2004) 327.

3 See Conclusions of the Presidency, Brussels European Council, 12 December 2003, Council of the European Union, Brussels, 5 February 2004, 5381/04. See Communication from the Commission to the Council and to the Parliament “Public finances in EMU 2003,” published in the European Economy No 3/2003 (COM (2003) 283 final).

4 See COM (2003) 270.

5 See United Nations Economic Commission for Europe, Guidebook on promoting Good Governance in Public Private Partnerships, ECE/CECI/4, United Nations, 2008.

6 Citation needed for UN Millennium Declaration.

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8 See J. Kay, Efficiency and Private Capital in the Provision of Infrastructure, in Infrastructure Policies for the 1990s, Organization for Economic Co-operation and Development (1993).

9 See Christopher H. Bovis, Public-private partnerships in the 21st century, ERA Forum: Volume 11, Issue 3 page 379, Springer, (2010).

10 In its policy statement, Public Sector Comparators and Value for Money, February 1998, the HM Treasury Taskforce in the United Kingdom set out the role of comparators in public procurement, stressing the importance of the value-for-money principle. The comparators are indices that help to distinguish between the lowest cost and the best value for money for public authorities and also their uses as an exercise of financial management and a means of demonstrating savings to public authorities.

11 See Christopher H. Bovis, Public Procurement: Case Law and Regulation, Oxford University Press, Chapter 11, 594 (2006).

12 See D. Moss, When All Else Fails: Government as the Ultimate Risk Manager, Harvard University Press. 2002.

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17 See HM Treasury, Public Private Partnerships: The Government’s Approach (2000). See also, HM Treasury, PFI: Meeting the Investment Challenge (2003).

18 See L. De Pierris, Improving the Infrastructure, 40 PFI Journal 44–45 (2003).

19 See M. Spackman, Public-Private Partnerships: Lessons from the British Approach, 26 Economic Systems 283–301 (2002).

20 See Department of Treasury and Finance, Partnerships Victoria (Melbourne), (2000). See also, Department of Treasury and Finance, Practitioners’ Guide-Guidance Material (2001).

21 See, Office of Management and Budget, Preparation, Submission, and Execution of the Budget, OMB Circular No. A-11 (2002).

22 See D. Grimsey and M. Lewis, Public Private Partnerships: The Worldwide Revolution in Infrastructure Provision and Project Finance (2007).

23 See Christopher H. Bovis, The State, Competition and Public Services, in The European Union Legal Order after Lisbon 137 (Patrick Birkinshaw and Mike Varney eds., 2010); L. Flynn, Competition Policy and Public Services in EC Law after the Maastricht and Amsterdam Treaties, in Legal Issues of the Amsterdam Treaty 196–97 (D. O‟Keeffe & P. Tworney eds., 1999). ; J. L. Buendia Sierra, Exclusive Rights and State Monopolies under EC Law 330 (1999); A. Moriceau, Services d‟intérêt économique general et valeurs communes, 519 Revue du Marché Commun et de l’Union Europénne358 (2008); M. Ross, Article 16 E.C. and Services of General Interest: From Derogation to Obligation?, 1 European Law Review 22–38 (2000).

24 See T. Prosser, The Limits of Competition Law(2005); see also C. Graham, Essential Facilities and Services of General Interest, in Diretto e Politiche dell’Unione Europea 29 (2007); Sauter, W., Services of general economic interest and universal service in EU Law, European Law Review, Vol. 33 No 2, 172 (2008).Google Scholar

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26 See The EU Internal Security Strategy in Action: Five steps toward a more secure Europe, COM (2010) 673 final.

27 See Council Directive 2008/114/EC of 8 December 2008 on the identification and designation of European critical infrastructures and the assessment of the need to improve their protection, Official Journal of the European Union, L345/75.

28 Council Directive 2008/114/EC of 8 December 2008 on the identification and designation of European critical infrastructures and the assessment of the need to improve their protection, Official Journal of the European Union, L345/75.

29 COM(2013)48.

30 See E. Brunner, M. Suter, “The International CIIP Handbook 2008/2009.-An Inventory of Protection Policies in 25 Countries and 6 International Organizations”, Centre for Security Studies, Zurich, 2008.

31 The European Union Programme for European Critical Infrastructure Protection (EPCIP) for energy, transportation, and finance focuses on four main areas: a) the creation of a procedure to identify and assess Europe's critical infrastructures and learn how to better protect them. This procedure was established for the energy and transport sectors in the Identification of European Critical Infrastructures Directive; b) measures to aid protection including expert groups at EU level and the creation of the Critical Infrastructure Warning Information Network (CIWIN) – an internet-based communication system for exchanging information, studies, and best practices; c) funding for over 100 critical infrastructure protection projects between 2007 and 2013. These projects focused on a variety of issues including national and European information sharing and alerting systems, the development of ways to assess interdependence between ICT and electricity transmission networks, and the creation of a “good practices” manual for policy makers; d) international cooperation with European Economic Area (EEA) and European Free Trade Area (EFTA) countries, as well as expert meetings between the EU, USA, and Canada.

32 See European Commission, Staff Working Document, Brussels, 28.8.2013, SWD(2013) 318 final.

33 In 2013, the European Commission evaluated the progress made by EPCIP and suggested the programme enter a new more practical phase for the future. This phase involves launching a pilot project analysing four critical European infrastructures with regards to possible threats. These include the EU's electricity transmission grid; the EU's gas transmission network; Eurocontrol – the EU's Air Traffic Management; Galileo – the European programme for global satellite navigation.

34 See the position of The “Thematic Network on Critical Energy Infrastructure Protection” (TNCEIP), an initiative of the DG Energy of the European Commission consisting of European owners and operators of energy infrastructure in the electricity, the gas and the oil sectors, Brussels, November 2012.