Public Private Partnership (PPP)

The Ministry of Finance
Slovak Republic

Introduction

Modern and efficient infrastructure is an important pre-condition of economic growth and prosperity. It is also necessary to meet the growing demands of people everywhere as expectations rise. This is no different in Slovakia.
For most of the 20th Century, the construction and operation of  infrastructure  has  been handled by  public sector agencies, whilst the involvement of private investors and operators has been restricted by this policy. It is clear now that this situation is changing, first in the high growth economies of South East Asia and now, increasingly in EU countries as governments look to work with the private sector to provide more efficient solutions to their nations’ infrastructure needs.
The private sector, if it is rightly motivated, is more effective than the public sector. For example, this applies to the production of pencils or the production of automobiles. It also applies to public notary or telecommunication services, banking or distribution of electric power. There is no reason why this already proven principle should not apply also to the building and operation of infrastructure or in other areas that have been traditionally serviced by the public sector. 
There are two basic reasons that justify increasing the activities of the private sector in the area of infrastructure. First, the private sector tends to be more effective during the implementation of large investments compared to the public sector. And there’s no reason why this efficiency should not be used in the area of infrastructure. Second, through participation of a private sector, better standards of infrastructure and maintenance of that infrastructure can be assured without immediate impact on public sector budget expenditures.
These contractual arrangements, often known as Public Private Partnerships or ‘PPPs’ are slowly transforming national and pan-national investment decisions.
PPPs though, require new skills and approaches from governmental agencies and these skills are rarely found in most countries’ government offices. With this in mind, the Government of Sslovakia will take a cautious and responsible approach to the subject. This is to avoid making the same mistakes as other countries who have entered this new area without adequate preparation.
Obvious requirements would be clear rules and adequate regulation in e.g. environmental protection, safety, and the protection of competition. In such an environment there is plenty of opportunity available for the State to outsource part of its activities to the private sector and instead focus on those areas which cannot be performed by the private sector more efficiently for various reasons.
This form of PPP offers new possibilities for building infrastructure in the public interest while using private funding and management and at the same time increasing effectiveness from the public sector point of view.
The utilization of the benefits of PPP is included in the program declaration of the Government, ‘Strategy of development of competitiveness of Slovakia until 2010’ as well as EC documents, e.g. ‘Lisbon Action Plan’ or ‘Implementation of Lisbon Strategy’.
New Ways of Thinking in the Public Sector
PPP requires a change of thinking. The public sector, which is used to acquiring assets, must instead focus on the essential element: ‘What public service are we going to provide through this project?’.  For example in the case of a traditional highway construction, the public sector independently purchases the project, then the construction and finally, the equipment and the staff for road maintenance; when this is done using a PPP methodology, it orders only one thing – an operational and functional high-way that is maintained to the standards decided by the relevant State Authority.
The most important feature of PPP is that it combines an important investment with a long-term provision of services. The private partner ensures financing and construction of a capital-intensive infrastructure and at the same time he receives as counter-value the right to operate and provide services through this infrastructure.
It must be understood that PPP is a complicated relationship that may pose various risks for the public sector. One perceived disadvantage of PPP is that the State is usually capable of sourcing the funds necessary for project implementation at lower prices than private investors. This is a clear disadvantage to the private investors who then have to work even harder to overcome this natural handicap. However the evidence is that they regularly achieve this.Their motivation to prepare and implement the project is higher. This is demonstrated for example by optimal designing, meeting hand over deadlines and agreed investment costs but also by ensuring the quality of the investment which leads to lower operational expenses. 
The benefits of well-implemented PPP projects are already proven today, however it would be a mistake to consider PPP to be the ‘magic solution’ to problems that are purely due to a lack of funding or the poor quality of certain services provided by the State so far. PPPs carry over and spread liabilities into future periods, therefore projects that are not considered to be investments in the future or those that carry over unacceptable risk into future budget periods should be limited.
Some years ago, complications occurred during the first PPP projects in Hungary (highway M1) and Czech Republic (highway D47), when complete failure had substantial financial consequences on the public administration budget. Such experiences with PPP, where implementation failed, demonstrates the need for increased attention and the need to monitor such projects. Considering the current lack of skills and experience in Slovakia, a small number of pilot projects will first be implemented and will be placed under detailed observation. Developments in this area will be closely monitored and, where required, adjustments to legislative conditions as well as the institutional framework can be made. 
It will be also necessary to pay attention to the property relations caused by implementation of PPP projects and to the considering of  each individual project from rules of state aid point of view. 

PPP Policy Goals: 
•	Declare principles that PPP projects must comply with.
•	Set up such PPP regulation, that would reduce risks to the public administration budget.
1.	Characteristics of the PPP 
Currently there is no unified definition of PPP around the world. In some countries PPP is defined very broadly and in others only specific and selected projects are defined as PPP projects. The common sign of all PPP projects is only that the private partner assumes significant business risks related to the given project and is paid for doing so.
1.1.	Definition of PPP
The European Union does not possess an official definition of PPP. The European Commission prepared  a proposed draft of the PPP definition in the Green Book on PPP [2]. According to this Paper, ‘PPP is a form of cooperation between the public and private sector for the purpose of financing, construction, reconstruction, operation and maintenance of infrastructure and the provision of services through this infrastructure.’
The common sign of most of PPP definitions are the following features:
•	A private partner provides the design, construction, financing and operation of the infrastructure, in return for payments either directly from the users of the infrastructure or from a governmental body. 
•	Both the private partner and the public sector shares out the individual risks linked to the construction and operation of the infrastructure. This is done on the basis that the risk is handled by whichever side is best able to manage the risk.  
•	Relations related to PPP are long-term contractual relations, often up to 25 or even 30 years. 
The draft proposal of the new Act on Public Procurement that was approved by the Government by the Resolution of the Government No. 735 dated 28th September 2005 and which is also consistent with European legislation, states the definition of  Concessions:
„The concession is a contract of the same type as a contract to perform construction works with the difference that financial liabilities for construction works that should take place shall be offset by the right to operate the asset for an agreed period of time. 
This right may be linked to financial payment “.
This definition covers PPP, while it does not define PPP as a special type of concession. The subject of PPP apart from performance of construction works is also to ensure operation. Therefore every PPP must follow this procurement route. This fact shall be used for PPP regulation. 
1.2.	Long-term contracts that are not PPP
There is often confusion about what is called a PPP and what is not included. Sometimes any cooperation between the public administration and private sector is called PPP, from outsourcing to privatization, these forms of cooperation between the public and private sectors are quite common in our country and do not require a new approach from the public administration budget point of view. This PPP Policy deals with such projects, which according to currently regulation represent a new form of co-operation. The following long-term contracts between government agencies and private partners do not fall under the PPP Definition, which is the subject of this PPP Policy: 
a.	Long-term contract on purchase of services
Based on the long-term contract, the public sector purchases only services, e.g. operation and maintenance, but without major capital investment. It also includes many forms of outsourcing..
b.	Delivery of ‘Design & Build’ constructions
In such case a private partner is obliged to build and hand-over a construction according to specified requirements (usually controlled by a third party). Operational issues are settled separately.
c.	Joint-venture
Establishment of a new entity (JV company for example) where the public and private entity owns a share, while such an entity is not focused on implementation of one specific project. 
d.	Guarantees 
Where the Government issues State guarantees for a loan to a private entity to support certain activities. 
e.	Leasing
When a public sector agency is, during an agreed period of time, the user of infrastructure in exchange for payment, which is owned by the private partner.
f.    Privatization
Privatization is not about sharing project relating risks, because in principle, all the risks are assumed by the private sector. 

2.	Public administration budget risks
2.1.	Basic PPP condition: effectiveness for the public sector
The most basic and essential condition in order to implement any investment through PPP is that it should provide increased effectiveness for the public sector when compared to standard public procurement; a concept also known as ‘value for money’. It means that the investment should be implemented at a lower life time cost. 
It should not be considered that the only advantage of PPP project is so that the costs of the project can be excluded from the public administration debt. Such an approach would be irresponsible and would only mean a transfer of public administration expenditures into the future. The purpose of PPP should never be to resolve a tight budget but to combine a public sector need for infrastructure and the private sector experiences in employing innovations, business spirit and efficency thus ensuring higher „value for money“.
Experiences from many countries show that PPP project can ensure effectiveness for taxpayers and at the same time profit for private investors. The need to make profit coming from their activities creates pressure on private companies to meet their promises without exceeding expenses or delaying implementation which are typical flaws of many projects procured and financed by conventional methods.
Value for money is achieved by the private sector ensuring the following:
•	More efficient projects, with creative and innovative approaches towards technical problems,
•	Not exceeding investment expenditures,
•	Hand over of the project within the required deadline,
•	Optimization of project’s life cycle (integration of the design, construction, financing and maintenance elements of the project).
It is necessary to perform a complex analysis when comparing standard procurement and PPP, which shall objectively compare all risks and benefits of both methods. It should always be remembered that with PPP, the payments include not only the costs of the initial investment but also interest related to the project’s financing and also expenses related to operation, repairs and maintenance of the asset. 
The most important decision criteria regarding use of PPP financing is evidence of being able to achieve „value for money“. 
Even when investments are implemented through standard public procurement, major elements are performed by private companies, for example, designers or construction companies. Also more recently, the operational part is often provided by the private sector, for example purchase of technology. In case of PPP it is possible to utilize the synergy effects arising from the fact that the whole process is under ‘one owner’. With PPP the private investor is quite positively motivated to seek possible savings. For example during the analysis of a first PPP highway project in Slovakia the advisor proposed extension of embankments and shortening of bridges, which could provide substantial savings. There is also an automatic focus on the quality of the work. If a single company is both the builder and the operator it is substantially more motivated to build the infrastructure to adequate quality standards in order to reduce maintenance costs. It is also motivated to select materials, which are the most effective from an operational and maintenance point of view. 
2.2.	The impact of PPP on public administration budget
The concept of PPP was originally based on utilizing the higher efficiency of private enterprise compared to the State. However the importance of PPP as a tool for building capital intensive infrastructure investments has increased after it was proven that when using PPP with long-term contracts used for ‘acquisition of services linked to construction of infrastructure’, it is sometimes possible to implement investments without increasing the public administration debt. Under certain conditions expenses related to the construction of infrastructure do not increase the public administration debt (so called ‘off balance sheet’ projects) but It should be noted that the payments for the operation of such infrastructure can increase the deficit over a period of time. PPP thus allows a reduction in the current deficit for the price of increased public expenditures in the future. This could be acceptable however under certain conditions (such as avoiding the burdening of future generations with high public debt or implicit liabilities from pension systems) hence the payments are made during the years when the infrastructure is used.
Eurostat issued a Decree stat/18/2004 in February 2004 and Annexes Part IV to ESA 95 in August 2004 called Long-term contracts between government units and non-government partners (Public-Private Partnership), which defines the method of financial reporting of PPP projects with long-term contracts for „acquisition of services linked to construction of infrastructure “. The method of reporting depends on the method of risk sharing between the PPP partners.
Each PPP project is unique regarding risks related to its implementation and operation. The following three risks must be individually monitored during the assessment:
1. Construction risk – represents such events as delayed term of hand over of the construction, failure to meet valid norms and standards, exceeding expenses, technical faults and external negative impacts. If the Government is obliged to perform regular payments to the partner, regardless of whether the construction meets any requirements would prove that the Government assumes the majority of the construction risks. In most cases the contract would stipulate that if prescribed deadlines, time schedule, budget, standards and agreed specifications defined by the State are not met, the State will not make the agreed payments. 
2. Availability risk – is related to whether the infrastructure or the service meets previously agreed parameters and is operational or in other words that it is available for use. The proof that the State is not assuming the risk is that its periodical payments to a private partner are automatically and considerably (not just „symbolically“) reduced if the infrastructure or service is not available to the public as agreed in the contracts, is non-functional or does not meet technical, environmental or other standards.
3. Demand risk – represents the market risk of a decline in interest for the infrastructure or service, for example due to new trends in the market, competition or technical obsoleteness. Higher or lower demand influences project yields. Demand risk has caused difficulties with many PPP projects in the past, therefore private partners often prefer to avoid it. However, assuming at least part of this risk ensures higher certainty that the financing of such infrastructure would not be included in the public administration debt. 
According to the Eurostat regulations it is not sufficient if the private partner assumes majority of the risk in financial terms. A PPP project is not, according to current Eurostat interpretation, included in the public administration debt if the private partner assumes construction risk and at least one of the availability or demand risks. 
2.3.	Risk sharing between public and private sector 
The basic difference between PPP and standard public procurement is that with PPP there is substantial risk sharing between public and private partner. The basic rule of effective PPP projects is that: „the risk should be assumed by the party which is best able to handle it“.
The sharing of important risks by the private partner is the main instrument, which could be used to ensure not only the exclusion of some investment expenditures from the public administration deficit but also achieving efficiency of the whole project for the public sector. 
Getting the right balance in risk distribution represents the key factor of success or failure in a PPP project. In some cases, the definition of the main risk bearer is relatively easy, e.g. the risk of failure to meet the deadline of the construction is assumed by the private partner, which is demonstrated by the fact that payments for PPP start to be paid by the government after the construction is completed.
Risk sharing must be considered and discussed thoroughly and must also take into consideration conditions under which it is transferred to concerned parties. Excessive transfer of risks to the private partner may cause the project to become unnecessarily expensive or even impossible to finance. The private partner would usually assume the risk of changes that are predictable. On the other hand, as an example, the risk of tax changes is often assumed by the public administration since they are naturally best placed to understand and manage that risk.
2.4.	PPP regulations  and legislative framework 
The long life of PPP projects, their complexity and possible impact on the public administration budget demand the close supervision of the State.  Since, in Slovakia, it is a new method for procurement of infrastructure this is even more so.
The current legislative framework, including the budget rules or rules for concession procurement, whilst not representing a crucial problem for PPP project preparation, does not necessarily ensure that adequate attention is given to the approval of such projects. 
The Ministry of Finance of SR, which is responsible for the public administration budget and State reporting, must ensure the correct representation of PPP into national accounts in compliance with the rules set down by Eurostat. 
The improvement of PPP regulation will require the revision of laws amending budgetary rules. In the event that the regulation is approved, the entities of public administration, with the exception of self-governing region entities, will be authorised to conclude a concession contract in compliance with the law on public procurement only after its prior approval by the Government. The opinion of the Ministry of Finance of the SR of the impact on public administration debt (an analysis whether the majority of risks shall be borne by the public or private sector) of the contract implementation will be an obligatory part of the material submitted to the session of the Slovak Government. This regulation shall concern only those projects exceeding investment expenditures 100 million Slovak Crown. 
This modification will request amendment of law no. 523/2004 Coll. on public administration budgetary rules. Its objective is to limit negative outcomes of non-systematically implemented PPP projects and facilitate effective control of creating the long-term contingent liabilities with regard to their possible impact on public administration debt reported in unified ESA 95 methodology valid for the European Union.
In addition, public administration entities are obliged to provide data necessary for monitoring and reporting public administration debt purposes upon request of the Ministry of Finance of SR. 
Self-governing regions will be obliged to deliver a notification prior to launching a concession procurement to the Ministry of Finance of SR for PPP registering purposes. After concluding the concession procurement procedure, but before concluding a concession contract, the self-governing region is obliged to request the opinion of the Ministry of Finance of SR on the impact of the prepared concession contract on public administration debt. The above opinion of the Ministry of Finance of SR is necessary also before any amendment to the contract is concluded.  
On the basis of the Ministry of Finance of SR opinion on the impact of PPP on the public administration debt the implementation of the concession contract has two options: 
•	 If majority of risks remain within the public sector, the same rules shall apply to such contracts as apply to a returnable source of funding. Self-governing regions shall be allowed to conclude a concession contract only if the total of the investment value of the contract and the total of the municipality or higher territorial unit’s debt does not exceed the limit of 60% of real current incomes of the previous budgetary year and if the total of the annual financial value of the concession contract and the sum of annual instalments of returnable sources of funding, including payment of proceeds, does not exceed 25 % of real current incomes of the previous budgetary year.
•	If majority of risks is transferred to the private partner and investment costs have no impact on the public debt reporting, then the self-governing region may conclude a concession contract if the total of the annual financial value of this contract and the sum of annual instalments of returnable sources of funding, including payment of proceeds, does not exceed 25 % of real current incomes of the previous budgetary year.
Above-mentioned regulation shall apply only to projects with a certain investment value, which will be different for various types of procurers. The value limit of contractual investment expenditures of SKK 100 million shall apply to Higher Territorial Units and legal entities established by them.  
In the event that this relates to a municipality or by a municipality established and founded legal entity, this modification of regulation will apply to concession contracts the financial value of which exceeds the sum of: 
In municipalities with: 
a.	number of inhabitants up to 1000                                             12,000,000 SKK,
b.	number of inhabitants from 1001 to 3000                                20,000,000 SKK,
c.	number of inhabitants from 3001 to 5000                           	35, 000, 000 SKK,
d.	number of inhabitants from 5001 to 10000                        	50, 000, 000 SKK,
e.	number of inhabitants from 10001 to 50000                     	65, 000, 000 SKK,
f.	number of inhabitants from 50001 to 100000                 	75, 000, 000 SKK,
g.	number of inhabitants more than 100001                               100, 000, 000 SKK.
Upon request of the Ministry of Finance of the SR the self-governing region will be obliged to submit data necessary for reporting public administration debt.
3.	Principles PPP projects must comply with
PPP projects can bring significant benefit both to the public and private sector. It is, however, well known that in some cases projects have had a serious impact on the public sector (e.g. highway D47 in Czech Republic), but in other cases the investments resulted in immense losses for private sector, as for example the construction of  railway tunnel between the Great Britain and France. In order to avoid unsuccessful PPP projects, it is necessary to avoid mistakes from the past. Therefore each PPP project must meet the following pre-conditions: 
3.1.	Professionalism and correct procedure in PPP project preparation 
The procedure for PPP preparation is extraordinarily demanding with regard to professionalism and experience of the employer. It is essential that PPP Projects are prepared and implemented by top experts, financiers and lawyers. A highly experienced adviser can contribute significantly. A key issue is the provision of an adequate project team, project resources and above all, a highly competent team leader experienced in implementing similar projects. The development of an appropriate governance structure which permits the efficient adoption of important decisions is also very important. 
3.2.	Dialogue with the private sector before the start of the process 
There is no point expending valuable public resources on the preparation of a PPP project that will not attract any investors, or for which no bids will be submitted.  The best way to avoid such a situation is the preliminary consultation with representatives of the private sector with regard to the economic feasibility and attractiveness of the planned project. In addition, potential partners may propose innovations reducing total costs and improving the efficiency of the project. It is important that these consultations are done fairly and openly and in a way that offers no particular advantage to any bidder, prior to the commencement of the procurement process.
Projects with an apparent misbalance between profits and benefits, whether for the State or private sector, often reappear with problems and create situations that bring no benefit to anybody. 
3.3.	Transparency during the whole process 
Transparency in the award of PPP projects is an important factor for their success. Transparency, openness and fairness during the whole process of PPP preparation are important, because they minimise the possibility of corruption. Thus they help to ensure the best possible conditions in the ongoing competitions for the interests of taxpayers, as well as increasing the rivalry between bidders. Fair competition is in the interest of all serious investors. They will not want to be involved in a process if the objectiveness of it is in doubt. On the contrary, they are more likely to believe that they have no chance of winning if they think that the competition may be influenced by corrupt practices.  Involvement in the bidding phase means considerable financial costs therefore if there is any sense of a lack of transparency they are likely not to bid in the first place. 
Other countries’ experience in PPP projects shows that a non-competitive method of procurement is one of the most common reason for PPP failure since decisions like that are often challenged by national audit bodies and/or by the Courts. 
Although the openness and transparency principles are primary, it is equally important not to use them as an apology for the undue delay of procurement procedure. Both investors and interested parties will be willing to participate in fair and objective procurement procedure.  They will not want to be involved in a process lasting longer than is needed according to the law. Competition conditions should be expressed in comprehensible language and clarity of the process is essential.
In addition to the effort to make the procurement procedure as simple as possible, the employer must adequately take into consideration the consequences of his own action (or no action) and its impact on the interested parties with regard to their costs and resources. Interested parties have limited resources and if there is undue cost or delay risk, they will be reluctant to participate in the competition. 
3.4.	Thoroughly prepared PPP contracts 
The most complicated phase of PPP preparation is the thorough preparation of base line data and the contracts themselves. Contracts must include in detail all common PPP characteristics in order for them to be fundable. 
It is inevitable that the preparation of PPP contracts will be by renowned lawyers experienced in PPP preparation.
The public sector must have the right to withdraw out of the contract anytime and upon its own discretion. The calculation of fair compensation for such a withdrawal must be set out precisely in the contract.
Examples of some important provisions in the concession contracts: 
•	Definition of objectives, their quantification and performance indicators.  
•	Payment Mechanism with regard to project payments (according to availability, demand and quality).
•	Sharing of additional yields and excessive profit.
•	Consequences of contract breach by either party.
•	Restriction of concessionaire’s responsibility.
•	Right of the funding banks to enter the project.
•	Risk sharing.
•	Change Mechanism
•	Public administration‘s right to withdraw from the project upon its own discretion and fair compensation for the concessionaire in such cases.
•	What happens with the infrastructure after the concession contract termination.
•	Settlement of disputes and conflicts.
3.5.	Monitoring during the whole lifetime 
A PPP project is not finished by handing over the infrastructure into operation. The phase when regular payments for the services are made, requires the careful management of the agreed criteria on the part of the procuring public administration entity.  
Any failure to observe the relevant indicators must result in significant (but not only cosmetic) reduction in regular payments to private partner. The infrastructure must be adequately maintained and after the lifetime of the concession handed over in a fair condition.
Such project monitoring naturally requires adequate public administration capacities. Monitoring has to be performed in a way that enables the timely anticipation of difficulties and allows time for taking measures to prevent them. Consistent monitoring should ensure prompt measures for managing the potential threat of the private partner’s failure.  
4.	PPP institutional framework
The effective and transparent procurement and operation of PPP projects requires a suitable institutional framework. Some countries that are successfully implementing PPP have central national units for PPP, others have specialised departmental and regional PPP units and some have fully decentralised PPP units established only for the preparation period of a specific PPP. 
There are ongoing discussions on the best approach in the professional circles. Adequate remuneration for highly qualified experts and the harmonization of PPP with regional requirements appears to be a problem for a Central PPP agency.  A Central PPP unit must also have experts for a wide variety of sectors, such as highways, schools, hospitals and sewerage, etc., that might recreate capacities already existing at the relevant ministries. On the other hand, specialized departmental and ad hoc PPP units often manage to meet departmental and regional requirements. 
The first pilot PPP project is being currently developed at the Ministry of Transport, Post and Telecommunications  of SR. It is the project to develop a highway section, 29 km long, between the towns of Zilina and Martin. This project is being prepared in co-operation with a renowned international advisory firm. 
With regard to the fact, that at present there are no signals on significant use of PPP in the near future, it is necessary to concentrate specially on successful implementation of the above project. In the event of greater interest in using PPP in the future it will be necessary to come back to revisit the organisational and institutional challenges of PPP and evaluate, whether or not to establish a central PPP institution, whose main task would be the employment of experiences with PPP. Even without the establishment of a central PPP unit, it is useful that the public administration assimilates the information acquired during the first PPP pilot projects. 
Role of the Ministry of Finance of SR 
The Ministry of Finance of SR plays an important role in PPP projects with regard to the risks for the public administration budget.The Ministry of Finance of SR must monitor PPP in order to avoid unpleasant surprises in the area of PPP project impact on the public administration budget and on the level of the public administration debt.. Therefore it is essential that the Ministry of Finance of SR approve the impact of any PPP on the state administration debt. It will provide ex ante information on the impact of the relevant PPP on the state administration budget. The role of the Ministry of Finance of SR will be to prepare opinion on the impacts of PPP project on the state administration debt and to monitor PPP development.
Ministry of Finance of SR cannot, however, take over the responsibility for preparation and implementation of individual PPP projects which will remain the responsibility of the appropriate executive authorities. 

Cooperation within the EU framework
It is crucial to maintain dialogue with the European Commission and institutions such as EIB and EBRD and to involve them in the project preparation where it is seen as appropriate and useful. The European Commission officially declares “interest in the support and development of PPP within the structures by EC provided grants“. The EC has expressed its willingness to assist in development and implementation of PPP projects. 
Successful utilization of EU funds requires timely consultations with the European Commission, who due to the need of thorough examination of the use of its funds, must carry out a careful analysis of the proposed PPP projects in order to ensure objectiveness. 
In the near future a new form of European Investment Bank (EIB) “guarantee instrument“, designed in compliance with the requirements of EC and EU member states, will be adopted. The basic objective of the guarantee instrument is to speed up implementation of Trans-European Networks (TENS) transport projects. 
5.	Potential PPPs
Theoretically, there is no limit to the scope of PPP involvement in the field of infrastructure building financing and operation. Recently private companies in many EU member states and other countries have participated in several areas of governmental activities.
An attempt to limit these possibilities in Slovakia would deprive the government of the flexibility which is vital for maximizing the innovation that might arise out of PPP projects. This is important for achieving the objective of delivering high quality services at affordable prices to the public. 
At the level of the state administration authorities two important PPP projects are being prepared.  First is the highway section between Zilina and Martin. An integral part of the first planned highway section constructed by PPP will also be the longest, an 8 kilometre long tunnel from Visnove to Dubna Skala. This project should demonstrate how private companies manage the construction of a highway at one of the most difficult sections in SR. When they are successful, other sections of D1 highway from Bratislava to Kosice will also be constructed by means of PPP method. The second proposed project is for electronic collection of highway tolls. 
In the future it is expected that PPP will be applied also in the field of health services, sport and cultural facilities, railways, public administration buildings, social housing, reconstruction of cultural and historic sights, prisons, accommodation facilities for university students, or E-government. 

At the level of the self-governing region  it is possible to apply PPP in the following areas: local roads / illumination of streets, city public transport, water supply / sewage water management, processing of solid municipal waste and projects related to gaining energy from waste, reconstruction of the centralised heat supply, social services facilities, and the development of infrastructure for tourism. 
PPP projects have been successfully implemented in the above areas in other countries and there is no reason why Slovakia should not achieve similar success if appropriate support and preparation is ensured. 
It is probable that PPP projects with the highest level of support will be the ones, which are in the sectors that have demonstrated good international results and where there is chance to gain knowledge from the experience of other countries.  
As with any other major projects, projects procured with PPP methodology need appropriate time for their implementation. Whether public or private funding is used, large projects are required to undergo a process of intensive preparation followed by the public tender, in compliance with the requirements of EU Directives on public procurement. In most EU countries it is common that PPP project preparation takes 18 – 24 months before any construction is started. 

Bibliography:
[1]Directive for successful Public-private partnerships – PPP (Public-Private Partnerships), EC, DG Regional policy, January 2003
[2]Green book on Public private partnerships – PPP
[3] Decision of Eurostat  stat/18/2004
[4] ESA 95, part IV, Long-term contracts between public administration entities and non-governmental partners (Public private partnerships), Long Term Contracts Between Government Units and Non-Government Partners (Public-Private Partnerships), Eurostat, 30th August 2004
[5] Draft Guideline, Good Governance in PPP in Infrastructure: Lessons Learned From Selected Case Study, Economic and Social Council, UN, Trade/WP.5/2003/7
[6] Models for the financing of regional infrastructure and development projects, Public-private partnership, Council of Europe Publishing
[7] Public Private Partnership, International Monetary Fund, Teresa Ter-Minassian, March, 2004.
[8] PPP Highways in SR, phase 1, Mott MacDonald