For large infrastructure projects, concessions are the most rational form of investment. The key problem is that the contract with Vansi was never announced, and the high concession fee of 501 million euros indicates that there are also some obligations of the Serbian state that the public will never know about. In any case, the representatives of the Government and their external consultants, who wrote this “devil’s contract”, did not get much fame.
Concessions are not unusual for the implementation of large infrastructure projects or the procurement of specialized services, which are provided by someone who has knowledge and experience and is ready to invest a certain amount of money in the period of three to five years for the development of the project and then cover those costs with income on that basis in for a longer period of 10, 25 or even 99 years.
In transport, average savings of 30 percent were achieved in this way compared to costs in the public sector, so in 1997 the British Ministry of Transport defined categories of investments in which the PPP initiative must be evaluated as a procurement method, namely – for new rolling stock (railway, metro, trams), construction of new or extension of existing metro and railway lines, IT projects (ticketing, traffic management), power supply, signaling, escalators in railway and metro stations, air refueling of aircraft for air force system.
All “turnkey” type projects, with fixed prices and a completion date, carry the risk of significant cost overruns and delays, with the fact that in Great Britain during the 90s, cost overruns in PPP projects were only 22 percent, and in conventional procurement even 73 percent. At the same time, PPP projects were also more efficient, because they were delayed in only 24 percent of cases, while at the same time deadlines were broken in 70 percent of classic procurements.
Sign up for business updates & specials.
