…last Wednesday, in both senses of the term. Transport strikes, rain and traffic jams made some of the key speakers arrive late, so there was time for the room to fill up as everyone waited to find out about « Innovation in Public Private Partnerships ». A PPP is defined as « a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies ».
The speaker quartet from left to right included Hervé Mathé from ESSEC business school, who gave the academic introduction and overview, Loïc Prioux and Christophe Leroux both from the CEA (the French Atomic Energy Commission – a huge research institute) and Marc Teyssier d’Orfeuil, who shared the story of his PPP Club.
The four of them managed (a) to cover a wide spectrum of different types of PPPs and (b) to share with us two interesting and ongoing innovations concerning the dissemination and use of PPPs. Firstly, the idea of a PPP Club, which brings together all kinds of possible PPP stakeholders and acts as a sort of change management device on the state and local government level. Secondly the idea that European Union Research programmes might be run more effectively through a dedicated PPP consortium. The case in point concerned robotics – clearly a strategic research and innovation area.
Hervé, who is Dean of the ESSEC Singapore Campus,
stressed he was not an expert in this domain. This may explain why his stage setting was so clear, and his claims moderate and measured. He reminded us that the tradition of the state going into partnership with private entrepreneurs goes back to 1666 when Finance Minister Colbert and Farmer General Pierre-Paul Riquet signed the deal for the Canal du Midi, which connects the Mediterranean Sea and Atlantic Ocean. In 1992, the British Conservatives introduced the Private Finance Initiative, a PPP mixed financing mode which today accounts for 10-15% of public investment in the UK. When the PPP model finally became law in France in 2004 it was intended for infrastructure projects: train lines, hospitals, motorways, hospitals, public lighting, telecoms, etc. Examples were given of 5 recent PPP projects totalling over 20 billion Euros. He stressed that the efficiency and ROI of the PPP infrastructure model were hard to demonstrate and that studies were underway.
Could the PPP model guarantee better innovation, he asked, via the following sequence: PPP funded research can lead to invention which in turn can lead to (rudimentary but) disruptive innovation which requires incremental innovation to become slicker and really acceptable. Here he added an interesting aside: « Failed innovation cannot exist, because if an invention is not adopted (by users and the market) it is simply not an innovation! »
He then identified five risks from the public authority’s point of view : 1. concerning the right choice of contract type (one umbrella contract covering all aspects or several?); 2. regarding the negotiation process (where private firms have battalions of hardened lawyers); 3. Who controls the design process? (is this also farmed out to the private partner or can the public partner have some control over the design requirements?); 4. Building, is inevitably subcontracted by the private partner, and if margins are squeezed too much the users and taxpayers will bear the cost. 5. Long contract life (30 to 50 years) in which the public partner’s rent payments may end up costing far more than a traditional scheme would have, assuming of course that the public partner has the required competences.
Hervé ended by pointing out that PPP was not a universal model. Singapore’s public services, for example, recruit the country’s top graduates and therefore have « in house » competence.
Next, Marc Teyssier d’Orfeuil told us about his network of public private partnership clubs.
There’s the meta club, but also 18 spin off clubs, like the Ecological car club. « It makes sense, he says, you can’t just produce electric vehicles. You need to provide the infrastructures to charge them. Here’s where PPPs come in. »
We heard about antiprogrammes: « any legal innovation scares public administration »…and concluded that the PPP club is an anti-antiprogramme to sensitise and raise awareness among politicians and decision makers at national and above all local government levels. Its workshops help to lower stress levels when high level civil servants have to wade through 4000 pages of contract. A wide panoply of communication channels and events exists. Breakfasts, debates, conventions, national and international study visits, national and international prizes, etc.
The club was launched in 2004. All the major private contractors are members. [I think I heard that 400 parliamentarians had been involved in its activities]. If we consider that PPP is an innovation. Then the Club certainly sounds like an actor with high added value and high buy in.
We heard lots of interesting snippets:
– 30% of public lighting contracts are now PPP.
– 100% of PPP works have been delivered on time (because penalties are so stringent).
– the PPP mode has allowed 4 TGV projects to be launched simultaneously, whereas previously they would have been staggered over 20 years. The flip side is there won’t be any new ones till the 2030s!
– Where a traditional public contract will cost 1 billion €, the PPP costs 3 billion. BUT this covers financing, building, lifetime maintenance and services.
– 75% of PPP’s involve local authorities.
– In France the choice of the word « private » (in PPP) is ideologically a no no. People tend to think business is fleecing taxpayers.
– In PPPs the design phase is quite agile and allows interplay between the commissioning public partner and the private contractors concerning design specifications. This injects user knowledge into the system before the specs are frozen – something that does not and cannot happen with traditional contracts which are « psychorigide ».
– PPP can be creative. Public lighting contractors are saying, they could also build in wifi emission or even electric vehicle charging.
Then time ran out and the speakers changed. We moved from infrastructure projects into R&D with two speakers from the CEA – Atomic Energy Commission. The CEA is a huge public research player in France with over 15, 000 employees and an annual budget of almost 5 billion Euros
explaining that PPPs could help innovation by financing better, being closer to the market, accelerating technology transfer, favouring SMEs and start-ups and not just big business, enabling networking.
In France there is as yet no legal definition of a research PPP. The state emits a call for projects. This results in a consortium agreement. The ensuing partnership can either take the form of a contract or an entity. (Loïc’s CEA colleague Christophe Leroux later proceeded to give a graphic example of a European level contract type consortium). This must involve at least two actors (public and private), who collaborate by sharing resources (people and equipment).
Loïc showed us various models of possible structures in France.
The PPP will only be valid if there is 50/50 financing! Various ventures have failed because the balance has not been achieved.
He the turned to Research PPPs in Europe. The 2020 Horizon Programme is an 80 billion € budget covering innovation funding from 2014 to 2020. One major policy and funding governance innovation in this EU programme is the introduction of PPPs as a mode of financing. A (not legally binding!) EU document which qualifies this approach is available here.
He concluded with a contrast between the French and European approach to research PPPs. In France the choices are state inspired and directed (top down), whereas in the EU, concertation is involved (bottom up). An excellent illustration of this bottom up approach was provided by the final speaker, Loïc’s colleague from the CEA.
Christophe Leroux is an engineer at the CEA and has been closely involved in the EU’s Robotics 2020 PPP.
From him we got a look behind the EU’s scenes and could imagine how and why the 80 billion € 2020 Horizon programme has gone PPP.
80 million € was invested into robotics research in the last EU programme. Industrial partners felt that despite a world-class robotics R&D base in Europe there had not been much ROI and transfer into innovation in this strategic sector. The dissatisfied industrialists have been powerful enough to influence policy makers. « You’ve been criticising us for being unproductive and ineffective, said the EU, OK, so here’s the money, now you show us you can do better »
Last September a Memorandum of Understanding was signed by around 100 members and theBelgium based association euRobotics was founded. It is a contractual PPP. The structure has to fund itself. Membership fees range from 950€ to 15,000€ for companies and from 250€ to 5000€ from research organisations depending on size. The governance structure is on the association’s web site too.
The PPP is an STI (Science, Technology and Innovation) policy making body and one of its first tasks is to come up with a road map based on a strategic research agenda, of which an earlier (2009) example already existed. Although taking robotics to new sectors like health and agriculture are also on the agenda, which links in nicely with Guy Caverot’s examples of mobile polyarticulated robots in operating theatres as reported on this site a couple of weeks ago.
Christophe mentioned his own pet project -RockEU – which is part of the PPPs scope and looks particularly at stimulating innovation, financing research, supporting development, deploying instruments such as Pre Commercial Procurement (PCP), Public Procurement of Innovation (PPI) and Lead market Initiative (LMI) as well as legal, ethical and social questions.
The PPP’s new SRA (strategic research agenda) was completed a few weeks ago. The agreement will be signed mid July and the euRobotics PPP will be launched in the autumn.
Unfortunately Mike and I had to leave during question time, so there was no time to ask the million $ question : Has a provision been made by someone for this Science, Technology and Innovation Policy making innovation to be carefully observed, documented and monitored by seasoned observers, so that in 2018, when the next EU Agenda 2030 starts getting set, somebody will be able to answer the question « How well has this PPP innovation actually been working? »