1. Michael Steinicke Free choice and PPP Status in Denmark SOI March 30th 2008 Professor Michael Steinicke University of Southern Denmark

2. Michael Steinicke Plan for the presentation Introduction to market testing in Denmark Free choice and PPP Legal challenges, status and perspectives

3. Michael Steinicke Market testing in Denmark -recent development 1. Generation: procurement and privatization 2. Generation: free choice, the right to challenge and PPP –From just after 2001 (new government in Denmark) –Free choice and the right to challenge: from January 1st 2003 –PPP: a work in progress from early 2000

4. Michael Steinicke Briefly on the right to challenge Undertakings had the right to challenge the public authorities own carrying out their activities by submitting a specific offer The municipality was required to seriously consider the offer, but was not required to reach any specific conclusion –Even if the offered price was lower than the municipality’s own price there was no requirement to accept the offer Only in certain situations the municipality had the option to refuse to consider the offer e.g. –If the offer was abnormally low –If the undertaking didn’t have the required technical or financial capacities –If it had already been decided to bring the activity to market testing (public procurement)

5. Michael Steinicke The right to challenge - continued Scepticism from the beginning: –Considered to be a provocation to force a specific offer upon a municipality which didn’t express the need for it Only a very few challenges from undertakings A number of challenges in the rules themselves –If an offer was found to be interesting, often no agreement could be made before a procurement procedure was carried through –The foundation for these rules was the possibility to make a direct award The rules were repealed from July 1st 2007

6. Michael Steinicke Free choice Free choice as a concept: the right to chose, the citizens as consumers –A way to increase efficiency and quality of public services Different levels/methods of free choice –Free choice of schools, hospitals, day care institution, etc. Often only a choice between public solutions In a few cases private alternatives can be chosen if certain conditions are met –The only area where private companies are ensured access (if qualified) is in the field of supplying home help to the elderly Focus on free choice of home help

7. Michael Steinicke Free choice of home help An obligation to establish a free choice for receivers of home help –Home help covers personal and practical help The legal framework is law on social services §§ 91-92 Overall there are two models: –Procurement A limited number of service suppliers is selected subject to competition The correct price is found through the competition –Approval or qualification All qualified undertakings will gain access to the group of service suppliers from which the elderly can make the choice The price is established by the municipality –A third possibility: a hybrid No certainty for business for the undertakings

8. Michael Steinicke Free choice on home help -challenges Competition between the municipalities and undertakings –VAT The problem: public authorities received full compensation whereas private undertakings only were compensated a smaller part The Danish Competition Councils meeting of November 24th 2004 (no decision) New rules from July 2006: no VAT compensation –The cost analysis Competition Council meeting December 17th 2003 A municipality’s cost analysis covered different prices pr. hour and included subsidized labour Clash with the EU procurement rules? –The only authorized way to market test in the EU is by public procurement –Not considered to be a problem Private caretaking has traditionally been subject to bad press

9. Michael Steinicke Free choice on home help -effects A few surveys have been conducted National Social Appeal Board: –5 % of the elderly chose private suppliers –The largest obstacle for success: the elderly Conclusions of report from OECD: –From 4 % (personal help) to 21 % (practical help) –Large suppliers are less suitable than smaller suppliers –New suppliers will emerge

10. Michael Steinicke PPP in Denmark Focus on specific types of PPP: Offentlig-privat partnerskab –PPP; organizing construction and services in the same contract Samlet udbud –Collected procurement; including all parts of a construction project in one procurement Servicepartnerskaber –Service partnerships; an agreement at an early stage in the process, and common development of the project Sale-and-lease-back Offentlig-privat selskab (L548) –Public-privat companies; requiring a minimum level of private involvement and a maximum level of public control

11. Michael Steinicke PPP - trends A slow start, only now picking up momentum –Numbers are: Only two handful of projects so far About 20 more projects in the works Department-driven –A top-down process –A lot of material and co-financing options A few municipalities are marketing themselves on PPP, e.g. Odense Kommune (municipality of Odense) who has the ambition to become the Nordic Champion on public innovation In general favourite projects are: construction of schools, cultural institutions, sports facilities, day care centres, infrastructure projects and retirement homes Favourite methods: firstly PPP’s, secondly collected procurement

12. Michael Steinicke PPP – legal issues Is the current legal framework in Denmark sufficient? Probably not –Or at least not fully up to the challenge Specific issues: –Tax issues; the link between ownership and deduction –Procurement rules are not modeled to be used in PPP –Competitive dialogue is probably saving some of the glory for the procurement rules –Other issues: General lack of room for discussions Lack of flexibility

13. Michael Steinicke In conclusion The right to challenge was a failure The free choice rules are considered a success, but free choice of supplyer of home help has been subject to some debate due to the the private involvement PPP might be a success, but it is still at an early stage

14. Michael Steinicke Further information Websites: www.udbudsportalen.dk www.ebst.dk/ops Books: –Michael Steinicke: Kommunale aktiviteter (2003) –Karsten Naundrup Olesen and Michael Steinicke: Offentlig privat samarbejde (2009)