Recent developments and constraints for Public-Private Partnershipin Germany

Public-Private Partnership (PPP) is one vehicle to gain access to private capital for real estate development needs. PPP is currently used in many economic sectors. In the public real estate sector, PPP is increasingly being used to deliver office accommodation to house government institutions, departments, diplomatic missions as well as hospitals and schools. Germany has been on hold in realising PPP-projects in real estate. With the formulation of PPP guidelines for the federal government and by establishing a PPP competence network on the federal, county and municipality levels in this year, the whole process of tendering PPP-projects is poised to gain recognition in Germany. The contracts for the first pilot projects, mainly in the school sector, have been awarded. However, there are still some legal, financial and institutional constraints in realising PPP-projects due to Germany being a federal state. It is in this light that this paper focuses primarily on the procurement process covering the whole lifecycle approach to PPP by analysing the first German PPP-projects in public real estate. It emphasizes business needs of public and private entities, the tendering process as well as the financial and institutional involvements. It also discusses the difficulties in estimating the Public Sector Comparator (PSC) ñ a financial benchmark for comparisons of proposed costs in PPP schemes. Finally the paper highlights restrictions concerning the application of such efficiency comparison in PPPs.