On 27 April 2019, a Flemish decree establishing a framework for major projects and programmes entered into force. The decree aims to remedy the issues that have arisen in connection with the reporting by the Flemish government on alternative financing projects and is expected to increase the Flemish government's investment capacity by facilitating the use of public-private partnerships (PPPs).
Background
The basis for the Flemish government's annual reporting on PPP projects, and more generally projects involving alternative financing, was the resolution of 30 May 2007 on the provision of information regarding and the monitoring of alternative financing (Parl.St. Vl.Parl. 2006-07, no. 1143/3). However, such reporting had a weak statutory basis, and the information was often outdated or inconsistently provided which hindered adequate project follow-up.
It was therefore necessary to rethink the way in which information about such projects is provided to the Flemish government, with the aim of achieving greater efficiency and reducing the administrative burden in the context of major projects and programmes.
Major projects and programmes
Major projects involve a set of non-routine activities, limited in time, for which the Flemish Community or Flemish public entities are fully or partially responsible and which entail substantial financial consequences and implementation risks. The threshold value for major projects is EUR 100 million (for works) or EUR 20 million (for supplies and services). Major programmes consolidate several major projects - regardless of their value - into a single programme with a value of at least EUR 200 million.
The decree focuses mainly on DBFM-type (design, build, finance and maintain) PPPs. However, its scope is not limited to civil engineering or infrastructure projects, e.g. major IT projects may also be covered.
New ceiling
A ceiling is now provided for PPPs in order to avoid excessive spending and safeguard the policy space of the areas concerned and the consolidated Flemish budget. The Flemish government may only initiate and implement new major DBFM projects or programmes if the following conditions are met:
1. implementation of the project or programme will not lead to the payment of availability fees in excess of 60 per cent of the budget for the policy area(s) concerned, for at least five consecutive years;
2. implementation of the project or programme will not lead to the payment of availability fees in excess of 10 per cent of the Flemish government's budget, for at least five consecutive years.
It is believed that the framework decree will allow the Flemish government's annual investment budget, which currently amounts to around EUR 4 billion, to double. Indeed, spending EUR 1 billion on availability fees equals EUR 5 billion in traditional investments. The remaining EUR 3 billion may be used for traditional investments. This will result in a total investment budget of EUR 8 billion, i.e. twice the current amount.
Key features of the new decree
- The Flemish Government must draw up an annual list of major projects and programmes involving alternative financing. It must publish a report on these projects, including a brief overview of the objectives pursued, a "state of play" for ongoing projects, a timeline, a self-assessment and an indicative overview of future projects.
- A support entity is created which will be responsible for coordinating reporting. It can make recommendations and take initiatives to achieve high-quality, consistent and unambiguous reporting.
- At the request of the Flemish Parliament, the Flemish government must also periodically provide, by way of publicly available progress reports, more detailed information on specific projects and programmes designated by the Flemish Parliament.
- The decree introduces a system of periodic self-assessment. The authority in charge of day-to-day management of the major project or programme must carry out a self-assessment at least once a year.
- The new framework decree repeals and replaces the decree of 8 November 2002 on major infrastructure projects.
Next legislative steps
The Flemish government will now adopt a decree to establish or designate the support entity and to implement the other provisions, where necessary.
Additional information
The decree
Committee report on alternative financing of public investments
in collaboration with Ruben Kenis, Associate, Ruben.Kenis@nautadutilh.com
