Definition: Services purchased by government on the basis of d...

Category: National accounts

This refers more specifically to new forms of partnerships (frequently designed as “publicprivate
partnerships” - PPPs) which, for EDP and National Accounts classification purposes, are of great interest. The Eurostat decision on 11 February 2004 covered explicitly and exclusively this case.
It tends to occur in areas of activity where government has a strong involvement (transport, education, health, and security). Government concludes with one or several experienced commercial partners, directly or through a special legal entity set up for the specific purpose of a PPP, a contract for the delivery of services derived from a specific asset.
This type of contract mentions specifically-designed assets which generally need a significant initial capital expenditure (which is precisely why government uses such arrangements in many instances), and the delivery of agreed services, requiring the use of these assets and according to given quality and volume standards that are specifically defined in the contract. It is in this sense that these contracts differ from leases. The
contract may refer either to a new asset or to significant refurbishment, modernisation or upgrading of existing assets, including assets already owned and managed by government but provided that the expenditure for renovation, etc., will represent a predominant part of the new value of the asset after renovation.
A key feature of these PPPs is that government is the main purchaser of the services, through regular payments, once the assets are supplied by the partner, whether the demand originates directly from government itself or from third party users (as for health and education services, and some types of transport infrastructures). There is no need to specify
a given threshold on this point. Strictly speaking, it means just above 50% but in reality this percentage tends to be much higher, generally above 90%, because most contracts refer to “typed” economic models. The expression ��shadow tolls” is frequently used in the case of transportation infrastructure and refers to remuneration by Government for a given usage
volume of the transport infrastructure.
The use of the assets is specifically defined in the contract and the partner is necessarily limited as to how the assets may be used. For example, the partner cannot dispose of them at will, and in some instances, has to give priority to government users over other possible users. Note that many contracts do not rule out payments by “third parties”, but these are likely to represent a minor (even negligible) part of the partner’s revenue and frequently refer to a secondary activity associated with the dedicated assets (for instance “private” use of some infrastructure on given period or fees collected for telephone cables laid along, or under, a motorway).
In addition, it must be stressed that �government” in this context refers to the whole government sector (“General Government”, or sector “S.13” in ESA95) while different government units, even classified in different sub-sectors of government, take part in the
contract at various degrees. This should have no impact on the treatment in national accounts. http://ec.europa.eu/eurostat/ramon/statmanuals/files/KS-BE-04-004-EN.pdf