Public-private partnership for the design, financing, construction, reconstruction, rehabilitation and maintenance of local road infrastructure with payment by the public partner (availability-based) in the territory of the City of Sremska Mitrovica

Original TED description

The subject of the proposed project is the design, financing, construction, reconstruction, and rehabilitation of parts of the local road infrastructure of public importance, along with the provision of maintenance services for the local road infrastructure with public payment, on the territory of the City of Sremska Mitrovica, through the conclusion of a public-private partnership agreement between the City of Sremska Mitrovica and the private partner. Road infrastructure represents the backbone of the development and functioning of all possible human, economic, and other flows. Road infrastructure is an imperative of the social and economic standard both at the micro and macro level of a given locality, which essentially means the standard of living. A certain socio-political community measures its value primarily by the coverage of its road network – by its infrastructure facilities. The development of road infrastructure improves accessibility, which leads to the acceleration of regional development. With such an approach to the impact of investments, the overall benefits to society could outweigh the costs of investing in the development of road infrastructure. It is considered that the transport system is sustainable in the long term if it is able to provide the necessary capacity and level of service, if it is compatible with the locations it serves, if it is economical, relying on propulsion technology based on renewable and portable energy sources, if it is clean in order to maintain and regenerate the quality of the environment, and if it is cost-effective, and thus available to present and future generations. When it comes to public-private partnership, the basic elements of the concept of this model are clear allocation of responsibilities, risk sharing, and the duration of the partnership. Risk sharing enables each partner to assume the risk they can manage in the most adequate way, thereby achieving greater efficiency of such projects. The main goal of the development of road transport and road infrastructure is the establishment and development of a transport system that enables sustainable mobility of the population and provides support for the accelerated development of society and the economy, as well as strengthening competitiveness. Analyzing the current state of road infrastructure and the financial situation, it is evident that the City of Sremska Mitrovica does not have the possibility to independently invest in the construction of the planned sections, which is one of the essential prerequisites for the successful maintenance of road infrastructure while meeting the population’s needs for mobility. This project proposal is based on the idea of ensuring the availability of a portion of high-quality transport and accompanying infrastructure in urban zones and settlements through capital investment by the private partner. In addition to construction, reconstruction, and rehabilitation, the private partner will also prepare the project documentation, provide long-term regular maintenance across the entire territory and settlements, ensure protection and guarantee the quality of the works performed and services provided. The local self-government will not incur credit debt on this basis, given the way public-private partnership and concessions are regulated, while at the same time achieving the objectives of reducing budget expenditures, increasing the efficiency of public service delivery, and securing certain benefits for society as a whole. The compensation that the public authority will pay refers to the availability payment and infrastructure maintenance fee, and primarily relates to the payment for the service provided. With the received compensation during the contracted period, the private partner is obliged to finance and bear the financing costs for all obligations arising for it within this project, which primarily refers to: preparation of project documentation for the execution of works and maintenance of the subject infrastructure during the contracted period, capital investment (upgrading, construction, reconstruction, etc.), financing of investments and other costs arising within the project, maintenance and ensuring the availability of the subject road sections, and guaranteeing quality and maintaining the designed level of quality. In this way, by allocating risk to the private partner, optimizing procedures and phases, and assuming long-term responsibility for quality, the private partner will significantly better ensure quality than under the classical model based on construction and subsequent maintenance under a separate contract, which increases the risk of unclear boundaries of responsibility. Also, the classical method provides less guarantee for the quality of works, because the infrastructure is maintained independently, reducing the interest of both the contractor and the maintainer in delivering high quality. Under the proposed project, responsibility for all activities during the contracted period lies exclusively with the private partner. Of particular importance is the fact that the period in which the private partner would guarantee availability, quality, and maintenance — i.e., the period when the private partner is entitled to compensation — begins only once the infrastructure, or part of the infrastructure, has been fully completed in accordance with the implementation plan and execution timeline, and a proper handover certificate for the quality works performed has been issued.