An extract from The Public-Private Partnership Law Review, 6th Edition

Overview

While the development of infrastructure projects and the provision in general of public services in Belgium in the form of public-private partnerships (PPPs) is not new, its importance in government policy has grown rapidly over the past two decades. Historical underinvestment in qualitative infrastructure, the demand for better quality projects to be realised more quickly for the same price, and, importantly, a lack of available public funding necessitating spreading out investment needs over time, have all made for the strong revival of PPP projects in recent years.2 This has largely occurred at a federal level but to an even greater extent in the Flemish Region, where PPPs were one of the pillars of the government's investment policy during the 2009–2014 administration. However, the evolving views on European System of Accounts (ESA) conformity inspired the Flemish government to adopt a more reserved position during the 2014–2019 administration.

At the federal level, prominent examples of large PPP projects include the development of a new railway connection between the city of Brussels and the national airport (the Diabolo Project, completed in 2012), the construction of a tunnel underneath the river Schelde, the extension of the R2 freeway (the Liefkenshoektunnel, completed in 1991) and the construction of a prison complex in Haren (Brussels), which will become the largest prison complex in Belgium.

In the Flemish Region, major investments were made in the creation of the Flemish PPP Knowledge Centre to further boost the introduction and implementation of PPPs. As a result, a large number of PPPs have been tendered in various sectors, including transport and related infrastructure projects, renewable energy infrastructure and social infrastructure (e.g., schools and sports centres).

So far, PPPs have been less of a factor in the Brussels and Walloon Regions. Nevertheless, some large investments have been made through PPP projects in these regions, including transport, social infrastructure and, more recently, shopping malls comprising leisure facilities and apartments.

The year in review

i Major awards granted

In the Flemish Region, in April 2019, the award concerning the design, build, finance and maintain (DBFM) project for a second cluster of eight bridges over the Albert Canal was granted to Via T Albert, the SPV set up for this project. Previously, Via T Albert had already won a first cluster of seven steel bridges. In 2019, work started on the Haren Prison, the largest PPP project of the Federal Buildings Agency.

In the Walloon Region, the new tramline in Liège was awarded to a consortium Tram'Ardent, after Eurostat decided the project complied with the ESA rules. Financial close of this project took place on 31 January 2019.

On 31 May 2019, the Department of Defence awarded the DBFM contract pertaining to an aircraft maintenance hangar, offices, a warehousing area and a workshop at the military airport in Melsbroek (Brussels). Construction work is expected to start in March 2020.

On 18 February 2020, the contract for the design, build, finance and maintenance of the Dendermonde Prison project reached financial close. The Belgian Buildings Agency and the Federal Governmental Department of Justice awarded the contract for the provision of a prison in Dendermonde, which will house 444 inmates. The contract value of the project is €194 million.

ii Procedures initiated

Procedures have been initiated in respect of the construction of the administrative centre of Verviers and the installation of LED street lights across the Walloon motorway network. The registration period for construction firms interested in the Hasselt-Maastricht Tramline closed off on 16 September 2019. Procedures have also been initiated for another batch of the school cluster infrastructure project, referred to as the Schools of Tomorrow DBFM project. By December 2019, 163 of the Schools of Tomorrow DBFM projects were in the maintenance phase, whereas eight projects were in the building phase and 11 projects are currently in the design phase.

iii Miscellaneous

The National Pact for Strategic Investment is an initiative of the federal government to unite all stakeholders in strategic investments in Belgium around a common vision and goals to be achieved by 2030. On 11 September 2018, the strategic committee published a report that identified six areas for future investments, including healthcare, mobility and energy. A series of issues common to public investments were also examined, including permits and regulation, mobilisation of capital and PPP structures. As part of a political long-term commitment, mention is made of the speeding up and simplification of approval procedures for infrastructure projects. As part of the goal to increase the know-how of the project managers involved in PPP projects, the proposal was made to draft model tender documents and standardised contracts and to put these at the disposal of contracting authorities. Resulting from the activities of the National Pact, the Belgian federal government, acting via the Federal Holding and Investment Company, together with Synatom and AG Insurance set up the Infrastructure4Belgium fund on 26 February 2019. The fund will have €150 million at its disposal and will seek to invest, over time, approximately €2 billion in infrastructure projects, mainly in Belgium.

iv Significant legal changes

In 2019, no significant legal changes occurred to the legal framework, given the major overhaul that took place in 2016 and 2017. The Belgian legislation on public procurement was indeed amended in 2016 and 2017 pursuant to the implementation of the Public Procurement Directives 2014/24 and 2014/25 and the Concession Contract Directive 2014/23. The Concession Agreement Law was adopted on 17 June 2016. These new rules entered into force on 30 June 2017 and apply to all public procurement contracts or contracts that have been published or, in the absence of any publication requirements, for which from that date onwards an invitation to participate has been sent.

A Royal Decree of 15 April 2018 amended the above-mentioned new rules only on technical issues.

Recent decisions

In 2018, the Belgian Council of State ruled that the award of a contract for the building and renting of an office building without applying the public procurement rules was illegal.42

In 2019, various court decisions were rendered by the Council of State and the Council for Permit Disputes that put a definitive end to lawsuits in relation to the prison projects of Haren and Dendermonde, two major projects in the Belgian PPP landscape. The Council of State dismissed several appeals directed against the issue of environmental permits for the prisons in Haren and Dendermonde. The Council for Permit Disputes dismissed the petition to annul the building permit for the prison in Dendermonde, an access road and a bridge to the said prison. As a consequence of these decisions, the Haren prison has now moved to the construction stage and preparatory works for the Dendermonde Prison (access roads and bridge) have started. The actual works for the Dendermonde prison are scheduled to start in August 2020.

Outlook

Although the implementation of ESA 2010 initially gave rise to serious discussions as to the future of PPP projects, market practice reveals that PPPs have a future beyond ESA 2010, although their appearance has changed: on the one hand, a number of ongoing projects are being or have been renegotiated, while new projects are being structured in line with ESA 2010 to guarantee budget neutrality; on the other hand, projects are being carried out despite being 'on the balance sheet'.

As the ability of respective governments to invest directly is still limited, cooperation with the private sector, especially for infrastructure projects, still takes a prominent place in the Belgian PPP market. In this respect, it is interesting to note that listed regulated real estate investment funds are now authorised by law to make investments in PPP projects.

In Flanders, the Social and Economic Council of Flanders (SERV), an advisory body comprising representatives of employers and trade unions, commented on the Flemish government's role in PPP Projects. SERV recommended that PPP structures should not be assessed in the light of budgetary or financial added value (which have been key criteria in the past), but instead in the light of demonstrated operational or social added value (i.e., a better price quality over the entire life of a project).

The European Fund for Strategic Investments has been up and running since autumn 2015, keeping the ambitious timetable set by President Jean-Claude Juncker to implement the Investment Plan for Europe. The future of PPPs in Belgium will, among other things, depend on the funds that will be made available by the EU for investment in infrastructure projects, as a means to support economic growth, and the ability of Belgian authorities to secure the necessary European subsidies through the European Investment Bank and the European Fund for Strategic Investments. Tax incentives endorsed by the federal government with regard to construction of school premises have allowed the broad strengthening of PPPs, especially in Flanders where many public schools are refurbished or constructed in this way (e.g., the 'Scholen van Morgen' project, which was resumed after the application of these tax incentives). Further, the release of the Guide to the Statistical Treatment of PPPs by the European PPP Expertise Centre and Eurostat has delivered some clarity with regard to the ESA rules applied to PPPs, as the guide takes precedence over the prior Eurostat evaluation documents. Both events kick-started the PPP market again, after it had suffered a significant decrease during 2015–2017.

Currently, there is activity on the Belgian PPP market. A number of significant PPP projects have been tendered, (such as the R4 (West-East) ring road around Ghent and the Wissenhage bus and tram depot, for which three bidders were shortlisted in September 2019 following the submission of their first offers.