A general introduction to public-private partnerships in Netherlands

All questions

Overview

Over the course of the past 20 years the public–private partnership (PPP) has been an important and successful tool of Dutch contracting authorities for the realisation of projects. The contract form most used for major PPP projects in the Netherlands is that of the design, build, finance and maintain (DBFM) contract. DBFM contracting came to the Dutch market in the late 1990s and early 2000s. A first push for its use was made in 2004 when the Ministry of Finance introduced a policy whereby, subject to the outcome of a public–private comparator (PPC), PPP was deemed the preferred option for all projects with a value above certain thresholds. In 2008 the government embraced the PPP model further and lowered the applicable thresholds (to, e.g., €60 million for infrastructure projects). Standard DBFM documentation was developed and the Netherlands saw a significant wave of PPP projects. Initially these projects concerned certain types of government accommodation and roads. From 2014 onwards the Dutch Rijkswaterstaat agency, part of the Dutch Ministry of Infrastructure and Water Management, added several wet infrastructure works (river and sea locks as well as the Afsluitdijk dam) to its PPP tender pipeline.

However, more recently enthusiasm in the Netherlands for DBFM as a contract form has started to wane. Concerns were raised about the lack of flexibility and the division of risks within the standard DBFM contract, the latter, in particular, because of the increased complexity of the projects tendered. Certain projects, most notably the A15 road project and the IJmond sea lock project, saw contractors faced with very large costs as a result of risks materialising. In addition, a difficult market had resulted in contractors submitting low bids for projects. When market conditions in the building sector improved certain large Dutch contractors decided against bidding for new PPP projects, citing risks and costs. This meant that recent Dutch DBFM tenders such as, for instance, the A9 and ViA15 road projects attracted fewer bids.

It is against this backdrop that in 2019 the Minister for Infrastructure and Water Management presented the Dutch parliament with a report entitled 'The Future Task of Rijkswaterstaat'. The conclusion of this document was that change was necessary, both to improve competition in the market and in view of the complexity of the new challenges the government was facing. In March 2020 the report was followed by a transition agenda, 'Together in transition to a vital infra sector', prepared by Rijkswaterstaat in close consultation with market participants (an example of a PPP of a different kind). The aim of the transition agenda is to realise an infrastructure sector that is 'sustainable and innovative, financially healthy and with proper risk control'. The agenda only explicitly refers to PPPs in one of its action points, where it mentions PPP alliance-type contracts, but it is silent on the role of DBFM contracts as part of the new approach.

Further to the transition agenda, Rijkwaterstaat and Bouwend Nederland, a body representing contractors in the Netherlands, jointly commissioned a study into the performance of DBFM in the Dutch market over the past 15 years. The outcome of this study by the universities of Rotterdam and Groningen, published in October 2020, is described in Section II.

The year in review

No DBFM contracts were awarded in 2021. There were also no new DBFM contracts tendered during this period.

In November 2021 the IJmond sea lock project (contract value of over €500 million) reached completion. There are currently several large DBFM projects in the realisation phase, including the A9 Badhoevendorp–Holendrecht motorway (contract value of over €800 million; expected availability 2026), the A13/A16 motorway (contract value of approximately €1 billion; expected availability 2025) and the Afsluitdijk dam (contract value of over €500 million; expected availability 2025). In May 2021, the Minister of Infrastructure and Water Management informed parliament that the Afsluitdijk project faced (further) delays as well as significant cost overruns.

There has been some activity in the secondary market for PPP projects with transfers by existing shareholders of their stake in PPP projects to infrastructure investors.

In October 2020, the report 'Learning of 15 years of DBFM projects at Rijkswaterstaat' was presented by researchers of the Erasmus University Rotterdam and Groningen University. According to the report, which was commissioned by Rijkswaterstaat and Bouwend Nederland, projects realised using DBFM projects are on average of a higher quality, more often delivered on time and realised with less hindrance to the public. The contract form was, however, considered less suitable for more complex projects, and the researchers concluded that DBFM is a suitable contract form for projects of limited complexity with a value of €200 million to €400 million. It seems the government is in agreement with the findings of the report. In a letter from the Dutch Minister of Finance of 1 February 2021 the Minister confirms that the recent transition agenda does not mean a change in the government's policy with respect to DBFM. DBFM remains one of the tools to realise government projects. Where projects are of a sufficient size (€60 million for infrastructure projects), Rijkswaterstaat will still need to determine if the use of DBFM provides the best value for money by using the tool of the public private comparator (PPC). However, the Minister does note that the Ministry of Finance and Rijkswaterstaat are currently working on a new version of the PPC that will take account of recent experiences with the DBFM contract form. This new version of the PPC has not yet been published.

Following the October 2020 report, several proponents of the DBFM contract form declared the importance to retain DBFM as a tool for Dutch infrastructure projects. Without deal flow the knowledge built up over the course of the last 15–20 years would disappear. In an evaluation of the aforementioned report by the researchers themselves, published in March 2021, they underline that expertise gained should not be lost. This has, however, not led to the announcement of new DBFM projects.

Finally, in May 2021 the joint initiative of the Dutch financial sector to achieve climate transition, consisting of the Dutch Fund and Asset Management Association, the Dutch Association of Banks, the Federation of Pension Funds and the Federation of Insurers, sent a joint letter in which it emphasised the need for government measures to achieve climate transition. In their letter they urged the Dutch government to stimulate the use of public–private partnerships for the funding of this transition.