How can the quality of infrastructural projects be increased for the revitalization of the country and, concretely, what the government does and plans to do to relaunch investments in public works and infrastructure. Professor Andrea Gilardoni, a professor at Bocconi University and an expert on the subject, spoke about it with two super-technicians like Raffaele Tiscar (deputy secretary of the Prime Minister's Office) and Alessandra dal Verme (senior executive of the Ministry of Economy and Finance, MEF), who will intervene on Wednesday 30 September at the Rome workshop promoted by QPLab at the Auditorium in Via Veneto. Here is what emerged from the interview-interview.
GILARDONI – Do you share the idea that too often in our country there are abundant financial resources for works and infrastructures that we are unable to spend due to a poor ability to propose Quality Projects?
TISCAR-DAL WORM – “This is a firm belief, which stems from the experience of infrastructure financing and the observed results. Let's see the two aspects: programming and resources (adequacy and certainty) and spending capacity. Program – Before even talking about quality projects, we need to address the issue that our administration does not place itself in the perspective of "quality planning". Trivially:
a) Knowledge of territories and needs;
b) Definition of objectives;
c) Planning of interventions. The more correctly the programming is set up, the more it is verifiable if and how much the project corresponds to the objectives, i.e. the degree of effectiveness. It is in this context that the best project should emerge, i.e. the one with the most suitable design solution for responding to the objectives while limiting expenditure, in a fair balance between expected result and construction cost”.
GILARDONI – The problem of resources remains, their adequacy-certainty, and spending capacity: what do you think?
TISCAR-DAL VERME – “Defining whether or not resources are abundant depends on the country's infrastructure objectives in support of sectoral policies.
Let's say they are plentiful if you compare to budget. From a financial point of view, this is evidenced by the fact that compared to the forecasts defined annually in the DEF, the actual expenditure for capital investments is lower than the estimates and shows a decreasing trend. There is in the assets account a mass of perishable residues referring to capital allocations that have not been spent and can be re-entered in the budget only if the works are to be carried out with the presentation of the SALs.
However, the problem of definancing resources destined for infrastructure should not be underestimated. In recent years, more evidently since 2008, resources already allocated for infrastructures have been used to cover public finance maneuvers and various financial needs, including those of regions and local authorities. Furthermore, there has been a change in the accounting system for mortgages to finance public works and, starting from 2007, the State has had to account for the impact on the deficit of the use of long-term contributions assigned to infrastructural works, greatly slowing down the possibility of using multi-year contributions already provided for by law. The margins on the internal stability pact have also decreased for the Regions and local authorities, compromising the possibility of spending on investments.
We can therefore say that a component that has undermined the country's spending capacity has also been the lack of certainty of resources for a multi-year period suitable for the planning and implementation of investments and the continuous reprogramming of already finalized resources, allowing the allocation of resources in a completely extemporaneous way to the various works requested from time to time, but without being realised. The Infrastructure Annex, until 2014, contained an endless list of projects worth over 240 billion euros dating back to the previous decade as well. In this context, the ability to produce and evaluate technically sustainable projects, from all points of view, has been lost”.
GILARDONI – Your analysis is undoubtedly acceptable, but what do you think are the characteristics of a Quality Project? What are the key factors that make an infrastructural project acceptable from a social, economic and financial point of view?
TISCAR-DAL WORM – “A “quality project” must:
– respond to the objectives according to an adequate degree and, therefore, to be considered a priority with respect to the sector resources available;
– be financially sustainable, i.e. the economic and financial plan must be in balance taking into account the public contribution and the ability to remunerate invested capital with revenues;
– be the most suitable design solution with respect to the cost and duration of the works. At this moment, for the country, "frugal" projects of short/medium duration should be a priority, giving greater certainty to the timetable and the possibility of responding to the programmed objective. This safeguarding specific long-term strategic projects such as the extension of the high-speed railway network and the construction of works connected with the European corridors which, financed by construction lots, must all the more be followed with stringent procedures in all the phases indicated from the time schedule to avoid lengthening the construction times and the explosion of costs, already high due to the complexity of the works.
– be accompanied by a "quality announcement" and a "quality contract", to avoid as much as possible disputes and work interruptions which lengthen the duration of the time schedule and increase the cost".
GILARDONI – At European level, the quality of works and infrastructures is sought, among other things, through the formalization of the Cost Benefit Analysis for the selection of priorities, greater attention in the codes to the technical aspects rather than the bureaucratic ones, the diffusion of the most virtuous in public administrations, the formal involvement of local populations in decision-making processes. Is this the recipe for Italy too? What reform interventions are needed to increase the quality of the planning and design of the works?
TISCAR-DAL WORM – “The legislative decrees n. 228 and no. 229 of 2011 which arise from the delegation of article 30 of the State accounting law n. 196 of 2009, already envisage that investments relating to public works are framed and implemented in a virtuous process aimed at maximizing results in terms of spending productivity and achievement of objectives. In this sense, the decrees provide:
– The preparation by 30 October of each year of the Multi-annual planning document (DPP), which contains the sector objectives and is drafted according to the guidelines contained in the DPCM of August 3, 2012;
– The ex ante evaluation of the needs and of the single works, also through the cost-benefit analysis and the use of suitable indicators to represent the degree of compliance with the objectives;
– The selection of the works that access funding with the available resources; Monitoring of the progress of the works, to follow, in terms of public finance, the actual trend of expenditure as well as to also support the planning phase, possibly redefining the resources do not use;
– The ex post evaluation of the works to verify the results and the causes of the deviations and implement possible corrective measures.
The DPP constitutes the moment of synthesis between the sector objectives, the planned interventions, the available resources and contains all the sector planning documents, including the program and investment contracts with the major contracting authorities (for example ANAS and RFI) .
Therefore the regulatory reform intervention has already taken place, at the level of the law and of detailed regulations.
At this point, an effort must be made at the level of public administrations to ensure that all of this is implemented, recovering the country's ability to invest and create productive infrastructures, rationalizing spending and maximizing its positive effects on the economy.
In this sense, all the works submitted to the CIPE for financing and investment contracts should in any case bear, as of now, as part of the preliminary investigation, of the individual interventions, the cost-benefit analysis, productivity indicators, a stringent time schedule and methods of monitoring to follow the start of the work and the progress of the planned works”.
GILARDONI – Let's now see what can be done to simplify and rationalize procedures
TISCAR-DAL WORM – It is certainly a theme that has been recurring for years and must be tackled together with the implementation of the new European directive on public procurement, which itself suggests dictating fewer detailed rules and more general principles that can be set out in tenders and contracts.
In any case, it is necessary to intervene to avoid the increase in costs and the prolongation of the execution times of the works to an abnormal extent, on some critical issues that are constantly repeated in almost all the works contracts:
– a) Auction discounts ranging from 30 to 50% of the amount put out to tender, indicative of an unreliable project and an incorrect cost assessment, or of a discount that cannot be implemented to adequately implement the project;
– b) Variant appraisals functional to recovering the auction discounts, or necessary to replace a design that was deficient from the outset;
– c) Reserves of amounts even higher than the value of the work or the accrued SAL;
– d) Poor possibility of intervention by the contracting station in cases of suspension of the works due to financial difficulties of the contractors, including bankruptcy cases;
– e) Abnormal increase in costs from the preliminary project to the final project and extension of the duration until reaching the decade for the finalization of the final project;
– f) Calls for tenders and contracts not adequately defined in terms of obligations and responsibilities;
– g) Impossibility to exclude companies that have shown in previous tenders a lack of reliability for the good outcome of the works and that have repeatedly given rise to the situations indicated above.
GILARDONI - In essence, qWhat is the government's strategy to relaunch investment in works and infrastructure?
TISCAR-DAL WORM – "From a technical point of view, according to the DEF, the MIT (Ministry of Infrastructure and Transport) will present the DPP (Multiannual Planning Document) with the already anticipated sector programs that must be implemented, such as the plan for port and logistics , defining more precisely the interventions to be financed.
It would be necessary to provide substantial long-term resources, even starting from 2018, to ensure the launch of an adequate planning cycle, and the start-up of the works that will be able to achieve progress in subsequent years.
In the immediate future, it would be useful to quickly complete works that have already begun whose funding is available and can be implemented in a short time, give priority to projects of municipalities that have already been contracted out and stopped, projects that resolve bottlenecks in metropolitan areas or important junctions or even critical issues land maintenance, for the purpose of preventing major damage.
On these fronts, the start of construction sites could be faster and it is necessary strong coordination action to focus on the "good" projects, collect the available and compatible resources and quickly start the procedures or the continuation of the works and related reporting".
GILARDONI – Also on the wave of international experiences, a new Technical Unit of strategic infrastructures for the control of the PPP is being hypothesized. What role could it play and with what objectives?
TISCAR-DAL WORM – "In the economic and financial document of last April and in the related update note approved by the Government more recently, mention is made of the hypothesis of setting up a technical structure that supports public administrations in planning and in the technical and legal-economic evaluation of projects , accompanied by cost/benefit analysis and indicators of productivity and profitability/sustainability of investments with private capital participation. This is also in consideration of the objective of encouraging recourse to public/private partnerships and the possibility of activating new financial instruments which are being defined within the so-called "Piano Junker".
It would be a very streamlined structure made up of very high professionalism in technical, legal and economic-financial matters, which should, in summary, assist the administrations in:
– ensure efficient planning, design, implementation and management of public investment projects, identifying, through cost/benefit analyses, projects capable of offering a contribution to the country's competitiveness and economic recovery and assessing creditworthiness and economic sustainability of the PPP operation;
– ensure the transparency and accountability of the design process, also through forms of transparency for widespread knowledge of the project life cycle; dialogue with financial institutions, including international ones such as the EIB; attract private investors on Public Private Partnership projects;
– shorten the time required for awarding works concessions, guaranteeing correct preliminary investigations in drafting projects and in awarding procedures; ensure overall consistency and monitor the various phases of the life cycle of the work, controlling the main project variables: times, costs and quality”.
