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Old January 29th, 2015, 05:27 PM   #3261
ChrisZwolle
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Don't forget the financing cost. A 30 year bond payment means you'll spend twice the original amount.
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Old January 29th, 2015, 06:25 PM   #3262
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Government expertise says...
Building costs 1.325 billion for 59 km, which is roughly 22.4 millions per 1 km. That's ok (metropolitan area, new bridge over Danube, big interchanges, somewhere 3+3 lanes).

The problem is, the government plans a payment of 130-150 millions yearly for period of 30 years. And that's 3.9-4.5 billions all together, what is 3 times more than the building costs!!!
Imagine it as if the government took a mortgage and would be paying it off in the next 30 years. With a 4,5 % interest they would pay around 2x the original price in the actual money. If you would sell a 30 years bond you would pay around 3.7x times the original price in the actual money paid altogether. Ten euro now is worth ten euro and forty five cents over a year with such interest.

Money has a different value in time. We could discuss whether the interest that the PPP contractor charges is appropriate or not, but for that you would need to know more than the total payment the government will have to make.

Even if the government would borrow the money on the money market and tendered the construction and paid with the borrowed money, it would have to repay the loan with the interest. The interest easily makes the total payment two times or three times the amount of the borrowed sum.

The contractor could use its own money for the financing of the project, but this is mostly not the case. It has to take a loan. The problem with PPP is mostly in the basic fallacy that a private contractor is able to get a lower interest rate than a government. It is most of the time not true. The second problem is that the contractor will always add a surcharge to the interest rate under which it takes the loan and charge this premium to the government. Factually, there is really no way that the PPP project could be cheaper because of the financing.

The only way a PPP project could become cheaper (at least project like this, when it is financed by installments paid by the government and not directly from the toll that would be collected by the operator - i.e. total privatization of the whole motorway) is savings on the side of construction and maintenance. But almost exactly the same savings are possible when the construction and maintenance are tendered directly.

PPP projects are mainly a way how to hide actual debt of the government, not much else. As we see also in this example, it is also a way how to make the whole operation less transparent, because it harder to come to the actual data about the prices, maintenance costs, financial operations etc.

We could argue that these days the government could get its money very, very cheap (i.e. with very low interests). I am quite confident that much cheaper than any private corporation. However, governments prefer to hide their true borrowings via PPP projects.
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Old January 29th, 2015, 06:30 PM   #3263
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The main benefit of a PPP is that it allows large projects to be constructed in short time, while the government can spread the cost over decades instead of a few years. PPP projects are almost universally much faster than government projects (Germany being a good example, but also France.
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Old January 29th, 2015, 07:21 PM   #3264
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The main benefit of a PPP is that it allows large projects to be constructed in short time, while the government can spread the cost over decades instead of a few years. PPP projects are almost universally much faster than government projects (Germany being a good example, but also France.
Government can always spread the costs over decades. It doesn't need PPP for it. It is in no way some exclusive feature of the PPP. The main reason a government does it is because it doesn't want the debt in it's books and it makes the finances much less transparent.

And as far as the actual realization of the PPP goes, it is by most of the PPP types nothing that could not be done via the normal tendering.
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Old January 29th, 2015, 08:08 PM   #3265
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A PPP enables the government to proceed with a large project without having the immediate payment obligations in full. This means they can invest during times of budgetary constraints. Large widening or construction projects clearly shows PPP projects are completed much faster than if it was government-funded.

A PPP is not necessarily cheaper, however cost escalation and risk are on the tab of the constructor and not the taxpayer. Many government projects are only cheaper in theory, in reality they often run into delays and cost escalation.
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Old January 29th, 2015, 09:14 PM   #3266
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Quote:
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A PPP enables the government to proceed with a large project without having the immediate payment obligations in full. This means they can invest during times of budgetary constraints.
There really is nothing that would prevent the government to arrange the financing completely the same way. The government can easily arrange the repayment of the financing in even installments over a period of 30 years. There would be exactly the same cash flow happening. There really is no other difference than that with PPP this "debt" is off the books.


Quote:
Originally Posted by ChrisZwolle View Post
Large widening or construction projects clearly shows PPP projects are completed much faster than if it was government-funded.

A PPP is not necessarily cheaper, however cost escalation and risk are on the tab of the constructor and not the taxpayer. Many government projects are only cheaper in theory, in reality they often run into delays and cost escalation.
I can concur with this. But what does this also show? That the government is not projecting and tendering well and it is not closing good contracts. There really is no theoretical reason why the government should not be able to move the risks on the constructor without using PPP, or better said certain PPP.

There are many different types of PPP and it is not correct to compare them as a whole to a non PPP. We would need to look at every step of the whole chain of activities that need to be done and we could compare whether it is better to have them in house (i.e. done by the public authority) or outsource them to the private corporations and whether it makes sense to bundle them and tender as a bundle.

Finance - Design - Build - Operate - Maintain


a) Finance = It is without any doubt that securing the financing is cheaper for the government.

b) It is mostly privately done anyway. There are many possible arrangements from quite detailed to quite general designs leaving space for the construction partner.

c) Build. Again mostly privately done anyway.

d) Operate and Maintain - again everything is possible

Now if you look at this chain you can see that all of those pieces can be outsourced, they can be also bundled and tendered as a bundle. I think that it makes much more sense to talk about bundling and outsourcing than talking about PPP. PPP is just a sort of foggy word to conceal what is actually happening. In many cases what is actually happening is better described as outsourcing, privatizing and bundling the different pieces of the chain, but lets stay at the motorways.

I think that bundling Designing and Building and tendering it as a bundle with very general design parameters is efficient. I am also thinking that adding Maintenance to this bundle should create another savings due to a higher efficiency. A private contractor will design and build the structure in such a way as to minimize its maintenance costs. And I would believe that a private contractor is better at doing this than a government.

I am however not seeing any efficiency gains when bundling the financing together with the rest of the chain. The point is that most of the time PPP is defined exactly by including the financing in the bundle. I don´t see any advantages of such PPP. If we would talk about the rest of the chain and having it bundled. Yes, I would be for using PPP (that means using bundle and outsourcing certain activities, e.g. design - build - maintain bundle).

Now, as well as efficiency gains and economic gains from the bundling, there are are also risks. Some risks become lower when we use bundling, but other risks become higher. And you are back to the quality of he contracts and tendering.
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Old February 1st, 2015, 02:16 PM   #3267
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Quote:
Originally Posted by ANDi_ View Post
Government expertise says...
Building costs 1.325 billion for 59 km, which is roughly 22.4 millions per 1 km. That's ok (metropolitan area, new bridge over Danube, big interchanges, somewhere 3+3 lanes).

The problem is, the government plans a payment of 130-150 millions yearly for period of 30 years. And that's 3.9-4.5 billions all together, what is 3 times more than the building costs!!!
R1 project has 51km and total value of payments is aprox. 4bln € (everything included). D4+R7 per km seems to be a little cheaper and there is massive difference in road quality. R1 is poor R22,5m with 1,5m emergency "lanes" and this new project is between R24,5m and D33,5m. Not to mention huge multilevel junctions.

I don't mind this project if average yearly payment per km is lower than on R1.
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Old February 1st, 2015, 02:57 PM   #3268
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i15 don't compare it to even worse project. I wouldn't mind if it was let's say 2 times of the building costs and being built in short time of 2-3 years. Or at least if D4 was being built whole. But the plan for only south part of D4 and a part of R7, all together 60 km in 4 years is no record breaker.

We know it could be a lot cheaper, but that's not in intention of this government.
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Old February 2nd, 2015, 11:24 PM   #3269
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Detailed routing of whole motorway D4 here: http://www.openstreetmap.org/#map=16/48.0901/17.1853
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Old February 3rd, 2015, 12:35 AM   #3271
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Google Street View R1 + R2 Update 2014:

1. https://www.google.ch/maps/@48.57638...z9Uw!2e0?hl=de
2. https://www.google.ch/maps/@48.7477,...bqyA!2e0?hl=de
3. https://www.google.ch/maps/@48.75216...1T000000?hl=de
4. https://www.google.ch/maps/@48.74969...-L_g!2e0?hl=de
5. https://www.google.ch/maps/@48.74708...-Wz50U46BQ!2e0
6. https://www.google.ch/maps/@48.73973...22GEeDDWuQ!2e0
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Old February 11th, 2015, 10:10 AM   #3272
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https://dennikn.sk/46721/ako-sa-stavali-dialnice-za-komunistov-alebo-tatraplanom-po-prazdnej-d1-foto/

Nice old pictures of highway's construction in CSSR, see link in the title - I cannot post link here because my post count is less than 10 :-(
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Old February 11th, 2015, 10:45 AM   #3273
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Great photos!

Direct link: https://dennikn.sk/46721/ako-sa-stav...zdnej-d1-foto/
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my clinched highways / travel mapping • highway photography @ Flickr and Youtube

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Old February 11th, 2015, 10:55 AM   #3274
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Yeah, great stuff guys!
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Old February 11th, 2015, 03:07 PM   #3275
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REally nice pictures and awesome cars at that time
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Old February 11th, 2015, 07:39 PM   #3276
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Tatra 603 and Tatra 613, a.k.a. czechoslovak rolls royce
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Old February 12th, 2015, 09:31 PM   #3277
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cool!
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Old February 15th, 2015, 01:06 PM   #3278
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R4 (E371) Svidnik bypass, part 1 :

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2015-02-14 Svidnik - obwodnica - jazda w stronę Polski







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Old February 15th, 2015, 01:06 PM   #3279
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R4 (E371) Svidnik bypass, part 2 :

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Originally Posted by humar View Post
2015-02-14






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Old February 21st, 2015, 02:15 AM   #3280
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What is the AADT on R4 section near hungarian border ?
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