Vasco da Gama Bridge, Portugal

Prepared by team BRIDGE :

Cristóbal José Relaño Luque,University of Jaen,Spain

Maria Livia Lugoj, Constantin Brancusi University of Targu-jiu ,Romania Marija Hristovska,University of Maribor,Slovenia

Peter Madro,Comenius University,Bratislava,Slovakia Tadej Jančar,University of Maribor,Slovenia

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Introduction 1

1 A short definition of a public-private partnership (PPP) 1

2 Description of institutional setting for PPP in Portugal 1

3 Detailed description of the Vasco da Gama Bridge project 2

4 Partners involved in the project 3

5 Financial structure of the project 4

6 The time length of the project 4

Bibliography

INTRODUCTION

Over the last few decades, public-private partnerships have been increasingly used by governments around the world to finance and manage complex operations. Acording to Cruz and Marques (2010),Portugal has gained considerable experience with public-private partnerships (PPPs). These partnerships, typically rest on long-term contracts –often for a period of 30 years – between a public body and a private consortium. They require the private partner to provide a public service – using an existing public infrastructure asset – or to design, construct, maintain, and operate a new infrastructure asset. Finance for PPPs has come from private or public funds. In the beginning, PPPs concentrated in the transport sector – highways in particular – but the model has began to spread to other sectors too, notably the health sector. Portugal has been using PPP contracts to finance public infrastructure since the 90´s and currently it belongs to those countries that recur to these types of contracts more frequently. The purpose of this essay is to describe the Portuguese experience in PPPs, to discuss how the PPP program was organized, and to address the motives behind the decision to use a PPP,taking as a noteworthy example the Vasco da Gama Bridge, which was realised under tight schedule in time for the 1998 World Exhibition.

1. A short definition of a public-private partnership (PPP)

We can not go further and talk about the public-private partnership in Portugal ,before first stating

what is in fact a public-private partnership. Public–Private Partnerships, also known as P3 or PPP,

are contracts between government agencies and one or more private partners (which may include the

operators and the financers) according to which the private partners deliver the service in such a

manner that the service delivery objectives of the government are aligned with the profile objectives

of the private partners and where the effectiveness of the alignment depends on a sufficient transfer

of risk to the private partners (OECD, 2008, p. 17).

With other words PPP are arrangements between government and private sector entities for the

purpose of providing public infrastructure, community facilities and related services. Such

partnerships are characterized by the sharing of investment, risk, responsibility and reward between

the partners. The reasons for establishing such partnerships vary but generally involve the financing,

design, construction, operation and maintenance of public infrastructure and services.

2.Description of institutional setting for PPP in Portugal

Effective legal, regulatory and contractual conditions are crucial to PPP success but can only exist if supported by an efficient institutional structure which both facilitates PPP development and provides clear boundaries to protect the interests of all parties. The first PPP law (decree-law 86/2003), established the general regime of a PPP: the definition,

concept, preparation, bid, adjudication, changes, audit and global monitoring. The PPP law was

amended in 2006 (decree-law 141/2006), with the goal to promote a better cooperation between the

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Ministry of Finance and the sectorial ministries, and improve the mechanisms of controlling the use of

public resources in PPPs. Additionally, it introduced the obligation for the inclusion of a public sector

comparator (PSC). The last amendment in 2012 (decree-law 111/2012) focused on centralizing the

PPP process in the Ministry of Finance in order to increase the transparency and control over PPPs,

and at the same time expand the central government’s powers over regional and local PPPs.

Before making a decision to develop a public investment through traditional procurement or PPP, the

Portuguese government is obliged to create a task force to study and analyze the project. The task-

force report is a necessary starting point for the launching of a PPP as it comprises the main

characteristics of the technical, legal and financial issues for each project. These task forces also

have a role in evaluation of PPP projects, tender documents and bids as well as in negotiations with

private partners.

The procurement process for PPPs in Portugal follows several stages. The process starts with the

opening of a tender procedure which contains the following information and conditions: PPP

contracting procedures and specifications, analysis of the options that determine the configuration of

the project… The next step is international announcement and publishes the tender in the Official

Journal of the European Community. After receiving the bidders’ proposals, the government makes a

first evaluation. The best-qualified bidders are shortlisted and a round of negotiations starts. At the

end of the negotiation process, two bidders are allowed to present their best and final offer. After a

final evaluation of these proposals, the Finance Minister and the Sector Minister make a joint decision

on the winning proposal. The ultimate stage is the signing of the PPP contract between the

government and the private party (Monteiro, 2005).

3.Detailed description of the Vasco da Gama Bridge project

Over the last 25 years, Portugal has undergone a major infrastructure investment program. The first large project developed under a PPP scheme was the second bridge over Tagus River, called Vasco da Gama Bridge Several elements must be taken into consideration to understand the full complexity of building the Vasco de Gama Bridge witch is a cable-stayed bridge with a 17.182 m overall length of crossing,made up of seven sections including the Sacavem and EN10 Variant Interchanges, the North Viaduct, the Expo Viaduct, the main bridge, the central viaduct, the South Viaduct and the South Access.. The bridge carries six road lanes, with a speed limit of 120 km/h (75 mph), the same as motorways, except on one section which is limited to 100 km/h. On windy, rainy, and foggy days,the speed limit is reduced to 90 km/h. Fifty million vehicles cross the bridge every year. The traffic on the bridge is managed in the traffic control room, located in the Toll Plaza building,were we can find 87 video cameras, monitors and systems that include an Automatic Incident Detector (DAI) which indicates to the operators whether there is a traffic jam or not. There are also 73 emergency telephone posts installed in both directions along the bridge and access 5 branches, and linked to the traffic control room; and portal fames with traffic lights and eight variable speedpanels. To the control room staff also assists patrol vehicles, the traffic management system and the police and emergency services, to solve any incidents occurring on the bridge. There is also police post on the bridge and it is operated by the GNR-BT.

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Architecturally, Vasco da Gama Bridge is impressive. It was built to last for 120 years, and withstand

wind speeds of 250 km/h. It was designed to stand through earthquakes up to 4.5 times stronger than

the 8.7 on the Richter scale earthquake that shook Lisbon in 1755.

4.Partners involved in the project

How we said in the first part and how we see from the PPP’s definition,Vasco da Gama project was a contract between a public sector and a private one. When we talk about the public partners involved in this project we refer to the Government of Portugal and partially to the European Union Cohesion fund .The private partners are represented first by a consortium named Lusoponte and secondly by the European Investment Bank. The first public partner,the Government of Portugal, created an inter-ministerial agency called GATTEL (Office for the Crossing of the Tagus of Lisbon) in 1991,formed to decide on the location of the Crossing, as well as to co-ordinate and control the procedures necessary to promote its construction and operation as a private concession.The agency was chaired by the Ministry of Public Works. The Government of Portugal also gave government grants needed for the construction of the Vasco da Gama bridge. Regarding to the second public partner, the European Union Cohesion fund.,we must say that the Cohesion Fund is aimed at Member States whose Gross National Income (GNI) per inhabitant is less than 90% of the Community average. It serves to reduce their economic and social shortfall, as well as to stabilise their economy. The Cohesion Fund finances activities under the following two categories: Trans-European transport networks and environment. Cohesion Fund can also support projects related to energy or transport, as long as they clearly present a benefit to the environment.

LUSOPONTE, a consortium of Portuguese (50.4 %), British(24.8 %) and French(24.8 %) companies,

won the international public tender for the concession to design, construct,overseeing the

construction,finance and operate the new crossing and maintain the existing 25 April bridge for the 33

year concession period.

The European Investment Bank (EIB) is the European Union's nonprofit long-term lending institution

established in 1958 under the Treaty of Rome. As a "policy-driven bank" whose shareholders are

the member states of the European Union,the EIB is a publicly owned international financial

institution that has its current headquarters in Luxemburg and its mission is to make a difference to

the future of Europe and its partners by supporting sound investments and encouraging private

sector development, infrastructure development, security of energy supply and environmental

sustainability.

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5.Financial structure of the project

The Vasco da Gama Bridge funding project, with a total value of 897 million Euros, was mostly

funded by the private sector under a "Build, Operate, Transfer" ("BOT") scheme,a combination of

private equity, through bank loans, shareholders, and public grants as well.

To be more specific, the detailed financial resources for this scheme have been: European Union Cohesion Fund: 319 million Euros (35%);

European Investment Bank Loan: 299 million Euros;

Toll revenues from the 25 Abril Bridge: 50 million Euros (6.0%);

Others: (shareholders, government grants etc.): 229 million Euros (26%).

According to Lusoponte´s official web page,Portugal government signed an Agreement, on 3rd July 2000, which established and extended the duration of the concession until 24 March 2030. By means of this contract, the company obtained the permission to design, construct, finance and operate the new crossing. The section “tariffs” of the aforementioned web page concludes that nowadays the toll price varies from 2.60 Euros to 11.60 Euros, depending on factors such as size, height, and type of vehicle. The amount of this funding resource is very significant.

6.The time length of the project

In 1991, the Portuguese government launched an international call for tenders for the design, financing, construction, and operation of Vasco da Gama bridge crossing the Tagus at its widest point as the previous structure (the April 25 Bridge) was no longer adequate. In 1994, the Lusoponte concessionary consortium was selected from among all bidders. The contract stipulated that the bridge must be completed in time for the 1998 Lisbon World Exhibition, the World's Fair that celebrated the 500th anniversary of the discovery by Vasco da Gama of the sea route from Europe to India..Work began in January 1995, three months prior to the signing of the concession agreement. The bridge was inaugurated on time three years later, on 29 March 1998, what means that the exact time period for the length of the project,completed in a very tight schedule,is February 1995 – 29 March 1998. The concession contract it is supposed to end in 2027 at the latest.

The construction of Vasco da Gama Bridge over the river Tagus by Lusoponte has passed into the annals of the history of civil engineering as one of the largest and most successful projects of the 20th century.

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BIBLIOGRAPHY

Joaquim Miranda Sarmento : Do Public-Private Partnerships Create Value for Money for the Public Sector?The Portuguese Experience

http://www.oecd.org/portugal/48168959.pdf

Canadian Public Private Partnership: A Guide for Local Government http://www.cscd.gov.bc.ca/lgd/policy_research/library/public_private_partnerships.pdf

Cruz, C. O. & Marques, R. C. (2010). Revisiting the Portuguese experience with public-private partnerships

http://www.academicjournals.org/ajbm/pdf/pdf2011/4June/Cruz%20and%20Marques.pdf

Levison D., Garcia C. R. & Carlson K. (2006). A Framework for Assessing Public-Private Partnerships.

http://nexus.umn.edu/papers/PPP.pdf

Monteiro, R. S. (2005). Public-private partnerships: Some lessons from Portugal. EIB Papers, 72-81

http://www.econstor.eu/bitstream/10419/44845/1/494495332.pdf

LUSOPONTE – official website of consortium. http://www.lusoponte.pt/uk/pvg_tarifas.asp

http://www.lusoponte.pt/uk/pvg_projecto_financiamento.htm http://www.lusoponte.pt/uk/pvg_projecto_tracado.htm http://www.lusoponte.pt/uk/pvg_projecto_tracado.htm

Lisbon's Bridges and Aqueduct

http://www.luso.u-net.com/bridges.htm

Portugal,Vasco da Gama Bridge http://www.vinci-construction-projects.com/projets.nsf/en/type-of-

works.htm?openagent&f=Vasco+de+Gama+Bridge

Lisbon,Portugal Guide http://lisbon-portugal-guide.com/lisbon-sights/Ponte-Vasco-Gama.php

Vasco da Gama Bridge in Lisbon, Portugal

http://lookbridges.com/vasco-da-gama-bridge-in-lisbon-portugal

Vasco da Gama Bridge, Lisbon, Portugal http://www.roadtraffic-technology.com/projects/vasco-da-gama/

European Investment Bank

http://en.wikipedia.org/wiki/European_Investment_Bank