No privatisation of roads network
The government has no intention of privatising the country's road network, Transport Minister Austin Gatt told The Times Business, but wants to give the private sector long-term contracts for the building and maintenance of roads. This should lead to...
The government has no intention of privatising the country's road network, Transport Minister Austin Gatt told The Times Business, but wants to give the private sector long-term contracts for the building and maintenance of roads. This should lead to better quality roads, Dr Gatt said in an interview.
Dr Gatt's statement last week that the government was considering handing over the responsibility for the quality of roads to the private sector led some people to conclude that this was a form of privatisation.
"It is absolutely not privatisation because the ownership of the roads remains with the government and so does the management."
He points out that all roadworks have always been done by the private sector. "The government has not been building or repairing or maintaining roads for the last 30 or 40 years. It is always the private sector which has done this work."
Dr Gatt explained that instead of issuing a tender every time a road needs to be built or repaired, the government will be issuing one tender for a long period of time, and managing that contract.
"The management remains with the government. It is the government which sets the standards and assesses whether the standards are being conformed to. It mirrors exactly what happens today but instead of one road at a time, a number of roads are grouped together for a longer period of time. It is the model used everywhere in the EU," he said.
"All European countries have moved to a situation in which a public private partnership has been created for a particular area which means that a road, when it is built, and built well, will last for 25 years. A number of roads are grouped together, which create enough mass to provide work for a contractor for 25 years, and a tender is issued - very similar to what we do today for one road - for that whole area of roads to be built by the contractor but, also maintained by the contractor, for 25 years.
"In this way, the government, or the contracting authority, ensures that it will check standards, both in the building phase and in the maintenance phase. This is not something we invented and Minister Jesmond Mugliette had started the study process, which is being driven by technical people, who are using Portsmouth as the example to base on, as Portsmouth has a similar road density to Malta. So basically we are copying what happens abroad," he said.
Dr Gatt cited the Mellieħa home for the elderly as an example of a successful public private partnership which could be used to understand how the new roads set-up will work.
"The real difference between the old system and the one we are proposing is that firstly, you remove the administrative overhead from the system. You will no longer need to issue a tender whether the road is one kilometre long or 100 metres. Secondly, you are creating a mass. Today contractors can't specialise on roads because they are not assured of enough work in this area. Since they don't have a steady income from roads they can't specialise and purchase specialised equipment that is required to ensure that they can build roads in a professional manner.
"Thirdly, and this is what is most important, the PPP model, financially, leverages the long-term element of the contract against gains upfront. This means that within the next 12 years, we will basically rebuild all the roads in Malta and Gozo, not only arterial roads but also local roads. Apart from building them anew, we would be ensured of on-going maintenance of them. I am not only talking about the road surface, but the soft areas, the lights, traffic signs, street markings, pavements and utilities."
Dr Gatt categorically ruled out the possibility of motorists being made to pay tolls as a result of the increased role for the private sector.
"I absolutely rule this out. I will give you a very simple answer why. The government - in one way or another - spends an average €35 million a year on roads. We definitely do not have the quality that this amount of money should give us. The PPP model should not cost much more provided that we integrate all roads in Malta and Gozo within it. That creates the necessary mass that in turn creates economies of scale.
"With the same amount of money we can get much more efficiency, much better quality, if we pool it all together and do it long term. If the government is going to enter into a 25-year contract with a professional company for €35 million a year, this company will use this guaranteed income to get a loan in order to invest in the machinery and manpower."
How will the government ensure the quality of roads?
"First of all, I hope that having created economies of scale and given a long-term contract Maltese contractors will join together and also possibly get foreign contractors to pass on their know-how on large projects. In the Italian protocol we had Italian contractors working with Maltese contractors and workmen. To be fair, when the Maltese contractors were put to the test, they also came out well with pretty good quality. The EU funded roads, which Maltese contractors worked on, are pretty good.
"The problem with Maltese contractors is partly that we do not give them a long-term commitment. It's no use investing €2 million in equipment which are only going to be used for two months in a year. I hope, since we are going into a long-term commitment, we will see more contractors working together, rather than individually, because the way it works today, works against the government. There are too many sub-contractors, too many individuals to control, and there needs to be more responsibility as far as contracting is concerned.
"I hope we will be able to attract foreign contractors who can input their experience into the system - they have much more experience than local contractors where large scale and long-term projects are concerned. Once the work is long-term, it will raise quality. We will be rid of all administrative work after the award of the tender, except to approve designs and check quality," he said. Dr Gatt said that the contract for the Marsascala bypass, from the design to the permits to the actual implementation took five years of work.
"We can't keep on working like that. We need a master plan to be able to move on. This is what this type of new arrangement will deliver."
Asked about the fact that many people had huge expectations that EU membership would lead to a great improvement in our roads, and that there was a huge disappointment that it hadn't, Dr Gatt said there was a misconception on how such EU funds could be spent.
"The main part of co-financing for road infrastructure being provided by the European Union under the current Operational Programme (Cohesion Policy 2007 - 2013) has been earmarked for the upgrade of the Trans-European Transport Network (Ten -T). Priority Axis 3 of Operational Programme 1 provides a financial allocation for the upgrade of road network links and port infrastructure on the Ten - T Network.
"The Ten - T road network has been defined in EU legislation under Decision 1692/96/EC as being the 51 km primary road that starts from Rabat, Gozo and ends at the Freeport. We have done various stretches and now we are going to do the stretch between the airport and Marsa," he said.
Dr Gatt explained that under exceptional circumstances there were some funds for non-Ten - T roads under the European Regional Development Fund (Priority Axis 6) but there were certainly no EU funds for the village roads.
He said the government was still on track for the liberalisation of public transport.
"A month ago we published our regulations for unscheduled transport and we are awaiting feedback. Next month I should be able to go back to the Cabinet on this. We have also given the taxi operators our ideas for new legislation and in May or June we should be in a position to issue a tender for the bus service. We are in the final stages of drafting the tender for the Gozo-Malta ferry service."
Asked whether the government lacked a long-term strategic vision for transport, Dr Gatt said that Malta faced the same problem as many large cities, namely car congestion.
"Statistically, we spent 16.6 per cent of our household budget on transport. The European average is something like nine per cent. The only way to change that is to make a shift to public transport. To do this, you need an efficient system, and that is why liberalisation is important as it should create competition. Some cities have also made it difficult for the car to function. No shift has occurred without both these elements.
"Los Angeles invested millions of dollars in having the most advanced public transport in the world, yet they still allowed cars to freely enter the city centre. So if I can take my car into a city and park for free, I will not take the bus no matter how efficient it is. Transport in Malta is the second largest contributor to CO2 emissions. If we are to go over the limit of CO2 emissions after 2015 we will be fined by the EU. So we need to achieve this shift by offering better transport - liberalisation plus investment in public transport - but also by discouraging the use of cars in highly densely populated areas.
"We put in the CVA system in Valletta - but we have now reached the stage where everyone has got used to paying the fee and people are happy to enter Valletta and pay to park for eight hours there. So we have to have a look again at CVA because it has not achieved its aim," he said.
Dr Gatt did not rule out the possibility of CVA - which is a system that favours residents over commuters - being extended to other localities, such as certain areas of Sliema, St Julians, Birkirkara, Attard and Lija all of which he said, encounter the same problems as Valletta.
Dr Gatt's statement last week that the government was considering handing over the responsibility for the quality of roads to the private sector led some people to conclude that this was a form of privatisation.
"It is absolutely not privatisation because the ownership of the roads remains with the government and so does the management."
He points out that all roadworks have always been done by the private sector. "The government has not been building or repairing or maintaining roads for the last 30 or 40 years. It is always the private sector which has done this work."
Dr Gatt explained that instead of issuing a tender every time a road needs to be built or repaired, the government will be issuing one tender for a long period of time, and managing that contract.
"The management remains with the government. It is the government which sets the standards and assesses whether the standards are being conformed to. It mirrors exactly what happens today but instead of one road at a time, a number of roads are grouped together for a longer period of time. It is the model used everywhere in the EU," he said.
"All European countries have moved to a situation in which a public private partnership has been created for a particular area which means that a road, when it is built, and built well, will last for 25 years. A number of roads are grouped together, which create enough mass to provide work for a contractor for 25 years, and a tender is issued - very similar to what we do today for one road - for that whole area of roads to be built by the contractor but, also maintained by the contractor, for 25 years.
"In this way, the government, or the contracting authority, ensures that it will check standards, both in the building phase and in the maintenance phase. This is not something we invented and Minister Jesmond Mugliette had started the study process, which is being driven by technical people, who are using Portsmouth as the example to base on, as Portsmouth has a similar road density to Malta. So basically we are copying what happens abroad," he said.
Dr Gatt cited the Mellieħa home for the elderly as an example of a successful public private partnership which could be used to understand how the new roads set-up will work.
"The real difference between the old system and the one we are proposing is that firstly, you remove the administrative overhead from the system. You will no longer need to issue a tender whether the road is one kilometre long or 100 metres. Secondly, you are creating a mass. Today contractors can't specialise on roads because they are not assured of enough work in this area. Since they don't have a steady income from roads they can't specialise and purchase specialised equipment that is required to ensure that they can build roads in a professional manner.
"Thirdly, and this is what is most important, the PPP model, financially, leverages the long-term element of the contract against gains upfront. This means that within the next 12 years, we will basically rebuild all the roads in Malta and Gozo, not only arterial roads but also local roads. Apart from building them anew, we would be ensured of on-going maintenance of them. I am not only talking about the road surface, but the soft areas, the lights, traffic signs, street markings, pavements and utilities."
Dr Gatt categorically ruled out the possibility of motorists being made to pay tolls as a result of the increased role for the private sector.
"I absolutely rule this out. I will give you a very simple answer why. The government - in one way or another - spends an average €35 million a year on roads. We definitely do not have the quality that this amount of money should give us. The PPP model should not cost much more provided that we integrate all roads in Malta and Gozo within it. That creates the necessary mass that in turn creates economies of scale.
"With the same amount of money we can get much more efficiency, much better quality, if we pool it all together and do it long term. If the government is going to enter into a 25-year contract with a professional company for €35 million a year, this company will use this guaranteed income to get a loan in order to invest in the machinery and manpower."
How will the government ensure the quality of roads?
"First of all, I hope that having created economies of scale and given a long-term contract Maltese contractors will join together and also possibly get foreign contractors to pass on their know-how on large projects. In the Italian protocol we had Italian contractors working with Maltese contractors and workmen. To be fair, when the Maltese contractors were put to the test, they also came out well with pretty good quality. The EU funded roads, which Maltese contractors worked on, are pretty good.
"The problem with Maltese contractors is partly that we do not give them a long-term commitment. It's no use investing €2 million in equipment which are only going to be used for two months in a year. I hope, since we are going into a long-term commitment, we will see more contractors working together, rather than individually, because the way it works today, works against the government. There are too many sub-contractors, too many individuals to control, and there needs to be more responsibility as far as contracting is concerned.
"I hope we will be able to attract foreign contractors who can input their experience into the system - they have much more experience than local contractors where large scale and long-term projects are concerned. Once the work is long-term, it will raise quality. We will be rid of all administrative work after the award of the tender, except to approve designs and check quality," he said. Dr Gatt said that the contract for the Marsascala bypass, from the design to the permits to the actual implementation took five years of work.
"We can't keep on working like that. We need a master plan to be able to move on. This is what this type of new arrangement will deliver."
Asked about the fact that many people had huge expectations that EU membership would lead to a great improvement in our roads, and that there was a huge disappointment that it hadn't, Dr Gatt said there was a misconception on how such EU funds could be spent.
"The main part of co-financing for road infrastructure being provided by the European Union under the current Operational Programme (Cohesion Policy 2007 - 2013) has been earmarked for the upgrade of the Trans-European Transport Network (Ten -T). Priority Axis 3 of Operational Programme 1 provides a financial allocation for the upgrade of road network links and port infrastructure on the Ten - T Network.
"The Ten - T road network has been defined in EU legislation under Decision 1692/96/EC as being the 51 km primary road that starts from Rabat, Gozo and ends at the Freeport. We have done various stretches and now we are going to do the stretch between the airport and Marsa," he said.
Dr Gatt explained that under exceptional circumstances there were some funds for non-Ten - T roads under the European Regional Development Fund (Priority Axis 6) but there were certainly no EU funds for the village roads.
He said the government was still on track for the liberalisation of public transport.
"A month ago we published our regulations for unscheduled transport and we are awaiting feedback. Next month I should be able to go back to the Cabinet on this. We have also given the taxi operators our ideas for new legislation and in May or June we should be in a position to issue a tender for the bus service. We are in the final stages of drafting the tender for the Gozo-Malta ferry service."
Asked whether the government lacked a long-term strategic vision for transport, Dr Gatt said that Malta faced the same problem as many large cities, namely car congestion.
"Statistically, we spent 16.6 per cent of our household budget on transport. The European average is something like nine per cent. The only way to change that is to make a shift to public transport. To do this, you need an efficient system, and that is why liberalisation is important as it should create competition. Some cities have also made it difficult for the car to function. No shift has occurred without both these elements.
"Los Angeles invested millions of dollars in having the most advanced public transport in the world, yet they still allowed cars to freely enter the city centre. So if I can take my car into a city and park for free, I will not take the bus no matter how efficient it is. Transport in Malta is the second largest contributor to CO2 emissions. If we are to go over the limit of CO2 emissions after 2015 we will be fined by the EU. So we need to achieve this shift by offering better transport - liberalisation plus investment in public transport - but also by discouraging the use of cars in highly densely populated areas.
"We put in the CVA system in Valletta - but we have now reached the stage where everyone has got used to paying the fee and people are happy to enter Valletta and pay to park for eight hours there. So we have to have a look again at CVA because it has not achieved its aim," he said.
Dr Gatt did not rule out the possibility of CVA - which is a system that favours residents over commuters - being extended to other localities, such as certain areas of Sliema, St Julians, Birkirkara, Attard and Lija all of which he said, encounter the same problems as Valletta.