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13 december 2017
Calling time on PPPs
The courts and prisons in the Ministry of Justice's real estate portfolio, which covers 5.5 million sq.
and is valued at €10 billion, contribute directly to the public service of justice.
Faced with considerable demands and the growing cost of the public-private partnership (PPP)
rents it has taken on in recent years, the Ministry of Justice finds itself in a challenging financial
position. Furthermore, analysis of current PPPs shows that this arrangement is not well suited to
e ongoing need to adapt the Ministry’s real estate portfolio.
The Cour recommends that the Ministry of Justice’s real estate strategy is written into a multi
planning law and that it eschews PPPs in favour of public sector design-build contracts for the
construction of new prisons.
A budgetary challenge
Within the prison portfolio, there is a marked contrast between dilapidated institutions and newer buildings
created as part of programmes carried out over the last twenty years. Despite this investment, prisons
remain severely overcrowded and this leads to poor detention conditions. The question has been raised as
to whether the Ministry can mobilise sufficient resources to successfully carry out the extensive prison
construction programme that aims to achieve the objective of individual cells.
The portfolio of courts consists of old buildings that are expensive to renovate and courts built between
1960 and 1990 that are sometimes in a very poor state of repair. The associated funding requirements are
not well costed and should take into account how the ongoing functional reforms are affecting real estate.
In the coming years, the Ministry of Justice will face significant demands on its real estate, and existing
PPP rents will increase, which will considerably crowd out other real estate spending. It is therefore
essential that the Ministry has a plan that identifies its priorities. Present funding of needs and objectives is
not sustainable.
The unsuitability of PPPs
The use of PPPs was a core element of the Ministry of Justice's real estate policy between 2006 and 2014,
primarily for the construction of prisons but also the new court in Caen and the exceptional work on the new
Paris courthouse. Exempt from the common law of public procurement, PPPs were initially a way of
circumventing rules on public borrowing and spreading investment and funding costs over the length of a
contract. However, their borrowing costs are higher than those for public project ownership, and their
construction costs are also considerably higher than those for public sector design-build contracts. In
addition, maintenance costs are higher under PPPs than public sector design-build contracts with
outsourced maintenance (subcontracting). Lastly, the additional costs of works carried out during operation
and the inflexibility of PPPs, which serves as a barrier to the changes the public prison service needs, calls
into question the use of these arrangements.
In light of the above, the Cour believes that PPPs should not be used for prison and court real estate in
The new Paris courthouse: a perfect example
The Paris high court and courts of first instance will be housed together in an extraordinary building that
required a huge operation.
The total cost of the operation is €2.3 billion up to 2044, consisting of €725.5
million of investment, €643 million of borrowing and €960 million of operating costs. The use of a PPP,
prompted by short-term budgetary considerations, has led to average an
nual rental charges of €86 million
that will weigh heavy on the Ministry of Justice's budget.
The implementation of this complex contract has been characterised by significant stumbling blocks,
notably the private partner halting construction work while it waited for the government to sign off on a
transaction. When the government took possession of the site in August 2017, eight months behind
schedule, it was not complete. Additional work had to be done because of late decision-making by the
government, and there were instances of non-compliance, but these did not result in any penalties because
of an additional clause reinforcing the guarantees of the public entity in return.
With the building about to enter its operational phase, in view of what has happened with existing contracts,
the implementation of this extremely large partnership arrangement should be watched closely.
The Cour suggests that PPPs should be avoided in the future because they are not suited to the Ministry
of Justice's real estate portfolio, and makes the following six recommendations:
the Ministry of Justice’s real estate strategy should be written into a realistic multi
-year planning law;
public sector design-build contracts should be preferred for the construction of future prisons;
more should be done to understand the costs associated with prison and court real estate;
the public agency for justice real estate (Agence publique pour l’immobilier de la justice)
should provide more services upon transfer of ownership;
Conclusions should be drawn from the problems encountered with the Caen court PPP,
and a decision should be taken on whether to terminate the contract;
the appropriate skills should be in place so that existing PPPs can be monitored on an ongoing basis.
Read the report
Ted Marx
Head of communication
+33 (0)1 42 98 55 62
Denis Gettliffe
Head of Press Relations
+33 (0)1 42 98 55 77