Case Studies: Vehicle Technical Control (SGS Automotive), Albania

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Project Overview
Vehicle1.png
Figure 1: Vehicle technical control (SGS Automotive), Albania
Vehicle Technical Control (SGS Automotive), Albania
Project Type: Both
Contract Duration: 10 years
Budget: ALL 670M (approx. EUR 5M)
Project Time Line
Project conceived: 2008
Call for Tender: 18 December 2008
Contract Approved (signed): 3 September 2009
Date of Financial Close: 6 September 2009
Other important dates for the project:
As of 6 September 2009 vehicle technical control became mandatory in line with EC Directive 2009/40/EC and the Traffic Code of the Republic of Albania
Start of works: 3 September 2009
Start of operation: 14 September 2010


Introduction

In February 2008, the Council of Ministers of the Republic of Albania appointed the Ministry of Public Works and Transport to start the procedure for the concession for the mandatory service of technical control of vehicles and trailers in the Republic of Albania. This was in preparation for adopting on 6 September 2009 procedures with respect to vehicle technical control and testing in accordance with EC Directive 2009/40/EC and the Traffic Code of the Republic of Albania.

The objective is to gradually comply with EC regulations and standards with respect to road safety and emissions, while improving the quality of service, efficiency and standards of technical control.

The concession was awarded for 10 years to SGS Automotive Albania, a member of the AGS Group. The scope of contract was for:

  • Construction of a new Technical Control Center in the district of Tirana;
  • Completion of the reconstruction of existing infrastructure;
  • Installation of new technical control equipment;
  • Implementation of electronic control systems etc.

Today, SGS Automotive uses MAHA technical control technology and has a regular programme of staff training.

The Contracting Authority (Public Party)

The Ministry of Public Works and Transport serves as the Contracting Authority on behalf of the Albanian Government under law 9663/18.12.2006 (Law on Concessions) and its amendments laws 9995/22.09.2008; 10137/11.5.2009; 10157/15.10.2009 and the normative Act no.1/05.05.2010, which concerns the legal framework for concession projects in all sectors of the economy.

The Concessionaire (Private Party)

The concession contract was awarded to SGS Automotive Albania Shpk. founded on 14 September 2009. SGS Automotive Albania Shpk. is the sole concessionaire and is 100% owned by SGS.

SGS SA, (SGS Socieacuteteacute Geacuteneacuterale de Surveillance eee), is a large Swiss company which is one of the world's leading providers of vehicle inspection, testing and certification services.

Currently SGS Automotive Albania operates a network of 15 test centers spread all over the country, with 31 test lanes and more than 120 highly skilled personnel.

Users

Albania has a fleet of approximately 200,000 vehicles including diverse vehicle types, growing at around 6% per year. All are subject to the annual mandatory vehicle inspection.

Key Purposes for PPP Model Selection

A principal driving force has been securing the financing for the required investments and technology. The concessionaire (SGS Automotive Albania) was expected to carry out investments to ensure vehicle monitoring and testing in accordance with EU standards.

Project Timing

The Government of Albania Decison 1214/3.09.2008 approved the “Transport Sector Strategy” for the period 2008-2013, including concessions for transportation activities.

Vehicle control and testing is endorsed in the National Transport Plan with respect to road safety, by ensuring the safety of vehicles, the quality of driving instruction, and requirements for obtaining a driving license.

At the time of the tender (2008), Albania demonstrated positive growth (6% GDP growth and 3.4% inflation). Motorised vehicle ownership was rising at approximately 10% per year.

Project Locality and Market Geography

SGS Automotive Albania is present in all regions (Qarks), so as to provide vehicle technical control throughout the country. Technical inspection is compulsory, and is carried out on an annual basis.

Procurement & Contractual Structure

Tendering

The competitive procedure for submission of tenders for the "service concession for compulsory technical inspection of motor vehicles and trailers in Albania" was announced by the Ministry of Public Works, Transport and Communications on 18 December 2008.

The tender was based on standard bidding documents with predefined criteria, including requirements and technical specifications, technical standards, description of the testing equipment, economic indicators, and the financial, legal and administrative services to be provided.

Law 9663/18.12.2006, "On Concessions, as amended, and DCM 27/ 19.1.2007 form the legal basis of the concession award procedure. Two bidders responded to the call for tender: SAS Sakar-France and SGS-Switzerland. The concession contract was awarded to SGS-Switzerland.

Contract Structure

The Concession Agreement between the Ministry of Public Works and Transport, as the contracting authority, and the Swiss company SGS Societe Generale de Surveillance was signed on 3 September 2009. According to the terms of the contract, the concessionare has the right to perform compulsory technical control of all motor vehicles and trailers in Albania for 10 years, against a concession fee of 5% of revenues.

Increases in inspection fees are to be approved every two years by the Minister of Public Works and Transport.

Risk Allocation

The concessionaire is obliged to provide staff and services that comply with EC Directives. Risk allocation is illustrated in the risk matrix in Figure 2.

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Figure 2: Risk allocation

SGS Automotive Albania is totally responsible for the design and construction of the vehicle technical control centers. In this context, maintenance risk is shared. While SGS Automotive is the only provider of services, growth rates and vehicle ownership secure future revenues and profitability.

All regulatory risk remains with the government, as well as risks arising from third parties such as local car dealers and distributors.

Performance

The concession performance may be assessed as follows:

  • The level of investment has exceeded by 30% that specified in the concession agreement for the reconstruction and equipment of the technical centers;
  • EU directive 96/96/EC have been achieved;
  • State-of-the-art technical control technology has been installed.

No key performance indicators are described in the contract.

References

  • Official Journal of the Republic of Albania (1995, 2006, 2007, 2008, 2009, 2010). Albanian legislation on concessions, and regulatory acts for the implementation of laws. http://www.qbz.gov.al
  • Ministry of Public Works and Transport. Documentation of PPP procedures for transport, mainly relating to project implementation and competition.
  • Council of Ministers of the Republic of Albania Decison No.1214 (3.09.2008). On approval of the transport sector strategy. Official Journal of the Republic of Albania (2008), 145(22)
  • Council of Ministers of the Republic of Albania Decison No.27 (19.01.2008) On approval of the transport sector strategy. Official Journal of the Republic of Albania (2007), 10(12)
  • Guidelines for the technical control of road vehicles No. 2 (11.03.2010) Official Journal of the Republic of Albania (2010), 31(3)
  • INSTAT, Bank of Albania, Ministry of Finance and World Bank. Macro-Economic Indicators of Albania 2004-2014.
  • SGS Societe Generale de Surveillance (2012) Annual Report 2012 http:// www. SGS_2012_AR_Book2_Spread_EN.ashxwww.sgs.ch/en/OfficeDirectory.aspx
  • INFOARKIV (Albanian Media Archive). Reports (various) on the business operation of concessions in Albania
  • Newspaper articles
  • Swiss SGS, winner of the concession technical inspection of vehicleshttp://www. Lajme.shqiperia.com/ Newspaper Toda/.
  • Toward the end of the new centers of compulsory technical inspection of motor vehicles, for capital
  • A. Dedej, V. Shiko, 2014, Vehicle Technical Centrol, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8