3. Coordination across sectors and between levels of government

The OECD Recommendation of the Council on the Governance of Infrastructure defines high quality coordination of infrastructure as including:

“Investment strategies tailored to the place the investments aim to serve.

Effective instruments for co-ordinating across national and subnational levels of government, such as co-financing arrangements, contracts between levels of government, formal consultation processes, national agencies or representatives, working together with subnational areas, or other forms of regular inter-governmental dialogue and co-operation.

Incentives and/or opportunities for co-ordination among regional and/or local governments to match public investment with the relevant geographical area, including through contracts, platforms for dialogue and co-operation, public investment partnerships, joint authorities, and regional or municipal mergers.

strengthening capacities for public investment and promoting policy learning at all levels of government, ensuring adequate financial resources, professional skills, and sound institutional framework to ensure effective vertical and horizontal coordination.” (OECD, 2020[1])

For coordinating public investment across levels of government, the OECD Recommendation of the Council on Effective Public Investment Across Levels of Government 2014 states that it is important to:

“Adopt effective instruments for coordinating across national and sub-national levels of government … to identify investment opportunities and bottlenecks, to manage joint competencies, to minimise the potential for investments to work at cross-purposes, to ensure adequate resources and capacity to undertake investment, and to create trust among actors at different levels of government. Several tools can be used … such as co-financing arrangements, contracts between levels of government, formal consultation processes, national agencies or representatives working with sub-national areas, or other forms of regular inter-governmental dialogue.

Provide incentives and/or seek opportunities for co-ordination among regional and/or local governments to match public investment with the relevant geographical area. Horizontal coordination is essential to increase efficiency through economies of scale and to enhance synergies among policies of neighbouring (or otherwise linked) sub-national governments. Modes of coordination include contracts, platforms for dialogue and co-operation, specific public investment partnerships, joint authorities, or regional or municipal mergers.” (OECD, 2014[2]).

Coordination of public investments matters because there are often synergies between infrastructure sectors that get missed if decision-makers are planning and delivering investments from within their own siloes of government. For example, the location of housing developments in relation to transport routes and schools, hospitals, parks and other public facilities can have a significant impact on congestion levels and the ability for people to access the amenities and services that contribute to their overall wellbeing.

There are two categories of coordination relevant to this report:

  • Vertical coordination, which is the coordination of investment decisions between national and sub-national government and the private sector

  • Horizontal coordination, which is coordination within a level of government (either national or sub-national).

Vertical coordination helps to identify and prioritise investment opportunities and bottlenecks, strategically coordinate investments, and ensure that adequate resources and capacity are in place to undertake investments. Addressing the multi-dimensional and global challenges of climate change, urbanisation, and demographic pressures, for example, requires partnerships that align policy objectives and investments at all levels. While policymakers often recognise the advantages of vertical coordination, it can be difficult to put into practice. Vertical coordination can be achieved through dialogue and by ensuring the coherence of infrastructure investment strategies at all levels. Box 3.1 and Box 3.2 include leading examples from OECD countries of initiatives to create vertical coordination.

Horizontal coordination is required so that investment needs are undertaken at the right scale and avoid fragmentation as infrastructure needs and projects often span jurisdictional boundaries. Fragmentation might occur where similar investments are undertaken by neighbouring jurisdictions, unnecessarily duplicating investment. Infrastructure investment coordination and cooperation are difficult, even when actors recognise the need for it. It can be hampered by transaction costs, competitive pressures, resource constraints, differing priorities and fears that the distribution of costs or benefits from co-operation will be one-sided (OECD, 2019[3]) (OECD, 2014[2]).

For public investment in infrastructure specifically, vertical and horizontal coordination is important for the following reasons:

  • To maximise the benefits from infrastructure investment, infrastructure providers need to coordinate the location and capacity of transport routes with urban planning decisions and the placement of social infrastructure like schools and hospitals. Without coordination, there is a risk of unintended spill over effects like congestion bottlenecks

  • Inter-municipal cooperation allows local governments to invest at the right scale, reduce fragmentation and duplication of investment, take advantage of spill over effects and enjoy more resources for their investment projects (OECD, 2014[2]).

  • The sequencing of infrastructure pipelines across portfolios ensures that the public sector does not ‘flood the market’ with infrastructure projects, creating construction cost inflation

  • A coordinated pipeline can be sequenced in a way that matches the cyclical nature of construction, increasing demand for construction services during downtimes and easing off in high times

  • Reaching an efficient scale and viability for infrastructure investments, such as by bundling programmes of projects that span sectors and municipalities, can attract larger scale private operators who may bring new efficiencies to the local infrastructure market

  • More efficient maintenance practices, such as opening up network corridors for repairs and maintenance on all utilities once, rather than repeatedly opening up network corridors to main different infrastructure types

  • Opportunities to gain new skills and more innovative practices from a wider and more diverse range of infrastructure providers.

Box 3.3 shows a good example of horizontal integration at the sub-national levels of government in Spain.

There are several tools that enable coordination, which are specified in more detail below:

  • Coordination of capital budgeting

  • Spatial planning

  • Sharing of services (vertically and horizontally).

Coordinating the allocation of capital and operational expenditure across investment sectors or projects can present opportunities to achieve greater synergies and efficiencies from a country’s investment portfolio. For example, allocating expenditure to housing and transport investments in a coordinated manner ensures the location of houses can also benefit from being near efficient transport services. For citizens, this offers more attractive housing options that have greater access to employment and other services; for governments, it enables them to capture greater value from their investment through the form of land value uplift taxes or the generation of revenue from land sales.

Coordinated capital budgeting also ensures that projects can be delivered as efficiently as possible, by avoiding any unforeseen negative impacts of one investment over another, which may result in the need to do rework or inhibit the ability for these investments to deliver at their maximum levels of service.

Reviewing and approving all investment decisions at ministerial decision-making committees, such as Bulgaria’s Council of Ministers, is an important way of ensuring a degree of coordination between capital investment decisions. But there is value in countries coordinating their investment decisions at the conception stage, to ensure that synergies and efficiencies are built into the design of investments as early as possible.

This requires public entities from different line ministries and/or municipalities to work together in developing investment proposals that derive greater synergies and efficiencies. This ensures that officials can present proposals for the allocation of capital and operational expenditure that funds a coordinated project design, construction and maintenance plan.

A common method for coordinating infrastructure and land use decisions is through spatial planning. Spatial plans help establish agreement amongst diverse stakeholders on how policies can be expressed for a defined spatial area through the development of infrastructure and the use of land and other resources. Stakeholders commonly involved in spatial planning include national and sub-national governments, private sector, communities, indigenous peoples and other interested parties.

Spatial plans are most effective as coordination mechanisms when they take account of all infrastructure delivered at the national, sub-national governments and the private sector. This ensures that infrastructure providers are coordinated and have a joint understanding of the current and future infrastructure needs.

High quality spatial plans are informed by a strategic vision and robust data such as population forecasts, future spatial distribution of people, biodiversity and ecology, economic activity forecasts and the identification of sites of social significance.

Spatial planning can give infrastructure providers a greater certainty over the future location and timing of infrastructure, which helps send positive investment signals. Spatial plans can also protect existing and new infrastructure from future legal challenge or competing uses of land. Spatial plans often signal new corridors or zones for infrastructure development while projects are still in the conceptual phase.

Spatial planning also gives stakeholders a better opportunity to participate in planning processes, by being involved at an earlier stage, allowing stakeholders to have a greater influence over the future direction of a spatial area. This is described in more detail in the Section 8: Integrating Stakeholder Engagement into Planning and Decision-making Processes below.

For the purposes of this report, the sharing of services (vertically and horizontally) includes cooperation between infrastructure providers at any level of government in order to deliver greater economies of scope and scale. Sharing of services could take various forms, from informal arrangements such as sharing of best practices, through to formal arrangements, such as memoranda of understanding and the collective contracting of services.

Sharing services can help national and sub-national governments deliver infrastructure more efficiently and effectively in the following ways:

  • Achieving the right economies of scale – certain goods and services, such as replicable engineering skills or the procurement of bulk materials, can be accessed more quickly and cost-efficiently by a larger purchaser than by many, smaller purchasers

  • Achieving the right economies of scope – larger entities are more likely to have the resources to recruit or contract-in highly skilled professionals, who may bring more innovative, effective and efficient practices in design, construction and asset management. Larger entities may also have the means to procure a wider scope of goods and materials, which could make their infrastructure practices more effective and efficient.

Sharing of services can be particularly beneficial for infrastructure services where the goods and services provided are replicable. For example, efficient and effective roading services can be delivered at scale because the inputs are standardised. For example, traffic engineering skills are largely replicable and the construction materials are widely applicable to all road types.

But the benefits of sharing services need to be balanced against the need to retain the input of local communities in decisions about public investments. It is generally best practice that decision-making is made at the most immediate or local level. Local decision-making can become lost if the entities responsible for delivering local infrastructure and services become too far removed from the communities they serve. For example, the placement of local amenities like public parks or social housing are matters that are very sensitive to local areas, and therefore need to be designed with close involvement from the community.

While a balance between centralisation and localism needs to be struck, countries that are resource-constrained and struggle to retain and attract necessary skills and capabilities benefit from focusing on improving their economies of scope and scale through greater sharing of services. There are a range of models by which national and sub-national governments can share services, which all have different benefits, costs and risks so need to be assessed against the unique circumstances of the government or sub-national government in question. One model is for agencies and municipalities to contract suppliers to service their collective geographic or functional areas. A second model is to establish utilities companies that deliver specialised services, but decisions about planning and investment are made by representatives from across the relevant line agencies and municipalities. A third model is to amalgamate line agencies and municipalities, whereby all planning, investment, delivery, human resources functions and their associated overheads are merged into the operations of either one or a small number of entities.

Like in many countries, Bulgaria’s multi-tiered governance can make it challenging to coordinate public investments horizontally and vertically. To coordinate public investment and other matters at the regional level, the 1999 Regional Development Act established six planning regions, or NUTS 2 statistical regions. Despite several regional development responsibilities, the planning regions mainly act as consultative bodies and “conduits” for regional planning and EU funds programming but have limited powers. They do not have an administrative status and, therefore, they do not have the human and financial resources to carry out their functions. Similarly, they suffer from a lack of representativeness and legitimacy (OECD, 2021[6]).

Overall, Bulgaria has a good framework for spatial planning, with room for improvement, and has good examples of sharing services at the municipal level. However, Bulgaria’s current capital budgeting processes undermine the country’s ability to coordinate its public investments further. These points are covered in more detail below.

Capital investments in theory, need to be consistent with sector development strategies. The process of capital budgeting under the Public Finance Act is undertaken by each line ministry and constrained by the capital allowance allocated to each line ministry in the annual medium term budget forecasts (MTBF), administered by the Ministry of Finance. Capital allowances are guided by criteria set by each line ministry, which differ between portfolios. MTBFs and programme budgets capture a capital investment’s objectives and key performance indicators. The Ministry of Finance also requires public budgeting authorities to submit quarterly updates on investments valued over BGN 50 million (EUR 25 million) as part of financial monitoring.

At the local level, Bulgaria’s 265 municipal councils have full autonomy to make their own investment decisions where capital is raised from their own sources, such as local taxes, which make up approximately 20 – 30% of their total revenues. They also have full autonomy to decide whether to coordinate with neighbouring municipalities. In addition, municipalities receive transfers from the state budget for capital expenditure each year, which account for around 70 – 80% of their total revenues. These transfers are calculated for each municipality by evaluating each municipality’s taxation capacity. While the national government allocates portions of these subsidies to specific infrastructure, such as kindergartens, nurseries, schools, social housing and museums, there is another portion of capital subsidy that municipalities can allocate according to their own priorities. Nevertheless, “municipal investment is relatively small and fragmented, which limits the emergence of strategic projects with positive spill overs across jurisdictions due to the lack of regional coordination and inter-municipal coordination”. (OECD, 2021[6])

Line ministries develop their own public investment programmes without being required, or incentivised, to consult with other line ministries. The Ministry of Finance is concerned only with each Primary Budget Authority (PBA) operating within the agreed budgetary allocation and it does not require line ministries to explain how, if at all, they are coordinating their investment programmes with other line ministries. This disjointed approach to funding is having an impact on the ground: municipalities described how having to apply for funding for infrastructure from multiple funding sources is creating inefficiencies. For example, a municipality may get funding to upgrade a road, but does not have funding to also improve the water infrastructure that runs beneath the road. If, in this example, the funding decisions about the roading and water infrastructure could be made at the same time, municipalities would only need to undertake earthworks once, thereby being more efficient with time and public resources.

While OECD countries have different approaches to managing capital budgets, good practice requires the implementation of a national framework for supporting public investment, including an adequate institutional capacity and a stable legal, regulatory and administrative framework. In 2019, most countries reported that line ministries were mainly responsible for evaluating infrastructure needs (77%), deciding the delivery mode (59%), monitoring project execution (63%), as well as prioritising and approving infrastructure projects (48%). However, a significant number also identified the Central Budget Authority as a key player, particularly for project prioritisation (30%) and approval (41%) (OECD, 2019[7]).

As noted in Section 6: Capital Budgeting and Fiscal Sustainability, Bulgaria's approach to capital budgeting is highly decentralised, which can result in a lost opportunity to capture efficiencies and synergies through a more coordinated approach. For example, there is no centralized mechanism to prioritize or choose specific solutions to challenges that cut across several ministerial portfolios. The guiding principle is that the individual ministries are best placed to develop policies in their area of competence. While this is a sound assumption, line ministries should be encouraged to coordinate their capital projects where necessary. For example, Ireland's Public Spending Code - A Guide to Evaluating, Planning and Managing Public Investment (Department of Public Expenditure and Reform, Ireland, 2019[8]) requires managing authorities to consider the impact of a proposed project (including unintended consequences); it also requires an economic appraisal which takes account of the level of deadweight and displacement that may occur. This Code, therefore, requires line ministries to take account of all possible considerations, which will ensure that other line ministries are consulted. In Slovakia, the MoF keeps a register of every investment included in the state budget and separate modules, the Register of Investments. This is used for budgeting capital expenditures in the budget information system. This provides basic financial and non-financial information about the investment (name, status, type, schedule, costs, budgeted expenditures etc.) for monitoring and evaluation purposes.

Bulgaria lacks place-based planning, which is one reason why the country has low levels of regional development and inter- and intra-regional disparities. One of the reasons for a lack of place-based planning is because there is no robust regional governance structure to enable this. Each district, made up of municipalities, contains a deliberative organ, the district development council (DDC), whose main responsibility is regional development. However, in practice, DDCs do not have sufficient authority, human capital and financial resources to carry out their mandated responsibilities.

Place-based policies can address the diversity of economic, social, demographic, institutional and geographic conditions across regions by targeting specific territories and providing tools to address issues like economic and social stagnation that traditional structural policies often fail to remedy. They also promote an integrated approach across sectors ensuring that a wide range of sectoral policies, from transport and education to innovation and health, are co-ordinated with each other and meet the specific needs of different regions – from remote rural areas to the largest cities. ( (OECD, 2019[9]) ( (OECD, 2021[6])

To better coordinate at the municipal level, regional associations of municipalities were formed to assist each other in solving common regional issues, such as rendering assistance in a broad range of consultancy services. Today, there are around ten active regional associations in Bulgaria, one example being the Association of Danube River Municipalities, which brings together 35 municipalities with a combined population of over 800 000 inhabitants along the Danube River in the central part of the Danube region. The main objective to promote the social and economic development of the Danube region and establish a common concept and strategy of regional development, furthering the joint implementation of socio-economic policies, enhancing co-operation with all the stakeholders in the sub-region and developing a common regional identity (Ministry of Regional Development and Public Works, 2016[10])

As noted above, spatial planning is an important tool is helping coordinate investments, which informs place-based decision-making. According to the Ministry of Regional Development and Public Works (MRDPW), spatial plans in Bulgaria specify the spatial development and construction and settlement formations within specific geographic areas. The details set out in spatial plans are "… binding for investment design” (Ministry of Regional Development and Public Works, Bulgaria, 2022[11]). The Minister of Regional Development and Public Works is responsible for implementing state policy regarding spatial plans and coordinates the activities of national and sub-national governments. The Minister has authority to approve spatial plans and infrastructure that span multiple regions or that include infrastructure of national significance, including national roads and rail lines. The Minister can also approve spatial plans for underwater linear objects and measures to protect against landslides and soil erosion.

Infrastructure of national significance, as defined by law, must be given regard to within spatial plans. MRDPW is responsible for ensuring spatial plans are legally compliant. This helps ensure that all public infrastructure investments, either national or municipal, within a defined geographic area are planned from a whole-of-network perspective, ensuring that interdependencies between infrastructures are taken in to account and benefits across investment are maximised.

The Regional Development Act sets out the hierarchy of spatial planning in Bulgaria is as follows:

  • The National Spatial Development Concept (NSDC) - sets the long-term objectives and priorities at the national level, considering relevant strategic-setting documents at the international and national levels and focuses on nationally significant infrastructure corridors and sites and the integration with EU-wide transport and energy networks. The NSDC directs subordinate spatial plans.

  • Integrated Territorial Development Strategies (ITSD) - sets spatial objectives and priorities at a regional level. ITSDs include an indicative list of priority projects at the regional level, including budget estimates and indicative timings for delivery, including for infrastructure sites and corridors. ITSDs are developed for a period of seven years, except for technical infrastructure specifications, which are planned for up to 30 years for Level 2 Planning Regions. The NDSC is subject to ex-post evaluation of its implementation.

  • Municipal integrated development plans – define the medium-term objectives and priorities for a given municipality, including any links to neighbouring municipalities in accordance with the relevant ITSD and municipal master plans.

Under the Spatial Development Act, which is a different statute governing land use planning, there are two types of spatial plans:

  • General Spatial Development Plans (GSDP) – provide a basis for the overall planning for the future development of a given territory, by specifying the use of infrastructure and the protection of environmental, cultural and historical sites. GSDPs must be coordinated with the Ministry of Culture regarding cultural heritage sites and buildings, and the Ministry of Environment and Water regarding the environmental impact assessment processes. GSDPs can be directed by either a minister at the national level or a mayor at the municipal level. Subject to public consultation once drafted, GSDPs must be coordinated with national and territorial administrations, utility companies and other interested parties and are approved by MRDPW. The decision to approve a GSDP can be appealed only by parties directly affected by its proposals, such as property owners. Currently, 183 of Bulgaria’s 265 municipalities have GSDPs. Despite signalling the use of future infrastructure, GSDPs do not grant authority to build new infrastructure.

  • Detailed Spatial Development Plan (DSDP) – outlining policies, rules and requirements applied to the use of specific lots of land for the purposes of development. DSDPs are subject to public consultation processes, which can be appealed by affected property owners.

NSDCs and ITSDs are formally adopted by the Council of Ministers following consultation with relevant ministries and the public. ITSDs also need to be adopted by regional development councils. This suggests there is buy-in to the priorities and commitments made in the planning hierarchy at the highest levels of government. However, NSDCs and ITSDs can be amended under particular circumstances, such as:

  • “In case of change of the administrative-territorial structure of the Republic of Bulgaria, which affects the areas in the respective planning region as well as changes in the territorial scope of the planning region;

  • In event of update of the NSDC;

  • Upon recommendation of the adopted reports for monitoring the implementation of the ITSDs;

  • In event of significant changes in the economic and social conditions in the relevant planning region, as well as substantial changes in regional policy requiring corresponding changes in the strategic framework for territorial development of a planning region;

  • As a result of changes in the related national legislation or in European Union law;

  • When adopting, modifying or updating sectoral strategic documents at national or regional level, to which the priorities or indicative lists of important project ideas of the ITSDs are related;

  • In case of changes in the environment and priorities for development of local authorities, on the proposal of more than half of the members with voting rights of the respective regional development council;

  • In case of exceptional circumstances (Republic of Bulgaria, n.d.[12]).”

Changes to GSDPs must be presented by the mayor to their respective municipalities as part of preparing an annual report on the GSDP in question.

It is important that changes to any form of spatial plan are infrequent because regular amendment can undermine the planning certainty that spatial plans are meant to provide to communities, businesses and investors. However, it is also important to allow some flexibility to allow reasonable changes to be made in the event of unforeseen circumstances. We understand changes to NSDCs, ITSDs, GSDPs and DSDPs are rare, which suggests the circumstances under which amendments can be made to spatial and development plans strikes an appropriate balance.

At the territorial level, individual municipalities have authority to determine their own spatial planning policies and plans that relate to their own geographic areas. However, they must also produce integrated development plans, which flow from NSDCs and ITSDs, defining the medium-term objectives and priorities for the municipal area, identify any links with the municipality's existing strategic documents or with those of neighbouring municipalities.

The current NSDC is set for the period 2013 – 25 and identifies the need to address the following national infrastructure deficits:

  • Delays in the optimal connection of the national territory with the neighbouring countries … [including] … delays in the construction of the TEN-T network ….

  • Delays in the optimal transport connection between the weak northern Bulgaria and the stronger southern Bulgaria.

  • The need to build efficient transport, engineering, tourism and cultural infrastructure …."

Since at least 2020, Bulgaria has committed to taking a more holistic, integrated approach to spatial planning. ITSDs are increasingly focused on supporting territories and how territorial investments can better integrate rather than focusing on individual settlements and sector-specific investments. ITSDs are also incorporating the mapping of needs at the national level regarding the sectoral policies prepared by the state institutions and agencies responsible for their development. This is a positive development, because it shows that Bulgaria is developing a more holistic, integrated approach to spatial planning, which will help coordinate investments and capture new efficiencies and synergies from those investments.

MRDPW is designated as the lead authority for developing Priority Nine of Bulgaria2030, which is focused on lifting local development, particularly regarding the wellbeing of people in rural communities, the competitiveness of regions, resilience from natural hazards such as landslides and improving water quality. Ensuring the Ministry has responsibility for delivering priorities under the highest-level strategic document helps ensure that its objectives are reflected in territorial-level planning instruments, such as spatial plans, increasing the likelihood that Bulgaria2030 will have a real impact on people.

However, the process of acquiring land often proves to be time-consuming and creates uncertainty for those involved. The acquisition of state, municipal or private land takes place once spatial plans are approved and before construction permits are issued. Due to the complex administrative processes in place for acquiring land in Bulgaria, acquiring land can often take up to two years.

Furthermore, a lack of coordination between different sectoral policies and an uncertain funding environment presents problems for doing spatial planning more effectively. As noted above, this highlights the need for decisions about allocation of capital and operational expenditure to be coordinated with how the use of land is planned, so that funding decisions can be backed-up by planning decisions reflected in spatial plans. Spatial plans deliver greater planning certainty if they are supported, at least indicatively, by funding decisions.

Municipalities developing spatial plans are required to coordinate with selected ministries, but this only happens with respect to limited factors, such as compliance with environmental and cultural heritage requirements. Wider coordination only occurs once a first draft of a spatial plan has been developed, by which time the opportunity to truly co-develop the spatial plan has passed. This suggests there is a missed opportunity in Bulgaria to involve early the key decision-makers on public investment, infrastructure and land use, thereby capturing the benefits of coordination described above.

Spatial plans are generally subject to public consultation, which often leads to disputes or delays due to parties opposing particular proposals. This is a common occurrence with spatial planning and reflects the balance that needs to be struck between top-down decision-making that delivers certainty with the need to include the perspectives of local people.

Municipalities described how the Spatial Development Act, which governs the rules and requirements for spatial planning across all levels of government, is regularly amended to address new, emerging issues. Regular changes to the legislation are likely to undermine the value of spatial planning, which is to deliver long-term certainty on the location and timing for public investments against a clear, consistent and enduring criteria. EU rules attempt to bring certainty by requiring that Commission-funded infrastructure and services stated in spatial plans are committed to for at least a five-year period. Municipalities described how this can also result in inflexibility in times of unexpected change, such as a current need for new social housing for refugees fleeing Ukraine. However, overall, the five-year requirement is a good incentive to discourage frequent changes to spatial plans.

DSDPs protect existing and future infrastructure, which helps provide certainty to current infrastructure providers and citizens about the operating life of current assets. However, few municipalities have managed to introduce DSDPs because of difficulties obtaining the necessary support from communities. 

Spatial plans in Bulgaria include an ecological assessment, which is an important feature of spatial planning because it identifies any significant ecological issues early on, which helps avoid any ‘showstoppers’ during the environmental impact assessment phase.

There are existing examples in Bulgaria of the sharing of services between municipalities, but it is not widely accepted and practised in Bulgaria. There are few examples of effective inter-municipal co-operation initiatives, except where it is legally mandated, as is the case for the provision of water, sewerage, and waste management (OECD, 2021[6]). In 2000, despite the existence of an EU funding opportunity and the poor situation in numerous municipalities in terms of waste management, most Bulgarian local authorities rejected participation in regional waste management associations. The national government then made it mandatory in 2010 to fulfil the commitments made to the EU for the National Waste Management Programme. A municipality that rejects participation, causing delays or thwarting the creation or functioning of a regional association, shall cover the damages and missed benefits of the remaining municipalities in the region (Kalfova, 2017[13]).

Another example comes from the Waters Act 2000, which imposed the creation of water and sanitation associations for each district. The participation of municipalities is not obligatory, but the main incentive for them to participate has been EU funding, as only water and sanitation associations were eligible for funding in the 2014-20 programme period. By 2021, 29 regional water and sanitation companies had been established (OECD, 2021[6]).

However, there are still reluctant municipalities. For example, in 2010, 15 municipalities refused to join the water and sanitation associations due to financial considerations, despite water and sanitation costs for municipalities in the mountainous area being below the average under the association model (Kalfova, 2017[13]).

Despite this, there are several anecdotal examples of inter-municipal cooperation contributing to better investment outcomes. For example, there is an agreement amongst several municipalities near Sofia for the construction of a waste landfill. The municipalities agreed to enter a formal arrangement of inter-municipal cooperation because it was an opportunity to learn from one municipality which had experience in building a similar waste landfill. This initiative has led to a better quality of service and better control over the company operating the landfill. In another example, one municipality created a company to provide maintenance services across transport, water services and waste management. In the 10 years that the company has been operating, costs had been reduced by two or three times what they had previously been when individual suppliers were appointed to offer transport, water services and waste management independently. Another example came from the water services sector, where several companies employed by multiple municipalities have formed an agreement to reconstruct a local water supply network, which reportedly has led to better service quality outcomes.

There seems to be general support among officials for more inter-municipal cooperation in the future, recognising they provide opportunities to share expertise. But any future attempts for inter-departmental cooperation at the national level requires coordination amongst the Council of Ministers.

Some rules and regulations limit what infrastructure and services can be jointly managed at the municipal level, which presents a barrier to future inter-municipal cooperation. Municipalities also described how additional incentives would be needed to encourage more inter-municipal cooperation. Public entities at both the national and sub-national levels should identify where these barriers exist, and reform these requirements to remove any future barriers.

There have previously been discussions at a political level to amalgamate a number of Bulgaria’s 265 municipalities, which were resisted due to concerns about losing local accountability and decision-making. But as noted above, there are various institutional models that can deliver the benefits of inter-municipal cooperation aside from amalgamation. The OECD has previously recommended that Bulgaria establishes effective multi-level governance coordination mechanisms. Creating a culture of cooperation and regular communication is essential to achieve effective multi-level governance and long-term reform (OECD, 2021[6]). Bulgarian municipalities could explore the other models of inter-municipal cooperation described above that allow municipalities to retain their existing governance and ownership arrangements. This way, municipalities can still seek to achieve the economies of scope and scale needed to retain staff with the necessary skills and experiences, bundle projects at a scale that will be more appealing to a wider infrastructure market, present a sequenced pipeline to the labour market and provide services and materials, such as the replicable engineering skills and provision of aggregates, at a larger scale.


[8] Department of Public Expenditure and Reform, Ireland (2019), Public Spending Code: a guide to evaluating, planning and managing public investment, https://www.gov.ie/en/publication/public-spending-code/.

[13] Kalfova, E. (2017), Inter-municipality cooperation in Bulgaria - Between the necessity and impact of EU policies”, 25th NISPAcee Annual Conference.

[10] Ministry of Regional Development and Public Works (2016), Decentralisation Strategy 2016-2025 of Bulgaria, http://www.adodunav.org/bg/page/misiia.

[11] Ministry of Regional Development and Public Works, Bulgaria (2022), Response to ‘An Overview of Public Investment Planning and Decision-making in Bulgaria, Part B: questionnaire for line ministries’.

[6] OECD (2021), Decentralisation and Regionalisation in Bulgaria: Towards Balanced Regional Development, OECD Multi-level Governance Studies, OECD Publishing, Paris, https://doi.org/10.1787/b5ab8109-en.

[4] OECD (2020), “Infrastructure Governance Review of Argentina”, OECD Journal on Budgeting, https://doi.org/10.1787/f2574b7b-en.

[1] OECD (2020), Recommendation of the Council on the Governance of Infrastructure, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0460.

[7] OECD (2019), Budgeting and Public Expenditures in OECD Countries 2019, OECD Publishing, Paris, https://doi.org/10.1787/9789264307957-en.

[3] OECD (2019), Effective Public Investment Across Levels of Government: implementing the OECD principles, https://www.oecd.org/effective-public-investment-toolkit/OECD_Principles_For_Action_2019_FINAL.pdf.

[9] OECD (2019), OECD Regional Outlook 2019: Leveraging Megatrends for Cities and Rural Areas, OECD Publishing, Paris, https://doi.org/10.1787/9789264312838-en.

[2] OECD (2014), Recommendation of the OECD Council on Effective Public Investment Across Levels of Government, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0402.

[5] OECD 28th Territorial Development Policy Committee (2012), Public Investment across Levels of Government: the case of Galicia, Spain, https://www.oecd.org/cfe/regionaldevelopment/galicia_edited.pdf.

[12] Republic of Bulgaria (n.d.), Implementing Regulation of the Regional Development Act.

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