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February 16 2012

The Public-Private Partnership Law in line with European Provisions

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Government Decision no. 86/2011 amending and supplementing Public-Private Partnership Law no. 178/2010 (hereinafter referred to as the “Law”) was published in the Official Journal no. 729 issued on October 17th, 2011.

The Ordinance was passed:

  • further to Notification no. 724 of January 26th, 2011 issued by the Permanent Representation of Romania to the European Union which informed the Romanian authorities that the European Commission recommended the amendment of legislation on public-private partnership (hereinafter referred to as “PPP”) so as to comply with the European acquis and case law, and that the case was already introduced in the EU Pilot preceding infringement procedures; and
  • in view of the need to adopt urgent measures to improve the PPP system and harmonize its implementation with the relevant European framework, as otherwise the European Commission would have initiated the infringement, the most serious consequence being the delay in implementing some major investment projects having a social and economic impact at national or local level.

The amendments and supplements mainly relate to:

  • principles of PPP
  • definitions;
  • types of PPP contracts;
  • scope of application;
  • public partners;
  • negotiated procedure without publication of a notice of selection;
  • alternative tenders;
  • stages of awarding the PPP contract;
  • appeals;
  • Central Unit for the Coordination of Public-Private Partnership ;
  • Appendix.

Principles of PPP

According to the new regulations, the private investors entitled to provide certain services under the legislation in the Member State of establishment may not be rejected on the sole ground that they are not legal entities according to the Romanian law.

Also, for the purposes of the award of PPP contracts by public partner, the Romanian State shall apply in its relations with other Member States conditions as favourable as those granted to private investors/economic operators from third countries under the Agreement on Public Procurement Contracts concluded in the Uruguay Round of Multilateral Trade Negotiations. For this purpose, Romania consults with the Advisory Committee for Public Contracts(established under Art. No. 1 of Council Decision no. 71/306/EEC of July 26th, 1971) about the measures to be taken in order to implement the Agreement.

Last but not least, according to legal provisions, especially those concerning the advertising of awarded contracts and the information to private investors, the Romanian State shall not disclose information forwarded to it by private investors which they have designated as confidential, especially related to technical or trade secrets and confidential aspects of tenders/ letters of intent.

Definitions

Regarding the “private investor” term – the novelty is the request that the legal entity must be supplier of goods, service provider, or contractor –operating in the area in which they legally market products, services and/or work execution.

The following new definitions are introduced:

  • PPP works contracts–contracts whose subject matter is either the execution or both the design and execution of works related to one of the activities listed in Appendix no. 1 to Government Emergency Ordinance no. 34/2006 on public procurement, public works concession contracts and services concession contracts approved by Law No. 337/2006, as amended and supplemented (hereinafter referred to as “GEO 34/2006”), or the realisation, by any  means, of a work that meets the requirements specified by the public partner in the notice of selection and the attached document; a “work” is the outcome of a set of construction works or public works which is sufficient of itself to fulfil an economic or technical function;
  • PPP supply contracts–PPP contracts, other than those previously described, having as subject matter the supply of goods that meet the requirements specified by the public partner in the notice of selection and the attached document; a contract whose main subject matter is the supply of goods and only incidentally covers the siting and installation is considered to be a PPP supply contract;
  • PPP service contracts– contracts, other than the two aforementioned, whose subject matter is the provision of services listed in Appendix no. 2 to GEO 34/2006; a PPP contract whose subject matter consists in both goods and services is considered to be a PPP service contract as long as the value of those services exceeds that of the goods; a PPP contract is considered to be a PPP service contract if the services provided within the meaning of Appendix no. 2 are the main subject matter and activities within the meaning of Appendix no. 1 are only incidental;
  • public telecommunications network– the public telecommunications infrastructure which permits conveyance of signals between defined network termination points by wire, by microwave, by optical or other electromagnetic means;
  • network termination point -all physical connections and technical access specifications, part of the public telecommunications network and required for access to and effective communication through the network;
  • public telecommunications services— telecommunications services provided by one or more telecommunications entities specifically designated by the Member State;
  • telecommunications services— services whose provision consists wholly or partially in the transmission and routing of signals on the public telecommunications network by means of telecommunications, except for radio and television.

Types of PPP contracts

If before the legislative amendment there were only two types of contracts, after the correlation with the European legal provisions, a PPP may be achieved through the following types of contracts:

  • works contracts
  • supply contracts
  • service contracts

Scope of application

Contracts are awarded for the purpose of carrying out a relevant activity in the public utilities sectors: gas, heat and electricity, water, transport, postal services, exploration for and extraction of oil, gas, coal, or other solid fuels and also ports and airports, under the specific terms of each type of contract.

In the gas, heat, electricity or drinking water sector, the law is applicable to the following relevant activities:

  • provision or operation of fixed networks intended to provide a service to the public in connection with the production, transport or distribution of gas or heat, electricity or water;
  • supply of gas or heat, electricity or drinking water to such networks;
  • PPP contracts awarded by public partners that perform a relevant activity relating to drinking water and which are connected with hydraulic engineering projects, irrigation or drainage, provided that the water volume to be used for the supply of drinking water represents more than 20% of the total volume of water made available by such projects, or irrigation or drainage systems or which are connected with the disposal or treatment of sewage.

The supply of electricity/ drinking water – gas or heat to networks that provide a public service by a public partner is not considered a relevant activity, if the following conditions are met:

  • Electricity generation/water supply is made by the public partner because the consumption is necessary for an activity other than those mentioned at Art. 52 paragraph (1) or (3), or at Art. 56 of the Law.
  • supply of the public network depends solely on the public partner’s own consumption and does not exceed 30% of the entity’s total production of electricity, drinking water, given the average of the last three years, including the current year.

The scope of the law also includes:

  • relevant activities regarding provision or operation of networks intended to provide a service to public in the field of transport by railway, automated systems, tramway, trolley, bus or cable;
  • postal services, whether reserved or not according to Art.12 of GEO 31/2002 regarding the postal services, i.e. collection, sorting, transport, and delivery to recipients of postal items – correspondence, books, catalogues, newspapers, periodicals, parcels containing goods with or without commercial value – regardless the weight.
  • mail service management services, i.e. services that precede and follow the dispatch;
  • added value services in connection with electronic mail, entirely provided by electronic means, including the secure transmission of coded documents by electronic means, address management services and transmission of registered electronic mail.
  • services concerning postal items not included in the first category, such as direct mail bearing no address.
  • financial-postal services, such as those mentioned in category 6 in Appendix no. XVII A and Art. 24 letter c) of Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors, including in particular money orders and postal giro transfers;
  • logistics combining delivery and/ or warehousing with other non-postal functions.
  • relevant activities of exploiting a geographical area for the purpose of: exploring for or extracting oil, gas, coal or other solid fuels; the provisions of airports and maritime or inland ports or other terminal facilities to carriers by air, sea or inland or waterway.

Public partners

According to the amendments, the public partners are defined as including:

  • any public company that operates one of the relevant activities, over which the public partners as described under Art. 8 letter a)and b) may exert a dominant influence, directly or indirectly, as a result of ownership, financial participation or governing rules; dominant influence on the part of the public partner is presumed when directly or indirectly in relation another undertaking holds the majority of the subscribed capital, or controls the majority of the votes attached to the shares issued by the undertaking; or can appoint more than half of that undertaking’s administrative, management or supervision members;
  • any legal entities which, when they are not public partners as above described, have as one of their activities one or more of the relevant activities or any combination thereof, and benefit from special or exclusive rights granted by a competent authority; ”special or exclusive rights” means rights granted by a competent authority of a Member State through regulatory or administrative provisions, which have as result the reservation for one or more entities of the exploitation of relevant and which substantially affect the ability of other entities to perform such activities.

Negotiated procedure without prior publication of a notice of selection

By exception, public partners may award a PPP contract through a negotiated procedure without prior publication of a notice of selection for additional works or services that are not listed in the initially estimated project or in the original PPP contract and, as a result of unforeseen circumstances, become necessary for performance of the works or provision of services described therein, provided that the contract is awarded to the private investor contracting that work or service and:

  • if those additional works or services may not be separated technically or economically from the original contract without being a major inconvenience for the public partner; or
  • even if those additional works or services may be separated technically or economically from the original contract, they are strictly necessary for its completion; however the aggregate estimated value of contracts awarded for additional works or services must not exceed 50% of the amount of the original contract.

Alternative tenders

A new concept introduced by the Law is “Alternative tenders”. Thus, public partners may authorize private investors to submit alternative tenders, provided that the following rules are followed:

  • the notice of selection shall indicate whether or not alternative tenders are authorized, or otherwise, alternative tenders may not be authorized.
  • public partners authorizing alternative tenders must state in the attached document the minimum requirements to be met by the alternative tenders and any requirements for their presentation;
  • public partners shall consider only the alternative tenders that meet the minimum requirements;
  • in procedures for the award of a PPP service or supply contract, public partners which have authorized alternative tenders may not reject an alternative tender on the grounds that it would, if successful, lead to either a PPP supply contract rather than a PPP service contract, or a PPP service contract rather than a PPP supply contract.

Stages of awarding the PPP contract

Public partners must draw up for each PPP contract a report that must include at least the following elements:

  • name and address of the public partner, subject matter and value of the PPP contract;
  • names of successful private investors and the reasons for their selection;
  • names of rejected private investors and the reasons for their rejection;
  • reasons for the rejection of tenders considered abnormally low;
  • name of the successful private investor and the reasons for his tender having been selected and, if known, the share of the contract which the successful investor intends to subcontract to third parties;
  • for competitive dialogue, the circumstances which justify the use of this procedure;
  • if necessary, the reasons why the public partner has decided not to award a PPP contract.

This report, or the main features thereof are communicated to the European Commission upon request.

Moreover, under the new regulations, PPP contracts may be concluded only after the end of a minimum 10-calendar day standstill period from the day following the communication of the outcome to the private investors by fax or any other electronic means, or if other means are used, before the expiration either of at least 15 calendar days from the day following the communication of the outcome to the private investors, or of a period of at least 10 calendar days from the day following the receipt of the relevant communication.

Appeals

The amendments and supplements mainly focus on issues such as:

  • deadline for lodging appeals to the National Council for Solving Complaints (hereinafter referred to as: “the Council” or “NCSC”) – the aggrieved person may refer to the Council for the cancellation of the act and/or for the recognition of the claimed right or legitimate interest, within 10 calendar days from the day following the dispatch of the public partner’s communication to the private investor by fax or any other electronic means, or if other means are used, before the expiration either of at least 15 calendar days from the day following the communication to the interested private investor, or of a period of at least 10 calendar days from the day following the day when the interested private investor receives, according to the Law, the communication about an act of the public partner considered unlawful.
  • resolutions that may be provided by the Council: if the appeal is admitted: total or partial cancellation of the act; ordering the public partner to issue the act, fulfilment of an obligation by the public partner, including removal of any discriminatory technical, economic, or financial specifications from the notice of selection, the attached document or any other documents issued in relation to the procedure; any other remedial measures.

Central Unit for the Coordination of Public-Private Partnership

The Central Unit for the Coordination of Public-Private Partnership (hereinafter referred to as: “C.U.C.P.P.P.”) has new duties such as:

  • discloses to the European Commission all the international agreements concluded in accordance with the Treaty with one or more third countries aimed at supplying products or performing works, intended for the joint implementation or exploitation of a project by the signatory States.
  • checks each and every notice of selection or any other supporting documents submitted/sent by the public partner for publication in SEAP and OJEU, as appropriate;
  • establishes a review and selection committee regarding the sustainability and feasibility of PPP projects; public partners present to this committee the PPP projects they intend to perform, presenting substantiation studies or pre-feasibility studies, budgeted expenditure, funding issues, technical details, etc. and any other elements that may prove the advantages of implementing the PPP project; the projects that are not admitted by the committee may not be initiated; the organisation and functioning of the committee are established by order of the General Secretariat of the Government;
  • is a cooperation mechanism for analysing and drafting legal uniform opinions and, where the C.U.C.P.P.P. and the National Authority for Regulating and Monitoring  Public Procurement (hereinafter referred to as: ”N.A.R.M.P.P.”) have issued, in the applicant’s opinion, different points of view in relation to the applicant’s questions about the conduct of a selection or procurement procedure, as the case may be; when an applicant received two different points of view related to a question/ clarification only a committee established as a cooperation mechanism may settle the issue; if the applicant received two different opinions from the two above mentioned bodies, then it must submit to the General Secretariat of the Government a written request for issue of one point of view; the points of view issued by both C.U.P.P.P.C. and N.A.R.M.P.P. along with the same documentation submitted when requesting those answers should be attached to the application. The final answer/ solution shall be given mainly in view of the position of N.A.R.M.P.P.; if there is no unanimity, the differing views must be recorded in the minutes of the meeting.
  • if  C.U.C.P.P.P. when fulfilling its specific monitoring duties, identifies some elements that could lead to the absolute nullity of the PPP contract, then it must notify N.A.R.M.P.P; if the public authority takes risks that lead to the classification of the project as public expenditure, according to the law, the PPP contracts may not be initiated, signed, or implemented, subject to the sanction of absolute nullity.

Appendix

Last, but not least, an Appendix to the law was added which provides for the minimum information that must be included in the notice of selection for PPP contracts.

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