Rules for the Implementation of the Public-Private Partnership Lawprint
Government Decision no. 1239/2010 approving the Rules for the Implementation of Public -Private Partnership Law no. 178/2010, and for the approval of several measures concerning the reorganization of the Central Unit for the Coordination of Public-Private Partnership within the Ministry of Public Finance was published in the Official Gazette no. 833 issued on December 13th, 2010.
The Decision approves the Rules and stipulates that the Central Unit for the Coordination of Public-Private Partnership within the Ministry of Public Finance is to be reorganized as General Directorate subordinated to the General Secretariat of the Government.
The Rules mainly regulate the following issues:
- duties of the public partners;
- types of public-private partnership (hereinafter referred to as “PPP”) contracts ;
- form and content of the pre-feasibility and substantiation studies;
- form and content of the attached document and the prior information notice;
- evaluation committee;
- criteria for evaluating candidates;
- negotiation criteria and committee;
- appeals settlement procedure;
- form and content of the project agreement;
- criteria regarding the duration of the PPP contract;
- organisation and operation of the project company;
- form and content of the draft PPP project contract.
Duties of the Public Partners
The PPP projects for works of local interest are initiated by commune, city and municipal councils and councils of the territorial-administrative subdivisions of municipalities or intercommunity development associations.
The PPP projects for works of county interest are initiated by the county councils.
The PPP projects for works of national interest are initiated by the Romanian Government, ministries and public partners.
For this purpose, the Rules set the relevant duties for:
- The executive and deliberative authorities, as defined by Local Public Administration Law no. 215/2001;
- The legal representatives and deliberative executive bodies of the public partners as defined by art. 8 letter b)-e) of Law no. 178/2010;
- The Ministry responsible for managing the scope of public-private partnership project;
- The Government;
- The boards of directors of intercommunity development associations.
Types of PPP Contracts
Depending on the level of involvement of private investors, the PPP may be achieved through the following types of contract:
- design-build-operate-transfer (DBOT);
- build-operate-develop-transfer (BODT);
- build-operate-transfer (BOT);
- develop-maintain-operate-transfer (DMOT);
- rehabilitate-operate-transfer (ROT).
A. DBOT, BODT, BOT Contracts
The DBOT, BODT, BOT Contracts are used:
- for the execution of a public facility, usually a new one;
- when the public partner executes the facility for the benefit of the community it represents;
- if there are no budgetary financial resources and/or professional management in the area of that facility.
The characteristics of these contracts include the following:
- The private investor is usually a majority shareholder of the project company;
- The public partner brings to the project company’s share capital assets, which are the private property of the State or administrative-territorial units.
The parties have the following obligations under these contracts:
- The public partner :
- identifies and defines the project;
- prepares the substantiation or pre-feasibility study including the technical design (which is mandatory only for BODT contracts);
- draws up the prior information notice;
- draws up and publishes the document attached to the prior information notice;
- establishes the amount, form and modality of participation in the project company
- organizes the selection and negotiation procedures prior to the conclusion of the PPP contract
- concludes the PPP contract
- accepts the public asset at the end of the contract;
- The private investor :
- participates in the selection procedure organised by the public partner with a preliminary tender;
- signs the project agreement, if selected for the negotiation stage;
- submits the final tender presenting its participation in the funding, building, development or modernization, operation and maintenance of the facility made by the PPP project;
- enters into the PPP contract, result of the negotiation procedure;
- transfers the public asset at the end of the contract.
Also, the private investor may charge the appropriate rates for the use of the public asset by third parties for a specific period of time, the investor being allowed to recover its investment, to fund the maintenance and to make a profit. The charge rates are set at the end of the negotiation stage in the final tender.
B. DMOT and ROT Contracts
The DMOT Contract is used:
- For the development and maintenance of a public facility that must be developed and maintained by the public partner for the benefit of the community it represents;
- If there are no budgetary financial resources and/or professional management in the area of that facility.
The ROT Contract is used:
- For the rehabilitation and maintenance of a public facility that must meet modern standards and be maintained for the benefit of the community represented by the public partner;
- If there are no budgetary financial resources and/or professional management in the area of that facility.
The rules set for the other types of contract shall apply accordingly, depending on the specific type of the contract to be concluded.
Form and Content of the Pre-Feasibility and Substantiation Studies
The pre-feasibility and substantiation studies are the basic documents for initiating a PPP project. These studies are prepared by the public partner who also bears the cost.
The pre-feasibility study is the documentation that includes the public-private partnership project technical and economic justification, main characteristics and technical-economic indicators. The substantiation study is the document which is usually more elaborate than the pre-feasibility study and which is usually drafted for more complex projects. It includes the public-private project technical and economic justification, main characteristics and technical-economic indicators.
Form and Content of the Attached Document
The attached document must include at least the following elements:
- Information on the public partner and the initiated PPP project (a brief description of the initiating public partner, a brief description of the public-private project, budget estimates, the proposed allocation of the project risks, details regarding the category and types of goods and services that have to be provided by the investor in the public-private project, the estimate project schedule, the commercial principles applicable in the project);
- Details about the basis for the evaluation of the letters of intent for selecting the investors to enter into the project agreement (the investor’s experience in similar projects, the balance of abilities and expertise of the legal entity or of the association; the ability of the investor to meet the public-private project financial and technical requirements, the integrity of the legal entity or, if applicable, of each member of the association of investors, which is proved by the previous funding of significant investments);
- The general terms and conditions for the attached document (a statement of the public authority, according to which it unilaterally and undisputedly reserves the right not to carry on the PPP project, providing factual arguments in support of such decision, at any stage prior to the submission by the investor of its final tender, result of the negotiations; a statement declaring that the public authority will not reimburse the costs incurred by any investor in the preparation of the letters of intent or any other activities undertaken during the negotiations ; details on how the intellectual property rights that are mentioned in the letter of intent and its attachments are protected; the statement that the public partner has no intention to provide any kind of data referring to documents or information contained in the other tenderers’ files, but only data concerning its own tender);
- The format, time limit and the place of receipt of the letters of intent;
- The information that the investors need to provide in their tender (details regarding the investor; an overview of the proposed approach of the PPP project; data regarding the investor’ expertise and abilities and also the support for the ability to meet the project requirements; details about the financial situation of each member of the investors’ association as well as about the potential financial collateral resources, if any; pieces of information regarding the confidentiality and any probable conflict of interests; the confirmation that neither the investor, nor any member of the association has any current or potential conflict of interest; evidence of the ability of the investor to manage the proposed level of risk allocation.
The evaluation committee has to select the candidates with whom the project agreements are to be signed.
The committee is composed of at least 5 members which are experts and specialists of the public partner and, if applicable, members of the local and county councils, ministers, state secretaries, members of the public partner’s board of directors or executive management, as defined in art. 8 letters b)-d) of Law no. 178/2010, or any other individual with expertise in the area of the PPP project’s objective, as co-opted expert, who is not in a conflict of interests.
Criteria for Evaluating the Candidates
The criteria for evaluating the candidates with whom the project agreement is signed so as to move to the negotiation stage are the following:
- The proven ability of the candidate to understand the objectives of the initiated PPP project;
- General overview of the candidate;
- Statement of the candidate’s economical and financial situation;
- Proof of the candidate’s professional qualifications and technical ability.
These criteria are the basic elements for the preparation and approval by the public partner of its own selection rules for the initiated PPP project.
Negotiation Committee and Criteria
The negotiation committee negotiates with each selected candidate in order to establish the private partner who is to submit the final tender and to sign the PPP contract.
The negotiation criteria include inter alia:
- The accurate identification of the public partner’s and private investor’s responsibilities in the PPP project subject to negotiation;
- Setting the legal responsibilities of the two partners during the prior stages and the organisation of the project company;
- The parties setting the objectives requested by the public partner for the implementation of the PPP project;
- The clear identification of the technical, financial and legal responsibilities of the two partners;
- Determining the total amount of investment, a clear description of the parties’ participation and agreeing on the period determined for the completion of the public-private partnership contract.
The requirements for the implementation of the PPP project, the terms of the contract and its appendices are negotiated within the limitations of the mandate given to the negotiation committee by the head of the public partner.
The committee must draw up negotiation minutes brief after every negotiation session. The minutes must include the main debated issues and also the result of the negotiation.
The public partner is bound to prepare its decision regarding the hierarchy of the investors on the criterion of the best tender derived from the negotiation procedure and notify its decision to all investors at the same time.
Appeals Settlement Procedure
The private investors may submit an appeal to the public authority or in court, according to the provisions of Administrative Litigation Law no. 554/2004.
In the first hypothesis, the investor must file a written appeal with the public authority within 5 working days from the date when the decision is communicated.
The public authority’s decision on the appeal may be appealed in administrative court under Law no. 554/2004.
The procedure for settlement of appeals by the public partner is administrative jurisdictional.
Form and Content of the Project Agreement
The project agreement is the legal document, concluded before the PPP contract between the public partner and the private investor in order to prepare the PPP contract.
The project agreements are concluded with the investors who have been selected further to the first stage of selecting the private partner, in the rank order established by the committee evaluating the private investors’ letters of intent and attached documents.
The project agreement includes the following:
- General terms (definition of the signatory parties, including identification data; the confidentiality requirements; the validity of the project agreement);
- Rights and obligations of the parties;
- Settlement of mutual liabilities during the negotiations;
- Specific terms (listing the main criteria for the negotiation; statement of compliance with the principles stipulated in art. 3 of Law no. 178/2010 during the negotiation; determining in principle the estimate value of the private investment which is subject of negotiation; establishing in principle the specific duration which is subject of negotiation in order to be subsequently set precisely in the PPP contract.
Criteria Regarding the Duration of the PPP Contract
The duration of the PPP contract is negotiated by the PPP partners on the basis of the pre-feasibility /substantiation studies.
At the end of the term, the facility executed by the PPP project is transferred to the public partner at no cost and in good condition, free of any liens or encumbrances.
Organisation and operation of the Project Company
Throughout the duration of the PPP contract, namely until the date when the decision of the company project liquidation becomes final and irrevocable, the leader of the association – private investor may not be removed from the project company.
However, some entities are allowed to withdraw if they have completed the activities for which they were involved.
Also the project company and the two partners enter into a management contract for the assets entrusted for management and a service contract. These two contracts are the basic elements for the internal rules for the organisation and operation of the project company.
Form and Content of the PPP Project Contract
The content and form of the PPP contract are negotiated based on the framework project agreement and a draft contract proposed by the public partner to the private investor ranking first after the negotiation stage.
The contractual clauses are drafted based on the project implementation requirements already negotiated and accepted during prior stages, based on the minutes and the report of the negotiation committee.
The contract is divided in two sections, namely:
- General terms – including general, specific and joint conditions;
- Technical requirements, which stipulate the PPP implementation requirements (financing, building, operation, profit, etc.).
The Rules for Implementation provide in detail the types of information that each clause must contain.
Before signing the contract, the public partner submits the project agreement to the National Institute of Statistics, for analysis and for consulting Eurostat on the budgetary treatment of the costs involved in the PPP project.
Appendices to the Rules
The Rules have the following appendices:
- Appendix no. 1 – List of Main Documents Underlying the PPP Project and the abilities of these documents approval;
- Appendix no. 2 – Project Risk Allocation Matrix;
- Appendix no. 3 – Standard Framework Project Agreement.