Definitions: example of overlapping of legal categories

[Peru: Draft proposal for APP law] 4.1 Obra Pública.- Bajo esta modalidad de ejecución, las entidades públicas ejecutan directamente las obras, ya sea por administración directa con personal propio de sus unidades ejecutoras o por administración indirecta, mediante terceros. En esta modalidad el sector público asume la mayor parte de los riesgos asociados a la provisión de la infraestructura o de los servicios públicos, aplicando, en lo que corresponda, la normatividad de contrataciones y adquisiciones.

4.2 Concesión Auto sostenible: Son aquellas concesiones que presentan rentabilidad privada positiva. Se financian con los ingresos generados por la explotación de la concesión, incluyendo a aquellas cuya recaudación sea realizada por una empresa del Estado. Estas concesiones pueden ser gratuitas u onerosas, en éste último caso el concesionario debe realizar una contribución determinada en dinero o una participación sobre sus beneficios a favor del Estado.

Toda Concesión Auto sostenible cumple con las condiciones siguientes:

i) No requieren ningún tipo de garantía financiera por parte del Estado:

ii) Las garantías no financieras que aseguren al concesionario un nivel de ingresos o demanda determinados, son nulas o mínimas, conforme se establezca en el Reglamento de la presente Ley.

4.3 Concesión Cofinanciada: Son aquellas concesiones que requieren aportes de recursos del Estado, demandan algún tipo de garantía financiera por parte del Estado o requieren de alguna garantía no financiera cuya demanda de recursos es mediana o alta, de acuerdo a los parámetros que se fijen en el Reglamento de la presente Ley

Focus on service performance

[Mexico: Acuerdo Secretaria de Hacienda Diario Oficial 9 Abril 2004]

Contrato de servicio de largo plazo: acto jurídico que involucre recursos de varios ejercicios fiscales, celebrado entre una dependencia o entidad de la Administración Pública Federal y un inversionista proveedor, mediante el cual se establece, por una parte la obligación a cargo del inversionista proveedor de prestar, a largo plazo, uno o más servicios con los activos que éste construya, sobre inmuebles propios o de un tercero, incluyendo el sector público, de conformidad con un proyecto para prestación de servicios que le sean proporcionados.

..Which involves the creation of an asset

[Mexico: Acuerdo Secretaria de Hacienda Diario Oficial 9 Abril 2004]

4. Para ser considerados como tales, los proyectos para prestación de servicios deben cumplir con lo siguiente:

III. La prestación de los servicios debe hacerse con los activos que construya o provea el inversionista proveedor con base en lo requerido por la dependencia o entidad contratante. La realización del proyecto de inversión que, en su caso, se requiera para dar cumplimiento al contrato de servicios de largo plazo será responsabilidad del inversionista proveedor.

[NEW SOUTH WALES TREASURY, "Submission to public accounts committee. Inquiry into Public-Private Partnerships", November 2005]

A "PFP" is a very specific form of PPP which involves the creation of an asset through private sector financing and ownership control for a concession period (usually long term). The Government is willing to contribute through land, capital works, risk sharing, revenue diversion or purchase of the agreed services.

A "PFP" covers Economic Infrastructure or Social Infrastructure, and typically includes both a capital component and an ongoing service delivery component. PFPs are generally complex and involve high capital costs, lengthy contract periods that create long term obligations, and a sharing of risks between the private and public sectors. They therefore require careful consideration and approval by the Government.

PPP that include public works (an exception to the rule)

[Mexico: Acuerdo Secretaria de Hacienda Diario Oficial 9 Abril 2004]

En los casos excepcionales de proyectos para prestación de servicios cuya realización implique llevar a cabo obras públicas para construir parte de los activos con los que serán prestados los servicios, las dependencias y entidades, en la programación, presupuestación, contratación y ejecución de dichas obras, deberán observar lo establecido en las disposiciones aplicables.

Comparing PPP and Conventional procurement

[An introductory guide to Public-Private Partnerships

Hong Kong Government Efficiency Unit, 2008]

How does the procurement of a facility compare?

Conventional approach

PPP approach

• The client department would seek the assistance of one of the works departments in designing the facility or in the case of design and build contracts, to prepare performance specifications for the facility

• The client department would form a PSCom incorporating its own and other departmental staff, as well as outside expertise, if required, to oversee the project

• Once pre-contract planning is completed and resource allocation approvals are obtained, works departments would call for tenders from private contractors to construct or to design and build the facility in accordance with its specifications (unless approval is obtained pursuant to Financial Circular No. 2/2003, tender invitation should start after funding is secured)

• Following internal approval, the client department would conduct public consultation including the consultation with relevant LegCo Panels before obtaining endorsement of LegCo's Finance Committee (FC)

• The successful bidder would be the one that satisfies the minimum requirements specified with respect to quality of service or product and scores the highest mark in the tender evaluation which weighs both the technical and cost aspects

• Separate specialist contracts might be let to different private contractors for specialist equipment and facilities

• During construction of the facility, the works department would monitor all aspects of the construction including process, quality and cost, on terms that provide best value

• Upon completion of construction of the facility, the works department would inspect the works and, when appropriate, certify that the works have been completed and the final payment will be made to the contractor

• The fundamental approach to procuring a facility via a PPP is to define the facility in terms of the service which it is to provide

• The client department would form a PSCom incorporating its own and other departmental staff, as well as outside expertise, if required, to oversee the project (see Chapter 3)

• The PSCom would prepare documents, including output-based performance specifications, to request proposals for a private sector consortium to design, build, finance, operate and maintain the facility for a specified period, e.g. between 10-30 years

• Following internal approval, the client department would seek approval of the Policy Committee before conducting consultations, including LegCo Panels, and then obtaining endorsement of the LegCo's FC

• The successful consortium bidder would be the one that satisfies the mandatory requirements specified with respect to the ability of the facility to deliver the service required, the quality of design, construction and operation and on terms which provide best value for money

• In assessing the conforming proposals received, the PSCom will in most cases benchmark them against an estimate of the full lifecycle cost of the project if it was done by the conventional in-house approach

• The client department and its advisors will deal solely with the consortium. The consortium bidder will manage the specialist contractors. Under a PPP, the appropriate member of the PSCom or an independent third party will verify the facility as fit for the purpose. Only then will payment for commissioning, under a DBO, or services received, under a DBFO, be paid

How does the procurement of a service compare?

Conventional approach

PPP approach

• The service element of the project is divorced from the asset acquisition phase; any risk that the facility will not deliver the service quality required lies with the client department

• The client department would make arrangements for the operational aspects of the facility. This would include cleaning and security, and the maintenance and repair of the facility. This may involve a mixture of permanent and contract staff from the client department, Electrical andMechanical Services Department (EMSD) and works departments, and a mix of different outsourcing contracts

• The PPP approach requires the client department to focus on the long-term quality of the service outcomes required and structure the procurement process accordingly. Consortium bidders will be provided with targets and incentives to ensure that the outcomes are achieved

• As well as defining the facility acquired in terms of service delivery, a range of further services will often be procured.

• Sometimes these will be the subject of aseparate 'Operation and Maintenance (O&M)' contract, which may include mid-life capital expenditure. Services such as operation of water supply/sewerage services, office cleaning, or road maintenance could be covered under these types of contract. Such contracts may also cover service with respect to existing assets

How does the funding of, and payment for, a facility/service differ?

Conventional approach

PPP approach

• The funding of the capital and recurrent costs would normally come from a range of different sources within the government

• The costs of the preparatory design and supervisory work for the construction contracts and the capital costs of construction works would be met from the Capital Works Reserve Fund (CWRF)

• Progress payments for the facility would be made upon certified completion of different stages of design and construction

• The operational costs would be met from the client department's Recurrent Account Occasional expenditure on replacement plant and equipment would come under the department's Capital Account/CWRF as appropriate

• Similarly, in works departments, expenditure under various departmental subheads would take place over the life of the facility

• The government would normally pay the winning bidder only after the facility was operational, and then payments would be only for "availability" and services provided according to the contractual specifications

• Payments under a PPP will most often be combined within a unitary charge, paid at regular intervals throughout the life of the project. The unitary charge will incorporate elements of amortised capital costs paid out of the CWRF and/or recurrent costs paid out of the client department's Recurrent Account

• An alternative, under a DBO, is for initial capital costs to be paid during the construction/upon commissioning of the facility, and only recurrent and capital replenishment costs to be covered by the unitary charge

• Payments would be subject to satisfactory performance in the provision of services on the part of the consortium

• Payments could include incentive elements where performance targets are set

• If the consortium fails to meet performance standards by delivering the services as specified in the contract, or fails to rectify defects at its own expense within specified timeframes, the payments will be abated, deferred, or halted in accordance with the terms of the contract

Legal Instruments for carrying out PPP

[Portugal: Decreto-Lei n.º 86/2003, de 26 de Abril, Artigo 2.º] 4 - Constituem, entre outros, instrumentos de regulação jurídica das relações de colaboração entre entes públicos e entes privados:

a) O contrato de concessão de obras públicas;

b) O contrato de concessão de serviço público;

c) O contrato de fornecimento contínuo;

d) O contrato de prestação de serviços;

e) O contrato de gestão;

f) O contrato de colaboração, quando estiver em causa a utilização de um estabelecimento ou uma infra-estrutura já existentes, pertencentes a outras entidades que não o parceiro público.

5 - Excluem-se do âmbito de aplicação do presente diploma:

a) As empreitadas de obras públicas;

b) Os arrendamentos;

c) Os contratos públicos de aprovisionamento;

d) Todas as parcerias público-privadas que envolvam, cumulativamente, um encargo acumulado actualizado inferior a 10 milhões de euros e um investimento inferior a 25 milhões de euros;

e) Todos os outros contratos de fornecimento de bens ou de prestação de serviços, com prazo de duração igual ou inferior a três anos, que não envolvam a assunção automática de obrigações para o parceiro público no termo ou para além do termo do contrato.

Exclusions

[Brazil: Lei 11.079, Art. 2] § 4 Public-private partnerships may not be contracted in cases where:

I - the contract value is less than R$ 20,000,000.00 (twenty million reais);

II - the term for the provision of services is less than 5 (five) years; or

III - the sole scope of the contract is the supply of labor, the supply and installation of equipment or the execution of public works.