Successful PPP frameworks have clear, well-understood and documented policies. The PPP policy must provide clarity to stakeholders (public and private) on how the Government wants to undertake PPPs. The policy should include:
• Purpose of the PPP policy: vision, mission and goals
• Definition of PPP, for example, projects will be considered PPP if:
• the private partner provides some combination of the design, construction, funding, management, maintenance and operation of infrastructure
• the project provides long-term, performance based services.
• Identification of responsibilities amongst Government entities, including
• selecting projects for PPP, project promotion, development and marketing
• Government support allocation and managing fiscal risk
• regulation of performance and monitoring implementation
• gathering of know-how and lessons learned, standardization, operating guidelines.
• Government approval must be sought, at different stages of the project.
• Conditions to the allocation of Government support or liabilities.
PPP legal frameworks are often anchored in a legal instrument that implements the PPP policy.3 These may be called PPP laws, concession laws, BOT laws or otherwise. Or the legal framework may be embedded in other legal instruments (laws, decrees or regulations), for example related to procurement, infrastructure sector regulations, Government finance or privatization.
| Key Messages for Policy Makers |
| • PPP policies should be clear, comprehensive, yet flexible-periodic updates are a useful way to adopt lessons learned into the PPP program. • Keep the legal framework simple and clear. Do not confuse complexity with comprehensiveness. Simple is better, and will give more confidence to investors. Detail is best left to secondary legislation that is more easily amended to respond to change. • Do not use the legal framework to second guess the PPP contract by creating rights and obligations at law that should be addressed in the contract on agreed terms. If the Government is keen to establish such terms, standard form documents can achieve this, where the terms can be spelled out in detail. |
The need for a specific law or set of regulations associated with PPP will depend on the nature of the legal system and current legal framework. In some legal systems, in particular those applying Civil Law, PPP laws and the like are common, as a way to formally sanction PPP and specify the extent to which it is a permissible method of procurement for Government entities, for example, Russia and Thailand have passed specific PPP laws.
In some cases a law would be too political, or would simply take too long, and therefore PPP regimes are established in PPP regulations, as secondary legislation. This was the approach taken in Nigeria, with PPP regulations created under the public procurement law (though a PPP law was before Parliament in Nigeria, at the time of writing this text). In Indonesia, the PPP "law" was implemented through a Presidential decree (a "Perpres"), which in the legal hierarchy is inferior to laws and Government regulations. This has created difficulties where sector procurement processes implemented under Government regulations are inconsistent with the PPP decree; the Government is considering a PPP law.
In other systems, in particular Common Law systems, PPP laws are less common. The UK does not have a separate PPP law. The PPP function was created within the Treasury, thus the PPP processes were enforceable not by law, but by the intervention of a powerful central ministry which created incentives to ensure compliance.
Whatever the legal authority supporting PPP, detailed operating guidelines are needed to ensure consistency of practice amongst those implementing PPP, transparency for Government entities and investors as to applicable rules and efficiency through common practices. For example, in the Philippines, the amended Build Operate Transfer (BOT) Law is supplemented by detailed and clearly written implementing rules and regulations, the investment and coordination committee guidelines and procedures, and a series of forms and checklists that must be utilized by the implementing agencies and local Government units during project selection and development, which are periodically reviewed and revised based on lessons learned. In Colombia, Conpes issues written policy decisions, improving the PPP legal framework as it gains experience with PPP project implementation.
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3 Examples of PPP legal instruments can be found at www.world-bank.org/pppiresource.