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OUG on Public Private Partnership – adopted. New things

de Razvan Diaconu , 14.5.2018

The Government adopted on Thursday the emergency ordinance on public-private partnership (PPP), which amends previous regulations.

The law from 2016 remained inapplicable because “ implementing rules to which it refers have not been adopted“, writes in the explanatory for this legislation approved on Thursday.

In December last year, Tudose government also approved an ordinance with the same subject, also without an explanatory memorandum.

New provisions

According to the Government, the objective of a PPP type of association is to achieve or, depending on the case, rehabilitate and/or expand a good or some goods that will belong to the patrimony of the public partner.

In the new legal provisions, the term PPP “project” has been replaced by “contract”, “to remove the legal uncertainty.”

For the same purpose, “it has been stated in several provisions that granting certain categories of rights to the private partner or the project company under the public-private partnership contract will not involve a new award procedure.”

Additions to and modifications refer to:

  • Regulating the possibility to develop under PPP projects that involve exclusively the operation of a public service
  • Clarification of the concept of financial closure (the date when all condition precedents have been met for the entry into force of the financiers’ obligation to provide the funds needed to finance the PPP contract)
  • restricting the public partner’s participation with public funds in the investment phase to 25% of the investment to give priority to attracting private funds for implementing public investment, representing financial resources other than non-reimbursable external funds and the national contribution corresponding to such funds
  • the creation within one year of a special Fund for financing PPP contracts that fall under the category of strategic projects
  • the special financing fund will consist of public revenue from tax and non-fiscal financial resources, including subsidies, provided for by the special law on the establishment of the special fund
  • removing regulatory overlaps with the law on public procurement and concessions made following the adoption of OUG 104/2017 for amending and supplementing Law 233/2016 on PPP, according to the explanatory memoranda.

Also, among the main elements of PPP, we can also note:

  • the duration of at least 5 years of contractual relationships, allowing the private partner to recover the investment and obtain a “reasonable profit”
  • the pooling of private with public funds or, where applicable, risk sharing between the public and the private partner depending on the ability of each signing party to assess, manage and control a particular risk.
  • the public partner will be able to transmit or establish, in favour of the project company, the right to collect and use tariffs from the users of the products/products or public service that form the object of the public-private partnership contract.
  • The duration of the public-private partnership contract is determined mainly by the depreciation period of the investments to be made by the project company and depending on the way these investments are financed.
  • The duration shall be established so that:
    • to avoid artificially restricting the competition
    • to ensure a reasonable profit for the respective field following the exploitation of the good/goods and the operation of the public service that forms the object of the project
    • to ensure a reasonable and affordable price for the services that form the object of the project, to be paid by the beneficiaries of the services.

The steps required to conclude and start fulfilling the obligations of a PPP contract are:

  • drafting a substantiation study by the public partner;
  • approving the substantiation study by the Government for central public administration projects or, where applicable, by the deliberative authorities for local government projects;
  • the procedure for awarding the public-private partnership contract;
  • the approval of the public-private partnership contract that results from the finalization of the negotiations and initialized by the government for the projects of the central public administration, or, where applicable, by the deliberative authorities, for projects of the local public administration;
  • the signing of the public-private partnership contract;
  • the fulfilment of all the condition precedent stipulated in the public-private partnership contract, including the financial closure.

The public partner has the obligation to send to the National Institute of Statistics, within 30 days since signing, a copy corresponding to the original of the public-private partnership contract.

The Government may decide that certain projects that it considers strategic will be prepared and awarded on behalf of the public partners that are to implement them, by the National Commission for Strategy and Prognosis.

The initiative to implement a public-private partnership project belongs to the public partner.

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