Introduction
On May 18th, 2010, the Law For the Participation of the Private Sector in Infrastructure, Services, and Public Utilities Projects (more commonly known as the Public/Private Partnership or “PPP” Law) was published in the Official Gazette as Law No. 67 of 2010. This finally marked the end of a lengthy process of drafting, debate, criticism and anticipation during the last five years, and its issuance is a sign of the continuous efforts by the Egyptian Government to attract investments, especially in infrastructure projects.
Key Concepts and Parameters
- The provisions of the PPP Law apply to partnership agreements between the Administrative Entities and the private sector with respect to infrastructure, services, and public utilities projects, as well as consulting agreements relating thereto.
- More importantly, the agreements referred to above shall not be subject to the Public Procurement Law No. 89 of 1998, nor to Law No. 61 of 1958 for the Granting of Concessions in Natural Resources, nor to laws pertaining to the granting of concessions for public utilities.
- The term “Administrative Entities” above refers to those Ministries, Public Authorities and other public entities that are determined by decree of the Prime Minister. In other words, not all public authorities can enter into PPP agreements except if so designated by the Prime Minister.
- “Private Sector”, on the other hand, refers in the context of the PPP Law to companies and other juristic personalities – whether Egyptian or Foreign – with less than 20% Egyptian public capital. This means that any entity where there is more than 20% Government capital is not deemed to be “private sector” for the purposes of this Law.
The PPP Agreement
The core of the Law is composed of the provisions governing the PPP Agreements. Here are those key provisions:
- The scope of the PPP Agreements is to finance, build, and prepare infrastructure and public utility projects, and provide their services, or finance and develop such utilities, with an obligation to provide the maintenance for such projects and provide services and facilities necessary for the project to be useable for production or provision of services in an orderly manner throughout the term of the Agreement.
- The term of the Agreement may not be less than five years and not more than thirty. It may, however, be for a longer term with special approval from the Council of Ministers upon the recommendation of the Higher PPP Committee (of which more will be said). The value of the Agreement may not be for less than One Hundred Million Egyptian Pounds.
- The Agreement must be entered into between the competent Administrative Entity and a special purpose private sector company (“SPC”) whose only purpose is to perform the Agreement.
- The SPC may not be entitled to any payments under the Agreement except after production or sale of service has commenced and the Administrative Entity has issued a certificate of acceptance.
- The Agreement may state that the SPC sells its products or services to the Administrative Entity.
The Awarding Process
The process of awarding an Agreement begins with the Administrative Entity requesting from the Higher PPP Committee and obtaining a permission announce the call for offers for a PPP project. Once awarded, the Administrative Entity oversees the performance by the SPC of the building or preparation of the Project.
In general the Law states that the awarding of Agreements must be subject to the following principles and requirements:
- The selection of SPC must be based on a transparent, competitive and fair process.
- A short list must be prepared for each offered project. The Administrative Entity may hold discussion with all short listed SPCs, subject to confidentiality.
- The Administrative Entity must prepare the tender documents including all information required by the SPC to submit its offer. One of the required elements in such documents is the basis upon which the selection of offer will be made. This is stated in the Law in a way that ensures that the selection is not necessarily tied up to the lowest value, but rather to a set of criteria each having a declared weight. The Administrative Entity also makes its assumptions regarding
- Offers are made in two separate envelopes, financial and technical. And offers made by submitted by consortia, provided no member of a consortium may submit a competing offer on its own, or with another consortium.
- The offers are submitted to a committee formed by the Administrative Entity which includes representatives of the State Council, the Ministry of Finance and the Central Unit. This committee awards the Agreement on the basis of the procedures which will be issued by Executive Regulations.
The Higher PPP Committee and the Central Unit
The Law establishes a Higher PPP Committee (“Committee”) as the highest supervisory body for the application of the PPP Law. It is chaired by the Prime Minister and is composed of the Ministers of Finance, Investment, Economic Development, Legal Affairs, Housing, and Transport, in addition of the head of the Central PPP Unit. The Central PPP Unit is the operating body within the Ministry of Finance in charge with the administration of PPP Agreements, and with providing technical and legal expertise to Administrative Entities. It is also empowered to supervise the awarding of Agreements and to select technical experts and consultants for the bidding processes. The Higher Committee, on the other hand, is responsible for setting out the overall national strategy for PPP, approving the application by Administrative Entities into the PPP framework, ensuring the availability of funds, issuing standards and criteria of general application and approving the awarding of Agreements.
Protective Measures
The SPC is obliged, once the project is online, to maintain equity of treatment in selling its products or services. The Administrative Entity may intervene in changing the terms of building, preparation, development and other works or the terms of payment for services or amend prices for sale of products and services in cases of public policy interest, but only within the limits agreed upon in the Agreement and with the approval fo the Higher PPP Committee. Moreover, an Agreement may state the basis for its amendment upon the occurrence of unexpected circumstances, including changes in laws.
In case of failure by the SPC to operate the project properly, the Administrative Entity may, itself or through other parties, operate the project.
Introduction
On May 18th, 2010, the Law For the Participation of the Private Sector in Infrastructure, Services, and Public Utilities Projects (more commonly known as the Public/Private Partnership or “PPP” Law) was published in the Official Gazette as Law No. 67 of 2010. This finally marked the end of a lengthy process of drafting, debate, criticism and anticipation during the last five years, and its issuance is a sign of the continuous efforts by the Egyptian Government to attract investments, especially in infrastructure projects.
Key Concepts and Parameters
- The provisions of the PPP Law apply to partnership agreements between the Administrative Entities and the private sector with respect to infrastructure, services, and public utilities projects, as well as consulting agreements relating thereto.
- More importantly, the agreements referred to above shall not be subject to the Public Procurement Law No. 89 of 1998, nor to Law No. 61 of 1958 for the Granting of Concessions in Natural Resources, nor to laws pertaining to the granting of concessions for public utilities.
- The term “Administrative Entities” above refers to those Ministries, Public Authorities and other public entities that are determined by decree of the Prime Minister. In other words, not all public authorities can enter into PPP agreements except if so designated by the Prime Minister.
- “Private Sector”, on the other hand, refers in the context of the PPP Law to companies and other juristic personalities – whether Egyptian or Foreign – with less than 20% Egyptian public capital. This means that any entity where there is more than 20% Government capital is not deemed to be “private sector” for the purposes of this Law.
The PPP Agreement
The core of the Law is composed of the provisions governing the PPP Agreements. Here are those key provisions:
- The scope of the PPP Agreements is to finance, build, and prepare infrastructure and public utility projects, and provide their services, or finance and develop such utilities, with an obligation to provide the maintenance for such projects and provide services and facilities necessary for the project to be useable for production or provision of services in an orderly manner throughout the term of the Agreement.
- The term of the Agreement may not be less than five years and not more than thirty. It may, however, be for a longer term with special approval from the Council of Ministers upon the recommendation of the Higher PPP Committee (of which more will be said). The value of the Agreement may not be for less than One Hundred Million Egyptian Pounds.
- The Agreement must be entered into between the competent Administrative Entity and a special purpose private sector company (“SPC”) whose only purpose is to perform the Agreement.
- The SPC may not be entitled to any payments under the Agreement except after production or sale of service has commenced and the Administrative Entity has issued a certificate of acceptance.
- The Agreement may state that the SPC sells its products or services to the Administrative Entity.
The Awarding Process
The process of awarding an Agreement begins with the Administrative Entity requesting from the Higher PPP Committee and obtaining a permission announce the call for offers for a PPP project. Once awarded, the Administrative Entity oversees the performance by the SPC of the building or preparation of the Project.
In general the Law states that the awarding of Agreements must be subject to the following principles and requirements:
- The selection of SPC must be based on a transparent, competitive and fair process.
- A short list must be prepared for each offered project. The Administrative Entity may hold discussion with all short listed SPCs, subject to confidentiality.
- The Administrative Entity must prepare the tender documents including all information required by the SPC to submit its offer. One of the required elements in such documents is the basis upon which the selection of offer will be made. This is stated in the Law in a way that ensures that the selection is not necessarily tied up to the lowest value, but rather to a set of criteria each having a declared weight. The Administrative Entity also makes its assumptions regarding
- Offers are made in two separate envelopes, financial and technical. And offers made by submitted by consortia, provided no member of a consortium may submit a competing offer on its own, or with another consortium.
- The offers are submitted to a committee formed by the Administrative Entity which includes representatives of the State Council, the Ministry of Finance and the Central Unit. This committee awards the Agreement on the basis of the procedures which will be issued by Executive Regulations.
The Higher PPP Committee and the Central Unit
The Law establishes a Higher PPP Committee (“Committee”) as the highest supervisory body for the application of the PPP Law. It is chaired by the Prime Minister and is composed of the Ministers of Finance, Investment, Economic Development, Legal Affairs, Housing, and Transport, in addition of the head of the Central PPP Unit. The Central PPP Unit is the operating body within the Ministry of Finance in charge with the administration of PPP Agreements, and with providing technical and legal expertise to Administrative Entities. It is also empowered to supervise the awarding of Agreements and to select technical experts and consultants for the bidding processes. The Higher Committee, on the other hand, is responsible for setting out the overall national strategy for PPP, approving the application by Administrative Entities into the PPP framework, ensuring the availability of funds, issuing standards and criteria of general application and approving the awarding of Agreements.
Protective Measures
The SPC is obliged, once the project is online, to maintain equity of treatment in selling its products or services. The Administrative Entity may intervene in changing the terms of building, preparation, development and other works or the terms of payment for services or amend prices for sale of products and services in cases of public policy interest, but only within the limits agreed upon in the Agreement and with the approval fo the Higher PPP Committee. Moreover, an Agreement may state the basis for its amendment upon the occurrence of unexpected circumstances, including changes in laws.
In case of failure by the SPC to operate the project properly, the Administrative Entity may, itself or through other parties, operate the project.