Emil Lukaev of Penkov Markov & Partners in Sofia looks at the new business opportunities from public-private partnerships (PPP)
After a long wait, the Public-Private Partnership Act (PPPA) is now fact. As of January 1 2013, Bulgarian businesses can take advantage of newly regulated investment opportunities in construction, maintenance or operation of technical and social infrastructure facilities and perform other activities in the public’s interest. This model of cooperation between the state and municipalities on the one hand and business on the other hand has been successfully applied in other EU member states such as Spain, Greece, Great Britain and France.
It is noteworthy that the legal definition of a public- private partnership (PPP) envisages a long-term cooperation contract (from 5 to 35 years), whereby the private partner operates in the public interest and provides funding for its activities, while the public partner is involved through various forms of financial support specifically defined in the act. Investment by businesses in such projects should result in a profit, which is guaranteed by the rate of return on investment and obtaining financial support adjusted to that respective rate.
Public-private partnerships can occur when performing public interest activities cannot be awarded under the Public Procurement Act, the Concession Act or the Subsurface Resources Act. Another condition for such collaboration is "achieving better value for invested public resources," i.e. better efficiency in their spending, "allocating risks between the partners."
In order to protect state and municipal interests for the duration of the PPP, the law prohibits the transfer of ownership from the public to the private partner. The private partner is given the opportunity to solely maintain and manage public property, where such has been granted.
At the national level, such business projects are realised through the implementation of the National Program for Public-Private Partnership, as approved by the Council of Ministers. Annual Operational Plans are also adopted. At the local level, public-private partnerships are determined by municipal councils in their respective municipal development plans, which are being implemented by mayors. To realise a PPP project without it being included in an operational plan, or a municipal development plan respectively, is impossible.
Concluding a partnership agreement requires the following steps: adopting a Council of Ministers resolution, respectively a resolution of the municipal council or the competent authority of the body governed by public law, on opening up a selection procedure for a private partner; issuing a notice of initiation for the procedure; entering the notice into the Public Procurement Register and promulgating it in the Official Journal of the European Union; undertaking the selection procedure; and finally, adopting a decision determining the private partner.
The PPP contract can be concluded 14 days after officially notifying all stakeholders of the choice of a public partner, except in cases when the selected participant is the sole stakeholder.
The decision on selecting a private partner can be appealed before the Commission for Protection of Competition, while the commission's decision can be appealed before the Supreme Administrative Court.
The newly adopted PPPA creates the legal basis for a new incentives instrument for promoting private investment in business activities. The legislator’s aim is to fill in the gaps, related to the realisation of PPP projects, omitted by current sector specific legislation (the Public Procurement Act, the Concession Act, the Subsurface Resources Act). The effect of this new form of cooperation between the public and private sectors is still to be determined in the years to come.
Emil Lukaev
Attorney at Law
Penkov Markov & Partners
Sofia