Noah Edwin Mwesigwa and Hellen Nakiryowa of Shonubi Musoke & Co Advocates in Kampala look at the impact of the Ugandan PPP law
Over the last decade, Uganda has embraced the use of public private partnerships (PPPs) as a means of implementation of several projects and as a viable alternative to public funding in public infrastructure and services provision. Today, the government continues to look to the private sector for capital and skill in the implementation of crucial infrastructure projects.
In spite of the growing popularity of PPPs in Africa, Uganda currently lacks a formative regulatory framework specifically governing PPP arrangements. These arrangements have been and continue to be purely contractual in nature with guidance being drawn from the 2010 National PPP Framework policy.
The Public Private Partnerships Bill, 2012 (the Bill) is an attempt to fill this void and is set to provide the much needed legal framework and institutional structures to regulate and streamline the development and implementation of PPPs in Uganda.
The Bill is fairly ambitious and has a wide application. In its objectives it seeks to provide for the functions of the various players in the PPP processes and to regulate the procurement, implementation, maintenance, operation, management and monitoring of PPPs from project inception to conclusion.
The Bill goes on to lay down the core infrastructure areas for which PPP arrangements may be entered. These include transportation, ICT, social infrastructure, water management, energy related facilities, oil and gas pipelines, tourist infrastructure, sports and recreational facilities, mining as well as any strategic industries. The Bill also limits its application to government ministries, departments and bodies that carry out a public function (the contracting authorities). Local governments are excluded.
The Bill requires the private party to be incorporated in Uganda as a special purpose company for purposes of implementing a specific PPP. The Bill goes on to limit any share capital and shareholding alterations to such company without the approval of the Minister of Finance (the Minister) and the respective Minister of the respective ministry under which the project falls. Such corporate restriction on shareholding adjustments appears relatively onerous.
The Bill requires that prior to a PPP project taking off, a contracting authority conduct a cost benefit analysis of the project and following confirmation of the project’s suitability for implementation; register the project with the relevant Ministry as well as appoint the technical manpower required in the PPP processes. A feasibility study of the project is also required to be conducted and approved by the Ministry. Upon such approval, the procurement of the private party may commence. Where the government is to finance the project, Ministerial confirmation on the availability of funds for implementation of the PPP project will be required prior to procurement.
In a bid to enhance governance and transparency, the Bill requires every PPP project to have specified manpower requirements. This Project team is required to develop the project for procurement, procure the private party and inform on the progress of the project. An evaluation committee is also required to evaluate bids.
The Bill in recognition of the apparent lack of manpower within government permits the appointment of personnel. It is therefore most likely the government will routinely rely on the private sector to provide this much needed manpower.
In line with international best practice, PPP procurement laws have been separated from the mainstream procurement laws under the Bill. The Bill affords government the power to identify and appraise a PPP private partner through a specific procurement process adopted under the Bill. This can involve competitive or non-competitive procurement methods. Competitive procurement may be achieved through open or restricted bidding and may be used in combination with competitive dialogue procedures and or negotiated procedures.
Non-competitive procurement on the other hand may be achieved by way of direct procurement or private initiatives through unsolicited proposals. This is however subject to competitive bidding once approved.
The evaluation of bids is equally emphasized under the Bill. Grounds for disqualification under the Bill are laid out and the PPP bids are generally to be evaluated using the lowest price criteria taking into consideration the technical, professional and financial capacity of the bidder. In looking at the evidence of funding, the share capital, capital secured by the private party in form of loans and credit and the necessary guarantees or assurances required for obtaining the capital credits are looked at cumulatively.
The Bill also provides for the nature and form that a PPP agreement may take. It envisages seven PPP models. These include a concession, operation and maintenance agreement, lease develop and operate agreement, build, own and maintain agreement, build own operate and transfer agreement, design build finance and operate agreement and the build own and operate agreement.
Please note that irrespective of the PPP model that is adopted, the Bill requires that any PPP agreement contain clear and detailed terms including the type of PPP, descriptions of the rights and obligations of the parties, the project specifications, sums to be paid to the private party, financing of the project, risk and profit allocation between the parties, insurance policies for the project, environmental and intellectual property protection guarantees and compensation and reparation.
The Bill further provides that all responsibilities and risks of financing the obligations of a private party under PPP to be borne by such private party while the government is prohibited from borrowing, guaranteeing or raising a loan for a PPP except as approved by Parliament under the Constitution. Projects above certain values also require Cabinet approval.
The Bill further requires for all PPP projects to be audited every financial year from the year of project inception to that of project conclusion by the Auditor General or such other auditor appointed by the Auditor General.
The Bill is a welcome piece of legislation but however presents many challenges in the form of inconsistencies, omissions, ambiguities and regulation. It is hoped that these will be addressed before it finally becomes law.
Shonubi Musoke& Co Advocates
About the author
The author practices in all fields of general business law/corporate and commercial law including arbitration and litigation. He is rated by several international publications as a leading lawyer in this field. He routinely advises local and international clients on diverse legal issues ranging from routine matters to complex structures/transactions. He also serves as a director/company secretary on several boards.
Mr Mwesigwa graduated from Makerere University Kampala with an honors degree, holds a diploma in legal practice from the Law Development Centre, attended the Academy of American & International Law, Dallas Texas, and has attended numerous legal courses locally and internationally and is undertaking the distance LLM program by the College of Law of England & Wales. He has authored several articles on legal developments and laws in Uganda.
He is an active member of the International Bar Association, Uganda Law Society and the East African Law Society.
Shonubi Musoke & Co Advocates
About the author
The author practices in all fields of general business law with an emphasis on banking and finance. She routinely advises local and international clients on diverse legal issues ranging from routine matters to complex structures/transactions and projects.
Ms Nakiryowa graduated from Makerere University Kampala with an Honors Degree, holds a Diploma in Legal Practice from the Law Development Centre and holds a Masters Degree in Law (banking and finance) from Leeds University, England. She was the successful recipient of a Tullow Scholarship having beaten off stiff competition to emerge as one of the beneficiaries of these much sought after scholarships. She has attended numerous continuing legal education courses locally and internationally.
She is an active member of the Uganda Law Society, the East African Law Society and several alumni associations.