Law 93 of September 19, 2019 and Executive Decree 840 of December 31, 2020 (hereinafter the “Regulations”) are intended to create and establish the operating procedure of the Public-Private Partnerships regime for the development of the private investment, as well as the social development by promoting the development of infrastructure and public services in the country, contributing to the economy and job creation and competitiveness, as well as improving the living conditions of the general population.
The Regulations are applicable to the Central Government, to the autonomous and semi-autonomous entities of the Non-Financial Public Sector, to the municipalities and to commercial companies in which the State owns at least 51% of the capital stock.
Public-Private Partnerships for Development (hereinafter “PPP”) are private capital linkage modalities in which experiences, knowledge, equipment, technology, and technical and financial capacities are incorporated, and risks and resources are distributed, with the aim to create, develop, improve, operate and/or maintain public infrastructure for the provision of public services.
The PPP´s regulated by the Regulation are those that are materialized in a long-term contract signed between one or more entities (included in the scope of the Regulations) and a legal person from the private sector, for the design, construction, repair, expansion, financing, exploitation, operation, maintenance, administration and / or supply of a good or service to the contracting public entity and/or to the end users of a public service.
In a PPP, the PPP contractor is totally or partially in charge of financing the construction, exploitation, operation and maintenance of the public asset and assumes project risks, according to each case. Payments for the investment made, as well as operating and maintenance expenses, may be totally or partially in charge of the contracting public entity and/or the end user of the service. In the PPP contracts, service levels will be established and must be fulfilled by the PPP contractor. PPP contracts may include formulas and/or mechanisms for the relationship between compliance with service levels and the determination of the amount of payment to which the PPP contractor will be entitled, always focusing the PPP contract on the common good and social benefit.
Below some relevant facts of these Regulations:
- PPP Agreement: it is the legally binding long-term agreement of wills, entered between the contracting public entity and the PPP contractor, in which the conditions, rights and obligations of the parties for the execution of a PPP project are established. The tender documents, as well as the technical and economic offer of the APP contractor, will form an integral part of the respective APP contract.
- PPP Project: refers to the formulation, financing, construction, development, use, enjoyment, exploitation, maintenance, operation, modernization, expansion and/or maintenance, operation, modernization, expansion and/or improvement and public infrastructure, associated equipment and other structures used to the provision of public services; the rehabilitation, modernization, operation, exploitation and/or maintenance of public infrastructure, associated equipment and other structures used to the provision of public services; and/or the provision of associated public services in each case.
- Classification of PPP´s according to their function: (i) self-financed and; (ii) co-financed.
- Value of the PPP Project: With the exception of the municipalities and in accordance with the rules established in the Regulations, it is forbidden to enter into a PPP contract when the value of the corresponding project is less than fifteen million dollars (US$15,000,000.00).
For more details of the bidding process, requirements and prohibitions of bids under the APP regime, the rights and obligations of the APP Holder Company and reporting obligations of an PPP Agreement, please do not hesitate to contact us for a comprehensive advice tailored to your needs.