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June 28, 2022

Public-Private Partnership: New Changes

By Loredana Van de WAART, Partner, GRUIA DUFAUT LAW OFFICE

The legislation governing Public-Private Partnerships (PPP) has just undergone further changes, aimed at creating the premises for an effective use of this mechanism in public investment projects having a major impact in the economy. So far, the public-private partnership has been governed by several regulations, but all these have failed notably because of the lack of guarantees/funding from the public partner. Thus, Government Emergency Ordinance no. 39/2018 on public-private partnerships, published in Official Journal no. 427 as from 18.05.2018, aims at eliminating the legal provisions that have been blocking PPP projects, in particular those concerning the partial funding of projects and the possibility for the public partner/another public entity to guarantee such projects.

The Objective of PPP: The purpose of the public-private partnership is the execution or/and rehabilitation and/or extension of one or more assets that will belong to the public partner and/or the operation of a public service. Such partnerships may also be concluded for the provision of community services, as well as for activities in the field of sectoral procurement. This partnership can take two forms, namely (i) the contractual public-private partnership (under a contract between the public partner and a new company, owned by the private partner) or (ii) the institutional public-private partnership (whereby a new company is created, owned by the public and private partner). The law stipulates the main rights and obligations that the public-private partnership contract must provide.

Initiation, Award and Approval

PPP projects will be initiated by the public partner, who is required to draw up an explanatory memorandum, in accordance with the provisions of the Ordinance. Public-private partnership contracts will be awarded in accordance with public procurement legislation (Laws no. 98, 99 or 100/2016), depending on the conclusions of the explanatory memorandum.

These contracts must be approved by the Government (for projects of the central public administration) or, as the case may be, by the Local/County Councils, for projects of the local public administration. The National Commission for Strategy and Prognosis will have a significant role in the implementation of strategic projects. Thus, in this case, the Commission will also bear the costs generated by the elaboration of the explanatory memorandum and the award procedure.

Project Funding

The new Ordinance provides several important clarifications regarding the funding of the PPP project. Thus, the Ordinance stipulates the creation of a special fund for the funding of public-private partnership contracts, ensuring the resources needed for public-private partnership projects. In accordance with the Ordinance, this Fund will be established no later than one year from its entry into force.

Moreover, the contribution of the public partner from financial resources other than non-repayable external funds and the national contribution for such funds will be limited to 25%.

Attention! The new regulation extends the public partner’s possibility to contribute to the public-private partnership through payments made to the private partner or to the project-company or for investments, as the previous conditions have been eliminated; these conditions made projects non-fundable or poorly fundable (the old regulation provided the possibility of the public partner to undertake payment obligations only in the stages preliminary to the execution of the investment and only after the use of the private partners’ funds). Furthermore, the Ordinance stipulates the possibility for the public partner to supply guarantees to the contract funders, which are credit institutions or financial institutions.

Overall conclusion: Compared to the old regulations, the new legislation is more flexible, more permissive and more adapted to the requirements for a successful implementation of such projects. It stipulates more guarantees to be paid by the public partner/other public entities, aiming at making such projects more interesting for both private partners and funders. We hope that the authorities have the necessary ability to launch and manage them and to secure the necessary funds for their implementation as quickly as possible.

Note: The information presented in this document does not replace legal counselling. Please note that this article offers general and non-exhaustive information regarding the legislation governing PPP. Any decision to act or not to act should not be based on this information, but on specific legal counselling.

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