Public-Private Partnership Contracts: Amendment of Regulations

November 30, 2017

The Federal Executive Branch introduced amendments to the regulations of Public-Private Partnership (“PPP”) Law No. 27,328 and implemented a transparency proceeding for consultations related to PPP contracts. In addition, the Undersecretariat of Public-Private Partnership approved the Guide for Transparency in the Management of Public Procurement.

(a) Decree No. 936/2017 - Amendments to regulating Decree No. 118/2017 of the Law No. 27,328

On November 15, 2017, Decree No. 936/2017 –which introduces amendments to the Decree No. 118/2017 of Public-Private Partnership Law No. 27,328–, was published in the Official Gazette (the “Regulations” and the “PPP Law”, respectively, and jointly, the “PPP Regime”).

The main amendments introduced to the PPP Regime are the following:

  • The restriction on projects whose exclusive purpose is the provision of workforce, the supply and provision of goods and the construction or execution of works is eliminated. The Regulations now expressly allow for the execution of this type of projects and the possibility that the repayment of these projects be made through consideration for use (paid by the users of the project) and / or public consideration (paid by the contracting entity, other entities of the public sector and/or trusts with specific purpose). When repayment of this kind of works is made by public funds, funding of payments to be made under the project must be obtained by the PPP contractor (Section 1 as amended).
  • Regarding the structuring stage of the PPP project, the Regulations now specify the scope of the intervention of the Argentine Ministry of Environment and Sustainable Development, which must intervene prior to the convening government authority issuing its assessment (Article 13 of the PPP Law Assessment), which in turn occurs prior to the call for tenders or public bidding process initiates (Section 5 as amended).
  • Environmental authorizations must be obtained prior to the project’s implementation (previously, these were required to be obtained prior to the call for bids). (Section 5 as amended)
  • Regarding the Argentine Government’s financial programming, the Ministry of Finance is required to grant approval prior to the issuance of the Article 13 of the PPP Law Assessment, and the Ministry of Treasury is required to grant approval prior to the signing of the PPP contract; (previously, both Ministries were required to approve before the issuance of the Article 13 of the PPP Law Assessment). (Section 6 as amended)
  • Regulations are modified regarding provisional reception of works, incorporating the possibility of receiving sections or functional or non-functional modules. (Section 9 as amended - Part 5)
  • The new Decree allows for different types of instruments and securities being issued in favor of the PPP Contractor, including certificates, securities, negotiable instruments and similar instruments recognizing the PPP contractor’s investments or service performance implemented through the different stages, functional or non-functional modules, provided the progress milestones are reached. The terms of such certificates, titles and negotiable instruments may provide that these are negotiable (or directly represented by listed securities, negotiable instruments or similar), irrevocable and unconditional, subject to no deductions, reductions and/or any other compensation of any kind (Section 9 as amended – part 6)
  • Regarding the financing of the project, it allows that the financial structure be guaranteed through the transfer of certificates, securities, negotiable instruments or similar instruments as mentioned above (Section 9 as amended – Part 9)
  • Regarding guarantees, it allows for the transfer of the controlling stock of the special purpose vehicle (SPV) used for the project and of the participation certificates in the case of participation trusts. (Section 9 as amended – Part 9)
  • Regarding the contractor’s selection process, the following adjustments were introduced: (i) greater flexibility is given to the possibility of extensions of the opening or offers presentation dates, as well as their terms, to allow for a broader participation of offerors; (ii) the offer assessment opinion needs only to be published online (therefore it does not need to be notified individually to all the offerors); (iii) the act that grants the PPP contract may be challenged in accordance with the conditions established in the Administrative Proceedings Law No. 19,549 and its regulations. (Section 12 as amended – Part 12, 22, 27, 31, y 35).
  • Regarding the return of contract compliance guarantees, these may be returned by the public authorities “ex officio” once the PPP contract has been complied with (Section 12 as amended – Part 40a)II)).
  • Finally, it is clarified that disputes may be submitted to international arbitration when the PPP contractors have foreign shareholders with a minimum percentage of participation that must be established in the bidding specifications of each project.

 (b) Decree No. 944/2017 – Transparent Proceeding

On November 21, 2017, Decree No. 944/2017 –which approves the regulations of the transparent proceedings provided by Section14 of the PPP Law (the “Transparency Proceeding”)-  was published in the Official Gazette.

According to the PPP Law, when justified by the complexity or amount of the project (following the parameters set forth in this regulation), a Transparent Proceeding may be allowed. The organizing authority must submit a draft of any of the documents related to the project in question (bidding general conditions, particular conditions, technical specifications, among others) to the Transparent Proceeding. The purpose of this procedure is to enable the interested parties to contribute to the development and definition of the most appropriate solution for the public interest by receiving opinions, comments and debates or rounds of consultations related to the project.

In the event of implementing the Transparent Proceeding, the organizing authority must publish calls for proposals, and together with the Undersecretariat of Public-Private Participation, publish on its website the documents submitted for consultation. The organizing authority must open a registry for those interested in participating.

The opinions, observations, proposals and/or suggestions presented during the Transparent Proceeding are non-binding and do not generate a right nor will they determine preference or compensation in favor of the interested party.

 (c) Disposition 1-E/2017 – Guide for Transparency regarding Public Private Partnership projects

On November 21, 2017, Provision 1-E/2017 –which approves the guide for transparency regarding public private partnership projects (“PPP Transparency Guide”) provided by Section24 of the Regulation– was published in the Official Gazette.

The PPP Transparency Guide has been jointly prepared by the Anti-corruption Office and the Public Private Partnership Undersecretariat; they must identify the best transparency and ethics practices applicable internationally regarding a PPP project.

The Guide includes criteria that must be applied by the interested parties in PPP projects, such as:

  1. PPP contracts must be based on genuine needs of the governmental area, defined in proper time and specifying the grounds for the decision;
  2. the processes established for the renegotiation of the respective PPP contracts must ensure transparent negotiations and protection of the interests of all interested parties;
  3. PPP projects must guarantee the disclosure of key information before and after the administrative granting acts, such as data related to the offer process and its progress, transfer of funds by the government, future commitments, contingent liabilities and the performance of the projects;
  4. Clear guidelines must be established to handle confidential information;
  5. The bidding terms and the PPP contract must contain a clear explanation of the methodology and the basis of the identification, evaluation and assignment of the risks;
  6. The bidding terms must not contain provisions that may raise a claim that they are "directed bidding terms".
  7. Clauses that illegitimately distort the conditions of accessibility of suppliers or illegitimately limit the concurrence or equality between the offerors must be avoided.

Further information:

Public-Private Partnership (PPP): Roads and Highways

New Bill on Trusts in Public-Private Partnership Contracts

Regulations to the Public-Private Partnership Law

New Legal Framework for Public-Private Partnership