In Bulgaria, the resort to public-private partnerships (PPP) as an instrument for raising private funds for projects serving the public interest is increasingly under discussion. PPP are used for almost all public utilities, such as public buildings and hospitals. However, the implementation of PPP into the Bulgarian legislative system has been disjointed and confusing. The desire of Bulgarian state institutions to resort to PPP projects is therefore in jeopardy for lack of a suitable legal framework.
An attempt for regulation
According to a survey from 2009, the number of pieces of legislation dealing with PPP in Bulgaria exceeded 30. It is characteristic of this legislative explosion that one of the first legal definitions of PPP was stipulated in the Bulgarian Physical Education and Sport Act (Закон за физическото възпитание и спорта).
Without a unified legal framework for PPP on the national level, some local governments have in recent years adopted regulations governing terms and conditions for the implementation of PPP locally. The existence of municipal ordinances providing various forms and procedures for the implementation of PPP in different Bulgarian municipalities, combined with the lack of a systematic and unified legal framework at the national level, further impede the adoption of a specialised law and increase the legal uncertainty.
Some believe there is no need for a special regulation on PPP because the Concession Act (Закон за концесиите; CA) and the Public Procurement Act (Закон за обществените поръчки; PPA) are adequate. We disagree, especially given the inconsistencies between the CA and the PPA.
PPP as regulated in the CA and the PPA
Under the PPA, contracts for services are awarded for up to four years, and may be extended to five years in special cases. Since PPP are by nature long-term contractual relationships between public and private partners, such time limits are inappropriate for PPP projects under the PPA.
Under the CA, the concessionaire is selected in an open procedure. Restricted procedures, negotiated procedures, and competitive dialogues are not available. This limitation of procurement procedures has prejudiced the selection of a private partner for PPP structured as a concession within the meaning of the CA, rendering such a selection impossible. PPP are long-term projects with a particularly complex legal, financial, economic, and technical framework, the determination of which requires extensive negotiations with eligible private partner candidates. Such negotiations may thus only be conducted in a negotiated procedure or competitive dialogue, not an open procedure. The practice of the EU member states with a developed PPP market has shown that in most of cases the selection of the private partners occurs in a competitive dialogue.
The CA does not allow payments from the public to the private partner for providing free public services. The concession is a legal instrument on the basis of which the public partner grants the private partner the right to exploit a work or service of public interest. The private partner has the obligation to build, operate, and maintain the object of the concession at his own risk. According to the CA, the consideration of the private partner is the right to operate the concession site. The consideration of the private partner may not, however, consist solely of compensation from the public partner. But if the compensation paid by the public partner has the legal effect of eliminating the private partner’s risk, then this is deemed a pure public procurement structure and not a concession. PPP may not, therefore, be implemented as concession projects under the CA if the mechanism of payment is not linked to the exploitation of the concession.
The legal framework of PPP in Bulgaria is fragmented and incoherent. A special PPP law consistent with EU law and best international practices is needed to bring uniformity to the present disorder.