General frameworki Types of public-private partnership
As previously indicated, PPPs were not regulated and institutionalised in Lebanon before the issuance of the PPP Law. The foregoing did not prevent certain PPP projects from being implemented by some ministries or other government agencies, such as the roll out of the first mobile telecommunications network procured by the MoT in 1994 and awarded to LibanCell and FTML on a BOT basis. The MoT reclaimed the network's infrastructure in 2004 and procured their management to Alfa and MTC. Another notable example is the mandatory vehicles-inspection stations and services project procured by the MOIM in 2002 on a BOT basis. The private investor designed, financed, built, operated and handed over to the MOIM four vehicles inspection stations under a nine-year contract. Because of the delay in procuring the expansion of further vehicles-inspection stations, a management contract was entered into with the private investor in 2013 in relation to the four existing stations until a new tender for the expansion of the existing station was launched. This tender was actually launched in 2016 but the administrative decision awarding the project was annulled by the Shura Council for violating the law. To date, the BOT model remains the main model used by ministries and other procuring entities. With the issuance of the PPP Law and the development of infrastructure requiring operations and management (e.g., mobile telecommunications network and vehicles inspection stations), further models are expected to be used. As previously indicated, several initiatives are being considered by several ministries and government agencies, and we expect further PPP opportunities to arise in 2019.ii The authorities
The HCPP plays a pivotal role in the inception, procurement and implementation of PPP projects. The HCPP is chaired by the president of the CoM and comprises the competent minister (depending on the project being procured), the Minister of Justice, the Minister of Finance, the Minister of Economy and Trade and the Minister of Labour. The HCPP has a secretary general who heads its Secretariat General (SG) and handles the daily business of the HCPP.
PPP projects are proposed by the chairman of the HCPP or by any competent minister. Municipal projects are proposed by the chairman of the municipal council. A preliminary study is required to be submitted to the HCPP. It will be considered by the SG, which will prepare a report concerning the feasibility of the proposed project and submit it along with its recommendation to the HCPP. The HCPP will then decide whether to proceed with the proposed project. If the HCPP decides to proceed, it will form a committee (the PPP Committee) chaired by the Secretary General and comprised of representatives of the competent minister, the Ministry of Finance, the chairman of the relevant regulatory authority and the chairman of the municipal council for municipal projects. The PPP Committee will be assisted by a work team, including consultants appointed thereby, a representative of the public entity who will benefit from the project, experts from ministries and regulatory authorities and a representative of the SG whose role is to coordinate the efforts of the work team. The PPP Committee, assisted by the work team, will prepare a complete study of the project covering technical, economic, legal and financial aspects, including the project award criteria and the level of interest of potential investors and lenders and will prepare a report and raise it along with its recommendation to the HCPP. Once the HCPP approves to proceed with the procurement of the project, it will transfer it to the CoM for its approval. Following the approval of the CoM, the PPP Committee launches the procurement process for the award of the project.
According to the PPP law, any ministry or other public entity or municipality may engage in PPP projects. As previously indicated, PPP projects may be proposed either by the chairman of the HCPP or by the competent minister, that is, the minister overseeing the public entity intending to engage in PPP projects.iii General requirements for PPP contracts
Any project of public interest initiated by the government, public entities or other government bodies (with the exception of municipalities, which have the option of whether to subject such projects to the PPP Law) in which the private sector contributes through financing and management and at least one of the following activities – design, building, development, refurbishment, equipment, maintenance and operations – is subject to the PPP Law, including telecommunications, power and civil aviation projects.
The PPP Law provides that the PPP contract should address the following matters:
- the rights and obligations of the parties;
- the basis for the financing of the project;
- the time period of the PPP contract, provided that it does not exceed 35 years from the signature date of the PPP contract;
- the revenue that the project company will generate from the public entity or that the public entity will generate from the project company, depending on the nature of the project, in consideration of the project company carrying out the required activities pursuant to the PPP contract and the terms of payment;
- fees or taxes relating to the PPP project that the government or municipal council allows the project company to collect in the name and on behalf of the concerned public entity;
- the key performance indicators applicable to the project;
- reports relating to the implementation of the project that the project company has to prepare and raise to the public entity and the HCPP;
- the risk allocation between the public entity and the project company and the measures to be adopted for the mitigation of such risks;
- the limitations applicable to the modification of the initial terms of the contract;
- the guarantees, undertakings and representations that may be granted by the project company, the private investor or the public entity for the implementation of the project;
- the assets and property owned by the public entity put at the disposal of the project company throughout the term of the project for the fulfilment of its obligations, as well as the rights and obligations of the project company in relation to such assets and property;
- the transfer of the project to the public entity upon expiry of its term;
- project and services continuity upon expiry or termination of the PPP contract or upon breach by the project company of its contractual obligations thereunder;
- remedies and penalties applicable to contractual parties in the case of a breach of their contractual obligations and detailed procedures for the implementation of such penalties; and
- dispute resolution procedures including mediation, and national and international arbitration.
Although the PPP Law does not specifically require the HCPP to conduct a value-for-money exercise before approving the procurement of a project on a PPP basis, the PPP Law requires the PPP Committee to carry out a complete study of the project covering technical, economic, legal and financial aspects, including the project award criteria and the level of interest of potential investors and lenders and to raise recommendations in this respect to the HCPP, which transfers the file to the CoM for the final approval on the procurement of the project on a PPP basis. The PPP Law provides that implementation decrees may be issued by the CoM following the proposition of the president of the CoM. Such decrees have not yet been issued and further requirements may be set out in such instruments if and when issued by the CoM.
As previously indicated, the study of the PPP project covering technical, economic, legal and financial aspects should be approved by the HCPP and the CoM for the project to be procured by the PPP Committee in accordance with the procedure set out in the PPP Law.
Bidding and award procedurei Expressions of interest
Once the approval of the CoM is granted for the procurement of the project on a PPP basis, based on the studies conducted by the SG and the PPP Committee and approved by the HCPP and the CoM, the PPP Committee starts the procurement process. The process starts with the advertisement of a public invitation for interested parties, including the prequalification criteria, which should be set out in accordance with the nature and scale of the project. The invitation should be published in local and international newspapers, specialised publications and the website of the HCPP one month before the deadline for the submission of expressions of interest. The PPP Committee examines the prequalification requests, with the assistance of the working team, assesses such requests based on the published prequalification criteria and raises a report to the HCPP, including a recommendation of prequalified and non-prequalified participants for the issuance of the final decision. Once the HCPP takes a decision in relation to the prequalified and non-prequalified participants, the result of the prequalification process is announced, provided that at least three participants are prequalified; otherwise, the process should be repeated.ii Requests for proposals and unsolicited proposals
The PPP Law is silent with regard to unsolicited proposals.
Once the prequalification phase is completed, the PPP Committee, with the assistance of the working team, will prepare the request for proposals (RFP), which should include the following:
- the PPP project's evaluation criteria, which should be objective, measurable, subject to evidence or testing, and set out in accordance with the scale and nature of the project; and
- instructions to bidders, as well as all financial, technical and administrative components of the project, enquiry and objection procedures, and procedures to make determinations in relation to objections.
The PPP Committee will share the draft PPP contract with the prequalified bidders and conduct, with the assistance of the working team, consultations with the prequalified bidders and lenders in an objective and transparent manner to reach a comprehensive understanding of the technical and financial requirements of the project. The PPP Committee will amend, if necessary, the draft RFP in accordance with the result of such consultations. The PPP Committee will then raise the final draft of the RFP to the HCPP for approval. Once such draft is approved, the chairman of the HCPP will raise it to the CoM for final approval thereon. The draft RFP for municipal projects is raised by the chairman of the HCPP to the chairman of the municipal council following the HCPP's approval thereon.
Once the RFP is approved in accordance with the foregoing process, the PPP Committee notifies it to all prequalified participants, who are then required to submit their technical and financial proposals to the PPP Committee in accordance with the instructions set out in the RFP. If fewer than three proposals are submitted, the project should be retendered. If only two proposals are submitted in response to the retendering procedure, then the procurement process may be resumed, subject to the approval of the HCPP.
The PPP Committee will open the technical proposals in the presence of the participants to assess their compliance with the requirements of the RFP. The PPP Committee may address enquiries to the participants or request that they provide missing requirements and confirm certain undertakings within time frames it may determine in this respect. Technical proposals that are not compliant with the RFP requirements should be rejected and the related financial proposals should be returned to the rejected participant without opening them. The rejected participants will be notified of the decision and the causes thereof.
The PPP Committee will assess, with the assistance of the working team, the remaining technical proposals in accordance with the project evaluation criteria set out in the RFP, and the PPP Committee will determine the technical proposals that have been found to be compliant with the evaluation criteria. If at least two technical proposals have not been found compliant, the project should be retendered for the sake of securing competition in bidding. The PPP Committee will then open the financial proposals submitted by the participants whose technical proposals have been accepted in the presence of such participants, and raise to the HCPP a report classifying the proposals in light of the technical and financial evaluation. The PPP Committee will also raise with this report its recommendation as to the best offer based on the project evaluation criteria set out in the RFP.
The PPP Committee may, by delegation from the HCPP, conduct negotiations with the participant who has submitted the best proposal, in order to enhance its proposal from a technical perspective. The project will be awarded to the participant who has submitted the best proposal based on the evaluation of the PPP Committee in accordance with the project evaluation criteria set out in the RFP with the approval of the HCPP. The PPP Committee will announce the result of the procurement process and notify the unsuccessful participants of the causes of the rejection of their proposals.