General frameworki Types of public-private partnership
Pursuant to the PPPCL, PPPs may be contractual or institutional. Depending on the subject matter of the project and relevant industries, a PPP may or may not include elements of concession; the PPPCL applies to PPPs regardless.
A contractual PPP is where all the rights and obligations of the parties are solely regulated by a public contract, the mandatory content of which is prescribed by the PPPCL. A public PPP contract that has the elements of a concession project could additionally regulate other matters relevant to the respective industry in which the project is realised.
An institutional PPP is based on the relationship between the public and private partner being the shareholders of a joint venture company, which could be established by the public and private partner either by the subscription of respective pecuniary or non-pecuniary contributions in the company, or by a capital increase by the private partner in the company owned by the private partner. In the case of an institutional PPP, upon the selection of a private partner, public and private partners enter into the public contract (with or without the elements of concession) and agreement on the incorporation of a joint venture company, which will be the company in charge for the realisation of the respective PPP project.
Pursuant to the PPPCL, the concession represents a contractual or institutional PPP with the elements of concessions governing commercial use of a natural resource or publicly owned assets in general use owned by the public partner. The private partner is contractually assigned the right to use the assets in the ownership of the public partner for an agreed period. The private partner bears the risk of commercial usage of the subject of concession. The concession always assumes payment of a concession fee, which is commonly paid by the private partner to the public partner. The PPPCL recognises concessions for public works and public services.
Concessions may be used for:
- the exploration and exploitation of natural resources and operations in protected areas, as well as for use of other protected natural resources;
- energy projects;
- infrastructure projects (e.g., ports, public roads, public transportation, airports and railways); and
- development projects in the fields of sports and education, culture, community, health and tourism.
Pursuant to the PPPCL, public authorities are entitled to independently initiate the procedure of realisation of PPP projects from their respective competence. These authorities are:
- the state authority, organisation, institution and other direct or indirect users of budgetary funds, as well as the social security organisation;
- the public company;
- the legal entity conducting the operation of general interest, which must meet at least one of the following conditions:
- at least 50 per cent of members of the management of the legal entity must be the representatives of the public authority;
- over 50 per cent of voting rights in the legal entity must belong to the representatives of the public authority;
- the public authority must supervise the operations of the legal entity;
- the public authority must hold more than 50 per cent of shares in the legal entity; or
- more than 50 per cent of financing of the legal entity must come from the public authority; and
- the legal entity established by the public authority that performs an operation of general interest and meets at least one of the conditions set out in the sub-items of (c).
Pursuant to the PPPCL, the concession grantor could be:
- central government;
- the government of the relevant autonomous province;
- the assembly of the relevant local self-governance unit;
- a public company; or
- the legal entity authorised for awarding the concession by a separate law.
The PPP project proposal is submitted to the PPP Commission for its evaluation and opinion on whether the respective project could be realised in PPP form.
If the PPP project is proposed by Serbia or a public authority, and if the estimated value of the respective project exceeds €50 million, the PPP Commission mandatorily requests the opinion of the Ministry of Finance.
The Ministry of Finance, competent authority of the autonomous province or local self-governance unit performs the supervision over the implementation of public contracts. Apart from the reporting supervision, the aforementioned authorities are entitled to initiate the supervision through respective inspections and the competent tax authority.iii General requirements for PPP contracts
PPP contracts are executed for a term of between five and 50 years. If the subject of the PPP contract is a concession, the term of the respective PPP contract is determined within the above time frame, unless a different deadline is set out by a separate law governing the respective industry in which a concession may be granted.
The term of the PPP contract must not hinder competition more than necessary to procure the amortisation of the investment of the private partners and reasonable return of the investment. If additional time is needed following the elapse of the term of the PPP contract, a new PPP contract may be entered into with the election of private partners in the manner and procedure set out by the applicable law.
The PPPCL does not recognise any value thresholds for contracts, services and projects contracted or not contracted through a PPP structure. With regard to contracted PPP projects, the project value ranges between several million euros to several hundred million euros. The most important criteria for approving a PPP project by the PPP Commission is not purely the value of the proposed project but predominantly other criteria, such as:
- public demand for the operation or services;
- the resources or competences of the public partner to independently realise the respective project;
- the efficiency and effectiveness of the proposed investment;
- testing the advantages and disadvantages of a make-or-buy decision;
- determining and testing the project's value for money;
- assigning a public sector comparator to the respective project;
- an investment analysis (i.e., financial and economic flow);
- analysis of vulnerability and sustainability of the proposed project; and
- risk analysis and a distribution of risks review.
The evaluation of the PPP project proposal is conducted by the PPP Commission, which, on the grounds of the above, issues an opinion on whether the PPP project proposal could be realised through a PPP structure, as well as which model of PPP would be the most suitable model. The public authority is obliged to submit the PPP project proposal for adoption to the following authorities:
- central government;
- the government of the relevant autonomous province; or
- the assembly of the relevant local self-governance unit.
Only PPP project proposals that pass the above tests and are approved by the competent authorities and the PPP Commission will be selected for implementation.
Bidding and award procedure
The PPPCL sets out the principles for PPP, which include the principle of equal and fair treatment of all parties' participation on the process of selecting the private partner, prohibiting any form of discrimination in the process of selection or award. This principle also obliges the public partner to ensure that all the bidders are provided with complete and accurate information on the award procedure, and standards and criteria for selecting a private partner. No bidder can be subject to favouritism or advantage over another bidder in respect of time, information or access to the public authorities awarding the public contract.
The selection and on award procedures must be based on objective and publicly announced criteria known in advance, and the grounds and merits for rendering this decision must be provided to each bidder that participated.
Pursuant to the PPPCL, the selection of the private partner is conducted either through the procedure governing the public procurement regulated by the Public Procurement Law (Official Gazette of the Republic of Serbia, Nos. 124/2012, 14/2015 and 68/2015) (PPL) or for awarding of the concession regulated by the PPPCL, elaborated in more detail below.
If the PPP is to be granted as a concession, the tender documents must contain the:
- form, content and term of the bid;
- description of the subject of concession;
- draft concession agreement or main elements of the concession agreement;
- conditions and proofs, which the bidders must meet and document in the process; and
- specification of other requirements the bidders should meet.
The tender documentation must be prepared in the manner enabling the comparison of received bids for the concession award.i Expressions of interest
The procedure of awarding a public contract is initiated by a public announcement in the Official Gazette of the Republic of Serbia on the public authority's website and on the Portal of Public Procurement. Public invitation is, when necessary, announced on the Tenders Electronic Daily website, the internet edition of the appendix to the Official Gazette of the European Union. This is a mandatory requirement under the PPPCL when the value of the PPP project exceeds €5 million.
Pursuant to the PPL, the procedures of public procurement are as follows:
- an open procedure, in which all interested parties may submit the bid;
- a restrictive procedure:
- the submission of expression of interest, upon which the public partner examines the qualification of the parties that submitted an expression of interest; and
- the submission of bids only by parties whose qualification has been confirmed by the public partner;
- a qualification procedure:
- the submission of expression of interest, upon which the public partner examines the qualification of the parties that submitted an expression of interest; and
- the submission of bids only by parties whose qualification has been confirmed by the public partner, whereby this procedure is applied when the public partner cannot plan the scope, quantity and time;
- a negotiation procedure, either with or without an announcement of invitation for the submission of bids;
- competitive dialogue;
- design concourse; and
- a low-value public procurement.
As PPP projects are projects of predominantly high value and the subject of the projects include design, financing, construction, reconstruction, maintenance and operation, the award of a PPP contract is not, in practice, realised in design concourse or low-value public procurements, nor in a qualification process.
The most common procedure is the restrictive procedure. However, in highly complex projects in which open or restrictive procedures cannot be implemented, the public partner conducts competitive dialogue until it recognises the solution or solutions to enable the efficient realisation of the PPP project. Competitive dialogue has been applied in several PPP projects recently in Serbia, owing to their complexity and the necessity to determine the best technical solution.
In the case of a concession, before preparing the concession proposal, the public authority appoints an expert team to determine the value of concession, prepares the feasibility study and undertakes all other necessary actions preceding the awarding of the concession. Based on economic, financial, social and other parameters, as well as the environmental impact assessment study, the competent public authority submits the concession act proposal to the above-mentioned authorities at the national, provincial or local level.
After the adoption of concession by the relevant competent authorities, the concession must obtain the approval of the PPP Commission and subsequently by the Ministry of Finance.
Awarding a PPP with concession elements is initiated by the announcement of a public invitation, which must contain:
- data on the concession grantor;
- the subject of the concession and term of the concession;
- the deadline for submission of bids;
- technical, financial and other conditions that the bidders must meet and relevant supporting evidence;
- criteria for selecting the best bid;
- the date of submission of information on the outcome of the selection process;
- an authority competent to decide upon the requests for protection of rights; and
- other relevant data.
The public invitation should state whether the procedure of selection of the best bidder is conducted with or without prequalification.
If the estimated concession value exceeds €50 million, the public authority may decide that the concession is awarded in phases, if this is envisaged in the concession.ii Requests for proposals and unsolicited proposals
Expression of interest and bids are submitted within the deadlines set out by the public authority, bearing in mind the complexity of the public contract and the time necessary for the preparation of a bid.
If the procedure of electing a private partner is conducted in accordance with the PPL, the following deadlines are considered reasonable and cannot be shorter than the following:
- In an open procedure, the shortest deadline for the receipt of the bids is 52 days from the date of announcement of the public invitation.
- In a restrictive procedure, following negotiation with announcement of public invitation and competitive dialogue conducted by the public partner:
- the shortest deadline for receipt of the bids, or receipt of expression of interest or qualification, is 37 days from the sending of the public invitation; and
- the shortest deadline for receipt of bids is 40 days from the date on announcement of the public invitation.
The deadline for the submission of bids for PPPs with concession elements is at least 60 days from the date of the announcement of the public invitation in the Official Gazette of the Republic of Serbia.
The PPPCL recognises the concept of an unsolicited proposal. The public authority may consider and accept the unsolicited proposal of the private partner if the unsolicited proposal does not relate to the project for which the procedure of award of a public contract or invitation has already been initiated or announced. Following the submission of an unsolicited proposal, the private partner will inform the public authority on the value of the prepared documentation, whose value the public authority shall reimburse to the private partner in the event of an award of the public contract to the private partner not being the one that has submitted an unsolicited proposal.
Within 90 days of the date of receipt of an unsolicited proposal, the public authority shall determine whether the project serves in the public interest. The public authority is entitled to discuss all aspects of the proposed project, including the justification of the costs and expense of the preparation of the project. If the public authority determines that the unsolicited proposal serves the public interest and decides to start the procedure of awarding the PPP contract, the public authority is obliged to initiate either the public procurement procedure or concession award, as elaborated above. If the procedure is initiated based on an unsolicited proposal, this must be stated in the public invitation.
A private partner that has submitted an unsolicited proposal is entitled to take part in the procedure of awarding the public contract if its participation does not hinder competition. If the private partner that has submitted an unsolicited proposal has competitive advantages over the other bidders, the public authority must provide all other bidders with information that could level the playing field. If the competitive advantage of the private partner that has submitted an unsolicited proposal cannot be neutralised, the public partner must exclude this private partner from the procedure of awarding of the public contract.iii Evaluation and grant
The best bidder is selected in accordance with the selection criteria, set in advance in the invitation for submission of bids and tender documents. The best bidder is selected in a competitive and non-discriminatory manner. The criteria for the evaluation of bids are 'economically most favourable' or the 'lowest offered price'. The criteria of an 'economically most favourable' offer includes:
- offered price, being the 'net present value' related to overall costs in the agreed term without value added tax;
- offered discounts;
- deadlines for providing respective services or operations;
- cost efficiency;
- technical and technological advantages;
- environmental advantages;
- energy efficiency;
- technical support;
- guarantee period and type of guarantees;
- spare parts commitments;
- terms of maintenance;
- number and quality of engaged personnel;
- functional characteristics;
- social criteria;
- costs of 'life circle'; and
- other respective criteria.
The decision to select the bid relies on:
- the data on the best bidder;
- the subject of the PPP project;
- the venue and term of the PPP project;
- the type of procedure of selection of the best bidder;
- the applied criteria;
- the deadline in which the best bidder should be entered into a public contract with the public partner;
- elaboration of criteria for the choice of the best bidder; and
- other elements required by the law or by the tender documents.
Upon rendering this decision and before entering into the public contract, the public authority is obliged to submit the final draft of the public contracts to its competent authorities for consent. The relevant authority checks the compliance of the final draft of the public contract with the PPPCL and tender documents and gives its consent to the final draft of the public contract within 30 days of its receipt. The public contract can be executed only upon completion of the above procedure and obtaining of the consent of the relevant authorities (state government, government of autonomous province or assembly of local self-governance unit, as elaborated above). The same procedure applies to possible amendments of the public contract during its term.
The public contract is entered into within the deadline set out upon selecting the best bidder. The public partner is obliged to take over from the selected private partner on the date of entering into the public contract all required securities for payment of concession fee or any other fees under the contract, as well as securities for compensation of possible damage in accordance with the estimated value deriving from the rights given under the public contract (e.g., pledge statements, guarantees and promissory notes).