The Sultanate of Oman (Oman) has recently published the implementing regulations (Decision No. 3 of 2020 of the Public Authority for Privatisation and Partnership) (the Implementing Regulations) for Decree No. 52 of 2019 (the PPP Law) regulating the operation of public private partnerships (PPPs) in Oman. This is a key move for the development of Oman's infrastructure in line with the Oman Vision 2040.
Dr. Dhafir Awadh al Shanfari, the Chief Executive Officer of the Omani Authority for Partnership for Development has recently announced that Oman has "49 projects currently in the pipeline" covering a variety of PPP models. These projects will aid Oman’s efforts to set up partnerships between the country’s public and private sectors as the country aims to increase economic efficiency and diversify its economy in order to shield Oman's economy against a potential drop in the price of oil according to the Omani Minister of Finance, HE Darwish Al Balushi.
This article considers the provisions of the PPP Law and the Implementing Regulations and key points to note.
APPLICABILITY OF PPP LAW
The PPP Law applies to "contracts concluded by the competent authority [(being ministries and public bodies (the Competent Authorities))] with a project company [(being a company established by the successful tenderer of a project (a Project Company))] under which it undertakes, within a specified period, to finance, establish, manage, operate, exploit and maintain infrastructure and public utilities projects, and to provide the services thereof and contribute to the performance of their function", in return for the payment to the Project Company of the consideration agreed upon (PPP Contracts).
It is important to note that the PPP Law expressly provides that it will not prejudice the texts of other laws relating to the management, leasing, licensing, usufruct or franchise of any public utilities, which will continue in full force. However, the PPP Law provides that Decree No. 36 of 2008 (known as the Tenders Law) and Decree No. 51 of 2019 (known as the Privatisation Law) do not apply to PPPs subject to the PPP Law.
ENTERING INTO A PPP
The PPP Law provides that Competent Authorities may not enter into PPP Contracts, unless the PPP project (being a project whose purpose is to carry out work or provide public services of economic or social importance consistent with Oman's strategy and development plan, or to improve or develop an existing public service, or raise the efficiency thereof (a PPP Project)) has "economic or social benefits and is consistent with [Oman's] strategy and development plan".
Article 5 of the PPP Law provides that a private sector bidder will be chosen in accordance with the principles of transparency, openness, equality of opportunity, equality and freedom of competition to carry out each PPP Project. Additionally, Decree No. 110 of 2020 provides that the Ministry of Finance (the PPP Authority) will undertake the tendering and awarding procedures in relation to a PPP Project (once it is approved for submission to the market) (the ramifications of the reallocation of responsibility from the Public Authority for Privatisation and Partnership (as referred to in the PPP Law) to the Ministry of Finance remains to be seen, however we are continually monitoring this development for further updates).
The pre-qualification procedures for a PPP Project are set out in Chapter 4 of the Implementing Regulations (separate provisions exist for consultants), which begin with the publishing of an invitation for pre-qualification on the website of the PPP Authority, or any other means, but which must contain:
- a summary of the PPP Project and the objectives thereof;
- the experience required for qualification; and
- the time period and place prescribed for submitting applications for qualification documents, provided that the period prescribed for submitting the qualification applications does not exceed fifteen days from the date of publishing the announcement.
In assessing applications for pre-qualification, the Implementing Regulations provide that applications will be assessed based on the following criteria (amongst others):
- track record;
- technical ability of the applicant; and
- solvency of the applicant/ability of the applicant to raise funds.
Following the pre-qualification process, the PPP Authority will provide its recommendations regarding the qualified and disqualified partners to the board of the PPP Authority for approval.
The PPP Authority, in coordination with the Competent Authorities will then issue an invitation to the qualified partner, to purchase the tender document.
The PPP Authority is required to draft the tender document for the partnership project in coordination with the Competent Authority, in Arabic or English, or both, and set its price. In all cases, the tender document shall be submitted to the board of the PPP Authority for approval.
The PPP Law and the Implementing Regulations provide that amongst other items, the tender document must contain:
- basic information on the PPP Project to enable the submission of a tender, as well as the form of PPP;
- specifications of the PPP Project, and the technical and financial conditions to be fulfilled by the tender;
- documents to be submitted, dates and procedures to be observed and complied with;
- the technical, financial and legal bases according to which the tender is evaluated and decided upon; and
- the basic terms of the PPP Contract, indicating the conditions that may not be negotiated.
SUBMITTAL OF TENDER
The Implementing Regulations provide that a qualified partner in submitting a bid, is required to prepare one single original copy for each of the technical offer and the financial offer, and to sign and stamp them, and submit the number specified in the tender document of the photocopies of the technical and the financial offers.
Additionally, Chapter 6 of the Implementing Regulations provides that a bid bond must be submitted with every tender as required by the tender document. Such bond will be returned to unsuccessful bidders, immediately after the end of the period specified for the validity of the bid, or before that if an award is made to one of the applicants, or the bidding procedures are cancelled. The bid bond of a successful bidder will be returned if they provide a performance bond.
The PPP Authority will then submit to its board a report on the results of the evaluation of technical offers along with its recommendations, for consideration of approval thereof.
AWARD OF TENDER
The PPP Project will be awarded to the best bidder, taking into account all technical and financial aspects. The PPP Authority will notify the successful bidder within thirty working days from the date of the award decision and invite the successful bidder for negotiation of its bid and the PPP Contract.
If a final agreement cannot be reached through negotiations with the successful bidder, the PPP Authority may invite the next ranked bidder or bidders to negotiate therewith for the purpose of finally agreeing with one of them on the terms of the PPP Contract. The PPP Authority may not renegotiate with the bidder with whom a previous negotiation has been held and failed.
A successful bidder must submit a performance bond at the value and within the deadline specified in the tender document. The period of validity of the performance bond will start from the time it is issued, until the end of the PPP Contract.
The PPP Law provides that a PPP Contract must contain details on matters such as:
- the nature and scope of the project;
- ownership of the project's funds and assets;
- responsibility for obtaining licences, permits and approvals;
- mutual financial obligations; and
- duration of the contract.
as well as containing a governing law clause providing for Oman law. Disputes arising from the PPP Contract can be settled by arbitration or other "amicable methods of dispute settlement".
Pursuant to the PPP Law, the successful tenderer is required to establish a project company whose sole purpose will be to implement the PPP Project (the Project Company) and which, pursuant to the Implementing Regulations, may be wholly owned by non-Omani persons. The board of the PPP Authority may also approve the Competent Authority becoming a shareholder in the Project Company, after obtaining the approval of the Ministry of Finance.
Chapter 8 of the Implementing Regulations provides that the Project Company will:
- take the form of a joint stock company (or a limited liability company where there is an absence of the need for financing or there is a limited scope of services or the PPP Authority decides so);
- have articles of association that will not conflict with the provisions of the PPP Contract; and
- have share ownership which will not prejudice any of the pre-qualification conditions or the terms of the PPP Contract.
The Project Company is permitted to mortgage the land on which the PPP Project is established, as well as installations, equipment, tools, and other items that are used in the operation of the PPP Project for the purpose of financing the project. However, any amendment to the legal form of the Project Company, decrease in its capital, sale or mortgage of its shares, merger, acquisition or, transfer of ownership by assignment or sale shall be prohibited, unless after obtaining the written approval of the PPP Authority.
SUPERVISION OF PROJECT COMPANY
Chapter 9 of the Implementing Regulations provide that the Project Company is required to submit to the Competent Authority (who must submit the same to the PPP Authority) a report, every three months before and during construction and operation, on the progress made and the status of all work related to the implementation of the PPP Contract.
The PPP Law also provides for a general oversight function for the Competent Authority to supervise the subject-matter of the PPP Contract and follow up the stages of implementing the PPP Project. In doing so, employees of the Competent Authority shall have the right to enter the site of the PPP Project and any related premises at any time, for inspection and supervision purposes.
One of the key requirements of the PPP Law is that the Project Company will undertake to transfer expertise, technology and knowledge to the Competent Authority, and to train and qualify the employees of the Project Company so as to manage and operate the PPP Project, in accordance with the terms and conditions agreed upon in the PPP Contract. This fits well into one of the key objectives of the Oman Vision 2040, which is the creation of a 'knowledge society'.
As highlighted above, almost fifty projects are currently being proposed as PPP Projects in Oman, which demonstrates the embracing of the PPP model by government entities in Oman to develop the nation's infrastructure.
The publishing of the Implementing Regulations, giving effect to the provisions of the PPP Law will allow all stakeholders in the public and private sectors keen to invest in PPP Projects in Oman to gain confidence in Oman's long term commitment to PPP Projects as a means of developing its infrastructure as well as the stable legislative framework in place to support the same.