General frameworki Types of public-private partnership
PPP projects may be structured in very different manners in Germany. For the construction of public buildings (e.g., hospitals, schools or administrative buildings), the public authorities in most cases want to continue to hold the property rights in the real estate and only transfer the right to build and operate or manage a building used for public purposes to a private investor. From a legal perspective, it is also possible that the private investor acquires title to the real estate and either has an obligation to re-transfer the real estate to the public authority or remains the owner at the end of the fixed term.
Public authorities may also award concessions to a private investor. The main difference between a public contract and a concession is the type of consideration granted to the contractor. While the contractor under a public contract usually gets a remuneration, a concession holder obtains a right to use or market the provided service or good (e.g., market the service to third parties). These types of contracts are predominant, for example, in the transfer and operation of electricity and gas grids in municipalities and cities (see Section 46(2) German Energy Act) with approximately 20,000 agreements in Germany. The concession holder obtains the right to market the capacity of the electricity or gas grid to third parties (i.e., to electricity or gas providers) for a maximum period of 20 years. Although in recent years some municipalities and cities have shown a tendency to establish or mandate a public entity to operate the electricity and gas grid (re-municipalisation), the law provides that municipalities may not award concessions in-house without a public procurement procedure (see Section 46(4) German Energy Act). Therefore, private sector parties can participate and – with a good offer – be awarded such concessions in a public tender.
In addition, the public authorities may establish joint ventures with private partners (sometimes this is called institutional PPP), for example, in the corporate structure of a limited liability company. Such entities may be used, for example, in the areas of waste management, water supply services and sewage treatment. Public law restrictions generally require that the public authority holds a majority of voting rights in the joint venture. The shareholders' agreement will also include additional safeguards for ensuring the fulfilment of public tasks. This may include a restriction of the statutory purpose of the company to fulfil the public task, obligations to fund the legal entity and options for the public authority to call shares under certain circumstances. Alternatively, a public law structure – institution under public law – has been used for such public-private joint ventures (e.g., previously for the operator of Berlin's water supply system Berliner Wasserbetriebe until October 2012). This requires, however, an act of parliament that explicitly allows the participation of a private investor.ii The authorities
The 16 federal states in Germany have certain political competences. For certain tasks – such as military, federal waterways and rail infrastructure – the federal government has (some) administrative competences. At the federal level, the Federal Republic of Germany is often the contract partner, represented by the ministry in charge of the relevant task (e.g., the Federal Ministry of Transport and Digital Infrastructure, the Federal Ministry of Defence or the Federal Ministry of Finance) or by a subordinated federal authority. Other public tasks and much of the infrastructure is administered by the federal states – such as state roads, universities, schools and prisons. At the state level, the state may be the contracting authority, represented by the state ministries or subordinated state authorities. In addition, projects may also be administered on the municipal or county level. This applies, inter alia, to hospitals, schools, local and regional transport by bus and train, electricity and water supply. The contracting authorities on the municipal level are the municipality or city, or its entities. In the case of regional tasks (e.g., hospitals) the contracting authority may be the county. Municipalities may also form special purpose entities fulfilling certain public tasks, in particular, in relation to regional traffic, water supply and waste management.iii General requirements for PPP contracts
In Germany, there is no specific act on PPP projects or contracts, apart from the constitutional provision on the administration of motorways. The civil law framework and regulatory requirements apply to PPP projects (e.g., laws on taxes, social security, minimum wage, trade unions and health and safety). More specific requirements can derive from budgetary provisions, public procurement law and provisions on specific sectors, such as energy.
Before using a specific procurement structure such as a PPP, the government – under budgetary requirements – has to conduct a cost-benefit analysis on different procurement possibilities (see Section 7(2) Federal Budget Act). State legislation contains similar requirements for the states' and municipalities' decisions. This analysis shall also take into consideration the risks of different structuring possibilities and, in particular, the possibility to involve the private sector for the fulfilment of the task or service. For PPP projects, permits or consents may be required under the budgetary provisions. In particular, the consent of the ministry of finance or – for municipalities – the supervisory authority may be necessary for contracts under which the public authority grants a guarantee, takes a loan or enters into an agreement similar to a loan. In addition, approval of the federal or state parliament or the municipal council may be necessary for costs in the budget.
A specific public law entrustment is necessary if the private partner will be authorised to take authoritative decisions with regard to third parties. Such an entrustment may only be granted in or based on an act of parliament. For example, the operator of the German toll collection scheme has been publicly entrusted with certain tasks in connection with the levying of tolls for the use of motorways by HGVs (see Section 8(2) Act on Levying Tolls on Federal Motorways). However, in most PPP projects the private partner acts only as an administrative assistant and the transfer of such tasks generally does not qualify as a public entrustment. Certain tasks may not be subject to PPP projects under German law, for example, tasks that (regularly) require the use of direct force. The details are controversial and have been discussed, for example, in connection with PPP projects concerning prisons.
Bidding and award procedure
The legal framework for public procurement within the European Union is harmonised for public contracts (including supply, works and services contracts) and concessions that exceed certain EU harmonised thresholds. The relevant EU provisions were reformed in 2014 and Germany has implemented these provisions as of April 2016, so they are relatively recent. The main provisions under German law are implemented in Section 97 et seq. of the Act against Restraints of Competition (GWB). In addition, there are implementing regulations, such as the Public Procurement Regulation, the Concessions Regulation, the Regulation on Procurement in the Sectors of Transportation, Water and Energy Supply and the Regulation on the Procurement in the Sector of National Defence and Security.i Requests for participation
The contracting authority has to publish a contract notice in the Supplement of the Official Journal of the European Union if the value of a public contract exceeds certain thresholds. The standard form of a contract notice shows, inter alia, information on the type of the contract, its value, the criteria for the selection of the tenderer and the award criteria. The public authority has to review whether the applicants fulfil the selection criteria. The selection criteria relate to certain grounds for exclusion, for example, the commission of certain defined criminal acts by the management or responsible employees or the initiation of insolvency proceedings against the bidder. In addition, the contracting authority may use selection criteria that relate to the economic and financial standing of the bidder (e.g., minimum requirements on a specific annual turnover or minimum insurance requirements) and criteria that relate to the technical and professional capacities (e.g., references, licences necessary for the business or a sufficient number of suitable employees in order to execute the contract).ii Requests for proposals
The contracting authority further defines the requirements for the proposals in the tender documents and invitation to tender. This may include requirements on works or service specifications, prices and additional information on the quality of services or works. Generally, the public authority will provide a rather extensive list of requirements for the tender.iii Evaluation and award
The selection of the successful tenderer has to be based on the evaluation criteria as provided by the public authority in the tender documents. Permissible criteria are price-only or a mix of price and quality criteria, and possibly also environmental or social criteria. In most PPP projects the public authority will use a mix of criteria and assess the tenders accordingly.
After the selection of the successful tenderer the contracting authority has to notify the other tenderers of the envisaged award decision (see Section 134(1) GWB). The public authority may conclude the contract with the successful tenderer 10 to 15 days after the submission of the notification – depending on the form used for the notification – unless a competitor has filed a complaint against the award with the competent procurement chamber. The procurement chamber for federal cases is the procurement chamber at the Federal Cartel Office in Bonn. The procurement chamber's decision can be appealed at the competent Higher Regional Court. The Higher Regional Court in Düsseldorf is competent for appeals in federal cases.