General frameworki Types of public-private partnership
As stated above, there are two types of PPP that are mainly used in France: concession agreements, which serve to implement major infrastructure projects such as canals, motorways, water distribution systems and toll bridges; and partnership contracts, which can be compared to private finance initiative contracts.
Concession agreements and partnership contracts are both administrative contracts under French law. This distinction is important as the contractual relationship in an administrative contract is different from that in a private contract. Indeed, the parties are, de facto, unequal insofar as the public person benefits from public authority powers.
As stated in the Concession Agreement Ordinance, a concession agreement is defined as an agreement under which a grantor assigns, for a limited period of time, to one or several economic entities, the performance of works or the management of a service, it being specified that: a risk linked to the operation of such works or service must be transferred to the economic entity in exchange for the right to operate the said works or service; a fee in favour of the entity can be added to such operation right; and the risk transfer to the economic entity necessarily implies a real exposure to the market's fluctuation.
A partnership contract is an administrative contract under which a grantor entrusts to a private party, for a period set according to the amortisation of investment or agreed financing terms, a comprehensive project relating to the design, construction or conversion, maintenance, operation or management of works, equipment or intangible assets necessary to the public service, as well as to the total or partial financing of the latter.
The Partnership Contract Ordinance also clarifies that dismantling and destruction works, as well as the management of a public service, can be transferred to the private party under a partnership contract.
The two main PPPs can be differentiated according to their payment terms: under a partnership contract, the grantor will pay rent to the private partner in exchange for the performance of the mission, while under a concession agreement the compensation of the concessionaire will mainly arise from payments made by users of the service.ii The authorities
The Concession Agreement Ordinance provides that, in addition to public authorities (the French state, local authorities and their public institutions), private entities (entities specially created to satisfy a non-commercial public interest or formed by several public entities in order to jointly perform certain activities and public undertakings acting as network operators) will be allowed to grant concession agreements.
The Partnership Contract Ordinance is also flexible regarding the grantor that may enter into a partnership contract. The state and its public institutions, local authorities and local public institutions, as well as public health facilities, social security bodies and some public or private entities pursuing a public-interest mission and mainly financed by public funds (i.e., public-private joint ventures and state-owned public industrial and commercial institutions) may all enter into partnership contracts.
For partnership contracts executed by the state, the ministries that are involved will depend on the scope of the particular contract. For partnership contracts, approval by the Minister of the Economy and the Budget is additionally required before signature.
The Partnership Contract Ordinance provides for an extended list of potential procuring authorities. Indeed, the granting authorities will be the same as those described in the Concession Agreement Ordinance. As such, private entities could also enter into a partnership contract.
Nevertheless, central administrations, public health facilities and medical cooperation public structures that used to be grantors before the European Directive will no longer be able to enter into partnership contracts.
Another important actor in the PPP sector in France is the PPP Support Service (FIN INFRA). The FIN INFRA is a dedicated unit within the Ministry of the Economy that assists grantors in the implementation of partnership contracts. The FIN INFRA is primarily responsible for the validation of the preliminary evaluations prepared by grantors before launching a tender. The FIN INFRA also assists and advises public authorities in the preparation and negotiation of partnership contracts as well as any other complex public contracts or public contracts implying an innovative financing scheme.
According to the Partnership Contract Ordinance, the FIN INFRA will still be a major actor given that it will also have to issue an opinion about the financial sustainability of each partnership contract. This new requirement should be an efficient way to avoid the financial difficulties deriving from the implementation of some partnership contracts in France.iii General requirements for PPP contracts
Requirements are different for the use of partnership contracts and concession agreements.
The Concession Agreement Ordinance provides that concession agreements must include provisions pertaining to the duration of the contract and the tariffs applicable to service users. The Concession Agreement Ordinance also provides that concession agreements can include provisions pertaining to sustainable development and social objectives.
Moreover, to optimise cost monitoring, the Concession Agreement Ordinance aims to increase transparency relating to the performance of concession agreements.
As a consequence, concession agreements must specify that the concessionaire will be required to provide an annual report to the grantor and that the grantor will have to annually publish essential data pertaining to the concession (i.e., type of investments and applicable tariffs).
Unlike concession agreements, the use of partnership contracts is strictly regulated. The contemplated project has to be related to the construction or conversion, upkeep, maintenance, operation or management of work, equipment or intangible assets necessary for public service and to all or part of their funding. First, a preliminary evaluation has to be carried out to evaluate the project's implementation method. Then, a second evaluation must assess the financial sustainability of the project. In light of these evaluations the grantor must demonstrate that the use of a partnership contract shows better cost-effectiveness than any other type of agreement. Finally the grantor is compelled to submit these evaluations to the FIN INFRA, which is in charge of issuing an opinion on the project's implementation structure.
This preliminary procedure was introduced by the Partnership Contract Ordinance, aiming to simplify the former implementation procedure and answer criticisms raised during the past decade regarding the implementation of partnership contracts.
A partnership contract must include several mandatory provisions, such as the duration of the contract, the conditions for sharing risks between the grantor and its co-contracting party, the performance objectives assigned to the co-contracting party, the payment terms and the consequences of termination of the contract.
Both partnership contracts and concession agreements are thus entered into for a period determined by the depreciation period of the selected investments or financing terms.
Bidding and award procedure
Bidding and awarding procedures for partnership contracts are closely regulated.
Regarding concession agreements, the Concession Agreement Ordinance and the Concession Agreement Decree regulate the bidding and award procedures for concessions of a value greater than or equal to €5.548 million, excluding tax. The new legal framework applicable for concessions will remain flexible, with the aim of ensuring effective and non-discriminatory access for all potential bidders (including small and medium-sized companies). Nevertheless, in practice, most of those minimal requirements already existed in French case law.
As regards partnership contracts, the Partnership Contract Ordinance provides that three granting procedures can be implemented:
- a competitive dialogue, in the case of particularly complex projects where grantors are not objectively able to define the technical means or specify the legal or financial aspects of a project;
- a negotiated procedure for small projects below a certain amount defined by decree; or
- a restricted call for tenders.
As competitive dialogue is the most common procedure for the awarding of partnership contracts, we will focus on that.i Expressions of interest
To allow effective competition among applicants (it being specified that applications can be submitted through a consortium), partnership contracts and concession agreements must be the object of adequate publicity.
Nevertheless, partnership contracts may only be used in the following cases: if the value exceeds €2 million for immaterial assets or if the contract contains specific targets on performance; if the value exceeds €5 million for network infrastructures; or if it exceeds €10 million in the other cases.
Regarding concession agreements, publication requirements are less strict. The public tender notice has to be published in a newspaper authorised to carry legal advertisements and in a specialised newspaper of the relevant economic sector. The notice must also specify the procedures for the applications' submission and the essential characteristics of the concession agreement, including its purpose and nature. Granting authorities may also require the production of documents from the bidders in support of their applications (i.e., the presentation of sufficient professional and financial guarantees to ensure the continuity of the public service).
In both cases, the publication notice must specify the deadline for applications.ii Requests for proposals and unsolicited proposals
For both partnership contracts and concession agreements, tendering documents will be communicated to shortlisted applicants.
Regarding concession agreements, the grantor shall deliver a programme document to the applicant that defines the quantitative and qualitative characteristics of the required benefits and, if applicable, the service pricing conditions applicable to the end user.
Regarding partnership contracts, in a competitive dialogue, the grantor has to define the detailed needs and objectives that the project will have to meet in a functional programme that will be transmitted to the applicants selected for the dialogue.
The possibility of an unsolicited proposal is contemplated neither for concession agreements nor for partnership contracts.iii Evaluation and grant
For partnership contracts, a dialogue will be conducted with each candidate to define solutions on the basis of the functional programme. The dialogue typically involves two or three phases, which are normally carried out over a period of nine to 12 months.
At the end of the dialogue period, the procuring authority will invite the candidates to submit a tender based on the considered solutions. After analysis of the tenders, a partnership contract will be awarded to the candidate with the most economically advantageous tender in accordance with the criteria set out in the contract notice or in the tender procedure. The awarding criteria must include the overall cost of the tender and performance objectives defined according to the purpose of the contract. As soon as the preferred bidder is selected, the contracting authority shall inform the unsuccessful candidates that their tender was rejected. A standstill period of at least 16 days is required between the date of notification of the decision and the date of execution of the contract to allow for any eliminated candidate to initiate a summary proceedings challenge on grounds of a breach of the relevant procurement rules.
For the sole partnership contracts to be entered by the state or entities linked to the state, the FIN INFRA must assess the impact on public finances and the fiscal sustainability of such agreement before its execution.
For all partnership contracts, once they have been signed, the procuring authority is required to send an executed copy of the partnership contract to the FIN INFRA.
At the end of the awarding procedure, a notification must be sent within 30 days to the European Union Official Journal.
Regarding concession agreements, before the negotiation phase, the grantor selects the potential bidders based on their capacities and abilities in accordance with the criteria set out in the publication notice. Once they have been selected, applicants have to submit tenders that will be freely negotiated with the contracting authority. At the end of these negotiations a concessionaire will be chosen and the applicants who have had their offers rejected will be notified. A standstill period, however, shall be respected.