General frameworki Types of public-private partnership
The types of PPP mainly include operations and maintenance (O&M), management contract (MC), BOT, BOO, build–own–operate–transfer (BOOT), TOT, and rehabilitate–operate–transfer (ROT).
The type of PPP project is chosen in light of the specific conditions of each project and business or political requirement of the parties. In fact, the PPP-related rules do not prohibit the selection of other types of PPP. That said, although the build–transfer (BT) model formerly applied in some previous public utility projects, it is not deemed a formally adopted type of PPP in China in practice. Based on our understanding, this is because BT is generally prohibited in most public projects when being deemed as a disguised form of government debt raising, and second, BT does not cover the operation and maintenance of a project, and does not comply with the long-term or full life-cycle cooperation and risk-sharing nature of PPP projects, which is emphasised in China.ii The authorities
At the central government level, ministries of the state council take charge of the guidance and supervision of PPP promotion in relevant fields according to the division of functions. The MOF and NDRC act as coordinating authorities in developing PPP in different fields by establishing project libraries, organising evaluations and approvals, and improving the relevant systems and mechanisms. Both the MOF and NDRC have issued guideline opinions on PPPs and published guidelines on PPP contracts. Both authorities have also published PPP project lists and project libraries to promote PPPs. Additionally, according to the needs of different projects, the administrative authorities for different industries, such as construction, transportation, water resources, environmental protection, health, education, culture, civil aviation, land, agriculture and forestry, are responsible for project guidance, implementation and supervision.
In practice, most PPP projects are promulgated by county, municipal or upper-level local governments. Besides following rules and policies issued by central government, the local governments are in charge of promulgating specific policies and carrying out the implementation thereof, pursuant to the existing plan and the realities of the region. Based on the provisions of the MOF or NDRC rules or other competent authorities regulations, in a specific PPP project, the competent county or upper-level government is mainly responsible for the review, organisation and coordination, as well as the examination and supervision of the PPP project.
For the purpose of implementing a single PPP project, the government will appoint an implementation institution to be responsible for the preparation, procurement, supervision and transfer work of the project. In practice, the local government itself and functional departments or non-profit institutions appointed by the local government could be the implementation institution of a PPP project. In addition, the government will designate one or more companies as government representatives to participate in the formation of a special purpose vehicle (SPV), exercise shareholder rights and fulfil shareholder obligations on behalf of the governmentiii General requirements for PPP contracts
There are two major suggestive contract forms that govern PPP projects, including the Contract Guidelines for PPP projects published by the MOF, and the General Contract Guidelines for PPP Projects published by the NDRC. Neither of the proposed contract texts requires mandatory use.
PPP contracts follow the principles of contractual legality and compliance, equal government and social capital rights and obligations, public welfare, honesty, fairness, efficiency, and flexibility. It usually contains the project participants, the purpose of the contract, the principle of risk allocation, investment construction, operation and maintenance, transfer, payment mechanism, rights and obligations, breach of contract, dispute settlement and other core and key clauses. In practice, the content of the PPP contract will vary according to the industry area, project characteristics and operation mode of each project.
Bidding and award procedure
As indicated in the PPP Procurement Measures, social capital shall be selected through a legal procedure. The MOF provides that the selection of social capital should be a government procurement (PPP procurement), and provides five methods for PPP procurement, including public bidding, invitation bidding, competitive consultation, competitive negotiation, and single-source procurement. According to the characteristics of the purchasing demand of a PPP project, the project-implementing agency chooses the appropriate purchasing method according to law. If a method other than public bidding is proposed to be selected, the implementation institution should first apply for approval of the finance department of a certain level of government.
The NDRC Guiding Rules also provide that the social capital shall be selected through public bidding, invitation bidding, two-stage bidding, competitive negotiation, etc. However, the NDRC Guiding Rules further provide that, for PPP projects of which the engineering investigation, design, construction, supervision and supply of important equipment or materials are to be contracted to or supplied by the social capital investor itself, the social capital must be selected through bidding according to the Bidding Law.i Expressions of interest
MOF and NDRC procedures are similar in this respect. An announcement of pre-examination of qualifications shall be released via the government procurement information release media designated by the relevant finance department at or above the provincial level (for projects listed in MOF project library) or on media appointed by the NDRC (for projects listed in the NDRC project library). The time period for submission of application documents for pre-examination of qualifications shall not be less than 15 working days from the date of release of the announcement (requirement of the MOF) or five days after the bidder issues the pre-examination invitation document (requirement of the Bidding Law). Where there are at least three social capitals that pass the pre-examination of qualifications, the implementation institution may continue the preparation of bidding documents. Where there are fewer than three social capitals that pass the pre-examination of qualifications, the implementation institution shall organise a new round of pre-examination of qualifications after adjusting the content in the announcement of the pre-examination of qualifications.
The bidding documents of a PPP project shall contain all procedural and substantive requirements of the project, and shall contain the evaluation method and criteria, draft contracts and other legal instruments for the PPP project. Among others, the bidding documents shall point out those details of the project contract that are variable during the negotiation for confirming procurement results. The PPP bidding documents shall also expressly state that the project contract must be submitted to central government at the corresponding level for approval and not take effect until it is approved.
The MOF further provides that, where a competitive negotiation or competitive consultation procurement method is adopted, the project procurement documents shall, in addition to the contents prescribed in the preceding paragraph, specify the contents that may be substantively changed by the evaluation team based on negotiations with social capitals, including the technical and services requirements under procurement needs and the terms of the draft project contract.ii Requests for proposals and unsolicited proposals
Generally, the requirements for bidding documents are set forth in the documents calling for bids. If the selection of PPP social capital is carried out through bidding, generally the proposal of bidders will respond to the substantial requirements and conditions as provided in the documents calling for bids.
Compared with the public bidding procedure, the other methods, especially by way of competitive negotiation and consultation, provide relatively more space for the social capitals respecting the variable details. In short, in the process of competitive consultation, the consultation group may make material changes to the technical and service requirements of the procurement and terms of the draft contract based on the consultation documents and the actual consultation situations. The material changes shall be effective parts of the consultation documents and be sent to all candidate social capitals. The candidates will submit a new response document accordingly.
A PPP project can be proposed by both the government and social capitals, but is usually proposed by the government. The recommendation of potential PPP projects by social capitals shall be made to the financial departments (PPP centre) in the form of a project proposal. The Administration Measures on Public-Private Partnership (PPP) Project Database in the Traditional Infrastructure Field (Trial) issued by the General Office of the NDRC provided that a PPP project can be filled in and submitted by industrial departments, public institutions and various types of enterprises to the project database so as to be listed in the PPP project library.iii Evaluation and grant
A legally established evaluation team shall be responsible for pre-examination and bid evaluation. The members of the evaluation team shall sign the qualification pre-examination report and the evaluation report.
The implementation institution shall establish a special working group responsible for the negotiation and confirmation of the final bidding results according to law.
The public body and the bid-winning social capitals to conclude transactions shall enter into PPP project contracts within 30 days after the notice of winning the bid or concluding transactions is issued.
Public notification and public announcements are requested for each step above.