General frameworki Public-private partnership applicability criteria
The PISU Act very loosely defines projects that fall under the PPP purview as the state intends for PPPs to serve as a mechanism to develop infrastructure in Thailand indefinitely. According to the PISU Act, any project that falls under the criteria of being both a state undertaking and a public-private joint investment will be eligible for PPP procurement.
However, the New PPP Act is projected to clarify the applicability criteria and focus and reserve the use of PPPs for infrastructure projects, such as hospitals, roads, schools and trains, to maximise the use of state assets. The use of state assets is being studied and reviewed for PPPs in the EEC, but such criteria is open to other projects that the government may want to encourage and support for the development of the national economy and its markets.ii Types of public-private partnership and the transfer of the assets used in the project
PPPs in Thailand may take many forms, because under the PISU Act there is no classification for the types of investment undertakings. The type of PPP project is chosen based on the specific conditions of each project and further defined by the functions under the responsibility of the private entity. The most common type of PPP for infrastructure projects are:
- design–build–operate–maintain (DBOM): the private entity is in charge of the development and long-term operation and maintenance of the asset, as well as the arrangement of financing; and
- operate and maintain (O&M): the private entity is in charge of the operation and maintenance, as well as the arrangement of financing.
For the transfer of the project' assets, most PPP projects in Thailand have used the following contractual structures: build–own–operate, where a private organisation builds, owns and operates some facility with some degree of encouragement from the government; build–transfer–operate, where a contract is signed between an authorised state agency and investors to build an infrastructure facility completely, and then the investors transfer the facilities to the authorised state agency and obtain the right to operate such facility commercially for a fixed term; and build–operate–transfer, whereby the investor transfers the facilities at the end of the concession. As such, the investors are able to finance, design, construct and operate a facility stated in the concession contract, and this enables the project proponent to recover its investment, operating and maintenance expenses in the project.
Although the type of PPPs are disencumbered, some caution must be made to the type of assets that are being transferred and owned by the private entity as the Constitution prohibits the private ownership of infrastructural public utility services that are essential for the nation's subsistence and security.iii The authorities
Under the PISU Act, there are three main authorities involved in the PPP process: the Cabinet, the Committee and the Office.
The Cabinet plays an important role in administering the principles of the particular PPP project, and in budgeting the annual government statement of infrastructure for the PPP project. The Cabinet is the final approving authority when it comes to the private entity selection and the draft PPP contract during the procurement stage. The role of the Cabinet during the procurement stage may be reduced in the upcoming New PPP Act to increase efficiency and flexibility in the PPP process.
According to Section 8 of the PISU Act, the Committee is composed of the Prime Minister as chairman, the Minister of Finance as vice-chairman and the Director-General of the Office as a member and secretary. The Committee has powers and duties mainly to: prepare a strategic plan; give approval in principle to a project involving a private investment and the operation of a project; prescribe rules and regulations under the PISU Act; and give decisions on issues pertaining to the implementation of this Act.
The Office serves as an ancillary body to the Committee, responsible for carrying out secretarial tasks (i.e., supporting the Committee in the implementation of PPP projects). According to Section 18 of the Act, the Office shall have the following powers and duties to: prepare a draft strategic plan for submission to the Committee; study and analyse projects and submit opinions to the Committee for consideration and approval; study, research and prepare a database relating to private investment in state enterprises for dissemination, provision of education and advice to state agencies and the general public to promote and build an undertaking of private investments in state undertakings; and report problems and obstacles arising from the implementation of the PISU Act to the Committee.
As for the EEC region, there are three main authorities: the Cabinet, EEC Policy Committee, and the EEC Office. In comparison to the current PISU Act, the role of the Cabinet is confined to approving the principles of the PPP project and apportioning the state budget. The EEC Policy Committee plays a role similar to the Committee and has the authority to independently approve the private entity selected from the procurement process, without screening or approval of the Cabinet. Similarly, the EEC Office plays a role similar to the Office.iv General requirements for PPP contracts
In general, PPP contracts must conform to the framework of the 2013 PISU Act and the requirements of the Notification of the Office regarding Standard Contract Terms for Public-Private Partnership Contracts BE 2558 (2015) (the SC Notification). A draft PPP contract must contain the standard contract terms for investment contracts as prescribed by the SC Notification with the approval of the Committee. Generally, PPP contracts must at least contain the following clauses:
- duration, provision of services and the implementation of the project;
- rights and duties of each party;
- the ownership of the project assets and their valuation. If state assets are utilised in implementing the project, the right and duty of each party in relation to the utilisation and maintenance of the aforementioned assets shall also be specified;
- changes to the nature of the provision of services under the project;
- changes to a contracting party, contractor, subcontractor and the assignment of claims;
- force majeure events and actions in the case of a force majeure event, including payment of compensation;
- causes for termination of the contract, methods of termination, consequences of termination other than termination as a result of expiry, as well as information relating to actions to be undertaken to continue the provision of services if the suspension of the project, and payment of damages arising from the termination of the contract;
- step-in right and details thereof;
- the host agency shall not be bound to settle a dispute by arbitration unless the host agency demonstrates the reasons and necessity for doing so because of this being the general practice for that particular type of PPP contract; and
- the governing law of the PPP contract and the implementation of the project shall be Thai law.
Notably, the PISU Act and the PPP regime under the EEC allows the concept of a direct agreement, an agreement to be entered by and between the private entity, the bank and the procuring government agency in order to increase the bankability factor. The step-in right specified in such agreements protects the banks, and ultimately the project, with the recourse of a capable private entity 'stepping in' to preserve the continuity of a project under distress induced by the collapse of the former private entity. Under the EEC framework, the direct agreement is to be attached as an annex of the PPP contract signed between the host agency and the private entity.
Apart from the main requirements listed above, it is prohibited for the PPP contract to contain any provisions allowing a unilateral renewal or extension of the duration of the project under the PPP. Legal provisions regulating all general PPPs and PPPs under the EEC framework reiterate the same principle and prohibit granting the private entity the unilateral right to adjust or amend any contractual conditions in a manner that will have an impact on the provision of public services or the benefits to the public sector.
Language requirements in the Thai context means that PPP contracts and other documents integral to the implementation of a PPP must be prepared in Thai. If any part of a PPP contract is prepared in English, a provision must be included in the contract indicating that, in the event of any conflict or discrepancy between the two, the parties will comply with the original Thai document.
Once the private entity selection and negotiation results have been obtained, and a draft investment contract has been prepared, the Selection Committee will submit the draft to the Office and the Office of the Attorney-General for their review of those submissions. Those reviews are then submitted to the responsible minister for his or her review, who will then submit them to the Cabinet for its consideration and approval.
Bidding and award procedurei Expressions of interest
In Thailand, the selection of the private investor commences at the level of the host agency, who plays a key role in publishing relevant notices. Thus, virtually all expressions of interest are implied by the submission of a proposal by the bidder, and all proposals must be solicited by these notices.
The process begins with the host agency's drafting of the invitation for bids. The document must contain, among others, the terms of reference detailing the background, objectives, scope of work and commitment duration of the project, a statement declaring that the bidder must have not been granted privileges or immunities from the courts, the required qualifications of the private investor, information related to the request for proposal and its fee, and the selection criteria.
The Selection Committee, made up of the host agency as chairman, representatives of the Office and the Office of the Attorney-General as members, is granted the authority to approve the draft invitation for bids as well as the discretion in selecting the private investors. Once the Selection Committee is established, the actual bidding and award procedure begins. The Selection Committee under the EEC framework is a distinct entity, but similarly composed of the host agency as chairman, representatives of the EEC Office and the Office of the Attorney-General as its members.
The Selection Committee may also, when it deems appropriate to narrow down the number of applicants, shortlist a pool of qualified bidders before publishing the invitation for bids. In this case, only the selected investors will receive the invitation for bids.
The Selection Committee and the host agency can jointly decide to opt out of the bidding procedure in selecting the pool of private investors. If the Office concurs, the Office may petition the Committee for its approval. Where there are disagreements between the Selection Committee and the host agency, the Office will petition the Committee for its approval only when the Office also deems opting out to be more appropriate to the case at hand. If the Committee approves, the host agency has to provide the rationale behind such decision, and disclose the names of the chosen investor or investors along with supporting justifications.ii Requests for proposals and unsolicited proposals
Once approved, the host agency must publish the invitation for bids at least 60 days before the submission deadline of the proposals in three different mediums. Thereafter, it is the responsibility of the interested party to purchase the request for proposals at the designated place, time and date as specified in the invitation for bids.
The request for proposals solicits the following information to be provided by the interested party: the qualifications of the bidder related to the nature of work, a business plan that also details financial aspects, and an implementation plan stating its benefits proposed to the state.
The submitted proposals must contain all the information requested in both the invitation for bids and the request for proposals at a minimum. Any foreign entities and foreign individuals who wish to participate in the bid may submit their proposals in the same manner.
As mentioned above, there are no procedures that would allow private investors to submit unsolicited bids.iii Evaluation and grant
Once all of the proposals have been collected, all bidders or their representatives gather for the opening of the proposal envelopes. Strict evaluations of the submitted proposals are then conducted, at which stage the Selection Committee may request additional information from the bidders, but any bidder who wishes to amend or provide any unsolicited content is prohibited from doing so. The Selection Committee plays a significant role in the project implementation to evaluate and select the private investor.
After a negotiation with the selected party is concluded, the Office and the Office of the Attorney General will jointly submit their opinion to the responsible minister for consideration and approval. Under the PISU Act, the final grant is approved by the Cabinet. Therefore, although the Selection Committee is allowed to enter into negotiations with the bidders having passed the evaluation, the project implementation must be approved by the Cabinet. As mentioned above, however, this role will be shifted to a minister of a relevant Ministry. As for the PPPs in the EEC, the EEC Policy Committee grants the final approval. The standard of the evaluation process developed is safeguarded via the incorporation of the one-stage, two-stage and multi-stage processes.