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Request for proposals by the competent authority Submission of project proposals by the private sector Evaluation by the competent authority Selection of preferred bidder by the competent authority Negotiation Contract award (between the competent authority and the designated concessionaire) Approval of detailed engineering and design plan by the competent authority Through approval of concession agreement and engineering & design plan, the operational rights (total cost of the project, duration period, rate of return, toll, etc.) are to be bestowed upon the designated concessionaire.
Act on Private Participation in Infrastructure Article 13 of the Act on Private Participation in Infrastructure (Designation of Concessionaire) (1) A legal entity who intends to conduct a PPI Project shall prepare a project proposal as specified by the Presidential Decree, pursuant to the Request for Proposal publicly announced under Article 10 (3), and submit it to the Competent Authority.
(2) The Competent Authority shall designate one of those who have submitted the project proposal as a potential concessionaire after reviewing and evaluating the project proposal under the conditions as prescribed by the Presidential Decree which was submitted under paragraph (1) above. In this case, a legal entity who has submitted a project proposal which contains the terms suitable for the Competent Authority’s smooth project implementation, such as provision of the long-term investment fund that serves greater public interests, may be given preferential treatment at the stage of review and evaluation of the project proposals. Amended by Act No. 7386, Jan. 27, 2005 (3) The Competent Authority shall designate the Concessionaire by closing a Concession Agreement with the potential concessionaire as designated under paragraph (2) above, which Concession Agreement shall include the conditions for project implementation such as total project cost (referring to the amount adding up each item of cost as prescribed by the Presidential Decree, which is the cost necessary for the Infrastructure Facilities) and the concession period. Matters regarding the designation of a Concessionaire who meets the requirements determined by the Presidential Decree shall undergo a prior deliberation by the Committee. Amended by Act No. 7386, Jan. 27, 2005 (4) A legal entity designated as a Concessionaire as prescribed in paragraph (3) above shall be deemed a Concessionaire under the Applicable Laws.
(5) A legal entity designated as a Concessionaire shall apply for approval of a Detailed Engineering and Design Plan for Implementation (DEDPI) as prescribed in Article 15 (1) within the period specified by the Presidential Decree from the date of its designation, and if the Concessionaire fails to apply within the given period, the designation of Concessionaire shall become ineffective. Provided when deemed inevitable, the Competent Authority may grant an extension of the said period only once within the scope of one year.
Grant of buyout right and termination of agreement
Where a concessionaire requests the competent authority to purchase the project, the competition authority should examine the request to determine whether to grant the concessionaire buyout right through deliberation by the PPI Project Board and notify the concessionaire of the result within 60 days after the request was made.
Article 59 of the Act on Private Participation in Infrastructure (Grant of Buyout Right) If a Concessionaire of a Revertible Facility is unable to construct, manage, or operate Infrastructure Facilities due to inevitable circumstances as determined by the Presidential Decree including natural calamities, it may request the State or a local government to purchase the project (including Supplementary Projects) concerned under the conditions as prescribed by the Presidential Decree. Amended by Act No.
7386, Jan. 27, 2005 Article 39 of the Enforcement Decree of the Act on Private Participation in Infrastructure (Grounds for Grant of Buyout) A Concessionaire of a Revertible Facility may request the State or local government to buyout the project (including Supplementary Project) pursuant to the
provisions of Article 59 of the Act in the event that any of the following cases occurs:
1. Natural disasters, war, and other cases of force majeure by which the construction is suspended for six months or longer or the total project cost increases by 50% or more;
2. Natural disasters, war, and other cases of force majeure by which the operation of the facility is suspended for six months or longer, or where the repair cost or reconstruction cost exceeds 50% of the total project cost originally planned;
3. Where the State or a local government has failed without justifiable cause to perform its duties under the Concession Agreement for a year or longer subsequent to the receipt of the notice requesting for performance of the said duties, or where the construction or operation of the facility has been delayed or suspended for six months or longer because the State or a local government failed to perform its duty under the Concession Agreement without justifiable cause; or
4. Where a cause, which the Competent Authority deemed proper, hence stated in the Concession Agreement as a cause to grant buy out, takes place.
The competent authority and the concessionaire shall make best endeavors to continue the concerned project before grant of buyout right or termination of the concession agreement.
They shall consult with each other to address risks to implementing the concession agreement and come up with ways to select a substitute for the current concessionaire.
The competent authority shall set out clearly in the concession agreement the consultation procedure in case risks to implementing the concession agreement occur, along with the period of time necessary for addressing such risks.
3. Were competition concerns taken into account at the time of granting a concession? What are the competition concerns or issues that have arose from concessions in your country? Was special protection in regard to dominance, entry or price control granted to concessionaires at the time of granting a concession?
Items with which to examine and evaluate proposed PPI projects are explicitly stipulated by the Act on Private Participation in Infrastructure.
Article 13 of the Enforcement Decree of the Act on Private Participation in Infrastructure (Examination and Evaluation of Project Proposal) (1) When the Competent Authority examines and evaluates the submitted project proposal pursuant to Article 13 (2) of the Act, it shall focus on the following
1. Matters regarding the composition of the parties implementing the project, including the form of composition of the Concessionaires and the relationship between the equity investors and the Concessionaire;
2. Matters regarding the feasibility of the project proposal, including total project cost, construction period, location, and content of construction;
3. Financing plan including equity and loan procurement capability;
4. Matters regarding the economic feasibility of the project, including user fees, volume of use, free use period, ownership and profitable use period, discount rate, and scale of any Supplementary Project;
5. Land purchase plan, including details such as the area of land already acquired and the feasibility of the purchase plan;
6. Matters regarding the applicable technology for construction, including details such as whether the minimum technology requirements have been secured and whether the latest technology shall be used;
7. Matters regarding management ability, including the reasonability of any repair and management and operation plan;
8. Matters regarding the service to the public interest such as the provision of convenience to the facility users; and
9. Other matters which the Competent Authority deems necessary.
In evaluating a project proposal, the competent authority may prefer proposals that are more conducive to a smooth progress of its project such as the one containing a longterm investment fund potentially beneficial to public good.
In project examination and evaluation, the competent authority may adjust items depending on the characteristics of the proposed project and give more weight to some items than to the others.
The points allocated to each evaluation item are reasonably distributed between technical and cost items in consideration of the level of sophistication required for construction and operation of the concerned project and its characteristics.
4. Which sectors from your economy are exempted from competition law?
Which sectors or what type of concessions are under a specific regulatory oversight? Are concessions subject to the national competition law?
Korea’s competition law is applied to all industrial sectors. However, a concessionaire’s acts deemed legitimate pursuant to other laws and regulations are exempted from antitrust application.
Private Participation in Infrastructure (PPI) projects are subject to the Act on Private Participation in Infrastructure, and private investment projects involving facilities other than infrastructure are conducted pursuant to the relevant laws and regulations governing the concerned facilities.
5. Is there evidence in your country that concessions have brought about benefits for consumers in terms of greater infrastructure, diversification, higher quality, better prices; overall consumer welfare?
Through prior feasibility study, a project verified to have passed the VFM(Value for Money) test is to be granted as a qualified PPI project.
Total welfare effect (for both consumers and producers) should be higher than that of a public project.
However, there is no need to prove that a PPI project has the higher consumer welfare effect.
As the PPI scheme has a relatively short history, a body of evidence to verify whether PPI projects have enhanced consumer welfare or not has yet to be accumulated.
(Enactment of the Private Capital Inducement Promotion Act in 1994) It is generally recognized that in terms of service quality, PPI projects are better than public projects, but costs of PPI projects are higher as well.
1. How many and what type of concessions have been granted in your country?
What is the typical/average duration of a concession?
Presently in Latvia’s Register of Concessions are registered 26 concession contracts.
The great parts of those contracts are concluded in Public utilities and transport sectors. The typical/average duration of a concession agreement is 15-20 years. There is no yet register for Partnerships procurement contracts. Now we are elaborating a new PPP law, there will be provided PPP contract register.
2. What were the modalities for creating a concession (Public offering/tender, decree, etc.)? Is there a law in your country for the granting/termination of concessions? Are there provisions in concession agreements which allow the government to terminate the concession?
At this moment, public and private entities can enter into PPP projects either by concluding concession contract up to 30 years under the Law on Concessions, or under any Partnership procurement contract agreement up to 30 by way of Public procurement law.
It is possible to create joint venture. When forming a joint venture entity with private partner, public partner shall comply with the basic principles or the EU Treaty, Equality of treatment, Transparency, Proportionality and Mutual recognition.
Although, currently there is no special regulation on how to select a private partner in
institutional PPP, number of laws shall be taken into account:
a) Law “On prevention of squandering state and municipal financial resources and property”. The objective of the Law is to prevent illegal and unsuitable use of state and municipal financial resources and property;
b) Law “On state and municipal capital (common) stock and capital companies” and Commercial Law sets procedures on how joint-ventures are established, how they are managed, etc.
Concession contract- The modalities for creating concession are public offering/tenders and auction. It is regulated by Concession law. The Concession Law sets the concession award procedure, and provides for basic principles of concession agreement. According to the definition set by the Law, concession is the delegation of rights to exploit public service or the transfer of concession resources.
The Law indicates two types of contracting authorities (public partners) – authorized ministry (in the name of the state) or the local government.
In order to initiate the procedure for the award of concession, the Cabinet of Ministers or local government approves the Conditions for granting concession and/or the list of concession resources (if such exists).
Partnership procurement contract - Public procurement law Section 67, 3rd paragraph, stipulates that „service agreements in case of public-private partnership, can be concluded for a period up to 30 years if the time period is crucial for the existence of the agreement, and if on every case Cabinet of Ministers have decided upon it”.
Herein, Cabinet of Ministers decides on every single case, whenever, service agreement is deemed to be longer than 5 years, and evaluated whether justification for the long-term contract is feasible.
After the consent from the Cabinet of Ministers, contracting authority according to the Section 8 of the Law can decide on the most efficient procedure, open or restricted.
The major difference between two legal acts:
Public Procurement Law regulates contracts where the payment is envisaged from the contracting authority for a period up to 30 years.
Concessions Law regulates contracts where the payment is envisaged from the enduser for a period up to 30 years.
Now we are elaborating PPP law - we would like to establish one single address for contracting authorities willing to pursue PPP procurement. That law would regulate both contractual and institutionalized PPPs.
More information you can find in web page- http://www.ppp.gov.lv/en/