Partnership
Partnership concept
Public-private partnerships are based on contractual arrangements between one or more government agencies and a private sector company on specific projects.
Under this agreement, the private partner provides the government with assets and services (usually provided by the public sector) directly.
These arrangements include a simplified form of outsourcing, or may extend to the transfer or participation of management, or the decision-making process, so that the private sector has a greater role in planning, financing, designing, building, operating and maintaining public services.
Various options for services and production
Public ownership and operation by the public sector.
Public ownership and operation by the private sector through management or concession contracts.
Private ownership and operation by the private sector.
Co-ownership and operation by users and localities.
Partnership Objectives
Achieving better value for less in terms of public spending.
Encouraging the private sector to participate and innovate.
Promote economic growth in the country and provide new job opportunities.
Achieving sustainable development and better outcomes and outputs than each team can achieve alone.
Attracting and stimulating national, regional and foreign investments.
Focus on policy development for the public sector.
Partnership justifications
The inability of governments to achieve sustainable development on their own.
The rapid technical and economic change provided the opportunity to reduce the cost of projects.
Increasing competition pressures and low growth rates.
Achieving a higher value for the money invested.
The ability of capital in the private sector, and its knowledge and experience in project management, to reduce the time periods for their implementation, and to reduce and improve the cost of services.
Reducing the burden of government spending and financing, and sharing risks with the private sector.
Requirements for a successful partnership
Strong political support at the national level.
Rigorous analysis of project feasibility before contracting.
Detailed analysis of the risks of joint ventures from the technical, economic and social points of view...
The serious follow-up to the implementation of projects and ensuring compliance with the scheme and contract terms.
Choose the projects that really need the private sector partnership.
Types of Partnership Contracts
Service Contracts:
The Public Corporation retains full responsibility for the operation and management of the entire facility, but contracts with the private sector to provide some services such as meter reading, billing and maintenance.
The duration of these contracts ranges between one and three years.
Advantages: the entry of more than one party from the private sector and thus obtaining competition and providing good service...
Disadvantages: The maintenance burden remains on the government institution
Management contracts:
The public sector transfers responsibility for managing a group of activities to the private sector, where the public entity finances working and investment capital and set a cost recovery policy.
The state uses them to activate losing companies to raise their value and then sell them.
The term of these contracts ranges from 3 to 5 years.
Advantages: The state retains ownership of the asset while solving problems using the best expertise
Disadvantages: The state bears the risks resulting from partnership operations, such as paying fixed fees.
Lease contracts:
Private companies rent the public facility and are responsible for its operation and management, and thus bear a lot of risks. This method was used in the transport and mining sector, for example in Thailand, and was applied in the railway sector.
The duration of these contracts ranges from 5 to 15 years and can be extended.
Advantages: Save operating expenses without giving up public ownership and get income without risk.
Disadvantages: As a result of the non-transferability of ownership assets, the company does not make any improvement.
Franchise Contracts:
Private companies are responsible for operating, managing and investing, while the public entity remains the owner of the facility's assets. These concessions are offered at the entire state or city level, and their duration usually ranges between 25 and 30 years. Used in Argentina in the field of transportation and communications.
Advantages: The concessionaire is responsible for the expenses and investments and thus saves the financial burdens on the state.
Disadvantages: There are no obvious defects, but the contract formula must be taken into account.
Build, operate and transfer ownership: BOT
This system appeared at the end of the nineteenth century and the beginning of the twentieth century in France and was used in electricity, railways and water stations and spread in many countries, and in 1984 it was used in the construction of the Channel Tunnel linking England and France.
The company builds entire projects and uses them and benefits from them for a period specified in the contract and is eventually owned by the state.
Advantages: Transferring construction and operating risks away from the government and benefiting from the expertise of the private sector.
Disadvantages: It requires accuracy in the bidding procedures and requires political and economic stability.
Benefits of using the BOT. system
Obtaining a ready project at the end of the concession period without incurring any burdens.
The project remains strategically under government control.
Creating new job opportunities by investing in projects.
Raising the quality of services and reducing their costs.
Reducing the burden on the state budget and diversifying sources of income.
Avoiding the (especially developing) country from borrowing from abroad.
Attracting foreign investments in the field of large projects.
Transfer, develop and localize modern technology.
Creating good financing opportunities for local financial markets and institutions.
Cons of using the BOT. system
The possibility of higher service costs for users.
This mostly led to the creation of a kind of monopoly.
Difficulty choosing a contractor.
Problems in the evaluation and preparation of feasibility studies.
Managing project phases requires great coordination between different government agencies.
Decreased quality of service and maintenance in the last years of the decade.
Puts pressure on the local capital markets to finance the costs of exorbitant projects.
Build, operate, own and transfer BOOT
The state grants the private sector investor the right
In establishing a project, owning and maintaining its assets, and achieving profits for an agreed period of time, provided that ownership of its assets will be transferred to the state at the end of that time period, where ownership is exclusive to the private sector, which is not achieved in previous types of contracts.
Advantages: Transferring construction, operating, management, investment and financing risks to the private sector.
Disadvantages: During the operation and maintenance period, the project is not subject to the dominance of the public administration, even if it is subject to its control.
Build, operate and own BOO
This method is considered one of the full privatization methods, in which the private sector is given the responsibilities of construction, operation and management in full, in addition to the absolute ownership of the project assets without being tied to a specific time period, and there is no obligation from the private sector to transfer assets to the state.
Advantages: This method has the advantage of transferring the risks of construction, operation, management and investment to the private sector. It contributes to encouraging national and foreign investments.
Disadvantages: During the period of operation and maintenance, the project is not subject to the dominance of the public authority, even if it is subject to its oversight. There are risks of losing the state's control over the nature of the project, whose activity may change.
Sale:
The state sells already existing organizations.
Direct selling by putting it on the market and selling.
Selling through shares in order to expand the ownership base of citizens.
The private sector (represented by individuals, companies, or workers) bears the risks of financing, management, operation, maintenance and other risks. In addition, the project's assets do not belong to the state after that.
Phases of the Partnership Project Cycle
The first stage: is initiation of the project and selection.
First action
Choosing a project and nominating it as a partnership project
The second procedure
Completion of the selection of the partnership project and preparation of the concept paper
Third action
Reviewing and verifying project documents through the Partnership Central Unit
Fourth procedure
Issuance of a decision by the committee on the feasibility of moving the project to the second phase
The second stage: the feasibility study
Explanation of the reason for choosing the idea of partnership
Study of the external and internal environment.
Technical and engineering study of the partnership.
Preparing a feasibility analysis of a partnership project with the private sector
Develop the proposed project proposal structure, and risk distribution structure, by the relevant ministries and their affiliated partnership units.
The third stage: risk assessment and cost feasibility for the country
Completion of the study and financial feasibility by the partnership units in the relevant ministries.
Review the studies submitted by the competent ministry with the knowledge of the central unit of the partnership.
The ministerial committee for partnership reviewed the project and the proposals of the central unit of partnership.
An evaluation review of the differentiation between implementing the project under the umbrella of the partnership or through the usual public offering.
Fourth stage: tendering and offering procedures
The central unit of partnership cooperates with the private sector during this stage to finalize the tender procedures and offer the project.
The Partnership Central Committee reviews the procedures and documents and submits the required approvals in a timely manner.
In many cases, the Partnership Central Unit provides forms of qualification documents and tender documents to the various ministries.
Fifth stage: tendering and offering procedures
Tender selection procedures
First action
Opening technical envelopes
The second procedure
Evaluation of technical offers
Third action
Conducting a competitive dialogue
Fourth procedure
Announcing evaluation results for technical offers
Fifth action
Opening the financial envelopes
Sixth procedure
Evaluation of financial offers and completion of comparative financial models
Seventh procedure
Comparing the financial model with what is required by the central unit of the partnership
Eighth procedure
Selection and announcement of the winning bidder
Sixth stage: signing the contract and closing the money
The steps that follow the signature of the relevant ministries on the final contract with the winning bidder, the completion of the signing of all financing contracts with the financiers, and the financial closure, which include the following steps:
Completion of contract negotiation.
Applying the terms of enforcement and ensuring that all obligations have been implemented by the state and the private sector.
Confirmation of the financial closing stage and ensure the arrival of contracts.
Seventh stage: Post-contract performance follow-up
This stage clarifies the procedures to be followed by the relevant ministries to monitor the implementation of the works by the private sector during the construction and operation phases and until the end of the contract.
First action
Preparing the performance follow-up plan for the partnership contract and establishing performance monitoring committees
The second procedure
Monitoring performance during the construction and operation phases
Third action
Managing contract review or renegotiation requests and supervising dispute resolution
Fourth procedure
Supervising partnership projects until the end of the contract and transfer of ownership
Public-private partnership law in Qatar
Article 3 states that partnership means allotment of lands by way of lease or usufruct license for development by the private sector, construction and transfer of ownership and operation regulations.
Article 5 states that each government agency or competent department may designate a project to be implemented through partnership, and it shall be presented to the Minister together with his recommendations.
Article 8 states that the contracting authority shall prepare a comprehensive study of the project
Article 11 specifies that the bid may be submitted by a consortium consisting of more than one company, and the bid shall be submitted in the name of the alliance, and none of the constituent companies may submit another bid.
Article 19 stipulates that the term of the contract shall be limited by agreement of the two parties to no more than 50 years, and contracts may be concluded for a period longer than that in accordance with the requirements of the public interest.
Some international arbitration agreements
European Convention on Commercial Arbitration signed at Geneva in 1961 and arrangements relating to
Implementation of this agreement in 1962,
The Convention on the Settlement of Disputes through Arbitration relating to Investments between States and Nationals of Other Countries, was signed in 1965 under the auspices of the International Bank for Reconstruction and Development, which established an arbitration center called ICSID
Agreement for the Settlement of Investment Disputes between the Countries Hosting Arab Investments and the Citizens of Other Arab Countries, signed in 1974...