Public-private partnership is a form of cooperation between a government agency and a private-sector company. It is established by means of pooling of resources, capital and expert knowledge for the purpose of completing a project that will serve the public. Public-private partnerships can be used to finance construction, rehabilitation, operation or maintenance of infrastructure.
Principles of Public-Private Partnership:
- long-term contractual relations between the partners;
- creation of new infrastructure;
- full or partial private financing;
- allocation of risks and responsibilities in which a private party bears significant risk and management responsibility.
Potential Benefits of Public-Private Partnership for the Private Partner:
- availability of government resources to meet the growing needs;
- access to economic infrastructure (transportation, education, healthcare, housing, etc.).
- sovereign guaranteed loans;
- increase of efficiency in project delivery, operations and management;
- improvement of transparency and business value to the project;
- creating and maintaining a strong image for the company.
Russian laws and regulations provide for two types of PPP: concession agreements and public-private (municipal-private) partnerships. These forms are used at the federal, regional and local levels depending on the type of project.
Other Forms of Partnership between the Government and a Private Partner:
- public contract agreement;
- lease agreement with investment commitments;
- management/operation and maintenance contracts;
- owner operator contract agreement.
Public-private partnership, municipal-private partnership in Russia
Mechanics of PPP is currently regulated by the RF Federal Law No. 224-FZ dated July 13, 2015 "On Public-Private Partnership, Municipal-Private Partnership in the Russian Federation and the Amendment of Certain Legislative Acts of the Russian Federation" (“Federal PPP Law”).
Private partner – a local legal entity which is a party to an agreement on public-private partnership.
The following legal entities cannot act on the side of a private partner:
- state and municipal unitary enterprises,
- state and municipal unitary agencies,
- public-law companies and other legal entities,
-non-profit organizations in the form of funds, formed by legal entities mentioned above.
Public partner – the Russian Federation, subjects of the Russian Federation or a municipal entity.
The Authorized Body in the Field of Public-Private Partnership
Federal law provides for mandatory identification of the authorized body of the Russian Federation.
Key functions of the authorized body:
- to assess the PPP projects performance (except the authorized bodies of local authority);
- to approve tender documents;
- to ensure inter-ministerial committee coordination in the implementation of PPP projects;
- to monitor the implementation of the PPP project;
- to enter agreements on public-private partnership into the Registry of Public-Private Partnerships.
Open list of competencies of authorized bodies is adopted and may be extended by the federal and regional laws, municipal regulations or regulations of the Government of the Russian Federation.
The RF Federal Law № 115-FZ dated 21.07.2005 "On Concession Agreements" governs concessions.
Concession provider – the Russian Federation, an authorized federal executive body or a subject of the Russian Federation, represented by a public authority of the subject of the Russian Federation, or a municipal formation, represented by a local authority.
Concessioner – a self-employed entrepreneur, a local or foreign legal entity, or an unincorporated association of two or more such independent legal entities acting under simple partnership agreement (joint venture agreement).