SUPPORT OF PPP/MPP PROJECTS STEP BY STEP
PPP Agreement Procedure Includes 6 Steps:
1) Proposal to Implement a PPP/MPP Project
According to the Russian law, a proposal on implementation of a PPP/MPP project may be initiated either by a private partner or a public partner (namely, by the RF Government, the regional or municipal government). In any case the project initiator shall submit a proposal for consideration of the authorized body of the respective governmental level (RF, regional or municipal) responsible for PPP/MPP projects.
2) Consideration of the Proposal by Public Partner
Provided that the proposal is initiated by the private partner, it proposal should be prepared in accordance with the approved form and accompanied by the independent guarantee.
The independent guarantee should be issued by the bank for the amount of not less than 5% of the projected amount of funding.
Upon primary consideration, the public partner submits the proposal to the authorized body for further assessment of the project effectiveness and determination of its comparative advantages, or makes a decision on impossibility of the project implementation.
3) Consideration of the Proposal by the Authorized Body
Upon receipt of the proposal from the public partner, the authorized body shall undertake assessment of effectiveness and comparative advantages of the project. While the considering the proposal the authorized body may negotiate the proposal with the public partner and (or) the proposal initiator and request additional information and documents.
4) Public Partner Decision
The regional or municipal government should take the final decision on the PPP or MPP project implementation.
5) Tender for the PPP/MPP Agreement.
The public partner shall organize and hold a tender for the PPP/MPP agreement.
The public partner places the tender announcement on the official website of the Russian Federation for information on tender/auctions (torgi.gov.ru)
* In the event a private partner is the proposal initiator preparation of tender documents is not required in certain cases.
6) Conclusion of the PPP / MPP Agreement
The Agreement shall be signed with the tender winner.
* Provided that a private partner is the proposal initiator, upon announcement of the PPP/MPP project on the official website (torgi.gov.ru) the following options are possible:
- If any other bidder demonstrates willingness to participate in a PPP/MPP project and submits the respective notice, the tender proceedings are initiated.
- If no other bidders submit notices on participation in PPP/MPP project, the project initiator (private partner) may conclude the PPP/MPP agreement with public partner on the agreed (announced) terms.
Benefits of private initiative
Private partners who are able to demonstrate availability of at least 5% of the project budget may submit proposals for PPP/MPP projects, and, if no other bidders apply, may enter into PPP/MPP agreements without having to go through a regular tender procedure.
According to the Law on Concession Agreements the tender procedure is a basic procedure for conclusion of the concession agreements. It essentially consists of the following stages:
1) Tender Initiation Decision
This decision defines the subject matter of a concession and approves the tender documentation. Decision is customary taken by the relevant executive body of the regional or local government of the Russian Federation (the “grantor”).
2) Tender Announcement
Upon taking of the tender initiation decision, the grantor shall publish information on upcoming tender (make a tender announcement) on the designated official website for placement of information about tender/auctions held by the grantors in Russia (torgi.gov.ru). The tender shall be held within 180 days upon adoption of a tender initiation decision.
3) Pre-tender Applications by Concessionaires
All interested concessionaires shall submit their applications on willingness to participate in a tender within 30 days from the tender announcement date.
4) Preliminary Selection
All submitted applications are considered by the tender commission on compliance with requirements specified in the tender documentation. Once the preliminary selection is held the tender commission announces the list of qualified applications. Timeframe for preliminary selection is set in the tender documentation.
5) Final Selection
Upon preliminary selection, the qualified applicants are encouraged to submit the final tender proposals to the tender commission. Such final proposals basically contain key terms and conditions of a concession agreement to be concluded between the grantor and the winning bidder and list the bidder’s proposed undertakings to meet the goals of the concession.
6) Announcement of the Tender Results and Conclusion of the Concession Agreement
Tender commission reviews the final proposals of all qualified applicants and determines the winning bid. The winner shall receive the minutes of the tender commission final meeting and a draft of a concession agreement for pre-signing review. Once all terms and conditions of a concession agreement are discussed and agreed upon between the grantor and a potential concessionaire, they sign the concession agreement and launch the concession project.
Private initiative procedure
Recent amendments to the Law on Concession Agreements (effective May 01, 2015) allow the potential concessionaires to submit private initiatives for implementation of concession projects. Provided that such a private initiative is accepted by the grantor and no other applicants submitted their proposals, the concession agreement may be concluded without holding the tender procedure.
According to the Law on Concession Agreements the private initiative shall be submitted and approved through the following procedure:
1) Submission of the Private Initiative
The private initiative shall be submitted to the specific authorized body within the regional or local government.
2) Consideration of the Private Initiative
The authorized body (competent authority) then considers the submitted private initiative (a proposal to conclude the concession agreement) and decides, whether the concession agreement:
- shall be concluded; or
- may be concluded on different terms; or
- cannot be concluded.
3) Negotiations with the Private Initiator
Provided that the competent authority decides the concession agreement may be concluded on different terms, the negotiations shall take place to elaborate on the terms mutually acceptable by both parties. Timeframe for negotiations is normally set forth in the decision of a competent authority. Once all terms are agreed upon, the competent authority renders a decision on conclusion of a concession agreement on the agreed terms.
4) Private Initiative Announcement
Either the competent authority decides to conclude the concession agreement on the terms of the private initiator, or the parties agree on different terms of the concession agreement, the respective decision shall be followed by the announcement of the accepted private initiative. The competent authority shall publish its decision accompanied with a text of private initiative on torgi.gov.ru within 10 days after it was taken.
5) Conclusion of the agreement
Provided that within 45 days upon publication no other applicants submitted their applications to conclude the concession agreement on the terms set by the private initiative, the concession agreement shall be concluded with the private initiator without holding tender procedure.
However, if one or more applicants do submit their applications, the competent authority shall make a decision to hold tender procedure for determination of the concessionaire.
Forms (Types) of the Concessionaire Fee:
- fixed payment, periodic payment or one-time payment;
- share of production or revenue, received from concessionaire’s activity;
- conveyance of concessionaire’s property to the grantor;
- combination of above-mentioned forms (types).