The Regulations for Public-Private Partnerships have been Issued

By Decree 1190, the President of the Republic issued the Regulations for Public-Private Partnerships[1]. The main provisions of the Decree are:

• The delegated management contract is the agreement whereby the rights and obligations of the delegating entity and a private party are set with regards to the performance of the public project subject to delegated management.
• The public-private partnership (PPP) comprises the indirect management of public activities whereby, through a long-term delegated management contract, a private operator is entrusted with the development or management of public infrastructure or a public service; the private operator bears the risk and liability during the life of the contract, and the consideration is tied to performance, demand for or use of the asset or service.
  
  

Interinstitutional Committee for Public-Private Partnerships

• This is the entity responsible for issuing the policies, technical regulations and management as regards the delegated management of public projects.
• The main duties of the Committee include:
  • Define the sectors in which the use of the PPP modality will be promoted.
  • Determine the policies and guidelines for the application of the benefits under the PPP Law.
  • Grant, in full or in part, the tax benefits provided for in the PPP Law.
  • Promote the participation of the national and international financial sector in the financial structuring of PPP projects.
• In the exercise of its powers, the PPP Committee must:
  • Approve the projects that a delegating entity puts forward for development through the delegated management modality.
    
    

National Register for Public-Private Partnerships

• The Technical Department of the PPP Committee will keep digital, individual, sequential and updated records of PPP projects in the National Register for Public-Private Partnerships.
• The PPP Register will keep an online publication of the up-to-date PPP Project Program; the technical, economic-financial and legal studies for each project; the reports and resolutions for structuring; the administrative decisions for the approval and granting of tax incentives; the bid specifications; the successful bid; the award decision; the delegated management contract with all annexes; the project follow-up reports; complete contract termination acts, and final evaluation reports.
  
  

Regime for Delegated Management Contracts and PPP Projects

Public Projects:

• Services of general interest are considered the public services regarding strategic sectors and the provision of goods or services under the authority of a government in conjunction with the private sector.
• The public project managed via a PPP can consist, among other things, of the planning and design, construction, equipping, operation and maintenance of a new infrastructure work or the reconditioning or improvement, equipping, operation and maintenance of an existing infrastructure work for the provision of a service of general interest.
• All kinds of productive, research and development activities for which the government is authorized to participate with or without the private sector can be developed using the PPP modality.
• Self-financed projects are those whose income is derived from the price paid by the end users or which, in any case, do not require firm payment commitments chargeable to the public budget.
• When a project requires firm commitments or contingent commitments by the government, projects with public financing will be considered.
• In projects executed under the PPP modality, the risks will be distributed between the public and private sectors. The rights and obligations of the private operator will be defined in the corresponding delegated management contract, based on the risk distribution matrix with which the structuring of the project was concluded.
• The projects to be executed under the PPP modality will be preferentially integrated, ensuring that the private operator is in charge of the different components in the execution of the project.
• In any PPP project, the government must specify the results to be achieved in the execution of the project by the private operator, through specific, measurable, achievable, relevant and programmable indicators.
• As with any other public project, the PPP projects will be subject to prior evaluation during their performance and conclusion.
  
  

Public Projects by Private Initiative

• By public invitation or on their own initiative, private parties can propose to the government that public projects be performed by delegated management, with public financing or self-financing.
• To present a private initiative, the bidder must prepare the project profile and pre-feasibility studies which are required in the planning stage.
• The delegating entities will determine the public interest of the project within a maximum of six months.
• If the project is declared to be in the public interest, the delegating entity will continue the administrative proceeding established for its incorporation in the PPP Project Program.
• Once the private initiative project is incorporated in the PPP Project Program, the private bidder will be notified so that it can carry out the feasibility studies in a maximum of six months.
• The proceeding for the selection and procuring of the private operator will be adjusted to the same rules which apply to public initiative projects.
• The private bidder will participate in the process in the same conditions as the other interested parties, with the sole exception that it can be entitled to a bonus of up to 10 percentage points in the evaluation of its bid during the respective public tender. If the private bidder does not present the best bid, it will not be entitled to present a bid that is equal to or better than the best qualified bidder.
• In private initiative projects the specifications will establish the amount that the successful bidder must reimburse to the private bidder for the prefeasibility and feasibility studies for the project when the latter is not the successful bidder. If it is the successful bidder, it will not be entitled to be reimbursed for costs incurred.
  
  

Participants in the PPP Project

• The delegating entities are the government agencies for the competency to be delegated. Government enterprises are not delegating entities.
• The private operator will be a corporation incorporated under the laws of Ecuador, with the specific purpose of handling the public project subject to delegated management. Depending on the nature of the public project to be executed, the private operator can adopt another arrangement which is authorized under the legal system.
• The private operator must be incorporated with a contribution in cash or in kind from the private sponsor as provided for in the specifications. When the delegated operator is incorporated, the members of the company must be the successful sponsors in the same percentages as set out in their bid.
  
  

Economic-Financial Terms

• As consideration for the activities undertaken, the private operator can receive different modalities of income in the form of contributions or payments chargeable to the public budget or payments made by the final recipients of the good or service concerned, or a combination of the two, in accordance with the delegated management contract.
• For the execution of public-private partnership projects, the private operator can create business trusts for the collection and management of funds from the business activities carried out on occasion of such projects. When the private operator does not have a direct relationship with the users or beneficiaries of the PPP project, the government agencies can create trust transactions in order to guarantee the respective payments to the private operator.
• The total accrued value of the final and contingent obligations that the government agency can asume with the PPP Project Program, in present value, cannot exceed 5% of the nominal value of the annual Gross Domestic Product estimated by the Central Bank of Ecuador, a limit that can be changed by administrative decision by the governing entity of public finance.
• The economic-financial plan for the project will be a requirement that must contain any bid which is submitted in the respective tender.
• The private operator, in its relationship with third parties who will finance the PPP project, will have the necessary autonomy and sufficiency to grant the guarantees required for the assets and rights of the delegated management contract which are its exclusive property, except in those cases in which its acts or contracts may imply that the third party has the capacity to suspend the public service or affect the levels of service.
  
  

Other Provisions:

• The concession contracts and any other mode of delegating a public project to private enterprise will be adjusted to the same requirements and procedures provided for in these regulations, as applicable.
• The different modalities of PPP contracts will not enjoy tax benefits.
  
  

[1] Published in Official Register Supplement No. 333 of November 19, 2020.