Public/Private Partnerships

Profession:Macedo Vitorino e Associados
 
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Summary

Decree-Law 86/2003 of 26 April 2003 sets out the main general rules and principles applicable to public and private partnerships.

Portugal has since the early nineties been familiar with the concept of project financing under public/private partnerships (PPPs). In fact, with the number of projects built under PPP schemes, a set of standardised procedures has been developed.

Until now and while developing several different projects within the same sector, the Government first established the framework regulations for the development of PPPs in such sector and then specific regulations for each new project. The same with respect to projects for the construction of a single facility or infrastructure, where the Government approved regulations detailing the main terms and conditions for the development of such projects.

Decree-Law 86/2003 of 26 April 2003 now sets out the general rules and principles applicable to the definition, conception, preparation, tendering and selection procedures, modification, inspection and supervision of PPPs, without prejudice to further regulation within any given sector.

1. Requirements

Any applicant must meet several requirements for the setting up of a PPP project, which include (i) the clear definition of the PPP's purpose, including the expected results, so as to allow both parties to establish a reasonable share of the entailed liabilities; (ii) the presentation of a partnership model and of its benefits in comparison with other alternatives; (iii) compliance with all applicable legal requirements, including all necessary administrative licences, authorisations and opinions; and (iv) the adoption of all actions that are likely to lead to the economic competitiveness of the PPP project.

2. Project liability and risk sharing

As a rule, the public entity shall be responsible for supervising and controlling the performance of the PPP project with the purpose of ensuring public interest. On the other hand, the private entity shall be responsible for the financing, development and management of the PPP project.

The project agreement must clearly set out the risk sharing between the public and private entities, subject to the following principles: (i) the risk sharing must take into account the capability of the parties to handle such risks; (ii) the PPP project must entail a significant and effective transfer of risk to the private entity; (iii) the avoidance of any unjustified risks, unless in connection with the reduction of...

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