1. What is a Public-Private Partnership?
It is a contract between the public and the private sector to develop an infrastructure project, manage a Government asset or provide a service (or perform a function) that is typically provided by the Government.
2. What are the advantages of a Public-Private Partnership?
- It allows for greater collaboration between the Government and non-government entities in areas of Government where there is still opportunity for better efficiency.
- It makes possible for the Government to share investment or financing costs of projects with non-government participants.
- It accelerates the development of public works and streamlines the operation of public facilities.
- New sources of revenue for the Government and the non-governmental sector can be created.
- New and better jobs can be created.
- The quality of services provided can improve.
3. What has been the global experience with Public-Private Partnerships? Where have they been used? What types of projects have they been used for?
Public-Private Partnerships have been used almost everywhere in the world including the United States. The most active and most experienced ones have been in Europe, particularly in the United Kingdom, Ireland, the Netherlands and Spain; they have also been used in Australia.
PPPs have been used for various types of projects including roads, bridges, mass transportation, airports, housing, schools, hospitals, water treatment systems, solid waste management systems, and others.
Successful Partnerships in different jurisdictions can be seen in the volume of projects that governments have implemented and continue deploying. For example, between 10% and 15% of infrastructure projects in England are carried out through the PPP model. In Spain, awarding road concessions is a practice that began in the 1960s, and between 1998 and 2003, 22 Partnerships were formed, with a total value in excess of €6 billion, 13 of which are in operation.
4. What is the typical term of these contracts?
The term of a Public-Private Contract depends on the type of asset that is the object of the contract.
Contracts terms for roads or other transportation assets in the United States tend to be long, between 75-99 years. However, other jurisdictions have shorter ones, between 30-40 years; the economic terms of the contract dictate its duration. Contracts for housing Partnerships can vary from 5-10 years. Contracts for education Partnerships last as much as 30 years.
It is important to note that no contract is equal and that the nature of its assets and the financial terms agreed with the private contractor will dictate how short or long the term of a contract is.
5. Why are we considering this model now? What advantages does it offer Puerto Rico today?
Partnerships are a tool to promote economic development and to comply with Government’s mission to provide quality services to the citizens while administering and using their money as efficiently as possible.
The PPP model is now considered because the legal framework in Puerto Rico in relation to Partnerships was unclear and fragmented. Some public entities already had the authority to develop certain types of projects, but their enabling laws were not sufficiently comprehensive or flexible.
With Partnerships, we will start new infrastructure projects to stimulate the economy and support long-term economic growth.
6. What projects are made as Public-Private Partnerships?
- Water reservoirs
- Power plants that are fueled by alternate sources of energy
- Transportation systems
- Health, security, education, correction and rehabilitation facilities
- Low-income housing projects
- Sporting, recreational and cultural facilities
- Ground and wireless communication networks
- High-tech information and mechanical systems
- Other types of activities or facilities identified as a priority project through legislation
7. What purpose does the Law serve?
The Law establishes the Government’s public policy in order to support and encourage Public Private-Partnerships through a legal framework that is clear, transparent, agile and flexible.
This will help encourage proponents to participate, foster competition between proponents and contribute to the effectiveness of processes, all of which translates into higher gains for the citizens.
8. What is the role of the new Authority?
The Authority is responsible for promoting public policy to encourage Partnerships.
The Authority will be in charge of all procedures involved in the creation of a PPP, including identifying projects, requesting proposals, selecting the proponent, negotiating the contract and monitoring contract compliance.
The Authority will centralize all functions of the Partnership process to give certainty to the process and, thus, confidence in it to the proponents. In addition, it will be responsible for enacting uniform procedures that guarantee the effectiveness of processes and encourage competition among proponents
9. How do we ensure that processes are transparent?
The bill ensures the transparency of the process by including government sector participants, either through the participation of officials from various government entities in the Partnership Committees, the composition of the Authority’s Board that must approve the process and the contract—which includes representatives from the Legislature, the Executive and an independent third party—and the requirement that the creation of the PPP be approved by the Board of Directors of the relevant government entity and the Governor.
In addition, the project requires the publication on the Internet of documents that are sent to the proponents. It also requires the Authority to publish a detailed report on the process that will be made available to the public.
10. Why was the incorporated scheme chosen for the Law?
This scheme was chosen because it resembles the schemes adopted by other jurisdictions that have been successful in implementing Partnerships.
The Law was influenced by laws from Spain, the United Kingdom, Ireland and the State of Virginia, as well as by the laws approved by the Legislature in the case of the P.R. Highways and Transportation Authority and the Port of Americas.
The selected scheme is centralized and attempts to address the main criticisms made to the older PPP system, namely that it is fragmented, lengthy and bureaucratic.
11. How will the use of the funds generated by PPPs be determined?
The Law establishes that the funds generated by a PPP will be used as specified by the Governor on the recommendation of the President of the Government Development Bank and the Director of the Office of Management and Budget. The use of the funds corresponding to the General Fund will have to be authorized by the Legislative Assembly.
In some cases, funds will have to be used to pay outstanding debts of the government entity.
12. What is the first step in establishing a PPP?
Responding to the Request for Qualifications (RFQ) and providing detailed information on capabilities in specific areas and/or specific projects.
13. What type of company can request or qualify for a PPP?
Those who meet the basic and general qualification as governed by Law and fully comply with the request for qualifications disclosed by the Authority.