Glossary Questions and Answer

 


Public-Private Partnership or Partnership: Any agreement between a government entity and one or more persons, subject to the public policy set forth in the Public-Private Partnerships Act of No. 29 of June 8, 2009 (the), the terms of which are provided under a Partnership Contract, to delegate operations, functions, services, or responsibilities of any government entity, as well as to design, develop, finance, maintain or operate one or more facilities, or any combination thereof.


Authority: Puerto Rico Public-Private Partnership Authority created by the Public-Private Partnerships Act.


Partnership Committee: A Committee designated by the Authority to evaluate and select qualified persons and the proponents of a Partnership and to establish and negotiate the terms and conditions it deems appropriate for the corresponding Partnership Contract.


Partnership Contract: The Contract executed by the selected proponent and the partnering government entity to establish a Partnership, which may include, but shall not be limited to, delegating a function, administering or rendering one or more services, or conducting the design, building, financing, maintenance, or operation of one or more facilities that are in themselves or are closely related to Priority Projects as established in Section 3 of the Public-Private Partnerships Act. A Partnership Contract may be, without it being understood as a limitation, any modality of the following kinds of contract:

  • “design / build ”,
    • “design/ build/ operate”,
    • “design/ build/ finance/operate”,
    		“design/ build/ operate/transfer”,
    		“turnkey”,
    		long-term lease contract,
    		surface right contract,
    		administrative grant contract
    		“joint venture contract”
    		"long-term administration and operation contract "
    		And any other kind of contract that separates or combines the design, building, financing, operation or maintenance phases of the priority projects, as established in Section 3 of the Public-Private Partnerships Act.

    Contractor: The person who executes a Partnership Contract with a partnering government entity or the successor thereof.


    Government Entity: Any department, agency, board, commission, body, bureau, office, municipal entity, public corporation or instrumentality of the Executive Branch, as well as of the Judicial Branch and the Legislative Branch, of the Commonwealth of Puerto Rico, whether existing or to be created in the future.


    Facility (ies): Any property, capital work or facility of public use, whether real or personal, whether existing or to be developed in the future, including, but not limited to:


    		aqueduct and sewer systems
    		systems to collect, transport, manage, and eliminate non-hazardous and hazardous solid waste
    		systems to recover resources
    • systems to produce, transmit or distribute electric power
    • freeways, highways, pedestrian walkways, parking facilities; airports, convention centers, bridges, sea or air ports, tunnels
    • transportation systems, including mass transportation systems
    		communications systems, including telephones
    		information and technology systems
    		industrial facilities
    		public housing, correctional institutions
    		facilities used as tourist, healthcare or agricultural-industrial infrastructure
    		other similar facilities


    Proponent:     Any person or its affiliated or related entities who has submitted a proposal to enter into a Partnership with a government entity.

     


    Answers to Questions about Public-Private Partnerships
    1. What is a Public-Private Partnership?
  • A public-private partnership (PPP) is a contract between an actor of the public sector and an actor of the private sector to develop an infrastructure project, manage a government asset or provide a service (or carry out a function) that is typically provided by the government.

     
    2. What advantages does a Public-Private Partnership offer?

  • It allows more collaboration between the government and non government entities in areas of governance 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 income for the government and the non government sectors can be created.
  • New and better jobs can be created.
  • The quality of services provided can be improved.

     
    3. What has been the experience worldwide with public-private partnerships? Where have they been used? For what kind of projects?
    • Public-Private Partnerships have been used almost everywhere in the world, including the United States. Those most active and with the most experience with PPPs have been the European countries especially Great Britain, Ireland, the Netherlands and Spain, and they have also been used in Australia.
      • PPPs have been used in a variety of projects, including roads, bridges, mass transportation, airports, housing, schools, hospitals, water treatment systems and solid waste management systems.
    • The success of PPPs in different jurisdictions can be observed in the volume of projects that governments have implemented and continue to implement. For instance, between 10% and 15% of England’s infrastructure projects 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 PPPs related to roads were formed, with a total worth of more than €6 billion, of which 13 are operating.

     

     

    4. What is the typical term of these contracts?
  • The term of a Public-Private Partnership contract depends on the kind of asset that is the object of the contract.
    • Contract terms for roads or other transportation assets in the United States tend to be long, between 75 and 99 years. However, in other jurisdictions, there are shorter terms, between 30 and 40 years; contract duration is dictated by the economic terms of the contract.
    • The duration of PPP housing contracts can vary between 5 and 10 years.

  • Education PPP contracts can last as much as 30 years.

  • It is important to take into account that no contract is the same and that both the nature of the asset and the economic terms agreed to with the private contracting party will dictate how long or short the contract term will be.

     

     

    5. Why are we considering this model now? What advantages does it offer Puerto Rico today?
      • Public-Private Partnerships are a tool to encourage economic development and to pursue the government mission of providing quality services to citizens while managing and using their money in the most efficient manner possible.
  • The PPP model is being considered now because the legal framework in Puerto Rico for PPPs so far is unclear and fragmented. Some public entities already have authority to develop certain kinds of projects, but their enabling laws are not sufficiently flexible or inclusive.
      • Through this PPP model, we are going to begin new infrastructure projects to stimulate the economy and support the growth of the economy for the long term.

     

     

    6. What projects are being considered to become public-private partnerships?

  • landfills

  • water reservoirs

  • power plants that use alternative sources of energy

  • transportation systems

  • health, security, education, correction and rehabilitation facilities

  • low-income housing projects

  • facilities for sport, recreation and cultural activities

  • ground and wireless communication systems

  • high technology information and mechanical systems

  • other kinds of activity or installation identified as a priority project through legislation

     

     

    7. What is the goal of the law?
    • The law establishes the government’s public policy in order to support and encourage the creation of public-private partnerships through a legal framework that is clear, transparent, agile and flexible.
      • This helps to incentivize proponents to participate, encourages competition among proponents and contributes to the effectiveness of the processes—all of which will result in more gains for citizens.

     

     

    8. What is the function of the new Authority?

    • The Authority is in charge of pushing forward the public policy of encouraging PPPs.

    • It is in charge of all the procedures involved in the creation of a PPP, including identifying projects, requesting proposals, selecting the proponent, negotiating the contract and overseeing compliance with the contract.

  • It will centralize all the functions of the PPP process in order to provide certainty to the process and, thus, confidence in it to the proponents. In addition, it is responsible for enacting uniform procedures that guarantee the effectiveness of processes and encourage competition among proponents.

     

     

    9. How do we ensure that the processes will be transparent?

    • The bill ensures the transparency of the process by including government sector participants, that is through the participation of officials from the different government entities in the PPP committees, the composition of the Authority’s Board of Directors which has to approve the process and the contract—and which includes representatives from the Legislative Assembly, the Executive and a third, independent 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 Internet publication of the documents that are sent to the proponents. It also requires the Authority to publish a detailed report of the process, to which the public will have access.

     

     

    10. Why was the incorporated scheme chosen for the law?

  • It was chosen because it is similar to the schemes adopted by other jurisdictions that have been successful implementing PPPs.

    • The law was influenced by laws from Spain, Great Britain, Ireland and the State of Virginia, as well as by the laws approved by the P.R. Legislative assembly for the P.R. Highways and Transportation Authority, and the Port of the Americas.

  • The selected scheme is centralized and it aims to address the main criticisms made to the older PPP system: that it is a long, fragmented and bureaucratic process.

     

     

    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 decided by the Governor with 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 assigned to the General Funds will have to be authorized by the Legislative Assembly.
    • In some cases, the funds will have to be used to pay outstanding debts of the government entity.

     

     

    12. What is the first step to establish a PPP?
      • Responding to the Request for Qualifications and providing detailed information about abilities and capacities in the specific areas and/or projects.

     

     

    13. What kind of company can request or qualify for a PPP?
      • Those that meet the basic and general qualification established by the Law and that fully comply with the request for qualifications disseminated by the Authority.