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Establishing a PPP Framework

21.7.5 Approvals

Most governments have rules for approving capital investment projects that is, defining who can give approval at various points in the life of the project for the project to proceed to the next phase. Because PPPs often do not require capital investment by the government, they may not automatically be subject to these approval rules. Many governments therefore define similar approval requirements for PPPs.

Often, several decision points are created, allowing weak projects to be stopped before they consume too many resources or develop a momentum of their own. At a minimum, approval is typically needed to enter into a PPP transaction. Because the final cost of a project is not known until procurement is concluded, final approval may be needed before the contract is signed.

Jurisdictions vary as to which entity can approve a PPP. A few countries require legislative approval of projects. More often, approval may come from the cabinet or a cabinet level committee, the finance ministry, or a combination of agencies and authorities. Approval responsibilities may depend on the size of the project, as is typically the case for other capital investments.[98]

Table 2.7 provides examples of approval requirements set out in national PPP frameworks.

TABLE 2.7: Example PPP Approval Requirements

Country

Approval requirements

New South Wales, Australia

In New South Wales, capital and recurrent funding for the project needs to be approved by the Budget Committee of the Cabinet, the Expenditure Review Committee (ERC) of the Cabinet, and if there are joint financing arrangements, the PPP also needs to be approved by the Treasurer. The ERC’s funding approval decision takes into account decisions about the relative need for the project made by a separate committee, the Cabinet Infrastructure Committee (CIC) which looks at the project’s business case.

Approval requirements are defined at each stage of the PPP process.

1. PPP Project Planning and Definition – ERC approval is required to proceed with release of Expression of Interest (EOI) tender documentation.

2. Expression of Interest – Agencies should consult New South Wales Treasury to determine if ERC approval is required.

3. Request for Detailed Proposals – ERC approval is required before entering into contract negotiations or pre-selection negotiations based on prescribed “negotiation parameters” with preferred bidder(s).

4. Negotiations and Contract Finalization – ERC approval is required prior to the Portfolio Minister (or delegate) signing any contract if significant variations arise in negotiations. The Treasurer’s approval is also needed under the Public Authorities Financial Arangements (PAFA) Act for agencies to enter into a joint financing arrangement. This will be a condition precedent for any PPP contract to become effective.[99]

Chile

Final approval of a PPP – through a signing of the decree that formalizes the concession – rests with the President and the Ministry of Finance together. Contracts cannot be bid out unless the Ministry of Finance has approved the bidding documents. The Ministry of Finance must also approve any changes to economic aspects of the bidding documents, as well as certain changes during implementation.[100]

Colombia

PPPs must be approved by the following.

· CONFIS – the National Fiscal Council (CONFIS), which leads the national fiscal policy and co-ordinates the budgetary system, approves the future appropriations (vigencias futuras) for PPP projects. CONFIS is comprised of the Ministry of Finance, the Director of the Administrative Department of the National Planning Agency, the Chief Economic Advisors of the Presidency, the Vice-Minister of Finance, and the directors of the National Treasury, Public Credit, and Tax and Customs Authority. Before reaching the CONFIS, the project must have the approval of the sector ministry and the National Planning Department.[101]

· CONPES – the National Council for Economic and Social Policy (CONPES) is the highest planning authority in Colombia, and it advises the government in all aspects related to the economic and social development of the country. CONPES certifies the strategic importance of the project. Such certification is required for the project to be eligible to receive future appropriations. CONPES comprises the President, the Vice President, the Cabinet, the Director of the Administrative Department of the Presidency, the Director of the National Planning Department, and the Director of Colciencias.[102],[103]

Philippines

All national projects and projects over PHP200 million ($4.6 million) require approval from the Investment Coordination Committee under the National Economic and Development Authority (NEDA) Board. Build-Own-Operate projects require approval from both the NEDA Board and the President. The members of the NEDA Board are Cabinet members responsible for the major infrastructure, economic, and finance departments.[104]

South Africa

There are four stages of PPP approvals made by the Cabinet on recommendations by the Treasury. Projects are submitted for approval after: (1) the feasibility study has been completed, (2) the bid documents have been prepared, (3) bids have been received and evaluated, and (4) negotiations have concluded and the PPP contract is in its final form.[105]

 

[98] As described in Irwin (2007) Government Guarantees: Allocating and Valuing Risk in Privately Financed Infrastructure Projects.

[99] New South Wales Government (2012) NSW Public Private Partnership Guidelines.

[100] National Congress of Chile (2010) Law 20410 ("Concessions Law") Article 7, 20 and 28.

[101] The United Republic of Tanzania (2010) Public Private Partnership Act. 2010, Section 3.2.3.

[102] The Department for Science, Technology and Innovation.

[103] Congress of Colombia (2011) Law 1508 ("PPP Law").

[104] Congress of the Philippines (1993) The Philippine BOT Law Republic Act No. 7718, Rule 2, pp16-19.

[105] Government of South Africa (2004) PPP Manual.

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