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Rules applicable to Institutionalised Public-Private Partnerships (IPPP)

The Commission has published guidance on creating institutionalised public-private partnerships (IPPP). These are public-private entities usually created to provide public services. The rules applicable to the creation of IPPP have been clarified in order to enhance legal certainty.

ACT

Commission interpretative communication on the application of Community law on Public Procurement and Concessions to institutionalised PPP (IPPP) [2008/C 91/02 – Official Journal C 91 of 12.4.2008].

SUMMARY

This communication details how Community provisions on public procurement and concessions in the case of institutionalised public-private partnerships (IPPP) * are to be applied. The aim is to enhance legal certainty and to assuage concerns regarding the participation of private partners in IPPP.

Creating an IPPP

An IPPP is generally set up through:

  • the creation of a new entity in which the capital is held jointly by the contracting entity and the private partner and which is assigned public procurement or concessions; or
  • the participation of a private entity in an existing company which has obtained public contracts or concessions in the past.

The contracting entity * must comply with the Community’s legal provisions on public procurement and concessions and in particular follow a fair and transparent procedure, either when selecting the private partner for the IPPP or when granting a public contract or a concession to the public-private entity.

A double tendering procedure (one for selecting the private partner to the IPPP and another one for awarding public contracts or concessions to the public-private entity) is not considered practical. However, one possible way of avoiding a double tendering procedure is by selecting a private partner for the IPPP by means of a transparent and competitive procedure, the subject of which is both the public contract and concession attributed to the IPPP and the partner's operational contribution to the IPPP.

Applicable Regulation

There are no specific rules governing the creation of an IPPP in Community law. However, the principles of fair treatment and the prohibition of discrimination on grounds of nationality derived from Article 43 of the Treaty establishing the European Community (EC Treaty) on freedom of establishment and from Article 49 EC on the freedom to provide services apply to the fields of public procurement and concessions.

Rules applicable to the selection process of a private partner are different depending on whether or not the public procurement or the concession is covered by the so-called “traditional” Directive (2004/18/CE: on public works contracts, public supply contracts and public service contracts) and/or the Directive on “special sectors” (2004/17/CE on public procurement in the water, energy, transport and postal services sectors).

  • If the public-private entity’s task is to carry out a public contract fully covered by the Public Procurement Directives, the procedure for selecting the private partner is determined by these same Directives.
  • If it relates to a public procurement or concession partially covered by these Directives, the rules derived from the EC Treaty apply in addition to the relevant provisions of these Directives.
  • In the case of a public procurement or a concession not being covered by the Directives, the selection of the private partner must comply with the principles of the EC Treaty.

The contracting entity must publicise the selection and award criteria for identifying the private partner for the IPPP. The criteria used must comply with the principle of equal treatment. The Public Procurement Directives specify requirements related to the personal capacity of the private partner, such as the personal situation of the candidate, his economic and financial standing, his technical ability, etc. Such criteria may also be used in the context of concessions and public contracts not fully covered by the Public Procurement Directives.

The principles of equal treatment and non-discrimination imply an obligation of transparency which consists in ensuring for any potential tenderer a degree of advertising sufficient to enable the market to be opened up to competition. In the context of an IPPP, the contracting entity should include in the contract notice or the contract documents basic information on the following: the public contracts and/or concessions which are to be awarded, the statutes and articles of association, the shareholder agreement and all other elements governing the contractual relationship between the contracting entity and the public-private entity before being created.

Subsequent modifications

The principle of transparency also requires the disclosure in the tender documents of optional renewals or modifications of the public contract or concessions, as well as the disclosure of optional assignments of additional tasks. The information provided should be sufficiently detailed, in order to ensure fair and effective competition.

The IPPP must remain within the scope of its initial activity and cannot obtain any further public contracts or concessions without a procurement procedure. However, the IPPP must be able to adjust to changes in the economic, legal or technical environment. An adjustment is possible on the condition that it complies with the principles of equal treatment and transparency. Any changes to the essential terms of a contract, not provided for in the initial tender documents, require a new procurement procedure.

Context

The public consultation undertaken at the time of the publication of the Green Paper on Public-Private Partnerships and Community law on public contracts and concessions showed the need for clarification on the Community’s legal provisions applicable to institutionalised public-private partnerships (IPPP). In effect, the perceived lack of legal certainty could undermine the success of such projects and dissuade public authorities and private entities from creating an IPPP.

Key terms of the Act

  • Institutionalised Public-Private Partnerships (IPPP): co-operation between public and private parties involving the establishment of a mixed capital entity which performs public contracts or concessions. The private input to the IPPP consists, apart from the contribution of capital or other assets, in the active participation in the operation of the contracts awarded to the public-private entity and/or the management of the public-private entity. Simple capital injections made by private investors into publicly owned companies do not constitute IPPP.
  • Contracting entity: the State, public services, bodies governed by public law and associations formed by one or more of these services or one or more of these bodies governed by public law.
Last updated: 28.07.2008
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