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| Infrastructure, Energy and Environment |
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Amendments to the Public Private Partnerships Law
June 09, 2016 |
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| Amendments to the Public Private Partnerships Law |
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On April 21st, 2016, several amendments to the Public-Private Partnerships Law (“PPPL”) were published in the Federal Official Gazette.
Near to four years after the original publication of the PPPL, there have been just a few projects initiated under this new framework. The main reasons of this underutilization were the numerous requirements for approval and the complexity of the procedure to structure and execute these projects.
The PPPL introduced novel mechanisms to the Mexican public procurement system, including “unsolicited proposals” (“UP”). However, the amount of studies necessary for them to be admissible, the approvals required to implement them, and a lack of specialization and infrastructure in the dependencies to evaluate them, caused that many of these unsolicited proposals ended up wedged after being submitted.
Considering the aforementioned, this reform was promoted with the purpose of accelerating and simplifying the approval and implementation procedures for these projects. The reform comes at an opportune time for the Mexican government, considering it is facing two consecutive years of budget cuts, and the fact that sections corresponding to infrastructure development have suffered important reductions. One of the main objectives of this reform is to facilitate this type of contracting so that private entities may provide the funding to infrastructure and public services projects, partially compensating the budget deficit.
The main points of the reform to the Public-Private Partnerships Law are the following:
1. Includes in the definition of PPP projects those intended to provide services to the participants of the new electric market.
2. Provides the requirement of publicity through the website CompraNet of approved PPP projects and UPs submitted, as well as reports by the Ministry of Finance and Public Credit in regard to authorized projects, amounts disbursed, and the annual amount of engaged payments.
3. Modifies the definition of government agencies which can contract this kind of projects to include State Ministries and the Coordinated Energy Regulatory Agencies.
4. Simplifies the feasibility declaration for the projects, which now will be issued by the interested government agency or department, eliminating requirements to issue this declaration.
5. Clarifies and reduces the authorizations required by each project depending on their funding source, substantially simplifying the authorization of projects which involve non-cash resources outside the federal expenditure budget, encouraging private funding of these projects:
a) If resources from the Federal Expenditure Budget are involved, it requires: i) Feasibility Opinion, ii) Registration on Portfolio and iii) Authorization of the Inter-Ministerial Commission.
b) If federal resources, in cash, outside Expenditure Budget are involved, it only requires: i) Feasibility Opinion, ii) Registration on Portfolio.
c) If only non-cash federal resources are involved, it only requires: i) Feasibility Opinion.
6. Allows new projects or modifications to be approved during the fiscal year in course, with authorization of the Inter-Ministerial Commission, while not exceeding previously approved maximum annual amounts.
7. Provides that the PPP contract shall include the obligations, reimbursements, and contractual penalties applicable in case of rescission, as well as the terms and conditions to comply with them.
Conclusions
The reform will accelerate some procedures, especially when funding is provided by private entities, nonetheless the procedures are still longer and more complex than in other public procurement modalities.
The reform did not provide significant improvements in regard to the UPs, which still lacks of incentives for private entities to submit them, so is probable that these will not have the increase expected during the following years.
We consider that, even though this is a useful reform, there is still a need for further incentives in order to this framework to be used more frequently, otherwise the entities will continue choosing more traditional contracting frameworks.
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IMPORTANT: The information here contained is of general nature and for informative purposes only. Please consider that what is here stated does not necessarily apply to individual circumstances. We strongly recommend not to perform any activity based on this information without the professional assistance of our lawyers. |
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Our Infraestructura, Energía y Medio Ambiente Practice Team can gladly support you in the following topics:
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• Public-Private Partnerships
• Participation in Public and Private Tenders
• Alternative Dispute Resolution
• Permits and Licenses
• Project Finance
• Regulation & Compliance
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• Regulation & Compliance
• Structuring and executing energy & infrastructure projects
• Negotiation and execution of D&B Agreements (design-build), EPC (engineering-procurement-construction), PMC (Project management), BT (built-transfer) and BOT (built-operation-transfer)
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