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The Warsaw Voice » Law » April 8, 2009
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Doors Are Now Open-Positive Changes to PPP Regulations
April 8, 2009   
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In theory, Public Private Partnership ("PPP") is an efficient instrument for cooperation between public authorities and private partners: private risk + public and private resources = profit + provision of public facility. In practice, private investors discovered that previous regulations threw up an insurmountable barrier that prevented widespread use of PPP projects.

The 2008 Public Private Partnership Act (the "Act") came into effect recently and replaced the much-criticized 2005 Public Private Partnership Act, which contained a number of obstacles to the investment process and frustrated the PPP concept.

Simplicity is the goal
The aims of the Act: (i) create a clear legal basis for the commitment of public funds to joint projects with private partners, (ii) to outline the general framework for cooperation, and (ii) to relax the preparatory and implementation procedures.

The legislators ditched the obligatory pre-implementation analyses, which had been the focus of criticism to date. Also consigned to history was the hazily-defined criterion of assessing the admissibility of a project from the public interest point of view. In a departure from the regulations to date, the Act does not dictate what sort of projects qualify or how the private partner is to take remuneration. Those details are left for the parties to determine themselves.

Benefits of laissez-faire
The object of a Public Private Partnership as understood by the Act is joint implementation of a project based on allocating the tasks and risks involved between the public and private partner. The Act does not impose a strictly defined list of projects that may be implemented using PPP, but gives the partners a free hand to decide for themselves. There are no obstacles to public and private entities cooperating to build or operate things such as sporting facilities, roads, water and sewage infrastructure, waste incinerators, schools, and penitentiary institutions. Any business, Polish or foreign, can be a private partner.

Greasing the wheels of administration
The private partner selection procedures depend on the way the given partner is to be remunerated. If the remuneration is to be in the main part the right to draw benefit from the object of the partnership, the 2009 Building Works and Services Concessions Act will apply. The Public Procurement Act is applicable to all other cases. In each case, the best offer is the one which presents the most advantageous balance between remuneration, effectiveness and the project's technical parameters.

The new criteria are better suited to this type of purpose than those under the 2004 Public Procurement Act. The implementation of a PPP venture entails an agreement on public private partnership, in which the private partner undertakes to implement the project for remuneration and to bear all or part of the costs involved. The public entity, on the other hand, undertakes to collaborate to achieve the desired aim, in particular by contributing its own resources. To help realize their joint goal, the public entity and private partner may set up a project company.

Incentives for greater private sector investment
The PPP regulations offer a number of facilities such as eligibility for supplementary cash injections for projects encompassed by European Union programs, the possibility of making state or municipal property available on a free-of-charge basis for the duration of the project within the framework of the public private partnership or tax incentives.

Future with hope
An analysis of the Act leads to a conclusion that the legislator wants the regulations to embrace both a broad range of projects and the formulae by which they may be implemented. The Act includes positive changes to public private partnership regulation that will provide an incentive to increased private sector investment and make the wheels of administration turn faster. The simplicity of the new regulations, combined with a more liberal approach by the public authorities, should result in PPPs becoming more common in Poland. There is an ongoing need for infrastructure projects and for more effective implementation with the participation of private partners-the new regulations open the way for this potential to be tapped.

Bartosz Clemenz, counsel at Salans Warsaw Real Estate team
Dominik Rafałko, associate at Salans Warsaw Real Estate team
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