Disputes over laws applicable to procurement for PPPs

The competition between private investors for public-private partnership (PPP) projects has reached white-hot intensity. In a few of the projects which the author handled recently, potential investors lodged complaints against each other over the selection of the project investor. The issue of the law applicable to the selection of private investors stands out: which is applicable to procurement for PPP projects – the Law on the Invitation and Submission of Bids (LISB), or the Government Procurement Law?

In the above-mentioned projects, the complainant and the local government (as the party inviting the bids and conducting the procurement) generally overlooked such attributes of a PPP project as its financing, investment, operation and maintenance, deeming such projects, out of force of habit, as simple invitations of bids for construction and thus subject to the LISB and related regulations. This is a fundamental misunderstanding of the nature of PPP projects.

Article 17 of the Notice on the Issuance of the Operational Guidelines for Public-Private Partnerships (for Trial Implementation), issued and implemented by the Ministry of Finance in 2014, expressly provides that: “If procurement for a private-public partnership project is to be done by a public invitation of bids, selective invitation of bids, competitive negotiations or single-source procurement, matters shall be handled in accordance with government procurement laws, statutes and related regulations.”