Oman: The Implementing Regulations of the Public Private Partnership Law
The Public Authority for Privatisation and Partnership's Decision No 3 of 2020
Following the promulgation of the Public Private Partnership Law (PPP Law) (promulgated by Royal Decree 52/2019) and the establishment of the Public Authority for Privatisation and Partnership (PAPP) in 2019, the implementing regulations of the PPP Law have now been issued and are in force (the Regulations). The Regulations have been published as required under the PPP Law and will support Oman's ambitious plans for public private partnerships: there are currently five projects being tendered in the market and PAPP has stated that it is developing 49 projects.
The issuance of the Regulations is welcome as public private partnerships (PPP) are an important part of Oman's plans for economic liberalisation and institutional reform. The current economic difficulties which are affecting the whole region have only made the move to a more widespread use of these structures more pressing and the finalisation of the legislative regime will surely build confidence in the market
New law and regulations
Prior to the PPP Law, there was no framework for PPP in Oman. Whilst PPPs have been used in Oman, particularly in the power and water sector (which is outside the ambit of the PPP Law and the Regulations) for almost 30 years, there were no specific regulations, structure or guidance for these initiatives. This has not been a problem as OPWP and its predecessors have been extremely successful in attracting foreign investment under PPP structures.
However, as Government policy moves to encouraging the use of PPP structures in other sectors, the Regulations should encourage investors to look at projects in other areas such as transport, information technology, healthcare and education. The Government's aim to attract private investment into the Sultanate is clear from the Regulations: investors should have confidence that the bid process and bid evaluation will be fair and transparent.
The Regulations allow the government much greater flexibility with regards to the term of a project. The PPP Law and the Regulations allow for a term of up to 50 years (in contrast with the circa 20 year term in the power and water sector in Oman).
There is now also a clear structure in place which allows a partnership project idea to be put forward by investors. Other jurisdictions have tried these market led approaches and it will be interesting to see how much use these provisions get. Certainly there is often reluctance from a developer to share an idea which may then be bid to the market without necessarily getting any benefit. However, the provisions in the Regulations offer a developer strong protections, including reimbursement of costs and a right to match prices bid during a tender process and so I would anticipate a lot of interest in these provisions.
If a developer does want to take advantage of this provision, then any person may submit a proposal to the PAPP outlining the purpose of the proposed project, the economic and social returns, plan and duration, associated assets, consistency with Oman's development and financial plans, rules and conditions to guarantee service and production as well as the legal and financial aspects of the project.
One important statement worth noting in the Regulations is that projects will be awarded following assessment of technical and financial elements. The mechanism is to be determined in each RFP; however a clear statement that an award will not be based on price alone is very welcome. This also applies to consultancy contracts which are awarded by PAPP.
PAPP is also permitted to accepted single bids, provided that they comply with certain requirements.
Formalities and timelines are set out very clearly in the Regulations, for example a period of 30 days for submission of bids following the invitation of qualified partners to purchase the tender document, which can be shortened to a minimum of 15 days.
In addition, there are very clear grievance procedures for disqualified applicants.
Those who would like to bid for PPP projects can find a list of existing projects on PAPP's website. Those wishing to bid may apply for the pre-qualification stage as a single party or as part of a consortium of more than one partner. One particularly positive step by PAPP has been to greatly simplify the process for obtaining RFQ documents - they are free and can be obtained by simply emailing PAPP. The market will welcome this simple approach and hopefully this will also be used for the RFP process.
Those who consider that they have a valid Partnership Project Idea can submit this to the PAPP for consideration in accordance with the Regulations. Potential bidders will need to demonstrate, inter alia, previous experience, qualifications and solvency. The project shall be awarded after the bids comparison process through the technical and financial evaluation.
At the date of this article, there are 49 projects for which bids have been open, are open or are in the pipeline. The next step will be for the first public private partnership project to undergo the process as outlined in the PPP Law and the steps set out in the Regulations from pre-qualification to award. It will also be interesting to see the response in the market for Partnership Project Ideas submitted by the private sector as envisaged by the Regulations.
Points to consider
The Regulations allow public or restricted tenders depending on the nature of the partnership project. There are also limited allowances for direct award where this is required in matters of public interest. It remains to be seen what this might include, but we anticipate that this might include, for example, very urgent projects or matters of national security where details of projects may not be suitable for publication more widely and where it would be appropriate to approach specialist firms direct.
The Regulations make provision for tender by competitive dialogue in relation to partnership projects of a special nature. Whilst this was mentioned in the PPP Law, the type of projects which are deemed to be of a special nature has not been described further; it seems likely that this will be decided by the PAPP on a case by case basis.
The availability, or not, of a sovereign guarantee has not been included in the Regulations; this will be a key factor in attracting investment. Similarly, the Regulations do not give any indication if expected change in law and termination provisions, including any compensation, will be offered. We would not expect to see detailed drafting, but some statement of the intention of the Government and PAPP with regards to these essential terms would be very welcome.
The project company will need to be incorporated as a joint stock company other than where financing is not needed, where there is a limited scope or in other cases determined by PAPP. Joint stock companies impose greater regulatory burdens on their shareholders and require higher capital; however they can be more easily listed, which is perhaps the reason for this requirement.
There is a limited right for PAPP to request changes to project sub-contracts if they do not comply with the project agreement, the PPP Law or the Regulations. This will cause concern to bidders, however the right is limited and approval of key subcontracts is not unusual regionally.