Concessions in Romania: Key Areas of Interest for Investors
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Septembrie 2008 |
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REFF & ASSOCIATES SCA - correspondent lawfirm of Deloitte |
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Website
www.deloitte.com/ro/legal
Introduction to concessions
The legislative framework regulating the public procurements and concessions in Romania was Simplemented and harmonized with EU Directives no. 2004/17/CE, 2004/18/CE, 1989/665/CEE and 1992/13/CEE starting with 2006 when GEO no. 34/2006 regarding the awarding of public procurement and concession contracts and its norms of application were enacted and currently represents an important domain of interest for both central and local administrations, contracting authorities, and investors. The element of interest introduced by the Romanian legal framework is represented by the concept of concession which is defined as a form of public private partnerships (PPPs), i.e. a form of cooperation between the contracting authority and private investors for development of general interest projects.
Traditionally, the key areas for concessions are road transport, road construction, oil, gas, extraction of other raw materials, water and sewage, various infrastructure construction and operation. Currently there are certain major infrastructure projects in course of implementation and others are preparing to come of the pipeline. The increase interest of the authorities in initiating and implementing PPPs is proved by the fact that the central and local authorities benefited during last years of training programs and practical guidelines for strengthening their capacities and abilities to implement this kind of projects1.
The key characteristic of concessions is that during the project, the concessionaire has the right to exploit the results of the works or services which make the object of the project. In case that the operating risk does not stay with the private partner, the contract will be qualified as a public procurement contract.
GEO no. 34/2006 provides for two types of concession contracts, respectively concession of public works and concession of services. However, sometimes it is difficult to qualify a contract as concession of public works or concession of services, since most of the complex projects imply both the performance of public works and services. A public works concession contract will be chosen in case that the object of the concession especially aims at performing works as defined in the law, even if the contract includes some services which may be necessary for the performance of the respective activities. In other words, if the respective services are ancillary and represent a supplementation to the main object of the contract, they will not trigger the re-qualification of the public works concession contract into a service concession contract. The opposite reasoning applies for qualifying a contract as concession of services.
Initiation of concession projects
The first part of the concession process is not public – falling within the exclusive competencies of the contracting authority – and commences with the issuance of a concession decision by the contracting authority, followed by a substantiation study (a study performed for further grounding the concession decision). For the projects which imply public investments (i.e. public funds are envisaged to be injected in the project), a feasibility study must also be performed, before the issuance of the afore-mentioned concession decision. These stages are performed by the contracting authority, which can appoint external experts for drafting specific documentation.
The timeframe between the inception of the concession project and the publishing of the participation announcement is not provided by the law. However, in this period, various decisions impacting the contemplated project have to be taken by the contracting authority, as the substantiation study and the feasibility study deal with technical, economic and financial analysis, environmental, social and institutional parameters pertaining to the project. After performing the substantiation study, which practically further grounds the concession decision, stating the opportunity and how the project should be implemented, the contracting authority performs the awarding documentation.
The participation announcement - the first step in making the procedure public
The point where the concession project is made public and the potential investors are able to get to know the project is the publication of the participation announcement in the Electronic System for Public Procurement (“SEAP”) and the Official Journal of the European Union, if the estimated value of the agreement, calculated based on the principles provided by GEO no. 34/2006, exceeds EUR 5 mn.
The participation announcement contains useful information with respect to the concession project, such as the contact details of the contracting authority, the location of the project, the deadline for submitting the candidatures, the personal, technical and financial conditions that have to be met by the candidates, the criteria used for awarding the concession contract and the contact details of the body competent to solve contestations.
The deadline for submitting the candidatures, mentioned in the participation announcement, cannot be shorter than 52 days from the publication of the participation announcement.
Details regarding the candidates - who can participate and possibilities of sub-contracting
Theoretically, any person can submit its candidature to a concession project, the law allowing for any individual, legal entity State or privately owned, or a consortium of such legal entities which activates in the field of supplying products, services and/or performing works to submit its candidature in a concession procedure.
For major and multidisciplinary projects, usually the private investors prefer to use consortiums as instrument of their candidature in a concession procedure. In such a case, certain issues should be considered, respectively:
- the members of the consortium cannot be changed during the concession period, due to the fact that the concession contract was awarded to the whole consortium, taking in consideration the contribution of each of its members,
- when analyzing the qualification criteria, in case of restricted tender, negotiation and competitive dialogue procedures, certain conditions, such as technical and/or economical capacity and the capacity of exercising the professional activity have to be observed by all the members of the consortium; thus, in case that one of the members of the consortium fails to comply with such criteria, there is a risk for the whole consortium to be considered as incompliant with the qualification criteria and hence rejected;
- in case the project will be realized through a project-company formed by the concessionaire and the contracting authority, additional issues may arise when structuring the project company.
With respect to the project-company, the law only mentions that a concession project can be realized through a company which will be held both by the appointed concessionaire and the contracting authority. This possibility may be provided within the awarding documentation, indicating the availability of the contracting authority to perform the project as such. However, there are no mandatory provisions with respect to the structure and management of such company. Hence, the concessionaire and the contracting authority have the liberty of structuring the company in a convenient manner for both parties.
