Public-Private Partnerships Law (PPP)
The Public-Private Partnerships Law (PPP) No. 47-20 aims to establish a regulatory framework that regulates the initiation, selection, award, contracting, execution, monitoring and termination of public-private partnerships and was enacted on February 20 of the year 2020, in line with the 2030 National Development Strategy of the Dominican Republic.
This law applies to:
- Those that make up the Public Administration under the dependence of the Executive Power;
- Decentralized and autonomous non-financial institutions;
- The institutions of social security;
- Non-financial public sector companies or agents that entrust private agents, under the modality of public-private partnerships, with the design, construction, operation, repair, expansion or maintenance of a good of social interest or the provision of a service of the same nature; and
- The City Councils.
Under the framework of this law there are two types of partnerships:
The public-private, which is the mechanism by which public and private agents voluntarily sign a long-term contract, as a consequence of a competitive process, for the provision, management or operation of goods or services of social interest in which there is investment total or partial by private agents, tangible or intangible contributions by the public sector, distribution of risks between both parties, and remuneration is associated with performance in accordance with the provisions of the contract.
The public-private non-profit, which is understood as the linking of legal persons of public law and non-profit, national or international cooperation and development organizations, to carry out collaborative activities in the provision of goods or services of social interest whose purpose is to promote the social development of the country. Said partnership does not recognize the generation of any financial benefit.
The bases of any public-private partnership, from its inception to its extinction, are: efficiency, equality and free competition, transparency and publicity, economy and flexibility, equity, responsibility, reasonableness, continuity-stability, regularity, risk distribution, responsibility fiscal, accountability, due process and socio-environmental sustainability.
Within the framework of the law, the General Directorate of Public-Private Partnerships was created as an autonomous and decentralized entity of the State, invested with legal personality, its own patrimony, administrative, jurisdictional, financial and technical autonomy, which will be attached to the Ministry of the Presidency.
The National Council of Public-Private Partnerships was also created, as the highest body of the General Directorate of Public-Private Partnerships, responsible for the functions of evaluating and determining the relevance of the public-private partnerships presented in accordance with this law.
This Council is made up of the Minister of the Presidency, who will preside over it; Minister of Finance; Minister of Economy, Planning and Development; the Legal Consultancy of the Executive Power; the General Director of Public Procurement, with voice and vote exclusively with regard to the design and structuring of the competitive processes for selecting the winning bidder; and the Executive Director of the General Directorate of Public-Private Partnerships, with voice, but without vote.
Public-private partnerships can be public initiative: Those that originate in public agents and can be with or without transfers of resources from the State; and private initiative: Those that originate in private agents that propose to the Dominican State the creation of a public-private partnership.
Process:
In this new process, to guarantee an adequate competitive process, the projects will be put out to public bidding, regardless of whether the proposal comes from a private company.
In the event that the initiative is from the public sector, the National Committee for Public-Private Partnerships must be requested to evaluate the project and carry out the tender to find a private counterpart to develop it.
If the initiative is private, the private sector proposes to the Government the development of the infrastructure work or a service of social interest to see if the Government would be interested in carrying it out in a partnership modality or that the two options are left open.
Once the project is awarded, it is established that the contracting ministry carries out supervision tasks together with the City Council, which is the contractor.
The Ministry of Economy, Planning and Development is working on the National Infrastructure Plan, with which it seeks to identify the works that the Dominican Republic needs for the next ten years, as a way to improve competitiveness and productivity and strengthen resilience for the benefit of the communities.
The plan stipulates several projects to carry out pre-feasibility studies for when a public-private partnership is going to materialize, the necessary planning analysis work has been done. The plan has the vision that, despite a change in the presidential mandate, the works can be carried out under the impulse of the PPP law.
Tax treatment:
The law contemplates the temporary exemption of the ITBIS during the first five years, computed from the beginning of the execution of the object project. The winning bidder may opt for the refund of the Tax on the Transfer of Goods and Services (ITBIS), in the purchase or rental of equipment, materials and supplies directly related to the construction, repair or expansion of the goods and infrastructures object of the public-private partnership contract, subject to compliance with the conditions and following the procedures established in the regulation(s) of this law.
It also contemplates the accelerated depreciation and amortization regime, where the winning bidder may access an accelerated depreciation and amortization regime subject to compliance with the conditions and following the procedures established in the regulation(s) of this law.
Having the Public-Private Partnerships Law is an important advance, but there are many challenges ahead for its application to be effective, with clear rules and adequate methodologies for risk assessment, distributing them appropriately.