Professional Interpretation

PPP project team of DOCVIT Law Firm will carry on the system combing with the discussion of PPP and the forms and types of project tender under it.

1. Classification of PPP Pattern

PPP pattern, a collective concept, is a general designation of series cooperation mode between government and social capital, including three major classes: Outsource; franchise; and privatization of social capital. More than ten different traditional operation modes under each class are BOT, BOOT, BOO, DBT, DBTO, DBFO and so on, under which, both sides will share profits and take risks.

Up to now, the common operation modes under PPP in our country mainly include: Operations & Maintenance （O&M）,Management Contract（MC）,Build-Operate-Transfer (BOT),Transfer-Operate-Transfer（TOT）, Rehabilitate-Operate-Transfer（ROT）and Build-Own-Operate （BOO）and others.

 (1) Operations & Maintenance (O&M), which designates an operation mode of cooperation projects between government and social capital, which government entrusts the social capital or projects companies to operate and maintain the public assets but except the user service. Government keeps the asset ownership, and just pays commission fees to social capital and projects companies. The contract period is generally no more than 8 years.

(2) Management Contract (MC), which designates a project operation mode that government entrusts the social capital or project companies to operate and maintain the public assets as well as provide user service. Government keeps the asset ownership, and just pays management fees to social capital or project companies. The management contract generally serves as a transition mode of Build-Operate-Transfer, and the contract period is no more than three years.

(3) Build-Operate-Transfer (BOT）,which designates a project operation mode that social capital or project companies take the duty of designing, financing, building, operating, maintaining and providing user service for new projects, and the assets and related rights will be handed over to the government  after the expiration of the contract. The period of contract generally is about twenty to thirty years.

(4)Transfer-Operate-Transfer (TOT）, which designates a project operation mode that government transfers the stock assets to social capital or projects companies , and lets them take the duty of operating, maintaining and providing user service. The assets and its ownership will be handed over to government after the expiration of the contract. The period of contract generally is about twenty to thirty years.

(5) Rehabilitate-Operate-Transfer (ROT）, which designates a project operation mode that government increases reorganization and expansion of projects under the mode TOT. The period of contract generally is about twenty to thirty years.

(6) Build-Own-Operate (BOO), a mode develops on the foundation of BOT, and the main difference between the both is the social capital or project companies keep the ownership of the projects, but the binding clause for public good guaranteeing shall be noted on the contract. There is no need to transfer after the project expiration

(7) Buy- Build-Operate (BBO), which designates a project operation mode that for a period of time, public assets will be transferred to the operation partner of private sector legally.

2. The analysis of project tender mode and type under PPP

During the popularization of PPP, the government procurement procedure is adopted by large amounts of projects in the selection of social capital by the government. Hence, the section7 in article 11 of Operation guide proposal of government and social capital cooperation model implementation issued by Ministry of Finance provides that “Project procurement should be taken under Government Procurement Law and related regulations, which include open tender, competitive negotiation, invite tender, consultation and single sourcing procurement. The project implementing agencies shall select the proper procurement with in law based on the demand characters of projects.” In addition, according to Measures for the administration of franchising of infrastructure and public utilities issued by National Development and Reform Commission, Ministry of housing and urban rural development and other ministries and commissions on 25, April,2015, franchise is carried on infrastructure and public work in the territory of the People's Republic of China such as energy, translation ,water conservancy, environment protection, municipal work and other fields, which are compulsorily put out to tender according to the Law on Bidding and Regulations for Invited Public Bidding Extension and It's Scope Standard of Engineering Construction Item for they are large infrastructure and public works referring to public interests and safety, and partly using state-owned fund or financing by state. But if the franchise projects which shall take open bidding are not tendered, the franchise treaty between implementing party and the franchisee may face a legal risk of invalidity for its violation of the mandatory law of state. Hence, the implementing party should make clear that whether should take open bidding for the projects before selecting the cooperation party.

3. Conclusion

With the high-speed increase of the number of projects under PPP, un-standardized implement and risks are further prominent. From the view of the number of cases accepted by people’s courts on cooperation between government and social capital, we can see that the number of disputes is continually increasing in recent years, which mainly are civil and administrative actions concentrating upon such fields as treatment of municipal sewage, gas supply, heating, and road construction. However, with the further extend of PPP project area, disputes will cover more fields, and the more types of case will appear, such as civil action, administrative reconsideration, administrative actions and even criminal actions. Hence, election of cooperation party for projects under PPP must be compliant with statutory procedures; the tender of projects must be implemented according to the provisions of Bidding Law and Procurement Law and other relevant legal regulations, otherwise, it may face to huge legal risks.