1. What are the different types of partnerships?
Partnership agreements are: common concession, sponsored concession and administrative concession; public service permission; concession of public assets and leasehold of public assets.
2. What is a partnership?
In a wider sense, investment partnerships involve long-term agreements between the Government and the private initiative for the provision of public services or for infrastructure enhancement. The assets used and/or built by the private sector shall usually return to the public authorities after the agreement termination (they are called “reversible assets”).
3. What is a common concession?
A common concession is an agreement between the Government and a private concessionaire for the provision of a public service within a fixed term and through previous assigned quality conditions. The concessionaire makes the necessary investment and undertakes the risks of the activity exploration, being compensated by rates charged from users and/or by means of exploration of eventual accessory incomes (non-tariff incomes). Concession of high traffic highways and concession of power distribution service are examples of common concessions.
4. What are Public-Private Partnerships (PPPs)?
Public-Private Partnerships are also concession agreements, but they have, as object matter, a public service that is not compensated only by rates charged by users, or a public enterprise for which the Government itself is the user. Then, as opposed to common concessions, on PPPs the concessionaire compensation arises, as part of or entirely, from payments made by the public authority. There are two modalities of PPPs: the sponsored concession and the administrative concession.
The sponsored concession is the concession of public services for which the rates paid by users are not sufficient to compensate the concessionaire. As a result, there is also a payment from the Government to the private partner (sponsorship). Several railway and basic sanitation projects fall into this category.
The administrative concession is the one on which the Government is the direct or indirect user of the service, and the concessionaire compensation arises from payments made exclusively by the Public Authority, without charges from other users. Examples of this type of PPP are administrative centers and prisons.
In all cases, the law prevents the adoption of PPPs in any of the following conjectures: (a) when it is about a simple service procurement or outsourcing; (b) when the estimated value of the agreement is lower than R$20 million; (c) when the length of the agreement is lower than 5 (five) years or over 35 (thirty-five) years; and (d) when the agreement´s unique purpose involves the provision and installation of equipment or the execution of civil works.
5. What is the law applicable to the partnerships?
See worksheet Legislation for the different laws and rules for concessions, PPPs, privatization and other procurements applicable to Federal Government projects.
6. What is the difference between concession and privatization?
There are some ways by which the provision of a public service, previously executed by the Government, can be carried out by a private partner.
This transference of responsibility may occur through concession, on which the assets used by the private partner in the course of the agreement return to the granting authority at the end of its duration. (In this event, the concessionaire may be obliged to pay the Government a given amount for the right of exploring the concession).
Or it may occur through privatization, which involves the selling of a state company (and its assets) to the private initiative (which does not return to the public authority). The Government gets the price for the selling of the assets through a competitive auction, previously informed by technical studies. Privatization may occur in regulated sectors in which the private company operates under conditions and rates are controlled by regulatory agencies.
Regardless of the modality, all of them may benefit users through the offer of better services. It also benefits the public authority, firstly by the relief of large investments—since this obligation is undertaken by the private sector—and, second, by the receipt of taxes and contributions throughout the concessionaires and privatized company’s actions.
7. What is the relevance of investment partnerships?
The partnerships encompass important mechanisms for the implementation of infrastructure and public services. On one hand, the private sector provides the resources needed in each project, diminishing additional burden to the financial capacity of the public sector. On the other hand, the services are performed more efficiently, more economically and with better quality, as a result of the private sector´s larger flexibility and the performance goals stipulated in each agreement.
8. How does one enter into a partnership proposal with the Government?
To enter into an investment partnership with the Government, a private company must take part into a bidding process. The ministries or sector agencies are responsible for opening the bidding procedure and publishing a public notice explaining the rules and conditions of the procedure.
The bidders should present their proposals within the terms established in the public notice. They may also contest its clauses or forward questions directly to the agency responsible for the process, within the terms also established in the public notice.
Usually, documents confirming the bidders’ technical and financial ability are required, as well as a commercial proposal (which may involve the payment of a grant to the Government or the charge of rates from users).
Private agents may initiate the opening of a bidding procedure for an investment partnership presenting their ideas to the public authority (to the ministries or to the PPI Bureau) or participating in the PMIs eventually opened by the Government.
9. What is EIP?
When the Government evaluate the concession of an infrastructure project, it may promote the necessary studies internally, hire third parties to develop them or open an Expression of Interest Procedure (PMI) to get them from the market. On a PMI, any interested party may apply for presenting solutions or studies for a given project, without costs incurred by the public authority. In this situation, they shall be entitled to an expense reimbursement (limited to an established level) in the future, in the event their modeling has been entirely or partially accepted, to the structuring auctioned project.
10. Can a foreign company participate in a proposal for studies of a given partnership and in the bidding procedure of a project?
Yes, unless there is, explicitly, any restriction to it in the public notice. The submission of documents should be made in the Brazilian Portuguese language.