Public procurement and PPP
Is the legislation governing public procurement and PPPs general or specific?
Specific legislation governs public procurement and public-private partnerships (PPP); namely, the Government Procurement Act 2007 (PPA) and the Government Procurement Regulations 2007 (PPR). PPPs are governed by the 2005 Law on the Commission for the Regulation of Infrastructure Concessions (Establishment, etc.) (the ICRC Law), the 2017 ICRC Regulations and the 2009 National PPP Policy. PPA establishes the National Council for Public Procurement (NCPP) and the Bureau. Public Procurement (BPP) as regulatory bodies to harmonize government procurement policies and ensure competitive procurement and disposal of public goods and services. However, these laws are not specific to any industry but apply in general terms to all sectors in Nigeria.
The ICRC Act establishes the Infrastructure Concessions Regulatory Commission (ICRC) with the aim of accelerating investments in national infrastructure through private sector funding by assisting the Federal Government of Nigeria and its ministries, departments and agencies to implement and establish effective PPPs. According to the ICRC Rules, the PPA and the PPR will not apply to transactions where the contracting authority has submitted a business case plan to the ICRC after identifying and prioritizing a project, and the ICRC has issued a certificate of business case to the contracting authority. .
Consideration of the proposal
Can the government or the relevant port authority consider port privatization / PPP proposals other than through a formal tender?
A fundamental principle of public procurement under the PPA is that all public procurement of works, goods and services performed by the federal government or any of its entities (including the Nigerian Ports Authority (NPA)) must be conducted under an open and competitive tender. to treat. The ICRC law specifies that the federal government or the entity concerned must launch open tenders for infrastructure projects or contracts. However, it allows the relevant government entity to negotiate directly when a single contractor or project developer submits a proposal or meets prequalification requirements.
The 2017 Public-Private Partnerships Regulations (the PPP Regulations) adopted under the ICRC Act provide for open tenders and other proposals that are not part of a formal tender , as :
- non-competitive bidding (i.e. direct negotiation when a contractor or promoter submits an expression of interest);
- unsolicited proposals (that is, proposals made when the contracting authority has not issued an invitation for expression of interest or request for proposals); and
- all procurement procedures prescribed by international financial institutions can be used for PPP projects involving funding from these institutions.
As a result, direct negotiation, spontaneous proposals and procurement procedures prescribed by relevant international financial institutions can be considered.
Joint venture and concession criteria
What criteria are taken into account when awarding port concessions and port joint venture agreements?
Under ICRC law, a concession contract is awarded to the bidder who not only meets the prequalification criteria, but also has the financial capacity, expertise and experience to undertake such infrastructure development or maintenance. , and who submits the most technically and economically compliant bid. The PPP Regulations specify that the criteria for selecting pre-qualified bidders must be indicated in the call for expressions of interest. In addition, the ICRC is required to publish and periodically update award guidelines which specify the criteria for selecting the most technically competent, economically viable and complete tender. Typically, the principles for awarding port concessions include transparency, competition, value for money, delivery capacity and public interest, among others.
Is there a PPP agreement template used for port projects? How far can the public body depart from its terms?
There is no PPP agreement template used for port projects. The general format of PPP agreements has been defined by guidelines or regulations issued by the competent authority, as evidenced by Annex VI of the PPP Regulation, which sets the minimum content of a PPP agreement. Nonetheless, the leases governing the operation of port terminals in Nigeria have similar terms, with slight modifications to align with individual particulars.
What government approvals are required for the implementation of a port PPP agreement in your jurisdiction? Does a specific law need to be passed in your jurisdiction for this?
The BPP establishes thresholds for the approval of public contracts. The highest approval threshold is at two levels, namely, the issuance by the BPP of a non-objection to the award and the approval of the Federal Executive Council for property over 100 million naira and plus, works of over 500 million naira and over, non-consultancy services of over 100 million naira and over, and consultancy services of over 100 million naira and over.
The ICRC law generally specifies that the approval of the Federal Executive Council, on the recommendation of the relevant ministry or agency, is required before the agency, ministry or government enterprise enters into a contract with a government enterprise. private sector, including port PPP projects. It is therefore not necessary that a law be passed to this effect.
On what basis are port projects in your jurisdiction generally implemented?
The basis for the implementation of port projects in Nigeria is either build-operate-transfer or rehabilitation-operate-transfer. Ownership of port areas and facilities remains in the NPA for the duration of the concession, which is why it is described as the owner model where the concessionaires have lease rights with reversion interests still in the NPA.
Is there a minimum or maximum duration for port PPPs in your jurisdiction? What is the middle term?
The ICRC law specifies that the duration of any such agreement is that stipulated in the concession agreement. Currently, there are 25 concession agreements, of which 15 are for 25 years, seven of them for 10 years and the remaining four for 15 years.
On what basis can the duration be extended?
Under current leases, there are no provisions detailing the basis for extending the term upon expiration, but they do require a terminal operator to apply for renewal three years prior to expiration. of the term. However, in practice, the NPA takes into consideration the review of the operator’s performance and the report on the level of compliance of its operations when making a decision on a renewal request.
What pricing structures are used in your jurisdiction? Are they subject to indexation?
The tariff structures are specified in the tariff regulations of the NPA. Concession fees for PPP projects are already stipulated by the ICRC in percentages to be paid at different stages of the contract. Other charges may be specified in the PPP agreement.
The current rental agreement in force provides for a fixed annual rent covering the entire duration of the rental agreement. There is also a fixed upfront payment called a start-up fee, which must be paid within 15 days of the date of execution. Another right stipulated in the rental agreement is the right of way, the amount of which is stipulated on any unit equivalent to 20 feet handled in the premises and payable in arrears at the end of each monthly period beginning on the first day of the first month following the entry into force date of the lease contract. The lease provides for an annual adjustment mechanism for debit charges.
Does the government provide guarantees for port PPPs or does it grant exclusivity to the port operator?
The government provides guarantees relating to port PPPs subject to applicable laws. Article 3 of the ICRC law provides that no guarantees, comfort letters or commitments will be issued by the federal government with regard to PPP projects without the approval of the Federal Executive Council. The government can provide capital, debt financing, grants, equity contributions and guarantees for a PPP project. These guarantees could be tariff rates, exchange rates and the like.
Under the current rental agreements, the tenants, being the port operators, are granted the exclusive right during the term of the lease to carry out the authorized operations in the terminal, unless otherwise assigned in accordance with the terms of the rental agreement.
Does the government or port authority offer other incentives to investors in ports?
The general incentives granted to investors by the Nigerian government are as follows:
- exemption of profits of a business established in a free zone or export processing zone from tax, rural investment allowance and investment tax relief for enterprises that have provided facilities for a business or trade at the rate of 100 percent where there is no installation, 50 percent for electricity, 30 percent for water and 15 percent for paved roads under the Corporate Income Tax Act;
- 100% foreign ownership, guaranteed against government expropriation of a private company, and unconditional transferability of funds through a licensed freely convertible currency broker under the Nigerian Promotion Commission Act 2004 investments ;
- repatriation of capital under the 1995 Foreign Exchange Act (supervision and various provisions); and
- Investment tax credit for the development and renovation of road infrastructure, where eligible companies would receive tax credits for the development or renovation of eligible roads.
These incentives apply to greenfield and brownfield investments.