Public-private partnerships (PPPs) are increasingly of interest to governments as a means of providing public infrastructure assets and services. This post is the first of a series that will examine PPPs from the perspective of international trade agreements, beginning with the WTO Government Procurement Agreement (GPA). In the recent revision of the GPA, three parties added a type of PPP to their coverage of construction services. In addition, the GPA parties made a commitment to examine PPPs in a future work program.
To assist governments and others in understanding PPPs, the World Bank, the Asian Development Bank and the Inter-American Development Bank have developed a Public-Private Partnerships Reference Guide. Recognizing that there is no single, internationally accepted definition of PPPs, the Guide offers a broad definition:
- “A long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance”.
According to the Guide, the “project functions transferred to the private party—such as design, construction, financing, operations, and maintenance—may vary from contract to contract, but in all cases the private party is accountable for project performance, and bears significant risk and management responsibility”.
The three GPA parties that added some form of PPPs to their coverage under the revised GPA are the European Union (works concessions), Japan (private finance initiative) and Republic of Korea (build-operate-transfer contracts).
EU’s Work Concessions: In adding works concessions to its coverage of construction services, the EU imposed several limitations. It limits the new commitment to two categories of entities: central government entities and sub-central government entities. It does not extend this coverage to its utilities. Also, the EU opens its works concessions only to the construction service providers of six GPA parties: Iceland, the Republic of Korea, Liechtenstein, Norway, the Netherlands on behalf of Aruba, and Switzerland. Finally, the EU accords special treatment to works concessions by restricting them to a national treatment regime, which it does not define. However, the scope of the regime can be inferred from similar commitments in other agreements.
Japan’s Private Finance Initiative: In the revised GPA, Japan added procurement with regard to construction projects that are within the scope of its Act on Promotion of Private Finance Initiative.
Korea’s Build-Operate-Transfer Contracts: Korea expanded its coverage of construction services to include build-operate-transfer (BOT) contracts. It defines a BOT contract as:
- “any contractual arrangement the primary purpose of which is to provide for the construction or rehabilitation of physical infrastructures, plants, buildings, facilities, or other government-owned works and under which, as consideration for a supplier’s execution of a contractual arrangement, a procuring entity grants to the supplier, for a specified period of time, temporary ownership or a right to control and operate, and demand payment for the use of such works for the duration of the contract.”
Other GPA Parties: Canada, Singapore and the United States cover PPP projects under free trade agreements (FTAs), but are silent with regard to their coverage of such projects under the GPA. For example, the U.S. has exchanged coverage of BOT contracts with two GPA parties (Korea and Singapore), as well as non-GPA partners, on the same basis as Korea covers BOT contracts under the GPA. Canada agreed to cover PPP projects in its comprehensive trade agreement with the EU.
Work Program: In the negotiations to revise the GPA, the Committee on Government Procurement – the Committee that oversees implementation of the GPA, agreed to undertake a future work program relating to PPPs. In a March 30, 2012 decision, it committed to add a work program that would review “the use, transparency and the legal frameworks of public-private partnerships, and their relationship to covered procurement”.
Subsequent posts will examine the EU’s works concessions under other agreements, Japan’s private sector initiative and other GPA parties’ use of PPPs.
Jean Heilman Grier
June 1, 2015