PPP Institutional Framework

Many parties are involved in the delivery of a PPP project from inception to the end date of the PPP agreement.

• The primary actors in the PPP Project Cycle are the signatories of the PPP agreement, i.e.
  • the Contracting Authority; and
  • the Private Party.
• The Contracting Authority is assisted by external experts, in particular:
  • the Transaction Advisor; and
  • the Independent Expert (jointly appointed by and providing advice to the Contracting Authority and the Private Party).
• The institutions involved in the appraisal and approval of the PPP project are:
  • the PPP Committee;
  • MFPED; and
  • the Cabinet.
• The key coordinating and supporting institution in the preparation, appraisal, and implementation of the PPP projects is
  • the PPP Unit.
• The following institutions are responsible for the legal review, accounting and financial reporting, and auditing of the PPP project on behalf of the government:
  • the Process Auditor;
  • the Accountant General;
  • the Auditor General; and
  • the Solicitor General.
• Many projects are subject to review or approval by regulatory authorities as a condition for obtaining a construction permit or an operating license. For example, ERA must provide regulatory approval on electricity projects, and NEMA must provide environmental permits. Which regulatory authorities are involved varies between projects in function of the sector in which the project is realized (for example transport, energy, water), and the type of project impacts (for example environmental, resettlement). The Contracting Authority must identify the relevant regulatory authorities in the Inception Stage to make sure that they are involved in a timely manner in the preparation and implementation of the PPP project.

The respective roles of the above institutions in the preparation, procurement, and implementation of PPP projects are defined in the PPP Act and the PPP Regulations. A brief description of the institutional roles is presented in the paragraphs that follow. These roles are further elaborated in chapters 3 to 7, each devoted to a stage of the PPP Project Cycle.

• The role and responsibility of the Accounting Officer are defined by section 13 of the PPP Act.
• The Accounting Officer of the Contracting Authority is ultimately responsible for the functions of the Contracting Authority in all stages of the PPP Project Cycle.
• In particular, the Accounting Officer takes all decisions – in consultation with the minister responsible for the Contracting Authority where applicable – in the preparation, procurement, and implementation of the PPP project, such as:
  • appointment and supervision of the Project Officer and the Project Team;
  • approval of the identification of a project for implementation as a PPP;
  • approval of Project Concept Note;
  • approval of terms of reference of Transaction Advisor;
  • award of Transaction Advisory mandate;
  • acceptance of Feasibility Study Report;
  • approval of the PPP project for submission to the PPP Unit and PPP Committee;
  • approval of Contracting Authority budgetary expenses for the PPP project;
  • approval of bidding documents prior to their publication;
  • appointment of the Evaluation Committee;
  • approval of the selection of prequalified bidders upon the recommendation of the Evaluation Committee;
  • review of the selection of Private Party by the Evaluation Committee;
  • signature of the PPP agreement with the Private Party on behalf of the Contracting Authority;
  • granting to the Private Party the right to use public assets owned or controlled by the Contracting Authority;
  • approval of all actions taken as part of contract management (payment of invoices, application of penalties, payments in compensation events, the appointment of external experts, contract change requests, and handling of disputes).
• The Accounting Officer – authorized and instructed by the minister responsible for the Contracting Authority where applicable – represents the Contracting Authority in high-level meetings on the PPP project with other government entities and the Private Party.
• The Accounting Officer is responsible for the institutionalization of a PPP team within the Contracting Authority (e.g. department or unit) so that skills in preparing and implementing PPP projects are not lost.

• The role and responsibility of the Project Officer are defined by section 14 of the PPP Act.
• The Project Officer is appointed and supervised by the Accounting Officer. The Project Officer should have sufficient skills and expertise to carry out the role and ideally be a senior member of staff within the Contracting Authority. The Project Officer is the head of the Project Team and is responsible for the everyday management of the PPP project in all stages of the PPP Project Cycle. The Project Officer prepares the decisions of the Accounting Officer and takes all decisions about the project that are not elevated to the Accounting Officer.
• In general, the function of the Project Officer is fulfilled by several persons, appointed consecutively, during the lifetime of the PPP project. Since a PPP agreement has a very long duration (30 years or more), it is unlikely that the same person will be able to fulfill this function from inception to the end date of the PPP agreement. Furthermore, the skills that are required for the management of the PPP project change between the stages of the PPP Project Cycle. It is therefore often optimal to appoint a new Project Officer with the appropriate skills at the start of another stage of the project cycle.
• Which arrangement works best must be determined by the Accounting Officer and depends on the availability of project management staff and their skills and interests. However, a common arrangement that often proves optimal is the following:
  • The first Project Officer is responsible from inception up to the completion of the works and the commissioning of the project assets. In this part of the PPP Project Cycle, the focus is on the development of the project. The tasks of the Project Officer are mostly non-routine and include project design, management of the Feasibility Study, interaction with stakeholders, and organizing the procurement process.
  • At the start of the operational phase, a new Project Officer is appointed. In this part of the project cycle, the focus is on performance monitoring and contract management. The tasks are periodically recurring and to a large degree of an administrative nature. These tasks require different skills than in the project development phase. Given the long duration of the operational phase (up to 25 years and more), it will probably be necessary to replace the Project Officer several times throughout the term of the PPP agreement as the person occupying the position retires or changes jobs.

• The role and responsibility of the Project Team are defined by sections 15 and 16 of the PPP Act.
• The Project Team is appointed by the Accounting Officer for each specific PPP Project and headed by the Project Officer. The Project Team is responsible for the practical fulfilment of all duties of the Contracting Authority in the development and implementation of a PPP project. In particular, the Project Team carries out the following tasks:
  • carrying out preliminary analysis and drafting of a Project Concept Note;
  • drafting of terms of reference for a Transaction Advisor;
  • conducting of procurement procedure for the selection of a Transaction Advisor;
  • management and supervision of the work of the Transaction Advisor;
  • review of the Feasibility Study Report prepared by the Transaction Advisor;
  • design of the procurement strategy and choice of the bidding method;
  • review of bid documents prepared by Transaction Advisor (request for prequalification, request for bids, draft PPP agreement, output specifications);
  • conducting procurement, clarification responses, coordinating site visits and contracting process (with assistance from Transaction Advisor);
  • technical assistance to prequalification and bid Evaluation Committees (analysis of applications for qualification, analysis of technical and financial bids, drafting of bid evaluation report);
  • verification of satisfaction of conditions precedent for commercial close and financial close by the Private Party;
  • ensuring that the Contracting Authority fulfils its conditions precedent and obligations under the PPP agreement (such as the delivery of the right-of-way);
  • monitoring of the performance of the Private Party;
  • PPP contract management;
  • reporting on the performance of the PPP project to the PPP Unit;
  • reporting on fiscal liabilities to MFPED; and
  • management of the interfaces and communication with other public and private stakeholders.
• The size and composition of the Project Team depend on the size and complexity of the particular PPP project.
  • In general, the Project Team is at least composed of:
    • technical personnel, specialised in the facilities and services that will be built and operated under the PPP agreement;
    • legal personnel, with expertise in public procurement and/or PPP;
    • financial personnel, ideally with competencies in financial analysis and modelling, feasibility studies, risk assessment etc.;
    • a representative from the Solicitor General’s office; and
    • a representative of the PPP Unit.
  • If necessary, the team may be expanded (possibly temporarily) by:
    • additional sector or technical experts, specialised in particular technical fields that are relevant to the project, for example, an environmental expert;
    • a social and resettlement expert;
    • a communication and stakeholder management expert; and
    • other relevant experts.
• At the start of the operational phase (after the completion of the works and the commissioning of the project assets) the Project Team during the development phase is usually dissolved and replaced by a contract management team or by a contract management unit within the Contracting Authority. The reason is that the skills required in the development phase are different from those needed in the operational phase. The members of the original Project Team are then available for redeployment in the preparation and development of other projects.
• The Project Officer and Project Team must be established before the registration of the PPP project with the PPP Unit under section 21(4) PPP Act.

• The role and responsibility of the Evaluation Committee are defined by section 19 of the PPP Act.
• The Evaluation Committee is appointed by the Accounting Officer. Such appointment should be by letter from the Accounting Officer specifying the terms and conditions of appointment, including voting rights (if any). Its function is to evaluate the bids submitted by candidate private parties and to select the Preferred Bidder. The evaluation of the bids comprises the:
  • the technical and financial capacity selection criteria;
  • the technical bids; and
  • the financial bids.
• In many procurement procedures, the bidders must first submit a prequalification application, demonstrating their technical and financial capacity to undertake the project. In this case, an Evaluation Committee is appointed to evaluate the prequalification applications that are submitted and to recommend to the Accounting Officer the selection of prequalified bidders.
• The Evaluation Committee is composed of officials, appointed from the staff of the Contracting Authority, with the skills required for the evaluation of the prequalification documents and bids. In general, the Evaluation Committee is composed of:
  • technical personnel, specialized in the facilities and services that will be built and operated under the PPP agreement;
  • legal personnel, with expertise in public procurement and/or PPP; and
  • financial personnel, ideally with competencies in financial analysis and modeling, feasibility studies, risk assessment, etc.

  Resources permitting, it is recommended to appoint a separate prequalification Evaluation Committee and bid Evaluation Committee.

• The PPP Act allows experts from outside the Contracting Authority to be included in the Evaluation Committee if needed. These may be the Transaction Advisor and the PPP Unit. The Transaction Advisor and the PPP Unit only have a support and advisory role. They cannot be voting members of the Evaluation Committee.

• The role and responsibility of the Private Party are defined by section 20 of the PPP Act.
• The Private Party is responsible for the implementation of the project under the terms of the PPP agreement. Depending on the type of project and the scope of the PPP agreement this may include:
  • construction of new public infrastructure or rehabilitation of existing public infrastructure;
  • maintenance and operation of said infrastructure, in order to provide services to users; and
  • financing of capital expenditures on infrastructure and equipment (initial capital expenditures in the construction phase, as well as replacement investments and major maintenance works in the operational phase).
• The Private Party is responsible (with facilitation from the Contracting Authority to the extent possible) for obtaining from the relevant authorities the permits that are required for undertaking the project. These permits must be issued in the name of the Private Party.
• In return for the above services, the Private Party is remunerated by user fees (in user-pays PPPs), by government payments (in government-pays PPPs), or by a hybrid combination of both (user-pays PPPs with government support). These types of PPPs are further elaborated in Section 2.1 of Annex A.
• The PPP Act requires that the Private Party is constituted as a special purpose company (SPC) under the laws of Uganda. The SPC is established prior to the signature of the PPP agreement and the shareholders of the SPC will be the Successful Bidder, either the members of the consortium that has been awarded the project or by an individual bidder, as the case may be.
• The PPP agreement will contain share transfer restrictions, which will ensure that the original shareholders are tied into the SPC for a certain period after the PPP agreement signature (usually for the construction phase as the bare minimum).
• Subsection 12 (2) of the PPP Act allows the Contracting Authority to participate in the capital of the SPC. Capital increases, share transfers, and changes in the corporate status of the SPC are subject to approval from the MOF and the minister responsible for the Contracting Authority.

• The role and responsibility of the Transaction Advisor are defined by section 18 of the PPP Act.
• The Transaction Advisor is appointed by the Contracting Authority in consultation with the PPP Unit and assists the Contracting Authority with the preparation and procurement of the PPP project. In particular, the Transaction Advisor is tasked with:
  • carrying out a comprehensive Feasibility Study of the PPP project, covering all aspects of the project: technical, economic, financial, fiscal, social, environmental, legal, institutional, PPP rationale (value for money) and PPP structuring;
  • preparing bid documents (request for prequalification, request for bids, PPP agreement, output specifications);
  • assistance to the Contracting Authority in the procurement and contracting process (including answering questions from bidders, organizing pre-bid conferences, negotiating with bidders, and evaluating prequalification documents and bids);
  • preparation of contract management framework.
• Due to the multidisciplinary nature of transaction advisory services, the Transaction Advisor usually consists of a consortium of specialized consulting firms and advisors (technical, legal, and financial).
• The cost of the Transaction Advisor depends on the size of the project but is typically between 0.5- 1% of the cost of the project. Although project preparation may seem an expensive initial outlay, accurate project preparation must be carried out. Investment in project preparation and a competent Transaction Advisor at the start is a good investment, compared to the escalating costs of entering into a badly structured or ill-conceived project.

• The Independent Expert is appointed jointly by the Contracting Authority and the Private Party. The fee of the Independent Expert is shared between both parties.
• The Independent Expert intervenes in the Implementation Stage of the project.
  • In the construction phase, the functions of the Independent Expert are:
    • review of the detailed engineering design to verify its conformity with the output specifications in the PPP agreement;
    • inspection and monitoring of construction works;
    • review modification requests and claims for compensation for special circumstances (for instance force majeure).
    • conducting commissioning tests; and
    • issuing of completion certificate.
  • In the operational phase (after the commissioning of the project assets) the functions of the Independent Expert are:
    • monitoring of compliance with maintenance and performance standards;
    • review of modification requests and claims for compensation for special circumstances.
  • At the end of the PPP agreement, the Independent Expert is responsible for the:
    • conducting handover tests; and
    • issuing of a handover certificate.
  • The first contract for the Independent Expert covers the construction phase until the final delivery of the project assets. During the operation phase, several Independent Experts are appointed consecutively, each for a period of three to five years.
  • These Guidelines recommend that an Independent Expert is appointed, based on international best practices.

• The role and responsibility of the PPP Committee are defined by sections 5 to 9 of the PPP Act.
• The PPP Committee is the key supervisory and decision-making body in the PPP Project Cycle. The role of the Committee is to ensure that PPP projects are prepared, procured, and implemented in accordance with the PPP Act and the PPP Policy. For this purpose, the PPP Committee performs the functions defined in section 7 of the PPP Act and described below.
  • At the Inception Stage, the PPP Committee approves the registration of the PPP project.
  • In the Feasibility Stage, the PPP Committee evaluates the Feasibility Study report submitted by the Contracting Authority. On this basis, the PPP Committee decides to approve or reject the project for implementation as a PPP. It must also ensure approval of the government support to the project, if applicable. These approvals are a condition for proceeding to the Procurement Stage.
  • In the Implementation Stage, the PPP Committee oversees the performance monitoring and financial management of PPP projects by Contracting Authorities.
• The composition of the PPP Committee is defined by section 5 of the PPP Act and includes:
  • the Attorney General or a person appointed by him or her;
  • the Permanent Secretary of the Ministry responsible for finance or his or her representative (Chairperson of the Committee);
  • the Permanent Secretary of the office of the Prime Minister or his or her representative;
  • a representative of the National Planning Authority;
  • the Permanent Secretary of the Ministry responsible for lands or his or her representative;
  • the Permanent Secretary of the Ministry responsible for local governments or his or her representative;
  • a representative of the Private Sector Foundation;
  • a representative of the Uganda Investment Authority;
  • a representative of academia;
  • a retired judge; and
  • the director of the PPP Unit (secretary of the PPP Committee).

• The MOF has the following functions in the PPP Project Cycle:
  • The Development Committee of MFPED determines if a project is to be best achieved under the PPP modality as per the Development Committee Guidelines;
  • approval of any transfer of shares, increase in share capital, or changes in the corporate status of a special purpose company (section 20 (2) of the PPP Act);
  • In case the Contracting Authority participates in the financing of the project, confirm the availability of financing (section 23 (4) of the PPP Act);
  • Provide a copy of the PPP agreement to the Parliament within one month of contract signing. (section 26 (10) of the PPP Act).
• The Debt and Cash Policy Directorate of the Ministry of Finance, Planning and Economic Development monitors the fiscal commitments and contingent liabilities from PPP projects, in cooperation with the PPP Unit.
• Other key departments within MFPED involved in the assessment of PPPs include the Budget Policy Evaluation Department, the Project Analysis and Preparation Department, and the Macro Economic Policy Department.

• The Cabinet has the following functions in the PPP Project Cycle:
  • approval of PPP agreements with a contract value exceeding the amount notified by the MOF by the statutory instrument from time to time (section 26 (2) of the PPP Act);
  • approval of amendments to the PPP agreement (subsection 26 (8) of the PPP Act);
  • approval of direct procurement of the Private Party (subsection 33 (3) of the PPP Act).

• The role and responsibility of the PPP Unit are defined by sections 10 and 11 of the PPP Act.
• The PPP Unit within MFPED has two functions in the PPP Project Cycle:
  • It serves as the secretariat and technical arm of the PPP Committee.
  • It provides technical assistance to contracting authorities (in particular the Project Team of the Contracting Authority) on PPP issues.
• In its first function, the PPP Unit carries out the following duties:
  • registration of PPP projects;
  • evaluation of the Feasibility Study, as input for the PPP Project Approval Decision of the PPP Committee;
  • evaluation of requests for government support, resulting in advice to the Committee on the granting of government support to a project;
  • maintain a record of all project documentation, including the PPP Project Register;
  • approval of project information disclosed by the Contracting Authority before its disclosure (see Disclosure Guidelines in Annex L);
  • practical organization of the communication of the PPP Committee with contracting authorities and other stakeholders (such as receipt and sending of reports and letters).
• • In its second function, the PPP Unit assists the Contracting Authority with technical, legal, and financial expertise in all stages of the PPP Project Cycle. The assistance covers the following areas (non-exhaustive list):
  • identification and prioritization of projects;
  • selection of a Transaction Advisor;
  • supervision of the work of the Transaction Advisor;
  • interpretation of findings of Feasibility Study;
  • structuring of PPP project (risk allocation, payment mechanism, output specifications);
  • fiscal risk analysis;
  • preparation of bid documents;
  • evaluation of prequalification documents and bids;
  • negotiation with bidders;
  • financial close;
  • performance monitoring;
  • assessment of claims in compensation events;
  • monitoring of fiscal impact and contingent liabilities.

• The role and responsibility of the Process Auditor are defined by section 17 of the PPP Act.
• The Process Auditor is an independent person appointed – after the registration of the project with the PPP Unit – by the Accountant General or nominated by the Accounting Officer and approved by the Accountant General.
• The Process Auditor verifies whether the Contracting Authority complies with the provisions of the PPP Act and the PPP Regulations in the preparation, procurement, and implementation of a PPP project. Before the signing of the PPP agreement, the Process Auditor reports his or her findings to the Accounting Officer.
• In addition, the Process Auditor prepares interim reports at the following stages:
  • registration of the Project;
  • procurement of the Transaction Advisor;
  • prequalification evaluation;
  • technical bid evaluation;
  • financial bid evaluation; and
  • conclusion of negotiations with the Preferred Bidder.
• The Process Auditor has the right to attend Project Team meetings as an observer to stay informed about the project and the actions of the Contracting Authority.

The Accountant General has the following functions in the PPP Project Cycle:

• appointment of the Process Auditor (section 4 of the PPP Act);
• prescribe the accounting and financial reporting rules for PPPs (subsection 28(3) of the PPP Act).

The Auditor General has the following functions in the PPP Project Cycle (section 30 of the PPP Act).

• (c) audit (or appoint an auditor to do so) all PPPs under the National Audit Act in each financial year from inception to the end of the project;
• (d) report to Parliament about the above audits.

The Solicitor General reviews and approves the PPP agreement as per Article 119(5) of the Ugandan Constitution.