The Amendment of Cameroon’s PPP Law
By Ferdinand Doh Galabe, Partner
Cameroon’s head of state has just promulgated Law no 2023/008 of July 25, 2023 to lay down the general regime of Public-Private Partnership Contracts. This new law repeals its precursor Law no 2006/012 of December 29, 2006 establishing the general regime for partnership contracts.
The new law was presented before lawmakers as a bill geared at diversifying sources of financing public infrastructure projects, and as a tool to make PPPs an effective alternative to traditional State budget-based financing regulated by Decree no 2018/366 of June 20, 2018 on the public contracts code.
In 2020 alone, over 6328 public contracts were awarded worth a total of 506 billion FCFA, under the 2018 Decree on public contracts. On the other hand, only about 54 PPP projects had been initiated between 2006 and 2019, for a total investment of nearly 140 billion FCFA.
Unlike under the old law which recognized only two types of PPP contracts, Section 4 of the new PPP law now distinguishes three major types of PPP contracts with different payment mechanisms:
- Government-pays PPPs in which the private party is paid through rents from the public party over a specified period;
- Concessional or User-pays PPPs in which the private party is paid by users of the infrastructure (concession, BOT, BOO, affermage, management contract, and authorisations or contracts for temporary occupation of state real property); and
- Hybrid-payment PPPs which combines the payment mechanism of the concessional and the government-pays PPPs.
Contrary to the old law which concerned only the state itself and its branches, the new law widens the scope of public actors who can now recourse to PPPs as a means of financing public projects, to now include sub-national entities (municipalities and regions), public establishments and public corporations.
The new PPP law introduces a special procedure for awarding PPP contracts, namely the direct negotiation procedure, alongside the traditional competitive tendering procedure, which remains the general rule. The new PPP framework does not apply to certain sectors such as electricity, water management, oil & gas and mining, which are regulated by special laws.
The new law establishes the Prime Minister as the highest state authority in charge of PPPs. In this vein, he has the power to award and amend PPP contracts, and regulate the PPP sector, with the assistance of the ministry of economy and the PPP unit.
Unlike the old law which allowed for PPPs to be initiated strictly by a public entity, the new law now allows for private parties to initiate the PPP process through spontaneous bids.
The new law equally opens the way for a derogatory type of award process whereby the public party may, following an authorization of the Prime Minister, enter into direct discussions and negotiations with a bidder in the framework of competitive call for tenders. How this will work practically is still to be laid down by a Prime Ministerial regulation.
The new PPP law equally streamlines and simplifies the stages of the tender process, breaking it down into: the public call for expression of interests, restricted call for tenders, competitive dialogue, award, negotiation of contract terms, and signature of PPP contract.
Rider clauses (up to 30% of the price of the contract) and complementary contracts concluded through direct negotiation are now regulated by the new PPP law, allowing for more flexibility and better risk management during the execution phase of the PPP.
In view of strong competition from multinationals, lawmakers considered measures in the contracting partner selection process to ensure greater involvement of Cameroonian companies in PPPs and government procurement, by implication. Contract award criteria now include the share of the contract that shall be executed by local SMEs.
The new PPP law equally provides a dispute settlement mechanism whereby aggrieved bidders may seize the Prime Minister within seven business days following the publication of the results of the tender process. Such an appeal is adjudicated within thirty days. The law is silent on the way forward after this appeal process and on the nature of the decision of the Prime Minister.
As PPP lawyers, we provide full-range PPP legal services, including the drafting & negotiation of agreements, equity transactions, debt transactions, drafting of engineering and construction agreements, advising on real estate laws, tax laws, environmental laws, employment & labour regulations, private investment incentives law, etc. We advise on the entire chain of the PPP project including, procurement strategy, tax structuring, contractual documentation, risk allocation, right down to PPP finance structuring.
We help concessionaires, contractors, lenders, sponsors, developers, equity investors, and governmental entities, to gain a comprehensive understanding of the structure and breadth of their legal obligations under the PPP contract and assist them to properly document their rights and obligations under various PPP projects. Our lawyers have accumulated experience working on PPPs in different sectors, including road infrastructure, hospitals, power, public buildings, ecotourism, shopping centres, seaports (BOT), construction of pipelines, supply of hospital equipment, solar energy, etc.