What you Need to Know About Public-Private Partnership in the UAE?

Posted by Awatif Mohammad Shoqi Advocates & Legal Consultancy on September 15th, 2022

Public-private partnership is commonly understood as a contractual relationship between a government entity and a private sector company to share risks and opportunities in undertaking commercial projects which involve public services.

The level of partnership, including the contribution and responsibility of each party generally depends on the project being developed.

PPP could take the form of service contracts, management contracts, leasing contracts, concession contracts, and BOT (build, operate, transfer), BOOT (build, own, operate, transfer), and BOO (build, own, operate), etc.

Most PPPs are risk-based partnership, contracted on a long-term basis, with the aim of establishing infrastructure in the country by using the private sectors efficiency, financial potential and expertise.

The Government of UAE aims to achieve a great benefit for the society members, the state, private sector and the entire national economy through implementing strategic development projects by entering into these private partnerships.

What Laws Govern PPP in the UAE?

The Government of UAE issued Cabinet Decision No. 2/2017 which sets out a high-level framework of guidelines and procedures for partnership with the private sector.

According to the PPP Cabinet Decision, before considering a PPP, several factors would have to be taken into consideration under Para 2.8. These include but are not limited to: (a) financial resources or experience of the federal entities cannot provide the services and projects; (b) private partner can implement services or projects faster than the government; (c) there is opportunity of innovation and creativity; (d) lack of regulatory or legal objections for involving the private sector; and (e) the outputs of the partnership can be measured and priced.

Additionally, in the Emirate of Dubai, the Dubai Law No. 22 of 2015 On the Organization of Public-Private Partnership in the Emirate of Dubai has been issued. This law aims to organize public-private partnership in Dubai and enable the government to implement its strategic projects efficiently and effectively.

Abu Dhabi has also issued Abu Dhabi Law No. 2 of 2019 and Abu Dhabi Administrative Decision No 179 of 2020 on the regulation of PPP in Abu Dhabi.

What is the process for establishing PPP?

The broad guidelines for establishing PPP have been set out in the PPP Cabinet Decision, however, these guidelines are only for indicative purposes and the PPP Cabinet Decision states that the federal entities are required to review these provisions, adopt or use other procedures or practices that may have been recently applied in any phase of the project life cycle.

According to Chapter 7 of the PPP Cabinet Decision, a project may be awarded for government procurement by various methods, including but not limited to:

a.) Open procedure: All interested suppliers can submit their bids. This is also called “public tender”.

b.) Selective procedure: Only qualified suppliers are permitted to submit their bids. This method is also referred to as “closed tender”.

c.) Limited procedure: Only suppliers who are invited for bidding can submit their bids. This is also called “limited practice”.

d.) Competitive dialogue: In this method, a dialogue is initiated with the qualified bidders. The contract form and the technical outputs from the projects are discussed and based on this discussion, the bidding requirement document is prepared. A dialogue may also be carried after the bidding documents are issued, to address any issues arising in the contract, or other matter which require amending the project requirements before bids submission.

The PPP Cabinet Decision further clarifies that due to the complexity of the PPP contract, especially in infrastructure projects which form a substantial percentage of the total PPPs carried out by the UAE government, the awarding method of competitive dialogue is considered to be the most appropriate method in selecting a private sector partner.

It should be noted that the above methods are not exhaustive and there are several other methods, such as restricted procedure, negotiated procedure which could be used for selecting a private sector partner.

That said, as mentioned above, the Emirates of Dubai and Abu Dhabi have established their own laws on PPP and for these Emirates, such laws may be more relevant.

Conclusion

It is a proven fact that partnerships with the private sector result in raising the efficiency and effectiveness of performance, promote quality of services, stimulate the economy and safeguard the interest of the public at large and therefore, these regulations by the UAE Government and the Emirates provide the much-needed guidance to ensure effective participation by the private sector so that it contributes positively in supporting the government’s efforts in further developing the national economy.

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