Senegal is a leader among West African countries with regard to public-private partnerships (PPPs), having already put in place important projects for both service management and infrastructure development. The general framework of public works contracts comprises the Code of Obligations of the Administration2 and Law 90-09 of 26 June 1990 on the organisation and control of companies in the parapublic sector and private legal persons with financial support from public powers. This establishes the regime governing the preparation, procurement, execution and control of contracts concluded by the above-mentioned legal persons to meet their needs for performing work and purchasing supplies or services, as well as the award and control of contracts participation in the execution of a public service.
Unless otherwise provided by law or regulation, the conclusion of public procurement contracts (i.e., involving the participation of co-contractors of public persons to the performance of a public service referred to in Article 10 of the Code of Obligations of the Administration) is subject to the rules of control provided for in this Decree. Public procurement contracts are written contracts entered into by a contracting authority for payment to meet its needs for works, supplies or services, or a combination of the three. Public procurements are administrative contracts.
However, there are special procedures for awarding public contracts on the basis of a legislative derogation. This is the case for Law No. 2014-09 of 20 February 2014 regarding Public-Private Partnerships (the PPP Law), which provides for other contractual conditions owing to the fact that it is the co-contractor of the administration that finances and operates the constructed structure for a time before transferring ownership to the administration.
In this sense, Article 2 of Law No. 2014-09 provides:
This Law applies to partnership contracts entered into by the State, a local authority, a public body, an agency, a majority public corporation, a national corporation and any other body or corporation of public law, and the associations formed by these people . . . The provisions of this Act apply to all sectors of economic and social life, with the exception of sectors subject to special regulation, including the energy, mining and telecommunications sectors.
Therefore, it is the contract that provides for the transfer of ownership of the plant.
II THE YEAR IN REVIEW
This year, there has been no new legislation. The institutional framework has been set by the PPP Law and its implementing legislation. As a result, there have been no substantial developments during this period.
On 4 December 2017 to 6 December 2017, the Minister of Investment, Promotion, Partnerships and Development of the State's Teleservices organised an international forum conference on the funding of public private partnerships.
III GENERAL FRAMEWORK
i Types of public-private partnership
Partnership contracts may be awarded in three ways, either by competitive bidding, direct agreement or negotiated procedure, according to the conditions defined by this law.
The PPP Law eases the terms and conditions for dealing with unsolicited offers to better capture investment opportunities, which is a significant change from the previous law of 2004.
ii The authorities
The PPP Law applies to partnership contracts entered into by the state, a local authority, a public institution, an agency, a majority public-participation company, a national company and any other body or legal person governed by public law, as well as the associations formed by these legal persons. It provides for different structures in charge of the governance of these contracts, such as:
- the National Committee of Support to Public-Private Partnerships, which is responsible for validating the project preliminary assessments prepared by the contracting authorities to provide support to public sector entities in the preparation, negotiation and monitoring of public-private partnerships and to disseminate and promote public-private partnerships. The composition, organisation and functioning of the Committee are fixed by decree;
- the body of regulation and settlement of disputes, namely the Infrastructure Council, which is responsible for the regulation of the system of PPP contracting and the settlement of disputes related to the execution of such contracts; and
- the Tendering Commission, which is the structure responsible for bid opening and bid evaluation, whose composition and functioning are specified by decree. It is constituted by the contracting authority.
iii General requirements for PPP contracts
There are provisions for adapting by means of regulations the award procedures described in this draft law, for local authority partnership contracts on the one hand, and for those of other public authorities on the other hand, not reaching a certain threshold specified by decree (Article 2). In addition, the provisions of the PPP Law apply to all economic and social sectors, with the exception of sectors subject to special regulations, notably the energy, mining and telecommunications sectors. This Act does not apply to contracts entered into by a contracting authority with a legal person of public law or with a corporation majority-owned by Senegal.
See Section III.iii on the pre-qualification procedure.
According to Article 16 of the PPP Law, a pre-qualification notice is published by the contracting authority. This publication may be made in print, electronic or audiovisual media, national or foreign, specialised or not. The dissemination of the pre-qualification notice is made to inform all potential candidates of the existence of the project. Applicants who successfully apply for pre-qualification are invited by the contracting authority to submit an offer under the conditions set out in Articles 13 et seq. A tender committee is then set up. The contracting authority must inform each candidate of the decision it has taken in this regard and communicate to any candidate who requests it the reasons for the rejection of his or her candidacy.
In addition to this main procedure, there is a special procedure for dealing with spontaneous supply. A private operator may send a spontaneous offer to a contracting authority. In this case, the operator carries out the preliminary studies so as to present a coherent project, including appropriate technical proposals and the corresponding financing solutions.
An unsolicited offer may also relate to the completion of a project whose studies were conducted by the contracting authority at least five years before the date of submission of the unsolicited tender.3 The unsolicited bidder submits a complete file to the contracting authority with technical and financial specifications. If the unsolicited bid is accepted, the contracting authority must refer it to the National Committee of Support to Public-Private Partnerships and the Minister of Finance, for examination and opinion on the basis of the file submitted by the holder of the spontaneous offer.
On the basis of the opinions obtained, the contracting authority shall request the Prime Minister or the deliberative body of the public authority to apply for authorisation to proceed with the negotiation of the contract with the holder of the unsolicited bid. In the event of a favourable opinion, the contracts are submitted, after signature by the parties, to the approval of the Prime Minister.4
To conclude, a contract governed by the provisions of the PPP Law may be passed by a contracting authority, following the opinion of the Infrastructure Council on referral of the National Committee of Support to Public-Private Partnerships if:
- it is imperative to ensure the continuity of public service under conditions of delay that are incompatible with the implementation of the tender procedure provided for in this Law, and where the contracting authority cannot provide the service itself; and
- the infrastructure can be realised or exploited, for technical reasons or reasons relating to the protection of exclusive rights, only by a single economic operation.5
The end of the procedure is sanctioned by a report drawn up by the contracting authority. The final partnership agreement, together with the minutes of the finalisation of the development and the tax schedule, if applicable, is sent for approval to the Minister in charge of Finance, after the opinion of the National Committee of Support to Public-Private Partnerships.
The partnership contract, once approved by the Minister of Finance, is sent for information to the Infrastructure Council and the National Committee of Support to Public-Private Partnerships.
Partnership contracts are published in the Official Journal with the exception of clauses relating to business secrecy.6
IV BIDDING AND AWARD PROCEDURE
i Expressions of interest
The selection of the project operator must pass global tender procedures in two stages preceded by a pre-qualification. In the first stage, the technical proposals are opened in public session, and in the second stage, the financial offers are opened in public session by the tender commission.
ii Requests for proposals and unsolicited proposals
Candidates are pre-qualified exclusively on the basis of their ability to perform the contract and according to the following criteria:
- specific technical experience;
- the material and human resources that candidates have to fulfil the contract; and
- financial capabilities.7
The pre-qualification procedure shall be conducted by the contracting authority assisted by the tender commission referred to in Article 5 of this Law. The commission meets at the request of the contracting authority.
According to Article 16 of the PPP Law, a pre-qualification notice is published by the contracting authority. See Section III.iii.
iii Evaluation and grant
Candidates are pre-qualified according to the aforementioned criteria (see Section IV.ii).
The contract is awarded to the candidate whose bid is evaluated as the best one in view of the selection criteria set out in the tender documents.8
V THE CONTRACT
Article 6 of the PPP Law provides that the remuneration of the co-contractor, under a partnership contract, comes mainly from payments by the public body throughout the duration of the contract. It is linked to performance objectives assigned to the contracting party or to the availability of works or equipment.
The partnership agreement may provide for the possibility for the other party to receive income on the basis of ancillary activities; or for a mandate from the contracting authority to the counterparty to collect, in the name and on behalf of the public body, the payment by the end user of benefits accruing to the latter.
ii State guarantees
Pursuant to Article 7 of the PPP Law, PPP contracts contain clauses on the methods of payment of the contractor by the public body. In Senegal, the state financial system is very centralised; indeed, it is the Ministry of Finance that manages this aspect. Therefore, in practice, no problems should arise with regard to state commitments.
iii Distribution of risk
Article 7.2 of the PPP Law states that PPP contracts include clauses relating to the conditions under which risk-sharing is established between the contracting authority and the project operator.
iv Adjustment and revision
The PPP Law provides for two kinds of adjustment and revision. First, under Article 30, a complementary contract to a partnership contract may be entered into by direct agreement by a contracting authority where a project under execution has been the subject of a partnership contract. For reasons of economic, social or cultural necessity, or related to consistency requirements in the technical and financial management of the project, the contracting authority decides on its extension. The authorisation to conclude the complementary contract by direct agreement is given by the Prime Minister, on referral to the National Committee of Support to Public-Private Partnerships, after consulting the Infrastructure Council and Minister of Finance.
In addition, under Section 31, any changes to the work, supplies, services or deadlines of the original contract initiated by the holder or the contracting authority must be subject to prior agreement between the parties by an amendment to the partnership contract. These changes cannot be substantial. Failing this, a new allocation procedure is necessary. An amendment is considered substantial if it:
- introduces conditions that, if they had been included in the initial award procedure, would have permitted the selection of a candidate other than the one initially selected;
- changes the economic balance of the partnership contract in favour of the partner for a cost greater than or equal to 30 per cent of the initial amount of the financial offer selected; or
- considerably modifies the scope of the partnership contract. This is particularly the case when the addendum has the effect or purpose of substituting another contract for the original contract either by upsetting the economy or by changing the object.
Any amendment must be authorised beforehand by the Infrastructure Council.
v Ownership of underlying assets
Article 23 of the PPP Law provides that, within three months of the signing of the partnership agreement, the project operator must be constituted in the form of a company incorporated under Senegalese law whose capital is made up of at least 20 per cent of the capital contributions from national economic operators.
The offer of securities is made after the determination or valuation of securities by an independent expert selected by the operator and the public person by mutual agreement or by an expert chosen by the Infrastructure Council, within a maximum of three weeks by public company advertising or investment mandate with a bank.
After fixing the price of the securities, the sale takes place for a period of 45 days. The operator or the authorised third party shall notify the Infrastructure Council of the list of acquirers, the number of securities acquired and their prices, and the number of securities not sold at the end of this period.
Securities not acquired by national investors at the end of the period indicated in the above remain property of the operator unless the state of Senegal decides to acquire them provisionally. In this case, the state must transfer the securities to national operators within two years or transfer them to the operator.
vi Early termination
The partnership agreement may provide grounds for termination for:
- serious deficiencies of the contracting authority, whereby the judge decides to cancel the judgment at the request of the project operator, under the conditions laid down in Section VII. The project operator can then claim damages to the contracting authority;
- serious misconduct by the project operator, whereby the contracting party terminates the contract partnership. The contracting authority may review the responsibility of the project operator before the judge in light of any mistakes he or she has made. Nevertheless, the contract of partnership may provide that, in this case, the contracting authority pays financial compensation related to infrastructure recovery;
- a reason of general interest, in which case the termination is then pronounced by the contracting authority. The project operator is then entitled to an allowance covering expenses incurred and loss of profits;
- cases of force majeure, at the initiative of each of the parties, under the conditions provided for in the contract; and
- following a challenge to the financial balance of the project resulting from an action or decision of the contracting authority. Termination is pronounced by the judge at the request from the project operator under the conditions of Section VII. The project operator can then claim damages from the contracting authority.
The project operator may challenge the termination of the partnership and amount of compensation owed by the contracting authority before an arbitration body or national court under the conditions laid down in Section VII. However, the judge does not have the power to annul a termination decision taken by the contracting authority; he or she can only grant compensation to the project operator.
Senegal has put in place important measures for both service management and infrastructure development regarding PPPs:
- In 1996, an agricultural PPP was achieved in the water subsector between the Senegalese Water Company, the private operator exclusively responsible for the operation of drinking water installations, and the National Water Company of Senegal, a public body responsible for managing the assets and controlling the quality of the operation of this public service. The original 10-year contract has since been extended by various amendments.
- In the rail transport sector, Senegal and Mali granted the concession of the Dakar–Bamako railway to the company Transrail SA in 2003.
- A concession contract relating to financing, the construction and maintenance of the toll motorway linking Dakar to Diamniadio was signed in 2009 with SENAC SA. The motorway has been in operation since August 2013. An amendment to this contract was signed in June 2014 for the extension of this highway to Diass and the Blaise Diagne International Airport.
- In 2012, an axle load control concession involving the financing, construction, equipping and operation of weighing stations and measuring the gauge of heavy goods vehicles was signed.
- A subsidiary of DP World has been a concessionaire since 2008 and for 25 years the container terminal of the Autonomous Port of Dakar. DP World is not only in charge of the operation, but also the extension and rehabilitation of the container terminal in the northern area of the port.
- The operation, management and maintenance of the Baux Maraîchers urban and inter-urban bus station was entrusted to a private company as part of a PPP.
In these different partnerships, various financing schemes have been adopted in response to the specific nature of each operation.
VII Litigation Proceedings
In the absence of an amicable settlement, under Article 37 of Law No. 2015-09, disputes relating to the execution or interpretation of partnership contracts fall within the jurisdiction of the Senegalese courts or arbitral tribunals. Arbitration is conducted in accordance with the stipulations of the arbitration clause contained in the partnership contract. This clause opens a route of arbitration both before the regional arbitration bodies (i.e., the Common Court of Justice and Arbitration of the Organization for the Harmonisation in Africa of Business Law; and the Organisation for the Harmonisation of Corporate Law in Africa (OHADA)) but also international (the International Criminal Court, the International Centre for Settlement of Investment Disputes, the United Nations Conference on Trade and Development, etc.). Further, the OHADA Uniform Act on Arbitration Law, applicable in Senegal, provides for the enforcement of awards made by international arbitral tribunals.
There has been no significant case law yet. Nevertheless, considering the significant interest in PPPs from of private and public actors, we expect litigation in the future.
The Emerging Senegal Plan will offer many opportunities to develop PPP projects. Promulgated by a priority action plan, this strategy aims to complete a series of infrastructure projects by 2023. To this end, the Senegalese government has set up an institutional and legal framework favourable to PPPs aimed at carrying out infrastructure projects to achieve the objectives set.
Indeed, significant investments are required for infrastructure development in Senegal. The lack of financial capacity of Senegalese public entities has led to an increase in the number of public-private partnerships.
Those upcoming public private partnership projects are listed below:
- the Corn Value Chain Project in Grain Corridors;
- the Dakar–Bamako Railway Project (South) and the Rehabilitation Project;
- the Commercial Infrastructure Rehabilitation Project;
- the ANAM Port Project;
- the Bargny 'Port du Futur' Mineral Project;
- the Cheikh Anta Diop Student Housing Project;
- the Construction and Equipment Project for a Network of Higher Institutes of Professional Education;
- the Electricity Transmission Investment Project;
- the Niokolo-Koba Park Management Project;
- the Electronic Waste Management Project;
- the Seawater Desalination Plant Project;
- the Integrated Special Economic Zone Project;
- the Court Construction Programme;
- the Falémé Zone Iron Project (Eastern Senegal-MIFERSO iron mines);
- the Aristide le Dantec Hospital Reconstruction Project;
- Daga Kholpa Urban Pole Project; and
- other projects, such as the construction of prisons, courts, sports facilities, tourist centres (e.g., seaside offers in Pointe Sarène, the proposed development of the Mbodjène tourist site and development of the Joal Finio tourist site), agribusiness projects and projects on infrastructure (e.g., highway-development programmes).
The Emerging Senegal Plan was adopted in 2014 to accelerate socio-economic and infrastructural developments in Senegal. This plan constitutes the frame of reference for the country's economic and social policy for the next 20 years, and is based on three tenets:
- the structural transformation of the economy through the consolidation of the current drivers of growth and development of new sectors that create wealth, jobs, social inclusion, and attract high-level experts and investment opportunities;
- the significant improvement of living conditions in the country, with more sustained action against social inequality; and
- strengthening security, stability and governance, the protection of rights and freedoms, and the state of law in order to maintain public policy.
1 Khaled Abou El Houda is a partner at Houda Law Firm.
2 Law No. 65-61 of 19 July 1965, as amended by Law No. 2006-16 of 05 August 2006.
3 Article 24 of the PPP Law.
4 Article 27 of the PPP Law.
5 Article 29 of the PPP Law.
6 Article 22 of the PPP Law.
7 Article 15 of the PPP Law.
8 Article 14 of the PPP Law.