Procuring Infrastructure Public-Private Partnerships

While Lao PDR is currently reforming it's PPP regulatory framework through a 7th draft PPP Law, which has not yet been established, PPPs are currently being procured based on the following instruments: 1) Law on Investment Promotion (2016 Revision) [hereinafter "Investments Law"], which sets its scope in Article 6 as, "This Law applies to investment of domestic and foreign natural persons and legal entities, investing and doing business in the Lao PDR and domestic investors for their overseas investments " and incentivises in Article 9(1)(7), "Investment, service provision and development of public infrastructure for urban traffic congestion reduction and residence facilities, infrastructure development for agricultural and industrial production, transportation services of goods, transit services and international linkage." Additionally, Article 26(5) describes the forms of investments that shall include, "A public-private partnership (PPP)" but in Article 31 provides, "Public-private partnership business is a joint-venture investment between public authority and a private party under a joint-venture contract to implement a project of new construction, improvement of infrastructure or to provide a service to the public. Sectors, conditions and procedures for public-private partnership are set out in a separate regulation." Such regulation has not been issued yet; 2) Prime Minister Decree No.03/PM Government Procurement of Goods, Construction, Maintenance and Services (amended 2004) [hereinafter "Procurement Law"], which shall apply to especially the procurement process, Article 3 of which provides, "This Decree applies to the following targets: i) Government entities at the central, provincial and local levels, including overseas representative organizations of the Government of Lao PDR funded by the national budget. ii) State owned enterprises. iii) Joint ventures in which the State holds shares."; 3) Ministry of Finance Decree No. 01639/MOF (1998) Implementing Rules and Regulations on Government Procurement of Goods, Construction, Maintenance and Services [hereinafter "Procurement Regulations"]; and 4) Decree 29/PO on the Promulgation of the Law on the Amendment of the Enterprise Law (2005). The aforementioned shall shape the PPP regulatory framework in Lao PDR for purposes of this analysis.

http://www.investlaos.gov.la/images/IP_Law_2016_PDF/Investment_Promotion_Law_amended_2016_Unofficial_translated-English.pdf
https://www.mpwt.gov.la/attachments/article/1232/Decree%2003PM%209Jan2004%20English%20%28Latest%29.pdf
https://www.wto.org/english/thewto_e/acc_e/lao_e/WTACCLAO3A1_LEG_24.pdf
http://www.investlaos.gov.la/images/sampledata/pdf_sample/Enterprises_2005_Eng.pdf

Decree on Public Private Partnerships in the Lao PDR is in the process of drafting (draft 7) and revising since June 2015, according to the relevant authorities at Ministry of Planning and Investment, we have been informed that it shall be promulgated in the end of 2017.

Article 2(6) of the Procurement Law provides, "Procuring Entity or Project Owner means the Government entity and state enterprises using funds from the national budget. " For purposes of the case study assumption, the Ministry of Public Works and Transport https://www.mpwt.gov.la/en/ shall be the relevant procuring authority.

PPP Unit has been established within the Investment Promotion Department (IPD) in the Ministry of Planning and Investment [hereinafter "PPP Unit"]

Article 13 of the Procurement Regulation provides, "The procuring entity may contract with firms of consultants or individual consultants for the purposes of provision of expert advice or assistance in institutional matters and specialized services in connection with the implementation of projects and detailed engineering and design.
Consulting firms will be preferred where the work involves the application of multi-disciplinary expertise and requires the support of an organization with competent personnel. Individual consultants will be used where a particular assignment can best be carried out by an individual expert with the requisite qualifications and experience.
The award of contracts to such consultants shall follow the procurement procedures of this Section where the value of the contract exceeds 20 million kip. "

Contributors provided that it is difficult to foresee or have a clear view on what prioritizations are in place throughout Lao, as there is no list issued by the government. Financing is also a problem for projects.

Article 44 of the Investments Law clarifies the components of an investment application that is to be considered and provides, "5. Feasibility study or business plan with following main content:
purpose of investment, estimated value of investment, project location, operation timelines, project effectiveness, labour need, need for a state land lease or concession; financial, technical-economic feasibility, projected benefit sharing, plan and procedures for
operation, document certifying funding support, request for investment incentives;
6. Report of environmental, social and natural impact assessment."

Article 44 of the Investments Law clarifies the components of an investment application that is to be considered and provides, "5. Feasibility study or business plan with following main content:
purpose of investment, estimated value of investment, project location, operation timelines, project effectiveness, labour need, need for a state land lease or concession; financial, technical-economic feasibility, projected benefit sharing, plan and procedures for
operation, document certifying funding support, request for investment incentives."

Article 44 of the Investments Law clarifies the components of an investment application that is to be considered and provides, "5. Feasibility study or business plan with following main content:
purpose of investment, estimated value of investment, project location, operation timelines, project effectiveness, labour need, need for a state land lease or concession; financial, technical-economic feasibility, projected benefit sharing, plan and procedures for
operation, document certifying funding support, request for investment incentives;"

Article 44 of the Investments Law clarifies the components of an investment application that is to be considered and provides, "5. Feasibility study or business plan with following main content:
purpose of investment, estimated value of investment, project location, operation timelines, project effectiveness, labour need, need for a state land lease or concession; financial, technical-economic feasibility, projected benefit sharing, plan and procedures for
operation, document certifying funding support, request for investment incentives;
6. Report of environmental, social and natural impact assessment."
Moreover, Article 5 of Decree No.112/PM on Environmental Impact Assessment (2010) provides, "Procedure on initial environmental examination or environmental impact assessment, as well as procedure on deliberation of a report on initial environmental examination or a report on environmental impact assessment, must be in compliance with the project cycle of the investment project, and be in accordance with the laws of the concerned agencies."

According to Article 84(6) of the Investments Law and in concurrence with establishing a one-stop-shop for investors, there shall be an office within the Ministry of Planning and Investment that shall, "Coordinate with other relevant sector authorities to issue enterprise registration certificates, tax registration certificates, business operating licenses and other permits according to laws and regulations upon receiving the IPSC’s approval for relevant applications."

According to Article 84(6) of the Investments Law and in concurrence with establishing a one-stop-shop for investors, there shall be an office within the Ministry of Planning and Investment that shall, "Coordinate with other relevant sector authorities to issue enterprise registration certificates, tax registration certificates, business operating licenses and other permits according to laws and regulations upon receiving the IPSC’s approval for relevant applications."

According to Article 84(6) of the Investments Law and in concurrence with establishing a one-stop-shop for investors, there shall be an office within the Ministry of Planning and Investment that shall, "Coordinate with other relevant sector authorities to issue enterprise registration certificates, tax registration certificates, business operating licenses and other permits according to laws and regulations upon receiving the IPSC’s approval for relevant applications."

According to Article 84(6) of the Investments Law and in concurrence with establishing a one-stop-shop for investors, there shall be an office within the Ministry of Planning and Investment that shall, "Coordinate with other relevant sector authorities to issue enterprise registration certificates, tax registration certificates, business operating licenses and other permits according to laws and regulations upon receiving the IPSC’s approval for relevant applications." Additionally, Article 67 of the Investments Law gives investors the right to,
"9. To receive benefits from land lease or concession in accordance with laws and regulations of Lao PDR;
10. A land leaseholder or concessionaire has the rights to use the land according to the period of leasing contract or concession agreement,
11. own their assets including buildings, facilities and other structures on the concession land and transfer such ownership to nationals or foreigners in accordance with laws and regulations."

According to Article 84(6) of the Investments Law and in concurrence with establishing a one-stop-shop for investors, there shall be an office within the Ministry of Planning and Investment that shall, "Coordinate with other relevant sector authorities to issue enterprise registration certificates, tax registration certificates, business operating licenses and other permits according to laws and regulations upon receiving the IPSC’s approval for relevant applications." Additionally, Article 67 of the Investments Law gives investors the right to,
"9. To receive benefits from land lease or concession in accordance with laws and regulations of Lao PDR;
10. A land leaseholder or concessionaire has the rights to use the land according to the period of leasing contract or concession agreement,
11. own their assets including buildings, facilities and other structures on the concession land and transfer such ownership to nationals or foreigners in accordance with laws and regulations."

Article 29 of the Procurement Law provides, "All procurement procedures require the appointment of a tender committee by the project executing agency at the central or local levels. The tender committee is comprised of:
ƒAt the ministry or equal ranking agency’s level, from 1 to 3 representatives of the ministry and representatives of the procuring entity or project owner, 1 representative of the Ministry of Finance, 1 representative of the Committee for Planning and Cooperation, and 1 representative from each technical department concerned."

Article 11(2) of the Procurement Law provides, "Notification is widely publicized through the media or official means."
Article 12 of the Procurement Regulation provides, "Invitations to bid covered by these IRRs shall be notified at least as follows:
a) Domestic Public Bidding: in a mass circulation Lao language newspaper;
b) International Public Bidding: in a mass circulation English language newspaper published in Lao PDR and, where possible, in an international English Language newspaper;
c) Limited Bidding: invitations to bid should be sent at the same time by registered post to the suppliers or contractors selected by the procuring entity in accordance with Part IV; invitations to bid should be sent to at least 3 bidders and, in the case of international procurement to at least 3 bidders in at least 2 different countries; Direct Contracting and Price Comparison: the procuring entity may directly approach the suppliers or contractors from whom it intends to solicit quotations."

Article 11(2) of the Procurement Law provides, "The time limits for the preparation and submission of bids are 45 days at least before the submission’s
deadline." Article 4(d) of the Procurement Regulation provides, "Bidders must be given adequate time to prepare and submit their bids. The minimum time limits which must be the same for all bidders are set out in Article 12. Additional information may be requested in writing and the responses of the procuring entity should be given expeditiously and sent to all bidders together with a copy of the request. The time limit should take account of the time necessary for any site visits required for the preparation of the bids."
Article 12 of the Procurement Regulation provides details such time limits according to each procurement method and provides that the minimum number of days to submit bids for the "normal procedure" under "public bidding" is 45 days.

Article 10 of the Procurement Law provides,
"Procurement methods may follow:
ƒ Public bidding
ƒ Limited bidding
ƒ Direct contracting
ƒ Price comparison. "
Article 11 of this Law elaborates on the procedures for open tendering.
When read in light of Article 4 of the Procurement Regulation, open tendering is considered the default procedure. Article 4 of the Regulation provides, "This is the basic method of public procurement and must be used unless there are circumstances which justify the use of the exceptional procedures described below. Under this procedure, all firms and individuals who are capable of providing the goods or works sought shall be given an equal opportunity of submitting bids following notification in accordance with Article 12."

Article 16 of the Procurement Law provides, "The case of large-scale, technically complex and high value projects, the suitability of bidders is evaluated prior to carrying out the bidding. The qualification’s evaluation process is carried out in form of public tender by stipulating standards and conditions that are notified to firms interested to submit documents for pre-qualification by the tender committee. Any firms meeting the standards and conditions stipulated in the pre-qualification documents are then invited to participate to price competition. "

Article 17 of the Procurement Law provides, "For large complex plants and high value projects for which the project executing agency may be undesirable or impractical to prepare complete technical specifications in advance or detail design is of a high cost. In such a case, a two-stage bidding procedure may be used. Under which first stage involves un-priced technical proposals and methodologies for the evaluation of the responsive bids. The second stage involves the competition of the priced proposals."

Article 11 of the Procurement Law provides, "Tender documents must be complete and precise, contain information on goods, works and services, including technical specifications, place of delivery, time, bidding conditions and terms of contract, as well as the standards applied the evaluation of bids for proper acknowledgment by bidders."
Article 11(5) of the Procurement Law provides, "The examination and evaluation of bids is carried out according to the criteria and conditions stipulated in the bidding documents. The evaluation of bids must indicate the proposals of all bidders and the reasons for award of contract and is submitted to the project executing agency for approval in according with the Article 36."
Article 15 of the Procurement Regulations further provides, "Bidders must all be afforded fair and equal treatment and must be admitted to the public bidding procedure or selected for the limited bidding, domestic price comparison, international comparison or direct contracting procedures on the basis of objective selection criteria."
Article 12(3) of the Regulation also provides, "The notification shall include reference to:
 the identity of procuring entity;
 a summary of the works or goods sought;
 address for bidding documents, further information and submission of bids;
 cost of bidding documents;
 procedural requirements;
 final date for submission of bids."

Article 11 of the Procurement Law provides, "Tender documents must be complete and precise, contain information on goods, works and services, including technical specifications, place of delivery, time, bidding conditions and terms of contract, as well as the standards applied the evaluation of bids for proper acknowledgment by bidders." Furthermore, Article 4(2)(1) of the Procurement Regulation provides, "Bidding documents must be prepared in such a way as to enable bidders to prepare complete and responsive bids. They must contain all the information necessary to enable a bidder to make an informed decision as to whether or not to participate in the procurement procedure. They must be written in terms which are clear and precise."

Provisions in the Procurement Law and Regulation such as Article 15 of the latter are too broad and don't refer to a financial model for the project as much as to financial capabilities of the bidders themselves.

Article 11(5) of the Procurement Law provides, "The examination and evaluation of bids is carried out according to the criteria and conditions stipulated in the bidding documents. The evaluation of bids must indicate the proposals of all bidders and the reasons for award of contract and is submitted to the project executing agency for approval in according with the Article 36."
Article 15 of the Procurement Regulations further provides, "Bidders must all be afforded fair and equal treatment and must be admitted to the public bidding procedure or selected for the limited bidding, domestic price comparison, international comparison or direct contracting procedures on the basis of objective selection criteria. For these reasons, bidders may be excluded from these procedures only where they fail to satisfy one or more of the selection criteria chosen by the procuring entity."

Article 15(2) of the Procurement Regulation provides, "Reasons for exclusion must be given in writing to any bidder excluded from a procurement procedure." Article 4 of the Procurement Regulation provides, "(i) Award of contract: The contract shall be awarded to the bidder which submits the lowest evaluated bid and the successful bidder shall be notified forthwith. The unsuccessful bidders shall be notified within 7 days of the decision of the procuring entity and the successful bidder to proceed with the contract. The procurement committee shall prepare a record of the reasons for its decision."

Article 15(2) of the Procurement Regulation provides, "Reasons for exclusion must be given in writing to any bidder excluded from a procurement procedure." Article 4 of the Procurement Regulation provides, "(i) Award of contract: The contract shall be awarded to the bidder which submits the lowest evaluated bid and the successful bidder shall be notified forthwith. The unsuccessful bidders shall be notified within 7 days of the decision of the procuring entity and the successful bidder to proceed with the contract. The procurement committee shall prepare a record of the reasons for its decision."

Article 25 of the Procurement Regulation provides that contracts shall contain, "the conditions for the variation of the contract and early termination; these may
include:
-details of the circumstances under which adjustments may be made to terms and conditions of the contract, notably the contract price, and the mechanism for adjustment;"

Article 25 of the Procurement Regulation provides that contracts shall contain, "the conditions for the variation of the contract and early termination; these may
include:
-details of the circumstances under which adjustments may be made to terms and conditions of the contract, notably the contract price, and the mechanism for adjustment;"

Article 25 of the Procurement Regulation provides that contracts shall contain, "the conditions for the variation of the contract and early termination; these may
include:
-details of the circumstances under which adjustments may be made to terms and conditions of the contract, notably the contract price, and the mechanism for adjustment;
-a force majeure clause which provides that the failure on the part of the parties to fulfil their contractual obligations will not be considered to be a breach of contract if such a failure is due to unforeseeable events outside the control of the parties; such a clause should set out the consequences of such an event;"

Article 93 of the Investments Law provides,
"Investment dispute resolution related to investment can be carried out through the following forms:
1. Amicably negotiation;
2. Administrative dispute resolution;
3. Dispute resolution by the Office for Economic Dispute Resolution in the Lao PDR or international organization to which Lao PDR is a party;
4. Filing of a claim or litigation to the domestic court or an international court to which Lao PDR is a party."
Moreover, Article 25(f) of the Procurement Regulation provides that the contract shall include, "the mechanisms for dispute resolution intended to regulate events following the breach of a contract by one of the parties; this will include:
 the language of construction and interpretation of the contract; where more than one language is used, reference must be made to the language version which takes precedence;
 the governing law and forum of dispute resolution; the governing law will be the law of the Lao PDR and the forum may be the courts of the Lao PDR, the Office of Arbitration of the Lao PDR or any other recognized mediation
or arbitration authority designated by the parties by common agreement;
 a clause requiring the parties to attempt to reach an amicable settlement before turning to the courts or other tribunals."
And according to Decree No. 44/PO on the Promulgation of the Law on Resolution of Economic Disputes (Economic Disputes Law), Article 3, provides, "Economic disputes shall be resolved by amicable settlement between
the parties to the dispute, mediation [or] by arbitration. Resolution of economic disputes shall be handled in compliance with this law, other laws and regulations of the Lao PDR and rules for the resolution of economic disputes selected by the parties to the dispute in accordance with agreements and treaties which the Lao PDR has signed or is a party to." And Article 4 sets out the conditions for such dispute resolution by providing that, "The resolution of a dispute must be conducted according to the
following conditions:
• The [dispute] shall be an economic dispute;
• The [submission of the dispute for resolution] shall be agreed upon by the parties;
• The economic dispute shall not be a dispute on which the people's court is in the process of adjudicating or has already issued a final judgment;2
• The resolution of the economic dispute shall be consistent with the actual situation, [and] shall not violate rules relating to the resolution of economic disputes, [or] laws and regulations pertaining to stability, peace and social order."

Article 93 of the Investments Law provides,
"Investment dispute resolution related to investment can be carried out through the following forms:
1. Amicably negotiation;
2. Administrative dispute resolution;
3. Dispute resolution by the Office for Economic Dispute Resolution in the Lao PDR or international organization to which Lao PDR is a party;
4. Filing of a claim or litigation to the domestic court or an international court to which Lao PDR is a party."
Moreover, Article 25(f) of the Procurement Regulation provides that the contract shall include, "the mechanisms for dispute resolution intended to regulate events following the breach of a contract by one of the parties; this will include:
 the language of construction and interpretation of the contract; where more than one language is used, reference must be made to the language version which takes precedence;
 the governing law and forum of dispute resolution; the governing law will be the law of the Lao PDR and the forum may be the courts of the Lao PDR, the Office of Arbitration of the Lao PDR or any other recognized mediation
or arbitration authority designated by the parties by common agreement;
 a clause requiring the parties to attempt to reach an amicable settlement before turning to the courts or other tribunals."
And according to the Economic Disputes Law, Article 3, provides, "Economic disputes shall be resolved by amicable settlement between
the parties to the dispute, mediation [or] by arbitration. Resolution of economic disputes shall be handled in compliance with this law, other laws and regulations of the Lao PDR and rules for the resolution of economic disputes selected by the parties to the dispute in accordance with agreements and treaties which the Lao PDR has signed or is a party to." And Article 4 sets out the conditions for such dispute resolution by providing that, "The resolution of a dispute must be conducted according to the
following conditions:
• The [dispute] shall be an economic dispute;
• The [submission of the dispute for resolution] shall be agreed upon by the parties;
• The economic dispute shall not be a dispute on which the people's court is in the process of adjudicating or has already issued a final judgment;2
• The resolution of the economic dispute shall be consistent with the actual situation, [and] shall not violate rules relating to the resolution of economic disputes, [or] laws and regulations pertaining to stability, peace and social order."

Article 38 of the Economic Disputes Law provides, "The parties have the obligation to implement the results of economic dispute resolution within fifteen days from the date the decision15 was issued or from the date the parties became aware of the arbitral award in the event that the parties were not present at the arbitration." Article 40 further provides certain procedures for such, "Upon receipt of the parties’ request, the people's court must issue a final judgment not later than thirty days from the date of receipt of the request. The court will only verify whether the dispute resolution procedure was in compliance with existing regulations on economic dispute resolution and verify compliance with laws and regulations pertaining to stability, peace and social order. If the verification confirms compliance, the people's court will confirm [the decision18], which will then become enforceable. The parties do not have the right to appeal unless the confirmation of the people's court was a confirmation of a wrong settlement or the confirmation by the people’s court is inconsistent with the settlement agreement between the parties or the arbitral award.
In the event that the people's court finds that the result of economic dispute resolution has violated the laws and regulations stipulated in the above paragraph, the court will not confirm the resolution. The parties have the right to request the OEDR or UEDR to re-examine the dispute or to file a claim in the people’s court for adjudication."

Article 41 of the Economic Disputes Law provides that for Enforcement of Arbitral Awards of Foreign or International Economic Dispute Resolution Organisations Upon receipt of an arbitral award of a foreign or international economic dispute resolution organisation, the OEDR must examine [such
award]. If it is found that the arbitral award is within the scope of the rights and duties of the Lao PDR as a party to international treaties relating to economic dispute resolution and such award is consistent with the laws of the Lao PDR, the OEDR shall call on the parties to guide implementation.
In the event that [one of] the parties does not implement [the award], the OEDR must inform the other party. The party which is in a disadvantaged situation has the right to request the people’s court of the Lao PDR to issue a final judgment to ensure that the arbitral award is enforced.
If it is found that the arbitral award of the foreign or international economic dispute resolution organisation conflicts with the laws of the Lao PDR, the OEDR shall reject and return the arbitral award together with the reasons [for rejection] to such organisation."
Moreover, Lao is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) since June 17, 1998.

Article 87 of the Investments Law broadly provides, "The investment will be terminated in the following cases:
1. based on request of the investor or any of contracting parties in case the other party has breached the commitment as set out in a contract or laws and regulations;
2. failure of corrective action as required under Article 86 second paragraph of this Law;
3. Non-payment of tax, duty and other financial obligations as required by relevant laws and regulations;
4. final court’s decision terminating the investment;
5. bankruptcy as per the law; Termination of an investment shall not release its investor from his/her obligations and liabilities owed to individuals, entities and State."