Procuring Infrastructure Public-Private Partnerships

The Malaysian government has been encouraging PPPs actively since 1991. The PPP scheme were officially unveiled under the 9th Malaysia Plan in 2006 whereby the government decided to streamline privatization by adopting new approaches such as PPP/PFI model and mechanisms. The Tenth Malaysian Plan (2011-2015) further enhances the objective of PPPs.
Malaysia does not have specific PPP law. However, the Financial Procedure Act 1957 provides for the general control and management of the public finances in Malaysia. The Act was amended in 1972 to empower the Minister of Finance to manage, control, supervise and direct all financial matters involving the federal government. Although, the Act does not provide specifically for PPPs, the Act is still relevant as it regulates public purchase and acquisition. Treasury Instructions, Treasury Circulars and Federal Circular Letters issued by the Ministry of Finance further contain provisions that regulate government procurement.
To maintain check and balance in the procuring process, projects proposals are assessed and evaluated by the Project Steering Committee i.e. through the PPP Committee and the Highest PPP Committee. It is then tabled to the Cabinet for a collective decision. In addition to the above, PPPs in Malaysia are also governed by the national policies on PPPs, including the privatization masterplan. These national policies set out guidelines for the regulation of PPPs. In view of the fact that these national policies are not act of parliament, it is not binding. Nevertheless, these policies guide PPPs and to be followed when procuring PPPs.
Apart from the above, UKAS as the central agency in coordinating PPP in the country has also developed several Guidelines pertaining to PPP and privatization. These Guidelines further detail out the objective of the policy, methods of PPP and privatization, as well as the implementation mechanism.

PPP procuring authorities involve all governmental levels from Federal Government (ministries/agencies) to state governments as well as local governments depending on the project, in which their roles are conducted according to their respective authority or responsibility

Public Private Partnership Unit, Prime Minister's Department http://www.ukas.gov.my
When the privatization policy was launched in 1983, a Privatization Section (initially known as the Privatization Special Task Force) was established and was put under the Economic Planning Unit of the Prime Minister's Department. In 2009, after the official introduction of PPP under the 9th Malaysia Plan, the Privatization and Private Finance Initiative Unit was established which is now referred to as the Public-Private Partnership Unit ("3PU"), a government agency within the Prime Minister's Department, otherwise known as the Unit Kerjasama Awam Swasta ("UKAS").
JKAS, which is a committee established by UKAS, has central decision making powers on policy matters for proposed PPP projects. Before launching the procurement, the evaluation of the PPP projects is undertaken by the JKAS members consisting of (i) the Director General of UKAS, (ii) the Director or Principal Assistant Director of the Secretariat Subsection, Project Monitoring and Secretariat Section of UKAS, (iii) Attorney-General, (iv) representatives from the Economic Planning Unit of the Prime Minister’s Department, (v) representative from the Investment, MKD (MKD refers to the Ministry of Finance Incorporated, a corporate body under the Ministry of Finance which has the authority to enter into contracts, acquisitions, purchases, possessions, holdings and maintains tangible and intangible assets) and Privatization Division of the Ministry of Finance, (vi) Deputy Director General (Policy) of UKAS and (vii) Deputy Director General (Development) of UKAS. Meetings are also attended by representatives from key agencies/divisions, which include the Budget Management Division of the Ministry of Finance, Government Procurement Division of the Ministry of Finance Malaysia, Department of Lands & Minerals, Department of Valuation and Property Services and the Director of Technical Section of UKAS, Implementing Ministry/Agency and Specialist Officer of UKAS. (according to UKAS official website)

According to UKAS official website, its main functions are as follows: As a central agency, the main functions of UKAS, JPM is as follows:
1. To formulate policies and strategies for public-private partnership;
2. To plan, implement, coordinate, monitor and evaluate public-private partnership initiative (PPP) and the development of the corridor and corridor development and managing the provision of the Facilitation Fund (Facilitation Fund);
3. To examine and evaluate the technical and financial proposals of PPP projects with the assistance of relevant agencies;
4. Prepare and improve and update the Guidelines PPP procedures from time to time;
5. Negotiate terms and conditions of the concession agreement with the assistance of the Attorney General and the relevant agencies;
6. Carry out continuous research and improvement of PPP programs;
7. To engage in strategic cooperation with relevant agencies abroad;
8. To provide advice to government agencies and the public and to promote PPP program; and
9. Being a Secretary to the Government projects to be implemented in five regional corridors of the East Coast Economic Region (ECER), Iskandar Malaysia (IM), Sarawak Corridor of Renewable Energy (SCORE), Sabah Development Corridor (SDC) and the Northern Corridor Economic Region (ECER)

Section 4.0 of the Public Private Partnership Guidelines published by the Prime Minster Department’s Public-Private Partnership Unit (UKAS) ('PPP Guidelines') provides that the Ministry of Finance or Central Budgetary Authority shall approve the PPP project before launching the procurement process.
Section 13 of the Financial Procedure Act 1957 (“1957 Act”) provides that the Minister responsible for finance must authorize any project which utilizes public funds: (2) "The Minister or the Menteri Besar or Chief Minister, as the case may be, shall by warrant under his hand authorize the issue from the Consolidated Fund of such sums as may be required to meet the cost of any service charged upon the Consolidated Fund." “Menteri Besar or Chief Minister” in relation to the Consolidated Fund or estimates of a State means— (a) in the case of Sabah, the Minister responsible for finance in the State; and (b) in the case of the other States, the Menteri Besar or Chief Minister of the State and includes the State financial authority of the State, acting in accordance with any directions given to him by the Menteri Besar or Chief Minister (Section 3 of 1957 Act)

The third and seventh step the process Flow of PPP Projects is consideration and evaluation of PPP proposal and submission to Cabinet for approval (PPP Guidelines, p. 11)

The approval from the Cabinet for the selection of the private operator is required before negotiations with the selected private operator (PPP Guidelines, Section 4.0 pg. 11).

Prioritization is not regulated and is generally based on the policies and priorities determined and set by the Government from time to time.

A PPP proposal will only be considered if there is a need on the part of the Government for the project after taking into account the benefits/probity as a whole in terms of, inter-alia: i. socio-economic impacts (PPP guidelines, 2.1).
PPP Guidelines, Sections 3.1: All PPP proposals should be submitted directly to the relevant Ministries/agencies. The typical information required for submission of PPP proposals should include (...) results of economic, financial and engineering feasibility studies, including SCBA (socio-economic cost benefit analysis)

Contributors did not confirm that cost-benefit analysis of the socio-economic impact of PPP projects is always done in practice.

PPP Guidelines, Sections 3.1: All PPP proposals should be submitted directly to the relevant Ministries/agencies. The typical information required for submission of PPP proposals should include, inter alia, risk matrix. (...)

Section 2.1 of the PPP Guidelines is related to principles in Adopting PPP Approach : A PPP proposal will only be considered if there is a need on the part of the Government for the project after taking into account the benefits/probity as a whole in terms of, inter-alia: ii. value for money and cost savings to the Government.
Section 3.1 contains Typical Information Required for PPP Proposals, including: The PPP modality options and the preferred option, concession period, risk analysis and allocation and financing scheme

Section 2.1 of the PPP Guidelines is related to principles in Adopting PPP Approach : A PPP proposal will only be considered if there is a need on the part of the Government for the project after taking into account the benefits/probity as a whole in terms of, inter-alia: ii. value for money and cost savings to the Government. According to section 2.2 of the PPP Guidelines, the main driver of the PPP Program is Value for Money (VfM), defined as 'the optimal combination of whole life cost and quality to meet the users' requirements'. Generally, VfM is achieved through:
- risk transfer which allocates risks optimally between the public and private sectors ;
- long term nature of contracts (which embodies whole life costing) ;
- the use of output specification which allows bidders to innovate ;
- competition that provides fair value of the project ;
- performance-based payment mechanism ;
- private sector management expertise and skills.

PPP Guidelines, Sections 3.1: All PPP proposals should be submitted directly to the relevant Ministries/agencies. The typical information required for submission of PPP proposals should include, inter alia, the justification for the proposal, business and financial plans, evidence of financial stability and capability, proposed payment mechanism and risk matrix. (...) Typical Information Required for PPP Proposals includes, interalia: (...) An evidence of financial stability and statement of financial capability, including access to capital (debt and equity), and Letters of Support from potential lenders (...)

Section 34A(2) "Environmental Quality, Prescribed Activities" of the Environmental Quality Act 1974 (“1974 Act”) provides that environment impact assessments are to be conducted for any activity which "may have a significant environmental impact" and submitted to the appointed Director General of Environmental Quality. Therefore, environmental assessment report is a pre-requisite for a procurement of all major infrastructure projects, including PPP projects.

PPP Committee (JKAS) terms and conditions
Financial sub-committee : 7.2 JKK members
(A) Chairman: Section Director (project negotiation supervisor), UKAS, JPM
(B) Secretary: Section Principal Assistant Director or Assistant Director (desk officer to the project negotiation), UKAS, JPM
(C) Permanent Members: Ministry of Finance Malaysia; Economic Planning Unit, Prime Minister's Department; UKAS Specialist Officer, related JPM
(D) Invited Members: Implementing Ministry / Agency

Technical aspects : 8.2 JKT Members
(A) Chairman: Director, Deputy Director of the Technical Section, UKAS, JPM
(B) Secretary: Principal Assistant Director Assistant Director of Technical Section, UKAS, JPM
(C) Permanent Members: Economic Planning Unit, Prime Minister's Department Public Works Department or Malaysia Administrative Modernization and Management Planning Unit (MAMPU) - depending on the type of project Specialist Officer UKAS, related JPM
(D) Invited Members: Implementing Ministry / Agency

The majority of our contributors confirm that prequalification/shortlisting criteria are specified in the tender documents and available to all bidders.

If it is a public procurement by tendering, the procuring authorities will invariably treat all tenderers equally and make available the same information to all tenderers.

Typically, results of pre-bidding conference are published but the contents of the pre-bidding conference are not published.

As stated in the PPP Guidelines Para 3.1 Box 2:
Typical Information Required for PPP Proposals
- A business plan, including: partnership structure; duration of the proposed partnership; ownership (present and future); terms of payment; maintenance costs; reserves that need to be kept by the private partner; risk management, including that of force majeure; risk transfer from the government to the private sector partner; economic benefits to the government.
- A financial plan, including: detailed cost schedule; financial structure; potential partner's sources of funding; how improvements, upgrades and modifications will be financed; pro forma financial statements (include in the submission a softcopy of the financial models)

Pursuant to section 3.4 of the PPP guidelines : The relevant Ministries are responsible for the contract management and performance monitoring

Guidelines on Concessionaire Shareholders Changes : 1. Purpose of the Guidelines is to:
i. standardize the application process conversion of shareholdings concessionaires;
ii. detailing the factors and elements that need to be considered in the process of changing the shareholding;
iii. a reference in implementing the change holdings shares; and
iv. improve the efficiency and transparency of the process of change holdings share.

As per Guidelines on Concessionaire Shareholders Changes
Para 8: Companies must comply with the criteria and eligibility requirements as follows:
Para 8.1
No change in shareholding during the moratorium period unless for the purpose of listing on Bursa Malaysia;
Para 8.2
Moratorium period for the services sector is a minimum of 2 years while the construction sector was 3 years or more depending on the construction period of the project;

As per Guidelines on Concessionaire Shareholders Changes
Para 8: Companies must comply with the criteria and eligibility requirements as follows:
Para 8.1
No change in shareholding during the moratorium period unless for the purpose of listing on Bursa Malaysia;
Para 8.2
Moratorium period for the services sector is a minimum of 2 years while the construction sector was 3 years or more depending on the construction period of the project;

Arbitration Act 2005, Article 3: (1) This Act shall apply throughout Malaysia - in respect of a domestic arbitration, where the seat of arbitration is in Malaysia (...) and in respect of an international arbitration, where the seat of arbitration is in Malaysia (..). Recognition and enforcement of award is regulated by Article 38 of the said Arbitration Act 2005.

There is no specific regulation as to unsolicited proposals. Section 3.0 of the PPP Guidelines applies to both solicited and unsolicited proposals, but does not explicitly state so. Unsolicited proposals which are submitted will be processed by the relevant ministries and will be proposed to the JKAS for deliberation. In situation where there is a need to evaluate unsolicited proposals, the evaluation process is done based on Treasury Instructions, Treasury Circulars and Federal Circular Letters as well as UKAS’ Standard Operating Procedures (SOPs) and PPP Guidelines.