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New Regulation Enables Private Initiative PPPs

September 10, 2009

The Colombian government issued long awaited regulations to enable private initiative Public Private Partnerships, or PPPs, according to a recent report by Bogota lawyers Jorge Di Terlizzi jditerlizzi@prietocarrizosa.com, Partner and César Barrero Berardinelli cesar.barrero@prietocarrizosa.com, Associate, of the firm of Prieto & Carrizosa.  They say that the new regulations “pav[e] the way for new business opportunities in infrastructure development.”

Decree Number 4533 of 2008 sets forth what they describe as an “expeditious process” for private initiatives for the design, construction, maintenance, and operation of public works under concession agreements.  The process covers how such initiatives are submitted, evaluated, and eventually awarded by governmental authorities.

In what seems a practical approach, the decree  (i)  acknowledges that private initiative based infrastructure projects may need governmental support, thereby allowing tendering parties to submit initiatives that include governmental budgetary allocations as part of the project’s financial model, and (ii) allows current concessionaires to structure private initiatives linking pre-existing concessions to the new project.”

Furthermore, the decree does not expressly limit the submission of private initiatives based projects to a single awarding governmental entity. This would seem to allow private initiatives to structure (i) infrastructure projects that involve more than one governmental entity (for example a roadway concession involving national and/or local authorities), and (ii) multimodal infrastructure projects that may or may not involve various awarding authorities (for example an airport and a roadway within a single concession agreement to allow financial feasibility, regardless of whether these are physically connected or not).

Besides the obvious intention to attract investment in infrastructure, the decree is aimed at speeding up the process by which these projects are structured and ultimately awarded, as it provides that all financial, technical and legal supporting information must be submitted when tendering a private initiative.

Once government has assessed a project’s overall feasibility, it may open a bidding process ruled by Colombian Government Procurement Law to award a concession agreement over such projects.

The decree finally provides that those parties that tendered private initiatives may participate in the respective bidding processes. Should the concession agreements be awarded to parties different from those having tendered the initiative, the decree provides that design and study expenses thereby incurred will be reimbursed to the party submitting the initiative.

Prieto & Carrizosa gladly welcomes the issuance of the decree, and is quite confident that it will give way to many new business opportunities in infrastructure in Colombia.

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