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Public service contract (DSP)
The public service contract (DSP) in France is defined by the Sapin law of 29 January 1993. It enables the concession grantor to involve a long-term public or private sector partner in an operation that includes all or part of a set of missions ranging from design-construction to operation-maintenance.
In this type of PPP, the remuneration of the public service provider is substantially pegged to the operation of the structure. Often, users pay to use the service or the infrastructure. As a result, the demand risk is primarily assumed by the public service provider. Investment subsidies may be provided to make the operation economically viable for the provider.
The public service contract can take a variety of forms. In France, the most widespread are:
- the concession contract, which comprises a substantial infrastructure construction or renovation phase followed by operation and maintenance
- the affermage (service concession) contract, which covers only the operation and maintenance phase.
- Despite this somewhat variable geometry in France and in throughout Europe, European law lumps all these contract forms together under the single term concessions.
In France, the public service contract holder is generally selected in a three-phase procedure:
- ITT (optional). Candidates respond to a pre-qualification report in which they list their experience in the relevant field and their financial data.
- detailed tender document issued by the public authority
- negotiation (optional). As a rule, this phase serves to decide between the two candidates short-listed in the second phase. Negotiation can involve all aspects of the contract – quantitative, qualitative and financial.
French partnership contracts patterned on the Private finance initiative (PFI)
These contracts were introduced in France by decree of 17 June 2004. These are contracts in which the public authority entrusts to a company or consortium an overall mission relating to the provision of an infrastructure and/or public service. The basic difference between a partnership contract and a public service contract is that in a partnership contract, remuneration is not substantially pegged to receipts from operations. Instead, the private sector operator receives a fixed fee from the public authority. These fees are, however, dependent on the operator’s compliance with performance criteria. Partnership contracts are therefore contracts subject to performance compliance. Furthermore, the private sector partner may propose additional receipts from operation of the structure or the facility. Therefore, although the private sector partner does not bear the risk and there is a contractually agreed fee, the private sector partner does bear the risks related to these ancillary receipts.
The partnership contract is an exception to public procurement law. During the preliminary assessment phase, the public authority must therefore justify the use of this type of contract on grounds of urgency, complexity, or enhanced economic efficiency compared to other types of public procurement contract (the third criterion was added by the French law of 28 July 2008).
The 2004 decree provides for the following partnership contract procedure:
- Preliminary assessment by the public authority with the assistance of an expert body
- Award of a partnership contract under a competitive dialogue, call for tender or negotiation procedure.
The public authority may ask the candidate having submitted the economically most advantageous bid to clarify aspects of the bid. When the amount of the contract to be carried out is less than the threshold set by decree, the public authority may resort to negotiations with publication of a notice of competitive tender.
In all cases, the selection of the candidates must be made on the basis of criteria set out in the notice of competitive tender.
The partnership contract may be used in many different sectors provided that complexity, urgency or economic efficiency can be demonstrated. PPPs may even be used for comprehensive contracts under which the user does not pay directly for the service (urban lighting, prison management, hospital complexes, etc.). The partnership contract also lends itself to projects for which financial profitability cannot be predicted but which provide substantial social and economic benefits, such as infrastructure projects aimed at opening up isolated regions.
The partnership contract model takes broad inspiration from the PFI (Private Finance Initiative) model that came into use in the United Kingdom in the 1990s.