The emerging framework for PPP projects in Ghana

By Kobina Hughes, Consultant, Fenwick Elliott

On 3 June 2011 the Government of Ghana adopted a national policy on public private partnerships (PPPs).  In March 2012, the World Bank approved support to Ghana’s PPP programme.  A key component of the World Bank programme was the enactment of a PPP law.  In June this year the World Bank undertook a mid-term review of Ghana’s PPP programme.  The Bank noted in the review that a PPP bill has been drafted and is being finalised.1

This article considers a number of points that arise from the draft bill, namely one or two observations on regulatory certainty, risk allocation and how standardisation may help with this and post-award monitoring, the governing law deeming provisions, and allowing for a “standstill period” on contract award.

Section 133(6) of the draft bill (Validity of PPP Agreements etc.) provides that any PPP project initiated after the commencement of the Act is to comply with the provisions of the Act.  Non-compliance could therefore render a transaction invalid and a key aspect of due diligence will therefore be to ensure that the transaction is Act-compliant.  This may not be a straightforward exercise.

First, under ss. 2(1) and 2(4), the Act is to apply to all public sector projects undertaken through any forms of partnership between the public and private sectors where there is a clear agreement on shared objectives for the provision of public infrastructure and services traditionally provided by the public sector, as a result of which the private sector party performs part or all of the government’s service delivery functions, and assumes the associated risks over a significant period of time.  There is clearly some room for debate in this definition as to whether or not a project is actually a PPP project.  Secondly, under s. 35, a project is not a qualifying PPP project unless it has been identified in one of a number of plans, those being the National Development Plan, the National Infrastructure Plan, the National Public Investment Plan, the District Development Plan, the national list of Strategic National Projects and a specific list of areas of investment identified by sector ministries.  Finally, under s. 37, a PPP must be registered as such by the public body in question and (under s. 38(2)) any step taken after registration that is not in compliance with the Act, including the award of the contract for the PPP project to a bidder, “shall not be valid and shall be of no effect”.

Stakeholders will therefore need to establish (1) that the project meets the definition in s. 2, (2) that the project is on one of the s. 35 lists, and (3) that the project has been duly registered under s. 38 before they can be confident that it will not at some stage be declared invalid.  It will be interesting to see whether the final draft manages to reduce the number of hurdles that stakeholders need to get over in the interests of regulatory certainty.

The draft bill contains a number of provisions relating to public procurement, local content and dispute resolution.  Whilst the desire to have everything in a framework PPP law in one place is understood, there is a risk that the Act may contain provisions that conflict with the provisions of existing laws or which are less stringent (such as the Public Procurement Act 2003 which is in any event currently under review, the Petroleum (Local Content and Local Participation) Regulations 2013 and other local content legislation that is already in the pipeline, and the Alternative Dispute Resolution Act 2010).

Section 3(3) of the draft bill provides that:

“To enhance the attainment of the objectives of this Act, every PPP arrangement shall have a clear table or metrics showing the allocation of risks to the party best able to control and manage the identified risks. 

Contracting Entities and approval authorities shall take the risk allocation arrangement and the result of any Value for Money assessment into account in considering the applicable PPP method for any PPP Project.”

It would aid the programme if fundamental principles of risk allocation were known at the outset of each project, instead of all risk allocation being reviewed afresh for each and every project, and a degree of standardisation would help with this.

The draft bill provides at s. 96 that the form of agreement to be used for each PPP Project shall be developed by the public body in question in collaboration with the responsible Division in the Ministry of Finance (and the office of the Attorney General), subject to guidance to be issued by the Minister of Finance from time to time on a range of matters, including the right of the private sector party to create security interests over the project assets, the right of the private sector party to assign rights under the PPP Agreement, compensation for specific changes in legislation and material changes, and takeover of the project by the public sector party.

Given that the government will probably not be providing direct funding to projects in most cases, the position on contingent mechanisms (guarantees of debt, exchange rates, the conversion of local currency, offtaker obligations and compensation on termination) could be made clear through standardisation.  Only one section of the draft bill, s. 99, is devoted to contract management.  Providing tools to ensure that quality standards and the pricing mechanism are being adhered to could also be dealt with through standardisation.  Under s. 5(3) of the Act, the functions of the Minister of Finance set out in the Act are to be performed by the Ministry’s Public Investment Division and the Division is currently leading on the development of standardised PPP documents and a PPP Manual/Guidelines for the effective management of PPP projects.  In addition to standardising project documents (and the fundamental risk allocation matrix), the Division could set out its position on the preferred EPC contract platform for the various sector PPPs.

Departures from the standard documentation ultimately developed could be established as the exception rather than the norm, adopting lessons learnt from practice elsewhere.  In the UK Building Schools for the Future programme for example, derogations from the standard form contracts were strongly discouraged and in the event that the stakeholders chose to make changes to the standard forms, a derogations table and business case justifying the changes were required to be submitted and the stakeholder seeking the changes was held responsible for all consequent legal costs.

Under s. 100 of the draft bill (Governing Law of PPP Agreements) the law of any PPP Agreement is to be the law of Ghana.  However, the parties are to have autonomy over the choice of law in respect of agreements relating to lending or financing for the PPP project.  Where the parties fail to exercise their autonomy over the choice of law relating to the financing Agreements, the laws of Ghana shall be deemed to be the applicable law to those Agreements as well.  Should these provisions become law, stakeholders will be well advised to ensure that the transaction documents (whether standard or otherwise) accurately reflect their intentions as regards the choice of law in all the documents.

Under Article 23 of the 1992 Constitution of the Republic of Ghana, administrative bodies are required to act fairly and reasonably and comply with the requirements imposed on them by law, and in the event that they fail to do so, an application for judicial review may be made to the High Court under Order 55 of the High Court (Civil Procedures) Rules 2004.  Recognised grounds for judicial review in Ghana include illegality, irrationality and procedural impropriety.  Under s. 3(13) of the draft bill, public bodies are required to engage in “adequate stakeholder consultation” (as may be prescribed in Regulations) when implementing PPP projects.  The statutory consultation requirements under the draft bill are to be welcomed.  If enacted these provisions may have an impact wider than the PPP programme itself and aid the development of breach of a legitimate expectation to consult as further grounds of judicial review in Ghana, based on principles akin to “the Gunning Principles”.2

Section 107(3) of the draft bill provides that a complaint about the award of a PPP contract cannot be lodged or entertained 21 days or more after approval of the award or if the PPP Agreement has been signed, whichever is earlier.  This provision is likely to encourage stakeholders to rush to sign the PPP Agreement immediately on deciding to make the award in order to avoid having to deal with complaints by aggrieved bidders.  One means of mitigating this risk would be to allow for a “standstill period”.  In the UK, Regulation 87 of the Public Contracts Regulations 2015 provides for a standstill period of between 10 and 15 days, during which “the contracting authority must not enter into the contract”, and under Regulation 99(5) an aggrieved party may seek a “declaration of ineffectiveness” from the courts where an award is purported to have been made in breach of the standstill requirement.

Given the high-value, long-term nature of PPP projects, one poorly structured project could severely rock confidence in the programme.  The final draft of the bill carries a huge burden and its publication (as well as publication of the standardised documentation being developed to accompany it) is eagerly awaited.

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• 1. A copy of the draft bill can be found on the Ministry of Finance website (click here Draft Ghana PPP Bill).
• 2. R v Brent London Borough Council, ex parte Gunning (1985)