Legal impediments to private participation in Public-Private Partnership in Cameroon. By Cyrille Mbolo, Legal Consultant

Cameroon lacks basic infrastructures, and has adopted Public-Private Partnership as a mean to tackle the infrastructure gap issue, since the public budget and skills solely can not   curb the infrastructure problem. In order to create a favorable climate for  PPPs, laws have been enacted, institutions have been created and put in place, and meetings have been organized to promote PPPs. In spite of all these initiatives, PPP projects have not known the awaited infatuation from the investors. One of the reasons of this shyness, in my opinion, is the legal framework, which though good needs to be improved. These necessary improvements relate to the procurement issue, the ambiguity concerning unsolicited proposals, the risk transfer issue, the inconsistency of the Section 6 of the Decree n°2008/0115/PM of the 24th January 2008 precising the enforcement clauses of Law n° 2006/012 of the 29th December 2006 fixing the general regulations of partnership Contracts, and the limited role of the Ministry in charge of Finance.  Concerning the procurement process in Cameroon, we will deal with projects initiated by the public entity on one hand, and unsolicited proposals on the other hand. According to  Section 13 of Decree n°2008/0115/PM of the 24th January 2008 precising the enforcement clauses of Law n° 2006/012 of the 29th December 2006 fixing the general regulations of partnership Contracts, the stages of the procurement are as follow: A public tender with the manifestation of interest; a restricted tender; the presentation; a dialogue of pre-qualification; the adjudication; the notification of results; the signing of the contract. The approach which consists on prequalifying bidders seems the best one as far as we are concerned, as it avoids spending time and resources examining all the propositions, and permits to concentrate on the offers submitted by the  best bidders who meet the financial and technical threshold to deliver the project. However, we think that the adoption of a competitive dialogue ended by a post bid negotiation between the public entity and the preferred bidder undermines competition, does not guarantee fairness, and is not transparent.   Relating to competition, the aim of the procurement stage is to create a competitive tension between bidders, so that each bidder could propose the better offer, at the better terms. This objective could hardly be attained, if one bidder could have the opportunity to negotiate the terms of the contract with the public entity directly, out of any competition, because “Without any competitive tension between bidders, the Preferred Bidder effectively becomes a monopoly supplier (even if theoretically the Public Authority could go back to the other bidders this is seldom workable in practice, not least because the losing bidding team will have been redeployed elsewhere by their employers)”[fusion_builder_container hundred_percent="yes" overflow="visible"][fusion_builder_row][fusion_builder_column type="1_1" background_position="left top" background_color="" border_size="" border_color="" border_style="solid" spacing="yes" background_image="" background_repeat="no-repeat" padding="" margin_top="0px" margin_bottom="0px" class="" id="" animation_type="" animation_speed="0.3" animation_direction="left" hide_on_mobile="no" center_content="no" min_height="none"][2]. So every bidder will do whatever he can to reach the direct negotiation stage, by proposing the ideal offer that will eliminate his competitors (deal creep) at the competitive dialogue stage, then at the stage of the direct negotiation with the public entity, he will be free to review his initial offer, or let his lenders impose their terms to the public entity, or the private partner could accept the contract proposed by the public entity, with the intention to renegotiate it during the operational phase at its advantage[3]. Relating to fairness, all bidders should be treated equally, and then have the same duties and rights, particularly in countries like Cameroon where PPP is in its early stages. It is not normal to treat the bidder considered as preferred, differently from the others, because they are all bidders until the adjudication of the project. This is not only a moral concern, but also a practical one, as it could raise opportunistic behaviors as seen above. Moreover, with a differential treatment the public entity puts itself in an uneasy situation, as it is somewhat compelled to sign the contract with the preferred bidder, as it could not have recourse to the other bidders who have probably redeployed their  teams elsewhere as Yescombe says, and the recourse to the reserved bidders does not guarantee behaviors different from the previous one. What is more, the public entity could not afford to cancel the project or the negotiations with the preferred bidder because of political credibility concerns, and the time and resources already spent. Relating to transparency, the direct negotiation procedure is not transparent, because the direct negotiation between the preferred bidder and the public entity is made behind closed doors, and no one knows what is really discussed, what could create opacity and cause ungrounded or grounded fantasies, what will render the final contract dubious and incite legal challenges from losing bidders[4]. The dialogue of prequalification could cause leaks and also be an opportunity for corruption, indeed if the dialogue continues after the bidders have presented their bids. Finally, the competitive dialogue and direct negotiation procedures  do not fit to the Cameroonian context, as they are complex, lengthen the procurement phase delay the financial close,  increase the cost of the project, and there is a risk that the project will no longer be Value for Money (as the scope of the project and the risk transfer could have been modified during direct negotiation).   In order to promote competition, fairness, and transparency,  Cameroon could resort to the restricted procedure, where after the prequalifying phase, all the prequalified bidders could interact with the public entity discussing the technical, the financial, and the legal specifications of the project, the requirements of  the bid, and the tender documents are issued. Clarifications accessible to all bidders are made after the issuance of the tender documents, and interactions are stopped once the bids are presented. The bids are evaluated, the winning bidder is declared, and the PPP contract is signed on the basis set out in the bid. This procedure is quick, lower-cost, transparent, competitive and preserves fairness, then reassuring potential bidders. Some African countries like Sierra Leone[5] have adopted this procedure. Cameroon should also allow variant bids, to foster private sector innovation once a bid competition is launched.   Concerning unsolicited proposals, the Cameroonian PPP law states in Section 5 (2) of the Decree of 2008 that the private operator concerned can benefit from an advantage within the framework of public tender to competition for the selection of a partner to the public entity. This statement is good, as it encourages unsolicited proposals, but it could be improved if it was clearer. The  likelihood concerning the benefit of an advantage contains an ambiguity, because the private operator who proposes the project is not certain on whether or not he will benefit from an advantage, and is also ignorant concerning the nature of that advantage.  Cameroon should clearly state whether or not the private operator who initiates a PPP project will benefit from an advantage, and what the nature of this advantage is, to really stimulate unsolicited proposals. Many countries are clear about the advantages of the private operator initiator, for example South Africa gives him an automatic access to the Best and Final offer stage, in Indonesia the government or the winning bidder pays him a developer’s fee, in Chile he receives a bid bonus, and several states in India use the Swiss challenge approach[6] Senegal gives a compensation[7].   Relating to the role of the Ministry of Finance, according to sections 7 and 8 of the Decree n° 2008/0115/PM of the 24th January 2008 precising the enforcement clauses of Law n° 2006/012 of the 29th December 2006 fixing the general regulations of Partnership Contracts, the Minister in charge of finance advices the public contractor initiator on the budgetary sustainability of the project. This role of the Minister in charge of finance is threefold limited: first, the role of the Minister in charge of finance should not only be an affordability one; secondly, its role should not be limited to an initial approval of the PPP project and thirdly, the Minister in charge of finance could play a more active role in the financing of PPP projects. The affordability role assigned to the Minister in charge of finance is important, but its skills, its expertise are also very important for the assessment of the financial implications of the PPP project, notably the vfm assessment, and the assessment of contingent liabilities[8].  The Minister in charge of finance should assess the Vfm of the project, that is to assess whether the PPP project is cost-benefit justified, and the least cost way of achieving benefits compared to public procurement.[9] Concerning the affordability assessment of the project, contingent liabilities should be scrutinized by the Minister in charge of finance, because of advantages given to the private partner through the Law n° 2008/009 of the 16th July 2008 stating the accounting, financial and tax system applicable to partnership Contracts, and direct commitments of the public entity that could have severe indirect impacts on the public budget[10]. Moreover, if the public contractor initiator has the sufficient financing to deliver the project, in practice it could not recourse to the Ministry in charge of finance, and it could undertake the PPP project, increasing the risk of implicit guarantees.[11] It is advisable that the Minister in charge of finance technically supports public entities, even if they have sufficient money to finance the PPP project. What is more, the Ministry of finance could implement a contingent liability management process,[12]  Contingent liabilities funds could be created,[13] and the budgeting of the public commitments stated in section 17 of  the Law n° 2008/009 of the 16th July 2008 stating the accounting, financial and tax system applicable to partnership Contracts should include contingent liabilities for a realistic budgeting. Secondly, adopting the procurement process chosen by Cameroon, the role of the Minister in charge of finance should not be limited to an initial approval. At the initial approval stage, the business case forecasts the cost of the project, but a more realistic cost will appear during the procurement process, and the selection of the partner. So the contract structure and the project’s cost could finally be very different from what the public entity though at the beginning of the process.  It is thus advisable that after the initial advice of the Minister in charge of finance, a final approval be given after the signing of the contract between the preferred bidder and the public entity. This final approval permits that the Minister in charge of finance assesses whether the contract structure is still value for money and affordable (concerning direct liabilities and contingent liabilities). Finally, the Minister in charge of finance could play a more active role in the financing of PPP projects. According to section 8 of the Decree n° 2008/0115/PM of the 24th January 2008 precising the enforcement clauses of Law n° 2006/012 of the 29th December 2006 fixing the general regulations of Partnership Contracts, the Ministry in charge of finance advices on the budgetary sustainability of the project. Considering that  the obligation of the public entity initiating a PPP project to pay  project preparation expert costs to the Support Council for the Realization of Partnership Contracts ranging from 20.000 000 FCFA to 100.000 000 FCFA according to Section 4 of Order No. 186/CAB/PM of 15 November 2011 to fix the rates and conditions for the collection of fees payable for partnership contracts, is burdensome compared to traditional procurement, the Minister in charge of finance could  create a unit that assist these public entities in project preparation and transaction costs, for example by financing project preparation expert costs, as  the Project Development Facility (PDF) does  in South Africa.   One of the main advantages of the PPP is the risk transfer, which permits to transfer risks to the entity best able to manage it, at the lowest cost. The transfer of risk also allows a single point of responsibilities avoiding finger pointing between partners, when the project does not evolve as planned. Cameroon has chosen the possibility to share the design risk with the private operator (Section 13 of the Law n° 2006/012 of the 29th December 2006 stating general regulations of partnership Contracts), thus sharing the conception, construction, operational and performance risk,[14] because the private operator could easily attribute the failure of the project to a misconception, and ask for a compensation, increasing contingent liabilities. If Cameroon could have taken the political risk, and even guarantee some commercial risks, it was not advisable to take a technical risk, which should be transferred to the private operator and his subcontractors to avoid finger pointing and opportunistic behaviors.   According to Section 6 of the Decree of 2008, the feasibility file should comprise the list of potential qualified partners. This section is interesting  as it provides for an assessment of the market before the launching of the PPP project, but the requirement of a list of potential qualified partners at this stage is either inopportune, either not well formulated in my opinion, as it limits access to the market. The establishment of a list of potential qualified partners seems premature to us at this stage, because the public entity at this stage only knows the need of the project, its  urgency and complexity,  and the output that will help to fulfill that need. It does not know the details of the project, that is why he has recourse to PPP in order that the prequalified bidders show him the best technical, financial or legal means to fulfill that need. So the public entity, not having the details of the project at this stage could hardly evaluate the quality or capacity of potential partners. Even if the public entity could establish a list of potential qualified partners based on the track record of some private operators, the establishment of such a list could undermine the success of the Cameroonian PPP program, as it informs potential bidders that a list of potential qualified partners is already made before the launching of the prequalification procedure. So it could deter potential bidders, who do not know whether or not they are considered as potentially qualified and have the privilege to be on the list, or potentially disqualified partners that are perhaps on a blacklist, or unknown partners listed nowhere, with little chance to win the bidding before those considered a priori by the public entity as potentially qualified partners. This list at this stage is unfair and gives the feeling that the procurement phase is launched, while the public entity has prejudgments on bidders, who is qualified and who is less qualified, and this prejudgment will certainly influence the adjudication of the contract. Moreover, it could foster the private operators to do all they can to be on the list of the potential qualified partners, even through corruption. I understand that the aim of this section is not to be unfair or foster corruption, even if these are the consequences that its formulation could cause. The drafters’ intention was certainly to assess the potential appetite of the market for the project. So the formulation as far as we are concerned, that could have clearly expressed this intention is “the establishment of the list of potential interested partners”, not “potential qualified partners”, because their qualification will be assessed later, at the prequalification stage. Finally, Cameroon could reduce the number of ministries, to improve coordination, and improve the fight against corruption.   M. MBOLO Cyrille is Consultant at AHEAD - LEGAL ADVISORY  

[2]Yescombe, E. R. (2013) Public-Private Partnerships: Principles of Policy and Finance, 2nd

edition, Elsevier Science, Oxford, p 83

[3] Guasch, José Luis (2004) Granting and Renegotiating Infrastructure Concessions: Doing it

Right, World Bank, Washington, D.C.

[4] That is probably why Senegal did not authorize this procedure in its PPP law of 1st March 2004

[5] Sierra Leone PPP Act 2010 (Sections 45 to 59)

[6] See PPP Reference guide, 2014, p198

[7] See PPP law of 1st March 2004 (section 18)

[8] Polackova, Hana (1998) Government Contingent Liabilities: A Hidden Risk to Fiscal Stability,

World Bank

[9] PPP Reference guide, op cit

[10] See the case of Incheon road airport project  in South Korea or  National Air Traffic Service (NATS) in UK in 2011

[11] See PPIAF

[12] As Colombia did:Colombia , Ministerio de Hacienda y Crédito Público (2005) Pasivos Contingentes, Bogotá ; See also Cebotari, Aliona (2008) Contingent Liabilities: Issues and Practice, International Monetary

Fund, Washington, D.C.

[13] As Colombia with the Government Entities Contingent liabilities Fund, the State of Sao Paulo in Brazil with Companhia Paulista de Parcerias (CPP), Indonesia with the Indonesia Infrastructure Guarantee Fund (IIGF) and South Korea with the Infrastructure Credit Guarantee Fund (ICGF)

[14] See Jeffrey Delmon, Partenariats Public-Privé dans le secteur des infrastructures, World Bank 2010, p 69-71

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