Posted on September 27, 2023
Public procurement and PPP
Is the legislation governing procurement and PPP general or specific?
The legislation governing procurement in the Netherlands is based on European Directives 2014/23/EU, 2014/24/EU and 2014/25/EU, and was implemented in the Netherlands in the Public Procurement Act 2012 (amended 1 July 2016) and its delegated legislation and guidelines.
With regard to port development, some more specific rules based on Directive 2014/25/EU (special sectors) are applicable to port development procurement.
There is no comprehensive legislative framework for public–private partnerships (PPPs) in the Netherlands. PPP projects are usually tendered, making use of existing procurement legislation. Dutch PPP projects are typically governed by standardised design–build–finance–maintain(–operate) (DBFM(O)) contracts (version 5.0).
May the government or relevant port authority consider proposals for port privatisation/PPP other than as part of a formal tender?
There are no specific rules applicable to the privatisation of Dutch government entities. Privatisation of a port authority does not necessarily involve a formal tender. Assets previously owned by a local government may be transferred or leased in perpetuity to the newly formed independent port authority, but the government has retained a full ownership interest in the newly formed privatised port authority in Rotterdam.
Joint venture and concession criteria
What criteria are considered when awarding port concessions and port joint venture agreements?
In many tender procedures, the award criterion is the most economically advantageous tender. Commonly used sub-criteria for the award of a project are the price (net present value), the risk management plan and the value of certain risks listed in the tender guidelines (listed risks) accepted by the private party. The award of port concessions and port joint venture agreements is frequently decided by the relevant port authority or commissioning authority. For example, with regard to the project to reclaim land from the North Sea (Maasvlakte II), the Port of Rotterdam Authority used the criteria below for the concession of a container terminal:
- the financial bid, including volume guarantees and revenue projections (40 per cent);
- the business plan; in other words, the degree to which the new terminal would attract new cargo to the port (25 per cent);
- the sustainability of the bid, including percentages of rail, truck and inland waterway modes of transportation that would be used (20 per cent); and
- the terminal concept, with regard to the efficiency and the quality of the proposed terminal (15 per cent).
Is there a model PPP agreement that is used for port projects? To what extent can the public body deviate from its terms?
Nowadays, the Dutch government regularly opts for DBFM(O) contracts to realise large public works and transport infrastructure projects. All elements concerning the design, realisation and maintenance of a building project form an integral part of one contract to be commissioned by the commissioning party to the contractor. Distinctive for a design–build–finance–maintain (DBFM) contract is that the financing of the building project is shifted to the contractor in exchange for regular payments as compensation during the running period of the contract. Since there is a link between the running period and the economic life of the realised works, the contract is usually concluded for a longer period (20 to 25 years).
A consortium is, in most cases, incorporated as a special purpose vehicle (SPV) to conclude and execute the contract for the port development with the commissioning party (government). An SPV is a private company with limited liability financed either by banks and equity capital or by loans from the government itself, all in exchange for shares in the company. It can be said that operating a port has become an interesting business, attracting the attention of large investment groups and equity fund managers.
The Dutch government issued a standard DBFM model agreement for large infrastructure projects initiated by the national government, but parties are free to deviate from this model. Furthermore, there are guidelines that provide a decision model with regard to whether a project is suitable for PPP and, if so, for DBFM. Recently, local governments have also experimented with a light version of DBFM for smaller port development projects.
For existing port areas, the relevant port authorities apply standard terms and conditions in their sublease agreements.
What government approvals are required for the implementation of a port PPP agreement in your jurisdiction? Must any specific law be passed in your jurisdiction for this?
For the realisation of the project, a variety of permits may be required related to the environment, construction, and occupational health and safety standards. With regard to a DBFM agreement itself, a national government agency will need to obtain approval from the Minister of Finance. Under certain circumstances, large projects financed by the government may be regarded as state aid within the European context and, in these cases, approval from the European Commission is therefore sought before there can be substantial government investment in port areas. However, in May 2017, the scope of Regulation (EU) No. 651/2014 was extended to ports. Public investments of up to €150 million in seaports and up to €50 million in inland ports can now be made without the approval of the European Commission.
On what basis are port projects in your jurisdiction typically implemented?
Relatively large projects may be implemented as DBFM(O) projects. Other projects can be implemented as a classic government procurement for works, as either a design–build project or a design–build–maintain project.
Is there a minimum or maximum term for port PPPs in your jurisdiction? What is the average term?
There is no minimum or maximum term for concessions or PPPs. In the concession for a very large project involving a large investment from private parties, such as the newly built Maasvlakte II, a term of 60 years can be applied. Usually, concessions and lease agreements in port areas are concluded in 20 to 30 years. In principle, government agencies are free to determine the term. However, a term may be regarded as too long if it is not proportional to the investments that the concession holder is required to make (see ECJ 9 March 2006, C-323/03, Commission v Spain).
On what basis can the term be extended?
In principle, the term may be extended if provided for in the concession, but this is not a standard approach.
What fee structures are used in your jurisdiction? Are they subject to indexation?
With regard to the land rent of existing port areas, the port authority leases or subleases plots of the port area to private companies. On the basis of those lease agreements, the port authority may charge an occupancy fee for the site (fixed per square metre or per metre of quay length) and for the facilities (if applicable). These fees may be subject to discounts specifically negotiated with the port authority. Normally, the occupancy fee is revised annually according to inflation. Concessions of port terminals may contain cargo handling fees (revenue sharing).
Additionally, port authorities may collect harbour dues for the provision of services, which are calculated on the basis of several variables such as gross tonnage, the type of the vessel and the type of cargo. The quay dues or berthing fees, buoy dues and dolphin dues are based on a fixed fee per linear metre of the ship (overall length). The waste fees are based on the capacity of the main engine of a ship; exemption from the waste contribution is possible provided that a number of requirements are met.
Does the government provide guarantees in relation to port PPPs or grant the port operator exclusivity?
Generally, the government does not provide any guarantees. A concession, lease or sublease agreement inherently grants exclusivity to a port operator for the duration of the concession, lease or sublease agreement.
Does the government or the port authority provide any other incentives to investors in ports?
The Rotterdam Port Fund (RPF) is an independent investment fund that was established at the end of 2016. It is an initiative by the port of Rotterdam and four private investors. The RPF invests in fast-growing companies that aspire to be a part of the transition to the port of the future. The five investors together put approximately €50 million into the fund. They want to finance fast-growing and innovative companies that have a relationship with the port sector. The Port of Rotterdam Authority aims to speed up the energy transition – the transition from a port aimed at fossil fuels to the use of renewable raw materials.
Companies that invest in the ports of Rotterdam and Amsterdam are being financially stimulated. This is done on an individual and tailor-made basis, depending on the business case at hand. For this purpose, the port authorities can make use of price mechanisms that are available to them. Companies that have a clearly negative impact on the environment or that focus on the storage and transhipment of fossil fuels are no longer offered any land in the Rotterdam and Amsterdam port areas.