Entry into force of the new PPP decree in Senegal: salient provisions on local content
8 min read
On 15 November 2021, decree No. 2021-1443 of 27 October 2021 (hereinafter the "New PPP Decree"), implementing law No. 2021-23 of 2 March 2021 on public-private partnership contracts (hereinafter the "New PPP Law") was published in the Official Gazette of the Republic of Senegal.
Apart from customary provisions in terms of the Public-Private Partnership ("PPP") award process and relevant bodies, the New PPP Decree contains some particularly striking provisions on local content.
Although the former PPP framework (in particular, the "Former PPP Law")1 already contained some requirements in terms of local content, both the New PPP Law and New PPP Decree strengthen such requirements in public-private partnership contracts (hereinafter, the "PPP Contracts").
Senegal is very proactive in promoting local content in various major sectors, as it recently did in the hydrocarbon sector.2
PPP Contracts for national or Community companies only
The New PPP Law promotes the involvement of Senegalese and, more widely, African Economic and Monetary Union (hereinafter, "WAEMU") nationals in PPP Contracts.
Organic criteria to be qualified as a national or Community company
The company must:3
- Be an economic operator
- Have had its registered office in Senegal or in any WAEMU Member State for at least one year on the date of the authorisation to launch the procurement procedure
- Have at least 50 per cent of its managerial and executive staff composed of natural persons who are nationals of a WAEMU Member State for each of the above-mentioned staff categories
Maximum amount for projects reserved for national or Community companies
PPP Contracts whose estimated overall value before tax is below XOF five billion4 may be reserved for national or Community companies.5
The New PPP Decree specifies that criteria for the promotion of the national and Community private sectors apply to the private initiative offers,6 newly established by the New PPP Law.
Procurement procedure for projects reserved for national or Community companies
Projects reserved for national or Community companies can be subject to a derogatory procurement procedure (including procurement without any competitive tender under certain conditions).7
If the tender procedure initially reserved for national or Community companies has proved unsuccessful, the procedure must then be opened to all economic operators.
Requirements in relation to the project company's shareholding
The New PPP Law encourages local economic operators to hold a share of the project company's stock,8 as further detailed in the New PPP Decree.9
As a normal rule in PPP regulation, applicable in many jurisdictions, the contractor is required to incorporate a local company dedicated to the implementation of the PPP project.
More interesting, the New PPP Decree strongly increases the minimum percentage of the company's shareholding to be owned by local or Community economic operators from 20 per cent10 to 33 per cent.11 This requirement applies throughout "the life" of the project company.
The New PPP Decree, however, introduces some flexibility in the way this requirement can be implemented. Indeed, this minimum shareholding threshold may be adjusted upwards or downwards at the request of the contracting authority if it appears at the time of the preliminary assessment that it is likely to compromise optimum implementation of the project.
The contracting authority may also specify a shareholding threshold reserved for legal persons governed by public law or any legal person governed by private law that is directly or indirectly controlled by a legal person governed by public law. In this case, the shareholding threshold reserved for the above-mentioned persons is taken into account in the calculation of the minimum shareholding threshold reserved for national or Community companies.12
Depending on the size of the project, the sector of activity and the interest shown by national or Community companies, a time limit as well as the procedures for selling the project company shares to meet the minimum threshold may be provided in the tender documents.13
If the contractor fails to meet the shareholding threshold by the date specified in the bidding documents, the contractor shall, at the end of the third year following "the date of receipt of the works" or the date of commencement of the services, either:
- Open its shares to "popular funds", or
- List on the stock market the minimum shareholding reserved for national or Community companies
An independent expert selected by mutual agreement between the contractor and the contracting authority will assess the value of the shares.
Subcontracting operations reserved for national or Community companies
Under the Former PPP Law, the successful candidate for a PPP Contract had to commit to reserving a significant proportion of subcontracting for national operators.14
The condition is now stronger insofar as "subcontracting operations are reserved in priority for national or Community companies",15 unless it is determined by the contractor that they do not have the skills and qualifications required for the implementation of the project.16
The above provisions, however, do not apply for many types of contracts17 in which there is an interdependent relationship between the contractor and the company.18
If the contract has been awarded through the direct agreement procedure, subcontracts concluded with a company with which the contractor has an interdependent relationship shall be forwarded to the contracting authority for a no-objection opinion prior to their signature.
The contracting authority has 15 days from receiving the draft subcontract and its annexes to give its opinion.
Incentive mechanism in the evaluation of final offers: margins of preference
In evaluating the final bids, the bidding committee must take into account the following incentives:19
- A maximum margin of preference of two per cent for any candidate who undertakes by an irrevocable commitment to subcontract at least ten per cent of the total value of the contract, excluding tax, to small- and medium-sized enterprises having their registered office in a WAEMU Member State
- A maximum margin of preference of eight per cent for any candidate who undertakes by an irrevocable commitment to subcontract at least 30 per cent of the total value of the contract, excluding tax, to national and Community companies
- A maximum margin of preference of two per cent for any candidate whose shareholders are at least 50 per cent women from a WAEMU Member State or 50 per cent of its staff is under 35 years old from a WAEMU Member State
- A maximum margin of preference of five per cent for a consortium composed of at least one national or Community company in which the majority of the share capital is held by one or more natural persons who are nationals of a WAEMU Member State. Ditto for individual candidates held by one or more natural persons who are nationals of a WAEMU Member State
The margin of preference may be applied either to the financial bid score, the technical bid score or the overall score obtained by the bidder.
Local content plan
The project company must prepare a local content plan and submit such plan to the contracting authority and the National support unit for public-private partnerships.
The local content plan includes, inter alia, the objectives in terms of promoting local companies, goods and services.
This plan is updated at least once a year and is monitored annually according to the terms of the contract.20
Application of the New PPP Law and New PPP Decree
The New PPP Law repeals the Former PPP Law and applies to all transactions in respect of which a public tender notice has been published after 15 March 2021.21
Notably, it does not apply to contracts relating to the energy, mining and telecommunications sectors.22
In addition, PPP contracts signed before 15 March 2021 will continue to be effective until they expire, but may only be extended or renewed under the conditions provided for in the New PPP Law, unless the conditions of such extension or renewal have been expressly provided for in the PPP Contract in question.23
The New PPP Decree enters into force in accordance with article 10 of law No. 2021-21 dated 2 March 2021, the day after its publication in the Official Gazette of the Republic of Senegal; i.e. 16 November 2021.
1 Law No. 2014-09 of 20 February 2014 on partnership contracts.
2 Law No. 2019-04 of 1 February 2019.
3 Article 24 of the New PPP Decree.
4 Article 25 of the New PPP Decree.
5 Article 26 of the New PPP Law.
6 Article 35 of the New PPP Law: the private initiative allows an economic operator to send a contracting authority a proposal for a PPP Contract project that is not in response to an invitation to tender.
7 Article 25 of the New PPP Decree. Derogatory procedures are set out in article 28 of the New PPP Law and Article 72 of the New PPP Decree. The launching of a derogation procedure is subject to the opinion of the body in charge of a priori control, which is issued within eight clear working days from the date of referral (art. 73 of the New PPP Decree).
8 Article 34 of the New PPP Law.
9 Article 26 of the New PPP Decree.
10 Article 23 of the Former PPP Law.
11 Article 26 of the New PPP Decree.
12 Article 26 of the New PPP Decree.
13 Article 27 of the New PPP Decree.
14 Article 25 of the Former PPP Law.
15 Article 40 of the New PPP Law.
16 Article 28 of the New PPP Decree.
17 Construction contract, turnkey contract, operation and maintenance contract and any subcontract.
18 Interdependence shall be deemed to exist (a) where one holds, directly or through an intermediary, the majority of the share capital of the other or exercises in fact the power of decision therein, or (b) where both of them are placed, under the conditions of (a), under the control of the same third party.
19 Article 29 of the New PPP Decree.
20 Article 30 of the New PPP Decree.
21 Article 55 of the New PPP Law.
22 Article 2 of the New PPP Law.
23 Article 55 of the New PPP Law.
White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.
This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
© 2021 White & Case LLP