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Public Private Partnerships from Government Contracts Perspective in Turkey

23 February, 2020

The term, Public Private Partnership (“PPP”), is defined by PPL Knowledge Lab as “a long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility and remuneration is linked to performance[1]. With respect of this portrait, the PPP is frankly considered as an instrument for the allocation of risk for the parties, specifically as the government entity and the private party, and indeed as a tool to balance the interests of the interest of the public counter to private interest.

Through PPP contracts,  private entities are being dealt with building and/or maintenance a facility required for public service which in exchange entitles these entities to receive certain amount of annual fee (rent) from the related state[2]. In practice, the PPP contracts are frequently encountered, particularly in transportation and municipal activities or environmental infrastructure services and public service accommodations[3]. In this context, Turkey has been the largest PPP market in Europe with at least 22.8 billion Euro worth of projects between  2013 and 2018[4]. Considering the high volume of the PPPs in Turkey, one may clearly argue that Turkey is likely to benefit from those partnerships in the future as well. To this end, this article aims at enlightening the PPP contracts for participators from a legal perspective.

Where is the Difference Compared to Other Government Contracts?

Public Procurement Contracts (“PPC”) constitute the core part of government contracts engaging the public and private sectors. While a PPC is stipulated for supplying or building of a public service/facility and is completed with delivery of such goods and/or services, a PPP contract, requiring a commitment up to thirty years, is peculiar to maintenance and operation of the facility  besides of the construction[5]. Moreover, while a public procurement award is paid immediately, the PPP contract’s value is annually paid by the states. Thus, the PPP creates an opportunity to benefit from technology and innovation of the private sector in public services without allocating all resources before initiating the project, which is crucial notably for highly amounted investments.

On the other hand, privatization is also a commonly used method that enables the private sector to participate in public services. However, a PPP contract does not provide any right or responsibility to the contractor in terms of public service. The context of a PPP contract is limited with construction, maintenance and operation of the facility which is required for the public service. As distinct from privatization, the contractor in PPP gains its revenue from the payments made by the state instead of users.

Although in doctrine, it is claimed by some that building, operating, and transfer agreements are also regarded as public private partnership[6], PPP is also different than such government contracts because of the scope of the partnership and method of financing[7].

The Legal Status of PPP under Turkish Law

There is no general legislation that regulates PPP in Turkey since the Draft Law on Implementation of Some Investment and Services in the Framework of Public Sector and Private Sector Cooperation Models still could not become a law yet. However, Law No. 6428 on the Establishment, Renovation of Facilities and Service Procurement by Public Private Partnership Model by the Ministry of Health and Amendments to Some Laws and Decrees (“Law no. 6428”) brought certain provisions on the matter. Therefore, a PPP shall be conducted in accordance with the Law no. 6428 in case it is deemed within the scope of the law. Otherwise, the issue must be evaluated pursuant to general legislation relevant to the government contracts.

A government contract is awarded following a tender process as per the Public Procurement Law numbered 4734 unless it is within the scope of exceptions provided by its 3rd Article. The tender process is considered as a part of administrative law and any dispute arisen until the signature of the contract shall be settled by the administrative courts. However, government contracts are governed by private law once the contract is signed by both parties. Accordingly, civil courts shall be deemed to be competent when a dispute arises during the implementation of such contract.

In conclusion, PPP contracts likely to differ depending on project-based contract provisions. Turkish Code of Obligations numbered 6098 and or Turkish Code of Commerce numbered 6102 may also become applicable in case contract provisions do not regulate a disputed matter. Nevertheless, it is not unannounced to assert that the provisions of the Public Procurement Contracts Law numbered 4735 may be applied to PPP contracts since the Law numbered 4735 attributes to the matters regarding PPPs, and it is also explicit that the government entities generally refer the Law 4735 within the government contracts.

[1] PPP Knowledge Lab,  https://pppknowledgelab.org/guide/sections/1-introduction

[2] Gözler Kemal & Kaplan Gürsel, İdare Hukuku Dersleri, Ekin Basım Yayın Dağıtım, 15. Baskı, Bursa, 2014, p. 464.

[3] Kenton Will, Public Private Partnerships, https://www.investopedia.com/terms/p/public-private-partnerships.asp, (accessed: 20.02.2020)

[4] European PPP Expertise Center, Market Update: Review of the European PPP Market in 2018, European Investment Bank, 2019, p. 2.

[5] Gözler, Ibid, p. 465

[6] Keçeligil Hasan Tahsin, Kamu-Özel İşbirliği: Esasları ve Türkiye Uygulaması, Terazi Hukuk Dergisi, cilt: 13, sayı: 145, Eylül 2018, (158-175), p. 160

[7] Boz Selman Sacit, Kamu Özel İşbirliği (PPP) Modeli, İnönü Üniversitesi Hukuk Fakültesi Dergisi, Cilt: 4, Sayı: 2, 2013, (277-332), p. 301.

Author: Kaan Erdoğan

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