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Concessions

Romania has enacted legislation to provide a transparent process for public procurements and concessions, promoting competition among economic operators and supporting investments in public projects.

The Government Emergency Ordinance 34/2006 regarding awarding public procurements contracts, contracts for the concession of public works and contracts for the concession of public services (GEO 34/2006) was approved on July 17 2006. It provides a list of activities and sectors, among them water, power, transportation and postal services, wherein concessions are allowed.

Under GEO 34/2006, a contract for the concession of public works or services is similar to a public procurement contract – its object is the design and execution of works, or the performance of certain services. However, the difference between this contract and a public procurement contract is that the consideration for works performed or services rendered by the concessionaire consists either solely of the right to exploit the construction/services, or in that right together with payment of a predetermined monetary amount granted by the concessor.

Any services provider or works contractor, individual or public/private legal entity, or groups of such persons engaged in activities in these fields may be a concessionaire, while a concessor may be any state body – public authority or public institution – acting on a central, regional or local level, or any public enterprise performing one or more activities in the public utilities sector that awards public procurement contracts or framework agreements with a view towards performing such activities.

The concession-awarding procedures according to GEO 34/2006 are: (i) public open auction – any interested person may submit an offer; (ii) limited auction – any interested person may attend, while only selected candidates will submit an offer; (iii) competitive dialogue – any interested person may compete, and based on the solutions provided during discussions with the contracting authority, the selected candidates will submit a final offer; (iv) negotiation – involves consultancy and negotiations with selected candidates regarding the contractual provisions, including price; (v) inviting bids – involves calling for bids from more operators; and (vi) solutions contest – in which the awarded competitor is selected by a jury.

If the estimated value of each acquisition of services or works does not exceed the Romanian lei equivalent of €5,000 the contracting authority may acquire the services or works directly.

Public assets

Because GEO 34/2006 only regulates the concession of public works and services, Romania faced the need to adopt a separate deed for the concession of public assets. Government Emergency Ordinance 54/2006 (GEO 54/2006) provides the new legislative framework for the concession of public assets.

Private assets belonging to the state or local communities will no longer be subject to concession, as they were under the former law of concessions (Law 219/1998). Private assets belonging to the state or local communities will be capitalized under different means, such as leases and joint ventures. According to the Romanian Constitution, as subsequently amended, it represents exclusive public property: rich soils of any nature, means of communication, air space, waters with hydropower availability and those which can be used for the public interest, beaches, territorial waters, natural resources of the economic zone and the continental shelf, as well as other assets established by law.

Public assets of the state will be subject to concession by the ministries and the specialized bodies of the central administration, while public assets of the local authorities will be subject to concession by county and local councils, the General Council of Bucharest and public entities of local interest.

The new regulation maintains the same term limit for concessions (49 years), while stipulating the same possibility for extension (that is, half of the initial term).

Sub-concessions remain forbidden, but the new regulation provides for several exceptions (for example, a public asset granted under a concession agreement to state-owned companies).

The concession procedures commence upon the initiative of public authorities or upon a proposal filed by any interested person and are then taken over by public authorities.

A concession agreement will be executed after a tender procedure with at least three valid offers. If three valid offers are not received, the authority must re-tender. If the minimum valid offers are not received at the second call for tender, the authority can proceed with direct negotiations. The main assessment criterion for awarding a contract is the highest level of the royalty.

In light of the foreign investments performed in Romania, the new regulation provides the possibility of executing a concession agreement in both Romanian and English versions. Nevertheless, the Romanian version will prevail in all cases.

In the event of a concession of public assets for which several public services or works need to be performed, the concession would not be granted based upon GEO 54/2006, but rather upon GEO 34/2006.

As commonly seen in practice in Romania in the last years, GEO 54/2006 will fully apply as of the date on which its methodological norms are enacted. On the same date, many provisions of GEO 54/2006 that are unclear will be set out in more detail.

Dragos Iacob and Ciprian Glodeanu

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