CP3P Legal & Regulatory Frameworks 2 — Questions and Answers
Question 1: In civil law jurisdictions, how are PPP contracts commonly classified?
- As purely private commercial contracts
- As administrative contracts governed by public law (Correct answer)
- As international treaties
- As unregulated memoranda of understanding
Correct answer: As administrative contracts governed by public law
Civil law systems typically treat PPP contracts as administrative contracts, giving the authority special public-law powers and duties.
Question 2: What is the primary purpose of a dedicated PPP law?
- To guarantee private partners a minimum return
- To replace all general procurement legislation
- To set procedures, institutional roles, and limits for developing and procuring PPPs (Correct answer)
- To exempt PPP projects from environmental regulation
Correct answer: To set procedures, institutional roles, and limits for developing and procuring PPPs
A PPP law establishes the process, responsibilities, and boundaries that govern PPP preparation, procurement, and management.
Question 3: Which change-in-law risk is most commonly retained by the contracting authority?
- Discriminatory or project-specific changes in law (Correct answer)
- General changes in corporate tax rates
- Changes in law affecting all businesses equally
- Changes in accounting standards
Correct answer: Discriminatory or project-specific changes in law
Authorities usually bear discriminatory and specific changes in law because the private partner cannot price or control them.
Question 4: Lenders' step-in rights in a PPP are typically documented in which instrument?
- The shareholders' agreement
- The construction subcontract
- The operating manual
- The direct agreement between lenders and the contracting authority (Correct answer)
Correct answer: The direct agreement between lenders and the contracting authority
The direct agreement gives lenders the right to be notified of defaults and to step in or substitute the private partner.
Question 5: How do many PPP frameworks handle unsolicited proposals to preserve competition?
- They award the contract directly to the proponent
- They prohibit all private-sector project ideas
- They subject the proposal to a competitive process, sometimes with a Swiss challenge or bonus (Correct answer)
- They require legislative approval for each bid
Correct answer: They subject the proposal to a competitive process, sometimes with a Swiss challenge or bonus
Mechanisms like Swiss challenge or bonus points reward the proponent while still testing value for money through competition.
Question 6: Which US federal program provides direct loans, loan guarantees, and lines of credit for surface transportation projects, including P3s?
- TIFIA (Correct answer)
- CDBG
- FEMA Public Assistance
- Section 8
Correct answer: TIFIA
The Transportation Infrastructure Finance and Innovation Act (TIFIA) program offers federal credit assistance often used in transportation P3s.
Question 7: Which 2005 federal legislation authorized tax-exempt Private Activity Bonds for highway and freight transfer facilities used in US P3s?
- The Clean Water Act
- SAFETEA-LU (Correct answer)
- The Davis-Bacon Act
- The Federal Acquisition Streamlining Act
Correct answer: SAFETEA-LU
SAFETEA-LU amended the tax code to allow up to $15 billion in surface transportation Private Activity Bonds.