Overview:
The amendment fundamentally expands the use of direct negotiation as a legitimate procurement method, moving away from the original Proclamation’s strong emphasis on competitive bidding. It also restructures the PPP Board and imposes stricter qualification requirements on private parties seeking to use this route.
Summary of Key Amendments
1. New Definition Added:
Formally defines Direct Negotiation as a selection method for private parties to develop and implement infrastructure or public service projects initiated by the private party, contracting authority, or PPP Directorate General, without a competitive bidding process.
2. New Exclusion Added to Scope of Application
It excludes “Business activity conducted by a joint venture or a company established by a public enterprise in conjunction with a private party or a Foreign Government or a public enterprise of a Foreign Government.” from the Proclamation’s application.
3. Changes to PPP Board Composition (Article 8)
The Board membership has been significantly restructured: New ministries are added and some are removed.
4. New Board Power to Authorize Direct Negotiation
It provided the Board Expanded power to permit direct negotiation projects
- New Article 8(3) : The Board may now permit project implementation through direct negotiation if it believes the project benefits the public interest and ensures quick financing, based on:
- Bilateral Government Economic Cooperation and Diplomacy, or
- Private party project initiation.
- New Article 8(4) : Any project proposal submitted for direct negotiation must be consistent with the country’s overall development plan and strategy.
5. Minimum Requirements for Private Parties Seeking Direct Negotiation (New Article 8(5))
Stricter qualification criteria for direct negotiation (financial, technical, criminal record, local content) is introduced. Private parties or consortia proposing direct negotiation must meet specific requirements:
- (a) Foreign investors: Certificate of incorporation and government support letter from their home country. Local investors: Support from the relevant government institution confirming financial capacity, technical skill, and decent image.
- (b) Evidence of financial status, plus technical capacity and experience in developing/managing two or more similar projects.
- (c) Project proposal must promote domestic investor participation, use of domestic products, and job creation for Ethiopians.
- (d) Clean criminal record for the last five years for the private party, its CEO, directors, or shareholders with more than 5% capital share.
- (e) Evidence of financing commitment from lenders for the loan-financed portion of the project.
- (f) The Ministry may prescribe additional requirements by directive.
6. New Detailed Procedure for Direct Negotiation (New Article 40(7))
Multi-stage approval process for direct negotiation introduced. A complete new procedure for direct negotiation was added, comprising nine sub-paragraphs:
- (a) Joint evaluation: Project proposal is first evaluated jointly by the Contracting Authority and the Ministry for special significance. If beneficial to the public, the Ministry directs a pre-feasibility study and profile preparation by the PPP Directorate General and Contracting Authority.
- (b) Ministry evaluation: The Ministry evaluates the pre-feasibility study and company profile, then reports to the Board.
- (c) Board decision: The Board may endorse the project for direct negotiation, order revisions, or reject it. Important clarification: Board endorsement does not constitute final acceptance or award of the project.
- (d) Referral for detailed study: If approved, the Board refers the proposal to the Ministry for detailed feasibility study.
- (e) Detailed feasibility study: The PPP Directorate General causes the Contracting Authority to conduct a detailed feasibility study, then reviews it (applying Articles 17 and 18 as appropriate).
- (f) Draft agreement: Upon Board approval of the feasibility study, the PPP Directorate General prepares a draft project agreement as a base document for negotiation and sends it to the private party before negotiations begin.
- (g) Pre-negotiation protocol: Parties must agree on a timeframe and prepare a code of ethics for the negotiation, submitted to the Minister for approval.
- (h) Conduct of negotiation: The PPP Directorate General and Contracting Authority jointly conduct negotiations with the private party.
- (i) Approval of results: Upon successful completion, the PPP Directorate General reports the negotiation results to the Board for approval.
- (j) Applicability of other provisions: Articles 34 and 44–68 apply mutatis mutandis to contract signing and project implementation.
7. Effective Date The amendment came into force on February 3, 2023,
8. It amends Public Private Partnership Proclamation No. 1076/2018
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