In mid-June, the Verkhovna Rada supported in the second reading and as a whole Draft Law No. 7508 — an initiative aimed at reforming the sphere of public–private partnership (hereinafter referred to as PPP) in Ukraine and accelerating the restoration of infrastructure damaged by the war.
The draft was adopted as a basis back in October 2022, after which discussions and work on its improvement continued. Transparency International Ukraine previously analyzed the earlier version of the draft law ahead of the second reading. At that time, we noted both positive innovations (expanding the scope of PPP application, sources of its financing, simplifying and reducing the procedures for preparing PPP projects) and shortcomings related to the imbalance of interests between public and private partners, as well as a questionable procedure for preparing and selecting PPP projects for restoration.
Over more than two years, the text of the draft law was repeatedly amended before the final vote. Therefore, we decided to find out what has changed and whether the risks of this legislative initiative have been minimized.
Summary
Draft Law No. 7508 is a step toward modernizing the field of public-private partnerships (PPPs) in Ukraine, especially in the context of post-war reconstruction. It opens new opportunities by expanding the areas of PPP application, the list of public partners, and sources of financing. At the same time, it provides for the reduction and simplification of project preparation. In addition, the adopted law partially fulfills Ukraine’s commitments under the Ukraine Facility program regarding harmonization with EU legislation.
However, it also carries a number of risks related to insufficient procedural transparency. Excessive discretion granted to tender commissions may result in non-transparent selection of private partners. Ensuring transparency and a fair balance of interests between the parties remains a challenge.
In any case, whether PPP will gain new life will depend on the practice of implementing the new Law.
What is new in the final version?
The first and most obvious innovation is the change in the name of the draft law. Previously, the emphasis was placed on improving the mechanism for attracting private investment through public–private partnerships to accelerate the restoration of facilities destroyed by the war. Instead, in the final version the draft received a concise title — On Public–Private Partnership. Along with the name, the rest of the terminology related to “public–private partnership” was updated in line with EU law, where the term public–private partnership (PPP) is used.
The legislators decided to do away not only with the old terminology but also with the Law on Public–Private Partnership itself — it will cease to be in force once the new law takes effect — on October 31 this year. Such a decision seems rational: even before the first reading, the draft law amended almost all articles of the current law.
In the final version, the list of potential public partners* was expanded and clarified. It now includes state-owned and municipal enterprises engaged in activities aimed at providing socially significant services (such as water, gas, and electricity supply, transportation, postal services, etc.) and serving as administrators or recipients of budget funds. This will make it easier for such enterprises to attract private investment for the development of their own infrastructure.
* Given the similarity of provisions in the updated Laws of Ukraine on Public–Private Partnership and on Concession, in this text the terms “public–private partnership,” “public partners,” and “private partners” also encompass, respectively, concessions, concession grantors, and concessionaires (except in cases where legislation establishes differences regarding their status or requirements).
Individuals will also be able to participate in competitions for the conclusion of contracts under public–private partnerships. At the same time, just like corporate bidders, if successful, they will be required to establish a special legal entity that will operate exclusively for the purpose of implementing the respective PPP project. In addition, the requirements for such legal entities have been clarified: once Ukraine acquires membership in the European Union, private partners may be only residents of Ukraine or of an EU Member State.
All references to private initiators were excluded from the draft law. Thus, the preparation of PPP projects will be carried out exclusively by public partners, which reduces the risk of granting an advantage to any particular participant in the competition.
The selection of private partners will take place under updated competitive procedures — open tenders, restricted tenders, or competitive dialogue — to be conducted using the electronic system. At the same time, in the final version of the draft law, the introduction of these changes has been postponed to early 2027, in view of the need to develop the relevant electronic system functionality and relevant bylaws.
The adopted version of the draft law also enshrines a number of provisions specifying the requirements for tender documentation. In particular, it must include technical criteria describing all the characteristics necessary for the implementation of the PPP project (including, but not limited to, service quality levels, design and safety requirements, operational features, and indicators of environmental and climate efficiency). However, explicit references to specific brands or manufacturers are strictly prohibited. Furthermore, the content of the tender announcement has been clarified: it must contain detailed information about the public partner, the substance and duration of the PPP project, the forms of state support provided, and the deadline for submission of bids.
In earlier versions, the draft law allowed for a PPP term to be set beyond the period actually necessary for the private partner to recover its investments and earn the expected level of profit. In the final version, the term of the PPP will be limited and must be determined taking into account the period required for:
- creation and technical maintenance of the PPP facility
- management (operation) of the PPP facility or the provision of socially significant services to achieve the goals and objectives of the project
- effective transfer to the private partner of operational risk (the risk of technical maintenance of the PPP facility)
- recovery of investments made in the PPP facility and receipt of a defined level of profit.
Among the significant innovations of the final version of the draft law is the possibility of appealing competitive procedures for selecting a private partner before a specially established commission under the Antimonopoly Committee of Ukraine. Previously, the draft law provided for a single way of resolving disputes arising in connection with the competition to determine a private partner — through court proceedings. However, judicial proceedings for disputes related to the competition procedure may be ineffective, as the court may terminate the case after the contract with the winner is concluded. At the same time, the provisions on appeals to the AMCU commission will only enter into force within one year from the date the law itself takes effect.
Other key changes:
– The exclusion of localization provisions from contracts — in particular, the requirements for mandatory use of raw materials, resources, technologies, machinery, and equipment of Ukrainian origin or production, as well as the hiring and employment of Ukrainian citizens during the implementation of a PPP project
– The addition of risk allocation between the public and private partners as a material term of a public–private partnership agreement
– The removal of the possibility of making payments in favor of the concessionaire if it fails to fully recover the investments it has made through service users (consumers), as well as the removal of payments by the concessionaire to the concession grantor in cases where actual demand and/or supply indicators exceed estimated levels
– Granting the public partner the right to terminate a public–private partnership agreement if it becomes known that, at the time of being selected as the competition winner, the private partner did not meet the qualification criteria or grounds existed to restrict its participation in the competition.
What about the risks?
Old ones that remain
Despite the introduction of a number of important and positive changes to the draft law following the second reading, some of the risks we previously identified in earlier versions of the document remain.
In the adopted draft law, commissions in concession competitions were deprived of the ability to establish qualification criteria “other” than those provided by law, relating to professional suitability, economic and financial standing, and the technical and professional capacity of applicants. However, for public–private partnership competitions, the open-ended list of qualification criteria has been retained. This approach is risky, as the tender commission may, at its own discretion, introduce any criteria under the defined categories, including those that could artificially restrict competition.
In addition, the draft law leaves it to the discretion of the tender commission to determine the relative weighting of qualification criteria and the evaluation of bids. Under such circumstances, the commission may not only establish criteria other than those defined by law, but also assign disproportionate weight to them, thereby distorting the outcome of the bid evaluation.
The draft law also preserves the option of limiting the maximum number of applicants in certain competitive procedures (restricted tenders, competitive dialogue) at the discretion of the tender commission. It will also determine the rules for selecting the best applicants to advance to the next stage of the competition. In the absence of clear legal requirements, competition commissions may make unjustified decisions to limit the maximum number of applicants in the competition procedure — either due to lack of experience in the field or for the purpose of abuse. In both cases, this could lead to reduced competition.
Certain forms of state support for PPP projects also remain risky. One such form is the demand guarantee — payments made in favour of the private partner to compensate for the difference between the minimum guaranteed and the actual level of demand for the goods (works, services) to be produced (performed, provided) under the PPP project. The draft law retains the risk that the methodology for calculating such payments may be determined in an unsubstantiated way, creating an advantage for the private partner.
Another form of support is the purchase, full or partial payment by the public partner (or an entity acting on its behalf) for a certain volume of goods (works, services) produced (performed, provided) by the private partner under the PPP agreement. In practice, this amounts to procurement outside the procedures established by the Law of Ukraine on Public Procurement and contradicts it, as that Law does not provide exceptions for such procurement transactions. In addition, the draft law does not contain safeguards for situations where such support will be excessive and unjustified.
As for the overly simplified procedure for preparing PPP projects aimed at restoring infrastructure and the economy, Parliament left this matter open — under the draft law, the procedure for their preparation will be approved by the government.
New risks
In addition to the previously identified ones, the adopted draft law also introduces new risks.
The draft law envisages a new type of tender commission for the organization and conduct of a competition for a specific PPP project. In addition to members of the standing commission, it may include representatives of other state authorities and local self-government bodies, representatives of the asset holder, and other persons as decided by the public partner. The introduction of additional individuals to the one-time commission will directly impact the voting results, as decisions are made by a simple majority. Thus, this innovation carries the risk of direct influence over commission decisions.
The draft law also grants the tender commission broad powers to refuse participation in a competition or to disqualify a winner if there is evidence of collusion, the offering of undue advantage, the commission of a serious professional offense, or the identification of existing or potential threats to Ukraine’s national security. Concepts such as “serious professional offense” or “threat to national security” are evaluative in nature and lack a defined legal boundary, creating room for subjective or selective interpretation. This may be used to exclude unwanted participants from competitions under the guise of formal compliance with procedure.
In an earlier version, the draft law limited the possibility of designating information about the financial–commercial part of a bid as confidential. However, this reference disappeared from the final version. As a result, both the technical and financial–commercial parts of a bid will not be subject to disclosure if the applicant/participant designates this information as confidential. This approach poses significant risks to the transparency of the competition process and restricts participants’ access to information.
Conclusion
Public–private partnership is one of the mechanisms Ukraine can potentially use to overcome the consequences of the full-scale war. Amid a budget deficit, its advantage lies in reducing costs for rebuilding destroyed infrastructure and maintaining it thereafter.
The legislative framework in this area required improvement, and Draft Law No. 7508 is an attempt to give public–private partnership new life. This is primarily through the expansion of its scope, the list of public partners and funding sources, as well as the simplification and shortening of PPP project preparation procedures.
With the adoption of Draft Law No. 7508, Ukraine has also partially advanced toward fulfilling one of the indicators of the Ukraine Facility macro-financial assistance program, which requires aligning legislation in the field of public procurement, including concessions and public–private partnerships, with the EU acquis.
The adopted draft law contains a number of risks, mostly related to the excessive discretion of tender commissions in selecting private partners. However, the introduction of an alternative mechanism for appealing commission decisions, actions, and inaction may partially offset these risks. At the same time, ensuring transparency of competitive procedures and maintaining a balance of interests between the public and private partners in providing state support for PPP implementation remains a challenge. In any case, whether PPP will gain new life will depend on the practice of implementing the new Law.
This material is funded by the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.
