Germany: Choosing a Strategic Partner in PPP Projects

Last Updated: 11 October 2005

By Ute Jasper and Daniela Schwarz


In response to the new duties contained within the new statutory framework for the treatment of residual waste, the city of Halle, like many other German municipalities, decided last year partly to privatize some of its responsibilities connected with the treatment of residual waste and to form a new company in this context, which it intends to manage with a strategic partner.

In order to select a strategic partner, an EU-wide procedure for awarding contracts must be carried out and has accordingly been organized by Halle. There are three types of procedure that may be carried out:

  • the open procedure;
  • the restricted procedure; and
  • the negotiated procedure.

In selecting its strategic partner, Halle has opted for the negotiated procedure, which allows for negotiation between the awarding authority and the bidders prior to awarding the contract.

EU-Wide Procedure for Awarding Strategic Partner Contracts

The EU-wide procedure for the selection of the best strategic partner must be well prepared and well organized. Apart from the strict legal requirements, the sheer number of participants in the process can become problematic, in particular because of their various, often contradictory, interests. Therefore, experienced project managers are needed who can recognize and remove obstacles early on. They must formulate the appropriate requirements and coordinate the interim results with politicians, the municipality's supervisors, the fiscal office and employees. At the same time, however, they must not act rigidly, but must structure the procedure in such a way as allows the ideas of the private partners to be considered and included in the tender procedure. The procedure should therefore follow a 'funnel' model: beginning as openly as possible, with the circle of potential partners and conceivable cooperation models gradually narrowed down.

Successful Project Management

Project management begins far in advance of the actual competition procedure - as was the case with the city of Halle. It was decisive that Halle wanted to define its targets in the broadest possible manner, in order to select the most suitable partner with which to implement the public-private partnership (PPP) project. Consequently, the public administration had to convince citizens, politicians and supervisory authorities alike of the sense and purpose of involving private entities, and had to apply the greatest diligence to the selection of a partner. The aspects to be examined focused on two key questions: (i) which concept is economically beneficial; and (ii) which models and procedures are legally admissible?

In order to decide on a direction and establish a basis for the decisions of politicians and the supervisory authorities, a preliminary study of these questions was prepared which examined potential procedures and models. It was thus possible for Halle neutrally to determine the benchmarks for the procedures with respect to all potential bidders.

Project Organization

In such cases the project organization, too, must be established and commence prior to the tender procedure. A small negotiating team responsible for the project is crucial for success. This team must form the interface and control centre for all participants, and must elicit preliminary decisions from the politicians. A member of the administration must be informed of all processes, supervise time schedules and be available as a contact person.

Competition Principles

The negotiation team steers the tender procedure. In this context, a partner for a private PPP project can theoretically be selected according to all three types of procedure provided in the law on awarding contracts. However, PPP projects can rarely be carried out under the structure of an open or restricted procedure, because of their complexity. Therefore, the EU public procurement legislation allows for the private partner to be selected through a negotiated procedure. The choice of procedure is a decisive point in the entire process, as any mistakes at this point could lead to the cancellation of the project and thus to a considerable loss of time, as well as to subsequent compensation claims against the public sector. Halle had encountered just this experience in a previous attempt to find a partner (European Court of First Instance, C-26/03) and was thus acutely aware of the importance of complying with the public procurement legislation.

In the negotiated procedure, in contrast to the other two types of procedure, the public sector is subject only to very minor legal requirements. Aside from some formal provisions of the public procurement legislation, only the basic principles of EU law on contract awards apply, such as a 'clean competition' (ie, transparency and freedom of discrimination). This flexibility made it possible for Halle to select the private partner in free negotiations and evaluate each possible partner's potential to help the city achieve its individual targets.

Selection of Models and Bidders

As in the example of Halle, a successful procedure for awarding contracts must be structured as a funnel.

The negotiated procedure commences with publication of a public tender announcement in the supplement to the EU Official Journal, inviting potential PPP partners to participate in the procedure by sending in their tender applications. The interested parties must submit, within a certain period, proof of their personal capability and capacity to perform the project. Next, those candidates which have successfully demonstrated that they can be considered for the partner selection are identified. They are provided with the award documents and requested to submit an indicative offer, on the basis of which they will participate in the subsequent negotiations - the 'hot phase' of the procedure. In the procedure, the circles of bidders and models will be narrowed down, and the requirement for offers will be specified.

The negotiations are subject to few formal requirements. However, the principles of transparency and equal treatment must be observed. The participants negotiate the concepts offered and work out, through a cooperative process, the optimal economic, administrative and legal structures for the PPP models. The principal may incorporate particularly intelligent ideas of individual bidders into the procedure, as long as this does not infringe any IP rights. In so doing, the best ideas for models will be used and the most beneficial combination overall will be chosen.

In general, the initial negotiations rarely lead directly to the identification of the best cooperation partner, since the bidders tend to keep an ace up their sleeve which they will show only when presenting their finally binding offers. For this reason, and because negotiations with just a single preferred bidder often prove to be more difficult and tedious than negotiating rounds with several interested parties, it rarely makes sense to select a preferred bidder.

Agreements - Assuring a Stable Partnership

The agreements reached through a transparent and non-discriminatory tender procedure must be coordinated in order to ensure the project's success. In the particular context of the city of Halle, the following basic principles can be established.

If Halle seeks a private partner and wishes to utilize that partner's financial means and know-how, it must grant the partner the necessary flexibility to make the most of its potential. It may not, therefore, interfere with the operative business. Only on this condition will the private partner be prepared to pay a high purchase price for the share acquired. Only if municipality politicians refrain from interfering in non-economic considerations can the private partner manage the joint enterprise in such a way that the anticipated profits can be achieved. This does not mean that the city of Halle will be controlled by the private partner: it can continue to determine and change the scope of performance. This autonomy must also be fixed in the agreements. If the city gives instructions that lead to an increase in costs, it must adjust the remuneration correspondingly.

In turn, the city may also require the private partner to adhere to its commitments. For this purpose, it must determine, in a guarantee agreement, the performance promised by the private partner. For example, this applies to the number of jobs to be created, location advantages and profit expectations. Moreover, the private partner must ensure that the joint enterprise stays within the budget, which is ultimately paid by the citizens through taxes or fees. It must also avoid any risk of insolvency. This, too, must be agreed upon in guarantee agreements, which must include sanctions (eg, penalties, termination rights) that are triggered if the guarantee representations are not observed.


The implementation of a PPP project, such as the part-privatization of the treatment of residual waste in Halle, is complex and requires diligent preparation. Resistance may best be overcome by involving the diverse interest groups (citizens, politicians, administrations, supervisory authorities) as early as possible in an interactive process in the conception of the PPP model. For legal reasons, the private partner must be selected through a tender procedure, or at least through a competitive bid procedure. A competitive process is also recommended for economic reasons. Despite the regulatory framework, there is sufficient flexibility to allow for the identification of a partner which meets the individual requirements of the project and with which the public sector can reach its targets. In order to safeguard the success of the project, all requirements and assurances must be established in enforceable and approved agreements.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions