2023 Laws of Puerto Rico › TITLE TWENTY-SEVEN - Public Service (§§ 1 — 2641) › PART V - Regulation of Public Services (§§ 2601 — 2641) › Chapter 91 - Public-Private Partnerships Act (§§ 2601 — 2623) › § 2609 - Partnership contract

(a) Required terms and conditions.— A partnership contract executed under the provisions of this chapter shall contain, insofar as applicable, provisions concerning:
(1) A definition and description of the services to be rendered, the function to be discharged or the facility to be developed or improved by the selected proponent.
(2) In the case of new facilities or repairs, replacements or improvements to existing facilities, the plan for the financing, development, design, building, rebuilding, repair, replacement, improvement, maintenance, operation or administration of the facility.
(3) The term for the partnership, which in the case of grants, may not exceed the term provided for in subsection (e) of this section.
(4) The kind of right, if any, that the selected proponent or the partnering government entity or both shall have over income or any portion thereof, in connection with the function, service or facility under the partnership or any real property included as part of the partnership.
(5) The contractual rights and the mechanisms available to the partnering government entity to assure compliance by the selected proponent with the conditions of the partnership contract, including but not limited to compliance with quality standards set for the function or service under the partnership or adequate maintenance of the facility under the partnership or compliance with the approved design and other standards for building, repair or improvement projects or to ascertain compliance by the proponent with its obligations under the partnership contract.
(6) In the case of partnership contracts whereby the proponent shall fix, impose and charge fees to citizens or to the partnering government entity for rendering a service or discharging a function or for the use of a facility: (A) the right that the selected proponent shall have, if any, to determine, impose, and charge fees, rental fees, rates and any other kind of charge for rendering such service or discharging such function or for the use of such facility, (B) the contractual limitations and conditions with which the proponent must comply in order to alter or modify such fees, rental fees, rates or charges, and (C) the mechanisms available to the partnering government entity to ensure that the proponent complies with such limitations and conditions. It may also be provided that the adjustments in prices, rental fees, charges or rates may be computed (1) on the basis of fixed adjustment amounts previously agreed in the partnership agreement or (2) by price units as specified in the partnership contract or (3) on the basis of costs that are attributable to the circumstances which have lead to the adjustment as provided for in the partnership contract or (4) in such other way as the parties mutually agree. The partnership contract may also provide that, in cases in which there is no discrepancy and in which adjusting prices, rental fees, rates or charges is in order, but there is no agreement as to how to determine the adjustment amount, the Authority may be the entity that determines the adjustment amounts that are in order. The contractual limitations and conditions regarding the adjustment of prices, rates, rental fees, and charges negotiated between the parties shall take into account any previous commitment with bondholders and other creditors of the partnering government entity whose debt remains effective throughout the duration of the partnership contract.
It shall also contain the mechanisms and procedures to be used by the partnering government entity to resolve and adjudicate controversies and complaints from the citizens regarding the service, function or facility object of the public-private alliance. The Authority shall likewise have the obligation to conduct an external audit on the compliance with the partnership contract every five (5) years or before, when it is deemed necessary, during the term of the thereof. A copy of the audit report shall be presented before the Office of the Secretary and of the Clerk of both Legislative Bodies.
(7) The obligation to comply with applicable federal and local laws.
(8) The causes for terminating the partnership contract, as well as the rights and remedies available in cases of the noncompliance or the delay in the compliance of obligations under the partnership contract by both the partnering government entity and the selected proponent; Provided, That:
(A) The partnering government entity shall not be responsible for unforeseeable, special, indirect or punitive damages, and
(B) the unilateral authority to terminate a contract for reason of convenience (or for any other reason) shall not apply to partnership contracts simply by providing notice thirty (30) days in advance, but rather, such terms and conditions as the parties may have agreed and entered into the partnership contract shall apply to the termination for reason of convenience or for any other reason.
(9) Nonbinding informal proceedings to hear allegations by the parties as to breach or interpretation of contract, which proceeding may provide for the Board of Directors of the Authority and the partnering government entity, or the delegates thereof, and the equivalent governing body of the contractor, or the delegates thereof, to meet to discuss their discrepancies and try to settle these before resorting to such formal methods for the settlement of disputes as they may have agreed.
(10) The procedures and rules for amending or assigning the partnership contract.
(11) The rights concerning inspections by the Authority and the partnering government entity or any independent engineer of the parties or the creditors of the project for the building or repair of or improvements to the facility, as well as the operational compliance under the terms and conditions agreed to under the partnership contract.
(12) The requirements for obtaining and maintaining all such insurance policies as required by law and such other additional policies as the Authority, in its judgment, deems to be necessary for the partnership contract.
(13) The requirement for the selected proponent to periodically file audited financial statements with the Authority or the partnering government entity or with such other entity as the parties may agree.
(14) The requirement for the selected proponent to file such other report in connection with services, functions or facilities under the partnership as may be requested by the partnering government entity or the Authority.
(15) The circumstances under which the partnership contract may be modified in order to maintain a financial balance between the parties, as well as the provisions on noncompliance and the remedies allowed in such cases, including the imposition of penalties, fines and such other circumstances as the parties may agree under the partnership contract. The partnership contract shall likewise contain a provision on sanctions for breach thereof and shall include the following clauses:
(A) All contractors shall be subject to the provisions of §§ 1755 et seq. of Title 3, “Code of Ethics for Contractors, Suppliers and Applicants for Economic Incentives of the Executive Agencies of the Commonwealth of Puerto Rico”.
(B) The breach of a partnership contract by the contractor could be sufficient cause for the government entity to claim damages caused to the public treasury.
(C) Every contractor who fails to comply with the partnership contract and whose noncompliance causes the termination of said contract, shall be disqualified from contracting with any other government entity for a period of ten (10) years, counting from the date in which the termination of the contract is complied with by the contracting party or is declared final and binding by a court or forum with jurisdiction.
(D) The sanctions imposed by this chapter shall not exclude any other sanction that could be established by the parties in the partnership contract or established in this chapter.
(16) The terms and conditions related to the transfer of the goods or service object of the partnership contract, once said contract has been terminated.
(17) The kind of bond or security to ensure compliance with the partnership contract.
(18) The provision establishing that the partnership contract shall be governed by the laws of the Commonwealth of Puerto Rico.
(19) All clauses, conditions and laws that govern partnership contracts shall be binding and demandable for all parties from the creation to the term of the partnership contract. Therefore, any change or transfer of the rights of a contractor to a third party with respect to the rights of the contractor shall make this third party a successor contractor and shall have the same responsibilities and benefits of the original contractor, and shall also comply with the requirement of a qualifies and selected proponent. The change in contractor shall not be considered a novation of any type whatsoever to demand changes or the extinction of the clauses of the contract. If the successor contractor requests a change in the partnership contract, it shall be submitted to and approved by the Board of the Authority.
(b) Additional terms and conditions.— A partnership contract executed under provisions of this chapter shall also provide for the following:
(1) The review and approval by the partnering government entity, within the term of effectiveness of the partnership contract, of the selected proponent’s plans for developing and operating the facility, rendering the service or discharging the function.
(2) The financing obligations of the selected proponent and the partnering government entity.
(3) The distribution of expenses between the selected proponent and the partnering government entity.
(4) The rights to acquire or convey ownership over intellectual property created or developed by the contractor or the partnering government entity or both during the term of the partnership contract and the compensations required, if any, for conveying or retaining such rights over intellectual property.
(5) A clause through which each contracting party makes a commitment to defend and indemnify the other party for any claim caused by its own acts or omission.
(6) The conditions under which income derived from a service, function or facility is to be shared in the event that such income exceeds the projected income by the parties to the partnership contract.
(7) The settlement of disputes between the contracting parties by means of alternate methods, such as commercial mediation and arbitration.
(8) Subject to the limitations of subsection (a)(8)(A) of this section, damages as applicable under certain circumstances, such as payable specific or liquid damages in cases of termination without just cause or delays in building, if applicable.
(9) Provisions on extensions to the partnership contract within the limits allowed under subsection (e) of this section.
(10) Provisions on compliance with those norms and regulations on public safety and transportation established by Public Service Commission that are applicable to the activities object of the partnership contract.
(11) Any other term or condition as the Partnership Committee may deem appropriate.
(c) Exemption from procedures to fix rates.— A contractor who, under the partnership contract, is empowered to assess, fix, alter, impose and charge fees, rental fees, rates, and any other kind of charges for rendering the service or discharging the function, or for building, repairing, improving or using the facilities, pursuant to the provisions of the partnership contract, needs not meet the requirements imposed on a government entity under its organic act or the pertinent special laws to raise or lower such fees, rental fees, rates or charges. The contractor shall comply with any provision on the procedures for changes in rates which shall be included in the partnership contract, excepting the provisions of subsection (b)(10) of this section.
(d) Contract oversight.— The Authority, with the assistance of the partnering government entity and the Bank, shall oversee the performance and compliance of the contractor under the partnership contract. To such effect, the Authority shall render to the Governor of Puerto Rico and the Legislature, an annual report on the development of projects and the compliance by contractors of the partnership contracts in effect.
(e) Term of partnership contract.— The term of a partnership contract executed under this chapter shall be that which the Authority deems shall serve the best interests of the People of Puerto Rico, but in no case shall such term exceed fifty (50) years; however, upon evaluation of its merits and efficiency and effectiveness results, such partnership contracts may be extended for successive terms which collectively do not exceed twenty-five (25) additional years, as the Authority, the partnering government entity, and the Governor or the executive official on whom he/she delegates, may determine. Said extension must be approved by legislation.
(f) Nontransferable obligations of the partnering government entity.— It is hereby provided, that the contractor under a partnership contract neither assumes nor is responsible for any existing obligations or debts of the partnering government entity, unless the partnership contract expressly provides that the contractor is indeed assuming or is responsible for the same. Furthermore, the contractor shall not be responsible for the obligations concerning the merits, time and service accrued by employees of the partnering government entity that the contractor agrees to hire at the time of executing the partnership contract, nor for any other obligation of such partnering government entity with such employees, except for such obligations and responsibilities as the contractor may assume expressly under the partnership contract. In the event that the contractor does not agree to assume the cost of the obligations referred to in the above sentence, the partnering government entity shall assume the costs of liquidating such obligations.
(g) Inapplicability of prohibition on employee transfers.— In the case of a partnering government entity that during the fiscal year in which the same executes a partnership contract or in any preceding fiscal year has or has had an operational deficit, or which is or was in a fiscal situation that is or has been certified by the Bank as a precarious fiscal situation, such partnering government entity shall be exempted from the application of, and no labor contract clause shall have any force or effect that prohibits the transfer to the contractor of any function, service or facility of such partnering government entity or on the transfer of employees of the latter who are assigned these functions, services or facilities, and such clause shall not prevent such transfers from being made as a result of the establishment of a public-private partnership. In the event that such prohibition exists and is rendered ineffective, the Authority shall require that the contractor, in the course of the procedures for selecting the persons who shall work with the contractor, the latter guarantee that he/she shall give preferential treatment to employees of the partnering government entity who shall be affected by the establishment of the partnership and who shall not be transferred to other positions within the partnering government entity or other government agencies. Said employees shall be exempted from the restrictions for acts of former public servants included in the Ethics in Government Act, §§ 1854 et seq. of Title 3. The parties shall implement a displaced employees transition plan for other employments and retraining, whose cost shall be defrayed in equal parts by the contracting parties.
Every public employee who is a participant of the following retirement systems of the Government of Puerto Rico, §§ 761 et seq. of Title 3, known as the “Commonwealth of Puerto Rico Employees Retirement System Act”; Act No. 91 of March 29, 2004, known as the “Commonwealth of Puerto Rico Teacher’s Retirement System Organic Act”; §§ 233 et seq. of Title 4, known as the “Judicature Retirement Act”; §§ 601 et seq. of Title 18, known as the “University of Puerto Rico Act”, the Electric Power Authority Employees Retirement System approved by the Board of Directors of the Authority through the approval of Resolution 200 of June 25, 1945, who has ten (10) years or more of service accumulated and is part of a partnership, shall maintain the vested rights under said system and may continue to make his/her individual contribution to the retirement System, and his/her new employer shall make its employer contribution. Provided, That the beneficiaries of Act No. 305 of December 31, 1999 [sic], are excluded.
In the case that the new employer has its own Retirement System and the employee chooses to avail him/herself of the same, the transfer of the total contributions shall be allowed, without the employee having to pay taxes for the contributions transferred.
No system, that is to say, the system of the University of Puerto Rico, of the Electric Power Authority, the Teacher’s Retirement System or the Employees Retirement Systems of the Government and the Judicature may interfere with the faithful compliance of this section.
History —June 8, 2009, No. 29, § 10.