With the entry into force of Legislative Decree No. 209/2024 (the “Corrective”), significant changes have been made to the regulation of project finance, modifying what was originally established by the previous Public Procurement Code (Legislative Decree No. 50/2016, Article 183, paragraph 15) and initially carried over, albeit with some amendments, into the new Code (“Code” or Legislative Decree No. 36/2023).

Here, we aim to provide an overview, from the perspective of a financial advisor, of some of the changes the Corrective has brought to the Code’s provisions regarding project finance. Specifically, attention will be focused on the content of Article 193 (Award Procedure) of Title IV (Project Finance). As is well known, Article 193 of the Code has been entirely rewritten by the Corrective.

A little over one hundred days after the Corrective’s entry into force, it is still not possible to draw a comprehensive assessment of how Article 193 has been received by market participants. Only at the end of 2025 will it be possible to attempt a first evaluation: the number of public-private partnership (“PPP”) proposals submitted during the year to public administrations will allow an understanding of whether the procedural changes introduced by the Corrective have encouraged, rather than dampened, the willingness of companies to invest in the construction and management of public utility works.

At present, however, to try to intercept an initial market orientation regarding the novelties introduced, it is already possible to refer to some analyses of the “new” Article 193 published in the specialized press in recent months, as well as to comments expressed by sector operators and “collected” in the course of daily professional activities involving PPP initiatives. This latter, albeit empirical, “market sounding” activity (among companies, public bodies, legal advisors) already allows us to identify some emerging “lines of thought”: for example, granting authorities seem to express some concerns regarding the objectively increased procedural complexity underlying Article 193, compared to the previous legislation.

Capturing the underlying sentiment of the business sector is more complex, given the heterogeneity of the actors involved. It should first be recalled that companies operating in this field, whenever news of possible changes to project finance regulations spreads, tend to express the expectation that such changes might finally contribute to forming a structured market segment, within which they could operate according to specific industrial strategies, thereby overcoming the current contingency where PPPs are predominantly the result of ad hoc, occasional, non-scalable situations. This “expectation” was disappointed even before the Corrective entered into force, when it became clear from the consultation drafts that the ambition was only to intervene on procedural aspects. In fact, with the Corrective, no real “step change” was attempted, at least in the field of project finance. Nevertheless, it is highly relevant to focus on certain provisions of the new Article 193, as they are particularly important for any investor evaluating whether to invest in a PPP development process.

In this regard, we immediately note a simplification introduced by the Corrective that has undoubtedly been well received by market operators: the possibility, under Article 193, of preparing, for the purpose of submitting a PPP proposal, the feasibility project (an essential component of any proposal) according to the simplified scheme set out in Article 6-bis of Annex I.7 of the Code (the additional documents required under Article 6 of Annex I.7 must, pursuant to the law, be produced only as the project is then selected to form the basis of the tender).

Clearly, this reduction in design requirements was necessary, as preparing a proposal is in itself a particularly burdensome exercise, especially due to design costs. The Code, by reducing the design levels from three to two (eliminating the detailed design stage), had consequently introduced the need to accompany proposals with the feasibility project under Article 6 of Annex I.7 (whereas previously the technical-economic feasibility project encompassed only preliminary design); this had undoubtedly affected companies’ willingness to develop proposals, especially when the design tasks were complex. Such reluctance was justified by the fact that, since most PPP proposals do not reach the declaration of public interest, investment in design was subject to a considerable degree of uncertainty.

Thanks to the Corrective, the impact of design costs on the budgets for preparing proposals is therefore partially reduced. However, in our opinion, this result does not compensate for the additional complexity and uncertainty that investors now face as a result of the Corrective.

Regarding uncertainties, one of the aspects that has most discouraged companies in evaluating the new Article 193 concerns the lack of certainty about the possibility of acquiring, during the procedure, the pre-emption right (exercisable, as is known, during the tender phase). This issue requires a brief overview: under the previous legislation, the proposer prepared their proposal knowing that, if declared of public interest, it would lead to acquiring the aforementioned right. In other words, the pre-emption right was a form of reward for those who had invested significant resources in developing a PPP proposal for the public administration.

This is no longer the case: as clarified in paragraph 12 of Article 193, the pre-emption right may now be assigned, following a “competitive comparison” procedure, to either “the promoter or one of the proposers” (where, according to the somewhat confusing terminology adopted in Article 193, the promoter is now the developer of the original proposal under paragraph 3 of the same article). In other words, the pre-emption right has become, so to speak, contestable.

We will not dwell here on the justifications given for this change, which had always been a powerful incentive; it suffices to note that the desire to make the pre-emption right contestable does not stem from any certainty that the previous formulation of Article 193 was in conflict with European law. The matter has been open since 2004, and after alternating developments, a judgment by the European Court of Justice is still awaited. The changes introduced by the Corrective therefore seem driven only by the fear that such a judgment may eventually arrive, potentially condemning the use of pre-emption as anti-competitive. For the record: one may question whether it would have been wiser to wait for the outcome and reasoning of the European Court of Justice before amending the relevant legislation, given the probable effect of discouraging the market (it should be recalled that in 2007-2008, when the pre-emption right was abolished, the market almost completely stalled until the incentive was reinstated).

With the change regarding the pre-emption right, the Corrective seems to have undermined the fundamental rationale for which it was originally and astutely conceived: to encourage private companies to submit project finance proposals to public administrations. Today, the remaining function of this reward is unclear, since the possible assignment of the pre-emption right to a proposer (who is not the author of the original proposal and has therefore not borne the related economic burden of developing it) undoubtedly reduces the willingness of the operator to invest “first” in a proposal. Conversely, assigning the pre-emption right to a proposer may lead to granting an undue advantage, rewarding a party who was effectively “already there,” drawn into the procedure by the promoter’s original submission. In short, the incentive designed to reward those initiating the virtuous process of investing in a PPP may now be given to someone who does not need to be incentivized.

This reversal regarding pre-emption could discourage the market, particularly in cases where proposals concern works or services not yet included in the administration’s programming. In such contexts, denying certainty of a reward to the party that conceived the original “business idea” clearly dampens private initiative. Legal scholars may argue in favor of the choice made, but the financial analyst can only report the market “sentiment”: the regulation frustrates the willingness to innovate and therefore has a “recessive” effect, especially where proposals would otherwise be of higher quality (i.e., concerning works and services not yet envisaged by administrations).

Unfortunately, the Corrective does not seem to have paid much attention to this. It is possible that this apparent disinterest in incentivizing the private sector stems from the observation that a trend has solidified where the public sector “moves first,” even when the goal is private-initiative project finance. This refers to the increasing issuance of public notices soliciting the market to submit PPP proposals for specific works or services. In these cases, the relevance of pre-emption as an incentive may appear less significant, since operators are encouraged to invest by the notice itself, which implicitly confirms the administration’s interest. Legislative Decree 36/2023 codified this ability to solicit proposals in paragraph 11 of Article 193, further spreading this practice.

As often happens, these “call for promoter” notices tend to outline a detailed and constrained framework within which companies must develop their offers; this naturally limits the scope for genuine innovation. Private operators therefore approach such solicitations as if they were a full-fledged tender (albeit with a particularly long, cumbersome, and complex procedure), often aligning their proposals meticulously with the notice. For these reasons, the excessive use of solicitations somewhat betrays the original mission of project finance since the “Merloni Law” (Law No. 109/1994): beyond attracting private capital, the instrument was intended primarily to inject innovation into public administration. This function risks being lost.

Considering the above, the reform of the pre-emption mechanism may not significantly affect the annual number of proposals submitted to granting authorities; qualitatively, however, there may be a decline in genuinely private-origin proposals, which are typically of higher value.

Another aspect that has raised concerns among many private operators (and some public ones) concerns the procedural structure under Article 193: compared to the previous legislation, the new law further and significantly articulates the procedure, introducing several phases and sub-phases, certainly aimed at identifying the feasibility project to be approved (and used as the basis for the subsequent tender), but which in practice makes the process more complex, lengthy, and risky. The result is a significantly burdened evaluation process of proposals, sometimes, in our opinion, unnecessarily so.

In an economic context where calls for simplification are increasingly frequent, under the assumption that it is essential to maintain the country’s competitiveness, a regulation spanning 17 paragraphs, meticulously tracing steps that could have been left to the administrative discretion of granting authorities, may appear outdated. Paragraph 2 of Article 193 vividly illustrates this: it proceduralizes even the phase preceding proposal submission, requiring that “for the purpose of submitting a proposal under paragraph 1, an economic operator may submit to the granting authority a preliminary expression of interest, accompanied by a request for the information and data necessary for preparing the proposal.

The granting authority informs the economic operator of the existence of preliminary public interest in preparing the proposal; in this case, the requested data and information are transmitted to the operator and made available to all interested parties via publication in the ‘Transparent Administration’ section of its institutional website.”

Firstly, it should be said that obtaining data and information from authorities to prepare proposals has never been problematic and has always been handled on the basis of appropriate public/private collaboration. There was no real need to proceduralize this phase. Doing so, in the name of supposed greater transparency, has non-negligible negative consequences. This approach immediately generates delays and rigidity: the public administration, before providing the requested information, is required to consider its interest in the proposal preparation, according to its own methods and timing. Furthermore, the provision seems somewhat illogical: how can a private operator articulate an expression of interest, even with a rough outline, before having received the very data and information needed to determine whether conditions exist to prepare a PPP proposal?

From the operator’s point of view, the “cost” of obtaining information and data is significant, as it involves their publication in the administration’s transparency portal. Clearly, entrepreneurs, especially those willing to invest in proposals concerning interventions not included in the public-private partnership programming under paragraph 1 of Article 175 of the Code, cannot tolerate that their preliminary intentions be made public at such an early stage, with the obvious consequence of alerting competitors. This is a clear example of how legislative proceduralization of even minor aspects can discourage investors.

Finally, regarding the new Article 193, the evaluation process of proposals raises concerns: in particular, paragraphs 5 and 6 show how complex the process has become, as two comparative evaluation phases are foreseen (which themselves precede the tender evaluation under paragraph 8). Paragraph 5 requires the granting authority to select, in comparative form and based on criteria considering feasibility and alignment of the projects and financial plans with the authority’s needs, one or more proposals for further evaluation under the next paragraph. Paragraph 6 allows the authority to request the promoter and proposers selected under paragraph 5 to make any necessary modifications for approval and, if multiple proposals are admitted, to proceed with further comparative evaluation until the proposal to be used as the tender basis is identified.

Those with operational experience in the sector will immediately understand how complex this can be, particularly if many proposals must be compared. The formal subdivision of the procedure into multiple sub-phases, the need to justify choices and exclusions during the process, and the requirement to dialogue concurrently with multiple operators regarding necessary modifications for approval are elements that, even individually, justify widespread concerns about delays, risks, and litigation.