Republic of the Philippines
House of Representatives
Quezon City

FIFTEENTH CONGRESS
First Regular Session

HOUSE Bi No, 4949
Introduced by Honorable Raul A. Daza

EXPLANATORY NOTE

This bill seeks to enhance the public-private partnership for infrastructure
development in the Philippines. :

itis hereby declared the policy of the state to recognize the indispensable role of
the private sector as the main engine for national growth and development and provides
the most appropriate incentives to mobilize private resources for the purpose of
financing the construction, operation and maintenance of infrastucture and
development projects normally financed and undertaken by the Government.

For this purpose, Republic Act No. 7718 otherwise known as the Philippine Build
and Operate Transfer Law (BOT Law) was enacted to encourage private participation in
publicinfrastruciure investments. Following the faws enaciment, the BPT program was
able to generate a number of projects in the power and transport sectors in the early
#1990's. However, the government's tight fiscal situation along with the voiding of a
large airport terminal project dampened the interest in the BOT program.

To rekindle the private interest in Public-Private Partnership (PPP) and to restore
confidence in the BOT law, profound poficy reforms must be made, foremost is.
creating a legal framework that protects property rights and is committed to the
enforcement of contracts. Moreover, the jegal and judicial system must be conducive to
contractual performance, to fair and timely adjudication of any contractual dispute that
may amerge and must be supported by a substantive and operationally efficient set of
implementing rules and regulations (IRR).

It is also important that governmental Implementing Agencies (IAs) and local
goverment units (LGUs) must acquire the necessary technical, legal and financial
expertise to be able to idenlify, design, implement and monitor PPP projects
Regulating bodies inckxed in the implementation of such PPP projects must be
credible, tansparent, accountable and technically competent.

Taking the various concems at this stage about the existing BOT law, this
Proposed BOT bill is guided by the principles aligned with the making of Public-Private
Partnership a state policy in infrastructure development, upholding competitive bidding
as the core of government procurement policy.

In view of the foregoing, approval of this bill is highly recommended

AL

RAUL A. DAZA


Republic of the Philippines:
House of Representatives
Quezon City

FIFTEENTH CONGRESS
First Regular Session .
‘ 919

HOUSE BILL No. ___

Introduced by Honorable Raul A. Daza

AN ACT ENHANCING THE PUBLIC-PRIVATE PARTNERSHIP IN
INFRASTRUCTURE DEVELOPMENT IN THE PHILIPPINES

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembied:

Section 1. Short Title. - This act shall be known as the “Public — Private Partnership in
Infrastructure Development Act of 2008.”

Sec. 2. Declaration of Policy. — It is hereby declared the policy of the state to:

a. Recognize the indispensable role of the private sector as the main engine for
national growth and development;

b. qeate and enabling environment for public-private partnership (PPP)
Projects, that is, private-sector investment in public infrastructure for efficient
Provision of public services;

©. recognize the long-term nature of private investment in infrastructure and
services and to mitigate the associated risks by ensuring that the validity and
enforceability of contracts are respected through the due procass of law,

d. encourage private investment in public infrastructure and/or public services
that:

(i) yields value for money for the state by allocating risks to the party
best able to manage them;

(i) is affordable in light of overall budgetary sustainability, forward
commitment in relation to public expenditure and the potential
returns on private-sector investment,

(iii) maximizes the benefits of Private-sector efficiency, expertise,
flexibility and innovation;

(iv) is financiatty viable; and,
{v) is desired in light of economic and social benefits and costs;
®. ensure a consistent approach among government agencies at both national

and local levels in the adjudication, design, assessment, solicitation and
management of projects; and


f. build capacity of govemment agencies and local government units,
hereinafter. referred to as LGUs to avail themselves of investment
opportunities.

Sec. 3. Scope of Contractual Arrangements. — For this purpose, the goverment
agencies including Govermment-Owned and Controlled Corporations, hereinafter
referred to as government agency and LGUs may select from the list of contractual
afrangements provided below: Provided, however, ich agency may adopt other
contractual arrangements that may be decided upon during contract negotiations:
Provided, finally, that new contractual arrangements not listed under this Act may be
adopted but shall be approved by the Investment Coordination Committee (ICC). The
Contractual arrangements are as follows:

a. Build operate-and-transfer (BOT): A contractual arrangement whereby the
project proponent undertakes the construction, including financing, of a given
infrastructure facility, and the operation and maintenance thereof. The Project
Proponent operates the facility over the fixed term during which it is allowed to
charge facility users appropriate tools, fees, rentals and charge not exceeding
those proposed in its bid or as negotiated and incorporated in the contract to
enable the project proponent to recover its investment, and operating and
maintenance expenses in the project. The project proponent transfer the facility
to the govemment agency or LGU concerned at the end of the fixed term which
shall not exceed fifty (50) years: Provided, that in case of an infrastructure or
development facility the operation of which requires a public utility franchise, the
Proponent must be Filipino or, if a corporation, must be duly registered with the
Security and Exchange Commission (SEC) and owned up to at ieast sixty

' parcent (60%} by Filipinos.

“The buiid-operate-and-transfer shalt include a ‘supply-and-operate situation,
which is a contractual arrangement whereby the supplier of equipment and
machinery for a given infrastructure facility, if the interest of the Govemment so.
requires, operates the facility in the process provide technology transfer and
taining to Filipino nationals.

b. Build-and-transfer (BT): A contractual arrangement whereby the project
component undertakes the financing and construction of a given infrastructure or
development facility and after its completion tums it over to the government
agency of LGU concemed, which shall pay the proponent on an agreed schedule
its total investments expended on the projects, plus a reasonable rate of return
thereon. This arrangement may be employed in the construction of any
infrastructure or development project, including, critical facilities which, for
secunity of strategic reasons, must be operated directly by the government.

¢ Build-own-and-operate (BOO): A contractual arrangement whereby a Project
Proponent is authorized to finance, construct, own, operate and maintain and
infrastructure or development facility from which the proponent is allowed to
recover its total investment, operating and maintenance costs plus reasonable
retum thereon by collecting tolis, fees, rentals or other charges from the facility
users: Provided, that all such projects, upon recommendation of ICC, shall be
approved by the President of the Philippines as chair of the NEDA Board, Under
this project, the proponent that owns the assets of the facility may assign its
operation and maintenance te a facility operator.

d. Build4ease-and-transfer (BLT): A contractual arrangement whereby a project
Proponent is authorized to finance and construct an infrastructure or
development facility and upon its completion tums it over to the goverment
agency and LGU concemed on a lease arrangement for a fixed period after


which ownership of the facility is automatically transferred to the goverment
agency or LGU concerned.

. Build-transfer-and-operate (BTO): A contractuaf arrangement whereby the public
sector contracts out the building of an infrastructure facility to a private entity
such that the contractor builds the facility on a tum-key basis, assuming cost
overrun, delay, and specified performance risks.

“Once the: facility is commissioned satisfactorily, title is transferred to the
implementing agency. The private entity, however, operates the facility on behalf
of the implementing agency under an arrangement.

f. Contract-add-and-operate (CAO): A contractual arrangement whereby the
Project proponent adds to an existing infrastructure facility which it is renting from
the govemment. It operates the expanded project over an agreed franchise
Period. There may or may not be, a transfer arrangement in regard to the facility,

9. Development-operate-and transfer (DOT): A contractual arrangement whereby
favorable conditions extemal to a new infrastructure project, which is to be built
by a private project proponent, are integrated into the arrangement by giving that
entity the right to develop adjoining property, and thus, enjoy some of the
benefits the investment creates such as higher property or rent values.

fh. Rehabilitate-operate-and-transfer (ROT): A contractual arrangement whereby an

existing facility is tumed over to the private sector to refurbish, operate and

maintain for a franchise period, at the expiry of which the legal title to the facility

. is turned over to the government. The term is also used to describe the

Purchase of an existing facility from abroad, importing, refurbishing, erecting and
consuming it within the host country.

i, Rehabilitate-own-and-operate (ROO): A contractual arrangement whereby an
existing facility is tumed over to the private sector to refurbish and operate with
no time limitation imposed on ownership. As long as the operator is not in
violation of its franchise, it can continue to operate the facility in perpetuity.

Soc. 4. Private Detivery of Public infrastructure and/or Services. — (1) Any government
agency or LGU may contract with the private sector for the delivery of public
infrastructure and/or services in any of the following areas:

Energy, including oil and gas;

transport, including railways, roads, tunnels, bridges, ports, canals, channels,
airports, pipelines;

water, including water storage and wastewater,

communications;

information technology;

education;

health;

tourism;

quiture, sports, and leisure facilities;

government buildings, industrial estates and townships, and housing;
. Markets, warehouses, and slaughterhouses:

any other area as may be prescribed.

co

cre->sa>@~a0

(2) Contractual arrangements that may be utilized for the purposes of Projects.
contemplated in Section 3 shall be determined during the negotiations between the
government agency or LGU, on one hand, and the private sector, on the other.


(3) For the purpose of this section and subsequent reference in the following sections
“prescribed” means prescribed in the IRR issued in terms of this Act, except as
otherwise indicated.

Sec. 5. Project Preparations. — (1) Each government agency or LGU shail within its
areas of responsibility prepare a project for approval by the approving authority
mentioned in Section 6 of this Act

(2) Prior to preparing a project for approval, the head of the concamed goverment
agency or LGU shall review or assess the following:

a. the risks associated with the proposed project taking into account the various
methods for sharing these risks; and

b. the economic and financial feasibility of the proposed project, including a
comparison of the cosis and benefits of implementing the project in terms of this Act
with the costs of implementation in another form.

(3) A government agency or LGU that lacks the capacity to prepare a project in the
manner prescribed (including the pre-bidding, bidding and contract management stages
Of the project) can tap the Project Development Facility (PDF). The PDF will provide the
fund, the start-up capital of which shall come from the national goverment budget or
grants from donors of Official Development Assistance (ODA). In the case of a
government agency, the PDF shall be appropriated within its budget ceiling, to enable
the government agency to solicit assistance or expert advice as necessary. in the
¢fterest of sustainability, the winning bidder for a PPP project shall be required to
‘compensate for the cost that the govemment agency expended in developing its
Proposal. In the case of LGUs, the Department of Financa (OOF) shall act as
custodian of the PDF and the winning bidder for a LGU-initiated PPP project shall
likewise compensate the cost expended in developing the propasal. In the event that
resources from the PDF are expended in developing the proposals in the event that
resources from the PDF are expended in developing the required assistance within the
prescribed period, the govemment agency or LGU shall report to the {CC and National
Economic Development Authority (NEDA) Board, respectively.

Sec. 6. Approving Authority. — the National Economic Development Authority (NEDA)
shalll issue the necessary rules and regulations for the effective implementation of this
Act. To this end, the NEDA Board, through the Investment Coordination Committee
KIC), shall request national agencies and local government units to submit program
reports of PPP projects:

(1) 4 national government agency that has identified and prepared a project in the
manner specified in Sec. 5 shall:

(a) be required to endorse through the head of the govemment agency, the
Project proposal and contract to the ICC. This endorsement shall serve as
the first-pass approval for the Project and draft contract. All government
agencies are required to review technical, legal, financial, economic and

social lopications of the project and approve the same Prior to endorsement
to the

{b) submit projects of major national importance with a contract value above an
amount as may be prescribed, to the NEDA Board for approval; all other
Projects to the ICC for approval.

(2) All locai_ government Public-Private Partnership (PPP) projects shall be
approved following the provisions of the Local Government Code.


Sec. 7. Implementing, Monitoring and Auditing Functions. —(1) A goverment agency or
LGU that has secured approval for a project in the manner provided in Sec. 6 of this
Act, shall be responsible for the implementation, management and supervision of the
project. Regular monitoring reports shall be submitted to the ICC for its information.

(2) Regular auditing shall tikewise be conducted following Commission on Audit
(COA) guidelines. Reports may be required from the respective govemment
agency, LGU or COA as deemed necessary.

Sec. 8. Competitive Bidding Procedures. — (1) Competitive bidding procedures shall
apply to all projects for which private investment is solicited in terms of this Act

(2) Under exceptional cases, government agencies may resort to direct negotiations
under such conditions prescribed in Section 53 of RA 9184. LGUs may resort to
direct negotiations under conditions prescribed in the Local Government Code
and/or RA 9184 as may be applicable. Such conditions shall include a
requirement that the government agency or LGU must give public notice in the
prescribed manner of:

(a) the intention to enter into direct negotiations:

(b} the conclusion of negotiations to enter into a contract through direct
negotiations; and

(©) the salient terms of the contract to be concluded.

(3) A government agency may only entertain an unsolicited proposal provided that
‘such proposal is not contained in its prioritized projects in the Medium term
Philippine Investment Program (MTPIP). in the case of LGUs, an unsolicited
Proposal may be entertained provided it does not appear in the local
development pian of the LGU concemed

In addition, the unsolicited proposal to be acceptable is subject to other
conditions as follows:

(@) the government agency or LGU has notified in writing the approving authority
within seven (7) working days of the receipt of the proposal,

(b) the head of the government agency or head of LGU has conducted an
assessment as contemplated in Section 5 (2) and has certified in writing to
the approving authority that it is capable of conducting alt proceedings relating
to the proposal;

(c} the head of the government agency or LGU certified in writing that the
Proposed project serves the public interest;

(d) the proposal does not entail the provision of any form of government
guarantee, subsidy or undertakings as may be prescribed:

{9} the proposal complies with such requirements for unsolicited proposals as
may be prescribed, and

(f) the proponent has indicated its costs for developing the proposal in the
prescribed manner.

{4) Notwithstanding compliance by any govemment agency or LGU with the
Provisions of subsection (3) Section 8 of this Act, the ICC may direct a
government agency of LGU not to proceed with its consideration of an

nsolicited proposal until such time as the latter Satisfies the approving authority
that:


(a) It has access to adequate resources to properly assess the proposal, to
conduct the evaluation of comparative proposals, to conduct negotiations and
to oversee implementation; and

(b) The proposal meets such requirements related to the public interest as may
be prescribed.

(5) All unsolicited proposals shall be subject to comparative proposals, after
approval by the approving authority, in the manner as may be prescribed.

{6) A government agency or LGU may, during its negotiation and before issuing a
request for comparative proposals, negotiate with the proponent that the latter
be compensated for the cost of developing the proposal and to submit the
proposal to competitive bidding procedures. The government agency or LGU
shall introduce, as part of the bidding conditions, a requirement that the winning
bidder {if not the original proponent) reimburse the original proponent for its cost
in developing the proposal or for such amount as the government agency or
LGU and the proponent may agree beforehand in writing.

{7) Non-compliance with the provision of subsection (3) hereof shall be ground for
declaring a contract null and void.

Sec. 9. Contract and Public Disclosure. — (1) reproduction of copies of all contracts

concluded in terms of this Act shalt be the responsibility of the government agency or

LGU. The said goverment agency of LGU is required to forward a copy of the signed

agreement to the ICC for record purposes.

* (2) The grant of access to the signed agreements by the public shall be the
responsibility of the government agency or LGU.

Sec. 10. Validity of Contracts. ~ (1) No party shall in any proceedings before any court,
allege the invalidity of any contract concluded under this Act on the grounds of non.
compliance with the provision of this Act or its RR after a period of ninety (90) days has
elapsed from the date of publication of the approval of the govermment-procured project
in the Official Gazette.

Sec. 11. Contract Termination. — in the event that a project is revoked, cancelied or
terminated by the Government through no fault of the project proponent or by mutual
agreement, the project proponent shall be compensated by the goverment as provided
for in the contractual agreement.

In cases where the government defaults on certain major obligations in the
contract and such failure is not remediable or if remediabie shall remain unremedied for
an unreasonable length of time, the project proponent may, by prior notice to the
concemed government agency or LGU, specifying the turn-over date, terminate the
contract. The private proponent shall likewise be compensated by the Government
according to the provisions of the contractual agreement.

Sec. 12. Investment Promotion. ~ there shall be established a build-operate-and-
transfer Center to be attached as a unit to the Depariment of Trade and Industry {DTI)
ta be known as the Public Partnership Center (PPC) which shall have the following
responsibilities:

(a) Promote and market the government's private-sector investment program,
including the formulation and implementation of a Promotion and marketing
plan, providing service as an information center for investors/developers as
Well as for government agencies;


(b) Participate in the technical working group(TWG) that may be established by
the IRR Committeo:

(c) Perform business development and investment-related activities in support of
the other functions and mandate of the DTI; and

(d) Perform such other functions as may be prescribed under the IRR.

Sec. 13. Liability. — in accordance with Section 38, Chapter 9 of the administrative Code
of 1987, the head of the government agency shall not be held liable for acts done in the
performance of his official duties, to undertake the purposes of implementing this Act or
its IRR unless there is a clear showing of bad faith, malice, or gross negligence.

Yow i uyGHReHUNY FURS aU FeyuIUOnS. ~ (1) Ine Implemenung Kules and
Regulations issued by virtue of Republic Act No. 6957 as amended by Republic Act No.
7718 shail remain in full force and affect until repealed.

(2) The IRR committee may, subject to the approval of the NEDA Board and after
conducting public consultations and publication as required by law, issue the
IRR to provide for the implementation of this Act in the most expeditious:
manner. The committee may, as needed, update such IRR from time to time.

(3) Without limiting the generality of the foregoing, the IRR may provide for.

(@) contractual arrangements and repayment schemes that may be entered into
under this Act;

(b) areas in which private investment may be solicited;

(c) institutional arrangements for bid management;

(d) manner of preparation and content of documents, inclsding, clarifications and
Pre-bid conferences;

(e) qualifications or proponents, contractors, bidders, and facility operators:

(f) procedures for competitive bidding;

(g) procedures for direct negotiation;

(h) procedures for unsolicited proposals;

(i) contract negotiation and award;

{j) contract approval and implementation;

{k) investment incentives, government guarantees, support and undertaking:

(1) contract management, coordination, monitoring and auditing;

(m)the powers, functions and duties of concemed agencies;

(n) any other matter required for the expeditious implementation of the Act.

(4) For the purposes of this section, “committee” means a committee created by the
President comprising one representative from each of the following:

(a) The Department of Public Works and Highways (DPWH),

(b) The Department of Transportation and Communication {DOTC);
(c) The Department of Energy (DOE);

{d) The Department of Trade of Industry (DTI);

{e) The Department f Finance (DOF);

{f) The Department of Interior and Local Government {DILG),

(9) The National Economic and Development Authority (NEDA);

(h) The Department of Budget and Management (DBM); and

(i) The Office of the President (OP).

Sec 15. Repealing Clause. — Any law, particularly Repubjic Act No. 6957 as amended
by Republic Act No. 7718, Presidential Decree, Executive Order, Rules, and
Regulations, contrary to or inconsistent with this Act are hereby repeated of modified
accordingly.


Sec. 16. Separability Clause. — if any provision of this Act is held invalid, the other
provisions not affected thereby shall continue to be in full force and affect

Sec. 17. Effectivity Clause. - This Act shall take effect fifteen (15) days after its
publication in the Official gazette and in at least two (2) newspaper of general
circulation

Approved