Republic of the Philippines
House of Representatives
Quezon City

SIXTEENTH CONGRESS
First Regular Session

HOUSE BILL No. 2906

Introduced by Representative Jesus N. Sacdalan

EXPLANATORY NOTE

AS a background, this bill was filed in the 14! Congress by then Rep. Paul
Daza, and re-filed in the 15!" Congress by then Deputy Speaker, Rep. Raul A.
Daza, But, because of several circumstances, this bill was not acted upon.

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

The Philippines is a pioneer among developing countries in using the Build-
Operate-Transfer schemes for infrastructure development as cited by the
American Chamber o Commerce in the Philippines. In 1990 the first BOT law
in Asia, Republic Act No. 6957 was enacted. In 1994, this was amended by
Republic Act 7718, by increasing the number of variants of BOT contractual
arrangements, to encourage the participation of the private sector in the
public infrastructure investment and development.

From the passage of Republic Act No. 6957, the country had a highly
successful record of implementing BOT projects. A number of projects in the
power and transport sectors were implemented under the BOT schemes,
However, the Asian financial crisis in mid-90's alongside with the country's
tight fiscal situation and the legal problem in the airport terminal project
dampened the interest in the BOT program.

Under the present administration, Public-Private Partnership (PPP) is identified
and employed as one of the primary strategies to spur and stimulate the
infrastructure development, and as such this will require actions to renew or
revive the private sector's interest in the program, and to restore the
investors’ confidence in the BOT schemes. There has to be profound and
weighty policy and institutional reforms that must be made. These reforms
are seen in providing the legal framework that grant property rights and is
committed to enforcement of contracts ; a legal and judicial system that
must be conducive to contractual performance and fo fair and timely


adjudication of any contractual dispute that may arise; that government
implementing agencies and local government units must acquire necessary
technical, legal and financial expertise to be able to identify, design,
implement and monitor PPP projects, and that the legal framework must be
backed by a substantive and operationally efficient set of implementing rules
and regulations.

Considering the multiple concerns in various stages about the existing BOT
law, this bill is guided by the principles aligned with the making of Public-
Private Partnership in infrastructure development as state policy, upholding
competitive bidding as the core of government procurement policy.

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

ge
REP. JESUS/N. SACDALAN


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 2306

Introduced by Representative Jesus N. Sacdalan

AAN ACT ENHANCING THE PRIVATE-PUBLIC PARTNERSHIP IN
INFRASTRUCTURE DEVELOPMENT IN THEPHILIPPINES

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

Section 1. Short Title - This Act shall be known as the Public - Private
Partnership in Infrastructure Development Act of 2013.

Section 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. Create an enabling environment for public-private partnership (PPP)
projects, that is, private sector investment in public infrastructure for
efficient provision of public services;

c. 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.
process 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 expenditures and the potential


retums on private sector investment;

(i) maximize the benefits of private sector efficiency, expertise flexibility
and innovations;

{iv) is financially viable ; and

{v) is desired in light of economic and social benefits and costs.

e. 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 government agencies and local government units,
hereinafter referred to as LGUs to avail themselves of investment
opportunities.

Section 3. Scope of Contractual Arrangements - For this purpose, the
government agencies including Government-owned and Controlled
Corporations, hereinafter referred to as government agency and LGUs may
select from the list of 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 tetm during which it is allowed to charge facility users
appropriate toll, fees, rental 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 government 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 Securities and Exchange Commission (SEC) and owned up to
at least sixty percent (60%) by Filipinos.

The “Build-Operate-and-Transfer” shall include a supply-and-operate
situation which is a contractual arrangement whereby the supplier of


o

equipment and machinery for a given infrastructure facility if the
interest of the Government so requires, operates the facility and in the
process provide technology transfer and training to Filipino nationals.

Build - and — Transfer (BT) - A contractual arrangement whereby the
project proponent undertakes the financing and construction of a
given infrastructure or development facility and after its completion,
turns it over to the government agency or LGU concerned which shall
pay the proponent on an agreed schedule its total investments
expended on the projects, plus a reasonable rate of return thereon.

Build - own ~ and - operate (BOO) - A contractual arrangement
whereby a project proponent is authorized to finance, construct, own,
operate and maintain an 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 toll, fees, rentals or other charges from the facility users.
Provided, that all such projects, upon recommendation of the
Investment Coordination Committee (ICC), shall be approved by the
President of the Philippines as Chair of the National Economic and
Development Authority (NEDA) Board . Under this project, the
proponent that owns the assets of the facility may assign its operation
and maintenance to a facility operator.

. Build —- Lease - 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 government agency or the LGU concerned on a lease
arrangement for a fixed period after which ownership of the facility is
automatically transfered to the government agency or LGU
concerned.

Build ~ Transfer - and Operate (BTO) - A contractual arrangement
whereby an agency/LGU 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.

Contract ~ add - and - operate (CAO) - A contractual arrangement
whereby the project proponent adds to an existing infrastructure
facility which it is renting from the government. It operates the


expanded project over an agreed franchise period. There may or may
not be, a transfer arrangement in regard to the facility.

g. Develop - operate - and - transfer (DOT) - A contractual
arrangement whereby favorable conditions external 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.

h. Rehabilitate - operate - and = transfer (RDT) - a contractual
arrangement whereby an existing facility is turned 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 perpetuality.

Section 4. Private Delivery 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;

culture, sports, and leisure facilities

government buildings, industrial estates and townships, and housing;
markets, warehouses, and slaughterhouses;

any other area as may be prescribed

fore)

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(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 Implementing Rules and
Regulations (IRR) issued in terms of this Act, except as otherwise indicated.


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

(2) Prior to preparing a project proposal for approval, the head of the
concemed government 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 costs 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 fo prepare a
project proposal in the manner prescribed [including the pre-bidding,
bidding and contract management stages of the projec!) can tap the
Project Development Facility (PDF). The PDF will provide the fund, the start-up
capital of which shall come from the national government 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 interest of sustainability, the winning bidder for a PPP
project shall be required to compensate for the cost that the government
agency expended in developing its proposal. In the case of LGUs, the
Department of Finance (DOF) 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 proposal. In the event that resources from
the PDF are expended in developing the proposals or in the event that the
resources from the PDF are expended in developing the required assistance
within the prescribed period the government agency or LGU shall report to
the ICC and the National Economic Development Authority (NEDA) Board,
respectively.

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

(1) A national government agency that has identified and prepared a
project in the manner specified in Section 5, shall:


(a)be required to endorse through the head of the goverment
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 implications of th

(d)submit project proposals of national importance with a contract
value above an amount as may be prescribed, fo the NEDA Board
for approval all other project proposals to the ICC for approval.

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

Section 7. Implementing, Monitoring and Auaiting Functions. - (1)
government agency of 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 likewise be conducted following Commission on
Audit, (COA) guidelines. Reports may be required from the respective
government agency, LGU or COA as deemed necessary.

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

(2) Under exceptional cases, government agencies may resport 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

(c) 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 Plan (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:

(a) the goverment 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 all 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;

(e)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 government agency or LGU with
the provisions of subsection (3) Section 8 of this Act, the ICC may direct
a government agency or LGU not to proceed with its consideration of
an unsolicited proposal until such time as the latter satisfies the
approving authority that:

(a)It has 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 he 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.

Section 9. Contract and Public Disclosure. (1) reproduction of copies of all
contracts concluded in terms of this Act shall be the responsibility of the
government agency or LGU. The said government agency or 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.

Section 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 ground of non-compliance with the provision of this Act or its IRR
after a period of ninety (90) days has elapsed from the date of publication of
the approval of the government-procured project in the Official Gazette.

Section 11. Contract Termination. In the event that a project is revoked,
cancelled or terminated by the Government through no fault of the project
proponent or by mutual agreement, the project proponent shall be
compensated by the government 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 remediable shall remain
unremedied for an unreasonable length of time, the project proponent may,
by prior notice to the concerned 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.


Section 12. Investment Promotion. There shall be established a build-
operate-and-transfer center to e attached as a unit to the Department of
Trade and Industry (DTI) to be known as the Public Partnership Center (PPC)
which shall have the following responsibllities:

(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 Committee;

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

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

Section 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 the IRR unless there is a
clear showing of bad faith, malice, or gross negligence.

Section 14. Implementing Rules and Regulations. (1) The Implementing Rules
and Regulations issued by virue of Republic Act 6957 as amended by
Republic Act. No. 7718 shall remain in full force and effect 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:

(a) 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, including
clarifications and pre-bid conferences;

{e) Qualifications of proponents, contractors, bidders and facility
operators;


(f) Procedures for committee bidding:

(g) Procedures for direct negotiatio

(h) Procedures for unsolicited proposals:

(i) Contract negotiation and award;

(i) Contract approval and implementation;

(k) Investment incentives, government guarantees, support and
undertaking;

(I) Contract management, coordination, monitoring and auditing;

(m)The powers, functions and duties of concerned agencies

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

Act.

(3) 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);

(a) The Department of Trade and Industry (DTI);

(e) The Department of finance (DOF);

(f) The Department of Interior and Local Government (DILG);

(g) The National Economic Development Authority (NEDA):

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

(i) The Office of the President (OP)

Section 15. Repealing Clause. Any law, particularly Republic 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
repealed or modified accordingly.

Section 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
effect.

Section 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.