Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Eighteenth Congress
First Regular Session

HOUSE BILL NO. 7

Introduced by Representative JOEY SARTE SALCEDA

AN ACT
STRENGTHENING PUBLIC-PRIVATE PARTNERSHIPS AN)
APPROPRIATING FUNDS THEREFOR

EXPLANATORY NOTE

RA No. 6957, as amended: An Offshoot of the Important Role of the Private
Sector in Nation Building. The private sector is an indispensable component in sustainable
development. Recognizing the contribution of the private sector to nation building, Section
20, Article Il of the 1987 Philippine Constitution explicitly provides that “The State
recognizes the indispensable role of the private sector, encourages private enterprise, and
provides incentives to needed investments.”

Pursuant to this declared State policy, two primary laws were enacted by Congress
namely: Republic Act No. 9184 or the Government Procurement Reform Act (RA 9184) for
the procurement of goods, supplies and services, and Republic Act No. 6957 as amended by
Republic Act No. 7718 or the Philippine Build-Operate-and-Transfer (BOT) Law allowing
for a more focused framework in PPP infrastructure development. R.A. No. 9184 was
enacted to, among others, promote transparency in the procurement process and in the
implementation of procurement contracts. Republic Act No. 6957 allows for LGUs to enter
into contractual arrangements with the private sector to implement infrastructure projects thru
a Built-Operate-And-Transfer and Build-Transfer-and-Operate. Eventually, R.A. No. 6957
was amended by Republic Act No. 7718 or the Philippine Build-Operate-and-Transfer (BOT)
Law broadened the list of PPP government implementing government entities to include
government owned and controlled corporations (GOCCs), government financing institutions
(GFls) and state universities and colleges (SUCs); putting up incentives for attracting private
sector investments to venture into PPP projects, and allowing negotiated unsolicited
proposals provided that these comply with conditions outlined in the Law. More importantly,
RA 7718 allowed for other contractual arrangements or schemes to implement PPP projects.

Under existing law, the overall policy making body for all PPP-related matters is
lodged with the PPP Governing Board (PPPGB), composed of the Secretary of Socio-
Economic Planning as chairperson, the Secretary of Finance, as vice-chairperson and as


members, the Secretary of Budget and Management, Secretary of Justice, Secretary of Trade
and Industry, Executive Secretary and the Private Sector Co-Chairman of the National
Competitiveness Council

Salient Features of the Proposed Bill. This proposed bill further enhances and
reinforces the provisions of R.A. 6957, as amended to engender transparency in transactions,
efficiency in the performance of project obligations, and putting additional thrust and impetus
to the PPP program through a more robust cooperation between the public and private
sectors, With these in mind, the bill proposes the following additional amendments to RA
6957, as amended, to wit:

Section 1, as proposed, emphasizes the role of the private sector as “prime mover” for
national growth and development. It expresses in a categorical and explicit terms the
bounden obligation of the government to provide support to allow the private sector to
achieve reasonable rate of return on investments (ROI) in financing the construction ete.
through a competitive and transparent selection process. It also makes it the declared policy
of the state to abide by the principle of transparency with the end in view of protecting the
interest of the public by ensuring fair and reasonable pricing and timely delivery of quality
services.

Amendments to Section 2. (Definition of Terms) under the proposed bill are hereunder
enumerated, to wit:

a)

Inclusion of “bulk grains handling facility or logistic support system” among the
list of Public-Private Infrastructure or Development Projects or “projects”
enumerated in R.A. 6957 as amended.

'b) Inclusion of a definition of “PPP Infrastructure AND Development Plan (PLAN)”.
c) Under RA6957 as amended, the definition of “Facility operator” spells out in
specific terms that Filipino ownership of the public utility franchise should be at
least 60% which is reflective of the wording of Sec. 11 Art. XII of the 1987
Constitution. However, under the proposed bill “Facility operator” as defined
makes reference not only to the nationality and equity requirements as stated in
the Constitution but also to include requirements under all applicable laws.

Allows for a more specific and expanded definition of “Government guarantee” to
include “full or partial responsibility” by the government.

The definition of “Return on Investment” as proposed specifies the factors to be
considered in determining the ROI. The definition of ROI in RA6957 is more
restrictive and does not take into account the aforementioned factors.

f) More detailed definition of the “Project Cost.”

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As proposed, Section 3. Private Initiative in Infrastructure includes a proviso that
specifically requires the submission to the BOT Authority for approval of all national and
local government projects; with the exception of projects that require national government
guarantee or undertaking, in which case the project shall be recommended by the BOT
Authority Board to the president for approval.

A new section, to be numbered as Section 4, defines contractual arrangements.


The previous Section 4, renumbered as Section 5 in the proposed bill, makes it a
requirement for government agencies and LGUs to submit to the PPP authority list of projects
for possible listing in the plan and harmonized investment promotion.

Section 4-A of Republic Act No. 6957, as amended, renumbered as Section 5-A in the
proposed bill, makes it a requirement for Unsolicited Proposals accepted by any appropriate
government agencies / LGUs to be submitted to the PPP Authority for evaluation and
approval, subject to certain conditions.

Section 5, to be renumbered as Section 6 in the proposed bill, requires that projects
under the law shall be done through competitive and transparent public bidding

A new section (Section 8) is introduced establishing a Project Development Facility
(PDF) to serve as a revolving fund to, among others, finance the proper identification, study,
validation, development, and preparation for public bidding.

Section 9, as proposed, spells out the consequences of contract terminations as a result
of the fault or non-fault of the project proponent. Notice that RA No. 6957, as amended,
envisages two situations for contract termination, namely:

1) it is the government that initiates contract termination without the fault of the
proponent, or
2) the government defaults on certain major obligations.

The proposed provision however shifts the emphasis and perspective to the project
proponent’s fault or non-fault which, for all intents and purposes, will have substantial
bearing on the burden of proof.

Section 10 of the RA 6957, as amended, renumbered as Section 12 in the proposed
bill, removes the one billion peso (P1,000,000,000) threshold for projects entitled to
incentives. As proposed, projects, except unsolicited projects, are entitled to incentives
regardless of cost.

A new section, to be numbered as Section 13 in the proposed bill, makes it the
obligation of the Republic of the Philippines or LGUs to uphold the validity and
enforceability of a duly executed contract, unless proven otherwise.

A new section (Section 15), which we will consider as the most substantive, allows
for the creation and establishment of the Public-Private Partnership Authority to serve as the
central body of the government for BOT, Private Sector Participation (PSP) or Public-Private
Partnership projects (PPP), attached to the Department of Trade and Industry (DTI). This is a
significant departure from the organizational structure under RA 6957 which vests upon the
PPP Governing Board the power to set the policy direction of the PPP. As envisioned under
the proposed bill however, the PPP Authority institutionalizes the policy-making body of the
government for BOT and other contractual arrangements. This will make for a more
consistent policy direction for the PPP programs. Subsequent provisions as proposed concern
the composition of the Authority including its powers and functions, budget, and appointment
of its personnel. To give more teeth to the proposed bill, a penalty clause is also introduced,


defining the penalties and sanctions for the violation of any provision of the law and its
implementing rules and regulations.

In view of the foregoing, approval of this bill is earnestly sou;

JOEYSARTESALCEDA


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Eighteenth Congress
First Regular Session

HOUSE BILLNO,__??

Introduced by Representative JOEY SARTE SALCEDA

AN ACT
STRENGTHENING PUBLIC-PRIVATE PARTNERSHIPS AND
APPROPRIATING FUNDS THEREFOR

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

SECTION 1. Short Title— This Act shall be known as the “Public-Private Partnership
(PPP) Rationalization Act.”

SEC. 2. Declaration of Policies and Principles. — Section 20, Article II, of the
Constitution provides that the State recognizes the indispensable role of the private sector,
encourages private enterprise, and provides incentives to needed investments, Furthermore, it
is the declared policy of the State to recognize the private sector as the main engine for national
growth and development, and provide an enabling environment for private sector participation
to mobilize private resources for the purpose of financing, designing, constructing, operating
and maintaining development programs and projects normally undertaken by the government.
Aside from financial incentives as provided by law, the government shall foster robust private
sector participation by ensuring a competitive climate through reduced costs of doing business
by providing cost-effective and time-saving government regulations and procedures and
specific government undertakings in support of the private sector.

It is further declared that the State shall protect the public interest by providing
affordable, accessible, and efficient public services. Subject to reasonable rules and under the

guiding principle of full public disclosure of all transactions, the State shall ensure fair and
1


reasonable pricing and timely delivery of quality infrastructure and services through equitable
tisk allocation inherent in PPP Projects.

Furthermore, it is declared that the State shall ensure that all PPP Projects yield
sufficient value for money to optimize the use of resources in order to achieve better quality of
PPP Projects at lower costs.

The State shall pursue a policy of maintaining a reasonable balance on infrastructure
financing through all means available that will most effectively meet the government’s
objectives. In optimizing value for money, the State shall determine the appropriate financing
by taking into account project drivers and constraints like budget availability, timelines,
stakeholder commitments, and market capacity. Alternative sources of financing may include
appropriations, official development assistance, and PPPs.

Finally, it is declared that the State shall affirm open, fair, transparent, and competitive
selection as the central tenet for securing private investment in PPP Projects.

SEC. 3. Scope and Application. ~ This Act shall apply to all PPP Projects undertaken
by Implementing Agencies through PPP contracts with a Private Proponent, including Joint
Ventures, as defined under this Act. It shall likewise apply to and be enforceable among all
parties to said PPP contracts.

Implementing Agencies are hereby authorized to undertake PPP Projects through PPP

contracts with a Private Proponent in accordance with this Act

SEC. 4. Definition of Terms. — As used in this Act:

(a) Approving Body - refers to an entity authorized to approve PPP Projects, in
accordance with Section 7 of this Act;

(b) Brownfield Project - refers to a project with existing development programs or
projects;

(c) Construction - refers to new construction, rehabilitation, improvement, expansion,
alteration, and related works and activities including the necessary supply and
installation of equipment, materials, labor and services, and related items;


(d) Contractor - refers to any entity allowed under Philippine laws, which may or may
not be the Private Proponent, and which shall undertake the actual construction or
supply of equipment for the PPP Projects;

(e) Cooperation Period - refers to the period during which the PPP contract is in effect;

(f) Facility Operator - refers to an entity with legal personality authorized under
existing laws, which may or may not be the Private Proponent, that shall be
responsible for all aspects of operation and maintenance of facility, including, but
not limited to, the collection of tolls, fees, rentals or charges from facility users;

(g) Government Undertakings - refers to any form of contribution and support, which
the government may extend to a Private Proponent for the implementation of PPP
Projects;

(h) Greenfield Project - refers to a pioneer development program or project;

(i) Implementing Agency - refers to a department, bureau, office, instrumentality,
commission, authority of the national government, state universities and colleges
(SUCs), local government units (LGUs), or government owned-or-controlled
corporation (GOCC) as defined in Republic Act No. 10149, including government
instrumentalities with corporate powers (GICP), government corporate entities
(GCE), government financial institutions (GFls), which is authorized to undertake
any PPP Project;

(j) Joint Venture (JV) - refers to a contractual arrangement whereby both the
Implementing Agency and the Private Proponent contribute to pool resources
comprising of capital, services, or assets (including equipment, land or intellectual
property) to jointly undertake a specific investment activity. The investment
activity shall be for the purpose of accomplishing a specific goal with the end view
of facilitating private sector initiative in a particular industry or sector, and
eventually transfer the activity to either the private sector under competitive market
conditions or to the government. The JV involves a community or pooling of
interests in the performance of the investment activity, and each party shall have
the right to direct and govern the policies in connection therewith with the intention
to share both profits, and risks and losses subject to agreement by the parties. A JV
may be undertaken through a contract or by creating a JV entity;

(k) Local PPP Project - refers to a PPP Project that shall be undertaken by an LGU;


(1) National PPP Project - refers to a PPP Project that shall be undertaken by the
national government, GOCC, GICP, GCE, GFI, or SUCs;

(m)Operation and Maintenance - refers to activities necessary and incidental to
preserve or restore the operational status of an asset or system based on specified
performance indicators;

(0) PPP Project - refers to infrastructure or development programs, projects, activities,
facilities, and related services normally financed and undertaken by the public
sector but which shall now be wholly or partly financed, designed, built, operated
and maintained by the private sector;

(0) Private Proponent - refers to the private sector entity which shall have contractual
responsibility for the PPP Project. The Private Proponent may be Filipino or
foreign-owned, and may engage the services of a foreign Contractor or foreign
Facility Operator, subject to requirements and limitations provided under the
Philippine Constitution;

(p) Viability Gap Funding (VGF) - refers to such financial support the government
may provide to a concession-based PPP Project with the objective of making fees
affordable, while improving the commercial attractiveness of the project, excluding
costs of right-of-way, resettlement, and real estate taxes.

SEC. 5, Public-Private Partnership. —A PPP is a contractual arrangement between the
Implementing Agency and the Private Proponent for the financing, designing, constructing,
operating and maintaining, or any combination thereof, of PPP Projects which are normally
provided by the public sector. PPP Projects may be undertaken through contractual
arrangements, including joint ventures, authorized under the Implementing Rules and
Regulations (IRR) of this Act.

SEC. 6. Priority Projects. —Implementing Agencies shall include in their development
plans, strategies, and investment programs those priority PPP Projects. In identifying those
projects, the Implementing Agencies shall be guided by the following principles: effectiveness
in meeting government objectives, value for money, accountability and transparency, consumer
rights, affordability, public access, safety, and security. Priority projects shall be consistent

with the national and local development and investment plans.


The Implementing Agencies shall submit their list of PPP Projects or any update thereto

to the PPP Center, referred to in Section 20 of this Act, for information. Each proposed PPP

Project shall be subject to the approval of the appropriate Approving Body.
The PPP Center shall ensure that the Congress of the Philippines and the public shall
be provided with adequate and timely information on PPP Projects.

SEC. 7. Approval of PPP Projects. — (a) The approval of PPP Projects under this Act

shall be in accordance with the following:

(1) National PPP Projects. National PPP Projects costing up to five billion pesos
(P5,000,000,000.00) shall be approved by the Investment Coordination Committee of
the National Economic and Development Authority (ICC-NEDA). Projects costing
more than five billion pesos (P5,000,000,000.00) shall be approved by the NEDA
Board, upon prior recommendation by the ICC-NEDA. The ICC-NEDA may, from
time to time, update the aforementioned amounts when the need arises. Project cost
shall be determined as follows

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(ii)

(ii)

(v)

For Greenfield Projects, it shall refer to the total capital expenditure;

For Brownfield Projects, it shall refer to the sum of total capital

expenditure and remaining book value of the asset or system;

For Operation and Maintenance agreements:

a. Itshall refer to the remaining book value of the asset or system in case
of concession-based PPP Project; and

b. Itshall refer to the present value of total government payments in case
of availability-based PPP Project;

For JV projects, it shall refer to the total amount of contributions of the

government to the project in present value with discount rate as prescribed

by the appropriate Approving Body. The said discount rates shall be

regularly published in the NEDA website.

(2) Local PPP Projects. Local PPP Projects shall be approved by the local

sanggunians, except in cases where a Local PPP Project: (1) requires any Government

Undertaking from the national government for capital-intensive projects; or (2) exposes

the national government to significant fiscal and monetary risks, as may be determined
by the ICC-NEDA.


(b) The Approving Body shall assess all PPP Projects based on its overall feasibility
analysis and accord paramount importance on the affordability of user fees and efficiency in
public service. To ensure that all risks associated with PPP Projects are managed and mitigated
accordingly, all PPP contracts to be entered into by the Implementing Agency shall adhere to
the principles stipulated under the Generic Preferred Risk Allocation Matrix (GPRAM) issued
by the ICC-NEDA.

(c) The appropriate Approving Body shall act on the project within thirty (30) working
days upon satisfactory compliance by the concerned Implementing Agency with the
requirements of the appropriate Approving Body. Failure of the appropriate Approving Body
to act on the project within the specified period shall be deemed an approval thereof and the
concerned Implementing Agency may proceed with the procurement of the PPP Project.

SEC. 8. Solicited Proposals. ~ Solicited Proposals refer to submissions by the Private
Proponent to bid for priority PPP Projects through open, fair, transparent, and competitive
public bidding initiated by the Implementing Agency. Government Undertakings are allowed,
subject to the approval of the Approving Body.

The public bidding may be conducted in a single-stage or two-stage bidding process.
The prequalification documents, technical, and financial proposals shall be submitted in at least
three (3) separate envelopes. Electronic bid submission may also be allowed,

The contract shall be awarded to the bidder who has passed the prequalification stage
after having satisfied the prescribed minimum financial, organizational, and legal standards,
has passed the technical proposal evaluation, and has submitted the most favorable financial
bid based on the parameters defined in the bid documents. Affordable user fees and efficient
public services shall be of paramount importance in awarding a PPP contract.

The Implementing Agency shall declare failure of bidding in case of any of the
following:

a. Ifno bids are received;

b. If there are no complying bids;

c. If, after advertisement, only one bidder applied for and met the pre-qualification,

unless otherwise allowed by the ICC-NEDA.

‘The Implementing Agency may consider, on a negotiated basis, a single complying and

responsive bid in case of any of the following:


a. If, after advertisement, more than one bidder applied for pre-qualification but only
‘one met the pre-qualification requirements,

b. If, after pre-qualification of more than one bidder, only one submitted a bid; or

c. If after pre-qualification, more than one bidder submitted bids but only one is found

by the Implementing Agency to be complying.

If the winning bidder fails to comply with any post-award requirement or fails to enter
into a contract with the Implementing Agency, the latter may proceed to consider the next
technically and financially qualified bidder. In case the contract is awarded to the next
technically and financially qualified bidder, it shall be without prejudice to legal remedies
available to the Implementing Agency like forfeiture of bid security, withdrawal of award, and
such other remedies allowed under existing laws and the PPP contract.

The head of the Implementing Agency shall create a Bids and Awards Committee
(BAC), which shall be responsible for all aspects of pre-bidding and bidding process in
solicited proposals, or the comparative bidding process in unsolicited proposals. The
composition of the BAC shall be specified in the IRR of this Act which may include other
relevant government agencies.

‘Any change in control of the Private Proponent or composition of the consortium after
the submission of a solicited proposal shall be subject to the approval of the Implementing
Agency.

SEC. 9. Unsolicited Proposals. — Unsolicited Proposals refer to project proposals
submitted by a Private Proponent not in response to a formal solicitation or request issued by
the Implementing Agency.

In accordance with the provisions of this Section, the Implementing Agency may
accept, reject, or convert an unsolicited proposal into a solicited proposal, subject to the
evaluation of eligibility and merits of the project, and the qualifications of the Private
Proponent who submitted the unsolicited proposal.

An unsolicited proposal involving a priority project may be considered if the
Implementing Agency has not awarded any contract to implement such project. In case the
Implementing Agency has already incurred any development cost for the priority project, such
as the conduct of feasibility study, business case, and surveys, among others, for the last five
(5) years, the Private Proponent must undertake to reimburse the Implementing Agency of such

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documented development costs. Reimbursable development costs for a specific priority project
shall be determined by the Implementing Agency.

An unsolicited proposal for a priority project which requires a Government Undertaking
may be accepted by the Implementing Agency: Provided, that such proposal shall be
automatically converted to a solicited bid.

‘An unsolicited proposal may also be accepted for a project that is not in the list of
priority projects: Provided, that it does not require any of the following Government
Undertakings:

Viability Gap Funding;

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. Government equity except in JV arrangements;
Performance undertaking;

ae

Exemption from real property taxes;

e. Loan guarantee;

f. Contribution of assets, properties, and rights; and

g. Right-of-Way and related costs

‘As an exception, items (f) and (g) above shall not be considered as Government
Undertakings in the following instances:

a. The Implementing Agency owns the assets, properties, rights, including the right-

of-way; or

b. The government receives appropriate compensation pursuant to existing laws, rules,

regulations and guidelines.

In cases where the Implementing Agency receives more than one unsolicited proposal
involving the same or similar project, the Implementing Agency may reject all such proposals,
and instead, bid out the project as a solicited proposal. Otherwise, the Implementing Agency
shall evaluate the proposals using a first in time approach. Under this approach, the first
‘complete proposal is evaluated and decided upon. The second complete proposal shall only be
processed if the first one is rejected or if there is a failure in the negotiation of the first proposal.

If the Implementing Agency accepts, on a negotiated basis, an unsolicited proposal, it
shall grant the Private Proponent who submitted the unsolicited proposal an original proponent
status, which shall be valid for a period not exceeding one (1) year, unless extended by the head
of the Implementing Agency. The Implementing Agency shall publish an invitation for the
submission of comparative proposals.


If no other proposal is received for a period of not less than six (6) months from the
date of last publication, the PPP contract shall be awarded to the original proponent.

If another qualified comparative proponent submits a superior counter-financial
proposal within the period referred to above, and it is accepted by the head of the Implementing
Agency, the original proponent shall have the right to match such counter-financial proposal
within a period not exceeding thirty (30) calendar days from the receipt of notice.

If the Implementing Agency converts an unsolicited proposal and uses it as basis for
public bidding, the original proponent shall be reimbursed of the cost incurred in the
preparation of the proposal, such as the cost of any feasibility study undertaken: Provided, that
such reimbursement shall be in an amount as may be determined in the IRR of this Act,
excluding those which are borne by the Implementing Agency, such as the cost of right-of-way
acquisition: Provided, further, That such reimbursement shall be paid in full by the winning
bidder as a requirement for the award of the contract, or by the Implementing Agency in case
of two consecutive failures of bidding. The PPP Governing Board, as referred to in Section 21
of this Act, may adjust the amount of reimbursement cost as the need arises. If the
Implementing Agency fails to act on an unsolicited proposal within sixty (60) working days
from receipt thereof, the project proposal shall be deemed rejected, without prejudice to any
liability that the erring or negligent officials or employees may incur under existing laws.

Within ten (10) working days from receipt of the unsolicited proposal, the
Implementing Agency shall inform the PPP Center in writing of such receipt and shall furnish
it with a copy of the proposal. The PPP Center may assist the Implementing Agency in the
evaluation of unsolicited proposals.

Upon submission of the unsolicited proposal, the Private Proponent shall pay an
administrative fee to the Implementing Agency for processing of the same, subject to existing
laws, rules and regulations.

Any change in control of the Private Proponent or composition of the consortium after
the submission of an unsolicited proposal shall be subject to the approval of the Implementing
Agency.

SEC. 10. Protest Mechanism. — In all stages of the procurement process, the following
protest protocol shall be strictly followed:
(a) Decisions of the BAC may be questioned by filing a motion for reconsideration

9


within fifteen (15) working days from receipt thereof. The BAC shall act on the motion and
render a decision within thirty (30) calendar days, otherwise it shall be deemed denied.

(b) The decision of the BAC on the motion for reconsideration in the immediately
preceding paragraph may be further questioned by filing an appeal to the head of the
Implementing Agency concerned, and paying a non-refundable appeal fee in an amount
equivalent to no less than 4 of 1% of the project cost within fifteen (15) working days from
receipt thereof, The head of the Implementing Agency shall act on the appeal and render a
decision within thirty (30) calendar days, otherwise it shall be deemed denied.

If the head of the Implementing Agency in the immediately preceding paragraph is not
a Department Secretary, the decision of the head of the Implementing Agency may be further
questioned by filing an appeal to the Secretary of the Department to which the Implementing,
Agency is attached within fifteen (15) working days from receipt thereof . The Department
Secretary shall act on the appeal and render a decision within thirty (30) calendar days,
otherwise it shall be deemed denied.

(©) The decision of the Department Secretary in the immediately preceding paragraph
may be questioned by filing an appeal to the Office of the President within fifteen (15) working
days from receipt thereof. If, within sixty (60) calendar days, the Office of the President does
not act on the appeal, the same is deemed denied.

In no case shall an appeal taken from any decision rendered pursuant to this Act stay or
delay the bidding process.

SEC. 11. Project Supervision and Monitoring. — Every PPP Project shall be
implemented in accordance with the designs, plans, specifications, and standards as approved
by the Implementing Agency, and costs as approved by the appropriate Approving Body. The
Implementing Agency shall supervise the project and provide periodic monitoring reports to
the appropriate oversight agencies.

‘The PPP Governing Board shall set the framework for monitoring of the compliance of
the parties to PPP contracts.

‘The PPP Center shall be responsible for the coordination and monitoring of projects
implemented under this Act. For this purpose, the Implementing Agency shall submit to the
PPP Center all executed PPP contracts, information on the status of projects implemented by,
as well as copies of all unsolicited proposals and related documents received by, the former.

10


At the end of every calendar year, the PPP Center shall submit a report to the President of the
Philippines and to the Congress of the Philippines on the progress of all projects implemented

under this Act.

SEC. 12. Investment Incentives. ~ The PPP Governing Board shall recommend to the
Board of Investments the variations or specific priority projects/activities and the threshold
amounts to qualify a PPP Project for incentives under applicable laws or policies governing

investments in the country.

SEC. 13. Investment Recovery Scheme. — In undertaking PPP Projects, the Private
Proponent shall be allowed to recover its investments and earn profit through any of the
following schemes or a combination thereof:

(a) Revenue-based - refers to a scheme where the Private Proponent is authorized to
charge and collect, in whole or in part, from the public reasonable user fees or tariffs not
exceeding those agreed in the contract subject to appropriate regulation in accordance with
Section 14 of this Act. Where applicable, the Private Proponent may likewise be repaid in the
form of a share in the revenue of the project; and

(b) Availability-based - refers to a scheme where the Implementing Agency commits
to make predetermined payments, which do not take the form of charges paid by the users of
the works or of the service, but of regular payments by the Implementing Agency based on
contractually-defined performance delivery.

Other non-monetary payments, such as commercial development rights, or the grant of
a portion or percentage of the reclaimed land, subject to the constitutional requirements on land
‘ownership, may also be allowed to supplement the foregoing schemes.

In determining the Rate of Return (ROR), the maximum ROR shall be equal to the post-
tax weighted average cost of capital for the same or comparable businesses computed using
established methodologies such as the capital asset pricing model. Income tax shall be allowed
as a cash outflow for rate-determination purposes. This provision shall not bar the application
of performance based-rate regulation or any other rate methodologies, should the
administrative agency regulating such public service deem it efficient and in the public interest.


SEC. 14, Regulation, — All PPP Projects shall be subject to regulation by the appropriate
regulatory body or by contract in the absence of the former.

SEC. 15. Variation, Expansion, or Extension of an Existing PPP Project. — A contract
variation, expansion, or extension may be allowed by the Implementing Agency, subject to the
rules and procedures as provided in the IRR of this Act: Provided, That in case of project
expansion or extension, it shall not exceed the cost of the civil works of the original project,
and shall be adjacent or contiguous to the same, otherwise, the project shall be considered a
new project and shall be tendered accordingly.

For avoidance of doubt, application for variation, expansion, or extension shall be

governed by existing laws, decrees, orders, rules and regulations at the time of application.

SEC. 16. Divestiture / Divestment. — Subject to the approval of the head of the
Implementing Agency, a Private Proponent may divest its ownership, rights, or interest in a
PPP Project: Provided, that the divestiture shall be after a holding or lock-in period as indicated
in the PPP contract: Provided further, that the new Private Proponent has equal or better
qualifications as with the previous Private Proponent.

The Implementing Agency may divest its ownership, rights, or interest in a project:
Provided, that projects which involve full or partial divestment or transfer of ownership of
government assets or properties shall be subject to approval of the appropriate Approving Body

and applicable laws, decrees, orders, rules and regulations.

SEC. 17. Contract Termination. — Ifa PPP contract is revoked, cancelled or terminated
prior to its completion, either contracting party shall compensate the other party pursuant to
terms as defined in the PPP contract. Depending on the contractual stipulations, the grounds
for contract termination which would warrant the right of compensation may include, but are
not limited to, default, insolvency, unlawful divestment or divestiture, or other unlawful acts,

by the Private Proponent or by the government.

SEC. 18. Wind-up and Transfer Measures. — All PPP contracts shall provide for wind-

up and transfer measures.


SEC. 19. Prohibition on the issuance of Temporary Restraining Orders, Preliminary
Injunctions and Preliminary Mandatory Injunctions. ~ No temporary restraining order,
preliminary injunction, or preliminary mandatory injunction shall be issued by any court,
except the Supreme Court, against any Implementing Agency or the PPP Center, its officials
or employees, or any person or entity, whether public or private acting under the government
direction, to restrain, prohibit, or compel the following acts:

a. Bidding, rebidding, or declaration of failure of bidding of PPP Projects;

b. Qualification or disqualification of bidders;

c. Awarding of PPP contract;

d. Acceptance of any unsolicited PPP project proposal, even if not acted upon by the

Implementing Agency concerned under Section 9 of this Act;
fe. Acquisition, clearance, development of the right-of-way, site or location of any PPP
Project;

£. Construction, operation and maintenance of any PPP Project;

g. Commencement, execution, implementation, termination or rescission of any PPP

contract; and

h. Undertaking or authorization of any other lawful activity necessary for such PPP

Project or contract.

This prohibition shall apply in all cases, disputes or controversies instituted by any
person, including, cases filed by bidders or those claiming to have rights through such bidders.
This prohibition shall not apply when the matter is of extreme urgency involving a
constitutional issue, such that unless a temporary restraining order is issued, grave injustice
and irreparable injury will arise.

In addition to any civil and criminal liabilities a judge may incur under existing laws,
any judge who shall issue a temporary restraining order, preliminary injunction or preliminary
mandatory injunction in violation of this Section, shall suffer the penalty of suspension of at
least sixty (60) days without pay.

Any temporary restraining order, preliminary injunction, or preliminary mandatory
injunction issued in violation of this section is void and of no force and effect.

SEC. 20. PPP Center. — To achieve the goals of this Act, the PPP Center created under
Executive Order No. 8, series of 2010, as amended by Executive Order No. 136, series of 2013,

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is hereby institutionalized. It is hereby authorized to adopt its current organizational structure,
absorb its existing employees, and upgrade its human resource component, as may be
necessary.

Towards a more efficient and effective performance of its mandate, the PPP Center

shall have the following powers and functions:

‘a. Assist Implementing Agencies in identifying, developing, prioritizing, and
maintaining a pipeline of PPP Projects;

b. Provide advisory services, technical assistance, trainings, and capacity
development to Implementing Agencies in all PPP-related matters, and act as a
procurement agent upon the request of the Implementing Agency;

¢. Manage and administer the Project Development and Monitoring Facility (PDMF)
as provided in Section 22 of this Act;

d. Recommend plans, policies, and implementation guidelines related to PPP, in
consultation with appropriate oversight committees or agencies, Implementing
Agencies, private sector and other relevant stakeholders;

e. Ensure the sustainability of the PPP program by monitoring, capturing, and sharing
lessons learned from PPP Projects;

f. Submit reports to the Office of the President and the Congress of the Philippines
on the implementation of PPP program and projects of the government at the end
of each year;

g. Promote and market PPP programs and projects, in collaboration with other
government investment promotion agencies;

h. Issue advisory opinions relating to PPPs;

i. Serve as the central repository of all PPP Project documents, including all executed
PPP contracts and any subsequent amendment or supplement thereto, including
settlement agreements, entered into by Implementing Agencies,

j. Actas Secretariat to the PDMF Committee and the PPP Governing Board;

k. Perform such other functions as may be necessary to achieve the objectives and
purposes of this Act.

The PPP Center shall report directly to the PPP Governing Board and shall be attached

to the Department of Finance (DOF) for purposes of policy and program coordination.

The PPP Center shall be headed by an Executive Director with the rank equivalent to

“


an Undersecretary, who shall be appointed by and co-terminus with the President of the
Philippines. The Executive Director shall perform the following functions:

Undertake the day-to-day management and supervise the operations of the PPP

Center;

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Recommend to the PPP Governing Board such policies and measures which are
deemed necessary for the effective exercise and discharge of the powers and
functions of the PPP Center,

Sit as a non-voting member of the PPP Governing Board, and as a member of the
INFRACOM, ICC-NEDA, and other inter-agency bodies in cases where PPPs are
concerned; and

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| Perform such other functions as may be assigned by the PPP Governing Board.

SEC. 21. PPP Governing Board. ~ The PPP Governing Board, created under Executive
Order No. 136, series of 2013, and hereinafter referred to as the Board, is hereby
institutionalized. It shall be the overall policy-making body for all PPP-related matters,
including the PDMF. It shall be responsible for setting the strategic direction of PPP programs
and projects and in creating an enabling policy and institutional environment for PPP.
‘The Board shall be composed of the following:
a. The Secretary of Finance as Chairperson;
b. The Secretary of Socio-Economic Planning as Vice-Chairperson;
. The Secretary of Budget and Management;
|. The Secretary of Justice;
‘The Secretary of Trade and Industry;
The Executive Secretary;

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The Secretary of Interior and Local Government,

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|. The Executive Director of the PPP Center, as non-voting member, and

i. A private sector representative, appointed by and co-terminus with the President of

the Philippines.

The principal members of the Board may designate their respective alternates, who
shall be the official next-in-rank to them, and whose acts shall be considered the acts of their
principals.

‘The presence of the Chairperson and four (4) other members of the Board shall

15


constitute a quorum and a majority vote of the members present shall be necessary for the
adoption of any issuance, order, resolution, decision or other act of the Board in the exercise
of its functions. The Board shall act as a collegial body. In the conduct of meetings, the
Chairperson shall not vote except to break a tie.

‘The Board shall act on any matter for its consideration not later than thirty (30) working
days from the date of submission thereof.

SEC. 22. Project Development and Monitoring Facility. — (a) The PDMF is hereby
established and shall be used for the procurement of advisory and support services related to
the preparation, structuring, probity management, procurement, financial close, project
evaluation, and monitoring of implementation of PPP Projects.

(b) The PDMF referred to under EO No. 8, series of 2010, as amended by EO No. 136,
series of 2013, shall be transferred to the PDMF under this Act. The PDMF may be funded
through and such amount as may be needed and included in the general appropriations act,
official development assistance, or other sources.

(c) The PDMF shall be managed and administered by the PPP Center as a revolving
fund. In order to sustain the PDMF, the PPP Center may collect and receive fees and recover
costs expended through PDMF in accordance with the guidelines to be approved by the PPP
Governing Board. Such amount shall be retained and authorized to be used by the PPP Center
for the purposes indicated herein.

A PDMF Committee is hereby created which shall approve applications for PDMF
support submitted by the Implementing Agencies.

The PDMF Committee shall be composed of: (1) the Secretary of Socio-Economic
Planning as chairperson; (2) the Secretary of Finance, (3) the Secretary of Budget and
Management, and (4) the Executive Director of the PPP Center, as members. The PPP Center
shall serve as the Secretariat for the PDMF Committee.

Subject to approval of the PPP Governing Board, the PDMF Committee shall also
formulate, prescribe, and recommend policies, procedures, and guidelines for the use of PDMF
and recovery of costs charged to the fund.

SEC. 23. Creation ofa Risk Management Fund. — Under an optimal allocation of risks
between the Implementing Agency and the Private Proponent, each risk in a PPP Project shall

16


be assigned to the party that is best able to control the likelihood of its occurrence, manage its
impact on the project, and absorb the risk at the lowest cost.

To ensure fiscal sustainability, enhance the ability of the Implementing Agency to
discharge its obligations under risks allocated to it, and improve terms of financing of PPP
Projects, there is hereby created a trust fund named Risk Management Fund, herein referred to
as the Fund, which shall be financed through dedicated budgetary appropriations and
contributions from the budgets of the Implementing Agencies.

‘The Risk Management Fund shall provide a reliable pool from which disbursements on
government obligations on liabilities that have materialized can be drawn. Any appropriation
and contribution to the Fund, including accrued interests thereon, are permanently appropriated
and shall not revert to the general fund if not disbursed during the fiscal year. The Fund shall
be administered by the DOF following fiduciary standards for fund management. The
operations of the Fund can be enhanced through official development assistance.

The initial seed fund of Three Billion Pesos (P3,000,000,000.00) shall be constituted
to the Fund from the effectivity of this Act.

Notwithstanding the establishment of this fund, the government may still provide an
un-programmed appropriation for unforeseen risks that the government may incur from PPP
Projects.

To monitor such government obligations on liabilities that have materialized and other
unforeseen risks that may arise from PPP Projects; and to develop the guidelines to access the
Fund, the inter-agency technical working group created under Development Budget
Coordination Committee (DBCC) Resolution No. 2015-2, is hereby institutionalized.

As part of the budget submission, the DOF shall submit an annual report on the status
of the fund to Congress of the Philippines. Proceeds of the fund shall be invested in risk-free
highly liquid assets.

SEC. 24. Establishment of a PPP Unit. Each concemed Implementing Agency shall
organize a PPP unit headed by a senior official, who shall be responsible for planning,
overseeing, and monitoring PPP Projects of the Implementing Agency. The PPP unit may also
include as members, among others, technical and legal personnel who are knowledgeable on
the technical and legal aspects, respectively, of the PPP Projects.


SEC. 25. Contracts and Public Disclosure. — Copies of all PPP contracts executed
under this Act shall be considered as public documents. The procedure for the disclosure of
such documents shall be consistent with existing policies, laws, decrees, orders, rules and

regulations,

SEC. 26. Miscellaneous Provisions. — (a) Issuance of Legislative or Administrative
Franchise, License or Permit, All PPP Projects requiring legislative franchise under existing
laws shall secure the same prior to project implementation. Upon compliance by the Private
Proponent of the requirements set by the appropriate regulatory body, the Private Proponent
shall be automatically granted or issued by the appropriate regulatory body the franchise,
permits, license, certificates, or other similar authorizations necessary for the conduct of its
business.

(b) Standardization of Real Property Tax Valuation. The DOF shall issue the
guidelines on real property tax valuation of PPP Projects to ensure uniform and consistent
implementation among all LGUs.

(c) Exemption from Payment of Transfer Taxes. For all PPP Projects, the transfer of
ownership of the PPP Project to the Implementing Agency shall be exempt from capital gains
tax, documentary stamp tax, donor’s tax, and all taxes and fees, whether from national or local,
related to the transfer thereof.

(@) Standardization of Required Endorsements and Permits for PPP Projects. The
PPP Center, in consultation with relevant government agencies, bodies, and LGUs, shall ensure
the adoption of standard timelines and requirements for the issuance of relevant endorsements,
approvals, and permits for PPP Projects

(e) Mandatory Inclusion of Dispute Avoidance and Alternative Dispute Resolution
Mechanisms in PPP Contracts. All PPP contracts shall include provisions on the use of
dispute avoidance and Alternative Dispute Resolution (ADR) mechanisms. The contracting
parties shall be given complete freedom to choose which ADR mechanisms and venue shall
govern their dispute, as well as the rules or procedures to be followed in involving the same.

(f) Conflict of Interest. Conflict of interest shall be prohibited at all times in the
interpretation and implementation of this Act. Conflict of interest, which refers to any act or
omission tending to oppose or disrupt the faithful performance of one’s duty or mandate, shall
include personal, pecuniary, and regulatory conflicts of interests: Provided, That with regard


to regulatory conflicts of interest, no regulatory body shall be allowed to enter into any PPP
contract that they regulate: Provided further, That a regulatory agency that owns public
infrastructure or right-of-way that is intended for a PPP Project shall assign the same to the
department exercising administrative supervision over it, or to the department to which it is
attached, in order that such department may enter into a PPP contract involving such public
infrastructure or right-of-way.

(g) Capital Market Financing. In addition to equity and loans, capital markets may
also be accessed to finance PPP Projects under proper guidance by the appropriate regulatory
bodies.

SEC. 27. Implementing Rules and Regulations. - A committee called the IRR
Committee shall, within sixty (60) working days from the effectivity of this Act, formulate and
prescribe, after public hearing, the IRR for the proper implementation of this Act. The IRR
shall be published after the 60-day period and shall take effect fifteen (15) days after its
publication

The IRR Committee shall be composed of the members of the PPP Governing Board,
and other agencies as may be identified by the PPP Governing Board.

From time to time, the Committee may formulate and prescribe, after due public
hearing, amendments or revisions to the IRR, consistent with the provisions of this Act. The
amended or revised IRR shall take effect fifteen (15) days after its publication.

SEC. 28. Administrative, Civil, and Penal Sanction. - Any person, whether private
individual or public officer or employee, who commits any of the prohibited acts hereunder
proscribed, shall be punished by imprisonment from a minimum of three (3) years to a
maximum of six (6) years and one (1) day:

a. Downgrading the category of the project cost for purposes of evading the required

approvals under this Act;

b. Representation that the Private Proponent has the necessary capitalization to

commence, complete, and implement the PPP Project when the same is false in
material respects;


c. Falsification or insertion of certain provisions in the execution copy of the contract
which are materially and substantially different from the approved final draft
contract; and

d. Any violation of Section 26 (F) under this Act.

In addition, such act committed by the Private Proponent and its concerned officers
shall cause the rescission of its contract for the said PPP Project without compensation and
shall be perpetually disqualified from participating in any bidding or other contractual
arrangement for any government project. This is without prejudice to any other civil or
administrative liability that erring officials or Private Proponents may incur.

SEC. 29, Accountability in PPP Projects. - The Commission on Audit (COA) shall
have jurisdiction over the activities and transactions of the PPP Project, which shall be limited
to the exercise of its visitorial power as defined in the 2009 Revised Rules of Procedure of the
COA, and any amendments thereto, Such power shall be further limited to determining whether
the contribution or share of the Implementing Agency in the PPP Project is being allocated and
utilized according to its intended purpose, and if the Implementing Agency is getting its
rightful share from the revenues generated, as may be applicable

SEC. 30. Transitory Clause. — The provisions of this Act shall apply to all PPP Projects
except: (a) all projects wherein a PPP contract between the winning Private Proponent and the
Implementing Agency concerned has been executed prior to effectivity of this Act; and (b) all
projects undertaken through competitive selection wherein the bid/s have already been opened
prior to the effectivity of this Act. For PPP Projects not covered under items (a) and (b) above,
this Act shall govern, provided that this Act shall not, in any manner, operate to impair vested
rights already accruing to a party.

All unexpended funds for the calendar year, properties, equipment, contracts and
records of the PPP Center are hereby retained. The amount necessary to carry out the
organizational changes of the PPP Center provided in this Act shall be determined by the PPP
Governing Board. Appropriations for succeeding years shall be incorporated in its budget
proposals for congressional action.

All officials and employees of the PPP Center shall be retained and shall not suffer any

loss of seniority or rank or decrease in emoluments.


SEC. 31. Separability Clause. ~ Ifany provision of this Act is declared unconstitutional
or invalid, other parts or provisions hereof not affected thereby shall continue to be in full force

and effect.

SEC. 32. Repealing Clause ~The following are hereby repealed:

a. Republic Act No. 6957;

b. Republic Act No. 7718;

c. Executive Order No. 8 (s. 2010) as amended by Executive Order No. 136 (s. 2013);

d. Executive Order No. 78 (s. 2012);

. Section 8 of Executive Order No. 423 (s. 2005);

£ 2013 Revised Guidelines and Procedures for Entering Into Joint Venture
Agreements Between Government and Private Entities; and

g. Joint Venture Guidelines issued by LGUs.

Allother laws, decrees, orders, rules and regulations, and all other related national and

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local issuances or parts thereof inconsistent with this Act are hereby repealed or amended

accordingly

SEC. 33. Effectivity. This Act shall take effect fifteen (15) days after its publication in

the Official Gazette or ina newspaper of general circulation.

Approved,

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