In the News: What are PPPs? (part 2)

The government’s Public-Private-Partnership (PPP) program has made the headlines again in recent weeks.  The administration has publicly stated that its PPP program is attracting much interest from local conglomerates and foreign investors.  A PPP “project menu” is reportedly being prepared and will be released in October 2010.  But which laws are relevant in the context of Philippine PPPs?

There is no single law or set of regulations which establishes a legal framework for Philippine PPPs.  The applicable law and regulations depend on the specific context of the project.  The common thread that runs through all of them, however, is that subject only to a few narrow exceptions, the government may not enter into a PPP contract without public bidding.

Here are some of the Philippine laws and regulations that relevant in a PPP context:

  • Executive Order No. 423 (2005) – This executive order attempts to consolidate the approval procedures for all government contracts.  Under this issuance, except for contracts which by specific provision of law must be approved by the President, the head of a government entity has full authority to enter into contracts on behalf of such entity.  (A private developer should also check if the charter of such entity authorizes the contract, however.)   If the exceptions to public bidding are believed to apply, prior clearance must be obtained from the National Economic and Development Authority (NEDA) and the Government Procurement Policy Board – unless the exempt contract involves an amount below P500 million, in which case, a certification under oath by the head of the procuring entity is sufficient.  EO 423 also provides that certain contracts which require Presidential approval must first be approved by the NEDA.
  • The BOT Law (Republic Act No. 6957, as amended by Republic Act No. 7718) – This statute and its implementing regulations apply to all “private sector infrastructure or development projects,” i.e., projects that are normally financed and operated by the government but which will be wholly or partly financed, constructed and operated by the private sector under any of the contractual arrangements recognized by the BOT Law and its regulations.  The recognized contractual arrangements include (but are not limited to) build-operate-and-transfer, build-lease-and-transfer and rehabilitation-operate-and-transfer arrangements. Generally, the private developer assumes the burden of developing and operating the project (with some support from the government).  At the end of an agreed cooperation period, the project assets are transferred to the government.  If the BOT project is being entered into with a local government unit as the counterparty, the requirements of the Local Government Code (Republic Act No. 7160, as amended), particularly section 302 thereof, must also be observed. There is also a separate set of regulations applicable to information and communication technology projects sought to be implemented under the BOT Law. Continue reading