Section 20, Article II of the 1987 Philippine Constitution provides that "The State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments." In recognition of this role in sustainable development, Congress enacted two primary laws to implement the same: the Government Procurement Reform Act (RA 9184) for the procurement of goods, supplies and services, and the RA 6957 as amended by RA 7718 or the Philippine BOT Law which provided a more focused framework in PPP infrastructure development. The enactment of RA 6957 allowed LGUs to enter into contractual arrangements with the private sector to implement infrastructure projects through two variants - Build-Operate-and-Transfer (BOT) and Build-Transfer-and-Operate (BTO). RA 7718 enhances the provision of RA 6957 by broadening the list of PPP government implementing agencies such as government owned and controlled corporations (GOCCs), government financing institutions (GFIs) and state universities and colleges (SUCs); putting in place 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 provided for the inclusion of other contractual arrangements or schemes to implement PPP projects.
Table 1-1: Comparison of RA 6957 and RA 7718
| Declaration of Policy | • Recognizes the indispensable role of the private sector for national growth and development • Provides incentives to mobilize private resources for the purpose of financing the construction, operation and maintenance of infrastructure and development projects normally financed and undertaken by the Government | • Recognizes the indispensable role of the private sector for national growth and development • Clarifies the provision of incentives in mobilizing private resources with the inclusion of minimum government regulations, procedures and specific government undertakings for the private sector as the need arises |
| Private Initiative in Infrastructure | • Emphasizes the solicitation of expertise from a duly prequalified private contractor through build-operate-and-transfer or build-and-transfer scheme | • Emphasizes the solicitation of expertise of individuals, groups or corporations in the private sector who have extensive experience in undertaking infrastructure or development project |
| Priority Projects | • Provides that local projects funded and implemented by the local government units concerned shall be submitted to the local development councils for confirmation or approval | • Enhances the provision of RA 6957 by citing all concerned government agencies, Government-Owned Controlled Corporations (GOCCs) and LGUs shall identify priority development programs for PPP • Provides that local projects shall follow the approval process for different cost ceilings, to wit: (a) Three Hundred Million Pesos (PhP300,000,000) for approval of the Investment Coordination Committee (ICC) of National Economic and Development Authority (NEDA); and (b) more than PhP300,000,000 for the approval of the NEDA Board • Clarifies the acceptance of 'unsolicited' proposals provided that such comply with the conditions set forth in the Law |
| Eligible Projects | • Infrastructure | • Cites infrastructure or development projects, and emphasizes the inclusion of non-traditional infrastructure sectors such education, health, and agriculture |
| Implementation Schemes | • Includes other variants - BOT, BT, BOO, BLT, BTO, CAO, DOT, ROT, ROO, and other variants as may be approved by the President |
As provided in the amended BOT Law and its Implementing Rules and Regulations (IRR), collaborative partnerships between the government and the private sector can be made possible through a broad spectrum of modalities. The BOT Law identifies a number of variants and includes a catch all provision for other variants that may be identified later. However project implemented using new variants are subject to the approval of the President of the Philippines. Table 1-2 elaborates on the different contractual arrangements identified and supported by existing Philippine laws, rules and regulations, and delineates the respective roles of government and the private proponent under each PPP modality.i
Note however that there are other laws and regulations that impact on the implementation of PPP projects. Worthy of note are laws related to economic and quality regulations for infrastructure services and public utilities and environmental laws and regulations. These should be complied with in conjunction with the BOT Law.
Table 1-2: RA 7718 PPP Variantsll
| PPP Modality | Role of the Private Proponent | Role of the Government | Notes/Remarks |
| Finances and constructs; operates and maintains facility for a fixed term; collects fees and charges to recover investments plus profit; transfers facility at the end of cooperation period (maximum of 50 years) | Provides franchise (if required) and regulates activities of BOT contractor; acquires ownership of facilities at the end of cooperation period | Includes a supply-and-operate scheme, a contractual arrangement whereby the supplier of equipment and machinery for a given infrastructure facility, if the interest of the Government so requires, operates the facility. | |
| | Finances and constructs; turns over ownership of the facility to government after project completion | Acquires ownership of facility after construction; compensates proponent at agreed amortization schedule | May be employed in any project, including critical facilities which, for security or strategic reasons, must be operated by the Government. |
| Finances, constructs and owns facility; operates and maintains facility in perpetuity (facility operator may be assigned); collects fees and charges to recover investments and profits | Provides authorization and assistance in securing approval of BOO contract; possesses the option to buy the output/service provided by the BOO operator | All BOO projects upon recommendation of the NEDA-ICC shall be approved by the President of the Philippines. | |
| Finances and constructs; turns over project after completion; transfers ownership of facility after cooperation/lease period | Compensates proponent by way of lease of facility at agreed term and schedule; owns facility after cooperation/lease period | Akin to Lease-to-Own | |
| | Finances and constructs on a turn-key basis; transfers title of facility after commissioning; operates the facility under an agreement | Owns facility after commissioning | Minimizes construction risk delays |
| Adds to an existing facility; operates expanded project for an agreed franchise period | Collects rental payment under agreed terms and schedule; regains control at the end of lease term | There may or may not be a transfer arrangement with regard to the added facility provided by the Project Proponent. | |
| Builds and operates a new infrastructure; transfers property/ facility at the end of the cooperation period | Regains possession of property turned over to investor after cooperation period | Project proponent enjoys some benefits the initial investment creates such as higher property or rent values; akin to BOT with the option to develop adjoining property | |
| Refurbishes, operates, and maintains facility; facility is turned over after the franchise period | Provides franchise to ROT company; regains legal title of property/ facility after franchise period | Also used to describe the purchase of facility from abroad, importing, refurbishing, erecting and consuming it within the host country. | |
| | Refurbishes and owns facility; operates facility in perpetuity as long as there is no franchise violation | Turns over facility and provides franchise to operate; may opt to share in the income of ROO company | Period to operate is dependent on franchise agreement. |
The implementation of PPP projects at the local level is facilitated by the Local Government Code (LGC) of 1991 (RA 7160). As much as the Code vests upon the LGU wide latitude of prerogative to enter into contracts involving its properties, this prerogative should however be used along and harmonized with other relevant legal pronouncements. DILG MC No. 2011-16, in particular, recognizes the need to facilitate the "localization of the mandated powers and functions of the PPP Center" and, thus, enjoins all Local Chief Executives to establish a PPP Sub-Committee in the Local Development Council that would, among others, "assist the Local Development Council (LDC) in the formulation of action plans and strategies related to the implementation of PPP programs and projects."
Box 1-2: Policy and Legal Framework of PPP in the Philippines
| • 1987 Constitution Section 20, Article II • Build-Operate-Transfer Law • RA 6957 as amended by RA 7718 • Other Related Laws and Executive Issuances • Local Government Code • Public Service Act (Commonwealth Act No. 146, as amended) • Foreign Investments Act of 1991 (RA 042, as amended by RA 8179)lll • Foreign Borrowings Act of 1966 (RA 4860) • Omnibus Investments Code of 1987 (EO 226, as amended)iv • Government Procurement Reform Act of 2003 (RA 9184)v • EO 423, "Prescribing the Rules and Procedures on the Review and Approval of all Government Contracts to Conform with RA 9184" • Various laws related to quality and economic regulations • Laws related to environment protection |