2.6.2  DETERMINING THE APPROPRIATE CONTRACTUAL ARRANGEMENT

The current BOT law provides for nine variants. Figure 2-6 illustrates the BOT variations and their corresponding stage of transfer.

Figure 2-6: Suggested PPP Modality per Stage of Transfer

The project structure borne out of the financial analysis effectively determines the PPP variant. However, policy considerations also come into play. For example, if the LGU decides that it wants to reduce tariffs to the consuming public, then the project may be structured into a BTO arrangement instead of a BOT, but it takes on a greater project risk. Conversely, if the LGU wants to minimize its risk exposure, then the BOO arrangement may be more appropriate. Allocating more risks to the private sector through B00s, however, will usually require a transparent regulatory environment with a competent, professional regulatory body that is capable of administering fair price adjustments while adequately protecting the public interests. This is especially true when the private sector partner has a monopoly of the particular service.