A Government Reform for the Common Good

7/29/2019 A Government Reform for the Common Good

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RA 6957 AN ACT AUTHORIZING THE FINANCING, CONSTRUCTION, OPERATION

AND MAINTENANCE OF INFRSTRUCTURE PROJECT BY THE PRIVATE SECTOR,

AND FOR THE OTHER PURPOSES

DECLARATION OF POLICY:

it is the declared policy of the State to recognize the indispensable role of

the private sector as the main engine for national growth and development

and provide the most appropriate incentives to mobilize private resources

for the purpose.

IMPLEMENTING RULES AND REGULATIONS

A committee composed from: DPWH,

Department of Finance, NEDA, DILG, Insurance Commission

Shall formulate and prescribe the implementing rules and regulations,

the criteria and guidelines for evaluation and bid proposals,

to subject the facility collections to audit by the Commission on Audit,

conditions for the cancellation of contracts.

PRIVAT INITIATIVE IN INFRASTRUCTURE

All government infrastructure agencies, including government-owned and

controlled corporations and government units, are hereby authorized to enter into

contract with any duly prequalified private contractor for the financing,

construction, operation and maintenance of any financially viable infrastructure

facilities through the build-operate-and transfer / build-and-transfer scheme

BUILD-OPERATE-AND TRANSFER SCHEME

A contractual arrangement whereby the contractor undertakes the construction,

including financing, of a given infrastructure facility, and the operation and

maintenance.

The contractor operates the facility which shall not exceed (50) years during

which it is allowed to charge facility users appropriate tolls, fees, rentals and

charges sufficient to enable the contractor rate of return.


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The contractor transfers the facility to the government agency / LGU concerned

at the end of the fixed term.

For the construction stage, the contractor may obtain financing from foreign /

domestic sources and or engage the services of a foreign/Filipino contractor:

provided that the ownership structure whose operation requires a public

utility must be in accordance with the Constitution

For corporate investors, citizenship of each stockholder shall be the basis

for the computation of Filipino equity

For foreign contractors, Filipino labor shall be employed or hired in the

different phases of the construction where Filipino skills are available

The financing institutions shall not exceed 20% of the total cost of the

infrastructure facility of project

Financing from foreign sources shall not require a guarantee by the

Government /GOCC

supply-and-operate - is 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 providing in

the process technology transfer and training of Filipino nationals.

BUILD-AND-TRANSFER SCHEME

A contractual arrangement whereby the contractor undertakes the

construction, including financing, of a given infrastructure facility, and its

turnover after completion to the government agency / LGU concerned

which shall pay the contractor its total investment expended on the

project, plus a reasonable rate of return.

This arrangement may be employed in the construction of any

infrastructure project including critical facilities which, for security or

strategic reasons, must be operated directly by the Government


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PRIORITY PROJECTS

That may be financed, constructed, operated and maintained by the private

sector.

National project must be approved by Congress

Local projects shall be submitted to the local development councils for

confirmation and approval.

PUBLIC BIDDING OF PROJECTS

In Build-operate-and-transfer arrangement, the contractor shall be awarded to

the lowest complying bidder based on the present value of its proposed tolls,

fees, rentals, and charges over a fixed term or the performance standards, plans,

and specification. Winning contractor shall be awarded with the franchise to

operate and maintain the facility.

In build-and-transfer arrangement, the contract shall be awarded to the lowest

complying bidder based on the present value of its proposed schedule of

amortization payment for the facility to be constructed according to the

prescribed minimum design and performance standards, plans, and specification:

.In build-and-transfer arrangement, the contract shall be awarded to the lowest

complying bidder based on the present value of its proposed schedule of

amortization payment for the facility to be constructed according to the

prescribed minimum design and performance standards, plans, and specification.

A Filipino contractor who submits an equally advantageous bid shall be given

preference

For the financing, construction, operation, and maintenance of any infrastructure

project undertaken, the contractor shall be entitled to a reasonable return of its

investment and operating and maintenance costs in accordance with its bid

proposal and accepted by the concerned contracting infrastructure agency/ LGU


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REPAYMENT SCHEME

For build-operate-and-transfer arrangement, repayment scheme is effected by

authorizing the contractor to charge and collect reasonable tolls, fees, rentals

and charges for the use of the project facility not exceeding those proposed in

the bid and incorporated in the contract

provided that during the lifetime of the franchise the contractor shall undertake

the necessary maintenance andn repair of the facility in accrodance with

standards prescribed.

For build-operate-and-transfer arrangement, repayment scheme is effected by

authorizing the contractor to charge and collect reasonable tolls, fees, rentals

and charges for the use of the project facility not exceeding those proposed in

the bid and incorporated in the contract

provided that during the lifetime of the franchise the contractor shall undertake

the necessary maintenance andn repair of the facility in accrodance with

standards prescribed.

CONTRACT TERMINATION AND ADJUSTMENT

If project is revoked, cancelled or terminated by the Government through no fault

of the contractor / by mutual agreement, the Government shall compensate the

contractor for its actual expenses incurred in the project plus a reasonable rate of

return.

The interest of the Government shall be duly insured with the GSIS or the

Insurance Commission

PUBLIC PRIVATE PARTNERSHI PROJECTS AS OF 2012

LRT LINE 1 South Extension Operation & Maintenance ( Baclaran to Cavite)

LRT LINE 2

East Extension Operation & Maintenance (Doroteo Jose to Masinag

Operation & Maintenance of the Internationalstandard Laguindingan Airport

(Misamis Oriental)

International-standard New Bohol (Panglao) Airport Development

World-class Cebu international Airport Passenger Terminal Building

Operation & Maintenance of the International Gateway of Puerto Princesa

Airport meeting the International Civil Aviation Organization


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Automatic Fair Collection System: decommissioning of magnetic-based

ticketing system with contactless-based smart card technology, with the

introduction of a centralized back office that will perform apportionment of

revenues

Integrated Transport System (ITS) Project: terminals will connect passengersfrom the provinces to other urban transport systems-railway, city bus, taxi and

PUV-serving inner Metro Manila

Cebu Rapid Transit Demonstration Project: restructure of main urban transport

corridor from Bulacao to Ayala Cebu City.

NLEX-SLEX Connector Road: elevated expressway which starts in Caloocan

City and ends in Buendia, Makati and connects NLEX and SLEX to decongest

traffic in Metro Manila

NAIA Expressway Project (Phase II): the project provides access to NAIA

Terminals I,II and III and links two existing expressway namely the Skyway and

the Manila Cavite Expressway

CALA Expressway (Cavite & Laguna Side): involves the construction of two

expressway Cavite & Laguna Side connected to SLEX near Sta. Rosa

Laguna

Improvement/Rehabilitation of the Quirino Highway: that traverses three (3)

provinces, Quezon, Camarines Norte, Camarines Sur

New Centennial Water Supply source Project: construction of a dam, a water

treatment plant, and an associated main pipeline that will provide water supply

security to Metropolis

Operation & Maintenance of Angat Hydro-electric Power Plant: MWSS-

owned auxilliary turbines 4 & 5 installed in Angat Hydro-Electric Power Plant

Balara Water Hub:

Construction of operationalization of an international center for water excellence

located within the MWSS Balara Compound UP Diliman Campus

Vaccine Self-Sufficiency Project (Phase II)

Envisioned to accelerate progress in vaccine production and ensure vaccine

sufficiency, thru local formulation, filling, labeling, packaging.


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Grains Central Project, The project will establish grains bulk handling systemswith corn grains processing centers and transshipment stations in major cornproducing areas and selected sea ports by upgrading, expanding and enhancingthe existing operations in at least 15 corn postharvest processing and tradingcenters.

Establishment of Cold Chain Systems Covering Strategic Areas in thePhilippines, The project will involve the construction and operationalization ofCold Chain Centers to be located in major Production and consolidationareas of agri-fishery products. The Centers will be equipped with the requiredfacilities and machineries for minimal processing of livestock, fisheries andhigh value crops.

REFERENCES:

REPUBLIC ACT NO. 6957

Public Private Brochure, 2012

ANALYSIS:

The latest GDP figures reveal the same growth patterns, suggesting littlestructural change in the Philippine economy. On the demand-side, growth remainslargely consumption-driven, fuelled by remittances. On the supply-side, growth hasincreasingly relied on the services sector, which largely involves low-productivity

activities. The result is a state of low-capital-stock equilibrium -- an economy thatdelivers growth but creates few jobs. The countrys growth potential can be moreeffectively realized by private and public investments aimed at addressing gaps ininfrastructure which could, in turn, support the development of high-productivity sectors.

To give the needed boost to the countrys investment level and to build upinfrastructure necessary to accelerate economic growth, public-private partnerships(PPP) have been made a flagship program by the Aquino administration. The PPPprogram taps into the financial resources of the private sector, which is presumablymore efficient in funding, constructing, operating, and maintaining major infrastructureprojects that the government would otherwise usually undertake alone.

Governments partnership with the private sector in carrying out public projectscan be traced as far back as the passage of the first Build-Operate and Transfer (BOT)Law in 1990 as a response to chronic fiscal strain. In 1994, the Ramos administrationamended the BOT Law as it authorized various types of public-private financingschemes. The NAIA 3 Terminal, a public-private-partnership initiative, was conceivedduring this time. From 1994 to the 2000s, the Philippines managed to reel in sizeableinvestments from domestic and foreign firms through PPPs as a key policy in promoting


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infrastructure but even in broader initiatives such as institutional reforms. In other words,

more than a purely economic endeavor, the PPP program is also a confidence-building

initiative by the government with the private sector, allowing and encouraging them to

actively participate in nation-building.

Needless to say, however, these signals would be made clearer if they comesooner rather than later. While we ponder the daang matuwid advocated by the

administration, wouldnt it be better if we could see actual roads being built as a resul t of

this governance philosophy? There is reason to be hopeful, but the nation can wait on

the sidelines for only so long.

Given the Aquino administration's focus on inclusive growth, many of the PPPprojects are in areas where the local government units may not have the appreciation,much less the expertise, for long-term gestating ventures. Power plants are a case inpoint, as many LGUs toe the line of very vocal interest groups in their localities that

subscribe to the not-in-my-backyard syndrome for a host of reasons ranging frompotential pollution to displacement of whole communities. In Mindanao, which issuffering from recurring brownouts, many communities are opposed to coal-fed powerplants proposed by groups like AP. In fact, groups opposed to such big-ticket projectsfunded by agencies like the ADB made their presence felt on Friday, holding a rally astone's throw away from the regional lender's annual meeting.

The agency, which President Benigno Aquino III chairs, approves big-ticketventures that require government counterpart funding or foreign financing, and so wouldhave an impact on the country's fiscal and monetary position. Projects to be rolled outinclude the Modernization of the Philippine Orthopedic Center; New Bohol (Panglao)

Airport; Automatic Fare Collection System; Light Rail Transit Line 1 (LRT 1) Extension;Ninoy Aquino International Airport Expressway; the Vaccine Self-Sufficiency Program ofthe Department of Health, among others. At present, the PPP Center is bidding out aP10.4-billion Department of Education project aimed at building 9,500 classrooms. Asecond project, the southbound extension of LRT 1, is next on the auction block. ThePhilippine government is aiming for five to six percent economic growth this year. It hasramped up public spending in the first quarter for the purpose, but not enough it seems,as the amount disbursed so far has fallen short of target.

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A Government Reform for the Common Good