ArticlesPaving the Pathway for Private-Sector Participation: The PPP Code

By: Atty. Monique G. Bugnosen

Recognizing the indispensable role of the private sector in nation building and national growth, the Philippine government passed Republic Act No. 11966, or “An Act Providing for the Public-Private Partnership (PPP) Code of the Philippines” (the “PPP Code”). The PPP Code is a unified legislation for the implementation and development of PPP Projects. It aims to further the “President’s 8-Point Socioeconomic Agenda of enabling high-quality job creation and inclusive growth by promoting investments in critical physical and social infrastructure”¹.

Commenting on the PPP Code’s passage into law, National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan optimistically opined that “[t]he PPP Code will enable much-needed development across various sectors and accelerate the delivery of public services necessary for economic growth and socioeconomic transformation. With its implementation, the government can harness PPPs to finance priority programs such as the Marcos Administration’s Infrastructure Flagship Projects (IFPs) and even social infrastructure in the education and health sectors. The law encourages leveraging private-sector expertise in process innovation, resource mobilization, and high-quality service delivery”².

Public-Private Partnerships (PPP) Projects

PPP Projects refer to long-term arrangements between the government and the private sector wherein the latter provides its resources to the government to finance, design, construct, operate and maintain infrastructure or development projects and services. PPP Projects seek to address, among others, the country’s need for high quality, efficient, affordable, and accessible infrastructure and/or public services.

Section 4 of the PPP Code defines its scope, which covers “all contractual arrangements between an Implementing Agency and a Private Partner to finance, design, construct, operate, and maintain, or any combination or variation thereof, infrastructure or development projects and services which are typically provided by the public sector, where each party shares in the associated risks.”

Additional PPP Arrangements

Prior to the passage of the PPP Code, PPP Projects were governed by the Build-Operate-Transfer (“BOT”) Law (RA No. 6957, as amended by RA No. 7718) and its implementing rules and regulations. These effectively limited private sector participation because they basically only provided for BOT arrangements, wherein the project proponent will build and operate a project or facility for a given period of time until its operation is transferred to the government.

The PPP Code strives to address this gap by providing project proponents with alternative ways to partner with the government. Under the PPP Code, private proponents now have additional arrangements by which they can partner with the government. In addition to BOT arrangements, the PPP Code covers:

1. joint venture;
2. toll operation;
3. lease agreements providing for rehabilitation, operation, and/or maintenance, including the provision of working capital and/or improvements to, by the private partner of an existing land or facility owned by the government for a period of time covering more than one (1) year;
4. lease agreements, when such lease is a component of a PPP Project; and
5. all other contractual arrangements which possess characteristics or elements of a PPP, or as may be approved by the appropriate Approving Body.

Broadening Governing Institutions

To ensure the holistic implementation of this key legislation, the PPP Code tasks several Implementing Agencies to identify, develop, assess, evaluate, approve, negotiate, award and undertake PPP Projects, viz:

1. Department, bureau, office, instrumentality, commission, authority of the national government;
2. State universities and colleges (SUCs);
3. Local Universities and colleges (LUCs);
4. Local Government Units (LGUs); and
5. Government owned-or-controlled corporations (GOCCs).

By specifically including LGUs as among the Implementing Agencies, the PPP Code acknowledges the LGU’s autonomy in entering and implementing PPP Projects within its territorial jurisdiction, while at the same time ensuring consistency and harmony with the national government’s investment programs by providing specific mechanisms for LGU PPP Projects.

Guidelines on Unsolicited Project Proposals

The PPP Code provides new guidelines and procedures for Unsolicited Proposals, i.e. project proposals made or initiated by a private proponent to undertake a PPP Project, in order to protect public interest as well as provide a longer comparative challenge period to encourage competition.

Under Sec. 10 of the PPP Code, all Unsolicited Proposals shall be submitted to the PPP Center for determination of completeness, after which the PPP Center shall endorse to the appropriate Implementing Agency. The Implementing Agency is then tasked to determine whether it will continue to process the Unsolicited Proposal or reject the same. The Implementing Agency is mandated to state in writing the action it decides to take, with the corresponding justification/s, within three (3) calendar days from the end of the detailed evaluation. If the Implementing Agency fails to act on the Unsolicited Proposal ninety (90) calendar days after the end of the detailed evaluation period, the Unsolicited Proposal shall be deemed approved. However, if the Implementing Agency renders a decision within the said period, its decision shall be final and non-appealable.

If an Unsolicited Proposal is approved or deemed approved, the relevant parties shall conduct good faith negotiations within a period not exceeding one hundred fifty (150) calendar days. If negotiations yield favorable results, the Implementing Agency shall grant the private proponent an Original Proponent Status (OPS). The Implementing Agency shall thereafter submit to the appropriate Approving Body the Unsolicited Proposal, including the parties’ proposed negotiated parameters, terms and conditions.

Upon receipt of the Unsolicited Proposal, the Approving Body will evaluate and assess its completeness in form and substance. If the Approving Body finds that the Unsolicited Proposal lacks certain requirements, it shall inform the Implementing Agency, who in turn shall notify the affected party. The Approving Body can only move forward with the approval of the Unsolicited Proposal once it is satisfied that requirements have been submitted completely.

Upon the Approving Body’s determination that the Unsolicited Proposal satisfies all financial, technical and legal requirements, it shall approve the same. The approved Unsolicited Proposal shall thereafter be subjected to the comparative challenge process for a period of at least ninety (90) days but no more than one (1) year. During this period, the Implementing Agency shall allow other private proponents to submit comparative or competitive proposals to compete with the Unsolicited Proposal.

If no valid comparative or competitive proposals are received during the comparative challenge period, then the PPP Project will be awarded to the original proponent. However, if there is a comparative proposal submitted with terms better than that submitted by the original proponent, the latter is given the right to match such proposal within thirty (30) calendar days from receipt of notice of the results of the comparative challenge. If the original proponent matches the proposal of the challenger proponent, the Implementing Agency shall award the PPP Project to the original proponent; otherwise, the PPP Project shall be awarded to the challenger proponent.

Conclusion

The recently-passed PPP Code marks a significant milestone in the country’s infrastructure development and economic growth agenda. With its enactment, the Philippines aims to streamline and enhance the efficiency of PPP Projects, address longstanding challenges and foster an environment conducive to genuine partnerships between government and the private sector in high-impact infrastructure initiatives.

The PPP Code unifies fragmented legal frameworks surrounding PPPs, providing clarity and consistency in project implementation. By establishing clear procedures for the approval of both national and local PPP Projects, it aims to expedite the process and reduce bureaucratic hurdles, ensuring timely project delivery. Furthermore, the PPP Code introduces a predictable tariff regime that safeguards the public interest, striking a balance between affordability for citizens and viability for investors. It also places a strong emphasis on strengthening enabling institutions for PPPs, enhancing governance, transparency, and accountability throughout the project lifecycle.

If implemented correctly, the PPP Code may just be the Philippines’ long-awaited catalyst for infrastructure development – bridging the widening infrastructure investment gap and paving the way for inclusive and sustainable economic growth.

Monique is a Junior Associate and a member of the Litigation, Taxation, and Corporate Services of the firm.

Monique’s practice includes corporate secretarial matters and compliances before regulatory bodies such as Local Government Units, the Bureau of Internal Revenue, the Securities and Exchange Commission, and other administrative bodies. Her work with the Firm also involves corporate and commercial dealings such as mergers and acquisitions and due diligence. She has handled litigation matters, appearing in courts for criminal cases, and quasi-judicial bodies for administrative cases.

 

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