Valenzuela issues JV guide

Posted on July 28, 2014

THE CITY of Valenzuela has issued guidelines it hopes would spur private sector investments that could help prod development.

Laborers work on a major road project in southern Metro Manila in this photo taken last March 31. Manila has been pressing local governments to harness private sector resources and expertise for strategic projects that could spur development of their localities. --

Ordinance No. 140, series of 2014 -- signed into law last July 14 by Mayor Rexlon T. Gatchalian and published in a newspaper last July 21 -- outlined requirements and procedures for joint ventures (JV) between the city and private sector partners.

The city cited the need for such a local law since “a joint venture is not a variant under Republic Act (RA) No. 6957, as amended by RA 7718 -- popularly known as the Build-Operate-Transfer law -- and does not involve procurement as defined under RA 9184 or the Government Procurement Act” and because “joint ventures by local government units are excluded from the coverage of the 2013 and 2008 Joint Venture Guidelines issued by the National Economic and Development Authority (NEDA)”.

The law -- titled “The Joint Venture Ordinance of Valenzuela City” -- also noted that the Justice as well as Interior and Local Government departments, in separate opinions in 2012 and earlier this year, confirmed “the absence of a detailed statute and framework on local government unit joint ventures...”

Sought for comment, Mr. Gatchalian said in a telephone interview last July 21: “We enacted this because we wanted to keep our options open and unlock the potential value of PPPs (public-private partnerships), of partnering with the private sector for the city.”

“We went to the PPP Center and NEDA recently and what we have now is patterned after the template of guidelines they gave us,” Mr. Gatchalian added.

According to the ordinance, the city government may enter into joint ventures with private sector partners for projects within city limits, and even outside this boundary provided projects concerned help city inhabitants.

The local law also specifies modes of participation by the city government in joint ventures with the private sector, as well as sources of funding like its Internal Revenue Allotment -- or its share in national government tax collections -- as well as Special Education Fund when the project is education-related and Calamity Fund when disaster response is involved.

Projects covered should involve infrastructure, other development as well as service-related projects “which are traditionally or not traditionally provided or supplied by the City”. The list, the ordinance said, includes power plants including hydroelectric projects; dams; highways; airports and sea ports; canals; drainage systems; water supply; sewerage; irrigation; telecommunications; railways; other transport systems; land reclamation; dredging; industrial estates or townships; housing; buildings; tourism projects; markets; slaughterhouses; solid waste management; information technology networks and database infrastructure; education and school facilities; prisons; hospitals and health services; memorial parks and services; parking structures and traffic management; material testing; zoos, parks and plazas; sports, leisure gaming and recreational facilities; cockpits; theaters; as well as “any of the devolved activities under Section 17 of the Local Government Code of 1991”.

It added that private sector proponents, and the facility operator if it is separate, must be at least 60% Filipino-owned in case projects require public utility franchise, but clarified that those that do not require such franchise may be majority foreign-owned.

Joint venture projects will undergo auction or, in the case of an unsolicited proposal, Swiss Challenge under which the city will invite other interested parties to submit comparative proposals.

The city will resort to direct negotiations in case an auction yields only one complying bidder.

The ordinance also set the deadlines for pre-qualification of interested parties; pre-bid conference; recommendation, decision and notice of award; as well as execution, submission and ratification of joint venture agreements, besides defining requirements for prequalification, for technical proposals, and for bid submission, among others.

It also set bid security to be specified in technical proposals at 3% of project cost if less than P100 million; 2.5% of project cost or P3 million -- whichever is higher -- if cost is P100 million to less than P500 million; 2% of project cost or P12.5 million -- whichever is higher -- for P500 million to less than P1 billion; 1.5% of project cost or P20 million, whichever is higher, for P1 billion to less than P5 billion; and 1% of project cost or P75 million, whichever is higher, for those worth at least P5 billion.

The mayor, “upon recommendation of the Bids and Awards Committee, may issue” implementing rules and regulations for the ordinance, which itself takes effect 15 calendar days after publication in at least two newspapers.