AGENCIES proposing public-private partnership (PPP) projects could be required to submit complete financial documents and limit variations to contracts, a draft of the revised rules implementing the Build-Operate-Transfer (BOT) Law showed.
In a March 2 document, the National Economic and Development Authority (NEDA) and the PPP Center detailed the proposed changes to the implementing rules and regulations of Republic Act No. 6957 or the BOT Law. This law authorizes the private sector to finance, build, operate, and maintain infrastructure projects.
Under the draft rules, projects to be considered will need a complete feasibility study, along with economic and financial models based on recent data.
The agency or local government unit (LGU) could need to submit to the relevant approving body a set of at least 18 parameters covering the scope of the project, the contract, performance indicators, revenue share, proposed fees, and liabilities.
It could also include a condition banning one-sided provisions in the contracts.
“A contract is onerous if the cost of the project outweighs the advantages the government and the public will receive from the project,” the draft rules stated.
The head of the government agency or LGU is in charge of making sure that the draft contract seen during the bidding is consistent with the parameters. This official cannot make changes that will alter the approved risk allocation, change the definition of contingent liabilities, or worsen the fiscal impact on the government.
The proposed revisions aim to protect both the government and the public from excessive payments, undue guarantees, unnecessary fiscal risks, and onerous contractual provisions, the draft said.
Other than improving agencies and local government units’ ability to assess the projects, the new rules aim to “reflect appropriate sharing of risks between the government and the project proponent.”
Contract variations may be allowed by the head of the agency or LGU if such changes do not impact the set parameters. The changes should not increase fees and charges or cut down the government’s profit share — unless approved by the regulator.
Variations will also be allowed if they do not reduce the scope of construction works or performance standards, and if they do not extend the contract term.
Lastly, contract variations can be permitted if “there is no additional government undertaking, or increase in the financial exposure of the government under the project.”
New or additional works or services, including the expansion of the existing project, beyond the approved scope, will not be treated as a contract variation.
“It shall be considered as an entirely new project that requires approval by the appropriate approving body and bidding,” the document said.
Any changes to toll, fees, rentals, and other charges must be approved by the concerned regulator, basing their decision on economic conditions and the financial performance of the project.
The proposed changes to the implementing rules also added project types that are covered by the law, which means more projects could be financed and operated by the private sector.
Projects building and expanding aerial and space infrastructure, trading posts, disaster risk reduction infrastructure, and agri-fishery facilities could be covered if the proposal is approved.
Socioeconomic Planning Secretary Karl Kendrick T. Chua, the chairman of an interagency committee that would amend the implementing rules and regulations, had said that PPP projects could help bring back jobs. But the government must make sure that “private sector interests are aligned to the public’s interests,” he added.
The committee includes NEDA, the PPP Center, and the departments of Finance, Agriculture, Energy, Environment and Natural Resources, Information and Communications, Interior and Local Government, Public Works and Highways, Trade and Industry, and Transportation.
Byunghoon Nam, an ASEAN+3 Macroeconomic Research Office (AMRO) senior economist on the Philippines, had previously said that tighter controls could cut infrastructure investments funded by PPPs in the near term.
But with proper implementation, the revised rules could lead to more financially viable PPP projects and prevent unnecessary fiscal payments and guarantees, he said in November.
Comments from stakeholders on the proposed changes can be sent to the PPP Center until March 15. — Jenina P. Ibañez
