PPP is defined under the PPP Code and its IRR as a contractual arrangement between an Implementing Agency of the government and a Private Partner to finance, design, construct, operate, and maintain, or any combination or variation thereof, infrastructure or development projects and services.
In previous articles, the salient features of Republic Act 11966, otherwise known as the Public-Private Partnership (PPP) Code of the Philippines, were explained in brief. With the issuance of the PPP Code’s Implementing Rules and Regulations (IRR) which went into effect on 6 April 2024, we take a deep dive into PPPs.
Preliminarily, PPP is defined under the PPP Code and its IRR as a contractual arrangement between an Implementing Agency of the government 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, and where the investment recovery of the Private Partner is linked to performance.
Under the PPP Code and its IRR, there are two modes for the procurement of PPP projects — Solicited and Unsolicited. In a nutshell, a Solicited PPP Project is different from an Unsolicited PPP Project as the former refers to those that are identified as part of its List of PPP Projects and developed by the government, specifically by an Implementing Agency; while the latter are those projects that are proposed by a Private Proponent. They likewise have differences with regard to the process by which they are entered into by the government, as well as their legal requirements.
For the List of PPP Projects, they are required to be posted by the PPP Center and Implementing Agencies on their respective websites.
Under the PPP Code and its IRR, the development of PPP Projects shall consider, among other things, the (a) legal, technical, economic, and financial feasibility of the PPP Project; (b) value-for-money of the proposed PPP Project; (c) optimal risk allocation; (d) affordability of tariffs; (e) climate resilience and sustainability; (f) commercial feasibility and market acceptability; (g) social and environmental safeguards; (h) lessons learned from previous or ongoing PPP projects; and (i) whole-of-government approach.
During this stage, a Feasibility Study for the identified project is developed by the Implementing Agency which requires a minimum set of information as prescribed under the PPP Code IRR such as project description, legal due diligence, market analysis, economic analysis, risk allocation, and risk mitigation plan, among others.
The Feasibility Study of a PPP Project is likewise required to include the results of the stakeholder consultation which should be conducted in accordance with PPP Center guidelines. The target stakeholders may be composed of facility users, landowners, informal settlers, businesses or existing operators, and project-affected persons.
One major difference between a Solicited PPP Project and an Unsolicited PPP Project is that Government Undertakings are generally prohibited from being given to the latter. Government Undertakings may be in the form of: a) viability gap funding and other forms of subsidy; b) payment of RoW-related costs; c) performance undertaking; d) exemptions from any tax, unless otherwise prohibited by the IRR or other applicable laws, rules, and regulations; e) guarantee on demand; f) guarantee on loan repayment; g) guarantee on private sector return; h) government equity; i) contribution of assets, properties, and/or rights; j) monetary payment of contingent liability through the PPP Risk Management Fund of the national government, in the case of Local PPP Projects; and k) credit enhancements.
In the development of Solicited PPP Projects, the Implementing Agencies may utilize the Project Development and Monitoring Facility (PDMF) which is a funding mechanism for the procurement of advisory and support services related to the preparation and structuring of PPP projects. The PDMF may also be used for the other stages of the PPP process such as project evaluation, procurement, probity management, financial close, and monitoring of implementation.
For more of Dean Nilo Divina’s legal tidbits, please visit www.divinalaw.com. For comments and questions, please send an email to cad@divinalaw.com.
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