LGU PPPs: Drafting the Local PPP Code

PPP Center of the PhilippinesMarch 8, 2018

Presentation Outline

The PPP Center, Its Role and Mandate

The Philippine PPP Program

Guiding Principles in the Development of LGU PPP Codes

Salient Features of LGU PPP Codes

Ways Forward for LGUs

The PPP Center, Its Role and Mandate

The PPP Program and the Center’s roles through the years

1986-1992• BOT Law

(RA 6957)

1992-1998• Amended

BOT Law (RA 7718)

• BOT Center under Office of the President –Coordinating Council of the Philippine Assistance Program (CCPAP)

1998-2001• Renamed

BOT program to PSP program

• Coordinating Council for PrivateSector Participation (CCPSP)under the Office of the President

2001-2010• Revert to

BOT Program

• BOT Center under DTI

2010- 2016• PPP

Program

• Renamed PPP Center and attached to NEDA

2016-present• PPP

Program

• PPP Center attached to NEDA

The PPP Center’s Mandate

Executive Order No. 8 dated 9 September 2010SECTION 2. Powers and Functions of the PPP CenterThe PPP Center shall cover all the PPP programs and projectsincluding all the variants or Arrangements under the BOT Lawand Joint Venture Agreements xxx

PPP Governing Board Policy Circular No. 07-2015 dated 25 August 2015PPP Monitoring Framework and ProtocolsIll. Scope. This policy is intended to cover all PPP projects,including all variants and arrangements under the Build-Operate-and-Transfer (BOT) Law and its RevisedImplementing Rules and Regulations (IRR) and JointVenture Agreements, among others, undertaken bygovernment entities such as National Government Agencies(NGAs), Government-Owned or Controlled Corporations(GOCCs), Local Government Units (LGUs), and othergovernment instrumentalities.

The PPP Center

Policy reforms to enhance

enabling environment

2 Prepare

3 Approve

4 Procure

5 Implement

1 Identify

Capacity building of implementing

and oversight agencies

Projects under

BOT Law &

Joint Ventures

Policy, Capacity and Projects

PPP Center to directly report to the PPP Governing Board chaired by NEDA, vice-chaired by DOF with the following members: DTI, DBM, OES, DOJ, and NCC

PPP Project Pipeline (as of March 7, 2018)

30PROJECTS

PHP 388.45 Billion**

AwardedPHP 323.06 Billion*

16

Under ProcurementPHP 0.298 Billion

1

4For Evaluation & Approval

Under Development

Under Review by the IAPHP 65.09 Billion

2

7

*Projects started from 2010 onwards

**Amount does not include 12 other projects with no estimated costs yet

The Philippine PPP Program

Private Sector Participation in Government Projects

Public sector owns and operates assets

Public-Private Partnership (PPP)

Private sector owns and operates assets

*RA 6957 as amended by RA 7718 and its IRR covers the different BOT contractual arrangements and excludes Joint Venture Agreements

• Utility• Restructuring• Corporatization• Decentralization

• Build-Operate-and-Transfer (BOT)*

• Joint Venture Agreements

• Full Divestiture/Privatization

Private Sector Engagement HighLow

PPPs in the Philippines

Contractual arrangement between government and the private partner for the provision of a public asset or service

It is a long term contract (e.g. 20 -30 years which shall not exceed 50 years)

Role of private partner: finance, design, construct, operate, and/or maintain government facilities

Risk is borne by the party who can best manage it

The facility is turned over to government at the end of concession period

Legal Framework for LGU PPPs

PPP Modality Governing Framework

BOT Law Variants BOT Law and IRR

Joint Ventures LGC/2013 NEDA Guidelines/Local Ordinances

Concessions Special Laws/LocalOrdinances

Management and Service Contracts

GPRA

Lease and Affermage Civil Code/Public Act/LGC/Local Ordinances

Divestment/Disposition Commission on Audit Circular No. 89-296

Corporatization/Subsidiary Corporation Code

LGU P4 is a policy-level and project-level approach of promoting the general welfare, inclusive growth and better quality of life for the Filipinos.

Build-Operate-and-Transfer (BOT) Law and its revised IRR

Contractual Arrangements/Modalities:1. Build-and-Transfer (BT)2. Build-Lease-and-Transfer (BLT)3. Build-Operate-and-Transfer (BOT)4. Build-Own-and-Operate (BOO)5. Build-Transfer-and-Operate (BTO)6. Contract-Add-and-Operate (CAO)7. Develop-Operate-and-Transfer (DOT)8. Rehabilitate-Operate-and-Transfer (ROT)9. Rehabilitate-Own-and-Operate (ROO)10. Other variations of any of the above

An act authorizing the financing, construction,operation and maintenance of infrastructureprojects by the private sector and for otherpurposes

Build-Operate-and-Transfer (BOT) Law and its revised IRR

Government Project CompanyConcession

Agreement

DurationRisks Rewards Turnover

A concession agreement under a specificcontractual arrangement is signed betweenthe government and the private partner forthe provision of a public asset or service

A project company is formed by or among the private sector proponents

Lenders

Investors

Construction

OperatorRoles

Joint Venture Agreements (JVAs)

Own Local Government PPP Code/JV Ordinance- Department of Interior and Local Government issued MC No. 2016-120 or the

Guidelines for the Implementation of Public-Private Partnership for the PeopleInitiative for Local Governments (LGU P4). The MC encourages LGUs toadopt an LGU P4 Code where one of the suggested modalities is JV.

RA 7160 Local Government CodeJoint Venture Agreements- Section 22 Corporate Powers “Every LGU, as a corporation, shall have the

following powers xxx (5) to enter into contracts; xxx”- Section 35. Local government units may enter into joint ventures and such

other cooperative arrangements with people's and non-governmentalorganizations to engage in the delivery of certain basic services, xxx”

NEDA Joint Venture Guidelines (2008 or 2013)Executive Order No. 423 s. 2005- Section 8 “the NEDA, in consultation with the GPPB, shall issue guidelines

regarding joint venture agreements with the private entities with the objective ofpromoting transparency, competitiveness and accountability in governmenttransactions, and, where applicable, complying with the requirements of anopen and competitive public bidding”

- LGUs not covered by the guidelines with respect to its local autonomy. However,LGUs are not precluded from adopting the process stipulated in the guidelines.

Joint Venture Agreements (JVAs)

Jointly undertakes (directs and governs) an infrastructure or development projects

(with end view of eventually transfer to either

private sector or to government)

Joint Venture

Private SectorGovernment

Pools money/capital, services, and/or assets

Shares risks & rewards

Corporate JV:max of 50% OCS

Guiding Principles in the Development of LGU Public-

Private Partnership (PPP) Codes

LGU PPP Code Guiding Principles

*Based on DILG MC 2016-120

Pro-People Pro-Accountability Pro-Change

Pro-Value Pro-Learning Pro-Innovation

Pro-Rule of Law Pro-Justice Pro-

Participation

Pro-decentralization

Pro-People

PPP Projects must be aligned with the development plans. PPP projects must be socio-economically viable. User-fees shall be affordable.The body regulating user fees and delivery of public service shall

not have a conflict of interest. Repayment schemes must be anchored on pay for performance

and be limited by a reasonable rate of return. PPP contracts shall have clearly defined indicators and expected

levels of performance. Additionally these shall define how thoseindicators shall be measured.

Pro-Accountability

The LGU shall set up a Project Management Team that willbe responsible for getting the project through the variousphases – development, approval, procurement,implementation. This includes defining, assigning, trackingand reporting of all project tasks.

Projects must undergo appraisal and approval. Appraisal must be done by a body that is independent of

the body that developed the project.Approving body and authorities are clearly defined

A unit responsible for ensuring that provisions of the contractare being implemented shall be established.Contracts shall be made available to the public.

Pro-Change

PPP projects shall be designed and structured in a way thatcaptures lessons learned from similar projects and frombest practices.

Implementation bottlenecks and issues shall be analyzedso that future projects can benefit from lessons learned.

Pro-Value

The project should be an answer to a public need andshould provide the optimum technical solution amongalternatives.

Risks shall be allocated optimally to achieve best value formoney.

Parameters for bidding shall be established by the LGU. The choice of private partner shall be done through a

competitive process with sufficient timelines to be providedto allow bidders to provide competitive offers.

Pro-Learning

The LGU shall invest in capacity building and learningactivities in areas of project development, appraisal,procurement and monitoring.

Pro-Innovation

Innovation shall be encouraged through output-basedproject specifications that focus on outcomes expected fromthe private partner and not on the means to be employed todeliver those outcomes.

Pro-Rule of Law

Laws and relevant rules and regulations must always befollowed through the various phases – development,approval, procurement, implementation.

PPP projects must not fall under the pitfalls of governmentcontracts- corruption, clientism, complacency, conflict ofinterest and concealment.

Pro-Justice

LGUs shall also advance human rights, climate and genderjustice and prioritize the needs of the marginalized in theimplementation of its PPP projects.

Pro-Participation

Stakeholders shall be identified and a public consultationshall be conducted.

Pro-Decentralization

Enacting a LGU PPP Code can be an embodiment of thisprinciple.

LGU Public-Private Partnership (PPP) Code

Identifies the legal framework and PPP modalities thatthe LGU can utilize for its PPP projects.

Establishes the procedures, timelines, andrequirements that the LGU and potential PrivateSector Partners will need to follow in theimplementation of local PPP projects.

Promotes consistency, reliability and transparencyamong LGUs in dealing with the Private Sector.

Salient Features of LGU PPP Codes

LGU PPP Code General Sections*

*Based on draft PPP Center PPP Code for LGUs and DILG MC 2016-120 Annex 1

Policy Declaration

Guiding Principles and

ObjectivesModalities

Projects Governance Structures

Project Approvals

Selection Procedures

Standard Contract

Provisions

Contract Management

and Monitoring

Final Provisions

Policy Declaration

• Enumerates the legal basis of the LGU in enacting aLocal PPP ordinance as provided by relevantPhilippine laws and issuances.

Go to Example

Guiding Principles and Objectives

• Defines the values that the LGU will uphold throughthe PPP Code which can be rooted from the LGU’slocal thrust, mission and vision in partnering with thePrivate Sector.

• Outlines the LGU’s purpose and overall goal inenacting a PPP Code

Go to Example

Definition of Terms

• Provides for uniform understanding of the termsused in the PPP Code.

• Aids in the interpretation of the PPP Code andgives clarity to unique terms as well as wordswhich might have alternative definitions.

Go to Example

Modalities

Key considerations• Include modalities and contractual arrangements

that the LGU can utilize for its PPP projects

Go to Example

Projects

• Identifies the infrastructure and developmentalprojects that the LGU considers as eligible for PPP

• Eligible projects are suggested to be based onpriority sectors within the region, province and thecity/municipal level

Go to Example

Governance Structures

• Outline the composition and roles of a PPP coreteam that will handle PPP projects of the LGU

• Roles include the development of PPP projectstudies/FS, evaluation of unsolicited proposalscoming from potential Private Sector partners etc.

• Contract management duties to ensure smoothimplementation of PPP project

• Spearheads the safekeeping of alldocumentations to aid in the project’s knowledgetransfer

• Focal point of external and internal coordinationon all things concerning the PPP projects of theLGU.

PPP Unit*

Go to Example

Project Approvals

• Determines the approval or confirmation processthat the PPP projects, depending on the modality,will need to go through.

Go to Example

Selection Procedures

• Prescribes the procedures that the LGU will followin the selection of Private Sector partners for itsPPP projects

• LGUs are encouraged to subscribe to proceduresset forth by existing laws and may formulate generalguidelines and timelines for modalities withissuances that do not cover LGUs (i.e. NEDA JointVenture Guidelines)

Go to Example

Standard Contract Provisions

• Stipulates the minimum required standard contractprovisions that PPP contracts should have.

• Can act as a safeguard of the LGU in ensuring that thePPP contracts cover the basic legal relationship, roles,and responsibilities of both parties

Go to Example

Contract Management and Monitoring

• Establishes procedures and mechanisms in managingPPP Contracts and monitoring PPP projects of the LGU

• The PPP Governing Board issued Policy Circular No.07-2015 on PPP Monitoring Framework and Protocolswhich aims to:

• identify the roles and responsibilities of the keyparties involved in monitoring the implementation ofPPP project

• define the protocols for generating, processing, andsharing information for monitoring the implementationof PPP projects

• document information on lessons learned and bestpractices during project implementation that can beused in planning, evaluating, and implementing futurePPP projects

Go to Example

Final Provisions

• Stipulates additional considerations of the LGU in the enactment of its PPP Code

• May include the following, as necessary: Appropriations Fiscal oversight Adherence to existing PPP Governing Board

Policy Circulars Alternative Dispute Resolution Implementing Rules Confirmation of Executed PPP Contracts and

Procedures Commenced Application of other PPP Laws and Regulations Repealing Clause Separability Clause Effectivity

Ways Forward for LGUs

Key Next Steps

• Revisit modalities that are applicable to the LGU’s PPP agenda

• Review available templates and resource materials relevant to PPPs

• Draft LGU PPP Code and submit for review• Draft supplementary executive orders (designation of

members to the PPP Unit and Contract ManagementTeam, and appropriate timelines for the selectionprocedures)

• Local Sanggunian to deliberate on the proposed LGU PPP Code supported by ample public consultation

PPP Codes into PPP Projects

LGU PPP Code PPP Project/sCebu City, Cebu JV Ordinance Waste to EnergyBaguio City, Benguet DILG P4 SanitationQuezon City, Metro Manila Various

referencesWaste to Energy

Valenzuela City, Metro Manila

JV Ordinance Public Market, Town Center, Public

HousingGeneral Santos City, South Cotabato

Variousreferences

Public Market

Los Baños, Laguna DILG P4 Public MarketZamboanga City, Zamboanga del Sur

DILG P4 Multiple Projects

PPP Codes into PPP Projects

LGU PPP Code PPP Project/sTacloban City, Leyte JV Ordinance ReclamationSto. Tomas, Batangas Draft PPP

CodeWater Supply

Muntinlupa City, Metro Manila

Draft JV Ordinance

Multi-level Parking, Public Market

City of San Fernando,Pampanga

Various References

Slaughterhouse, Town Center

City of San Jose del Monte, Bulacan

DILG P4 Slaughterhouse/Integrated Transport

Terminal

www.ppp.gov.ph

PPPCenter.Philippines

@PPP_Ph

Public-private-partnership-Center-of-the-philippines

PPPPinas

For further information, please visit:

For inquiries, kindly e-mail:

info@ppp.gov.ph

THANK YOU!

Reference Slides

Pro-People

Reference:BOT Law IRR Section 2.3 List of Priority Projects

Concerned Agencies/LGUs are tasked to prepare their infrastructure ordevelopment programs and to identify specific priority projects that may befinanced, constructed, operated and maintained by the private sector…

The List of Priority Projects shall be consistent with the Philippine DevelopmentPlan (PDP), and Provincial Development and Physical Framework Plan (PDPFP).

The Public Investment Program (PIP), and the Comprehensive IntegratedInfrastructure Program (CIIP) shall be deemed as the list of National PriorityProjects. The Provincial Development Investment Programs (PDIPs)/ LocalDevelopment Investments Programs (LDIP) shall be deemed as the List of LocalPriority Projects.

Back to Pro-People

Pro-People

Example:

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Pro-PeopleExample:

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Pro-

People

Pro-People

Example:DILG MC 2016-120 Chapter 5 Sec. 33 Code of Conduct

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Pro-People

Suggested reference:PPP Governing Board Policy Circular 03-2015: Institutionalization of

Best Practices in the Public-Private Partnership (PPP) Process

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People

Pro-Accountability

Example:

The LGU PPP Implementing Office shall be led by the Department Head ofthe Sectoral Office concerned. For purposes of PPP implementation, the LocalChief Executive (LCE) shall designate representatives from the following Officesto provide support:

Office of the LCE; Legal; Planning and Development; Accounting and Finance; Engineering; Environment; and Social Welfare and Development

Go to Roles of PPP IO

Pro-Accountability

Development Phasea) Prepare and conduct pre-investment activities

such as pre-feasibility studies, business case,feasibility studies, among others;

Approval Phasea) Prepare the necessary documents that may be

required by the approving body, includingcoordination with the local Sanggunian for theneeded resolution, ordinance, endorsement ofthe project, and authority to the LCE for theproject;

b) Submit to the LCE the project for endorsementto the appropriate approving body pursuant tothe LGU’s Public-Private Partnership Code

Procurement Phase

a) Assist the Prequalification, Bids and AwardsCommittee (PBAC) in preparing tenderdocuments including pre-qualification andbidding documents and draft contract;

b) Assist the PBAC in the conduct of pre-qualification, bidding, evaluation of bids andrecommendation for award;

b) Facilitate the compliance of all the requisitepermits and approval prior to implementation;and

c) Facilitate the conduct of PPP project investor’sforum and ensure the widest dissemination ofinformation relative thereto.

Implementation Phasea) Monitor and evaluate the implementation of PPP

project; andb) Prepare and submit reports to PPP Committee

on the implementation of the PPP projects;c) Submit the original signed copy of PPP contract

and other project-related documents to theApproving Body and the PPP Center within five(5) calendar days after signing thereof; and

d) Prepare status and implementation reports ofPPP Projects and submit the same to the PPPCenter. The reports shall be in accordance withthe format, contents and other guidelinesprescribed by the PPP Center.

The LGU PPP Implementing Office shall perform the following functions:

Back to Pro-Accountability

Pro-Accountability

Example:

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Pro-Accountability

Example:DILG MC 2016-120 Annex 1 Chapter 5 Section 37

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Pro-Change

Example:DILG MC 2016-120 Annex 1 Sec 5 n.

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Pro-Change

Suggested reference:PPP Governing Board Policy Circular 07-2015: PPP Monitoring

Framework and Protocols

Implementation

Selection of Project

Proponent

Review and Approval

Identification and Preparation

1

2

3

4Pre-Construction Construction O&M Asset Transfer

Establishment of systems and protocols in tracking and documenting projects delivery

Creation of a central database for PPP project documents

Institutionalization of Project Steering Group (PSG), Technical Working Group (TWG), and EDC Subcommittee on PPP Projects Execution

Regular issuance of Project Monitoring Reports (monthly for projects implemented from 2010-onward; quarterly for projects implemented before 2010)

Back to Pro-Change

Pro-Value

Example:

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Pro-Value

Risk Allocation Principle“Allocating the risk to the party which can better manage it, can reduce

the project’s overall cost to government”

Suggested Reference:Investment Coordination Committee-Cabinet Committee (ICC-CC) adopted

Generic Preferred Risk Allocation Matrix (GPRAM)

Back to Pro-Value

Pro-Value

Reference:BOT Law IRR Section 4.2 Instruction to Bidders

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Pro-Value

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Pro-Learning

Example:DILG MC 2016-120 Annex 1 Sec. 38 Capability Building Program

The LGU may also utilize the PPP Center’s resources for projectdevelopment, capacity building, knowledge management and projectmonitoring

Back to Pro-Learning

Pro-Innovation

Reference:BOT Law IRR

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Pro-Rule of Law

Example:DILG MC 2016-120 Chapter 5 Sec. 33 Code of Conduct

Back to Pro-Rule of Law

Pro-Justice

Example:

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Pro-Participation

Suggested reference:

PPP Governing Board Policy Circular 10-2016: Public Consultation and

Engagement for PPP Projects

Back to Pro-Participation

Reference SlidesFor Salient Features of

LGU PPP Codes

Policy Declaration

Sec. 20, Art. II of the 1987 Constitution“Section 20. The State recognizes the indispensable role of the private sector, encourages privateenterprise, and provides incentives to needed investments.”

“It is the declared policy of the State to recognize the indispensable role of the private sector asthe main engine for national growth and development and provide the most appropriate favorableincentives to mobilize private resources for the purpose.”

R.A. No. 7160 or the Local Government Code (LGC)Art. 400 of the LGC IRR-Financing, Construction, Maintenance and Management of Infrastructure Projects by the PrivateSector under BOT Law mechanism.

R.A. No. 6957 as amended by R.A. No. 7718 (Amended BOT Law) 2nd par., Section 1.2 of theBOT Law IRR:“For LGU projects, concerned LGUs may formulate additional guidelines/procedures not in conflictwith this Act and these Implementing Rules and Regulations and pertinent provisions of R.A. No.7160 (Local Government Code of 1991) and its implementing rules and regulations.”

EXAMPLES:

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Guiding Principles and Objectives

EXAMPLES:

Go to next example

Guiding Principles and Objectives

EXAMPLES:

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Definition of Terms

EXAMPLE:

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Modalities

Example:

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Projects

EXAMPLE:

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Governance Structures

EXAMPLES:

Go to next example

Governance StructuresEXAMPLES:

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Project Approvals

EXAMPLES:

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Selection Procedures

EXAMPLES:

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Standard Contract Provisions

EXAMPLE:

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Contract Management and Monitoring

EXAMPLE:

Back to Contract Management