BOT Law and the 2022 IRR

RA 6957, amended by RA 7718

Alberto C. Agra
PPP Law, Administrative Law and Local
Government Law Professor, Ateneo Law School
Certified PPP and Regulation SpecialistTM

Advocate and Author, PPP Law-for-All

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Overview of Public-Private
Partnerships (PPPs)

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Parties in PPPs

Private Public Public

Private Public Private

Options Public-Private
Loans/ Grants/
Official Dev’t
Partnerships Assistance

National/ Local
Government
Funds

Public
Entity
 Aspects:
o Project
Nature of PPPs o Design
Private Sector o Finance
Public Sector o Construction
o Operations
o Governance
o Risk-Allocation
o Period
o Performance
Project
o Payments
o Liabilities
o Procedures
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 BOT Law and
2022/ Revised IRR

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Questions we will answer
o Are the acts of the Agency included or excluded from the scope of Material
Adverse Government Action (MAGA)?
o Will COA have jurisdiction over revenues of the private sector?
o What is the basis of the Reasonable Rate or Return (RRoR)?
o Are there new projects allowed?
o Is a concession a new modality?
o What are the guidelines for project approval?
o Is usufruct of public land a form of subsidy?
o Is there a new definition of "New Technology" for unsolicited proposals?
o When is an unsolicited proposal complete?
o What are the grounds for revocation of Original Proponent Status?
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Flow of Presentation: 9 Ps

Policy Packages Privileges

Parties Permission Procedures

Projects Parameters Pact

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The Policy

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Policy
Provision for incentives and Competition
support
Appropriate risk-sharing
Climate of minimum mechanisms
Government regulations
Closer collaboration between
Reasonable returns of national and local governments
investments
Compliance with obligations
Transparency and undertakings

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The Parties

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Public Parties Authorized by the
Coverage appropriate Agency/
LGU pursuant to the
Act or this Revised IRR
Department, Bureau, Office, Commission,
Authority or Agency of National Government
Local Government Units
LGUs may adopt
Government-Owned and/ or -Controlled additional guidelines
Corporations and procedures (not in
conflict with law and
Government Financial Institutions IRR)

State Universities and Colleges

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Private Parties
Project Proponents
• Individual
• Partnership
• Corporation
• Firm
• For above, local or foreign, including consortia of local, foreign or
local and foreign firms

• Cooperative

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Private Parties
Project Proponents
Project Proponent (PP) Facility Operator (FO)
contractual responsibility may or may not be the PP
for Project operate and maintain
with adequate financial registered with SEC or for
base cooperatives, Cooperative
Development Authority
Contractor (C)
if require Public Utility
may or may not be the PP Franchise, secure prior to
undertake construction commencement
and/ or supply equipment

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Private Parties
Requirements/ Tests

Legal Technical

Financial

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Legal Requirements
If Then
Project requires public utility franchise for
operation (PP=FO)
Project requires public utility franchise for
operation (PP not FO)
Project not require public utility franchise PP or FO Filipino or Foreign-Owned
Unincorporated Consortium Undertaking of Members –
Jointly and Severally Liable
Incorporated Consortium Undertaking of Corporation –
Jointly and Severally Liable
Local Contractor licensed and accredited by the PCAB
Foreign Contractor licensed and accredited by accreditation
institution in the Contractor's country (once
awarded, register with PCAB)

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Technical Requirements
Experience and Track Record
Firm Experience Key Personnel Experience
o PP, Consortium Members or FO o sufficient experience in the
o Successfully undertaken a project(s) similar or related to relevant aspect of schemes
the subject project similar or related to the subject
project
o May individually specialize on any or several phases of
the project(s)
o If consortium proponent:
o Evaluated based on the individual or collective experience of
the member-firms of the consortium and of the Cs (even if
the C is not a member of the consortium)
o Submit business plan - identify members, equity interest/
contribution of each member to the consortium, list of
prospective Cs

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Financial Requirements
(for detailed engineering design, Construction and/or O&M)
Equity Debt
o a minimum amount of equity to the project measured in terms of the PP submits bank testimonial:
latest net worth (deducting total liabilities from the total assets less o PP banking with them
equity commitments to other projects)
o PP in good financial
o PP submits: standing and/ or qualified
• latest audited FS to obtain credit
• a sworn affidavit disclosing ongoing and new projects requiring equity accommodations from
• a sworn affidavit disclosing ongoing and new projects requiring debt such banks to finance the
financing project equivalent to the
• debt to be incurred in all projects value of the debt
• equity required by all projects requirement in the
proposal
o a set-aside deposit equivalent to the minimum equity required, committed
solely for the project
o Not considered - joint and several liability agreements, accession agreements,
guarantee letters from parent companies

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The Projects

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Projects
Infrastructure or Development Projects
• Highways, including expressway, roads, bridges, • Power generation, transmission, sub-transmission,
interchanges, tunnels, and related facilities distribution, and related facilities

• Railways or rail-based projects that may or may • Telecommunications, backbone network, terrestrial and
not be packaged with commercial development satellite facilities and related service facilities
opportunities
• Information technology (IT) and data base
• Non-rail based mass transit facilities, navigable infrastructure, including modernization of IT, geo-spatial
inland waterways and related facilities resource mapping and cadastral survey for resource
accounting and planning
• Port infrastructures like piers, wharves, quays,
storage, handling, ferry services and related • Irrigation and related facilities
facilities
• Water supply, sewerage, drainage, and related facilities
• Airports, air navigation, and related facilities

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Projects
Infrastructure or Development Projects
• Education and health infrastructure • Public fish ports and fishponds, including storage and
processing facilities
• Land reclamation, dredging and other related
development facilities • Environmental and solid waste management related
facilities such as but not limited to collection
• Industrial and tourism estates or townships, equipment, composting plants, landfill and tidal
including ecotourism projects such as terrestrial barriers, among others
and coastal/marine nature parks, among others
and related infrastructure facilities and utilities • Climate change mitigation and adaptation infrastructure
projects and related facilities
• Government buildings, housing projects
• Agri-fishery industrial hubs, agribusiness facilities,
• Markets, slaughterhouses, and related facilities agricultural research facilities, agricultural estates, agri-
logistics systems, contract farming, and related facilities
• Warehouses and post-harvest facilities
• Disaster risk reduction and management infrastructure
projects and related facilities

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Priority Projects
• Agencies/ LGUs to prepare list List consistent with the
• To be adopted by Approving Body Agency's/LGU's master plans
• Published in newspaper of general • Philippine Development Plan
circulation and international • Regional Development Plans
circulation, if applicable (or online) • Provincial Development and
Physical Framework Plans
• Lists of National Priority Projects • Comprehensive Development
• Public Investment Program (PIP) Plans
• Three-Year Rolling Infrastructure • such other plans or programs as
Program (TRIP) may be mandated by the
• Successor priority lists President

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Guidelines for Project Approval
• Value-for-money analysis shows that PPP modality is the most viable
procurement option
• Proposed project is technically feasible and is optimal based on a value
engineering/value analysis study
• Outputs of the project are clearly specified and do not restrict competition
• Project is economically viable
• Agency's/LGU's plans for mitigating social and environmental impacts
• Project Cost is sufficient to achieve the technical requirements (key
performance indicators/ targets to meet social and environmental standards)
• Operating costs are sufficient to achieve the operational requirements

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Guidelines for Project Approval
• Project is financially viable for investors at the project level
• Project's cash flows are healthy and sufficient to service debt obligations
• Risk allocation complies with the Generic Preferred Risk Allocation Matrix
• Firm payments are justified by the Agency/LGU
• Proposed bid parameter generates the most value-for money for the public
and shall not deter competition
• Agency/LGU has the capability to deliver its assumed obligations for the
project
• Proposed Parameters, Terms and Conditions (PTCs) are consistent with the
Act and this Revised IRR

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Completeness of Proposed Projects
• Complete Feasibility Study (Note: Pre-FS or Business Plan not
allowed)
• Economic and Financial Models that are traceable (contain data
not older than 3 years)
• Parameters, Terms and Conditions (PTCs) [replacing “Minimum
Design, Performance Standards/Specifications, and Economic
Parameters”]

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The Parameters

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Parameters, Terms & Conditions (PTCs)
• Scope of the project
• Contractual Arrangement
• Contract term
• Obligations, undertakings, and applicable liquidated damages of the Project
Proponent
• Requirement to submit performance reports by the Project Proponent to the
Agency/LGU and to the PPP Center
• Key performance indicators, targets, and measurement
• Government Undertakings
• Bid parameter that does not deter competition
• Requirement to disclose to the Agency/LGU and the appropriate Approving
Body by the Project Proponent of its loan agreement

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Parameters, Terms & Conditions (PTCs)
• Ceiling for debt-to-equity ratio
• Revenue share for the government, if any
• Reasonable Rate of Return (RRoR)
• Proposed structure of tolls/fees/rentals/charges
• Grounds for termination
• Firm and contingent liabilities, risk allocation, materiality threshold amount and/or
compensation cap
• Acceptable conditions for lenders' step-in rights;
• Conditions for acceptable permitted security interest
• A condition prohibiting the incorporation of onerous and 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]

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Reasonable Rate of Return (RRoR)
o Accruing to the Project Proponent at the Project Level [Note under
2012 IRR: rate of return is based on what a Project Proponent shall be
entitled to]
o Reflects prevailing cost of capital (maximum of 12% if negotiated
contract, public utility project which are monopolies)
o Adjusted RRoR (IRR of project or to shareholders after adjusting the
project's free cash flows to reflect the value of all Government
Undertakings and risks)
ovalue of assets, right of way, franchise, personnel, IP, revenues
accruing to Proponent due to undertaking, guarantees, subsidies,
credits, incentives, cost savings

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No Additional PTCs
(In Draft Contract and Negotiations)
• Altering the approved risk allocation Effect if violate:
• Conflict or supersede the PTCs approved by Executed contract is
the Approving Body null and void
• The incremental fiscal impact being Changes allowed:
disadvantageous to the government o Prior to submission
• Altering the definition of contingent liabilities or bulletin)
of bids (prior to bid
expanding the types of contingent liabilities
o Prior to submission
• Worsening the approved viability indicators of comparative
from the government’s perspective proposals

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The Permission

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Approving Bodies
Head of Agency
based on PTCs (also changes)
Government Undertakings in draft contract not approved not
binding against the Republic
NEDA, NEDA-ICC or Local Development Council
Statutory Counsel (contract review and opinion; 20 days)
Department of Finance (project involves funds of national government,
and local projects requiring ICC review/ approval)
Bids and Awards Committee

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Approving Bodies for Projects
(and as Co-Grantors)
National Projects (Approval) Local Projects (Confirmation)
up to Php 300M: NEDA-ICC up to Php 20M: MDC

more than Php 300M: NEDA above Php 20M up to Php 50M: PDC
Board for approval upon the
recommendation of ICC up to Php 50M: CDC

regardless of amount, negotiated above Php 50M up to Php 200M: RDC

projects shall be submitted to the above Php 200M: NEDA-ICC
NEDA Board for approval upon
recommendation by the ICC Expended by public
and private sector

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Confirmation
• Purpose: validating the consistency of the proposed project with
existing master plans and development plans
• Expressed Confirmation
• within 60-day period from upon written request and submission of all
requirements

• confirmation by inaction if no confirmation within 60 days

• Sanggunian approval after confirmation

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COA Audit
Scope Powers
o revenues, share and/or receipts pertaining to or o audit and examine
accruing to the Agency/LGU o visitorial power over non-
government entities such as the
o expenditures or uses of funds and property, Project Proponent pursuant to the
owned or held in trust by, or pertaining to the Government Auditing Code
Government o access to all project-related
o Follow Government Auditing Code documents

o Compliance with contract o Purpose: ensure that revenues,

share and/or receipts pertaining to
o Compliance with law and rules or accruing to the Agency/LGU
derived from any project proposed
[Note: “All revenues and receipts pertaining to or
under the Act are fully and properly
accruing to the Project Proponent shall be treated accounted for and remitted to the
as private funds” deleted from New IRR] Agency/LGU

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The “Packages”

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BOT and its Variants
Build-and-transfer (BT) Contract-add-and-operate (CAO)

Build-lease-and-transfer (BLT) Develop-operate-and-transfer (DOT)

Build-operate-and-transfer (BOT) Rehabilitate-operate-and-transfer (ROT)

Build-own-and-operate (BOO) Rehabilitate-own-and-operate (ROO)

Build-transfer-and-operate (BTO) Others approved by President

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Build-and-Transfer
Undertaking: financing and construction of an infrastructure or
development facility
Payment of Fees: paid on an agreed schedule the total investments
expended on the project, plus a reasonable rate of return
Repayment: through Amortization as may be appropriate and reasonable
Legal Title to Facilities: turned over to the government agency or LGU
concerned after completion
Transfer to Agency/ LGU: Full and legal ownership; facility must be
operable; 3rd party to assess residual value; Project Proponent to provide
Transfer and Warranty Securities

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Build-Lease-and-Transfer
Undertaking: financing and construction of an infrastructure or
development facility; government leases from private sector
Payment of Fees: lease payment
Repayment: through Amortization as may be appropriate and reasonable
Legal Title to Facilities: ownership of the facility is automatically
transferred to the government agency or LGU concerned after the lease
period
Transfer to Agency/ LGU: Full and legal ownership; facility must be
operable; 3rd party to assess residual value; Project Proponent to provide
Transfer and Warranty Securities
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Build-Operate-and-Transfer
Undertaking: financing and construction of an infrastructure facility, and its
operation and maintenance
Payment of Fees: charge on facility users of tolls, fees, rentals, and charges
Repayment: collection of reasonable tolls, fees, and charges for a fixed term

Legal Title to Facilities: during operation period, the facility belongs to the
project proponent, who then transfers the facility to the government agency
or LGU concerned at the end of the fixed term
Transfer to Agency/ LGU: Full and legal ownership; facility must be
operable; 3rd party to assess residual value; Project Proponent to provide
Transfer and Warranty Securities

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Build-Own-and-Operate
Undertaking: financing, construction, ownership, operation and
maintenance of an infrastructure or development facility
Payment of Fees: collection of tolls, fees, rentals or other charges
from facility users
Repayment: collection of reasonable tolls, fees, and charges for a
fixed term
Legal Title to Facilities: ownership is retained by the project
proponent

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Build-Transfer-and-Operate
Undertaking: construction, including financing, of an infrastructure facility, and
its operation and maintenance

Payment of Fees: as provided under the agreement

Repayment: First Option – Amortization as may be appropriate and reasonable

(through Tolls, fees, rentals and charges, management fee); Second Option -
collect tolls, fees, rentals and charges for a fixed term)

Legal Title to Facilities: once the facility is commissioned satisfactorily, title is

transferred to the government agency or LGU concerned, with the project
proponent assuming cost overrun, delay and specified performance risks; the
private entity, however, operates the facility on behalf of the implementing
agency/LGU under an agreement

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Contract-Add-and-Operate
Undertaking: addition to an existing infrastructure facility which it is
renting from the government
Payment of Fees: as provided in the agreement
Repayment: collection of reasonable tolls, fees, and charges for a fixed
term
Legal Title to Facilities: there may or may not be a transfer arrangement
in regard to the facility, but the project proponent operates the
expanded project over an agreed franchise period

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Develop-Operate-and-Transfer
Undertaking: development of adjoining property is integrated into the
agreement for new infrastructure project which is to be built by a private
proponent
Payment of Fees: enjoyment of benefits that the investment creates
such as higher property or rent values
Repayment: collection of reasonable tolls, fees, and charges for a fixed
term
Transfer to Agency/ LGU: Full and legal ownership; facility must be
operable; 3 party to assess residual value; Project Proponent to
rd

provide Transfer and Warranty Securities

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Rehabilitate-Operate-and-Transfer
Undertaking: refurbishing, operation and maintenance of an existing facility; or
the purchase of an existing facility from abroad, importing, refurbishing, erecting
and consuming it within the host country

Payment of Fees: charge on facility users of tolls, fees, rentals, and charges; as
provided in the agreement

Repayment: collection of reasonable tolls, fees, and charges for a fixed term

Legal Title to Facilities: as long as the operator is not in violation of its Franchise,
it can continue to operate the facility in perpetuity; no time limitation imposed on
ownership

Transfer to Agency/ LGU: Full and legal ownership; facility must be operable;
3rd party to assess residual value; Project Proponent to provide Transfer and
Warranty Securities
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Rehabilitate-Own-and-Operate
Undertaking: refurbishing, operation and maintenance of an existing
facility’ private proponent will own the facility
Payment of Fees: collection of tolls, fees, rentals or other charges
from facility users; as provided in agreement
Repayment: collection of reasonable tolls, fees, and charges for a
fixed term
Legal Title of Facilities: as long as the operator is not in violation of its
Franchise, it can continue to operate the facility in perpetuity; no time
limitation imposed on ownership

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The “Privileges”

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Government Undertakings
Direct Government Guarantee Direct Government Equity
Cost-sharing (deleted) Performance Undertaking
Credit Enhancement Legal Assistance
Direct Government Subsidy Security Assistance
Financing and Investment
Incentives

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Direct Government Guarantee
An agreement whereby the government or any of its agencies or local
government units assume responsibility for the repayment of debt directly
incurred by the project proponent in implementing the project in case of a loan
default.

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Cost-Sharing (deleted)
This shall refer to the Agency/LGU concerned bearing a portion of capital
expenses associated with the establishment of an infrastructure development
facility, such as, the provision of access infrastructure, right-of-way, transfer of
ownership over, or usufruct, or possession of land, building or any other real
or personal property for direct use in the project and/or any partial financing of
the project, or components thereof, Provided, that such shall not exceed fifty
percent (50%) of the Project Cost, and the balance to be provided by the
Project Proponent. Such government share may be financed from direct
government appropriations and/or from Official Development Assistance
(ODA) of foreign government or institutions.

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Credit Enhancement
This shall refer to support to a development facility by the Project
Proponent and/or Agency/LGU concerned, the provision of which is
contingent upon the occurrence of certain events and/or risks, as stipulated
in the contract. Credit enhancements are allocated to the party that is best
able to manage and assume the consequences of the risk involved. Credit
enhancements may include, but are not limited to, government guarantees
on the performance, or the obligation of the Agency/LGU under its contract
with the Project Proponent.

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Direct Government Subsidy
Forms: Government, or any of its Agencies/LGUs will:
o defray, pay for or shoulder a portion of the Project Cost
o defray, pay for or shoulder a portion of the expenses and costs in operating or maintaining the
project
o bear a portion of capital expenses associated with the establishment of an Infrastructure or
Development Facility
o contribute any property or assets to the project (provision of access infrastructure, right-of-way,
transfer of ownership over, or usufruct, or possession of land, building or any other real or
personal property for direct use in the project)
o in the case of LGUs, waive or grant special rates on real property taxes on the project during the
term of the contractual arrangement
o waive charges or fees relative to business permits or licenses that are to be obtained for the
Construction of the project, all without receiving payment or value from the Project Proponent
and/or Facility operator for such payment, contribution or support.

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Direct Government Subsidy
Guidelines
o All without receiving appropriate compensation from the Project Proponent and/or Facility
Operator
o not exceed 50% of the total Project Cost
o may be financed from direct government appropriations and/or from official development
assistance (ODA) of foreign government or institutions
o contribution of assets or property
o value of the direct government subsidy shall be determined by a government financial institution
before the project is submitted to the Approving Body
o compensation shall be considered as appropriate if the value of the compensation is at least
equal to the value of the contribution or undertaking as determined by a government financial
institution

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Guidelines for Grant of Usufruct
• Use of Government Financial Institutions - • Compensation Amount - the amount of
To determine the value of the usufruct of compensation for the usufruct of assets shall
government assets, the original proponent be based on the appraised value of the
shall procure, at its own cost, the services asset as determined by the government
of a government financial institution. financial institution. Such amount, including
interests, if any, shall be paid in Philippine
• Conduct of Valuation - The valuation of the pesos on a date set forth under the
usufruct shall be conducted on a date/s, contract.
which is mutually agreed upon by both • Interest Rate - Non-payment of
parties, provided that it shall be done compensation on or before the agreed date
during the negotiation stage but not later shall incur interest at a rate stated in the
than the publication of the invitation for contract, taking into consideration relevant
comparative proposals. The valuation rules and regulations on interest. In case the
determined by the government financial parties fail to agree on the applicable interest
institution shall be valid and binding upon rate, or in default thereof, the prevailing risk-
both parties. free rate shall apply.

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Direct Government Equity
This shall refer to the subscription by the Government or any of its agencies
or Local Government Units of shares of stock or other securities convertible
to shares of stock of the project company, whether such subscription will
be paid by the money or assets.

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Performance Undertaking
This shall refer to an undertaking of a department, bureau, office,
commission, authority, agency, GOCC, or LGU in assuming responsibility
for the performance of the Agency’s/LGU’s obligations under the
contractual arrangement including the payment of monetary obligations, in
case of default. These undertakings may be subject to payment of risk
premium to the Government or LGU, or any other authorized agency.

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Legal Assistance
This shall refer to the extension of representation by government lawyers to
a Project Proponent but only in cases, hearings, or inquiries where the
Agency/LGU and Project Proponent are party-defendants/respondents
therein including the adoption by such government lawyers of positions and
strategies consistent with upholding the validity of the approved contractual
arrangement.

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Security Assistance
This shall refer to the deployment of government security forces, either from
the Philippine National Police (PNP) or the Armed Forces of the Philippines
(AFP) in the vicinity of the project site to provide security during the
implementation of the project up to completion.

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Financing and Investment Incentives

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The Procedures

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2 Routes
Solicited Unsolicited

competitive bidding Not in List of Priority Projects

(unless Project involves a new
must be included in the List concept or technology)
of Priority Projects
No Direct Government
may have all the Privileges Guarantee, subsidy [Cost-
sharing subsumed] or equity
required
Swiss challenge (right to match)

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Solicited Mode (Public Bidding)
Project ID and Preparation
Approval by Approving Body
No approval through inaction
If disapproved, Agency/ LGU informed
Agency/ LGU may resubmit (reasons for disapproval must be
addressed; treated as a new project)
Advertisement/ Invitation to Pre-Qualify and Bid (within 6 months)
Preparation of Pre-Qualification Documents
Pre-Qualification of Bidders (qualified or disqualified [right to appeal;
bidding process suspended pending resolution)

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Solicited Mode (Public Bidding)
Issuance of Tender Documents
Bid Submission and Evaluation
Agency/ LGU may opt for Simultaneous or Single-Stage Qualification
and Bidding (3 envelopes – qualification, technical and financial)
Submission of Statement
accepts the qualification criteria
waives any right it may have to seek and obtain a writ of injunction or
prohibition or restraining order against the concerned Agency/LGU or
its PBAC (qualification process to award)
without prejudice to the right of a disqualified or losing bidder to
question the lawfulness of its disqualification or the rejection of its bid

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Solicited Mode (Public Bidding)
Bid Submission
Technical Proposal Financial Proposal
o Acceptance/Compliance statements with o Proposed Project Cost,
regard to all terms and conditions in the tender operation and maintenance
documents cost, and all other related costs
o Operational feasibility of the project o Project financing scheme, which
o Technical soundness/preliminary engineering may include the amount of
design, including proposed project timeline equity to be infused, debt to be
obtained for the project, and
o Preliminary environmental assessment sources of financing
o Project Cost o Financial bid
o Bid Security

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Solicited Mode (Public Bidding)
Evaluation
First Envelope Evaluation Second Envelope Evaluation
o Technical soundness o assessment and comparison of the
financial proposals of the bidders
o Operational feasibility
o Environmental Standards Agency/LGU reserves the right to
reject any or all bids, waive any
o Project Financing minor defects therein and accept
the offer it deems most
advantageous to the Government

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Direct Negotiations
• If after advertisement: • ICC shall determine
• Only 1 PP applies + meets pre- the RRoR prior to the
qualification requirements then submits negotiation
compliant bid • Scope of negotiation
• > 1 PP applied for pre-qualification + Only - limited to the
1 meets pre-qualification requirements financial proposal of
then submits compliant bid the lone complying
bidder
• If after pre-qualification of > 1 PP:
• Only 1 submits bid
• Only 1 found compliant
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Winning Bidder/ Financial Aspect
Lowest proposed toll, fee, rental or charge at the start of project operation, if
a pre- agreed parametric tariff adjustment formula is prescribed in the bid
document

Lowest present value of government subsidy to be provided for the period

covered by the contract

Highest present value of proposed payments to Government, such as:

concession fees, lease/rental payments, fixed/guaranteed payments, and/or
variable payments/percentage shares of revenue for the period covered by
the contract

Any other appropriate financial bid parameter as may be approved by the

Approving Body
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Solicited Mode (Public Bidding)
Recommendation to Decision to Notice of Award which requires
submission of:
prescribed performance security
proof of commitment of the required equity contribution
proof of firm commitments from reputable financial institution to provide
sufficient credit lines
in the case of a consortium, the agreement indicating that the members are
jointly and severally liable for the obligations of the winning bidder under the
contract
in case a special purpose company (SPC) is formed for purposes of
undertaking the project, proof of registration
Public Dissemination of Bidding Results (PHILGEPS, Agency/ LGU
website)
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Solicited Mode (Public Bidding)
Execution/ Approval of Contract
Agency/ LGU and Project Proponent, that was pre-qualified and
awarded with the project, shall be the signatory to the contract
If Project Proponent fails to sign, bid security forfeited
Agency/ LGU to consider the bidder with the next ranked complying
bid (if fails to sign, bid security forfeited)
Once signed, presumption arises that Project serves public interest
Regulator shall grant in favor of the Project Proponent a Franchise
(Note: Recovery of difference from government if issuance of
franchise results in decrease in tolls removed in IRR)

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Unsolicited Proposals
3 Conditions must be met
1.The project:
a. involves a new concept or technology as determined by the Agency/LGU
and/or

b. is not part of the List of Priority Projects

2.No Direct Government Guarantee, subsidy or equity is required
3.The Agency/LGU concerned has invited by publication, for 3
consecutive weeks, in a newspaper of general circulation,
comparative or competitive proposals and no other proposal is
received for a period of 60 working days.
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New Technology
• New and untried in the Philippines • Positive impact on the implementation and
operations of the project
• Green, smart, emerging, or state- • reduction of Construction costs;
of-the-art technology, or any other • acceleration of project execution;
similar or related concepts/
technologies
• improvement of safety;
• enhancement of project performance;
• Information disclosed • improvement in productivity or quality of produce;
• sufficient detail so as to allow proper • extension of economic life;
evaluation • reduction of O&M costs;
• details of the new concept or • reduction of negative environmental impact;
technology • reduction of social/economic disturbances either
• cost-benefit analysis comparing the during construction or operation phase; or
new concept or technology with • increase in use of materials with a high domestic
traditional ones content.

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Unsolicited Proposals
When Complete?
• cover letter (description of the • financial and economic model used
project, its expected output and by the Project Proponent
outcome, implementation period, • pre-qualification requirements
and general description of the • proposed PTCs
new concept or technology)
• documentary evidence of
• company profile of the Project compliance (no Direct Government
Proponent or the business plan of Guarantee, subsidy or equity and
the proponent consortium publication)
• feasibility study • proprietary information (sealed
• draft contract envelope)

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Unsolicited Proposals
Submission of Complete Proposal
Acknowledge receipt (7 calendar days)
Letter of Completeness to PP and PPPC (35 calendar days)
If incomplete, letter informing of lacking information/ requirements (PP can
resubmit; will be treated as new submission)
>1 proposal for same or similar project prior to acceptance
Reject all
Bid out project
Evaluate proposal based on 1st in time approach
Agency/ LGU informs all and their ranking based on date of submission
1st proposal evaluated and determined if compliant/ complete
2nd proposal evaluated only if 1st is incomplete/ not compliant
When awarded, unopened proposals will be returned (notice)

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Unsolicited Proposals
Evaluation of Proposal (120 calendar days) - Agency/ LGU to: (sequence clear)
Qualify PP for Project
Evaluate:
Confirm the existence of the new concept or technology
Validate the absence of any direct government guarantee, subsidy, or equity
Assess the appropriateness of the contractual arrangement and
reasonableness of the proposed risk allocation
Review the proposed PTCs for the project
Ensure the technical, financial, and economic viability of the project
Evaluate the proposed RROR
Act
Accept– Notice; Grant of Original Proponent Status; Endorse to Approving
Body (30 calendar days)
Reject - Notice stating reason; Return all documents
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Unsolicited Proposals
Approval of the Project (prior to Evaluation of the Proposal
Negotiation) Based on Detailed Guidelines
Confirmation by ICC/ Sanggunian Issue Notice with approved
National Projects (60 calendar days) PTCs with advice to
ICC endorses to TWG (validate commence negotiations
completeness and qualification of project) If rejected, issue notice with
ICC confirms grant of OPS (notice issued) reasons (Approving Body can
then proceed with evaluation of merits; or extend period to comply)
rejects (return documents and revoke OPS;
Agency/ LGU may entertain other 90 calendar days
proposals)
Local Projects (60 calendar days)
Sanggunian may create TWG; same
function as ICC

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Unsolicited Proposals
Revocation of Original Proponent Status
• Grounds/ Instances • Effects
• It is found that the facts disclosed are • The Agency/LGU may accept new
incomplete, incorrect, misleading, untrue, unsolicited proposals involving the same
inaccurate, or different from what was or similar project
represented • Original proponent may resubmit a new
• Any non-compliance or violation of the or revised proposal.

•
BOT Law and this Revised IRR
Non-confirmation by ICC/ Sanggunian
• If UP conflicts with Government
Projects
• Failure of Negotiations
• Government not precluded to pursue
• Withdrawal of Project Proponent or
• OP cannot file injunction/ seek TRO
Consortium Member prior to project
approval

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Unsolicited Proposals
Negotiation with Original Proponent (sequence clear)
Notice to Commence Negotiation (commencement date, authorized
representatives and mechanics; 7 calendar days)
Negotiation Stage (good faith; complete and conclude in 80 calendar days)
Outcome
Failure of Negotiation (irreconcilable differences; reject proposal and revoke
OPS)
accept a new Unsolicited Proposal
bid out the project as a solicited proposal
undertake the project on its own
Successful Negotiation (signed certification stating that the negotiated
terms comply with the PTCs approved by the Approving Body)

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Unsolicited Proposals
Action of Approving Body on Negotiated PTCs
validate compliance with approved PTCs
If not comply, failure of negotiations
Approval of Project Proposal and Contract by Agency/ LGU
Review by DOF if national funds will be involved (issue opinion within 20
working days) stating explicit approval of the proposed Government
Undertakings within which, not binding on Republic)
Review by Statutory Counsel (issue opinion within 20 working days)
Agency/ LGU Review and Approve
Qualification and Tender Documents Prepared
Draft contract final and non-negotiable by comparative proponents
Proprietary Information (confidential; not part of tender documents)

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Unsolicited Proposals
Invitation for Comparative Proposals
published at least once every week for 3 consecutive weeks, in online
media and in at least 1 newspaper of general circulation (For projects
costing at least PhP 500 million, the invitation may also be published at
least once in at least 1 online media and newspaper of international
publication) and posted continuously in the websites of the Agency/LGU
and PPP Center
State time and place where tender documents can be obtained; 60 days
to submit comparative proposals (beyond deadline, no proposal can be
accepted)
Posting of Bond on 1 day of publication
st

Qualification of Comparative Proponents (same criteria for OP)

Submission of Proposal (3 envelopes – qualification, technical and
financial)
Evaluation of Proposals (3 stages – sequential)

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Unsolicited Proposals
Disclosure of Price Proposal (in Tender Documents or upon opening of
financial proposals of comparative proponents)
Exercise or Right to Match
If no comparative proposal or no complying bid – award to OP
If there is and price proposal is better than OP’s, OP has right to match
If OP matches, OP gets award; If OP does not match, challenger gets
Determination of Winning Proponent
If winning comparative proponent fails to enter into the contract,
consider 2nd ranking with better offer than OP – OP given right to
match; if offer not better than OP – award to OP)

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Special Purpose Company (SPC)
Agency/ LGU may require formation
o SPC that will be created shall assume and accede to all the rights and obligations of
the winning Project Proponent
o the winning Project Proponent subscribes to and pays for a significant/principal shareholding or
controlling interest in the SPC
o in the case of a consortium, all members thereof shall present proof of contractual or other legally
binding ties to or relationships with the SPC for the development and implementation of the project in
accordance with their submitted business plan
o an accession undertaking is executed by the SPC and the Project Proponent in favor of the
Agency/LGU making the SPC principally liable for the performance of the winning Project Proponent's
obligations
o SPC shall be prohibited from engaging in other concessions, businesses, or
undertakings not approved by the Approving Body which may conflict with the
approved project or otherwise lead to anti-competitive behavior or abuse of dominant
position.

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Project Execution
Issuance of Notice to Commence Milestones Compliance
Implementation Failure by or delay may
Preparation and Approval of Detailed result to:
Engineering Design imposition of
liquidated damages
Project Construction contract rescission
Performance Security for Pre-Construction forfeiture of the
and Construction Works, and Operations performance security
(Requires replenishment of performance
security when it falls below the amount Repair and Maintenance
required in the contract and/or Project Cost
increases)
Review of Project Construction, Operation
and Maintenance by Agency/ LGU, PPP
Center and COA)
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The Pact and Key Provisions

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Draft Contract
• specific contractual arrangement, term, and • grounds for and effects of contract termination
scope of work including modes for settling disputes
• project technical specifications and system • the manner and procedures for the resolution of
features warranty against corruption
• implementation milestones including those for • compliance with all other applicable laws, rules, and
securing other approvals, project completion regulations
date • key performance indicators, targets, and procedures
• cost recovery scheme via proposed tolls, fees, for measuring and reporting results
rentals and charges • obligation of the Project Proponent to disclose loan
• liquidated damages agreement
• performance and warranty bonds • performance security requirements, including their
validity and top-up mechanism procedures
• minimum insurance coverage
• acceptance tests and procedures
• procedures for resolving disputes

• warranty period and procedures (after transfer)

• manner and procedures for the resolution of warranty
against corruption

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Contract Variation
Conditions Requirements
• No impact on the PTCs • Variation not exceed Approving Body-
• No increase in the agreed fees, tolls and charges approved cap 10% of the original
Project Cost
• No decrease in the Agency's/LGU's revenue or profit
share derived from the project • Any extension of the contract term
shall not serve as a substitute to
• No reduction in the scope of works or performance compensate the Project Proponent, in
standards any manner whatsoever, without the
• No fundamental change in the contractual written approval of the Approving Body
arrangement • Performance security shall be
• No extension in the contract term proportionately increased in the case
of any government-approved variation
• No additional Government Undertaking
• No increase in the financial exposure of the
Government under the project

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Liquidated Damages
When Due: Project Proponent fails to: Obligation of Project Proponent
o Satisfactorily complete the work on or before • Pay
completion date
o Meet the operating performance standard • Performance security for
construction works or for
o Perform any of its obligations operations, as the case may
Contract must define: be, may be applied

• Persistent breach (an accumulation of a Without prejudice to the right of

significant number of breaches over a stated the Agency/LGU concerned to
period of time; an accumulation of payment rescind or terminate the
deductions from the performance security) contract
• Cap on amount
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Tolls, Fees, Rentals and Charges
• reasonableness to the end-users of the facility
• Contract shall include a fixed initial/base tolls/fees/rentals/charges, as
applicable, and as approved by the appropriate Regulator

• Regulator retains the power to approve or disapprove adjustments to tolls/

fees/ rentals/ charges

• Project Proponent shall not be automatically entitled to an increase in the

tolls/fees/rentals/charges, unless duly authorized and approved by the
Regulator

• Agency/LGU shall not be liable for the non-approval by the concerned

Regulator of any application of increase or adjustment

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Accession/ Divestiture
o Project Proponent may divest or accede its ownership and/or rights to a project
o divestiture or accession shall be after the holding or lock-in period
o new Project Proponent has equal or better qualifications as with the previous
Project Proponent

o If not follow above:

o disqualification of the Project Proponent
o cancellation of the contract
o forfeiture of the Project Proponent's bid or performance security

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Contract Termination/ Rescission
Revised Grounds/ Procedures
o Failure to comply with any obligation o Contract must state:
prescribed in the contract, and such o Remedies
failure is not remediable or if remediable
shall remain unremedied for an
o curing periods
unreasonable length of time, will result in o lender step-in rights
contract termination or rescission o written notice requirements
o termination shall take place only upon failure to
o Grounds: remedy or cure the default
o Government event of default o Termination payment (which excludes debt
o Project Proponent event of default guarantees, payment for expected returns,
payment of profits of commercial business units)
o Force majeure and other no-fault
termination events o Project shall not be terminated for an event of
o Persistent breach of obligations default without exhausting the corresponding
remedy or curing period
o Other termination events
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Take-Over of Government
o Grounds for Immediate Take-Over: Emergency or Public Interest
o Temporary Take-Over
o Collection of tolls/fees/charges by the Agency/LGU to held in trust for
the Project Proponent less the actual operating costs incurred by the
Agency/LGU
o Project Proponent cannot claim compensation during take-over
o concession or cooperation period shall be suspended until the facility
or operation thereof is returned to the Project Proponent
o Permanent: Project Proponent shall be entitled to claim compensation
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Dispute Resolution
o Mechanisms: Arbitration of Litigation
o Stated in Contract
o Acts and decisions of Regulators shall not be subject to arbitration

96
Conflict of Interest
o regulatory agencies or bodies implementing a project shall prepare
a conflict mitigation plan
o In case a conflict of interest arises, the concerned parties shall
inhibit themselves from the performance of their duties in
connection to the project

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Liabilities: Firm
Foreseeable and definite liabilities, as described in the provisions of a contract. These
include, but are not limited to, milestone payments, amortization payments, availability
payments, viability gap funding, variation payments, and payment for settlement of
undisputed claims.

Criteria
• The project passes the criteria for technical viability, economic feasibility, social acceptability,
and climate change resiliency
• The project offers value for money and that the proposed firm liabilities are supported by a
financial model
• The fiscal impact of the firm liabilities is sustainable based on the assessment of the DOF
• The Agency proposing a project under the Act and this Revised IRR must commit to bidding
the project competitively and with the goal to keep firm payments to a minimum
• Payments are in local currency
• Payments are conditional, subject to the Project Proponent achieving availability targets

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Liabilities: Contingent
Liabilities that may be incurred from events specified in a contract, the occurrence,
timing, or amount of which are uncertain. These include, but are not limited to MAGA,
force majeure, breach of government warranties, and failure to deliver contractual
obligations.
Rules
• Contingent liabilities shall be set only for risks that the national or local government, whichever is applicable, is
best able to control
• Agency/LGU shall submit a risk mitigation plan for approval by the Approving Body
• Both the draft and the final contract shall be consistent with the approved PTCs related to contingent liabilities
• All contingent liabilities to be assumed by the government shall be transparent in terms of specific risk events
• For force majeure risks, contingent liabilities above the insurance proceeds shall be shared equally between
parties to the contract
• The PTCs related to contingent liabilities shall consist of condition to negotiate a remedy or cure for a risk
event, term for curing period, parameters for compensation for damages or losses, condition to include step-
in rights, and parameters for payments if terminated

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Material Adverse Government Action
(MAGA)
Includes:
Excludes (not MAGA):
o any act of the executive branch
o Project Proponent had no knowledge of, or could
o acts of the Agency/LGU
not reasonably be expected to have had
knowledge of, prior to the effectivity of the contract
o acts of the Approving Body
o That occurs after the effectivity of the contract, o acts of the executive branch,
that: made in the exercise of
o specifically discriminates against the Project regulatory powers
Proponent; and
o has a material adverse effect on the ability of the
o acts of the legislative branch
Project Proponent to comply with any of its o acts of the judicial branch
obligations under the contract.

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 www.albertocagra.com
09175353823
alberto agra
[email protected]

Thank you.

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