PUBLIC – PRIVATE PARTNERSHIPS FOR LGUS

Slides: Courtesy of the PPP Center of the Philippines

The PPP Concept

Legal Framework for LGU-PPP Projects

The BOT Option

Selected LGU PPP Projects

The PPP Center

Presentation Outline

Contractual arrangements between public and private entities to provide public infrastructure and/or public services

PUBLIC-PRIVATE PARTNERSHIPS

ELIGIBLE PROJECTS

Power Plants

Highways/Roads

Railroads & Railways

Ports

Airports

Transport Systems

Telecommunications

ICT Systems/Facilities

Canals, Dams, Irrigation,

Water Supply

Land Reclamation

Sewerage, Drainage, Dredging, Solid Waste Management

Tourism, Education

Health Facilities

Industrial & Tourism Estates

Markets, Warehouses, Slaughterhouses

Housing, Government Buildings

Other Infrastructure/ Development Projects/Systems

FINANCIAL (Monetary) • Transfers LGUs burden of raising funds to the private

sector partner(s)• Allows allocation of LGU funds for other urgent uses

• Additional sources of revenues for LGU, depending on the contractual arrangement

EFFICIENCY GAINS (Non-monetary)• Efficient provision infrastructure/services• Superior technology and expertise• Technology transfer and training

ADVANTAGES OF PPPs

1987 Philippine Constitution• The State recognizes the indispensable role of the

private sector, encourages private enterprise, and provides incentives to needed investments.

RA 7160 (The Local Government Code)• Section 302 empowers the LGU to enter into BOT

infrastructure contracts with the private sector through the BOT Law

• Section 17 allows LGUs to enter JV arrangements and other contractual arrangements for the provision of basic services and facilities

RA 7718 : The Amended BOT Law and its Implementing Rules and Regulations• Provides the basic framework for BOT/PPP and outlines

the government approval process

LGU-PPP PROJECTS LEGAL FRAMEWORK

GOVERNANCE STUCTURE FOR LGU PPPs

• Per DILG MC 2011-16 and Proposed Amendment

PPP Sub-Committee

• Per Proposed Amendment to DILG MC 2011-16

PPP Implementing Office

• Per Amended BOT Law and IRR

PPP Pre-Qualification, Bids & Awards Committee

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Several variants (arrangements) allowed

Covers most infrastructure and development sectors/services needed by local governments

Provides for reasonable rates of return for private partners

Institutionalized some form of government support

Has defined step-by-step policy/processes of PPP/BOT development, approvals and procurement

BOT/PPP LAW HIGHLIGHTS

SERVICE CONTRACTGovernment procures the services of a

private entity to carry out one or more specified task/s or service/s for a fixed period, typically 1-3 years for a fixed cost; government control remains

MANAGEMENT CONTRACTGovernment hires private entity for the

daily operation and management of a particular task or service; government ultimately remains responsible for service provision

LEASE CONTRACT Private partner is responsible for service

provision in its entirety, and bears financial risk of Operation and Maintenance (O&M); government retains ownership of the facility/ infrastructure

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TYPES OF PPP CONTRACTS

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CONCESSIONPrivate partner is responsible for capital

investment and full delivery of services, including O&M, collection, construction/ rehabilitation of the infrastructure facility or system; government retains ownership of the public assets during the concession period

JOINT VENTURE Government and private partner pool

resources (money/ capital, services, assets) to pursue a specific infrastructure facility or project; government and private partner share in the profits, losses, and risks of the project

BOT (and its variants) Private partner finances, constructs, and,

in some cases, operates and maintains a facility or project. Private partner is allowed to charge user fees to recover its investment. Government and private partner share project risks.

Build-Operate-Transfer

Build and Transfer

Build-Own-and-Operate

Build-Lease-and-Transfer

Build-Transfer-and-Operate

Contract-Add-and-Operate

Develop-Operate-and-Transfer

Rehabilitate-Own-and-Transfer

Rehabilitate-Own-and-Operate

Other variations as may be approved by the President of the Philippines

VARIANTS AUTHORIZED

Types of Contracts

Asset Owner-

ship

Capital Investment

Commercial Risk

O&MDuration

(Yrs)

Service Contract Public Public PublicPrivate &

Public1-2

Management Contract

Public Public Public Private 3-5

Lease Public Public Shared Private 8-15

Concession Public Private Private Private 25-30

BOT and Variants Private &

PublicPrivate Private Private >30

ALLOCATION OF ROLES AND RESPONSIBILITIES

PROJECT

COMPANY

Concession Agreement

Loan Covenants

Operating and Maintenance

Agreement

Fixed-price, Date-certain, Lump-sum, Turnkey

Contract

Shareholders’ Agreement

Government AgencyLenders

OperatorConstruction Consortia

Investors

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CONTRACTUAL ARRANGEMENTS

Private partners repaid through:• Tolls, fees, rentals and other charges from users of

facility for a fixed term not to exceed 50 years• Share in revenues of the project, depending on the

contractual arrangements• Other non-monetary payments

REPAYMENT SCHEMES

Cost Sharing• Projects with difficulty sourcing funds may be partially

financed from direct government appropriations (GAA) and/or Official Development Assistance (ODA)

• Financing from General Appropriations or Official Development Assistance (GAA) not to exceed 50% of project cost

Other Government Undertakings • Include credit enhancements such as take or pay

arrangements, currency convertibility, etc.

LGUs may provide tax incentives (RPT), exemptions, or reliefs, subject to the provisions of the LGC

GOVERNMENT SUPPORT

Project Cost Approving Body

Up to PhP 20 millionMunicipal Development Council

Above PhP 20 – 50 million Provincial Development Council

Up to PhP 50 million City Development Council

Above PhP 50 – 200 millionRegional Development Council

Above PhP 200 million NEDA – ICC

For all LGU projects, local sanggunian (local councils) approval is required before bidding and before contract award.

LGU BOT APPROVAL

Development

Approval

Competition

Cooperation

Mo

nit

ori

ng

an

d

Evalu

ati

on

Project

Identification

Project

PreparationContractual

Considerations

Contractual

Arrangement

NEDA ICC

NEDA BOARD

Tariff Setting Independent Regulator

Bidding/Solicitation of Comparative Proposals

Award/Construction/Development of Facility

Concession/Cooperation Facility Users/Public

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PPP PROCESS FRAMEWORK

Project

Preparation

Commencement of

Implementation

Project

Approval

Invitation to Bid

Preparation &

Submission of Bids

Evaluation of

Bids

Contract Award

6 months 1 .5 months 6 months 1 month

Commencement of

Bidding Process

TIMELINES FOR SOLICITED PROJECTS UNDER THE REVISED IRR

OF R.A. No. 6957, As Amended by R.A. No. 7718 (BOT LAW)**

*6 months standard project preparation time frame may vary depending on project complexity

* * Plus estimates

5 cd

Submission of

Unsolicited Proposal

Commencement of

Implementation

Evaluation/

Approval of

Proposal

Negotiation Period and

Approval/Review of the

Contract

Evaluation of

Comparative

Proposals

Contract Award

30 calendar days *

5.5 months ** 90 calendar

days

20 calendar

days

Invitation for

Comparative

Proposals

TIMELINES FOR UNSOLICITED PROJECTS UNDER THE REVISED IRR

OF R.A. No. 6957, As Amended by R.A. No. 7718 (BOT LAW)***

* After acknowledging receipt of proposal, agency/LGU shall advise the proponent for the proposal’s completeness within 30 calendar days

* * Evaluation of proposal by the Agency/LGU and ICC

* * * Plus estimates

5 calendar

days

60 working

days

Commencement of

Bidding Process

SELECTEDLGU BOT PROJECTS

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Project Title Sector IA / LGU

Estimated

Cost

(in US$

M)

Scheme Mode Status

1 Talisay City Hall Property Devt Talisay City Gov't. 4.00 BT Unsolicited Concluded

2Malabon Digital Infrastructure

Project

Information

TechnologyMalabon City Gov't 0.46 BTO Unsolicited Concluded

3 Pampanga GIS CenterInformation

TechnologyPampanga Prov'l. Gov't. 0.96 BTO Unsolicited Concluded

4 Bohol Provincial Electric System Power Bohol /Prov'l Gov't. 5.00 JV Unsolicited Operational

5 Koronadal City IT ProjectInformation

TechnologyKoronadal City Gov't. 0.50 BOT Solicited Operational

6 Bohol Water Supply System Water Bohol Prov'l. Gov't. 14.40 JV Solicited Operational

7 Mandaluyong Marketplace Property Devt Mandaluyong City Gov't. 23.00 DOT/BT Solicited Operational

8 Dapitan Public Market Property Devt Quezon City Gov't. 1.30 BOT Unsolicited Operational

9 Carmen Public Market Property Devt Cagayan de Oro City Gov't. 2.36 BOT Solicited Operational

10 Cogon Public Market Property Devt Cagayan de Oro City Gov't. 4.00BT /

BOTSolicited Operational

11 Slaughter House Property Devt Cagayan de Oro City Gov't. 3.00 BOT Solicited Operational

12 Bocaue Public Market Property DevtBocaue, Bulacan/ Mun.

Gov't.1.20 BOT Solicited Operational

Operational and Concluded projects:

LIST OF LGU PPP PROJECTS

THE PPP CENTER OF THE PHILIPPINES

Executive Order No. 8 (09 September 2010)• BOT Center renamed PPP Center and transferred

attachment from DTI to NEDA• Expanded PPP Program Mandate

covers all arrangements under the BOT Law, Joint Venture arrangements and other PPP arrangements

• Promote the government’s PPP Program• Provide technical advisory services to

implementing agencies and local government units • Pursue PPP/BOT policy reforms• Monitor PPP implementation

MANDATE

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PPP CENTER INITIATIVES FOR LGU PPPs

Capacity Building Program for LGUs (2012-1013) in collaboration with the NEDA and DILG Regional Offices

DILG Memorandum Circular 2011-16 – Enjoining all LGUs to create a PPP Sub-Committee to facilitate a focused PPP project(s) development skills building for LGUs

PPP Manual for Local Government Units (2012)– VOLUME 1 – Understanding PPP Concepts and Framework

– VOLUME 2 – Developing PPP Projects (Steos, Processes, Requirements)

– VOLUME 3 – Utilizing LGU Templates (FS, Financal Model, Contract, Bid Docs)

Technical Assistance to Seleced LGUs

2013 LGU PPP Strategy

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The LGU PPP Manual is envisioned as a tool that should guide its users

in developing infrastructure projects using PPP processes.

VOLUME 1: Understanding PPP Concepts and Framework.

Overview of PPP concepts and framework in the context of local

development finance

VOLUME 2: Developing PPP Projects

for Local Government Units.

Comprehensive step-by-step process on PPP

project preparation and development

VOLUME 3: PPP Project Templates

and Bid Documents. Compilation of template

documents and sample projects on PPP at the local level

PPP KNOWLEDGE PRODUCTS

MARAMING SALAMAT PO!