----------1991 Local Government Code----------

LGU’s were authorized by the LGC to enter into contracts with any duly prequalified individual
contractor, for the financing, construction, operation, and maintenance of such facilities, under the
BOT arrangement, subject to the applicable provisions of the BOT Law and the terms and conditions
provided in Section 302 of the LGC.

The LGC further provided that projects that may be financed, constructed, operated, and
maintained by the private sector should be included in the LGU’s local development plans and public
investment programs and be disclosed to the public and duly registered contractors. The projects also
need to be confirmed by the local development councils based on the plans and specifications
submitted. The contracts for approved projects shall be awarded to the lowest complying bidder in a
public bidding.

----------Republic Act 7160 Local Government Code of the Philippines----------

Local governments (provincial, municipal or city) act according to Republic Act 7160 (Local
Government Code of the Philippines). The Code provides the scope of authority of local government
units in development planning and disposition of resources, revenue generation, basic services and
facilities for which it is responsible, and a corporate governance system.

These are the responsibilities of the local government units with regards to PPP’s (Public-Private
Partnership Center, 2012).
Provincial level
 Provides a venue in engaging private sector participation in local development planning
process
 Identifies areas of investments where private sector could come in
 Designates location of development activities where private sector could operate
 Provides local incentives for private sector investments
 Engages the private sector as lead or partner of the government in implementing local
development projects

----------RA 7718----------

RA 7718 has specified the nationality requirements in participating for any PPP project in the
Philippines

 Regardless of nationality, anyone is encouraged to invest and participate in the Philippine PPP
Program.

 For PPP, 100% foreign equity may be allowed in all areas of investment EXCEPT in case of
infrastructure facility whose OPERATION requires public utility franchise. In the construction
stage of the infrastructure projects, the project proponent can obtain financing from foreign
and/or domestic sources and/or engage the services of a foreign and/or Filipino contractor:
provided, that, in case an infrastructure or a development facility’s operation requires a public
utility franchise, the facility operator must be Filipino or if a corporation, it must be duly
registered with the Securities and Exchange Commission and owned up to at least sixty percent
(60%) by Filipinos.
 ----------PREFERRED PPP----------

I. Form of PPP

 Concession-based PPP
This form of PPP, the government grants the private sector the right to build, operate and
charge public users of the public good, infrastructure or service, a fee or tariff which is
regulated by public regulators and the concession contract. Tariffs are structured to provide
for recovery of debt service, fixed costs of operation, and return on equity.

II. Contractual Arrangement / Modality

PPP Modality Private Sector Role Government Role Notes

 Build-Operate- Finances and Provides franchise (if Includes a supply-and-
and-Transfer constructs; operates required) and regulates operate scheme, a
(BOT) and maintains facility activities of BOT contractual
for a fixed term; contractor; acquires arrangement whereby
collects fees and ownership of facilities the supplier of
charges to recover at the end of equipment and
investments plus cooperation period. machinery for a given
profit; transfers facility infrastructure facility, if
at the end of the interest of the
cooperation period Government so
(maximum of 50 requires, operates the
years). facility.
 Build-and- Finances and Acquires ownership of May be employed in
Transfer (BT) constructs; turns over facility after any project, including
ownership of the construction; critical facilities which,
facility to government compensates for security or strategic
after project proponent at agreed reasons, must be
completion amortization schedule operated by the
Government.
 Build-Lease-and- Finances and Compensates
Transfer (BLT) constructs; turns over proponent by way of
project after lease of facility at
completion; transfers agreed term and
ownership of facility schedule; owns facility
after after
cooperation/lease cooperation/lease
period. period.
 Build-Transfer- Finances and Owns facility after
and-Operate constructs on a turn- commissioning.
(BTO) key basis; transfers
title of facility after
commissioning;
operates the facility
under an agreement.
III. Type of PPP Project

 Telecommunications, backbone network, terrestrial and satellite facilities and related

service facilities;

 Information technology (IT) and database infrastructure, including modernization of IT,

geospatial resource mapping and cadastral survey for resource accounting and planning;

IV. Type of Project Proposal

Unsolicited proposal
An unsolicited proposal refers to submission of project proposal to the government without
formal solicitation. However, the unsolicited proposal may only be accepted and
considered by the implementing agency if it complies with the following conditions:

1. It involves a new concept or technology and/or it is not part of the list of priority projects in
the Philippine Investment Program [Medium Term Public Investment Program,
Comprehensive and Integrated Infrastructure Program] and the Provincial/Local Investment
Plans;
2. It does not include a Direct Government Guarantee, Equity or Subsidy;
3. It has to go to ICC for the determination of reasonable Financial Internal Rate of Return and
approval to negotiate with the Original Proponent; and
4. After a successful negotiation, proceed to publication and request for competitive proposals
according to Swiss Challenge Rules.

V. PPP At Local Level

Infrastructure Sector Eligible Projects

Information and Communication Technology Information technology (IT) and database
(ICT) Systems and Facilities infrastructure that includes: IT modernization;
geospatial resource mapping; cadastral survey for
resource accounting and planning
I. On the Legal Framework

The only requirements in the BOT Law are that LGUs shall include in their infrastructure programs
priority projects that may be financed, constructed, operated, and maintained by the private sector
under the provisions of the BOT Law and that local projects funded and implemented by LGUs shall be
submitted to the local development councils for confirmation or approval.

Competitive challenges to unsolicited proposals are a form of competitive bidding. If LGUs are not
able to prepare projects for bidding out to the private sector or if a proposed project is not in the
LGU’s list of priority projects, the BOT Law allows unsolicited proposals but they are subject to Swiss
challenge. If done properly, this form of competitive challenge can also bring about good results.
Some of the successful PPP projects of LGUs were unsolicited. The new Implementing Rules and
Regulations (IRRs) direct all implementing agencies and LGU to submit to the PPP Center a copy of all
unsolicited proposals that they receive. The PPP Center has been mandated to guide the concerned
LGU in the preparation and development of the project.

The only requirements in the BOT Law are that LGUs shall include in their infrastructure programs
priority projects that may be financed, constructed, operated, and maintained by the private sector
under the provisions of the BOT Law and that local projects funded and implemented by LGUs shall be
submitted to the local development councils for confirmation or approval.

In Republic Act No. 7718 which amended the BOT Law, build–own–operate arrangements were
introduced as an option but, unlike other new alternative arrangements, need to be approved by the
President of the Philippines upon the recommendation of the National Economic and Development
Authority (NEDA). Another amendment was that the list of local projects costing up to P20 million had
to be submitted for confirmation to the municipal development council, while those costing between
P20 and P50 million had to be submitted to the provincial development council for confirmation.
For city projects, the city development council could confirm projects only up to P50 million. All LGU
projects costing between P50 and P200 million were to be submitted to regional development
councils (RDCs) for confirmation and those above P200 million were to be submitted to the
Investment Coordination Committee (ICC) of NEDA.

Establish deadline for the confirmation of LGU PPP projects. The new IRR’s set the 30-day deadline
for approval of LGU projects by the Local Sanggunians, upon satisfactory compliance of the LGU of
with the requirements of the Local Sanggunian. It further states that failure of any of these bodies to
act on the project proposal within 30 days will mean that the project is deemed approved and the
proponent LGU may proceed with the solicitation of proposals. However, there is no deadline set for
confirmation of LGU projects (prior to approval by the Local Sanggunian) by the municipal, provincial,
city, or regional development councils. Having such deadline and lapsing arrangement on
confirmation of local PPPs would improve predictability of local PPP preparation and procurement
timelines.

LGU’s can also be encouraged to enact their own PPP Code or omnibus ordinance covering all
applicable PPP modalities. In the same letter mentioned above, Secretary de Lima confirmed the
authority of the LGUs to do this. A former acting secretary of justice, Alberto Agrahas drafted a PPP
Code that has been used by Camarines Sur and several other provinces to pass their own PPP Code.
Other LGUs may wish to do the same to add order and transparency in their PPP activities. Fiscal and
other investment incentives can also be included in the code. The PPP Center has developed its own
draft PPP Code for the guidance of LGUs wanting to implement a PPP program.
II. On the Institutional Framework

The PPP Center can link up with other government agencies and LGU leagues in carrying out its
various functions. According to Executive Order No. 8, the powers and functions of the PPP Center in
relation to LGUs include the following: (a) providing advisory services, TA, trainings, and capacity
development to LGUs in project preparation and development; (b) providing project facilitation and
assistance to LGUs in addressing impediments or bottlenecks in the implementation of PPP programs
and projects; and (c) monitoring and facilitating the implementation of priority PPP programs and
projects. The PPP Center, formerly the BOT Center, has had many years of experience in promoting
BOT and other types of PPP arrangements among different government entities including LGUs. The
PPP Center continues to conduct training sessions and workshops to familiarize LGUs with the PPP
concept, framework, and modalities. In 2001, it signed a memorandum of agreement with the DILG to
collaborate in organizing such training workshops. The PPP Center should also consider entering into
a memorandum of agreement with the DOF-BLGF which has been accredited by the Professional
Regulation Commission as an Institutional Continuing Professional Education Provider to LGUs and
regional offices. Although the current course offerings are related to the collection of real property
and business taxes, these can be expanded to include PPP projects and their appropriate local tax
treatment. The PPP Center can also explore working with the various leagues of LGUs, such as the
League of Provinces, League of Cities, and League of Municipalities, to disseminate information to
more LGUs and generate their interest in PPPs.

To facilitate the process of identifying priority projects that are appropriate for PPPs, the PPP Center
can strengthen its linkages with development partners that have already been working with LGUs in
their development planning and investment programming activities. Many of these development
partners are also supporting the PPP Center itself in its own capacity-building activities. These include
the Asian Development Bank, the World Bank, and the Governments of Australia, Canada, and Japan.
Through these linkages, the PPP Center can help LGUs come up with their list of candidate PPP
projects and get these lists approved by the appropriate bodies at the local and national levels,
depending on the cost of the project.

III. On the Regulatory Framework

the LGC provides that an LGU may impose and collect reasonable fees and charges for services
rendered. LGUs may also fix the rates for the operation of public utilities owned, operated, and
maintained by them within their jurisdiction. For BOT projects, contractors may charge and collect
reasonable tolls, fees, rentals, and charges for the use of the project facility not exceeding those
proposed in the bid and incorporated in the contract, for a fixed period not more than 50 years. These
tolls, fees, rentals, and charges are to be approved by the LGUs concerned on the basis of
reasonableness and equity. How these fees and charges will be adjusted over time, in response to
macroeconomic variables and compliance with maintenance or service obligations, are major
challenges that LGUs need to be prepared and capacitated for. LGUs should therefore create and
capacitate their own regulatory units with the assistance of the concerned national government
entities, particularly those with their own experiences in implementing PPP projects.

IV. On the Monitoring and Evaluation Framework

As the successor of the Coordinating Council of the Philippine Assistance Program, the PPP Center is
responsible for the coordination and monitoring of projects implemented under the BOT Law, as
amended. RDCs and LGUs are expected to periodically submit information on the status of their
projects. At the end of each year, the PPP Center reports to the President and Congress on the
progress of all projects implemented under Republic Act No. 7718. It submits tables on pipeline,
awarded, ongoing, and completed projects to the Department of Budget and Management for
inclusion in the Budget of Expenditures and Sources of Financing.
LGUs should undertake their own monitoring and evaluation activities for their PPP projects. These
can be spearheaded by the head of the LGU’s PPP unit. As mentioned in an earlier section, the revised
IRRs for the BOT Law states that the PPP Project Development Officer shall be responsible for the
planning, overseeing, and monitoring of the LGU’s PPP projects. This can be done using monitoring
templates and tables being developed by the PPP Center for different types of projects. Their findings
should be submitted to the PPP Center, which can organize peer reviews or other knowledge-sharing
activities among LGUs implementing similar PPP projects.

RESOURCES:
https://nro13.neda.gov.ph/ppp-knowledge-corner/
https://www.adb.org/sites/default/files/publication/213606/philippines-ppp-lgus.pdf
https://ppp.gov.ph/wp-content/uploads/2017/03/dilg-memocircular-no2016-
120_20160907_lgu-p4.pdf
https://ppp.gov.ph/wp-content/uploads/2018/03/PPPC_PRES_Drafting-LGUPPP-Code-
20180308.pdf