Executive Order

no. 278
PRESCRIBING GUIDELINES FOR
PROJECT LOAN NEGOTIATIONS
AND PACKAGING OF
GOVERNMENT FOREIGN-ASSISTED
INFRASTRUCTURE PROJECTS
(Practice of Architecture and
Related Consulting Services for ForeignAssisted Projects, its IRR and Guidelines)

Who, Where, When,

Why?
EO 278 was signed on February
2, 2004 by former Philippine
President Gloria MacapagalArroyo at MALACAANG
PALACE in response to concerns
raised by Filipino contractors
and consultants regarding the
perceived bias toward foreign
firms.

Whereas:
the 1987 Constitution and existing
laws mandate the government to
give preference to qualified Filipinos
in the grant of rights, privileges,
and concessions covering the
national economy and patrimony
hiring
of
consultants,
which includes:
purchase of materials,
contractors,
architects,
engineers
and
other
supplies, goods, and
professionals necessary
equipment

for
a
project's
implementation

Wherea
s:

for
recent
foreignassisted infrastructure
projects bid out by
various
government
agencies, there have
been
concerns
that
Filipino constructors and
consultants
are
experiencing difficulty in
participating
in
the
bidding of such projects
due to various reasons
such as:

contracts have been packaged in

sizes too large or beyond local
financial capabilities
criteria and requirements for
participation have been set
above local capabilities and
experience
criteria are set beyond the
requirements of the project

Whereas:
there is a need to prescribe guidelines in the
areas of preparation and packaging of
projects/contracts and loan negotiations for
government
foreign-assisted
infrastructure
projects which will provide Filipino constructors
and consultants with better market opportunities
and allow them to upgrade their capabilities and
compete internationally

ASEAN
INTEGRATION and
the EO no. 278
ASEAN is a close knit
community
established
between
countries in the
Indonesia,Malaysia,Phili
Southeast Asian region for
ppines,Singapore,
better mutual co-operation in
andThailand.
social and commercial way of
life.
Brunei,Vietnam, Laos , Myanmar, and
Cambodia.

Foreign-assisted
Infrastructure
The ASEAN Infrastructure

Fund is
also one possible external source of
funding
Philippine
infrastructure
requirements. This regional fund is
initially expected to provide loans of up
to US$300 million a year

Country

Indonesia

Indonesia

Viet Nam

Indonesia

Myanmar

Lao People's Democratic

Republic

Indonesia

Title
42362-013
Java-Bali 500-Kilovolt Power
Transmission Crossing
43251-025
Metropolitan Sanitation Mana
gement Investment Project
46391-001
Ha Noi and Ho Chi Minh City
Power Grid Development Secto
r Project
49043-001
Sustainable and Inclusive En
ergy Program (Subprogram 1)

46422-003
Greater Mekong Subregion Ea
stWest Economic Corridor E
indu to Kawkareik Road Impr
ovement Project
46443-003
Second Greater Mekong Subre
gion Corridor Towns Develop
ment Project
49080-001
Electricity Grid Strengthenin
g - Sumatra Program

Project Status

Approval Date

Approved

3 Dec 2013

Approved

31 Mar 2014

Approved

23 Sep 2014

Approved

30 Sep 2015

Approved

10 Nov 2015

Approved

13 Nov 2015

Approved

2 Dec 2015

Funding/ Bankability Issues: Each structure, ranging from public procurement to full PPP, has
advantages and disadvantages, but ultimately the project will need to be structured so that it works
for all stakeholders. Key considerations include:
a. Integration:
If a concession structure is chosen (rather than a fully public sector project), there could be a fully
integrated PPP structure under which a private sector concessionaire enters into a project
agreement with the relevant procuring authority and is responsible for designing, financing,
constructing, operating and maintaining the entire project. Given the scale of the project, this may
not be a viable structure. One alternative would be to separate the infrastructure concession from
rolling stock procurement and operations. Another would be to have multiple infrastructure and
maintenance concessions for different works packages. Civil works could be separated from
systems such as signaling. There are several variations to each of these structures, for example
where the public sector procures part or all of the works separately from an operations franchise.
There will be a degree of integration risk for the public sector where different infrastructure works
are procured separately.
b. Management:
A fully public sector project would require the procuring authority to retain a high level of
responsibility for managing project delivery and operations. Given the cross-border nature of the
project, this might also give rise to governance issues at the inter-governmental level. In a full PPP
structure, the public sector's management burden is minimized since the concessionaire will have
overall responsibility for delivering the project.

c. Risk transfer:
A balanced and realistic risk allocation is a crucial aspect of project
deliverability. Key risks to be allocated between the public and private sectors
include land acquisition, cost overruns, completion risk (including integration of
separate works packages), operational interfaces, performance risk, traffic risk,
political risks and termination compensation. The level of risk retained by the
public sector and transferred to the private sector will depend on the structure
chosen for the project and will to a large degree determine the level of private
sector interest and funding of the project.
d. Financing:
The availability of long-term debt financing will depend in large part on the way
in which the project is structured. A key aspect in transportation project will be
the level of traffic risk to be borne by the concessionaire. Government support
in the form of partial funding of construction costs, availability payments and
revenue or loan guarantees may be necessary in order for the project to be
bankable. Aside from public sector funding, sources of finance may include
international and local commercial banks, multilaterals and export credit
agencies. An appropriate level of gearing will also have to be considered,
bearing in mind that significant equity investment in a project of this size may
be difficult for many sponsors. Lenders may also require some level of sponsor
support such as a completion guarantee or additional equity to cover cash

This kind of regulation seem todirect the

ASEAN job market towards a locals first,
ASEAN second policy

However, these eight

professions only account for
1.5% of the total ASEAN
workforce

Section 1. General Policy on

Consultancy Services for
Government Infrastructure
Projects
government should, as much as possible, fund
consultancy
services
for
government
infrastructure projects with local funds and
using local resources and expertise.
Consultancy services shall be proposed for
foreign assistance only where foreign funding is
indispensable or local funds are insufficient.

provide
funds in :
a. Pre-investment components
which shall include feasibility
studies and related surveys and
special studies;

b. Detailed engineering design

and related activities (where
the project is determined to be
feasible); or

c. Project
Management/Supervision

Section 2.Packaging of
Government Infrastructure
Projects.
Large government infrastructure projects, when
feasible, shall be packaged into separable work
components without sacrificing the technical
integrity of the structure to be built and taking into
account Filipino capabilities.
The packaging of such projects shall take into account
the technical and financial capabilities and experience of
Filipinos in the domestic and international market, as well
as the most logical and practical scope of work to
complete a project or any part thereof.

In the criteria for determining eligible or pre-qualified

bidders, the successful completion of a single project
whose value is at least fifty percent of the value of the
contract to the bid shall be acceptable as work
experience requirement.

Clustering of small and medium projects may be

adopted, provided that the resulting cluster or package is
within the capabilities of Filipino contractors.

However, packaging of projects that is tantamount to or

will result in contract splitting as defined under Section
11 of Executive Order No. 109-A, for the purpose of
evading or circumventing the requirements of law and/or
existing rules and regulations, shall not be allowed.

Section 3. Pre-Loan
Negotiations

Prior to loan negotiations, the negotiating panel

shall convene a technical working.

Construction Industry Authority of

the Philippines (CIAP)

SECTION 4. Projects Preparation

and Loan Negotiation Parameters

Special Tax
Privileges
Para
met
ers

Intellectual
preservation of the
local talents

Exemptions,
Assumptions, Deductions
or Credits
*Reciprocity Rule

SECTION 5. Implementing
Rules and Regulations (IRR)

NEDA Infrastructure
Committee (INFRACOM)

SECTION 6. Repealing
Clause
All executive issuances, orders,
rules and regulations, department
orders, circulars of parts thereof
inconsistent with this Order are
hereby repealed, amended and/or
modified accordingly.

SECTION 7. Separability Clause

If any provision of this Order is
declared
invalid
or
unconstitutional,
the
other
provisions not affected thereby
shall
remain
valid
and
subsisting.

SECTION 8. Effectivity
This Order shall take effect
fifteen (15) days after its
publication in the Official
Gazette or in a newspaper of
general circulation.

DAYS