Contrary to what some may advance, the build-operate-and-transfer law (BOT law) is not the only law on public-private partnerships (PPPs) in the country. Republic Act (RA) 6957, as amended by RA 7718, is just one of many laws and regulations governing arrangements between the government and the private sector.
There is therefore no single and universal PPP law in the Philippines. There are several definitions of PPPs, as there are relevant laws, national and local, guidelines and regulations. A scan of available definitions shows that there are broad definitions, as there are restrictive or myopic ones.
The National Economic and Development Authority (Neda), in the Midterm Update of the current Philippine Development Plan, defines a PPP as “a contractual arrangement between the government and the private sector to deliver public infrastructure and/or public services.” Any binding relationship between the public and private sectors is thus a PPP.
Another broad definition of a PPP is offered by this author. In his template PPP Ordinance for local governments, which to date has been referred to by 51 provinces, cities and municipalities, PPP is
described as “a legally enforceable contract where each party assumes specified functions, bears certain risks, provides contribution or renders some obligation, and earns benefits and revenues from the PPP arrangement.” He also emphasizes the purpose of PPP, which is to “serve the general welfare and the public good.”
The PPP Center, the successor to the BOT Center, propounds a limited definition. Presumably lifted from the BOT law, it, as published in its official web site, defines PPP as “a contractual agreement between the Government and a private firm targeted towards financing, designing, implementing and operating infrastructure facilities and services that were traditionally provided by the public sector. It embodies optimal risk allocation between the parties—minimizing cost while realizing project developmental objectives. Thus, the project is to be structured in such a way that the private sector gets a reasonable rate of return on its investment.”
Under this definition, joint ventures, concessions, leases, privatization, divestments, management or service arrangements, donations, pure financing or operations contracts, and purely-publicly financed projects are excluded from the scope of a PPP and are, thus, not considered as PPP arrangements. Following this, a project which is not traditionally provided by the public sector cannot be a proper object of a PPP.
For those who subscribe to a more liberal appreciation of a PPP, what cannot be done under the definition of the PPP Center can be accommodated under the Neda definition and template PPP Ordinance. The broad concept of PPP can, in fact, house at least 24 modalities, not just the nine variants under the BOT law.
The Neda has its own guidelines for joint ventures by government-owned and -controlled corporations, government instrumentalities, state universities and colleges and government financial institutions. Concessions were entered into under the National Water Crisis Act and the Electric Power Industry Reform Act of 2001. The public sector can engage private proponents for management and service contracts under the Government Procurement Reform Act.
For local governments, they have the authority to enact their own PPP frameworks for their joint ventures, concessions, leases, management and service contracts not using public funds, and donations. The BOT law, therefore, is not the controlling law for these non-BOT law variants. The definitions, approval procedures, requirements and limitations found under the BOT law need not be followed because they are not applicable.
The reality of not having one PPP definition, which captures all possible PPP modalities, should be seen as an opportunity for innovation and exposition of democracy. The downside of not having a single PPP law—the lack of uniformity—is outweighed by the upside of not having one. While there could be confusion on what is or what is not a PPP and possible challenges on the authorities of
administrative agencies, government officials should take on the challenge of innovating and broadening PPPs, and learning more.
More choices require more learning, which necessitates adaptive leadership.
PPP Learn No. 2
PPP Modalities
The advantage of having no single PPP law in the Philippines is that the government, particularly local governments, has more options. The inclusive set of PPP modalities provides for at least 24 choices. These are:
1.Build-Transfer
- Build-Lease-Transfer
- Build-Operate-Transfer
- Build-Own-Operate
- Build-Transfer-Operate
- Contract-Add-Operate
- Develop-Operate-Transfer
- Rehabilitate-Operate-Transfer
- Rehabilitate-Own-Operate
- Rehabilitate-Lease-Transfer
- Rehabilitate-Transfer
- Rehabilitate-Transfer-Operate
- Concession Arrangement
- Joint Venture
- Lease or Affermage
- Management Contract
- Management Contract (No Public Funds)
- Service Contract
- Service Contract (No Public Funds)
- Divestment or Disposition
Corporatization
- Subsidiary with Private Equity
- Onerous Donation
- Gratuitous Donation
- Others
In the succeeding columns, these modalities will be discussed. For your comments, please e-mail the columnist at alberto.c.agra@gmail.com.