ACT AMENDING CERTAIN SECTIONS OF REPUBLIC ACT NO. 6957,
"AN ACT AUTHORIZING THE FINANCING,
OPERATION AND MAINTENANCE OF INFRASTRUCTURE PROJECTS BY THE PRIVATE SECTOR,
AND FOR OTHER PURPOSES"
[ REPUBLIC ACT
NO. 7718 ]
SECTION 1. Section
1 of Republic Act No. 6957 is hereby amended to read as follows:
"SECTION 1. Declaration
of Policy. - It is the declared policy of the State to recognize the
indispensable role of the private sector as the main engine for national
growth and development and provide the most appropriate incentives to mobilize
private resources for the purpose of financing the construction, operation
and maintenance of infrastructure and development projects normally financed
and undertaken by the Government. Such incentives, aside from financial
incentives as provided by law, shall include providing a climate of minimum
government regulations and procedures and specific government undertakings
in support of the private sector."
Section 2 of the same Act is hereby amended to read as follows:
"SEC. 2. Definition
of Terms. - The following terms used in this Act shall
have the meaning stated below:
"[a] Private sector
infrastructure or development projects. - The general description of
infrastructure or development projects normally financed and operated by
the public sector but which will now be wholly or partly implemented by
the private sector, including bit not limited to, power plants, highways,
ports, airports, canals, dams, hydropower projects, water supply, irrigation,
telecommunications, railroads and railways, transport systems, land reclamation
projects, industrial estates or townships, housing, government buildings,
tourism projects, markets, slaughterhouses, warehouses, solid waste management,
information technology networks and database infrastructure, education
and health facilities, sewerage, drainage, dredging, and other infrastructure
and development projects as may be authorized by the appropriate agency
pursuant to this Act. Such projects shall be undertaken through contractual
arrangements as defined hereunder and such other variations as may be approved
by the President of the Philippines.
"For the construction stage
of these infrastructure projects, the project proponent may 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: Provided, further, That in
the case of foreign contractors, Filipino labor shall be employed or hired
in the different phases of the construction where Filipino skills are available:
Provided, finally, That projects which would have difficulty in sourcing
funds may be financed partly from direct government appropriations and/or
from Official Development Assistance [ODA] of foreign governments or institutions
not exceeding fifty percent [50%] of the project cost, and the balance
to be provided by the project proponent.
- A contractual arrangement whereby the project proponent undertakes
the construction, including financing, of a given infrastructure facility,
and the operation and maintenance thereof. The project proponent operates
the facility over a fixed term during which it is allowed to charge facility
users appropriate tolls, fees, rentals, and charges not exceeding these
proposed in its bid or as negotiated and incorporated in the contract to
enable the project proponent to recover its investment, and operating and
maintenance expenses in the project. The project proponent transfers the
facility to the government agency or local government unit concerned at
the end of the fixed term which shall not exceed fifty  years: Provided,
That in case of an infrastructure or development facility whose operation
requires a public utility franchise, the proponent must be Filipino or,
if a corporation, must be duly registered with the Securities and Exchange
Commission and owned up to at least sixty percent [60%] by Filipinos.
shall include a supply-and-operate situation which is a contractual arrangement
whereby the supplier of equipment and machinery for a given infrastructure
facility, if the interest of the Government so requires, operates the facility
providing in the process technology transfer and training to Filipino nationals.
- A contractual arrangement whereby the project proponent undertakes the
financing and construction of a given infrastructure or development facility
and after its completion turns it over to the government agency or local
government unit concerned, which shall pay the proponent on an agreed schedule
its total investments expended on the project, plus a reasonable rate of
return thereon. This arrangement may be employed in the construction of
any infrastructure or development project, including critical facilities
which, for security or strategic reasons, must be operated directly by
- A contractual arrangement whereby a project proponent is authorized
to finance, construct, own, operate and maintain an infrastructure or development
facility from which the proponent is allowed to recover its total investment,
operating and maintenance costs plus a reasonable return thereon by collecting
tolls, fees, rentals or other charges from facility users: Provided, That
all such projects, upon recommendation of the Investment Coordination Committee
[ICC] of the National Economic and Development Authority [NEDA], shall
be approved by the President of the Philippines. Under this project, the
proponent which owns the assets of the facility may assign its operation
and maintenance to a facility operator.
- A contractual arrangement whereby a project proponent is authorized to
finance and construct an infrastructure or development facility and upon
its completion turns it over to the government agency or local government
unit concerned on a lease arrangement for a fixed period after which ownership
of the facility is automatically transferred to the government agency or
local government unit concerned.
- A contractual arrangement whereby the public sector contracts out
the building of an infrastructure facility to a private entity such that
the contractor builds the facility on a turn-key basis, assuming cost overrun,
delay and specified performance risks.
"Once the facility is commissioned
satisfactorily, title is transferred to the implementing agency. The private
entity however, operates the facility on behalf of the implementing agency
under an agreement.
- A contractual arrangement whereby the project proponent adds to an existing
infrastructure facility which it is renting from the government. It operates
the expanded project over an agreed franchise period. There may, or may
not be, a transfer arrangement in regard to the facility.
- A contractual arrangement whereby favorable conditions external to a
new infrastructure project which is to be built by a private project proponent
are integrated into the arrangement by giving that entity the right to
develop adjoining property, and thus, enjoy some of the benefits the investment
creates such as higher property or rent values.
- A contractual arrangement whereby an existing facility is turned over
to the private sector to refurbish, operate and maintain for a franchise
period, at the expiry of which the legal title to the facility is turned
over to the government. The term is also used to describe the purchase
of an existing facility from abroad, importing, refurbishing, erecting
and consuming it within the host country.
- A contractual arrangement whereby an existing facility is turned
over to the private sector to refurbish and operate with no time limitation
imposed on ownership. As long as the operator is not in violation of its
franchise, it can continue to operate the facility in perpetuity.
"[k] Project proponent.
- The private sector entity which shall have contractual responsibility
for the project and which shall have an adequate financial base to implement
said project consisting of equity and firm commitments from reputable financial
institutions to provide, upon award, sufficient credit lines to cover the
total estimated cost of the project.
- Any entity accredited under Philippine laws which may or may not be the
project proponent and which shall undertake the actual construction and/or
supply of equipment for the project.
"[m] Facility operator.
- A company registered with the Securities and Exchange Commission, which
may or may not be the project proponent, and which is responsible for all
aspects of operation and maintenance of the infrastructure or development
facility, including but not limited to the collection of tolls, fees, rentals
or charges from facility users: Provided, That in case the facility
requires a public utility franchise, the facility operator shall be Filipino
or at least sixty per centum [60%] owned by Filipinos.
"[n] 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.
"[o] Reasonable rate
of return on investments and operating and maintenance cost. - The
rate of return that reflects the prevailing cost of capital in the domestic
and international markets: Provided, That, in case of negotiated contracts,
such rate of return shall be determined by the ICC of the NEDA prior to
the negotiation and/or call for proposals: Provided, further, That for
negotiated contracts for public utility projects which are monopolies,
the rate of return on rate base shall be determined by existing laws, which
in no case shall exceed twelve per centum [12%].
- Refers to new construction, rehabilitation, improvement, expansion, alteration
and related works and activities including the necessary supply of equipment,
materials, labor and services and related items."
SEC. 3. Section
3 of the same Act is hereby amended to read as follows:
"SEC. 3. Private Initiative
in Infrastructure. - All government infrastructure agencies, including
government-owned and -controlled corporations and local government units
are hereby authorized to enter into contract with any duly prequalified
project proponent for the financing, construction, operation and maintenance
of any financially viable infrastructure or development facility through
any of the projects authorized in this Act. Said agencies, when entering
into such contracts, are enjoined to solicit the expertise of individuals,
groups, or corporations in the private sector who have extensive experience
in undertaking infrastructure or development projects."
SEC. 4. Section
4 of the same act is hereby amended to read as follows:
"SEC. 4. Priority projects.
- All concerned government agencies, including government-owned and -controlled
corporations and local government units, shall include in their development
programs those priority projects that may be financed, constructed, operated
and maintained by the private sector under the provisions of this Act.
It shall be the duty of all concerned government agencies to give wide
publicity to all projects eligible for financing under this Act, including
publication in national and, where applicable, international newspapers
of general circulation once every six (6) months and official notification
of project proponents registered with them.
"The lists of all such
national projects must be part of the development programs of the agencies
concerned. The list of projects costing up to Three hundred million pesos
[300,000,000] shall be submitted to the ICC of the NEDA for its approval
and to the NEDA Board for projects costing more than Three hundred million
pesos [300,000,000]. The list of projects submitted to the ICC of the NEDA
Board shall be acted upon within thirty  working days.
"The list of local
projects to be implemented by the local government units concerned shall
be submitted for confirmation to the municipal development council for
projects costing up to Twenty million pesos; those costing above Twenty
up to Fifty million pesos to the provincial development council; those
costing up to Fifty million to the city development council; above Fifty
million up to Two hundred million pesos to the regional development councils;
and those above Two hundred million pesos to the ICC of the NEDA."
SEC. 5. A new section
is hereby added after Section 4 of the same Act and numbered as Section
4-A, to read as follows:
"SEC. 4-A. Unsolicited
proposals. - Unsolicited proposals for projects may be accepted by
any government agency or local government unit on a negotiated basis: Provided,
That, all the following conditions are met:  such projects involve a
new concept or technology and/or are not part of the list of priority projects,
 no direct government guarantee, subsidy or equity is required, and
 the government agency or local government unit has invited by publication,
for three  consecutive weeks, in a newspaper of general circulation,
comparative or competitive proposals and no other proposal is received
for a period of sixty  working days: Provided, further, That
in the event another proponent submits a lower price proposal, the original
proponent shall have the right to match that price within thirty  working
SEC. 6. Section
5 of the same Act is hereby amended to read as follows:
"SEC. 5. Public Bidding
of Projects. - Upon approval of the projects mentioned in Section 4
of this Act, the head of the infrastructure agency or local government
unit concerned shall forthwith cause to be published, once every week for
three  consecutive weeks, in at least two  newspapers of general
circulation and in at least one  local newspaper which is circulated
in the region, province, city or municipality in which the project is to
be constructed, a notice inviting all prospective infrastructure or development
project proponents to participate in a competitive public bidding for the
projects so approved.
"In the case of a build-operate-and-transfer
arrangement, the contract shall be awarded to the bidder who, having satisfied
the minimum financial, technical, organizational and legal standards required
by this Act, has submitted the lowest bid and most favorable terms for
the project, based on the present value of its proposed tolls, fees, rentals
and charges over a fixed term for the facility to be constructed, rehabilitated,
operated and maintained according to the prescribed minimum design and
performance standards, plans and specifications. For this purpose, the
winning project proponent shall be automatically granted by the appropriate
agency the franchise to operate and maintain the facility, including the
collection of tolls, fees, rentals, and charges in accordance with Section
"In the case of a build-and-transfer
or build-lease-and-transfer arrangement, the contract shall be awarded
to the lowest complying bidder based on the present value of its proposed
schedule of amortization payments for the facility to be constructed according
to the prescribed minimum design and performance standards, plans and specifications:
Provided, however, That a Filipino contractor who submits an equally
advantageous bid with exactly the same price and technical specifications
as those of a foreign contractor shall be given preference.
"In all cases, a consortium
that participates in a bid must present proof that the members of the consortium
have bound themselves jointly and severally to assume responsibility for
any project. The withdrawal of any member of the consortium prior to the
implementation of the project could be a ground for the cancellation of
"The public bidding
must be conducted under a two-envelope/two-stage system: the first envelope
to contain the technical proposal and the second envelope to contain the
financial proposal. The procedures for this system shall be outlined in
the implementing rules and regulations of this Act.
"A copy of each contract
involving a project entered into under this Act shall forthwith be submitted
to Congress for its information."
SEC. 7. A
new section is hereby added after Section 5 of the same Act and numbered
as Section 5-A, to read as follows:
"SEC. 5-A. Direct Negotiation
of Contracts. - Direct negotiation shall be resorted to when there
in only one complying bidder left as defined hereunder:
"[a] If, after advertisement,
only one contractor applied for prequalification and it meets the prequalification
requirements, after which it is required to submit a bid/proposal which
is subsequently found by the agency/local government unit [LGU] to be complying.
"[b] If, after advertisement,
more than one contractor applied for prequalification but only one meets
the prequalification requirements, after which it submits bid/proposal
which is found by the agency/LGU to be complying.
"[c] If, after prequalification
of more than one contractor, only one submits a bid which is found by the
agency/LGU to be complying.
"[d] If, after prequalification,
more than one contractor submit bids but only one is found by the agency/LGU
to be complying: Provided, That, any of the disqualified prospective bidder
may appeal the decision of the implementing agency/LGUs Prequalification
Bids and Awards Committee within fifteen  working days to the head
of the agency, in case of national projects or to the Department of the
Interior and Local Government, in case of local projects from the date
the disqualification was made known to the disqualified bidder. Provided,
furthermore, That the implementing agency/LGUs concerned should act on
the appeal within forty-five  working days from receipt thereof."
SEC. 8. Section
6 of the same Act is hereby amended to read as follows:
"SEC. 6. Repayment Scheme.
- For the financing, construction, operation and maintenance of any infrastructure
project undertaken through the Build-Operate-and-Transfer arrangement or
any of its variations pursuant to the provisions of this Act, the project
proponent shall be repaid by authorizing it to charge and collect reasonable
tolls, fees, and rentals for the use of the project facility not exceeding
those incorporated in the contract and, where applicable, the proponent
may likewise be repaid in the form of a share in the revenue of the project
or other non-monetary payments, such as, but not limited, to the grant
of a portion or percentage of the reclaimed land, subject to the constitutional
requirements with respect to the ownership of land: Provided, That
for negotiated contracts, and for projects which have been granted a natural
monopoly or where the public has no access to alternative facilities, the
appropriate government regulatory bodies, shall approve the tolls, fees,
rentals, and charges based on a reasonable rate of return: Provided,
further, That the imposition and collection of tolls, fees, rentals,
and charges shall be for a fixed term as proposed in the bid and incorporated
in the contract but in no case shall this term exceed fifty  years:
Provided, furthermore, That the tolls, fees, rentals, and charges
may be subject to adjustment during the life of the contract, based on
a predetermined formula using official price indices and included in the
instructions to bidders and in the contract: Provided, also, That
all tolls, fees, rentals, and charges and adjustments thereof shall take
into account the reasonableness of said rates to the end-users of private
sector-built infrastructure: Provided, finally, That during the
lifetime of the franchise, the project proponent shall undertake the necessary
maintenance and repair of the facility in accordance with standards prescribed
in the bidding documents and in the contract. In the case of a Build-and-Transfer
arrangement, the repayment scheme is to be effected through amortization
payments by the government agency or local government unit concerned to
the project proponent according to the scheme proposed in the bid and incorporated
in the contract."
SEC. 9. Section
7 of the same Act is hereby amended to read as follows:
"SEC. 7. Contract Termination
- In the event that a project is revoked, canceled or terminated
by the Government through no fault of the project proponent or by mutual
agreement, the Government shall compensate the said project proponent for
its actual expenses incurred in the project plus a reasonable rate of return
thereon not exceeding that stated in the contract as of the date of such
revocation, cancellation or termination: Provided, That the interest
of the Government in these instances shall be duly insured with the Government
Service Insurance System or any other insurance entity duly accredited
by the Office of the Insurance Commissioner: Provided, finally, That
the cost of the insurance coverage shall be included in the terms and conditions
of the bidding referred to above.
"In the event that
the government defaults on certain major obligations in the contract and
such failure is not remediable or if remediable shall remain unremedied
for an unreasonable length of time, the project proponent/contractor may,
by prior notice to the concerned national government agency or local government
unit specifying the turn-over date, terminate the contract. The project
proponent/contractor shall be reasonably compensated by the Government
for equivalent or proportionate contract cost as defined in the contract."
SEC. 10. Section
8 of the same Act is hereby amended to read as follows:
"SEC. 8. Regulatory
Boards. - The Toll Regulatory Board which was created by Presidential
Decree No. 1112 is hereby attached to the Department of Public Works and
Highways with the Secretary of Public Works and Highways as Chairman."
SEC. 11. Section
9 of the same Act is hereby amended to read as follows:
"SEC. 9. Project Supervision.
- Every infrastructure project undertaken under the provisions of this
Act shall be in accordance with the plans, specifications, standards, and
costs approved by the concerned government agency and shall be under the
supervision of the said agency or local government unit in the case of
SEC. 12. A
new section to be numbered as Section 10 is hereby added to read as follows:
"SEC. 10. Investment
Incentives. - Among other incentives, projects in excess of One billion
pesos [1,000,000,000] shall be entitled to incentives as provided by the
Omnibus Investments Code, upon registration with the Board of Investments."
SEC. 13. Section
10 of the same Act is hereby renumbered as Section 11 to read as follows:
"SEC. 11. Implementing
Rules and Regulations. - A committee composed of one (1) representative
each from the Department of Public Works and Highways, the Department of
Transportation and Communications, the Department of Energy, the Department
of Environment and Natural Resources, the Department of Agriculture, the
Department of Trade and Industry, the Department of Finance, the Department
of the Interior and Local Government, the National Economic and Development
Authority, the Coordinating Council of the Philippine Assistance Program,
and other concerned government agencies shall within sixty  days from
the effectivity of this Act, formulate and prescribe, after public hearing
and publication as required by law, the implementing rules and regulations
including, among others, the criteria and guidelines for evaluation of
bid proposals, list of financial incentives and arrangements that the Government
may provide for the project, in order to carry out the provisions of this
Act in the most expeditious manner.
"The Chairman of this
committee shall be appointed by the President of the Philippines from its
"From time to time
the Committee may conduct, formulate and prescribe after due public hearing
and publication, amendments to the implementing rules and regulations,
consistent with the provisions of this Act."
SEC. 14. A
new section to be numbered as Section 12 is hereby added to read as follows:
"SEC. 12. Coordination
and Monitoring of Projects. - The Coordinating Council of the Philippine
Assistance Program [CCPAP] shall be responsible for the coordination and
monitoring of projects implemented under this Act.
councils and local government units shall periodically submit to CCPAP,
information on the status of said projects.
"At the end of every
calendar year, the CCPAP shall report to the President and to Congress
on the progress of all projects implemented under this Act."
SEC. 15. Section
11, 12 and 13 of the same Act are hereby renumbered as Sections 13, 14,
and 15, respectively.
SEC. 16. Repealing
Clause. - All laws or parts of any law inconsistent with the
provisions of this Act are hereby repealed or modified accordingly.
Clause. - If any provision of this Act is held invalid, the other provisions
not affected thereby shall continue in operation.
SEC. 18. Effectivity
Clause. - This Act shall take effect fifteen  days after
its publication in at least two (2) newspapers of general circulation.
[Sgd.] JOSE DE VENECIA, JR.
President of the Senate
Speaker of the House of Representatives
This Act which is a
consolidation of House Bill No. 10943 and Senate Bill No. 1586 was finally
passed by the House of Representatives and the Senate on April 12, 1994
and April 27, 1994, respectively.
[Sgd.] ROBERTO P. NAZARENO
Secretary of the Senate
Acting Secretary General
House of Representatives
Approved: 8 MAY 1994
[Sgd.] FIDEL V. RAMOS
President of the