Dissecting PPP contracts # 5: Grant of rights

Dissecting PPP contracts # 5: Grant of rights

By what authority can a private-sector proponent (PSP) in a public-private partnership (PPP) arrangement operate a project that is traditionally government’s? By what right can that PSP charge and collect fees from the consumers or public? What does government get in return under the scheme?

In a PPP, let us say, for water supply, power transmission, public market, toll road or bridge, airport, reclamation or telecommunications, how can the PSP undertake these? In order for the PSP to do these, there must be a “grant of rights”.

Indispensability. No grant, no project. Without this grant, concession, license, or vestiture of authority by government, the PSP cannot supply water, transmit power or operate a public market, charge fees and earn from the project. The PSP, on its own, cannot do these “public” projects without an express grant.

Grantor. The relevant government agency—national government agency, government corporation or instrumentality, regulatory agency or local government unit—which, under its mandate, has the responsibility to pursue or regulate a particular PPP project, must accede and make such grant.

Grantee. In a PPP, the grantee is the winning PSP. After going through competition for the market, the PSP secures the award.

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PPP conversations #8 with Bataan Gov. Abet

PPP conversations #8 with Bataan Gov. Abet

One Bataan. One provincial public-private partnerships (PPPs) ordinance. One component city and 10 municipalities with PPP policies. All 237 barangays following the provincial PPP ordinance. Seven awarded and pending PPP projects…and more.

Indeed, the whole of Bataan is PPP-ready…and it is not just ready on paper. PPP is now a bureaucracy-wide, development-oriented, people-centric and public good-driven strategy in the whole province. While no one person or leader can claim credit, critical to this enviable reality is the innovative, performance-based and democratic leadership of the young father of the province—Gov. Albert “Abet” S. Garcia.

One Bataan. One provincial public-private partnerships (PPPs) ordinance. One component city and 10 municipalities with PPP policies. All 237 barangays following the provincial PPP ordinance. Seven awarded and pending PPP projects…and more.

Indeed, the whole of Bataan is PPP-ready…and it is not just ready on paper. PPP is now a bureaucracy-wide, development-oriented, people-centric and public good-driven strategy in the whole province. While no one person or leader can claim credit, critical to this enviable reality is the innovative, performance-based and democratic leadership of the young father of the province—Gov. Albert “Abet” S. Garcia.

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PPP Conversations #7 with Center for Global Best Practices

PPP Conversations #7 with Center for Global Best Practices

The Center for Global Best Practices (CGBP) stands out as a leader in public-private partnership (PPP) knowledge building and sharing. From 2011 to this month, CGBP has organized 16 seminars on PPPs and joint ventures. Before the current year ends, it will host another one.

Its last seminar on PPP, just this month, was attended by more than 100 representatives from government agencies, local governments, private companies, cooperatives, banks, land developers and law firms. Around 1,500 PPP stake-holders have learned about the basics of PPPs, and the various modalities of this alternative development strategy, as well as the challenges of PPP projects. The participants have gained insights on the future and opportunities of PPPs while, at the same time, appreciating the risks of dealing with the government.

AT the helm of CGBP is a dynamic, creative and driven leader. CGBP President and founder Henry Aquende shares his thoughts on PPP. His definition of PPP is broad and not restricted to any particular law or modality. He posits that any business-oriented partnership between government and the private sector is a PPP. He considers PPPs not as an end but a means to accelerate country development.

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Dissecting PPP contracts #2: Preambulatory clauses

Dissecting PPP contracts #2: Preambulatory clauses

 

Pardon the fancy word. Preambulatory clauses is just another term for whereas clauses. Simply, it is the introduction or preliminary statement to the main contract. This columnist first encountered this term in his legal forms class sometime in 1987 while he was in law school.

Like the Preamble in the Constitution, this cluster of clauses in a public-private partnership (PPP) contract defines the rationale or context, sets the background and provides the why of the arrangement. Even if, by themselves, the clauses do not create rights and obligations, they are important and relevant when interpreting provisions of the contract.

PPP preambulatory clauses may cover the following matters:

 (1) Mandate of the agency. The preambulatory clauses follow the statement of the parties. However, this statement does not mention the authority or mandate of the government agency in pursuing PPP as a development strategy or in implementing a particular PPP engagement. Stakeholders reading the contract would better appreciate the project by knowing the agency.

(2) The need for the project. Part of the background of executing a PPP contract is why the parties entered into such a partnership for a specified project or activity. The need would typically be couched as a gap, inadequacy or failure, such as lack of access to water or power. An exhaustive discussion of this need is not embedded in the PPP contract but is contained in the study for the project.

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Dissecting (and understanding) PPP Contracts No. 1: The Step-in Rights

Dissecting (and understanding) PPP Contracts No. 1: The Step-in Rights

When a government agency and a private-sector proponent (PSP) enter into a formal, often, long-term arrangement, the ultimate aim is to provide a public service. So it would be to the best interest of everyone, parties and nonparties alike, project lenders included, if the contract will be operative up to the time the stated period expires.

However, as history will teach us, glitches, to put it mildly, occur midstream. Public-private parnertship (PPP) contracts have been terminated, guarantees called upon, traffic projections become useless, tariff adjustments not realized, and the PSP performs below par.

In the latter instance, the “step-in” rights provision may be invoked. The insertion of step-in rights provisions, or protective or intervention schemes is a security mechanism, which provides comfort to stakeholders.

(1) Who steps out? The PSP is the one who steps out. In which case, the PSP, depending on the type of nonperformance, can no longer continue being the operator, builder or service provider.

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