Availing of availability payments

Availing of availability payments

How can a project undertaken through a public-private partnership (PPP) arrangement, whereby the investment and rate of return are not recoverable from end-users, become viable? How can a project undertaken through a public-private partnership (PPP) arrangement, whereby the investment and rate of return are not recoverable from end-users, become viable?

Such a scenario is particularly true for public good-oriented or “soft” projects where the  government, not the consumers, pay. Examples of socially aimed projects are schools, rehabilitation and evacuation centers, prisons, irrigation systems and agriculture development. Sports facilities and railways, while considered “hard,” may not be that feasible or “PPP-able” if implemented without “add on” or “value added” mechanisms.

One such mechanism is “availability payments (AP).” AP is a long-term agreement with fixed periodic payments by a government agency or sponsor to the private-sector proponent (PSP) when the facility is completed and delivered to government. When the facility or service becomes available, the government or the sponsor pays, hence the name. Simply put—no facility, no AP.

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PPP for Marawi City and Tacloban City

PPP for Marawi City and Tacloban City

How does a city reel from the devastation of war, like Marawi City, and from a calamity, like Tacloban City? After combat operations in Marawi have been declared terminated and, after four years since Supertyphoon Yolanda lashed its fury on Tacloban, how can the government reconstruct and rehabilitate, and provide, in an expeditious manner, more and better, yet affordable, services? Who will finance and build the destroyed homes, hospitals, markets, roads, bridges, irrigation systems, schools and water-supply facilities?

One Way. Using government resources, appropriated or donated, and building facilities, either through procurement or by administration, Marawi can be “modernized” and Tacloban rebuilt. For Marawi and Tacloban then, P5 billion and P26 billion have been initially earmarked, respectively.However, this is not the only approach available.

The alternative. The other way, which can be undertaken with the first, is to pursue public-private partnerships (PPPs). “Build, Build, Build” can also happen through this alternative developmental approach whereby the private sector can codesign, cofinance, codevelop, co-implement, coconstruct, comanage and coown a project.

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Dissecting PPP contracts #9: The party clause and assignment of rights

Dissecting PPP contracts #9: The party clause and assignment of rights

Who pays attention to the party clause and assignment of rights provisions of a public-private partnership (PPP) arrangement? For those who want to make the parties accountable—those here means us—we should. The parties are the ones entrusted by law and contract to serve the public through this development strategy. We should know who to point our fingers at and exact performance from.

When a government/implementing agency enters into a project-based arrangement with a private sector proponent (PSP), the transaction is embodied in a binding and legally enforceable contract. Like any other contract, the party clause captures the who of the PPP.

The first party, the one awarding the contract, can only validly undertake the PPP Project if empowered to do under its charter or enabling law. The implementing agency is the party that is vested with law, let us say to supply water, lease out a parcel of land or provide basic services, to perform the task but could not do so completely, efficiently and/or expeditiously, on its own. That implementing agency, after choosing from other development strategies, opts to partner with a PSP using the PPP approach.

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News flash: ‘3rd’ joint-venture guidelines

News flash: ‘3rd’ joint-venture guidelines

In the same way that there is no single law or regulation governing all public-private partnership (PPP) modalities in the country, there are also no universal joint-venture (JV) guidelines that must be followed by all government agencies.

On October 2 this columnist contrasted two JV frameworks. These are the 2013 JV Guidelines issued by the National Economic and Development Authority (2013 Neda JV Guidelines), which covers government-owned and -controlled corporations, government instrumentalities, government corporate entities (GCEs), state universities and colleges and government financing institutions (GFIs); and the template PPP and JV ordinances for local government units (LGUs) developed by this columnist.

This template ordinance is now the official template of the Department of Interior and Local Government (DILG) under Memorandum Circular 2016—120 (DILG MC). Some 100 LGUs have already adopted their respective PPP and JV ordinances.

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Dissecting PPP contracts #8: ADR

Dissecting PPP contracts #8: ADR

During the life of a public-private partnership (PPP) arrangement, which may last for 50 years, disputes and controversies may arise. These cases typically come about after the term of the officials who vetted and awarded the project. Philippine PPP history has seen the effects of such successor risk.

Cases have been lodged in connection with canceled contracts, changes in interpretation of contractual provisions and breach of material obligations. These happen unilaterally or without the knowledge, consent or participation of the other contracting party. Aggrieved parties may either seek redress and relief from courts, quasi-judicial bodies or “neutral third persons.”

Publicized arbitration cases. In at least three instances, the Philippine Government, through its implementing agencies, has been hailed to arbitration proceedings before international neutral third persons. The private sector proponents of Metropolitan Waterworks and Sewerage System, Ninoy Aquino International Airport Terminal 3 and Laguna Lake Rehabilitation and Dredging Project filed arbitration cases after unilateral adverse action by the successor administration.

Executive Order 78, series of 2012. Under this executive issuance, referral to “neutral third persons” is now the rule. Provisions on Alternative Dispute Resolution (ADR) mechanisms must be included in PPP, Build-Operate-and-Transfer Law-related and joint venture agreements, whether entered into by national government agencies, government corporations or local government units. This executive order is anchored on Republic Act 9285, or the ADR Act of 2004.

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PPP conversations #10 with Metro Pacific Tollways Corp.

PPP conversations #10 with Metro Pacific Tollways Corp.

ALL over the world, public-private partnerships (PPPs) are undertaken for roads. In the Philippines road infrastructure is done through either build-operate-transfer, build-transfer-operate, joint venture, concession or procurement arrangements with national government agencies, local governments or government corporations.

Metro Pacific Tollways Corp.(MPTC) has done and continues to operate over 200 kilometers of road PPPs in North Luzon Expressway (Nlex) and Cavite Expressway (Cavitex) and will soon complete three more—Cavite–Laguna Expressway (Calax), Nlex-South Luzon Expressway (Slex) connector road and Cebu-Cordova link expressway.

MPTC President and CEO Rodrigo Franco shares his insights on the need for resource exchange, the readiness of the government and the private sector to enter into such collaborative arrangements, and the successes and risks of PPPs. He calls on us to support and be patient with this alternative development strategy. Thank you MPTC for keeping the PPP flame burning.

• What is your concept of PPP?

PPP is a joint endeavor of the government and private entities to
deliver essential services, especially infrastructure, to the public.  As its resources and capabilities are never enough, the government through the PPP Program contracts private- sector entities to help deliver basic services. The government and its private-sector partner share the risks and rewards of the endeavor. The private entity generates returns from a stream of payments either from the government or the recipient of the services.

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Contrasting 2 joint-venture frameworks

Contrasting 2 joint-venture frameworks

Every time this columnist lectures on public-private partnerships (PPPs), he cannot de-emphasize the differences in the frameworks on joint ventures (JVs). A JV is a PPP modality whereby both public- and private-sector proponents (PSPs) contractually agree to a common purpose, contribute, exchange resources, jointly perform functions and proportionately share in governance, revenues, profits, losses and risks. The two types of JVs are contrasted as follows:

  1. Classes of public entities. JVs, on the part of government, can be entered into between government corporations and instrumentalities, state universities and colleges and government financing institutions (GFIs) and PSPs; and between local government units (LGUs) and PSPs.
  2. Governing frameworks. GFI-PSP JVs are currently governed by the 2013 Guidelines issued by the National Economic and Development Authority (Neda JV Guidelines), while LGU-PSP JVs are anchored on the 1991 Local Government Code and its implementing rules. However, the “how to” or details—definition, requirements, conditions, form of contributions and procedures—are supplied by LGUs through their respective ordinances. To date, some 90 LGUs already have theirs. The template PPP ordinance annexed to the Department of Interior and Local Government Memorandum Circular 2016-120 (DILG MC) incorporates LGU JVs.
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