What can be negotiated in a competitive challenge process

What can be negotiated in a competitive challenge process

Part One

Another aspect of unsolicited proposals (UPs) for public-private partnership (PPP) arrangements, which is the subject of interpretation and conjecture, is the boundaries of negotiation. Negotiation, which is Stage 2 of a three-step process, takes place after a government implementing agency (IA) accepts a complete UP from a private-sector proponent (PSP) for a particular PPP project, and before that IA opens the negotiated terms to competitive challenge.

The implementing rules and regulation of the build-operate-transfer law (BOT law IRR), which specifically lists nine modalities, and the 2013 Guidelines issued by the National Economic and Development Authority on Joint Ventures (Neda JV Guidelines) define the scope of the negotiation. The BOT law IRR and Neda JV Guidelines are couched in general terms and do not expressly spell out the matters that cannot be covered under Stage 2.

The BOT law IRR provides that “negotiations shall focus on the project scope, implementation arrangements, reasonable ROR (rate of return) and other parameters determined by the ICC (Investment Coordinating Committee of Neda)/Approving Body, and the terms and conditions of the draft contract for the Unsolicited Proposal, among others.”

Under the JV Guidelines, “both parties shall negotiate on the terms and conditions, scope, as well as all legal, technical, and financial aspects of the JV activity.”

Based on these two regulations, the parties can surely discuss three things: (1) the project scope, i.e., its legal, technical and financial aspects; (2) the contract, i.e., its terms and conditions; and (3) the implementation arrangements. The question now is, “Are there limits to what can or cannot be discussed and negotiated upon and hopefully, agreed on?” It is clear that the latitude of negotiation is broad, but how broad?

Without a doubt, the negotiation checklist, as used in the BOT law IRR and Neda JV Guidelines, is “inclusive,” not exclusive. The BOT law IRR uses the terms “other parameters” and “among others,” while the Neda JV Guidelines mentions “terms and conditions” and “aspects.” These terms, however, cannot be construed as absolutes or not without limits.

The “others” must be reasonably linked, relevant and related to the project as proposed in the UP. Further, following a rule on statutory construction, the “others” must be of the same kind or nature as the enumeration. But the enumeration is so broad—project, contract and implementation—giving the IA wide discretion.

While the parties can discuss almost everything, the discretion is not unlimited. For one, the parties, during the negotiation stage, cannot revise the project itself. In Stage 2, the parties cannot agree to change a bridge project to a water distribution project. However, in the bridge project, water distribution pipes may be installed, which was not originally contemplated in the UP. Related components, which could render a project (more) viable or complete, can be introduced during negotiations. This is still project-related.

To be concluded

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