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.

  1. National government intervention. For GFI JVs, the role of the Neda (Investment Coordination Committee) depends on the value of government’s contribution. If the amount is P150 million or more, the Neda needs to approve the negotiated terms. For JVs by LGUs, the Neda intervention, for purposes of awarding a JV agreement, is not required regardless of the project cost and value of the government contribution. Under the the Neda JV Guidelines, depending on the arrangement, the Office of the President, Governance Commission for GOCCs and Privatization Council may approve or disapprove certain terms. This is not the case for LGU JVs.
  2. Rule on exclusion. If there are two or more unsolicited proposals lodged prior to any one being accepted, the proposal earliest filed must be evaluated first. The second or subsequent proposal will only be considered if the first is rejected. This is the “first-in-time approach”. There is no such rule for current JV ordinances. LGUs may consider all proposals simultaneously and accept the “best” one.
  3. Rules on challenge. Under the DILG MC and enacted PPP and JV ordinances, the original proponent (OP) has the right to match the best or superior offer from any eligible challenger, if any. The procedure under the Neda JV Guidelines is different. The OP is given the option to submit a second better financial offer, which should be contained in a sealed envelope. This is opened at the same time the envelopes containing the financial bids of challengers, if any, are opened. The OP only bags the award if it makes the best offer or if its offer ties with the highest offer of a challenger. The OP has no right to match. The former approach is “open-eyed”, while the latter, a “blind” exercise.

So, for those who want to do JVs with government, one must appreciate the different rules of engagement. This would lead you to make a knowledge-based decision.

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