PPP Menu No. 2: To court or be courted

THE government cannot be forced to make a particular decision or compelled to order a specific viand of the Public-Private Partnership (PPP) Menu.

In PPPs, while being consensual and contractual in nature, the initiatory and ultimate decision for a PPP-government project lies with the public sector. One such initiatory determination is the manner by which a public implementing agency (IA) chooses its private-sector proponent (PSP) for a particular project.

Either an IA will court or allow itself to be courted—whether it will go through bidding, open competition or competitive selection, and court the public, bidders and PSPs; or it will consider an unsolicited proposal from and allow itself to be courted by a PSP in a competitive challenge process.

The originator. In a bidding, the IA is the originator, while in a competitive challenge, it is the PSP. When an IA courts, it chooses the project and the modality, prepares the terms of reference,  and drafts the PPP contract. The government, therefore, owns, as public funds are expended, the project documents. It publishes its intention to invite PSPs.

In a competitive challenge, the PSP, without being invited, conceptualizes the project, prepares the unsolicited proposal, submits a project study and term sheet or draft contract. It spends for all these and, therefore, it has proprietary ownership over the study. Without one of these, the submission will be incomplete.

No guarantees. Like in any process or courtship, the intention might not come true. When government courts, there could be no takers. In a bidding by an IA, no PSP may be interested or even if there are interested PSPs, they may be ineligible or their proposals may fall short of the standards set by the IA.

When an IA is courted by a PSP, it may reject outright the latter’s unsolicited proposal. Even if an IA accepts a proposal, the arrangement may be short-lived. The PSP may turn out to be unqualified or the IA and the PSP may not come to terms during the negotiations. The original PSP may also not get the award if a challenger prevails.

There are, therefore, no guarantees. A party can be forced to say yes. The other party must agree and follow the process set by law or relevant guidelines.

The courtship rules. Depending on the modality, the courtship rules may vary. Under the build-operate-transfer law and joint-venture guidelines issued by the National Economic and Development Authority, courtship by IAs and PSPs are allowed. Under the Government Procurement Reform Act, concession laws like the National Water Crisis Act and the Electric Power Industry Reform Act, and Commission on Audit circular for divestment, unsolicited proposals are not. In these cases, only government can initiate.

The trend. The unofficial count of awarded projects by this columnist shows that, in the past eight years, nine out of 10 PPP projects by national government agencies are pursued through solicitation. The reverse is true for government-owned and -controlled corporations and government instrumentalities, and local governments. There are more awarded projects through the unsolicited route.

The columnist hopes that this part of the 25-viand PPP Menu is clear.

Merry Christmas to all.