REPUBLIC ACT No. 7718
AN ACT AMENDING CERTAIN SECTIONS OF REPUBLIC ACT No.
6957, ENTITLED "AN ACT AUTHORIZING THE FINANCING, CONSTRUCTION, OPERATION
AND MAINTENANCE OF INFRASTRUCTURE PROJECTS BY THE PRIVATE SECTOR, AND FOR OTHER
PURPOSES"
Section 1
Section 1 of Republic Act No. 6957 is hereby amended to read as
follows:
Section
1
Declaration
of Policy
It is the declared policy of
the State to recognize the indispensable role of the private sector as the main
engine for national growth and development and provide the most appropriate
incentives to mobilize private resources for the purpose of financing the
construction, operation and maintenance of infrastructure and development
projects normally financed and undertaken by the Government. Such incentives,
aside from financial incentives as provided by law, shall include providing a
climate of minimum government regulations and procedures and specific
government undertakings in support of the private sector."
Section 2
Section 2 of the same Act is hereby amended to read as follows:
Section
2
Definition
of Terms
The following terms used in
this Act shall have the meaning stated below:
a. Private sector infrastructure or development
projects
The general description of
infrastructure or development projects normally financed and operated by the
public sector but which will now be wholly or partly implemented by the private
sector, including bit not limited to, power plants, highways, ports, airports,
canals, dams, hydropower projects, water supply, irrigation,
telecommunications, railroads and railways, transport systems, land reclamation
projects, industrial estates or townships, housing, government buildings,
tourism projects, markets, slaughterhouses, warehouses, solid waste management,
information technology networks and database infrastructure, education and
health facilities, sewerage, drainage, dredging, and other infrastructure and
development projects as may be authorized by the appropriate agency pursuant to
this Act. Such projects shall be undertaken through contractual arrangements as
defined hereunder and such other variations as may be approved by the President
of the Philippines.
For the construction stage
of these infrastructure projects, the project proponent may obtain financing from
foreign and/or domestic sources and/or engage the services of a foreign and/or
Filipino contractor. Provided, That, in case an infrastructure or a development
facility's operation requires a public utility franchise, the facility operator
must be Filipino or if a corporation, it must be duly registered with the
Securities and Exchange Commission and owned up to at least sixty percent (60%)
by Filipinos: Provided, further, That in the case of foreign contractors,
Filipino labor shall be employed or hired in the different phases of the
construction where Filipino skills are available: Provided, finally, That
projects which would have difficulty in sourcing funds may be financed partly
from direct government appropriations and/or from Official Development Assistance
[ODA] of foreign governments or institutions not exceeding fifty percent [50%]
of the project cost, and the balance to be provided by the project proponent.
b. Build-operate-and-transfer
A contractual arrangement
whereby the project proponent undertakes the construction, including financing,
of a given infrastructure facility, and the operation and maintenance thereof.
The project proponent operates the facility over a fixed term during which it
is allowed to charge facility users appropriate tolls, fees, rentals, and
charges not exceeding these proposed in its bid or as negotiated and
incorporated in the contract to enable the project proponent to recover its
investment, and operating and maintenance expenses in the project. The project
proponent transfers the facility to the government agency or local government
unit concerned at the end of the fixed term which shall not exceed fifty [50]
years: Provided, That in case of an infrastructure or development facility
whose operation requires a public utility franchise, the proponent must be
Filipino or, if a corporation, must be duly registered with the Securities and
Exchange Commission and owned up to at least sixty percent [60%] by Filipinos.
The
build-operate-and-transfer shall include a supply-and-operate situation which
is a contractual arrangement whereby the supplier of equipment and machinery
for a given infrastructure facility, if the interest of the Government so
requires, operates the facility providing in the process technology transfer and
training to Filipino nationals.
c. Build-and-transfer
A contractual arrangement
whereby the project proponent undertakes the financing and construction of a
given infrastructure or development facility and after its completion turns it
over to the government agency or local government unit concerned, which shall
pay the proponent on an agreed schedule its total investments expended on the
project, plus a reasonable rate of return thereon. This arrangement may be
employed in the construction of any infrastructure or development project,
including critical facilities which, for security or strategic reasons, must be
operated directly by the Government.
d. Build-own-and-operate
A contractual arrangement
whereby a project proponent is authorized to finance, construct, own, operate
and maintain an infrastructure or development facility from which the proponent
is allowed to recover its total investment, operating and maintenance costs
plus a reasonable return thereon by collecting tolls, fees, rentals or other
charges from facility users: Provided, That all such projects, upon
recommendation of the Investment Coordination Committee [ICC] of the National
Economic and Development Authority [NEDA], shall be approved by the President
of the Philippines. Under this project, the proponent which owns the assets of
the facility may assign its operation and maintenance to a facility operator.
e. Build-lease-and-transfer
A contractual arrangement
whereby a project proponent is authorized to finance and construct an infrastructure
or development facility and upon its completion turns it over to the government
agency or local government unit concerned on a lease arrangement for a fixed
period after which ownership of the facility is automatically transferred to
the government agency or local government unit concerned.
f. Build-transfer-and-operate
A contractual arrangement
whereby the public sector contracts out the building of an infrastructure
facility to a private entity such that the contractor builds the facility on a
turn-key basis, assuming cost overrun, delay and specified performance risks.
Once the facility is
commissioned satisfactorily, title is transferred to the implementing agency.
The private entity however, operates the facility on behalf of the implementing
agency under an agreement.
g. Contract-add-and-operate
A contractual arrangement
whereby the project proponent adds to an existing infrastructure facility which
it is renting from the government. It operates the expanded project over an
agreed franchise period. There may, or may not be, a transfer arrangement in
regard to the facility.
h. Develop-operate-and-transfer
A contractual arrangement
whereby favorable conditions external to a new infrastructure project which is
to be built by a private project proponent are integrated into the arrangement
by giving that entity the right to develop adjoining property, and thus, enjoy
some of the benefits the investment creates such as higher property or rent
values.
i. Rehabilitate-operate-and-transfer
A contractual arrangement
whereby an existing facility is turned over to the private sector to refurbish,
operate and maintain for a franchise period, at the expiry of which the legal
title to the facility is turned over to the government. The term is also used
to describe the purchase of an existing facility from abroad, importing,
refurbishing, erecting and consuming it within the host country.
j. Rehabilitate-own-and-operate
A contractual arrangement
whereby an existing facility is turned over to the private sector to refurbish
and operate with no time limitation imposed on ownership. As long as the
operator is not in violation of its franchise, it can continue to operate the
facility in perpetuity.
k. Project proponent
The private sector entity
which shall have contractual responsibility for the project and which shall
have an adequate financial base to implement said project consisting of equity
and firm commitments from reputable financial institutions to provide, upon
award, sufficient credit lines to cover the total estimated cost of the
project.
l. Contractor
Any entity accredited under
Philippine laws which may or may not be the project proponent and which shall
undertake the actual construction and/or supply of equipment for the project.
m. Facility operator
A company registered with
the Securities and Exchange Commission, which may or may not be the project
proponent, and which is responsible for all aspects of operation and
maintenance of the infrastructure or development facility, including but not
limited to the collection of tolls, fees, rentals or charges from facility
users: Provided, That in case the facility requires a public utility franchise,
the facility operator shall be Filipino or at least sixty per centum [60%]
owned by Filipinos.
n. Direct government guarantee
An agreement whereby the
government or any of its agencies or local government units assume
responsibility for the repayment of debt directly incurred by the project
proponent in implementing the project in case of a loan default.
o. Reasonable rate of return on investments and
operating and maintenance cost
The rate of return that
reflects the prevailing cost of capital in the domestic and international
markets: Provided, That, in case of negotiated contracts, such rate of return
shall be determined by the ICC of the NEDA prior to the negotiation and/or call
for proposals: Provided, further, That for negotiated contracts for public
utility projects which are monopolies, the rate of return on rate base shall be
determined by existing laws, which in no case shall exceed twelve per centum
[12%].
p. Construction
Refers to new construction,
rehabilitation, improvement, expansion, alteration and related works and
activities including the necessary supply of equipment, materials, labor and
services and related items."
Section 3
Section 3 of the same Act is hereby amended to read as follows:
Section
3
Private
Initiative in Infrastructure
All government
infrastructure agencies, including government-owned and -controlled
corporations and local government units are hereby authorized to enter into
contract with any duly prequalified project proponent for the financing,
construction, operation and maintenance of any financially viable
infrastructure or development facility through any of the projects authorized
in this Act. Said agencies, when entering into such contracts, are enjoined to
solicit the expertise of individuals, groups, or corporations in the private
sector who have extensive experience in undertaking infrastructure or
development projects."
Section 4
Section 4 of the same act is hereby amended to read as follows:
Section
4
Priority
projects
All concerned government
agencies, including government-owned and -controlled corporations and local
government units, shall include in their development programs those priority
projects that may be financed, constructed, operated and maintained by the private
sector under the provisions of this Act. It shall be the duty of all concerned
government agencies to give wide publicity to all projects eligible for
financing under this Act, including publication in national and, where
applicable, international newspapers of general circulation once every six (6)
months and official notification of project proponents registered with them.
The lists of all such
national projects must be part of the development programs of the agencies
concerned. The list of projects costing up to Three hundred million pesos
[300,000,000] shall be submitted to the ICC of the NEDA for its approval and to
the NEDA Board for projects costing more than Three hundred million pesos
[300,000,000]. The list of projects submitted to the ICC of the NEDA Board
shall be acted upon within thirty [30] working days.
The list of local projects
to be implemented by the local government units concerned shall be submitted
for confirmation to the municipal development council for projects costing up
to Twenty million pesos; those costing above Twenty up to Fifty million pesos
to the provincial development council; those costing up to Fifty million to the
city development council; above Fifty million up to Two hundred million pesos
to the regional development councils; and those above Two hundred million pesos
to the ICC of the NEDA.
Section 5
A new section is hereby added after Section 4 of the same Act and
numbered as Section 4-A, to read as follows:
Section
4-A
Unsolicited
proposals
Unsolicited proposals for
projects may be accepted by any government agency or local government unit on a
negotiated basis: Provided, That, all the following conditions are met: [1]
such projects involve a new concept or technology and/or are not part of the
list of priority projects, [2] no direct government guarantee, subsidy or
equity is required, and [3] the government agency or local government unit has
invited by publication, for three [3] consecutive weeks, in a newspaper of
general circulation, comparative or competitive proposals and no other proposal
is received for a period of sixty [60] working days: Provided, further, That in
the event another proponent submits a lower price proposal, the original
proponent shall have the right to match that price within thirty [30] working
days."
Section 6
Section 5 of the same Act is hereby amended to read as follows:
Section
5
Public
Bidding of Projects
Upon approval of the
projects mentioned in Section 4 of this Act, the head of the infrastructure
agency or local government unit concerned shall forthwith cause to be
published, once every week for three [3] consecutive weeks, in at least two [2]
newspapers of general circulation and in at least one [1] local newspaper which
is circulated in the region, province, city or municipality in which the
project is to be constructed, a notice inviting all prospective infrastructure
or development project proponents to participate in a competitive public
bidding for the projects so approved.
In the case of a
build-operate-and-transfer arrangement, the contract shall be awarded to the
bidder who, having satisfied the minimum financial, technical, organizational
and legal standards required by this Act, has submitted the lowest bid and most
favorable terms for the project, based on the present value of its proposed
tolls, fees, rentals and charges over a fixed term for the facility to be
constructed, rehabilitated, operated and maintained according to the prescribed
minimum design and performance standards, plans and specifications. For this
purpose, the winning project proponent shall be automatically granted by the
appropriate agency the franchise to operate and maintain the facility,
including the collection of tolls, fees, rentals, and charges in accordance
with Section 5 hereof.
In the case of a
build-and-transfer or build-lease-and-transfer arrangement, the contract shall
be awarded to the lowest complying bidder based on the present value of its
proposed schedule of amortization payments for the facility to be constructed
according to the prescribed minimum design and performance standards, plans and
specifications: Provided, however, That a Filipino contractor who submits an
equally advantageous bid with exactly the same price and technical
specifications as those of a foreign contractor shall be given preference.
In all cases, a consortium
that participates in a bid must present proof that the members of the consortium
have bound themselves jointly and severally to assume responsibility for any
project. The withdrawal of any member of the consortium prior to the
implementation of the project could be a ground for the cancellation of the
contract.
The public bidding must be
conducted under a two-envelope/two-stage system: the first envelope to contain
the technical proposal and the second envelope to contain the financial
proposal. The procedures for this system shall be outlined in the implementing
rules and regulations of this Act.
A copy of each contract
involving a project entered into under this Act shall forthwith be submitted to
Congress for its information.
Section 7
A new section is hereby added after Section 5 of the same Act and
numbered as Section 5-A, to read as follows:
Section
5-A
Direct
Negotiation of Contracts
Direct negotiation shall be
resorted to when there in only one complying bidder left as defined hereunder:
a. If, after advertisement, only one contractor applied
for prequalification and it meets the prequalification requirements, after
which it is required to submit a bid/proposal which is subsequently found by
the agency/local government unit [LGU] to be complying.
b. If, after advertisement, more than one contractor
applied for prequalification but only one meets the prequalification
requirements, after which it submits bid/proposal which is found by the
agency/LGU to be complying.
c. If, after prequalification of more than one
contractor, only one submits a bid which is found by the agency/LGU to be
complying.
d. If, after prequalification, more than one contractor
submit bids but only one is found by the agency/LGU to be complying: Provided,
That, any of the disqualified prospective bidder may appeal the decision of the
implementing agency/LGUs Prequalification Bids and Awards Committee within
fifteen [15] working days to the head of the agency, in case of national
projects or to the Department of the Interior and Local Government, in case of
local projects from the date the disqualification was made known to the
disqualified bidder. Provided, furthermore, that the implementing agency/LGUs
concerned should act on the appeal within forty-five [45] working days from
receipt thereof.
Section 8
Section 6 of the same Act is hereby amended to read as follows:
Section
6
Repayment
Scheme
For the financing,
construction, operation and maintenance of any infrastructure project
undertaken through the Build-Operate-and-Transfer arrangement or any of its
variations pursuant to the provisions of this Act, the project proponent shall
be repaid by authorizing it to charge and collect reasonable tolls, fees, and
rentals for the use of the project facility not exceeding those incorporated in
the contract and, where applicable, the proponent may likewise be repaid in the
form of a share in the revenue of the project or other non-monetary payments,
such as, but not limited, to the grant of a portion or percentage of the
reclaimed land, subject to the constitutional requirements with respect to the ownership
of land: Provided, That for negotiated contracts, and for projects which have
been granted a natural monopoly or where the public has no access to
alternative facilities, the appropriate government regulatory bodies, shall
approve the tolls, fees, rentals, and charges based on a reasonable rate of
return: Provided, further, That the imposition and collection of tolls, fees,
rentals, and charges shall be for a fixed term as proposed in the bid and
incorporated in the contract but in no case shall this term exceed fifty [50]
years: Provided, furthermore, That the tolls, fees, rentals, and charges may be
subject to adjustment during the life of the contract, based on a predetermined
formula using official price indices and included in the instructions to
bidders and in the contract: Provided, also, That all tolls, fees, rentals, and
charges and adjustments thereof shall take into account the reasonableness of
said rates to the end-users of private sector-built infrastructure: Provided,
finally, That during the lifetime of the franchise, the project proponent shall
undertake the necessary maintenance and repair of the facility in accordance
with standards prescribed in the bidding documents and in the contract. In the
case of a Build-and-Transfer arrangement, the repayment scheme is to be
effected through amortization payments by the government agency or local
government unit concerned to the project proponent according to the scheme
proposed in the bid and incorporated in the contract."
Section 9
Section 7 of the same Act is hereby amended to read as follows:
Section
7
Contract
Termination
In the event that a project
is revoked, canceled or terminated by the Government through no fault of the
project proponent or by mutual agreement, the Government shall compensate the
said project proponent for its actual expenses incurred in the project plus a
reasonable rate of return thereon not exceeding that stated in the contract as
of the date of such revocation, cancellation or termination: Provided, That the
interest of the Government in these instances shall be duly insured with the
Government Service Insurance System or any other insurance entity duly
accredited by the Office of the Insurance Commissioner: Provided, finally, That
the cost of the insurance coverage shall be included in the terms and
conditions of the bidding referred to above.
In the event that the
government defaults on certain major obligations in the contract and such
failure is not remediable or if remediable shall remain unremedied for an
unreasonable length of time, the project proponent/contractor may, by prior
notice to the concerned national government agency or local government unit
specifying the turn-over date, terminate the contract. The project
proponent/contractor shall be reasonably compensated by the Government for
equivalent or proportionate contract cost as defined in the contract.
Section 10
Section 8 of the same Act is hereby amended to read as follows:
Section
8
Regulatory
Boards
The Toll Regulatory Board
which was created by Presidential Decree No. 1112 is hereby attached to the
Department of Public Works and Highways with the Secretary of Public Works and
Highways as Chairman.
Section 11
Section 9 of the same Act is hereby amended to read as follows:
Section
9
Project
Supervision
Every infrastructure project
undertaken under the provisions of this Act shall be in accordance with the
plans, specifications, standards, and costs approved by the concerned
government agency and shall be under the supervision of the said agency or
local government unit in the case of local projects."
Section 12
A new section to be numbered as Section 10 is hereby added to read as
follows:
Section
10
Investment
Incentives
Among other incentives,
projects in excess of One billion pesos [1,000,000,000] shall be entitled to
incentives as provided by the Omnibus Investments Code, upon registration with
the Board of Investments."
Section 13
Section 10 of the same Act is hereby renumbered as Section 11 to read
as follows:
Section
11
Implementing
Rules and Regulations
A committee composed of one
(1) representative each from the Department of Public Works and Highways, the
Department of Transportation and Communications, the Department of Energy, the
Department of Environment and Natural Resources, the Department of Agriculture,
the Department of Trade and Industry, the Department of Finance, the Department
of the Interior and Local Government, the National Economic and Development
Authority, the Coordinating Council of the Philippine Assistance Program, and
other concerned government agencies shall within sixty [60] days from the
effectivity of this Act, formulate and prescribe, after public hearing and
publication as required by law, the implementing rules and regulations
including, among others, the criteria and guidelines for evaluation of bid
proposals, list of financial incentives and arrangements that the Government
may provide for the project, in order to carry out the provisions of this Act
in the most expeditious manner.
The Chairman of this
committee shall be appointed by the President of the Philippines from its
members.
From time to time the
Committee may conduct, formulate and prescribe after due public hearing and
publication, amendments to the implementing rules and regulations, consistent with
the provisions of this Act.
Section 14
A new section to be numbered as Section 12 is hereby added to read as
follows:
Section
12
Coordination
and Monitoring of Projects
The Coordinating Council of
the Philippine Assistance Program [CCPAP] shall be responsible for the
coordination and monitoring of projects implemented under this Act.
Regional development
councils and local government units shall periodically submit to CCPAP,
information on the status of said projects.
At the end of every calendar
year, the CCPAP shall report to the President and to Congress on the progress
of all projects implemented under this Act.
Section 15
Section 11, 12 and 13 of the same Act are hereby renumbered as Sections
13, 14, and 15, respectively.
Section 16
Repealing Clause
All laws or parts of any law inconsistent with the provisions of this
Act are hereby repealed or modified accordingly.
Section 17
Separability Clause
If any provision of this Act is held invalid, the other provisions not
affected thereby shall continue in operation.
Section 18
Effectivity Clause
This Act shall take effect fifteen [15] days after its publication in
at least two (2) newspapers of general circulation.
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