REPUBLIC
ACT NO. 7718AN
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."
SEC. 2.
Section 2 of the same Act is hereby amended to read as follows:
- "SEC. 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.chanrobles virtual law library
- "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.chanrobles virtual law library
- "[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.chanrobles virtual law library
- "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.chanrobles virtual law library
- "[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.chanrobles virtual law library
- "[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.chanrobles virtual law library
- "[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.chanrobles virtual law library
- "[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.chanrobles virtual law library
- "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.chanrobles virtual law library
- "[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.chanrobles virtual law library
- "[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.chanrobles virtual law library
- "[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.chanrobles virtual law library
- "[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.chanrobles virtual law library
- "[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.chanrobles virtual law library
- "[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.chanrobles virtual law library
- "[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.chanrobles virtual law library
- "[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%].chanrobles virtual law library
- "[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."
SEC. 3. Section
3 of the same Act is hereby amended to read as follows:
- "SEC. 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."
SEC. 4. Section 4 of
the same act is hereby amended to read as follows:
- "SEC. 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.chanrobles virtual law library
"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.chanrobles virtual law library
"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."
SEC. 5. A new section
is hereby added after Section 4 of the same Act and numbered as Section
4-A, to read as follows:
- "SEC. 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."
SEC. 6. Section 5 of
the same Act is hereby amended to read as follows:
- "SEC. 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.chanrobles virtual law library
"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.chanrobles virtual law library
"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.chanrobles virtual law library
"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.chanrobles virtual law library
"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.chanrobles virtual law library
"A copy of
each
contract involving a project entered into under this Act shall
forthwith
be submitted to Congress for its information."
SEC. 7. A new
section is hereby added after Section 5 of the same Act and numbered as
Section 5-A, to read as follows:
- "SEC. 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.chanrobles virtual law library
"[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.chanrobles virtual law library
"[c] If, after
prequalification
of more than one contractor, only one submits a bid which is found by
the
agency/LGU to be complying.chanrobles virtual law library
"[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."
SEC. 8. Section 6 of
the same Act is hereby amended to read as follows:
- "SEC. 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."
SEC. 9. Section 7 of
the same Act is hereby amended to read as follows:
- "SEC. 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.chanrobles virtual law library
"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."
SEC. 10. Section 8 of
the same Act is hereby amended to read as follows:
- "SEC. 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."
SEC. 11. Section 9 of
the same Act is hereby amended to read as follows:
- "SEC. 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."
SEC. 12. A new
section to be numbered as Section 10 is hereby added to read as follows:
- "SEC. 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."
SEC. 13. Section 10
of the same Act is hereby renumbered as Section 11 to read as follows:
- "SEC. 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.chanrobles virtual law library
"The Chairman of
this committee shall be appointed by the President of the Philippines
from
its members.chanrobles virtual law library
"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."
SEC. 14. A new
section to be numbered as Section 12 is hereby added to read as follows:
- "SEC. 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.chanrobles virtual law library
"Regional
development
councils and local government units shall periodically submit to CCPAP,
information on the status of said projects.chanrobles virtual law library
"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."
SEC. 15. Section 11,
12 and 13 of the same Act are hereby renumbered as Sections 13, 14, and
15, respectively.chanrobles virtual law library
SEC. 16. Repealing
Clause. - All laws or parts of any law inconsistent with the
provisions of this Act are hereby repealed or modified accordingly.chanrobles virtual law library
SEC. 17. Separability
Clause. - If any provision of this Act is held invalid, the other
provisions
not affected thereby shall continue in operation.chanrobles virtual law library
SEC. 18. Effectivity
Clause. - This Act shall take effect fifteen [15] days after
its publication in at least two (2) newspapers of general
circulation.
Approved:
[Sgd.]
EDGARDO
J.
ANGARA
[Sgd.] JOSE DE VENECIA, JR.chanrobles virtual law library
President of the
Senate
Speaker of the House of
Representatives
This Act which is
a consolidation of House Bill No. 10943 and Senate Bill No. 1586 was
finally
passed by the House of Representatives and the Senate on April 12, 1994
and April 27, 1994, respectively.chanrobles virtual law library
[Sgd.]
EDGARDO
E.
TUMANGAN
[Sgd.] ROBERTO P. NAZARENO
Secretary of the
Senate
Acting Secretary General
House of Representatives
Approved: 8 MAY
1994
[Sgd.] FIDEL V.
RAMOS
President of
the Philippines
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