What can be negotiated in a competitive challenge process

Conclusion

Relevant Laws and Regulations. The governing law and applicable regulations cannot be the subject of a contract. Therefore, the implementing agency (IA) and private-sector proponent (PSP) cannot agree to dispense with the relevant regulatory approvals needed for a project, like the environmental compliance certificate from the Department of Environment and Natural Resources, the rate of return for a build-operate-transfer (BOT) law modality from the National Economic and Development Authority (Neda)-Investment Coordination Committee or the appropriate franchise.

Government Support. The IA, during negotiations, cannot commit to support or contribute to the project what it cannot do so under relevant laws and regulations. Thus, the IA cannot agree to an insertion of a direct government guarantee, subsidy or equity for any of the BOT law-modalities.

Mandate of the Agency. Another aspect that could not be negotiated upon between the parties is the mandate of the IA. The authority of the IA is governed by its charter and cannot be expanded by agreement. Thus, a tourism agency cannot venture into a water-supply project unless empowered to do so under its enabling law or if a water-public corporation is included in the project.

Track Record of PSP. A PSP cannot be entrusted with a PPP project that it has no track record on or expertise over. The parties cannot simply agree on this. However, there could be remedy. For example, the PSP for a bridge project, which now includes a water-distribution project as a result of the inclusion of this component during the negotiations, can tie up with another PSP, which has the technical capability.

Competitive Procedure. For modalities under the BOT law and JVs, the BOT law and Neda JV Guidelines must be followed. The parties cannot agree to do away with the required publication and challenge of an unsolicited proposal.

Modality. On the bases that the BOT law and Neda JV Guidelines are silent on the matter, that there is no explicit legal prohibition and that the IA has broad discretion, the parties can change the proposed modality. This could be permitted if no relevant law is violated, pertinent procedures are observed and the terms are favorable to the IA and the public. During negotiations, an unsolicited proposal for a BOT arrangement may be modified to a build-transfer-operate, a BOT to a JV or JV to a straight lease.

Contractual Provisions. The stipulated contractual terms and obligations in the unsolicited proposal and the draft PPP contract are not final. These are proposals subject to agreement and competition, provided none of the terms are violative of any law or contrary to public policy. This is an implied limitation on all contracts as all laws are read into them. The negotiating parties, therefore, can shorten or lengthen the contract period, determine the degree of involvement of government, limit or expand step-in rights provisions, among others.