PSPs challenging a PSP

P-A-C-T. Public-private partnerships, which are agreements between government/implementing agencies (IAs) and private sector proponents (PSPs), must observe four selection requirements. These are: Public Advantage, Accountability, Competition and Transparency. Straight negotiations must be avoided. Without PACT, the act (i.e., the PPP contract) may be voided and the actor (i.e., the parties to the PPP contract) held liable.

Solicited versus unsolicited. There are two recognized PACT-compliant ways by which an IA can select a PSP—the IA either solicits and initiates the selection process, or the IA accepts an unsolicited proposal (UP). For UPs, the PSP, not the IA, prepares, without being invited, the project study. The PSP obviously takes a risk of being snubbed outright since the IA cannot be compelled to accept a UP.

Governing policy. The BOT law, the 2018 Joint Venture Guidelines issued by the National Economic and Development Authority (Neda Guidelines), Memorandum Circular 120-2016 released by the
Department of the Interior and Local Government allow for both open bidding or competitive selection, and competitive challenge for UPs.

“Who” is challenged? There is nothing personal about the
competitive challenge process. The “who” in the challenge is the original proponent (OP)—the PSP whose UP was accepted under the BOT law; or the PSP who passed the negotiation phase under the Neda Guidelines.

When is the challenge? The IA cannot sign the PPP contract with the OP without going through a challenge, otherwise, there will be no PACT. The challenge happens in Stage 3—after the UP is evaluated and accepted (Stage 1) and the IA and PSP come to terms after negotiations (Stage 2). The IA causes the publication inviting challengers. The PSP, on the day of the publication, posts the required security.

Who can challenge? The PSPs who wish to challenge must be legally, technically and financially capacitated. They must signify their intention to participate in the process, purchase the terms of reference (TOR) for the challenge and submit their counteroffers.

What is being challenged? In Stage 2, the IA and PSP agree on the technical aspect of the PPP project. The terms and conditions of the challenge are spelled out in TOR, which are anchored on the negotiated terms in Stage 2. What remains to be determined is the economic or financial aspect of the project, the scope of the challenge in Stage 3. Interested challengers must be able to implement the project based on the Stage 2-determined technical description of the project with all its components.

If there is no challenger? In the event that there is no challenger, the OP secures the project under the negotiated terms arrived at in Stage 2.

If challenged, what now? If there are qualified challengers, the OP, depending on the relevant policy, shall have the right to match or outbid the superior offer, or shall have the option to submit a second financial offer.