A little of administrative law in PPP law

There are other laws that have a bearing on PPPs. One such cluster of laws would be laws pertaining to administrative agencies, i.e. administrative law (AL). For PPP stakeholders, practitioners and regulatory agencies, they must be mindful of the Administrative Code of 1987 and enabling instruments of administrative agencies (AAs). While there are commonalities, every AA has its peculiarities—name, purpose, geographical jurisdiction, relationship with other AAs, structure, corporate powers, rule-setting and quasi-judicial powers, among others.

These two sets of laws are intrinsically linked with each other. To illustrate, the Department of Tourism (DOT), which is an AA governed by its charter or creating law, (1) can undertake a tourism PPP project under any of the modalities listed in the BOT law. However, it cannot pursue a reclamation project because this is not within its mandate nor can it enter into a JV for that tourism project because national government agencies are not covered under the Neda JV Guidelines.

Neda checkpoints in PPPs

For public-private partnerships (PPPs) or arrangements between government/implementing agencies (IAs)—national government agencies, government-owned and -controlled corporations (GOCCs), government instrumentalities (GIs) and local government units (LGUs)—and private-sector proponents (PSPs), the role of the National Economic and Development Authority (Neda) depends on the modality, and governing law and regulation.

The relevant laws and rules would be the build-operate-Transfer (BOT) law providing nine modalities; the Neda Joint Venture Guidelines (JV Guidelines); and the Department of the Interior and Local Government Memorandum Circular 120-2016 (DILG MC 120) covering 24 modalities.

The Neda is not a single-level agency. The Neda can refer to the Neda Board chaired by the President, the Neda-Investment Coordination Committee (Neda-ICC) and the Neda-ICC-Technical Board (Neda-ICC-TB).

Neda 4-pass rule. Under the BOT law, for unsolicited proposals (UPs) for national PPP projects, regardless of the project cost, the Neda intercedes at four junctures. After the IA determines the completeness of and accepts the UP, and prior to negotiations, all relevant documents are forwarded to the Neda-ICC for determination of the reasonable rate of return (second pass).

Under Joint Memorandum Circular 2017-01 (MC 2017-01) issued by the Department of Finance and Neda, the Neda-ICC-TB shall first undertake a technical review (first pass) prior to elevation to the Neda-ICC. After Stage Two of the UP process, the Neda-ICC must approve the terms of the negotiations (third pass) and subsequently recommend approval to the Neda-Board (fourth and last pass)

Neda 3-pass rule. Under the BOT Law, for solicited national projects with a total project cost of more than P300 million, the project must be approved by the Neda Board (third and last pass) upon the recommendation of the Neda-ICC (second pass). Under MC 2017-01, the Neda-ICC-TB shall undertake a technical review (first pass) prior to elevation to the Neda-ICC.

Opening just one unsolicited proposal or all

The implementing rules and regulations of the build-operate-transfer law and the 2013 Joint Venture Guidelines issued by the National Economic and Development Authority provide for the first in time approach. The regulations are similarly worded.

This approach becomes relevant when there is more than one unsolicited proposal (UP) submitted by private sector proponents (PSPs) for the same or similar project under a public-private partnership (PPP) arrangement.

The build-operate-transfer law IRR provides that, “under this approach, the first complete proposal is evaluated and decided upon. The second complete proposal will only be entertained if the first one is rejected. Otherwise, the second proposal will be considered only if there is a failure in the negotiation of the first proposal or during the invitation for comparative proposals…xxx. Under the first in time approach, the head of agency/LGU shall acknowledge the submission of other unsolicited proponent for the same or similar project concept, and advise the unsolicited proponent on existence of similar project concept and its rank/position based on date of submission of unsolicited proposals.”

The questions now are, does the rules strictly provide for a sequential approach, i.e., second or later UPs can only be opened by the government implementing  agency (IA) if the first or subsequent UPs are rejected, or do the rules countenance a simultaneous approach, i.e., all UPs are opened to determine completeness, and the first complete, UP is the first/only one considered for evaluation and possible acceptance?

• The sequential approach. A plain reading of the rules provides that a second UP, in terms of time of submission, can only be opened by the IA if the first is rejected. Logically, a third UP can only be opened if the first and second UPs are rejected.

If the first UP is ascertained to be complete, the second UP cannot be opened and evaluated. To allow the opening of subsequent UPs when earlier ones are not yet rejected would be violative of the rules and would amount to an amendment of the rules. The rule is clear and there is no need to interpret.

An unsolicited proposal is (in)complete when…

The completeness (or incompleteness) of an unsolicited proposal (UP) submitted by a private sector proponent (PSP) for a public-private partnership (PPP) arrangement largely depends on the law or regulation upon which the UP is submitted. For build-operate-transfer (BOT) and joint- venture (JV) schemes, the BOT law and its implementing rules and regulations (IRR) and the 2013 guidelines issued by the National Economic and Development Authority (Neda Guidelines), respectively, shall govern.

In a PPP, there are three levels of completeness—for the UP, for post-UP-acceptance-pre-award-negotiations and for post-award-pre-notice-to-proceed. The third level is more complete than the second, and the second more complete than the first. As the process progresses, more details are supplied, i.e., from assumptions, to secondary information, to negotiation-related materials and to primary data.

For a UP, the BOT law only provides three requirements referring to the technology, a negative list of government support and need for a challenge. There is no statutory provision that enumerates the contents for completeness. The IRR, however, imposes four—cover letter; feasibility study, which should indicate relevant assumptions; company profile; and the draft contract.

Business judgments in PPPs