National PPP landscape

Under the PPP Code and its IRR, the overall PPP process in the Philippines includes the following stages:

• Preparation includes the following:
  • identification, involving the establishment of the PPP unit of the implementing agency, the identification of PPP projects, and the preparation, submission and publication of the list of PPP projects; and
  • development, involving the preparation of the feasibility study, including risk allocation and mitigation, project structuring, and stakeholder consultation.
• Review and Approval includes assessment and approval of the project by various approving entities.
  • Procurement includes bid documentation and bid process management up to award of the PPP project to the winning bidder.
  • Award and Execution of PPP Contract includes the issuance of the notice of award to the winning bidder, compliance with requirements of the notice of award, and execution of the PPP contract by the implementing agency and the winning bidder.
  • Implementation includes all activities from commercial close up to hand-back/transfer of the project by the private partner to the implementing agency at the end of the PPP contract period.

Public–private partnership project preparation process

Project identification

Implementing agencies should consider the CLIPs, including national, local, regional, and sectoral development plans and investment programs of relevant government entities. Only projects that are included in the CLIPs may be included in the list of PPP projects to be prepared by the implementing agency.

The guiding principles for identifying PPP projects are

• effectiveness in meeting government objectives;
• appropriateness of the chosen procurement modality and source of funding;
• preliminary indicators of VFM, economic viability, and financial viability;
• accountability and transparency;
• consumer rights;
• affordability;
• market acceptability and commercial attractiveness; and
• public access, safety, and security.

Implementing agencies and the PPP Center must ensure the lists of PPP projects proposed for implementation are widely publicized to inform interested parties, including on their respective websites. In addition, a consolidated list of all submitted lists of PPP projects is posted on the website of the PPP Center. Unsolicited proposals are included in the consolidated list of PPP projects of the PPP Center once they have been endorsed by the PPP Center for processing.

Project development

In developing PPP projects, implementing agencies should consider the following factors

• legal, technical, economic, and financial feasibility of the project;
• VFM of the proposed project;
• optimal risk allocation;
• affordability of tariffs;
• climate and disaster resilience and sustainability;
• commercial feasibility and market acceptability;
• social and environmental safeguards;
• lessons learned from previous or ongoing PPP projects; and
• whole-of-government approach.

Furthermore, the prior conduct of stakeholder consultation is required for the development of a PPP project.

A major part of the development process is the preparation of a complete feasibility study for the project, which requires extensive due diligence of the various aspects of the project.

The table below details the required information and contents of a feasibility study for PPP projects requiring NEDA Board or ICC approval.

The risk allocation developed in the feasibility study must comply with the Generic Preferred Risk Allocation Matrix (GPRAM). There is no GPRAM specific to each sector. The GPRAM lists 41 key risks for a PPP project, along with the preferred risk allocation for each. The details are provided in the table below. The implementing agency must justify any deviation from the GPRAM.

The GPRAM is based on the principle that risks should be borne by the party that is best able to manage it. It identifies the proposed risk allocation and rationale, possible risk mitigation strategies, and suggested contract provisions for each type of risk.1

Under the GPRAM, commercial and business risks (such as demand risk in revenue-based PPPs), supply risk, construction and commissioning risk, operation risk, financing risk, and industrial related risk are allocated to the private sector while political and regulatory risks (e.g., risks on economic regulation and availability of government appropriations) are allocated to the public sector. For availability PPPs, however, the demand risk is assumed by the government. Force majeure and change in law risks are typically shared, with the private sector assuming the risk up to a monetary threshold; beyond that, it is the public sector that bears the risk. The public sector assumes the risk arising from discriminatory changes in tax laws from national and local governments while general changes in taxation are allocated to the private sector. The private sector bears the risk on the residual value on transfer to the government (i.e., life cycle maintenance, refurbishment, and performance requirements).2

Material adverse government action (MAGA), which has been a contentious issue in the procurement of PPP contracts in the past, is now defined in the PPP Code as “any act of the government which the Private Partner had no knowledge of, or could not be reasonably expected to have had knowledge of, prior to the effectivity of the PPP contract, and that occurs after the effectivity of the PPP contract, other than an act which is authorized or permitted under the PPP contract, which (1) specifically discriminates against the sector, industry, or project, and (2) has a significant negative effect on the ability of the Private Partner to comply with any of its obligations under the approved PPP contract.” The earlier definition of MAGA in the revised IRR of the Amended BOT Law states that MAGA provisions in the PPP contract “shall also provide for the rules on materiality or amount threshold, nature and manner of recourse, and a cap in case of monetary compensation.” As this provision was not carried over to the MAGA definition in the PPP Code, it appears that the government will now fully bear the risks arising from MAGA (noting that the MAGA clause under the PPP Code is as yet untested).

Interconnectivity and interoperability risks are shared under the GPRAM. The private partner must ensure its design meets interconnection requirements. On the other hand, the government must ensure the setting of appropriate interconnectivity requirements and necessary actions by owners or operators of related projects and network components since it is best placed to require necessary complementary actions by those third-party owners or operators. The PPP Code further details the interconnection/interoperability approving process.

The implementing agency must present the proposed risk allocation for the project to the approving body in the feasibility study and as part of the PTC forms.

• 1PPP Center. 2016. Generic Preferred Risk Allocation Matrix.
• 2PPP Center. 2016. Generic Preferred Risk Allocation Matrix.

Public–private partnership project review and approval process

The approval process requires the implementing agency to submit the following minimum PTCs along with the feasibility study to the approving body

• scope of the PPP project;
• contractual arrangement;
• contract duration;
• rights and obligations of the implementing agency and the private proponent, and corresponding penalties for failure to fulfill obligations under the PPP contract;
• performance standards and targets upon which the key performance indicators, targets, and measurement for monitoring and reporting results may be derived in preparing the draft PPP contract;
• safeguards that will protect the interests of the government and the public;
• investment recovery scheme, including terms of payment;
• revenue share for the government, if any;
• government undertakings, including appropriate compensation to the government, as applicable;
• risk allocation for the PPP project, including a risk mitigation plan for risks assumed by the government;
• contingent liabilities arising from risks, including an intent to avail of the PPP Risk Management Fund, as applicable;
• bid parameter;
• ceiling for debt-to-equity ratio;
• in case of solicited projects, the proposed public bidding process—i.e., whether single stage or two stage; and
• in case of USPs, the proposed period for comparative challenge process, whether single stage or two stages—i.e., not less than 90 calendar days and not more than 1 year.

The criteria for evaluation and approval of PPP projects, whether national or local, by the approving body are, among others:

• The project context and objectives are clearly specified.
• The scope, outputs, and performance indicators of the project are clearly specified.
• The proposed project is technically feasible and optimal, considering, among others, the technical requirements of gender and people with disabilities in accordance with existing legal requirements.
• The proposed project has an environment, climate change, and social safeguards framework, including identified risks and mitigating measures.
• The project cost is sufficient to achieve the technical requirements of the project, including the general performance standards and targets set for the project, and those components needed to meet gender, social, and environmental standards.
• Operating costs are sufficient to achieve the operational requirements.
• The project is economically viable, and the information used are reasonable and robust to determine viability.
• The VFM analysis shows that PPP modality is the more viable procurement option than traditional government procurement.
• The project is financially viable for investors at the project level, and the information used is reasonable and robust to determine viability.
• The project’s cash flows are healthy and sufficient to service debt obligations.
• Risk allocation complies with the GPRAM and any deviation is justified by the implementing agency (and approved by the approving body).
• Government undertakings and investment recovery schemes are justified by the implementing agency.
• The proposed bid parameter is the most advantageous to the government, fosters competition, fairness, and transparency, and ensures the best interest of the public.
• The implementing agency has the capability to deliver its assumed obligations for the project.
• The proposed tariff regime is affordable to users.
• Fiscal considerations are sufficiently provided, including contingent liabilities, foregone government revenue streams, and indirect costs associated with the project.

The approving body is required to render its decision on the national PPP project within 120 calendar days from its receipt of complete requirements.3 If the approving body fails to render a final decision within this period, the project shall be deemed approved and the implementing agency may proceed with the procurement of the project within 7 calendar days from receipt of a notification from the PPP Center.

For USPs, the approval phase commences after successful negotiation and the grant of original proponent status (OPS) to the private proponent, as discussed in the section Unsolicited Public–Private Partnership Proposals.

The final PTCs set forth by the approving body will be the basis for the drafting and approval of the tender documents and the PPP Contract. In solicited projects, changes to the PTCs of the draft PPP contract may be allowed before submission of bids, with the prior approval of the head of the implementing agency and the approving body. Changes to PTCs of the draft PPP contract after bid submission and prior to contract execution are not allowed, except for changes to contract terms affected or decided by the winning bidder’s bid. For USPs, changes to the PTCs of the draft PPP contract are not allowed, except for changes to contract terms affected or decided by the winning challenger’s bid.

• 3All submissions of solicited PPP proposals requiring ICC and/or NEDA Board approval must be submitted to the ICC Project Documents Portal.

Public–private partnership approval guidelines

The ICC PPP Approval Guidelines and their attachments, which the NEDA Board approved on 25 April 2024, prescribe the detailed guidelines on the process and procedures for the review and approval of PPP projects requiring approval by the NEDA Board or the ICC and the following matters where the approving body is the ICC or the NEDA Board:

• proposed change in the PTCs of the draft PPP contract prior to submission of bids for solicited national PPP projects;
• proposed variation, expansion, or extension of all contracts covering PPP projects executed prior to or after the effectivity of the PPP Code;
• withdrawal or substitution of a consortium member that results in a change of control of the private partner or consortium that will affect its majority ownership and/or beneficial ownership after the approval of the project;
• RROR in case of single complying bid for solicited project;
• in case of USPs, guidelines on cases where the appropriate approving body requires PTCs outside of the negotiated PTCs;
• guidelines on cases where the appropriate approving body failed to render its decision on a PPP project within 120 calendar days from receipt of complete requirements;
• changes in procurement modality after the PPP project has been approved by the appropriate approving body; and
• requirements to establish the qualification of the private proponent for unsolicited proposals.

PPP project procurement process and award and execution of PPP contracts

The implementing agency conducts the procurement process through its PBAC, created by its head.4 The PBAC is responsible for all aspects of pre-bidding and bidding, including, among others:

• preparation and issuance of the tender documents,
• publication of the invitation to qualify/prequalify and bid/for comparative proposals,
• assessment of qualification/prequalification of prospective bidders/challengers,
• conduct of pre-bid conferences and issuance of bid bulletins and supplemental notices,
• interpretation of bidding rules,
• conduct of bidding,
• evaluation of bids,
• resolution of protests, and
• recommendation for the acceptance of the bid and/or for the award of the PPP contract.5

After securing the approval of the approving body, the implementing agency proceeds with the publication of the invitation to prequalify/qualify and/or bid in the case of solicited projects, and invitation for comparative proposals in the case of USPs, on the websites of the implementing agency and the PPP Center. In case the Implementing Agency does not have a website, it may publish such invitation on its official digital platform. For solicited projects, the deadline to publish the invitation to qualify/prequalify and bid is within 90 calendar days from issuance of the notice of approval by the approving body. In the case of USPs, the invitation for comparative proposals must be published within 7 calendar days from issuance of the document showing the approving body’s approval of the USP. The implementing agency has 20 calendar days after the 7-day period to prepare and issue the comparative challenge documents.

Upon issuance of the invitation, the PBAC prepares and issues the tender documents/comparative challenge documents to prospective bidders, which include

• instructions to bidders/challengers,
• a draft PPP contract reflecting the PTCs approved by the approving body,6
• a bid form reflecting the required information to properly evaluate the bid proposal,
• forms of bid and performance securities,
• requirements and timelines/milestones of agencies concerned in granting of administrative or local franchise, if applicable, and
• other documents as may be deemed necessary by the PBAC.

The PBAC decides on the best mechanism in assessing the qualification/prequalification of prospective bidders/ challengers and in evaluating proposals. For example, it may adopt a shortlisting mechanism in the case of evaluating qualification/prequalification documents or a scoring system in the evaluation of technical proposals.

The implementing agency recommends whether to conduct the procurement in a single-stage or two-stage bidding process, subject to the approval of the approving body as part of the PTCs. In a single-stage bidding process, simultaneous submission of qualification requirements and bid proposals is required. On the other hand, in a two-stage bidding process, the prequalification requirements are submitted first, and only those that pass the prequalification stage will be allowed to submit their bid proposals. Further, the implementing agency may resort to simultaneous evaluation of the technical and financial proposals where the nature of the PPP project warrants the appreciation of both technical and financial proposals as a whole to determine the best proposal. Simultaneous evaluation of technical and financial proposals must be completed within 45 calendar days from the date the bids are opened.

The procurement process, which begins on the date the invitation to prequalify/qualify and/or bid or invitation for comparative proposals is published and ends on the date the implementing agency confirms fulfillment by the winning bidder of the post-award requirements for both solicited and unsolicited projects, must not exceed 1 year and be not less than 90 days for the submission of comparative proposals. For USPs, the original proponent is given 30 calendar days to match or better the financial proposal of the most superior comparative proposal. The period for the right to match is excluded from the counting of the period for the comparative challenge process.

The PBAC issues bid bulletins or supplemental notices to provide any substantive interpretation or changes of the bidding rules up to 30 days before bid submission date. The implementing agency must secure clearance from the reviewing bodies, consisting of the PPP Center, its statutory counsel, and the DOF (if the project involves a national government undertaking or availability payments) before it releases the final draft of the PPP contract to bidders/challengers no later than 30 calendar days before the deadline for submission of bids/ comparative proposals.

The procurement milestones for a two-stage bidding process for a solicited PPP project up to contract award and execution are summarized in the table below.

• 4The voting members of the PBAC are from the implementing agency, although it may hire external consultants. There are non-voting members and observers from other agencies and groups, such as the statutory counsel of the implementing agency, the Philippine Competition Commission, the PPP Center, the regulatory body, facility users, and recognized consumer group.
• 5Government of the Philippines. 2024. Implementing Rules and Regulations of the PPP Code.
• 6At this stage, the PTCs are approved by the approving body but the contract itself is not yet approved by the applicable reviewing body/bodies (PPP Center, DOF, and statutory counsel, as applicable).

As presented on the PPP Center website, the processes for the approval and procurement and the contract award and execution stages of solicited national PPP projects, with corresponding timelines, are depicted in the figure Submission of a Solicited National Public-Partnership Project, while the processes for the development, approval, and procurement (comparative challenge) and contract award and execution stages for national unsolicited PPP projects are depicted in the following figures.

Submission of a Solicited National Public–Private Partnership Project

Submission of an Unsolicited National Public–Private Partnership Project

Submission of an Unsolicited National Public–Private Partnership Project (Comparative Challenge)

Submission of an Unsolicited NATIONAL PPP Project