REPUBLIC ACT NO. 7718 - AN
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. Sec. 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 meanings 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 but 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.
"For the construction stage of these infrastructure projects, the
project proponents 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 subjects 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.
"(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 the fixed term during which it is allowed to charge
facility users appropriate tools, fees, rentals, and charges not
exceeding those 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.
"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.
"(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.
"(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.
"(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.
"(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.
"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 arrangement.
"(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 agreement franchise
period. There may, or may not be, a transfer arrangement in
regard to the facility.
"(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.
"(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.
"(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.
"(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.
"(l) Contractor — Any entity accredited under the
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.
"(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.
"(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 or 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%).
"(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. Sec. 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. Sec. 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.
"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 (P300,000,000) 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
(P300,000,000). The list of projects submitted to the ICC of the
NEDA Board shall be acted upon within thirty (30) working days.
"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 pesos 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
Sec. 4 of the same Act and numbered as Sec. 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
in 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. Sec. 5 of the same Act is hereby
amended to read as follows:
"Sec. 5. Public Bidding of Projects. — Upon approval
of the subjects mentioned in Sec. 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.
"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 Sec. 5 hereof.
"In the case of a build-and-transfer or build-lease-and-transfer
arrangement, the contract shall be awarded to the lowest applying
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.
"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.
"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.
"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
Sec. 5 of the same Act and numbered as Sec. 5-A, to read as
follows:
"Sec. 5-A. Direct Negotiation of Contracts. — Direct
negotiation shall be resorted to when there is only one complying
bidder left as defined hereunder:
"(a) If, after advertisement, only one contractor
applies 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.
"(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.
"(c) If, after prequalification of more than one
contractor, only one submits a bid which is found by the agency/LGU to
be complying.
"(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. Sec. 6 of the same Act is hereby
amended to read as follows:
"Sec. 6. Repaying Scheme. — For the financing,
construction, operation and maintenance of any infrastructure projects
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 effect
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 built-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. Sec. 7 of the same Act is hereby
amended to read as follows:
"Sec. 7. Contract Termination. — In the event that a
project is revoked, cancelled 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.
"In the event that the government defaults on certain major obligations
in the contract and such failure is not remedied 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."
SECTION 10. Sec. 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. 1122 is hereby
attached to the Department of Public Works and Highways with the
Secretary of Public Works and Highways as Chairman."
SECTION 11. Sec. 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."
SECTION 12. A new section to be numbered as Section 10 is hereby added to read as follows:
"Sec. 10. Investments Incentives. — Among other
incentives, projects in excess of One billion pesos (P1,000,000,000)
shall be entitled to incentives as provided by the Omnibus Investments
Code, upon registration with the Board of Investments."
SECTION 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.
"The chairman of this committee shall be appointed by the President of
the Philippines from its members.
"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."
SECTION 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.
"Regional development councils and local government units shall
periodically submit to CCPAP, information on the status of said
projects.
"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."
SECTION 15. Section s 11, 12, and 13 of the same Act
are hereby renumbered as Section s 13, 14, and 15, respectively.
SECTION 16. Repealing Clause. — All laws or parts of
any law inconsistent with the provisions of this Act are hereby
repealed or modified accordingly.
SECTION 17. Separability Clause. — If any provision
of this Act is held invalid, the other provisions not affected thereby
shall continue in operation.
SECTION 18. Effectivity Clause. — This Act shall take
effect fifteen (15) days after its publication in at least two (2)
newspapers of general circulation.
Approved: May 5, 1994
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