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This page features the full text of
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".
REPUBLIC
ACT NO. 7718AN
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:
"Sec.
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."chanrobles virtuallaw libraryred
Sec.
2. Section 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.chanrobles virtuallaw libraryred
"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.chanrobles virtuallaw libraryred
"(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. chanrobles virtuallaw libraryred
"(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. chanrobles virtuallaw libraryred
"(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. Section 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. Section 4 of the same Act
is hereby amended to read as follows:chanroblesvirtualawlibrary
"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.chanrobles virtual law library "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 Section 4 of the same Act and numbered as Section 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. Section 5 of the same Act
is hereby amended to read as follows: chanrobles virtuallaw libraryred
"Sec.
5. Public Bidding of Projects.
— Upon approval of the subjects mentioned in Section 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 Section 5 hereof.chanrobles virtual law library
"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 Section 5 of the same Act and numbered as Section 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.chanrobles virtual law library "(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. Section 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."chanrobles virtuallaw libraryred
Sec.
9. Section 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.chanrobles virtual law library "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."
Sec.
10. Section 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."
Sec.
11. Section 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."
Sec.
12. A new section to be numbered
as Section 10 is hereby added to read as follows:chanroblesvirtualawlibrary
"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."
Sec.
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.chanrobles virtual law library
"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."
Sec.
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.chanrobles virtual law library "Regional
development councils and local government units shall periodically
submit
to CCPAP, information on the status of said projects.chanrobles virtual law library
"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."chanrobles virtuallaw libraryred
Sec.
15. Sections 11, 12, and 13 of
the same Act are hereby renumbered as Sections 13, 14, and 15,
respectively.chanrobles virtual law library
Sec.
16. Repealing Clause. — All laws
or parts of any law inconsistent with the provisions of this Act are
hereby
repealed or modified accordingly.chanrobles virtual law library
Sec.
17. Separability Clause. — If
any provision of this Act is held invalid, the other provisions not
affected
thereby shall continue in operation.cralaw:red
Sec.
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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