BOT Law amended, IRR OK’d

To ensure that public-private partnerships (PPP) will not be disadvantageous to Filipinos, the National Economic Development Authority (NEDA) under Socioeconomic Planning Secretary Karl Chua approved the amended implementing rules and regulations (IRR) of the Build-Operate-Transfer (BOT) Law.

Chua said the approval of IRR will ensure that project proponents applying for the BOT scheme are qualified to implement properly designed PPP proposals to the benefit of Filipinos.

The PPP Center said the IRR provides a balanced sharing of risks between the government and the project proponent, while emphasizing safeguards for the benefit of the public, both as taxpayers and consumers.

The amended IRR also reflects sharing of risks and allowing reasonable rates of return on investment, incentives, support and undertakings.

One amendment respects the authority of the various regulatory bodies and allow them to exercise their mandates.

New monitoring mechanisms are also included in the IRR to ensure compliance with PPP obligations both by the implementing government agency and the private sector.

To allow flexibility in implementing projects, no requirement of firm membership was imposed in cases of operations and maintenance arrangements and unsolicited proposals.

To remove uncertainty in the rules on project variations, the IRR authorized the approving body to set a cap on allowable variations during the project evaluation stage, which in no case shall exceed 10 percent of the original project cost.

On the contract itself, the IRR requires the definition of the materiality thresholds and compensation which the proponent shall be entitled to, following the occurrence of a material adverse government action.

Regulatory acts of the executive branch are excluded from material adverse government action to benefit the public.

The BOT scheme is a contractual arrangement where the contractor undertakes the construction, including financing, of a given infrastructure facility, and its operation and maintenance.

The contractor operates the facility over a fixed term during which it is allowed to charge facility users appropriate tolls, fees, rentals and charges sufficient to enable the contractor to recover its operating and maintenance expenses and its investment in the project plus a reasonable rate of return.

The contractor will then transfer the facility to the government agency or local government unit concerned at the end of the fixed term which shall not exceed for 50 years.