Question & AnswerQ&A (OGCC)
The Guidelines are issued pursuant to Section 8 of Executive Order No. 423 dated April 30, 2005, which mandates NEDA, in consultation with the Government Procurement Policy Board, to issue necessary guidelines on Joint Ventures (JVs).
The Guidelines apply to all government-owned and/or controlled corporations (GOCCs), government corporate entities (GCEs), government instrumentalities with corporate powers (GICPs), government financial institutions (GFIs), and state universities and colleges (SUCs) expressly authorized by law or their respective charters to enter into JV Agreements. Local Government Units (LGUs) are not covered.
A Joint Venture is a contractual arrangement where a private sector entity and a Government Entity contribute money, capital, services, assets, or any combination thereof to jointly undertake an investment activity for a specific goal, with a view to eventually transferring ownership to the private sector under competitive market conditions. It involves sharing risks, profits, and losses with rights to direct and govern the policy.
The two types are: 1) Contractual JV – a legal and binding agreement without forming a JV Company; and 2) Corporate JV – where a JV Company is formed and registered with the SEC by JV partners to perform the JV's primary functions.
The preferred mode is through forming a JV Company registered as a stock corporation under the Corporation Code, with the Government Entity's equity contribution being less than 50% and compliance with ownership and nationality requirements.
The Head of the Government Entity has the authority to approve JV Agreements in principle, ensure compliance with the Guidelines, and is ultimately accountable for the project implementation. They also approve awards, oversee compliance, and submit required reports.
Selection is generally by Competitive Selection, a transparent process with defined parameters open to any qualified private entity. Where Competitive Selection fails, the process may proceed via Negotiated Agreements, which can involve unsolicited proposals or limited negotiations according to specified guidelines.
They must have clearly defined business objectives; specified participation and management roles; defined capital contribution and ownership rights; profit/loss division; dispute mechanism; termination/liquidation provisions; confidentiality terms; and indemnification mechanisms.
Material deviations that increase government liabilities or prejudice losing participants require re-approval under the same approval process as the original contract. Non-material amendments must follow approval processes. Non-compliance renders such deviations or amendments invalid.
They must submit annual reports on JV implementation to the Department of Finance by the first quarter of the succeeding year, including audited financial statements and a three-year work program. They must also submit salient features and copies of JV Agreements amounting to at least Php 300 million to NEDA for monitoring.
The JV-SC oversees the selection process of a private JV partner and is composed of regular voting members including a chairman, legal counsel, finance officer, management/operations officer, technical expert, and a NEDA representative; along with non-voting provisional members and observers from related sectors.
Failure occurs in instances such as only a single party submitting eligibility documents, withdrawals leading to a single remaining participant, no proposals received, proposals not meeting technical or financial parameters, or no qualified private sector participant found.
The Government Entity may conduct another competitive selection or pursue limited negotiations pursuant to Annex B. In some cases, it may seek private sector entities through a competitive challenge procedure in accordance with Annex C.
When a negotiated JV occurs, other private sector entities are invited to submit comparative proposals. The original private sector proponent has the right to match any superior offer made by others to ensure transparency and competition, with the best offer awarded the JV.