Question & AnswerQ&A (DPWH MEMORANDUM CIRCULAR NO. 46)
The BOT scheme is a contractual arrangement where a contractor undertakes the construction, financing, operation, and maintenance of an infrastructure facility for a fixed term (not exceeding 50 years), during which they can collect tolls or fees to recover costs plus a reasonable return. After this period, the facility is transferred to the government agency or local government unit (LGU).
The BT scheme is a contractual setup where the contractor builds and finances an infrastructure project and, upon completion, turns it over to the government agency or LGU, which then pays the contractor the total investment plus a reasonable return, usually based on an agreed amortization schedule.
Government infrastructure agencies and government-owned or controlled corporations such as DPWH, DOTC, NIA, MWSS, LWD, PNR, Light Rail Transit Authority, Philippine Ports Authority, Manila International Airport Authority, NPC, NEA, PNOC, EPZA, and Public Estates Authority, as well as Local Government Units (LGUs), are authorized.
Eligible projects include highways (roads, expressways, bridges, tunnels), rail-based projects, mass transit, ports, airports, power generation and distribution, telecommunications, irrigation, water supply and sewerage, educational and health infrastructure, land reclamation, industrial estates, markets, warehouses, fishports, and environmental management facilities.
At least 60% of the capital of the contractor must be owned by Filipino citizens in compliance with the Philippine Constitution, particularly for infrastructure requiring a public utility franchise.
Filipino labor must be employed or hired in phases where Filipino skills are available, applicable to both foreign and Filipino contractors.
Financing from Philippine government institutions by foreign or foreign-controlled contractors shall not exceed 20% of the total cost of the infrastructure facility or project.
The PBAC, created by the agency or LGU, is responsible for pre-qualifying bidders, receiving and opening bids, evaluating the bids against set criteria, and recommending the award of the contract to the agency head.
It must demonstrate marketability, technical soundness (preliminary engineering design), economic feasibility (economic internal rate of return at least equal to the social discount rate), financial viability, operational feasibility, and environmental standards compliance.
Tolls, fees, rentals, and charges are subject to adjustment by a formula related to official government price indices defined before bidding and incorporated in the contract. Adjustments may also compensate the contractor for delays or inadequacies in facilities provided by the government agency or LGU.
They may face forfeiture of performance bonds, liquidated damages for delayed completion, incentive bonuses for early completion may be given, and the franchise can be nullified if minimum standards are not met.
Contracts are awarded to the lowest evaluated complying bidder based on the present value of proposed tolls, fees, rentals, and charges over a fixed term. The bid must comply with minimum design and performance standards.
The Toll Regulatory Board approves tolls for national highways, roads, bridges, and public thoroughfares.
The concerned agency or LGU must publicly publish the list of priority BOT/BT projects every six months in newspapers of general circulation and notify registered contractors and relevant trade organizations.
Contracts may be terminated or canceled by the agency/LGU in cases of force majeure such as war or major calamities, or if the government fails to provide required facilities or changes its plans affecting the project. In such cases, the contractor shall be compensated for actual expenses plus a reasonable rate of return.