Definitions of key terms
- Under Section 2, a build-operate-and-transfer scheme is a contractual arrangement where the contractor undertakes construction (including financing), operates and maintains the facility over a fixed term, and charges facility users tolls, fees, rentals, and charges sufficient to recover operating and maintenance expenses and investment plus a reasonable rate of return.
- Under Section 2, under a build-operate-and-transfer scheme, the contractor transfers the facility to the concerned government agency or local government unit at the end of the fixed term, which shall not exceed fifty (50) years.
- Under Section 2, during the construction stage of a build-operate-and-transfer scheme, the contractor may obtain financing from foreign and/or domestic sources and/or engage foreign and/or Filipino constructors, subject to the constitutional and statutory conditions stated in the definition.
- Under Section 2, the ownership structure of the contractor of an infrastructure facility whose operation requires a public utility franchise must comply with the Constitution.
- Under Section 2, for corporate investors in the build-operate-and-transfer corporation, the citizenship of each stockholder is the basis for computing Filipino equity.
- Under Section 2, for foreign constructors, Filipino labor must be employed or hired in construction phases where Filipino skills are available.
- Under Section 2, financing of a foreign or foreign-controlled contractor from Philippine government financing institutions shall not exceed twenty percent (20%) of the total cost.
- Under Section 2, financing from foreign sources shall not require a guarantee by the Government or by government-owned or controlled corporations.
- Under Section 2, the build-operate-and-transfer scheme includes a supply-and-operate situation, where the supplier of equipment and machinery operates the facility if the interest of the Government so requires, including technology transfer and training to Filipino nationals.
- Under Section 2, a build-and-transfer scheme is a contractual arrangement where the contractor undertakes construction (including financing), and after completion turns over the facility to the concerned government agency or local government unit, which pays the contractor its total investment expended plus a reasonable rate of return.
- Under Section 2, the build-and-transfer scheme may be employed for any infrastructure project, including critical facilities that must be operated directly by the Government for security or strategic reasons.
Priority projects and publicity duties
- Under Section 4, concerned infrastructure agencies—including government-owned and controlled corporations and local government units—must include in their infrastructure programs priority projects that may be financed, constructed, operated, and maintained by the private sector under the Act.
- Under Section 4, agencies must give wide publicity to all projects eligible for financing under the Act, including publication in national newspapers of general circulation once every six (6) months and official notification of contractors registered with them.
- Under Section 4, lists of all national projects must be part of the agencies’ medium-term infrastructure programs and must be duly approved by Congress.
- Under Section 4, local projects funded and implemented by local government units must be submitted to the local development councils for confirmation or approval.
Public bidding and award rules
- Under Section 5, once projects under Section 4 are approved, the concerned head of the infrastructure agency or local government unit must cause publication of a notice inviting all duly prequalified infrastructure contractors to participate in public bidding.
- Under Section 5, the notice must 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 circulated in the region, province, city, or municipality where the project is constructed.
- Under Section 5, for a build-operate-and-transfer arrangement, the contract is awarded to the lowest complying bidder based on the present value of proposed tolls, fees, rentals, and charges over a fixed term, subject to prescribed minimum design and performance standards, plans, and specifications.
- Under Section 5, for a build-operate-and-transfer arrangement, the winning contractor is automatically granted the franchise to operate and maintain the facility and collect tolls, fees, rentals, and charges in accordance with Section 6.
- Under Section 5, for a build-and-transfer arrangement, the contract is awarded to the lowest complying bidder based on the present value of the proposed schedule of amortization payments for the facility, subject to prescribed minimum design and performance standards, plans, and specifications.
- Under Section 5, for a build-and-transfer arrangement, a Filipino constructor who submits an equally advantageous bid must be given preference.
- Under Section 5, a copy of each build-operate-and-transfer or build-and-transfer contract must be submitted forthwith to Congress for its information.
Repayment scheme, franchises, and limits
- Under Section 6, in any project undertaken under the Act, the contractor is entitled to a reasonable return of its investment and operating and maintenance costs in accordance with the bid proposal as accepted and incorporated into the contract terms and conditions.
- Under Section 6, for a build-operate-and-transfer arrangement, repayment is effected by authorizing the contractor to charge and collect reasonable tolls, fees, rentals, and charges for use of the facility, not exceeding those proposed in the bid and incorporated in the contract.
- Under Section 6, the government infrastructure agency or local government unit must approve the fairness and equity of tolls, fees, rentals, and charges except tolls for national highways, roads, bridges and public thoroughfares, which must be approved by the Toll Regulatory Board.
- Under Section 6, imposition and collection of tolls, fees, rentals, and charges must be for a fixed term as proposed in the bid and incorporated in the contract, but in no case may the term exceed fifty (50) years.
- Under Section 6, during the franchise lifetime, the contractor must undertake necessary maintenance and repair of the facility according to standards prescribed in bidding documents and the contract.
- Under Section 6, for a build-and-transfer arrangement, repayment is effected through amortization payments by the concerned government infrastructure agency or local government unit to the contractor according to the scheme proposed in the bid and incorporated in the contract.
- Under Section 6, for land reclamation or the building of industrial estates, the repayment scheme may consist of a grant of a portion or percentage of the reclaimed land or industrial estate built, subject to constitutional requirements on ownership of lands.
Termination, adjustment, and insurance
- Under Section 7, if a project is revoked, cancelled, or terminated by the Government through no fault of the contractor or by mutual agreement, the Government must compensate the contractor for actual expenses incurred plus a reasonable rate of return.
- Under Section 7, the reasonable rate of return in these cases must not exceed that stated in the bidding documents and the contract as of the date of revocation, cancellation, or termination.
- Under Section 7, the Government’s interest in such instances must be insured with the Government Service Insurance System or any other insurance entity duly accredited by the Office of the Insurance Commissioner.
- Under Section 7, the cost of insurance coverage must be included in the bidding terms and conditions.
- Under Section 7, tolls, fees, rentals, and charges on the facility are subject to adjustment according to a formula related to official government price indices, which must be defined before bidding (through bidding documents) and incorporated in the contract.
Toll Regulatory Board and supervision
- Under Section 8, the Toll Regulatory Board is attached to the Department of Public Works and Highways, with the Secretary of Public Works and Highways as Chairman.
- Under Section 9, every infrastructure project undertaken under the Act must be constructed, operated, and maintained by the contractor according to plans, specifications, standards, and costs approved by the concerned government infrastructure agency.
- Under Section 9, all operations under the Act are under the technical supervision of the concerned government infrastructure agency.
Implementing rules and effectivity
- Under Section 10, implementing rules and regulations must be formulated by a committee composed of representatives from the Department of Public Works and Highways, Department of Finance, Department of Local Government, National Economic and Development Authority, and duly accredited organizations representing the private Philippine construction industry.
- Under Section 10, the committee must prescribe implementing rules and regulations after public hearing and publication as required by law.
- Under Section 10, implementing rules and regulations must include criteria and guidelines for evaluation of bid proposals, provisions to subject facility collections to audit by the Commission on Audit, and conditions for cancellation of contracts.
- Under Section 13, the Act takes effect fifteen (15) days after its publication in at least two (2) newspapers of general circulation.
Repeal, separability, and official dates
- Under Section 11, all laws or parts of any law inconsistent with the Act are repealed or modified accordingly.
- Under Section 12, if any provision is held invalid, the other provisions not affected continue in operation.
- The Act is Republic Act No. 6957, titled “An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and for Other Purposes”, approved July 9, 1990, with effectivity fifteen (15) days after publication in at least two (2) newspapers of general circulation.