Valenzuela City Joint Venture Ordice 2014

Issuing authority, title, and legal basis

The ordinance is enacted by the Sangguniang Panlungsod of Valenzuela City (title section and enacting clause).
It is authorized by the listed members of the City Council shown in the ordinance records.
It is grounded on Section 35 of Republic Act No. 7160 (Local Government Code of 1991) and Article 66 of its Implementing Rules and Regulations, which empower local government units to enter into joint ventures (preamble).
It cites and distinguishes joint ventures from Republic Act No. 6957, as amended by Republic Act No. 7718 (BOT Law), and from public procurement under Republic Act No. 9184 (GPRA) (preamble).
It states that local government unit joint ventures are excluded from the coverage of the 2013 Revised and 2008 Joint Venture Guidelines issued by NEDA (preamble).
It provides a rule of interpretation that the ordinance and its provisions must be liberally interpreted to accomplish its policy and objectives (Section 5).

Core definitions and key JV terms

Competitive Selection means a transparent, criteria-based method for selecting a joint venture partner that is open to any interested party (Section 6(a)).
Unsolicited Proposal subject to Swiss Challenge means an alternative selection method where a proposal by a private sector proponent is challenged by third parties through comparative proposals, and the original proponent has a right to match any superior offer (Section 6(b)).
A Contractual Joint Venture is a legal and binding agreement where the City and partners perform primary obligations without forming a joint venture company (Section 6(c)).
Cost of Joint Venture Project is the total amount of parties’ contributions in present value with discount rate (Section 6(d)).
Credit Enhancement is direct and indirect support to a development facility by the private sector proponent and/or City, contingent on specified events and/or risks, allocated to the party best able to manage and assume the risk (including government guarantees subject to indirect-guarantee rules) (Section 6(e)).
Direct City Equity is the City’s subscription to shares (or securities convertible to shares) of a joint venture company, paid by money or assets (Section 6(f)).
Direct City Guarantee is the City’s agreement to assume responsibility for repayment of debt directly incurred by the private sector proponent in case of loan default (Section 6(g)).
Direct City Subsidy covers City defrayal/payment/shouldering of project costs or operating and maintenance costs, condoning/postponing payments, contributing property/assets, waiving special real property tax rates, and waiving business permit/license charges or fees—without receiving payment or value from the private sector proponent or operator for such support (Section 6(h)).
Divestment or Disposition covers removing/withdrawing title to property (including City-owned shares) and vesting ownership to a private sector proponent and vice versa (Section 6(i)).
Joint Venture Agreement is the contractual arrangement between the City and its joint venture partner as provided in Section 7 (Section 6(j)).
Joint Venture Company is a stock corporation formed by the City and a joint venture partner with 50% or less of outstanding capital stock owned by the City (Section 6(k)).
Joint Venture Partner / Private Sector Proponent (PSP) is the private entity selected with adequate track record, technical capability, and financial base consisting of equity and firm commitments from reputable financial institutions to provide sufficient credit lines to cover the total estimated project cost; it may be a consortium or private joint venture (Section 6(l)).
Joint Venture Project refers to the projects referred to in Section 10 (Section 6(m)).
Project Study is prepared by the City for competitive selection or by a private sector proponent when submitting an unsolicited proposal, and must include: needs analysis; affordability assessment; value for money; preliminary risk assessment; stakeholder assessment; human resource assessment; bankability assessment; legal viability assessment; market testing if relevant; indicative transaction implementation plan; and draft joint venture agreement; it may be a feasibility study, pre-feasibility study, or business plan (Section 6(n)).
Public-Private Partnerships (PPP) are legally enforceable contracts between the City and a private sector proponent where each party assumes specified functions, bears specified risks, provides contributions/obligations, and earns benefits and revenues (Section 6(o)).
Unsolicited Proposal refers to project proposals submitted by a private sector proponent to the City to undertake a joint venture project without a formal solicitation issued by the City (Section 6(p)).

Joint venture agreement: term and cooperative scope

A Joint Venture Agreement is a contractual arrangement between the City and one or more joint venture partners involving community or pooling of interests in performance, where each party has the right to direct and govern policy for the project and shares income, dividends, revenues, profits, risks, and losses (Section 7(a)).
The term of a joint venture agreement must be a fixed period not exceeding 50 years (Section 7(b)).
The City may implement joint venture projects in a Government-to-Government arrangement with other LGUs, NGAs, GOCCs, GIs, and GCEs for projects located within the City’s territory or benefiting the City/community even if the site is outside the City’s territory, provided the collaborating entity undertakes joint selection of the private sector proponent with the City (Section 7(c)).

Contributions, equity rules, and transfer control

Parties to a joint venture must contribute money, capital, services, personnel, assets (including equipment and land), intellectual property, or other value, or combinations thereof (Section 8(a)).
The City may contribute proprietary resources and support, including franchise/concession/permit/undertaking, delegated or shared proprietary functions, usufruct, right-of-way, equity, subsidy, or guarantee; it may also use cost-sharing and credit enhancement mechanisms, exercise police power, perform devolved powers, and integrate zoning ordinances and extend goodwill, subject to third party independent valuation (Section 8(a)).
The City may allocate parts of its Internal Revenue Allotment, development fund, regular funds, proceeds from utilization/development of national wealth, Special Education Fund (for education-related projects), Calamity Fund (for calamity or reconstruction-related projects), and special funds as its contribution, subject to applicable laws, rules, and regulations (Section 8(b)).
The City may contract a loan, avail of Official Development Assistance, secure grants, and issue bonds, debentures, securities, collaterals, and notes, with proceeds earmarked for the joint venture activity (Section 8(c)).
The City must generally be a minority equity or shareholder, while the private sector proponent is the majority, except when 50% of the outstanding capital stock or contribution is owned or made by the City (Section 8(d)).
Subject to agreement, the City may be entitled to a share greater than its contribution or equity (Section 8(e)).
Each party earns dividends/profits/income/revenues and bears risks/losses/obligations proportionate to its share, unless the joint venture agreement provides that the City has a greater share of returns and/or bears a lower proportion of risks (Section 8(f)).
The private sector proponent must not sell or transfer its interest during the City’s involvement without the express written consent of the City Mayor upon authority of the City Council; the City may sell or transfer its interest by public auction, subject to the joint venture agreement and applicable laws (Section 8(g)).

Joint venture agreement contents and approvals

Joint venture agreements must, as far as practicable, include provisions on: effective date; identities and business types of parties; business name; principal place of business within the City of Valenzuela; joint venture project and purposes and term; the joint venture vehicle; total project cost and specifications; party relationship and management roles and co-venturer statement; committed contributions and when made and procedure for additional capital; profit/revenue/risk/loss sharing percentages; governing board/board of directors and officer selection; termination/liquidation/buy-out and asset ownership/transfers after expiration; divestment/disposition procedure; alternative dispute resolution and arbitration; anti-corruption warranties; and compliance with applicable laws, rules, and regulations (Section 9(a)).
All joint venture agreements must be signed by the City Mayor with prior authorization by the Sangguniang Panlungsod, and by the duly authorized representative of the private sector proponent (Section 9(b)).
Amendments or supplements that do not violate competition and fairness must be approved by the City Mayor with prior authorization by the Sangguniang Panlungsod after award and signing; failure to follow this approval process makes the amendment or supplement null and void (Section 9(c)).
Regulation of the joint venture must follow the joint venture agreement; a duly executed agreement must be respected, not impaired, and binding on the successor administration under corporate succession (Section 9(d)).

Eligible JV projects and procurement/audit rules

The City may undertake infrastructure, development, or social service-related projects, regardless of whether they are traditionally provided by the City (Section 10(a)).
The City may enter into joint venture agreements for enumerated sectors including: power plants; highways; ports; airports; canals; dams; hydropower; water supply; sewerage; irrigation; telecommunications; railroad and railways; transport systems; land reclamation; industrial estates or townships; housing; buildings; tourism; markets; slaughterhouses; warehouses; solid waste management; information technology networks and databases; education and school facilities; sewerage; drainage; dredging; prisons; hospitals and health services; memorial parks and services; parking structures and traffic management; material testing; zoos; parks and plazas; sports/leisure gaming/recreational facilities; cockpits; theaters; and other projects/business purposes (Section 10(b)).
The City may also undertake joint ventures for devolved activities under Section 17 of the 1991 Local Government Code (Section 10(b)).
The City may identify specific priority projects enumerated in its comprehensive multi-sectoral development plan and development and physical framework plan (Section 10(c)).
If a project requires a franchise/concession/license to operate: the winning private sector proponent must be automatically granted, through a duly enacted ordinance, the franchise/license/permit to jointly operate and maintain the facility (including collection of tolls/fees/rentals/charges per the joint venture agreement schedules) in a contractual joint venture; if a joint venture company is formed, the franchise/concession/license is automatically granted to the joint venture company (Section 10(d)).
The original franchise period in the joint venture agreement may be extended as authorized by the City, but the total franchise period must not exceed 50 years (Section 10(d)).
Procurements using public/city funds must follow Republic Act No. 9184 and its revised implementing rules; procurements using private funds by the private sector proponent or by the joint venture company are not covered by RA 9184 (Section 10(e)).
City revenues/funds/expenditures/contributions are subject to audit examination by the Commission on Audit (COA), while the private sector proponent’s revenues/funds/expenditures/contributions are subject to audit by a private auditing firm (Section 10(f)).

Joint venture vehicles and formation parameters

Joint ventures may be implemented either as a Contractual Joint Venture (Unincorporated) or by establishing a Joint Venture Company (Incorporated Company) (Section 11(a)).
A joint venture company must be incorporated and registered as a stock corporation under Batas Pambansa Blg. 68 (Corporation Code of the Philippines) and applicable Securities and Exchange Commission rules and regulations (Section 11(b)).
Ownership and nationality requirements under the Constitution and other pertinent laws must be complied with (Section 11(b)).
The City must be represented in the company board proportionate to its investment unless more seats are allotted to the City (Section 11(b)).
The joint venture company must be allowed to derive income from activities authorized in the joint venture agreement during its term; the parties must receive dividends each year from net profits that constitute portion of unrestricted retained earnings in accordance with the joint venture agreement (Section 11(b)).
The joint venture company must stipulate a fixed existence term not exceeding 50 years (Section 11(b).

Project study and reimbursement rules

A project study for a joint venture project must be submitted through the process tied to Swiss Challenge competitive mechanics (Section 12).
Preparation costs for the project study may be reimbursed by the winning private sector proponent to the City or the original proponent, subject to the terms of the competitive selection or Swiss challenge (Section 12).

Bids and Awards Committee functions and powers

The Bids and Awards Committee (BAC) acts as the selection committee for selecting a joint venture partner for a specific joint venture project (Section 13(a)).
When acting as selection committee, the BAC has quorum with a simple majority of voting members; the Chairperson votes only in case of a tie; BAC business-conduct rules apply if the ordinance provides none (Section 13(a)).
With the Mayor’s approval, the BAC may invite provisional non-voting members from national agencies, regulatory agencies, NEDA, DILG, COA, and the private sector to observe, and may form a support staff/technical working group composed of City employees and staff (Section 13(a)).
The BAC is responsible for identification of joint venture projects and all aspects of pre-selection and selection, including project study preparation/evaluation, drafting/evaluation of the joint venture agreement, publication of invitations, eligibility requirements and proposal securities/amounts and schedules, pre-qualification, conferences and supplemental notices, interpretation of selection-process rules, conduct of selection/challenge processes, legal/financial/technical evaluation, resolution of disputes between proponents/challengers, defining appeals mechanisms, and recommending acceptance and/or award (Section 13(b)).
BAC recommendations must be submitted to the Mayor for consideration and approval; the Mayor must approve tender documents and the draft joint venture agreement before issuance to prospective private sector proponents/bidders (Section 13(c).

Competitive selection: solicitation, prequalification, bids

The City may solicit proposals through Competitive Selection, requiring bid/tender documents and publication and posting of invitations to pre-qualify and bid (Section 14).
Bid/tender documents must include: Instructions to Bidders; Terms of Reference; Draft Joint Venture Agreement; Bid Form; bid and performance securities forms; requirements and milestones for granting franchises if applicable; and other necessary documents as deemed by the joint venture-selection committee (Section 14(a)).
The BAC Chairman must publish an invitation once every week for two (2) consecutive weeks in at least one (1) newspaper of general circulation, and post it in two (2) conspicuous places in the City and on the City website during the specified period (Section 14(b)).
Prequalification eligibility requires compliance with legal requirements, experience/track record, and financial capability, with project-specific qualification criteria determined by the City (Section 14(c)).
For franchise-requiring projects where private sector proponent and facility operator are the same entity: the PSP must be Filipino or a corporation duly registered with the SEC and owned at least 60% by Filipinos; for consortia, Filipinos must have at least 60% interest (Section 14(c)(i)).
For franchise-requiring projects where PSP and facility operator are separate: the facility operator must be Filipino or a SEC-registered corporation owned at least 60% by Filipinos (Section 14(c)(i)).
For projects not requiring a public utility franchise to operate: the private sector proponent or facility operator may be Filipino or foreign-owned (Section 14(c)(i)).
Consortium members must be disclosed at prequalification; consortia must execute an undertaking to be jointly and severally liable for the PSP’s obligations; if members organize as a Philippine-registered corporation, that corporation executes the undertaking substituting for the consortium members’ undertaking (Section 14(c)(i)).
Construction undertakers must be licensed/accredited by PCAB if Filipino, or by an equivalent accreditation institution in the contractor’s country of origin if foreign; once awarded, the foreign contractor must secure PCAB license and accreditation (Section 14(c)(i)).
The prospective private sector proponent must have adequate firm and key personnel experience (Section 14(c)(ii)).
The prospective private sector proponent must have adequate financial capability to sustain financing requirements for detailed engineering design, construction, and/or operation and maintenance (Section 14(c)(iii)).
After submission of prequalification documents, the City through the BAC must determine pre-qualified vs disqualified within 30 calendar days after the submission deadline; pre-qualified proponents must be informed within 7 calendar days after approval and a prequalification certificate issued; disqualified proponents must also be informed with grounds within the same period (Section 14(d)).
Disqualified proponents may appeal within 5 calendar days from receipt of the disqualification notice; bid evaluation is suspended during the appeal; the Mayor (or authorized representative) must act within 30 working days from receipt of the appeal and upon payment of a non-refundable appeal fee of at least 0.5% of Project Cost; the decision is final and immediately executory (Section 14(d)).
All prospective private sector proponents must submit a qualification statement accepting qualification criteria and waiving any right to seek an injunction/prohibition/restraining order against the City or its BAC officials to stop qualification, bidding, negotiation/award, or execution of the awarded joint venture agreement; the waiver does not bar questioning the lawfulness of disqualification or rejection through appropriate administrative or judicial processes without requesting writs of injunction/prohibition/RO (Section 14(e)).
BAC makes tender documents available to all prequalified bidders after prequalification evaluation, and issues notice of prequalification/disqualification so bidders have ample time to examine and prepare bids before bid opening (Section 14(f)).
A pre-bid conference must be conducted at least 30 calendar days before bid submission deadline to clarify bidding document provisions; written amendments from the City are required to modify documents; amendments must be issued to all bidders within a reasonable time; each bidder must acknowledge amendments prior to submission; a conference proceedings summary must be issued to prospective bidders; attendance is not mandatory (Section 14(g)).
Bids must be submitted on or before the deadline in the Instructions to Bidders, marked “Do Not Open Before (date and time of opening of bids)”, and enclosed/labeled separately as Qualification Requirements, Technical Proposal, and Financial Proposal (Section 14(h)).
Late bids submitted after the deadline must be returned unopened (Section 14(i)).
At the qualification opening date/time, the BAC/selection committee opens the qualification envelope and checks completeness; recording of information and sign-in register is required (Section 14(j)).
Qualification evaluation occurs before technical proposal opening; City must inform bidders of qualification/disqualification within 10 calendar days; qualified bidders proceed while disqualified bidders’ technical and financial proposals are returned unopened (Section 14(k)).
Bids are rejected automatically for incomplete information in any envelope and/or non-compliance with bid security requirements (Section 14(l)).
The technical envelope opening must verify completeness and that required bid security is in the prescribed form, amount, and validity period; all present bidders/representatives must sign the opening register (Section 14(m)).
The financial envelope of only technically passed bidders is opened; financial proposals of technically failed bidders are returned unopened with disqualification reasons; the BAC notifies qualified bidders of the financial opening date/time/place; BAC may simultaneously open and evaluate technical and financial proposals if bidders are notified prior (Section 14(n)).
Withdrawal/modification of bids may be allowed through written notice before opening of the first envelopes; no modifications/withdrawals after; late modifications are returned unopened; withdrawal after bid opening causes forfeiture of bid security (Section 14(o)).
The City may reject any or all bids, waive minor defects, and accept the offer deemed most advantageous to the government (Section 14(p)).
Direct negotiations are used when only one complying bidder remains under defined scenarios after advertisement/prequalification and compliance checking, covering technical and financial aspects within project study/terms of reference minimum requirements; the Mayor approves direct-negotiation terms before award (Section 14(q)).
Disqualification appeals in direct negotiation must be filed within 15 working days from receipt of notice and resolved within 45 working days; the Mayor’s decision is final and immediately executory (Section 14(q)).

Bid security rates and bid validity limits

The bid security must be in cash, certified check, manager’s check, letter of credit, bank draft/guarantee from a reputable local/foreign bank, or surety bond callable on demand from GSIS or an insurer duly registered and recognized by the Insurance Commissioner and acceptable to the City, or combinations thereof, payable to the City based on total project cost, as per the schedule (Section 14(h)(i) numbering in the ordinance).
Bid Security schedule must be applied as follows (Section 14(h)(i)):
- Less than PHP 100 million: 3% of Project Cost
- PHP 100 million to less than PHP 500 million: 2.5% of Project Cost or PHP 3,000,000.00, whichever is higher
- PHP 500 million to less than PHP 1 billion: 2% of Project Cost or PHP 12,500,000.00, whichever is higher
- PHP 1 billion to less than PHP 5 billion: 1.5% of Project Cost or PHP 20,000,000.00, whichever is higher
- PHP 5 billion or higher: 1% of Project Cost or PHP 75,000,000.00, whichever is higher
Bid security issuance may be from a local bank, an international bank, or both; if issued by an international bank, it must be confirmed/validated by its local branch in the Philippines or by a BSP-registered authorized bank (Section 14(i) around bid security standards).
Bid security guarantees that the private sector proponent will enter into the joint venture agreement within the time prescribed in the bidding documents (Section 14(h)(i)).
Bid securities must be valid for the period stated in bidding documents but in no case beyond 180 calendar days from bid opening (Section 14(h)(i)).
The bid security amount fixed by the City prior to bidding must not be less than the amount prescribed in the schedule (Section 14(h)(i)).

Unsolicited proposals and Swiss challenge stages

Unsolicited proposal subject to Swiss challenge runs through three (3) stages (Section 15).
Stage One (Unsolicited Proposal) requires submission of a complete proposal package, including a cover letter and project study showing assumptions; a company profile; a draft joint venture agreement; and other needed documents even if proprietary, all in a sealed envelope (Section 15, Stage One).
The City acknowledges receipt of a complete/complete-check proposal within 7 calendar days, and advises whether the submission is complete or incomplete within 30 calendar days from submission (Section 15, Stage One).
If incomplete, the City returns the proposal with the lacking information; the City may thereafter entertain other similar proposals (Section 15, Stage One).
The BAC performs initial evaluation and determines eligibility of the private sector proponent (Section 15, Stage One).
After initial evaluation, the Mayor issues a certificate of acceptance or non-acceptance for purposes of detailed negotiations, upon BAC recommendation (Section 15, Stage One).
If there are more than one unsolicited proposals for the same joint venture project, the Mayor may reject all and pursue competitive selection, or accept an unsolicited proposal that is complete and gives greater community advantages and benefits and City revenues (Section 15, Stage One).
Stage Two (Detailed Negotiations) allows parties to negotiate technical and financial terms; once successful, parties issue a joint certification stating agreement reach, proponent eligibility, and agreed technical and financial aspects (Section 15, Stage Two).
The issuance of the certification starts solicitation for comparative proposals under Stage Three (Section 15, Stage Two).
If the original proponent holds an exclusive franchise/concession (e.g., power service contract, water rights, mining contract/rights) from a responsible national government agency without which the joint venture project/activity cannot be undertaken without participation/consent, the Swiss challenge under Stage Three is not required and the competitive/SWISS challenge process is deemed complete (Section 15, Stage Two).
If negotiations do not result in acceptable agreement, the City may reject the proposal in writing with grounds and may accept a new proposal from other private sector proponents, use other PPP modalities, or subject the project to competitive selection (Section 15, Stage Two).
Stage Three (Swiss Challenge) requires BAC-prepared tender documents using the same eligibility criteria used in determining PSP eligibility; proprietary information must be respected and protected as confidential and not used as tender documents (Section 15, Stage Three(i)).
The Mayor approves all tender documents including the draft joint venture agreement before publication of the comparative-proposal invitation (Section 15, Stage Three(ii)).
The invitation for comparative proposals must be published at least once a week for two consecutive weeks in at least one (1) newspaper of general circulation and posted in two conspicuous places in the City and on the City official website if available (Section 15, Stage Three(iii)).
The original proponent must post proposal security on the first day of publication of the comparative invitation in the amount and form stated in tender documents (Section 15, Stage Three(iv)).
In evaluating comparative proposals, the best offer must include the original proposal; if a comparative proponent’s offer is more advantageous, the original proponent has the right to match; if no matching offer is received within