Key amendments to the implementing rules and regulations of the Build-Operate-and-Transfer Law

30 September 2022

On 26 April 2022, the Implementing Rules & Regulations (IRR) of “An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector and for Other Purposes” or the Build-Operate-and-Transfer Law (Republic Act No. 6957, as amended by Republic Act No. 7718) was amended.

While there were significant improvements (i.e., clarification on the required parameters, terms and conditions for approval of a project), the new administration considered the request of various private sector groups and associations to further enhance the IRR.

Thus, the Government, through the Public-Private Partnership Center (PPPC) of the Philippines, revisited the IRRs and launched a public consultation. The newly amended IRRs, which will take effect on 12 October 2022, addresses private sector concerns and further enhances existing provisions, following the statement of Socioeconomic Planning Secretary Arsenio M. Balisacan of the National Economic and Development Authority (NEDA) that there is a “need to establish the right policies, institutional frameworks and regulations that will further promote competition and transparency in our PPP regime.”

Key amendments introduced in the 12 October 2022 IRR:

Deleted the phrase expressly excluding the regulatory acts of the executive branch, and acts of the legislative and judicial branches of government from the scope of Material Adverse Government Action (MAGA)
Required the advice of the regulator and/or the approval of the approving body for finalizing the formula/adjustment schedule for the imposition of tolls/fees/rentals/charges
Provided remedies for the Project Proponent against instances where:
- the regulator approves a franchise that results in a decrease in the amount of tolls/fees/rentals/charges under the approved concession/PPP agreement
- the regulator disapproves the tolls/fees/rentals/charges stipulated in the concession/PPP agreement, or
- the regulator disapproves the proposed amount for the adjustment of the tolls/fees/rentals/charges contrary to the approved formula/adjustment schedule
Deleted the provision excluding acts and decisions of regulators from being the subject of arbitration
Defined “availability payments” as the predetermined payments by the Agency/LGU to the Project Proponent in exchange for delivering an asset or service in accordance with the contract. The definition likewise provides that such shall not be construed as a Direct Government Subsidy

Defined “viability gap funding” as a type of subsidy in the form of a financial support that the government may provide to a revenue-based PPP Project with the objective of making fees affordable, while improving the commercial attractiveness of the project, excluding costs of right-of-way, resettlement, and real estate taxes.
Expanded the enumeration of private sector or development projects to include intermodal transport stations and terminals, in-land cargo terminals, park and ride facilities, automated fare collection systems, traffic management systems, traffic monitoring systems, traffic enforcement systems, congestion management systems, parks
Removed the concept of the “adjusted rate of return” (i.e., defined in the previous IRR as the project internal rate of return adjusted to reflect the value of government undertakings and risks assumed by the government, including government Right-Of-Way (ROW), value of assets or usufruct granted by government, intellectual property) and indicating that the detailed methodology to calculate the Reasonable Rate of Return (RROR) will be done by the NEDA Investment Coordination Committee (ICC)
Removed the provision requiring projects to first undergo evaluation by a technical working group composed of NEDA, the Department of Finance (DOF), and the Agency/LGU, prior to endorsement to the ICC Technical Board
Removed the detailed methodology for determining the minimum amount of equity required for proponents, and
Required the use of independent property appraisers to determine the value of the usufruct of government assets.

The 2022 Revised IRR can be accessed at https://ppp.gov.ph/wp-content/uploads/2022/04/2022-Revised-IRR-of-BOT-Law-RA-6957-as-amended-by-RA-7718.pdf