Setting the facts straight — what are Public Private Partnerships



Anna Mae Lamentillo

What are PPPs? What is its role in government projects? Are PPPs privately owned?

To put it simply, PPP or Public-Private Partnership is, as the term explicitly states, an agreement between the government and a private company to undertake a project.  PPP is not the project itself. It is a funding scheme by which a project is implemented.

The Public-Private Partnership Center (PPPC) defines it as a contractual agreement between the government and a private firm targeted towards financing, designing, implementing and operating infrastructure facilities and services that were traditionally provided by the public sector. It is a mechanism to distribute project risks to both public and private sector.

On the part of the government, the PPP addresses limited funding sources for local development projects. Since the private company allocates the financial resources for a certain project, public funds can then be allocated for other local priorities. The project that is the subject of the PPP is structured in such a way that the private sector gets a reasonable rate of return on its investment.

In this concession agreement, the government confers to the private sector the right to build and operate a facility, example an expressway, as well as the right to collect toll for a predetermined period of time. Once the duration of the concession has ended, control (including operations and maintenance) of the infrastructure reverts back to the State. There is no full divestiture of ownership in PPP.

Legal Basis of PPPs in PH

Public Private Partnerships in the Philippines date back as early as 1986, when Proclamation No. 50 created the Asset Privatization Trust (APT) and the Committee on Privatization. It has evolved since with the enactment of several laws, including RA 6957 or the Build-Operate-Transfer Law in 1991, RA 771815 and Memorandum Order No. 16616 in 1993, Administrative Order 103 in 2000, Executive Order 144 in 20021, Executive Order No. 819 in 2010 and Executive Order No. 13620 in 2013.

The current structure of PPP in the Philippines has been improved to streamline and clarify processes, including procedures for managing unsolicited proposals, joint venture agreements, and appointment of probity advisors for PPP procurement, among others.

Projects under PPP

According to the PPPC, there are at least 17 PPP projects in the Philippines under implementation—15 of which are solicited (project was identified by the implementing agency or government unit) and two are unsolicited (the private sector project proponent submits a project proposal to an implementing agency without a formal solicitation from the government).

In the Department of Public Works and Highways, there are at least 26 projects at various stages. One of the project is Skyway Stage 3 —an 18-km expressway spanning from Buendia in Makati to Balintawak in Quezon City.

Since the project was started until November, 2017, accomplishment on right-of-way activities was almost nil. For instance, site possession for the entire alignment was only at 8.64%. Before the issuance of Department Order 65, only Section 1 had substantial right-of-way acquisition, which was only at 34.85%. No right of way was acquired for Section 2A and 2B. Section 3 and Section 4 were only at 2.86% and 5.5% respectively. Relocation of the 47 National Grid Corporation poles and 1,312 Meralco poles only started in May, 2017.

It was clear that the original alignment that was proposed had to be revised. In May, 2017, DPWH Secretary Mark Villar received a proposal from San Miguel Corporation to realign Section 2B to utilize the San Juan River alignment. The Memorandum of Agreement was signed on October 25, 2018, which included the construction of an interconnection structure between Metro Manila Skyway Stage 3 and the NLEX SLEX Connector, an 8-kilometer elevated 4-lane toll expressway from NLEX Harbor Link Segment 10 in C3 Road, Caloocan City, to PUP Sta. Mesa in Manila.

Twelve months later, civil works construction for the main span of Skyway Stage 3 is completed. By December, travel time from NLEX to SLEX will be reduced from 2 hours to only 30 minutes. Makati to Quezon City will only be 20 minutes.

Hybrid PPPs 

Under the administration of President Rodrigo Duterte, the government supported another type of modality — the hybrid PPP to complement the traditional PPP structure in the government’s “Build, Build, Build” program. Under this modality, the government builds and finances infrastructure projects and later on bids out the operation and maintenance aspects to the private sector.

So far, the government has two hybrid PPP projects—the Clark International Airport and the New Bohol Airport.

All infrastructure projects under the “Build, Build, Build” program are financed by three implementation modalities — PPP, national government financing, or official development assistance (ODA).

To reiterate, PPP is a funding scheme, a financing modality. It’s not BBB vs PPP, because Public-Private Partnership is part of “Build, Build, Build.”