The National Economic and Development Authority or NEDA has released its “2023 Revised Guidelines and Procedures for Entering into Joint Venture Agreements between Government and Private Entities.” It was approved by the NEDA Board on 9 March and took effect on 25 April.
The 2023 revised guidelines amended its 2013 version. According to NEDA Secretary Arsenio M. Balisacan, “The amendments have been designed to enhance competition for projects under joint ventures, enhance the performance of private sector participants, and strengthen checks and balances to ensure the technical and financial viability of government projects.”
Among the amendments intended to enhance competition for projects is the adoption of the Best-and-Final Offer or BAFO method, replacing the right to outbid, in the competitive challenge for unsolicited JVs. The BAFO method shall be used when a challenger’s financial proposal is found to be more advantageous than the financial proposal of the original proponent. In such event, the JV Selection Committee shall invite all private sector participants, including the original proponent, to submit their best and final offer or the second financial proposal using the same parameters as in the tender documents.
In relation to the competitive challenge, private sector participants may now be given more than 120 calendar days but not exceeding one year, depending on the nature and complexity of the JV project, to develop and submit comparative proposals.
Further, the tender documents are now free to view as they will be posted online without requiring their purchase. The private sector participants shall only be required to post participation and bid fees once they decide to participate in the tender. This amendment addresses the issue of setting a short period for the purchase of tender documents. Relative thereto, the cost of eligibility documents and bidding fees were also lowered. The eligibility and bidding fees now range from P25,000 for JVs costing P500 million and below, up to P250,000 for JVs costing above P10 billion.
In case multiple unsolicited proposals are received within a period of three months for the same JV project, the government entity has the option to select the best proposal or convert unsolicited JV projects into solicited ones.
With regard to the amendments that seek to enhance the performance of JV projects, the 2023 JV Guidelines prescribe the information to be included in a feasibility study and likewise expanded the list of minimum standard contract provisions. These are intended to comply with the requirements of other laws and to avoid the proliferation of non-compliant JV agreements.
For tender documents, key performance indicators and business efficiency measures are now required to be part thereof to prevent instances where JV partners enter into a deal without any agreed performance indicators or any metrics to ensure the quality of service. Regulators shall also prescribe standard minimum design and/or performance standards/specifications pertinent to their respective sectors.
The 2023 JV Guidelines also prescribe a lock-in period for ownership for purposes of ensuring the private JV partner retains ownership/ involvement with the JV agreement within a specified term. This prevents private sector participants from entering into JV agreements and then reassigning their shares to other entities to flip or cash out within a short period.
Moreover, regarding the regulation of tolls/fees/charges, the adjustment thereof is now based on an approved formula/schedule in the approved contract to be determined by the appropriate regulatory or approved body prior to tender.
In terms of the improvement of checks and balances, all JV agreements are now required to be posted online and made available for public viewing. An independent valuation by a third party is also required to ensure that the assets of the government, which form the basis for the sharing of revenues/risks, are valued properly.
Further, to provide teeth to the 2023 JV Guidelines, it is explicit that a JV Agreement shall be deemed void ab initio if it is entered into by the JV partners with material and/or willful violation of any of the provisions of the said guidelines and other laws, rules, and regulations relative thereto. Void JV Agreements shall be deemed as not having been entered into at all and shall vest no rights, benefits, or privileges.
