Guidelines for Project Loan Negotiations and Packaging of Govt. Foreign-Assisted Infrastructure Projects

April 20, 2004

IMPLEMENTING RULES AND REGULATIONS OF EXECUTIVE ORDER NO. 278, SERIES OF 2004, PRESCRIBING GUIDELINES FOR PROJECT LOAN NEGOTIATIONS AND PACKAGING OF GOVERNMENT FOREIGN-ASSISTED INFRASTRUCTURE PROJECTS

SECTION 1. Purpose and Coverage. —

1.1. These Implementing Rules and Regulations (IRR) are being issued pursuant to Section 5 of Executive Order No. 278, Series of 2004, entitled "Prescribing Guidelines for Project Loan Negotiations and Packaging of Government Foreign-Assisted Infrastructure Projects," for the purpose of providing the necessary parameters governing the preparation of infrastructure project/ contract packages (for both local and foreign funding) and loan negotiations for foreign assisted infrastructure projects of all agencies or subdivisions of the National Government including Government-Owned and/or Controlled Corporations (GOCC's), Government Financial Institutions (GFI's) and Local Government Units (LGUs).

SECTION 2. Definition of Terms

2.1. For the purpose of these IRR, the following terms or words or phrases shall mean or be understood as follows:

(a) Appropriate Authorities — refers to the head of the procuring entity defined in the IRR-A of R.A. 9184 as: (i) the head of the agency or body, or his duly authorized official, for national government agencies (NGAs) and the constitutional commissions or offices, and branches of government; (ii) the governing board or its duly authorized official, for Government-Owned and/or-Controlled Corporations (GOCCs), Government Financial Institutions (GFIs), and State Universities and Colleges (SUCs); or (iii) the local chief executive, for Local Government Units (LGUs).

(b) Complex and/or Multi-disciplinary Infrastructure Projects — refers to infrastructure projects which cover works requiring varied competencies which can be further divided into sub-components.

(c) Consulting Services — refers to services for infrastructure projects requiring adequate technical and professional expertise that are beyond the capability and/or capacity of government to undertake such as, but not limited to: (i) advisory and review services; (ii) preinvestment or feasibility studies; (iii) design; (iv) construction supervision; (v) management and related services; and (vi) other technical services or special studies and other related consulting services as defined in the IRR of RA 9184.

(d) EO — refers to Executive Order No. 278 entitled "Prescribing Guidelines for Projects Loan Negotiations and Packaging of Government Foreign Assisted Infrastructure Projects."

(e) Consultant — an individual or firm, regardless of nationality, that is qualified under the IRR of RA 9184 to render consulting services as defined in these IRR and accredited as such by the umbrella organization of consultants recognized by the Government.

(f) Foreign-Assisted Infrastructure Projects — refers to government infrastructure projects which are wholly or partly funded by foreign loans.

(g) INFRACOM — refers to the NEDA Board of Committee on Infrastructure created under Executive Order No. 230, Series of 1987.

(h) Infrastructure Projects — include the construction, improvement, rehabilitation or restoration of roads and bridges, railways, airports, seaports, communications facilities, irrigation, flood control and drainage, water supply, sanitation and sewerage systems, shore protection, energy/power and electrification facilities, national buildings, school buildings, hospital buildings, and other related construction projects that form part of the government capital investment.

(i) Joint Venture — is an alliance between two (2) or more parties for the pooling of resources, sharing of risks, obligations, liabilities, profits and losses and the existence of which may or may not be co-terminus with the completion of the project. In all cases, the responsibilities and liabilities of the joint venture partners shall be defined in the joint venture agreement and shall be in accordance with the requirements of the project. The responsible joint venture partners shall post the corresponding warranties and the necessary securities or liability insurance when awarded the contract.

(j) Loan Negotiating Panel — refers to the Philippine government team vested with authority to negotiate with international financing institutions or entities for the funding of government projects.

(k) Local Funds — refers to monetary resources from national and local government or domestic sources such as, but not limited to, continuing and annual budgetary appropriations, government revenue collections corporate earnings, grants, and government and corporate domestic borrowings.

(l) Packaging of Projects — refers to the apportionment of large-seized or complex and/or multi-disciplinary infrastructure projects into separable contract packages/work components considering the most logical and practical scope of work to complete a project without sacrificing its technical integrity, optimizing project economy and efficiency, and taking into account Filipino capabilities. TAacCE

(m) Special Tax Privileges — refers to tax privileges such as exemptions, assumptions, deductions or credits granted to foreign nationals by the Philippines under specific international tax treaty obligations.

(n) Technical Working Group — refers to the inter-agency committee that will provide inputs to the Philippine Loan Negotiating Panel.

SECTION 3. Funding for Consulting Services

3.1 As a general rule, consulting services for government infrastructure projects shall be funded from local funds and using local resources and expertise. Consulting services shall be proposed for foreign assistance only where foreign funding is indispensable and/or local funds are insufficient.

3.2 Pursuant to Section 3.1 above, the appropriate authorities are required to allocate/provide funds in their respective investment programs for the conduct of the following:

a) Pre-investment components which shall include, but not limited to, pre-feasibility studies, comprehensive land use plan, master development plan, feasibility studies and related surveys and special studies; or

(b) Detailed architectural and/or engineering design and related activities (where the project is feasible); or

(c) Project management/construction supervision.

SECTION 4. Hiring of Consultants.

4.1 To promote the development of Filipino consulting services, Filipino consultants shall be hired whenever the services required for the project are within the expertise and capability of Filipino consultants.

4.2 For consulting services funded through local sources where Filipino capability is determined by the appropriate authorities to be insufficient, Filipino consultants may hire or associate themselves with foreign consultants, with Filipino consultants as lead consultant.

4.3 For consulting services funded through foreign sources, foreign consultants intending to participate in development projects in the Philippines shall enter into joint ventures (e.g. 60% foreign/40% Filipino) with Filipino consultants in the interest of effecting technology transfer and/or providing expertise on local conditions, subject to the agreement between the Philippine government and the international financing institution.

SECTION 5. Packaging of Government Infrastructure Projects

The following basic principles shall govern the work packaging of government infrastructure projects, irrespective of funding source.

5.1 Large government infrastructure projects, where feasible, shall be packaged into separate contract packages/work components without sacrificing the technical integrity of the project. For purposes of these IRR, the adjusted allowable ranges of contract cost for Large B contractors set by the Philippine Contractors Accreditation Board (PCAB) shall be used as reference points in determining large projects.

5.2 In the packaging of large government infrastructure projects, the technical and financial capabilities and experience of Filipino contractors both in the domestic and international markets, as well as the most logical and practical scope of work to complete a project, must be considered.

5.3 Large government projects as mentioned in Section 5.1 above, including complex and/or multi-disciplinary infrastructure projects covering works of a different nature requiring varied competencies shall be packaged into separable contract packages/work components as defined below, or combinations thereof, or by number of units, or by geographical location, taking into account the provisions of Section 5.2 above:

5.3.1 Vertical construction projects (schools, buildings, hospitals, houses, air/land/sea/rail terminals, power stations, lighthouses, etc.)

a. Foundation Works

b. Superstructure Works

c. Electro-Mechanical Works

d. Finishing Works

5.3.2 Horizontal construction projects (bridges, railways lines, elevated railway carriages, tunnels, subways and other subterranean works, dams, dikes water impounding structures, piers and wharves, irrigation systems, flood control systems, water or sewer pipeline systems, power stations, power transmission and/or distribution systems)

a. Bridge

a.1 Main Bridge

a.2 Approach

b. Railway lines and elevated railway carriages

b.1 Civil Works

b.2 Electro-Mechanical Works

b.3 Supply of Rolling Stock

c. Piers & wharves, irrigation systems and flood control systems

c.1 Dredging Works

c.2 Civil Works

c.3 Buildings

c.4 Control Gates

c.5 Electro-Mechanical Works

c.6 Well Drilling

d. Water or sewer pipeline systems

d.1 Pump House and Appurtenant Structures (Civil Works)

d.2 Supply and Installation of Pumps and Accessories

d.3 Electro-Mechanical Works

d.4 Power Supply /Generator Set

d.5 Sub-Station

d.6 Tunnelling Works

e. Power stations

e.1 Foundation Works

e.2 Superstructure Works

e.3 Electro-mechanical Works

e.4 Supply and Installation of Power Plant

f. Power Transmission Lines/ Sub-Stations and/or Distributions Systems

f.1 Supply of Materials and/or Equipment

f.2 Erection/Installation/Construction of Materials and or Equipment

f.3 Supply and Erection/Installation/ Construction of Transmission Lines/ Substations and/or Distribution System

g. Tunnels, Subways and other Subterranean Works

g.1 Tunnel Boring Machine Works

g.2 Conventional Tunneling Works

g.3 Tunnel Lining Works

g.4 Tunnel Portals

g.5 Electro-Mechanical Works

5.3.3 Airports

a. Civil Works

b. Electro-Mechanical Works

c. Ancillary Equipment Supply

d. Navigational and Weather Equipment and Supply

e. Communications Equipment

5.3.4 Civil works for construction of a dam and/or water impounding structure and appurtenant facilities shall consist of only one package. For hydroelectric/multi-purpose dams, however, electro-mechanical works for the power generation component may be a separate package. For flood control and irrigation dams, control gates and other appurtenant facilities shall be a separate package.

5.3.5 Interconnection projects involving submarine cables, underground cables, cable terminal stations, converter stations including appurtenant facilities, irrespective of the voltage, shall consist of only one package.

5.4 Clustering of small and medium-sized projects may be adopted, provided that it is consistent with the principles of economy and efficiency and the resulting cluster or package is within the capabilities of Filipino contractors.

5.5 Non-complex infrastructure projects such as roads, dikes, irrigation canals, water pipelines, and drainage shall be packaged by sections or lengths.

5.6 Splitting of government contracts for purposes of evading the requirement for public bidding and/ or the requirements of law as provided in Section 11 of Executive Order No. 109-A is not allowed. ACTaDH

5.7 The successful completion of a single project in scope or nature to the project to be bid, with at least fifty (50) percent of the value of the infrastructure contract to be bid shall be acceptable as work experience in determining the criteria for eligible and pre-qualified bidders, subject to the agreement between the Philippine government and the international financing institution in cases of foreign-assisted projects.

SECTION 6. Determination of Filipino Capabilities

6.1 During the project appraisal stage, the appropriate authorities shall refer to the list of PCAB-licensed and registered contractors and/or the roster of consultants accredited by the umbrella organization of consultants recognized by the Government and other appropriate sources to determine sufficiency of Filipino capability in undertaking specific requirements for consulting services and/or construction of infrastructure projects, in accordance with the criteria/guidelines to be prescribed by the Construction Industry Authority of the Philippines (CIAP) and approved by the INFRACOM.

6.2 The appropriate authorities shall endeavor to secure, during the project appraisal stage, all inputs for the packing of infrastructure projects, including inputs from concerned private sector groups, such as, but not limited to, the Philippines Constructors Association, Inc. (PCA) and the Confederation of Filipino Consulting Organizations, Inc. (COFILCO).

SECTION 7. Pre-Loan Negotiations

7.1 Prior to loan negotiations, particularly during project packaging and appraisal, the government implementing agency shall convene a Technical Working Group (TWG) to include at least one (1) representative from the private sector to provide inputs and ensure transparency. The Department of Finance (DOF) shall invite the representative(s) upon recommendation by the CIAP, in case of infrastructure projects, and upon recommendation by the private sector concerned in case of goods and consulting services.

7.2 The TWG that will provide inputs to the negotiating panel shall be composed of the implementing agency concerned, the Department of Finance (DOF), Department of Foreign Affairs (DFA), National Economic Development Authority (NEDA), Construction Industry Authority of the Philippines (CIAP) and the private sector representatives coming from the construction industry recommended by the CIAP and the umbrella organization of consultants.

SECTION 8. Loan Negotiation Parameters

8.1 Where special tax privileges are being requested to be granted to a particular class/nationality as part of the government's international commitments, the loan negotiating panel must require a written commitments from the appropriate authorities to evaluate all bids through an equalization process in order to arrive at a fair bid comparison.

8.2 To ensure the sustained promotion of Filipino talents in all fields, effect technology transfer, and adoption of measures that will help them become competitive, the loan agreement shall, whenever economically viable, provide for joint venture associations between Filipino and foreign firms.

8.3 The government negotiating panel shall ensure that the loan agreement, including exchanges of notes and other documents made integral parts thereof, do not contain provisions which discriminate against Filipinos and limit their participation in the project to be funded under the loan agreement.

SECTION 9. Amendments to the IRR

9.1 The INFRACOM may amend/revise the provisions of these IRR consistent with the intent and spirit of EO 278 as deemed necessary.

9.2 Amendments to these IRR shall become effective fifteen (15) days after its publication in the Official Gazette or in at least one (1) newspaper of general circulation, unless the INFRACOM specifies otherwise.

SECTION 10. Separability Clause

10.1 If any of the provision of this IRR is declared invalid or unconstitutional, the other provisions not affected thereby shall remain valid and subsisting.

SECTION 11. Effectivity

11.1 These IRR shall take effect fifteen (15) days after its publication in the Official Gazette or in a newspaper of general circulation.

11.2 These IRR shall apply prospectively to all locally-funded infrastructure projects which have not yet been advertised for bidding as of the date of effectivity of these IRR.

11.3 These IRR shall also apply prospectively to all consulting services and infrastructure projects proposed for foreign funding where loan negotiations have not yet been concluded as of the date of effectivity of these IRR.

DONE in the City of Pasig, this 20th day of April in the year of Our Lord, Two Thousand and Four.

FOR NEDA BOARD

COMMITTEE ON INFRASTRUCTURE:

(SGD.) ROMULO L. NERI

Director General, NEDA Chair, NEDA Board Committee on Infrastructure

CIAP GUIDELINES TO DETERMINE FILIPINO CAPABILITY IN UNDERTAKING SPECIFIC REQUIREMENTS FOR CONSULTING SERVICES AND/OR CONSTRUCTION OF INFRASTRUCTURE PROJECTS

SECTION 1. Purpose and General Coverage

1.1. These guidelines are being issued pursuant to Section 6.1. of the Implementing Rules and Regulations (IRR) of Executive Order No. 278, Series of 2004, entitled "Prescribing Guidelines for Project Loan Negotiations and Packaging of Government Foreign-Assisted Infrastructure Projects." for the purpose of providing the procedure and criteria to determine sufficiency of Filipino capability in undertaking specific requirements /consulting services and/or construction of infrastructure projects.

SECTION 2. Definitions of Terms

2.1. For the purpose of these guidelines, the following terms or words or phrases shall mean or be understood as follows:

a) Appropriate Authorities — refers to the head of the procuring entity defined in the IRR-A of RA 9184 as: (i) the head of the agency or body, or his duly authorized official, for national government agencies (NGAs) and the constitutional commissions or offices, and branches of government; (ii) the governing board or its duly authorized official, for Government-Owned and/or-Controlled Corporations (GOCCs), Government Financial Institutions (GFIs), and State Universities and Colleges (SUCs); or (iii) the local chief executive, for Local Government Units (LGUs). Provided, however, that in an agency, department, or office where the procurement is decentralized, the Head of each decentralized unit shall be considered as the head of the procuring entity subject to the limitations and authority delegated by the head of the agency, department, or office.

b) Project Appraisal Stage — is one of the stages in project preparation after the approval of the project by the NEDA Investment Coordination Committee (ICC) and prior to loan negotiations. It starts with the submission of the approved project to the International Financing Institutions (IFI) for appraisal and eventual loan financing. It is at this stage where the IFI reviews and confirms the feasibility and readiness of the project for implementation. This stage covers the discussions with the IFIs and the appropriate authorities on project description, its cost, financing to be made by the IFI and GOP; schedule, implementation arrangements and conditions to be made before final negotiations.

c) Project Preparation Phase — this phase is initiated once a project is identified. It is a process which involves the refinement of the elements described in the identification phase and includes all steps necessary to bring the project to the stage of appraisal, which consist of the feasibility study. Generally, project preparation begins with a description of project objectives, identification of principal issues, and the setting up of a timetable for the different phases of the development cycle. This phase covers the full range of technical, institutional, financial and economic issues relevant to achieving the project objectives.

d) Philippine Contractors Accreditation Board of PCAB — an implementing arm of the Construction Industry Authority of the Philippines (CIAP) tasked, among others, with the issuance, denial, suspension, or revocation of licenses to construction contractors.

e) Terms of Reference or TOR — refers to the document prepared and provided for purposes of bidding to consultants by the appropriate authorities containing a description of the project and the consulting services required, project objectives, scope of work to include the functions, duties, and responsibilities of the consultants, expected outputs, expected time frame, and approved budget of contract. The TOR should contain the name of the project executing agency, as well as the minimum consulting services requirements of the project specifying, among others, the areas of expertise, qualifications of key personnel and other relevant information to enable consultants to prepare fairly reasonable technical and financial proposals.

 

f) Track Record — refers to applicable work experiences of consultants and constructors for specific types of projects.

 For construction contracts, track record shall be based on the single largest project completed for a specific project type which is of similar technology to the contract to be bid, i.e., it has the same major categories of work, such as bridges and flyovers.

 For consulting services contracts, track record shall be based on the overall applicable experiences of the firm (and associates, in case of joint venture) and of the individual experiences of the principal and key staff including the times when employed by other consultants.

 Applicable experiences refer to consulting services contracts completed which are similar in nature and complexity to the contract to be bid.

g) Umbrella Organization of Consultants — an organization duly recognized by the Government Procurement Policy Board (GPPB) composed of the various organizations of consultants that may be engaged by the government and which shall accredit its members on the types of services and fields of professions where the members are technically and financially qualified to offer their services. The umbrella organization shall prepare and certify a list of fields and expertise in such fields available with the names of the accredited local consultants which shall be updated as often as necessary and disseminated to concerned agencies of the government.

SECTION 3. Determination of Filipino Capabilities for Consulting Services

3.1 During the project preparation phase or prior to application for funding and finalization of the Terms of Reference (TOR) for consulting services pursuant to Section 6.1 of the IRR of EO 278, the appropriate authorities shall refer to the current and updated database summary submitted to the Government Procurement Policy Board (GPPB) by the umbrella organization of consultants recognized by the GPPB, and posted in any appropriate information system for dissemination to the public reflecting the number of registered and/or accredited consultants per type of consulting service based on track record as defined under Section 2.1 f hereof, as well as to similar reports submitted to the GPPB by government agencies on the number of Filipino consultants engaged by them for specific consulting services, provided such agency reports have been furnished the umbrella organization of consultants recognized by the GPPB for possible comment. If the required type of consulting services is not in the current and updated database summary, the appropriate authority shall issue a written notice to the umbrella organization to confirm such a condition, together with the following information: IcADSE

a) Project description (location, type of project, duration, scope/coverage);

b) Specific consulting services required (e.g. pre-investment, including pre-planning/pre-design, detailed plan and/or design preparation, project and/ or construction management, project management, etc.);

c) Estimated cost of the project; and

d) Other pertinent information on the project requirements in terms of specific consulting services required.

3.2 The umbrella organization shall officially acknowledge in writing, the receipt of notice and information from the appropriate authority. Within fifteen (15) days from such acknowledgment, the umbrella organization shall issue a certification either confirming that it has no accredited consultants for the required consulting services, or indicating the number of its accredited consultants per type of consulting service based on track record in the required fields.

3.3 In the event that no certification is issued by the umbrella organization after the 15-day prescribed period, the appropriate authority shall proceed with the finalization of the TOR based on the latest posted list.

3.4 For consulting services funded through local sources where Filipino capability is determined by the appropriate authorities to be insufficient, Filipino consultants may hire or associate themselves with qualified foreign consultants, provided that the Filipino consultants are the lead consultants.

SECTION 4. Determination of Filipino Capabilities for the Construction of Infrastructure Projects

4.1 During the project appraisal stage and for the purpose of finalizing the contract packages for the construction of a project in accordance with Section 5 of the IRR of E.O. 278, the appropriate authorities shall secure and refer to the PCAB official report indicating the contract amounts of the largest projects undertaken by Filipino registered contractors per project type and size range, as well as the number of Filipino registered contractors per project type and size range attached to these Guidelines as Annex A.

4.2 The PCAB shall issue updates to Annex A quarterly or as often as necessary, which shall be made available to government agencies upon written request.

4.3 In cases where the required information is not available in the PCAB report, the appropriate authority shall request other government agencies 1 and the national constructors associations duly recognized by CIAP for track record information on specific domestic and overseas projects undertaken by Filipino registered contractors.

4.4 The appropriate authorities shall ensure that the track record requirements for each of the contract packages of a project shall not exceed the contract amounts of the largest projects undertaken as reflected in the PCAB report.

SECTION 5. Amendments of these Guidelines

5.1 The CIAP Board shall make the appropriate amendments to these Guidelines as it may deem necessary, subject to the approval of the NEDA-Committee on infrastructure (INFRACOM).

SECTION 6. Effectivity

These Guidelines shall take effect 15 days after posting of the approved Guidelines in the NEDA website.

Note:

APPROVED by NEDA-Board Committee on Infrastructure (INFRACOM) as per Resolution No. 1, series of 2006 dated December 6, 2006.

Footnotes

1. Department of Public Works and Highways (DPWH) for road, bridge, building irrigation, flood control projects, park, playground and recreational work; Department of Transportation and Communications (DOTC) for airport horizontal structures, building, industrial plant, communication facilities, equipment, and instrument installation; National Irrigation Administration (NIA) for irrigation, flood control, dam, reservoir, tunneling; National Power Corporation (NPC) for electrical works in power generating plant, dam, reservoir, tunneling, hydroelectric plants, thermal and geothermal generating plants; Philippine Ports Authority (PPA) for ports, harbor, offshore engineering; Metropolitan Waterworks Sewerage System (MWSS) for sewerage and sewage treatment/disposal plant, water treatment and system, dam reservoir, water supply and well drilling work; Local Waterworks Utilities Administration (LWUA) for sewerage and sewage treatment/disposal plant, water treatment and system, water supply; National Electrification Administration (NEA) and National Transmission Corporation (Transco) for transmission poles and towers, sub-station and related electrical work; Philippine National Railways (PNR) and Light Rail Transit Authority (LRTA) for railways.