Like any other contest, the selection of the winning private-sector proponent (PSP) in a public-private partnership (PPP) competitive process is based on predetermined parameters. “Who the winner is” for a particular project depends on the applicable modality and relevant law. There is no single formula to determine who wins.
While there is discretion to determine the applicable parameter, there should be no discretion or subjectivity in the application of said parameter when the process has been set. A scan of PPP laws and regulations reveals that there are seven possible economic parameters. The choices and underlying questions are:
(1) Highest payment to government; What is in it for government? For the Daang Hari-Slex Link Road and the Mactan-Cebu International Airport Project, the PSPs that offered the highest upfront payments to the government were adjudged winners. Similarly, the PSPs that offered the highest concession fee secured the contracts for power generation and transmission projects.
(2) Lowest government subsidy; What is the cost to government? The PSPs that committed to undertake the Naia Expressway, LRT Line 1 Extension and Cavite-Laguna Expressway projects for the lowest cash support from the government clinched the awards. For the School Infrastructure Projects, the lowest amount or rent that will be paid by the government to the PSP was applied.
(3) Lowest tariff by end-user; How much will the users pay? The lowest bulk-water charge was the parameter for the Bulacan Bulk Water Supply Project. About 20 years ago, the lowest tariff per cubic meter was used for the choice of the water concessionaires in Metro Manila.
For the Automatic Fare Collection System, the lowest charge per transaction was an
alternative parameter.
(4) Highest share in revenues; How much is the government’s share? For the Cebu-Cordova Bridge, Valenzuela City Center and Iloilo Ferry Terminal joint-venture (JV) projects, the highest share in the revenues, over and above the contribution of the host local governments, was the basis for the awards. For reclamation projects under a JV setup, the winning coventurer shall be the one who can allot a bigger share of the reclaimed land to the government.
For the lease contracts of the UP Town Center, Batangas Terminal and Passi City CityMall, the highest guaranteed lease payment was the
chosen indicator.
(5) Highest purchase price; How much is the government willing to sell? For the disposition of a government asset like the property of the Food Terminal Inc., the highest purchase price was the requirement.
(6) Highest rated bid; Who can provide the “best” service? For management and service contracts using public funds, a scoring system based on highest rated bid must be utilized.
(7) Lowest calculated bid/ price; Who is the “cheapest?” For procurement of infrastructure projects where government funds will be disbursed, the PSP that promises the lowest calculated bid or price compared to the Approved Budget for the Contract should be the winner.
The bid documents must spell out the justification and specify which of the seven parameters will be used. The determination of who should get the award is not a one-size-fits-all or cut-and-paste approach. This process involves study and debate. Were you part of this?