EO 278

Executive Order No. 278

Prescribing Guidelines for Project Loan Negotiations and Packaging of Government Foreign-Assisted Infrastructure Projects

Introduction

  • Issued by: GLORIA MACAPAGAL-ARROYO, President of the Philippines.

  • Objectives: The order aims to significantly improve the participation and competitiveness of Filipino constructors and consultants in government-related infrastructure projects. It seeks to enhance access to better market opportunities, strengthen local capabilities, and foster national pride in local infrastructure development.

Legal Framework

  • Basis: The executive order is grounded in several foundational laws including the 1987 Philippine Constitution, Commonwealth Act Nos. 138 & 541, the Official Development Assistance (ODA) Act of 1996, and the Government Procurement Act (RA No. 9184).

  • Preference for Filipinos: The legal framework emphasizes a clear preference for qualified Filipino constructors and consultants, ensuring that they are prioritized in terms of rights, privileges, and implementation of governmental projects. This is intended to bolster domestic employment and the economy.

Concerns Raised

  • Filipino constructors and consultants experience significant barriers when bidding for foreign-assisted infrastructure projects due to:

    • Project contracts being excessively large, thus exceeding the financial capabilities of local bidders.

    • Criteria and requirements often surpassing the available expertise and experience of local firms, leading to a disparity in competitive bidding.

General Policy on Consultancy Services (Section 1)

  • Funding Priorities: There is a clear mandate to prioritize consultancy services for infrastructure projects by utilizing local resources and expertise effectively.

  • Foreign Assistance: Such services may only be supplemented by foreign assistance if local funds prove to be insufficient.

  • Types of Work Included:

    • Conducting pre-investment studies, including feasibility studies to assess viability.

    • Elaborating detailed engineering designs that meet project specifications.

    • Managing and supervising projects to ensure they adhere to governmental standards and timelines.

  • Collaborative Efforts: Filipino consultants are permitted to engage foreign consultants under specific conditions, notably:

    • Foreign consultants must enter joint ventures with a qualified Filipino lead consultant to ensure local expertise is not overshadowed and that capacity building takes place.

Packaging of Government Infrastructure Projects (Section 2)

  • Basic Principles:

    • Large infrastructure projects must be strategically divided into manageable components to maintain technical integrity while ensuring efficiency.

    • Packaging must consider the technical and financial capabilities of Filipino contractors, both in domestic and international contexts.

  • Experience Requirements for Bidders: For firms to be pre-qualified, they must have successfully completed a project valued at no less than 50% of the bid contract. This aims to create a minimum experience threshold that validates the capabilities of bidders.

  • Clustering Projects: There is allowance for clustering small and medium-sized projects as long as such groupings align with the existing capabilities of Filipino contractors.

  • Avoidance of Legal Evasion: The order strictly prohibits packaging initiatives that intentionally split contracts to evade legal obligations set forth in existing regulations.

Pre-Loan Negotiations (Section 3)

  • Transparency Initiatives:

    • A technical working group comprising private sector representatives is mandated to ensure transparency and fairness during the pre-loan negotiation phases.

    • The Department of Finance (DOF) is tasked with inviting representatives based on recommendations from pertinent organizations to foster inclusivity.

Project Preparation and Loan Negotiation Parameters (Section 4)

  • Key Provisions:

    • Loan agreements must embrace special tax privileges in bid offers, aligning such agreements with the government's international commitments.

    • Encouragement of joint ventures between Filipino firms and foreign companies is promoted when economically viable, ensuring that such arrangements facilitate necessary technology transfer and enhance competitiveness in the industry.

    • Loan agreements should not contain provisions that discriminate against Filipino participation in projects funded by international loans.

Implementing Rules and Regulations (Section 5)

  • NEDA Infrastructure Committee: The National Economic and Development Authority (NEDA) Infrastructure Committee (INFRACOM) is tasked with the responsibility of promulgating Implementing Rules and Regulations (IRR) within 60 days following the issuance of this executive order to ensure effective implementation and compliance.

Repealing Clause (Section 6)

  • The order stipulates that all previous executive issuances, orders, and regulations that are inconsistent with this directive are hereby modified or repealed to prevent conflicting regulations.

Separability Clause (Section 7)

  • Should any provision of this executive order be found invalid or unconstitutional, all other provisions not affected by such a ruling shall remain valid and enforceable, ensuring the integrity of the complete order.

Effectivity (Section 8)

  • Implementation Timeline: The executive order will take effect 15 days following its publication in either the Official Gazette or a widely circulated newspaper to ensure public awareness and compliance.

Date Issued

  • Date: February 2, 2004

  • Signatories:

    • GLORIA MACAPAGAL-ARROYO, President

    • ALBERTO G. ROMULO, Executive Secretary