Lgu JV

LGU Joint Ventures
Alberto C. Agra
Certified PPP SpecialistTM
Certified Regulation SpecialistTM
PPP Consultant and Practitioner
PPP Law and Local Government Law Professor, and Political Law Bar
Reviewer, Ateneo Law School
Adviser to DILG on PPP
President, Forensic Solutions
Columnist, PPP Lead, BusinessMirror
PhD Candidate, Leadership Studies major in Public Management,
Ateneo School of Government
Former Acting Secretary of Justice, Acting Solicitor General and
Government Corporate Counsel
WWW.ALBERTOCAGRA.COM
Which of these are possible?
1. LGUs entering into JVs
2. No NEDA approval regardless of project cost
3. Award in 3 months
4. No open bidding, only unsolicited proposals
5. LGU has greater share than what it contributes
6. Market with commercial space, pay parking,
transport terminal
7. No national funding support
8. Non-cash contribution of LGUs
9. Unincorporated JVs
10.JVs with Disposition/ Divestment
LGU JV Enabling Law
1991 Local Government Code (R.A. 7160) and IRR
Sec. 35. Linkages with People's and Non-governmental

Organizations. — Local government units may enter into
joint ventures and such other cooperative arrangements
with people's and non-governmental organizations (or
the private sector) to engage in the delivery of certain
basic services, capability-building and livelihood projects,
and to develop local enterprises designed to improve
productivity and income, diversity agriculture, spur rural
industrialization, promote ecological balance, and
enhance the economic and social well-being of the
people.
Affirmation
Agencies Policies/ Opinions
• Executive Order 78 (07.04.12) 1. No specific statute on PPP
• Department of Justice 2. No national guidelines on LGU
o Opinion No. 18 (04.03.12) JVs
• Department of Interior and 3. LGUs may:
Local Governments
o Opinion No. 11 (04.08.14)
a) enact own PPP Codes/ JV
o Opinion No. 10 (04.08.14) Ordinances
o Opinion No. 8 (03.06.14) b) adopt NEDA JV Guidelines,
o Opinion No. 47 (07.13.12) use BOT Law
• Office of the Executive c) refer to “Agra PPP Code”
Secretary 4. JV contracts must be respected
o Letter (10.25.11)
Concept
Contributions
Equity
Functions
Private Dividends
Income LGU
Sector Risks
Governance
Definition
A JV, a PPP modality, is a contractual arrangement
between the City and a JV PSP or a group of private
sector entities as co-venturers involving a
community or pooling of interests in the
performance of the service, function, business,
activity or components of the JV project, with each
party having a right to direct and govern the policy
in connection therewith, and with a view of sharing
income, dividends, revenues, profits, risks and
losses, subject to the JVA.
JV not BOT Law Variant
Inapplicable Provisions in
Differences BOT Law
o Community/ Pooling of o Only for Projects traditionally
Resources, not purely provided by LGU
private o Approval Processes
o Proportionality, not distinct o Debt-Equity Ratio
assumption of benefits and o Maximum Rate of Return
obligations
o Restrictions on Unsolicited
o LGU contributes, unlike BOT Proposals
Law where LGU not
o Priority Projects
contribute as a rule
o New Technology
o JV Company by Parties, not o Guarantee, Subsidy or Equity
just by Private Sector
My Own 10
1. Waste-to-Energy/
Renewable Energy
2. Water Supply
3. Septage/ Sewerage
4. Reclamation
5. Rehabilitation Centers
6. Monorail
7. Bridges
8. Mixed-Use Land Dev’t
9. Markets and Terminals
10. Smart Cities
Notes on JV Projects
1. Infrastructure, development, revenue-raising
or social service-related projects (which are
traditionally or not traditionally provided or
supplied by the LGU)
2. Projects listed in Development Plan
3. Single Use or Multiple Use
4. Public Good-Driven
5. Facilitative of Private Sector Initiative
Notes on JV Projects
6. Transfer of Ownership to Private Sector possible
7. Automatic grant of franchise or concession
8. Maximum of 50 years
9. Procurement
o By LGU using LGU funds – follow GPRA
o By Private Sector – Internal Rules or GPRA
10.Audit
o LGU funds and contributions – COA
o Private funds and contributions – Private Internal
Audit
LGU Contributions
Money and Capital
•Regular and Special Funds, IRA, RPT, SEF, Share in
National Wealth, Calamity Fund, Development Fund,
Loan Proceeds, Grants, Bonds, Securities, Subsidy,
Equity, Cost-Sharing, Viability Gap Funding, Cost
Avoidance or Savings (actual/ current or future/
monetized)
Non-Cash (Anything of Value)
•Services, Personnel, Intellectual Property, Usufruct, Land
(own or expropriated), Minimum Revenue Guarantee,
Right-of-Way, Goodwill, Franchise, Concession, Credit
Enhancement, Tax Incentives/ Holidays, Police Power
Sharing in Profits, Losses and Risks
PSP Share – 80%

Governance
Functions
Contributions
Profits
Losses
Risks More Gain
Less Risk
LGU Share – 20%

Proportionate Sharing:
Alternative Scheme on 20%-80%
Funding Franchise/ Construction Use of Land/

Governance
Rights WWW.ALBERTOCAGRA.COM
Improvements
Notes on LGU Contributions
1. Contributions/ Shareholdings determine
minimum share/ participation of LGU (% of
gross or net income or revenues)
2. General Rule: LGU minority share, Private
Sector majority share (can be 50-50)
3. Proportionate Sharing: dividends, profits,
income, revenues (unless by agreement, LGU
greater share – minimum or floor); and risks,
losses and obligations (unless by agreement,
lower risks – maximum or ceiling)
Notes on LGU Contributions
4. Sharing: (1) overall or across the board or (2)
specific assignment/ apportionment, provided,
joint governance
5. Private Sector cannot sell interest without
consent of LGU
6. Private Sector can advance share/ equity of LGU
(set-off from future revenues)
7. Subject to 3rd party valuation (GFI or Private
Sector)
8. No fixed debt to equity ratio (reasonableness)
9. Cost avoidance or substantial savings factored in
sharing. WWW.ALBERTOCAGRA.COM
JV Vehicle: 2 Options
Unincorporated
JV Company or
JV or
Corporate JV
Contractual JV
1 2
Considerations for Contractual JV
1. Audit: Audit by Private Audit Firm (not by
COA)
2. Procurement: Adherence to Internal Rules
(not GPRA)
3. Labor: Compliance with Labor Code (not Civil
Service Law)
4. Compensation Scheme: Based on Labor Code
(not Salary Standardization Law)
JV Company
SEC- Stock Nationality

Registered Corporation Requirements
LGU in Board Income

50-Year Term
(≥ Share) (≥ Share)
JV Agreement
1. Identification of the JV 8. JV Term
parties 9. Project specifications and
2. JV Name features
3. Principal place of 10. Management role of JV
business parties
4. JVA effectivity date 11. Statement that parties are
5. JV purpose/s and co-venturers
objective/s 12. Establishment of JV Fund
6. JV vehicle (incorporated 13. Amount and Contributions
or unincorporated) of each party
7. Total cost of JV activity
JV Agreement
14. Creation of special bank 20. Creation of Management
account Committee or designation
15. Provision on infusion of of General Manager
additional capital 21. Implementation
16. Percentages and sharing milestones
of profits and losses 22. Provision for the
17. Termination/ Liquidation acquisition of licenses
of JV 23. Type of insurance
18. Buy-out provisions 24. Confidentiality of trade
19. Transfer of ownership of information
assets 25. Ownership or retention of
patents
JV Agreement
26. Performance security 31. Performance and warranty
requirements bonds
27. Undivided pro-rata 32. Payout of funds
interests held by the co- 33. Minimum insurance
venturers on all assets of coverage
the JV 34. Acceptance tests and
28. Restriction regarding procedures
assignment of private 35. Dispute Settlement and
sector participant’s Alternative Dispute
undivided pro-rata Resolution
interests
36. Warranty against corruption
29. Cost recovery scheme
37. Compliance with law
30. Indemnification and
38. Government exit provision
liquidated damages WWW.ALBERTOCAGRA.COM
Notes on JV Agreements
1. JVA signed by Representatives of each party
2. Prior authorization (or ratification) from local
legislative council
3. JVA Beneficiary: Constituents
4. No award/ JVA if material deviations/
disadvantageous provisions/ prejudice other
bidders
5. Amendments possible (if fair and not violate
competition)
Notes on JV Agreements
6. Non-impairment of JVAs
7. JVA binding on Successor Administration
8. Judicial, Executive or Administrative
Confirmation of JVA
9. Exclusivity of JV Project
THANK YOU.

Lgu JV

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LGU Joint Ventures

Sec. 35. Linkages with People's and Non-governmental

PSP Share – 80%

LGU Share – 20%

Funding Franchise/ Construction Use of Land/

SEC- Stock Nationality

LGU in Board Income

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