PPA amends policy on awarding of port terminal contracts

• The Philippine Ports Authority amended its policies on the awarding of port terminal management contracts

• PPA Administrative Order No. 03-2023 provides greater detail on “clustering” or granting to only one terminal operator the terminal management contract for several ports

• The order reduces the investment categories to just three tiers from six, and included concession periods for every tier

• A minimum escalation of 5% per year is the proposed concession fee under AO 03-2023

• The order takes effect on June 3

The Philippine Ports Authority (PPA) has amended its policies on awarding of port terminal management contracts.

The new rule provides greater detail on “clustering” or granting to only one terminal operator the terminal management contract for several ports.

PPA Administrative Order (AO) No. 03-2023 dated May 15 amends certain provisions of AO 03-2016 and AO 12-2018. It takes effect on June 3.

AO 03-2016 embodies PPA’s Port Terminal Management Regulatory Framework (PTMRF), PPA’s new guidelines in the awarding of port terminal management contracts issued in 2016, while AO 12-2018 provides guidelines for selecting and awarding contracts under PTMRF. The framework seeks to promote private sector participation in port operations in order to provide higher quality service.

AO 03-2023 amends AO 03-2016, now calling the “bundling” of port terminal management at several ports as “clustering.”

Under AO 03-2023, the clustering of port terminal management at several ports maybe included to ensure commercial viability of the contractor. The clustering of ports for bidding shall be within the same port management office (PMO) and take into consideration the complementary ports/terminal sub-ports, as well as volume of vessels, cargoes, and passengers.

PPA general manager Jay Daniel Santiago earlier said they are looking at clustering of ports to stabilize the market of terminals in a particular area.

READ: PPA plans to bid out management contracts for port clusters

Santiago said with only one port operator for several ports in a particular area, management of vessel traffic will be “flexible” because the operator can then divert vessels to one of the other nearby ports it operates if there is vessel queuing.

He noted though that PPA is not pushing anti-competitive behavior with clustering. “We’re just looking basically to make sure that the development is consistent and uniform for all,” he said.

AO 03-2023 also reduced the investment categories to just three tiers from six tiers under AO 03-2016, and has included the concession periods for every tier.

The three tiers are the following:

• Tier 1 – full concession for 25 years

• Tier 2 – contractor handles physical land infrastructure, above-ground fixtures and semi-fixtures, and mobile-handling equipment while PPA handles physical undersea infrastructure, 20 years concession period

• Tier 3 – contactor handles above-ground fixtures and mobile-handling equipment, 15 years concession period

On the bidding, AO 03-2023 added that the master plan study for each specific port, which is a requirement prior to the conduct of bidding, should include minimum standards for the management and operation of passenger terminal building, whenever possible.

Previously under AO 03-2016, the master plan study only determines the requirements for cargo-handling equipment, port facilities, and services to achieve minimum performance and productivity targets.

AO 03-2023 also required that the result of the master plan study be reflected in the Terms of Reference (TOR) for the bidding of port terminal management contract.

Moreover, PPA should have tools to monitor compliance with minimum performance and productivity targets for both concession agreements and management contracts. If ports are servicing similar types of vessels and cargoes, a standard performance and productivity targets, as well as equipment requirement, should be observed.

For the conduct of bidding for clustered ports, the PMO should also conduct a master plan for the port terminals which will be included in the cluster, considering the minimum performance and productivity targets as well as equipment requirement, for each port of the cluster. The result of the study should also be reflected in the TOR.

In terms of financial obligations and liabilities under AO 03-206, the contractor should remit to PPA a periodic concession and/or management fee and variable fee in consideration of the rights and privileges granted to the contractor. The amount of concession and/or management fee shall be increased periodically, subject to a pre-established formula to be determined by PPA. AO 03-2023 now adds that any yearly increase in the concession and/or management fee should not be less than 5% increase per year.

To reflect the same, AO 03-2023 amends AO 12-2018, and states that the proposed concession fee for the management operations at the port subject of the bidding process should have a minimum escalation of 5% per year.

On the technical eligibility of prospective bidders, AO 03-2023 amends AO 12-2018 and adds a new requirement of at least two years’ experience in providing port terminal management services/cargo-handling services, or other related port services, as indicated in completed and ongoing contracts.

All other provisions of AO 03-2016 and AO 12-2018 not affected by AO 03-2023 will remain in force.

PPA since 2020 has been bidding out port terminal management contracts under PTMRF. PPA has so far has bid out 19 ports. Of these, one port was under Tier 2, which was Davao, while 18 ports under Tier 3 and these include Puerto Princesa, Ormoc, Tabaco, Legazpi, Zamboanga, Iligan, Ozamiz, Calapan, Tacloban, Nasipit, Matnog, Fort San Pedro, Pulupandan, Surigao, Masao, Tagbilaran, Pagadian, and Pasig River ports.

Santiago earlier said they hope to bid out within the year the port terminal management contracts for the ports of Iloilo and General Santos, which will be under Tier 2. A separate notice, however, states that PPA will be rolling-out the development plan for Port of Iloilo (Iloilo Commercial Port Complex) and its corresponding tariff for Tier 1 ports.

Santiago said they are looking at clustering the ports of Roxas, Mansalay, and Bulalacao in Oriental Mindoro, and three or four ports in Bacolod. – Roumina Pablo