PPA revises policies for awarding of port terminal contracts

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  • The Philippine Ports Authority has revised its policies for awarding port terminal management contracts
  • Changes include adding eligibility requirements for Tier 1 bidders and adds the calculation of minimum concession fees for managing Tier 1 ports
  • These modifications come ahead of PPA’s bidding for the Iloilo Commercial Port Complex, its first Tier 1 port with a 25-year full concession
  • Administrative Orders 08-2023 and 09-2023 are set to take effect on November 10 to implement these changes

The Philippine Ports Authority (PPA) has revised rules for awarding contracts to manage port terminals, adding more requirements for bidders and the calculation of minimum concession fees for Tier 1 ports.

The changes are contained in Administrative Orders, AO 08-2023 and AO 09-2023 effective on November 10.

The new rules will come into play as PPA plans to bid out its first Tier 1 port, the Iloilo Commercial Port Complex (ICPC). Tier 1 involves a full concession of 25 years.

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Current guidelines for awarding port terminal management contracts are contained in AO 03-2016 and AO 12-2018, which encourage private companies to improve port services.

Mark Jon Palomar, who manages the PPA Commercial Services Department, said bidding for ICPC will start after some revisions to the bidding terms. PPA unveiled development plans for ICPC in June.

AO 08-2023 specifies that Tier 1 contractors must repair and maintain port facilities under the contract, as well as maintenance of PPA-owned and built equipment and infrastructure. It adds two new requirements for Tier 1 bidders: they must have an experience managing ports similar in size or greater than the port subject of the bidding, with a minimum of 10 years’ experience handling foreign containerized and non-containerized cargoes; and experience in undertaking similar rehabilitation and construction works that it proposes to undertake as part of its port development plan.

In addition, AO 08-2023 expands the infrastructure investment and maintenance program (IIMP) to include rehabilitation and construction activities during the first two years of operation and an expansion plan in the event cargo demand breaches the port’s operating capacity for Tier 1.

The IIMP is part of the minimum project specification standards prescribed by PPA that should be part of the Port Development/Business Plan that the bidder should submit as part of its technical and financial bid.

For the performance security, the amount should now be equivalent to the total amount of concession fee of the year for which the performance security is posted, regardless of the form of performance security. Previously under AO 12-2018, the amount of performance security ranges from 5% for cash, cashier’s check or manager’s check; 10% for bank draft/guarantee or irrevocable letter of credit; and 30% for surety bond.

AO 09-2023, on the other hand, changes the calculation of the minimum concession fee. It uses the average revenue from the last three years of the port subject to bidding, instead of the last five years.

AO 09-2023 also adds a new section on determining the base figure for the computation of minimum concession fee for ports classified under Tier 1, which are to be developed exclusively and purely to cater for foreign vessel and cargo.

For the first five years of the concession period, a 20% share of annual gross revenues must be remitted by the concessionaire. From the sixth to the tenth year, a fixed annual concession fee will be determined by PPA. Starting in the 11th year, the fee will increase based on the Consumer Price Index adjustment factor. If the port’s traffic exceeds certain thresholds, a 20% variable fee must be paid.

While AO 08-2023 and AO 09-2023 introduce these adjustments, other rules in AO 03-2016 and AO 12-2018 that remain unaffected by the changes continue to be in force. Notably, in May, PPA also issued AO 03-2023, which brought further modifications to these guidelines.  – Roumina Pablo