The Investment Coordination Committee (ICC) has formally issued its Guidelines on the Valuation and Compensation of the Usufruct of Assets, Properties, and/or Rights Contributed for National Public-Private Partnership (PPP) Projects. Approved by the ICC on April 15, 2025, these guidelines were formalized in a memorandum dated May 5, 2025, and signed by ICC Chair Ralph G. Recto, Secretary of Finance, and ICC Co-Chair Arsenio M. Balisacan, PhD, Secretary of Economy, Planning, and Development. The issuance is required under Section 140 of the Implementing Rules and Regulations (IRR) of the PPP Code (Republic Act No. 11966), which mandates that any assets, properties, and/or rights contributed by an Implementing Agency (IA) to a National PPP Project must be valued through a fair valuation determined by a Third-party Appraiser.
These guidelines apply to National PPP Projects where a third-party valuation report is necessary for processing the project for approval by authorities such as the Economy and Development Council (ED Council), the ICC, or the head of the implementing department or agency. The ICC’s objective is to provide specific guidance on the valuation and compensation of the usufruct of assets, properties, and/or rights contributed by the government. Usufruct is defined as the right to enjoy the property of another while preserving its form and substance, unless otherwise provided by law or the title constituting it. The contribution must be valued according to accepted standard methodologies and practices commensurate to the nature of the assets.
The purpose of this valuation varies by project type: for Unsolicited Proposals, it establishes the appropriate compensation the government must receive, which can in no way be lower than the value of the usufruct and ROW costs contributed. For solicited and unsolicited Joint Ventures (JVs), the valuation ensures that the government’s equity contribution (including assets and rights) does not exceed fifty percent (50%) of the Project Cost in a contractual JV or fifty percent (50%) of the outstanding capital stock of a JV company. Furthermore, if the investment recovery scheme involves granting a portion of reclaimed land, the valuation establishes that such a scheme is subject to fair valuation.
For private proponents submitting Unsolicited Proposals, the third-party valuation report submitted to the PPP Center must cover the usufruct of all assets, properties, and/or rights involved in the proposed scope. This coverage extends to ongoing construction or improvements, where the usufruct value must be based on the projected completion percentage at the target transfer date, and also includes existing assets in the project site that may be demolished or decommissioned. Importantly, cash contributions of contracting parties in unsolicited JVs are not required to be valued. The third-party valuation report must indicate the Valuation Approach and Valuation Method, presenting a fair range of values (low, base, and high case), and must justify why the chosen approach is the most relevant and appropriate. The third-party appraiser must be included in the list of Accredited Asset Valuers of the Securities and Exchange Commission (SEC) or associated with a recognized accrediting body. The appraiser must also declare that they have no present or prospective interest in the assets, that their fees are not contingent upon the value reported, and that they have avoided conflicts of interest, pursuant to the International Valuation Standards (IVS).
During negotiations between the Implementing Agency (IA) and the Private Proponent, the parties must agree on a Final Value for the usufruct that is within the fair range of values, and which shall in no case be lower than the low case of the fair range indicated in the third-party valuation report. The compensation paid to the government shall also be no lower than the agreed-upon Final Value. The parties must negotiate parameters concerning compensation, such as the timing of payment (upfront, later, or in installments). If payment is not made upfront, the interest rate or discount rate used cannot be below the prevailing risk-free rate. Furthermore, the parties must ensure that taxes, handback values of government assets, and cashflows incidental to the PPP Project do not form part of the compensation for the contributed usufruct. If the parties fail to agree on the Final Value or the appropriate compensation within the negotiation period, the IA must declare a failure of negotiation. The valuation report submitted for final approval must not be older than one (1) year from the date of submission to the appropriate Approving Body. The results of the valuation are final and cannot be altered by the Approving Body, serving only as a decision-making parameter that is not binding on the government.
For National PPP Projects currently undergoing completeness check, detailed evaluation, negotiation, or approval upon the effectiveness of the Circular, the prior rules will apply; however, the new Guidelines will apply once the project proceeds to its next stage of processing. National implementing agencies preparing for national solicited JVs must also observe many of the same requirements concerning the coverage, quality, and age of the third-party valuation report as outlined for unsolicited proposals.
