Philippines Public-Private Partnership:

A Case Study on the LRT Line 1 System and Its Ongoing Extension

Presented to
Prof. Eric Daniel de Torres
University of the East Manila
College of Arts and Sciences

In Partial Fulfillment
Of the Requirements in APS 313
Fundamental of Public Administration

Presented by:
Emaas, Genilyn G.
Parra, Eunice Anne B.
Raeses, Ronald A.

Contents
Executive Summary

ii

Introduction

PPP Defined

Origin and Evolution of PPP

Origin and Evolution of PPP in Europe

Origin and Evolution of PPP in Poland

Origin and Evolution of PPP in Philippines

PPPs Today in Philippines

PPP: New Public Management Analysis

Advantages of PPP

PPP Processes

Topic Introduction: LRT Line 1 System

10

Construction

10

Operation

11

SWOT Analysis: LRT Line 1 System

12

Strength

12

Weakness

13

Opportunity

13

Threat

14

Conclusion

16

Recommendation

17

References

23

Executive Summary
This case study was able to define Public-Private Partnership as a contractual agreement between
the Government and a private firm targeted towards financing, designing, implementing and
operating infrastructure facilities and services that were traditionally provided by the public
sector. It can be found also in this study that PPP addresses the limited funding resources for local
infrastructure or development projects of the public sector thereby allowing the allocation of
public funds for other local priorities.
Also, this study was able to trace back the origin and evolution of PPP in Europe, Poland, and the
main site of this study- Philippines. Similarly, this study was able to find out the advantages of
PPP as well as the processes that every PPP Project has to take.
In the midst of the study, the PPP Project-LRT Line 1 System was introduced which will serve as
the main scope of the strength analysis. As the discussion progress, LRT Line 1 Cavite Extension
was also introduced to provide an analysis as for its weakness, opportunity, and threat.
To end, conclusion and recommendation were added.

I. Introduction
3

PPP Defined
Public-Private Partnership (PPP) can be broadly defined as a contractual agreement between the
Government and a private firm targeted towards financing, designing, implementing and
operating infrastructure facilities and services that were traditionally provided by the public
sector. It embodies optimal risk allocation between the parties minimizing cost while
realizing project developmental objectives. Thus, the project is to be structured in such a way
that the private sector gets a reasonable rate of return on its investment.
PPP offers monetary and non-monetary advantages for the public sector. It addresses the limited
funding resources for local infrastructure or development projects of the public sector thereby
allowing the allocation of public funds for other local priorities. It is a mechanism to distribute
project risks to both public and private sector. PPP is geared for both sectors to gain improved
efficiency and project implementation processes in delivering services to the public. Most
importantly, PPP emphasizes Value for Money focusing on reduced costs, better risk
allocation, faster implementation, improved services and possible generation of additional
revenue.|1
Origin and Evolution of PPP
Since a long time, PPP has been a form of public tasks implementation widely used in the
countries of Western Europe. The inter-sectoral cooperation was developing in the Old World,
as early as the early modern period. In recent years, PPP has become increasingly popular in
Poland. The legal framework for such cooperation in Europe and Poland has continued to
evolve over the past several years. The aim of all those entities involved in institutional
development and practical implementation of PPP was to make PPP equivalent to the
traditional methods of financing and implementation of public tasks.|2

1 What is PPP.(n.d.).Public-Private Partnership Center. PPP.com.ph. Retrieved

September 10, 2015 from http://ppp.gov.ph/?page_id=27574
2 PPP-definition,origin,evolution. (n.d.para. 2).Sports Infrastructure Management
Board of Krakow. Ppp4Krakow.net. Retrieved September 10, 2015 from
http://ppp4krakow.net/About_PPP/Definition,_origin_and_evolution/
4

Origin and Development of PPP in Europe

The PPP sources might be found in the concession contracts. The history researchers show
that as early as 1438, the French nobleman Luis de Bernam was granted a river concession to
charge the fees for goods transported on the Rhine. Another well-known literature example of
the concession of this type was the one that had been granted in 1792 in France to the brothers
Perrier for water distribution in Paris. Soon the French legal practice formed the so-called
public works concession (concession de travaux publics). The broad participation of private
capital in public investments has found widespread use in the period since the turn of the
seventeenth and eighteenth centuries to the end of the nineteenth century, when construction
of infrastructure facilities (water channels, roads, railways) in Europe and later in America,
China and Japan was funded by private sources under concession contracts.
After the period of expanded government intervention in the infrastructure sector during the
period from the late nineteenth century to the 1970s of the twentieth century
the transformation of the infrastructure into market oriented economy became very popular in
the 1980's and 1990's. In 1992 the UK began to implement Private Finance Initiative (PFI)
a comprehensive program of the government, which was to cover the state-owned enterprises.
Under PFI, the public sector became a purchaser of services provided by an entrepreneur,
while the latter provided the necessary fixed assets for their implementation. One
of the leading models of the infrastructure management and development under PFI have
become contracts that were involving the transfer to a private party of the obligation to carry
out the infrastructure project or the provision of public services together with the simultaneous
transfer of specific risk onto that entrepreneur. In return, the investor would obtain a
temporary (usually 15-30 years) right to use the facility or service, with the possibility of
charging fees to external users or simultaneous payments from the budget of a public entity.
The largest projects carried out under this scheme were the Channel Tunnel, the Second
Severn Crossing and the Channel Tunnel Rail Link. Under the PFI scheme the task in the
areas such as roads, subways, prisons, national defense, health care, housing for the
administration and computerization are successfully implemented. In France, a popular model
for establishing cooperation between public entities and private partners has, in the 1990's,
become the delegation de service public institution. This model is characterized by raising
revenues from fees of users (possible to be achieved, after all, payments charged to a public
5

body) of the infrastructure managed and maintained by the concessionaire (depending on the
model of law - also construction infrastructure). Concessions and PPP integrated gradually
into the legal systems of other European Union countries. The most of the duplicated ones
were the British and the French models. The contracts of this type for construction and
infrastructure management in countries such as Germany, Italy, Spain, Portugal, the
Netherlands, Scandinavian countries, Ireland, Greece, Czech Republic, Bulgaria, Romania,
Hungary reached hundreds of millions of Euros, but often also concern small, local projects.|3
Origin and Development of PPP in Poland
The origin of public-private cooperation in the infrastructure sector within the territory of
Poland dates back to the times of partitions of Poland. The most important railway lines were
built under the concessions. After regaining independence, the Polish authorities tried to draw
local government and private capital to the development of local lines. They based on the Law
of 14.10.1921 on awarding concessions to private railways, defining relations of the State
Treasury with the future owners. Another opportunity of intersectoral realization of the public
projects appeared in Poland after 1989. The first piece of legislation that regulated the legal
relations of that type was the Act of 27 October 1994 on toll motorways and National Road
Fund, under which A1, A2 and A4 toll motorways are built and operated, or just operated: In
2004, under the Public Procurement Law of 29 January 2004 the institution of public works
concessions was introduced to the Polish legal system. The first Polish law piece of legislation
fully dedicated to PPP institution was the Act of 28 July 2005 on public-private partnership.
The Polish legislator's intention was that the Act would regulate the PPP agreements between
the public and private sectors and set an appropriate standard of functioning of such
cooperation for the effective implementation of public tasks. Unfortunately, over more than
three years of application of the Act on PPP of 28 July 2005 no public-private partnership
agreement was concluded under provisions thereof.

3The origin and development of PPP in Europe.(n.d). Sports Infrastructure

Management Board of Krakow.Ppp4Krakow.net. Retrieved September 10, 2015 from
http://ppp4krakow.net/About_PPP/Definition,_origin_and_evolution/
6

Therefore, in effect of legislative works undertaken, by the end of February 2009, the Law of
19 December 2008 on public-private partnership, and the Act of 9 January 2009 on
concessions for public works or services entered into force, whose purpose was to create
a transparent, flexible and effective legal framework of the intersectoral cooperation.

During 3 years of application of the new PPP legal framework about 30 PPP contracts and
concessions were implemented.|4

Origin and Development of PPP in Philippines

In 1986, right after the martial law regime of the Marcos Administration, then President
Corazon C. Aquino, government divested itself from non-essential business-related assets
acquired during the Marcos era. It also enacted Presidential Proclamation No. 50 in
December 1986, which created the Asset PrivatizationTrust (APT) and the Committee on
Privatization (COP) to handle this move.

The following year, Congress passed the 1987 Philippine Constitution. It defined the role of
the private sector as a valuable partner in achieving the development goals of the country.
Section 20, Article II specifically states that, the State recognizes the indispensable role of
the private sector as the main engine of national growth.

In 1990, the passage of Republic Act 6957 entitled, An Act Authorizing the Financing,
Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and
for other Purposes, also known as the Build-Operate-Transfer (BOT) Law brought the
participation of the private sector into the frontline of development efforts.
4The origin and development of PPP in Poland.(n.d). Sports Infrastructure Management Board
of Krakow.Ppp4Krakow.net. Retrieved September 10, 2015 from
http://ppp4krakow.net/About_PPP/Definition,_origin_and_evolution/

In 1993, then President Fidel Valdez Ramos amended the BOT law to what is currently known
as Republic Act 7718 or the Amended BOT Law and its Implementing Rules and Regulations.

President Ramos then issued Memorandum Order No166 directing the Coordinating Council
of the Philippine Assistance Center (CCPAP) of the Office of the President to establish a BOT
Center with the CCPAP Chairman as BOT Action Officer.

During the administration of President Joseph E.Estrada, the CCPAP BOTC enter was
reorganized into the Coordinating Council for Private Sector Participation (CCPSP) by virtue
of Administrative Order 67. This expanded the coverage of the BOT Program into other forms
of private sector participation. It was as also during the Estrada administration that the CCPSP
formalized its provision of technical assistance support through technical assistance
agreements (TAAs) with IAs/LGUs.
During her presidency Gloria Macapagal-Arroyo signed Executive Order 144. This was in
2002. It converted the CCPSP into the BOT Center and lodged it under the Department of
Trade and Industrys (DTI) Industry and Investment Group (IIG). Its task was to promote and
market not just BOT projects, but transform Public Private Partnerships (PPP) as the
cornerstone of the national infrastructure development plan.|5

PPPs Today in Philippines

Under the Presidency of Benigno Simeon C. Aquino III, public-private partnership was tagged
as a powerful machinery to help push forward the countrys development. Under his

5 Historical Background: The Root of PPPs in the Philippines. (n.d.).Public-Private Partnership

Center. PPP.gov.ph. Retrieved September 10, 2015 from http://ppp.gov.ph/?page_id=44

administration, private sector participation in the countrys economic agenda is clearly defined
in his social contract with the Filipino people.

On September 9, 2010, President Aquino signed Executive Order No. 8 entitled

Reorganizing and Renaming the Build-Operate-and-Transfer (BOT) Center to the PublicPrivate Partnership (PPP) Center of the Philippines and Transferring its Attachment from the
Department of Trade and Industry to the National Economic and Development Authority and
for Other Purposes.

The Public-Private Partnership Center of the Philippines is the sole body tasked to facilitate
and coordinate the countrys PPP program. Part of its task is to manage a revolving fund
called the Project Development and Monitoring Facility. At the same time, the PPP Center
provides Implementing Agencies (IAs) technical advisory support in project development and
management and monitors the implementation of PPP priority projects. Also part of its task is
to formulate policy guidelines for PPP transactions, and develop and manage a central
database of all PPP programs and projects.
On May 2013, Executive order No. 136 amended certain sections of the BOT law, including
the creation of a PPP Governing Board, chaired by the Socioeconomic Planning Secretary,
with the Finance Secretary as co-Chair. Included as members of the Board are the Secretaries
of Budget and Management, Justice, Trade and Industry, the Executive Secretary and the
Private Sector co-chair of the National Competitiveness Council
The PPP Governing is the overall policy-making body for all PPP-related matters, including
the Project Development and Monitoring Facility. It shall be responsible for setting the
strategic direction of the Philippine PPP Program while creating an enabling policy and
institutional environment for PPPs in the Philippines.|6

6PPPs Today.(n.d.).Public-Private Partnership Center. PPP.gov.ph. Retrieved

September 10, 2015 from http://ppp.gov.ph/?page_id=44
9

PPP: New Public Management Analysis

Through its time frame the Public Administration began to develop and continue to grow.
Administrators pondered new strategies and methodologies where the so-called New Public
Management emerged. NPM offers all-purpose key to better provision of public services.
More specifically, in the contemporary global context, NPM is characterized by the eclipse of
state-centered approach. The public service has been transformed in terms of its slope, role,
structure and orientation in order to provide successful public services. Moreover, one of the
major tenets of NPM is market-led restructuring of the public sector. As a result, NPM
portrayed the contemporary public sector reforms as a paradigmatic shift to a newly emerging
paradigm. It is also characterized by managerial freedom-market-driven competition, business
like service delivery, result-based performance, client orientation, pro-market culture and
adaptation of private sectors style of management. Meanwhile, Public-Private Partnership
program under Aquinos administration and also the previous administration realized that it is
a mechanism is to expand the capacity of public sector through the utilization of the resources
coming from the private sector to further enhance the delivery of public services.

Advantages of PPP
In general, governments tap Public-Private Partnership (PPP) for the following reasons:
(i)

PPPs encourage the injection of private sector capital.

National Budget and official development of assistance are limited and are subject to
government prioritization. Private sector funding, on the other hand, is readily
available. It may be tapped to augment ODA funds and the government budget to
implement critical government projects.

(ii)

PPPs make projects affordable.

Government spending will be less if the project is undertaken as a PPP, since the
private sector funds their share of the project (including operation and maintenance)
during the duration of the concession. PPP projects consider the whole of life costing
approach (whole lifecycle costing) which ultimately lowers capital and operating
costs.

10

All PPP projects undergo a competitive, transparent bidding. PPP project proponents
usually provide the most cost-effective capital goods necessary for the project.
(iii)

PPPs deliver value for money.

Value for money (VfM) is achieved when the government obtains the maximum
benefit from the goods and services it both acquires and provides. It is the best
available outcome after taking into account all the benefits, costs, and risks over the
entire project life, which may not necessarily be the lowest cost or price.

(iv)

In PPPs, each risk is allocated to the party who can best manage or absorb it.
In PPPs, risks are assumed by the party that is best able to manage and assume the
consequences of the risk involved.
PPPs enable the government to take on fewer risks due to shared risk allocation.
Generally, the private sector takes on the projects life cycle cost risk, while the
government assumes site risks, legislative and government policy risks, among others.

(v)

PPPs force the public sector to focus on outputs and benefits from the start.
Project preparation activities are more rigorous in public-private partnerships. This
ensures that the project is highly bankable and can stand public scrutiny. Better project
preparation and execution will result in adherence to project design within the agreed
timelines.
In PPPs, the government focuses on providing quality infrastructure and services by
setting each projects minimum performance standards and specifications (MPSS).

(vi)

With PPPs, the quality of service has to be maintained for the entire duration
of the cooperation period.
In PPPs, project execution will be more rigorous as project ownership belongs to
the project proponents. The public sector only pays when services are delivered
satisfactorily.
During the implementation stage, an independent consultant is hired to ensure that
both public and private parties adhere to the terms of the contract/ concession
agreement.

(vii)

PPPs encourage innovation.

11

PPPs maximize the use of private sector skills. It utilizes higher levels of private
sector efficiency, specialization, and technology.|7
The above-mentioned advantages of PPP correlate to the major context of NPM stated
earlier in this context.

PPP Processes
Every PPP Project in the Philippines has to undergo four (4) stages, namely: Development
Stage, Approval Stage, Competition Stage, and Cooperation Stage. The diagram below will
show what takes place every stage.

7Advantages of PPP.(n.d). Public-Private Partnership Center. PPP.gov.ph. Retrieved September

19, 2015 from http://ppp.gov.ph/?page_id=27574

12

13

II.Topic Introduction: LRT Line 1 System

The Light Rail Transit System Line No. 1 consists of the 15km elevated
railway system servicing the Taft Avenue - Rizal Avenue route between
Baclaran, Pasay City and the Bonifacio Monument in the City of
Caloocan. It is considered to be the first LRT system in Southeast Asia.

CONST

Source: www.lrta.gov.ph

RUCTION
Actual

construction

in

Manila

started

in

September

1981 at Taft Avenue between EDSA and Libertad.

By the end of 1983, the construction had risen out of the streets over most of
the route; and the shape of the new transit facility was taking shape for all to
see. The first Light Rail Vehicles (LRVs) arrived in Manila in November 1982
and construction of the Pasay Depot became the most vital task of the whole
project.
Power was turned on in the Depot and became operational in December
1983.

The LRVs began trial runs on the Taft Line in March 1984 and by

September 1984 the Taft Line gave the public a view of what was to come by
providing free public passenger rides for a one week period.

14

After September, there was a strong coordinated effort to finish all the
remaining Taft Line work and finally, on December 1, 1984, the Taft Line was
officially opened to public service.
Work on the Pasig River Bridge started in November 1984 with the super-structure floated out
and put into place. By the end of January 1985, the bridge was completed and track laid across to
join up with the track on the other side.
Previous to this, there had already been a major effort on the Rizal Line side, and with the Pasig
River Bridge complete, speed trials began in February 1985. By April 1985, passenger service
was extended into Carriedo, the downtown station, and one month later,on May 12, 1985, the
Rizal Line was put into service.|8
OPERATION
To operate the System, a contract was entered
into between the LRTA and a speciallycreated
new company METRO INC. - a wholly owned
subsidiary of the Manila Electric Company.
METRO's task would be to acquire the know-how
of the new technology and develop an efficient, well-trained organization to
operate the System and manage its day to day affairs and be responsible for
all technical matters in the future.
The LRTA took over all System operations after the rank-and-file employees
of

METRO

INC.

staged

wildcat

strike,

destroyed

some

of

LRTA's

properties and paralyzed the entire operation of LRT Line 1 system from July
25 to August 2 of 2000. In view of the adverse consequences brought about
by the said strike on the financial position of LRTA and on the efficient
provision of LRT services to the public, the LRTA decided not to renew the 168Construction.(n.d.).Light Rail Transit Authority. Lrta.gov.ph. Retrieved September 6,
2015 from http://www.lrta.gov.ph/index.php/2014-05-21-01-05-51/2014-05-22-02-12-18/201405-22-02-16-08

15

year Operating and Maintenance Agreement with METRO, Inc. which

coincidentally expired on July 31, 2000.|9

III.
SWOT Analysis: LRT Line 1 System
Strength
There are at least two factors that we can use to analyze the strength of the PPP Project-LRT
Line 1 System. One is the number of passenger traffic and the other one is the gross revenue
collection.

Source: lrta.gov.ph

9Operation.(n.d.).Light Rail Transit Authority. Lrta.gov.ph. Retrieved September 6,

2015 from http://www.lrta.gov.ph/index.php/2014-05-21-01-05-51/2014-05-22-02-12-18/201405-22-02-16-08

16

The above table labeled as Passenger Traffic shows the number of passengers that the
LRT Line 1 System had serviced and continuing to. We can notice that there is a significant
increase from 156.93 Million passengers in 2011 to 171.80 Million passengers in 2013.

Gross
Collection

Source: lrta.gov.ph

Revenue
is a great

key
performance indicator inany project for it shows the income collected. From the table, we
can notice a substantial increase in the income of the LRT Line 1 System every year. From
2, 285.61 Millions of Peso income in 2011, it already reached 2, 524. 61 Millions of Peso
in 2014.
Weakness
We can analyze the weakness of LRT Line 1 System by relating to another PPP Project
dubbed as the LRT Line 1 Cavite Extension (which will be further discussed later in this
text). As we interviewed Ms. Rosalia E. Hapal, a project monitoring officer at PPP Center,
she mentioned four (4) weaknesses that the project might encounter. According to her, the
LRT Line 1 Cavite Extension might be prone to following risks. First, it can be exposed to
force majeure and political events. Huge project like this will encourage public officials to
participate in the implementation process. As a result it can trigger their political interest,
may it be for the greater good or for worse. Second, it can uncover macro-economic
factors. Throughout the operation, the project will surely grow and enlarge, thus, current
and future administration will be forced to allocate more funds for its maintenance and
progress. Third, it can be exposed to construction risks such as heavy traffic, need for house
relocation, personal injuries and the likes. Lastly, operational risks- machine malfunctions,
human errors, passengers complain will likely to happen.
Opportunity

17

Figure 1.2 LRT

Cavite
Project
(Source:

Line 1
Extension
Benefits
ppp.gov.ph)

Objectively, one good opportunity in having a light rail system is that it doesnt end at one
point. From time to time it can be extended. Meanwhile, the current administration has
decided to enter in another partnership with private sectors for the extension of the LRT
Line 1 System. The Public Private Partnership (PPP) project dubbed as LRT-6
would further extend the LRT Line 1 system by another 19 kilometers all
the way to Dasmarias from the proposed end in Niog in Bacoor, Cavite.
The mass transit system would pass along the Aguinaldo Highway and
would

have

stations

in

Niog,

Tirona,

Imus,

DaangHari,

Salitran,

Congressional Avenue, and Governors Drive.

The LRT Line 1 Cavite Extension Project assumes to increase the daily passenger capacity
from 500,000 to 800,000 that can benefit more than 4 million residents in the southern part
of Metro Manila and Cavite. Also, the length of the operation will be extended to 32.4
kilometers with 12.60 kilometers as average daily trip length per passenger. And lastly, the
project is expected to increase the rolling stock from 139 light rail vehicles (LRVs) to 259
LRVs and refurbishment of the existing ones.
Threat
Atty. Salvador Belaro, Jr., as he asked the Supreme Court to stop the implementation of the
LRT Line 1 Cavite Extension, mentioned two flaws associated to the mentioned PPP
Project. One is the overpricing and the other one is the violation of the Constitution and the
Build-Operate Transfer (BOT) Law.

18

Belaro said that the project is overpriced by 300% versus the recently finished North
Extension Project. The 5.71-kilometer North extension project from Monumento to North
EDSA costs only P6.3 billion. The Cavite extension project, which double that distance,
will costs however to P64.9-billion, P39 billions of which is for civil and electrical
works.He considered the project as the most disadvantageous government contract of all
time, because, according to him, the said project can result to public debt of illimitable
magnitude.
Atty. Belaro pointed out that if the concessionaire would be spending up to P20 billion for
the Cavite extension project, the latter would still derive a profit (from LRT1 rail services
alone) of at least P60 billion ($1.36 billion or P2.23 billion [$50.41 million] multiplied by
32 years) for the entire concession period or P1.6 billion yearly, The P1.6 billion yearly net
income for the concessionaire is said to balloon to a yearly net income of P3 billion
because of the numerous provisions in the concession agreement. In effect, the government
stands to shoulder all the burden just to make the project a reality, making it the most onesided contract of all time.|10

10 SC Asked to Halt LRT 1 Cavite Extension. (February 20, 2015).

Rappler.www.rappler.com. Retrieved September 19, 2015 from
http://www.rappler.com/business/industries/208-infrastructure/84533-sc-asked-haltlrt1-cavite-extension-project
19

IV.

Conclusion

Over the years, public-private partnerships in the Philippines have progressed, with each
administration implementing different strategies on how to engage the private sector in its
development efforts. Its legal framework is replete with laws and regulations that track the
evolution of PPPs.
This study was able to find out the following advantages of PPP which correlate to the context of
New Public Management. These are the following: PPPs encourage the injection of private
sector capital; PPPs make projects affordable; PPPs deliver value for money; In PPPs, each risk
is allocated to the party who can best manage or absorb it; PPPs force the public sector to focus
on outputs and benefits from the start; With PPPs, the quality of service has to be maintained for
the entire duration of the cooperation period; and PPPs encourage innovation.
Too, this study was able to find out the stages every PPP Project in the Philippines has to
undergo, namely: Development Stage, Approval Stage, Competition Stage, and Cooperation
Stage.
With an aging infrastructure, a growing population, and the need to be more competitive in the
global market, different administrations sought alternatives to cope with the need to build more
projectsin sectors like powers, roads, and specifically in transportation.
In this study, we can conclude that the government looked (and is continuing to) to the private
sector as a reliable partner in infrastructure development.

20

V. Recommendation
Emaas, Genilyn
For the longest time, the LRT Line 1 has been languishing. The LRTA which is tasked to manage
and maintain and operate the LRT Line 1 has been struggling to keep up with the sustainability of
the LRT. Come the Aquino administration, the problem of the lack of trains and the remaining
ones falling apart cannot be ignored anymore. Decades of neglect has finally caught up with the
Philippine government. The Aquino government realized that it would need a huge amount of
money to address the needs of the LRT line 1. Trains will need to be refurbished. The tracks need
to be replaced. The maintenance of then stations and its upgrade all spelled money which
government does not have at this point.So, in order to address this challenge and to ferry the more
than 400,000 commuters using the LRT Line 1 everyday, government decided to tap the private
sector to help government improved the LRT Line 1. But, since this is a public utility, ownership
should remain with government. What was proposed was to undertake the project of upgrading
the operations, maintenance and the extension of the LRT Line 1 as a Public-Private Partnership
project.
As a PPP project, government is turning over the operations, maintenance and the construction of
the other stations all the way to Niyog in Bacoor to the winning proponent, which is a consortium
of then Ayala Corp. and Metro Pacific Investments Corp. One advantage of tapping the private
sector to do this work for government is funding. We do not have the financial space to undertake
this project which costs 64.9 Billion pesos. But the private sector has that kind of money. So we
let them build the stations, operate and maintain the trains and other facilities. In exchange, they
get all their revenue from the fare of the LRT line 1. Ayala-MPIC bided on this project because
their financial model says that they will indeed make money off this venture with government.
With a projected increase to 800,000 commuters everyday due to the improvements and the
extension of the train stations, the projected revenue is highly feasible. Another thing is that the
private sector brings to the project their skills, expertise, innovation in technology and other
resource things that the government might not readily have. Beep card for all the LRT -MRT
21

trains is an innovation that was brought by the private sector. This particular project is the
Automated Fare Collection System. This will be part of the improvements for the said LRT line
one.
Despite the consensus of the significance of PPP project as the main engine for national growth
and development, and to accelerate growth in the infrastructure industry I, however, recommend
that we must go further in enhancing the PPP scheme in the Philippines whereby the priority
should not be limited to the local private key actors because it is one of the primary reasons of
alleged corruptions, irregularities, and anomalies between local private key actors and
government. In line with that, some personalities from the private entities have personal
attachment and connection to the government officials where surreptitious agreement and
transaction between the two parties is undeniably happening. As a result, corrupt, fraudulent and
deceptive management hinders the successful operation. Furthermore, allowing international
private key actors enter into the business operation will somewhat weigh down the possibilities of
these unlawful activities. Thus, this could be attainably possible if we are about to amend the
constitutional restrictions such as limits to foreign equity in the exploration, development, and
utilization of natural resources; public utilities; build-operate-transfer projects and the likes in
allowing foreign key actors through the liberalization of the foreign investment, and that equity
may be allowed in all areas of investments. The PPP in Philippine model only guarantee
profitable service delivery

rather than effective service delivery to the public since it is all

driven exclusively by local private key actors. In the case of the Philippines, the local private key
actors are usually with the same position in the government and these would lead to
monopolization of the countrys overall profits and gains. The country needs to be competitive in
order to take advantage of the growing marketplace of opportunities, especially for small and
medium enterprises. Foreign investments, on the other hand, have the full potential to conduct
businesses in the Philippines with partnership from the government in developing infrastructures
of railways, LRT to be specific. The capabilities of these foreign actors are evident through their
advance technologies and equipment, financial capacity that is sustainable to development,
expertise, and influence in seeking international assistance. Subsequently, foreign investors will
able to aid Philippine government to generate funds in sustaining the operation of a particular
project. Since, the PPP scheme is being used as an instrument to further enhance the Philippines
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holistically given the fact that it does not promote a parallel growth between economic and
social development. The macro level economic growth simultaneously increases with the poverty
rate also increases which if we analyzed might root a huge problem to the overall development in
the Philippines. Hence, if the government wants to achieve a holistic and inclusive total
development, the progress that the administration is working for must be able to be seen evenly
economically and socially and this could be possible if the participation of the public or the
people will be considered and addressed by the administration by which the principle of
transparency and accountability take into place. And, for this collaboration among the private, the
government, and the people to take place, I recommend that there must be a mechanism that will
promote or represent the society or the ordinary citizens in the Public-Private Partnership scheme
to attain the full potentials and success of adopting such project in the country which must be
within the scope of the policies and technicalities of the PPP scheme. Since, the core target of all
administration is to provide an effective and efficient service to the public why not consider the
participation of the public per se in the process. For instance, in the immense shift of LRTs
magnetic card to beep card and an uncontrollable fare increase, the government and the private
entities must adequately consider the future implications of these changes whether it will weigh
down the sufferings of the public or will just add another source of burden.
Thus, in order to prolong a successful operation, administrators must uphold the satisfaction of
the public to the services being delivered. It must the peoples interests that ought not to be
neglected.
Para, Eunice
As for the threat of the LRT Line 1 Cavite Extension, it is worth recommending that The
Commission on Audit should intervene and re-evaluate the said project. The Commission on
Audit examines, audits, and settles all accounts and expenditures of the funds and properties of
the Philippine Government. Attorney Salvador Belaro Jr. said that the project is overpriced by
300% versus the recently finished North Extension Project. For us not to doubt this project, the
Commission on Audit should investigate if the said project has no anomaly behind its
implementation. I dont see anything wrong with investigating this project; this will only protect
and ensure that the money of the taxpayers is being spent correctly according to the tenor of the

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state. Taxpayers should be aware also if who will benefit this project. It is the right of the citizens
to know that the project implemented by the Government is in pursuit of mainly public interest.
The Commission on Audit is vested under paragraph 1, section 2, article IX of the Constitution
that the Commission on Audit has the power, authority, and duty to examine, audit, and settle all
accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property,
owned or held in trust by, or pertaining to, the government, or any of its subdivisions or
agencies. The Commission on audit has the power to examine entirely the expenditure of the
Department of Transportation and Communications in line with the Cavite Extension Project.
This will cause no harm because this will just ensure that the project will be done with no amount
of corruption happened.
As a voter, we should look out to the politicians behind the scene in the negotiations of this Light
Rail Transit line 1 Cavite Extension Project because the money may be used to fuel up or
strengthen their candidacy in the upcoming 2016 elections. The future of our country is at stake
and it will be the future also and the output of the Public-Private Partnership Program by the
present government administration. If we let the said overpricing happen today, the future
administrative government will be the one to suffer the consequences and instead of economic
development, it may lead to economic sabotage. It may also lead to the repugnant of the citizens
to the Public- Private Partnership Program of the Government.
In addition to that, we citizens should be aware of the transactions and expenditures of our
government because we are the one who will benefit every program that the government will
implement.
I would also like to recommend that the project will not only focus more on the operation process
but also in maintaining it. This will protect the welfare of the people who will be benefited and
they are more than 4 million residents from the southern part of Metro Manila and Cavite. The
enjoyment of the people should be a priority because it will reflect on the effectiveness of the
project. If the government doesnt meet the expectation of the people, this LRT Line 1 Cavite
Extension is another project that needs to be improved.

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Another thing to recommend is a better relocation site for the families who will be affected by the
project. In line with the relocation, they should also be given a livelihood program for them to be
able to support their everyday needs.
To ensure that there will be no public debt after implementing this project, let us keep an eye on
the COA report of this project and see if there is any corruption or anomaly happened. Let us all
be aware of this kind of project because this will form part of the development of our country. If
the project will not lead to development, it may result to illimitable magnitude of public debt. The
development of the country is in the hands of the government. So if the projects implemented by
the government become responsive to the needs of the people, it may create opportunities like
more jobs and higher wages.
Raneses, Ronald
Operation and maintenance (O&M) activities, which encompass not only technical issues, but
also managerial, social, financial and institutional issues, must be directed towards the elimination
or reduction of the major constraints which prevent the achievement of sustainability (BRIKKE
2000). Many failures are not technical ones. They may result from poor planning, inadequate cost
recovery, or the outreach inadequacies of centralized agencies (DFID 1998).
Operation and maintenance has been neglected in the past, or been discussed and introduced only
after a project was completed. This neglect or delay in applying proper operation and
maintenance has adversely affected the credibility of the investments made, the functioning of the
services, the well-being of rural populations, and the development of further projects.
However, the importance of O&M has gained considerable visibility over the past few years, and
it appears that policy-makers and project designers are now more conscious of the direct links
between improved O&M practices and the sustainability services. There is also greater
recognition of the need to approach projects in a comprehensive way, emphasizing not only the
design and construction but also post-construction activities (BRIKKE 2000).
Operation and maintenance refers to all of the activities needed to run a scheme, except for the
construction of new facilities. The overall aim of operation and maintenance is to ensure
efficiency, effectiveness and sustainability of facilities (CASTRO 2009).
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The two activities of operation and maintenance are very different in nature. Operation refers
to the direct access to the system by the user, to the activities of any operational staff, and to the
rules or by-laws, which may be devised to govern who may access the system, when, and under
what conditions.
Maintenance, on the other hand, is to do with the technical activities, planned or reactive, which
are needed to keep the system working. Maintenance requires skills, tools and spare parts
(CARTER 2009). Maintenance can be classified as follows (adapted from CASTRO 2009):
(i) Preventive maintenance: includes work that is planned and carried out on a regular basis to
maintain and keep the infrastructure in good condition, such as network inspection, cleaning and
greasing of mechanical parts and replacement of items with a limited lifespan. It sometimes also
includes minor repairs and replacement as dictated by the routine examinations.
Unfortunately, the implementation of a preventive maintenance program can be time consuming
and costly. This creates constant debate as to whether a preventive maintenance program is worth
installing. Will all the man hours and money invested in the program outweigh emergency
repairs? From our years of experience, we believe that when the program is properly operated the
benefits exceed the costs.
Here are other important benefits of a properly operated preventive maintenance program:

Equipment downtime is decreased and the number of major repairs are reduced

Better conservation of assets and increased life expectancy of assets, thereby eliminating
premature replacement of machinery and equipment

Reduced overtime costs and more economical use of maintenance workers due to working
on a scheduled basis instead of a crash basis to repair breakdowns

Timely, routine repairs circumvent fewer large-scale repairs

Improved safety and quality conditions for everyone

(ii) Corrective maintenance: Corrective maintenance is defined as maintenance work which

involves the repair or replacement of components which have failed or broken down. For failure
modes which lend themselves to condition monitoring, corrective maintenance should be the
26

result of a regular inspection which identifies the failure in time for corrective maintenance to be
planned and scheduled, then performed during a routine plant outage.
When corrective maintenance is done, the equipment should be inspected to identify the reason
for the failure and to allow action to be taken to eliminate or reduce the frequency of future
similar failures. These inspections should be included in the work plan.
(iii) Reactive maintenance: a reaction to a crisis or public complaints; it normally occurs as a
result of failures and the malfunctioning or breakdown of equipment. In order to ensure the
routine maintenance and health of the system, the technician should adhere to a routine check-up.
The project manager will need to ensure that the technician is doing his/her job. If done correctly
and on a regular schedule, preventive measures can reduce the risk of costly repairs.
The key to ensuring effective equipment maintenance is to make certain that responsibilities are
clearly defined and maintenance personnel have the tools and skills to do their job effectively.
Indeed, project at any level requires careful planning to ensure success. One of the factors in
project planning should always account for the management of human resources. In PPP ProjectLRT Line 1 and its ongoing extension human resources play an important role in operation and
maintenance. For that reason, it is worth recommending that our government together with
agencies involved (e.g. DOTC & LRTA) and private partners should have a separate and clear
plan in handling them.

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References
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Advantages of PPP.(n.d). Public-Private Partnership Center. PPP.gov.ph. Retrieved September 19, 2015

from http://ppp.gov.ph/?page_id=27574
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PPP-definition,origin,evolution. (n.d.para. 2).Sports Infrastructure Management Board of Krakow .

Ppp4Krakow.net. Retrieved September 10, 2015 from
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The origin and development of PPP in Europe. (n.d). Sports Infrastructure Management Board of Krakow.
Ppp4Krakow.net. Retrieved September 10, 2015 from
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The origin and development of PPP in Poland.(n.d). Sports Infrastructure Management Board of Krakow.
Ppp4Krakow.net. Retrieved September 10, 2015 from
http://ppp4krakow.net/About_PPP/Definition,_origin_and_evolution/

Historical Background: The Root of PPPs in the Philippines. (n.d.).Public-Private Partnership Center.
PPP.gov.ph. Retrieved September 10, 2015 from http://ppp.gov.ph/?page_id=44

PPPs Today.(n.d.).Public-Private Partnership Center. PPP.gov.ph. Retrieved September 10, 2015 from
http://ppp.gov.ph/?page_id=44

Construction.(n.d.).Light Rail Transit Authority. Lrta.gov.ph. Retrieved September 6, 2015 from

http://www.lrta.gov.ph/index.php/2014-05-21-01-05-51/2014-05-22-02-12-18/2014-05-22-02-16-08

Operation.(n.d.).Light Rail Transit Authority. Lrta.gov.ph. Retrieved September 6, 2015 from

http://www.lrta.gov.ph/index.php/2014-05-21-01-05-51/2014-05-22-02-12-18/2014-05-22-02-16-08

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SC Asked to Halt LRT 1 Cavite Extension. (February 20, 2015). Rappler.www.rappler.com. Retrieved September
19, 2015 from http://www.rappler.com/business/industries/208-infrastructure/84533-sc-asked-halt-lrt1cavite-extension-project

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