Business groups warn of negative signal from re-bidding road PPP

October 27, 2014 at 09:47

“Additionally, we believe that the winner should be the company that can build and operate the infrastructure at the lowest cost and not the company that provides the government with the highest ‘income’. In the end, Juan de la Cruz will have to pay the higher price.”

John D. Forbes, senior adviser of American Chamber of Commerce of the Philippines, shared this view, saying separately via text: “Foreign investors expect bid rules to be followed very closely.”

“Second, the country needs better roads such as CALAX to be built yesterday. Thus, delay of CALAX and not following PPP rules strictly are worrisome,” he added.

“There are three business missions from the US in town this week, and the executive director of the PPP Center was in the US on a road show,” he noted.

“The integrity of the bidding process should be the paramount concern and not the total ‘offer’ to the government.”

The foreign business leaders gave their remarks a day after President Benigno S.C. Aquino III announced at a forum of the Foreign Correspondents Association of the Philippines that he was “inclined to think that a re-bid will be the proper course of action on this particular issue.”

“Accepting the winning bid at this time when there is an allegation that there was a much superior bid will mean having to explain the P9-billion difference that the government will forego,” Mr. Aquino had explained.

To recall, San Miguel Corp. subsidiary Optimal Infrastructure Development, Inc. was disqualified on a technicality concerning its bid security after submitting the highest bid for the project — involving an offer of a P20.1-billion premium on top of project cost — last June. The company formally sought Malacañang’s intervention later that month.

That left Team Orion — the consortium of Ayala Corp.’s AC Infrastructure Holdings Corp. and Aboitiz Land, Inc. — as the highest bidder with an offered premium of P11.66 billion that bested the premium offers of P11.33 billion of Metro Pacific Investments Corp.’s MPCALA Holdings, Inc. and P922 million of MTD Philippines, Inc.

In an order dated June 30 issued by the Office of the President, Malacañang suspended implementation of the Department of Public Works and Highways (DPWH) resolution to disqualify San Miguel’s Optimal Infrastructure.

Ramon R. del Rosario Jr., chairman of Makati Business Club and an independent director of Ayala, said via text: “A rebid will have a severe negative impact on investor confidence in the PPP program and the entire bidding process.”

“The government should uphold its own rules. As a director of Ayala Corp., I share the view that there is no legal basis for a CALAX rebid as it was conducted in full compliance with the BOT (build-operate-transfer) law.”

However, for Alfredo M. Yao, president of the Philippine Chamber of Commerce and Industry, courting fresh bids for the project would be a “practical move” that “will not affect investor confidence that much”.

“I think the problem — the basis of San Miguel’s disqualification which was the bid security — is too technical; the move to rebid is a practical move because a ‘billions of pesos’ difference is big,” Mr. Yao said in a telephone interview yesterday.

“Looking forward, the government should fill the gap in this issue and re-think the BOT law,” he added.

The project involves a 35-year contract to finance, build and operate a 47-kilometer four-lane toll road connecting growth hubs south of Metro Manila. The expressway will connect the end of the Cavite Expressway in Kawit, Cavite to the South Luzon Expressway (SLEx)-Mamplasan Interchange in Biñan, Laguna.

Construction is scheduled to start by October next year and end by September 2017.

CALAX is DPWH’s third PPP project after the Daang Hari-SLEx road link awarded to the Ayala group and the NAIA Expressway that went to San Miguel.