Rats in the PPP Center

Categories: Business Updates

Date Posted: 01 Jul 2014

Is our PPP riding down “Daang Matuwid” or do all roads lead straight to Ayala?

In the case of the recent bidding for the Cavite-Laguna Expressway (CALAX), it seems the PPP Center and the DPWH have gone down the Ayala superhighway again, causing the Filipino people to lose out on P8.45 billion pesos in royalties.

I have no problem with Ayala winning one PPP bid after another, albeit amid questionable circumstances. After all, it is a profit-driven corporation that must leverage whatever advantage it can get. However, I take exception when their victories come at the expense of the Filipino’s best interest.

An MRT train is seen parked at Ayala-owned TriNoma Mall along North EDSA. DOTC would now locate the MRT-LRT common station in the area. (Photo by Michael Varcas)

An MRT train is seen parked at Ayala-owned TriNoma Mall along North EDSA. DOTC would now locate the MRT-LRT common station in the area. (Photo by Michael Varcas)


But I’m getting ahead of myself here.

Last June 2, the PPP Center and DPWH held a public bidding for the multi-billion peso CALAX, a 47-kilometer four-land highway that would connect the Cavite Expressway and the South Luzon Expressway. Four parties participated in the bid, namely the SMC Group (through its subsidiary, Optimal Infrastructure Development, Inc.), the Ayala-Aboitiz consortium, the Metro Pacific Group, and MTD Philippines.

On the day of the bidding, the Ayala-Aboitiz consortium and the c flagged the bidding and awards committee on an apparent error on the SMC bid. You see, public bids of this sort call for a “Bid Security”—a document from a financial institution guaranteeing the availability and accessibility of the amount tendered over a certain period of time. In this case, the time frame required was 180 days, beginning June 2. This meant that the bid guarantee should have been valid until November 29, 2014.

ANZ Bank is the partner of SMC in this particular exercise, and, on its bid guarantee, the date of expiration stated November 25, 2014—four days short of what was required. However, if you review the entire context of the document, it clearly states that the guarantee is good for 180 days beginning June 2. The expiration date of November 25, 2014 was obviously a typographical error.

San Miguel and ANZ Bank quickly rectified the situation by submitting a formal letter to the DPWH and the PPP Center, dated June 4, affirming that SMC’s Bid Security was indeed valid for 180 days, ending on November 29, 2014. It submitted another letter of clarification on June 10 with the same message, upon the recommendation of the DPWH’s lawyers.

Given the pettiness of the issue, SMC should have been allowed to proceed with its bid—perhaps sanctioned with a penalty, at most. However, to everyone’s surprise, DPWH and PPP Center decided to disqualify SMC altogether. The notice of disqualification was handed down on June 13.

When the bids were opened, SMC proved to be the highest bidder, pledging P20.1 billion for the right to build CALAX, P8.45 billion more than the second highest bidder, the Ayala-Aboitiz Consortium, who bid only P11.65 billion.


As a tax-paying citizen, I am incensed at how government readily walked away from P8.45 billion in windfall revenues for a simple typographical error—one that had been clarified twice. In perspective, P8.45 billion would have been enough to build 7,000 homes for those affected by Yolanda. Enough to fund a full-blown expansion of NAIA 1…or even purchase a dozen or so new trains for the overcrowded MRT 3. P8.45 billion could have gone a long way towards easing the suffering of our people.

I reckon the DPWH and PPP Center has done a disservice to the nation. The whole point of privatization and public-private partnerships is to raise the most funds for the republic and/or build infrastructure at the lowest cost to government. Isn’t its mandate to serve the best interest of the Filipino?

The PPP Center’s executive director, Cosette Canilao, apparently speaking on behalf of the DPWH, justified their decision by saying that they are just implementing the bidding rules. Not to disqualify SMC, Canilao claims, would undermine the credibility of our PPP Program and the bidding process it is committed to uphold. She further asserted that to not enforce the bidding rules to the letter, no matter how petty, may dissuade investors from participating in future bidding exercises of the PPP Center.

But let’s look at the PPP Center’s track record in enforcing bidding rules…

In April 2012, the DPWH allowed the winning bidder, the Ayala Group, to alter its design for the Daang Hari-SLEX Connector Road. Not only was Ayala spared from disqualification for changing its plans mid-stream, even worse, government agreed to foot the P500-million bill for additional right-of-ways that resulted from the change. This came out of taxpayers’ money.

A second case in point is the recently awarded Automated Fare Collection System (AFCS), which, again, Ayala won over the second highest bidder—the SM Group of Henry Sy. While Ayala’s bid, per se, was P100,000 higher than that of SM, it came with conditions: it would pay government 28 percent upfront, with the remaining 72 percent paid in 2024 and 2025, only if certain conditional volumes were met. On the other hand, SM’s bid was an upfront payment with no conditions attached.

And yet another case: the MRT-LRT common station in North Edsa. This was overseen by the Department of Transportation and Communication. Despite SM having paid P200 million for the rights to name and host the station six years ago, the DOTC reneged on the deal after getting SM’s money and would now locate the station in Ayala’s TriNoma area.


To Colette Canilao: please don’t dumb down the Filipino by saying that you are just preserving the integrity of the bidding process. The examples above show that you have turned a blind eye to far more severe infractions in the past. If there’s anything that will undermine the credibility of the PPP program, it is the unpredictability of it all.

Is Ayala being favored? It sure looks like it. No wonder Ayala Land’s president for International Sales, Thomas Mirasol, bragged before the Singaporean Press that Ayala Land had become “the de facto Government.”

Filipinos are no longer willing to look the other way. Resentment is festering. The rats have definitely come out of the woodwork.


Written By: Andrew James Masigan

Andrew is an economist, political analyst and businessman. He is a 20-year veteran in the hospitality and tourism industry. For comments and reactions, e-mail andrew_rs6@yahoo.com. More of his business updates are available via his Facebook page (Andrew J. Masigan). Follow Andrew on Twitter @aj_masigan.
Source: http://www.mb.com.ph/rats-in-the-ppp-center/

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