THE PUBLIC-private partnership (PPP) thrust of the government has suffered a blow just as it was trumpeting economic gains at this year’s Asia Pacific Economic Cooperation meetings, as Megawide Construction Corp. canceled an P8.69-billion contract for the country’s first hospital PPP deal after the Department of Health (DoH) took “too long” to fulfill its part of the deal.
It is the first time a contract under the government’s flagship PPP program has been canceled.
“Megawide has terminated the contract for the Modernization of the Philippine Orthopedic Center (POC) with the DoH,” the company said in a statement yesterday.
“The DoH has not yet given us the Certificate of Possession for the project site,” Megawide Corporate Information Officer Manuel Louie B. Ferrer said in a telephone interview yesterday.
“It’s been too long. It’s been two years already.”
The project involves a 25-year contract to design, finance, build, operate and maintain a 700-bed orthopedic hospital within the National Kidney and Transplant Institute (NKTI) Compound along East Avenue in Quezon City, and transfer the facility to the DoH after the concession period.
Megawide Citi Consortium, Inc. -- a subsidiary of listed Megawide whose shares ended flat yesterday at P6.34 apiece even as the industrial sectoral index to which it belongs edged up 0.94% -- was awarded the contract in December 2013. It then entered into a P2.9-billion syndicated loan in October 2014 to help finance the project and had expected to start construction within that quarter in order to make the facility operational within the first three months of 2017.
A DoH-Megawide statement e-mailed to media later in the day pinned the blame squarely on the department.
The statement noted that former Secretary Enrique T. Ona failed to convince the board of the NKTI -- a government firm under the department that directly owns the land on which the new facility was to rise -- to allow such use of the area. Janette P. Loreto-Garin, who succeeded Mr. Ona in acting capacity in October last year after the latter resigned amid a controversy over vaccine acquisitions, did not fare any better.
“While DoH sits in the board of NKTI, it failed to convince the management of the said hospital to allow the use of their [sic] land for the proposed PPP project,” the statement read, adding that Ms. Garin “also failed to secure the consent of NKTI management for the use of its land for the proposed PPP project.”
The same statement cited other hurdles that were under the government’s purview -- including displacement of current POC employees as well as difficulty and delay in appointing an independent project consultant -- “all of which were unanticipated by the DoH and which negatively affected the implementation of the project.”
“Furthermore, the proposed rehabilitation hospital that will house the displaced employees of the Philippine Orthopedic Center is still being deliberated in Congress,” the statement read further.
“All of these contributed to the decision of Megawide to terminate the… agreement…”
The statement quoted Ms. Garin as saying: that “DoH cannot abandon its duty of ensuring care for our indigent patients in the Philippine Orthopedic Center if their place of transfer cannot be ensured”.
“Furthermore, it will be unfair to expect Megawide to shoulder the cost of caring for our indigent patients and be obligated to absorb all displaced employees pending approval of a new law in Congress to create the rehabilitation hospital.”
It went on to say that “DoH and Megawide assure the public and all investors that this is an isolated case”.
“Megawide looks forward to other PPP agreements that the DoH will offer.”
Besides this hospital project, Megawide has bagged four other PPP deals out of the 10 the government has awarded, so far: the P2.5-billion Southwest Integrated Transport System Project, the P16.43-billion first phase of PPP for School Infrastructure Project (PSIP), PSIP’s P3.86-billion second phase, as well as the the P17.52-billion Mactan-Cebu International Airport Passenger Terminal Building.
Sought for comment, Peter Angelo V. Perfecto, executive director of the Makati Business Club, said in a mobile text message yesterday: “Is the DoH willing to accept the responsibility for the failure of this PPP that could deliver better services to our people?”
Despite the DoH-Megawide explanation, he said “it still remains their [department’s] problem though and their commitment. Megawide -- or any private sector partner -- cannot be made to wait indefinitely.”
“It would be wise for government, particularly the DoH, to deliver on its commitment in connection with the project site.”
John D. Forbes, senior adviser of the American Chamber of Commerce of the Philippines, said in a separate text that the “repeated review” of projects by successive secretaries and administrations creates “policy inconsistency.” He warned this case could “undermine other PPP projects in process when the next administration takes over.”
PPP Center Executive Director Cosette V. Canilao said via text that she was “preparing a memo” to President Benigno S. C. Aquino III and economic managers on the “process, remedies and consequences” of this development.
“It’s up to the DoH how to move this forward.”
source: Businessworld
