Tension rose steeply on Monday inside a packed conference room at the headquarters of the public works department in Manila. Five minutes into the 2 p.m. deadline of the submission of bids for the P122.8-billion Laguna Lakeshore Expressway Dike deal, none of the three qualified bidders seem to be keen on presenting their offers.
Two minutes passed and San Miguel Corp., the only group that brought its bid documents during the tender, decided to submit its proposal. But after a few seconds or so, it withdrew its bid, and government officials declared the auction process terminated.
His face flushing, and his eyes pleading, Department of Public Works and Highways (DPWH) Public-Private Partnership (PPP) Officer in Charge Ariel C. Angeles declared the process a “failed bid.”
“There are no bidders that submitted a bid. Right now we have to assess and check on everything as to the reasons of the failed bidding,” he said. “The bidding process was terminated because of a failure to bid. One party submitted, but they withdrew.”
San Miguel officials present during the bidding refused to give a comment on their group’s decision to back out of the tender process; but the two other parties were more vocal as to their reasons. Team Trident—composed of Ayala Corp., Aboitiz Equity Ventures Inc., SM Prime Holdings Inc. and Megaworld Corp.—has three key issues on the deal: economic viability, problems with connectivity and the complexity of the deal.
“We looked at the overall economic viability and risks. We took some of those to see if we can get this financed. But we couldn’t get to a sufficient level of comfortability with the economic viability and risks and our ability to take it to the banks,” he said. Connectivity to different growth areas in Metro Manila was also an issue for the so-called megaconsortium. “You have to have a guaranteed access to other central business districts,” Azanza said. “Connectivity is crucial, as it is a 700-hectare development.”
The deal’s complexity, he added, made it more commercially unviable. “The other one is the complexity of the deal. Consequently, the technological solutions for this project were so challenging that the cost implications almost doubled than what the government initially had,” Azanza said.
The project involves the construction of a 47-kilometer flood-control dike—on top of which will be a six-lane expressway—on an offshore alignment 500 meters away from the western shoreline of Laguna Lake. It includes interchanges, bridges, floodgates and pumps from Taguig to Los Baños in Laguna. It also involves the reclamation of 700 hectares of raw land adjoining the expressway-dike.
The thoroughfare-cum-dike project will help mitigate flooding along the western coast of the Laguna Lake running from Taguig to the town of Bay in Laguna. It will also serve as an alternative transport route to the congested South Luzon Expressway and enhance the hydrology for the ecosystem of Laguna Lake.
“The government also wants this rolled out in seven years. So, its complexity, less connectivity and a very tight time frame to roll this project out. So just imagine how the risk-reward balance was clearly not in the favor of the bidders,” Azanza said. Alloy-Pavi Hanshin LLEDP Consortium of Alloy MTD Capital Bhd., Prime Asset Ventures Inc., and Hanshin Engineering Constructions, on the other hand, believes that the bidding process itself was illegal.
“We believe that the bidding process is illegal and is unenforceable and is risky,” MTD Philippines Inc. President Isaac S. David said. “It is risky, as the signing of the contract, which mandates that we have to pay 20 percent of the premium up front, was set on April 6, a few months before the entry of a new administration.”
He said that his group is not too comfortable with the changing of the guards of the Philippines, as the new set of leaders may choose not to respect the contract that was signed during the last administration. “They can delay or cancel the contract,” he added. The group also submitted its position on the “illegality” of the bidding process.
In its letter to the public works department, the company said that the lack of a presidential proclamation “reserving the reclamation area for purposes of procurement transaction” made the tender illegal. “Second, the legal personality of the procuring entity is questionable. It has to be the Philippine Reclamation Authority, not the public works agency, nor the Laguna Lake Development Authority,” David said in explaining the contents of the copy of the letter that was furnished to the BusinessMirror. San Miguel bigwig Ramon S. Ang said the government has to reassess the implication of the project for the private sector before offering it again as a PPP deal.
“The project is just not feasible. The government will have to reexamine its assumptions and redesign a mutually beneficial contractual structure best suited for a deal as large and complex as this one, given its potential to create opportunities that will generate the greatest benefit to a lot of people,” he said in a text message.
PPP Center Executive Director Andre C. Palacios said that it will be impossible for the current administration to rebid the deal, but said that his camp will continue to support the public works agency in crafting its game plan for the development of the facility.
“I doubt if we can do another bidding within this administration. But the PPP Center and the transaction advisors remain committed to support the implementing agencies in whatever steps they will take for the project,” he said. This is not the first time that the Aquino administration declared a failed bidding for a key infrastructure deal. Two other deals—the expansion of the Light Rail Transit (LRT) Line 1 and the construction of the Cavite-Laguna Expressway—saw their first auctions failing, but were later awarded to their private proponents after a second try.
source: Business Mirror
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