THE INSIDE MAN

CALAX bidding: In favor of fair play

CALAX bidding: In favor of fair play image

Text: Tito F. Hermoso / Photos: PPP Center | posted June 17, 2014 12:13

Welcome to the club

Heartbreaker

It was a heartbreaker as deals go, when Optimal, San Miguel's Infrastructure unit didn't win the 47.0km Calamba-Laguna Expressway [CALAX] PPP due to a 'packaging' technicality. But to the bids committee of the DPWH, concurred to by the PPP office, the deficiency was enough not to open Optimal's bid. Naturally, San Miguel, has to study legal options as they claim that their Php20-B bid was more beneficial to the government than the Ayala-Aboitiz's Team Orion winning bid of Php11.6-B.

Tape and stapler

Despite the painstaking safeguards of the BOT law, government mandated bidding guidelines and even the more stringent PPP rules, this is not new as far as this government and any other previous government is concerned. As they say, the devil is in the details and apparently the technicality of Optimal's bid goes beyond mere tape and staplers as Mr. Ramon Ang, San Miguel CEO, quipped.

CALAx Coverage

Tollway juggernaut

If San Miguel won the bid, San Miguel infra would control the most kilometers of the Southern tollways, with Metro Pacific Tollways holding on to the CAVITEX and Ayala with its Daang Hari. But nevertheless, this loss should not discourage San Miguel. In fact, it should further accelerate plans to widen the SLEX, build TR4 - the Expressway from Ayala Greenfield to Lucena City - and upgrade the STAR Tollway to full dual carriageway.

Moving on

Neither should losing CALAX discourage Metro Pacific Tollways as it should accelerate approval of plans to connect CAVITEX to C5 which should be a boon to the proposed new NAIA on Ramon Ang's reclaimed portion of Manila Bay, right by Entertainment City. Which in turn should provide an additional alternative route for users of San Miguel's NAIA Expressway which is a-building.

Many new big players, many laments

As more and more big conglomerates get interested in mega-infrastructure projects, conflicts are not far behind. The SM group is protesting the relocation of the combined MRT-LRT-1-LRT-7 SM City station to Trinoma. The SM group is also protesting DOTC's award of the rail transit universal ticketing system to the Ayala-Metro Pacific combine. The Filinvest-Changi group is protesting the award of the Mactan airport to Megawide-GMR, the winning bidder.

Overbidding

On the other hand, winning bids that are far more than the losing bidders have kept wagging tongues quiet, save for those who think that the winners 'overpaid' beyond sensible commerce per conventional thinking of ROI. EXamples: San Miguel's winning bid for the NAIA Expressway and Ayala's win for the Daang Hari Expressway. But then everyone is aware that San Miguel's infusion of massive amounts of capital into the TPLEX project accelerated its construction, bringing benefits to SCTEX traffic and Central/Northern Luzon business far sooner than the planners of TPLEX imagined in 2008. So 'overpaying' has it benefits. That would have been the story of CALA Expressway, if the Php20-B premium is true, but it was not to be.

Technicalities and EXcuses

As for technicalities, San Miguel can point to a long list of technicalities that were ironed out or as some say, papered over instead of getting disqualified, per pre-bid specifications for the SLEX junction to Ayala's winning bid for Daang Hari Expressway some years ago. Many other PPP projects – mostly DOTC LRT projects - were rebid several times over as technicalities keep propping up. Despite government's best intentions and Expertise, there are certainly aspects where the private sector knows better. Which also means the government and public can benefit just as well so it pays for them to work together than argue the nitty gritty.

Unsolicited proposals

This is why we have always insisted that government not shun unsolicited proposals. When there was a lack of government projects in the pipeline, it was the unsolicited proposals that moved infrastructure forward. And even if there is a plethora of government projects in the pipeline now, the private sector is still worth giving a listen to.

If only...

EXamples are the Laiban dam project, which also incorporates the Kaliwa river project both proposed by San Miguel in 2010. Imagine, the Metro will never have to Experience water shortages and power shortages if this 10-year project commenced in 2010. True, the project has been in limbo from an even earlier proposal 20 years ago, but it should have been given due course. Now it is in the works for a possible PPP after the Kaliwa river project is finalized.

Swiss Challenge

Giving ear to San Miguel's unsolicited proposal in 2010 would not have guaranteed that San Miguel would win Laiban Dam because the law requires the so-called 'Swiss Challenge', i.e. the proposal be EXhibited to other interested parties who may want to improve on the finance and technology. Metro Pacific's NLEX connector would have gone through this if it wasn't for the revival of the PNCC, the government-owned owner of the near universal tollway franchise.

Philippine Pacific Airways?

The Swiss challenge would have applied to Ramon Ang's proposed NAIA by the Bay. Recall that the DOTC didn't take kindly to San Miguel's bid for Mactan airport because it owned PAL. Likewise, the same attitude applied to the Gokongwei group, being owners of Cebu Pacific. To think what would happen to those rules if the friendship between Lance Gokongwei and Ramon Ang develop into a hypothetical Philippine Pacific Airways, a merger between Cebu Pacific and PAL? It is immaterial if San Miguel's stockholders control PAL as the proposal was to build the giant airport and operations, under the watchful guidance of the CAA, was to be bided out anyway - so PAL would not have any undue advantage over other airlines.

Other hurdles

Ramon Ang's NAIA proposal preceded the JICA study of Sangley Point as the alternative NAIA, which the DOTC now favors. Many of us know that JICA, being a generously funded Japanese agency, have Japanese airports as an Excellent model, many of which are usually islands Expanded by reclamation and connected by underwater tunnel or causeway as such avoid flight path and other noise/environmental restrictions. Right now, further privately funded reclamation of the Bay area is being resisted by Las Pinas City and other environmental groups. This does not faze San Miguel's Ramon Ang, but it is the apparent government mindset against unsolicited proposals that can be discouraging. The DOTC favoring the JICA study shouldn't shut out San Miguel's participation in building the new NAIA whether its by Manila Bay or Sangley Point.

Palace rules supreme

But all is not lost. Recall that the President once interceded to allow both the Citra-San Miguel Skyway Stage 3 and Metro Pacific's NLEX Connector to proceed as the Metro's first crosstown Expressway. We are in no doubt that President Aquino is serious about being remembered as the 'PPP infrastructure President' so motivation is not lacking in getting these projects running despite the corruption cleansing delays of the past 4 years.

Singled out?

As for being singled out, San Miguel can take heart. It is not alone. Metro Pacific's MERALCO is being prevented from recovering costs through a price hike. Ayala's Manila Water, along with Metro Pacific's Maynilad is under the same agony. Ayala's Globe and Metro Pac's Smart are being forced to refund customers. Almost all tollway operators have had all toll fee hikes languishing in the in-tray of the TRB for years.

Fig leaves and unfair treatment

If that's bad, what more for projects that were awarded but never implemented? Remember the Metro Manila PHILTRAK bus system that pre-dated Curitiba's Bus Rapid transit system in the 90's? There's a Bus Rapid transit system for Cebu coming soon but PHILTRAK's languishes in the archives of the newspapers. There's also the 2010 integration of the SCTEX to the NLEX, under Metro Pacific Tollways, which, among many benefits in BCDA savings, would have taken out the Dau and Mabalacat toll plazas for faster journeys. This remains in limbo and even under threat of a Swiss Challenge which is highly irregular considering the O&M of the SCTEX is already a signed and sealed contract and not an unsolicited proposal. Or could it be that the SCTEX, which can be argued to be better consolidated with TPLEX, be the fig leaf for slighted San Miguel at Metro Pacific's Expense? It was only a few years ago when San Miguel did say it was no longer interested in SCTEX. We hope that Atty. Casanova, the pro-active crusading chief of the BCDA, can appeal to the president's sense of justice and fair play. Nevertheless, as for San Miguel, you are not alone. And welcome to the club.