THE INSIDE MAN

Who's delaying 'Build, build, build'?

Who's delaying 'Build, build, build'? image

Tito F. Hermoso / AutoIndustriya.com, Build Build Build | December 06, 2017 13:08

Government's mass infrastructure building program delayed

We see a glass half full

Seeing a glass half full, we have no cause for complaint specially if we look at DPWH Secy. Villar's bulging portfolio. The C-5-CAVITEx link has started building. The last segment of TPLEx to Rosario, La Union has already cleared Pozzorubio. The Plaridel bypass, albeit downgraded to single carriageway, is inching north easterly to Baliuag. RROW acquisition for NLEx Segment 10 from Karuhatan to North Harbor has picked up resulting in 50% completion of the elevated roadway. Skyway Stage 3 has already settled the long delayed stacked Skyway river alignment and RROW of Section 2. Scores of wide river bridges, coastal highways and congested town bypasses have been completed all across the nation. Ground has broken for the Cebu-Cordova Bridge and Causeway, the CALAx down south and the CLEx expressway to Nueva Ecija from SCTEx Tarlac. And one of the best news was that DoF's Sonny Dominguez did away with the extortionate “franchise premium or fee” that was tacked on to what was already steeply priced PPP but confusingly specced projects. That fee was so steep that only conglomerates that want to wrap the flag on themselves would dare spend for it.

Sea change in funding and planning

Exasperated with delays caused by informal settlers blocking RROW clearing, PRRD has resorted to his tough-guy Davao Mayor ways by expanding the scope and powers of the still born legislation for Traffic solving emergency powers. Disappointed by the delays caused by litigation by losing bidders in PPP project awards, PRRD had reverted back to GA [Government Appropriation] for project construction contracts relegating PPP only for O&M. Hence the 5 southern airports that were bundled together by the Pnoy government as a PPP, were unbundled back to one project per airport. Deeply suspicious of rent-seeking oligarchs and the New World Order bullies of the West, PRRD declared that he preferred to fund our “Golden era of infrastructure” through soft loans and grants from his new found Oriental friends, Japan and China. He also wanted to do away with lowest bidder auctions as these invited corruption and substandard construction of projects even as O&M integrated specifications for PPP infrastructure projects were separated in order to make the construction part a GA initiative. Despite the sea change in the way infrastructure projects are to be implemented, the PRRD administration, to its credit, did not resort to the abrupt halt of all projects to instigate an Aquino style “ethnic cleansing” where all contracts and appointments dated after Cory Aquino stepped down as president are suspected to be “corrupt”. Also this time, unsolicited proposals were welcome and will always follow the law by going through a Swiss Challenge and vetting for relevant economic cost benefit analysis by the NEDA-ICC.

Who's delaying 'Build, build, build'?

First to stall

And yet, the first infrastructure projects to stall were the PPP's in the pipeline like the long delayed Kaliwa and Laiban dams and their integrated metropolitan water supply projects. Besides the delays for the 5 southern airports, NAIA and Clark expansion reverted to ODA funded BCDA project status. Tutuban-Malolos-Clark railway and Calamba-Naga-Legaspi-Sorsogon railways were withdrawn from PPP to become ODA funded government projects too. Much later, the Plaridel bypass nee Balagtas to Nueva Ecija tollway, dropped its PPP status to become a China ODA funded highway. The Trans-Mindanao Railway and the Davao circumferential highway was to be ODA funded too. Within a year, PRRD would ink Japanese ODA funding for the Metro Manila Subway and a BRT line on EDSA. Also China will fund at least 2 of all the eleven new bridges across the Pasig.

'Dead ma' file?

Meantime, unsolicited proposals, supposedly encouraged, were subsequently left in limbo. Solar group's proposal to turn Sangley point into a NAIA substitute built like the Kansai airport and attached to a giant container port remains just as a proposal even after it was presented at a Cabinet meeting early in the PRRD reign. Despite its JICA approved study and ease to get Japan Dev. Bank financing, it too has not moved forward. More advanced is San Miguel's 700B, 6-runway airport in Bulacan, Bulacan consisting of an aerotropolis on reclaimed land, expressway links to NLEx and MRT-7 which SMC has lined up for financing. Meantime, Metro Pacific and JGSummit-Filinvest offers to expand Clark into a 2-terminal airport along with multi-year O&M were slapped down by DoTr Secy. Tugade, while Vince Dizon of BCDA is only beginning to look at the ODA funded alternatives for expanding the existing Clark Terminal One. Metro Pacific continues to pursue its standing offer to take over MRT-3, pay its debtors and overhaul it totally to prevent the daily disruptions that it is bedeviling it today – yet still no decision.

Can't live without them

Despite PRRD ranting against and prosecuting oligarchs – suspending Bobby Ongpin's PhilWeb [now reinstated], threatening Mighty Tobacco with closure [now a Japan Tobacco owned company] and belittling MVP [Manuel Pangilinan] as just an employee of Indonesia's Anthony Salim's First Pacific, the “oligarchs” were determined to pursue PPP projects which prove their nationalist credentials. Metro Pacific Tollways launched the Cebu-Cordoba toll bridge and toll Causeway. It proposed CTBex or Cavite-Tagaytay-Batangas Expressway, the logical extension of CALAx from Silang to Tagaytay all the way to Nasugbu. Metro Pac also proposed extending their Harbor Link expressway to link to CAVITEx and the 3 major reclamation projects on Manila Bay in between. Not to be outdone and uniquely not on PRRD's oligarch hit list, San Miguel Infrastructure, building on the success of NAIAx, proposed plans to link NAIAx to BGC, Dr. A. Santos and Buendia. As San Miguel will be breaking ground on the C-6 Metro Manila Skyway from Bicutan to Batasan, it is now submitting plans to extend SLEx TR4 from Ayala Greenfield to Lucena City.

Who's delaying 'Build, build, build'?

What investment incentive?

With DPWH and DoTr [LTO license plates, license cards, LTFRB Jeepney phase out, CAAP airport upgrades, various railways, BRT and subways] pressing ahead with their respective projects, mostly to be funded by ODA, there is actually a surfeit of project proposals because of the sudden about turns of government. The abrupt change preferring GA over PPP and the subsequent conflicting criteria issued by PRRD froze and stymied the early goodwill and eager interest in doing infrastructure in the country. How, indeed to do you satisfy the PRRD rant or negative list ? No to oligarchs. No to lowest bidder auctions. Yes to foreign contractors, which needs Congressional amendments to existing laws. Massive ODA borrowing which need massive tax increases that, in turn, still needs Congress and Senate approval. Yes, to smaller non-oligarch company bidders but what about track record? Where would an eager infra investor begin?

Deciphering the 80-year-old mayor-king

In understanding PRRD's announcements [and rants] one needs a sensible and “applied” approach a technique well-honed by ex-Press Secretary Ernesto Abella in learning the euphemisms, nuances and separating the bombast from the intention. Unfortunately, Sec. Abella has been replaced by Sec. Roque whose style is more akin to “predictive text” than Abella's sanitized and politically-correct Berlitz translation of PRRD's language. Still, this may well be the way to deal with PRRD:Unless you really are one, pretend that the Oligarch label does not apply. Present and behave like the internationally known and respected conglomerate that you are whether you be Aboitiz, Ayala, Metro Pac, Megawide, DMConsunji, etc. Draw up your own plans and include your funding as an alternative to ODA.

Alternative to lowest bid auctions

So PRRD doesn't trust the lowest bid auction system? Not to worry, we can apply the Dutch or Scandinavian qualifying system that determines the winner as the one who can successfully optimize or surpass “performance parameters” over and above the passive specifications standard of infrastructure construction. Allow us to illustrate by the ff. Example:

Who's delaying 'Build, build, build'?

Simulation exercise: Mariveles-Manila Bay-Marogondon expressway or MMBMex

The Philippines wants a toll expressway route from MEPZ [Mariveles Export Processing zone] in Mariveles, Bataan to CEPZ [Cavite Export Processing Zone] in Maragondon in Cavite, passing through Manila Bay. The winning PPP or BOM [Build, Operate and Maintain] bidder must prove that it can provide, perform and achieve performance parameters as follows ;

  1. the road must be usable in all kinds of weather, even in gale force winds.

  2. drivable even in heavy rain or fog [specify the minimum visibility limits]

  3. Easy to maintain without massive shut downs or closures that throttle capacity below 50% max traffic capacity.

  4. Allow or maintain unhampered passage of other forms of transport [water, air and rail] that abuts or intersects the MMBMex right of way.

  5. Charge a toll of no more than XX.xx PHP per kilometer [to be determined by NEDA-ICC] subject to the usual TRB rate adjustment parameters.

  6. Specify a maximum time of one hour and 30 minutes in order to complete an end to end journey at traffic levels 30% of highway max. capacity. This maximum journey time will also be the benchmark guide for O&M to target and build capacity expansion during the 30 year franchise.

BOM/PPP

The BOM/PPP proponent/bidder is also encouraged to design, build, plan the tollway in such a way that it shall be at least one step [or even more] ahead of the traffic demand for the duration of the franchise life of 30 years. So at the bidding stage, the proponent should already include and integrate plans for future lane additions, flyover additions, drainage enhancements, facilities forecourts and even by-passes and tunnels.

Wide range of choices/solutions

With a broad objective, the proponents/bidders can build anything they deem necessary to fulfill the mandate of the project, anything is possible under the sun. A 120km Mariveles to Maragondon coastal expressway along Manila Bay ? A combination bridge and under-Manila Bay tunnel like the Oresund Straits bridge ? Or a Tsing Ma style stacked highway bridge connection, including a railway component ? An all undersea tunnel set up, perhaps ?

ODA with forward cover

And if PRRD still insists on ODA? Insist that the government, for its own protection, provide forward exchange cover. If this be costly, then it should be factored into the costing of the project so the private sector can choose to finance it itself. Early on, choosing between private sector funding and ODA should be straightforward and not a source of delay. Warning: Vaughn Montes of PIDS [Philippine Institute for Development Studies] has warned that historically speaking, Chinese, Japanese and Korean ODA funding projects take 20% longer than PPP from signing ceremony, detailed studies then to the first shovel of earth moved.

Who's delaying 'Build, build, build'?

Judging and approving authority

So now who decides on the winning proposal? First hurdle must be technical feasibility. For our MMBMex, why not tap the Hong Kong Highways Department or China's engineering road agency who approved the Tsing Ma bridge and the Hong Kong-Zhuhai-Macau bridge. Or the Scandinavian agency that approved the Denmark to Malmo, Sweden Oresund Strait bridge. Or the French agency that approved the Milau viaduct over the Tarne Gorge. Or the Virginia Highways Dept. that approved the Chesapeake Bay Bridge-Tunnel.

Litigation proofing

The next approving level will be for the PPP and NEDA-ICC to approve of the financing terms. At this stage, the PPP bidding procedures should be as conflict proof as possible, post-award to the winner to preclude losing bidders from filing a case that would delay project implementation. Perhaps even include in the bid qualification documents that in case of dispute, they promise to abide by decision of the PPP's conflict resolution or arbitration committee or the NEDA-ICC's arbitration committee.

Dealing with the oligarchs

Oligarchs? Well the PPP office or the Palace should be able to draw up a cursory list of oligarchs or oligarch characteristics to be avoided. Then bidders will then sign an undertaking that they are not a company that purposes oligarchic objectives, whatever whichever the PPP bids committee will define it to mean in order to pay lip service to PRRD's gripe.

Getting the newbies to qualify

So how about newbie companies with no track record? Easy. Besides minimum paid-in-capital requirements, Newbie [or new upcoming crony] can form a consortium. Former IDF paratrooper and LRT-1 project consultant Eli Levin, having cobbled together both LRT-1 and MRT-3 investor consortia, knows how, just like he eats breakfast. Hire the best known construction outfits. Project managers. Infra designers. Brand name architects like UK's Richard Rogers, Fosters and partners, Denmark's Ove Arup or Germany's Hochtief. Hire known local specialist contractors for laying tollway fiber optics and electronic surveillance. EasyTrip or Capstone [Ex E-Pass] for Electronic Toll Collection. GJB, the first of Norconsult's ADB approved EU standards traffic sign makers since 1977. Readycon pavement layers and menders. TPCP for high visibility and high wear resisting road markings. That consortium or consortia will now match the established conglomerates of the oligarchs.

Beyond the rhetoric

To infra investors who suddenly developed cold feet, they shouldn't be always taking every rant of PRRD as marching orders. They are more of a broad outline of the moral objective, yes, believe it or not, those shout-outs are moral objectives and intentions. And it is to PRRD and our country's loss that ex-Press Secy. Abella isn't around anymore to interpret the sound and fury of PRRD into orders that can be acted and built on immediately. But once the investors get wind of the true intention outside of the political bluster, follow our PPP bids and unsolicited proposal investor guide, there should be a lot more of them wanting to do “Build-build-build”, ASAP.