Taking up the Swiss challenge

Roads that become riddled with potholes at the slightest rain, public school buildings torn down by the weakest storm, medicines in government hospitals with little or no efficacy … These are some of the results of a corruption-laden public bidding system that needs to be overhauled — or replaced entirely.

President Duterte was correct in observing that the bidding process for public works projects had delayed the completion of vital infrastructure and bred corruption, and that syndicates were rigging the bidding for government projects and bribing officials.

Most Filipinos have known this all along, but, as Sen. Panfilo Lacson pointed out, they seem to have grown accustomed to such malpractice and are no longer outraged by it.

And then, of course, making matters worse is the fact that no contractor or supplier has been clapped in jail for substandard projects and supplies.

Mr. Duterte favors the Swiss challenge system for public works projects in his administration. Under this scheme, a government agency that receives an unsolicited proposal for a project from a private group invites third parties to match it or offer a better proposal. The original project proponent will be allowed to match any counteroffer and bag the project.

Some quarters say this would be in violation of the Government Procurement Reform law, which directs the government to bid out its public works or services projects, with the contract awarded to the lowest bidder.

However, Malacañang clarifies that there is no need for an executive order mandating the use of the Swiss challenge system in the awarding of government projects as it would only apply to “big ticket” projects.

Indeed, the build-operate-transfer law allows the Swiss challenge, and a number of big infrastructure projects have been done using the system.

In the past two decades, these projects included the Ninoy Aquino International Airport (Naia) Terminal 3 by Philippine International Air Terminals Co. Inc. (Piatco); the NLEx-SLEx connector road by Metro Pacific Tollways Development Corp. (MPTDC) and its subsidiary, Manila North Tollways Corp.; the Caliraya-Botocan-Kalayaan power plant by the Argentine company Impsa; the Metro Rail Transit Line 7 by San Miguel Corp.; and the Cebu-Mactan toll bridge also by MPTDC.

Of these, Naia Terminal 3 deserves particular attention now that the government is considering taking the Swiss challenge route.

The key is to lay down safeguards to prevent a repeat of that sorry experience: During the Ramos administration, a group of local taipans offered to build Naia Terminal 3 for $650 million.

Being unsolicited, the proposal was opened to a Swiss challenge and a group led by the Cheng family in partnership with the German firm Fraport AG offered to build the terminal at a much lower cost.

It would have been fine were it not for the various cost escalations allowed by the succeeding Estrada administration to the Cheng group.

The Naia Terminal 3 contract was awarded to Piatco in 1997, but it was declared irregular by the Arroyo administration in 2002 due to allegations that the consortium violated the Anti-Dummy Law, among others.

The Supreme Court voided the deal in 2003 and the government moved to take over Naia Terminal 3 after compensation talks broke down. Naia Terminal 3 became fully operational only in August 2014.

This long delay was marked by arbitration cases here and abroad and doubled the original cost proposed by the group of taipans.

Any Swiss challenge template to be adopted by the Duterte administration should take this sad example into serious consideration.

Otherwise, the exercise will cause the same delays, higher cost, poor service, and substandard projects.

As for smaller government projects, Sen. Francis Escudero has promised to review the absence or lack of sufficient specifications and accurate terms of reference, which he believes is the real reason public bidding has become so rotten.

There is hope in correcting the country’s failed bidding process.