Why does gov’t want to take over private firms?

Why is the government so insistent on taking over private corporations? For example:

1. The Land Transportation Office (LTO) has started taking over Stradcom, a private contractor and its current IT provider. The LTO wants to spend P3.44 billion on the LTO-IT system even though Stradcom has offered to invest anew P2 billion if the government will renew its contract, thus sparing the government the need to spend P3.44 billion. Stradcom will also upgrade the current LTO-IT system at no cost to the government.

2. The Bases Conversion and Development Authority (BCDA) wants to take over Camp John Hay although Camp John Hay Development Corp. (CJHDevco), the current developer, has already given to the BCDA a proposal that would make the latter earn P5 billion under a renewed memorandum of agreement.

Details:

1. The LTO Bids and Awards Committee has qualified only two groups out of nine that have expressed interest in joining the bidding for the LTO-IT system. Stradcom did not participate because the technical specifications in the bidding documents discriminate against it.

Yet Stradcom has the only software application with a proven track record to work under the LTO’s business rules and processes. However, the technical bid documents specifically required a “server-based package which is existing and being used outside the Philippines.” This eliminates Stradcom whose existing software has proven effective not outside but inside the Philippines.

Given the major differences in transportation laws between the Philippines and other countries, the requirement of a “server-based package which is existing and being used outside the Philippines” will not serve the best interests of the LTO; it only ensured that Stradcom could not participate in the bidding.

When this was questioned by Stradcom in the first pre-bid conference, the Department of Transportation and Communications changed the requirement to a “web-based… package solution based on an existing system currently in use.”

Again, this discriminated against Stradcom because while it can certainly apply a web-based solution, the current system it has, although proven effective, is not web-based.

The current contract of Stradcom with the LTO is under a PPP (public-private partnership) or BOO (build-operate-own) system. The government, however, is bidding out the contract anew under the Government Procurement Reform Act (Republic Act No. 9184) for P3.44 billion (earlier P8.2 billion).

Why should the government spend this amount when it can save it by simply renewing the Stradcom contract; even better, improve the LTO-IT system at no cost to government and make government earn more from it?

Recall also that Stradcom had in 2012 proposed to renew its contract, offering to invest another P2 billion in the rehabilitation of the existing infrastructure and the expansion of its services to the LTO to include online transactions, mobile ticketing, and biometric verification for drug tests. On top of this, Stradcom offered the government a yearly revenue share of P200 million or

P2 billion in 10 years. Under this proposal, the government will not spend a single centavo for the upgrades in the system that is already tried and tested.

With the system the government is now bidding out, the government will spend P3.44 billion, and that is on a system that has never been tested in the Philippines.

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2. Camp John Hay. Background:

The dispute between the BCDA and CJHDevco began after some commitments in the latest Revised Memorandum of Agreement (RMOA) signed in July 2008, were not fulfilled by the BCDA.

The BCDA had committed, in the RMOA, to set up a One Stop Action Center (Osac) that would process all the permits, licenses, etc. needed by CJHDevco to speed up the development of Camp John Hay, after its Special Economic Zone status was restored.

Instead of the creation of an Osac, CJHDevco found its application for permits being rejected by the John Hay Management Corp., even though the requirements had been fulfilled. It was being given the runaround. So, instead of taking a few days to acquire a permit as agreed, it was taking months for CJHDevco to secure each needed permit—that is, if the applied-for permit was released at all. In the meantime, investors were losing money and time, and the development of the camp moved at a snail’s pace.

In 2012, after four frustrating years, CJHDevco filed for arbitration and placed its lease payments in escrow. BCDA president Arnel Casanova ignored the arbitration court’s order to reply. The BCDA was compelled by a Baguio regional trial court to submit itself to the arbitration court. Evidentiary hearings before the Philippine Dispute Resolution Center were concluded last January 2014.

Let’s hope the court does not let the management of Camp John Hay fall into the wrong hands—definitely not into the hands of the BCDA.

Make Camp John Hay finish what it has started and compel the BCDA to fulfill its obligations instead of preventing CJHDevco from fulfilling theirs.