PPP dilemma

The government—the Department of Public Works and Highways, in particular—is in a quandary: The highest financial bid it got for the P35.4-billion Cavite-Laguna expressway (Calax) project is only a little more than half of the offer of another bidder it had disqualified for an alleged technical or “typographical” error.

The DPWH opened last Friday the financial bids for the 47-kilometer toll expressway that will connect the Cavite Expressway to the South Luzon Expressway. It announced that the joint venture between Ayala Corp. and Aboitiz Land submitted the highest premium of P11.65 billion among the qualified bidders. On the same day, San Miguel Corp. opened its disqualified subsidiary’s financial bid, which had been returned unopened by the DPWH, showing a premium offer of P20.1 billion.

The SMC subsidiary, Optimal Infrastructure Development Inc., was disqualified based on a DPWH resolution dated June 11 declaring that the bid security it had submitted did not comply with the bidding rules—which required a validity of 180 calendar days—and deciding further that its bid was “not in compliance with the [invitation to bid] requirements.”

As expected, SMC immediately issued a statement saying it disagreed “in the strongest terms” with the DPWH decision. “Given that we have already clarified the issue of bid security and amended our bid to make it responsive to the bidding criteria, the decision to throw out the bid of our subsidiary is prejudicial, unfair and disregards both legal and all common-sense considerations that should be given to projects of this scale and importance,” SMC said. It added that the DPWH disqualified the SMC unit for allegedly submitting a deficient bid security despite the clarification by the issuing bank that the bid security was valid and enforceable for the period prescribed in the rules. The DPWH decision came after another bidder wrote to point out that the SMC unit did not comply with the rules because its bid security was four days short of 180 days and that its proposal was “not properly packaged, sealed and labeled.”

The PPP Center executive director, Cosette Canilao, ostensibly speaking on behalf of the DPWH, justified the decision to disqualify. She said the government had to implement the bidding rules to the letter to protect the integrity of the process and the program. “We just have to follow the auction rules,” Public Works Secretary Rogelio Singson was also quoted as saying when asked to comment on the higher SMC bid. His statement would have been difficult to dispute had the DPWH been a stickler for the bidding rules in previous PPP projects.

At this point, it is hard to ignore the points SMC raised regarding what appear to be accommodations extended by the DPWH to other bidders in the past. It said that during the Naia Expressway bidding in July 2013, its lone competitor, Metro Pacific Investments Corp., submitted a noncompliant bid security that had a multiple-drawdown feature, when the bidding rules clearly required a single drawdown. This lapse should have been ground for automatic disqualification, but it was considered and accepted by the DPWH.

Another instance was during the Daang Hari SLEx bidding in April 2012 when the DPWH allowed a “viaduct or tunnel” design to accommodate the request of the eventual winning bidder, Ayala Corp., despite a written objection lodged even before the PPP project was opened for bidding. The DPWH would reportedly incur an additional P500 million in right-of-way expenses because of the new design accommodation.

As things stand, the Calax project may go the way of other troubled PPP projects—unnecessarily delayed. If SMC decides to sue, implementation of the project could be stalled. If the DPWH decides to proceed and award the project to the Ayala-Aboitiz group, the government will lose an opportunity to gain nearly P10 billion more by deciding now to implement the bidding rules to the letter.

There is one question that begs for an answer from the PPP Center and the DPWH: Does the error in SMC’s bid have, or will it have, a bearing on the bidding process

itself, or on the outcome of the whole exercise? This is a point that all government agencies involved in the flagship PPP program ought to consider in deciding on petty technical questions or issues that may arise in the course of future bidding.