Dilemma over Calax

President Aquino’s decision to rebid the controversial P35.4-billion Cavite-Laguna Expressway (Calax) project puts him in a “damned if you do, damned if you don’t” position. Weeks ago the President indicated that he was inclined to rebid the public-private partnership (PPP) project, which would see the construction and operation of a 45-kilometer toll road south of Metro Manila. Talking to reporters in Beijing last week during a leaders’ summit, he said he was firm on rebidding the project, pointing out that it was his administration’s obligation “to get the best deals for our people.”

Team Orion, a joint venture between Ayala Corp. and Aboitiz Land Inc., topped the qualifying bids for the Calax project last June with an offer of P11.66 billion. Optimal Infrastructure Development Inc. (OIDI), a unit of San Miguel Corp., was disqualified from the bidding over a technicality: The date on the validity of its bid bond, an irrevocable standby letter of credit amounting to P355 million issued by a universal or commercial bank, was four days short of the required 180 days. OIDI sought Malacañang’s intervention to reverse its disqualification. OIDI’s offer, while not opened by the Department of Public Works and Highways (the implementing agency of the Calax project) but by San Miguel before the media last June, turned out to be the biggest at P20.1 billion.

We understand the opposition of the majority of the members of the business community to a rebid. Days after the President’s announcement, foreign and local business groups and fund managers aired misgivings over a rebid, arguing that it could scare away investors, especially the big foreign groups needed to sustain the administration’s PPP program. As former finance secretary Roberto de Ocampo put it: “Rebidding Calax sets a dangerous precedent for future public bids. It undermines the very foundation of the PPP program. This is potentially a precedent that will give the next disqualified bidder reason and credence to take its appeal to Malacañang and hope for a similar outcome.”

Eight business groups led by the Makati Business Club also weighed in on the matter. They noted that the DPWH conducted the Calax bidding “with complete transparency and fairness, and in full compliance with the BOT Law,” so there was no legal basis for a rebid. They warned that a disregard of the rules through a rebid would adversely impact investor confidence in the PPP program and in the bidding procedures.

But can the President’s avowed intention to get the best deal in every government project just be ignored? He also pointed out that his administration had a deficit and that Finance Secretary Cesar Purisima would be glad if the government would get a better premium from the Calax project. We can imagine what the huge difference in the Calax bids—P8.45 billion—can do in terms of building schools, roads and bridges, and even providing food for the poor.

The country’s biggest business organization, the Philippine Chamber of Commerce and Industry (PCCI), in fact agrees with the President. In a statement, it explained that the minor technicality that barred the government from accepting the bid of OIDI should not have led to a disqualification. It noted that this technicality would deprive the government of the P8.45-billion difference between OIDI’s bid and the P11.65-billion offer of the Ayala-Aboitiz consortium that was accepted by the government. The PCCI said the money could even be used to fund rehabilitation efforts for areas devastated by natural disasters.

It also makes us wonder how significant is the cause of OIDI’s disqualification. Just how big an issue is the noncompliant bid bond given the fact that the bank that provided it—ANZ Bank (Australia New Zealand Banking Group)—and San Miguel itself went to the DPWH to manifest that the bond would cover the entire 180 days as required under the rules? Is it an extremely material aspect of the entire bid with a weight as much as the technical and financial components, which definitely have a bigger impact on the project itself?

The President is the public servant of not only the business community but also some 100 million people, a quarter of whom are poor. How he must wish for a Solomonic solution to this dilemma. Either he pleases the business community and angers the people, or disappoints investors and gratifies ordinary Filipinos. Tough choice.