BCDA: Government not disadvantaged, much less defrauded, in New Clark City project

I refer to the article “Deal to Construct P13-B gov’t complex at New Clark City questioned,” (12/2/19) by Marlon Ramos.

As a current member of the board of the Bases Conversion and Development Authority (BCDA) and as the sitting director of the National Government Administrative Center (NGAC) JV, representing BCDA, I feel compelled to clarify certain misconceptions in Ramos’ article, which styles itself as news even if, in truth, it should be an op-ed piece.

The article accuses BCDA of flouting the law on public bidding and government circulars, and of circumventing the bidding process and entering into a disadvantageous contract.

Using a source who conveniently hides behind a cloak of anonymity for “security reasons,”the news article loudly proclaims that the NGAC project was designed with “criminal intent”to “defraud the government.”It paints a picture of a contract tailor-fitted and rushed to accommodate a favored proponent.

Nothing can be farther from the truth. The original unsolicited proposal that MTD Capital Berhad (the “Proponent”) submitted on Oct. 11, 2017, pursuant to the BCDA JV Guidelines, did not include the Aquatics Center (2,000-seater FINA-certified swimming and diving facility) and Athletic Stadium (20,000-seater IAAF-certified track and field facility)””collectively, the “Sports Facilities.”

The original proposal only covered the NGAC facilities consisting of government office buildings (14,000 sqm total gross floor area or GFA), the integrated operations center/one-stop shop (14,000 sqm total GFA) and government housing (500 housing units capable of housing 1,000 people)””collectively, the “NGAC Facilities.”

The BCDA negotiated that the Proponent take on the additional responsibility of constructing the Sports Facilities, only after the Philippines accepted the hosting duties of the 30th SEA Games.

Truth be told, the Proponent was initially reluctant to assume the additional responsibility of constructing the Sports Facilities because of the especially tight deadlines for their completion, and the peculiar uncertainty of returns for the Sports Facilities.

However, it relented and accepted the challenge of building such world-class facilities in behalf of the Philippines. For its part, the BCDA assured the Proponent that it intended to appoint an operation and maintenance (O&M) provider for the Sports Facilities.

The proposal to construct both the NGAC Facilities and the Sports Facilities (together, the “Project”) underwent the careful scrutiny not only of the BCDA management and its board, but also of the Asian Development Bank (together with the Bank’s own legal, financial and technical consultants), acting as transaction adviser, with a singular goal, i.e. to ensure the most advantageous terms for the government

After more than four months, the BCDA awarded the contract to the Proponent on Feb. 22, 2018, and only after getting clearance to proceed from the Office of the Government Corporate Counsel (OGCC), which acts as BCDA’s statutory counsel. Since the original OGCC opinion required certain clarifications, BCDA continued to work with the OGCC to satisfy its concerns until the OGCC issued a clean opinion on Oct. 2, 2018.

The Project is implemented as a joint venture, with the resulting JV Company between BCDA and the Proponent undertaking to design, build, operate and maintain the NGAC Facilities to be transferred to BCDA at the end of the JV term of 25 years (renewable for another 25 years).

The arrangement with respect to the Sports Facilities is different, in that these are to be transferred to BCDA right after full acceptance, with the BCDA required to select a qualified O&M provider.

While it is true that the construction of the NGAC Facilities and the Sports Facilities are being undertaken under different modalities””i.e., the former being undertaken pursuant to a build-operate/maintain-transfer arrangement, and the latter pursuant to a build-transfer scheme””both are pursued under one JV legal framework.

To date, the Proponent (or more accurately the JV, owned 90 percent by the Proponent and 10 percent by BCDA) has not received a single centavo as payment for the Project even as the Sports Facilities are already in full use for the ongoing SEAG, as the current utilization of the facilities is still part of their testing and commissioning. Only after full acceptance will the JV be paid for building the Sports Facilities, through five annual availability payments.

As for the NGAC Facilities, the JV will only recover its cost through the lease or purchase of the government buildings and residential and support facilities, all of which are being built without any guaranteed payments. Financing is 100-percent finance by private sponsor (the DBP loan mentioned in the article is a purely commercial transaction between the JV and the bank) and demand risk for the NGAC Facilities is borne by the JV.

Simply put, if nobody purchases or leases the spaces or units at the NGAC Facilities, such loss is solely the JV’s””owned 90 percent by the Proponent””to bear.

These are the hard facts. How, then, is the government in this particular Project disadvantaged, and worse, defrauded?

A.B. BATUHAN
Director
Bases Conversion and Development Authority