Cebu airport winning bidder another Piatco?
Senator Osmeña says GMR Infrastructure, the foreign partner in the winning consortium, has previous dealings similar to those of notorious NAIA 3 contractor Piatco

WINNING BIDDER. The tandem of GMR Infrastructure and Megawide submits the highest bid for the Cebu airport expansion project. Photo of Osmeña delivering speech by Joseph Vidal/Senate PRIB

MANILA, Philippines – “Shades of Piatco.”

Senator Sergio “Serge” Osmeña III on Tuesday, February 25, asked the Senate to look into the pending award of the contract for Mactan-Cebu International Airport’s expansion, saying the airport could suffer the same fate as NAIA Terminal 3 in the hands of the winning consortium, led by India’s GMR Infrastructure Ltd.

In a privilege speech, Osmeña revealed GMR’s ties with Frankfurt Airport Services Worldwide (Fraport), the operator partner and majority beneficial owner of Piatco (Philippine International Air Terminals Company Incorporated), the consortium in the NAIA 3 debacle.

The senator questioned GMR’s integrity and insinuated that it might have learned “tricks” from the German firm. He said GMR’s and Fraport’s Delhi International Airport project in India bore similarities to the notorious NAIA 3 deal.

Osmeña, a Cebuano, also raised concerns about alleged conflict of interest violations committed by GMR as well as its financial capability.

“So Mr. President, if a person were to be judged by the company he keeps, what does GMR’s association with Fraport tell us?” Osmeña asked.

“I therefore appeal to this body, Mr President, to look into this matter and to add its voice to ensure a speedy resolution of the conflict of interest issue so an award can be made to the highest qualified bidder.”

GMR is the foreign airport operator partner of local company Megawide Corporation in the consortium that won the bidding for the P17.5-billion contract to expand the Cebu airport, the second busiest airport in the country. This is one of the largest Public-Private Partnership projects of the Philippine government.

The award, however, has been delayed pending the completion of a post-evaluation process meant to address concerns raised against the consortium.

Osmeña said, “As a Cebuano, I am very much concerned because…should the project falter like the infamous Piatco Terminal 3 of the Ninoy Aquino International Airport, it is not only the people of Cebu province but all Filipinos who would suffer the consequences.”

Fraport and partner Piatco are in a long-running legal battle with the Philippine government over NAIA 3. Fraport and Piatco are seeking just compensation after their contract was nullified by the Supreme Court in 2002 over alleged violations of the Anti-Dummy Law and huge kickbacks and payoffs that bloated the contract price. The legal issues caused NAIA 3 to be mothballed for 6 years until its soft opening in 2008.

‘Not a dependable investor’

Last December 12, GMR-Megawide won the bidding for the Cebu airport project with an offer of P14.4 billion. It bested the groups of Filinvest Development Corporation (FDC), Metro Pacific Investments Corporation and JG Summit Holdings, San Miguel Corporation and Incheon Airport Consortium, First Philippine Airports Consortium, Premier Airport Group, and AAA Consortium.

The consortium of FDC and its foreign partner Changi Airport, which submitted the next highest bid of P14 billion, asked the Department of Transportations and Communications to disqualify GMR-Megawide for violations that Osmeña also outlined in his privilege speech.

First is GMR’s alleged violation of Rule 5.6(c) of the bidding rules that states a board member or director or partner of a bidder or any of its affiliates must not be directly involved in the bid process of another bidder.

FDC claimed that GMR and First Philippine Airports have interlocking interests. It said the managing director of First Philippine Airports’ partner in its Cebu airport bid – Malaysia Airports Holdings Berhad – sits in the board of GMR’s airport projects, including the one in Delhi. (READ: Filinvest wants top Cebu airport bidder disqualified)

“The conflict of interest issue is not to be taken lightly as the provision is embedded in all government auctions. It aims to protect the government from colluding parties or related entities submitting several bids for one project. The mere existence of the relationship is enough to cause a conflict and the government is not required to prove collusion as the provision is preventive in nature,” Osmeña said.

The senator also echoed FDC’s concerns about GMR’s financial stability. “GMR’s own audited financial statements reveal the company had suffered operating losses for the past 3 years.”

On the Fraport issue, Osmeña said that GMR’s Delhi airport project enjoyed “post-contractual benefits” that violated processes, and failed on its contractual obligations resulting in additional fees for airport passengers – just like Piatco. He was quoting a report of the “Comptroller and Auditor General of India.” 

“GMR should not even be remotely considered a dependable investor to be entrusted with a long-term involvement in our Mactan airport. I fear that GMR might merely flip its equity in this project for a profit. And where would that leave the Cebuanos?” noted Osmeña.

The Cebu airport project involves the construction of a new international passenger terminal building that can handle 8 million passengers per year, double its current capacity. The deal also includes the operation and maintenance of old and new facilities.

The Cebu airport accommodated some 6.7 million passengers in 2012, more than its intended capacity of 4.5 million. –

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