PH’s PPP thrust: Work in progress

Chrisee Dela Paz
(UPDATED) After 5 years since its kickoff in 2010, did the flagship public-private partnership program of President Benigno Aquino III meet expectations?

PPP TRAFFIC JAM. 41-year-old Celina Garcia is just one of the millions Filipino motorists and commuters who find getting around Metro Manila more time-consuming than ever. Illustration by Mara Mercado/Rappler

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(UPDATED) Celina Garcia, 41, a mother and a bank officer, leaves home in Marikina City at 5:30 am to bring her child to school.

Her child eats breakfast in the backseat of the car during the 20-minute ride. It will take her two hours to drive from her child’s school to her workplace in Makati City.

With one mode and one stop, she travels an average of two hours and 20 minutes each way. This kind of travel is common among Filipino motorists and commuters – a huge waste of time in social terms.

“For us, car is important to travel within Metro Manila, as public modes of transport, like the MRT3 (Metro Rail Transit Line 3), is more time-consuming, unreliable, and not safe,” Garcia said.

She said she is “losing hope” in the country’s urban transport.

Over the years, commuters have endured long queues at MRT3, delayed flights due to air congestion at the Ninoy Aquino International Airport (NAIA), and congestion at the Manila ports.

Unmet expectations?

The country’s public-private partnership (PPP) thrust was envisioned to address these woes. But 5 years since its kickoff in 2010, did the flagship program of President Benigno Aquino III fail to meet expectations?

In an interview, PPP Center executive director Cosette Canilao said the government expects these 5 infrastructure projects to be completed by mid-2016:

5 PPP projects targeted for mid-2016 completion (Source: PPP Center)
Project Description Concessionaire Contract awarded Project status / reasons for delay
DepEd’s P16.43-billion ($363.29-million) Phase 1 PPP School Infrastructure 9,623 classrooms in 2,300 public schools in Region I, III and IV-A BF Corporation and Riverbanks Development Corporation; Megawide Construction Corporation and Citicore Investment Holdings October 2012 As of May 31, 8,876 classrooms (95.48%) completed and delivered; 416 classrooms (4.48%) ongoing construction; 4 classrooms (0.04%) in different stages of pre-construction
DepEd’s P3.86-billion ($85.35-million) Phase 2 PPP School Infrastructure 4,370 classrooms in 1,895 public schools in 6 regions Megawide Construction Corporation and group of BSP Company Incorporated and Vicente Lao Construction October 2013 As of May 31, 1,193 classrooms (27.30%) completed/substantially completed; 1,465 classrooms (33.52%) under construction; and 1,712 classrooms (39.18%) under pre-construction
DPWH’s P15.86-billion ($350.69-million) NAIA Expressway Phase II 4-lane, 7.75-km elevated expressway and 2.22 km at-grade feeder road that will provide access to NAIA Terminals I, II and III; and link the Skyway and the Manila-Cavite Toll Expressway San Miguel Corporation’s Optimal Infrastructure Development Corporation May 2013 As of June 15, only 47.98% of the structure has been completed because the implementing agency has yet to deliver full right-of-way
DPWH’s P2.01-billion ($44.44-million) Daang-Hari South Luzon Expressway Link Road 4-km, 4-lane toll road from the junction of Daang Reyna and DaangHari in Las Piñas/Bacoor, Cavite, to SLEX through Susana Heights Interchange in Muntinlupa, traversing the New Bilibid Prison Reservation Ayala Corporation December 2011 As of June 25, 99% civil works construction completed;ongoing installation and testing/commissioning of the toll collection system
DOTC’s P1.72-billion ($38.03-million) Automated Fare Collection System Contactless-based smart card technology on LRT Line 1 and 2 and MRT3 AF Payments Inc. of Ayala Corporation and Metro Pacific Investments Corporation January 2014 The unified automated fare collection system for Metro Manila’s elevated trains begins its public trial run at the Light Rail Transit 2 (LRT2) on Monday, July 20

Other than these 5 PPP deals, the Aquino administration has awarded 5 other PPP deals so far, but none of these have seen completion yet. These are the:

  • P8.69-billion ($192.15 million) Modernization of Orthopedic Center
  • P17.52-billion ($387.40-million) Mactan-Cebu International Airport Terminal Building
  • P64.9-billion ($1.43 billion) LRT1 Cavite Extension
  • P2.5-billion ($55.28-million) Integrated Transport System-Southwest Terminal
  • P55.51-billion ($1.23-billion) Cavite-Laguna Expresswa

Canilao said Aquino’s flagship PPP thrust started on the right foot, yielding substantial revenues, concession fee payments to the government, and rolling out deals faster than the previous administration. (READ: Aquino: More PPP projects awarded than past 3 admins)

Encouraged by this success, the PPP Center lined up about 60 PPP deals in the pipeline that it is also actively marketing to foreign investors through international roadshows.

BEHIND TARGET. As of July 14, the government is able to complete around 70% of right-of-way. 'We are 12 months behind target completion,' San Miguel Corporation says. Photo by Chrisee Dela Paz/Rappler

Mood has changed

The mood, however, changed because of notable delays in tariff adjustments in some power, water, and toll road PPP deals; right-of-way disputes; as well as changes in the rule of the game.

The major win for the Aquino administration, the 7.1-kilometer NAIA Expressway (NAIAX) Phase II, has been on the drawing board since May 2013, but until now, it remains uncompleted.

This was because implementing agency Department of Public Works and Highways was not able to fulfill its promise of giving winning concessionaire San Miguel Holdings Corporation (SMHC) full right-of-way delivery by April 2014.

Now, the completion of the project has been pushed back by a year.

The contract to modernize the Philippine Orthopedic Center also hit a roadblock – health workers and party-list organizations filed a petition against the “privatization” of the state hospital. 

The Mactan-Cebu International Airport (MCIA) contract, meanwhile, faced delays when losing bidder Filinvest-Changi consortium filed a complaint against winning bidder GMR-Megawide consortium, alleging conflict of interest.

TURNOVER. President Benigno Aquino III witnesses the turnover of a check by MPIC's Manuel Pangilinan to DPWH Secretary Rogelio Singson during the project briefing on the Cavite-Laguna Expressway Project at Malacañang. Also in the photo are PPP Center's Cosette Canilao (extreme left), and Finance Secretary Cesar Purisima (extreme right). Photo by Robert Viñas/Malacañang Photo Bureau

Right of way, changes in rules

The construction of a new Cebu airport terminal was even set back by 5 months because of a right-of-way issue.

The most complicated PPP deal to date, the Light Rail Transit line 1 (LRT1) Cavite extension project, has also been subjected to repeated feasibility studies, bid out twice, and is now stalled because of a legal tussle.

The first bidding in August 2013 failed due to misallocation of risk and insufficiency of allowed subsidy. It was put on the auction block again in May 2014 with the lone bidder, the group of Metro Pacific Investments Corporation and Ayala Corporation, winning the project. 

The construction of the project has not even started yet due to an ongoing legal tussle involving the location of a “common station” shared with another rail line.

The cost of these issues on LRT1 Cavite extension project? About a year’s delay and millions of foregone revenue.

For the controversial road deal Cavite-Laguna Expressway project (CALAX), the government has declared a failure of bidding and conducted a second round after an appeal from disqualified bidder San Miguel Corporation (SMC) over a non-compliant bid security.

Afterwards, SMC announced it was supposed to bid for a premium fee of P20.1 billion ($444.28 million), much higher than highest complying bidder Team Orion’s P11.67 billion ($257.95 million). The Philippine government eventually gave the Ramon Ang-led company another chance through a fresh round of bidding.

“We believe that rules should not be changed mid-stream. The government’s decision to dishonor the rules that they themselves wrote ruins the credibility of the entire PPP program,” CLSA Philippines, Incorporated Research Analyst Ignacio Gonzales said in his report dated November 2014.

“This will definitely deter foreign and local investors from participating in future biddings – a potentially bigger loss than the opportunity cost of not accepting San Miguel’s bid,” he added.

Moving forward

But from where it started in 2010, the PPP Center has made significant strides in terms of rolling out projects and building a robust pipeline of infrastructure deals.

PPP Center’s Canilao told Rappler that the government targets to award 21 projects more before Aquino steps down. She admits, however, that this target “could be hurdled by unforeseen challenges along the way.”

“The challenges notwithstanding, we think the PPP program will continue to be a necessary feature because of constrained public resources and ability to tap into private sector technical, financial, and managerial expertise,” read a December 2014 report from GlobalSource Partners and Lazaro Bernardo Tiu & Associates (LBT&A) Incorporated.

“At the end of the day, it is the assurance of a predictable legal and regulatory environment during the bidding and award stage and over project life that will kindle private sector interest and achieve value for money for the public sector,” LBT&A’s Romeo Bernardo and Marie Christine Tang said in the report. 

Beyond Aquino administration

The next administration could inherit fewer PPP headaches if the changes in the decades-old Build-Operate-Transfer (BOT) Law are implemented under Aquino’s watch.

Amendments to the BOT Law, including a longer timeframe for challenging an unsolicited proposal and the standardization of contract templates for PPP projects, are expected to be passed by mid-2016, Canilao said.

For University of Asia and the Pacific senior economist Victor Abola, the country’s PPP thrust is “work in progress.” 

“Reforms don’t happen overnight. I hope the next administration will learn from what this current administration experienced. Changes in BOT Law are the start,” Abola said.

With the passage of amendments to the BOT law too, Aquino made sure in his 2014 State of the Nation Address that the program would outlast his term.

If delays continue to hound the implementation of these infrastructure deals, it is not only Garcia who will continue to suffer, but also the estimated 1.1 million daily MRT3 and LRT1 riders.

For commuters like Garcia, these projects will not help unless construction is completed.

The 41-year-old bank officer said her family is thinking of renting a place near her office and transferring her child to another school close to her workplace to save time.

“If our Plan B won’t work, my child will need to have her breakfast at the backseat of our car every weekday just to be in time for her school and for my work,” Garcia said. – Rappler.com

$1 = P45.24