How BCDA's multi-billion New Clark deal slipped through

 

MANILA, Philippines – The multibillion-peso deal of the Bases Conversion and Development Authority (BCDA) to build New Clark City's sports facilities slipped through the approval process by circumventing several rules, documents obtained by Rappler show.

The BCDA entered into a Joint Venture Agreement (JVA) with Malaysian firm MTD Capital Berhad to build the New Clark City in Capas, Tarlac, which includes sports facilities consisting of a 20,000-seater athletic stadium, a 2,000-seater aquatic center, and an athletes’ village.

A memorandum by the Governance Commission for GOCCs (GCG), BCDA's own Joint Venture Guidelines, and even the draft JVA of the contract all required that a favorable legal opinion should be secured from the Office of the Government Corporate Counsel (OGCC) prior to signing the deal.

The favorable legal opinion of the OGCC being cited by the BCDA was issued only on October 2, 2018 – 8 months after the JVA took effect.

"The latest OGCC review obviously supersedes the old one, and this was done after clarifications were made by BCDA," the BCDA said in a message to Rappler on Monday, November 25.

Rappler immediately followed up with the BCDA why the legal opinion was issued only after the signing of the agreement, but it hasn't received a response as of Tuesday afternoon, November 26. We are also trying to obtain a copy of the favorable legal opinion from the OGCC. We will update this story once the BCDA responds.

Rappler also tried to reach out to Isaac David, MTD Capital Berhad director, but has not received a response. We will also update this story once he replies.

How it happened

On January 30, 2018, former OGCC chief Rudolf Jurado issued a contract review of the draft JVA and flagged some provisions of the construction of New Clark's sports facilities.

Under the draft JVA, the BCDA will contribute the project site as equity capital, while MTD Capital Berhad will shoulder the construction cost. Later, MTD Capital Berhad obtained a P9.5 billion-loan from the Development Bank of the Philippines for this purpose. (The cost of the project in the final JVA was P8.5 billion.)

The draft JVA added that BCDA will obtain ownership of the sports facilities after paying MTD Capital Berhad in 5 annual installments. The amount per yearly installment was left blank in the draft JVA reviewed by the OGCC at the time.

Later, in the final JVA, the amount became P2.2 billion per year, meaning BCDA would pay a total of P11.1 billion in 5 years.

A provision not found in the draft JVA, and which later appeared in the final JVA, said the excess covers MTD Capital Berhad's "reasonable costs and returns," seen as a return on investment.

Jurado had flagged the repayment scheme. According to his contract review, the deal constitutes a build-and-transfer scheme and not a joint venture. A build-and-transfer scheme, the review said, should be subjected to a public bidding.

The deal was a result of MTD Capital Berhad's unsolicited proposal, which later won through a Swiss challenge. The BCDA insists the project is a legitimate joint venture.

The rules on legal opinion

The negative contract review notwithstanding, BCDA president and CEO Vivencio “Vince” Dizon signed the JVA with MTD Capital Berhad. The contract became effective on February 22, 2018.

Section 3.2(a)(iii) of the draft JVA said "on the signing date, the BCDA shall submit a legal opinion from the OGCC confirming the validity and enforceability of this agreement."

That provision was deleted in the final JVA.

BCDA's own JV Guidelines, approved in September 2017, say that "prior to the execution date of the JV agreement, the OGCC as the statutory counsel of BCDA, shall issue the corresponding Counsel's Opinion."

GCG Memorandum Circular No. 2018-02, signed January 3, 2018, says that when entering into deals involving major development projects, "the required favorable legal opinion and/or contract review by the OGCC shall be secured by the Government-Owned and Controlled Corporations (GOCC) before entering into said agreements."

The October 2, 2018 legal opinion by the OGCC was not signed by Jurado as President Rodrigo Duterte fired him in May 2018. Duterte appointed Elpidio Vega as new OGCC chief on October 1, 2018. 

"The Office of the Government Corporate Counsel (OGCC), in its Opinion No. 182, s. 2018, confirmed that the 'provisions of the executed JVA and the legal framework of the Project are in compliance with the existing laws, rules and regulations,'" the BCDA said in an earlier statement. 

Profit-sharing

Another provision in the final JVA that was not found in the draft JVA, was the 50-50 profit sharing over the sports facilities.

“The parties hereby agree that the net profit after tax and the net losses relating to the sports facilities: i.) 50% to or by (as applicable) the BCDA; and ii.) 50% to or by (as applicable) to the Winning Private Sector Proponent [MTC Capital Berhad],” the final JVA said.

Section 4.9 of the final JVA says "any subsequent changes in the sharing of gains and losses shall be subject to the mutual agreement of the parties."

The BCDA earlier said that it has opted to pay MTD Capital Berhad in full and not in 5 annual installments.

"This means that upon full payment and complete turnover to BCDA, BCDA will receive 100% share of the revenues," said the BCDA. 

The New Clark sports facilities will host two sports competitions – swimming and track & field – for the 30th Southeast Asian Games (SEA Games), which is being hounded by controversy over the budget and other expenses.

Poor preparations that led to foreign teams sleeping on hotel floors, a match played without a scoreboard, and other venues racing to finish construction before the formal opening on November 30, threaten the event as a whole.

Some worry that the SEA Games would end up as Asia's Fyre Festival, a big-time Bahamas musical event gone wrong, and which resulted in fraud charges against organizers. – with a report from Ralf Rivas/Rappler.com

Lian Buan

Lian Buan covers justice and corruption for Rappler. She is interested in decisions, pleadings, audits, contracts, and other documents that establish a trail. If you have leads, email lian.buan@rappler.com or tweet @lianbuan.

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