In 2011, the Mactan Cebu International Airport (MCIA), the gateway to various tourist destinations in the Visayas Islands served a total of 4.75 million incoming and outgoing domestic passengers and more than 1.47 million incoming and outgoing international passengers.
The total, 6.2 million, is already far beyond the existing capacity of the MCIA Terminal which was designed to serve only 4.5 million passengers a year. Consider that in 10 years from 2001 to 2011, the total number of domestic and international passenger traffic grew by 10.7 percent annually with the second half of the same period registering a much faster annual growth rate of 15.2 percent compared to the first half’s 6.4 percent annual growth rate. So even by a conservative growth rate of 10 percent, MCIA must already have about 8 million passengers to serve this year.
With the rapid growth in the number of passengers and capacity already exceeded, MCIA and the Department of Transportation and Communications (DOTC) made plans to: a.) Construct a new passenger terminal, along with all associated infrastructure and facilities as per Philippines or international guidelines and ICAO standards; b.) Construct an apron for the new passenger terminal; c.) Renovate and expand the existing terminal along with all associated infrastructure and facilities as per Philippines/international guidelines and ICAO standards to handle domestic operations; d.) Install all required equipment and other associated facilities as per Philippines/international guidelines and ICAO standards; e.) Install the required information technology and other equipment commensurate with the operations; and f.) Allow the private sector to operate and maintain both the passenger terminals (new and existing) during a specified concession period.
Given the limited funds of the government, the project is proposed to be undertaken under a public private partnership based on the Philippines Build Operate Transfer law and its Implementing Rules and Regulations (IRR) as legal framework.
The proposed project attracted many private investors which formed their consortiums, submitted their bids and passed the required legal, technical and financial qualifications. The final hurdle would determine who among them submitted the highest bid for the right to undertake the project and operate the terminal for 20 years. The highest bid was made by the Megawide-GMR Consortium with a P14.4 billion bid. The second was the Filinvest-Changi Consortium with a bid of P14 billion.
Since it was the next highest bidder, I think it was also natural for Filinvest-Changi Consortium to know whether there was no mistake in the bidding process and to be given a fair hearing. Thus, before the granting of the Notice of Award and signing of the Concession Contract, it challenged the result of the bidding by raising two issues: the financial capacity of GMR and its alleged violation of the Conflict of Interest rule.
On the second issue, Filinvest-Changi consortium claims that Megawide-GMR consortium violated the Conflict of Interest rule when one of the members of the board of directors of the airport affiliates of GMR Infrastructure Ltd., which is part of the GMR-Megawide consortium is the managing director of Malaysia Airports Holdings Berhad (MAHB), which is part of the First Philippine Airports consortium which is also one of the bidders for the MCIA project.
As a background, the instruction to bidders of the DOTC’s bids and awards committee (BAC) says that in addition to the grounds for disqualification described in Section V-01, a Prospective Bidder may also be disqualified from participation in the Bidding for several reasons. One of this is “any Conflict of Interest that would give it any unfair advantage in the Pre-Qualification process as defined in Section V-04 of the Instruction to Bidders.”
Section V-04 on conflict of interest says that prospective bidders and consortium members (if the Prospective Bidder is a Consortium), including their affiliates, must not have any conflict of interest and that without limiting the generality of what would constitute a conflict of interest, one of the things considered by the DOTC-BAC as conflict of interest is this: “a member of the board of directors, partner, officer, employee, professional advisor or agent of a Prospective Bidder, any Consortium Member, or any of their Affiliates (of either the Prospective Bidder or any of its Consortium Members), is also directly involved in any capacity related to the Bidding Process for the Project for another Prospective Bidder, any Consortium Member of any other Prospective Bidder, or any of their Affiliates (of either the Prospective Bidder or any of its Consortium Members), within a period of two (2) years prior to the publication of the Invitation to Pre-Qualify and Bid and one (1) year after award of the Project.”
Clear as it may seem to one person, this particular provision on conflict of interest may not be clear to another. Thus the controversy and vehement denial of GMR of any violation. Which is correct? That is the question that now needs to be settled.
This project is the biggest so far in Cebu in terms of cost. The people of Cebu are already complaining of the delayed implementation. I think the issue raised is valid because it involves the integrity of the PPP system which is used by the government to attract private investors to help build the country’s infrastructure. The Philippin’es poor infrastructure has always been cited as one of the big reasons for our low competitiveness. Failure to protect the PPP’s integrity therefore may derail our infrastructure development program and condemn many of our people to continue living in poverty longer than necessary.
With these in mind, I think there is really a need to look more closely into the issue. If a conflict of interest existed, the Megawide-GMR consortium should be disqualified and therefore barred from getting the project even if it is the highest bidder. Whatever its final decision, the DOTC-BAC better do it fast with utmost diligence and transparency in order to close the issue for good to the full satisfaction of the people of Cebu.
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