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Breaktime: Never shall the train meet

/ 04:15 AM January 30, 2014

Uh-oh, another bidding done by the DOTC, this time involving the P1.7-billion single ticket system for the three light rail lines in the metropolis, seems to be unraveling.

Word is out that the Department of Transportation and Communications (DOTC) is ready to announce the winner of the bidding that it conducted almost two months ago. The jury is still out on why the announcement of the winner is taking too long.

Bearing the impossible official name of AFCS, or the automated fare collection system, it happens to be a rare PPP (public-private partnership) project, one of the first under the three-and-a-half-year old Aquino (Part II) administration, which seems to be in a mad dash for PPP projects as the term of our leader Benigno Simeon (aka BS) unwinds in the next couple of years.


In other words, the AFCS ought to be an urgent undertaking, particularly since it proposes to install a quick payment system for all the three light rail lines, thus benefiting the poor commuters who at present must form queues at the bursting train stations as long as our coast lines.

At the opening of the bids on Dec. 9 last year, at least according to news reports, two groups emerged on top, each offering to pay the government over a billion pesos to install and run the AFCS for 10 years. Topping the list was the AF Consortium, made up of BPI Card Finance Corp., Metro Pacific Investments Corp. (MPIC), Smart Communications, Globe Telecom, AC Infrastructure Holdings (owned by the Ayala group), and NTT Data Corp. (owned by Oracle Solutions).

The AF Consortium submitted a bid that was only P103,900 higher than that of the second-highest bidder, which was the SM Consortium, made up of SM Investments, BDO Capital and Investments, Advanced Card Systems (based in Hong Kong) and Pentacapital Investment.

News reports immediately quoted representatives of the AF Consortium as highly elated by the outcome of the bidding as the consortium seemed to come up on top. Hold it, boss, just wait a minute there—the bid of the AF Consortium bears a little scrutiny. Our inside info is that the AF Consortium bid of P1,088,103,900—actually—entailed certain conditions.

For instance, it turns out that the AF Consortium proposed to pay the government for the project only about P280 million upfront—you know, similar to a down payment. Payment of the rest of the amount would hinge on certain conditions. For instance, the consortium proposed to give to the government the P800 million in the total payment in its proposal, only if and when its total intake in the ticketing system would have reached at least P750 million per quarter.

What if the government—through the rather overloaded DOTC, with its many projects like airports, seaports, light rails—would fail to meet the conditions on the train ridership? Clearly, if the light rail systems failed to hit such a volume for some reasons, the government would not get those P800 million.

The thing is that, based on projections of the DOTC, the ridership on those light rail systems would only reach the volume specified by the AF Consortium in its bid only after nine or 10 years. Does it mean then that, based on the conditions attached by the AF Consortium in its bid, the government cannot expect to get a single centavo in the first eight years?

Moreover, what if the ridership would fail to reach the volume imposed by the AF Consortium as a condition, which could happen because of the way the DOTC has been mishandling the operations of those light rail systems, the government could very well say goodbye to the P800 million. In other words, it seems the DOTC would take a big gamble by accepting the AF Consortium conditions, just because it submitted the highest bid.


Come on, boss, do not tell me that these guys, with their MBAs and sharp pencils, really never heard about “present value” in the computation of prices and bids and such? From what I heard, the SM Consortium actually submitted a bid that offered to give the government P1.088 billion upfront. It would be a one-time, unconditional full payment of the entire P1.088 billion, the cash being ready upon the signing of a concession agreement between the consortium and DOTC.

Put another way, the SM Consortium was willing to take all the risks, including the possibility of poor ridership on those light rail systems.

Now, it so happens that the DOTC also received an appeal from another bidder for the AFCS, none other than the E-Trans Solutions Consortium, made up of East West Bank, Sagesoft Solutions, Pilipinas Micro Matrix Technology and Pulsar Advancer Tech.

DOTC culled out the E-Trans Consortium in the technical evaluation of the bidders, but the consortium appealed to the DOTC to open its financial bid anyway, although the DOTC rules specified that only the financial proposals of those that passed the technical evaluation would be eligible for the financial bidding stage.

Now, word is going around that political connection would come into play in the DOTC awarding of the billion-peso AFCS project.

It is said that certain groups that took part in the bidding were known to be big supporters of our leader BS during the election campaign in 2010.

Really, the decision of the DOTC on this fat contract should bear watching.

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TAGS: bidding, Business, Department of Transportation and Communications (DoTC), LRT, MRT, Philippines, rail transport, ticketing system
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