Malacañang to resolve Calax row

Conglomerate San Miguel Corp.

MANILA, Philippines–Malacañang has issued an order suspending the implementation of a resolution by the Department of Public Works and Highways (DPWH) to disqualify conglomerate San Miguel Corp. from the controversial bidding for the Cavite-Laguna Expressway (Calax) project under the public-private partnership (PPP) framework.

In an order dated June 30 issued by the Office of the President, a copy of which was obtained by the Inquirer, Deputy Executive Secretary for legal affairs Michael Aguinaldo said the execution of the June 11 DPWH resolution was “stayed, unless otherwise ordered by this office.”

Optimal Infrastructure Development Inc. (OIDI), the San Miguel unit that was bidding for the project, was given by Malacañang 30 days from its notice of appeal to submit its appeal memorandum. The order said the memorandum should include, among others, a “concise statement of the facts and issues and the grounds relied upon for the appeal.”

The DPWH resolution suspended by Malacañang referred to the disqualification of the technical proposal of OIDI for the $864-million tollroad project. This disqualification left only three groups qualified to bid for the project—MTD Capital Bhd, Team Orion (a partnership between the Ayala and Aboitiz groups) and Metro Pacific-led MPCALA Holdings Inc.

OIDI was disqualified as the DPWH deemed that its bid security—an irrevocable standby letter of credit in the amount of P355 million issued by a universal or commercial bank—was “not in compliance” with the provisions set forth in the guidelines. The DPWH noted that the bid security issued by ANZ Bank contained an expiry date of Nov. 25, 2014, or four days short of the required expiry date of Nov. 29, 2014.

ANZ, for its part, sent a formal clarification to DPWH on June 4, 2014, saying that the 180-day expiration would hold. The bank sent a second letter of clarification on June 10.

The “stay” order from Malacañang constrains the DPWH from awarding the tollroad project to Team Orion, which had submitted the highest bid after OIDI was disqualified. Team Orion offered to pay a premium of P11.659 billion to the government for the right to build the tollroad.

Shortly before the opening of the qualified bids on June 13, however, SMC announced outside of the DPWH premises its premium offer of P20.1 billion. On June 26, OIDI filed a formal notice of appeal to the Office of the President against the decision of Public Works Secretary Rogelio Singson and the special bids and awards committee to disqualify it from the bidding.

The disqualification has triggered a big debate given the P8.45-billion difference between the offer of OIDI and Team Orion. Some said the disqualification was based on a flimsy technicality, given that ANZ had already clarified the effectivity of the bid security and an invoice was submitted to prove that OIDI had paid for a premium of 180 days and not 176.

Others said the DPWH was only following the implementing rules and regulations of the revised BOT (Build-Operate-Transfer) Law. The posting of the bid security is for the purpose of guaranteeing that the proposed contract awardee will enter into a contract with the concerned agency within the time prescribed by the rules.

Those who had sought OIDI’s disqualification said the provision on rejection of bids (Section 7.5) under the implementing rules of the BOT had specifically stated that incomplete information on any of the envelopes and/or non-compliance with the bid security requirements shall be grounds for automatic rejection of bids. They said it’s a “pass or fail” process of screening that leaves no room for any error.

This development is the latest in the controversy over the 45-kilometer Calax project. DPWH had hoped to render an award as early as June. But Singson said in a text message Wednesday that OIDI’s appeal “has to be resolved first” by Malacañang.

OIDI filed its memorandum of appeal to the Office of the President last June 27. It sought a reversal of the bids and awards committee’s decision to disqualify its offer and that its bid security and bid proposal be declared as “compliant with the instructions to bidders” that the department issued.

Moreover, it wanted the financial bid to be accepted “by way of ‘judicial notice’ as officially opened and read in the amount of [P20.105 billion] concession payment as the bid amount of appellant.”