Gov’t orders ‘price challenge’ for SCTEx

THE SUBIC-CLARK-TARLAC Expressway INQUIRER FILE PHOTO

MANILA, Philippines–Malacañang has decided to subject the privatization of the country’s longest tollroad Subic-Clark-Tarlac Expressway (SCTEx) to a competitive “price challenge” after the apparent failure of three rounds of contract renegotiation with the group of businessman Manuel V. Pangilinan over the last four years.

In an interview with Inquirer on Tuesday, Bases Conversion Development Authority (BCDA) president Arnel Casanova confirmed that he had received an order from the Office of the President to conduct a price challenge for the 31-year SCTEx concession.

“We will draft the terms of reference as soon as possible,” Casanova said, adding that it was possible to conduct the price challenge before the year ends.

Under the price challenge, other parties will be given the opportunity to vie for the highest upfront cash value that the concessionaire will have to pay to the government for the right to take over the operation and management of SCTEx, where about 30,000 vehicles pass every day.

The minimum bid for the upfront cash is set at P3.5 billion, the same level offered by Manila North Tollways Corp. (MNTC) last February, the last time it submitted an improved offer to operate and manage SCTEx.

On top of the upfront cash, the concession required the private sector to remit to the government a 50-percent share in gross proceeds from the tollroad, Casanova said. SCTEx has an estimated cash flow of at about P1 billion a year.

Once BCDA has transferred the concession, the private sector would take care of all the expenses on operation and maintenance while BDCA would take care of the debt-servicing requirements, Casanova explained.

As the original project proponent, Pangilinan’s group will have the right to match the highest cash value offer from other bidders. Such a price challenge can thus jack up the cost of MNTC or, in the worst-case scenario, lose the contract if there is a much aggressive rival.

From the government’s perspective, conducting a price challenge means unlocking the best value out of the SCTEx project. This followed concerns aired by the Department of Finance on the adequacy of the government’s prospective share of revenues from the tollroad. For its part, MNTC had to revise its offer three times to improve the terms and uphold its claim on this contract.

The SCTEx concession was won by MNTC during the Arroyo administration when the BCDA moved to privatize the operation of the tollroad. A few months before President Aquino assumed office in 2010, MNTC was considered the sole eligible bidder for SCTEx after rival Northlink Tollway Management—a joint venture between San Miguel Corp. and Star Tollways Corp.—was declared short of the technical requirements.

The contract was affirmed by the BCDA board under the Aquino administration subject to several rounds of renegotiation starting 2011. The last proposal was submitted in February, during which the Pangilinan group offered an upfront cash—the same premium that the government will now subject to a price challenge.