Award of big infra projects

Transportation Secretary Arthur Tugade said a mouthful when he announced recently that the government would handle the development of Clark International Airport in Pampanga.

This means, government resources and personnel will be used to improve the airport facilities of the erstwhile biggest United States air force base in this part of the world.

His decision shuts out the offers of several business conglomerates and their partner airport operators to undertake the modernization and operation of the airport that airplanes use when, due to natural or manmade causes, they cannot land at the Ninoy Aquino International Airport.

Tugade expressed apprehension that inviting the private sector to the project would result in delays arising from litigation by losing bidders.

Without going into specifics, he stated that this was the experience in past administrations.

A case in point is the expansion of the Mactan Cebu International Airport (MCIA), the country’s second largest airport hub, where five companies bid for the project.

The Megawide-GMR consortium was awarded the project in April 2014.

The second highest bidder questioned the award for alleged conflict of interest.

The dispute was investigated by the Senate and some senators weighed in on the issue based on their political affiliation.

As if the legislative intrusion was not enough, the losing bidder filed a suit in the Supreme Court to stop the award but failed.

It was only after 14 months, or in June 2015, that Megaworld-GMR was finally able to commence the improvement of MCIA.

To date, the modernization of MCIA is reportedly going on smoothly and the consortium may be able to finish the project ahead of schedule.

Had the implementation of the project not been delayed for 14 months, the entire MCIA complex would probably be up and running today.

Tugade cannot be faulted for thinking that the national interest plays second fiddle to the private companies’ fiduciary obligation to get the best deals possible for their stockholders and investors.

Private companies go all-out when they bid for big ticket government projects.

They get the best technical people, investment analysts and professional advisers that their money can buy to ensure a fighting chance in the bid.

And depending on the circumstances, they enlist the assistance of government officials (with the right amount of incentives) who can tilt the balance in their favor when the bidding contest appears to be tight.

For all the efforts made and expenses incurred, losing a bid is not easy to accept.

The loss becomes more painful if the difference between the highest and second highest bids is minimal, or the loss is due to technicalities that could have been avoided had the staff that prepared the bid documents been more thorough in their work.

To mitigate the loss or in order not to lose face, the unsuccessful bidder would often question the award for various reasons, e.g., bias in the evaluation of the bids, erroneous interpretation of the rules, and failure of bidding.

If the bidder is unable to reverse the award through administrative means, it would either file an action in court to question the bid proceedings, or go to the media to air its grievances, or tap the services of a congressman or senator who would call for a congressional investigation on the incident supposedly “in aid of legislation.”

With the right amount of arguments, it is easy to find a judge who will issue a restraining order to prevent the commencement of the project despite the fact that the law states that government infrastructure projects are immune from that kind of court action.

Faced with possible delay in the implementation of the award, the winning bidder is sometimes obliged to offer the losing bidder, in consideration for withdrawing its opposition, a piece of the project or reimburse the expenses it incurred in the preparation of its bid.

If the government has the resources anyway, Tugade’s decision to make the government do the modernization of Clark International Airport and probably other big ticket infrastructure projects alone, makes good business sense.