54 INFRASTRUCTURE

Pres. Aquino gives green light to Stage 3 project

The Metro Skyway Stage 3 project is 1 of the 2 connector road projects of the North Luzon and eyed to shorten travel time and decongest roads in .

resident Benigno Aquino has approved (September 25) the construction of the Metro Manila Skyway (MMS) PStage 3 project, which will connect South Luzon Expressway (SLEX) to the (NLEX). The P26.5-billion project will be funded by the Citra Central Expressway Corporation. The Department of Transportation and Communications (DOTC) along with the Toll Regulatory Board (TRB) will oversee the construction of the project, which is now scheduled to begin early in the 2nd quarter of 2014. The project is undergoing preparatory works until end-2013. The 1st section – from Buendia to Nagtahan – is expected to open in early 2016, just before President Aquino steps down. DOTC said it will coordinate with the Department of Public Works and Highways (DPWH), the Metro Manila Development Authority Aside from the MMS Stage 3 project, another NLEX-SLEX (MMDA), and local government units of Makati, Manila, and Connector Road project – an unsolicited proposal from the Quezon City to minimize traffi c inconvenience in the route of Metro Pacifi c Tollways Development Corporation (MPTDC) the project. Once the project is connected to NLEX-Balintawak, – is expected to be approved and started during the Aquino it is expected to reduce travel time from Buendia to Balintawak administration. It was approved by the National Economic from 2 hours to 15 minutes. The new road is also expected Development Authority (NEDA) on January 18 to proceed to decongest EDSA and other major roads, such as Quezon with a Swiss Challenge. But DOTC has called to drop the Avenue, Araneta Avenue, Nagtahan Avenue, and Quirino Avenue. Swiss Challenge mandated for the proposal and instead require

The 1st section – from Buendia to Nagtahan – is expected to open in early 2016, just before Pres. Aquino steps down.

Philippine ANALYST September 2013 INFRASTRUCTURE 555

NLEX-SLEX Connector Road Metro Manila Skyway Stage 3 (MMS Stage 3)

IMPLEMENTING AGENCY DPWH DOTC-TRB PROJECT DESCRIPTION It will be a 4-lane elevated expressway that is 13.4 km long from Buendia to the Manila Port District in Tondo, using the alignment of the It will mostly be elevated with 6 lanes and run 14.2 km from Skyway- Philippine National Railway (PNR). A separate P10-billion, 8-km NLEX- Buendia to NLEX-Balintawak. Harbor Link project will connect the road to NLEX. CONSTRUCTION TIMEFRAME 2 years 2014-2017 PROJECT COST P22.95 billion P26.5 billion

MPTDC to form a joint-venture with the Philippine National The MMS Stage 3 project is expected to take 3 years Construction Corporation, which holds the franchise for NLEX (2017) to connect to NLEX. Meanwhile, the NLEX-SLEX and SLEX. The government has decided to extend the existing connector road is expected to take 2 years to complete joint-venture between MPTDC and PNCC in NLEX to expedite construction from Skyway-Buendia to the Manila Port the implementation of the project and possibly lower toll District in Tondo. Another 8-km road project, NLEX-Harbor rates. MPTDC said that it is now waiting for the President’s Link, will connect the road to NLEX-Balintawak. Segment approval of the project structure to proceed with construction. 9 – from NLEX to McArthur Highway – started construction in February 2013 and is expected to be completed next year, while Segment 10 is expected to be completed in 2 years.

Philippine ANALYST September 2013 56 INFRASTRUCTURE

DOTC on PPP after 3 deferred projects: ‘It is Out of the 10 priority projects lined-up in 2010, 8 were under DOTC. More than 3 years later, only the LRT-1 extension contract really just a sophisticated process’ bundled with the privatization and O&M contract made it to bidding – but failed. Of the 6 other projects, 2 (New Bohol Airport Business leaders urged the government to review the PPP Development and Enhanced O&M, and Laguindingan Airport process after the bidding for 3 PPP projects under the DOTC O&M) are still being reviewed for implementation under the PPP were deferred. But for the Transportation department, ‘it’s scheme, 2 projects (Puerto Princesa Airport O&M and LRT Line just the nature of PPP.’ 2 O&M) are still in the feasibility study stage, and 2 (MRT 3 Privatization and O&M and New Daraga Airport Development) The European Chamber of Commerce of the were removed from the PPP line-up. The government decided (ECCP) urged the Department of Transportation and not to sell MRT-3 but fi nance its O&M through the Offi cial Communications (DOTC) to review their Public-Private Development Assistance (ODA) fund. While the New Daraga Partnership (PPP) procedure after 3 problematic auctions. The PPP Airport was implemented through national government funding. projects that had failed or were deferred recently were the Light Rail In July 2013, former Budget and Social Security System Transit 1 (LRT-1) extension project, Mactan-Cebu International chief Romulo Neri said that the slow progress in PPP Airport (MCIA) rehabilitation, and the Automated Fare Collection implementation is caused by DOTC’s economic team that System (AFCS) for Metro Manila light rails. Rebidding of lacks the technical expertise to pursue PPP projects. He added LRT-1 is scheduled in the 1st quarter of 2014, while the bidding that these people are not aggressive in implementing PPP for MCIA and AFCS are rescheduled for November 2013. projects as they are scared they will be charged criminally The bidding for the P60-billion LRT-1 extension – supposedly for presumed mistakes. The PPP Center, however, said that the biggest PPP to date – failed on August 15 after 4 pre- the implementation of the projects really just takes time. qualifi ed groups backed out while the only participant made a The Philippines still managed to be faster in implementing conditional offer, which DOTC refused. The conditions in the projects than other countries with a PPP program and agreement concerning real property taxes and guaranteed fare investors see that it is becoming more competitive. increases were said to be the primary reasons. DOTC is now in However, the quality of infrastructure and competitiveness the process of getting clearance from the National Economic and index remained low in the past 4 years (see table). Development Authority for revising the concession agreement. Business groups want the government to implement projects Meanwhile, the P17.2-billion MCIA rehabilitation project and faster to support aggressive economic growth. The ECCP has the P1.72-billion AFCS for Metro Manila were also deferred days suggested that the thrust of DOTC on PPP be reviewed and before the scheduled auctions on August 28 and 30 (respectively) new policies be applied that can speed up the process of PPP as bidders requested officials to review the contracts. implementation, but no specifi c details on suggested policies DOTC claimed that the delays are both theirs and the on how to do that were given. The Management Association private sector’s fault. The bidders in the LRT-1 extension of the Philippines (MAP) has been trying to set a meeting with project requested to postpone the bidding so they could further the DOTC to identify the reasons for the delays so the private study and adjust their offers after some changes were made in sector can participate in resolving the issues. But the DOTC the contract as a result of discussions held with the bidders. has not yet responded. Meanwhile, the PPP Center said it will Meanwhile, bidders for the MCIA and AFCS also requested be conducting a full review of the policies in the PPP program. for a longer period of time to prepare. “Why will they feel bad when they are the ones requesting postponement or more time? They should feel bad if we don’t listen and just push through with the bid,” the DOTC said. It added that “nothing went wrong (in the process)… It’s just the nature of the PPP. It is really a But it is faster than other countries. sophisticated negotiation process ending in a competitive bid.”

DETAILS ON SOME DELAYED DOTC PPP PROJECTS NUMBER OF CONTRACT PERIOD FROM ISSUANCE PPP PROJECT PRE-QUALIFIED CAUSE OF DELAY STRUCTURE OF ITPB TO PRESENT BIDDERS 4 (but only 1 Clarifi cations on real property taxes and guaranteed P60-billion LRT-1 extension BOT 1 year and 2 ½ months bidder) fare increases. P17.5-billion MCIA rehabilitation project BROT 9 months 7 Revisiting the agreement on real property taxes. P1.7-billion AFCS in Metro Manila Rails Supplier 9 months 5 Delineation of roles and obligations.

Note: ITPB = Invitation to Pre-Qualify to Bid; BOT = Build-Operate-Transfer; BROT = Build-Rehabilitate-Operate-Transfer Source: PPP Center, various press releases.

None of the 8 PPP projects of DOTC have been awarded.

Philippine ANALYST September 2013 INFRASTRUCTURE 575

The private sector has been off ering assistance to DOTC, but the government has not yet responded.

COMPARATIVE TABLE IN PPP PROCUREMENT AND INFRASTRUCTURE COMPETITIVENESS WEF INFRASTRUCTURE COMPETITIVENESS INDEX (SCORE AND RANK) PPP PROCUREMENT COUNTRIES AVERAGE GROWTH (IN MONTHS) 2010-2011 2011-2012 2012-2013 2013-2014 IN SCORE 2.92 3.09 3.19 3.40 Philippines 14-18 5.2% 104th 105th 98th 96th 5.88 6.09 6.22 6.12 United Kingdom 22-35 1.4% 8th 6th 6th 8th 5.80 5.88 5.84 5.80 Canada 16-18 0 9th 11th 13th 12th 5.44 5.43 5.70 5.60 Australia 14-18 1% 22nd 24th 18th 18th 3.49 3.60 3.60 3.65 India 24 1.5% 86th 89th 84th 85th 3.98 4.02 4.13 4.13 South Africa 35 1.2% 63rd 62nd 63rd 66th Note: PPP Procurement starts from the Issuance of Invitation to Pre-Qualify to Bid and ends at the Issuance of Notice to Proceed. Sources: PPP Center, World Economic Forum (WEF) Global Competitiveness Reports.

PPP Center said it will be conducting a full review of PPP policies.

The PPP program was initiated to implement infrastructure Megawide Construction won Contract A, which will construct that the economy needs to become more functional and effi cient. 2,440 classrooms in 982 schools in the Ilocos, Cagayan Valley, But if the country wants to sustain and go beyond the 6-7% Central Luzon, and Cordillera regions. Meanwhile, BSP & GDP growth ceiling in the future, it will have to be faster in Co.-Vicente T. Lao Construction consortium won Contract implementing the projects. Three years ago, Britain offered to E, which will construct 1,930 classrooms in 750 schools help the Aquino administration in drafting the PPP program, at the Northern Mindanao and Caraga regions. Both fi rms but this was not taken up. Britain can provide expertise to the offered less than the ceiling amount set by the government: Philippines in drafting rules for the implementation of the program Megawide offered P2.255 billion for Contract A (ceiling since they started the scheme. In September, it again offered to amount is P2.258 billion) and BSP & Co.-Vicente T. Lao lend its expertise on the PPP. There has been no response to date. offered P1.603 billion (ceiling amount is P1.604 billion). PSIP 2 is an P8.8-billion project with a build-transfer arrangement where the contractors will be paid after the facilities Only 2 of 5 contracts awarded for PSIP Phase are built. The project aims to construct 10,679 classrooms in over 4,000 schools in the country. Contracts B, C, and D 2 account for 6,309 classrooms in 2,925 schools. Contract B will cover the MIMAROPA and Bicol regions; contract C on The Public-Private Partnership (PPP) Center awarded 2 of Western, Central, and Eastern Visayas; and contract D on the the 5 contracts for the PPP for School Infrastructure Project Zamboanga Peninsula, Davao, and SOCCSKSARGEN regions. (PSIP) Phase 2, this accounts for less than half of the total The lack of bids for PSIP 2 is the latest blow in the auction number of classrooms to be built. PISP 2 is the 4th PPP of PPP projects after 3 projects under the Department of project to exhibit diffi culties following the deferred projects Transportation and Communications (DOTC) were deferred. under the Transportation department. The lack of qualifi ed bidders and several technical issues were, again, identifi ed as the main reason why only 2 contracts Megawide Construction Corp. and the consortium BSP & Co.- were awarded for PSIP 2. Megawide Construction and BSP Vicente T. Lao Construction were the only bidders who qualifi ed & Co.-Vicente T. Lao are given 20 days upon receipt of the for the fi nancial bids. The 2 other fi rms who prequalifi ed for the notice of award to submit the post-award requirements under project were: D.M. Wenceslao and Associates, Inc.-DATEM, and the Build-Operate-Transfer (BOT) Law before the contract Bright Future Educational Facilities Inc.-Riverbanks Development signing. The PPP Bids and Awards Committee is still awaiting Corp. However, D.M. Wenceslao-DATEM withdrew their the approval of the National Economic and Development application and Bright Future-Riverbanks Development did Authority (NEDA) for the rebidding of the remaining not pass because of technical issues that were not resolved. contracts for PSIP 2, and a schedule is yet to be announced.

Philippine ANALYST September 2013 58 INFRASTRUCTURE

The lack of qualifi ed bidders and several technical issues were identifi ed as the main reason why only 2 contracts were awarded for PSIP 2.

PROJECT DETAILS OF THE PPP FOR SCHOOL INFRASTRUCTURE PROJECT PHASE 2

Project Description/Rationale: The project involves the designing, fi nancing, and constructing of 10,679 one-storey and two-storey classrooms. This includes furniture, fi xtures, and toilets in 5,033 public schools in 14 regions nationwide.

Implementing Agency: Department of Education (DepEd)

Estimated Project Cost: P8.8-billion (US$215-million)

Implementation Timeframe: 2013-2014

Procurement Mode: Solicited

PPP Structure: Build-Transfer (BT)

Project Timeline: April 17, 2013: released the list of prequalifi ed bidders July 18, 2013: bidding September 30, 2013: notice of award

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STATUS OF BIG TICKET INFRASTRUCTURE PROJECTS AS OF SEPTEMBER 2013 IMPLEMENTING FUNDING CIVIL WORKS PROJECT TITLE PROJECT COST STATUS / ISSUES AGENCY SOURCE TIMEFRAME ROADS

Deadline for submission of pre-qualifi cation documents was extended by 1 month to Oct. 23 after bidders requested DPWH to review the real Cavite-Laguna Expressway DPWH PPP 2015-2017 P35.4 billion property tax (RPT) component, which was set to be shouldered by the concessionaire. Bidding is expected to commence early in 1H2014.

Pres. Aquino approved the construction of the project. Preparatory works Skyway Stage 3 DOTC-TRB PPP 2014-2017 P26.5 billion are underway and seen to be completed by end-2013. Construction will begin early in 2Q2014. Awaiting Pres. Aquino’s approval after DOTC, DPWH, and DOJ agreed to NLEX-SLEX Connector Road DPWH PPP 2013-2016 P22.95 billion expand the terms of the STOA of the joint venture between the MPIC and the Project Philippine National Construction Corp. (PNCC) to expedite implementation. Ninoy Aquino International Airport (NAIA) Expressway DPWH PPP 2014-2015 P15.52 billion Detailed engineering design and right-of-way settlement is ongoing. Phase 2 Segment 9 is expected to be completed in 1H2014 but a portion is still acquiring the right-of-way, while segment 10 just started settling the right- NLEX-Harbor Link (Segment DPWH PPP 2013-2015 P9.7 billion of-way with the Philippine National Railways and other private individuals, 9 and 10) which is expected to take a year. Segment 10 is scheduled for completion in 2 years. Sub-structure works on 3 of 7 bridges along the tollway are nearing completion. Star Infrastructure Development Corp. is trying to work ahead Star Toll way Upgrading DPWH PS 2013-2015 P2.3 billion of schedule in preparation for future weather disturbances that could delay construction. Ayala (private proponent) and DPWH approved a memorandum of agreement -SLEX Link Road expected to resolve the traffi c and environmental issues on the new design DPWH PPP 2012-2014 P1.96 billion Project proposed for the linkage. The South Luzon Tollroad Corp. is still reviewing the drafted MOA. Construction is 30.24% complete. RAILWAYS LRT-1 South Extension – Rebidding will commence in the 1Q2014. Awaiting NEDA approval for DOTC/LRTA ODA/PPP 2014-2018 P59.2 billion Construction/O&M revising the concession agreement. MRT-3 Rehabilitation DOTC NG 2014-2016 P10 billion For post-qualifi cation of bidders. AIRPORTS A new concession agreement was released and is currently awaiting NEDA Mactan-Cebu International DOTC-MCIAA PPP 2014-2016 P17.5 billion approval. There are currently 7 pre-qualifi ed bidders. Bidding will begin Airport Expansion on Nov. 15. Puerto Princesa Bid submission is due on Oct. 15. Korean companies Hanjin Heavy Industries International Airport DOTC ODA 2013-2015 P3.3 billion Construction Co. Ltd. and Kumho Industrial Corp. have expressed interest Expansion in the project. Caticlan Airport DOTC LGU 2010-2016 P2.51 billion Accomplished 78.72% of construction. Development Project OTHER TRANSPORTATION PROJECTS Cebu Bus Rapid Transit DOTC PPP 2013-2015 P17.52 billion Under evaluation of World Bank. System Awaiting NEDA Board approval. Meanwhile, commuters fi led a complaint Metro Manila Integrated DOTC-LTFRB PPP 2013-2016 P5.06 billion at the Supreme Court to issue a restraining order against policies on its Transport System implementation and declare it unconstitutional. Automated Fare Collection Bidding was postponed to November 2013. DOTC is still fi nalizing the DOTC-LRTA PPP 2013-2014 P1.72 billion System concession agreement and technical specifi cations. IT/MODERNIZATION Modernization of Philippine DOH PPP 2013-2016 P5.69 billion For NEDA ICC approval. Orthopedic Center EDUCATION PPP for School 100 sub-projects (342 classrooms) have been completed. Construction of Infrastructure Project DEPED PPP 2013-2014 P16.28 billion 922 sub-projects (2,930 classrooms) is ongoing. Notices to Proceed for 1,581 (PSIP) sub-projects (5,493 classrooms) have been issued. Phase 1 2 contracts were awarded in Sept. 30. Megawide Construction Corp. won PSIP Phase 2 DEPED PPP 2013-2014 P8.8 billion contract A, while BSP and Company Inc.-Vicente T. Lao Construction won contract E. 3 other contracts are still subject to bidding.

Notes: Agencies - DEPED = Department of Education; DOH = Department of Health; DOTC = Department of Transportation and Communications; DPWH = Department of Public Works and Highways; LRTA = Light Rail Transit Authority; LTFRB = Land Transportation and Franchising Regulatory Board; LTO = Land Transportation Offi ce; MWSS = Metropolitan Waterworks and Sewerage System; NIA = National Irrigation Authority; TRB = Toll Regulatory Board; Funding – LGU = Local Government Unit; ODA = Offi cial Development Assistance; PPP = Public-Private Partnership; PS = Private Sector;

Philippine ANALYST September 2013