Rebidding the Calax project: Bad for business, bad for the country

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Even after four-plus years, the obstinacy of President Benigno Aquino 3rd is still astonishing.

Despite firm calls by numerous economic analysts and no fewer than eight major business groups in the country, President Aquino has stubbornly clung to his uninformed opinion that the best way to handle the controversy surrounding the bidding for the P35.4 billion Cavite-Laguna Expressway (Calax) project would be to go back to square one and hold the bidding again.

If this is allowed to happen, not only will it be disastrous to any further efforts to attract investors to the Aquino Administration’s already floundering flagship infrastructure development initiative, the Public-Private Partnership (PPP) program, it will also impose unjustifiable, unnecessary costs on Filipino businesses and consumers for the next three-and-a-half decades.

To recall, four qualified bidders – San Miguel Corp’s. Optimal Infrastructure Development, Team Orion (a consortium of Ayala’s AC Infrastructure Holdings and Aboitiz Land), Metro Pacific Investments Corp.’s MPCALA Holdings and MTD Philippines – submitted bids for the Calax project in early June. SMC’s bid was the highest as it included a P20.1 billion “premium.” Unfortunately for SMC, it had made an error in its bid security coverage, and was disqualified in accordance with the bidding rules, as it should have been.


After entertaining a protest from SMC, President Aquino intervened on June 30, ordering the Department of Public Works and Highways to suspend its decision to disqualify the bid until a solution was found. This was a baffling choice on the President’s part, as the solution was plainly in the bid specifications and procedures all along – the project should be awarded to the next-highest bidder, the Team Orion consortium, who offered a premium of P11.66 billion.

The local business community agrees: On October 28, a joint statement pointed out that the bidding process, up to the point where Aquino needlessly interfered, was conducted fairly and transparently, and that the much-needed highway project should not be delayed a moment longer. That statement was signed by the Makati Business Club (MBC), the American Chamber of Commerce of the Philippines (AmCham), the Australian-New Zealand Chamber of Commerce Philippines (ANZCham), the Canadian Chamber of Commerce of the Philippines (CanCham), the Employers Confederation of the Philippines (ECOP), the European Chamber of Commerce of the Philippines (ECCP), Japanese Chamber of Commerce of the Philippines, Inc. (JCCIPI), and the Management Association of the Philippines (MAP).

Only the Philippine Chamber of Commerce and Industries (PCCI) has supported the President’s insistence that the project be re-bid.

As our business columnist Ben D. Kritz pointed out in his column yesterday, the “bid premium” model for build-operate-transfer (BOT) projects places an undue financial burden on Filipino businesses and individuals, who will pay billions more for the highway than it actually costs to build. Aquino’s specious reasoning that he would have to explain why the government passed up a P9 billion advantage is unacceptable; rather, he should be explaining why he is not seeking to provide infrastructure for the country at the most reasonable cost.

Its defects notwithstanding, the BOT model does at least offer a way – if an imperfect one – to develop the infrastructure the country sorely needs. Greedily throwing away a properly conducted bid process to favor one company that couldn’t follow the rules certainly does not encourage would-be investors to participate in other projects.

The President should consider the broader implications of his ill-considered position rather than the potential short-term windfall the government might gain. If his often-repeated resolve to build infrastructure and encourage “inclusive growth” are sincere at all, he must withdraw his call for rebidding the Calax project.

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2 Comments

  1. Maximo Macatuggal on

    The problem is this Government, a classic Populist regime, especially “sensitive” to howls of protest from leftist partylists and each and every interest group all pushing political and ideological agendas.

  2. It’s too late now, but Aquino shouldn’t have gotten involved in the first place and should have followed basic Leadership guidelines and just deferred to DPWH Sec. Singson who decided to disqualify SMC. But now his meddling – for that’s what it is – not only insults Singson and demoralizes the DPWH, but his relation to SMC’s Chairman Danding Cojuangco will lend a political taint to a rebid, however good-intentioned it may be, especially if SMC comes out the winner.