MIA rehab a misdeal; pursuing it only stinks

The Manila International Airport rehab is turning into a misdeal. Too many wrongs were made in the contracting. It is following the path of government’s worst fiascos. No amount of legal patch-ups and PR diversions can cure the infirmities. Pursuing it will only stink – in the midst of the administration’s supposed final push against corruption.

Last week the National Economic and Development Authority’s top officials junked the P109-billion rehab proposal. Finance Sec. Carlos Dominguez and Economic Planning Sec. Karl Chua found many deficiencies in the offer of Megawide Corp. They told endorser Transport Sec. Arthur Tugade that Megawide’s submissions were incomplete. Lacking too were evaluations by the Dept. of Transport and MIA Authority.

Dominguez and Chua co-chair the Investment Coordinating Committee of NEDA. The ICC approves what goes to the NEDA Board for finalizing. The President chairs the NEDA Board.

Dominguez and Chua told Tugade in a letter Nov. 19 “to ensure that all requisite documents, as specified in the attached ICC checklist of documentary requirements for the unsolicited proposal ... are complied with by the private proponent in form and substance.”

The ICC co-chairs added that DOTr should evaluate any proposal in accordance with law. That is, the Amended Build-Operate-Transfer Act and its implementing rules and regulations. It was necessary “prior to the endorsement or re-submission of the unsolicited proposal for ICC-NEDA Board action,” they wrote.

The IRR is specific. DOTr, as sponsor agency, should have first determined if Megawide was qualified legally, technically and financially. Thence it should have turned in complete papers.

Foremost of the defects was financial. Megawide had only P18-billion equity as of December 2019. This was way short of that 30-percent equity, or P32.3 billion, required for the P109-billion rehab.

Two days earlier, Nov. 17, Economic Planning U-Sec. Jonathan Uy already told DOTr U-Sec. Ruben Reinoso the same. Not only was Megawide’s net worth too small for a project that big. It was also wrong to base the 30-percent capital requirement solely on the initial expenses for the rehab. The entire 20-25-year period should be computed. That’s because the contractor still has improvements to fulfill even during the operation stage, when it will increase passenger and other airport fees.

Dominguez and Chua reiterated to Tugade: “The prospective sources of (Megawide’s) financing for the project’s succeeding phases, such as the issuance of treasury shares and preferred shares, projected increase in retained earnings and cash to be generated, are speculative and not guaranteed to materialize. Hence, the financial capability of Megawide is mostly hinged on uncertain sources.”

Next day, Nov. 20, Megawide sought to solve those matters. It elevated technical consultant GMR airport operator of India as 40-percent consortium partner. With GMR, it then declared to be jointly and solidarily liable for any project missteps.

Dominguez and Chua returned Megawide’s deficient offer to Tugade. They left the door open to “resubmission” if all requirements are completed. This encourages DOTr deal packagers to follow up the lacking papers.

But Rep. Jericho Nograles says it’s no longer feasible. The law was not followed from the start. To submit papers piecemeal, every time the NEDA screeners found deficiencies, is yet another error, he says. The prudent option for DOTr, following the Dominguez-Chua letter, is to “ministerially” return the proposal to Megawide. To do otherwise is giving unwarranted benefits to a favored party, he says: “That’s graft.”

Already Nograles is going after the MIA Authority for “according special treatment”. General manager Eddie Monreal gave original proponent status (OPS) to Megawide last July despite lacking papers and scrutiny. Dominguez and Chua discovered the deficiencies, Nograles pointed up to Monreal in a letter last Monday, Nov. 23.

Documents indicate that Monreal got the MIA board to approve the OPS on say-so of DOTr higher-ups. They were remiss in their duty to evaluate the unsolicited proposal, Nograles says.

The OPS is a crucial privilege under the BOT Law. It gives the unsolicited proponent first crack at bagging the project contract. All others must best its offer via Swiss challenge. In case of a superior offer, the original proponent can simply match it and still retain the deal.

Granting the OPS without full study violates Section 3(e) of the Anti-Graft and Corrupt Practices Act, Nograles says. That section defines as graft: “Causing any undue injury to any party, including the Government, or giving any private party any unwarranted benefits, advantage or preference in the discharge of his official administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence. This provision shall apply to officers and employees of offices or government corporations charged with the grant of licenses or permits or other concessions.”

Megawide’s proposal is to rehab and operate the aging MIA for at least 20 years. The offer was made as far back as March 2018. A consortium of seven conglomerates had beat it to the OPS then. That super-consortium backed out last July after DOTr rejected pleas to redo the terms in light of the pandemic and economic slowdown. The first OPS was rescinded and the second granted within days. Nograles sees undue haste that left no room for thorough review.

Other legislators saw more violations. One was the lack of stakeholder consultation, according to Cong. Jesus Suntay. MIA’s 14,000 employees were slated for dismissal. When this hit the headlines in October, Megawide offered to absorb them.

Nograles has sought investigation by President Duterte’s new mega task force against corruption. Other MIA stinks are expected to surface, like cash shortages, overpriced contracts, lavish life styles and human and drug trafficking.

*       *       *

Catch Sapol radio show, Saturdays, 8 to 10 a.m., dwIZ (882-AM).

Gotcha archives: https://tinyurl.com/Gotcha-Archives