There were two low hanging fruits at DOTr when Sec Art Tugade assumed office.

One was the privatization of the operations and management of NAIA which would make the quality of its service more competitive in ASEAN.

 The other involves the bundling of five domestic airports – Davao, Iloilo, Laguindingan (CDO), Bacolod and Bohol – for the privatization of its operations and management. Both have been cleared by NEDA. The process of bidding out the O and M of the bundled airports was in a very advanced stage compared to the NAIA project.

 Indeed, the actual bidding should have been done by the Jun Abaya team during the last quarter of their watch. But for some unexplained reason, they got cold feet and stopped the bidding. They had pre-qualified some of the better known local conglomerates, who were bewildered by the decision to delay the bidding.

When Sec. Tugade took over, his usec for aviation Bobby Lim told me the bidding would finally be held. The DOTr had just delayed the bidding for a month at the request of some of the bidders who needed more time to finalize their bids. Then, all of a sudden, Sec. Tugade cancelled the bidding altogether and decided to unbundle the airports.

The Tugade decision was a surprise. It frustrated the bidders who were raring to go. If the bidding was held as scheduled, it could have been the first important PPP project of the Duterte administration. It could have served notice the DOTr is on the ball and justified our high expectations of a decisive Art Tugade.

Unbundling will cause significant delay. That means they must recast the terms of reference and conduct separate bidding for each of the five airports instead of just one. It also means they have to go back to NEDA. There will be considerable delay in implementation.

Bundling the airports made sense. Not all the airports are attractive by themselves. Of the five airports, only Davao and possibly Iloilo are attractive.

Making a package deal of the good and the not so good is a way of making sure the less desirable airports would also have a chance to be world class. Unbundled, the less attractive airports will probably only get interest from local bidders with less capital and zero expertise, but with political clout.

 As it happened, the foreign partner of Metro Pacific, Aeroports de Paris withdrew because the economics of unbundling do not make sense. That’s a bad indicator that’s fully predictable if DOTr’s  Tugade thought it out instead of making a precipitate decision to unbundle.

I asked Sec. Art why he decided to unbundle. He said he doesn’t want to be held hostage by just one group managing five airports. If they get labor problems, the whole country could be paralyzed.

 I suspect there was more to it than that. I suspect local political pressures were exerted. DOTr officials told a Senate hearing they wanted to make the bidding more democratic by allowing lower capitalized firms to participate. Maybe it was Tugade’s way of showing congressmen he knows how to play political ball.

 Sen. Grace Poe, chair of the Senate public services committee, wondered about the unbundling decision of Sec. Tugade in a hearing early last month. “Stand-alone bids increase the risk some of the projects might not be pursued or might be delayed despite urgent need for investment in such infrastructure projects.”

Addressing Usec Lim, Sen Poe continued: “And since you decided to unbundle the project, will this not mean that you will have to reinitiate the bidding process? Hindi ba’t lalong tatagal tayo dito? Will this not result in the further deterioration of existing assets? Will this not impact the ability to support regional, commercial and tourism growth and the convenience of the riding public?

“Ang pinag-iingatan natin dito sa pag-a-unbundle ay kung sinu-sinong mga low capitalized, no track record ang maaring ma-qualify pa dito.”

Sen. Chiz Escudero expressed the same fear. He was skeptical about the claimed objective to democratize the bidding process and allow lower capitalized bidders to compete.

 Sen. Escudero said this is precisely the problem. “All I want here is a world class airport, domestic or international… Now the big players, the world class players will not participate anymore because these are too small for them… “

Sen. Chiz also debunked the claim of Usec Lim the standards would be the same even if the qualifications of bidders have been lowered. He accused DOTr of contradicting itself.

The senator asked, how can any small bidder meet the DOTr requirement of experience in running airports? Sen. Escudero pointed out that among local entities, only Megawide has a few years experience running Mactan and San Miguel has been running Caticlan for only a few months. Government is the only local entity with extensive experience running airports, even if very much below world class standards.

And worse, DOTr’s terms of reference gives the winning bidder a lot of leeway to determine what to do. The TOR only calls for compliance with “minimum performance standards and specifications.” Minimum is not good enough for Sen Escudero and neither should it be for us.

 Sen. Chiz asked: “So how can you get to experience, actually the know-how of these bigger companies and bring it to the smaller airports, if No. 1, you don’t have a TOR that specifies exactly what we need and want? And No. 2, you’re talking of new players. And if you’re democratizing it, most of these only have a construction background, if at all… Again, you end up with the mediocre effort…”

Because of the delay caused by the unbundling, the earliest they can bid out the regional airports is towards the end of this year. I think that may even be very optimistic.

In frustration and resignation, Sen. Escudero pleaded “If you are going to unbundle it, Usec Lim, then please, please, please, you have time. Provide not only minimum standards, but world class standards… it cannot be simply for mere compliance.

“Hindi ba dapat tama na iyong ‘Puwede na.’ Nasanay na iyong Pilipinas at Pilipino sa ‘Puwede na iyan, puwede na iyan, puwede na iyan.’ Mangarap naman tayo nang mas mataas-taas na. Hindi na puwede na puwede na.”

I cannot agree with Sen. Escudero more. I really had high hopes for DOTr Sec. Art Tugade. Now I am not too sure. The one time he could be decisive he seems to have made an unfortunate decision to unbundle.

The decision to hold the NAIA O and M privatization is more understandable because they still have no idea how they will approach the need for a respectable major gateway. He has to decide and announce if he is going for the dual airport concept that includes Clark. Everything else, including the train system, will follow.

How long do we have to wait? If we don’t see decisions being made by the end of this month (end of the first quarter), it is a signal the Tugade’s watch will not be any different from Mar’s and Jun Abaya’s.

Change has not come. It is still stuck in a traffic jam at the office of the transport secretary.

Source: http://www.philstar.com/business/2017/03/03/1677381/bundle…-unbundle