Why NAIA-3 is defective

Investigators of the shady deal for NAIA’s Terminal-3 were pictured as Chicken Little cackling that the sky is falling. They’re vindicated. A 100-sqm section of the ceiling did fall four days before the supposedly state-of-the-art facility was to test-run on Mar. 31.

The collapse shows up what probers have long said: Piatco, German partner Fraport, and Japanese contractor Takenaka cheated. As irregularly as Piatco bagged the franchise to operate the terminal, so did it carry on the construction. "A blessing in disguise" was thus how NAIA general manager called the cave-in that bolstered government’s lawsuits against the trio.

Piatco used the building phase to get kickbacks, shave off profits, and bribe officials. The scheme was plain. Piatco and Takenaka first adopted in Mar. 2000 a typical Engineering Procurement-Construction contract, under rules of the international federation of consulting engineers. Then it inserted Section 4.5 and Schedule 7 in the EPC. The riders allowed Piatco, through its powerful Employer’s EPC Committee, to control the selection of up to 85% of the subcontractors and suppliers. Sitting in the committee were Piatco’s Vic Cheng Yong and son Jefferson Cheng, and Fraport’s Hans Vogel and Stephan Bauchpless (later replaced by Salih Samim Aydin).

Under Sec. 4.5, Takenaka was to tap subcontractors or order supplies only from a list of Piatco-Fraport agents. Thus, FRA Debis and LH Systems, both Fraport affiliates, had exclusive joint option to provide the information technology for Terminal-3. Helmann was given sole right to security works.

There was more. The committee was given power to "finally approve or disapprove" a subcontractor or supplier selected by Takenaka but not in the favored list. In such cases, Takenaka was to report the specific work, material and equipment needed, along with bidders. The committee would then "have the right to exclude or reject any tender." In short, if an outsider gave a better bid, any favored agent could match it, regardless of financial or technical capability, track record, and trade reputation.

Schedule 7 thus provided Piatco a mechanism to earn kickbacks and steer the work to itself, its owners, pals and political protectors. It fostered nepotism, cronyism and bribery.

Engr. Reynaldo Libutan testified many times about it. For instance, a firm of former transportation boss Pantaleon Alvarez at first could not get the site-clearing subcontract for Terminal-3 because, despite its name Wintrack Builders, it had no track record, much more sufficient equipment, manpower and dumpsite. Insider Libutan swore to hearing Alvarez boast of Wintrack eventually wangling a deal because it was in the preferred list. And it did – for several hundreds of millions of pesos.

Alvarez had led a NAIA technical body, and sat in a Prequalification, Bids and Awards Committee that awarded the build-operate deal to Piatco. As congressman, he was vice head of the House transportation committee that rendered a whitewashed report on the scam, when the Senate Blue-Ribbon and Supreme Court en banc findings were to the contrary. When Alvarez was transportation secretary, Piatco and Fraport obtained several approvals. Among these was the designation of Phil. Airport and Ground Service Terminals Inc., a Piatco subsidiary into which Fraport illegally bought more than the 40 percent foreign limit, as Terminal-3’s new operator. Too, the signing of a third supplement to Piatco’s revised construction contract.

For these two rapid approvals, Piatco’s mysterious bagman Alfonso Liongson received $600,000 and $200,000. Not bad for two weeks’ labor.

Schedule 7 also designated Versatech Construction and Development Inc. as preferred subcontractor for the drainage system. Versatech further subcontracted the work, and defaulted on paying its own subcontractors. The president of one such subcontractor had to write a personal note to Alvarez for help in collecting P1 million. "For the past two months we had out five units of Backhoes/Excavators and one unit of Bulldozer rented by owner Charlie C. Fuentes of Versatech, who we understand is a friend of yours," the hapless fellow said. "Our problem is Versatech continuously collects from Takenaka for work accomplishments, but for one reason or another Mr. Charlie Fuentes is avoiding payment to us."

Incidentally, Versatech would not have qualified under normal trade for the drainage work, save for being in Piatco’s preferred list. Not only did it have no track record in that line, but the Construction Industry Authority of the Philippines also had blacklisted it for past shoddy works. Apart from the fallen ceiling, Terminal-3’s drainage is one of NAIA’s big headaches.

Meanwhile, a Japanese consultant for NAIA and the International Air Transport Association had separately inspected the structural soundness and safety of expropriated Terminal-3. Reports have been submitted to the Malacañang Policy Group, Transportation Sec. Leandro Mendoza, and NAIA’s Cusi. To this day, while government is negotiating with Piatco a "just compensation" courtesy of taxpayers, the offices have yet to make the findings public. Is that so, in spite of the collapsed ceiling, Piatco’s gofers in business and media circles can go on calling investigators Chicken Little?

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