Do the Swiss challenge

Disclosure: A reader of The Philippine Star flew all the way from Osaka, Japan to react to my column “Bracing for water competition” published last May 18. It largely dwelt on the various dam projects lined up by the Metropolitan Water and Sewerage System (MWSS) to ensure uninterrupted supply of potable water, especially for residents in Metro Manila and neighboring areas in Luzon.

One of these projects included the proposed P13.43-billion New Centennial Water Source-Kaliwa Water Dam project in Quezon Province. During our Kapihan sa Manila Bay held last May 16, MWSS administrator Reynaldo Velasco announced the MWSS is on track with its timetable on the Kaliwa water dam project which is projected to be completed by 2023.

According to Velasco, an inter-agency body directly under the supervision of the Office of the President is making sure the dam project does not suffer further delays, noting that it took 30 years for this project to finally take off. The dam – once operational – will provide an additional 650 million liters of water a day (mld) to augment the 4,000 mld from Angat Dam in Bulacan that provides much of potable drinking water and other uses.

The Kaliwa Water Dam project is among the 75 flagship projects under the “Build, Build, Build” Infrastructure Program of President Rodrigo Duterte. More than half of the administration’s “Build, Build, Build” infrastructure projects are funded by the official development assistance (ODA).

Although these ODAs carry highly concessional rates, these are still loans contracted by our government and paid by us, Filipino taxpayers. Interest rates of ODAs range from 1 to 3 percent per annum but have longer amortization period from a minimum of 10 to 20 years to pay back.

Several times overtaken by changes of the MWSS administrations, an original proponent to undertake the Kaliwa dam project submitted a “Swiss challenge” to undertake it instead.

Swiss challenge process in government procurement happens when an agency, which has received an unsolicited bid for a project, publishes details of the bid and invites third parties to match or exceed it. 

This was exactly what Toshikazu Nomura, chief executive officer and director of Global Utility Development Co.Ltd., did to hopefully nail down this project. According to Nomura, they first submitted to the MWSS Board in 2008 to undertake the Kaliwa Intake Weir project under a Build, Operate, Transfer (BOT) scheme. The Global Utility entered into a memorandum of understanding with the MWSS for this purpose.

The unsolicited proposal was submitted by Global Utility to undertake the project through Private Finance Initiative (PFI) for funding by the Japan International Cooperation Agency (JICA). At no cost to the MWSS, the Global Utility will partner with the Development Bank of the Philippines (DBP) to meet requirements of the country’s laws.

The Osaka-based Global Utility is no stranger to doing construction and engineering projects in the Philippines. It got the contract to put up the 300-megawatt Calaca-2 coal-fired power plant in Batangas and the National Network of 500-KV transmission line from Naga to Lucena-Kalayaan-San Jose.

However, their Kaliwa dam project got stalled after subsequent changes in the MWSS Board of Directors at each change of administrations. The project was put back on the table upon the instructions of former President Simeon Benigno Aquino III to MWSS to renegotiate the unsolicited proposal with Global Utility.

In its renegotiated BOT proposal, Global Utility will build seven-feet high low dam with a 16-kilometer-long tunnel that has a diameter of 3.3 meters. It would also construct a water treatment facility. A civil engineer by profession, Nomura described the project as most environmentally compliant, with least displacement of communities along the path where the dam will be built.

Again, Nomura rued, the MWSS ignored the existing unsolicited BOT offer of Global Utility when it announced public bidding for Kaliwa Dam project. 

In our Kapihan sa Manila Bay, the MWSS chief disclosed the Kaliwa dam project will be funded through ODA from China. Velasco claimed the Chinese government committed P10.2 billion to fund the Kaliwa dam project included in the ODA package signed during the state visit of President Duterte to Beijing in October last year. The balance of the total project cost will be shouldered by the MWSS supposedly out of its own resources coming from fees collected from its concessionaires.

Since this is a “tied” loan, Velasco explained, only contractors from China could bid to this project. He confirmed three Chinese firms have been pre-qualified to bid in the construction of the Kaliwa Dam, namely: China Energy Engineering Co.Ltd.; Power China Ltd.; and the consortium of Guandung Foreign Construction Co. Ltd. and Guangdung Yuantian Engineering Co.Ltd.

Based on the MWSS timetable, a pre-bid conference was already held last April 16. The MWSS Board set on May 11 the submission of bids. However, Velasco disclosed, the MWSS may have to reschedule the award and signing slated this August upon request of the Chinese contractors who asked for more time to submit other required documents and permits.

Not anymore. Last Friday night in his usual extemporaneous speech in Davao City, President Duterte announced his administration’s decision to officially do away with “lowest bid.” Instead, the President declared all government projects can go through ”Swiss challenge” to reduce, if not totally prevent corruption in public biddings.

“Gusto ko Swiss challenge na lang. Swiss challenge – you produce the bridge and I’ll pay you. If you do not finish it in accordance with my specifications, I will not pay you,” President Duterte declared. 

The President earlier noted the seeming “doldrums” of economic activities, especially in the countryside while government infrastructure projects have yet to take off from the planning boards.

Almost ten years after having offered the unsolicited proposal, Nomura – who is now 82 years old – is confident his Swiss challenge on Kaliwa low dam project will finally do it for the MWSS.