FINANCIAL PROPOSAL as per requirement to Bidders of the Magsaysay Park that was included in the Instruction to Bidders issued by the City Government of Dagupan.

(b1) Proposed tolls/ fees/ rentals/ other charges; and
-Present Worth of the proposed user (Future Tenants) tolls/ rentals/ other charges over the fixed term based on the discounting rate and foreign exchange rate prescribed in the bidding documents in accordance with Section 4.3 of IRR of R.A. No. 6957 as amended by R.A. No. 7718.
(b2) Any other document described in the Terms of Reference.

EVALUATION OF FINANCIAL PROPOSAL included in the INSTRUCTION to Bidders
Assessment and Comparison of the financial proposals of bidders shall be based on the Lowest PRESENT VALUE of the proposed tolls/ fees/ rentals and other charges over a fixed term for the facility to be constructed, rehabilitated, operated and maintained according to the prescribed minimum design and performance standards, plans and specifications. (as basis for the rate of return on investment of the proponent) (present value could be computed basing from cash flows)

The Lowest PRESENT VALUE could be computed by the Cash Flow of the project. The Capital Expenditure, other Expenses, Income and other accounts concerning the movement of cash. The Lease rate the proponent is to pay the government is a cash outflow. The rental rates(INCOME) and other charges the proponent shall be charging future tenants is a Cash Inflow. The scheduled amortization of the payment of the structure is a cash outflow(cost of the structure or Capital Expenditure). If the proponent has hard cash and finances the construction without borrowing money, the investment is considered in its present value as a cash out flow without need of getting the present value of the future amortizations.Other Forecasted Cash expenses are cash outflow.

Let it be stressed that the INCOME is still needed to determine the Lowest PRESENT VALUE.

Any accountant could compute the Present Value of the project. Any accountant would say that they will be needing the proposed Rental Rates the proponent is to charge its future tenants to compute for the Present Value. Any accountant having these data could compute the rate of return. This is the reason that the City Government stated these in the INSTRUCTION to Bidders specifically for the Magsaysay Park. That these must be submitted for their proposal. Lowest Present Value does not mean the bidder is to construct the structure with the lowest possible cost. Lowest Present Value is an analysis of the cash inflow and cash out flow. A bidder could construct a building that shall be worth 100million and yet have a Lower Present Value, compared to a bidder who shall construct a building worth 84million pesos. Present Value is dependent on the Capital Expenditure, other Expenses less the Future Income(to be moved back to present value).

What I do not understand during the deliberations in the Sanggunian is the persistent claim of the people defending the bidding process done and Metrostate that there is no need for the proponent to submit these cash inflow(How much the proponent will Charge future tenants) proposal. If that is the case, what will be the basis for EVALUATING the Financial Proposal? If this is the case, Then there was NO Financial Proposal that was Submitted, making the bidding a failed bidding.

The bottomline, however, is that, the two remaining bidders are DISQUALIFIED to begin with, because of RELATIONSHIP. Therefore, a rebidding should be in order. This will clarify the Legality and Clarity of the issue at hand.

JM Feliciano can not bid against S&F(Siapno & Feliciano) Realty

As per Instruction to Bidders of the City Government of Dagupan specifically for Magsaysay Park,

All Proponents found to have conflicting interests shall be disqualified to participate

in the procurement at hand, without prejudice to the imposition of appropriate administrative, civil, and criminal sanctions. A proponent may be considered to have conflicting interests with another proponent in any of the events described in paragraphs (a) through (c) and a general conflict of interest in any circumstances set out in paragraphs (d) through (g) below:
(a) A proponent has controlling shareholders in common with another Proponent;
(b) A proponent receives or has received any direct or indirect subsidy from another Proponent;
(c) A Proponent has the same legal representatives as that of another Proponent for the purposes of this Bid;

(d) A PROPONENT HAS A RELATIONSHIP, DIRECTLY OR THROUGH THIRD PARTIES, THAT PUTS THEM IN A POSITION TO HAVE ACCESS TO INFORMATION ABOUT OR INFLUENCE ON THE BID OF ANOTHER PROPONENT OR INFLUENCE THE DECISIONS of the City Government of Dagupan regarding this bidding process.

This will include a firm or an organization who lends, or temporarily seconds, its personnel to firms or organizations which are engaged in consulting services for the preparation related to procurement for or implementation of the project if the personnel would be involved in any capacity on the same project;
(e) A Proponent submits more than one Bid in this bidding process. However, this does not limit the participation of subcontractors in more than one Bid;
(f) A Proponent who participated as a consultant in the preparation of the design or technical specifications of the goods and related services that are subject of the Bid; or
(g) A Proponent who lends, or temporary seconds, its personnel to firms or organizations which are engaged in consulting services for the preparation related to procurement for or implementation of the project, if the personnel would be involved in any capacity on the same project.

The Development of the Magsaysay Park into a Tourism Park was the first objective of the City in 2004. It then modified on making it a Tourism/Commercial Complex on May2006. The Magsaysay Redevelopment Plan was passed by the council on May of 2006. As a Local Government Unit, it is the duty of every LGU to encourage and create an environment conducive to infrastructure developments and encourage its citizenry to support the vision of the city. Good Governance is based on the vision and mission of any LGU. Good Governance is practiced in the equal application of the law and compliance with the law.

The Rule of Law must be followed with the leader serving with example following the policies laid out by the government. The people then follow as they see that no one shall be above the law. The changing need of the city is constant and we must all respond to it. We must ensure that we create a Dagupan City that is a Model City to live in. Filipinos living abroad are model citizens. They follow the law because they see the law is implemented fairly without it being twisted or bended. That is the objective for Dagupan. “We envision Dagupan City as the premier center of the north for education, information technology, health, commerce and trade, and aquaculture, supported by God-loving, well-informed, healthy, self-reliant, empowered and vigilant citizenry steered by firm, decent and progressive leaders, towards a globally competitive, diversified and environment-friendly economy in a balanced, planned, attractive and safe environment”.
The success of any Local Government Unit shall be dependent on the trust and confidence of its people. The trust and confidence of its people will be translated to their participation in government programs. Recently, the city government has embarked on the Public Governance System that aims to promote understanding of what the relationship of the citizenry and the government should be. The first lesson taught was Participation of the Citizenry, second lesson is Accountability of people in authority, third lesson is Transparency in governance, and the last is Performance and Predictability of the government in its mission and vision.

The recent bidding of the Magsaysay Park has been a challenge to the elected officials of the city. In pursuit of equality and proper implementation of the law there was a division in the Sangguniang Panlungsod on how to deal with the Magsaysay Park bidding to show transparency and accountability.

Magsaysay Park Bidding reviewed.

RDC Requirement prior to bidding was not followed. RDC was issued only by Secretariat of RDC EXCOM on November 28, 2006 after the bidding has been done and a winning bidder was proclaimed. Said RDC EXCOM Resolution prepared by Secretariat shall be ratified by EXCOM once it shall be convened.

Three Bidders responded to the Published Invitation to Bid for the Magsaysay Park Development.
(1)Gamma Construction, (2)JM Feliciano Construction, (3)S&F (Siapno and Feliciano) Realty in Joint Venture with LXS Construction.

Gamma Construction was disqualified.

The two remaining bidders are (1) JM Feliciano Construction and (2) S&F (Siapno and Feliciano) Realty joint venture with LXS Construction.

As per Instruction to Bidders of the City Government of Dagupan specifically for Magsaysay Park,

All Proponents found to have conflicting interests shall be disqualified to participate in the procurement at hand, without prejudice to the imposition of appropriate administrative, civil, and criminal sanctions.

A proponent may be considered to have conflicting interests with another proponent in any of the events described in paragraphs (a) through (c) and a

general conflict of interest in any circumstances set out in paragraphs (d) through (g) below:

(a) A proponent has controlling shareholders in common with another Proponent;
(b) A proponent receives or has received any direct or indirect subsidy from another Proponent;
(c) A Proponent has the same legal representatives as that of another Proponent for the purposes of this Bid;

(d) A PROPONENT HAS A RELATIONSHIP, DIRECTLY OR THROUGH THIRD PARTIES, THAT PUTS THEM IN A POSITION TO HAVE ACCESS TO INFORMATION ABOUT OR INFLUENCE ON THE BID OF ANOTHER PROPONENT OR INFLUENCE THE DECISIONS of the City Government of Dagupan regarding this bidding process.

This will include a firm or an organization who lends, or temporarily seconds, its personnel to firms or organizations which are engaged in consulting services for the preparation related to procurement for or implementation of the project if the personnel would be involved in any capacity on the same project;
(e) A Proponent submits more than one Bid in this bidding process. However, this does not limit the participation of subcontractors in more than one Bid;
(f) A Proponent who participated as a consultant in the preparation of the design or technical specifications of the goods and related services that are subject of the Bid; or
(g) A Proponent who lends, or temporary seconds, its personnel to firms or organizations which are engaged in consulting services for the preparation related to procurement for or implementation of the project, if the personnel would be involved in any capacity on the same project.

FINANCIAL PROPOSAL as per requirement to Bidders of the Magsaysay Park that was included in the Instruction to Bidders issued by the City Government of Dagupan. (b1) Proposed tolls/ fees/ rentals/ other charges; and
-Present Worth of the proposed user (Future Tenants) tolls/ rentals/ other charges over the fixed term based on the discounting rate and foreign exchange rate prescribed in the bidding documents in accordance with Section 4.3 of IRR of R.A. No. 6957 as amended by R.A. No. 7718.
(b2) Any other document described in the Terms of Reference.

EVALUATION OF FINANCIAL PROPOSAL included in the INSTRUCTION to Bidders
Assessment and Comparison of the financial proposals of bidders shall be based on the Lowest PRESENT VALUE of the proposed tolls/ fees/ rentals and other charges over a fixed term for the facility to be constructed, rehabilitated, operated and maintained according to the prescribed minimum design and performance standards, plans and specifications. (as basis for the rate of return on investment of the proponent) (present value could be computed basing from cash flows)

JM Feliciano Construction as per SBAC did not meet TECHNICAL BID Requirement and was therefore eliminated.

S&F joint venture with LXS Construction was the only bidder left.

June 14, 2006. To comply with Bid Requirement, JM Feliciano Construction got a credit line of 8million pesos from the same Dagupan Bank as Siapno and Feliciano Realty joint venture with LXS Construction.

As per submitted document, S&F Realty and LXS Construction formed a new juridical personality METROSTATE Realty Corporation on September 4, 2006. It was later registered at the SEC on September 15, 2006. Its paid up capital is 100,000 pesos as per Bank Certificate issued on September 14, 2006.

November 7 opening of the final bid envelope which is the Financial Proposal

November 20, 2006 the SBAC submitted to the Sanggunian Panlungsod during the session the Deed of Undertaking of S&F and LXS transferring their duties and obligations to METROSTATE Realty Corporation which was not yet notarized at the time.

November 20. SBAC submitted S&F and LXS joint venture letter, intending to form themselves into a corporation that is tentatively called METROSTATE Realty Corporation stamped as received on May 16, 2006. September 15, the name METROSTATE Realty Corporation was registered in the SEC. 2:30PM same day, the City Government received all SEC Papers of METROSTATE as per stamped received date.

December 19, 2006 Sangguniang Panlungsod, divided, voted to pass a resolution authorizing the Mayor to enter into a contract with the winning bidder pinpointed as Metrostate Realty Corporation.

The special session was to discuss the Magsaysay Park Bidding among other things, Authorizing the Mayor to enter into contract with the winning bidder.

In a twist of event, Councilor Guadiz who was vehemently objecting to the manner of the bidding and award to Metrostate in the previous sessions of the Sanggunian became the lead man in defending Metrostate as the winning bidder of the Magsaysay Park BOT project.

Councilor Guadiz stated that the Mayor got its cue from the Sanggunian when the Sanggunian pinpointed the Magsaysay Park as a Tourism Park. It also got its cue when the Sanggunian made a resolution adopting the Magsaysay Redevelopment Plan. Hence, the mayor decided to bid out a BOT.

S&F and LXS joint venture bided for the Magsaysay Park BOT. It was pre qualified, qualified and participated in the bidding.

As to the question ” if Metrostate is a qualified winner” in the bidding, Councilor Guadiz stated that Metrostate is a recipient of the rights of S&F and LXS its parents when they issued a deed of undertaking transferring their rights to Metrostate.

Councilor Guadiz argues that Metrostate is the winning bidder and is qualified financially because it has a credit line of 8million pesos enough to back up the minimum requirement of 10% of the 84million peso BOT project and has a paid up capital of 100,000pesos. Councilor Guadiz also maintained that although Metrostate is a new corporation it will back up the requirement of Track Record and Experience as mandated in RA7718 by hiring a contractor with Track Record and Experience.

As to public consultation to support public acceptability, Councilor Guadiz maintains that the approval of the City Development Council of the plan is enough to cover the public consultation as basis for Public Acceptability since the members are barangay captains and representatives of NGOs.

As to the provision of Section 302 of the Local Government Code which states that it shall be the City Engineer upon written request of the mayor who shall prepare the minimum requirement of the plan, Councilor Guadiz claims that the project is now a Design Build Operate Transfer project therefore it should be the proponent who should make the design and plan of the project and does not need the city engineer to prepare the minimum technical requirement on this matter.

As to the matter of the sanggunian approving the BOT contract before it is bided out to the public as per the IRR of RA7718 which transfers the function of the ICC( for National Projects) to the Local Sanggunian (for LGU projects), Atty Geraldine Baniqued stated that the Sanggunian is only to authorize the contract of the BOT after the bidding and that There Is No Need for the Sanggunian to approve of the contract prior to bidding. Atty Baniqued also stated that it was Atty Roy Laforteza who made the contract.

Atty Baniqued also maintained that the Bidding is for a structure that is not considered a public utility as per public SERVICE law. She stated that the project is for a structure with recreational facilities. The presiding officer however stated that in the plan submitted the Sanggunian on November 27, 2006 after the bidding, the plan only showed a structure that shall be used as an economic enterprise by the leasing out of 18 rooms for food establishments. As per the Technical Plan, while it is true that the structure will only occupy 50% of the lot, the remaining 50% will be used as right of way driveway on the left and right and parking lot for 16vehicles at the back and another 15% space to be used for the center of the structure probably for tables and chairs of these food establishments.

During the ammendment of the resolution, Councilors Farah Decano and Joey Tamayo introduced amendments by deletion, deleting the provision of pinpointing METROSTATE as the winning bidder of the BOT stating that the resolution is only for the authorization to enter into a contract with the winning bidder subject to government rules and accounting procedures. This was objected to by Councilor Guadiz and 7 other councilors. Another amendment was introduced by Councilor Decano and Councilor Tamayo by insertion stating “Whereas the winning bidder must have participated in the prequalification, qualification and bidding process as per the requirement of Law.” This was vehemently opposed by councilor Guadiz supported by 7 other councilors. The presiding officer asked Guadiz on the reason for his objection stating that as per his committee report, Guadiz defended Metrostate as the winner since it assumed all the rights thru subrogation from S&F and LXS. Is it safe to state that a winning bidder need not participate in the prequalification, qualification and bidding process by rejecting the provision that a “winning bidder must have participated in the prequalification, qualification and bidding process”? Councilor Guadiz did not want to give any reason and insisted that said amendment be voted upon. Guadiz, supported by 7 other councilors OBJECTED to this amendment which only clarified that the Law on public bidding be implemented.

Councilor Guadiz, however, introduced an amendment by insertion on providing that in the contract of the winning bidder, a minimum of 12% and maximum of 18% shall be the rate of return on investment of the BOT operator.

In the manner of the PCAB (Philippine Contractors Accreditation Board) License requirement, Councilor Guadiz stated that the city has a right to add additional requirement in the bidding. Gamma was disqualified because of the city’s requirement for a PCAB license. Metrostate, however, is not required to have a PCAB license since it shall be hiring a contractor with a PCAB license commensurate to the structure to be built.

In the manner of the RDC EXCOM Resolution 66 issued on November28, 2006 after the bidding. The presiding officer called the secretariat of RDC and requested for the Minutes of the RDC EXCOM meeting, secretariat replied that they do not have the minutes of the meeting of the RDC EXCOM for Resolution 66 because it was only the secretariat who prepared this as Mr. Raffy Baraan requested for it. The secretariat said that it was standard operating procedure for the secretariat to prepare such resolutions so as not to delay any project but maintained that it shall later be ratified by the EXCOM once it shall be convened. The Regional Development Council en banc will then also ratify what was passed by the EXCOM once it shall convene itself. As per verbal clarification of RDC Secretariat, it was only the secretariat of EXCOM that prepared Resolution 66. The presiding officer gave copies of the letter of the RDC secretariat dated December14 to all SP Members explaining what happened to Resolution 66. Councilor Guadiz maintained that the SP received Resolution 66 of RDC EXCOM on November 28 and must treat it as it is, an EXCOM resolution.

RDC Resolution is a main requirement prior to bidding of BOT projects amounting to more than 50million pesos.

The presiding officer reminded the members of the Sanggunian that there is no SP opposition in the project and the intention of the project. The main issue of the discussion and decision to be made is the manner on how the bidding was conducted. The procedural lapses and loopholes are very clear in how the Magsaysay Park was bided out. The presiding officer continued to state, that even in the matter of the resolution to be passed regarding the Authorization, Councilor Tamayo noticed a switching in the middle of the second reading which was concurred by Councilor Nick Aquino, the original author when he stated that it is not the title of his resolution and could be verified in the logbook of the Sanggunian.
Majority insisted that the voting was already in order.

The chair reminded the body of its responsibility in complying with the law.

The manner of Voting.

Councilor Michael Fernandez NO
Councilor Farah Decano NO
Councilor Dada Reyna YES
Councilor Jojo Guadiz YES
Councilor Vlad Mata YES
Councilor Chito Samson YES
Councilor Pakoy Torio YES
Councilor Joey Tamayo NO
Councilor Alex De Venecia ABSENT
Councilor Nick Aquino YES
Councilor Eric Munoz YES
Councilor Charise Perez YES

With 8 votes in the affirmative and 3 votes in the negative, the Resolution authorizing the mayor to enter into contract with the winning bidder that pinpointed METROSTATE was approved by the council.

It could be noticed that the SP Members who opposed the resolution, Councilors Joey Tamayo and Councilor Farah Decano are both lawyers. Councilor Michael Fernandez is a graduating Law Student.

The committee report was passed by the body on the condition that it shall include the actual transcript of the discussion of the Sanggunian during its deliberation as basis for the resolution.

D I S C U S S I O N S that shall be part of today's special session at the Sangguniang Panlungsod Session Hall.

Light Text is the report of the Committee on Laws and Ordinances.

Bold Highlighted TEXT are possible arguments that shall be raised.

These are the common questions asked during the deliberations conducted by the Sangguniang Panlungsod:

1. Whether the capitalization of P1.1 Million by the Metrostate qualifies it to bid for the project?

The answer is in the affirmative. Despite the fact that the prospective bidder has an authorized capital stock of only P1.1 Million, he may legally participate and be qualified as a prospective bidder provided that he can show to the Bids & Awards Committee that at the time of the pre-qualification conference, he has a credit guarantee from a reputable bank equivalent to the value of the project. The law merely provides that, “the private sector entity which shall have contractual responsibility for the project and which shall have an adequate financial base to implement said project consisting of equity and firm commitments from reputable financial institutions to provide, upon award, sufficient credit line to cover the total estimated costs”. (Section 2 – R.A. 7718)

METROSTATE is a separate juridical personality that was not prequalified and qualified. It is a separate personality from S&F and LXS. It can not show its financial capability at the time of pre qualification because it was not yet a corporation during the pre qualification, qualification, pre bidding. It organized itself into a corporation only sometime September of 2006 this year.

2. Whether track record and experience of the project proponent is essential in the determination of the person who shall undertake the project?

The provisions of Republic Act 7718 gave the following definition of terms for the following individuals who are essential participants in a built-operate-and-transfer scheme.

“ Sec. 2 Definition of Terms. The following terms used in this Act shall have the meanings stated below:

(k) Project proponent – The private sector entity which shall have contractual responsibility for the project and which shall have an adequate financial base to implement said project consisting of equity and firm commitments from reputable financial institutions to provide, upon award, sufficient credit line to cover the total estimated costs.

(l) Contractor – Any entity accredited under Philippine laws which may or may not be the project proponent and which shall undertake the actual construction and/or supply of equipment for the project.

The requirement that the highest bidder is a contractor duly licensed under the Philippine Contractor’s Board does not apply in a Built-Operate-And-Transfer Scheme. The private proponent may not be a contractor and vice versa. The requirement that the highest bidder is a licensed contractor only holds true if the project is financed by the government. What is essential under a B-O-T scheme is that the private proponent shall have an adequate financial base to implement said project consisting of equity and firm commitments from reputable financial institutions to provide, upon award, sufficient credit line to cover the total estimated costs.

It is essential however that the contractor who undertakes the actual construction and/or supply for the project shall have the adequate competence and experience in managing projects similar to the subject project.

3. Is it necessary for the City Engineer to pre-approve the technical plan that will be submitted for bidding?

It depends. In a public bidding where the scheme is that the lowest bidder shall be adjudged the winner, there is a need for a common plan which shall be bided. The plan needs the approval of the City Engineer and/or the City Planning Officer. However in case of a “Design and Build” scheme, the City Engineer need not be consulted. In the latter scheme, the local government unit shall only give the specifications. The private proponents shall submit their design which shall be evaluated by the Bids & Awards Committee. The design that conforms best to the specifications and the terms of reference issued by the committee shall be adjudged the winner. In the latter scheme, the bid price constitutes only fifteen (15%) percent in the evaluation of the project. The design constitutes eighty-five (85%) percent of the entire project determination.

(c.) projects implemented under this Section shall be subject to the following terms and conditions.
1. The city engineer as the case may be, upon formal request in writing by the local chief executive, shall prepare the plans and specifications for the proposed project, which shall be submitted to the Sanggunian for approval.
4. The contractor shall be entitled to a reasonable return of its investment in accordance with its BID PROPOSALS as accepted by the local government unit concerned.

In the case of a Build Operate and Transfer agreement, the repayment shall be made by authorizing the contractor to charge and collect fees, rentals and charges for the used of the project facility NOT EXCEEDING THOSE PROPOSED IN THE BID AND INCORPORATED IN THE CONTRACT.

note: TOLL was not included in this section intentionally since TOLL is intended for the construction of Highways that shall charge toll fees. The BOT project is for the construction of a Tourist/Commercial Complex that shall be renting out the space to fastfood chains and the likes.

Sangguniang Panlungsod Members are requested to individually explain their reasons for voting on the Build Operate Transfer project awarding of contract to Metrostate Corporation thru a Resolution Authorizing the Mayor to enter into a contract with Metrostate Corporation.

The Sanggunian is in receipt of a letter from the Regional Development Council Secretariat stating that RDC EXCOM Resolution 66 is a resolution prepared by the secretariat that shall be ratified by the Executive Committee once it shall be convened. The letter also stated that it shall be the Executive Committee that shall submit it to the Regional Development Council en banc who shall ratify said Executive Committee Resolution. So far the Executive Committee has not yet convened itself that is why it is only the secretariat that prepared the resolution.

As regards the Financial Statement that is required in the Implenting Rules and Regulations of RA7718, the Sanggunian Panlungsod did not approve of any contract that shall be bidded out as basis for the comparative bidding of interested BOT operators. Stated in the Contract SHOULD BE the minimum designs, performance standards and economic parameters including discount rates, inflation factor, foreign exchange rates among others.

Reasonable Rate of Return as per Implementing Rules and Regulations of RA7718
A reasonable rate of return on investment shall be determined by the LGU on Negotiated BOT Contracts and/or CALLS FOR PROPOSALS by the concerned LGU. In setting the rate, LGU shall consider the following information as may be gathered from the prospective BOT project proponent and/or prevailing in the international and domestic market/industry.
A. DEBT/EQUITY RATIO
B. INTEREST RATE ON BANK LENDING
C. RETURN TO SHAREHOLDERS, among other things.

For Negotiated contracts of public utility BOT projects that are monopolies, the reasonable rate of return on rate base should not exceed 12%.

The scope of the review/approval of BOT projects shall focus on the following:

 Inclusion of the BOT project in the list of Development Projects of the LGU.
 Economic Viability of the BOT project, which shall be evaluated against a hurdle rate officially adopted.
 Financial Viability of the BOT project.
o

The analysis of the financial indicators as per Implementing Rules and Regulations of RA7718 shall be the basis of LGU decisions on the appropriateness of the BOT financing scheme for the project. The Present Value(PV) of the project net cash flow (that is why there is a need to determine the rates of fees rentals and charges the operator is to charge its future tenants) and the Financial Internal Rate of Return (FIRR) of the project on the equity involved and to the government, where government support is involved(involvement is the Huge Magsaysay Park lot that is to be used in the BOT project), shall be computed.

 Risk/sensitivity analysis of the financial indicators.
o The sensitivity analysis should at least consider the following scenarios: (i) increased in project cost by 10 and 20 percent, (ii) decreased in projected revenues by 10 and 20%, and (iii) combination of (i) and (ii).



Indication of preparedness including PUBLIC ACCEPTABILITY of the BOT project.

o Project preparedness shall be assessed against potential right of way problems, availability of relocation plans, and any potential legal and technical issues, among other things. A report on PUBLIC CONSULTATIONS as maybe conducted by the concerned LGU as part of its project preparation activities maybe submitted by the Local Sanggunian(representing the ICC) for information and reference.
 Justification of the choice of contractual arrangement as defined in Section2(a) of RA7718, when such information is available.

SUBMISSION of BOT proposals to the Local Sanggunian(ICC) for evaluation/approval shall include the following

Feasibility Study
Accomplished ICC (local Sanggunian) Project Evaluation Form
Endorsement by the Regional Development Council
Environmental Compliance Certificate
Location Map

ISSUES THAT MUST BE SETTLED and responded individually by the members of the Sanggunian prior to the approval of resolution.
In the case at hand there was no contract approve by the Local Sanggunian prior to bidding. Said Contract must reflect what is required by RA7718.

1. Was the Local Sanggunian requested for its approval of the proposed contract prior to bidding?
2. When was the contract given to the Sangguniang Panlungsod?
3. Who prepared the contract that is now being requested an authorization from the Sanggunian?
4. Did the contract include all requirements mandated by Law?

5. The most important aspect of the contract is the Financial Study, was the financial study reflected in the contract particularly on the rates that shall be charged future tenants?

6. Cashflow of the project will be reflected by cash outflows such as the lease rental rates, maintenance and operating expenses, miscellaneous expenses and most importantly the cash inflows which shall be determined by the rental rates, fees, charges to be charged the future tenants, was this requirement included in the proposed contract? This is necessary in the computation of acceptable rates of return as mandated by RA7718.

7. In the manner of PCAB license requirement, it was the SBAC that required this and disqualified Gama Construct. If it is not required, why did the SBAC disqualify Gama Construct?

8. Does Metrostate have the experienced and track record mandated by law being a corporation that is 3months old?

9. Did Metrostate show financial capability on addressing the financial requirement of the project?
10. How do we deal with Metrostate not being the personality that was pre qualified and qualified?

11. How do we deal with RDC ExCom Resolution 66 which was only prepared by its secretariat on November28 after the bidding has been completed, that said Reso66 is still needing ratification by the Executive Committee once it shall be convened? It is also subject to ratification by the RDC en banc once it shall convene itself.

12. Was there any Public Consultation done to determine public acceptability?
13.

Is a Rebidding in order?

Conclusion of Chairman on Laws and Ordinances

The documents are in order and there was substantial compliance with the procedural law governing Republic Act 7718.

D I S C U S S I O N S

These are the common questions asked during the deliberations conducted by the Sangguniang Panlungsod:

1. Whether the capitalization of P1.1 Million by the Metrostate qualifies it to bid for the project?

The answer is in the affirmative. Despite the fact that the prospective bidder has an authorized capital stock of only P1.1 Million, he may legally participate and be qualified as a prospective bidder provided that he can show to the Bids & Awards Committee that at the time of the pre-qualification conference, he has a credit guarantee from a reputable bank equivalent to the value of the project. The law merely provides that, “the private sector entity which shall have contractual responsibility for the project and which shall have an adequate financial base to implement said project consisting of equity and firm commitments from reputable financial institutions to provide, upon award, sufficient credit line to cover the total estimated costs”. (Section 2 – R.A. 7718)

2. Whether track record and experience of the project proponent is essential in the determination of the person who shall undertake the project?

The provisions of Republic Act 7718 gave the following definition of terms for the following individuals who are essential participants in a built-operate-and-transfer scheme.

“ Sec. 2 Definition of Terms. The following terms used in this Act shall have the meanings stated below:

(k) Project proponent – The private sector entity which shall have contractual responsibility for the project and which shall have an adequate financial base to implement said project consisting of equity and firm commitments from reputable financial institutions to provide, upon award, sufficient credit line to cover the total estimated costs.

(l) Contractor – Any entity accredited under Philippine laws which may or may not be the project proponent and which shall undertake the actual construction and/or supply of equipment for the project.

The requirement that the highest bidder is a contractor duly licensed under the Philippine Contractor’s Board does not apply in a Built-Operate-And-Transfer Scheme. The private proponent may not be a contractor and vice versa. The requirement that the highest bidder is a licensed contractor only holds true if the project is financed by the government. What is essential under a B-O-T scheme is that the private proponent shall have an adequate financial base to implement said project consisting of equity and firm commitments from reputable financial institutions to provide, upon award, sufficient credit line to cover the total estimated costs.

It is essential however that the contractor who undertakes the actual construction and/or supply for the project shall have the adequate competence and experience in managing projects similar to the subject project.

3. Is it necessary for the City Engineer to pre-approve the technical plan that will be submitted for bidding?

It depends. In a public bidding where the scheme is that the lowest bidder shall be adjudged the winner, there is a need for a common plan which shall be bided. The plan needs the approval of the City Engineer and/or the City Planning Officer. However in case of a “Design and Build” scheme, the City Engineer need not be consulted. In the latter scheme, the local government unit shall only give the specifications. The private proponents shall submit their design which shall be evaluated by the Bids & Awards Committee. The design that conforms best to the specifications and the terms of reference issued by the committee shall be adjudged the winner. In the latter scheme, the bid price constitutes only fifteen (15%) percent in the evaluation of the project. The design constitutes eighty-five (85%) percent of the entire project determination.

note: This is the report of the Committee Chairman that shall be decided by the Sanggunian Members. It may be accepted by the members, it may be rejected by the members. Other issues concerning the Magsaysay bidding not addressed in this report shall also be discussed in the special session on December 19, 2006 at 2:00 PM at the Session Hall of the Sangguniang Panlungsod.

December14, 2006

Atty. Geraldine Baniqued
City Legal Officer

Mr. Rafael Baraan
City Administrator

Thru: Benjamin S. Lim
City Mayor

Dear Mr. Rafael Baraan and Atty. Geraldine Baniqued,

Thank you very much for the reply letter from the City Legal Officer dated December 13, 2006 in reply to the letter of clarification dated December 7, 2006.

Issues that need to be clarified.

1. The Sangguniang Panlungsod was just being respectful and courteous in its non action towards the letter of the Mayor dated January 10, for him to be authorized by the Sanggunian to negotiate with a developer for the Magsaysay Park. On October 25, 2004 Resolution 4678-2004 was passed pinpointing the Magsaysay Park as a Tourism Park with recreational facilities (not a Tourist/Commercial complex). The Sanggunian was being kind to the Mayor by not formally rejecting request for Negotiation, since the Mayor’s request at that time did not have any basis. Letter of the Mayor to the Sanggunian requesting that the Mayor be granted authority to enter into a Memorandum of Agreement with a reputable firm to develop said property into a tourist/commercial facility. The request seeking an authority to negotiate should only be done as a last recourse if there are failed bidding on any approved and authorized project.

2. The job of the City Legal Office is to protect the interest of the City. May we request a direct reply on the where about of the remnants of what used to be the Bugnay Commercial Complex? You have stated in your previous reply letter that there was already a turnover of what used to be the Bugnay Commercial Complex. A confirmation from the City Engineer, Waste Management Officer and City Agriculturist who have in their jurisdiction huge lots which could accommodate tons of steel structure confirmed that they do not have in their possession said former Bugnay Commercial Complex or its remnants. Please make a clarification as a City Legal Officer if the city has a right to get the remnants of what used to be the Bugnay Commercial Complex (Magsaysay Commercial Complex).

3. Section 302 of RA7160 is the manner in which an LGU is to deal with a BOT technical plan to be bided out does not contradict with RA 6957 as amended by RA7718 of the BOT Law, therefore is not repealed but remains to be in force. Therefore, the Sanggunian must authorize the minimum basic technical requirement to be technically planned by the City Engineering upon written request by the City Mayor before a BOT bidding is to be conducted. Thank you for your correction, that the Sanggunian received such a plan on November 27 after the bidding was completed and awarded to Metrostate.

4. May we have a direct reply on how we shall now deal with Metrostate? It is a separate Juridical Personality that does not have a PCAB license during the time of bidding and was never pre qualified and qualified. It is S&F and LXS that were qualified. May we request a direct reply on the transferability of the PCAB license of LXS to Metrostate? Is this allowed?

5. Please do not go away from the BOT project being requested for clarification. The BOT project is a Commercial Complex and not an Expressway or Highway that shall demand Toll Fees. The treatment of a Tolled Highway is different from the one being requested clarification. WE are merely requesting the official legal opinion of the City Legal Officer as regards to the provision that the Local Government Unit concerned shall approve of the FEES, RENTALS and CHARGES as stated in the BOT Law. It is only to clear that the bidding did not consider said provision of the law. The reason why the BOT put this provision is for the LGU to determine the best offer in terms of infrastructure and lease rental it could get basing from what the BOT operator is to earn during the duration of the contract. It is a simple financial analysis that any accountant could do using the Present Value.

6. May we also request what Franchise the city legal officer is talking about?

7. The City Legal was gracious enough to state that the city stands to gain 9million pesos in local revenue from the establishments that shall occupy the commercial complex to be built by Metrostate. The city legal assumed that each of the 18 establishments shall be paying 500,000pesos per year for local taxes. To simplify the computation, these 18 establishments must declare a total sales of 1.2billion in a year or 100million pesos a month to achieve the 9million pesos annual local revenue BASED ON HOW THE CITY COMPUTES ITS LOCAL TAX. It will be equivalent to having declared gross sales of 5.555million pesos per establishment per month. In a daily basis, the City Legal forecasted EACH ESTABLISHMENT shall be having 185,200 pesos gross sales per day in selling coffee, hamburgers and other food products (please verify this computation from One Stop Shop Business Center). If this shall be the case, then there is indeed a need to ensure that the city will have a fair deal with any future BOT the Sanggunian may authorize by fully enforcing the mandate of the Law that it shall be the LGU concerned that shall approve the proposed fees, rental rates, and charges that a BOT operator is to bid.

Since you touch on the economic aspect of the project, may I again remind the status of the mall type Malimgas Market which is not earning revenue for the government. Records will show that the Malimgas Market collection in 2005 is about 20million pesos. The city however is spending almost 40million pesos for its yearly operation as reflected in CY2005. As of present, the mall type market has lost more of its tenant and continues to lose its tenants in the air conditioned second floor. Would the City Administrator suggest the repackaging of the Malimgas Market into a Tourism/ Commercial Market basing from the City Legal Officer’s forecast on sales of fast food chains in the city? Would the City Administrator proposed a leasing out of the 3rd and 4th floor of the Malimgas Market? Not only will the forecast increase the City’s local revenue, but it shall erase the city’s subsidy to the tune of 18.6million a year just to operate the Malimgas Market. The city will be saving 18.6million of subsidy expense for the Malimgas Market and at the same time the city could use the 18.6million pesos for its other programs. The Sangguniang Panlungsod through the Committee on Market and Trade and Industry has been pounding on the promotion of the Malimgas Market.

8. The Sangguniang Panlungsod Committee Report is different from the Sangguniang Panlungsod Resolution. May we request the opinion of the City Legal as regards to the required Regional Development Council Resolution for BOT projects in excess of 50million pesos. Is the Committee Resolution of the Executive Committee strong enough to comply with the requirement of the Law seeking for the Regional Development Council Resolution? The BOT was specific that for projects above 50million pesos, there is a need to secure the Regional Development Council’s Resolution, not the Executive Committee or any other committee’s resolution which was submitted to the Sanggunian on November 28, 2006 as reflected in RDC EXecutive COMmittee Resolution No.66 series of 2006.

May we propose a re bidding in the said BOT project and this time with people’s participation in the decision of leasing out the Magsaysay Park for another twenty five years.
The Sanggunian is united with the Mayor in the progress of Dagupan City. We are in unison with the vision of Dagupan as “We envision Dagupan City as the premier center of the north for education, information technology, health, commerce and trade, and aquaculture, supported by God-loving, well-informed, healthy, self-reliant, empowered and vigilant citizenry steered by firm, decent and progressive leaders, towards a globally competitive, diversified and environment-friendly economy in a balanced, planned, attractive and safe environment”.
There is nothing to lose in ensuring that the mandate of the law in any BOT project is complied with in the city of Dagupan. The city stands to gain more of the respect of the people if we make them a part of the decision in leasing out via the BOT, the Magsaysay Park to a private entity for another twenty five years.
Lately, the city government has been preaching good governance in the monthly PGS Seminar at the city museum. The four pillars of which are Participation, Accountability, Transparency and Performance. Let these be our guiding principles. Let us practice what we preach.
Mahal natin ang Pilipinas! Mahal natin ang Dagupan!
Together let us make Dagupan great, not only in physical structure but also in values.

Respectfully,

Sgd.
Alipio Vittorio Ramon D. Fernandez
City Vice Mayor and Presiding Officer

cc: ALL SP Members

Vice Mayor Alvin Fernandez joins Councilor Farah Decano in the formation of a federated student council of dagupan. The Sanggunian Panlungsod took care of the initial logistics to organize the student council into a federation for them to have a say in the affairs of governance in the city.

VM Alvin inspires students to be vocal on their ideas on how to make dagupan better. He stressed the need for students participation on local laws affecting them. Every one must participate. Inaction and indifference are acts of repudiation of the rule of law.