The Tacloban Airport Development Project is full of drama and surprises. In earlier columns, I used a lot of descriptions like “the emperor has new clothes”, magician, and deaf ears, to point out, among others, that for Phase II, the same bidder that botched the project’s Phase I and delayed its completion by two years will be awarded Phase II. It is the kind of description that you will not find in a government report.
Now here comes the news that despite its failure to complete Phase I on time, the contractor, MAC Builders still contests the efforts of the Civil Aviation Authority of the Philippines (CAAP) to terminate its contract.
Before this column goes deeper into the topic, we must bear in mind that in August 2023, the RPMC already passed a resolution urging the Department of Transportation to terminate the contract of MAC Builders and, by implication have a capable contractor finish the job.
As a response to this private-sector-led initiative, the contractor proposed to the RDC Executive Committee in September 2022 that it finish Phase I (or what is left of it after CAAP suddenly and surprisingly reduced its scope of work) by March 2024.
By all indications, CAAP, once again will relent to MAC Builders’ request that it be allowed to complete Phase I by March this year or around six weeks from the time this column goes to print. This move is probably intended to cure the problem posed by the existence of defects or unaccomplished portions of Phase I because Octagon is MAC. The only difference is its corporate name. It is a clever way of hiding MAC’s shortfalls in Phase I. MAC can then recover its self-inflicted losses in Phase I.
The implication of the excessive delay is by no means cheap. We are talking about millions of pesos in public funds. Phase I has a cost of 760 million pesos. Liquidated damages are computed to be at least one-tenth of one percent of the cost of the unperformed portion of the works for every day of delay.
Based on the original contract, the project was scheduled for completion in May 2022. That is a Godzilla-like 700-plus days of delay implying damages that can run up to over 35 million pesos if the unperformed works by the end of March 2024 amounts to 50 million pesos of the 760 million contracted cost. The delay represents liquidated damages that the government stands to collect which it will forgo because CAAP will say MAC is not at fault. It is one for Ripley's “Believe it or Not” but it seems that CAAP after this two-year delay will accept the blame that it is at fault to absolve MAC of any peso in liquidated damages.
The picture that is emerging has these components, so far: First, CAAP issues three variation orders which enable MAC to have zero negative slippage 30 days after CAAP says it has a negative slippage of 30 percent; Second, CAAP allows MAC a reprieve of several months, until March 2024 (from May 2022) to complete Phase I as CAAP reduces (some say with a touch of magic) the scope of work; Third, CAAP issues a Show Cause Order to put on record that it is following the process in the Procurement Law. In reality, this could be a ploy to enable MAC to justify its delay and failure to complete its contract on time; Fourth, CAAP conducts the bidding for Phase II before December 31, 2023, to avoid reverting the billion peso Phase II budget and giving MAC the chance to recover its losses; Fifth, CAAP allows Octagon to participate (CAAP surprisingly does not do the usual due diligence check to find out who the owners of Octagon are); Sixth, Octagon appears in line to be awarded the project by negotiation (because there are two other lower bids) to start in April 2024 just in time for MAC’s supposed completion of Phase I with all the suspicious amendments to the scope of its contract, by end of March 2024. And the long story of this very important project continues.
Hats off to CAAP for being resourceful and generous, like Santa Claus. It is almost February so maybe the expected Phase II award to Octagon can be considered a Valentine’s Day gift. After all, love reigns this month, and CAAP seems to love MAC Builders. Cupid's arrow will be right on target.
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