Press Release
March 28, 2014

Osmeña: Second hearing on Mactan airport uncovered more irregularities

Senator Serge Osmeña today said more foul-ups were uncovered in the bidding for the P17.5 billion Mactan Cebu International Airport (MCIA) facility during the second hearing of the Senate Committee on Public Services on the Public-Private Partnership (PPP) program of the government.

Osmeña, who is the Vice Chairman of the Senate Committee on Public Services, deplored the failure of the Department of Transportation and Communications -Prequalification Bids and Awards Committee (DOTC-PBAC) to conduct a more thorough due diligence check on the corporate background of GMR Infrastructure, which is the Indian partner in the GMR-Megawide consortium which submitted the highest bid.

Osmeña has delivered a Privilege Speech entitled 'Shades of Piatco' questioning the bidding process conducted by the DOTC for the 25-year MCIA expansion and management project.

Osmeña asked the PBAC whether it looked into the March 2012 Report of the Comptroller and Auditor General (CAG) of India, which cited several irregular acts of GMR, particularly the Airport Development Fee that it charges air travelers on top of the passenger service fee.

Osmeña likewise elicited an admission from DOTC Undersecretary and head of the PBAC Jose Perpetuo Lotilla that the PBAC did not inquire with the Maldives government about the controversial expulsion of GMR from the airport project in the Indian Ocean archipelago.

"You should make the effort to do more in-depth due diligence," Osmeña exhorted the PBAC as he emphasized the importance of independent third-party checking of the submissions by bidders.

Turning his attention on the financial aspect of the bidding process, Osmeña asked GMR about their net losses, which he said, has doubled from a year ago to 10.7 billion Indian Rupee based on their 9 months 2013 financial statements.

"In addition, their interest expense has ballooned by 37%, wiping out their cash profits. Hence they would need to borrow more just to service their interest payments," the Cebu solon said.

"Despite the sale of assets to reduce their financial obligations, GMR's debt level further increased, bringing its debt-to-equity ratio to an alarming 4.9 times," Osmeña added, pointing out that such ratios and financial trends are normally used in assessing the future financial health of companies.

On the conflict of interest issue, Osmeña clarified with Lotilla that the provision was intended to prevent giving any bidder an undue advantage as opposed to collusion, which is covered by another provision.

He stated that this rule clearly indicated that even directorship two years before the bid is considered a conflict of interest.

He expressed disappointment that the shoddy pre-qualification process did not address the conflict of interest violations and failed to uncover the PIATCO like background of GMR.

Osmeña said that the most important issue at hand is for Cebu to have the best airport and airport operator.

"To correct their sloppy pre-qualification, the DOTC in its post qualification stage can now take all these findings into consideration to ensure that the people of Cebu will end up with an airport group whose background is not only beyond question but outstanding," he said.

News Latest News Feed