,Jli:TROPOLlTAN WATERWORKS

& SEWERAGE SYSTEM

ADMINISTRATOR'S OFFICE
39 Seventh Street, Goodrich Village, Concepcion Uno, Marikina City
GlECEIVED BY: .
06 July 2017
NANiE: -- 0 ~ JUt ZOl7 :
PDDG Reynaldo V. Velasco, (Ret.), Ph. D. DATE: .to' J\f -r.""
Administrator, MWSS

Subject: BOT/PPP Contracting - the Best Means of Optimizing Projects & Driving Economic Growth

Dear Hon. Administrator Reynaldo V. Velasco:

This is a follow-lip of my letter to Sec. Mark A. Villar on the subject dated 07 March 2017, copy of which
was furnished to you being the MWSS Administrator and Vice- chairman of the MWSS Board of Trustees.

Your answers to the following items are expected as they are mandated under RA No. 6713.

1. MWSS justification for its preferred implementing mode of the sewerage projects' being
implemented by its concessionaires, if other than BOT contracting. it is reiterated that the BOT
contracting rrlode is the only one that can satisfy MWSS concession agceement Clause 9.4, which
stipulates that only the operating and capital expenses that were prudently and efficiently
incurred will be eligible for recovery through rate rebasing. Clause 9.4 is the is the heart of the
concession agreement, which justified the privatization of MWSS. Therefore, it must be fully
complied with.

2. MW?justification for its preferred implementing mode of Laiban Dam Project, if other than BOT
contracting.
.,. 3. MWSS justification why it is clinging to its interpretation that its concesslonaires are not
contractually bound to develop new water sources, despite the contractual responsibility of the
concessionaires to meet the service coverage requirement, which requirement is dependent on
the adequacy of water sources.

in connection with the above request, it was gathered that one of the causes of delay of the
development of new sources is the inability of the MWSS concessionaires to provide firm water
demand projections to MWSS. Certainly, this cause will automatically be removed if MWSS will
reverse its decision; i.e., make the concesslonaires contractually liable for the inadequacy of
water supply in their respective service area.

An internal legal opinion was also gathered from the grapevine that the responsibility for the
development of new sources is not clearly defined in the MWSS concession agreement.
Accordingly, this ambiguity was interpreted by the previous MWSS administrations in favor of
their. opportunity to handle the biggest single transaction of the century with its associated SOP
or "padulas". According to them, those who have different interpretation should bring the
matter to the Supreme Court for resolution.

The above stance of previous MWSS administrations surely is not for the best interest of the
public as it caused the delay of the implementation of the project and the possibie squander of
a very vital water resource. If indeed the present administration is bent to deliver the badly
needed infrastructures, why not reverse its interpretation in favor of a logical one that will
. enable the concessionaires to meet their service coverage obligation by making them
responsible for the -development of new sources.

in addition to the information and suggestions already given in my previous letters, the following are
offered to minimize the unit cost of treated water from Laiban Dam.

1. Laiban Dam must be implemented ahead of the 600 MLD Kaliwa Dam in order to minimize its
idle capacity. implementing the 600 MLD Kaliwa Dam ahead will not only compromise the
financial viability of Laiban Dam. It will also postpone further the implementation of Laiban Dam
and consequently
. .
. make it more expensive because of the growing number of structures in the

page 1 of 2

...~
; "
 proposed reservoir area. This concern is raised because it has been reported in that the 600 MLD
Kaliwa Dam will be implemented ahead.

2. Allow the existing MWSS concessionaires to sell bulk water outside its service area, extending
up to Calamba and to the unserved areas of Cavite as this is allowed under the MWSS Charter
as amended by P.D. No. 1406. All that is needed is a board resolution and approval of the
President. This will minimize further the idle capacity of the project and consequentiy the unit
cost of treated water.

Needless to say,. the fact that the present administration has been announcing that its Build-Build Program
will be funded from ODA funds and increased taxes, means that the government lacks financial resources.
It is therefore imperative that projects that can be implemented best through a BOT mode should be
implemented as such to boost the national economy without increasing taxes and incurring tied loans.

To facilitate the approval of Laiban Dam, it is further suggested that NEDA be requested to leave the fine
tuning of project FIRRlO the bidders as the best test of financial feasibility is the participation of bidders
as no investor will invest in a losing business. To facilitate the procurement process, unsolicited proposals
should be discarded as this has been proven to discourage the participation of price challengers,
circuitous, and is prone to corruption.

Also, in order not to undermine the FIRRof Laiban Dam, it is suggested that the concessionaires be advised
to refrain from sourcing water from Laguna Lake at present because it is yet unknown as to when the
current sewerage program of both MWSS concessionaires can reclaim its (of Laguna Lake) water quality.
This uncertainty and the increasing cost of energy for pumping and water treatment can make the short-
term gain from Laguna Lake a long-term pain. The utilization of Laguna Lake should be after the long-term
upland water sources and after the successful implementation of the Writ of Kalikasan issued by the
Supreme Court in 2010.

Very truly yours,

1. His Excellency, Pres. Rodrigo R. Duterte

2. Honorable Sen. Grace Poe - Chairwoman, Public Services

3. Honorable Sen. Manny Pacquiao, Chairman, Public Works

4. Honorable Benjamln, E. Diokno, DBM Secretary

5. Honorable Ernesto M. Pernia, Socio-Economic Planning Secretary and NEDA Director General

1 _ Former MWSS official and consultant as well as consultant in some projects of Maynilad Water and Manila
Water.
page 2of2

., r