Office of the Senator

EMMANUEL D. PACQ1JIAO
MAIN OFFICE TELEPHONE NUMBE.R,

39 Seventh Street, Goodrich Village, Concepcion Uno, Marikina City

-' - .
Direct: Line: 5526686
S r ~'. ["" . . '" ,,"' ~ .,: "'1 'J! A 0
biengaurino@gmail.com/ 0906-350-8342/ 934-4475
_.- ~.....
"}

20July 2017 H'j :' I

L.I
-.
I .

The Honorable Senator Manny D. Pacquiao

-;r _
Chairman, Public Works o ,-. T.; _1J)_--Ir+---n---
Senate of the Philippines

Subject: BQT/PPP Contracting - the Best Means of Optimizing Projects & Driving Economic Gr

Dear Sen. Manny Pacquiao:

Furnished herewith are my follow-up letters to Sec. Mark A. Villar and MWSS Administrator Reynaldo
V. Velasco dated 07 July 2017and 06July 2017, respectively.

The said letters are being brought to your attention for the foUowing reasons:

1. The subject matters are imbued with public interest and are vital in the attainment of national
economic growth. In view of the apparent inaction on these vital matters, perhaps a senate
inquiry may help facilitate in finding the logical choices, which will serve public interest.

2. The very long time it is taking the government to decide on my request since 2007 suggests
that the BOT Law be amended to make the BOT contracting mode mandatory or the first
priority in selecting the implementation mode for bulk water supply projects, sewerage
systems, railway systems, toll roads, and the likes. As discussed extensively in the attachments,
BOT contracting will optimize the design and construction of projects and thus minimize the
unit cost of public services. Also, it is suggested that the unsolicited mode of procuring BOT
contract be discarded because it has been proven to be circuitous and prone to corruption.

3. It has been observed that while DPWH has been spending money in installing/ maintaining its
website and email system, yet my emails on the subject are not being responded to. I had to
commute by LRTto avoid traffic congestion in delivering my letters. EO No. 02 of Pres. Duterte
recognizes only ha~<lcopies of letters. It does not cover suggestions like mine. Needless to say,
because it is part}roper decorum, but there is a need to oblige government officials and
employees who are recipients of emails to acknowledge receipt and to respond to the concerns
being raised after a specified period as in R.A. No. 6713. Perhaps, the FOI bill now being crafted
in both houses of Congress can address the deficiency of Pres. Duterte's EO No. 02.

In addition to the above suggestions, the following are also offered for consideration.

1. A law that will prohibit the award of water rights without the benefit of public bidding is
needed because the public is being held captive by opportunistic holders of the water rights.
This means that whoever wins in the bidding for the development of water resources should be
awarded the water rights. This will prevent the cost of water rights being passed on to the
consuming public, which cost normally includes grease money.

2. The conflict between technical-financial wisdom and the constitutional doctrine on non-
exclusivity of franchise is suggested to be ironed out in the field of water services. P.D. No. 198
Chapter XI, Section 47, recognizes the wisdom of granting exclusive franchise to local water
districts in order to make t~~~I~,a~~'2n<3f ground water resources controllable/sustainable
and .consequently make th[m;!echnfcalfy clnd financially viable. However, the Supreme Court
ruled in G.R. No. 168914/July 4, 2007 that Section 47 of P.D. No. 198 is unconstitutional. This
ruling makes it very hard for water districts to compete with small water service providers and
thus, they cannot afford to develop long term surface water supply sources because of
uncertainties in its revenue forecast owing to unregulated competition disregarding the
preservation of ground water resources. Such situation will spirally strain ground water
resources and consequently make its abstraction and treatment very expensive. It is submitted
that Article XXII, Section 11 of the 1987 Constitution allows exception to the non-exclusivity
doctrine subject to congressional intervention when the common good so requires.
 ,

3. To improve the water services outside the MWSS service area, it is suggested that the
management and operation of Water Districts and LGU managed water supply systems be
privatized similar to that of MWSS. It has been demonstrated from MWSS experience that the
private sector is more effective in managing and operating water and sewerage systems.
However, it is suggested that the Concession Agreement be modified as discussed in item 4
below. A law will be needed to address this suggestion.

4. Learning from the pitfalls of the current MWSS concession agreement, it is suggested that
MWSS be required to draft a new concession agreement as early as this time. The draft should
be submitted to Congress' because such agreement is a modification of the MWSS Charter,
which needs congressional approval. It should also be made available for public scrutiny and
fine tuning so that the rebidi:ling that will be made by 2035 will be free of the current defects.
The early preparation can take advantage of the services of those who have observed the
current defects while they are still around and sound. Among the provisions that need public
scrutiny are the following:

a. The formula for rate rebasing should implement Clause 9.4 which stipulates thatonlv the
operating and capital expenses that were prudently and efficiently incurred are eligible for
recovery. The current formula contradicts Clause 9.4 because it includes future
expenditures.
b." The responsibility for conducting public bidding for the provision of bulk water supply
should be explicitly specified to be that of the concessionaires because it is the one
responsible for meeting the service coverage. Moreover, the elevation and distance of the
water source to the distribution system is needed in optimizing the water distribution
system. Thus, it is imperative that such responsibility be logically assigned to the
concessionaires.
c. Instead of making the water tariff as the bid parameter as in the first bidding, it is suggested
that the initial water tariff be set equal to or less than the one current at the time of bidding
period. The bid parameter is suggested to be the capital infusion that a bidder will commit
and deposit for the exclusive use in the expansion/improvement of the services. It is
understood however that capital expenditures on water sources and distribution should be
based on optimized design.
d. Salient operating and planning data and drawings of water and sewerage facilities in GIS
platform should be made available on-line to MWSS for transparency for the following
jeasons:
1) To allow the government easy access to the facilities in case of the need to take over the
operation because of a crisis situation.
2) To enable MWSS in on line monitoring and review of the existing and proposed facilities.
3) To facilitate the review of rate rebasing submissions of the concessionaires .
. '4) To provide equa! chance to other bidders by the time the concession agreement will
mature and there will be a need to rebid the concessions.

Hoping for your diligent and intelligent intervention on the concerns raised. Please feel free to call or
email me for clarifications.

Respectfully yours,

1_ Former MWSSofficial and consultant

- Former consultant in some projects of Maynilad Water and Manila Water.
page 2 of 2