SM quizzes DOTC

WITH the government’s PublicPrivate Partnership (PPP) program picking up speed in recent weeks (finally!), it seems that rivalries between conglomerates eager for pieces of the action are heating up, too.

Apart from the brewing battle between the Megawide and Filinvest groups over the Mactan-Cebu International Airport terminal project, the “business-only” rivalry between the SM and Ayala groups is now coming to the fore.

The SM group has apparently filed a motion for reconsideration before the Department of Transportation and Communication (DOTC), following the announcement that the Automated Fare Collection System (AFCS) project has been awarded to the AF Consortium of Ayala Corp. and Metro Pacific Investment Corp.

On paper, the AF Consortium’s bid is higher than SM’s by a razorthin margin of just a little more than P100,000.

But according to SM Prime Holdings Inc. chief Hans Sy, the SM consortium submitted a superior financial bid because it offered to pay the entire P1.008-billion bid amount upfront and in cash.

In contrast, the AF Consortium’s bid involves an initial payment of P279 million, with the balance of P800 million to be paid in transaction fees when ridership volume reaches 750 million transactions a quarter—something that could happen several years down the road.

So from a “net present value” perspective, SM believes its bid is superior.

“Needless to say, an upfront, unconditional payment involves no risk to the government, not being dependent on the happening of any future event to which the payment is conditioned on,” Sy said.

Given its stance on the issue, expect SM to put up a fight and expect more fireworks going forward. But if recent developments are any indication—and if the buzz going around town is accurate—SM faces an uphill fight for this project. Or any other project under the present dispensation, for that matter.