Recto : High PPP bids could lead to higher user charges

MANILA-Sen. Ralph Recto today called for a review of the government policy of awarding multi-billion Public-Private Partnership projects to highest bidders as this scheme could lead to higher fees paid by the public who will use them.

“If a public infrastructure or basic service is the one being auctioned off, logic dictates that the best lowest bid should win it as it would translate to lower fees to be paid by the public who will use it,” the Senate leader argued.

Recto said if the contract, for example, for a road goes to the highest bidder, then the winning group will recover their investment by imposing higher fees on the public who will use that road. 

“The higher the bid, the higher the fees that the public will eventually shoulder. It has a domino effect and the last tile will fall on the people,” he said.

He said if PPP projects are pay-per-use enterprises, then the operative principle that should drive government in awarding these is to keep “what the public will pay to the minimum.”  

“What drives up the cost is that the government gets an advance payment or a prepaid tax for a structure that has yet to be built,” Recto said.  “Government’s dividends are frontloaded.” 

“By adding what is basically a franchise fee on a service like the use of a road,  which ordinarily  is rendered free by a government, what the government is doing is collecting in advance its share from a  basic public service it has privatized,” he said.

  

“The rights paid is a kind of institutional add-on which ratchets up   the project cost which is then passed on to the people. The people pay not just the cost of the project but for the government share which has been advanced,” Recto said.

In filing Senate Resolution No. 810, Recto said government should see PPP concessions not only from the point of view of raising revenues but also the protection of the public from excessive charges and costs.

Awarding projects and concessions based on proposed concession payments, while providing additional revenues for the government, may shift burden of payment to the people through increased user charges and consumer costs, Recto said. 

He, however, admitted that there are “state grants” which should be awarded to the private sector based on the highest bid. 

“If it’s land, or a reclamation project, or any mineral extraction contract, then government should insist on the highest fee possible. If it sells a land, then the highest offer should win. But if it is a hospital or a train line, then it shouldn’t be assessed on what’s in it for the government.”

“Kapag highest bidder ang mananalo sa pag-imprenta ng isang dokumento o lisensya, e di syempre mas mas mataas ang isisingil sa dokumentong iyan,” Recto said.     

Last month, the PPP Center announced that it would roll out 18 major infrastructure projects worth P603 billion before June next year.

The projects are part of the inventory of 47 PPP projects.

Two of the biggest projects include the North-South commuter rail worth P265.3 billion to be launched in November and the proposed subway system Mass Transit loop worth P132 billion to be launched in December.