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SC grants relief to SM Land, blocks public bid for BGC lot

Posted on September 05, 2014 07:33:00 PM [ BusinessWorld Online ]

THE property arm of the SM Group has won a Supreme Court ruling against the Bases Conversion and Development Authority (BCDA) over the disposition of a 33.1-hectare lot at Bonifacio Global City in Taguig.

In a 25-page decision, the high court’s Third Division compelled the BCDA to go forward with the process of entertaining SM Land Inc.’s unsolicited bid for the property. It did so by definitively blocking the BCDA plan to conduct a public bidding for the Bonifacio South Property, with the court’s Jan. 9, 2013 temporary restraining order (TRO) declared permanent.

“Allowing government agencies to retract their commitments to the project proponents will essentially render inutile incentives offered to… the private sector entity,” the court said.

At issue is the BCDA’s attempt to declare the lot subject to public bidding after extracting progressively higher bids from SM Land and embarking on the competitive challenge process -- also known as a Swiss challenge -- which it subsequently cancelled.

“SMLI has the right to a completed competitive challenge pursuant to the NEDA-JV Guidelines and the certification issued by BCDA,” the court ruled. “By their mutual consent and in signing the certification, both parties, in effect, entered into a binding agreement to subject the unsolicited proposal to a competitive challenge,” the court added.

“In the present case, the Court finds that BCDA gravely abused its discretion for having acted arbitrarily and contractual commitment to SM Land, to the damage and prejudice of SM Land. It veritably desecrated the rules the government itself set in the award of public contracts,” it added.

SM Land made its initial approach to the BCDA in 2009 with an unsolicited proposal to develop the property through a public-private joint venture agreement.

The proposal guaranteed the BCDA a payment amounting to P15,985 per square meter (sq m) or P8.1 billion.

Three months after, the initial proposal was followed by a second, guaranteeing a payment of P31,139 per sq m, or P20 billion.

SM Land submitted its third unsolicited proposal in May 2010, guaranteeing payment of up to P22.6 billion.

The BCDA responded by creating a joint venture selection committee (JV-SC) following the procedures prescribed under the detailed guidelines for competitive challenge procedures for public-private joint ventures as promulgated by the National Economic Development Authority (NEDA JV Guidelines).

In May 2010, BCDA then accepted the unsolicited proposal of the SM Land. Despite its acceptance, however, the BCDA claimed it was not bound to enter into a joint venture with SM Land; rather, it viewed its role as limited to conducting detailed negotiations.

Upon arriving at mutually acceptable terms and a guaranteed secured payment amounting to P25.9 billion, a certification of successful negotiations was issued by the BCDA and signed by both parties on August 2010.

The certification included a provision subjecting SM Land’s original proposal to competitive challenge and “activities for the solicitation for comparative proposals.”

The BCDA then conducted a competitive challenge to determine whether other parties can match the proposal of SM Land.

The BCDA then proceeded with the pre-eligibility conference on Sept. 3, 2010. Ayala Land Inc., Rockwell Land Corp, and Filinvest Land Inc. participated in the conference.

BCDA, however, failed to complete the competitive challenge and sent a letter to SM Land saying that it would “welcome any voluntary and unconditional proposal” to improve the original offer.

SM Land in December 2011 increased the total payment to P22.44 billion over 15 years with an upfront payment of P3 billion.

Without responding to the proposal, the BCDA sent a memorandum to the Office of the President in February 2012 recommending the termination of the challenge, proceeding instead with a public bidding.

BCDA then published a call for bids in daily newspapers in December 2012, which compelled SM Land to seek relief from the high court.

“BCDA is duty bound to proceed with and complete the competitive challenge,” the court said in its ruling. It also told the BCDA to publish within seven days the “invitation to apply for eligibility and to submit a comparative proposal” in three newspapers of nationwide circulation for two consecutive week and in the BCDA website (www.bcda.gov.ph).

BusinessWorld attempted to contact BCDA president Paciano D. Casanova but got no reply.

The agency’s legal team said it has yet to receive a copy of the ruling.

“We cannot comment on the matter yet because we haven’t seen the decision,” said BCDA lawyer Peter Paul Flores. -- Reden D. Madrid     
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