Saturday, April 26, 2003
 
  
OGCC backs PPA compromise deal, 
cites P24.74M in savings for gov’t 
 

THE Office of the Government Corporate Counsel (OGCC) has endorsed a pro­posed settle­ment between the Philippine Ports Authority (PPA) and Blue Crown Marine and Hydro Services, Inc. because it will save the government P24.74 million. 

In a statement, the PPA quoted the opinion of Government Corporate Counsel Manuel Tee­hankee, which says the settlement provides a waiver on the P10 million upfront money paid by the contractor to PPA as well as the P4.64 million in interest earnings on the payment by Blue Crown. 

Also, the contractor agreed to waive its pre-operating expenses on the project worth P10.10 million. 

The estimated savings do not include the interest earned on the lost potential income from 1998 to 2001, which was also being waived by Blue Crown. 

The proposed deal would also free the PPA from any future obligations and pave the way for the modernization of the North Harbor free from any burden. 

Blue Crown filed a damage suit against PPA in July 1999 after the ports authority failed to deliver the required pressure to generate the desired production rate of 150,000 cubic meters a month as guaranteed by the PPA. 

The contractor also had to incur pre-operating expenses and potential income losses due to the delayed turnover of the water distribution system. 

“If we don’t agree to pre-terminate the contract, the cost of damages would further bloat and we may not be able to take advantage of the waivers on the upfront money as well as the interest earnings. The more we forestall the termination of the contract, the more interest and cost damages we need to pay in the future,” said PPA General Manager Alfonso Cusi in a statement. 

Under the proposed agreement, the PPA would have to compensate Blue Crown a total of P44.18 million, representing the minimum potential income of Blue Crown for the 15-year contract that started in 1998 minus the upfront payment as well as interest earnings. This serves as the full and final settlement of the case for the pre-termination of the water contract. 

Cusi said the compromise agreement also provides more flexibility for the government in its efforts to modernize North Harbor. 

“I believe that the new agreement will be more cost-effective for the PPA in the long run. We will have lower operating costs since there will no longer be additional office rentals, professional and consultancy fees, and representation expenses for this project alone,” Cusi said. 

“At the same time, the PPA will earn from the water system, which had been fully rehabilitated and water tested by Blue Crown,” he added. 

The PPA awarded the bulk water selling agreement to Blue Crown in September 1997 as part of the North Harbor Modernization Program. The move signaled the privatization of the PPA’s water distribution system. 

Under the contract, Blue Crown would operate and maintain the water distribution facility for 15 years, renewable by another 15 years. Blue Crown would supply the water requirements to all vessels and commercial users from Pier 2 to Terminal 16 at the North Harbor. 
-- Sheryll B. Casanova