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Subic Bay Metropolitan Authority (MPD-SBMA)

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16 September 2008

Subic golf course contract not a ‘sweetheart deal’

The Subic Bay Metropolitan Authority (SBMA) has vehemently denied allegations that it has entered into a “sweetheart deal” with Hanafil Golf and Tour, Inc., a Korean-Filipino firm that is set to pour $48 million to redevelop the Subic Bay golf course.

SBMA Administrator Armand Arreza stressed that the agency had observed due process in awarding the contract to Hanafil, in accordance with RA 9184, otherwise known as the Government Procurement Reform Act.

“How could it be a sweetheart deal when, clearly, our agreement with Hanafil assures the government a P14-million income annually compared to the P3.6-million promised by the former operator?” Arreza asked.

“And this P14-million rental will be paid on top of a five percent revenue sharing scheme, as well as the $48 million development commitment,” he said.

Arreza also explained that the SBMA awarded the lease and development contract to Hanafil because the firm offered terms “most advantageous to the government” among the eight proposals received by the SBMA’s Bids and Awards Committee (BAC) for infrastructure.

“All these underwent the legal process — from the publication of an invitation to submit comparative proposals, to the creation of an oversight committee composed of SBMA directors and managers to oversee the bidding process,” Arreza said.

“So there is simply no substance to this sweetheart deal angle foisted by some detractors who seem to relish the idea of reverting to the previous contract that didn’t work out,” he added.

Arreza clarified these points in reaction to claims by Northern Samar Rep. Emil Ong that the terms and conditions of the Hanafil contract were “grossly disadvantageous to the government” because unlike the Universal International Group (UIG), the former operator, Hanafil was given a one-year grace period from payment of rentals to allow the new operator to develop the golf course.

Arreza said, however, that the SBMA has given the UIG “more than enough concessions already” to enable it to make good on its development commitments that were agreed upon as early as 1995.

Among UIG’s commitments were the construction of a first-class clubhouse, a five-star hotel and resort, a condominium and VIP villas targeted for completion before Subic hosted the Asia-Pacific Economic Cooperation summit in 1996.

Arreza said that the SBMA had allowed the UIG’s original lease and development agreement (LDA) to be amended three times, with the first amendment in 2001 effectively reducing the UIG’s rental fees, performance bond and service fees, and extending the firm’s compliance period for its commitments.

However, by January 2003, the UIG still accumulated $44,070 and more than P25 million in arrears, and also failed to deliver on its promises.

The second amendment in 2003 stopped the imposition of service fees altogether and waived future interest on fixed service fees, while the third, in 2004, reduced UIG’s lease rate by 50% and deferred the imposition of escalation rates.

Despite these, Arreza said the UIG continued to default on its obligations under the LDA and under the compromise agreements, so that by the end of March 2007 the firm’s arrears had ballooned to more than $2.55 million and P47.73 million.

“The firm’s failure to settle its debts and to fulfill its development commitments forced the SBMA to terminate UIG’s LDA in May last year in order to protect the interest of the government,” said Arreza. (SBMA Corporate Communications)

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