Critical Analysis of the Bulacan International Airport PPP Project

This report presents a critical analysis of the Bulacan International Airport Public-Private Partnership (PPP) project in the Philippines. It begins with an overview of PPPs and then delves into the background of the Bulacan airport project, which aims to replace the overcrowded Ninoy Aquino International Airport. The report analyzes the project's structure, including the Build-Operate-Transfer (BOT) model, the involvement of the Department of Transportation and San Miguel Holdings Corporation, and the project's cost and timeline. It examines factors affecting project implementation, such as funding, environmental concerns (flooding), and economic conditions. The report also explores the project's strategies, including the BOT financing method and procurement strategies. Finally, it offers recommendations to address potential risks and improve project outcomes, emphasizing the need for risk management and coordinated efforts between the government and the private sector. The analysis highlights the importance of this large-scale project for improving international commerce and tourism in the Philippines and the challenges involved in its successful completion.

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Table of Contents
Introduction......................................................................................................................................2
Overview......................................................................................................................................2
Background..................................................................................................................................2
Critical Analysis..............................................................................................................................2
Project Analysis...........................................................................................................................2
Factors affecting the project implementation..............................................................................3
Project strategies..........................................................................................................................4
Recommendations............................................................................................................................5
Conclusion.......................................................................................................................................6
References........................................................................................................................................7

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Introduction
Overview
The report is in regard to the development of a public-private partnership (PPP) project in
the Philippines. It contains the critical analysis of the PPP for developing the Bulacan
International Airport in New Manila, Philippines. Public-Private partnerships are corporate
partnerships between two or multiple private and public sectors. It is a typical cooperative
venture involving Government agencies and large corporate organizations. It is usually a long
term arrangement for improving the infrastructural facilities that can provide better operational
effectiveness to cities. Generally, the government partners with corporate organizations to
construct large buildings. Sometimes, PPPs are used for contracting out government services.
Background
The proposed New Manila Airport would be located at Bulacan, which is a Northern
extension of the City of Manila. It is being built as a replacement of the largely overcrowded
airport of Ninoy Aquino. The Bulacan International Airport is being built on an area covering
over 2500 hectares. It is being built alongside a proposed township of 12,000 hectares (PPP
Center, 2020). The estimated cost for the development of the new Airport is around 736 billion
Philippine Peso. The new airport is important for the city of Philippine as there was a need to
capacitate more passengers from various international locations, who frequently visit the city.
The airport once completed will be able to accommodate 100 million passengers. The
government of Manila and Philippines are both interested in improving international commerce
and tourism in the city and the country through this large-scale project.
Critical Analysis
Project Analysis
The ongoing Bulacan International Airport PPP project is one of the most important
infrastructural developments happening in the city of Manila. The Government is planning to
improve the aviation infrastructure of the capital city through the construction of this
international Airport. It is important to understand some of the most important aspects that are
connected with the development of the airport at Bulacan. The project is being implemented by
the Department of Transportation of the government of Philippines. The private organization
connected with the project is San Miguel Holdings Corporation.
The construction work started in August, 2019. The indicative cost of the project is
around 736 billion PhP. The airport construction work is currently in progress in Central Luzon’s
Region III. Estimated cooperation period for the PPP is 50 years (PPP Center, 2020). It is
important to note that the current procurement mode for the PPP is Unsolicited or single stage. In
regard to the final desired outcome of the project it can be said that it is significantly large scale.
The project is one of the most important long-term endeavours taken by the Department of
Transportation. At the same time the PPP is linked with many peripheral infrastructural projects
that are being planned and implemented at the same time.

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The core project concerns the construction, operation and maintenance of a new airport in
Bulacan. It would also be a new international gateway airport optimizing the international
connectivity of Manila. The design capacity of the Bulacan International Airport is focused on
accommodating up to 100 million passenger annually. It would contain 4 runways and high-tech
aviation oriented facilities. It would contain all forms of equipment that can help in managing the
aviation oriented aspects. The toll road that that would link the airport to the expressway of
North Luzon would be 8 km long. The project is large scale and much expensive for the
government of the country to fund. Hence, the major challenge is finishing the project in time. If
the PPP project goes on for a longer duration of time it can mean mounting financial pressures
on the transport department of the city.
The structure of the PPP is Build-Operate-Transfer (BOT). BOT is a form of financing
any project. In this case, the private entity that is involved in the project receives a concession
from the private sector entities (Shi, Yin & Guo, 2016). Hence, San Miguel Holdings
Corporation would receive concession in regard to finances, designing, construction, owning and
operating the facility. A concession contract would also be provided to the private firm. This
means that the organization would be able to recover the larger part of its operating and
maintenance expenses and other investments that are involved in the project. As the project is
long-term in nature the concession period fees are raised. The increase rate is controlled by
various internal or external variable. Hence, the organization can get the benefit of a satisfactory
internal rate for the investment returns. The single stage procurement mode that is currently
being used is a tender based arrangement with the suppliers. It is important to note that the
project concerns the development of a large area of the northern extension of Manila. It is
important that coordinated efforts are given prime importance.
Factors affecting the project implementation
PPP Projects are affected by various factors. These factors tend to affect the projects
more due to its long-term nature. The BOT oriented project structure is currently a feasible way
of financing the project as it is effective both for the local government and the San Miguel
Holdings Corporation. However, in the future there lies the risk of this structure being affected
by various financial or economic problems. There are many different factors that can affect the
PPP project outcomes. These can be governed by various issues that are present with the
administration, funding structure, economy or the environment. It is important to assess the
factors that are presently affecting the development of the PPP and the future factors that can
affect the construction of the Bulacan International Airport.
One of the major factor that can affect the PPP is the funding aspect. The project needs
significantly large funding from the part of the government. The government currently provides
the corporate builders resources at a subsidized rate. However, the growing costs of construction
materials are a significant problem for all the involved parties. This can end in inflated rates for
construction materials and end in the project being delayed. Delays in the project can be further
harmful for the funding process as it may render the process ineffective for a long duration of
time. This is a significant issue that can affect the BOT structure being utilized currently.
Currently, the major threats to the funding process comes from the development of the other
related projects. The Government is also due to fund a 12000 hectare new town adjacent to the
Airport that would be linked to the Airport. This means that the government would have to bear
the extra pressure emerging from the funding of this project. In future, the development can be
delayed due to this issue.

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Another major factor affecting the project is the environment of Philippines. The country
is regularly affected by various natural calamities. Bulacan, along with the rest of Manila is a
flood prone city (Skoufia et al., 2019). The city is affected by heavy flooding many times a year.
This can adversely affect the development of the Bulacan International Airport. It is important to
note that this factor is also greatly related to the funding process that is currently being
undertaken. The shortage in finances can be aggravated by the damage that flooding can bring to
the project. The problem can have multifaceted effects on the project as the supply chain would
also be disrupted along with the delay in construction.
Figure 1: Proposed Bulacan International Airport
(Source- DOTr – Home, 2020)
Economy is a major factor that can affect the development of the Airport. The economic
factors are connected with the per capita income, GDP growth and economic growth of the
country. However, there are various other sub-factors that can affect the development of the
airport. Currently, the GDP growth of the organization is 6.1% (Montefrio & Dressler, 2016).
The per capita GDP growth is currently stable, meaning that presently there would not be any
significant issues that can affect the PPP. However, there lies the risk of future economic issues
that can affect the PPP is different ways. In essence, most of the work needs to be undertaken in
the stable economic period.
Project strategies
The project strategies have been effectively planned by the Government of the country.
The department of transport is working effectively with the holdings company to ensure the
smooth development of the project. It is important to note that the funding technique being
utilized by the government is one of the most important strategies that are in place. Presently, the
BOT oriented project structure is a feasible way of financing the project as it is effective both for
the local government and the San Miguel Holdings Corporation. However, in the future there lies
the risk of this structure being affected by various financial or economic problems. There are
many different factors that can affect the PPP project outcomes (Montefrio & Dressler, 2016).
These can be governed by various issues that are present with the administration, funding

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structure, economy or the environment. These issues can pose significant issues concerning the
timely development of the airport. However, given that the cost of the requisite resources remain
normal for a longer duration of time, this strategy can be effective in terms of achieving the most
important objectives.
PPP projects are important in terms of the coordinated efforts that are required from the
part of the government and the private companies. In this case the strategy is to integrate a string
supply chain function to ensure the feasible and faster completion of the various buildings. A
major strategic challenge is to link the airport with the peripheral constructions that are taking
place. Hence, the 8 km long toll road is an important aspect of the entire project. Constructing
and linking this road is being undertaken by the government of the country. The peripheral
projects are however, not being directly linked to the Airport oriented PPP. The coordinated
activities are rather being maintained through effective communication. The construction of the
Bulacan airport is presently being undertaken independently. However, in the future, the projects
need to be linked with one another more effectively.
The procurement strategy is being based on the BOT methods of funding. The materials
are being procured from the nearby areas at subsidized rates. The focus in on utilizing this
procurement function to ensure satisfactory levels of return on investment for the private
organization. The growing costs of construction materials are significant problems for all the
involved parties. This can end in inflated rates for construction materials and end in the project
being delayed. Delays in the project can be further harmful for the funding process as it may
render the process ineffective for a long duration of time. At the time there are no major issues
concerning this area. However, in the future the costs can increase further necessitating some
form of alternative procurement function. The strategy is to utilize construction materials that
can reduce the cost of construction and keep the quality intact at the same time. The strategy
requires more coordinated efforts both from the part of the government and the private firm. The
strategies need to be considered collectively to reap the best results.
Recommendations
The New Manila Airport is one of the largest PPP projects that the government is
involved in presently. It is important that in view of the above analysis some recommendations
are made.
Firstly, there is a need to develop better strategies to manage the risks that can emerge
with time. This would necessitate coordinated efforts from the government and the private firm.
There is a need for proper risk assessment in order to proceed with the same.
Secondly, the funding processes needs to be reinforced with other feasible funding
strategies. The government can get other investors involved in the process to ensure that a proper
funding mechanism is established. This would require higher levels of analysis and planning in
regard to financial feasibility.
Thirdly, there is a need to incorporate an effective disaster management plan. This would
be effective as the project area is prone to be affected by climatic anomalies. A designated
disaster management team needs to be established to help in this function. This would provide

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more structural security to the PPP and ensure a safer environment for tackling any form of
natural calamities.
Fourthly, there is a need to develop better communication standards to enhance the
coordination and cooperation between the public and private agencies. Effective communication
frameworks can help to develop optimal project management functions.
Conclusion
The Bulacan International Airport is one of the major PPP projects that are being
currently undertaken by the government of Philippines. Some of the major financial constraints
have been related to the fund shortages that have been faced by the government due to the slower
economic development of Philippines. It is important to note that the Airport once complete can
greatly contribute to the development of international trade and commerce for the city as well as
the country. It is important to remember that public-private partnerships govern much of the
larger unban infrastructural developments that are required for big cities. They help to bring in
the funds of the government and the expertise of the private holding corporations towards the
creation of effective frameworks for urban development. PPPs are effective in terms of
developing urban infrastructural facilities were there can be shortage of funds. The Airport can
improve the economic condition of the Philippines if completed successfully on the given time.

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References
Bulacan International Airport Project (New Manila International Airport) | PPP CenterPPP
Center. (2020). Retrieved 12 March 2020, from https://ppp.gov.ph/ppp_projects/new-
manila-international-airport-project/
DOTr - Home. (2020). Retrieved 12 March 2020, from http://www.dotr.gov.ph/
Hodge, G. A., & Greve, C. (2017). On public–private partnership performance: A contemporary
review. Public Works Management & Policy, 22(1), 55-78.
Matsushita, H., & Morichi, S. (2019). Risk Analysis Of Ppp Urban Railway Projects In
Asia. Journal Of The Eastern Asia Society For Transportation Studies, 13, 482-502.
Molintas, D. T., Peralta, J., & Runas, T. (2020). Inclusive Growth: The impact of national
infrastructure on rural urbanism.
Montefrio, M. J. F., & Dressler, W. H. (2016). The green economy and constructions of the
“idle” and “unproductive” uplands in the Philippines. World Development, 79, 114-126.
Shi, S., Yin, Y., & Guo, X. (2016). Optimal choice of capacity, toll and government guarantee
for build-operate-transfer roads under asymmetric cost information. Transportation
Research Part B: Methodological, 85, 56-69.
Skoufias, E., Kawasoe, Y., Strobl, E., & Acosta, P. A. (2019). Identifying the Vulnerable to
Poverty from Natural Disasters: The Case of Typhoons in the Philippines. The World
Bank.