MARITIME WATCHKEEPER

THE NEW BLUE CROWN CONTRACT

The Philippine Ports Authority (PPA) has taken a giant step forward to realizing two of its landmark modernization programs for Manila North Harbor, following a compromise agreement which clears a legal obstacle that would have otherwise tied down the PPA’s ambitious plans.

Documents obtained by the Manila Bulletin yesterday showed that all the claims of Blue Crown Marine and Hydro Services, Inc. from the PPA as far back as March 1999, as a result of a 15-month delay in turnover, was settled recently by the new PPA leadership.

“All parties have been satisfied in this compromise agreement with Blue Crown. The PPA can now look forward with a clearer view of its objective to modernize North Harbor,” said PPA general manager Alfonso Cusi.

The Blue Crown Contract

The Blue Crown contract, signed with the PPA on Feb. 17, 1998, was the result of the privatization of the water distribution system in the North Harbor and provided that government paid the private firm a fixed fee of R4.9 million per year, representing a consumption of 1.8million cubic meters at the rate of R2.72 per cu. m.

However, due to the repairs undertaken by the PPA at the harbor, Blue Crown was unable to immediately operate, losing 15 months of potential income.

Furthermore, engineering works done at the Marine Slipway (Terminal 17) did not support contract specifications, thus, adversely affecting Blue Crown’s sales volume to the point that the PPA guaranteed volume of 1.8-million cu. m. a year was never attained.

Although the original contract was revised after Blue Crown filed a case of breach of contract against the PPA before the a Manila Regional Trial Court (RTC), the settlement terms still did not cover Blue Crown’s losses and claims, as shown in its audited financial statements for 1999 to 2001.

PPA cuts just deal

Upon careful review of the original and revised contracts of Blue Crown with the old PPA management, the new PPA leadership drafted compromise terms with Blue Crown, partly to avert a long-drawn legal battle that would have needlessly jeopardized major port works at the North Harbor, under the MSW Improvement Project and the NH

Modernization Project.

The P44.18-million settlement was approved recently in Resolution No. 1927 as agreed in the last PPA Board meeting, said Cusi, adding that Blue Crown, for its part, waived their demand for a refund of their pre-operating expenses amounting to P10.1 million.

“The amount (of P44.18 million) is computed based on the net present value of the stream of minimum income that Blue Crown is guaranteed under its contract,” Cusi said.

As for government, the PPA will still operate and earn from the water system without prejudice to the privatization of the services, under the scheduled implementation of the North Harbor Modernization Program.

Likewise, the PPA is now enabled to cut on operational costs and is assured of a full, rehabilitated and tested water distribution system.

“But most importantly,” Cusi said, “the deal makes the NH Modernization Project free from any encumbrance because of the Blue Crown contract.”

This means that the privatization of the water distribution system, which is a component of government’s modernization program for the ports, will not be tied down to the Blue Crown contract.
By Nate C. Barretto
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