Takenaka Terminated as NAIA-3 Contractor

The government has decided to axe Takenaka Corp. as contractor for the idled Ninoy Aquino International Airport (NAIA) Terminal 3, and is considering a lawsuit against the Japanese firm.

"We've just terminated [them," President Gloria Macapagal Arroyo told BusinessWorld on Saturday.

Trade Secretary Peter B. Favila, who was with Mrs. Arroyo, said he delivered the message to Takenaka during the President's working visit to Japan in late May.

"Takenaka is now seeking reconsideration of our decision of rescinding the contract," Mr. Favila said, but added that the government is not likely to change its mind because of continued delays in the opening of the facility.

"We have been held hostage for the longest time," he said.

Takenaka representatives were not immediately available for comment.

Mrs. Arroyo has in previous occasions expressed impatience over continued delays in the opening of NAIA-3, which the government expropriated in 2004. That seizure was prompted by wrangling with project developer Philippine International Air Terminals Corp. (Piatco) over compensation following a 2003 Supreme Court decision nullifying the consortium's contract.

The government and Takenaka have been negotiating terms to finish the facility. The latter's last offer was $14 million, which the state rejected as being too high.

NAIA-3 was to have opened last April, according to the last government announcement, but this did not push through after engineering consultancy firms hired by the Manila International Airport Authority (MIAA) warned against using the facility because of structural defects.

Ove Arup & Partners HK Ltd. said in March report that "The use of the facility at this time, even in a limited scale, is not advisable as this will expose users of the facility to life safety risks. It is important that the deficiencies identified in the structural evaluation are fully addressed before the facility can be used,"

TCGI Engineers, Inc., meanwhile, said: "We are convinced that if Terminal 3 is now operated even on a limited scale as contemplated in the planned 'rolling opening', users of the facility, such as passengers, well- wishers, airport personnel and other occupants will be exposed to life safety risks, most especially in the event of a major earthquake."

The MIAA asked Takenaka to immediately undertake remedial works but the government said it has instead insisted on more talks.

Mr. Favila said Takenaka has also not turned over other "deliverables" such as equipment, and that state lawyers are now preparing to sue the Japanese firm for breach of contract.

The Transportation department and the MIAA, he said, are now "scouting" for other contractors to finish the work.

"I had already recommended to the President that perhaps now we can use our own resources; [that] the Philippine government itself finish it and let the legal issues take its course," he added.

He declined to commit to a new opening date for Terminal 3 since it was unable to deliver on previous announcements.

"We've learned our lessons of having to ... because we have to manage expectations and we just want to focus on the President's directive just to have this terminal opened at the soonest possible time without compromising the safety of the public," Mr. Favila said.

He said that since this time of the year is a busy season, airlines might not be too keen to move.

"It's no point opening the terminal if you don't have the airlines transferring their facilities," Mr. Favila said.

Piatco, which includes German airport operator Fraport AG, was awarded the NAIA-3 contract in 1997, with the facility scheduled for opening in 2002. Questions surrounding the legitimacy of the deal led to the 2003 Supreme Court decision nullifying the contract.

The government was able to take physical possession of the terminal only last year after paying an initial P3 billion in compensation to Piatco, which has sued the government at the International Center for Settlement of Investment Disputes in Washington D.C. and the International Chamber of Commerce Arbitration Tribunal in Singapore.