Manila Bulletin

COA: SEA Games fa­cil­i­ties, gov't cen­ter in New Clark City ‘prej­u­di­cial’ to gov’t in­ter­est

- By BEN R. ROSARIO Business · Audit · Financial Accounting · Corporate Finance · Finance · Malaysia · Asian Development Bank · Commission on Audit

The Com­mis­sion on Au­dit (COA) slammed the con­struc­tion of the sports fa­cil­i­ties for the 2019 south east Asian Games and the Na­tional Gov­ern­ment Ad­min­is­tra­tive Cen­ter in New Clark City, cost­ing ₱9.53 bil­lion, as “prej­u­di­cial to the in­ter­est of the gov­ern­ment.”

In the re­cently re­leased 2019 an­nual au­dit re­port for the Bases Con­ver­sion De­vel­op­ment Author­ity, COA also de­cried the BCDA’s grant of “un­due ad­van­tage” to pri­vate firm MTD Cap­i­tal Ber­had (MTD) in the de­vel­op­ment of the sports fa­cil­i­ties, adding that this has “neg­a­tively” af­fected the com­pet­i­tive­ness of the bid­ding.

“The pro­vi­sions in the Joint Ven­ture Agree­ment (JVA) be­tween BCDA and MTD Cap­i­tal Ber­had in­volv­ing ex­pen­di­ture of pub­lic funds for the con­struc­tion of the sports fa­cil­i­ties, was ex­e­cuted with­out prior ap­pro­pri­a­tion of funds con­trary to Sec­tion 85 of

Pres­i­den­tial De­cree (PD 1445) which would deem the con­tract void,” the COA re­ported.

Au­dit records in­di­cated that the con­struc­tion of the sports fa­cil­i­ties dur­ing the 2019 SEA Games was pur­sued through Joint Ven­ture with the Malaysia-based MTD.

How­ever, fol­low­ing an au­dit of the deal, COA noted that the terms of the deal un­der the Build Trans­fer Scheme pro­vided by Repub­lic Act 6957 was dis­ad­van­ta­geous to gov­ern­ment.

Un­der the JVA which was ini­ti­ated by MTD through an un­so­licited pro­posal for the con­struc­tion and de­vel­op­ment of the NGAC, BCDA and MTD agreed for the con­struc­tion of gov­ern­ment build­ings, com­mer­cial cen­ters and res­i­den­tial hous­ing with 500 units ca­pa­ble of hous­ing 1,000 peo­ple for a to­tal cost of ₱4.185 bil­lion.

Later, the par­ties agreed to in­cor­po­rate in the pro­ject sports fa­cil­i­ties that would in­clude aquatic cen­ter, ath­let­ics sta­dium and an ath­lete’s vil­lage with 500 units ca­pa­ble of hous­ing 1,000 peo­ple. The cost then bal­looned to ₱8.510 bil­lion which the pri­vate sec­tor part­ner (PSP) con­trib­uted.

Un­der the agree­ment, the ad­vances of MTD were to be paid by BCDA in five equal an­nual in­stall­ments of ₱2.2 bil­lion 45 days af­ter the pro­ject com­ple­tion.

How­ever, in­stead of pay­ing the ad­vances in five equal an­nual in­stall­ments, BCDA de­cided to pay the full amount of ₱9.544 to the pri­vate sec­tor part­ner. So far, BCDA al­ready re­leased ₱5.488 bil­lion to the joint ven­ture for the sports fa­cil­i­ties.

Based on COA com­pu­ta­tion, gov­ern­ment was made to spend an ad­di­tional ₱1 bil­lion when it in­cor­po­rated the con­struc­tion of the sports fa­cil­i­ties and ath­letes' vil­lage to the orig­i­nal ₱4.18-bil­lion JV deal with the Malaysian firm.

“Since the pro­ject was fi­nanced by pub­lic funds and if only BCDA did not in­cor­po­rate the con­struc­tion of the sports fa­cil­i­ties with the NGAC joint ven­ture pro­ject but rather sub­jected to the more strin­gent re­quire­ments of RA 6957, as amended by RA No. 7718, the gov­ern­ment will not en­tail ad­di­tional ex­penses by pay­ing in­ter­est or con­struc­tion cost,” COA stated.

In its au­dit rec­om­men­da­tion, COA

asked BCDA to sub­mit com­pu­ta­tions on how they ar­rived at the cost of the sports fa­cil­i­ties.

The state au­dit agency also de­manded that BCDA jus­tify the choice of de­vel­op­ing the sports fa­cil­i­ties.

In re­ac­tion, the BCDA man­age­ment in­sisted that gov­ern­ment saved ₱1.911 bil­lion in fi­nanc­ing cost by opt­ing to dis­card the ₱2.2bil­lion an­nual pay­ment spread in five years.

Ac­cord­ing to the BCDA, join­ing the two projects into one joint ven­ture deal was given the go sig­nal by the Of­fice of the Gov­ern­ment Cor­po­rate Coun­sel and the Asian De­vel­op­ment Bank, its trans­ac­tion ad­viser.

“Man­age­ment claimed that the in­clu­sion of an in­fra­struc­ture pro­ject in a JVA is the most ad­van­ta­geous ar­range­ment, how­ever, we still be­lieve that there are other ar­range­ments that could pro­mote a bet­ter trans­parency, com­pet­i­tive­ness, eq­uity, ef­fi­ciency and econ­omy for the con­struc­tion of a gov­ern­ment in­fra­struc­ture pro­ject fi­nanced by pub­lic funds in adopt­ing RA 9184 (Gov­ern­ment Pro­cure­ment Re­form Act),” COA said.

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