Irregularities found
The Commission on Audit (COA) has found “indications of irregularities” in procurement and implementation of projects in Cebu City.
According to COA’s report for 2021, these indications were found in the city’s solid waste disposal, in the completion of the Cebu City Medical Center (CCMC), and in the procurement of rice allegedly from a non-illegible supplier in line with the city’s COVID-19 response, among others.
WASTE DISPOSAL
“Several indications of irregularities were noted in the areas of (a) procurement and (b) project implementation of the solid waste disposal services totaling ₱383,531,706.00,” part of the observation of COA‘s executive summary reads.
These have reportedly exposed the city to the risk of giving the impression that it favored a contractor, aside from the risk of attaining its program’s objective, COA said.
COA has recommended directing the Bids and Awards Committee (BAC) to submit the documents that are still lacking and to explain why a recommendation for award to the Joint Venture of Docast
Construction and the JJ and J Construction and General Supply was proper despite the presence of “glaring grounds” that would disqualify them from the project.
“We also recommended for the submission of the machine-generated receipts of the weighbridge to validate the total number of tonnages paid by the City and an explanation of the unusual pattern of change of the tare weights of the hauling equipment of the contractor,” COA said.
What are these grounds for disqualification?
COA noted that ownership and structure of the contractor did not agree with the city’s requirement; the primary business of both contractors appeared to be construction rather than logistics or hauling services, which was also not in accordance with the city’s TOR; and the bidder did not qualify in terms of the motor pool location requirement.
COA also noted that the contractor started the hauling and management of the solid waste even though the post qualification was not yet started; and that there was absence of BAC declaration that it has qualified, before the notice of award, execution of contract, and the issuance of the notice to proceed.
Various documents to establish the contractor’s technical eligibility were not submitted or attached to the disbursement voucher.
In a reply dated March 28, 2022, the former BAC Chairperson for Goods and Services told COA that Docast Construction is a legitimate and existing contractor of the city and has, in fact, prior to the procurement in question, was awarded three purchase orders for solid waste collection and disposal.
CCMC
COA also noted a significant delay in the completion of Phase 2 of construction of CCMC, which has a total contract cost of ₱299,674,815.09.
This delay is allegedly caused by the design and detailed engineering issues, slow decision-making, giving of unreasonable time extensions, and confusing computation of contract time.
Such delay, COA said, has deprived residents of the much-needed health facility, especially during this time of health crisis.
Along with this, COA noted inconsistencies in the implementation of procurement rules, which has allegedly rendered the transaction illegal or have put the interest of the government in a disadvantaged position.
COA recommended that the Department of Engineering and Public Works (DEPW) prepare and submit a vivid presentation of the contract time both during the period of suspension orders and time extensions along with a detailed computation of how it came up with a positive slippage of 11.05 percent as of December 31, 2021.
The City Accountant has also been directed to evaluate the DEPW’s computation of contract time thoroughly, and thereafter, impose liquidated damages to the contractor whenever appropriate.
The DEPW and the contractor are also made to explain why the portion of P6,042,658.18 of the variation order paid in CY 2021 should not be returned, considering that it was deemed waived by the contractor by operation of law.
The contractor is also expected to submit or secure the consent of Sterling Insurance Co. for the contract extension so as to make the security contract remain in full force and effect. Otherwise, it will be required to post a performance bond anew.
Earlier, Cebu City Mayor Michael Rama also threatened to cancel the contract of the current contractor if construction of the remaining floors of the CCMC will not be completed by October 2022.
On March 11, 2022, the OIC-City Engineer furnished the audit team with copy of a Memorandum dated March 10, 2022,
which required engineers to prepare and submit the documents required as per audit recommendations.
“During the exit conference, the DEPW explained that they are still in the process of preparing them. As of date, we have not yet received the transmittal of these documents,” COA said.
The city accountant, on the other hand, informed COA in a reply dated March 22, 2022 that the office has coordinated closely with DEPW, including seeking copy of their justification letter relevant to the audit observation.
The accounting office also reportedly manifested its commitment to adhere to the laws and regulations, not limited to RA No. 9184.
The city built a new CCMC building after the old one was damaged heavily by the massive earthquake that hit Central Visayas in 2013.
PANDEMIC RICE
Meanwhile, COA found indications that the city procured 39,478 sacks of rice for its COVID-19 response amounting to P90,799,400 from an ineligible supplier or middleman.
COA cited BAC’s failure “to take reasonable steps to ascertain the real standing of the supplier, hence, there was no assurance that the City was able to obtain the most advantageous price and terms for this contract.”
The BAC is directed to explain why it negotiated with Markabi Distributors Philippines, Inc. despite clear indications that it acted only as a middleman.
The BAC explained to COA that MDPI was an existing supplier for the city.
During the early days of the onslaught of the pandemic, the company was reportedly one of the suppliers that manifested its willingness to help the city even if it would be paid at a later time.
“They stressed that at the height of the pandemic, the City Government did not have the luxury of time to look for the suppliers, as the constituents were clamoring for rice due to the hard lockdown. Thus, the purpose of the Bayanihan Act had been achieved by dealing with the supplier is concerned,” COA said in its report.
OTHER ISSUES
COA’s 2021 report also showed that over the past five years, Cebu City has consistently registered a relatively low absorptive capacity of only 12.7 percent on average in the utilization of its 20 percent Local Development Fund.
There is still an unspent balance of ₱1,582,475,927.63 as of the end of 2021 and a significant delay in the start of the project implementation ranging from one (1) year to more than five (5) years from the time they were funded.
“This can be attributed to the inclusion of projects that were nonimplementation ready in the City’s Annual Investment Plan, and eventually in the annual budget, resulting in the inadequacy of basic infrastructures and facilities that could provide direct, immediate, and lasting impact to the quality of the lives of the constituents,” COA said.
The City Planning and Development Office and the City’s Local Development Council are expected to include in the city’s Annual Investment Plan, and eventually, in the city’s proposed budget only those programs and projects that are “Implementation Ready” and to defer projects that still have unresolved issues or while still working out on requirements, clearances, and the like.