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

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.