NEDA says DOTC review of RORO project 'deficient'

MANILA, Philippines - The Department of Transportation and Communications (DOTC)’s review of the controversial P11.8-billion modular roll-on, roll-off (RORO) ports project, which included a recommendation for the cancellation of the contract with a French government–owned firm, was found to be “suspect” and deficient.

The finding was released recently by the National Economic and Development Authority (NEDA) after conducting a review of the May 2 DOTC report of outgoing Secretary Jose de Jesus, which recommended a cancellation of the project.

NEDA director general and Socio-economic Planning Secretary Cayetano Paderanga, in his May 16 memorandum, raised the need for a more “in-depth analysis” to be undertaken by the DOTC and the Philippine Ports Authority (PPA) to come up with a better comparison on the cost efficiency of the modular RORO ports to be built under the contract as against the traditional ports built and now being used in the country.

In its review, NEDA aired its doubts on the credibility of the positions made in the DOTC report.

“Based on our review, we find that a more in-depth analysis would be required to undertake a meaningful comparison. We have outlined some steps that the proponent (DOTC and PPA) need to undertake to have such comparison in place,” Paderanga said in his memo addressed to the Presidential Management Staff (PMS), headed by Secretary Julia Abad.

The NEDA review of the DOTC report was undertaken on the request of the PMS for “a precise comparison of project cost versus similar alternatives, i.e. apple to apple comparison.”

“The technical rigor of the DOTC Project Review Committee Report is suspect and hence the resulting findings are at best premature. More technical information and analysis need to be presented so that a precise comparison of project cost versus similar alternatives can be undertaken,” the NEDA said in its findings.

It noted the DOTC’s failure to look into certain aspects of the modular ports to be built under the project, particularly the quality and design of the steel ports, their economic life, and operation and maintenance costs.

“Despite the effort made by DOTC, a meaningful conclusion cannot be made of the result of the comparison. This is so because the comparison did not take into account the following: (a) variations in the quality and the design strength of steel (i.e. between the modular port and the locally fabricated steel port); (b) useful economic life; and (c) operation and maintenance (O&M) costs,” the NEDA report said.

The report added that DOTC compared the prices of the modular ports with those of concrete ports traditionally undertaken by the PPA and “while it compared the capital requirements for a modular RORO port against locally sourced steel port, it failed to conduct life-cycle cost analyses of the same.

“Due to differences in technology, the economic life and the maintenance costs attendant to the various types of ports compared by the Department may also vary. In DOTC’s report, it was mentioned that the modular RORO ports have a lifetime of at least eighty (80) years and the coating protection of the steel component is guaranteed for seven (7) years with normal maintenance,” the same report said.

De Jesus had recommended to President Aquino in his May 2 memorandum the cancellation of the P11.8-billion contract despite the dire financial and diplomatic consequences of such course of action.

The recommendation was mainly premised on the finding that only two ports are needed in the country.

Cancellation could be costly

DOTC Undersecretary for Planning and Project Management Undersecretary Ruben Reinoso Jr. said earlier that the DOTC is already assessing the costs of terminating the contract to guide the President on his decision whether to push through with the project despite all the issues raised against and for it.

Dr. Patrick Azanza, senior adviser of French government-owned Eiffel and its joint venture partner Matiere SAS, expressed concern that the DOTC seemed oblivious of the mounting interest charges caused by their supposed exhaustive review of the contract and their failure to come out with their official findings.

Azanza said the start of actual port construction works has been delayed for almost a year since the project was halted by the Aquino administration to give way to a review of the contract signed during the previous administration by the DOTC and the PPA.

“Unofficial lowest estimate of possible interest charges and damages is P500,000 per day or P15 million per month of delay,” Azanza told The STAR, looking at the interest charges set to be charged the Philippine government for any delay in the project coming from its side stipulated under the government-to-government, ODA-funded contract.

With the one-year delay in the implementation, he said the interest charge now stands at around P180 million.

Azanza admitted that the French consortium was already anxious about the fate of their project in view of unofficial pronouncements coming from the DOTC, alleging an overprice in the costs of the 72 modular ports they will build.

Despite working for the foreign firm, he said he saw the terrible implications to the Filipino people of an ill-advised or careless move by the DOTC to cancel the contract because of misguided notions of the project being overpriced.

“This (interest charges) does not include the cost of international arbitration and the possible forfeiture of the P1.5 billion downpayment that the Philippines made,” Azanza, a Harvard-trained former international consultant for the Asian Development Bank, said.