COA spots irregularities in Kaliwa Dam deal

MANILA, Philippines — The Commission on Audit (COA) has noted several irregularities in the awarding of the contract for construction of the P12.2-billion Kaliwa Dam project in Infanta, Quezon to a Chinese firm.

In an eight-page audit observation memorandum dated June 10, it said that the technical working group (TWG) of the Metropolitan Waterworks and Sewerage System (MWSS) failed to observe proper bidding and vetting procedures before it awarded the project to China Energy Engineering Corp. (CEEC) in December 2018.

“We recommend that (MWSS) Management demand explanation from the members of the TWG for acceptance of the two bidders/contractors in spite of non-compliance with vetting/pre-qualification requirements,” the memo read.

“Also, hold responsible the TWG officers for failure to conduct vetting of the project and or request for replacement of the two not qualified bidders, which deprived the MWSS to select the most qualified contractor,” it added.

The memorandum was prepared by officer-in-charge audit team leader Rency Meryl Marquez and officer-in-charge supervising auditor Ma. Nancy Uy. It was addressed to MWSS administrator Reynaldo Velasco and was marked “received” by his office on June 10.

Malacañang promised to look into the issues raised by COA and those in the contract.

“We’ll let the President decide on that,” answered presidential spokesman Salvador Panelo when asked if the administration is open to suspending the contract.

Based on the audit team’s investigation, the TWG of the MWSS shortlisted and eventually accepted the bid applications of three Chinese firms – CEEC, Consortium of Guangdong Foreign Construction and Power China Ltd. – even if two of them failed to meet the pre-qualification requirements set earlier by the MWSS for the project.

The state audit body said CEEC and Consortium of Guangdong specifically failed to show that they have met the years of experience in design and engineering works as well as construction works as required for the project.

Under the MWSS’s guidelines, only the firms that have successfully completed in the last 20 years the design, engineering and construction works for a dam and conveyance structure of similar complexity as the proposed Kaliwa Dam project shall qualify for the bidding.

The COA said bid documents submitted by CEEC and Consortium of Guangdong did not indicate the dates of completion of the supposed hydro stations and dam projects they claimed to have undertaken.

“The TWG should have been more circumspect to verify whether the reported projects were actually completed to establish the validity and existence thereof and to attain the purpose of vetting which is to evaluate whether the nominated Chinese contractors meet the minimum technical qualifications,” the audit memorandum read.

Worse, the COA said it seemed that the supposed competitive bidding conducted by the TWG was a sham.

The audit body noted that Consortium of Guangdong was disqualified during the first stage of the bidding procedure as it was found to be lacking with the required documents such as business permit, Philippine Contractors Accreditation Board (PCAB) license, Philippine Government Electronic Procurement System (PhilGEPS) certificate and a valid Single Largest Completed Contract or SLCC.

Power China Ltd. was disqualified during the second stage of bidding as its offer was 6.91 percent higher than the Approved Budget for Contract (ABC).

COA said Power China made a high offer even if all the nominated bidders were earlier informed that any bid higher than the ABC shall be automatically rejected at bid opening.

“As a result, only the China Energy Engineering Corp. Ltd.  qualified, which is questionable considering that the two bidders were disqualified in the 1st and 2nd stages of the procurement process due to seemingly intentional purpose of the bidders not to comply with the TWG requirements and qualify as among those responsive bidders,” the COA said

“In summary, it can be deduced that the two bidders/contractors were included merely to comply with the ‘at least three bidders’ requirement as stated under the Procurement Law. Likewise, the procurement of the project is with the semblance of a competitive bidding when in reality, it is a negotiated contract from the inception of the bidding process,” it added.

Furthermore, the COA noted that CEEC had already begun deploying technical equipment and conducting preliminary activities in the project site including topographic and geologic surveys even if it was not given the formal Notice to Proceed or Notice to Commence Construction by the MWSS.

Furthermore, COA said the loan agreement between the Philippine government and China Eximbank remains ineffective due to the non-submission of several documentary requirements such as an environmental compliance certificate from the Department of Environment and Natural Resources, a letter of guarantee approved by the Bangko Sentral ng Pilipinas and approval from the National Commission of Indigenous People. – With Alexis Romero