MANILA, Philippines – The Commission on Audit (COA) has found many irregularities in the awarding of the contract for the construction of the Php12.2-billion Kaliwa Dam project. The dam is to be built by a Chinese firm in Infanta, Quezon.

The commission’s eight-page audit observation memorandum dated June 10 stated 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.

It further stated that MWSS must “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.”

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 meanwhile, assured it will look into the issues raised by COA.

On the Palace’s take if the contract needs to be suspended, Presidential spokesperson Salvador Panelo said, “We’ll let the President decide on that.”

Based on the audit team’s investigation, the TWG of the MWSS shortlisted and eventually accepted the bid applications of three Chinese firms: EEC, Consortium of Guangdong Foreign Construction and Power China Ltd. However, two of them failed to meet the pre-qualification requirements of the project set earlier by the metro water system.

Inexperienced?

COA explained that the two firms involved in the contract—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.

Furthermore, the auditing body said that bid documents submitted by CEEC and Consortium of Guangdong were not enough to show experience. The two firms 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.

COA also lamented that the supposed competitive bidding conducted by the TWG was a sham.

Consortium of Guangdong was disqualified during the first stage of the bidding procedure as it was found to be lacking 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. Meanwhile was disqualified during the second stage of bidding as its offer was 6.91% higher than the Approved Budget for Contract (ABC), the audit body noted.

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 explained.

“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.

On a worse note, in spite of the irregularities of the contract, 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.

COA then gave their observations on the loan agreement between the Philippine government and China Eximbank, saying that it stays 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 most importantly—the approval from the National Commission of Indigenous People.

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