COA flags irregularities in P8.51-B sports facilities project for SEA Games

State auditors questioned the Bases Conversion and Development Authority (BCDA) for approving an P8.51-billion sports facilities project for the 2019 SEA Games that was “prejudicial to the interest of the government.”

In a 2019 audit report released Wednesday, October 14, the Commission on Audit (COA) said the BCDA gave undue advantage to private contractor MTD Capital Berhad, which won the contract to develop the facilities in the National Government Administrative Center (NGAC) in New Clark City.

The COA noted that the lack of public bidding violated the Government Procurement Reform Act, while the execution of the project despite the absence of prior appropriation of funds goes against Presidential Decree No 1445 or the Government Auditing Code.

“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…which would deem the contract void,” the COA report said.

The state auditors compelled the BCDA to prove that appropriations were made prior to the execution of the JVA.

They also asked the BCDA to justify why they opted to pay the joint venture within calendar year 2019, considering that “MTD could have shared in the losses that might be incurred from the project inasmuch as there was no proof of viability for the sports facilities.”

The BCDA denied there were any laws violated, insisting the deal was advantageous to the government by being cost-efficient.

Read Rappler’s 3-part investigation on this project:

• Part 1 | BCDA, Malaysian firm ink questionable P11-billion SEA Games deal
• Part 2 | OGCC flagged non-bidding of BCDA’s New Clark sports facilities
• Part 3 | How BCDA’s multi-billion New Clark deal slipped through

Competitiveness ‘compromised’

The COA traced the BCDA’s transactions with MTD Capital Berhad, finding that as early as 2015, the latter had already approached the BCDA in a bid to develop the NGAC.

“On August 16, 2017, the same day when the Philippine Olympic Committee confirmed that the country will be hosting the 2019 SEA Games, BCDA received from MTD Capital Berhad an unsolicited proposal for the construction, operation, and development of the NGAC,” the COA said.

While the BCDA opened the invitation to other interested bidders on November 10, 2017, it also issued a certification of successful negotiation to MTD Capital Berhad on the very same day.

Auditors said competitiveness was “compromised because MTD had more time to study and even negotiate the specifics of the project with BCDA.”

But the BCDA said the bidding was done fairly, and that MTD Capital Berhad, being the original proponent from two years ago, incidentally had more time to prepare. (PODCAST: New Clark City: May anomalya ba?)

Proceeding without appropriation

Funding for the sports facilities was only approved on April 15, 2019, when the 2019 General Appropriations Act was signed – much later than the negotiations between the BCDA and MTD Capital Berhad.

“There was no study or proof of viability of the sports facilities thereby, management cannot rely on the sharing of gains to fund the payment of the annual amortization. With the funds of BCDA already earmarked for other projects, payments for the sports facilities was not included in the corporate operating budget,” the COA said.

The BCDA, acknowledging that there were no appropriated funds yet for the sports facilities, said it opted to use its corporate funds.

The COA also called out the BCDA for misleading information on cutting costs.

The BCDA said they were able to negotiate to reduce the total project cost from P121.785 billion to P12.695 billion, but the latter amount only covered the 40-hectare sports facilities area in the NGAC, including the athletic stadium, aquatic center, and athlete’s village, among others. 

The P121.785-billion project cost, meanwhile, covered the entire 207-hectare development proposal for the NGAC.

The multi-billion 2019 SEA Games – from its expenditures to organization – were a subject of controversy around the time the games were scheduled. Possibly the most notorious piece of the event was the cauldron used near the stadium that cost P50 million.

Taguig-Pateros Representative Alan Peter Cayetano, who himself was accused of having a conflict of interest in his role as an organizer, called on the COA to do a special audit of public funds used in the hosting of the SEA Games. – with reports from Michelle Abad/Rappler.com