Cagayan de Oro’s legislature allows firm to supply water to city’s consumers

CAGAYAN DE ORO, Philippines – The Cagayan de Oro city council allowed a bulk water supplier, whose dealings with the Cagayan de Oro Water District (COWD) were frowned upon by state auditors years ago, to directly supply treated water to households and establishments in the city.

The city council gave the Rio Verde Water Consortium Incorporated (RVWCI) the green light on Monday, April 8, just four days after the deadline set by another bulk water supplier for the water district to settle a disputed debt or face disconnection.

The Manny V. Pangilinan-controlled Cagayan de Oro Bulk Water Incorporated (COBI), which supplies about half of Cagayan de Oro’s tap water via the COWD, gave the water district only until April 12 to pay P426 million, a debt which the latter refused to acknowledge.

With 15 in favor, one objection, and two abstentions, the city council approved Resolution No. 2024-692, allowing Rio Verde to provide “end-to-end Level III water supply to all 80 barangays of Cagayan de Oro City.”

“We held a special session to approve the resolution because of the disconnection threat. We are not taking any chances,” said Councilor Edgar Cabanlas, head of city hall’s Task Force on Water Supply and Distribution.

Cabanlas said the city government, through the city council, registered no objection to allowing Rio Verde to directly sell to the city’s water consumers given the April 12 COBI deadline.

Rio Verde had sought the city council resolution as a legal requirement for it to secure a supply permit from the National Water Resources Board (NWRB).

Fraud findings

Rio Verde was the COWD’s first bulk water supplier for Cagayan de Oro in 2007 until a court voided a contract it made with the water district. 

The Commission on Audit (COA) also called out the COWD for its purchases from Rio Verde and issued notices of disallowances, stating that the payments “had no legal basis.”

Subsequently, COWD entered into an agreement with Pangilinan’s Metro Pacific Water, which then formed COBI in 2017. Under the setup, Metro Pacific controls 95% of the shares while the COWD owns 5%.

On November 9, 2009, the COA’s Fraud Audit and Investigation Office (FAIO) Audit Observation issued Memorandum (AOM) 2009-0019, where state auditors led by lawyer Alexander Juliano reported that the public bidding preceding the controversial COWD-Rio Verde deal did not comply with the Government Procurement Act.

Court records reveal that state auditors noted the following concerns:

• The contract was awarded to Rio Verde, a non-responsive bidder, in violation of Republic Act 9184. They also noted that the company was a newly organized consortium then, lacking the requisite three years of audited financial statements and Bureau of Internal Revenue (BIR) registration.
• The contract was crafted and awarded in a manner that apparently benefited Rio Verde unduly, as it substantially deviated from the model contract included in the bid documents.
• A supplemental agreement amended and increased the water rate formula to accommodate the contractor’s proposal, disadvantaging the public consumer by an equivalent of P1.46 per cubic meter.
• Fraud was committed in the execution of the contracts, as opined by the Office of the Government Corporate Counsel (OGCC).

Cabanlas said the COA notices only applied to the transactions between the COWD, a government-owned and controlled corporation, and Rio Verde.

In the new arrangement, Rio Verde will treat and supply water directly to the city’s consumers, alongside the COWD rather than through it.

“What can we do? We cannot just stand by and watch the city go waterless after April 12,” Councilor Joyleen Mercedes Balaba said. – with reports from Herbie Gomez/Rappler.com