Binay’s Makati building overshoots approved budget

MANILA, Philippines – Did the city government of Makati really save hundreds of millions of pesos for the construction of the controversial “parking building” that is now subject of a Senate probe? How much did the city government actually pay Hilmarc’s Construction? 

Depending on who’s talking, the controversial 11-story Makati City Hall parking building cost Makati taxpayers either P2.4 billion ($54.54 million)* or P2.7 billion ($61.36 million).

Vice President Jejomar Binay, who was then on his last term as Makati mayor 2007, initiated the project in 2007. The project was completed in 2012, with his son, Jejomar Erwin “Junjun” Binay Jr, as mayor. (READ: Red flags in ‘overpriced’ Makati infra projects)

Contradicting his critics that the “parking building” was overpriced, Binay has gone on record saying that the city government managed to save P200 million ($4.54 million) as a result of competitive bidding for the “parking building.” (READ: Binay: Makati even ‘saved’ P200 million from building) 

He said the project was also cleared by the Commission on Audit (COA). But what do the records show?

Issues

Rappler pored over the contracts and bid documents submitted to the Blue Ribbon and spotted some significant issues:

1) The Makati City government “saved” only P2.991 million ($67,977) from the alleged competitive bidding it conducted.

2) The purported savings were wiped out by “change orders” in the specifications of the contract. A change order, also known as a variation order or extra work order, refers to the introduction of new work items not included in the original contract due to a change of plans or designs. Change orders are also written agreements between contracting parties for changes in a building construction project. It may involve addition, deletion or alteration in a contract at the time of the bid. Change orders are standard practice in the industry.

3) Due to these change orders, the total expenses for the parking building exceeded the originally approved budget for the contract (ABC). The ABC, as defined in the implementing rules and regulations of the Procurement Law, is “the lump sum amount that shall cover the design and construction works.” Bids above the ABC are automatically disqualified.

Documents show that the 5-phase project has a total ABC of P2,279,667,187 billion ($51.8 million).

Table 1

Phase	ABC	Contract Price	Difference with ABC
Phase 1	P387,846,020	P386,998,154.20	P847,865.80
Phase 2	P499,994,622	P499,357,003.75	P637,618.30
Phase 3	P599,933,565	P599,395,613.34	P537,951.70
Phase 4	P649,981,803	P649,275,681.73	P706,121.30
Phase 5	P141,911.177	P141,649,366.00	P261,811.00
TOTAL	P2,279,667,187	P2,276,675,819	P2,991,368
*Source: COA Technical Evaluation Reports for Phases 1-5

Hilmarc’s Construction, which cornered all the 5 phases, submitted the following lowest calculated bids as declared by the Makati bids and awards committee. 

The figures above show that the Makati City government and its taxpayers “saved” only P2.991 million from the supposed “lowest calculated bid” submitted by Hilmarc’s Construction, a far cry from the P200-million savings cited by Binay. Two other supposed bidders contested Phase 1 of the parking building project, but one of the supposed participating construction firms has denied submitting any bid.

Overbudget but within COA limit 

Still, the supposed P2.991 million “savings” incurred further shrank as the construction for the project went on, with “change orders” applied by the city government. 

In fact, any savings supposedly incurred were wiped out because of the change orders.

Records show that the 5-phase construction project underwent 3 change contract orders that raised the actual cost of the parking building. The Department of Engineering and Public Works of the Makati City government justified the change order “to suit field conditions.” 

Table 2

Phase	Contract Price	Change Order	Change Increase
Phase 3	P599,395,613.34	P599,994,021.05	P598,407.71
Phase 4	P649,275,681.73	P649,934,440.96	P658,759.23
Phase 5	P141,649,366.00	P143,806,161.00	P2,156,795
TOTAL			P3,413,961.94

At least in Phases 3 and 5, the change orders even pushed the revised contract amount above the original ABC.

Table 3

Phase	Originally approved budget	Revised amount
Phase 3	P599,395,613.34	P599,994,021.05
Phase 5	P141,911,177	P143,806,161

If the revised figures of the contracts due to the change orders were added up, they would show that the total expense for the parking building actually amounted to P2,280,089,780.94, or an “overprice” of P422,593 ($9,604) when compared to the original ABC for the entire 5-phase project.

Table 4 

Approved budget for the contract	New	Total Difference
P2,279,667,187	P2,280,089,780.94	P422,593.00

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