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Binay’s Makati building overshoots approved budget

Rodneil Quiteles
Binay’s Makati building overshoots approved budget
EXCLUSIVE: Data show that total expenses for the parking building exceeded the originally approved budget for the contract (ABC)

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

Under the revised IRR of RA 9184 or the Government Procurement Reform Act, any variation or change order is allowed, provided it does not exceed 10% of the original contract price. 

COA certification

In his highly anticipated speech Thursday, the Vice President attacked his critics for dragging his son into the alleged irregularity and for using political-ally-turned-rivals as pawns in the Senate probe. Binay, who served as Makati mayor from 1986 to 1998, and from 2001 to 2010, is known to be eyeing the presidency in 2016.

Binay said the COA, in the past 5 years, had audited the entire project 10 times and found no anomaly.

But COA Chair Grace Pulido-Tan said a special audit now being conducted for the project has raised “many questions,” specifically on why the project had to undergo 5 phases. (READ: COA: “Many questions’ on Makati building) 

Contract review reports by resident COA auditors of Makati determined that the ABC pegged by the Makati City government for all the 5 phases were all deemed “reasonable” vis-a-vis COA estimated costs.

What does this mean?

COA Resolution 91-92, which governs auditorial review and evaluation of contracts, mandates COA auditors to make a separate costing of a particular government contract or Approved Agency Estimate “for purposes of determining the reasonableness of a contract price.”

A government project is considered excessive, if the contract exceeds 10% of the COA estimate.

Table 5

Phase Contract Price COA Estimate Variance
Phase 1 P386,998,154.20
P375,910,233 2.95 % above COA
Phase 2 P499,357,003.75
P494,194,340 1.04 % above COA
Phase 3 P599,395,613.34 
P549,336,810.36  9.11 % above COA
Phase 4 P649,275,681.73 
P592,166,077  9.64 % above COA
Phase 5 P141,649,366.00  No COA estimate Not available

Except for Phase 5 where the COA technical team did not provide an estimate, all 4 other phases show they were within the 10% tolerable limit stated in COA Resolution 91-92. However, Phases 3 and 4 were within striking distance of the 10% tolerable limit.

Former Makati bids and awards committee vice chairman Mario Hechanova said bid fixing is a normal practice in the city government, while the former vice mayor, former Binay ally Ernesto Mercado, said the Binays received 13% kickbacks from the infrastructure projects. (READ: Former employee: Fixing bids ‘usual practice’ in Makati)

Binay said the allegations were politically motivated and vowed to clear his name. – Rappler.com

*$1 = P44

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