COA: SEA Games venue made BCDA deal 'disadvantageous' at P12B

The Commission on Audit has flagged as disadvantageous to the government the P12-billion deal for the construction of the National Government Administrative Center and facilities used in the 2019 Southeast Asian Games in New Clark City.

State auditors said the Bases Conversion Development Authority made the government spend P1 billion more when it incorporated the P8.5-billion construction of sports facilities and athlete's village with the initial P4.18-billion joint venture deal with Malaysian firm MTD Capital Berhad.

“If only BCDA did not incorporate the construction of its sports facilities with the NGAC joint venture project but rather subjected to the more stringent requirements of RA 6957, as amended by RA No. 7718, the government will not entail additional expenses by paying interest or construction cost," COA said.

Republic Act 7718 is the Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and for Other Purposes.

“There is no parallelism between the two PPP (Public Private Partnership) frameworks. The differences between the two approaches make them impossible to combine in a single project, such as NGAC,” it added.

The original deal only involved the construction of government buildings, commercial centers and residential housing.

Under the revised P12-billion joint venture deal, the BCDA will pay MTD Berhad P9.539 billion instead of P8.5 billion for the construction of sports facilities that were utilized during the 2019 SEA Games.

The P9.539 billion was broken down to: P8.5 billion for cost of sports facilities, P579 million payment for one-year financing cost and the remaining amount going to variation orders.

The BCDA said the variations “were made upon the recommendation of the Technical Delegates of the International Association of Athletic Federation (IAAF) and Federation Internationale de Natation (FINA), Philippine SEA Games Organizing Committee (PHISGOC) and Asian Development Bank.”

Of the said amount, COA said BCDA has already paid P5.48 billion to MTD Berhad as of December 31, 2019.

BCDA response

BCDA said that paying MTD Berhad over P9 billion in cash for the SEA Games facilities rather than the other option of paying them P2.2 billion annually for five years as provided by the same JV deal saved the government as much as P1 billion.

“BCDA secured the lowest possible cost or annual payments for the construction of world-class Sports Facilities for the SEA Games when it negotiated the inclusion thereof in the NGAC Development Project,” BCDA said.

Likewise, BCDA argued that fusing the two projects under one joint venture deal was approved by the Office of the Corporate Government Counsel, and that the Asian Development Bank (ADB) deemed that such move "was best suited for the NGAC Project that has a unique component".

Further, BCDA cited that the part of the payment to the developer MTD Berhad is the financing cost with the agreed interest rate of 7.5 per cent—a fair and reasonable amount as provided by the joint venture deal.

COA rejected BCDA’s justifications, saying that the agency is not exempted from laws governing public infrastructure projects, especially when it involves expenditure of public funds.

“We still believe that there are other arrangements that could promote better transparency, competitiveness, equity, efficiency and economy for the construction of government infrastructure projects financed by public funds in adopting RA 9184 (Procurement Law),” state auditors said.

BCDA, COA said, could have gained more from the NGAC project if the sports facilities were not included in the joint venture agreement since MTD Berhad proposed a 100% premium on the value of the land used in the joint venture project which could have doubled BCDA’s ownership and share in gains.

“However, this was not adopted in the joint venture agreement as there was no premium given on the value of the said property,” COA said.

COA said that BCDA was wrong in arguing that the government was able to save billions because the NGAC project cost was reduced to P12 billion from MTD Berhad’s initial proposal of P121 billion.

COA noted that MTD Berhad’s initial proposal costing P121 billion should really be higher because it covered 207 hectares—way higher than the 40 hectares of land used under the P12 billion joint venture deal which paved the way for construction of sports facilities.

“We beg to disagree on BCDA’s contention that they did not incur additional expenses for the government because they were able to significantly reduce the total project cost from P121 billion to P12 billion," COA said.

"We would like to emphasize that the whole amount of financing cost could have been avoided if only the project was procured through RA 9184 and was not incorporated in a joint venture,” it added.

“It is not proper to compare the two project costs since they have different scopes of work of project developments. We stand with our recommendation that BCDA refrain from combining incompatible PPP (Public Private Partnership) frameworks, which are governed by different laws, on future projects,” COA said. -NB, GMA News