COA: Undue haste in construction of Makati Building II irregular

Published October 2, 2014 11:39am

(Updated 10:10 p.m.) The Commission on Audit found the undue haste in the construction of the controversial Makati City Hall Building II as irregular.

A preliminary report of the COA special audit submitted to the Senate blue ribbon subcommittee noted that there was no construction plan available when the construction of the building was awarded to Hilmarc’s Construction Corporation only a month after the passage of the ordinance for its appropriation.

The subcomittee is probing the alleged overpricing of the building which was constructed during the term of Vice President Jejomar Binay as mayor, with his son Junjun, now Makati mayor, a councilor then. Father and son are facing plunder charges in connection with the said alleged overpricing.

“While the swiftness of the action by the city government may be considered as efficiency, the same could also be considered as a red flag because this project will surely require a careful conceptualization and planning,” Alexander Juliano, who conducted the audit, told the subcommitte chaired by Senator Aquilino Pimentel III.

Juliano's report also indicated overpricing in the construction of the questioned building.

The COA auditor noted that for Phase I to IV alone, there was a already a difference of P126,098,550 between the approved budget for the contract and the agency's evaluated cost.

"These amounts are very significant. Further, the percentages of variance for Phases III and IV are within the borderline of the 10 % allowable variance. The materiality of the variance (contract price is above COA evaluated cost) deserves a deeper analysis," Juliano said in his report.

Red flag

A red flag is a potential indicator of deficiency.

He added that under the implementing rules and regulation of RA 9184 or the Procurement Act, the city is required to conduct detailed engineering in many activities such as survey, site investigation, soils and foundation investigation, construction materials investigation, preparation of design plans, preparation of technical specifications, quantity and cost estimates, program of work, proposed construction schedule, among others.

He said the procurement process for the contract of architectural and engineering service for the building started on November 12, 2007 or only four days after the passage of the supplemental budget which was the funding source for the project.

He said on that date, then city engineer Nelson Morales requested for a negotiated contract with the Bids and Awards Committee saying that the negotiation should be based on the unique experience and expertise of the consultant and the time constraint imposed by the bidding procedure.

On November 14 or two days later, the BAC found merit and approved the request of Morales for a negotiated bid instead of public bidding.

On November 15, then BAC chairman Marjorie de Veyra sent seven firms invitations to submit proposals. On November 22, BAC opened the proposals and found that the highest bid was tendered by MANA Architecture and Interior Design Co. The following day, De Veyra notified MANA that they were awarded the contract.

On November 28, the contract was executed between MANA and Makati City or just eight days before the building project was advertised in a newspaper on December 6, 2007.

“It appears that the negotiated procurement adopted by the BAC on the contract of architectural and engineering service was improper because none of the conditions laid down under RA 9184 was present such as two failed buildings, emergency cases, takeover of contracts, adjacent or contiguous projects, agency-to-agency, highly technical consultants and defense cooperation agreement,” said Juliano.

He added that when the building project was awarded to Hilmarc’s on January 11, 2008, there were no completed plans yet as the contract document services to be rendered by MANA was only 20 percent completed as of March 31, 2008.

The COA auditor said there was a substantial difference of P105.349 million between the approved budget for contract of P387.846 million as against the approximate cost of the project of P282.496 million as stated in the contract and various documents approved by the mayor.

No other bidders

He added while there were three bidders who participated in the Phase 1 of the project, “it was so unusual, especially when the mode of procurement was public bidding, that with respect to Phases 2 to 4, there was no other bidder who tendered his bids except the lone and winning bidder who also got the award for Phase 1.”

He further said the bids tendered by Hilmarc’s show very minimal variance from the approved budget of contract for all the five phases.

He also noted that there was no approved budget for contract or appropriation yet when the city government started the procurement process on November 27, 2009 for the Phase 3 of the building.

Juliano said based on the COA inspection report dated July 7, 2011 for Phase 3, the building was already habitable and ready for use “so it is questionable why the city had to disburse an aggregate amount of P793.7 million for Phases 4 and 5.

He further said that the city government may have incurred unnecessary expenditures for mobilization and demobilization for Phases 2 to 4 amounting to P14.49 million considering that only one contractor made all the five phases of the project.

The hearing was ongoing as of posting time.

COA investigation

Earlier in September, COA said it will conduct an audit investigation on the alleged overpriced Makati City Hall Building II.

COA conducted the special audit upon the request of the Office of the Ombudsman where plunder complaints were filed against VP Binay, his son Makati Mayor Jejomar Erwin "Junjun" Binay, and 21 other Makati City officials in connection with the alleged overpriced building.

“We are putting together a team of auditors and we're getting experts outside our office to look at it again,” COA commissioner Grace Pulido-Tan said then during the second day of the Good Governance Dialogues held in Quezon City.

Earlier in August, Tan claimed that the COA did not issue any clearance for the building and that the audit investigation report about the project, submitted by then Makati City auditor Cecilia Cagaanan, was still under evaluation at that time by the COA central office.

Request to keep the COA report confidential

Juliano and COA Commissioner Jose Fabia initially requested the Senate blue ribbon subsubcommittee to keep the preliminary report on the issue confidential as it was originally intended for the internal consumption of the commission.

“I want to put on record my reservation regarding the RA 3091 or premature disclosure. This report is just a preliminary report. We don’t have yet the comment of the management of city of Makati,” said Juliano during the hearing on Thursday.

Pimentel said the subcommittee cannot grant the request due to the high public interest on the matter.

“The request is this report to be remained confidential but we cannot grant that due to overwhelmingly public interest. We cannot grant it because we looked at our rules and sabi ng rules namin, kailangan executive session if it involves national security. I don’t think the alleged anomaly in Makati City Hall II involves national security,” he said.

The P2.5-billion building was overpriced by P1.314 billion, according to the complaint filed by defeated mayoralty candidate Renato Bondal against Vice President Jejomar Binay and his son Junjun before the Office of the Ombudsman. Bondal was Junjun Binay's opponent in the 2013 elections.

The building was constructed in 2007 when the elder Binay was Makati mayor and Junjun a city councilor.

In his statement before the Senate, Junjun Binay maintained that there was no anomaly in the construction of the building, which he described as “world-class.”

He said an audit conducted by a technical audit specialist in early 2014, following a request from his “political opponents,” showed that “the contract prices are reasonable.”

Tan also said among the issues that the COA team would look into is why the project was divided into several phases.

However, Junjun said during the hearing that carrying out projects in phases "is a practice in Makati."

The parking building project was divided into five phases. — With a report from Amanda Fernandez/RSJ/KG/NB, GMA News

Tags: makaticityhallbuilding2, makaticityhallbuildingii, commissiononaudit, jejomarbinay, junjunbinay