NEDA stands firm on irrigation
By BINGO P. DEJARESCO III "The NIA cannot escape accountability for this mess," the NEDA claimed even as (NEDA) the highest economic planning body of the country brought the controversial case for an opinion of the DOJ (Department of Justice).
"Throughout 2005 and much of 2006, there have been a series of letter exchanges between the NIA and the NEDA," the latter asking for "Compliance Requirements" on the over-runs, a mild term for disagreement over such claims.
This is a direct contradiction to resentments aired by Gov. Erico Aumentado, laying the blame on NEDA last week for "not finding remedies to the cost over-runs when they had a chance to do so three years ago." NEDA clarified that a NIA letter stating the over-runs does not automatically mean the ICC or NEDA will concur on the justifications of the over-runs - the reason for the exchange of letters for two years.
In the stand-off, Hanjin Industries of Korea continued with the project in "clear violation of R.A. 8182 of ODA which requires specific reappraisal and clearance from the ICC regardless of the cause of the over-run." Reportedly, the irrigation contractor (Hanjin) has pending collectibles from government to the tune of P600 million. "Accordingly, the Department of Budget and Management cannot release any more funds without ICC approval."
These were the statements of Engineer Roderick Planta, NEDA Manager for Project Monitoring to include the controversial P2.3-billion Bohol Irrigation Project Stage II (BHIP-2), which budget the NIA proposed to increase by P1.2 billion (from the original) and extended for two more years.
Planta was authorized to speak to the Chronicle in behalf of Socio-Economic Secretary (Head of NEDA and Co-Chair of the ICC) Romulo Neri who was caught between pressing engagements.
Apparently, NEDA could not act decisively on the request of NIA end-2004-January 2005 because it did not concur with some of the justifications of the increases.
MOST EXPENSIVE IRRIGATION
The NIA came back with the Proposal for 2007 increasing the Irrigation Budget from the 1999 approval of P2.284 billion to 2007 (P3.606 billion) or a difference of P1.222-613,383 per hectare. (See accompanying table) That increase of P1.2 billion is a huge 51% and not 27% as claimed by the provincial governor.
ITEM
1999 APPROVAL
2007NIA PROPOSAL
DIFFERENCE PER%
DIRECT COSTS
P1.998-B
P3.157-B
P1.159-B 58%
INDIRECT COSTS
P.385-B
P.448-B
P62.5-B 16%
GRAND TOTAL
P2.384-B
P3.606-B
P1.221-B 51%
According to Planta, an Agusan Irrigation project only costs (P280,000/hectare and a Tarlac project P220,000/hectare) compared to the BHIP-2 proposed cost of P613,383/hectare.
BHIP-2 Project Manager Modesto Membreve stated over Station dyRD's Pulso program last Friday that three irrigation projects in Ilocos Sur, Central Luzon and Can-asuhan had project over-runs as well without NEDA intervention. Planta disagreed saying that the three projects' further fund releases are also being held currently in abeyance pending resolution of their respective cost over-runs.
"The NEDA or the ICC are not picking on the Bohol Project. Secretary Neri, himself a Boholano has been concerned about the developments in the irrigation project precisely because it is located in his own home province. He wants everything to be in order." Planta emphasized.
In fact, Planta reasoned, Neri suggested the plantation of ornamental trees and other plants in the area for water sustainability and for eco-tourism purposes, tourism being Bohol's flagship industry. At any rate, the tree-planting suggestion only cost P8 million additional but the over-run being asked by NIA is a huge P1.2-billion" the NEDA Manager explained.
REASONS FOR OVER-RUNS
NEDA Manager Roderick Planta emphasized that any government is not compelled to finish any project with any unjustified over-runs since it may be "throwing good money after bad," merely to prevent it from becoming a "white elephant." All those "excessive over-runs" can be better placed in many other worthwhile projects.
"Besides, the Government just solved its fiscal deficit problems. Over-runs like this upset the Budget Planning of the Government, considering that P1.2 billion is not a small amount," he rationalized.
Also, a quick review of the cost over-runs of the 2007 Proposed NIA Budget over the 1999 Original Approval is not entirely foreign exchange-related, as bruited about.
The biggest over-run is the construction (direct costs) of the Bayongan Dam and Appurtument totaling P745.8 million and the Construction of Main and Lateral Canals of P285 million or a whopping total of P1.030 billion or 84% cause of the total over-run of P1.221 billion were justified by NIA as due "to inflation, foreign exchange, increase of cost of materials and additional works."
The inflation figures of government has been pegged at below 5% over many years now which should not translate into such an increase in cost of materials and equipment.
Main ingredients like cement, earthwork and steel are all sourced locally (not imported and does not have foreign exchange component and largely inflation-linked).
Foreign exchange (can only affect the yen denominated principal loan) has improved in RP from P54 to P45 to a dollar) and "additional works" should have been decided long before the contract was signed. Another eye-opener is the increase of P54 million in Consultancy Fees which were justified by new "assignment and schedules."
Still another item being watched is the land acquisition component that rose by P77 million, representing an original buying price of P83,000 to a high P217,000 (including improvements and financial assistance?).
These plus other reasons could have compelled NEDA and the ICC to hold their horses with respect to new fund releases based on an increase of P1.2 billion over-run.
SUMMARY OF MAJOR COST OVER-RUNS
2007 NIA PROPOSAL VS 1999 APPROVAL
(SUPPLIED BY NEDA)
DIRECT COSTS REASONS CITED NIA
(a) PRE-CONSTRUCTION - P5.981-M - due to additional survey not included in original estimates
(b) INTEGRATED WATERMANAGEMENT - - acquisition of new tele-metering P17.6-M equipments for dam
(c) LAND ACQUISITION - P77.6-M - increase acquisition price from P83,100 to P217,000/hectare (includes
improvements and financial assistance)
(d) BAYONGAN DAM AND APPURTUMENT - - due to inflation, forex difrntial,
P745.8-M increase cost of electro-mechanical equipments and additional works.
(e) CONSTRUCTION MAIN AND LATERAL - due to inflation, forex, price increase
CANALS - P285-M and additional works
DIRECT COST TOTAL P1.023-B OVER-RUN
CONSLTANCY FEES - P54-M - Modification of assignments and activities plus contingencies
INDIRECT COST P 62-M - Realigned to direct costs
GRAND TOTAL P1.221 - B OVER-RUN
DEPARTMENT OF JUSTICEIn a May 17 letter of NEDA's Neri to Agriculture Secretary Arthur Yap, Neri disclosed that the NEDA had requested the DOJ "to render its legal opinion on the consequence of proceeding with contract awards without first obtaining ICC approval of the cost over-run per ODA Act." Neri also requested the NIA Legal Department to issue its own legal stand alongside that of NEDA's legal counterpart. (The NIA is under Yap's Dept. of Agriculture)
Observers note that unlike a road which can be extended or repaired, an unfinished irrigation dam facility will be "useless," a monument of ineptitude, inefficiency or corruption (or all three). The case is therefore studied with kid's gloves - and more so because it can reflect on the country's respect for decorum in spending ODA funds from multilateral agencies or governments.
The NEDA makes collegial decisions and aside from the NEDA Head, the members include Secretaries Margarito Teves (DO Finance) and Rolando Andaya (DBM), Monetary Board Member Dr Vicente Valdepenas (Central Bank), among others.
(The Bohol Chronicle, June 17, 2007)
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