Delays in foreign-funded projects costing gov’t billions of pesos

CONSIDER this: we borrow money to fund some projects. On top of the interests attached to these loans, we pay 35 percent more because of delays in the implementation of these projects. The price tag? An additional P36.8 billion. And that’s only for 21 projects, as of July this year, according to the National Economic and Development Authority (NEDA).

The Department of Public Works and Highways (DPWH) chalked up the biggest amount in cost overruns, at a staggering P13 billion, covering 10 delayed projects. Nine of these projects were funded by the Japan Bank for International Cooperation (JBIC), and one by the World Bank (WB).

Other agencies that incurred additional costs for delayed projects were the Department of Transportation and Communications (DOTC), P6.96 billion; Bases Conversion Development Authority (BCDA), P6.47 billion; National Irrigation Authority (NIA), P4.42 billion; Light Rail Transit Authority (LRTA), P4.1 billion; and the Philippine Ports Authority (PPA), P1.83 billion.

Among the most oft-repeated reasons cited for the delay in the implementation of projects were additions or changes in the scope of work, currency exchange rate movement, increases in the cost of consulting work, increases in the cost of acquisition of right of way (ROW), and increase in cost of labor and materials and administrative cost.

As of July this year, the project with the biggest cost overrun in terms of percentage against the original estimate was the China-funded Banaoang Pump Irrigation Project. The project, originally costing P1.3 billion, was touted as one that will provide year-round irrigation to 6,000 hectares of rice land in the towns of Sta. Catalina, Sto. Domingo, Cauayan City, San Vicente, Vigan, Bantay, Magsingal, and San Ildefonso.

See the list of all foreign-assisted projects with cost overruns as of July 2007.

With the loan agreement signed on October 30, 2001, construction began in March 2003 with NIA as its implementing agency. But operations have yet to start, way beyond the December 2006 deadline set for the project. NIA is seeking an additional P1.24 billion, a 92.53-percent hike from the original project cost, allegedly due to “currency exchange rate movement, modification in the scope of works, and increase in right of way acquisition cost.”

In terms of absolute amounts, the Subic-Clark-Tarlac Expressway Project seeks the biggest cost increase at P6.47 billion. The P26.32 billion infrastructure project, financed by JBIC, was envisioned to connect the three business hubs beginning this month. But BCDA is now asking for a 24.61-percent increase in budget, supposedly to absorb “currency exchange rate movement, price escalation/adjustment, right of way acquisition, taxes, administrative expenses and interest during construction.”

The BCDA is followed by the LRTA, which is asking for an additional P4.1 billion for phase 2 of its Line Capacity Expansion Project. It involves the installation of air- conditioning units in the old fleet and the purchase of 12 four-car air-conditioned trains. The project cost was originally pegged at P8 billion, which was provided by JBIC. But the BCDA says it needs a total of P12.10 billion or 51.32 percent more. The increase is being blamed for “cost increase due to currency exchange movement, price adjustment” and “customs duties and taxes.”

Coming in third is the Arterial Road Links Development Project IV of the DPWH, which was supported by the JBIC with a P6.14 billion loan agreement signed in December 1999. With the funding, DPWH was supposed to improve and reconstruct about 420 kilometers of national arterial roads, including bridges and other structures in Nueva Vizcaya, Nueva Ecija, Catanduanes, Bohol, Leyte and Southern Leyte. The DPWH claims it needs an additional P2.88 billion or 46.99 percent more for the project, citing “cost increases due to additional project scope, high bid cost, and increases in cost of consulting services and right of way acquisition.” The project should have been finished in March this year.

Leonor Briones, co-convenor of Social Watch and former national treasurer says there are justifiable reasons that require project funding to undergo revisions, like wrong assumptions in currency exchange rates, weak feasibility studies, and unexpected price adjustments.But she says in some instances, requests for additional funds can be “very suspicious.” She ticks off right of way problems as an example, arguing that government can and often, uses its coercive power to see a project through. Thus, she says right of way problems is not an excuse to increase project costs. She adds there are many instances where project revisions can be blamed on “governance problems.”

Briones also urged the Commission on Audit (COA) to go over the cost overruns.