RP racks up P33.5 billion in cost overruns for foreign-funded projects – Escudero

Published by rudy Date posted on January 22, 2009

Twenty foreign-assisted projects have incurred P33.5 billion in cost overruns, Sen. Francis Escudero said yesterday.

Based on data submitted by the National Economic and Development Authority, the Department of Public Works and Highways accounted for the bulk of the overruns at P13.3 billion covering five roads, one bridge and four flood control projects, Escudero said.

The Department of Transportation and Communications followed with P6.8 billion for three airports and one feeder port project, while the Bases Conversion Development Authority was third with P6.5 billion for the Subic-Clark Tarlac Expressway.

“To view it from another perspective, P33.5 billion is almost 14 times what we will spend for new textbooks this year,” Escudero said. “It is P8 billion higher than the annual budget of the Department of Health.”

The NEDA report came days after the World Bank reported the alleged collusion among construction firms and corrupt officials in the rigging of bids for major road projects.

He said cost overruns for foreign-assisted projects are expected to increase this year as five big-ticket infrastructure projects are showing signs of breaching their budget ceilings. He said the figure does not include projects funded locally.

“This practice should be curbed and loopholes should be plugged because it is becoming a lucrative industry in the construction business,” Escudero said. “Instead of the approved project costs serving as the unbreakable ceiling, which is what the law requires, these have been reduced to mere suggested contract prices.” Escudero, chair of the Joint Congressional Oversight Committee on Official Development Assistance, said that while some cost overruns are necessary for some projects to be completed, these should be avoided as much as possible.

“Cost overruns should be reckoned against the detailed engineering plan of a project and against its feasibility study. Any request must not be processed until it is reviewed by the COA (Commission on Audit), by the various procurement transparency groups, and covered by a budget strategy paper that will address the fiscal impact of the new obligation,” he said.

Other agencies which incurred overruns were the National Irrigation Administration, P4.2 billion for four irrigation projects; Philippine Ports Authority, P1.6 billion for the Batangas port project; and the Light Rail Transit Authority, P1.1 billion for its capacity expansion project.

Escudero said major reasons cited for cost adjustment were acceptance of higher bids which amounted to P7.2 billion; increase in the prices of labor and materials (P9.7 billion) and design and project scope changes (P8.2 billion).

Foreign exchange movement, on the other hand, accounted for P2 billion in budget overruns while the increases in consulting services and administrative supervision jacked up costs by P1.5 billion and P1.2 billion, respectively.–Christina Mendez, Philippine Star

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