Tuesday, 18 October 2011

Project delays cost govt P7b in losses, Neda says

by Christine F. Herrera
Manila Standard

Slow progress and cost overruns plague major projects funded by official development assistance

THE delays in at least 15 foreign loan-funded infrastructure projects have cost the government P7 billion in losses as a result of cost overruns, the National Economic and Development Authority says in a recent report, a copy of which was obtained by the Manila Standard.

In the report dated Aug. 22, Neda Director Roderick Planta says in awarding the contracts, the Public Works Department insisted that the pricing be based on 2002 levels, a move that delayed the procurement of civil works.

As a result, Planta says, the P9.94-billion Urgent Bridges Construction Project for Rural Development financed by the Japan International Cooperation Agency was only 91 percent complete, even though the funds had been used up and the loan was considered closed in September 2011.

The Neda also listed as “critical” the P7.35-billion Presidential Bridge for Farmers Project, a United Kingdom-assisted project also under the Public Works Department, that had the “supply and services contract terminated.”

The agency also raised a warning over the P4.2-billion French-funded Presidential Bridge for Farms after “no activity” was noted in the first six months of the year.

As of June 30, 2011, 15 of the 19 bridges were still on the drawing board. The delayed civil works was attributed to “unsuitability of the project design to local sites and delayed design preparation in some sites.”

The 15 “critical projects” with Alert Level II status had a total cost of $1.62 billion (P70.05 billion at P43.55 to the dollar).

The Neda says that as of June 30, 2011, those projects already had incurred a 10-percent cost overrun, or about P7 billion.

Six of the 15 critical projects are being undertaken by the Public Works Department.

Three more projects, including The President’s Bridge, were given “Alert Level 1 Status” because of potential similar problems of delays being encountered by the 15 critical projects.

At least 13 more projects were identified as “potential problem projects” that could be elevated to Alert Level 1 Status if no progress was made by end of the year.

In all, the 31 infrastructure projects that were experiencing slow progress and delays, and 30 more that were still on schedule, had a total cost of $8.31 billion or P361.9 billion.

“Around 20 percent or one out of five ODA [overseas development assistance] projects is on critical level,” the Neda report says.

“The 18 ‘actual problem projects’ (15 critical or Alert Level II and three early warning or Alert Level I) are those that are actually encountering serious problems, as manifested by these projects breaching thresholds of at least two indicator categories,” Planta says.

The four indicator categories for identifying actual problem projects include leading indicators on financial, physical, cost overruns and project completion, he says.

“The 13 potential problem projects are programs and projects that are considered at risk based on a checklist of project variables and characteristics that historically result in major implementation problems,” Planta says.

“The alert status of loan-assisted projects are brought to the attention of concerned stakeholders.”

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