Fool’s gold?

Things I’ve been learning about the pace of our infrastructure delivery make me worry that our promised “Golden Age of Infrastructure” may end up being made of fool’s gold.

Last year, I raised the prospect of the government’s vaunted infrastructure thrust turning into “Build, build, bust,” given its shift away from public-private partnerships (PPP) in favor of taxpayer and loan funding. Our government’s track record in directly implementing projects doesn’t inspire much confidence, exemplified in five traditional issues: long delays, huge cost overruns, fat kickbacks, shoddy maintenance and large operating losses. On delays, I’ve written recently about right-of-way (ROW) issues and how these remain a (if not the) top reason for delays in key infrastructure projects. This was prompted by a recent presentation from the Japan International Cooperation Agency  on the status of implementation of various infrastructure projects it is supporting, which are some of our most crucial ones, and where ROW problems have indeed remained persistent.

I got even more worried upon reading the 2017 audit reports of our infrastructure agencies, particularly the Department of Public Works and Highways (DPWH) and the Department of Transportation (DOTr). These and the audit reports of other government entities, including every local government in the country, are now readily accessible in the Commission on Audit (COA) website coa.gov.ph—thank God for transparency!

The reports make interesting reading, and put to question the wisdom of relying mainly on these and other infra agencies to take charge of building, operating and maintaining the ambitious “Build, build, build” program the government has lined up.

At the outset, the government’s independent auditors questioned (“rendered an adverse opinion on the fairness of presentation of”) the consolidated DPWH financial statements due to various accounting errors and deficiencies. The agency’s 2017 budget allotments totaled P662.7 billion, already six times what it had in 2010, even as it had undergone substantial streamlining and reduction of personnel since then. The COA reports that only P222.7 billion, or only about one-third, was disbursed due to the delay or nonimplementation of infrastructure projects; the bigger bulk (two-thirds) remained unspent!

The report observes that (a) 2,334 projects costing P62.6 billion have been delayed; (b) 135 projects with a total cost of P6.1 billion were suspended; (c) 15 projects amounting to P2.1 billion were terminated; and (d) 815 projects with an aggregate cost of P2.6 billion were not implemented, “thus depriving the public of the benefits that could have been derived from the immediate and maximum use of the said projects.”

Of the total delayed projects, 120 projects amounting to P6.7 billion have already incurred negative slippage of 15 percent, but the COA noted that no liquidated damages were imposed on the contractors, nor were the contracts rescinded or terminated, as required. Moreover, P27.6 million in commitment fees went down the drain because of low disbursement rates, owing to implementation delays on foreign loan-funded projects.

The COA further observed: “Completed school buildings and procured equipment costing P326.3 million and P25.9 million, respectively, were not fully utilized thereby defeating the purpose for which government resources were spent.” It also noted: “A total of 334 infrastructure projects of DPWH were found to have defects, equivalent to at least P40.9 million which, if not corrected/rectified by concerned contractors, may result in wastage of government funds and deprive the public of the maximum use of the infrastructures.”

The COA further reported unrecouped advances to contractors, excessive rentals of motor vehicles, excessive contract costs, questionable ROW payments, undelivered construction and heavy equipment, and outright violations of the Government Procurement Reform Act (Republic Act No. 9184), including lack of public bidding and splitting of purchase orders. On the last, the COA called the DPWH to task for “defeating the purpose of transparency, completeness and economy in the procurement process.”

And I haven’t even dealt on the audit report on the DOTr yet.

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