Commitment fees: BRT delay costs city government P23M

CEBU, Philippines — The delayed implementation of the multi-billion Bus Rapid Transit (BRT) system in Cebu City has caused the government almost P23 million of commitment fees and denied the public of immediate use of the transport system, the Commission on Audit (COA) said.

The BRT project was approved in 2014.

COA said any further delay in the implementation may cause additional burden to government to fund expenses to complete the project, which may arise after the loan closing date.

In its consolidated annual audit report on the Department of Transportation (DOTr), COA said the government has accumulated P22,928,599.74 in commitment fees in the past four years.

It incurred P7 million in 2018, P6.4 million in 2017, P6.1 million in 2016, and P3.3 million in 2015.

The delay was attributed to the slow procurement process, right-of-way acquisition, and project viability issues, among others, which resulted in low disbursement or utilization of loan proceeds that might require loan validity extensions and hence, the incurrence of additional commitment fees.

A commitment fee, as defined in the report, is a fee levied on undisbursed portion of the loan, payable in the currency in which the loan is denominated. This fee can be collected or capitalized based on the loan agreement when the loan becomes effective. It is charged by a foreign lending institution on top of the interest charges and other fees as embodied in the agreement.

"The delayed implementation of the projects not only resulted in the incurrence of additional CFs, but most importantly, it deprived the general public of the benefits that could have been derived from the immediate use thereof," COA said.

In 2014, the Government of the Philippines (GOP) entered into a $198.5 million (P10.6 billion) loan agreement with World Bank (WB) and Agence Francaise De Developpement (AFD) for the BRT implementation.

The WB will finance the project with $116 million through the International Bank for Reconstruction and Development (IBRD) and $25 million through the Clean Technology Fund (CTF). Both loans have closing dates set on June 30, 2021.

Meanwhile, AFD extended a credit facility of $57.5 million with the closing date scheduled on March 32, 2021.

A review of the project’s status as of December last year revealed slow or no significant development due to delayed procurement activities and project implementation and issues concerning its viability.

It also reviewed the WB Aide Memoire that disclosed "unsatisfactory" rating for the implementation progress as it continued to be limited since all project-related activities were put on hold due to decision of the government to review the project.

It can be recalled that on April 11, 2018, Transportation Secretary Arthur Tugade and Presidential Assistant for Visayas Michael Dino recommended to cancel the BRT project due to the city’s narrow roads, among other reasons.

On April 24, the National Economic Development Authority-Investment Coordination Committee-Cabinet Committee asked DOTr to submit more robust evidence to support the cancellation of the BRT project.

The issue was resolved only in July 2018 when the government decided to continue with the implementation.

As a result, the contract with Social Management Consultant (SMC) commenced work only on September 26, 2018 or eight months after it was signed on January 31 of the same year.

Also last year, the contract with Technical Support Consultant (TSC) was signed on September 17 and work commenced on October 2.

Meanwhile, no progress was reported on the procurement of the Long-Term Procurement Specialist (LT-PS) and Land Acquisition and Resettlement Specialist (LARS) since May 2018 until the yearend.

The report said the delay in the project implementation, particularly the engagement of the services of TSC, SMC, LT-PS, and LARS, would affect the project completion date adversely as against the target date or before the closing date.

Other critical issues and areas of concern mentioned were the reduction of the staffing of the Project Implementation Unit that constrained the pace of the implementation further, and the need to revise the timelines and review and finalize the contract packages since the BRT project will form part of the Metro Cebu Intermodal and Integrated Transport System (MCIITS).

COA recommended that a calibrated plan of actions be undertaken immediately to address the issues to ensure a smooth and timely implementation of the project.

It also recommended that implementing agencies prepare and follow a Revised Detailed Time Schedule and Catch-up/Work Plan, and submit them to COA by the end of the year together with the corresponding project's Accomplishments and Justification for deviation or delay, if any.

To minimize incurrence of commitment fees, COA recommended further to require all stakeholders such as the evaluation panel members, approving authorities, requesting entity, project management offices, and others involved in the bidding, evaluation, and implementation phase to exert best efforts to minimize delays and maximize availment of loan proceeds.

The management reportedly agreed to the recommendations and committed to submit the necessary documents once finalized by the TSC. The project manager also said that the project, as part of the MCIITS, will now have to take into account all ongoing and proposed forms of mass transport systems in Cebu.

Just recently, technical support consultant The Egis International told the Cebu City government that it targets to start construction next year and that the project may have partial operability by December 2021. Significant civil works will be completed by March 2022. (FREEMAN)