The Power Sector Assets and Liabilities Management Corp. (Psalm) had unlawfully awarded a P438-million contract to rehabilitate a hydroelectric plant in Iligan City which could have helped address the power crisis in Mindanao, the Commission on Audit (COA) said.
In its 2014 audit report released on Friday, the COA assailed Psalm president Emmanuel Ledesma for entering into a negotiated contract with the joint venture of Guangxi Hydroelectric Construction Bureau (GHCB) and ITP Construction Inc. for the “total replacement” of Agus IV hydroelectric power plant without the approval of the Psalm board.
The state auditors said the awarding of the contract violated Section 48.1 of the implementing rules and regulations of Republic Act No. 9184, also known as the Government Procurement Reform Act.
Noting this major deficiency, the COA asked the Psalm to cancel the contract and demand the refund of P65 million in advance payment to GHCB.
“(T)he fact that (Psalm) did not secure the approval of the Psalm board…before entering into a negotiated contract with GHCB rendered the contract null and void ab initio, hence, not enforceable,” the COA said.
Worse, it said GHCB had failed to start the project as of Dec. 31, 2014, depriving the public of its intended benefits.
COA said Psalm “had all the reasons to require the refund of the advance payments because the contractor has not started the project nine months after the receipt of the payment.”
The major repair of Agus IV, which is powered by the picturesque Maria Cristina Falls, was requested by the National Power Corp. in 2013 in a bid to restore its full capacity of 50 megawatts.
Since 1971, Agus IV had not been able to operate to its total capacity.
After Finance Secretary Cesar Purisima and Mindanao Development Authority chair Lou Antonino approved the rehabilitation of the power plant last year, the NPC gave the contract amounting to P496.25 million to an Italian firm being the original manufacturer under the propriety mode of procurement.
But the Psalm board, headed by Purisima, rejected NPC’s decision and issued a resolution on March 6, 2014, allowing Ledesma to enter into a negotiated contract as allowed by law.
A month later, the board decided to nullify the authority it gave to Ledesma and directed the Psalm bids and awards committee (BAC) to conduct a public bidding instead.
In an April 15, 2014, memorandum, Ledesma said the BAC “discounted the urgency of the project and directed the BAC to resort to negotiated procurement…in accordance with the original deadline set by the board.”
This prompted the BAC to issue a resolution awarding the rehabilitation contract to GHCB two weeks later.
“Despite the revocation by the Psalm board of his authority to enter into a negotiation…(Ledesma) directed the BAC to prepare a resolution recommending negotiated procurement under emergency case…and awarded the rehabilitation contract to (GHCB),” the COA said.