DELAYS and adjustments to infrastructure projects could increase the cost of these Official Development Assistance (ODA)-funded undertakings by at least P2 billion this year, according to official government data.
Data obtained from the National Economic and Development Authority (Neda) showed that the Department of Public Works and Highways (DPWH) has requested for cost increases for two projects.
This has caused the country’s total ODA cost overrun stock to increase to P61.58 billion in the January-to-June 2020 period from P58.84 billion as of 2019.
“The cost overrun stock sums up all the amount of cost overrun requests under various ICC review stages [Secretariat review, ICC-Technical Board, ICC Cabinet Committee], incurred by all active ODA loans as of the reporting period,” Neda said in an e-mail to BusinessMirror.
“A cost overrun request is excluded from the stock upon meeting any of the following conditions: [a] ODA loan project with cost overrun has closed; [b] request is disapproved by the ICC; or [c] the implementing agencies withdraw the request,” it added.
Based on the data, P2.74 billion was added to the cost overrun stock of the country due to the DPWH’s Flood Risk Management Project-Cagayan, Tagoloan and Imus River (FRMP-CTI) and the Integrated Disaster Risk Reduction and Climate Change Adaptation Measures in Low Lying Areas of Pampanga.
Both projects were earlier identified by the Neda in the 2019 ODA Portfolio Review as among those were slated to be restructured this year.
The FRMP-CTI is a Japan International Cooperation Agency (Jica) project. The approved cost for the project was P7.5 billion but it is now seen to cost P8.82 billion.
The additional P1.32 billion or 17.55-percent cost increase, Neda said, was due to higher costs for the Imus River component of the project as well as higher Right-of- Way acquisition (Rowa) costs.
“[The] cost increase [will be used] to cover the price escalation and the supplemental agreement for additional consulting services for the Imus River component; and [b] changes in cost for the Right-of-Way acquisition,” Neda documents stated.
Meanwhile, the Integrated Disaster Risk Reduction and Climate Change Adaptation Measures in Low Lying Areas of Pampanga is funded by the government of Korea.
It’s original approved cost was pegged at P6.15 billion but is now expected to cost P7.57 billion. The P1.42 billion or 23.07-percent cost increase is due to an increase in the dollar-exchange rate for civil works.
Other reasons cited by Neda for the increase in cost is the change of project scope and a higher budget needed for Rowa based on the assessment made by a third-party appraiser.
“Cost overrun is defined as additional costs over and above the ICC-approved project cost [Section 2.1 of the IRR of the ODA Act].Agency requests for cost overruns undergo the ICC review process, mainly to determine whether the project continues to be economically viable,” according to the 2019 ODA Portfolio Review.
Meanwhile, Neda said the total ODA received by the country reached $26.21 billion as of June 2020. This is composed of $24.6 billion worth of loans and $1.61 billion.
The country received the most ODA funding from Japan, Asian Development Bank, World Bank, Asian Infrastructure Investment Bank (AIIB), and Korea.
ODA from Japan amounted $10.1 billion or 38.53 percent of the total; ADB, $7.07 billion or 26.98 percent; World Bank, $4.98 billion or 18.98 percent; AIIB, $957.6 million or 3.65 percent; and Korea, $679.65 million or 2.59 percent.