PROJECT delays and changes in financing cost the Philippines some $6.91 million in commitment fees (CFs) in the past two years, according to the National Economic and Development Authority (Neda).
Based on the Neda’s latest Official Development Assistance (ODA) report, the estimate includes the $3.76 million in CFs paid in 2017 and $3.15 million in 2016.
CFs caused by delays reached $2.81 million in the last two years, while those caused by cost of financing was higher at $4.1 million in 2017 and 2016.
“A review was conducted to estimate how much of the commitment fees paid in 2017 may be attributed to implementation delay,” a document from the Neda said. “The result of the analysis showed that approximately 33 percent of commitment fees paid in 2017 may be attributed to implementation delays.”
The Neda defines a commitment fee as the amount levied on the undisbursed loan amount or a portion thereof, payable per annum. It is a rate that is applied on the undisbursed amount of the entire loan or a portion.
The Neda clarified that “even when there is no implementation delay, a certain amount of commitment fee would still be charged as purely cost of financing. Implementation delay only increases the amount.”
Data showed that the top 6 projects with the highest contribution to total CFs attributed to implementation delays. These projects, the Neda said, accounted for 70 percent of CFs paid due to implementation delays.
The projects are Capacity Enhancement of Mass Transit Systems in Metro Manila of the Department of Transportation (DOTr) and Japan International Cooperation Agency (Jica) with $210,000; Road Upgrading and Preservation Project of the Department of Public Works and Highways (DPWH) and Jica with $180,000; and Central Luzon Link Expressway Project also of the DPWH and Jica with $160,000.
The other projects are the Senior High School Support Program of the Department of Education (DepEd) and Asian Development Bank (ADB) with $130,000; Kalahi-CIDSS National Community Driven Development Program of the Department of Social Welfare and Development (DSWD) and the ADB with $110,000; and Integrated Natural Resources and Environmental Management Project of the Department of Environment and Natural Resources (DENR) and the ADB with $80,000.
Meanwhile, Neda data also showed cost overruns for various projects P7.84 billion between 2014 and 2017.
Cost overrun is defined as additional costs over and above the approved project cost of the Investment Coordination Committee (ICC).
The report stated that the total ICC cost approved for all the projects was at P30.16 billion with the additional increase in cost of P7.84 billion, the total cost for the projects increased to around P38 billion.
In 2017 alone, there were three projects that incurred cost overruns. These are the Italian Assistance to the Agrarian Reform Community Development Support Program, which saw an increase in cost of P99.15 million; Arterial Road Bypass Project Phase II, P1.02 billion; and the Cebu Bus Rapid Transit (BRT), P5.69 billion.
The Neda cited two reasons for the increase in cost of the Italian assistance to the Agrarian Reform Community Development Support Program (ARCDSP).
The expenses in project management operation and the value-added tax cover for the Agricultural Enterprise Development and Local Capacity Building Support component both posted increases in the cost of the ARCDSP.
For the Arterial Road Bypass Project Phase II, the reasons were the increase in the number of lanes for the project to four lanes from the initial design of having only two lanes and the widening to four lanes of the Angat bridge and its approach roads and a smaller bridge.
In the case of the Cebu BRT, the increase in cost was due to “force majeure” with the signing of RA 10752, or the Right of Way (Row) Act, and foreign exchange rate movements.
“Force majeure event of signing into law of RA 10752 or the ROW Act, which provides that payment for project land acquisition should be based on market value instead of zonal values amounting to P5.07 billion,”
the Neda said.
The Neda said agency requests for cost-overruns undergo the ICC review process, mainly to determine whether the project continues to be economically viable.