PSALM to ‘cancel’ rehab contract of Agus plant

by Myrna Velasco, 05 July 2015
from Manila Bulletin

The Power Sector Assets and Liabilities Management Corporation (PSALM) is expected to cancel the contract awarded to a Chinese firm for the rehabilitation of a generating unit at the Agus hydropower complex, a highly-placed source has hinted.

It has to be recalled that the deal entered into by suspended PSALM president Emmanuel R. Ledesma Jr. with Chinese contractor Guangxi Hydro Electric Construction Bureau and ITP Construction Inc. for Agus VI – Unit 4 had become a nail in the coffin that ignited temporary boot from his post.

The Governance Commission for Government-owned and Controlled Corporations (GCG) has ruled that the change in the parameters of the contract award had been ‘irregular,’ because Ledesma’s action was also executed without the imprimatur of the PSALM Board.

Given the circumstances surrounding that contract award for the Agus generating unit, the source noted that “PSALM will decide to cancel the deal.”

In a petition filed by PSALM employees versus Ledesma at the GCG, it was averred that their chief executive “exercised unsound judgment and management decision non-compliance with bidding procedures.” The GCG had upheld that view in its ruling.

Agus plant operator National Power Corporation (NPC), in previous correspondence with PSALM has indicated that “direct contracting with the original equipment manufacturer … is the most expedient and cheapest way to achieve the desired results at unit number 4.” But it stipulated that such has not been considered by the PSALM chief executive.

It was similarly raised in the GCG complaint that there had been “no consultation with DBM (Department of Budget and Management) or NEDA (National Economic and Development Authority)-Investment Coordinating Committee for clearance or approval considering the project amount involved.”

There had also been only one offer made during the bidding, and the decision to immediately enter into negotiated arrangement could have been in violation of government procurement rules.

The cost of the rehabilitation contract for the Agus unit was pegged at P438 million, but NPC has opined that such cost level will escalate if the work will be given to a company or contractor that is not yet familiar with the equipment and installation at the asset.

NPC has estimated that prolonged shutdown of the plant could result in P60 million losses, which may then top even the originally approved of P496-million repair work budget for the generating facility.

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