Republic of the Philippines

Province of Palawan
Municipality of Roxas
Office of the Municipal Mayor

FOR : EDENCIO R. BERBA

OIC-Supervising Auditor
COA Team R4B-05, LSG-E Palawan
Provincial Capitol Compound, Puerto Princesa City

MS. ELISA T. CHAN

OIC, Audit Team Leader

DATE: August 4, 2015

RE : Construction of Roxas Public Market and Public Transport Terminal

MANAGEMENT COMMENT

This has reference to the Audit Observation Memorandum (AOM) No. 2016-11 (2015) dated
June 26, 2016 from your good office citing deficiencies and/or errors found out by the COA Technical
Audit Specialist (TAS) regarding the Design and Construction of Roxas Public Market and Integrated
Transport Terminal in Roxas, Palawan.

The COA Technical Audit Specialist (TAS) noted several deficiencies in the design/detailed
engineering output and the actual works performed by R.C Tagala Construction resulting to a total cost
deficiency of 11,135,750.05. Moreover, liquidated damages totaling 40,467,684.60 was computed
for the incurred delay of 609 days due to absence of valid and approved change order, time extension
and suspension order.

In view of the foregoing, the Management of Municipality Roxas, respectfully manifests and
submits its comment/s to the aforementioned audit observations:

A. Design of Roxas Public Market and Transport Terminal

Design of Roxas Public Market and Integrated Transport Terminal in Roxas, Palawan as
specified in item A.1 with sub-number a-i in the Scope of Services under the Terms of Reference
(TOR) and item 8.1 of Annex 6 of revised I.R.R of R.A No. 9184, as observed were not
submitted.

Relative to the foregoing, please be informed that the Municipal Government of Roxas has
been religiously compliant to submit the documents as required under items A.1 to the Bid and
Awards Committee (BAC) and the same were forwarded to your good office thru the late State
Auditor Renato S. Barcelo (herein attached is a copy of Certification issued by Auditor Barcelo
dated November 29, 2013).

Management cannot be said that it failed to submit the documentary requirements provided in
IRR of R.A. No. 9184. Therefore, it can be that the cost deficiency of P4,725,000.00 as observed
in the AOM has no basis.

B. Construction of Public Market

B.1 Since there the cost deficiency was not determined by the COA-TAS, the same can be
assumed that the alleged deficiency did not affect the over-all project implementation
especially so that it is not included in the submitted approved Program of Work (POW).
 B.2 Considering that said cyclone wires were no longer usable due to the natural course of
wear and tear condition, the same were no longer turned-over over the LGU.

B.3 It was observed in the AOM that the 15 KVA Generator set had not been actually
delivered.

The supposed replacement 50 KVA generator set was delivered in lieu of the 15KVA
generator unit. Unfortunately, the 50KVA generator set could not fit the space allocated
for the generator set. Hence, the same was pulled and the 15KVA generator set is now
ready for shipment and installation.

B.4 In view of punch list of remaining works submitted by Engr. Teodoro V. Cayetano, Jr. it
has been noted that the installation of One (1) unit Tonner Aircondition was not
included. However, we will urge the contractor to replace the existing 2 HP window
type aircondition unit with the one (1) Tonner Aircondition Unit prior to the Final
Acceptance of the project.

B.5 Aforementioned formworks, shoring and scaffolding were utilized by the Municipal
Government as temporary shelter materials of displaced occupants of the Public Market
and the MLGU is ready to assist COA TAS to inspect/validate on site in order to
ascertain the availability of these materials being used.

B.6 As regards the Second Level Stout (ST-I), please be informed that by the time Engr.
Joselito A. Yamson assumed as the OIC of the Municipal Engineering Office, that
particular portion of the project had not been inspected for the reason that it was no
longer part of payables subject for payment on the 5 th billing. Further, it should have
been reflected on the 3rd billing during the incumbency of Engr. Teodoro V. Cayetano,
Municipal Engineer as the Supervising Engineer.

In addition, what has been indicated in the Detailed Estimates of Public Market
submitted by the contractor was 0.8 meter which was paid by the MLGU per Program
of Work (POW) not the 1.0 meter as indicated in the AOM. Moreover, this MLGU is
now in the process of urging the contractor to submit a new structural analysis using the
0.8 meter stout (ST-I) to ensure safety and structural integrity of the structure of the
said project.

B.7 This issue should be addressed to Engr. Teodoro V. Cayetano, Jr., clarifications.

B.8 Other Observations:

At this juncture, please be informed that these necessary repairs have already been
implemented and restored to usable condition.

C. Construction of Transport Terminal

C.1 Usable materials were utilized also in providing the temporary shelter of those
displaced occupants in the Public Market.

D. As regards the total cost of project deficiency of 40,467,684.60 on the Design and
Construction, we manifest and submit the following comment, to wit:

1. The Time Extensions were duly approved by the Municipal Mayor, although the same
were not included in the submitted documents. The said documents were not turned-over by
Engr. Cayetano to Engr. Yamson when the latter assumed as OIC-MEO of the Municipality.

2. Date of expiration of the Project Public Market/Terminal was on November 24, 2014.
(Please see attached Inspection Report)
 3. As indicated in the statement of the Time Elapsed of the 1st billing up to the 4th billing,
it was Engr. Teodoro V. Cayetano, Jr. who signed all the Issuance of said S.O/STE. Engr.
Joselito A. Yamson only signed the S.O.s the 5 th billing with the presumption that previous
SOs/STEs were all submitted to the Auditors Office.

E. EXTENSION OF CONTRACT TIME

E.1. LIQUIDATED DAMAGES

E.1.a Per TAS Inspection Report the computation of L.D. appears to be erroneous. All the
issued suspension orders and extensions orders were not considered, thus the TAS
alleged that the remaining work percentage is 71.75% counting from September 12,
2014.

The Management humbly submits that the STE and Accomplishment (1 st billing) as of
June 11, 2013 the percentage of actual Accomplishment was at 42.50% which showed
approximately 3 months prior to the expiry date. (see attached STE).

In addition, by the time Engr. Cayetano has reported to his work assignment at the
Provincial Engineering Office for about 6 months, he never turned over any records
regarding aforesaid project to Engr. Joselito A. Yamson.

E.1.b. All the Suspension Orders/Extension Orders issued by Engr. Teodoro V. Cayetano, Jr.
were all with valid and justifiable reasons, hence, the 15% slippage cited in the AOM is
without basis.

Be that as it may, assuming without admitting, that there are deficiencies in the implementation
of the aforementioned project, the management shall compel the contractor to comply with all the
necessary measures ensuring the project implementation in accordance to the approved Plans and
Specifications. As such, the deficiency of 11,135,752.05 and the Liquidated Damages of
40,467,684.60 should be given reconsideration by the Audit Team.

Considering the foregoing, the Management of the Municipality of Roxas humbly prays
that its Comment/Justification on the audit observation made by the Audit Team per AOM No.
2015-11(2015) be given positive consideration.

Thank very much.

MARIA ANGELA V. SABANDO

Municipal Mayor

Proof of Receipt of Management Comment:

By:_______________________________
Date:_____________________________