COA: ‘Wrong’ contractor chosen

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The Power Sector Assets Liabilities Management (PSALM) awarded a contract for the oil spill cleanup in a Visayas town to a firm that did not have the capability of accomplishing the required work, state auditors said.

Super typhoon Yolanda, which hit Central Visayas in November 2013, damaged PSALM’s Power Barge 103 and swept it aground causing oil to spill on the shoreline of Barangay Botongan at the Estancia Pier and seven other barangays, namely; Zone 1 of Estancia, Sulong, Banban, Alinsulong, Embarcadero, Tanao and Binon-An of Batad.

“Service Contract for the environmental clean-up and salvaging operation for Power Barge 103 damaged by typhoon Yolanda amounting to P87.213 million was awarded to Kuan Yu Global Technologies Inc. (KYGTI) even if the latter was not technically, legally and financially capable, contrary to Section 53.2 of the Revised IRR [implementing rules and regulations]of RA [Republic Act] 9184,” the Commission on Audit (COA) said in a 2014 audit report on PSALM. RA 9184 is the Government Procurement Law.

The COA also said that KYGTI failed to disclose, during the bidding that the implementation of the deal would be under a sub-contracting arrangement with C.V. Gaspar and Lighterage Corporation (CVGLSC).


The firm also failed to submit to PSALM the required timeline of activities.

“Further, payments to KYGTI amounting to P8.721 million was not supported by a duly approved Variation Order contrary to Section 3 of Annex “E” of the IRR of RA 9184,” it said.

State auditors also said the KYGTI was recommended as the bidder with the lowest calculated bid by the PSALM President and CEO.

However, when the service contract and all supporting documents were reviewed, the state auditors noted several deficiencies.

“Based on the documents submitted, KYGTI was not technically capable due to lack of experience. The experience being claimed was not related to the Company but to its President only. Besides, the experience being presented by the President were for CYs [calendar years]2005 and 2006 or more than seven years ago, hence, is already very difficult to validate,” auditors said.

Because of the COA findings, the state auditors have disallowed the payments made to KYGTI totaling P87 million under Notice of Disallowance (ND) No. 2015-001 (13)(14) dated January 8, 2015.

The state auditors also told PSALM to “[s]trictly adhere to the provisions of the IRR of RA 9184 in the conduct of bidding for the procurement of services” and to “[r]equire all persons determined to be liable under ND No. 2015-001 (13) (14) to settle the audit disallowance.”

A notice of disallowance informs those concerned of their participation in the transactions disapproved in audit and that they have to refund the amount indicated in the said notice.

“During the exit conference, Management (was) informed that they will not submit comments on the herein audit observations as they will file their appeal from the disallowance issued by the Supervising Auditor/Audit Team Leader,” COA said.

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2 Comments

  1. nagmamagaling kasi psalm. hindi lang yan, mey kaso pa yang psalm tungkol sa procurement kaya yung dating presidente nyan na terminate.