City Hall blasts MCWD for continuing to work on disapproved projects

THE Metropolitan Cebu Water District (MCWD) has continued undertaking projects disapproved by the Office of the Government Corporate Counsel (OGCC), one of which is a desalination plant in Cordova town.

Such a move, according to Cebu City Legal Officer Jerone Castillo, is evidence of graft and corruption since there is already an opinion against the projects coming from the OGCC, which serves as the legal counsel of MCWD.

MCWD Chairman Jose Daluz III, however, questioned the OGCC’s opinion against MCWD, saying the OGCC was well aware of the projects from the start and raised no objections to them until now.

“Giingnan na gani ka sa imong lawyer na undanga kay disapproved in their entirety, imo gyud gipadayon and what kind of action is that? For somebody who is advised by their own lawyer to stop it and mo-proceed gyud ka sa (you still proceed with the) project,” said Castillo in a press conference on Friday, June 23, 2023.

In a Feb. 27, 2023 letter on MCWD’s request for an opinion and contract review of MCWD’s bulk water supply projects for Cordova, Marigondon and Canjulao on Mactan Island, Cebu through joint venture, the OGCC had disapproved the draft joint venture agreements (JVAs) for the three projects, calling the actions of the MCWD and its Joint Venture Selection Committee (JVSC) members relating to the projects detrimental to government and public service and a violation of Republic Act 3019 or the “Anti-Graft and Corrupt Practices Act.”

Government Corporate Counsel Rogelio V. Quevedo said the MCWD board’s approval of the conduct of proceedings pursuant to the 2013 Revised National Economic and Development Authority (Neda) Joint Venture Guidelines and awarding of the JVAs to the proponents, as well as the JVSC members’ recommending of the projects’ approval were “highly irregular and grossly inexcusable, tantamount to bad faith.”

He said this was because MCWD and the JVSC undertook proceedings for joint ventures under the 2013 Revised Neda JV Guidelines when these guidelines were not applicable to the projects.

Quevedo accused MCWD of “masquerading” the projects as joint venture agreements when he said the projects were just “pure and simple water supply/purchase agreements” which the MCWD should have entered through the more tedious and exacting process of public bidding.

Castillo said his June 15, 2023 investigation report regarding Daluz and two other members of the MCWD board of directors had been officially received by the Local Water Utilities Administration (LWUA) on June 21, and the City is now waiting for LWUA’s response or action on the urgent matter.

The investigation report recommends the removal and termination of Daluz and board members Miguelito Pato and Jodelyn May Seno from MCWD, all of whom are appointees of the late mayor Edgardo Labella.


Aside from the OGCC’s opinion on MCWD’s JVAs, the investigation report is based on the Sept. 21, 2022 petition for their removal filed by the MCWD Employees Union and its Executive Board before the Office of the Ombudsman Visayas.

The petition cited the deteriorating income of MCWD; the spiking of non-revenue water to 30 percent, which is higher than the 20 percent industry standard; inability of MCWD to meet the needs of its service areas; the board’s interference in appointment and personnel selection to favor unfit individuals; and its decision to press for a 70 percent water rate hike this year.

“We are hoping and praying because of the urgency of the situation that LWUA can act on this at the soonest time possible,” said Castillo.

In the MCWD board members’ May 23, 2023 joint reply to Castillo’s May 22 show cause letter threatening their termination, Daluz said MCWD’s corporate health and performance were negatively affected by the Covid-19 pandemic and Typhoon Odette (Rai), Presidential Decree 198 or the Provincial Water Utilities Act subjects the appointment of personnel in the supervisory level to the board of directors’ approval, and the water rate hike proposed for this year is not 70 percent but 60 percent, with the supplemental 10 percent hike set for 2024 yet.

He said the rate hike was necessary to fund water supply projects after years in which the rates were not adjusted despite rising inflation.

Castillo was unmoved, and in his June investigation report, accused the three of “gross incompetence” for their failure to secure an adequate supply of water, saying consumers need water, come calamity or not; he called the 70 percent rate hike “oppressive, arbitrary and shocking to the conscience.”

Talking with OGCC

On Friday, Daluz told SunStar Cebu that development is ongoing only for the desalination plant in Barangay Catarman, Cordova, Cebu established by Vivant Hydrocore Holdings Inc. (VHHI) and Watermatic Philippines.

The plant will initially supply 5,000 cubic meters of water per day and increase the volume until it reaches 20,000 cubic meters per day (CMD) at P73.86 per cubic meter cost to MCWD.

Daluz said the plant will be fully operational around December.

MCWD issued VHHI the Notice of Award (NOA) on Feb. 28, 2022, according to Quevedo.

The Canjulao project is projected to start in 2025 yet and the Marigondon project in 2026, said Daluz.

The Canjulao project with Pilipinas Water Resources Inc. is for 25,000 CMD at P73.86 per cubic meter. The NOA was issued on Nov. 28, 2022, Quevedo said.

The Marigondon project with the consortium of FDC Water Utilities Inc., FDC Utilities Inc., Hitachi Ltd. and Hitachi Aqua-Tech Engineering Ptd. Ltd. is for 30,000 CMD at P74.50 per cubic meter. The NOA was issued on Nov. 23, 2022, Quevedo said.

Last June 9, Pia Mae Barnido, MCWD JVSC member and acting assistant general manager for finance, said they had already issued the NOA to the project proponents but could not proceed to signing the JVAs without the favorable legal opinion of the OGCC, which is a requirement under the 2013 Neda guidelines for JVAs between government and private entities.


Daluz said MCWD had already talked to the OGCC which, he said, was willing to help the water utility in complying with the papers for the three desalination projects.

“Well, the OGCC was mistaken because Neda guidelines, as amended, say that we are now covered under them for the JV,” said Daluz, on the issue that the desalination projects are not covered under JVs and should be undertaken under Republic Act 9184 or the Government Procurement Reform Act.

Daluz also questioned the timing of the statement from the OGCC, saying that the OGCC was there during the discussions on the unsolicited proposals for the projects and they never raised the issues until MCWD submitted the documents and asked for their final opinion.

“In all stages of the proceedings, from the beginning until we sent them for their perusal and review, they were present. In fact, they signed all the proceedings. They asked for additional documents and the like… They were actively participating. So with other observers such as COA (Commission on Audit),” Daluz said.

No provisions

In his Feb. 27, 2023 letter to MCWD thumbing down the three JVAs, the OGCC’s Quevedo questioned why, if the projects were indeed joint ventures, there were no provisions in the JVAs on the (a) total cost of the joint ventures or a valuation of the intended contributions of each party, (b) profit or loss sharing by the supposed JV partners, (c) cost-recovery scheme and the timing of when such earnings shall be received, (d) procedure for additional capital infusion, (e) termination of the JV or buyout, and (f) establishment of a fund deposited in a special bank account under the dual control of MCWD and the JV partner.

Barnido said that since OGCC provided its opinion “in a wholesale manner, encompassing all three projects,” they submitted to the OGCC a letter-request last April to reevaluate the three JVA projects and specifically point out the issues for each project, since the OGCC did not specify “which specific aspects of the projects were considered irregular.”

This would guide them on how to rectify the JVA’s shortcomings, she told SunStar Cebu Friday.