The dispute came to light after Cebu Provincial Board (PB) Member Glenn Anthony Soco (Cebu, Sixth) in a resolution on Monday, Jan. 9, 2023, slammed the “absurdly low” rate of P24.59 per cubic meter of water that the Capitol’s joint venture firm CMWD is charging MCWD for 20 years.
Soco said with the low rate, CMWD won’t be able to remit the contracted 19.29 percent rate of return to the Cebu Provincial Government, which would violate the terms of their joint investment agreement.
MCWD customers, particularly homeowners in Compostela, Liloan, Consolacion, Lapu-Lapu City and some parts of Mandaue City could feel the impact if CMWD stops providing water to MCWD, said Minerva Gerodias, MCWD spokesperson.
“Our officials in the production department and our general manager have met to discuss what we can do to help cushion the impact should CMWD stop producing water to MCWD. One option we are possibly taking is to talk to our other bulk water suppliers like in Lusaran and convince them to increase their daily production,” Gerodias told SunStar Cebu Tuesday, Jan. 10.
Another option that MCWD can take, Gerodias said, is to buy more water from desalinated bulk water suppliers in Mandaue City and Lapu-Lapu City. In December last year, MCWD had signed P21 billion worth of deals with two desalinated bulk water suppliers.
Gerodias said the two desalinated bulk water suppliers have initially started delivering desalinated water this year.
Gerodias said another option is to deliver water and inject it to areas that will be affected if CMWD stops its operations.
She, however, admitted that the water produced by their bulk water suppliers is not yet enough to replace the 35 million liters a day that CMWD supplies to MCWD.
Remedy
On Monday, PB members, in a resolution, granted authority to Gov. Gwendolyn Garcia to take all necessary steps to protect the Province’s interest in relation to the 2012 joint venture agreement (JVA) entered into by the Province and the Manila Water Consortium Inc. which created their joint venture investment firm CMWD.
The resolution aims to allow Garcia to correct or remedy any violations committed on the JVA that may place the Provincial Government at a disadvantage.
In his resolution, Soco questioned the bulk water supply contract between CMWD and MCWD, saying the price was too low and there was no escalation clause.
According to their deal, CMWD would supply MCWD with 35 million liters of water a day for 20 years starting 2015 with no escalation of its contract price.
Soco also questioned the P24.59 per cubic meter rate that CMWD is charging MCWD when the water distributor is paying bulk water supply firm JE Hydro and Bio-Energy Corp. P65 per cubic meter for water from Barangay Lusaran in Cebu City.
The P1.2 billion Lusaran Bulk Water Project that can deliver 20 million liters of water daily to MCWD was formally inaugurated in December 2022.
But Gerodias said the P24.59 rate CMWD charges MCWD came up when the two were still negotiating back in 2012.
Gerodias said at that time, MCWD had wanted to pay CMWD around P14 per cubic meter based on the former’s production cost at that time.
MCWD, however, decided to go with CMWD’s proposal of P24.59 as their contract stated that the price would not escalate for the contract’s duration, Gerodias said.
Agreed to hike
Last Sept. 30, CMWD, during a meeting with Capitol officials, proposed to increase the contract price from P24.59 to P80 per cubic meter.
In a letter dated Nov. 22, 2022, MCWD, through its general manager Edgar Donoso and lawyer Jose Daluz III, chairman of the board of directors, manifested their agreement to CMWD’s proposal to adjust their current contract price effective Jan. 1, 2023, but only if the National Economic and Development Authority (Neda) agreed to the price adjustment.
Gerodias said while it was true that MCWD manifested its agreement to CMWD’s proposal for a price adjustment, it can only do so if Neda is given the requirements for the price adjustment and agrees to it.
Under Republic Act 9184 or the Government Procurement Reform Act, all prices for the given scope of work in a contract as awarded, are considered fixed prices and therefore, not subject to price adjustment and escalation during the contract implementation, except upon prior approval of the Government Procurement Policy Board (GPPB), or when a Treaty or International or Executive Agreement expressly allows it, the Neda said in a 2019 advisory on contract price escalation requests to the agency.
The GPPB is an inter-agency body established under RA 9184 to ensure the proper implementation by procuring entities of the law, and other rules and regulations on public procurement.
Straight to Capitol
Aside from that, MCWD also offered to continue CMWD’s contractual commitment to remit a 19.29 percent Project Internal Rate of Return (PIRR) to the Provincial Government.
Based on the 20-year contract signed between CMWD and MCWD, the Province of Cebu was expected to earn around P553.4 million in revenues.
Gerodias said that during their communication with CMWD, they found out that the latter had already paid around P149 million to the Province which they had started remitting in 2015.
Gerodias said MCWD offered to pay the remaining P404.4 million PIRR to the Province starting January 2023 through monthly installments of P2.8 million per month.
But the Province did not accept MCWD’s offer and opted to ask CMWD to increase its contract price instead.