Press Release
February 1, 2016

Partial Committee Report on
Proposed Senate Resolution Nos. 826 and 1114
February 1, 2016

Mr. President, on behalf of your Committee on Accountability of Public Officers and Investigations (Blue Ribbon) Subcommittee on Proposed Senate Resolution Nos. 826 and 1114, I have the honor to report to this august chamber for its consideration, Committee Report No.288 dated November 5, 2015 on Proposed Senate Resolution Nos. 826 and 1114.

Proposed Senate Resolution No. 826 (PSR No. 826) called for the investigation, in aid of legislation, of three subject matters:

(1) The Alleged P1.601 Billion Overpricing of the 11-Storey New Makati City Hall II Parking Building;

(2) The Reported Overpricing of the 22-Storey Makati City Hall Building at the Average Cost of P240,000.00 per Square Meter; and

(3) Related Anomalies Purportedly Committed by Former and Current Local Government Officials.

Proposed Senate Resolution No. 1114 (PSR No. 1114), on the other hand, calls for the investigation, in aid of legislation, of the alleged irregular transactions entered into by the Home Development Mutual Fund (HDMF)/Pag-IBIG Fund and the Boy Scouts of the Philippines (BSP), and other related anomalies.

PSR No. 826 was referred to the Senate Blue Ribbon Committee on August 11, 2014. Thereafter, this Subcommittee was created to conduct an inquiry, in aid of legislation, on PSR No. 826.

Jurisdictional Challenges against PSR No. 826 were filed by Mayor Jejomar Erwin S. Binay, Jr., Ms. Ebeng Baloloy, Atty. Pio Kenneth I. Dasal, Ms. Marjorie de Veyra, and Prof. Tomas B. Lopez with this Subcommittee on various dates. These Jurisdictional Challenges were all denied by the Subcommittee for lack of merit, ruling that this Subcommittee has jurisdiction to investigate and conduct hearings on PSR No. 826.

This Partial Committee Report discusses the allegations of overpricing in the construction of the Makati City Hall II Parking Building. In resolving the issue of whether the Makati City Hall II Parking Building, constructed at the cost of P2.28 Billion, is overpriced, the Subcommittee employed various tests and standards.

The Subcommittee employed The Valuation Approach, The Benchmarking Against Industry Standard Approach, The Comparison Approach, The Bill Of Quantities Approach, and The Opinion Of Experts Approach.

The Valuation Approach

The Valuation Approach took into consideration the total construction cost of the completed infrastructure project and compared this to its current market value.

Using the Valuation Approach, the Makati City City Hall II Parking Building's actual cost is P2.28 Billion as compared to its current market value of P891 Million. Thus, the overprice is P1.389 Billion.

The Benchmarking Against Industry Standard Approach

The Benchmarking Against Industry Standard Approach looked into the construction cost per square meter of a comparable building in the industry. The Makati City Hall II Parking Building is considered an "average standard office building." In 2012, the average construction cost per square meter of an average standard high-rise office building is only P35,260.00 according to the 2012 Davis Langdon and Seah Construction Costs Handbook.

Using the Benchmarking Against Industry Standard Approach, Makati City residents paid P69,549.52 per square meter for a building which should have cost only around P35,260.00 per square meter to construct or an overprice of P34,289.52 per square meter, and if we multiply this amount with the contractor's declared Construction Floor Area of 32,783.69 square meters, then we get the total overprice amount of P1.124 Billion.

The Comparison Approach

We compared the Makati City Hall II Parking Building with other buildings of either comparable or better design and technical specifications, and by doing so, we clearly saw the overprice.

We cited the Zuellig Building, a premium-grade office tower in Makati City, as an example. The Zuellig Building has 33 above-ground floors, with 5 basement floors. It provides approximately 65,000 square meters of Class-A office space, and approximately 2,000 square meters of retail area. It is notable for its environmentally conscious design, distinctive façade, and superior finishes. With all the foregoing high-end features, Zuellig Building's construction cost per square meter is only P42,712.00, a cost lower compared to the Makati City Hall II Parking Building's P69,549.52 per square meter.

The Bill of Quantities Approach

The bill of quantities (or bill of materials) of the Makati City Hall II Parking Building, when presented in tabular form and compared by phases, likewise reveals an alarming pattern of overpricing.

One observation is that the toilet finishes and plumbing fixtures increased dramatically per phase, especially in Phases IV and V. The total amount of P1.716 Million was spent on the toilets found on the ground floor alone. Toilets on other floors amounted to P5.674 Million in Phase IV. In Phase V, another P823,953.00 was spent on toilets when the building was already "habitable and ready for occupancy".

Also noticed were the following costs in the bill of materials:

  • The building signage cost is P974,000.00 or P40,000.00 per letter and the total signage cost is P4.20 Million;

  • The total elevator cost is P12.35 Million;

  • The total air-conditioning system cost is P21.8 Million;

  • The total cost of the interior garden at the 7th floor is P2.98 Million, with landscaping and finishes at the roof deck amounting to P14.48 Million;

  • The two generators amounted to P36.35 Million; and

  • The labor cost for the Meralco application is P21.99 Million.

The Opinion Of Experts Approach

Expert resource persons invited by the Blue Ribbon Subcommittee likewise found the total construction cost of the Makati City Hall II Building to be too high and excessive given the building's design and specifications:

(1) Architect Arnel Colcol of the Philippine Institute of Architects affirmed that the Makati City Hall II Parking Building is too expensive;

(2) Mr. Federico C. Cuervo, President and CEO of CV&A, in his Report dated November 27, 2014, stated that as of the 4th quarter of 2013, the market value of the building is P891 Million with first grade materials; and

(3) Architect Carlo Mateo of MANA ARCHITECTURE & INTERIOR DESIGN CO., the firm that prepared the architectural and other plans of the Makati City Hall II Parking Building, averred that the building is not worth P70,000.00 per square meters. Based on his company's design, the estimated cost of the building is from P45,000 to P55,000 per square meter.

Findings of the Subcommittee

Hence, after careful scrutiny of the evidence on hand, the Subcommittee concluded that the Makati City Hall II Parking Building is clearly overpriced and the amount of the overprice is from a low of P1,124,137,306.70 to a high of P1,389,069,379.14.

The Blue Ribbon Subcommittee likewise found the following:

1. Based on the Commission on Audit's (COA) Initial Evaluation Report dated October 1, 2014, the Project was implemented with undue haste as there was no Annual Procurement Plan yet by the Makati Local Government Unit including construction plans when it was bid out and awarded to Hilmarc's Construction Corporation;

2. There was no valid Approved Budget for the Contract for Phase III when Makati City started the procurement process;

3. Per COA Inspection Report dated July 7, 2011 for Phase III, the Parking Building was already habitable and ready for use yet the Makati City Government still spent an additional P793 Million for it in Phases IV and V;

4. There were unnecessary expenditures for mobilization and demobilization, excessive expenses in structural work, excessive structural design, no over-all plan and no idea as to total cost;

5. There were several violations of the National Building Code;

6. There were also allegations of bid rigging, pay-offs to the members of the BAC (Bids and Awards Committee), and a 3-Bag Kickback System in place in the City of Makati; and

7. There also arose the issue as to the true owner or owners of the vast hacienda in Rosario, Batangas when it was alleged that the hacienda was the fruit of the system of project overpricing and kickbacks by the Makati City government. This system provided an illustration as to how monies from the coffers of Makati City bankrolled the improvements in the hacienda, alleged to be owned by the Binay family.

In this Report, the Subcommittee concluded that its investigation on the alleged overprice in the construction of Makati City Hall II Parking Building has revealed the commission of the crime of Plunder, committed through what it called a "grand conspiracy".

It is worthy to note that various government agencies have acted in accordance with the discoveries that we have made herein.

In January 2015, after being prompted by our investigations, the Boy Scouts of the Philippines (BSP) was finally paid its long overdue rent by Alphaland for the use of its share pursuant to the Joint Venture Agreement between the BSP and Alphaland, in the amount of P7,709,920 covering 2014 rentals.

The Bureau of Internal Revenue (BIR) has filed on January 22, 2015, a P73.34-million tax evasion complaint against Mr. Antonio Tiu, the person who claimed ownership of the Rosario, Batangas Property, referred to in the course of the hearings as "Hacienda Binay".

The Department of Agrarian Reform (DAR) has investigated possible violations of Republic Act No. 6657, otherwise known as the "Comprehensive Agrarian Reform Law" in the Rosario, Batangas Property. DAR Secretary Virgilio de los Reyes has committed to pursue the investigation of this property and to report to this Subcommittee the results of his investigation on the alleged premature conversion or illegal conversion of agricultural land into any non-agricultural use.

On May 7, 2015, the Anti-Money Laundering Council, pursuant to Section 10 of Republic Act No. 9160, otherwise known as the "Anti-Money Laundering Act of 2001", sought, through an Ex Parte Petition from the Court of Appeals (CA), an order freezing certain bank accounts of, investments made by, and insurance policies issued to Vice President Binay, Mayor Junjun Binay, Gerardo Limlingan, Eduviges Baloloy, Ernesto S. Mercado, Greenergy Holdings, Inc., Sunchamp Real Estate Development Corporation, Earthright Holdings, Inc., Antonio L. Tiu, Millenium Food Chains Corporation, Elenita S. Binay, Lily Hernandez Crystal, Carmelita Palo Galvan, Francisco Balaguer Baloloy, Bernadette Cezar Portollano, Mitzi Ouano Sedillo, Marguerite Lichnock, Mellisa Gay Castañeda Limlingan, Victor S. Limlingan, Patricia Grace Limlingan Padua, Gerard Martin Castañeda Limlingan, James Lee Tiu, Pei Feng Lee, Ann Lorraine Buencamino Tiu, Frederick Dueñas Baloloy, Jennifer V. Baloloy, Mario Alejo Oreta, Jose Orillaza, Daniel C. Subido, Man Bun Chong, Erlinda S. Chong, April Joy Pascual Mercado, and OMNI Security Investigation and General Services. The CA (First Division) granted the Petition and issued a Freeze Order on all the accounts of the foregoing, as stated in the First Division's Order dated May 11, 2015.

Relevant to the pending case in the CA is a civil forfeiture case filed by the Anti-Money Laundering Council (AMLC) with the Manila Regional Trial Court - Branch 53 (RTC-Manila) against the following individual respondents: Vice President Jejomar C. Binay, Mayor Junjun Binay, Ernesto S. Mercado, Antonio L. Tiu, James L. Tiu, Ann Lorraine B. Tiu, Mario A. Oreta, Maria Luz A. Oreta, Maureen Ann O. Ferrer, Tomas B. Lopez, Jr., Daniel C. Subido, Margarita Anne Aurea T. Subido, Man Bun Chong, Erlinda S. Chong, Pei Feng Lee, Kenneth Sabino S. Tan, Clara Mae U. Ong, Makati Historical and Restoration Foundation, Inc., Meriras Realty and Development Corporation, Metrowaste Solid Waste Management Corporation, Twin Leaf Group, Inc., Cups and Mugs Kitchenette, Sunchamp Realty Estate Development Corporation, Subido Pagente Certeza Mendoza & Binay Law Offices, and Greenergy Holdings, Inc. The RTC-Manila issued on November 13, 2015 a 20-day Provisional Asset Preservation Order after finding probable cause that subject bank accounts, insurance policies, securities, investments, and real properties in the name of respondents are related to unlawful activities or money laundering offenses. On December 15, 2015, the RTC-Manila issued an Asset Preservation Order commanding respondent banking/financial institutions, concerned private and government entities, and all individuals acting on their behalf, to refrain from transacting, removing, converting, concealing, or through any other mode of disposing each covered bank account, insurance policies, securities, investments, and real properties of the aforementioned individual respondents.

The Philippine Stock Exchange (PSE), on May 13, 2015, imposed a suspension on the trading of shares of Greenergy Holdings, Inc. as a result of the May 11, 2015 Freeze Order. It must be noted that this Subcommittee was given the assurance by the PSE that all publicly listed companies that are under the PSE's jurisdiction shall be constantly monitored to ensure that the information and data that aregiven to the investing public are accurate, fair, objective, and complete.

On October 12, 2015, the Office of the Ombudsman has found probable cause to file graft charges against Vice President Binay, Mayor Binay, and 22 others for Malversation, Falsification, violations of Section 3(e) of the Anti-Graft and Corrupt Practices Act, and violation of the Government Procurement Reform Act, in connection with several alleged irregularities in the procurement and award of the contracts for the design/architectural services and the construction of the Makati City Hall II Parking Building. Earlier, on October 9, 2015, Ombudsman Conchita Carpio-Morales ordered the dismissal of suspended Makati Mayor Jejomar Erwin "Junjun" Binay, Jr. and recommended that he [Binay, Jr.] be perpetually disqualified from holding any public office.

In the course of our proceedings, we have likewise requested the Government Procurement Policy Board (GPPB), through its Executive Director, Atty. Dennis S. Santiago, for recommendations to improve transparency and accountability in government procurement procedures. To date, however, we have yet to receive any recommendation from the GPPB.

The Commission on Audit (COA) was also tapped to provide this Subcommittee with "ideas or concrete proposals, in aid of legislation, arising from this investigation or past investigations concerning infrastructure works of the government".

The Securities and Exchange Commission (SEC), through Chairperson Teresita J. Herbosa, was also requested to submit a final report to this Subcommittee on the transactions of the involved corporations that were mentioned in the course of our proceedings.

In view of the various inter-governmental agenies' findings that were un-covered during the 25 hearings of the Subcommittee, the following legislative recommendations have been adopted:

1. For the Senate to review the grant to Subcommittees of the Blue Ribbon Committee the power to cite and punish for contempt;

2. The enactment of a law providing for a presumption of overpricing in a government infrastructure project;

3. The enactment of a law requiring the use of "acceptable industry standards" approved by the COA and the DPWH, similar to the Langdon and Seah (formerly, Davis Langdon and Seah) Construction Cost Handbook, as the basis for agency estimates and as standard reference material for all government infrastructure projects;

4. The enactment of a law enhancing the transparency of government procurement processes by the mandatory video recording of all government procurement procedures and/or activities;

5. The enactment of a law that would require the inspection by COA of government construction or infrastructure projects to be undertaken together with an independent special inspection company (Independent Third Party);

6. Enactment of a law which would require the periodic rotation of the chairperson and members of the Bids and Awards Committee of local government units (LGU) in order to prevent the same evil of too much familiarization and camaraderie with those transacting with the LGU;

7. Enactment of a law which will allow "the opposition and dissenters" access to official records as a matter of right, like the Freedom of Information (FOI) law;

8. "One Project, One Ordinance", that is, the enactment of a law requiring local government units to pass one specific ordinance authorizing and governing the construction of each big-ticket infrastructure project, complete with costs estimates and planned sources of budget allocation, as well as descriptions, plans, and drawings which give an idea as to the final look and outcome of the project;

9. Enactment of an "Anti-Dummy of Public Officials Law" and make acting as a dummy of a public official, for corrupt purposes, a specific crime with stiff penalties;

10. Amend Republic Act No. 6770, otherwise known as the "Ombudsman Act of 1989" to strengthen the Ombudsman's powers in cases of forfeiture of unlawfully acquired properties of public officials or employees; and

11. Amend Republic Act No. 6541, as amended by Presidential Decree No. 1096, otherwise known as the "National Building Code," to impose stiff penalties of imprisonment and fine for any violation of this law.

Hence, I urge the consideration of this partial report.

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