Ghost projects — under warranty?

DPWH Secretary Vince Dizon’s recent press conference on the current controversies surrounding flood control projects was hard-hitting. He declared that contractors behind ghost projects and substandard works will be automatically and permanently blacklisted. But beyond the fiery headlines, he posed a crucial next step: How do we return the people’s money?

In his remarks, Secretary Dizon emphasized that government projects are “warranted for five years.” We must, however, clarify this statement. Under Republic Act 9184 (the Government Procurement Reform Act) and its IRR, contractors are indeed required to post a warranty security equivalent to at least 10 percent of the contract price.

As clarified by the Government Procurement Policy Board (GPPB), in an Opinion dated 8 October 204 (NPM No. 33-2014), warranty security (or bond) lasts for only one year from final acceptance. It replaces the performance bond and is returned to the contractor after that period, regardless of whether the structure is temporary or permanent. The warranty period, on the other hand, can last for two, five, 15 years, depending on the structure.

To clarify, warranty security or bond refers to the guarantee that the Government physically holds, and which it can call upon in case of defects within the first year. The warranty period, on the other hand, extends beyond that one year security.

Contractors remain liable for structural defects or failures for two years in the case of ordinary structures, five years for semi-permanent ones, and 15 years for permanent structures. But once the bond is released, the Government no longer has a ready financial instrument to tap. Instead, it must pursue recovery through civil or even criminal cases if defects are discovered later.

This subtle but important distinction should not be lost. If the DPWH continues to conflate the warranty period with the warranty security or bond, it risks creating false expectations among the public.

People may believe the government can simply “call the bond” at any time within five years, when in fact, after the first year, the bond is gone and only the contractor’s legal liability remains.

The way forward requires substantive reform, which should be addressed by the inquiries in aid of legislation before both the Senate and House. Further, there should be a standardization of all contracts between the DPWH and the Contractors, in light of the revelations in the inquiries.

It is somehow discomforting to know that we have yet to unravel the entire picture in this grotesque web of corruption, which shall continue in the next weeks or months. Secretary Dizon is right to demand accountability right now, and to ask how the people’s money can be returned.

But for that question to be answered convincingly, strong political will must be matched by legal precision. Only then can Filipinos be assured that ghost projects and substandard works will not only be punished, but that the public coffers will also be made whole.