THE San Fernando Water District (SFWD) in Pampanga has been placed at a disadvantage in its joint venture agreement with Primewater due to the latter’s failure to fulfill its commitment for a P743.8 million capital expenditure in the first five years.
State auditors disclosed in the 2022 audit report released last March 2 that actual capex as of year five of the JVA only amounted to P347.5 million or 46.72 percent of the target.
The SFWD JVA with Primewater Infrastructure Corp. took effect on December 16, 2016.
“Analysis of the Year 6 or CY 2022 CAPEX, using the estimated cost of accomplishment, also revealed that the accomplishments and spendings of Primewater were significantly less than the planned CAPEX for CY 2022 by 28.90 percent or P34,124,200,” the audit team said.
In response to the audit findings, the SFWD general manager and the Board of Directors agreed to demand penalties or forfeiture of Primewater’s performance bond “for unimplemented projects, commitments, and service obligations.”
Since the SFWD had fully turned over and gave Primewater all rights over its properties and facilities at the inception of the joint venture as part of its equity, the COA said the government agency is getting the short end of the deal since its partner has not fully complied with its obligation.
Auditors stressed that the SFWD that Primewater’s primary contribution has financial and technical components that the JV partner must meet.
The COA warned that Primewater’s continued failure to do so could amount to a basis for SFWD to break the JVA.
“Non-compliance of Primewater with its capital investment or contribution requirement may not only place the District at a disadvantage but may also be considered a breach of contract which can be a serious ground for the termination of the JVA,” the commission said.
In addition, the SFWD was reminded that it should take action to forfeit the 12 percent performance bond of Primewater as penalty for its non-performance of its obligation to put up a septage management system which was supposed to have been operational by November 2022.
“Based on the timetable for the implementation of the SMP, the septage treatment facility should have been completed in November 2022. However, as of audit date, the construction of the septage treatment facility reached only 56.2 percent,” the audit team said.
It pointed out that Section 4.7.3 of the JVA authorized the water district to impose a penalty equivalent to 12 percent of the performance bond within 60 days of written notice to Primewater about its deficiency.
