Court to Cebu City: Pay contractor P6 million

THE Court of Appeals (CA) has ordered the Cebu City Government to pay P6 million to Young Builders Corp., the contractor of the aborted reconstruction of the Carbon Market Unit II.

The amount represents the City’s unpaid balance to the contractor for the work it accomplished for the project in 2001 yet.

But while it ordered the City to pay P6 million, the appellate court denied the contractors demand for the P50.6-million payment for the variation it had worked on.

The contractor had built the foundation based on a revised plan without securing a variation order.

Instead of the original 2,910-linear meter pile works, Young Builders made a 13,000-linear meter pile work for the building’s foundation.

In its 27-page decision dated February 19, the CA upheld the February 2009 ruling of the Construction Industry Arbitration Commission (CIAC).

Like CIAC, the appellate court said the City’s explanation that it could not pay the balance because there were no available funds failed to persuade them.

Funds were not available supposedly because the City did not avail itself of a credit line with the Development Bank of the Philippines (DBP).

The CA said that when the project started, the City Accounting Office, which was then headed by Edna Jaca, had certified the availability of funds amounting to P154.3 million.

“The certificate of availability of funds expressly represented and certified that according to records, funds are available for the purpose (project)…This certificate is sufficient proof that funds for the project is available,” the CA said.

Also, the appellate court said the certificate of availability of funds issued by the City did not forewarn the contractor that the money needed for the implementation of the project would be sourced from a standby credit line.

Moreover, the City had not shown any record that they were prevented by any “circumstances beyond their control” from drawing a credit line with the DBP.

“The City cannot invoke its own voluntary failure to draw down on the standby credit line as a valid excuse for not paying what is clearly a legitimate contractual obligation to the contractor,” the CA said.

“Indeed, it would be unfair to refuse payment to the contractor for the works covered in the contract for the reconstruction of the Unit II,” they added.

The initial works that Young Builders has accomplished for the reconstruction of the Unit II amount to P30.8 million, which includes piling works (P22.7 million), civil structural works (P4.9 million) and general requirements (P3.1 million).

The City has paid P24.5 million to the contractor in 2003, before the City issued an order of work stoppage because the project started without a building permit as required by the National Building Code. It also did not have a locational clearance and did not comply with zoning requirements.

When sought for comment on the decision, Mayor Michael Rama said this only shows that there are cases that were not properly handled by the previous administration.

“I don’t know who will pay for it. We should have the City Legal Office look into that first,” he said.

For his part, City Administrator Jose Marie Poblete said any demand for payment will have to go through the Commission on Audit (COA).

As for the P50.6-million variation work done by Young Builders, the CA said they found no grounds for the City to settle it.

CA said the variation on the project plan does not have the approval or consent of the approving authority, which is the mayor.

Aside from this, the CA said the variation works is not covered by the original contract.

“Truly, no prudent businessman would pursue a transaction or proceed with an undertaking knowing pretty well that the additional works are not covered in the contract and have not yet been approved by competent authority,” the CA decision read.

“This court is constrained to deny the contractor’s claim for payment for the variation order,” CA added.

As of Thursday, the City has yet to receive their copy of the CA decision.

Last year, Rama pursued the renovation of Unit II and issued two work resumption orders on June 18, 2012 and on September 17, 2012.

But because Young Builders did not start working on the project, the mayor terminated the contract last February 18, citing “abandonment and undue delay in the prosecution of contract work.” (PDF of Sun.Star Cebu)