BENECO forfeits P37.9 million bond of contractor

BAGUIO CITY  – The Benguet Electric Cooperative (BENECO) ordered the forfeiture of the performance bond and bank guarantee posted by PHESCO, Inc. for the construction of the 3-megawatt Man-asoc minihydro project in Sebang, Buguias after the rescission of its contract with the cooperative due to serious delays in the programmed works for the project.

BENECO general manager Gerardo P. Verzosa pointed out the forfeited performance bond of the company is now being used by the management team to cover the mobilization collected by the ousted contractor and the initial works undertaken for the realization of the project beneficial in helping lower the power rates and maximize the potentials of the hydro plant for the benefit of the host communities.

“We will implement the hydro project by administration because we have the sufficient personnel and expertise to proceed with the project even if we have to pay certain charges that is an offshoot of the rescission of our contract with PHESCO from the bank where we obtained the loan for the put up of the hydro project,” Verzosa stressed.

PHESCO Inc. obtained the P37.9 million bank guarantee from the Banco de Oro as its performance bond for the Man-asoc minihydro project pursuant to the letter of acceptance and notice of award dated July 8, 2016 and letter dated June 27, 2017 issued by BENECO to execute the engineering, procurement, and construction of the 3-megawatt Man-asoc hydroelectric power generation facility in Sebang, Buguias, Benguet.

Earlier, BENECO required PHESCO to furnish the cooperative with a bank guarantee by a recognized bank for the desired amount as security for compliance with the contractor’s obligations pursuant to the contract for the project.

Last year the Board of Directors of the Benguet Electric Cooperative (BENECO) approved a resolution that confirmed and ratified the recent acts of management to terminate its engineering procurement construction (EPC) contract with PHESCO Incorporated for the 3-megawatt Man-asok minihydro power generation facility at Sebang, here.

BENECO Board Resolution 2017-100 stated that after the full deliberation of the issues presented by the management and PHESCO Inc., the board was constrained to confirm and ratify the acts of the general manager and the chairman of the project management committee in terminating the EPC contract dated August 1, 2017 due to alleged unjustified extreme delay in the implementation of the project by the contractors in violation of Section 152 of the contract; poor performance and extreme default in schedule at site as identified under clause 8.8b of the contract; persistent non-compliance with the requirements provided under Section 13 relative to variation and adjustments as contained in the contract and deliberate submission by PHESCO Inc. of unrealistic billing statement claiming 19.88 percent accomplishment which is more than 400 percent of the actual verified accomplishment of 4.06 percent.

BENECO management issued to PHESCO Inc. various letters regarding the contractor’s alleged extreme slow progress in their project at site; final nullification on extreme slow progress at site, notice of declaration to terminate the EPC contract and notice of declaration to terminate the contract, the latest of which was dated August 2, 2017.

The BENECO board decided to invite PHESCO management in a special board meeting to clarify matters relative to their letter dated July 24, 2017 addressed to the Board President clarifying certain issues and requesting for a meeting with the Board of Directors to discuss the extent of the authority given to the general manager and the project manager to issue the termination of the EPC contract as well as to discuss other pertinent issues concerning the project.

On August 10, 2017, in a special meeting of the BENECO Board, management and PHEXCO Inc. headed by Robert T. Yanson, Jr., vice president for operations, presented their respective issues and concerns wherein the contractor raised the problem that the project site was not properly and peacefully turned over to them and that there were serious problems among land owners which were supposed to have been addressed by the BENECO management.

Ricardo S. Pallogan, department manager of BENECO’s power generation department, said that BENECO management already took over the implementation of the project and that concerned departments are now preparing the comprehensive work and financial plan to be on track in the completion of the renewable energy project and prevent the rural electric cooperative from being imposed the penalties by the bank where they obtained the loan to be used for the put up of the hydro project.

The BENECO official disclosed that the comprehensive work and financial plan, including the schedule of completion, will be presented to the Board of Directors next week for ratification so that the management team that took over the put up of the facility could move on to the next chapter of the project.

By HENT

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