City’s housing project flagged

CEBU, Philippines — Cebu City's flagship socialized housing project has been flagged by the Commission on Audit (COA) for massive delays, possible overpricing, questionable disbursements, and weak contract management after more than P108 million in public funds had already been spent on an unfinished building.

In its 2025 Annual Audit Report, COA found that the five-story medium-rise tenement in Barangay Lorega San Miguel, intended to provide housing for 170 urban poor families along with spaces for healthcare, skills training, and daycare services, remains unfinished more than four years beyond its original completion date.

A total of P108,456,721.94 has already been disbursed for the project.

"The project remained uncompleted despite the lapse of more than four years from its original target completion date… thereby delaying the delivery of the project’s intended benefits to its target beneficiaries and resulting in the inefficient utilization of public funds," COA said.

The project was awarded in October 2020 through negotiated procurement after two failed biddings. It carried a contract price of P227.5 million with a construction period of 300 calendar days.

The Notice to Proceed was issued on October 27, 2020, setting the original completion date on August 30, 2021.

However, three Work Suspension Orders—citing the absence of approved plans, locational clearance, and building permits—extended the completion deadline by 397 days to September 30, 2022.

Despite the extensions, the structure remained incomplete as of December 31, 2025.

COA said the city released P34,125,000 as a 15-percent mobilization fee on December 3, 2020; another P34,275,916.29 on April 25, 2022 for 20.09-percent work accomplishment; and P40,055,805.65 on October 19, 2022 for 43.70-percent accomplishment.

The three payments totaled P108,456,721.94 even though the building was never completed.

Permit violations

The audit also uncovered several irregularities in the implementation of the project.

According to COA, construction began in January 2021 without the required locational clearance and building permit, in violation of the National Building Code.

The locational clearance was secured only on July 27, 2021, while the building permit was issued on March 10, 2022—months after construction had already commenced.

COA likewise questioned the authenticity of the Work Suspension Orders, noting that although they were prepared on different dates, all three were received by the contractor only on October 13, 2021.

A technical review conducted in February 2026 also found that the contract price exceeded COA's cost evaluation by P42,844,318.03, or 23.20 percent.

"The contract price exceeded the COA Cost Evaluation… thereby considered unfavorable," the state auditors noted.

COA attributed the excessive cost to overstated quantities of reinforcing steel for footings, beams, slabs, and tanks; overstated concrete works; inflated formworks; excessive masonry fast wall panels and finishing works; and overstated waterproofing quantities.

The audit also found that the project used higher indirect cost factors—20 percent for overhead and profit plus 12 percent value-added tax—contrary to Department of Public Works and Highways standards, which prescribe 10 percent overhead, 8 percent profit, and 5 percent VAT.

Contract termination

COA further cited deficiencies in the city's handling of the contract despite the contractor incurring a negative slippage of 52 percent.

"It cannot be established that the project was formally terminated, as no Notice of Decision was issued and served upon the contractor to that effect," COA emphasized.

The audit said that had the contract been properly terminated, the city could have pursued negotiated procurement through a take-over contract to complete the project.

During the audit exit conference, the Department of Engineering and Public Works admitted that the contract had already been terminated but said it only had an electronic copy of the notice.

City officials also informed COA that they were assessing the structural integrity of the unfinished building and preparing a program of work for its completion.

However, COA maintained that inadequate monitoring and the city's failure to prioritize the project resulted in prolonged delays, inefficient use of public funds, and the possible audit disallowance of the P108,456,721.94 already released.

COA recommended that the city create a Contract Termination Review Committee, assess the structural condition of the unfinished building, and consider implementing a take-over contract to finally complete the project.

The commission also urged the city to strictly comply with DPWH cost standards, secure all required permits before construction begins, and hold responsible officials accountable for unjustified delays.

"Expenditures that are unreasonable, immoderate, or beyond reasonable limits are considered excessive," state auditors said. (CEBU NEWS)