For the last three consecutive years at least, the Commission on Audit (COA) has consistently urged the Puerto Princesa City Government to recover tens of millions of pesos in advance payments paid to erring contractors whose projects had been terminated due to various violations or non-performance. The latest 2024 audit released last week by COA shows that the city government has largely ignored its recommendations.
COA reports from 2022 through 2024 alone showed a total of ₱81.9 million in unrecouped advance payments. The audit body noted that the city government has not applied any of the legal remedies available under the existing government procurement law, including the blacklisting of those erring contractors.
As of the latest 2024 audit report released in December 2025, the city’s Advances to Contractors account stood at ₱208.1 million. COA noted on its “status of recommendations” that the recovery of these funds remains “not implemented”.
The outstanding advances identified in the audit reports included ₱75.6 million from rescinded or terminated contracts, ₱6.2 million from dormant projects outstanding for over 10 years, and ₱84,504.78 from completed projects.
The COA reports identified specific contractors that have outstanding financial obligations to the city government. Among them were GSMAXX Construction, with ₱29.5 million in unrecouped advances from terminated projects including the Baywalk Public Market (₱5.9 million), Sanitary Landfill Phase II (₱7.9 million) and the San Jose Public Market (₱15.7 million);Asset Builders Corporation, with ₱24.1 million from the Coastal Development Project terminated 2019; Square Meter Trading and Construction Corp, with ₱22 million from the Baywalk Public Market terminated in 2020; and KUDZ Trading, which remains to have a balance of ₱250,000 from an agreed installment plan.
The COA pointed out that under RA 9184 and standard government contracting practices, the city could have at least forfeited the performance bonds and standby letters of credit or deducted the balances from retention fees paid by contractors but these were not applied.
The reports noted that despite terminating contracts worth over ₱690 million due to contractor default, the city had not blacklisted the erring contractors to bar them from future biddings. COA even pointed out that failure to blacklist erring contractors is a violation of procurement law.
While the City Accounting Office apparently issued demand letters in 2023 after COA auditors flagged these issues, no follow up legal remedies were resorted to by the city government.
There are quantifiable public costs from these unrecovered funds in terms of foregone public services, and opportunity costs from uncompleted infrastructures. It also sends a signal to contractors that in this jurisdiction, accountability is lax.
Several questions emerge from these audit findings: Why weren’t performance securities forfeited immediately upon termination? This is standard practice and largely automatic under procurement law. How did contractors with existing unrecouped balances continue to receive new contracts? This appears to be true in the case of GSMAXX which was awarded multiple projects despite outstanding liabilities. Are there connections between the contractors and city officials that might explain the lack of enforcement? This pattern certainly warrants an investigation. What happened to the performance bonds and bid securities that should have been posted? Were they deficient? Were they released improperly?
COA’s recommendations remain on the books, and the city government remains obligated to implement them. Under the Local Government Code, the Sangguniang Panglunsod has oversight on the city finances. The City Council should demand answers from the executive department.
(This editorial was based on Commission on Audit Annual Audit Reports for the City Government of Puerto Princesa covering fiscal years 2022, 2023, and 2024, as well as provisions of Republic Act No. 9184 Government Procurement Reform Act and its implementing rules and regulations.)
