Philippine Aviation project cost shoots up

A JAPANESE-funded project to modernize the communication, navigation and surveillance system of the Civil Aviation Authority of the Philippines (CCAP) has incurred cost overruns because of foreign exchange fluctuations and change in scope, the National Economic and Development Authority (NEDA) said.

Documents from NEDA showed that the cost of the Communications, Navigation, and Surveillance/Air Traffic Management (CNS/ATM) System Project increased by P2.4 billion to P13.27 billion from an earlier approved cost of P10.87 billion.

Of the total P2.4 billion, the NEDA said 33.3 percent was because of the proposed changes in scope in the construction/procurement of various equipment; 37.1 percent, customs duties and taxes excluded in the previous Investment Coordinating Committee (ICC) review; 24 percent, contingency; and 5.6 percent, consulting services.

Given this, the Department of Transportation and Communication (DOTC) and CCAP have sought approval for an adjustment in the cost of the project.

DOTC and CCAP also asked for a 39-month extension of the loan validity period because of the lack of a government counterpart and the 15-month delay in finalizing the project scope and tender documents.

Because of the delays, the DOTC-CAAP is asking for a loan extension of up to May 21, 2013.

The project, which aims to achieve greatest operational flexibility, airspace capacity and system efficiency, was originally scheduled for implementation over a six-year period starting 2002, with loan effectivity from February 21, 2003 to February 21, 2010.

Endorsed by the International Civil Aviation Organization (ICAO) to all its member-countries, the project is aimed at upgrading the traditional communications, navigation and surveillance system to form the basis for air traffic management system in the 21st century.

The project has seven major components such as the construction of the air traffic management automation, communications, navigation, surveillance, meteorological system, consulting services and land acquisition.

The US Federal Aviation Administration has sanctioned the Philippines’ flag carrier after the American regulatory office downgraded Manila’s aviation security services to Category 2 for failure to fully comply with the international aviation safety standards. Because of this, Philippine Airlines failed to expand its operations in the US.

ICAO conducted its audit in October last year, giving the Philippines until mid-next year to correct some deficiencies found in the country’s air aviation safety standards.