Public Procurement of Goods and Services
Public procurement in the Philippines is governed by the Government Procurement Policy Board (GPPB). Republic Act No. 9184, otherwise as the Government Procurement Reform Act, was enacted by Congress to provide guidelines in the procurement of goods and services in government. The law declared a policy to promote the ideals of good governance in all its branches, departments, agencies, subdivisions, and instrumentalities, including government-owned and/or -controlled corporations and local government units. All procurement of the national government, its departments, bureaus, offices and agencies, including state universities and colleges, government -owned and/or-controlled corporations, government financial institutions and local government units LGU’s, shall, in all cases, be governed by the following principles:
Transparency in the procurement process and in the implementation of procurement contracts.
Competitiveness by extending equal opportunity to enable private contracting parties who are eligible and qualified to participate in public bidding.
Streamlined procurement process that will uniformly apply to all government procurement. The procurement process shall simple and made adaptable to advances in modern technology in order to ensure an effective and efficient method.
System of accountability where both the public officials directly or indirectly involved in the procurement process as well as in the implementation of procurement contracts and the private parties that deal with government are, when warranted by circumstances, investigated and held liable for their actions relative thereto.
Public monitoring of the procurement process and the implementation of awarded contracts with the end in view of guaranteeing that these contracts are awarded pursuant to the provisions of this Act and its implementing rules and regulations, and that all these contracts are performed strictly according to specifications.
Procurement Is A Conventional Government Function
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Government procurement is a customary government function. A research study by World Bank estimated government expenditures to account for 14 to 20 percent of a country’s Gross Domestic Product GDP. In the case of the Philippines, government spending is equivalent to 18.1 percent of GDP as of Dec. 2012 while public debt has hovered around 40 percent of GDP. Valuable efforts have been exerted by the Aquino III administration to narrow the budget gap that brought credit upgrades from some international agencies.
Huge amounts of money are at stake when the government procures goods like vehicles, military arms and uniforms, construction equipment, computer systems, medical equipment and supplies, medicines, office furniture and supplies, and textbooks among many others. Construction and Services would include roads, bridges, hospital and school buildings, solid waste hauling services, water supply services, electric power services and consultancy, etc.
In all cases of procurement, contractors of services and suppliers of goods must interact directly with “patronage” government officials who are mostly designated through the “Padrino” system. These political advocates are given the power of discretion that can give rise to the manipulation of the procurement process. When procurement decisions are no longer based on price, experience, and quality of goods and services and anchored on “patronage”, then corruption is prevalent.
BIDS AND AWARDS COMMITTEE (BAC)
Under Section 11 of Republic Act No. 9184, GPPB provided the guidelines for the organization of the Bids and Awards Committee (BAC):
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“Sec. 11. The BAC and its Composition.- Each procuring entity shall establish a single BAC for its procurement. The BAC shall have at least five (5) members, but not more than seven (7) members. It shall be chaired by at least a third ranking permanent official of the procuring entity other than its head, and its composition shall be specified in the IRR. Alternatively, as may be deemed fit by the head of the procuring entity (Mayor and Governor in the case of LGU’s) , there may be separate BACs where the number and complexity of the items to be procured shall so warrant. Similar BACs for decentralized and lower level offices may be formed when deemed necessary by the head of the procuring entity. The numbers of the BAC shall be designated by the Head of Procuring Entity. However, in no case shall the approving authority be a member of the BAC.”
Sec. 14 of GPPB likewise mandates the formation of the BAC Secretariat that will serve as the support unit of the BAC in the conduct of its functions.
In most LGU’s, in the organization of the BAC, the “Padrino” system is definitely in place. Department Heads and other ranking government officials who are identified with the current administration are selected to compose the committee. The structure of the BAC Secretariat likewise displays similar patronage routine where only trusted and loyal followers of the Head of the Procuring Entity compose the team.
Common Corruption Schemes in Public Procurement
Numerous researches concluded the real existence of massive corruption in public procurements in the Philippines, whether in the national, regional and local levels.
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Most common practice is for goods and services suppliers to hire third party “experts” who are influential with the BAC preferably relatives of the ruling administration officials and those who have previously worked for the procurement agency itself. Since these individuals still have close contacts with the procurement offices, they even designed the actual specifications of the tender at issue being knowledgeable and skilled in the procurement process. Sometimes improper “advance” payments are made during the project design phase to influence government procurement authorities to narrowly design a project’s specifications to benefit the company making the payments.
It is also commonplace for government “patronage” officials to include complicated technical features in the project’s tender that will suit only their preferred supplier and bidder. It is a fact that the more technical the project’s terms of reference, the more room BAC officials have to use discretion in the selection process to favor a favored bidder over another.
Often times “pre-chosen” suppliers and bidders are provided access to confidential information, such as the tender specifications before they are officially released. Likewise, the BAC provides competitors’ confidential bid information to “patronage” bidders so that they can revise its own bids accordingly to ensure winning the bid.
In many instances, procurement officials register privileged but unqualified suppliers and contractors in their rosters and choose to fully scrutinize the bid of one supplier/bidder while giving a less rigorous review to the bid of the favored bidder. This way, suppliers that are unable to show appropriate qualifications and experience or the ability to deliver the appropriate product are still able to win the contract, the “preferred” bidder of course.
Sometimes contractors and suppliers will learn prematurely from BAC about that a government considering the procurement of goods/services and will then seek to “wine and dine” and entertain procurement officials before the tender process even begins. During these periods, suppliers and contractors are able to develop complicated schemes to transfer anomalous payments in exchange for assured direct contracts.
An Asian Development Bank (ADB) report concluded that the Philippine government is plagued with high-level corruption, a lack of transparency in public procurements, poor auditing practices and political interference in the country’s anti-corruption agencies. Looking at how the government is managing its finances and fighting corruption, the ADB says that many of the country’s laws on public finances are simply not being implemented and that public procurement of goods and services needs to be improved at all levels of government, especially at a national level.
Corruption at the national and local levels has long been regarded as a serious deterrent in improving the business environment in the country to attract foreign investments. The Bureaus of Customs and Internal Revenue remain to be on top of the list of the most corrupt agencies. Perceived by many as the most corrupt institutions in the Philippines include the Military and Police, Judiciary, Departments of Health, Education, Public Works and Highways, Transportation and Communications, Energy and even Congress, among others.
For this reason, institutional challenges require profound commitment to institute needed reforms with the establishment and implementation of effective anti-corruption measures . The ineffective Judiciary remains susceptible to political intervention and does not provide sturdy and visible enforcement of the law, undermining opportunities for long-term economic growth and development.
Justice remains uneven, and the legal framework is deficient in independence and efficiency. The cumbersome court system and loose regard for contracts continue to become an apprehension. The judiciary is susceptible to political interference. Even the Chief Justice of the Supreme Court was removed from office last year after being convicted of corruption.
As they used to say “It takes two to tango”. Contractors and Suppliers who play major roles in corrupted public procurements are as guilty as the corrupt public officials themselves. Knowledgeable of the feebleness of government procurement agencies caused by the “Padrino” system, coupled with the weak enforcement of the procurement anti-corruption practices, goods and services suppliers and contractors utilize public procurement agencies as their private tools for theirinsatiable pursuit of material wealth, in the same manner, enriching corrupt public officials with people’s money.
Corruption brought about by public procurement is a pervasive and long standing problem in the Philippines, and is here to stay.
May 20, 2013
Fresno, California USA