Saving pesos from corruption

In the country’s anti-corruption campaign, much attention is being given to sprucing up the government’s procurement process. Strategically, this is supposed to introduce longer-term structural reforms to ensure that every peso in the government’s coffers is properly spent.

The estimated amount of government procurement funds ending up in some bureaucrat’s pockets varies. For example, of the supposed P112 billion of public sector spending that goes through the procurement system, the Office of the Ombudsman estimates that about P22 billion is lost to flaws and manipulation of existing rules.

A Social Weather Stations (SWS) survey done last year, on the other hand, calculates that 15 percent is funneled out of projects and into corruption. In 2000, it was higher at 20 percent.

As most Filipinos would agree, corruption entails substantial costs to the economy and leads to a wasteful allocation of the country’s very scarce resources. In recent years, it has eroded public confidence and has been viewed as harmful to national development.

A World Bank report reveals, "corruption in the public and private sectors in the Philippines is pervasive and deep-rooted, touching even the judiciary and the media."

Perceived sectors in government most vulnerable to corruption are in the building of roads, the purchase of vehicles and equipment for public offices, and buying of books for public schools. It is in these areas where changes in control measures, particularly in the procurement system, can make a difference.

Transparency in the bidding process

In 1999, a detailed study of the Philippine procurement system was commissioned. This was to be used as the basis for reforming a perceived corruption-ridden procurement structure.

The study noted that the government’s procurement system is highly decentralized and complex. Each procuring agency or government-owned or controlled corporation handles its own purchasing according to totally unique rules and regulations.

Agencies also have their own respective procurement committees, most often distinctly different for various types of bidding, i.e., for goods/supplies, for civil works, consulting. There are also local and national procuring agencies.

As a first step, changes were introduced to increase competition, reduce delays and limit the discretion of bids and awards committees. This was also expected to reduce opportunities for corrupt practices.

Additionally, in December 2000, government also mandated all of its national agencies to use a web-based procurement system. Initial results showed that the cost of buying textbooks was reduced by about 40 percent. Together with competitive bidding procedures, medicine acquisition resulted in a savings of 27 percent.

It’s also not surprising how unscrupulous contractors manage to corner projects with the help of some corrupt members of the government’s bidding committee. One of the often-used ways to limit competition is to publish bid invitations only in newspapers with very limited circulation.

By now requiring publication of bids in fewer but more widely circulated newspapers and by making mandatory the use of the government’s Electronic Procurement System (EPS) Internet site, the Department of Budget Management (DBM) immediately monitored increased transparency and better competitiveness. The total cost of advertising was also significantly reduced.

The DBM also involved civil society in monitoring government procurement specifically by the Department of Education, Culture and Sports (DECS), the Department of Public Works and Highways (DPWH), and the health department. The idea was to have more people watching the process. So far the impression is that it seems to have improved the sense of accountability within the government procurement system involving said agencies.

Omnibus procurement bill

A procurement bill is now pending before both houses of Congress. Malacanang has certified the measure urgent and Congress is trying its best to reach a consensus and pass the bill before the end of the year.

Under the proposal, the pre-qualification of bidders would be simplified into an eligibility check that would be uniform to all government agencies using the non-discretionary "pass and fail" criteria. The streamlining is expected to shorten the time spent on pre-qualification and would give the concerned procurement committee with less discretion given the use of a uniform formula.

A major feature of the reform bill has to do with the scrapping of the floor price —— or the minimum amount the contract may cost —— and instead shift to an approved ceiling price, which would basically be the available budget allotted for the project.

Removing the floor price gives government more opportunity to save funds. Mandating a ceiling increases transparency and constrains potential collusion between the bids committee and the contractor.

The existing procurement process for civil works usually takes between seven months to more than a year. The streamlining of the whole scheme is also seen to cure the delays in the awarding of the contract to a minimum of two months to a maximum of four.

Another key reform would be the requirement of a five-year warranty on civil works and the imposition of cap on price adjustments and change orders. Any repair within the five-year warranty period would be at the expense of the contractor.

The DPWH car repair scam wherein vehicle parts were being changed almost every other month would hopefully be a thing of the past under this proposed reform measure.

Likewise, any last-minute change orders for infrastructure projects could be prevented. A good example is the over-priced asphalt-paved President Diosdado Macapagal Avenue whose original estimated cost rose by five times because of contract amendments.

So would all these initiatives help eradicate corruption? Doubts still remain among the many Thomases. There is just a lot of creativity out there, and ways to circumvent laws can easily be formulated. Yet, we’ll never know unless we try. Heck! we’re neck deep in corruption anyway so there’s really not much choice.

HIV/AIDS in the workplace

As a follow-up of my earlier column on the importance of increasing awareness of HIV/AIDS in the workplace, I will be discussing it more extensively on the IBC 13 News segment "Isyung kalakalan at iba pa" next week. Watch it either on the 5 p.m. or 10:30 pm telecast, Monday to Friday.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. If you wish to view the previous columns or telecasts of "Isyung Kalakalan at iba pa," you may visit my website at http://bizlinks.linkedge.biz.