World Bank-banned firm bags P100-million road contract

A public works contractor blacklisted by the World Bank for alleged collusive practices with corrupt officials has bagged a P100-million contract with the government.

The information surfaced in the course of yesterday’s hearing by the House committee on public works, chaired by Southern Leyte Rep. Roger Mercado, on the blacklisting by the WB of three Filipino and seven Chinese contractors who participated in the bidding for $33 million worth of road projects the bank offered to finance.

But the committee concluded the hearing – the second in two weeks – by clearing the contractors.

“There is no sufficient proof of collusion,” Mercado said. “Even the World Bank report states that collusion is ‘more likely than not.’”

The World Bank withdrew its offer to bankroll the road project after uncovering collusion among the bidders.

Questioned by Palawan Rep. Abraham Mitra, DPWH Undersecretary Manuel Bonoan said none of the seven blacklisted firms won any contract for the road projects that the government was forced to finance after the WB withdrew its funding offer.

However, Eduardo de Luna, owner of E. C. de Luna Construction, one of the seven banned companies, admitted that he won a P100-million contract for road construction in the Negros provinces.

He did not say when the contract was signed but he said it covers a section of a road project for which the DPWH and the WB had conducted three biddings, which all failed.

Bonoan quickly clarified that De Luna was not yet blacklisted when the DPWH gave him the contract.

“The blacklisting was just recently made. This was made only last month,” he said. He didn’t say when the P100 million deal was approved.

But at the same time, Bonoan admitted that as early as 2002, when the first bidding for the WB-funded projects was made and cancelled, the bank had already notified the DPWH of its findings, including the contractors involved.

He admitted they had no basis to doubt the World Bank’s findings.

He also said the WB did not furnish the DPWH a copy of its decision blacklisting the seven contractors.

“We asked them for the details of their investigation, but they did not give us,” he said.

De Luna is the contractor linked by opposition Sen. Panfilo Lacson to First Gentleman Jose Miguel Arroyo during the Senate hearing on the same controversy on Tuesday.

Reading from what he described as an appointments book of President Arroyo’s husband, Lacson said the First Gentleman met with De Luna at least 20 times.

Responding to a query from Davao del Sur Rep. Douglas Cagas, the contractor claimed he met Mr. Arroyo only once.

He said it was former dzRH reporter Restituto de Quiros who introduced him to Mr. Arroyo.

“It is Resty who is the friend of the First Gentleman,” he said.

Asked by Rep. Teodoro Casiño of Bayan Muna how “collusion” among contractors works, Bonoan sounded clueless. Bonoan has been with the DPWH for 40 years.

“It’s difficult to make a guess, your honor. I’m not in a position to say how it’s done, where it’s done. Collusion is never documented,” he said.

Casiño then read the winning and losing bids of the seven blacklisted contractors.

He said the winners in the three biddings offered prices 13 percent to 15 percent above the “agency (DPWH) estimates,” while the losing bidders submitted bids that were uniformly 30-percent to 35-percent higher than the estimated project cost.

“The losers submitted bids that were obviously designed to lose. This, to the World Bank, is proof of collusion or manipulation,” he said.

Bonoan grudgingly agreed that it was a sign that something was wrong in the bidding.

Contract for banned Chinese firm

A Chinese contractor banned by the World Bank, along with three Filipino and three other Chinese firms, is still allowed to participate in the country’s bidding processes for government projects and in fact has won a disputed P952-million Japanese-funded road contract.

University of the Philippines professor and lawyer Harry Roque said China Road and Bridge Corp. won a P952-million contract for the construction of a Japanese-funded road project in Catanduanes province. The project is being questioned for allegedly being overpriced.

Senators are questioning why the DPWH is still allowing firms blacklisted by the WB to participate in government projects.  

During Tuesday’s Senate hearing on the WB blacklisting, Ebdane said that the three Filipino contractors could still participate in biddings for projects not funded by the international financial institution.

Roque said this should not be allowed as Republic Act 9184 or the Government Procurement Act was even more stringent than the WB Rules.

“The most that the WB will impose for those that it will find guilty of bidding collusion is blacklisting. Our RA 9184, in addition, provides for a prison term and also, blacklisting. I therefore do not understand the logic of Secretary Ebdane’s statement,” Roque said.

Senators Miriam Defensor-Santiago and Panfilo Lacson said they could not understand why the DPWH had been insisting on a different set of rules and would not consider WB’s findings on collusive practices among contractors.

Lacson said RA 9184 stated that the DPWH must ban blacklisted firms.

“After all, the leadership demands responsibility. If he has authority, he has the responsibility to determine who among his people have been cooking up the bills together with the contractors,” Santiago said of Ebdane.

“My view is if you are leader of the institution and wrongdoing has been reported to you, then you should at least act on it in the sense of trying to identify who are the people in your department who are giving it a bad name,” she said.

Sen. Manuel Roxas II also said Ebdane should have taken a cue from the WB.

“If a respected entity says in their own investigation they have found collusive practice by these contractors, the relevant question for us as a government is: What did we do to follow-up on this?”

The World Bank’s ban on E.C. de Luna Construction Corp. is permanent.

Temporarily banned are Cavite Ideal International Construction and Development Corp. and CM Pancho Construction Inc.

The banned Chinese firms aside from China Road are China State Construction Corp., China Wu Yi Co. Ltd. and China Geo-Engineering Corp.

The firms took part in the bidding for the National Roads Improvement and Management Program or NRIMP.

Overpriced

Roque said the Philippine Military Academy ’59 Foundation Inc. and former Cavite Rep. Plaridel Abaya had questioned before the Supreme Court the Catanduanes road project won by China Road for being overpriced.

Roque said he represented Abaya and the PMA Foundation in the case. The complainants noted that China Road submitted a bid which was more than P200 million above the prescribed budget for the contract.

Abaya took a particular interest in the project because he was the lead author of RA 9184.

It was in May 2005 when Abaya and his classmates in the PMA Foundation asked the High Court to void a DPWH resolution awarding the contract to China Road.

But the High Court said in a ruling in February 2007 that the PMA alumni could not use RA 9184 to question the contract because such law was not yet in effect when the contract was approved. Instead, the SC said Executive Order 40 was applicable.

EO 40 prescribes that the approved budget contract is the bid ceiling but the EO also provides an exception for projects financed by international institutions, the SC said.

The High Court noted that JBIC’s procurement guidelines did not impose a ceiling on bids and state that the contract could be awarded to the company with the lowest evaluated bid. Since China Road made the lowest bid, it still bagged the contract even though its bid was 28.95 percent higher than the approved budget for the contract, the High Court said.

“The legal framework used in the Catanduanes contract is similar to the legal framework used in the national broadband network deal and the Northrail contracts,” Roque said in a statement yesterday. “The Catanduanes contract was passed off as an executive agreement.”

Roque said issues on non-compliance with RA 9184, could have been addressed by the SC in the case Abaya filed against Ebdane.

“We feel vindicated. In that case, Abaya sought to annul a JBIC-funded project awarded to a now blacklisted Chinese contractor for non-compliance with a mandatory provision of the law, specifically that bids that do not comply with the maximum price ceiling estimate of the DPWH should be disqualified from the bidding,” Roque said.

The rationale of the law, Roque explained, was that any increase from the maximum price estimate, which already included a 30 percent return on investment for the contractor, would go to graft and corruption.

The project that Abaya sought to nullify exceeded the price estimate by at least P200 million.

“Guess who got the excess?” Roque asked.

In infrastructure projects, Roque said the payment of overprice to a project proponent, be it a local government official or a member of Congress, could only be facilitated through a simulated public bidding that ensures that the public official’s favored contractor wins.

“The 30 percent overprice in these infrastructure projects cannot be paid under a fair and truly competitive bidding. That is why these flawed biddings are the rule in the DPWH rather than the exception,” Roque said.