The Senate is hiring independent experts to analyze the rates in the DOTC-ZTE contract for a national broadband network. The work would be surprisingly easy. The WiMAX portion of Equipment alone will show huge overpricing — by tens of millions of dollars.
This will be gleaned by comparing the DOTC-ZTE contract costs for WiMAX with the quotations from the subcontractor, Alvarion of Israel. Concerned persons provided The STAR pertinent documents.
Earlier shown was overpricing of $27 million (P1.35 billion) for the CPEs, or customer premised equipment (Gotcha, 26 Mar. 2007). Alvarion had quoted ZTE only $743.16 apiece in May 2006, or a total of P19 million for 25,844 sites. But the DOTC-ZTE contract of Apr. 2007 had it at $46 million, or nearly two-and-a-half times higher.
There was obvious overpricing as well in the other WiMAX aspects: base stations and cables, licensed software, warranties, and services.
When ZTE tapped Alvarion in 2006 as WiMAX subcontractor, the Chinese telecom firm was proposing only a fraction of the NBN. Through Filipino brokers, it was offering the Commission on Information and Communications Technology (under the Office of the President) only 22 base stations. In Oct. 2006 President Gloria Arroyo transferred the NBN project to the DOTC (Dept. of Transportation and Communication), which increased the number of base stations to 300.
Alvarion had quoted ZTE $8,853.60 for each base station equipment and cable. So for the 300 base stations the total should have been $2,656,077. At that rate, ZTE already would have made a good 20-percent profit, since Alvarion was offering it a “partner’s price” — actually a 20-percent discount. Such 20-percent margin is high in the very competitive telecom business.
But the DOTC-ZTE contract stated $8,735,272 for the same equipment and cables in 300 base stations. ZTE upped the price more than three times. Such 330-percent markup is unusual in telecoms. Technical men aver that it never would have happened had the government conducted open bidding instead of negotiating behind closed doors.
Testifying at the Senate, former ZTE technical consultant Dante Madriaga said they did start with less number of sites and base stations. But even back then, they already were more than doubling the prices to split the overpriced profit between ZTE and the Filipino brokers. Madriaga said the overpricing grew exponentially as the DOTC expanded the NBN’s coverage and thus required more equipment and services.
More overpricing — meaning kickbacks — were in licensed software. For instance, Alvarion quoted ZTE $4,800 ($6,000 less 20-percent “partner’s price”) for its basic AlvariSTAR infrastructure. The DOTC-ZTE contract listed the same program at $13,902 apiece, or $27,804 for two copies.
Alvarion also quoted $1,600 ($2,000 less 20%) per driver of the site devices; DOTC-ZTE listed this at $4,634 apiece, or $9,268 for two copies.
The three network elements also were jacked up. Where Alvarion quoted only a discounted $320 for a 10-license pack, DOTC-ZTE stated $8,109 for a 100-license pack, instead of $3,200 for ten times more. Where Alvarion offered $400 for a 1-license pack. DOTC-ZTE listed $69,509 for a 1,000-license pack. Where Alvarion quoted $3,800 for its MBST 10-license pack, DOTC-ZTE listed $471,689 for the 100-license pack. The overcharges became exponential since the DOTC-ZTE contract called for nine, 25 and three copies of these, respectively.
Even the extended warrantee fee was padded. Alvarion had offered a fee of seven percent of the total WiMAX equipment. Had there been no overpricing, the seven percent would have been computed from $19 million for 25,844 sites and $2.65 million for 300 base stations. But since these items were bloated to $46 million and $8.73 million, respectively, the seven-percent warranty fee also rose exponentially.
All this, for a project that experts say is not even necessary.
It should be noted that the DOTC keeps daring critics of the deal to “do the numbers” to prove any sleaze. Yet it also refuses to disclose the contract. Fortunately the Senate Blue-Ribbon Committee released to the press its copy of the annexes, including the WiMAX Bill of Quantities. And experts gave The STAR additional documents on the Alvarion price offers.
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RP is short of two million tons of rice each year. Instead of boosting farm productivity, government chooses to import the lack. Why? Because there’s kickback every step of the way, that’s why.
Malacañang said it would buy at $700 per ton. But the selling price of Vietnam is only $400 per ton. Somebody is about to make $300 per ton, or $600 million for two million tons.
There’s also a fat commission for the official who will decide which shipping firm to hire — to the tune of hundreds of thousands of dollars.
And there’s kickback even in jute sacks. Since the ’80s, this item elicits a dirty take of 15¢ per sack. If one ton requires 20 sacks, then two million tons will need 40 million sacks. The sack buyer earns a cool $6 million.
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E-mail: jariusbondoc@workmail.com