Warp speed

President Bongbong Marcos asked Congress to prioritize the anti-dynasty bill and several other pieces of legislation demanded by civil society groups. He even spoke of increasing use of artificial intelligence to improve bureaucratic efficiency.

He should have included a thorough review of the Procurement Law – not only to close down loopholes for corruption but also to enable government to acquire cutting edge technologies in a timely manner.

The existing procurement legislation suffers from many defects. Among those is the protracted procurement process that prevents government from acquiring the right equipment to fulfill its mission.

For example, if a government agency is fortunate enough to receive funding for smartphones for the communications needs of its employees, it will likely opt for the cheapest model available. This will allow the agency to stretch its funds to allow more people to acquire the gadget. After deciding on what to buy, a long procurement process ensues.

Normally, it will require at least six months to complete all the requirements to adhere to the procurement law. During this period, the agency issues notices to bid, conducts technical evaluation of the product and win the necessary approvals. Sometimes losing bidders contest the award and the process extends much longer.

By the time the agency actually procures the low-end equipment it decided on, technology has moved ahead. Major smartphone providers such as Apple, Samsung and Huawei would have released new models whose capabilities outstrip the price. The equipment the agency procured had depreciated even before they are used by its employees.

Across government, agencies struggle to acquire the equipment to modernize within the framework of antiquated procurement regulations. Technological change is simply outstripping the bureaucracy’s ability to adapt. Public bidding moves on government time while information technology advances at warp speed.

To complicate matters, the price of old technology drops sharply as soon as new versions are released. The products agencies choose for their staff are usually cheaper by the time they are acquired.

The bureaucracy also labors with licensing issues. Purchase of information and communications technologies (ICT) are treated as one-time capital expenditures while modern systems operate on recurring costs for subscriptions, renewals, support services, security patches and cloud services.

ICT systems cannot be simply purchased and left at that. They require continuous upkeep to remain secure, functional and interoperable. Firmware updates, security patches, hardware replacements, diagnostics and vendor support require continuing procurement.

Government budgeting treats maintenance as a secondary expense that can be postponed or reduced when the budget is tight. This attitude leads to expiries of support contracts. The delay of preventive maintenance causes faster deterioration and longer downtimes, often snowballing into costly repairs.

The existing regulations on procurement must be thoroughly reviewed to account for shorter product life cycles, rapid wear and tear as well as elastic product pricing.

Consumer zealots

Consumer advocacy groups have a reason to be there. Sometimes, however, they overstep boundaries and fall into zealotry.

One example is a self-appointed advocacy group for power consumers called Nasecore.

This group seems to think that all the revenues and profits of a distribution utility such as Meralco should be treated as consumer money held “in trust” by the corporation. The group is basically demanding that the Energy Regulatory Commission (ERC) police the manner Meralco allocates its revenues and investments. It works on the false assumption that when energy prices are high, regulators acquire the right to pry into every business and investment decision of private corporations.

This crosses every boundary.

Meralco is indeed a public utility and is tightly regulated as such. But the corporation’s earnings belong to the corporation, to be invested in what it deems to be the most appropriate manner. Meralco’s revenues are not consumer money held in trust. This is a figment of very dangerous imagination.

The ERC, for its part, determines allowable costs and a reasonable return on rate base. Once the energy tariffs are approved, whatever consumers pay for the product delivered becomes corporate revenue – not some sort of deposit by the consumers.

Regulatory oversight ends after rates are set and when costs are evaluated for determining the rate base. Whatever revenue the corporation lawfully earns are not trust property that regulators can reassign or redistribute. It is the corporation that decides how to reinvest its earnings and how much to allocate for dividends to its shareholders.

A trust fund implies that money is held for the benefit of another party. Utilities operate under a regulated business model, not as trustees of the consumers. Consumers pay for service while utilities earn revenues subject to compliance with regulations.

This is true for all other regulated industries such as water, telecoms and air transport. The payments made by consumers for services do not become funds held in trust by the corporations.

Nasecore crosses all boundaries of common sense and commercial law.

The group plucks numbers from thin air when it claims that P100 billion in “consumers’ money” is being used by Meralco. This is a number quoted without any basis. It is used for sheer propaganda effect. The use of unverified numbers and unfounded claims misleads the public and merely creates political noise – all to justify the group’s funding.

Consumers should be very wary of self-appointed advocacy groups claiming to speak on their behalf. Often, they weave issues out of thin air.