UPDATE February 2004 Philippines COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE THEWORLDBANK Country Operations and Services Unit East Asia and Pacific Region February 2004 Regional Vice President : Jemal-ud din Kassum, EAP Country Director : Robert Vance Pulley, EACPF Sector Director : Marisa Fernandez-Palacios, EAPCO Task Team Leader : Christopher Hoban, EACPF Contents Foreword --------------------------------------------------------------------------------------------------10 Overview---------------------------------------------------------------------------------------------------12 Big Progress in Procurement Reform ---------------------------------------------------------------12 Review of the June 2002 CPAR Agenda -----------------------------------------------------------13 Emerging Issues/Priorities -----------------------------------------------------------------------------13 Discussions with the Private Sector -----------------------------------------------------------------14 Meeting with the GPPB and Next Steps -----------------------------------------------------------14 Table Table 1: Status of Recommendations in the March 2003 CPAR -----------------------------13 Appendices Appendix 1 - List of CPAR Update Mission Participants and Persons Met ----------------16 Appendix 2 - Summary of Achievements and Status of Key Recommendations of March 2003 CPAR ------------------------------------------------------------------------------------18 Appendix 3 - Emerging Issues/Priorities------------------------------------------------------------26 Appendix 4 - Procurement Side Letter Draft 12/09/03 ------------------------------------------28 Appendix 5 - CPAR March 2003 ---------------------------------------------------------------------30 Acknowledgements Publication review and advice were received from Leonora Gonzales (External Relations Officer) who also acted as The CPAR Update report was prepared in December 2003. CommunicationsAdviser. TheTeam comprised CeciliaVales (Coordinator); Rene Sd. Manuel(ProcurementSpecialistforPublicWorks);Dominic Aumentado (Procurement Specialist for Education); Noel Sta.Ines(ProcurementSpecialistforHealth);HarbakshSethi ChristopherHoban (Consultant)andEvelynQuirante(SecretarialSupport).The Manager,PortfolioandOperations Team worked with representatives from the Asian Manila,Philippines DevelopmentBank, Mr.JimmyWu,PortfolioManagerand CesarValbuena,ProcurementSpecialist,andtheJapanBank forInternationalCooperation,Izuru Kimura,Representative and Mayumi Endoh, Representative. The Team collaborated closely with the Government's Technical Working Group for Procurement Reform led by Laura Pascua (Undersecretary, Department of Budget and Management); Jose Luis Syquia (Acting Executive Director,GovernmentProcurementPolicyBoard,Technical Services Office); Teodoro Encarnacion (Presidential Assistant on Procurement Concerns); Juan Miguel Luz (Undersecretary, Department of Education); Jose Lazo (Chief, Procurement Division, Department of Health); Arcadio Cuenco (Assistant Commissioner, Commission on Audit);Austere Panadero (Assistant Secretary, Department of Interior and Local Government); Elmer Dorado (OIC, Social Infrastructure Division, National Economic and Development Authority); and Cipriano Ravanes (President, Procurement Watch, Inc.). The Update Report was submitted to the Government Procurement Policy Board and was approved in its meeting ofDecember11,2003. TheBoardwaschairedbySecretary Emilia Boncodin of the Department of Budget and Management and alternately chaired by Director General Romulo Neri of the National Economic and Development Authority. This Report is a follow-up of the original CPAR, which was part of the Public Expenditures, Procurement and Financial Management Review. The original CPAR was preparedinJune2002andpublishedinMarch2003,byaTeam ledbyChristianA.Rey(TaskTeamLeader). Acronyms and Abbreviations ADB - Asian Development Bank GPPB - Government Procurement Policy Board AIM - Asian Institute of Management GPRA - Government Procurement Reform Act AO - Administrative Order ICB - International Competitive Bidding BAC - Bids and Awards Committee INT - Department of Institutional Integrity BSP - Bangko Sentral ng Pilipinas IRRs - Implementing Rules and Regulations BOT - Build-Operate-and-Transfer JBIC - Japan Bank for International Cooperation CIAP - Construction Industry Authority of the Philippines LC - Letter of Credit CDF - Countryside Development Fund LCE - Local Chief Executive CIDA - Canadian International Development Agency LGU - Local Government Unit COA - Commission on Audit LOI - Letter of Instructions CPAR - Country Procurement Assessment Report NBI - National Bureau of Investigation CPPR - Country Portfolio Performance Review NCB - National Competitive Bidding CSC - Civil Service Commission NGA - National Government Agencies DBM - Department of Budget and Management NGO - Non-Government Organization DepEd - Department of Education NEDA - National Economic and Development Authority DILG - Department of the Interior and Local Government OSG - Office of the Solicitor General DOJ - Department of Justice PCAB - Philippine Constructors Accreditation Board DOH - Department of Health PEAC - Pre-qualification, Evaluation and Awards Committee DPWH - Department of Public Works and Highways PD - Presidential Decree DTI - Department of Trade and Industry PPB - Procurement Policy Board EO - Executive Order PSB - Philippines Shippers' Bureau EPS - Electronic Procurement System PS - Procurement Service GAAM - Government Accounting and Audit Manual PWI - Procurement Watch, Inc. GEF - Global Environment Facility TIP - Transparency International Philippines G-EPS - Government Electronic Procurement System TTL - Task Team Leader GFI - Government-Financing Institution TWG - Technical Working Group GOCC - Government-Owned and/or Controlled WB - World Bank Corporation WBOM - World Bank Office Manila GOP - Government of the Philippines WG - Working Group GPIS - Government Procurement Information System Foreword ThefirstCountryProcurementAssessmentReport(CPAR) theGPPBhasalreadytakenconcretestepstowardsbuilding was completed in June 2002 and published in March 2003. the capacity of civil society organizations on the new ThisCPARhasservedasananalyticaltooltohelpassessthe procurement rules and regulations. publicprocurementsysteminthePhilippinesandinthepro- cess helped to generate a dialogue with the Government to Insupportofthisinitiative,the2003CPARmissionactivities improveprocurementpractices,andtohelpcivilsocietyand included discussions with the Council of Engineering the private sector understand better the current processes ConsultantsofthePhilippinesandthePhilippineConstructors and procedures in place. The June 2002 CPAR has been a Association to ensure that their concerns are included in the key instrument in helping the government, its key develop- pursuance of the reform agenda. ment partners and other stakeholders to focus on procure- mentpracticesandkeyreformmeasures.ThustheNovember Thereisstillmuchtobedonehowever.ThisUpdateidentifies 2003CPARUpdatewasajointeffortoftheGovernmentand several emerging priorities including the perception of high theWorldBank,withclosecollaborationfromtheAsianDe- costofsomeworksandgoods,andtheeligibilityofPhilippine velopmentBankandtheJapanBankforInternationalCoop- firms to compete for internationally financed contracts. eration. It was officially accepted by the Government on Significant progress has been made in implementing an December 11, 2003 and the publication was cleared on Feb- electronicprocurementsystem,butfurtherdevelopmentnow ruary5,2004. Itisbutfitting,therefore,toproperlyacknowl- needs to be pursued. Finally the new rules and procedures edgethekeycontributorstothesuccessoftheCPARUpdate need to be widely disseminated and training given to local process in a dedicated acknowledgement section of this Re- governments, the private sector and civil society.Therefore, port. the primary focus of the CPAR Update is to identify new activities to achieve these objectives including establishing The CPAR Update Mission reviewed the status of the partnershipsandfundingrequirementsforpartnershipswith reforms, and found that over 50% of the recommendations internationalorganizations,andtoachievebettergovernance from the first CPAR have been completed, and another 26% and better value for money. are in progress. The key accomplishments include the passage and promulgation of the Government Procurement Finally, we wish to commend the executive and legislative ReformAct (RepublicAct No. 9184) and its implementing branches of government for pursuing a key governance rulesandregulations(IRR),theestablishmentandimmediate measure that will reduce corruption in the long term. Much functioning of a powerful Government Procurement Policy now will depend on how these key institutional and policy Board(GPPB)anditsTechnicalServicesOffice,mandatory reforms will be implemented, monitored and enforced on a implementation of electronic procurement systems, a well- sustainable basis, towards achieving good governance. defined complaint mechanism and blacklisting procedures, provision for civil society monitoring, reasonable procurement audit provisions, numerous dissemination and training activities, and near-completion of harmonized bid RobertVancePulley documents and manuals. Country Director, Philippines World Bank Office Manila Itisworthparticularlynotingthatthenewprocurementpolicy February 2004 had institutionalized the participation of civil society organizations in all bids and awards committees thus enhancing the integrity of the bidding process. Moreover, COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 10 Overview Following the completion of the Country Procurement curement and institutionalizes transparency mea- Assessment Report in June 2002, which was published sures including the use of electronic procurement in March 2003, there has been a great deal of progress and the participation of Civil Society Organiza- in pushing procurement reform in the Philippines. This tions. The Law covers all national agencies, gov- CPAR Update was undertaken in November-December ernment owned and controlled corporations, all 2003 to take stock of achievements so far, and to review government entities and instrumentalities. the priorities for further action in procurement reform. l The inclusion of all Local Government Units in the coverage of the Government Procurement Discussions were held between the World Bank and Reform Act. the Government in November 2003 to review the status l The issuance of Implementing Rules and Regula- of actions identified in the first CPAR which were tions (IRRs) for the Law on October 8, 2003. recommended and taken, and to discuss The creation of the Government Procurement recommendations for future actions to carry forward l Policy Board vested with sole authority to oversee the reform process. The Japan Bank for International procurement reform and protect the national inter- Cooperation (JBIC) and the Asian Development Bank est in all matters affecting public procurement. A (ADB) also joined key meetings. The Bank Mission Technical Support Office was created by the Imple- Team met with other key stakeholders such as the menting Rules and Regulations to undertake the Council of Engineering Consultants of the Philippines, day-to-day operations of the GPPB in the perfor- the Philippine Contractors Association, Procurement mance of its duties and responsibilities in policy Watch, Incorporated and the Philippine Center for making, monitoring compliance, and training and Investigative Journalism. The list of participants to the advocacy. Mission and persons met by the Mission Team is presented in Appendix 1. In a wrap-up meeting held l Mandatory use of the Government Electronic Pro- on December 11, 2003, the key findings and curement System (G-EPS) for the procurement of recommendations were discussed with the Government common supplies and to promote transparency and Procurement Policy Board (GPPB) chaired by efficiency through the establishment of a central Secretary Boncodin. government procurement web site to be the primary source of information on all government procure- ment transactions. Initially, this has involved the Big Progress in Procurement Reform posting of bid invitations and awards in the pro- curement web site. Laudable achievements have been made in the l The monitoring and enforcement of procurement Government's agenda for procurement reform in the rules as well as ensuring efficiency and effective- past year, as follows: ness for each step of the procurement process through procurement audit. l Passage and promulgation of the Government Pro- l The provision of penal sanctions against violators curement Reform Act (GPRA) on January 10, 2003 of the Law, and its rules and regulations. (Republic Act No. 9184). The Law consolidates l The development of a procurement manual and the more than sixty laws pertaining to public pro- standard bidding documents and forms (harmo- COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 12 nized with thosse of the major international financ- Emerging Issues/Priorities ing institutions: World Bank, ADB and JBIC) to facilitate compliance with the new law. Several new issues emerged which were not included in the June 2002 CPAR. These arose from ongoing Review of the June 2002 CPAR discussions with government, and issues that arose from Agenda the completed activities. For example: The CPAR was a comprehensive document that covered l Some key priorities identified by Government the entire public procurement system of the country include the apparent high cost of some works and plus an in-depth study of three sectors: Public Works, goods procured by Government and the eligibility Education and Health. It contained fifty of Philippine firms to compete for internationally recommendations and agreed actions. Responsible financed contracts; government agencies reported on the status of l It was also noted that government has made completion of each agreed action. These agreed actions considerable progress in electronic procurement were classified into (a) national and local governments, systems and further development now needs to be and (b) the three sectors. The detailed status pursued; and, arepresented in Appendix 2. Most of the l With the passage of the new Law, issuance of the recommendations have either been completed (58%) Implementing Rules and Regulations and or are on-going (26%). The data in Table 1 provides completion of harmonized bid documents, a major an overview. challenge is to disseminate the new rules and procedures, and provide training at all levels Some activities that are still to be completed relate including local government units, the private sector to: and in civil society. l Professionalization of the procurement function; The focus of the CPAR Update therefore is on new l Corporatization of procurement services; activities to achieve these objectives. Discussions were held on how to implement funding requirements and to l Study on securities and bank guarantee; explore possible opportunities for partnerships with l Streamline and reducing delay in registration and licensing procedures; international organizations. There was a strong sense of commitment among the various organizations to l Establishment of record keeping systems at the work together to follow-up on the strong momentum LGU level; and for procurement reform­to achieve better governance l Eligibility of textbooks with foreign authors and better value for money for public spending in the (Science, Math and English). Philippines. Some of these partnerships are reflected in the joint responsibilities shown in the matrix in Table 1: Status of Recommendations in the March 2003 CPAR Appendix 3. Important priorities that were identified are: Completed On-Going Open TOTAL National/Local Levels 15 7 5 27 Sectoral Levels 14 5 4 23 l Disseminate information on Government Procure- 29 12 9 50 ment Reform Act/Implementing Rules and Regu- COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 13 lations to all stakeholders including local govern- l No clear mechanism in submitting a legitimate pro- ments, the private sector and civil society; test; and Hiring only of international firms as coordinating l Implement E-Procurement as a transactional tool; l consultants. l Preparation of a report on capacity, quality and size of contracts for works; These are legitimate concerns, which need to be l Training on harmonized bidding documents at all addressed in the on-going efforts of the government to levels including national agencies, local govern- ensure an efficient, transparent and open competitive ments, the private sector and civil society; process, however, it appears that almost all of these l Introduce a system of value engineering analysis issues had been addressed in the Law and in the on a pilot basis to check that designs and cost esti- Implementing Rules and Regulations. Further, some mates ensure best value for money; of them are likewise considered in the procurement l Pilot "design and build" procurement schemes in manuals and harmonized bidding documents. What at least one contract; and appears to be lacking is the dissemination of information l Capacity Building of Civil Society Organizations and training of the private sector and civil society. These (CSOs). activities are included in the emerging issues/priorities presented in Appendix 3. Discussions with the Private Sector Meeting with GPPB and Next Steps The discussions with the Philippines Contractors In a meeting held on December 11, 2003, the GPPB Association and the Council of Engineering Consultants and the Bank agreed on the following next steps: of Philippines (CECOPHIL) indicated some positive elements in the introduction of the GPRA and IRRs. The discussions disclosed some serious concerns l Appointment of the new Executive Director of TSO-GPPB soonest. The new TSO Executive Di- relating to: rector is on board. Issuance of harmonized bid documents with neces- l Qualification criteria for short listing of consult- l sary forms. ants and contractors, especially under contracts funded by International Financing Institutions; l Responsible Agencies will implement agreed ac- tions on dates specified. Progress will be monitored l Transparency of the pre-qualification/eligibility and jointly by the TSO-GPPB and the World Bank. evaluation processes; l International partners will make the promised as- l Lack of interest of contractors to participate in pro- sistance available. A request for ASEM 2 funds is vincial procurement as a result of provincial pref- being processed internally by the World Bank. erence provisions; GPPB will discuss with other donors possible as- l Capacity building of Civil Society Organizations sistance. with extended participation as observers in the Bids l Finalize World Bank Procurement Side Letter. The and Awards Committees; TSO-GPPB, DOF and NEDA representatives will l Adjustment of prices of contracts with long comple- start discussing the draft Side Letter, included as tion periods; Appendix 4. The March 2003 CPAR can be found in Appendix 5. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 14 Appendix 1 - List of CPAR Update Mission Participants and Persons Met Government/GPPB Emilia Boncodin, Secretary, DBM Romulo Neri, Director-General, NEDA Laura Pascua, Undersecretary, DBM Austere Panadero, Assistant Secretary, DILG Teodoro Encarnacion, Presidential Assistant on Procurement Concerns Arcadio Cuenco, Assistant Commisioner, COA Estanislao Granados, Assistant Secretary, DBM Jose Luis Syquia, Acting Executive Director, GPPB ­ TSO Reynaldo Bicol, GPPB Pia Zobel Ruiz, GPPB Alexander Padilla, GPPB Genmaries Entredicho, GPPB Jun Molano, GPPB Dennis Nacario, GPPB Mila Manalastas, GPPB Asian Development Bank Cesar Valbuena, Procurement Specialist Jimmy Wu, Country Portfolio Manager, Philippines JBIC Izuru Kimura, Representative Mayumi Endoh, Representative, JBIC Yasushi Tanaka, Senior Representative, JBIC Catherine Vidar, Project Officer, JBIC World Bank Christopher Hoban, Manager, Portfolio and Operations Cecilia Vales, Sr. Procurement Specialist Rene Manuel, Procurement Specialist Noel Sta. Ines, Procurement Specialist Dominic Aumentado, Procurement Specialist Chris Pablo, Operations Officer Harbaksh Sethi, Procurement Consultant Jeff Taylor, Consultant, WB Evelyn Quirante, Program Assistant Guest Participants Juan Miguel Luz, Undersecretary, DepEd Kenneth Ronquillo, OIC, HHRDB, DOH Joel Lazo, Chief, Proc. & Logistics, DOH Elinore Lavilla, Supervising Auditor, COA Katherine dela Cruz, OIC, CIAP Lilian Salonga, OIC-Research & Info Div., CIAP Emerson Benitez, Chief, BAC-DPWH Jose Bautista, DILG COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 16 Procurement Watch, Inc. Jacinto Gavino, Chairman Ramon Ereneta, President Cipriano Ravanes, Executive Director Council of Engineering Consultants of the Philippines Eric Ruiz, President Virgilio Madrazao, Treasurer Isaad David, Director Danilo Luzentales, Director Rolando Roque, Past President Lani Pimentel, Administrative Officer Philippine Constructors Association, Inc. Emilio Tumbocon, President Philippine Center for Investigative Journalism Ms. Yvonne Chua COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 17 Appendix 2 - Summary of Achievements and Status of Key Recommendations of March 2003 CPAR completed ongoing Key Area Activity and Agreed Action Responsible Agency Timetable Status as of October 31, 2003 Funding PUBLIC PROCUREMENT BY NATIONAL AGENCIES, Government-Owned-and-Controlled Corporation and other Instrumentalities Strengthen 1. Passage and promulgation of an Department of Budget December 2002 Done. USAID Legal and Omnibus Law on Procurement. and Management The Law was issued on February Policy Framework 10, 2003. 2. Prepare implementing rules and Government Procurement Done. USAID/ regulations after enactment of the Policy Board The Implementing Rules and ADB Law and preparation of Philippines Regulations-A was issued Bidding Documents and Forms. September 23, 2003 and became effective October 8, 2003. 3. Update Government Accounting Commission on Audit December 2003 Done. Audit Manual to include the new Government Procurement Reform Procurement Law. Act circularized as part of Audit Rules. 4. Develop a training program for Commission on Audit December 2003 On-going. auditors on the Law, its Implementing Training program on Law/ Rules and Regulations and Procurement Implementing Rules and Bidding Documents and Forms. Regulations developed; training of auditors (6 regions) completed. Strengthen 5. Establish the Government Procurement Department of Budget June 2003 Done. WB-IDI Organization and Policy Board. and Management The Board was convened on Staffing February 4, 2003 as mandated by law. 6. Conduct a study on the scope of work Department of Budget Done. of the Government Procurement Policy and Management/ The Government Procurement Board. Government Procurement Policy Board established by the Policy Board -Technical Law which defines its functions. Services Office Key Area Activity and Agreed Action Responsible Agency Timetable Status as of October 31, 2003 Funding PUBLIC PROCUREMENT BY NATIONAL AGENCIES, Government-Owned-and-Controlled Corporation and other Instrumentalities Strengthen 7. Establish a national training program Government Procurement June 2004 On-going. WB-IDF Organization for the new public procurement system. Policy Board Regional trainings on the Law (ASEM 2 and staffing In-depth training needs to be conducted. and the Implementing Rules and Grant); Regulations being conducted by the Government Government Procurement to pursue Policy Board. First round of training funding from of national agencies completed; ADB in training for LGUs started. December CPRMU 8. Professionalize the procurement function: Government Procurement December 2003 The Terms of Reference submitted WB IDF; Policy Board/Civil Service by Government Procurement Policy ASEM 2 Grant q PrepareaStudy Commission Board-Department of Budget and will cover 5 Management; completion by pilot agencies q Implementation(NGA) PRC September 2004. 9. Study to corporatize Procurement Department of Budget and June 2003 Procurement Service is CIDA/WB IDF Service as independent entity. Management-Procurement implementing the Government- Service Electronic Procurement System and reengineering its systems and procedures. The Terms of Reference for the corporatization being drafted; completion of study by December 2004. Improve Procurement 10. Enforce the regulation on transparency Commission on Audit December 2004 On-going. Government Practices and through procurement audit. Training on the Law and the to pursue Processes Implementing Rules and funding from Regulations. Traininng on ADB in Procurement Bidding Documents December and the Procurement Manual will CPRMU be required for auditors. 11. Enforce processing lead time through Commission on Audit June 2004 Done. IFIs will application of sanctions and monitoring Section 38 of the Law mandates conduct through procurement audit (Administrative leadtime for key steps. Commission brief ing with Order 129). Audit Procedure. Commission on Audit auditors leadtimes for Foreign- Assisted Projects Procurement Key Area Activity and Agreed Action Responsible Agency Timetable Status as of October 31, 2003 Funding PUBLIC PROCUREMENT BY NATIONAL AGENCIES, Government-Owned-and-Controlled Corporation and other Instrumentalities 12. The Implementing Rules and Department of Budget June 2003 Done. Regulations of the law should prohibit and Management--Procurement The Law does not allow for negotiation of price and contract amount Services negotiation of price and contract (goods and works) after bid opening (IRR). amount. 13. Develop a framework and guidelines Department of Interior and December 2002 Done. ASEM Grant for Congressional insertions and Local Government/Department Study and framework submitted by Constituency Development Fund. of Budget and Management/ consultants. Needs follow-up League of Cities activities to explore possibility q Terms of Reference prepared of enhancing audit by the and submitted by Department Commission on Audit and of Interior and Local Government monitoring by the Procurement Watch, Inc./Government-watch/ Philippine Center for Investigative Journalism/other NGOs. 14. Price monitoring to be included as an Government Procurement June 2003 PS regularly monitors commonly- important function of Oversight Board (IRR). Policy Board-Technical Services used supplies. For others to be Office/Procurement Service completed by June 2004. 15. The Civil Service Commission or the Department of Budget and June 2003 Done. Office of the Solicitor General to provide Management The Law provides for legal support to members of the Bid and assistance and indemnification of Awards Committee/Procurement Evaluation Bids and Awards Committee and Awards Committee subjected to members. harassment. 16. Develop on demand satisfactory World Bank December 2003 To be completed by June 2004 securities to be issued by non-banking (together with No. 17). institutions. Improve penalities in lieu of bid security for small contracts. 17. Replace surety bond with Bank Government Procurement June 2003 Done. guarantee/Leters of Credit/other forms. Policy Board The Implementing Rules and Regulations specify options. Enhance 18. Push for 60% implementation by all Department of Budget and December 2003 On-going. Transparency agencies of Government Electronic Management/Procurement As of October 31, 2003, 100% for Procurement Services Rule. Services Government-owned Controlled Corporations and 61% of national agencies were registered. To be completed in accordance with the Implementing Rules and Regulations. The Government Procurement Policy Board to monitor and report on compliance quarterly. Key Area Activity and Agreed Action Responsible Agency Timetable Status as of October 31, 2003 Funding PUBLIC PROCUREMENT BY NATIONAL AGENCIES, Government-Owned-and-Controlled Corporation and other Instrumentalities 19. Encourage guidelines and training of Procurement Watch, Inc./ December 2002 On-going. Initial funding civil society's participation in procurement Transparency International Phils. Procurement Watch, Inc., invited by ASEM at all levels. to observe procurement processes in one (1) government agency. High demand requires additional staff and training with workshops (funds). To be completed by December 2004. 20. Develop guidelines and training of Procurement Watch, Inc./ December 2002 On-going. IDF National Government Organizations and Transparency International Phils. One (1) workshop conducted to Civil Society. develop code of ethics and a C network for reporting. To be completed by June 2004. OUNTR LOCAL GOVERNMENT UNIT PROCUREMENT Y P Public 21. Ensure that Local Government Units' December 2002 Done. ROCUREMENT Procurement procurement is adequately covered in proposed Procurement Bill. 22. Local Government Units' concerns/ Department of Interior and December 2002 Done. views to be represented in the formulation Local Government/League of of the Implementing Rules and Regulations Cities A once the Bill is enacted. SSESSMENT 23. Local Chief Executives should not Department of Budget and December 2002 Done. chair the Bidding and Awards Committees. Management The Law prohibits approving authority to be chair of the Bids and Awards Committee. R 24. Make the implementation of Annual Department of Budget and June 2003 Done. EPOR Procurement Plan by the Local Management Circular Section 7 of the Law requires Government Units mandatory. Annual Procurement Plan linked T to Budget. UPDA 25. Professionalize the procurement Government Procurement December 2003 Study to become phase 2 of the IDF function and build Local Government Units- Policy Board/Department of Professionalization Study in TE level procurement capacity. Interior and Local Government Activity No. 8; to be completed in March 2005. q DevelopaStudy 21 q Implementation Key Area Activity and Agreed Action Responsible Agency Timetable Status as of October 31, 2003 Funding LOCAL GOVERNMENT UNIT PROCUREMENT 26. Rationalize method of procurement and Department of Budget and 60 days from Done. expedite payment to contractors and Management/Government approval of New Rules on alternative methods of suppliers (to be dealt with in the Implementing Procurement Policy Board Procurement Law procurement provided in Section Rules and Regulations). 48 of Implementing Rules and Regulations. q UpdatetheGovernment Commission on Audit December 2003 Government Procurement Reform Accounting and Audit Manual Act and Implementing Rules and Regulations circularized as Audit Rules. q Developandimplementtraining Commission on Audit June 2003 On-going; to be completed by program on procurement audit December 2004. 27. Develop a good record keeping system Government Procurement for: Policy Board/Department of Public Works and Highways/ q Provincial/cities(pilotphase) Department of Interior and December 2004 To be completed by December 2004. Local Government q Municipalities(fullimplementation) December 2004 To be completed by December 2004. PUBLIC WORKS SECTOR Key Area Activity and Agreed Action Responsible Agency Timetable Status as of October 31, 2003 Funding Policies and 28. Foreign contractors should be allowed DPWH/CIAP June 2003 The Contractors Licensing Law Procedures to bid without PCAB license but will need prohibits this. However, the process to present the license prior to award. is being streamlined. Further elaboration required to facilitate participation of bidders. Legal 29. Review the law on arbitration so as to CIAP/DPWH June 2003 Enhancement of existing Law Framework align it with international practice. based on UNCITRAL model is being considered. This requires in-depth study. Needs technical assistance for the study. Improve 30. Study on registration and licensing GPPB/DPWH/CIAP-PDCB June 2003 To be completed. Needs Procurement of contractors; design and implement an assistance to streamline. Practices and action plan to streamline processes for Processes registration and licensing of contractors. Evaluation of 31. Adopt the standard pass or fail criteria DPWH/ADB June 2003 Done. Bid Awards for all procurement except pre-qualification of ADB-funded projects which will also be scheduled to adopt pass or fail criteria in 2002. - do - 32. Standard estimated cost per classroom, DPWH June 2003 Done. for budgetary purposes, should not be a limitation to the resulting bid price. Delivery, 33. Provide/strengthen quality assurance DPWH June 2004 Needs assistance. Inspection, mechanism for design and supervision. Payment Enhance Transparency 34. Use of computerized registry by all DPWH December 2004 On-going. projects following progress of Pilot test on two WB-funded of computerization. projects under implementation. EDUCATION SECTOR Key Area Activity and Agreed Action Responsible Agency Timetable Status as of October 31, 2003 Funding Legal Framework 35. Revise Section 1-A, Rule IV of IRR of DepED December 2003 Done. and Policy RA 8047 and General Policy No. 5 of the National Book Policy to relax its requirements on importation of raw materials for textbooks. - do - 36. Amendment of the law to allow DepED December 2004 Because of the new curriculum, textbooks of foreign authors to compete this activity needs to be pursued. locally for Science, Math and English textbooks. - do - 37. Streamline the policy on textbook DepED Done. Further improvements with content evaluation. the new textbook policy (English, Math and Science). Organization 38. Training and empowerment of the bid DOH/SEMP2/All Agencies December 2003 Done. committee members (proffessionalization). BAC members to AIM procurement training. Planning and 39. Develop an effective procurement DepED June 2003 On-going with implementation of Monitoring planning and inventory monitoring system system at all levels (except school) at the Regional, Division, District and School to be completed in December 2003. Levels. Procurement process at "school" level is "open". Capacity Building 40. Strengthen DepEd's procurement DepED June 2003 Consultant hired through DBM; capacity. completion December 2003. Establishment of Procurement Service Unit. HEALTH SECTOR Key Area Activity and Agreed Action Responsible Agency Timetable Status as of October 31, 2003 Funding Organization 41. Review and implement Department of Department of Health December 2003 On-going. Health reforms in terms of decentralization of procurement. Advertisement 42. Develop a mechanism to ensure wider Department of Health/Social December 2003 Done. participation and competition Expenditure and Management Registration instead of accredidation Project 2 and wider notification. Capacity Building 43. Strengthen Bureau of Food and Drug's Department of Health June 2003 Done. capacity to shorten the registration process. Instead of up to 6 months, now 2-3 weeks. - do - 44. Training and empowerment of the bid Department of Health/Social December 2003 Done. committee members (professionalization). Expenditure and Management Staff sent to AIM training. Project 2/All Agencies Procedures and 45. Streamline the procedure for contract Department of Health/Social December 2003 Done. Practices review by Legal Services Division. Expenditure and Management One week instead of one month. Project 2 - do - 46. Streamline the cash allocation process Department of Health/Social December 2003 Done. and approval process to avoid delay. Expenditure Management Project 2 Monitoring 47. Develop a mecahnism to monitor and Department of Health/Social June 2003 Done for suppliers; for evaluate the performance of the suppliers, Expenditure Management constructors/consultants still constructors/consultants. Project 2 under preparation. Organization and 48. Review the staffing of Procurement Department of Health/Social December 2002 Done August 2002. Staffing and Logistics Service. Expenditure Management Project 2 Systems and 49. Establish a National Drug Price Department of Health/Social June 2003 Done November 2002. Procedures Monitoring System. Expenditure Management Project 2 - do - 50. Conduct a study on price of Department of Health/Social December 2003 Done August 2003. pharmaceuticals. Expenditure Management Project 2 Appendix 3 - Emerging Issues/Priorities Key Area Activity and Agreed Action Responsible Agency Timetable Proposed Funding Strengthen 1. Prepare implementation plan for Monitoring Government Procurement June 2004 World Bank-Institutional Organizational and Evaluation capability of the Policy Board Development Fund. Capacity Government Procurement Policy Board- Technical Services Office with respect to enforcement of the Government Procurement Reform Act/Implementing Rules and Regulations. 2. Disseminate information on Government Government Procurement March 2004 World Bank-Institutional Procurement Reform Act/Implementing Policy Board/Department of Development Fund; Rules and Regulations to Local Interior and Local Government Government to pursue additional Government Units through a Joint Circular. funding from ADB. 3. Implement E-Procurement as a Government Procurement December 2004 Government to pursue funding transactional tool. Policy Board/Procurement with ADB. Service 4. Training Government E-Procurement Commission on Audit/ December 2004 Services staff and Commission on Audit Procurement Service auditors in the area of system security. Improve 5. Prepare a report on capacity, quality and International Financing March 2004 Procurement size of contracts for works under Foreign Institutions Practices and Assisted Projects, including the mix of Processes national and foreign funding. 6. Training on Harmonized Bidding Government Procurement December 2004 World Bank-Institutional Documents at all levels including national Policy Board Development Fund and ASEM 2. agencies, local government, private sector and civil society. 7. Prepare a report on bid prices/variation Government Procurement September 2004 Government will request Japan orders relative to Engineer's Estimates in Policy Board/Department of Bank for International projects with and without fixed budget Public Works and Highways/ Cooperation funding. ceilings. Commission on Audit 8. Pilot testing of the Procurement Manual Government Procurement September 2004 ASEM 2 grant. in at least five (5) agencies/Local Government Policy Board/All Agencies/ Units. Local Government Units funding provide Funding will . Grant. Bank 2 Proposed orld trainer W for ASEM 2004 2004 2004 2004 2004 2005 2004 2004 imetableT December September June June June June June June of Public of of of of on of tch,a W Agency Highways Highways Highways Highways Procurement and Procurement Procurement and Procurement and Procurement Procurement and Procurement Highways Procurement Department orks orks orks orks Board/Department or and Board/Department W Board Board/Department W Board/Department W Board Board/Department W Board/Commission Responsible orks Government Policy Health W Goverment Policy Public Government Policy Government Policy Public Government Policy Public Government Policy Government Policy Public Government Policy Audit/Procurement Incorporated ferent to dif small with actual to items, for and foreign by on or supplies, Units. basis, s the Action estimating manual. estimates Begin. experience. Society in data documents Rules invite procurement criteria in variances. method value pilot a ards procured Services of cost and contract. Civil bid on money build" of wA medical procurement Agreed skills bidding and one Government of for books of and Government' and roads, and procurement system international projects a least as qualification requirements disseminate Implementing or analysis value building Bid manual. at common and, Local analyzing procurement designs observers. share the and of Procurement website. the in and best to "design and Activity and in that the selected bidding supply Improvement Include Introduce Pilot Capacity Define Collect prices classrooms, Downloading 9. from agency 10. prices 1.1 works Regulations 12. engineering check ensure three experts 13. schemes 14. Organizations partners Committee 15. match procurement 16. bid e.g. water agencies Area ransparencyT Key Enhance Appendix 4 - Procurement Side Letter Draft - December, 2003 National Competitive Bidding Procedures With respect to goods and works to be procured in accordance with the procedures referred to in paragraph 1 of Part C of Annex 1 to Schedule 4, the National Competitive Bidding (NCB) procedures of the Borrower shall apply, except that, unless otherwise agreed by the World Bank (the Bank) in writing, the following procedures shall apply: Participation in Bidding 1. Foreign suppliers and contractors from eligible countries shall be allowed to participate, if interested, without first being required to associate with, or enter into joint ventures with, local firms. However, joint ventures will be encouraged. 2. For foreign suppliers and contractors, prior registration (such as with the Bureau of Food and Drugs for the registration for drugs, agency accreditation, etc.), licensing (such as licensing by the Philippine Contractors Accreditation Board, etc.), and/or other government authorizations (such as a Mayor's permit, etc.), shall not be a requirement for purposes of participating in bidding competitions. Such registration, licensing and/or other government authorizations may, however, be required from the selected bidder as a condition of signing of the contract, and the Borrower shall not be stopped from asserting such requirement where this is mandated under national law. 3. Except for major or complex works, as defined in this Loan Agreement, where prequalification is required, prequalification of contractors shall only undertaken upon prior Bank approval. 4. Eligibility screening may be carried out prior to bidding with prior Bank approval. 5. If any bidder is to be denied access to the bidding process for reasons unrelated to its financial and technical qualifications to perform the contract, prior Bank approval shall be sought. Bid Documents 6. Suppliers and contractors shall not be required to purchase only local goods or supplies, or to hire local labor, except for unskilled labor. 7. To obtain the best market prices available, open competitive bidding shall be maximized. For this purpose, requirements shall not include restrictive importation permits from private associations or protective preferences for Philippine Flag vessels. 8. Two-envelope system procedures shall not be used unless prior Bank approval has been obtained. Advertisement 9. National Competitive Bidding (NCB) opportunities shall be advertised in national newspapers of general circulation, with sufficient time for bidders to prepare offers, which shall not be less than 30 days, unless a different time is specifically agreed upon by the Bank. Posting shall also be done in the Government COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 28 Electronic Procurement System (GEPS) or the Procuring Entity's website. Bid Submission and Opening 10. Bid opening shall be open to those who wish to attend, and the deadline for submission of bids shall be the same as that for bid opening. For goods, all bids received on time shall be opened and read publicly. For works, in addition to the bid, the following documents are read publicly: (a) bid security; (b) authority of signing official; (c) list of key personnel, (d) list of major equipment; and (e) credit line commitment. 11. Within 72 hours from bid opening, but prior to bid evaluation, a copy of the certified minutes of bid opening shall be furnished to the Bank, which shall contain the following: (a) names of the bidders provided with bid documents; (b) original amount (unevaluated) of the bid of each bidder, as read; (c) date, time and place of bid opening; (d) summary of bid proceedings; and (e) names of the bidders' representatives and other persons present. Evaluation 12. A ceiling may be applied to bid prices, with the prior Bank approval in advance of bidding. The Approved Budget Estimate used as ceiling shall be close to the Engineer's Estimate. 13. The Bank's domestic preferences shall not be applied in the evaluation of bids, and other preferences in effect in the Philippines shall also not be used, except with prior Bank approval. 14. Price negotiation shall not be allowed. However, in the case of a budget limitation, an adjustment in the quantities of goods or the scope of work may be agreed upon, subject to the prior Bank approval. 15. Privileges granted to Provincial bidders to match the lowest bid submitted by a contractor with the principal office address outside the province in which the project is located, shall not be allowed. 16. Explicit bid evaluation criteria shall be set forth in the bid documents based on monetarily quantifiable elements. 17. Experience qualification of bidders shall be equal to two (2) projects that are at least 75% of the estimated project cost. Contract Implementation 20. Modifications exceeding 15% of the contract amount and material changes in the conditions during implementation require prior Bank approval. 21. Arbitral award should be final and binding. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 29 Appendix 5 - CPAR March 2003 Overview 1.1 Recognizing that sound public procurement is for all Bank loans to the Philippines. Even if the find- an essential part of good governance, the Government ings of the 1997 review (Table 1) were discussed in of the Philippines (GOP) and the World Bank (WB) detail with GOP officials, the exercise was essentially have agreed to conduct and pro- conducted by the Bank with no duce a country procurement GOP ownership. assessment report (CPAR). This The Bank relies on the will summarize the findings and 1.3 The current CPAR started Representations and assurances agreed action plans to address in October 2001 and was con- in the "side letter" for entering issues during the Bank's fiscal ducted by the World Bank into a Loan Agreement with year 2002. The CPAR has been Office Manila (WBOM) work- the Philippines, and these recognized by the GOP as an im- ing closely with the GOP desig- portant tool to pursue its objective representations and assurances nated team. The joint working of reforming the public procure- form an integral part of the group has assumed both co- ment system. Key findings and Loan Agreement.1 responsibility and co-leadership recommendations of the CPAR of the project with the participa- have been included in the Bank's tion of the Asian Development proposed Country Assistance Strategy 2003 to 2005 Bank (ADB). Since October, the working group or for the Philippines. CPAR team has met weekly to analyze, discuss and endorse the consultants' main findings. Mainly, the 1.2 A first joint assessment was conducted in work has focused on: (i) Public Procurement Regime; 1994, followed by another in 1997. Because many (ii) Public Procurement in Practice; (iii) Procurement differences between procurement policies of the Bank in Externally Financed Projects; and (iv) Initiatives in and of the Government were noted, the 1997 CPAR Enhancing Transparency. It was agreed that the health, included the "side letter" which is currently being used education and public works sectors would be the focus of the CPAR. The performance of the Local Govern- ment Units (LGUs) was also assessed. Finally, the team The need for serious procurement reform assessed risks arising from the Bank's involvement. is urgent. From fiscal year 1997 to 2001, annual outlays for procurement of goods, works and services by national agencies The Need for Procurement Reform averaged more than Php113 Billion (Table 2). This excludes procurement by LGUs and 1.4 From the overall CPAR perspective, the need Government Owned and/or Controlled for serious procurement reform is urgent. From Corporations (GOCCs) placed at around fiscal year 1997 to 2001, annual outlays for procure- Php50 Billion a year and for Build Operate ment of goods, works and services by national Transfer Transfer (BOT) projects with agencies averaged more than Php113 billion. Public private sector participation, estimated Sector Infrastructure Outlays for 2000 and 2001 indi- at about Php372 Billion in 2001. cate that an average of Php 15 billion of the total bud- 1The "side letter" was first used in 1997 to specify the loan procurement conditions between the GOP and the Bank. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 30 Table 1: Status of Recommendations - CPAR 1997 The 1997 CPAR raised important issues and recommendations recognized by the Bank and the GOP as warranting attention. A situation assessment for each of these issues revealed that, with the exception of the price negotiation practice of the Procurement Service, all concerns were being addressed. Here is the status summary. Areas of Concern Status as of February 15, 2002 0.3 (a) Cumbersome internal procurement processes. The situation persists and continues to be recognized at high government levels. Executive Order (EO) 40 attempts to clarify some issues to simplify the processes. 0.3 (b) Vacillation of project implementers faced with This should no longer be an issue for the central conflicting Bank and local rules and possible legal government but is still a problem at the LGU level. consequences. 0.3 (c) Lack of familiarity of LGUs with Bank procurement Somewhat improved with training but much remains guidelines and rationale. to be done. 0.5 (a) Through seminars, workshops and appraisal This is continuously being done. missions, the Bank should emphasize the waivers . mandating the use of Bank procedures for National Competitive Bidding (NCB) procurement. Recommendations 0.5 (b) Maritime shipping restrictions. Task Team This is continuously being done. Leaders (TTLs) should discuss at appraisal. 0.5 (c) Discourage pre-qualification, encourage This is now the new norm in the GOP. post-qualification. 0.5 (d) Update the `side letter.' Done. 0.6 (a) Use procurement agents in LGU projects. This is being done. 0.6 (b) Use of Department of Budget and Management's This was tried in several projects. (DBM) Procurement Service (PS) as the procurement Unable to verify if advertisements and invitations indeed agent in Bank-financed projects--only when the PS stipulated no-negotiation. agrees that advertisements and invitations will state that there will be no price negotiation. 0.6 (b) Use of DBM's PS Bank should try to convince Unsuccessful. There is a 30% increase in the number DBM to stop the practice of negotiating prices with of agencies using the PS, from 1,200 to 2,186. the winning bidder. The practice is true of modes other than public bidding. 0.6 (c) Procurement Code. Ongoing. 0.6 (c) Update the procurement rules of Commission In progress. on Audit's (COA) Government Accounting and Audit Manual (GAAM). COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 31 Table 2: Philippines - Magnitude of National Government Procurement Outlays ExpenseClass 1997 1998 1999 2000 2001 Supplies and Materials 15.750 15.587 17.012 20.295 16.879 Library Books and Materials 0.034 0.158 0.094 0.225 0.071 Other Services 15.096 17.232 15.430 18.676 19.322 Gasoline, Oil and Lubricants 1.883 1.766 2.099 2.593 2.622 Land and Land Improvements Outlay 43.621 68.337 50.406 63.497 59.985 Buildings and Structures Outlay 17.533 12.579 10.175 11.431 6.570 Furniture, Fixtures, Equipment & Books Outlay 11.275 6.307 9.23 5.723 3.642 Information Technology (IT) Equipment Outlay 0.010 0.226 0.799 0.716 0.932 TOTAL 105.202 122.192 105.245 123.156 110.023 Source: Tables B.1 and B.14, Budget of Expenditures and Source of Financing, Fys 1999, 2000, 2001, 2002 and 2003 get involved procurement by national agencies, LGUs translating into a substantial savings. However, the pos- and government owned and controlled corporations sibility of reforms being blocked by vested interests is a (Table 2). This excludes procurement by LGUs and major concern. Government Owned and/or Controlled Corporations (GOCCs) placed at around Php 50 Billion a year and for Build-Operate-Transfer (BOT) projects with pri- Key Findings of the CPAR vate sector participation, estimated at about Php372 Billion in 20012. 1.6 From the overall findings of the CPAR, the public procurement system in the Philippines is dys- 1.5 The potential for functional. It is character- procurement reform, and ized by multiple laws, rules the budgetary savings real- and regulations which From the overall findings izable from more transpar- while adhering to the prin- ent and accountable of the CPAR, the public procurement ciples of competition and procurement, is high. The system in the Philippines is dysfunctional. transparency, are ineffi- experience of textbook and It is characterized by multiple laws, rules cient and prone to abuse. It drugs procurement under and regulations, which do however adhere also contributes to lower- World Bank-financed to the principles of competition and ing public funds' value for projects demonstrated that money. The following are transparency, but it is inefficient, and prone adoption of more transpar- the key reasons why the to abuse3. It also contributes to lowering ent procurement processes system, despite consider- public funds' value for money. and International able efforts in the past, CompetitiveBidding(ICB) does not function well. practices reduced unit l Proliferation of out- prices of textbooks by about 40 percent--this trans- dated and fragmented laws and the multiplicity of lated into a savings of about Php1.2 billion for the De- uncoordinated executive issuances. At times they partment of Education. In the case of DOH, unit prices are inconsistent with one another. They constitute of TB Drugs were cut by 33 to 94 percent, similarly a source of confusion, vacillation in decision mak- 2Presentation by Dr. Edgardo Jose L. Campos Jr., in the PWI Press Briefing, October 5, 2001. 3Addressed by the omnibus procurement law signed by President Arroyo on January 10, 2003. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 32 ing, slow procurement action, difficulty in enforce- l Surety law does not provide security for contracts ment and vulnerability to corruption. callable on demand. Bank guarantees and irrevo- l Absence of a single agency with a mandate for: (a) cable letters of credit are prohibitive in cost and formulating procurement policy, rules and proce- difficult to obtain from commercial banks. dures, (b) ensuring that these issuances are dissemi- l Allowing unsolicited proposals does not promote nated to and understood by implementing agencies, transparency in the privatization process. (c) monitoring and evaluating compliance, (d) pro- l Inadequate mechanism for encouraging legitimate viding tools to attain efficiency, complaints and lack of efficient administrative accountability and economy, and (e) increasing procedures for handling them. capacity building opportunities, increasing capac- ity building opportunities and a higher level of 1.7 The above key issues mean that despite the professionalism in the procurement function. GOP's efforts to streamline the process (as mentioned l Inadequate dissemination and updating of procure- below), waste continues in the use of public resources. ment rules and regulations. The lack of parallel More so, the ongoing decentralization of government training programs for consistent and efficient functions to LGUs poses an even greater risk. implementation. l Serious weakness in the capacity of members of 1.8 The opportunities for procurement reform are Bids and Awards Committees (BACs) as well as enhanced under the new Administration of President those of Technical Working Groups (TWGs). Gloria Macapagal-Arroyo. Her State of the Nation l Treatment of Annual Procurement Plans as mere Address last July 2001 underscored the urgent need for compliance with budgetary requirements. They are good governance. Last October, when Congress failed not viewed as tools for efficient implementation, to pass an omnibus procurement law, she showed reso- monitoring and evaluation. lution by streamlining procurement via an EO 40. It consolidated various rules and regulations on procure- l Allowing the practice of negotiation with the low- est calculated or evaluated bidder to meet budget- ary ceiling requirements. l Serious delays in registration and licensing of contractors and suppliers. President Gloria Macapagal-Arroyo l Political interference in the bidding process when underscored the urgent need for funding comes from congressional insertions good governance, and streamlined and countryside development funds (CDF) of procurement through an Executive Order, politicians. which consolidated rules and regulations. l Procrastination by bidding committee members The President has set as a top priority the due to risk averseness when evaluating compli- passage of the omnibus law on cated or controversial procurements. This often procurement, and the CPAR has helped to results in re-bidding as an exit strategy. identify specific reform measures for l Serious weaknesses in monitoring and enforcing strengthening the legal and policy procurement rules and regulations. framework, strengthening organization l Insufficient advertisement for small and and staffing, improving practices and medium-sized contracts at the LGU level. processes, and enhancing transparency. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 33 ment. And now that the new Congress is in session, Strengthening Organization and Staffing she has submitted as top priority the need to pass the l By June 2003, DBM and NEDA would have es- omnibus law on procurement. tablished the Government Procurement Policy Board (GPPB) as the procurement oversight en- 1.9 The 2002 CPAR exercise is therefore timely. tity. It would be empowered to: (a) regulate pro- Backed by the GOP's strong ownership of the exercise, curement processes, (b) formulate policy, rules and the CPAR working group identified the following spe- regulations, (c) monitor and evaluate compliance cific reform measures. by implementing agencies, (d) promote the use of state-of-the-art tools to attain efficiency, economy Strengthening the Legal and Policy Framework and accountability in the procurement process, and l By the end of the year, Congress would have passed (e) maintain capacity building by improving the the new procurement law covering all professionalism of the procurement function entities of government, including LGUs, with within the civil service5. provisions for sanctions against violators4. l By June 2003, DBM will have finished the study l Sixty days after the approval of the new Procure- for spinning off its Procurement Service (PS) into ment Law, DBM would have prepared the omni- a separate corporate entity. It will provide efficient bus law's implementing rules and regulations. service to agencies for the delivery of commonly l By end of 2003, the COA would have updated the used supplies. It will not compete with the private Government Accounting and Audit Manual sector in the process. (GAAM) in particular the portion related to l By the end of 2003, the Civil Service Commis- procurement rules and procedures. sion (CSC) in collaboration with DBM and all l By June 2003, the Construction Industry concerned agencies, would have finished the study Authority of the Philippines (CIAP) would have on how to professionalize the procurement issued a directive allowing foreign contractor to bid function in the civil service, to make the function without a Philippine License. (They will be required independent of political influences. to secure one prior to award.) l By June 2004, the DBM and the CSC would have l By middle of next year, DBM would issue a developed a sustainable procurement training directive replacing surety bonds as a form of security with Bank guarantees, letters of credit program with the cooperation of reputable or other forms. institutes of learning. Attendance will be a require- ment for current and future members of bidding l By middle of 2003, under of the leadership of the National Economic Development Authority committees, TWGs and other staff involved in (NEDA), the Build-Operate-and-Transfer (BOT) procurement. law and its "unsolicited proposal" rule would have been reviewed. A course of action would have been Improving Practices and Processes recommended to ensure fairness and transparency l By the end of 2004, to enforce the regulation on in the privatization process. transparency, compliance to mandated processing l By June 2003, the Construction Industry Author- lead times and the procurement plan, COA would ity of the Philippines (CIAP) and the Department have included review of procurement as an audit of Public Works and Highways (DPWH) would step. An appropriate training program for auditors have reviewed the law on arbitration aiming to align on procurement audit would have been it with international practice. developed. 4Passed by Congress in December 2002. 5The GPPB was established in January 2003. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 34 l By middle of 2003, CIAP, in coordination with for 60% implementation by all agencies of the gov- NEDA and DPWH, would have finished the study ernment electronic procurement system. on registration and licensing of contractors, l By December 2004, the computerized registry together with an action plan for implementation. would have been used by all projects, as assured l By June 2003, as ensured by DBM, the Implement- by the DPWH. ing Rules and Regulations (IRR) of the new l By June 2003, Procurement Watch International Procurement Law would prohibit negotiation of (PWI) would have developed guidelines and train- price and contract amounts for goods and projects ing manuals for civil society organizations for after bid opening. monitoring public procurement. PWI and Transparency International Philippines l By the end of 2002, the Department of the Inte- l rior and Local Government (DILG) and DBM (TIP) have on-going programs to encourage and monitor civil society's participation in would have developed a framework and guidelines procurement at all levels. for Congressional insertions and the Countryside Development Fund (CDF) to prevent the improper l The IRR of the new Procurement Law will use of these funds6. incorporate a complaint mechanism aimed at encouraging legitimate complaints and an effi- l By June 2003, price monitoring will be included cient procedures for handling them. as an important function of the Government Pro- curement Policy Board (GPPB) as assured by DBM. Sectoral Case Studies l By June 2003, the CSC would have finished the study on how to provide support to members 1.10 The case studies conducted on four of bidding committees and TWGs to prevent sectors, namely, Health, Education, Public Works and harassment. LGUs have likewise produced a number of reform l By December 2003, the Bangko Sentral ng measures specific to each sector (Table 3). Members Pilipinas (BSP) together with the WB would of the working group representing each sector will have reviewed the operations of domestic letters monitor the implementation progress. Regular reports of credit. This aims to reduce transaction costs to the working group will be made. and thus promote the use of the instrument to expedite the payment process. l By June 2003, the Department of Trade and Need for Overall Governance Reforms Industry (DTI), together with the Philippine Ship- pers' Bureau (PSB) would have completed the 1.11 The above-mentioned measures will help study on the financial impact of the Flag Vessel make the Philippines' public procurement system Law. By December 2003, they would have revised economic, efficient, transparent and more predictable. the policy of waivers for non-Philippine flag Yet, they will not be enough to completely deter vessels for the shipment of goods from Korea and corrupt and collusive practices. The most efficiently Japan. designed system will be prey to abuse if it is not man- aged by a Government with firm political will. Reforms Enhancing Transparency will therefore be needed in other areas such as public l By June 2003, DBM and the PS would have pushed financial management, accounting and internal 6The framework and guidelines for Congressional insertions developed in December 2002. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 35 Table 3: Sectoral Reform Measures Streamline the policy on textbook content evaluation DepEd Done Training, empowerment, and professionalism of the bid committee members DOH June 30, 2002 Streamline the procedure for contract review by the Legal Services Division DOH June 30, 2002 Review the staffing of the Procurement and Logistics Service DOH June 30, 2002 Conduct a study on the price of pharmaceuticals DOH Sept. 30, 2002 Revise Section 1-A, Rule IV of the IRR of Republic Act 8047 and General Policy DepEd Dec. 31, 2002 No. 5 of the National Book Policy to relax its requirements on the importation of raw materials for textbooks Standard estimated cost per classroom, for budgetary purposes, should not be a DepEd Dec. 31, 2002 limitation to the resulting bid price Develop an effective procurement planning and inventory monitoring system at the DepEd Dec. 31, 2002 Regional, Division, District and School Levels Strengthen the Department of Education's (DepEd) procurement capacity DepEd Dec. 31, 2002 Establish a National Drug Price Monitoring System DOH Dec. 31, 2002 Strengthen the Bureau of Food and Drugs' capacity to shorten the registration process DOH June 30, 2003 Develop a mechanism to monitor and evaluate the performance of the suppliers, DOH/ June 30, 2003 constructors, and consultants DepEd Review and implement Department of Health (DOH) reforms in terms of DOH Dec. 21, 2003 decentralizing procurement Develop a mechanism to ensure wider participation and competition DPWH Dec. 31, 2003 Streamline the cash allocation and approval process to avoid delay DOH/ Dec. 31, 2003 DepEd Provide/strengthen quality assurance mechanisms for design and supervision DPWH June 30, 2004 Amend the law to allow textbooks of foreign authors to compete for use as DepEd Dec. 31, 2004 Science, Math and English textbooks in the Philippines control, auditing, judicial systems and the civil service. Working Group (WG), possibly transforming it to a All these are currently the focus of the Government's "Procurement Technical Support Group (TSG)" until efforts to fight corruption. the GPPB oversight organization becomes fully opera- tional. This is necessary to ensure that the dialogue for Ingredients for Successful Reform reform implementation continues, and that the moni- Implementation toring of agreed actions is carried out. The Bank must be able to provide funding and staff support for the CPAR Working Group continuous operation of the Group. In addition, the 1.12 The Government's firm commitment must be members of the Group must be exposed to the experi- sustained. It is thus essential to continue the CPAR ences of other countries that underwent procurement COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 36 reform. They can adopt the les- as to identify solutions in case sons learned from those experi- Firm political will is needed to make of difficulties. These indicators ences. Participation in the Philippines' public procurement shall cover the following top- procurement reform workshops system economic, efficient, transparent ics: (a) interest of international and related training exercises competitors measured by the and more predictable. Complementary are essential. number of international bidders reforms will also be needed in public in a particular competition financial management, accounting and DonorCommunityAssistance group or thresholds; (b) profi- internal control, auditing, judicial 1.13 The CPAR identified ciency of procurement staff to systems and the civil service. the technical assistance for the be trained annually; (c) number agreed reform measures taking of rebidding being called; and into consideration the stated (d) processing times for the deadlines. In this instance, the donor community must procurement processes. be tapped to provide the needed resources to carry out the reform measures. A meeting with the donor com- munity should be organized by the CPAR WB (or the Strengthening Procurement and Project GPPB Technical Support Group, if already in exist- Management in Bank-Financed Projects ence) for this purpose. 1.17 ThecurrentportfolioofBank-financedprojects 1.14 It is worth noting the recent donor interven- in the Philippines has 25 operations with a tions on procurement such as: (a) Study on Moderniza- net commitment of US$1.4 billion and an undisbursed tion of Procurement; and (b) the Report on Streamlining balance of US$0.9 billion. The size of the portfolio, in Procurement for Project Implementation Efficiency terms of number of operations, will likely remain stable conducted by NEDA through the funding of ADB. in the next three years. Total disbursement in Fiscal Year 2001 was US$125 million under investment 1.15 Technical assistance through the Institutional projects, for a ratio of 11.9 percent. This is below the Development Fund grant of the World Bank has been regional standard of 18 percent. The generic implemen- accepted internally in the Bank. It will support the tation issues facing the Philippine portfolio are weak following reform measures: project and procurement management, slow replenish- · Passage of the Omnibus Procurement Law ment of funds, limited monitoring capability and un- · Preparation of the IRRs even capacity of Local Government Units (LGUs) to · Establishment and operation of the procurement undertake procurement.. oversight board · Development of the national training program 1.18 Sincethe1997CountryPortfolioPerformance · Professionalization of the procurement function Review (CPPR), the Government and the Bank recog- in the civil service nized that procurement was the major portfolio issue. · Corporatization of the PS Measures were instituted to improve procurement, such as (a) strict enforcement of lead times; (b) close moni- toring of procurement activities by implementing agen- Success Monitoring Indicators cies with supervision from oversight agencies; and (c) 1.16 Finally,theCPARWorkingGroupshallestab- focused training of procurement staff. lish appropriate monitoring indicators to measure the These measures were seriously implemented, so im- progress, success or failure of the Action Plan, as well provements followed in the ensuing year. However, COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 37 since 1999, the portfolio 1.20 As regards inves- based on disbursement Since the 1997 Country Portfolio Performance tigating allegations of performance was weaken- Review (CPPR), the Government and the Bank fraud and corruption, the ing again. recognized that weaknesses in procurement were Bank will rely on its In- a major portfolio issue. Measures were instituted tegrity and Investigation 1.19 The identified to improve procurement, such as (a) strict Unit (INTIU) and apply measures to address the enforcement of lead times; (b) close monitoring sanctions where called weakening portfolio per- for. INTIU visited the of procurement activities by implementing formance are: Philippines twice last agencies with supervision from oversight · Joint portfolio re year. agencies; and (c) focused training of views with the ADB and the Japan Bank for procurement staff. These measures were Risk Assessment International Coopera- seriously implemented, so improvements followed 1.21 The CPAR as- tion (JBIC) in the ensuing year. However, since 1999, the sessed the procurement · Regular project re- portfolio based on disbursement performance risk as average (Attach- view and visits by the was weakening again. ment 1). The Philippines' World Bank Office Public Procurement Sys- Manila (WBOM) port- tem, through its various folio team laws, rules and regulations, adheres to the principles of · Close monitoring of the status of implementation competition, fairness and transparency. However, there and procurement plans in every supervision mission are serious weakness in the implementation of the sys- · Conduct of ex-post reviews on a regular basis, tem which led to: (a) cumbersome procurement pro- preferably jointly with the statement of expenditures cesses and unnecessary delays; (b) inadequate capacity reviews of implementing agencies; (c) ineffective oversight; (d) · As agreed in the October 2001 meeting with the high incidence of re-bidding; and (e) lack of account- Association of Project Directors (Club of 29), the ability. monitoring of performance through the Procurement Benchmark and Disbursement Target system 1.22 In terms of translating the risk on Bank- (PBDT)7 financed projects to actual implementation, the CPAR proposes the following thresholds: Amount of Threshold per Contract for Procurement Methods and Prior Reviews Item Category Infrastructure Sector (per contract) Other Sectors (per contract) ICB Works Over $2,000,000 Over $500,000 Goods Over $500,000 Over $200,000 NCB Works Over $200,000 to $2,000,000 Over $50,000 to $500,000 Goods Over $100,000 to $500,000 $20,000 to $200,000 Prior Review Works More than $2,000,000 More than $500,000 Goods More than $500,000 More than $200,000 Consultant Services-Firm More than $100,000 More than $100,000 Consultant More than $50,000 More than $50,000 Services - Individual National Not more than $200,000 Not more than $200,000 Consultant Shortlisting 7The PBDT System was replaced by the Procurement/Selection Planning and Monitoring System (PSPMS) in December 2002. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 38 COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 39 The Public Procurement Regime Legal Framework curement is viewed from the identification of the item to be procured up to completion of the works or deliv- 2.1 The Philippines is a democratic and republi- ery of goods. can state which, under the 1986 Constitution, adopts the centralized presidential form. The powers of gov- Main Concerns ernment are exercised by three independent and 2.4 Public sector procurement is characterized by co-equal branches, namely: the Executive Branch outdated and fragmented laws and a proliferation which enforces the laws headed by an elected President of uncoordinated executive issuances. They prescribe a for a term of six years; the Legislative Branch which variety of procurement procedures and requirements promulgates the laws and is vested in a bicameral Con- which at times are not consistent with one another. gress consisting of the Senate Hence, there is an urgent need and a House of Representa- to review and revise the pro- Public Procurement is governed tives; and the Judicial Branch curement laws and EOs. New by a separate body of laws and which settles disputes involv- legislative measures will em- regulations, consisting of more than ing rights of contending parties body the best procurement under the law, and is vested in 40 legislative enactments, Executive Orders reform ideas suitable to Phil- the Supreme Court, an appel- (EOs) and administrative orders (AOs) ippine conditions. late court, and various other presidential decrees (PDs) and issuances special and lower courts. from government agencies.1 2.5 The multiplicity of EOs, ImplementingRulesandRegu- 2.2 The Philippine legal lations (IRRs) and other system is basically civil law, with a written Constitu- agency issuances result in overlapping and uncoordi- tion and a body of legislated statutes as the principal nated directives. They create ambiguity and uncertainty sources of law. Common law influence, however, is in some procurement procedures (Table 4). It is there- traceable in some commercial and procedural laws de- fore important to review the propriety and acceptabil- rived from American legal institutions. Also, the ity of the proposed rules against standard international Shari'ah legal system is actually recognized and en- practice. As of May 2002, there are three versions of forced in the Philippine Autonomous Region in Mus- the proposed law pending in the Senate and one con- lim Mindanao. solidated version in the House of Representatives. 2.3 Public Procurement is governed by a separate 2.6 Furthermore, most EOs and IRRs are promul- body of laws and regulations, consisting of more than gated to fill gaps left by the absence of a comprehen- 40 legislature enactments, Executive Orders (EOs) and administrative orders (AOs), presidential decrees (PDs) Table 4: Partial Inventory Count of Procurement and issuances from government agencies. The primary Issuances responsibility for the implementation and execution of Implementing Rules and Regulations 7 procurement laws and regulations rests with the heads Executive Orders 14 of agencies or offices and the evaluation and award Memorandum Circulars 3 processes are handled by ad hoc Bids and Awards Com- Other Administrative Issuances 17 mittees (BACs) in each agency or office. Generally, pro- Partial Total 41 1Republic Act No. 9184, Government Procurement Reform Act, consolidated all laws into one by January 2003. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 40 sive procurement law. They are normally limited to pro- fort to consolidate all the documents, but it does not viding implementing details of an existing law, not to have the power of law. Therefore, the CPAR team rec- substitute it. They do not cite the laws authorizing their ommends that an omnibus law on public procurement promulgation, although administrative issuances nor- be passed by Congress and promulgated and executed. mally require a legal or statutory basis for their valid- It will consolidate, organize and/or cancel the existing ity. And they do not indicate in their repealing clauses documents, and give a real legal basis to public pro- the specific provisions of previous EOs and IRRs, curement. The IRRs have to be prepared accordingly. which are amended, modified, or repealed. This makes the enforceability of some previously imposed provi- 2.10 Aside from the recommendation for the pas- sions uncertain. sage of the new procurement law, it is important to em- phasize the propriety and acceptability of the rules, 2.7 The Commission taking into consideration on Audit (COA) at times i n t e r n a t i o n a l disseminates procurement Republic Act No. 9184 practice, that are in- laws and executive issu- or the Government Procurement Reform Act cluded in the different ances for compliance by versions of the draft was signed into law by President Gloria field auditors. However, as Procurement Bill pend- Macapagal-Arroyo on January 10, 2003. the executive issuances ing in both houses of are changed, they are not The Act is designed to "fight graft and corruption, Congress. As major always accompanied by improve operational efficiency, bolster weaknesses had been corresponding changes in transparency in bidding procedures and identified in the draft leg- the COA rules. Controver- encourage competition," said the President islation, it is therefore in- sies arise about which rule in signing the new law2. cumbent upon the to follow. Bank, through this CPAR, to communicate 2.8 Some martial law to the Government the era policies and practices need to be re-examined. The recommended improvements prior to the approval of role of DBM as procurer of commonly-used supplies the bill by Congress. for the entire bureaucracy under Letter Of Instructions (LOI) 755 (1978) and regularized in EO 359 (1989) needs to be subjected to the scrutiny of the regular leg- Organizational Framework islative process. The practice of allowing downward price negotiation after public bidding and/or after con- Organizational Set-Up tract award should be probed. 2.11 The overall procurement function is vested to: (a) the head of each national agency or instrumentality; Main Recommendations (b) the governing board for government owned or con- 2.9 The main issue is the proliferation of EOs, trolled corporations (GOCC); and (c) the elected head AOs, and IRRs, which do not supersede each other or of each LGU. Normally, the size and capacity of the do not repeal the existing/previous rules. The prepara- procurement organization would depend on the volume tion of Executive Order (EO) 40 was a tremendous ef- of procurement work that each agency must accom- 2The CPAR was completed in June 2002 and contained many joint recommendations by the GOP and the Bank which were included in the new law. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 41 plish. Regulations, such as PD 1594, EO 262, and the ships. However, for organizational control to be effec- recently issued EO 40, mandate the creation in each tive, the set-up requires a cadre of officials and manag- agency of bid and selection committees. Some of their ers that are qualified to perform procurement functions. members work on an ad hoc basis. These are: (a) the In most agencies, proficient procurement staff are lack- Bid and Award Committee (BAC) for procurement of ing. Consequently, non-procurement proficient staff are works and goods and (b) the Pre-qualification Evalua- often designated, and this sometimes derails the pro- tion and Awards Committee (PEAC) for the selection cess of decision making. Worse, the proficient staff hesi- of consultant services. These committees are assisted tate and sometimes refuse to be designated as members by secretariats to handle the administrative function in of the committees. After all, the function is an added the bidding process. EO 40 mandates the creation of a burden to their original jobs, and they are given no in- permanent Procurement Secretariat with fixed respon- centives. In the Department of HEalth (DOH), some sibility. This is in the interest of efficiency. The Techni- members of the Committee have experienced harass- cal Working Group (TWG) assists the committees in ment from losing bidders. It is often perceived that those the technical evaluation of bids. Further, EO 40 pro- who want to become members of these procurement vides that the contract approving authority must not be units have personal hidden agenda. involved in the bid evaluation process. Professionalize the Procurement Function Function and Ad Hoc Staffing 2.14 The 1997 CPAR had strongly recommended 2.12 The BAC and PEAC determine the eligibility capacity building for implementing agencies to carry of prospective bidders or consultants, receive and open out their procurement work. In support of this bids or proposals, conduct the evaluation of bids or recommendation, the Bank utilized resources from the offers, undertake pre-qualification and post-qualifica- Strategic Compact to conduct a series of training work- tion proceedings, and recommend the award of con- shops for procurement staff in all sectors. In 1998, the tracts. The scope of the BAC and PEAC activities Bank established a self-sustaining training program spans the pre-procurement conference up to the rec- with the Asian Institute of Management (AIM), ommendation of the award. It is chaired by at least a which was selected competitively among institutes of third-ranking official of the agency with at least four higher learning. The curriculum covers procurement voting members, namely: the agency's Legal Officer management within the larger context of project man- as Secretary, a technical member, and representatives agement. Five courses have been delivered and the from Finance and from the end-user. Representatives training is being offered in two regional courses per from non-governmental organizations (NGOs) and the year. AIM is now considering the possibility of estab- COA are required as observers. lishing a graduate degree program with a specializa- tion in procurement management at the masters level. 2.13 Large agencies like the DepEd have a pool of Other lending institutions, such as ADB, JBIC and officers from which the Secretary can designate mem- other bilateral donors, conduct their own training for bers of the Committee for each specific procurement staff implementing their projects. package. Others, like the DPWH and DOH, designate membership for one year from among its senior and 2.15 As mentioned, honest and proficient staff middle managers. Although EO 40 instructed a perma- would not want to remain in procurement for a long nent set-up, the BAC and PEAC Secretariat, in most time. Sometimes procurement can be a hazardous job. agencies, are still ad-hoc and their members are desig- Training alone is insufficient for a civil servant to pur- nated together with the Committees. The same is true sue a career in procurement. It is therefore necessary for the TWG. The ad hoc staffing provides a built-in that the position and title on procurement be institu- check to the system, due to the rotation of member- tionalized within the civil service, not only at the na- COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 42 influences. The CPAR team's recommendation is to pro- The CPAR team's fessionalize the procurement function and establish a recommendation is to professionalize national training program to strengthen the capacity the procurement function and establish a of civil servants involved in procurement at the national training program to strengthen national and LGU levels. the capacity of civil servants involved in procurement at the national and LGU levels. Oversight and Regulatory Framework tional agencylevel but also at the LGU level. Moreover, 2.18 There is no single central public agency the qualification requirement for such career positions exclusively tasked with regulating and overseeing should be integrated into the educational stream, procurement. However, certain agencies and ad hoc whether at the college or graduate level. The CPAR bodies exist with varying oversight responsibilities. recommends that a study be conducted along the objec- · Procurement Policy Board (PPB)4. This com- tives mentioned. Discussions with the Civil Service prises the Secretaries of DBM (as chair), Depart- Commission (CSC) revealed support for such a study. ment of Finance (DOF), Department of Trade and Industry (DTI), DOH, the Department of National 2.16 Theneedtobuildcapacityinprocurementwas Defense, Department of Public Works and High- recognized a long time ago but the determination to ways (DPWH) and Department of Education build sustainable capacity is wanting. Due to fiscal (DepEd), and a representative from the Institute of constraints, the budget for training amounts to Nine Certified Public Accountants. The body promul- Hundred Pesos (Php900.00) per training course per gates rules for the operations of the Procurement employee. This is unrealistic as the regular procure- Service (PS) and other agencies, and conducts ment management training course offered by AIM evaluations of the centralized system for the pro- costs US$2,000.00. Except for the classes of AIM, curement of goods. there is no regular procurement training course that · CommitteeonInfrastructureofNationalEconomic caters to the needs of agencies. The technical assistance DevelopmentAuthority(NEDA).4 Thisbodymoni- component in foreign-assisted projects is tapped by tors, among others, the processing time used in the agencies to provide the funding for institutional bidding process by government agencies in works strengthening, including procurement training. In the and services contracts. It also promulgates rules absence of such funding, however it will be important and regulations to amend the existing ones for pro- to formulate a strategy for sustainable capacity build- curement of works and consulting services. ing in procurement, along the lines of professionalizing · Disciplinary Committee. This is an inter-agency the function and establishing a national training pro- committee created pursuant to AO 129. This is gram. under the Office of the President, and it imposes sanctions for government officials' non- Main Recommendations observance of established deadlines for bidding and 2.17 The main issue is the absence of a real profes- awarding of works and consulting services con- sion of procurement specialists in the civil service and tracts. This committee last convened in 1998. the ad hoc nomination of the BAC members. Hence, · PhilippineLicensingBoardforContractors. This there is a strong need to ensure that these persons are Government agency issues, suspends and revokes procurement certified and independent of political contractors' licenses. 4PPB and NEDA Infracom handling procurement were dissolved by the creation of GPPB under RA 9184. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 43 · Construction Industry Arbitration Commission. ducted to define the detailed functions to be covered. In This body rules on disputes arising from, or con- addition, to expedite the operation of the single over- nected with, contracts entered into by parties in- sight entity, the CPAR recommends that the CPAR volved in construction, including those involving Working Group, under the DBM, acts in the interim as the government. facilitator and support group to the current Procure- · Department of Budget and Management-Pro- ment Policy Board (PPB). In the meantime, the CPAR curement Service (DBM-PS). This operates a WG should define the role, organization and staffing of government-wide procurement system from which the oversight entity so that it could be involved in the all National Government Agencies (NGAs), state preparation of the IRRs. colleges, and govern- ment corporations are 2.20 The CPAR team rec- required to procure their The CPAR team ognizes the importance and commonly-used sup- recommends that an Oversight Entity5 professionalism of the Pro- plies, materials, and be established by law to: (i) oversee the curement Service. To ensure equipment needs. The procurement function; (ii) ensure quality independence and account- PS also monitors their ability, the CPAR recom- and regulate the status and training of prices. mends a study to propose the the procurement staff; (iii) maintain a · Systems and Proce- needed steps towards the con- public procurement website to disseminate dures Bureau of the version of the PS into an in- agency procurement requirements and DBM. This body devel- dependent and corporatized ops standards and activities; and (iv) monitor prices via an entity. s p e c i f i c a t i o n s electronic billboard which publishes for commonly-used up-to-date market prices of commonly-used supplies, materials and commodities. Government equipment, in coordina- Procurement tion with DTI and Processes and DOST. It designs an integrated supply man- Practices agement system for government and conducts stud- ies to improve the purchasing system. 2.21 In general, laws and administrative issuances mandate the transparency of procurement proceedings. Main Recommendations Competitive public bidding requires the public adver- 2.19 Given the number of entities involved in the tisement of requests for bid quotations through general oversight of procurement, the CPAR team recommends newspapers, through the posting of notices in conspicu- that an Oversight Entity be established by law to: (i) ous public places, and lately through government oversee the procurement function; (ii) ensure quality websites. Thus, invitations to bid are required to be ad- and regulate the status and training of the procurement vertised publicly at least twice within two weeks with staff; (iii) maintain a public procurement website to dis- at least seven days between publications in two news- seminate agency procurement requirements and activi- papers of general circulation. The Official Gazette is ties; and (iv) monitor prices via an electronic billboard published weekly and is available to anyone. Public bid which publishes up-to-date market prices of commonly- opening is undertaken by the BAC, which includes used commodities. It was agreed that a study on the membership from the private sector and the COA. It is scope of work of the oversight committee will be con- required to follow the prescribed procedure for evalu- ating bids. Biddings are conducted via the two-enve- 5Single oversight entity established under RA9184. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 44 lope system, where one contains the eligibility/techni- procurement in the different departments should cal requirements, and the other has the bidding docu- monitor the procurement process in accordance ments. The bid opening is public, and may be attended with the stated leadtime. by bidders or their representatives. l Registration and Licensing of Contractors. It is a practice to require foreign contractors to be reg- Main Concerns istered and licensed in the Philippines prior to the l Transparency. Even with all the legal documents bidding. The contractor has to embark on a long in place, it is recognized that the transparency of process and establish offices in the country before public procurement is not sufficient. There are still getting the license. too many influences jeopardizing the procurement l Negotiation of Contract Price. The review high- process. A high rate of re-bidding and price nego- lighted price negotiation as one of the key entry tiations before award often result in this situation. points for possible corruption. The bidding docu- Re-bidding is becoming a natural tool when the re- ments do not allow the reduction of quantities along sult of the bidding is not in line with expectations, pre-agreed percentages. Hence, some parties ne- or the lowest bidder is not qualified. The strategy gotiate with the lowest bidder to stay within the for the first case is evident. For the approved budget. The CPAR group recommends second, political pressures from the disqualified the introduction in the new law (or bidder intimidate BAC members. Re-bidding in the IRRs) a proviso to allow departments to sometines becomes an exit strategy. reduce quantities of the lowest calculated respon- l Complaint Mechanism. The IRRs of EO 40 sive bidder. That will let the departments reduce prescribed an appeal procedure that mandates that the contract amount when needed. "bidders who are not in favor of the BAC's deci- l Congressional Initiative and Countryside sion may appeal to the Head of Agency within Development Fund (CDF). This provision seven days from the issuance of such decision." may allow more funds to be channeled at the dis- The complainant has to file a non-refundable fee trict level for investments to support the popula- of Php50,000 for contracts amounting to Php10 tion. However, the actual procurement practice is million and Php100,000 for larger contracts. The not transparent as some sponsoring congressman rationale for the fee is to discourage irresponsible are purported to pre-determine the winning con- protests from going beyond the agency head. The tractors. This jeopardizes the credibility of the pro- procedure could have the effect of discouraging cess and compromises the integrity of BAC legitimate protests. members. l Lead Time. Lengthy processes characterize l Price Monitoring. Some entities such as the public procurement, and bids get to be extended PS, COA, DOH and DTI are maintaining a price on a regular basis. AO 129 stipulates a maximum list of commonly used supplies. Price monitoring time per activity and this should be enforced by the should be part of a normal and efficient procure- heads of agencies and the BACs. It should be moni- ment function in each department and office. How- tored through procurement audits. ever, there is a need for an oversight entity to l Procurement Plans. Procurement plans are supervise, monitor and process the prices from all developed for budget purposes but their implemen- departments. In essence, this will result in the moni- tation is not monitored due to insufficient toring of public procurement expenses of the Gov- procurement staff. Further, there is no specific link ernment. between budget formulation, planning of activities l Support to BACs. Members of these committees, and procurement execution. Persons in charge of who are nominated on an ad hoc basis, do not have COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 45 the necessary training required of professional staff. l Pre-Shipment Inspection. The Government no They do not receive the needed support in case of longer engages in automatic pre-shipment inspec- external harassment. tion. Public and private sector inspectors are left to l Bonds, Bank Guarantees, Letter of Credits their own arrangements. The result is that, in many (LCs). It is common to use surety bonds as bid cases, the pre-shipment inspection is and performance security. Unfortunately, these neglected or inspection is done only upon surety bonds are not really callable on demand and arrival in Philippine ports. This increases the bur- are very difficult to garnish. The practice demon- den or risk of the importer. When inspection is done strates that a surety bond is not an irrevocable guar- at the destination port, it increases the cost of rem- antee. Most foreign-assisted projects require bank edy because goods have to be shipped back to the guarantees or an irrevocable letter of credit as the manufacturer for repair or replacement. form of bid and performance securities. However, l International Arbitration. According to the Con- on the other hand, bank guarantees and irrevocable struction Industry Association of the Philippines LCs are not easily accessible to bidders, suppliers (CIAP) and the Philippine Constructors Accredi- and contractors since Banks in the country are ask- tation Board (PCAB), the Settlement of Disputes ing for the full amount of guaranty to protect them- provision, which culminates in an international selves. In this instance, it would be practical to court, is not binding. The local party to the con- study and develop alternative means to make the tract, if he/she so desires, may insist on having the system flexible but ensure that the objectives in im- final step of the process heard in a Philippine Court. posing bid and performance securities areattained. l Goods from Korea and Japan. PD 1466 Main Recommendations requires that imported goods should be transported l Enforce the regulation on transparency through by Philippine vessels. Since Philippine vessels go procurement audits. only to Japan and Korea, suppliers from these two Develop a complaint mechanism, which will countries are at a disadvantage compared to the l encourage legitimate complaints from bidders and other countries of the region, which can choose promote transparency in the process. any vessel available. One can transport goods on another vessel only if the fare on Philippine ves- l Conduct a study on the registration and licensing sels is more than 10% higher than the rest. A of contractors. Design and implement an Action waiver must be secured from the Philippine Ship- Plan to streamline these processes. pers' Bureau (PSB) before a non-Philippine l Enforce processing lead-time through the applica- vessel can be used. The CPAR WG finds this rule tion of sanctions and monitor the process through monopolistic, expensive and contrary to the rules procurement audits. of open competition. l Strictly implement the procurement plan and de- l Monopolistic Practices. In general, one of the velop and implement a training program for COA common procurement trends in the Philippines is auditors on procurement audit. the tendency to protect the local market from l Prohibit the negotiation of price and contract outside competition. That is, competitors are amounts after bids are opened and favor reduction dissuaded by cumbersome administrative pro- in quantities or introduce alternate solutions in the cesses: licensing of foreign contractors, mandatory bidding documents. transport on Philippine vessels, restricted access to Develop a framework and guidelines for Congres- foreign textbooks, difficult access to the cheapest l sional insertions and the CDF. Prepare terms of drugs from foreign countries, etc. reference for a study. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 46 l Include price monitoring as an important function institutions. An alternative is, in lieu of bid of the Oversight Board. security for small value contracts, establishing l The CSC or the Office of Solicitor General should penalties in the new law and its IRRs, such as sus- provide support to members of BACs/PEACs pensions for bidders who do not sign the contract. subjected to harassment. For performance securities, the Bank could help in designing one which could be issued by non-bank- l Discourage all forms of securities that cannot be ing institutions. garnished immediately. On bid security, the Bank l Provide the same waiver for goods from Korea and could help in designing "on demand" satisfactory Japan as other countries in the region following the securities, which could be issued by non-banking Philippine Flag Vessel Law. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 47 Decentralized Procurement Practices at the LGU Level Overview mittee responsible for bid evaluation. He/she approves the contract. The influence of the LCE in the 3.1 The need for procurement reform at the sub- bidding is so far reaching that effectively whoever he/ national or Local Government she prefers can win the contract if the LCE decides to Unit (LGU) level cannot be operate in such a way. overemphasized. At the core of development is the realization The need for procurement reform 3.4 Limited Capacity. of the objectives of the Local at the sub-national or LGU level cannot Past experiences, in particu- Government Code, decentral- be overemphasized. At the core of lar for Bank-financed izing, inter alia, the powers for development is the realization of the projects, have shown that the LGUs to handle various objectives of the Local Government Code, capacity in most LGUs for social, environmental, and in- decentralizing, inter alia, the powers procurement management is frastructure development for- very limited. This is due to for the LGUs to handle various social, merly vested to the national the absence of professional environmental, and infrastructure agencies. Thus, LGUs' pro- staff tasked to perform pro- development formerly vested to the jected procurement outlays at curement functions. Nor- national agencies. Php51Billion in 2002 in- mally, this is done by the creased by 89% from the pre- Treasurer or the Secretary vious level in 2001. Moreover, the WB's portfolio is (or worse, clerical staff) in the municipality or prov- shifting its focus towards the LGUs, with the number ince. In some cases where there are procurement staff, of projects directly or indirectly involving the LGUs they are not well versed in procurement. comprising more than 50 percent. As a consequence, a 3.5 substantial part of public procurement will be managed Non-Implementation of Approved at the sub-national level. The CPAR therefore has given Procurement Plans. Procurement plans are prepared by the LGUs to comply with budgetary the appropriate focus on LGU procurement. requirements. However, once approved, most LGUs do not make use of the plan as an implementation tool. Key Findings Sometimes, LGUs do not follow the plan and procure different items. Main Concerns 3.6 National Plans not Conforming to LGU 3.2 Fragmented Regulation. Procurement rules Investment Plans. In some instances, the LGU's are fragmented and there is no specific regulation for investment plans are not considered in the planning ex- the procurement of public works. ercises of some national agencies. Hence, the concerned LGUs are unaware of the projects being implemented 3.3 Lack of Check and Balance. The Local Chief by the national agencies. Worse, some projects dupli- Executive (LCE), such as the Mayor or cate what the LGUs have planned for the same year. Governor, is involved as Chairman of the bidding com- This is often true in projects funded by the CDF and the COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 48 Congressional insertions in the national 3.10 ByDecember2002, therulethattheLCEshall budget. not chair the BAC will be incorporated in the said law and its IRRs, as assured by the same bodies.1 3.7 Delays in Processing Payments to Contrac- tors and Suppliers. As provided in the COA rules, 3.11 By June 2003, the DBM will issue a circular public bidding must be conducted for contracts esti- that will mandate strict implementation of the mated to cost at least Php150,000.00. This amount was Annual Procurement Plan. estimated more than 10 years ago and is no longer real- istic. The consequence is that at the same time, money 3.12 By June 2003, the DILG will issue a circular and effort is consumed for both large and small pro- enjoining all agencies to consult LGUs during the curement deals. Also, there are too many steps in the preparation of national plans for LGUs. payment process in most LGUs, so payment is delayed beyond the 30-day normal span. 3.13 By December 2003, the CSC and DILG will finish the study on professionalizing the procurement 3.8 Lack of Systematic Record Keeping. function and will start the implementation of the Most LGUs do not have well-ordered procurement research. Also, the LGUs will be included in the filing systems. One cause of this is the absence of staff national training program for procurement. members who focus on procurement. No one is accountable to ensure that the files are complete and 3.14 By December 2002, the DBM and the GPPB organized. will insure that the rationalization of procurement methods for LGUs are incorporated in the IRR of the Main Recommendations procurement law. Also, by June 2003, COA will have 3.9 By December 2002, LGU procurement will finished updating the GAAM. be adequately covered in the proposed Procurement Bill and its IRRs, as assured by the DILG and the 3.15 DPWH or the PPB ensures that all provinces League of Cities and Municipalities.1 and cities will have effective procurement record keep- ing systems by December 2003. DILG ensures that all municipalities will also have the same system by December 2004. 1The GPRA covered LGU procurement where Local Chief Executives are prohibited from chairing the Bids and Awards Committee. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 49 Procurement in Externally Financed Projects It is necessary to take strong measures to improve portfolio Weak Procurement Management and procurement performance. The consequences of slow procurement are: 4.1 Since the 1997 CPPR, the Government and the (i) delays in project implementation; Bank recognized that procurement was a major portfo- (ii) increased costs in commitment fees; lio issue. Both agreed on measures to improve project procurement such as: (a) strict enforcement of mile- and (iii) delays in delivering project stones and lead times in procurement; (b) close moni- benefits to the poor. toring of procurement activities by the implementing agencies with supervision from oversight agencies; and showed marked improvement again and the same pace (c) focused training of project staff. These measures of improvement is expected for FY03 (Table 5). gradually resulted in an increase in disbursement for the years 1997 and 1998. However, since 1999 the 4.2 It is revealing that projects with able manage- portfolio based on disbursement performance weakened ment, such as the Social Fund (SZOPAD) and Agrar- again. In FY02 (July 2001-June 2002), however gross ian Reform Communities Development Project were not disbursement of projects that the World Bank supports affected by the performance downturn. On the other hand, projects with poor perfor- Table 5: Disbursement Ratio mance were mostly those 1/ Philippines Disbursement Ratio1/ implemented by LGUs with very limited capacity for project management. It is 30% therefore necessary to take strong measures to improve 25% portfolio and procurement 24% performance. The conse- (Target FY03) 20% quences of slow procurement 21% 17% are: (i) delays in project 17% 17% 15% 15% implementation; (ii) in- creased costs in commitment 12% 10% fees; and (iii) delays in deliv- ering project benefits to the poor. 5% NGAs 0% 4.3 97 98 99 00 01 02 03 Procurement proce- Fiscal Year2/ dures in projects financed by international institutions fol- 1/Actual disbursement over funds available at the beginning of the year. low the procedures agreed 2/Bank's fiscal year--July 1 to June 30. upon in the loan or grant COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 50 agreement. In the case of the WB and the ADB, the rience, therefore, the CPAR WG is recommending for loan agreements identify the method to be used for the future projects that: (i) the capacity of NGOs be as- procurement of different components of the project. The sessed carefully (particularly the past- guidelines issued by the lending institutions are fol- experience in managing projects, the financial man- lowed. To control the process, the lending institutions agement systems and past audits and the procurement provide no objection or clearances to bid documents or capacity and capability); and (ii) conflict of interest requests for proposals, evaluations and recommenda- within NGOs networks (between national boards and tions for award. members or leaders of regional NGOs who are part of the network) be looked into. The implementation 4.4 Procurement remains slow, resulting in a poor manual of the project shall clarify responsibilities and disbursement performance ratio of merely 17% in FY impose rules avoiding conflicts of interests in con- 2000 and 12% in FY 2001. These were attributed to sultancies and decisions of recruitment of host NGOs. factors such as: limited capacity of implementing agencies, poor procurement planning, poor technical Main Recommendations specifications, or interference from higher officials. In 4.7 During project pre-appraisal, the Procurement general, the implementation of projects is slow due to member of the Project Task Team must conduct the "de facto" absence of procurement planning. Dis- procurement capacity assessment of implementing bursements could be expedited by grouping the pur- agencies to determine actions to be taken to attain good chases, which follow the same rules of procurement. project and procurement management, particularly Another key issue is the frequency of re-bidding. This those involving the LGUs and the NGOs. is due to the insufficient precision of the documents distributed the first time to the bidders. 4.8 The implementing agency should present doable procurement plans and provide the structure LGUs for monitoring, reporting and updating the plans. 4.5 For want of projects, LGUs tend to jump at the first opportunity to access foreign-assisted projects, 4.9 Prior to project appraisal, there should be an notably those of the WB and the ADB. There is a need agreement as to the procurement organization that will to fully explain the nature of these projects, the poli- manage the project and Terms of References for the cies, the processes involved and all aspects of the loan, key staff in that organization, including the training especially financial feasibility. LGUs have to be edu- program for them. cated on the intricacies of the project. LGUs that have experienced WB's procedures are generally comfort- 4.10 The implementing agencies must ensure able with its prescribed system--clear, comprehensive that the technical specifications are complete and and consistent. However, some LCEs feel indisposed to biddable to prevent re-bidding. The Operations or some WB-assisted projects as the stringent rules Implementation Manual should indicate clearly the prevent them from making unilateral decisions. responsibilities and accountabilities for preparing and finalizing the technical specifications for major pro- NGOs curements. 4.6 NGOs are involved in many WB-financed projects at different levels: the majority are involved as 4.11 Budgetary allocations, the usage of which are consultant firms in implementing one or several con- controlled by politicians, can be used as counterpart tracts within a project. Overall project management and funds for procurement financed by the Bank when particularly procurement and financial management, is the procurement process strictly follows the Loan considered a weak area for NGOs. Based on this expe- Agreement. COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 51 Measures for Enhancing Transparency Government Anti-Corruption 27, and if the offense was committed in Institutions connection with his/her office. · National Bureau of Investigation (NBI) - an of- 5.1 As early as 1930 the Revised Penal Code fice under the DOJ, conducts fact-finding investi- already punished a wide spectrum of crimes commit- gations of graft cases and entrapment operations, ted by public officers, including bribery, corruption, including those against public officials and dereliction of duty, fraud against the public treasury, employees. misappropriation of public funds, infidelity in the · Presidential Anti-Graft Commission (PAGC) - custody of documents and usurpation of powers. Sub- created through EO 12 (Series of 2001) to investi- sequently, various other anti-corruption laws were gate administrative complaints against presidential passed, notably the Anti-Graft and Corrupt Practices appointees in the executive department charged Act; the Code of Conduct and Ethical Standards for with graft and corruption. Public Officials and Employees; the Ombudsman Act of 1989; the Witness Protection Program Law; the Plunder Law; and the latest, the Anti-Money Launder- Notable Anti-Corruption Programs of ing Law. To enforce the foregoing laws there are a host Government of government anti-graft bodies: · Office of the Ombudsman - a constitutional office · Government Electronic Procurement Sys- mandated by law to act on complaints filed against tem (GEPS) - was established under EO 40 to governmentofficersoremployees,andenforcetheir enhance transparency, accountability, equity, effi- administrative, civil and criminal liability. ciency and economy in government procurement. · Sandiganbayan - a special anti-graft court It serves as the single and centralized portal for created by the Constitution with exclusive jurisdic- the procurement of goods, supplies, materials and tion over violations of the Anti-Graft and related services, civil works and consulting ser- Corrupt Practices Act (RA 3019). It also has vices. Further, EO 40 mandates that all govern- jurisdiction over offenses of public officials and ment agencies and entities should post their employees connected with their office. advertisement in the centralized portal or EPS · Civil Service Commission (CSC) - a constitutional website. Likewise, the winning bid should also be office that serves as the central personnel agency posted. (Table 6). of the government. It is mandated to adopt mea- · Inter-Agency Coordinating Council - a sures to promote efficiency, integrity, and public voluntary alliance of government agencies man- accountability in the civil service. dated by the Constitution and laws to promote and · Commission on Audit (COA) - a quasi-judicial maintain accountability, integrity and efficiency in constitutional office mandated to audit the revenues public service. It is composed of the Office of the and expenditures of Government, and to promul- Ombudsman, CSC, COA, DOJ, NBI and the Presi- gate audit rules. dential Commission Against Graft and Corruption · Department of Justice (DOJ) - conducts prelimi- (now known as the National Anti-Corruption Com- nary investigations on criminal complaints against mission). The objective of the Council is to foster public officials if they rank lower than Salary Grade closer cooperation, share information, and pool re- COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 52 Table 6 The Philippines Government Electronic Procurement System 1. On November 22, 2000 the Procurement Service money in advertising costs. The total cost of the EPS of the DBM, with help from CIDA, launched an pilot program has been estimated at about US$400,000, internet-based pilot electronic procurement system (EPS) shared equally between DBM and CIDA. Within six months composed of a Public Tender Board, Electronic Catalog, after going live, the EPS had 86 agencies and 62 suppliers and Supplier Registry. The system improved access to registered, and 71 bid notices posted on the EPS. (As of government opportunities, saved cost, and enhanced the October 10, 2002, there are 1,797 agencies, 2,377 efficiency and transparency of government procurement. suppliers registered and 9,214 bid notices posted). Eventually all government procurement notices are 2. The DBM oversees government expenditures through envisaged to be posted on the EPS. Suppliers are able the release of budgetary allotments for different govern- to access government bid opportunities 24 hours a day ment agencies and departments, while its Procurement 7 days a week. Service (PS) handles the purchase of goods and services for over 1,800 client agencies and monitors prices of 5. While the system has great potential for improving goods and services. Transparency in government the transparency and efficiency of procurement, the GOP procurement is a systemic problem in the Philippines, and had noted the implementation challenges early and is added to this are inefficiency, poor service delivery and taking steps to address them. For example, even with high low sales volumes resulting from manual and paper-driven interest and support for the EPS, its initial implementation procurement processes. A 1999 study conducted by the was relatively slow. The reasons were numerous-- PS with CIDA assistance showed that a pilot EPS could agencies did not have the same resources or capacity for improve transparency, efficiency and value for money in supporting the EPS, only about 25 percent of agencies government procurement. trained in the EPS were ready for internet access, only about 8 percent of Filipinos were using the internet in 1999, 3. The system went live on December 1, 2000, and there was resistance to change from employees who is now being marketed by the DBM to other agencies. The thought the EPS would lead to a loss of jobs, and this was EPS advertises bids electronically. Bids are received in also a time of larger political uncertainty and turbulence in hard copy and evaluated by hand. The evaluation and the Philippines (the pilot testing ran into the presidential award results are then posted electronically. impeachment trial, the EDSA II people power revolution, 4. The EPS is supported by several EOs and AOs. and the assumption of office by a new government). EO 40 of October 2001 and Republic Act No. 8792, Second, a key lesson learnt has been that the technology dated June 14, 2000, recognize and encourage the use being used must consider the users' level of knowledge of electronic commerce in general and of electronic and skill, access to the necessary infrastructure/equipment procurement in particular. Section 27 of the E-Commerce and services, and needs and expectations. Third, Law (R.A. 8792) also mandates that by mid-2002, leadership has to come from the highest levels of the Agencies/GOCC/GFIs shall "transact government government, and be sustained. Fourth, the agencies using business and/or perform governmental functions using the EPS must have intimate knowledge of their target electronic data messages or electronic documents...", market and know how to segment it--each segment will leaving room for the selective application of electronic require a different marketing strategy and will have different procurement, depending upon the degree of sophistication service level expectations. Customers will start using a new of the existing systems, as well as their applicability to system continuously only if it adds and continues to add specific types of procurement and specific procurement value through its content and quality of information, and if processes. The implementing rules and regulations of EO the system and its support services meet or exceed their 262 state that "bid requirements should be placed in two service level expectations. Third, in order that technical consecutive issues of two newspapers of general and logistical support can be provided on a timely basis, circulation and posted in the EPS and the website of implementation and maintenance of the electronic the concerned agency." The previous practice was procurement service is being bid out to the private sector. to advertise the bids in three major newspapers-- advertising on the EPS has saved the government Source: DBM Case Study on the EPS COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 53 sources for the more effective prevention, investi- Bank. A hotline (10511-1-800-831-043) with multi- gation, and prosecution of venalities in lingual capabilities is available to the public all over government. the world. Hotline users can choose to remain anony- · National Anti-Corruption Plan - an ambitious mous. Cases that require further investigation are sent anti-corruption program proposed by the Develop- to the appropriate unit for investigation. ment Academy of the Philippines; the Government's executive training center. Its vision is a clean government and a corruption-intolerant Civil Society society. To attain this, the plan seeks to streamline government transactions; enforce anti-corruption 5.3 The Philippines has been prominent in involv- policies and laws; promote integrity in the civil ser- ing civil society in the public procurement process to vice; mobilize citizens enhance accountability and trans- against corruption and de- parency. This has happened at tect and prosecute corrupt The Philippines has both national and local levels. officials and employees. been prominent in involving · Government Purchases civil society in the public 5.4 Procurement Watch, In- Information System - a procurement process to enhance corporated (PWI) is a non-profit, COA-initiated electronic accountability and transparency. non-partisan, civil society orga- price monitoring in forma- This has happened at both national nization (CSO) created by a tion system to assist govern- group of concerned individuals and local levels. ment agencies in identifying from government, academe, the suppliers offering the best legal profession and the private market price of commonly sector, brought together by the bought goods. With the use of computers, the sys- challenge of reducing graft and corruption in govern- tem collects prices of goods purchased by member ment procurement through research, partnerships, train- agencies that undertook actual public biddings. It ing, and advocacy. Established on February 15, 2001 then transmits these data to the Government Pro- with support from the ASEM Trust Fund managed by curement Information System (GPIS) Center. the World Bank, PWI promotes transparency and ac- countability and assists in streamlining procedures in government procurement of goods, supplies, materials, World Bank services and infrastructure projects. 5.2 The Bank is active in looking into procurement 5.5 Active procurement monitoring, public fora, performance and transparency in the Philippines. As roundtable discussions, workshops, technical assistance part of its fiduciary responsibility, the Bank has em- to government, research, publications and barked on a systematic expost-review exercise to have media releases comprise some of PWI's activities. By all of the 25 ongoing projects reviewed at least once exposing inefficiencies in public procurement policies during the fiscal year. An external audit of procure- and procedures, and presenting alternatives based on ment in Bank-financed projects is scheduled for FY03. well-grounded research, PWI believes it can push for At the central level, the Department of Institutional In- reforms that enhance competitive public bidding and tegrity (INT) was created with a mandate to investigate lessen the possibility of corruption. any allegations of fraud and corruption reported to the COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE 54 A/ A/ N N $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $100,000 $50,000 $50,000 $50,000 $50,000 $100,000 $50,000 $50,000 $50,000 Individual A/ A/ Firm N N $100,000 $100,000 $200,000 $100,000 $100,000 $100,000 $200,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $200,000 $100,000 $200,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 LGU first & A/ A/ each ICB N N Threshold for Goods contracts $200,000 $1million $50,000 $200,000 $5million $5million $1million $1million $50,000 $50,000 $100,000 $50,000 $500,000 $1million All $100,000 $200,000 $1million $100,000 $50,000 $2million All $1million contract Review contracts Prior more, to of or PMP 2002) of 3 LGU estimated $500,000 first March Amount $50,000 each of and for orks contract (As than W $5million $1million contracts contracts contracts $200,000 $200,000 $5million $5million $5million $5million $50,000 $100,000 $100,000 $300,000 $300,000 $500,000 $5million $300,000 $5million $100,000 $2million Assessment first less all All All & contracts contract And cost Risk first TPBMCL contracts $75,000 Assessment 3 all Project-1 First ICB, Risk All Project Risk woL verageA High verageA woL woL woL verageA High verageA verageA verageA verageA verageA verageA High woL verageA woL High verageA verageA verageA Assessment verage/HighA verage/HighA Attachment A fice H Bank Bank R Social Bank Bank O A Of A Marikina Land D D NIA D DENR SBMA NPC MWSS DPWH DENR of Agency DepEd DBP/DILG DBP/DILG Land Land Land DENR/NIP Land DOF-MDFO Fund DOF/MDFO DPWH/MMDA Szopad City Implementing DSWD/DepEd/DOH DepEd/DSWD/DBM Grants Protocol (GEF) Protocol) Areas Development APL-2 Management (LOGOFIND) Management (GEF) & Fund/Montreal (Montreal Name (HD) Motherhood Management rustT Protected & Sanitation-APL1 Sanitation Safe Management Resources II ransportT & Reinforcement & Education Communities Development & Fund Substance Development II III (Infra) Development Priority Development ater ater Development Sewerage & Improvement Urban Grid of Project Development Based W W (GEF) Health Rural Freeport Rural Development Reform Social Road Environment Elementary Child Expenditure Development(RD) Finance Finance Resources Depletion TRIP AD Administration Districts Manila Urban Urban Bay Second Finance omen's ater SSESSMENT Human W Third Early Social Rural Rural Rural Agrarian W CCommunity OUNTRYMindanao SZOP PROCUREMENT AaterW Land Infrastructure LGU LGU Subic Manila RLGU EPORTMetro National UPDATEGlobal Energy ransmissionT Conservation56Mindanao Ozone MMUR