By RIZIEL ANN AGALOOS CABREROS and CAMILLE PABLO DE JESUS
(Part 2)
THE new green color of the fences along Metro Manila’s major thoroughfares may mask the “Metro Gwapo” legacy of former Metro Manila Development Authority (MMDA) chair and now vice presidential candidate Bayani Fernando, but not the series of lapses and anomalies that marked their procurement.
Documents show that the MMDA violated many provisions of Republic Act 9184, or the 2003 Government Procurement Reform Act (GPRA) in procuring the fences, including reference to brand names, and the failure to conduct competitive bidding, among other things.
This non-compliance with established procurement rules happened even after the Commission on Audit (COA) told the MMDA in 2006 to review and improve its observance of the GPRA.
An analysis of all purchase orders (POs) related to the fences’ fabrication, installation and maintenance reveals that out of the 82 transactions made by the MMDA with at least 34 different companies, 26 appear to be questionable under the GPRA. The POs, dated 2003 to 2009, range from P455 to P14.2 million.
RA 9184 states that all procurement by the national and local governments as well as the departments, offices and agencies shall be governed by the principles of transparency, competitiveness, streamlined and uniform process, accountability, and public monitoring.
The procurement law requires competitive bidding except when alternatives prove cheaper and more efficient. But alternative methods of procurement—which include direct contracting, negotiated procurement, repeat order, selective bidding and shopping—may only be done if justified by the different conditions set by law for each method.
The MMDA’s purchase orders show that less than one-fourth of all the documented transactions were conducted through the standard method of competitive bidding. The bigger bulk of the agency’s transactions in acquiring materials for the pink fences was conducted through canvass (40), direct contracting (10), and negotiated procurement (3).
Some of the transactions violated the MMDA’s own procurement guidelines, which state that all purchases worth P250,000 and above should be done through public bidding.
Of the 40 transactions done through canvass, at least 13 should have been bidded out. The COA, in its 2006 annual report, discovered the MMDA’s violations through its deals with H-Chem Industries when it procured through direct contracting 34,781 gallons of paint from December 2005 to December 2006 alone.
Distributed among 29 POs with amounts ranging from P38,000 to P2.85 million, the COA said the transactions enabled the MMDA to procure a total of P16.4 million through direct contracting with H-Chem Industries, all in one year.
“The procurement of paints through direct contracting is not within any of the conditions cited in the (GPRA),” the COA said. “While it may be true that H-Chem is an exclusive manufacturer and distributor of the brands Unicoat and Valiant, suitable substitutes can be obtained from the market at more advantageous price to the government.”
The MMDA said it preferred the two brands based on actual product evaluation. But Section 18 of the GPRA states that specification of goods should be based only on relevant characteristics and performance requirements and not on brand names.
Given this and the fact that there are many other paint manufacturers, the MMDA should have conducted competitive bidding, the COA said.
The COA added that even when the MMDA conducted public bidding in 2008, only H-Chem Industries participated, defeating the purpose of competition.
The H-Chem Industries is a company registered with the Securities and Exchange Commission (SEC), whose former corporate secretaries include Agriculture Secretary Arthur Yap who is now running unopposed as 3rd district representative of Bohol under the ruling party Lakas-Kampi-Christian Muslim Democrats. Meanwhile, his sister, Christine Ong, remains affiliated with the company.
Edenison Fainsan, MMDA assistant general manager for finance and administration, said the other companies which the MMDA invited to bid either lacked inventories or were not interested in dealing with the government on credit sales. He said H-Chem Industries was the only “responsive” supplier.
COA said, “The management’s justifications should be substantiated with the evidence that the items delivered passed the required test analysis by the authorized government testing center/office and should be supported by documents which would show that other suppliers are not really interested to deal with the government.”
While the MMDA posted invitations to bid on the Philippine Government Electronic Procurement System (PhilGEPS), the COA said it did not do enough to guarantee competitiveness because GPRA requires advertisement in newspapers of general circulation.
Numerous contracts that add up to as much as P18.84 million were awarded to the H-Chem Industries for the procurement of paints in 2008 alone. Of these, at least P10 million worth of pink and fuchsia paints could have been supplied at lower cost by other dealers if the bidding was more competitive.
The COA further found that in 2006, the MMDA could have saved P1.2 million of public funds if it did not enter into direct contracting with H-Chem Industries. The prices quoted by the company were found to be higher than those of the leading brands and therefore disadvantageous to the government.
At the start of the pink fence project in 2003, the MMDA contracted REMOJAY Enterprises for the installation of wire mesh fences at the approach of the Epifanio de los Santos Avenue-Shaw Boulevard underpass. MMDA contracted Vergo Enterprises for materials needed for the fabrication and painting of pink fences.
The transactions, which cost P386,807 and P295,300 respectively, were both procured through canvass or shopping which, according to the GPRA, is a procurement method where an agency requests for price quotations directly from qualified suppliers.
Article XVI Section 52 of that law states that shopping can only be done in emergency situations requiring urgent purchases for amounts less than P50,000, or for procurement of office supplies unavailable in the Procurement Service for amounts less than P250,000. Neither transaction meets these criteria.
The law guards against any kind of splitting of contracts that would circumvent the procurement requirements. Section 65 of the GPRA states that public officers who commit acts like “splitting of contracts which exceed procedural purchase limits and competitive bidding” could face imprisonment of at least six years and temporary disqualification from public office.
Still, the MMDA got into numerous such transactions with companies like Supersonic Manufacturing Inc. and H-Chem Industries Inc. with amounts that, when totalled, exceed the amount set by the GPRA.
For instance, a P324,160 worth of purchase from Supersonic Manufacturing was split into three small contracts dated Feb. 4-6, 2008.
The MMDA consistently procured wire mesh from Supersonic Manufacturing in 14 transactions through canvass and direct contracting. These could have been lessened and streamlined had the purchases, especially those that are sequentially close to each other, were merged accordingly through effective project planning.
From June 6 to Oct. 22, 2007, the MMDA contracted Supersonic Manufacturing in five separate transactions, amounting to P3.1 million.
In January 2008, it procured P1 million worth of wire mesh divided into five contracts—all done through canvass and direct contracting.
Purchase orders also show that from January to March 2009, MMDA purchased a total of P1.3 million from the same company, through the same methods.
MMDA Supply Division officer Cynthia E. Agonia said the agency transacted only with Supersonic Manufacturing through direct contracting because the company offered lower price quotations for wire mesh.
Seven POs, amounting to P3.3 million, were issued to Supersonic Manufacturing through direct contracting. These transactions could have been purchased through public bidding as in the case of the MMDA’s transactions with Alpha Seven Trades Inc. for the procurement of wire mesh with the same qualifications as those purchased from Supersonic Manufacturing.
Records of the MMDA show that there are other wire mesh manufacturers, making direct contracting unjustifiable.
In direct contracting, an agency simply asks a single supplier to submit price quotations and conditions of sale which it can accept immediately or after negotiations.
Article XVI, Sec. 50 of the GPRA states that the government can enter into direct contracting only if the requested items are manufactured or sold solely by a single company by reasons of copyright, trade secrets, exclusive dealing and lack of sub-dealers, or if it is necessary for holding a future contractor to guarantee its project’s performance.
The MMDA, however, failed to comply with any of these conditions.
Likewise, in 2007, the MMDA issued four separate purchase orders to H-Chem Industries for the painting of the pink fences. The transactions, which were completed through canvass and direct contracting, add up to a total of P464,662 and could have been procured through competitive bidding if filed in a single PO.
Of all 82 POs analyzed for this report, three transactions were done through negotiated procurement, where the agency directly negotiates a contract with a capable supplier.
The three contracts, which contributed up to 16 percent of the total amount of all procurements, were done between 2003 and 2004. The MMDA issued three separate POs for Wiza Philippines and J.P. Sta. Maria Enterprises, to purchase P11.8 million worth of wire mesh and other construction materials under negotiated procurement.
The GPRA states that government entities could enter into negotiated procurement only if certain conditions are met, including the two failed biddings, or a calamity or other life-threatening situations that need action. Negotiated procurement could also be resorted to in a terminated contract to prevent life and property damage, to take over a contract related to infrastructure project, and when the goods are to be purchased from another government agency.
Again, none of these was met by all the transactions conducted by the MMDA under negotiated procurement. In addition, there are more reasons the negotiated procurement cannot be justified.
Two memoranda, dated March 9 and June 15, 2004, signed by Acting Executive Director Angelito Vergel de Dios, and approved by former MMDA chair Bayani Fernando, said the agency considered negotiated procurement with J.P. Sta Maria Enterprises due to the former’s lack of sufficient supply and the latter’s offered prices that are “the lowest and most advantageous to the government.”
Records at the SEC and the Department of Trade and Industry revealed that J.P. Sta. Maria Enterprises and Wiza Philippines share the same business address in Marikina, where Fernando used to be mayor, a post now held by his wife.
Jaime P. Sta. Maria Jr., one of the incorporators and president of Wiza Philippines as of 2002, said in a text message he knew nothing about the transactions.
In a separate interview, Sta. Maria also said his younger brother Joseph Padaca Sta. Maria, owner of J.P. Sta. Maria Enterprises, is very conservative and does not venture into transactions higher than P5 million.
Jaime said they never entered into contracts with the government to avoid corruption. But procurement documents show numerous deals made between the Sta. Maria companies and the MMDA.
The COA reported in 2008 that because supporting documents such as cost estimates were not attached to the pertinent POs, there was no way to verify the MMDA transactions’ compliance with the procurement law.
(The authors are journalism seniors at the University of the Philippines College of Mass Communication. This report is based on the thesis they submitted to their adviser, VERA Files trustee Yvonne Chua.)