Eyes on bids

The latest procurement law seeks to fix public procurement loopholes

By Edward C. Gacusana

Delays, abuse of discretion, lack of transparency, and competition are just a few of the most common complaints we hear about government procurement. The Supreme Court’s decision to void the use of counting machines bought by the Commission on Elections; the coup attempt in Oakwood, Makati; and the impeachment case against Chief Justice Hilario Davide, Jr. all brought out public procurement-related allegations.

In an attempt to address these problems, Congress consolidated all existing laws on procurement by passing in January 2003 Republic Act (RA) 9184 - the Government Procurement Reform Act. The basic reforms addressed by the new law includes the simplification of pre-qualification; shift from lowest evaluated responsive bid to lowest calculated responsive bid for goods and civil works; use of the approved agency budget as ceiling and its posting on the Government E-procurement System (G-EPS) website; and the use of objective non-discretionary criteria.

The challenge now is to fully implement the fortified law and make people understand how and why it should work.

One Law

In August 1999, a legal review was conducted on the Procurement Systems and Procedures in the Philippines. Over 100 laws and presidential issuances dealing with public procurement were found. Some of the major procurement laws prior to the passage of RA 9184 includes Presidential Decree (PD) 1594 issued in 1978 by former President Marcos, which covered contracts for infrastructure and other construction projects. Former President Corazon Aquino also approved in 1987 Executive Order (EO) 164, including the Guidelines for the Hiring of Consultants issued by the National Economic Development Authority.

Former President Fidel Ramos also signed in 1996 EO 302, covering procurement of goods, supplies, materials, and general support services. By 2000, former President Estrada mandated all agencies as well as government-owned or –controlled corporations to participate in the electronic procurement system (EPS) of the Budget Department’s Procurement Service through EO 322. Also in 2000, EO 262 was issued to cover procurement of goods, supplies, materials, and general support services and an amendment to PD 1594, which covered government infrastructure contracts.

By the time President Gloria Macapagal-Arroyo took office and while the procurement law was still pending in Congress, she ordered for the consolidation of all procurement rules for goods, infrastructure projects, and consulting service, as well as the implementation of an EPS. Thereafter, she signed EO 40 in October 2001, which clarified the mode of procurement for Information and Communications Projects. It further sets up the EPS as the centralized electronic portal for all types of procurement. Despite this order, a procurement reform law had to be enacted in order to cover not just national government agencies but also local government units. The new measure consequently amended or repealed old laws that were incompatible with other issuances. The imposition of penal sanctions was also added.

RA 9184 is meant precisely to harmonize and standardize all related laws on procurement. Approved on 8 October 2003, its implementing rules and regulations paved the way to higher standards on procurement systems of government. This law superseded numerous laws including provisions of the Local Government Code. It will apply to National Government Agencies, State Colleges and Universities, Government Owned or Controlled Corporations, and Government Financial Institutions.

Interestingly, this law has two IRRs – part A for fully domestically funded procurement and part B for foreign-assisted projects. This was necessary in order to implement immediately the reforms in the national and local levels since foreign funders have their own rules on procurement.

Among others, the new law introduces the following basic reforms:
Simple Eligibility Check. Pre-qualification normally takes one to three months for goods while five to seven months for infrastructure projects to complete because one has to check and evaluate all prospective bidders. But in using the simple eligibility check, one only needs to confirm the presence or absence of the required documents using a pass or fail criterion. This would hasten the process and create more competition.

A detailed post-qualification would be conducted only on the bidder who will submit the lowest calculated bid.

Lowest Calculated Responsive Bid. In using the conventional lowest “evaluated” responsive bid, one can determine the winner using a “merit point system.” This process allows discretion in the allocation of points and the appreciation of bids. The new process, however, involves a ranking of bids from lowest to highest in terms of their calculated prices. Though the price is the main basis, the agency is required to emphasize technical specifications in setting its requirements to ensure the quality of goods procured.

Approved Budget as Ceiling. There is greater opportunity for collusion in the old practice of bracketing. To further enhance transparency, the bid floor has been removed, and the approved budget for the contract shall be the ceiling for the bid price and award. The agency is also required to publish the approved budget at the time the Invitation to Bid is published.

Objective Non-discretionary Criteria. The practice of giving bonus points to bidders who submit with supposedly “higher” quality is subject to abuse. This scenario is dangerous, especially for members of the Bids and Awards Committee (BAC) who could get lawsuits later from losing bidders for abuse of discretion. The remedy is to limit the BAC members in determining only the minimum criteria set by the agency. The point: less discretion, less chances for abuse.

Credible Bids and Awards Committee. The law is useless if there are no competent people to enforce it. Thus, RA 9184 also seeks to professionalize procurement officials. This entails training, development of procurement manuals and standard bidding documents/forms, and other capacity-building programs. One non-government organization in particular, Procurement Watch Inc., has been up and around training people to monitor bids. Currently, it has been coordinating with other organizations and trying to tap more volunteers to do the task. The target is to spread the know-how even to the local levels.

Under the Government Procurement Reform Act, every agency is required to prepare an Annual Procurement Plan (APP) – which not many people, unfortunately, gets to see. Hence, it is necessary to get people with integrity in the BAC.

In the new law, there should be one BAC for goods, civil works, and consulting services. The BAC should compose five to seven members, which shall have a fixed term of one year. Members may be entitled to honoraria (not more than 25 percent of monthly salary), but depending on fund availability.

To prevent conflict of interests, the law prohibits the head and approving authority to be the chairman or member of the BAC. For transparency purposes, in all stages of the procurement process, the BAC must invite two observers: one from a duly recognized private sector association and another from a non-government organization.

The BAC must likewise submit a procurement monitoring report on a semestral basis to the GPPB (Government Procurement Policy Board). The report covers all procurement activities in the APP, including goods and civil works from P50 million and above, and consulting services from P5 million and above.

Tool for Transparency

Technology is a tool for transparency, such that the law pushes the usage of the G-EPS as an online source of information on all government procurement activities.

The G-EPS serves as a gateway to acquire common-used supplies. It has an electronic bulletin board; registry of manufacturers, suppliers, distributors, contractors, consultants; electronic catalogue; and, electronic payment and bids submission mechanisms. Its primary goal is to institute a more open and competitive environment for procuring goods, general support services, civil works, and consulting services. This online supermarket hopes to guarantee the immediate availability of quality items to end-user agencies at the lowest prices.

In the long run, the new law will bring about the benefits of shorter bidding time, financial savings, lesser opportunities for corruption, and a better public expenditure program.