47602 PHILIPPINES A Joint Document of The Government of the Philippines, The Asian Development Bank and The World Bank October 3, 2008 Acronyms and Abbreviations 3 Preface 4 Foreword 6 Executive Summary 8 I. BACKGROUND 2 Country Economic Context Country Assistance Strategy WB Portfolio ADB Portfolio PublicSectorProcurement FurtherChallenges The CPAR Process Objectives Scope Methodology LinkswithOtherStudies II.FINDINGS,ASSESSMENTSANDRECOMMENDATIONS 20 PILLAR I: Legislative and Regulatory Framework ProcurementLegislativeFramework ImplementingRegulationsandDocumentation PILLAR II: Institutional Framework and Management Capacity LinkagesofPublicFinancialManagementSystems ManagementCapacity InstitutionalDevelopmentCapacity PILLAR III: Procurement Operations and Market Practices EfficiencyofProcurementOperationsandPractices FunctionalityofthePublicProcurementMarket ContractImplementationandCompletion PILLAR IV: Integrity and Transparency of Public Procurement System InternalControlandAudit EfficiencyofAppealsMechanism AccesstoInformation EthicsandAnti-corruptionMeasures III.COUNTRYRISKASSESSMENT 46 IV.FOREIGN-ASSISTEDPROJECTS 50 Legal Basis Harmonization Regulations ents BiddingDocuments ProcurementManuals Acceptable Private and Commercial Practices NCB Procurement Annex to the Loan Agreement Procurement Method Threshold Anti-Corruption Measures in WB Projects Use of Philippines Country System V.ACTIONPLAN 56 Action Plan for Philippine Public Procurement System Cont ANNEX : Composition of the CPAR Working Group ANNEX 2: WB Loan Portfolio and Lending Program ANNEX 3: Summary of APPI Assessment Scores for 0 Agencies ANNEX 4: SWS Survey Results on the Effectiveness of the Public Procurement System ANNEX 5: Recommendations and Agreements on CSO Participation ANNEX 6: Unacceptable GOP Procurement Rules ANNEX 7: Review of WB's NCB Procurement Annex ANNEX 8A: World Bank's NCB Requirements ANNEX 8B: ADB's NCB Annex to Procurement Plan ANNEX 9: Status of Actions Agreed in 2005 CPAR Update ANNEX 0: Key Source Documents CURRENCY CurrencyUnit=PhilippinePeso(Php) US$1.00=Php46(June2007) FISCAL YEAR July1­June30 ACRONYMS AND ABBREVIATIONS ADB AsianDevelopmentBank DOH DepartmentofHealth MDB MultilateralDevelopmentBank AF AsiaFoundation DPWH DepartmentofPublicWorks NCB NationalCompetitiveBidding APP AnnualProcurementPlan &Highways NEDA NationalEconomic APPI AgencyProcurement DTI DepartmentofTradeand &DevelopmentAuthority PerformanceIndicator Industry NGAs NationalGovernmentAgencies AusAID AustralianAgencyfor EGP E-GovernmentProcurement NGAS NewGovernmentAccounting InternationalDev't GDP GrossDomesticProduct System BAC BidsandAwardsCommittee GFIs GovernmentFinancialInstitutions OECD OrganisationforEconomic BIR BureauofInternalRevenue GOCC GovernmentOwnedand Cooperative&Development BIS BaselineIndicatorsSystem ControlledCorp's OMES OptimisedMicroturbine BLI BaselineIndicators GOP GovernmentofthePhilippines EnergySystems CAC CoalitionAgainstCorruption GPMs GenericProcurementManuals PAGC PresidentialAntiGraftCommission CAS CountryAssistanceStrategy GPPB GovernmentProcurement PBDs PhilippineBiddingDocuments CBCP CatholicBishops'Conference PolicyBoard PCA PhilippineConstructors ofthePhilippines GPRA GovernmentProcurement Association CIDA CanadianInternational ReformAct PDF PhilippineDevelopmentForum DevelopmentAgency IAEB InvitationtoApplyforEligibility PER PublicExpenditureReview COA CommissiononAudit &toBid PhilGEPS PhilippineElectronicProcurement COFILCO ConfederationofFilipino IAU InternalAuditUnit System ConsultingOrganizations ICM InitiatingConceptMemorandum PICE PhilippineInstituteof CPAR CountryProcurementAssessment IDF InstitutionalDevelopmentFund CivilEngineers Report IOM InternationalOverseas PPMP ProjectProcurement CPI Compliance/Performance Management ManagementPlan Indicators IRRA ImplementingRulesand SEC SecuritiesandExchange CSC CivilServiceCommission RegulationsPartA Commission CSO CivilSocietyOrganization IRRB ImplementingRulesand SGV Sycip,Gorres,Velayo&Co. CWG CPARWorkingGroup RegulationsPartB SMEs SmallandMediumEnterprises DAC DevelopmentAssistance ISO InternationalOrganization SUCs StateUniversitiesandColleges Committee forStandardization SWS SocialWeatherStations DBM DepartmentofBudget& JBIC JapanBankforInternational TAF TheAsiaFoundation Management Cooperation TAN TransparencyAccountability DENR DepartmentofEnvironment& LAIKO CounciloftheLaity Network NaturalResources ofthePhilippines TSO TechnicalSupportOffice DepEd DepartmentofEducation LB LeagueofBarangays oftheGPPB DPEM DevelopmentPlanningand LCP LeagueofCitiesofthePhilippines TWG TechnicalWorkingGroup EnvironmentalManagement LGA LocalGovernmentAcademy UGB UniformGuidelinesfor DILG DepartmentofInterior&Local LGUs LocalGovernmentUnits Blacklisting Government LMP LeagueofMunicipalities UNDP UnitedNationDevelopmentProgram DND DepartmentofNationalDefense ofthePhilippines USAID USAgencyforInternational DO DistrictOffices LPP LeagueofProvinces Development DOF DepartmentofFinance ofthePhilippines WB WorldBank Regional Vice President : James Adams, EAPVP Country Director : Bert Hofman, EACPF Sector Director : Alfred Nickesen, EAPCO Regional Procurement Manager : Shaun Moss, EAPCO Task Team Leader : Cecilia Vales, EAPCO 3 Preface Date and Basis of the Report Dominic Aumentado (Procurement Specialist, EAPCO), Rene AttheMarch2006PhilippineDevelopmentForum(PDF),the SD. Manuel (Procurement Specialist, EAPCO), Noel Sta. Government of the Philippines (GOP) and its development Ines (Procurement Specialist, EAPCO), Leonora Gonzales partners, including the World Bank (WB), the Asian (Senior External Affairs Officer, EACPF), Cecilia Verzosa Development Bank (ADB), the Japan Bank for International (Communications Adviser, EXTCD), and ADB's Candice Cooperation (JBIC), United Nation Development Program McDeigan(ProcurementSpecialist),aswellasconsultantsDavid (UNDP),theEuropeanCommission(EC),TheAsiaFoundation Howarth(internationalprocurementpractice),JoseLuisSyquia (TAF),andbilateraldonors(USA'sUSAID,Australia'sAusAid, (baseline indicators survey and performance assessment), Canada's CIDA), discussed the importance of pursuing HeidiMendoza(localgovernmentandcivilsociety),DennisS. procurementreform.Thepartnersagreedthatitwastimeto Santiago and Shalini Bhagat (legal and policy reform), Alice assessthenewpublicprocurementsystemmandatedbythe Tiongson(capacitybuildingandblacklistingmechanisms),and 2003procurementlaw,andtosetplanstobuilduponwhat SofronioUrsalandRobertDoller(anti-corruptionefforts).Mr. hadbeenthusfarachieved.AnewCPAR,thedocumentthat Jose Dalisay laymanized the text of key areas of the report recordstheprogressofprocurementreform,wasneededto including the Executive Summary. The CPAR was edited by diagnosethehealthoftheexistingpublicprocurementsystem SuzanneSnell(EAPPRconsultant). and,intheprocess,renewthedialoguebetweentheGOPand allstakeholderstodetermineandagreeontheactionstopush TheDecisionMeetingtookplaceonMay6,2008,andthefinal theneededreformsfurther.ThisCPARprocesswouldbethe reportwasissuedtoGovernmentbeforetheendofJune2008, secondfullexercise,thefirstCPARhavingbeencarriedoutin andacceptedbyGOPonOctober3,2008.Implementationof 2002,withupdatesin2003and2005. theCPARAgreedActionPlanwillbehandledandcoordinated bythenewlycreatedPDFSub-WorkingGrouponProcurement, InJune2006,theInitiatingConceptMemorandum(ICM)for whichwillmeeteveryothermonth,undertheoversightofthe theconductoftheCPARprocesswasdiscussedandfinalized, PDFWorkingGrouponGovernanceandAnti-Corruption. includingmeetingswiththeGOPanddevelopmentpartners tosecurecriticalsupportfor,participationin,andcommitment Ownership of Procurement Reform totheCPARprocess.Onthebasisoftheobjectives,scope, The GOP and development partners have been working andactivitiespresentedintheICMandagreedfollowingthe closelyonprocurementreformformanyyearsasanessential guidance of the June 29, 2006, review meeting, a team of element of good governance and an integral part of their WBstaffandconsultants,andrepresentativesofdevelopment jointcountryassistancestrategies.Thegoalsofprocurement partners conducted the review and assessment from July workhavebeentoanalyzeandimprovepublicprocurement 2006toFebruary2007.SWS,alocalsurveyfirm,conducted policies,organization,andproceduresbyincreasingcapacity, asurveyandfollow-upin2006-07onthepublic'sperception improving accountability and transparency, reducing the of procurement and how it could contribute to combating scopeforcorruption,andbringingsystemsintoharmonywith corruption. The survey was coordinated by TAF and funded internationallyacceptedprinciplesandpractices. byUSAID.Theassessmentresultwasintegratedwiththatof theGOP'sOECDBaselineIndicatorAssessmentinanintensive TheCPARprocessisthelatestphaseofthiseffortandhasbeen three-day workshop in Canyon Woods Resort, Province of spearheaded by GOP. The Government's Procurement Policy Laguna, in late May 2007, where participants agreed on Board's Technical Support Office (GPPB-TSO) collaborated an action plan to push procurement reform forward, with closely with the WB at the ICM stage to define the CPAR's particularfocusonenforcementandcombatingprocurement- objectives,scopeandmethodology,themission'sactivitiesand basedcorruption.Basedontheintegratedassessmentresult, timelines,andthepriorityareasforassessment. theCPARTeamdraftedandfinalizedtheCountryProcurement AssessmentReport. The GPPB then organized a CPAR Working Group (CWG) toworkwiththeWBteammembers,formingtogetherthe TheCPARTeamwasledbyMs.CeciliaVales(LeadProcurement CPARteam.TheCWGmembersincludedthechampionsof SpecialistandTaskTeamLeader,EAPCO)andincludedWB's procurementreformintheGovernment,therepresentatives 4 of the voting and non-voting members of the GPPB, and AttheJune2006ICMreviewmeeting,theformerWBCountry the development partners that comprise the PDF Working Director for the Philippines, Mr. Joachim von Amsberg, and Group on Governance and Anti-corruption. The chair of RegionalProcurementManager,ShaunMoss,offeredguidance theCWGwastheDepartmentofBudgetandManagement on the scope and overall direction of the assessment. The (DBM), and the co-chair was the National Economic and present Country Director, Mr. Bert Hofman, who co-chaired DevelopmentAuthority(NEDA).Sinceenforcementisamajor thedecisionmeetinginMay2008,supportedthefinalization areaofcoverage,theworkinggroupincludedrepresentatives and delivery of the CPAR to the Government. Mmes. Irina from anti-corruption agencies such as the Office of the Luca(WB-AFTPC)andVeraSongwe(WB-MDO),andMessrs. Ombudsman and the Presidential Anti-Graft Commission NaseerRana(WB-SARPS),andRobertRothery(ADB)provided (PAGC).Representativesfromthecivilsocietyorganizations, constructiveandvaluablecommentsasPeerReviewers. privatesectorandotherstakeholderswerealsorepresentedin theCWG,includingtheleaguesofbarangays1,municipalities, Mr. Christopher Hoban, former WB Portfolio Manager in cities, and provinces. Development partners were also Manila,andthecurrentPortfolioManager,Ms.MaryseGautier, representedintheCWG.ThefullcompositionoftheCWGis providedtheCPARTeamadviceandguidanceintheconduct presentedinAnnex 1. of the assessment. Mr. Yasuhiko Matsuda provided initial commentsonthedraftReport.Ms.EvelynQuiranteandSusan Acknowledgements CristobaloftheWBCountryOfficeinManila,andAtty.Sygrid The CPAR Team wishes to acknowledge the extensive PromentiallaandMs.MilaManalastasofGPPB-TSO,helpedthe cooperation and assistance received from all CWG and teaminarrangingthelogisticsforthemissionsandworkshops. GPPB team members, during and between the team's visits MesdamesNorGonzales,EvelynQuiranteandMariaKrizette and throughout many meetings, and from ADB, JBIC, TAF, Hermosofacilitatedthepublicationofthedocument. USAID, AusAID, CIDA and WB staff who provided inputs. The CPAR Team expresses its particular thanks for the cooperation,assistanceandinputstothereportcontributed byDBMUndersecretaryLauraPascua,whowasoverallCWG coordinator, and Executive Directors Estanislao Granados (ProcurementService)andRubyAlvarez(GPPB-TSO),whowere theworkinggroupcoordinators. A barangay is the basic political unit in the Philippines that serves as the primary planning and implementing unit of government policies, plans, programs, projects and activities in the community, as a forum where the collective views of the people may be expressed and considered, and where disputes may be amicably settled. 5 Foreword The Country Procurement Assessment Report (CPAR) ProcurementSystem,throughthePhilGEPS,whichwould processprovedtobeasuccessfulmechanisminassessing resulttogreatertransparencyandaccountabilityasthe thecountry'spublicprocurementsystem,identifyingits systemwouldbeopenforeasycivilsocietymonitoring strengthsandweaknesses,andprovidingaplatformfor andscrutiny. adialogueamongstkeystakeholders.ThepreviousCPAR in2002anditstwoupdateshadbeenrecognized,not We wish to commend the executive and legislative onlyasanassessmenttool,butmoreso,asthevehiclefor branchesofgovernmentforcontinuingtosupportand recordingtheprogressofthereformandthemeasuresto pursueprocurementreformwhichwouldbeadeterrent pursuetomovethereformagendaforward.Moreover, against corruption in the long term. Much will now ithasbecomeaninstrumentforinstitutinginnovative dependonthecontinuousimplementation,monitoring and modern reform approaches and standards, and and enforcement of this key institutional and policy cementing the collaborative partnership between the reform to ensure its sustainability in achieving good Governmentanditsdevelopmentpartners.Itisindeed governance. commendable to witness consistent Government's cooperation and commitment to the CPAR process, throughtheGovernmentProcurementPolicyBoardand itsTechnicalSupportOffice. The CPAR focuses largely on assessing the country's Bert Hofman public procurement system by comparing it against CountryDirector,Philippines international procurement standards, and following EastAsiaandthePacificRegion the OECD/DAC-WB Baseline Indicators for a good TheWorldBank performing public procurement system. The CPAR providesascorecardofachievementsandprogress,and identifiesthechallengesaswellasmeasurestoaddress thesechallenges.Althoughmuchhasbeenachievedin Claudia Buentjen reformingthelegislativeandregulatoryframework,much Officer-in-Charge remains to be done in strengthening the institutional PhilippinesCountryOffice framework and management capacity, enhancing the AsianDevelopmentBank competitivenessofthepublicprocurementmarket,and improvingtheintegrityandtransparencyofthesystem. TheCPARrecordstheactionplanthattheGovernment and its development partners have agreed, including commitment to financial resources, to mitigate those challenges. Itisworthcitingthesignificantachievementmadeinthe harmonizationandalignmenteffortstowardstheuseof countysystems.Foremostofwhichistheharmonization of bidding documents and procurement manuals for works, goods and consulting services that brought the country's system more aligned to the procedures of multilateral banks where less than ten exceptions werenoted.VerywellrecognizedintheReportisthe commitment to pursue a harmonized eGovernment 6 Foreword WewelcometheCPARprocessasanobjectiveyardstick Inending,allowmetonotethatonlytwothingsare of the Philippine government's accomplishment in certain: Reforms do not happen overnight and that pursuingprocurementreform.Itgivesusameasureof its success depends on each of us working together. howwellwehavedoneinthepast,butalsorevealsthe Towardsthisourdevelopmentpartnershavebeentruly amountofworktobedoneforthefuture. instrumental in this process of change, providing the necessary support when and where the government Manychallengesremain.Forone,furtherharmonization needsit. of our country system with that of our development partners is necessary in order to fully govern the participation of international bidders. Thus, one of the recommendations of the CPAR is to finalize the implementing rules for foreign funded procurement. Withthecooperationofourdevelopmentpartners,we hopetoaccomplishthisbeforeendof2009. Rolando G. Andaya, Jr. Chairman Theprofessionalizationofourprocurementpractioners GovernmentProcurementPolicyBoard is another. By pursuing the education and equipping thefrontlinersofprocurementreform--themembers of the various Bids and Awards Committees and its supportunits--withthenecessaryskills,theywillsoon berecognizedastruechampionsandprofessionalsin thefieldofpublicprocurement. 7 Executive Summary Public Procurement Cycle processandoftheneedforvigilanceinitsimplementation,so 1. Every year, the Philippine government spends hundreds of that it can play a greater role in effectively safeguarding the billionsofpesostobuythegoodsandservicesitneedstocarry publicinterest. out projects and deliver services to its citizens. This money comesfromthebudgetthatitfundsoutofitsownrevenues 6. Before 2003, the Philippines had many laws and many andfromloansandgrantsextendedbyforeignsourcessuchas agenciesdealingwithprocurement.Butbecausetheydidnot multilateraldevelopmentbanksandbilateraldonors. functionasaunifiedsystem,itwasverydifficulttoimplement realprocurementreform.Somerulesandregulationsworked 2. Deciding how to spend this money is a very important unfairly against foreign bidders who could have offered responsibilityonthepartofgovernmentleadersandofficials, competitiveprices. notonlybecauseofthelargeamountsbutalsothepublictrust involved.Citizensandtaxpayershavearighttoexpectthattheir 7.Whenitfirstreviewedthecountry'spublicprocurementsystem governmentwillspendthesefundswiselyandhonestly,forthe in 2001, the Government of the Philippines (GOP), with the greatestpublicgood. assistanceofitsdevelopmentpartnerssuchastheWorldBank (WB),theAsianDevelopmentBank(ADB),andtheJapanBank 3.Procurementisakeystepintheprocessofgettingthebest forInternationalCooperation(JBIC),sawthatmuchneededto bedone.The2001-02CountryProcurementAssessmentReport valueforthepeople'speso.Theprocessinvolvesannouncing (CPAR)notedthatthesystematthattimewasat"averagerisk" or advertising what the government needs, inviting qualified butalsofragmented,cumbersome,andpronetocorruption. partiesorindividualstooffertheirbids,evaluatingthosebids, awarding contracts to the chosen bidders, monitoring their The Government Procurement Reform Act deliveryandperformance,payingthemandrecordingtheresults 8.Abreakthroughcamewiththepassageandpromulgationin ofthewholeprocessforotherstosee.Italsoinvolvesmaking January2003oftheGovernmentProcurementReformAct(GPRA) sure that the bidding is fair and transparent to all, and that (Republic Act No. 9184), "providing for the modernization, anyonewithalegitimatecomplaintcanbegivenspeedyjustice. standardization and regulation of the procurement activities Forthepastfouryears,anaverageofPhp121billionworthof ofthegovernmentandforotherpurposes."Itwasdesigned infrastructure,equipment,materials,suppliesandserviceshas to streamline the Philippine procurement system, reduce passedthroughthisprocesseachyear,about15percentofthe opportunitiesforgraftandcorruption,harmonizethesystem country's total annual budget, equivalent to about 3 percent with international standards and practices, and promote of its Gross Domestic Project. Thus, procurement is a major transparency,competitiveness,andaccountability. governmentactivity. 9.TheGPRAreplacedwhathadbeenmorethan100laws,rules, Procurement Reform andregulationswithasingleunifiedpublicprocurementsystem. 4. While the procurement process is straightforward enough ItcreatedtheGovernmentProcurementPolicyBoard(GPPB),a onpaper,ithasmetmanydifficultiesandproblemsinpractice. policy and monitoring body with the mandate of handling all Corruption, inefficiency, ignorance, and disorganization have procurementmattersaffectingthenationalinterest.Itprovided resultedintheeffectivelossofmanybillionsofpesosandin for standard bidding documents and for generic procurement the procurement of substandard materials and services. By manualsintendedtomakeiteasierforeveryonetounderstand oneestimate,anaverageof20percentto30percentofevery andtoparticipateintheprocurementprocess. contractgoestoleakages,oraboutPhp30billionannually. 10.TheGPRAalsoincludedanti-corruptionprovisions,including 5. While many problems arise from dishonest officials and stiffpenaltiesandsanctions­administrative,civil,andcriminal bidders,procurementsystemsalsoneedtobeimproved,and ­ against offenders who are found guilty, with a minimum those involved in procurement need to become familiar with criminalpenaltyofsixyearsinprison. the correct methods and practices. The private sector also needsbetterinformationandtoolsinordertoparticipatemore What Has Been Achieved activelyandcompeteonalevelplayingfield.Thegeneralpublic 11. Since the passage of the GPRA, the public procurement needstobemadeawareoftheimportanceoftheprocurement system has become more efficient, and many loopholes for 8 corruptionopportunitieshavebeenclosed.Thepromotionof scenario is consistent with perceptions of a high level of e-procurement through the Philippine Government Electronic corruptioninprocurementandwiththeSWSsurveyfindingsthat Procurement System (PhilGEPS) has brought the system into only13percentofthepublicisawareofthenewprocurement thedigitalageandvastlyimprovedtransparencyandefficiency. lawanditsintendedbenefits,andonly29percentofpeople Inimplementation,standardbiddingdocumentsandmanuals interviewedagreedthatcorruptioningovernmentcontractsis arebeingusedbythekeyactorsinprocurement,theprocuring lesscommonnowthanfiveyearsago. agenciesandtheprivatesectorproviders.Inreviewingcompliance andclosingtheloopinimplementation,theauditorsandthe 15.Howevergoodthenewpublicprocurementsystemunder GPPBarenowlookingatthesamerulesanddocumentsasthe theGPRAis,likeanysystem,itcanfallpreytodeliberateabuse actors,whichshouldbemakingiteasiertoconductreviewand throughinappropriateuseofpower.Bythemselves,thelawand audit. the new procurement system alone may not be sufficient to controleitherthegrandcorruption--thetheftoflargesumsby 12. In January 2003, the GOP and its development partners high-levelpoliticiansorofficials--orpoliticalcorruption--misuse agreed to align and harmonize the new public procurement ofstatepowerbyofficialswhoshapetherulesofthegameto system with the requirements of foreign-assisted projects. As benefitthemandthosewhopaythem--thatprevailedpriorto ofDecember31,2007,fourareashavebeenharmonized:the procurementreform,andthatarereportedlycontinuing2.The standardbiddingdocuments,thegenericprocurementmanuals, successofprocurementreformwillrequiremeasurestostimulate thetrainingofprocurementstaffandtheuseofthePhilGEPS. strongpublicawarenessandsupportforprocurementreform. Efficiencyalsoincreasedfollowingtheimpositionofdeadlinesfor eachprocurementstep.Alignmentwithinternationalpractice 6.Public Awareness: Communication of the reform to the improved,andthenationalprocurementsystembecamemore public.MostFilipinosareunawareoftheimpactofprocurement widelyusedfollowingtheincreaseintheNationalCompetitive ontheirdailylives,throughthedeliveryofpublicservices,and Bidding(NCB)thresholdstoUS$1millionforgoodsandUS$5 oftheimportanceofprocurementreform.Arecentsurveyby millionforworks.From2004to2006,atotalofPhp400billion theSocialWeatherStations(SWS)foundthatonly13percent incontracts,oraboutUS$8.7billion,wentthroughtheNCB ofthegeneralpublicand30percentofgovernmentemployees system, including government-funded and foreign-funded knew about the 2003 procurement reform act. A better contracts. communicationstrategyneedstobedevisedandimplemented toraisethepublicprofileofprocurementsothatitsstakeholders 13. Many government agencies adopted e-procurement and andbeneficiariescanparticipatemoreactivelyandsafeguard have benefited from the transparency and competitiveness itagainstwrongdoing.Itisthereforenecessarytodeepencivil itfosters.ThetownofLo-oninBohol,forexample,doesall societyandprivatesectorinvolvementinvigilantmonitoringof itsbuyingonline.Usingcompetitivebidding,theDepartment procurementoperation. of Education's bulk purchases of textbooks for all schools nationwidesaved50percentcomparedtopreviouspractice,a 7. Procurement law implementation and enforcement. substantialsavingtotheeducationsector.Onetextbookthat ThesesevenoftheCPAR'ssome30recommendationsarecritical wasbeingpurchasedforanaverageofPhp100camedownto toimprovingimplementationandenforcement. Php45incompetitivebidding.Suchexampleshaveencouraged otherstotrythesystem. ·Review,revise,andissueanationaltrainingprograminline The Challenges That Remain withthestrategiccommunicationplantoensurechangein behavior of the current crop of procurement practitioners. 4. Allegations of procurement corruption. Most recent Private sector should also be included to improve corruption perception surveys indicate that perception of competitiveness; corruption in the Philippines remains very high. However, · Hasten the implementation of the career program of procurement is ranked as strong, an indication of good professionalizingprocurementpractitioners; procurement processes. Much progress has been made in procurement reform in terms of rules and regulations but implementation and enforcement are still weak, and the 2Source: Accelerating Inclusive Growth and Deepening Fiscal Stability Report for Philippine Development Forum objectives of the reform have not been fully achieved. This 2008, World Bank. 9 ·Improveprocurementprocessesandproceduresthroughthe they recommend that empirical data be gathered and developmentofsimplerbiddingdocumentsandprocurement presented to Government demonstrating that ABC-type manuals for small users, especially local government units, priceceilingsdonotprovidelong-termbenefits.Thisanalysis barangays,people'sorganizationandcommunities; shouldbeaccompaniedbytheresultsofthreeotherempirical ·Issue policies on record-keeping and public disclosure of studies:(i)acomparisonofcostorengineer'sestimateswith documents to provide the public with better access to ABC to determine how reasonable the ABC limits have procurementdataandinformation; beeninpractice,(ii)andananalysisofwhetherthecurrent ·ProvidefundingfortheGPPBTechnicalSupportOffice(TSO) lowparticipationofbiddersistheresultofimposingabid at a level adequate to strengthen its capacity to perform ceiling, and (iii) a report on the effectiveness of the ABC an expanded role to oversee the implementation and ruleinrelationtocontractadministrationandthequalityof enforcementofthelaw,andtoensureitsrelevance; completedworks. ·PursuetheexpansionofPhilGEPSPhases2to5,asitisthe solee-procurementportalforthecountry.Itsexpansionwill ·Absence of an independent complaints review body.An providereadyandadequateinformationthatwillmakethe independentadministrativereviewbodyshouldbeestablished procurementprocesstrulytransparent;and to accord the appeal process credibility and efficiency. · Preparation and issuance of Implementing Rules and Independenceisparamountinensuringacredibledecision Regulations­B to institutionalize the harmonization of ofthemeritsoftheappealand,beingadministrative,itwill procurementbiddingdocumentsandmanualsthatwillspecify avoid the lengthy process of a judicial proceeding, which the regulatory framework for procurement under foreign- invariablycannotbecompletedintimetofixproblemsina assisted projects. This will strengthen the implementation procurementprocedure.TheCPARactionplanincludesthe andenforcementofthelawandclarifytheapplicationofthe conductofastudytoreviewtheexistingappealsmechanism MDBs'ProcurementGuidelinesininternationalorexecutive inlinewithinternationalprocurementpractice. agreements,includingatthelocalgovernmentlevel. · Pre-qualification and Eligibility Screening. Under the 8. Procurement Policies and Mechanisms. The GPRA is procurementlawanditsimplementingrulesandregulations, considered a good procurement law as it has incorporated pre-qualificationisreplacedbyaneligibilitycheckandastrict mostinternationalprocurementpractices,includingcompetitive post-qualificationprocess.Tolessensubjectivity,apass/fail public bidding as the default mode, the mandatory use of evaluationisappliedduringeligibilitycheckbasedonadefined standard bidding documents, forms, and manuals, the use setoflegal,technicalandfinancialcriteria.Onlybiddersthat ofanelectronicgovernmentprocurementsystemtoenhance passtheeligibilitycheckareallowedtosecurebiddocuments transparencyandaccesstoinformation,aneffectiveoversight and submit a bid. Thereafter, the winning bid undergoes policybodytooverseeimplementationbyprocuringagencies, verificationandvalidationduringpostqualificationtoensure sanctionmechanismsagainsterringparticipantsintheprocess, that it has passed all the requirements and conditions as andotherfeatures.However,somefeaturesofthelawarenot specifiedinthebiddingdocuments.However,development inaccordancewithinternationalprocurementpractices. partners believe that eligbility screening, like use of ABC, resultsinrestrictingcompetitionandhascontributedtothe ·Approved Budget for the Contract (ABC). GPRAmandates lowobservednumberofcompetingbidders(anaverageof imposition of an Approved Budget for the Contract (ABC) threepercontract).Toimprovecompetition,thedevelopment thatsetsapricebidceiling;anybidsthatareabovetheABC partners recommend that empirical data be gathered and are automatically rejected. The Government's rationale for presented to Government demonstrating that eligibility thisruleisthatithelpscontaintheincidenceofcorruptand screening is less effective than pre-qualification, and that collusiveactivitiesandsofar,theGPPBhasbeensatisfiedwith an independent review be conducted on the effectiveness theresultofthemandatoryimpositionofABCinalllocally of eligibility screening requirements in the Philippines, in fundedcontracts.However,ABCisnotanacceptablerulefor particularfordocumentsthatarenotrelatedtothetechnical foreign-fundedcontractsbecauseitlimitscompetition;italso andfinancialcapacityofthebidder. imposesparticularlimitationsininternationalbiddingbecause internationalfirmsfacehighercoststhanlocalonesandABC 9. Private and public sector partnership. Conditions of doesnotalwaystakethisintoconsideration.Infact,ABCcan weakcompetitionthatprevailedinthepre-GPRAeracontinueto encouragecollusionamongasmallnumberofbidders. persist.Afewprivatecompaniestendtocornerthebiddingsfor specifictypesofcivilworksandgoods.Manycompanieswhoare The development partners believe that ABC should be notawareofthenewpublicprocurementsystemsaidtheyprefer abolishedoncetheGovernmentissatisfiedthatitscurrent nottodealwithGovernmentduetoitscumbersomeanddifficult purposeinlimitingcollusivebiddinghasbeenserved.Thus, procurementprocesses.Legitimatecompaniesshouldbemade 0 awareofthechangesduetotheGPRAthathavestreamlinedthe andManagementCapacity,andIntegrityandTransparencyof newprocurementprocessandcreatedalevelplayingfield.An thePublicProcurementSystem,partiallymetthestandardsand aggressivecommunicationstrategy,includingtargetedcapacity wereassessedashavingaMediumorModerateRisk.However, building for private sector participants would strengthen the Procurement Operations and Public Procurement Market private-publicsectorpartnership. Performancedidnotmeetstandardsandwereassessedata Highrisklevel.Thedetailsofthespecificriskassessmentsare discussedatlengthinChapter3oftheCPAR. The CPAR 20. ThisCPARistheproductofthelatestefforttomonitorand Looking Ahead assesstheeffectivenessofprocurementreforminthePhilippines, 22.AlmostallweaknessesidentifiedintheCPARareaddressed spearheadedbytheGOPinclosecollaborationwiththeWBand in the agreed Action Plan for 2008-10 presented at the end other development partners such as ADB, JBIC, AusAID, EC, ofthisreport.TheGPPBhasalreadyinitiatedconcretestepsto USAID,CIDA,TAF,andtheUNDP.TheGPPBorganizedaCPAR addressthethreecriticalchallengesmentionedabove:allegations Working Group, comprising the champions of procurement of corruption, public awareness, and implementation and reformintheGovernmentandrepresentativesofthevotingand enforcement.AStrategicCommunicationPlanhasbeendrafted non-votingmembersoftheGPPB,andofthedonors,private to increase public awareness. A long-term and sustainable sector,andcivilsociety. professionalization program has been designed, including a specifictrainingmoduleforprivatesectorparticipants,andthe 21. The CPAR found that the country's public procurement certificationofprocurementprofessionalshasbeenagreedto system has an assessed overall risk level of Medium or withtheCivilServiceCommission.ToensurethatCPARaction Moderate.Theoverallrisklevelisarrivedbycombiningseparate planisactedupon,fundedandfulfilled,aSub-WorkingGroup assessmentsforfourmajoraspectsorpillars,asrepresented onProcurementwasformedinAugust2007undertheauspices graphically in Figure 1. The Legislative and Regulatory of the Philippine Development Forum Working Group on FrameworksubstantiallymetinternationalstandardsforaLow GovernanceandAnti-Corruption,andwasofficiallyconvened assessedrisklevel.Twootherpillars,InstitutionalFramework inNovember2007. Figure 1. Graphical Representation of the BLI Pillars for the Philippine Public Procurement Systems in 2006 2006 Assessment of the Philippine Procurement System I The Legislative and Regulatory Framework Pillar IRR-B Foreign Assisted Projects 25.00% International Competitive 20.00% 15.00% 10.00% The Integrity and Institutional Framework 5.00% II IV Transparency of the Public and Management Capacity Procurement System 0.00% Follow-thru in Compliance Monitoring Internal Audit Pillar -Improve Compliance Pillar Role of Observers -Generation and Analysis of Data Linkage PhilGEPS as transparency tool Maximum Score Procurement Operations and 2006 Country Score III Public Procurement Market Performance Professionalization Pillar Record Keeping Private Sector Ownership Implementing Procurement Reform Supported by international development agencies, the Government's core reforms in procurement are promoting competitiveness, economy, transparency and accountability. These reforms, amongst others, led to reducing the cost of textbooks from an average of P100 to P40, for a cumulative savings of about P3 billion for the Government in the 2005-2006 procurement. 2 I. Background Country Economic Context The WB adopted a strategy of supporting "islands of 1.ThePhilippineshashighpotentialtoachieverapidsocialand economicprogress.Itenjoysastrongsetofassets:world-class good governance" as a talent,awell-educatedpopulationof83million,richnatural way of supporting resourcepotential(mineral,oil,gas,geothermal),andalocation that offers excellent trade opportunities. The Philippines institutions and reform also benefits from a very active civil society that can be an experiences that important agent for change. However, overall development outcomesinthePhilippinesoverthelastdecadeshavefallen demonstrate how progress shortofpotential,accordingtotheWorldBank(WB)Country can be made in an AssistanceStrategy(CAS)ProgressReportforthePhilippines (June2007).Percapitagrowthhaslaggedsignificantlybehind environment where public otherEastAsiancountries.Relativelylowdomesticandforeign institutions are often unable investmentflowsreflectweaknessesintheinvestmentclimate. Investorsandenterprisesconsidermacroeconomicinstability, to work effectively for the corruption,andpoorinfrastructureassignificantconstraints. common good 2. Ever since the late 1990s, the Philippine economy has shown consistent and steady growth culminating in a 7.2 percentexpansioninrealGDPfor2007.Largelysupported Country Assistance Strategy by a favorable international environment, strong domestic consumption,andhighremittanceinflows,lastyear'sgrowth wasthehighestinoverthreedecades.ThelasttimeGDP 3.Inresponsetotheinitiallyuncertainpolicyenvironmentin expanded close to this was in 1988 when it recorded a which the 2006-2009 CAS was prepared, the WB adopted 6.8percentgrowth.Thepastthreeyearshavealsoshown astrategyofsupporting"islandsofgoodgovernance"asa markedimprovementsespeciallyinthefiscalfront.Painful way of supporting institutions and reform experiences that reforms introduced earlier have allowed the country to demonstratehowprogresscanbemadeinanenvironment improve revenue generation and reduce its debt burden. wherepublicinstitutionsareoftenunabletoworkeffectively Similarly, the political environment has stabilized to some for the common good. The strategy addressed four key extent,particularlyfollowingtherecentmid-termelections, objectives:(a)achievingfiscalstabilitytogenerateresources when pre-electoral tensions and violence abated. The aimed at spurring growth; (b) generating economic growth electionsresultedinthePresident'spartymaintainingcontrol toacceleratejobcreationandpovertyalleviation;(c)ensuring oftheHouseofRepresentativesandlocalchiefexecutives' socialinclusionandimproveddeliveryofbasicservices;and(d) seats,whiletheoppositionsolidifieditscontroloftheSenate. improvinggovernance. Thenextmajorpoliticalexercisewillbethe2010Presidential election. The ceasefire in the conflict-affected region of 4.During2006-2007,thePhilippines'publicfinancialsituation Mindanaoisholding,inanticipationofthesigningofapeace enteredadecisiveturnaround.Followinganear-crisissituation agreement,thetimingofwhichhasnotyetbeenset. in2004,theconsolidatedpublicsector(CPS)financialposition 3 hasbeensteadilyimproving.Fromadeficitof1.9percentof The volume of public GDPin2005,theCPSturnedintoasurplusamountingto0.1 percentofGDPin2006and0.5percentin2007.Together expenditure passing withsteadyrealgrowthandanappreciationofthepesoin through the public realterms,thenon-financialpublicdebt/GDPratiorapidlyfell fromover100percentin2003tojust75percentbythethird procurement system has quarterof2006.Withthepositivegrowthregisteredin2007, increased rapidly in the thePhilippineshasextendeditsruntofourconsecutiveyears ofregistering5percentorbetterrealeconomicgrowth. last few years. Averaging around Php121 billion per WB Portfolio year from 2003 to 2005, procurement expenditure 5. The WB's portfolio in the Philippines comprises 22 active jumped to Php168 billion projects,withnetloancommitmentsof$1.1billion.Sevenof theseareintheagriculturalsector;sixsupporturbanprojects when the Government's forwater,sanitation,transport,financeanddevelopment;three infrastructure program supporthealthandeducation;andtwoeachsupportpower, social development, and judicial and administrative reform. kicked off in 2006, and Portfolio risk has been stable, with the number of problem increased further to projects remaining steady at three since 2001. The lending programforFYs08-10currentlyincludes30proposedprojects, Php229 billion by 2007 includingafollow-onjudicialreformproject,adevelopment policyloan,localgovernmentsupportforperformancegrants, sector support for social welfare, and program support for financialmanagementinformationsystems,agrarianreform, ADB Portfolio and disaster management; four transport projects; three power projects; six water and sanitation projects; and eight 7.ThecurrentADBportfoliointhePhilippinescomprises42 loans supporting environmental actions, including wetland active projects (17 loans, 24 Technical Assistants, and one andcoastalmarineenvironments,climatechangeadaptation, grant). Total net loan commitment is US$1,529.36 million two for persistent organic pollutants, three for prototype plus US$21.2 for Technical Assistance and US$9 million carbonfunds,andaprogramloanforenvironmentandnatural for the grant. Over the next three years the ADB's Country resources.ThecompositionoftheWB'scurrentloanportfolio Partnership Strategy (CPS) concentrates on addressing two andlendingprogramisprovidedin Annex 2. principalconstraints:uncertaintyofthebudgetoutlook,and theinvestmentclimate.Tighterfocusinthesetwoareaswill 6.Asaresultofthe2007PortfolioPerformanceReview,efforts eventually help the Government reduce poverty as well as are being made to further improve portfolio performance support faster achievement of the Millennium Development throughsystematicpreparationofsemiannualprojectportfolio Goals.Toeffectivelyaddressbudgetandinvestmentconstraints, reviewswithimplementingagenciesandperiodicjointportfolio ADB'sCPSwillintensifyitspolicyengagementinthreebroad reviewswiththeAsianDevelopmentBank(ADB),JapanBank areas: the power sector, financial markets, and governance, forInternationalCooperation(JBIC),andtheGovernment.For including local government and judicial reform. High policy itspart,theWBwillpursueeffortstoaccelerateandimprove engagementintheseareaswouldmanifestitselfinprogram project preparation and start-up and to closely monitor loans,whilesupportingtheGovernment'sfiscalresponsibility project implementation plans agreed with implementing program.TheADBCountryOperationsBusinessPlanmaybe agencies.Otherelementsofportfoliomanagementincludea viewed on www.adb.org/Documents/CPSs/PHI/2007/COBP- strengthened governance agenda, support to Government's PHI-2007.pdf. ongoingreformsofprocurementandfinancialmanagement processesinlinewiththeCASgovernanceagenda,capacity- Public Sector Procurement buildinginitiatives,andmeasurestoimprovequalityatentry 8.Thevolumeofpublicexpenditurepassingthroughthepublic andmonitoringofloansandtrustfunds. procurementsystemhasincreasedrapidlyinthelastfewyears. 4 AveragingaroundPhp121billionperyearfrom2003to2005, amongbidderswaslow,theprocesswassusceptibletocorrupt procurement expenditure jumped to Php168 billion when practices,andforeignbiddersfounditdifficulttoparticipate. theGovernment'sinfrastructureprogramkickedoffin2006, Inforeign-assistedprojects,thethresholdsfortheuseofNCB andincreasedfurthertoPhp229billionby2007(seeTable1). inthePhilippineswereverylow(averagingUS$200,000for Theincreasingtrendofbudgetaryallocationforprocurement goodsandUS$500,000forworks),andstrictfiduciarycontrols expenditure is a direct consequence of the increasing focus appliedprior-reviewthresholdsatthesamelowlevels.TheWB of the Government of the Philippines (GOP) on extending identifiedmorethan20rulesthatwereunacceptablebecause infrastructure networks and providing more services to the theymadeitdifficultforbidders,especiallyforeignbidders,to public. participateinanybiddingprocess. Procurement Reform 10. Preparation of the first CPAR thus became a crucial 9. The 2002 CPAR. When the GOP, working closely with instrument in generating dialogue allowing Government, its theWBandotherdevelopmentpartners,tookagoodlook key development partners, and other stakeholders to focus atitsownpublicprocurementsystemin1999,itsawmuch andagreeonkeyreformmeasures.Followingcompletionof room for improvement. The 2001-02 CPAR noted that the thisfirstCPAR,manyreformmeasureswereinstitutionalized system at that time was fragmented, cumbersome, and throughthepassageofanomnibusprocurementlawthatis pronetocorruption.Thereweretoomanyprocurementlaws, alignedwithinternationalbestpractices,inthatitisstructured rules, and regulations, and many agencies with overlapping aroundtheprinciplesoftransparency,competition,economy functions.Giventhissetup,itwasimpossibletoimplementreal and efficiency, fairness and accountability. The Government procurementreform--includingenforcement,monitoring,and ProcurementReformAct(RA9184)orGPRAwaspassedby performanceevaluation--acrossthebureaucracy.Competition bothhousesofCongress,approvedbythePresidentonJanuary Table : Philippine Government Procurement Budget, 2003-07. (in thousand pesos) EXPENSE CLASS 2003 2004 2005 2006 2007 Actual (in thousand pesos) Maintenance and Operating Expenses RepairandMaintenance 8,315,775 12,181,299 12,581,866 17,917,968 23,465,563 SuppliesandMaterials 17,359,408 20,078,844 19,917,216 25,742,846 39,637,080 UtilityExpenses 4,431,342 4,827,572 5,525,995 6,123,188 6,442,858 TrainingandScholarshipExpenses 2,840,775 3,493,190 4,145,486 4,481,290 6,209,303 ProfessionalServices 10,714,849 14,309,428 12,445,625 13,567,429 15,964,613 PrintingandBindingExpenses 622,646 701,908 523,469 621,855 1,871,709 AdvertisingExpenses 237,901 308,681 330,930 480,258 609,565 SubscriptionExpenses 1,381,716 171,633 125,237 134,848 171,309 Sub-Total 45,904,42 56,072,555 55,595,824 69,069,682 94,372,000 Capital Outlay LandandLandImprovement 3,477,582 4,471,246 4,621,993 6,671,426 12,127,661 BuildingsandStructures 2,956,275 3,349,326 5,513,794 5,820,924 8,472,219 OfficeEquipment,FurnitureandFixtures 11,296,904 4,872,374 2,882,669 2,961,520 4,944,178 TransportationEquipment 1,515,993 1,679,816 1,815,319 1,038,869 1,380,911 MachineriesandEquipment 2,605,938 1,585,144 1,503,100 4,563,132 8,084,841 PublicInfrastructure 54,189,418 53,770,213 42,848,594 77,784,263 99,936,131 Sub-Total 76,042,0 69,728,9 59,85,469 98,840,34 34,945,94 Total 2,946,522 25,800,674 4,78,293 67,909,86 229,37,94 Percent of National Government Budget (five-year average: 4.5%) 4.78% 4.5% 2.% 6.07% 9.84% Percent of Gross Domestic Product at current prices 2.82% 2.58% 2.% 2.78% 3.45% Source: Budget of Expenditures and Sources of Financing (2005-2009), Department of Budget and Management 5 The Government 2.Alignment and harmonization.Harmonizationactivities Procurement Reform Act were agreed upon in January 2003 and vigorously pursued by the GOP and its development partners, leading to the (RA 9184) or GPRA was near-alignment of the new public procurement system with the Multilateral Development Bank (MDB) Guidelines for passed by both houses foreign-assisted projects. As of February 2007, three areas of Congress, approved by havebeenfullyharmonized:(a)standardbiddingdocuments, throughtheissuanceinAugust2004ofthePhilippineBidding the President on January Documents(PBDs)forWorks,Goods,andConsultingServices 10, 2003, and became as harmonized with the ADB, JBIC, and WB; (b) Generic ProcurementManuals(GPMs)infourvolumes,asharmonized effective on January 26, with the ADB, JBIC, and WB, approved under a June 2006 GPPBresolution,formandatorynationwideimplementationby 2003 (15 days after its January2007;(c)jointtrainingofprocurementstaffthrough publication in a newspaper thenationaltrainingprogramusingtheStateUniversitiesand Colleges(SUCs),whereabout50percentoftheprocurement of nationwide circulation). staffhadbeenintroducedtothelaw,theimplementingrules, andtheharmonizedPBDsandGPMsasofDecember2006. Furtherharmonizationofimplementingrules,reporting,and monitoring has since occurred and is discussed further in 10,2003,andbecameeffectiveonJanuary26,2003(15days Chapter4ofthisreport(Foreign-assistedProjects). afteritspublicationinanewspaperofnationwidecirculation). Thenewlawhashadamajorimpactbyeliminatingmorethan 13. The outcome of alignment efforts has been that the 100 laws, rules, and regulations and replacing them with a nationalprocurementsystemhasbecomemorewidelyusedin singlepublicprocurementsystemthatisattunedtothelocal foreign-assistedprojects.ThePhilippineGovernmentElectronic cultureandgovernanceenvironment.Thelawalsocreatedthe ProcurementSystem(PhilGEPS)wasassessedtobeacceptable Government Procurement Policy Board (GPPB), a policy and forMDB-fundedprojects.TheNCBthresholdwasraisedfrom monitoringbodywiththemandateofhandlingallprocurement US$200,000toUS$1millionforgoodsandfromUS$2million mattersaffectingthenationalinterest. toUS$5millionforworks.Greaterrelianceonthecountry's publicprocurementsystemandtheuseofhigherpriorreview . Legal and institutional reform. The GPRA was the thresholds have led to the need for carrying out joint WB outcome of a widely participatory consultation process andGPPB-TSOprocurementcapacityassessmentsforproject that included the key development partners and resulted in implementingagencies. the inclusion of international procurement best practices: streamlined and time-bound procedures, standardization of 4.The procurement law as an anti-corruption measure. procurement documents, manuals and forms, mandatory Reforming the procurement system is a vital part of the use of e-procurement, protest and complaint mechanisms, Government's anti-corruption agenda, and the GPRA did andpenaltiesforprocurementoffendersandthoseinvolved much to push that agenda forward. The procurement law in corrupt practices. Organizational reforms were also consolidatedamultiplicityoflawsandotherissuances,making mandatedthroughthecreationofanoversightprocurement allprocurementmatterssubjecttoitanditsimplementingrules agency, increased accountability of bidding organizations, andregulations.Thelawprovidesforpenaltiesandsanctions staff professionalization, and the presence of civil society ­administrative,civil,andcriminal­againstpublicoffenders organizationsasobserversofthebiddingprocess.TheGPRA whoarefoundguilty,andbidders,contractors,suppliers,and also created opportunities for foreign bidders to participate consultingfirmsfoundguiltyofcorruptpracticeswillalsobe when: (a) the items are not locally available; (b) there are subject to prosecution. The minimum penalty for a criminal parity or reciprocity rights between countries, or applicable offenseissixyearsinprison.Theanti-corruptionagencies­ internationalorexecutiveagreements;or(c)whenthereisa OfficeoftheOmbudsman,PresidentialAnti-GraftCommission needtopreventasituationthatdefeatscompetitionorrestrains (PAGC),andtheCommissiononAudit(COA)­haveusedthe trade.Thisreformhasallowedanumberofforeigncompanies GPRAasabasisforinvestigationsandprosecutionsofsome to participate in both foreign-assisted and fully government high-profilecasesdiscussedinChapter2ofthisReport(see fundedprojects. sectiononIntegrityandTransparency). 6 Reforming the procurement theGPRAis,likeanysystem,itcanfallpreytodeliberateabuse system is a vital part of throughinappropriateuseofpower.Bythemselves,thelaw andthenewprocurementsystemalonemaynotbesufficient the Government's tocontrolgrandcorruption--thetheftoflargesumsbyhigh- anti-corruption agenda, levelpoliticiansorofficials--andpoliticalcorruption--misuse ofstatepowerbyofficialswhoshapetherulesofthegameto and the GPRA did much to benefitthemandthosewhopaythem--thatprevailedprior push that agenda forward. to procurement reform, and that are reportedly continuing. Thesuccessofprocurementreformwillrequiremeasuresto stimulatestrongpublicawarenessandsupportforit. Further Challenges 15.Whilethelegalframeworkhasbeensatisfactorilysetup The CPAR Process andharmonizationwiththedevelopmentpartnersismoving forward, big challenges remain in implementation and Objectives monitoringofcompliancewiththeprocurementlaw,including 18. ThisCPARwasdesignedmainlytoassessthecurrentpublic the enforcement of anti-corruption measures. This CPAR procurementsystemandgenerateadialoguetoimprovepublic identifiesthechallenges,presentsrecommendations,andhas procurement practices and help civil society and the private generatedacontinuingdialogueonanactionplantomove sector better understand these processes and procedures. towardsmakingmost,ifnotall,oftheprocuringentitiesGPRA Anadditionalobjectivewastomeasureaccountabilityinthe compliant. expenditure of public funds through procurement and link thisassessmenttotheparallelWBassessmentsofthesystems 6.Allegations of procurement corruption.Afterfiveyears for Public Expenditure Management and Public Financial ofimplementation,29percentofpeopleinterviewedintheSWS Management. surveyagreedthatcorruptioningovernmentcontractsisless common,while37percentdisagreedand30percentremain Scope undecided (see Annex 4, Para. 3.4). Most recent corruption 19. The assessment covers the implementation of the perception surveys indicate that perception of corruption procurement law at all levels, from the national agencies, in the Philippines remains very high. The recently published regional and district offices, sub-national agencies, and GlobalIntegrityIndex2007ranksthecountryasweak,with government-owned and controlled corporations, down to nochangefromlastyear.However,procurementisrankedas localgovernmentunits,includingthebarangay.Italsocovers strong,anindicationofgoodprocurementprocesses.Much the marketplace for public procurement, comprising private progresshasbeenmadeinprocurementreformintermsof sector bidders, suppliers, contractors, and consultants. The rulesandregulationsbutimplementationandenforcementare effectivenessofcivilsociety'sparticipationwasalsoassessed. stillweak,andtheobjectivesofthereformhavenotbeenfully Procurement transactions and contracts were reviewed and achieved.Thisscenarioisconsistentwithperceptionsofahigh analyzedfortheperiod2004to2006. levelofcorruptioninprocurementandwiththeSWSsurvey findingsthatonly13percentofthepublicisawareofthenew 20.ThescopeoftheworkforthisCPARincludes:(a)areview procurementlawanditsintendedbenefits. oftheeffectivenessofthepolicyandproceduralreforms;(b) thedevelopmentanddesignofastrategyforthenationwide 17. The CPAR team found that this low level of awareness implementationoftoolstomonitorandmeasuretheimpact isduetothefactthatthelawhasnotbeencommunicated of the reform; (c) the assessment of the implementation properlytocivilservants,theprivatesector,civilsocietyand and enforcement of anti-corruption measures and the other stakeholders. In particular, the private sector has not recommendation of measures to strengthen them; (d) the beeninformedoftheprovisionsinthelawthatleveltheplaying assessmentofthesustainabilityofcivilsocietyandprivatesector fieldandencouragecompetition.Bothcitizensandbusiness participationinpublicprocurementandrecommendationsof community are the intended beneficiaries of procurement waystoimproveit;and(e)theassessmentoftheeffectiveness reform,andthereforeneedtobewell-informedandvigilant of the GOP communication strategy and the suggestion of watchdogsparticipatingintheenforcementoftheprocurement recommendations to improve the public and international law.Howevergoodthenewpublicprocurementsystemunder perceptionoftheprocurementsystem. 7 The Philippines was IndicatorSystem(version4,July2006)developedbytheOECD- selected as a pilot DevelopmentAssistanceCommittee(DAC)­WBJointVenture onProcurement.Thesystemisdividedintofour(4)pillarswith country for the testing twelve(12)indicatorsandfiftyfour(54)baselinesub-indicators. of the Baseline Indicator Thescoringsystemrangesfrom3to0foreachbaselinesub- indicator.Ascoreof3indicatesfullachievementofthestated System and Compliance standard.Ascoreof2isgivenwhenthesystemexhibitsless Performance Indicator thanfullachievementandneedssomeimprovementsinthe areabeingassessed.Ascoreof1isforthoseareaswhere System (version 4, July substantiveworkisneededforthesystemtomeetthestandard. 2006) developed by Aratingof0istheresidualindicatingafailuretomeetthe proposedstandard.Inaggregatingthescorestodetermine the OECD-Development theoverallcountryscore,theusercountryisallowedtodecide Assistance Committee ontheweightsusedtoaggregateatindicatorandpillarlevels. TheGOPdecidedtoaggregatethescoresbyallocatingequal (DAC)­WB Joint Venture weights for each pillar at 25 points and provided certain on Procurement. weightsforeachsub-indicatorandindicatorsdependingon thenationalprocurementfocusorstrategies.ThefullGOPBLI reportisdisclosedintheOECDwebsite:www.oecd.org. 21.Inthecourseofthereview,specialattentionwaspaidto assessingtheimplementationandenforcementoftheGPRA 24.ForthisCPAR,theindicatorlevelscoreisarrivedatby and its Implementing Rules and Regulations Part A (IRR-A), addingthescoresofsub-indicatorsanddividingthesumbythe focusinglargelyon(i)anationaltrainingandprofessionalization totalmaximumscores.Theresultingpercentagedetermines program; (ii) e-procurement and its linkage with electronic the level of achievement per indicator, and the percentage budgeting and the new electronic government accounting levelsaregiventhefollowinginterpretation:thelowestlevelis system; (iii) recordkeeping, monitoring and evaluation; noneachieved(NA)forcompliancewithbaselinesfrom0-20 (iv) anti-corruption measures; (v) civil society and private percent,thehighestisfullyachieved(FA)forcomplianceof81- sectorobservers;and(vi)astrategiccommunicationplanto 100percent,withtwolevelsinbetween:partiallyachieved(PA) strengthencoalitionandbuildpublicsupport.Inlinewiththe for21-60percent,andsubstantiallyachieved(SA)for61-80 WBCASapproach,theassessmentclassifiedtheimpactson percent.ThisCPARdecidednottofurtheraggregatethescores threegroupsofstakeholders:nationalandlocalgovernment tothepillarorcountrylevel. entitiesandtheprivatesector. 25. FromFebruarythroughMay2007,theBLI-CPIassessment Methodology methodology was introduced in a series of workshops that 22. Three Stages. The CPAR process was conducted in comparedandvalidatedthefindingscomingfromtheearlier threestages.First,thekick-offmissionhadthewholeteam focus group discussions, workshops and field work. The discussingandagreeingontheobjectives,scope,coveredareas, validation process took four workshops for the GOP self- methodologies, and approaches. The second stage involved assessment, and three workshops with the development consultations with concerned groups and stakeholders, the partners, civil society, and the private sector to validate the privatesector,anddevelopmentpartners,afterthetechnical self-assessment. consultantshadrecordedtheinitialfindingsandanalysis.The thirdstagewasthefinalmissionwhichgenerateddialogueon 26.Agency Procurement Performance Indicator.TheBLI thedraftCPAR,usingtheindicator-basedreports,andachieved ispredominantlybasedonmacroindicatorsintendedtolook consensusonhowtoconcretelyaddresstheweaknessesofthe atkeyelementsofapublicprocurementsystem,andisnot currentpublicprocurementsystem.Participantsintheprocess intended to measure performance. It must be coupled with arelistedinAnnex1. a performance measurement tool to determine where to make changes and what changes need to be made, based 23.OECD/DAC-WB Baseline and Performance Indicators. oncollectionandanalysisofactualperformancedata.GPPB ThePhilippineswasselectedasapilotcountryforthetesting therefore developed 28 Agency Procurement Performance oftheBaselineIndicatorSystemandCompliancePerformance Indicators (APPI) that are related to the four pillars of the 8 BLIOctober2004version,inordertomonitorandevaluate andthestateofrecord-keeping,monitoring,decision-making actual implementation at the agency or micro level, linking and control systems within procuring entities. Auditing and performanceatthetransactionalleveltotheelementsofthe legal/prosecutorial experts reviewed the effectiveness of the procurementsystematthemacrolevel. anti-corruptionmeasuresoftheprocurementlawbymonitoring the investigation and prosecution process in selected high- 27. Starting in 2006, the joint procurement capacity profile procurement cases. The assessment highlighted the assessment of implementing agencies for WB-assisted strengthsandweaknessesofthosecaseshandledbyanti-graft projects had adopted the APPI as its main assessment tool. bodiessuchastheOmbudsman,PAGCandCOA. To assess actual performance of the public procurement system,theCPARusedtheAPPIsoftenentities:eightnational 30. Planning sessions were conducted with the leagues of governmentagencies--theDepartmentofPublicWorksand barangays,municipalities,citiesandprovinces,todiscussthe Highways(DPWH),DepartmentofHealth(DOH),Department initialfindingsoftheconsultantsonprocurementpracticesand ofEducation(DepEd),DepartmentofNationalDefense(DND), thestateofrecordsmanagementintheLocalGovernmentUnits ArmedForcesofthePhilippines(AFP),DepartmentofInterior (LGUs).Workshopswerealsoconductedamongrepresentatives and Local Government (DILG), Department of Environment fromtheGOP,civilsociety,andtheprivatesectortodiscuss and Natural Resources (DENR), and the Bureau of Internal the state of their participation in procurement reforms and Revenue (BIR)--one Government-owned corporation, the activitiesandthestatusandeffectivenessofcommunicating NationalPowerCorporation;andoneLocalGovernmentUnit the procurement reforms to the various stakeholders, and (LGU),theCityofMarikina.TheconsolidatedAPPIbecamethe todevelopacommunicationsstrategythateffectivelybuilds basisforassessingtheperformanceoftheprocuringentitiesin awareness of the general public and generates increased theimplementationoftheGPRA.Theresultsofthisexercise supportforthereforms. aresummarizedinAnnex 3. 31.Topromotee-procurement,anE-GovernmentProcurement 28. Public Perception Survey. Social Weather Stations (E-GP)MissionwasfieldedinNovember2006,todetermine (SWS), a local survey firm, conducted surveys in November PhilGEPS acceptability for foreign-funded procurement and andDecember2006,with20questionsaimedatassessingthe possible linkages with other public financial management public'sperceptionoftheeffectivenessofthenewprocurement systems such as the electronic budget and the electronic systemandhowitcouldcontributetocombatingprocurement NationalGovernmentAccountingSystem. corruption.Theresultsofthesurveyshapedrelevantportions ofthisreport,particularlyonStrategicCommunicationofthe Links with Other Studies Reform.TheSWSsurveywascoordinatedbyTAFwithUSAID 32. In parallel with the CPAR, the WB carried out an funding,andthesurveyresultswerereleasedinFebruary2007. assessmentoftheGOP'spublicfinancialmanagementsystem Follow-upsurveystomonitorprogressinthepublicperception using the Public Expenditure and Financial Accountability willbeconductedinthefutureupdateoftheCPAR.Theresults (PEFA) framework. The PEFA methodology includes one ofthe2006surveyaresummarizedinAnnex 4. indicator, out of the total of 28, on public procurement, which measures the extent to which competitive bidding 29. Procurement transactions and experts' reviews. is used for public procurement above a specified minimum A review of the Philippines' procurement legal framework threshold and the adequacy of justification provided when was carried out from July to November 2006. Reviews of competitivebiddingisnotused.PEFAisnotintendedtobe procurementtransactionswerealsoundertakentoassessthe a comprehensive assessment of the public procurement impactofthelawinthefield.Thesereviewswerefollowed system,butratheranapproachforperformanceassessment byfocusgroupdiscussionswithrelevantsectors,suchascivil inpublicfinancialmanagementingeneral.Assuch,itshould societyorganizations,theprivatesector,andtheleaguesof beseenasacomplementtotheCPARforthoseinterestedin barangays, municipalities, cities, and provinces. A team of gainingasenseoftheoverallqualityofthecountry'spublic consultants also conducted assessments on the status and financialmanagementsystem.ThePEFAreviewispresented effectivenessofthecommunicationstrategyforprocurement inthePEFA,PublicFinancialManagementPerformanceReport reforms, the sustainability of civil society and private sector and Performance Indicators where procurement garnered a participation in public procurement, the effectiveness of satisfactorypassingscoreofB+. the capacity-building and professionalization programs, the enforcement of blacklisting and disqualification procedures, 9 Bringing Justice to the Least Privileged Three large buses converted into mobile courts have been making the rounds of detention centers and jails in Luzon, Visayas and Mindanao, to hear simple cases, de-clog regular courts and decongest jails. Procurement of the buses were done efficiently and customized to the needs of justicial proceedings. Good procurement practices support the Judiciary's mission. 20 II. FINDINGS, ASSESSMENTS AND RECOMMENDATIONS Pillar I: Legislative and 37. Legal System and Hierarchy of Issuances. The RegulatoryFramework Philippine legal system is primarily civil law, with a written Constitutionandabodyoflegislatedstatutesastheprincipal 33.Thispillarlooksatthelawsgoverningpublicprocurement sourcesoflaw.However,commonlawinfluenceistraceablein andattheimplementingrulesandregulations.Graph1shows somecommercialandprocedurallawsderivedfromUSlegal the BLI assessment result for this procurement pillar, based institutions.Also,theShari'ahlegalsystemisrecognizedfor on two indicators: (1) legal framework, where international MuslimsandenforcedintheAutonomousRegioninMuslim standards are found to be substantially achieved; and, (2) Mindanao. implementing regulations and documentation, where the existingsystemisfoundtofullyachievethestandards. 38. In terms of the hierarchy of legal issuances, the 1987 Constitutionisthesupremelawoftheland,andnolawor issuancecanruncountertoit.Atthesecondlevelarethelaws Procurement Legislative Framework passedbyCongressorthoseissuedbythePresidentduringthe fewoccasionsthatthePresidentexercisedlaw-makingpower, Findings followed by a third level of executive orders issued by the 34.Governance Structure.ThePhilippinesisademocratic President,whichhavetheforceoflawaslongastheydonot and republican state that, under the 1987 Constitution, violatethelawspassedbyCongressandtheConstitution.At adoptedthecentralizedpresidentialformofgovernment.The thefourthlevelareadministrativeordersissuedbygovernment powersofgovernmentareexercisedbythreeindependentand agenciesandordinancesissuedbyLGUs,whichhavelocalized co-equalbranches:(a)theExecutiveBranch,whichenforces and limited coverage and effectiveness but may not violate thelawsandisheadedbyanelectedPresidentforatermof theConstitution,lawspassedbyCongress,ortosomeextent six years; (b) the Legislative Branch, which promulgates the ExecutiveOrdersissuedbythePresident. laws and is vested in a bicameral Congress consisting of a Senate and a House of Representatives; and (c) the Judicial Graph 1 - Legal and Regulatory Framework Branch,whichsettlesdisputesinvolvingrightsofcontending partiesunderthelaw,andisvestedintheSupremeCourt,an MAX. SCORE SCORE appellatecourt,andotherlowerandspecialcourts. 50 40 42 35.Therearefourindependentconstitutionalbodiesthatare 30 36 directlyaccountabletothepeopleandnotbeholdentothe 20 24 threebranchesofgovernment:(a)theCivilServiceCommission, 18 18 18 whichoverseesthecivilianbureaucracy;(b)theCommission 0 on Election, which administers the electoral process; (c) the 0 Commission on Audit, which audits government accounts; Pillar 1 Indicator 1 Indicator 2 Legislative and Legislative and Existence of and(d)theOfficeoftheOmbudsman,whichinvestigatesand Regulatory Regulatory Implementing prosecutesgraftandcorruptioncasesinvolvingcivilservants. Framework Provisions Rules 36. Within this governance structure, the management and operationofthepublicprocurementsystemisafunctionofthe ExecutiveBranch,becauseitisamechanismfortheacquisition ofgoods,works,andservicesthatenabletheGovernmentto deliverpublicservices. 2 39. The Government Procurement Reform Act. The ·Transparency in the procurement process and in the GPRAcoversallprocurementofthenationalgovernment,its implementationofprocurementcontracts; departments,bureaus,officesandagencies,includingSUCs, ·Competitivenessbyextendingequalopportunitytoenable Government Owned and Controlled Corporations (GOCCs), privatecontractingpartieswhoareeligibleandqualifiedto Government Financial Institutions (GFIs), and LGUs. The full participateinpublicbidding; textofthelawispostedontheGPPBwebsite(www.gppb. ·A streamlined procurement process applicable to all governmentprocurement,simpleandadaptabletoadvances gov.ph).Thelawmaynotberevised,amended,orrepealed, inmoderntechnology; except through Congress. It has been cited and applied by ·System accountability, whereby both the public officials theSupremeCourtinanumberofcases.Figure2showsthe directly or indirectly involved in procurement and in the hierarchyoflawsandissuancesintheGOPProcurementReform implementationofcontractsaswellastheprivatepartiesthat Framework,theircoverage,andareasforharmonizationwith dealwithgovernmentare,whenwarrantedbycircumstances, donors. investigatedandheldliablefortheiractions;and ·Public monitoring of the procurement process and the 40. Coverage and Principles of the GPRA.Thelawadopts implementation of awarded contracts to make sure that thefollowingprinciples: these contracts are awarded lawfully and are undertaken strictlyaccordingtospecifications. Figure 2. GOP Procurement Reform Framework . orkswemarFlageL Implementing Rules and Regulations Generic Procurement World Bank,ADB, Manuals JBIC Guidelines Harmonization Bidding Documents World Bank,ADB, JBIC Guidelines Government Procurement Policy Board (GPPB) Ombudsman / Presidential Commission on Audit Anti-Graft Commission Technical Support ersightvO Office (TSO) Trainings and Info. Campaigns APPI and OMES Investigations and Reports External Audit - Heads of Procuring - Local Chief Entities Executives snoitarepO - Bids and Awards - Bids and Awards Committees (BAC) Committees (BAC) - Technical Working - Technical Working Groups Groups - BAC Secretariat - BAC Secretariat - Budget and - Budget and Supply Officers Supply Officers - End users - End users Reports Reports and Complaints and Complaints 22 41. Procurement Reform Measures.Thelawisconsidered same,thisisnotthecaseforotherdevelopmentpartners;the a good procurement law because it incorporates almost Governmentisconcernedthattherearesomedevelopment all attributes of a good public procurement system. These partners, particularly bilateral ones, that are not following include: opencompetitivebiddingprinciplesofprocurement.Itisfor (a)linkingprocurementwithpublicfinancialmanagementby thisreasonthattheGovernmentispursuingthepreparation incorporatingannualprocurementplansinthebudgeting and issuance of an Implementing Rules and Regulations­B system; (IRR-B)toprescribeappropriateimplementingrulesforforeign- (b) modernization through the adoption of electronic fundedcontracts.AttheApril2008PhilippineDevelopment government procurement (PhilGEPS) and mandating its Forum,thedevelopmentpartnersagreedtoprepareIRR-Bto use; institutionalizetheharmonizationofdocumentsandmanuals (c) requiring competitive bidding as the primary mode of andattaineffectiveimplementationofthenewprocurement procurement; systematthenationalandLGUlevels.TheWBwillleadthiseffort (d) prescribing a balanced procurement organization in all onbehalfofthedevelopmentpartners. Recommendation: procuringentitiesthroughtheBidandAwardsCommittee, To provide guidance in the implementation of international chairedbyatleastathird-rankingpermanentofficial; competitive tendering, Implementing Rules and Regulations B (e)reducingopportunitiesforcorruptionby (IRR-B) should be drafted and issued, as provided for in Section (i) prohibitingtheheadoftheprocuringentityfrombeing 1 of IRR-A: "[T]he IRR-B for foreign funded procurement amemberofthecommittee, activities shall be subject of a subsequent issuance." The (ii)prescribing rules on fraud and corruption in the proposed CPAR Action Plan includes the drafting, finalization InstructiontoBiddersandStandardContractForms, and issuance of IRR-B. (iii)requiringdisclosureofrelationsbythebidderthrough a sworn affidavit that no officer of the corporation 43. Advertising rules and time limits.TheGPRArequires is related to the Head of the Procuring Entity by that public advertisement and posting of bid opportunities consanguinityoraffinityuptothethirdcivildegree, for competitive bidding and for procurement done through (iv) inclusion of penal clauses, civil liabilities, and alternativemethods.Theleadtimesfortheadvertisementupto administrativesanctionsagainstviolatorsofthelaw, thebidsubmissionareprovidedforintheimplementingrules. (v)provisionoflegalassistancefor,andindemnificationof, For foreign-funded international competitive bidding (ICB), BidsandAwardsCommittee(BAC)memberswhoare theGPRArequiresthattheMDB'sProcurementGuidelinesbe subjectedtoharassment;and followed. However, the law does not provide for extension (vi)requiringcivilsocietyorganizationsorNGOstoobserve ofthetimeframeswheninternationalcompetitionissought. thebiddingprocess; Recommendation: The proposed IRR-B should include a (f)facilitatingtheprocessthroughtheissuanceandmandatory provision for appropriate timelines for international bidding to useofstandardbiddingdocumentsandforms,andgeneric encourage the participation of foreign bidders. procurementmanuals; (g)providingavenuesfortransparencybymeansofaclearly 44.Rules on Participation.TheGPRAprovidesforfairness definedprotestmechanismandprocedures; and transparency in public bidding rules as indicated in the (h) streamlining contract implementation and settlement of InstructiontoBidders.However,itdoesnotprovidespecific disputes;and rulesfortheparticipationofGOCCsorstate-ownedenterprises (i) creationofanoversightandnormativebodymandatedto in public bidding that would promote fair competition and protectthenationalinterestinallmattersaffectingpublic encourage legitimate private enterprises to bid. The entry procurement, with due regard for the country's regional ofaGOCCbidderwouldcastdoubtonthefairnessofthe andinternationalobligations. process that would undermine competition. Consequently, theprocuringentitywouldoftenresorttodirectpurchaseor 42. Procurement methods. The GPRA provides for public negotiationwiththeGOCC,whichisallowedundertheGPRA. bidding as the primary mode of procurement and defines Recommendation:To promote fairness in public bidding, the thecircumstancesandcriteriabywhichmethodsotherthan implementing rules and regulations should include specific publicbiddingmaybeusedbytheprocuringentity.However, rules when a GOCC participates as a bidder. the GPRA does not specify the appropriate standards for international competitive tendering. It simply acknowledges, 45.Complaint and Protest Mechanisms.TheGPRAandits under its Section 4, that the procurement rules agreed in IRR-Aclearlydefinetheprotestmechanism.Allcomplaintsbya treaties and in international or executive agreements (such bidderarefiledwiththeprocuringentity'sBAC,whichistasked as donor loan and grant agreements) should be respected. toresolveitinthefirstinstance.Shouldbiddersnotbesatisfied, While the procurement principles governing the Philippine theymaythenfileanappealwiththeheadoftheprocuring procurement system and those of the multilaterals are the entity,intheformofaverifiedprotestanduponpaymentof 23 anon-refundableprotestfee.However,noindependentthird- Implementing Regulations partyreviewbodyisdesignatedtoresolvethecomplaintor and Documentation protest. Furthermore, the IRR-A sets the protest fee as one percent of the approved budget for the contract. Based on Findings theexperiencesofthenineAPPIpilotagenciesandonepilot 47. Implementing Rules and Regulations. The LGU,therearehardlyanyprotestsfromthebidders,because Implementing Rules and Regulations Part A (IRR-A) of the of the restrictive provisions on protests and the lack of an GPRA,whichprovidesspecificguidelinesandproceduresfor independentreviewbody.Whileanappealfromthedecision theprocurementofgoods,works,andconsultingservicesthat oftheHeadoftheProcurementEntitymaybefiledwiththe arefullyfundedbytheGovernment,wasjointlyformulatedby office of the President or the judicial courts, these are not theGPPBandtheJointCongressionalOversightCommittee. independentadministrativereviewbodiesasrequiredbythe BothbodiesthenendorsedtheIRR-AtothePresident,who standards.Recommendation:A study should be conducted officiallysignedandissueditonSeptember18,2003,under on how the appeals mechanism could be strengthened based AdministrativeOrderNo.119.TheIRR-Aamplifiesandclearly on the requirements of the law and international standards. discusses each provision of the GPRA, from procurement The Study should aim to find ways of making the protest planning, procurement organizations and responsibilities, mechanism a tool for upholding the integrity of the bidding bidding documents and forms, protests and appeals, to process. procurementmethodsandalternativemethods,procurement procedures, contract implementation, dispute resolution, Results of BLI Assessment liabilities, and sanctions and penalties against violators. 46. The above findings are reflected in the BLI assessment. AlthoughIRR-Adoesnotapplytoprocurementunderforeign- Indicator1garneredascoreof18percentoutofapossible assistedprojects,whichwillbecoveredinafutureIRR-B,itis 24pointsfora75percentcompliancelevel,indicatingthat appliedasasupplementtotheprocurementguidelinesand thelegislativeframeworksubstantiallyachievesthestandards the loan or grant agreements of the development partners, agreedupon.Thelegislativeframeworkisadequatelyrecorded wheneverthesearesilentonspecificareasorprocedures. andorganized,thelawiscomprehensiveenoughtocoverall typesofprocurementusingthenationalbudget,anditdefines 48. The Philippine Bidding Documents. The PBDs are andprovidesforallowableprocurementmethods.Thelegal standarddocumentsusedforprocurementthroughcompetitive framework also provides for public bidding as the default biddingthatsettherulesofthebiddingprocessandarebinding procurementmethodandclearlysetsouttheproceduresand onallparticipatingparties,thatis,theprocuremententityor timelimitsforthismethod.Table2providesasummaryofthe buyerandthebiddersfromtheprivatesector.ThePBDsfor ratingsfortheassessmentofthisindicator. works,goods,andconsultingservicesincludeinstructionsto bidders, bid data sheets, qualification requirements, award criteria, specifications, protest and complaint procedures, general and special contract conditions, and bidding forms. The standard forms, including conditions of contract, are based on international standards. As part of procurement harmonization,andexceptforaveryfewdifferencesmentioned inthePBDs,thesamedocumentsareusedbyprocuringentities Table 2: Summary of Scores for Indicator , Pillar I Sub-Indicators Score Max. Score 1(a)­Scopeofapplicationandcoverageofthelegislativeandregulatoryframework 3 3 1(b)­Procurementmethods 2 3 1(c)­Advertisingrulesandtimelimits 1 3 1(d)­Rulesonparticipation 2 3 1(e)­Tenderdocumentationandtechnicalspecifications 3 3 1(f)­Tenderevaluationandawardcriteria 3 3 1(g)­Submission,receiptandopeningoftenders 3 3 1(h)­Complaint 1 3 Total Score 8 24 Rating: 18/24 or 75%;Level of Achievement is Substantially Achieved (SA) 24 implementingNationalCompetitiveBidding(NCB)forforeign- Graph 2 - Institutional Framework and Management Capacity assistedprojects.However,sinceregionalanddistrictoffices andLGUshavefoundthePBDstobetoocomprehensiveand MAX. SCORE SCORE tediousforsmalllocalprocurements,simplifiedPBDsforsmall 40 procurementsuptocertainthresholdsarebeingdevelopedby 36 30 theGPPB. 25 20 49.The Generic Procurement Manuals.TheGPMsexplain the steps of the procurement process within a procuring 0 12 11 12 12 9 entity and serve as user guides for practitioners. The GPMs 0 5 alsodefinetherolesandresponsibilitiesoftheprocurement Pillar II Indicator 3 Indicator 4 Indicator 5 Institutional Public Sector organizations,thetechnicalworkinggroups,theprivatesector, Functional Existence of Framework Governance Normative Institutional andcivilsocietyobservers.Therearefourvolumes,oneeach and Body Management onsystemsandorganization,goodsandservices,infrastructure Capacity projects, and consulting services. Government agencies are allowedtocustomizeandmodifytheGPMstosuittheirneeds, manualsthatareaccessibletothepublic.Table3providesa subjecttotheapprovaloftheGPPB,andprovidingthechanges summaryoftheratingsforthisassessment. remainconsistentwithexistingprocurementlaws,rules,and regulations.LikethePBDs,thefourGPMswereharmonized inJuly2006withthemanualsusedbyADB,JBIC,andWB. Pillar II: Institutional Framework and WhiletheGPMsprovideaholisticapproachtoprocurement Management Capacity inallagencies,LGUsareunderstandablyconcernedthatthey may not always be appropriate for small LGUs. The GPPB's 51.PillarIIlooksathowtheprocurementsystemoperatesin challengeistoaddressthisconcern.Recommendation:GPPB practice through the institutions and management systems should develop simpler bidding documents and procurement thatarepartoftheoverallpublicsectorgovernance.Graph2 manuals for small users, especially LGUs, barangays, and showstheBLIscoresforthethreeindicatorswhichconfirmthe people's organizations and communities. followingfindingsastotheirlevelsofachievement: (3)linkagestoPFMsystems:Thepublicprocurementisfound Results of BLI Assessment nottobefullymainstreamedorintegratedintothepublic 50. The above findings are reflected in the BLI assessment. financialmanagementsystem. Indicator2garneredaperfectscoreof100percentduetothe (4)managementcapacity:Thecountry'sfunctionalnormative/ existenceofimplementingregulationsanddocumentationin regulatory body, the GPPB, substantially achieves the thelegalandregulatoryframeworkthathavebeenassessed baselines. to have met all the baseline elements of a good public (5)institutionaldevelopmentcapacity:Theexistingmonitoring procurementsystem.Theregulatoryframeworkisadequately systemsarefoundtobeinadequatetomonitorperformance recorded and organized, it implements and complements andcollectanddisseminateprocurementinformation,and the law, and provides standard documentation and generic thequalityoftrainingprogramsneedstobeimproved. Table 3: Summary of Scores for Indicator 2, Pillar I Sub-Indicators Score Max. Score 2(a)­Implementingregulationthatprovidesdefinedprocessesandprocedures notincludedinhigherlevellegislation 3 3 2(b)­Modeltenderdocumentsforgoods,works,andservices 3 3 2(c)­Proceduresforpre-qualification 3 3 2(d)­Proceduressuitableforcontractingforservicesorotherrequirements wheretechnicalcapacityisakeycriterion 3 3 2(e)­User'sguideormanualforcontractingentities 3 3 2(f)­GeneralConditionsofContractsforpublicsectorcontractscoveringgoods, works,andservicesconsistentwithnationalrequirementsandwhen applicable,internationalrequirements(20%ofIndicator) 3 3 Total Score 8 8 Rating: 100%; Level of Achievement is Fully Achieved (FA). 25 Linkages of Public Financial The creation of the GPPB Management Systems in January 2003 was a Findings major milestone in the 52.LinkageofAnnualProcurementPlanstotheBudgetary Process.Procurementplansaremandatedbylawtobeoneof implementation of the thebasesforthepreparationoftheproposedannualbudget GPRA. submittedtoCongress.Everyyear,procuringentitiesprepare theirannualoperatingplansandbudgetforthesucceeding calendaryear.Whiletheseproposalsaresupposedtoreflect entitieshavebeencomplyingwiththisrule.However,delays the thrust of national government and agency policies and in the payment of suppliers and contractors is a perennial programs,andidentifytheresourcesrequiredtodeliverpublic concern.Therearenobusinessstandardsfortheprocessing services, in practice procuring entities prepare the APPs in ofinvoicesbyNGAsandLGUsthatmeettheobligationsfor a spirit of compliance and do not take advantage of their timely payment stated in the contract. Recommendation: potentialasatooltoimprovetheprocurementprocessand Business standards for the processing of invoices for timely monitoritsefficiency.Nordomostagenciespreparemulti-year payment need to be developed in tandem with a generic plansthatarelinkedtotheannualbudgetprocessortothe financial management manual that covers procurement and preparationofAPP,andsomeNGAsandLGUsdonoteven logistics processes. The procurement system needs to be fully prepare or consolidate an APP. Recommendation: GPPB integrated with the budgetary and financial systems, in order needs to monitor the required submission of the APP and the to provide information on the completion of major contracts. PPMP, which are important internal financial and expenditure control mechanisms mandated by law, in order to ensure Results of the BLI Assessment full compliance. The provision to revise the APP should be 54.The above findings are reflected in the assessment. evaluated in light of abuses by some agencies. Clear guidelines Indicator 3 garnered a score of 9 percent out of a possible should be developed for multi-year contracts that will integrate 12 points or 75 percent compliance, because the public budgeting, expenditure and procurement programming. procurementsystemismainstreamedandintegratedintothe publicsectorgovernancesystem.However,compliancewith 53. Budget Before Bidding.Sincethebudgetcontainsthe therequirementtoprepareanAPPisuneven,andthelinkage initial list of projects to be procured and the corresponding between the budget process and procurement planning is budgetary requirement, as soon as the national budget is weak(nomulti-yearplans).Table4providesasummaryofthe approved by Congress, the procuring entities can refine BLIassessment. theirannualprocurementplanstoconformtotheapproved allocations before expenses are committed. Before the procurementprocessbegins,theinclusionoftherequirements Management Capacity inthebudgetischeckedbytheprocuringentity.TheGPRA requiresanapprovedbudgetforthecontractbeforestarting Findings theprocurementprocess.Moreover,acertificationofavailability 55. Normative/Regulatory Body: The Government of funds is required to be appended to the contract, as an ProcurementPolicyBoard.ThecreationoftheGPPBinJanuary internalcontrolpointtoensurethatfundsareappropriated 2003 was a major milestone in the implementation of the andavailable.Reviewsoftransactionsshowthattheprocuring GPRA.GPPBisapolicy-makingandmonitoringbodyforpublic Table 4: Summary of Scores for Indicator 3, Pillar II Sub-Indicators Score Max. Score 3(a)­Procurementplanningandassociatedexpendituresarepartofthe budgetformulationprocessandcontributetomulti-yearplanning 2 3 3(b)­Budgetlawandfinancialproceduressupporttimelyprocurement, contractexecution,andpayment 2 3 3(c)­Noinitiationofprocurementactionswithoutexistingbudgetappropriations 3 3 3(d)­Systematiccompletionreportsarepreparedforcertificationforbudget executionandforreconciliationofdeliverywithbudgetprogramming. 2 3 Total Score 9 2 Rating: 9/12 or 75%; Level of Achievement is Substantially Achieved. 26 procurementempoweredtoformulateandamendtheIRRand sufficientfinancialsupportfromthenationalgovernment.It relevantforms,toensurethatprocuremententitiesregularly isdependentforfundingontheProcurementService(PS),a conductprocurementtrainingprograms,toprepareoperations separateentityfullyownedbytheGovernmentthatismandated manuals,andtoconductannualreviewsoftheeffectivenessof toprocurecommonlyusedofficesuppliesandequipment.The theGPRAandrecommendamendments.Itisaninteragency demand for TSO to perform the full mandate of the GPRA bodycomposedoftop-levelofficialsfrom12keylineagencies isanissue,becauseoftheneedtoexpanditscoverageand tasked to formulate and issue policies and regulations on staffingsoitcanperformitsothermandatedfunctions,such procurement.TheBoardischairedbythecabinet'seconomic asmonitoring,enforcementandpublicrelationsandstrategic managers--the Secretary of the Department of Budget and communications.Recommendations:The GPPP-TSO should Management, and the Director General of the National be provided with sufficient financial resources to perform the Economic Development Authority as alternate chair--with full range of its function under the GPRA. Its ability to monitor arepresentativefromtheprivatesectorasavotingmember the implementation of procurement-related laws should be and observers from anticorruption bodies. The GPPB meets strengthened by creating a monitoring and enforcement group regularlyatleastonceamonth,followingagendasetinthe and a public relations and strategic communications unit. monthly meetings of its Technical Working Group (TWG), whichalsopreliminarilydeliberatesontheissuesandprepares Results of the BLI Assessment policyrecommendations. 58.ThecreationandsuccessfuloperationoftheGPPBandits TSOarereflectedinthepositivefindingsoftheBLIassessment. 56. In its short existence, the GPPB has quickly become Indicator 4 scored 92 percent because there is a functional effective in performing its functions as mandated by law. It normativebodyforprocurementthatisempoweredbylawto hasissuedseveralcircularsandresolutionsinpursuanceofits protectnationalinterestinallmattersrelatedtoprocurement. mandate,publishedontheGPPBwebsite(www.gppb.org.ph), Itisanindependentboardthathastheauthoritytopromulgate andhasbeenrecognizedbothlocallyandinternationallyas rulestoimplementthelaw.Table5providesasummaryofthe awell-functioninginteragencypolicy-makingbody.Itssuccess findingsforthisassessment. may be attributed to its multi-faceted structure that allows feedbackdirectlyfromthestakeholders. Institutional Development Capacity 57. Organizational, Technical and Funding Support. The GPPB is ably assisted by its Technical Support Office Findings (TSO),arelativelysmallofficethathasquiteanotablelineof 59. Collection and dissemination of Procurement accomplishments.Inparticular,theTSOHelpDeskhasgained Information: PhilGEPS. The PhilGEPS is the country's new strongsupportfrommanyprocurementpractitioners,whorely electronic system for government procurement, a single, onitasoneofthemostpopularandeasilyaccessiblesources centralized electronic portal to be used by all government of procurement information. Since its 2003 launch, it has agencies in the procurement of commonly-used goods. It accommodatedmorethan4,821phonequeriesand404walk- alsoservesasacentralportalprovidingtheprimarysourceof inqueriesfrombothgovernmentandprivateorganizations, informationontheprocurementofothergoodsandgeneral andissued291writtennon-policyopinions,32writtenpolicy supportservices,civilworks,andconsultingservices,including opinions, and 72 resolutions. However, the GPPB-TSO lacks policies,regulations,issuances,andcontractawards.Launched Table 5: Summary of Scores for Indicator 4, Pillar II Sub-Indicators Score Max. Score 4(a)­Thestatusandbasisforthenormative/regulatorybodyiscoveredin thelegislativeandregulatoryframework 3 3 4(b)­Thebodyhasadefinedsetofresponsibilities 3 3 4(c)­Thebody'sorganization,funding,staffing,andlevelof independenceandauthority(formalpower)toexerciseitsdutiesshouldbe sufficientandconsistentwiththeresponsibilities 2 3 4(d)­Theresponsibilitiesshouldalsoprovideforseparationandclarityso astoavoidconflictofinterestanddirectinvolvementintheexecutionof procurementtransactions 3 3 TotalScore 11 12 Rating: 11/12 or 92%; Level of Achievement is Fully Achieved. 27 in August 2006, it replaced a pilot electronic procurement 62. As of July 31, 2007, PhilGEPS had achieved significant systemandoffersmorefunctionalityforbettertransparency compliance:85percentofNGAsand79percentofgovernment andefficiency.Afive-year,US$5millioncontractwassigned entities overall had registered (excluding barangays, which with a private service provider in charge of operating the are allowed by law to procure through a municipal or city PhilGEPSanddevelopingadditionalfunctionalities.Adetailed government).Morethan6,000agenciesand22,000suppliers descriptionofPhilGEPSmaybefoundonthePhilGEPSwebsite hadregistered,andmorethan380,000noticesand58,000 (www.philgeps.net). awardshadbeenposted.Thelevelofcompliancebyprocuring entitiesasofJuly31,2007isshowninTable6: 60. Currently, PhilGEPS provides the following features and functions:(a)ElectronicBulletinBoard:Postingofprocurement 63.However,currently,thePhilGEPSprovidesonlyinformation opportunities, notices of awards, electronic distribution of onsomeofthecontractawardsanditsacceptabilityislimited. bid documents and automatic notification of bid notices Moreover, its data has not been verified by audit and so and amendments; (b) Supplier/Subscriber Registry: Registry far,therehasbeennoanalysisofprocurementinformation. of government agencies and all government suppliers, Recommendations: GPPB should monitor compliance by contractors and consultants; and (c) Electronic Catalogue: procuring entities on the use of PhilGEPS. The Procurement A price list of common-use goods, supplies, materials and Service(PS)shoulddevelopPhilGEPS'Phases2to5.Moreover, equipment which are to be purchased from a centralized thePSshouldengagetheservicesoftheCommissiononAudit procurement system being implemented by Procurement to verify the system, and a periodic analysis of information Services.Phase2developmentplanswillintroduceaVirtual shouldbeincludedaspartoftheaudit. Storeforgovernmentagenciesnationwidetoobtaincommon- useitems.Tofacilitatepayments,anelectronicpaymentfacility 64. PhilGEPS Acceptability to Donors. An assessment of willbedeveloped,includingprovisionsforelectronictransfer PhilGEPS'acceptabilityforprojectsbyMDBswasconductedin of funds. The Government will introduce charges and fees November2006.TheassessmentfoundthattheWBandADB aimedatmakingthesystemfinanciallyself-sustaining.Lastly, arereadytoacceptthePhilGEPSforapplicationonADB-and thesystem'sfunctionalitywillbeexpandedtosupportonline WB-fundedNCBandshoppingprocedures,subjectonlytofive procurementofbothcommonandnon-commonuseitems, modifications: andtoallowsupportofElectronicBidSubmissionandthefull ·ForMDB-fundedprojects,waivethePhilGEPSrequirement implementationofe-bidsubmissionprocesses. thattheentryoftheApprovedBudgetCeiling(ABC)field bemandatory. 61. Initial indications are that PhilGEPS provides significant ·Includearule-basedapproachtovalidatethedurationof benefitstoGovernmentandsuppliers.Itisamajortoolfor theprocurementnoticeperiod,sothatPhilGEPSwould implementing government procurement policy, and has notallowthepublicationofthetendernoticesubmittedby established an open, transparent, efficient and competitive aprocuringentityattemptingtoadvertiseatenderfora marketplace for government procurement, allowing periodoftimeshorterthanthatrequiredbyGPRA. Governmenttoobtainbetterpricesanddocumentaudittrails ·Includearule-basedapproachfortheMDBShopping (reports on government purchases and winning bidders). thresholdofUSD$100,000. It provides suppliers easy access to government tenders ·Allowtheoptionsofdownloadingofbiddingdocuments 24/7,electronicdocumentsfordownloading,andautomatic electronicallyandincludeamailingoptionuponthe notification of bid notices and supplements. It reduces requestofthebidder. suppliers'transportationandtimecostsandallowsthemtodo ·Allowthedownloadingbybuyingagenciesoftheorder marketresearchongovernmentprocurement. requestformthePhilGEPSwebsite. Table 6: PhilGEPS Compliance Government Procuring Entities Total Number Total Registered Level of Compliance NationalGovernmentAgencies(NGA's) 1,702 1,456 85.55% GovernmentOwnandControlled Corporations(GOCCs) 1,041 575 55.24% StateUniversitiesandColleges(SUC's) 190 180 94.74% LocalGovernmentUnits(LGU's) City 117 113 96.58% Provincial 79 71 89.87% Municipal 1,501 818 54.50% Barangay 41,995 2,136 5.09% 28 Thesystemdevelopmentworkrequiredtoaddresstheshort- ·Almostallprocuringentities(92percent)haveestablished termacceptabilityrequirementswascompletedinNovember theirorganizationalprocurementunitsandaretherefore 2007,andsixpilotagencies(DPWH,DOH,DepEd,DA,DENR, compliantwiththeprocurementorganizational andtheLocalWaterUtilitiesAdministration)havebegunusing requirement. theenhancedsystemforthepostingofbidandawardsnotices ·Sixof10procuringentitiesusedpublicbiddinginmore associatedwithWBandADBfunding.Long-termrequirements than90percentofthetotalvalueofcontractsintheir willbeaddressedwiththeimplementationofnewPhilGEPS APPs.GPPBshouldbestrictlyenforcingthecompetitive featuresforvirtualstore,chargesandfees,e-paymentande- biddingrequirementforallnotincompliance. biddingbeginningin2009. · Onlyoneoutof10procuringentitieshadatleastfive biddersineachbiddingprocess,signifyingthatcompetition 65. National Procurement Statistics:TheOnlineMonitoring isweak. ·All10procuringentitiescomplywiththerequiredtimefor and Evaluation System. In November 2006, GPPB's TSO bidders'preparationofbids,whichgivesbiddersenough launchedthePhilippines'firstweb-basedpublicprocurement timetoprepareproperbids. monitoring tool, OMES. The OMES is designed to function ·Sevenoutof10procuringentitiesdidnotcomplywiththe as a self-help tool for government agencies that wish to transparencyrequirementtoposttheawardofcontracts identify their own strengths and weaknesses in the field of onthePhilGEPSwebsite. procurement.ItalsoprovidesGPPBwithimmediatefeedback onreformimpactandwithsignalspointingtospecificareas 67. The National Training Program.TheGPRArequiresthe whereanagencymayrequiretechnicalassistanceandguidance GPPBtoestablisharegulartrainingprogramtoprofessionalize orwhereamendmentstothelawandtheIRRmaybeneeded. and improve the skills of government procurement officers Thesystemoffersthreeonlinesurveyforms:theAPPISurvey, and employees, who are required to avail themselves of theGPPB-TSOSurvey,andtheSavingsMonitor,whichevaluate thistraining.Inlinewiththispolicy,andinresponsetothe differentaspectsofanagency'scompliancewithGPRAand increasing demand for training on GPRA, GPPB's strategy is IRR-A.Inthefirsteightmonths,185agenciesregisteredand designed to address the training needs of all government 130 of these completed the Agency Performance Indicators agenciesnationwide.GPPB-TSOdevelopedaseriesoftraining (API) and the GPPB-TSO surveys. Although enhancements programs,whichinclude:(a)basictrainingontheGPRAand willbeneededtoperfecttheOMES,theGovernmentisvery thePBDsforLGUs,NGAs,GOCCs,andSUCs;(b)thetraining optimisticthatitisontherighttrack. oftrainers,andarefreshercourseontheGPRAandthePBDs fortrainersandresourcepersons;and(c)specializedtraining 66. The Agency Procurement Performance Indicators. coursesonvalueengineeringandfrauddetectionforselected The APPI is a micro-level procurement system evaluation participants. tool designed to monitor the performance of an agency's procurement system based on the four key pillars using 28 68.InMarch2004,theGPPBconductedthefirstTrainingof indicators(seeCPARMethodologysectioninpreviouschapter). TrainerssessionforrepresentativesfromDBM,COA,DILG,and GPPBselectedtenprocuringentitiestopilottheAPPIin2005- thePhilippineLeagueofLocalBudgetOfficers.Subsequently, 2006,basedonthevolumeofprocurementtransactions,with regionalcompositeteamsoftrainerswereformed,withthe thesupportoftheWB,becausemostoftheagenciesselected DBMasleadagency.TheLocalGovernmentAcademyisalso are implementing WB-financed projects. The performance involvedattheLGUlevel.InOctober2005,theGPPBformed evaluationresultswerevalidatedandagreedwitheachagency, partnerships with selected state SUCs in order to augment togetherwiththeoversightagencies,privatesectorandcivil the number of trainers and conduct training for NGAs and societyorganization(CSO)representatives.Sincethen,dueto GOCCs.AsofMarch2007,19percentofthesenational-level itseffectiveness,ithasbeenaddedasatoolforprocurement entities,andmorethan80percentofLGUs,hadatleastone capacity assessments of agencies implementing WB-assisted representativetrainedonthecontentoftheGPRAandinthe projects,therebymakingtheAPPIajointWB-GOPassessment useofPBDs;3percentofnationalentitiesand15percentof tool.Insummary,thekeyAPPIfindingsforthetenselected LGUshadatleastonerepresentativetrainedintheuseofthe agenciesareasfollows: GenericProcurementManuals(GPMs). ·The10pilotprocuringentitiesareadoptingtheGPRA anditsIRR-Ainternallythroughtheissuanceofcirculars 69.However,thetrainingprogramshavenotyetachievedtheir ordepartmentorders.Theprocuringentitiesaretherefore intendedimpact,otherthanthatofinformationsharing,and familiarwiththelawandtheyaremakingsurethatitis appeartobedesignedtoinformratherthantomeetspecific implemented. competencyrequirements.Theselectedcompositeteamand ·Mostentitiesarenotcomplyingwiththenationaltraining SUC trainers either lacked the appropriate training skills or policy.Thetrainingprogramisthereforeweakandmustbe the technical expertise/experience to discuss procurement in strengthened. detail.AnassessmentoftheTrainingofTrainersandRefresher 29 Coursesrevealsthatthemodulesandmaterialsfocusonlyon ProcurementUnitandTWGs.Recommendation: The GPPB's thetechnicalprovisionsofthelaw,andthuslacksubstance professionalization program, a long-term capacity building thatwouldfocusonbuildingthecapacitiesoftheseindividuals program that will include procurement as a professional career astrainers,suchasskill-buildingsessionsonhowtomanage stream, is being pursued albeit slowly. As this is an important thelearningprocess.Only64percentofattendeesbelieved reform initiative with sustainable impact, it is recommended that the resource speakers chosen were proficient in the that the program be pursued more vigorously. subject matter. The GPPB is aware of the problem and has conductedseveralvalidationworkshops,however,eventhese Results of the BLI Assessment workshopshavenotbeeneffectiveinaccuratelyidentifyingand 71. The above findings are reflected in the BLI assessment. addressingissueswiththecapabilityofthelecturersastrainers TheAPPIassessmentofthe10pilotagenciesandfieldvisits andpresenters.Anotherareaofweaknessidentifiedisthelack revealedthatseveralprocuringentitieseitherdonotfaithfully ofqualityevaluationmechanismtomeasureimprovementsin complywiththelegalrequirementtoposttenderinvitations thecapabilityoftheprocurementstaffasaresultoftraining. and awards in the PhilGEPS, or only do so irregularly. Recommendation: The national training program should Weaknessesinthedeliveryofthetrainingprogramswerealso be reviewed, revised, and reissued in line with the strategic discoveredandtheprofessionalizationprogramhasyettobe communication plan in order to ensure a change in behavior implemented. Finally, although the procurement system has of the current crop of procurement practitioners. The private qualitystandards,thereislimitedmonitoringanduseofthese sector should also be included in the training program in order standardsforstaffperformanceevaluation.Table7providesa to improve competitiveness. summaryofthefindingsforthisassessment. 70. Professionalization Program.In2006,GPPBlauncheda Pillar III: Procurement Operations significantprofessionalizationinitiative,intendedtoprovidea and Market Practices careerpathforprocurementpractitionersintheGovernmentand correctweaknessesincapacitybuildingidentifiedinthe2004 72. This pillar looks at the operational effectiveness and CPARexercise.SupportedbyaWBInstitutionalDevelopment efficiencyoftheprocurementsystemswithintheimplementing Fund(IDF)TrustFund,theformaltraininginvolvesafour-stage entityresponsiblefortheconductoftheprocurementactions. certificationprogramthatwillraisethelevelofefficiencyand effectivenessofpublicsectorprocurement.Inthecurrentphase It looks at the market response as one way of judging the oftheproject,15modularsyllabiandstudymaterialsarebeing qualityandeffectivenessofthesystem.Graph3showstheBLI developedbyaconsultingfirm,whichwilltrainlecturersfrom assessmentscoresofthefollowingindicatorsthatconfirmthe selectedSUCsandregionalcompositeteamsinthedeliveryof CPARfindingsregardingtheirlevelsofachievement: themodules.UndertheGPRA,aBidsandAwardsCommittee (6)efficiencyofprocurementoperationsandpractices: (BAC), BAC Secretariat, BAC TWG and Procurement Unit Lessthan50percentofthebaselineswerefound aretobecreatedineachgovernmententitytofacilitatethe tobemet. professionalizationofprocurement.Headsofprocuringentities (7)functionalityofthepublicprocurementmarket:Market aretoconsiderprocurementproficiencyasoneofthefactors responsetopublicprocurementsolicitationisweak in the designation of officials to the BAC, BAC Secretariat, andlessthan50percentofthebaselinesweremet. Table 7: Summary of Scores for Indicator 5, Pillar II Sub-Indicators Score Max. Score 5(a)­Thecountryhasasystemforcollectinganddisseminatingprocurement information,includingtenderinvitations,requestsforproposals,andcontract awardinformation 1 3 5(b)­Thecountryhassystemsandproceduresforcollectingandmonitoring nationalprocurementstatistics 1 3 5(c)­Asustainablestrategyandtrainingcapacityexiststoprovidetraining, adviceandassistancetodevelopthecapacityofgovernmentand privatesectorparticipantstounderstandtherulesandregulationsand howtheyshouldbeimplemented 2 3 5(d)­Qualitycontrolstandardsaredisseminatedandusedtoevaluatestaff performanceandaddresscapacitydevelopmentissues 1 3 TotalScore 5 12 Rating: 5/12 or 42%;Level of Achievement is Partially Achieved. 30 (8)existenceofcontractadministrationanddispute Good procurement resolutionprovisions:Adequateprovisionsexistfor contractadministrationanddisputeresolutionand performance at the qualityofcontractadministrationpracticessubstantially national government level metthebaselineelements. is the result of effective Graph 3 - Procurement Operations and Market Practices training programs offered MAX. SCORE SCORE at the national level. 40 Likewise, poor performance 30 30 at the LGU levels reflects 20 16 the inadequacy of training 0 12 9 9 0 5 4 7 programs that do not Pillar III Indicator 6 Indicator 7 Indicator 8 Procurement Efficient Functionality Existence of Contract meet local government Operations Procurement of Public Administration and and Public Operations Procurement Dispute Resolution demands. The private sector Procurement Market Market is excluded from training Efficiency of Procurement altogether. Operations and Practices Findings 73. Procurement Competence and Skills.Thefirstvolume atextbook-to-studentratioofonetoone.Moreover,bidding of the GPMs on Procurement Systems and Organizations timehasbeencutinhalf,andtransparencyisattainedthrough defines the qualification requirements for members of the compliancewiththerequirementofpostingadvertisementin BAC,TWG,andtheBACSecretariattobeestablishedineach thePhilGEPSbysomeagencies. government entity. It defines the duties and responsibilities oftheseprocurementofficialsandspellsouttheirskillsand 75. Performance at the Local Government Level. While knowledge requirements. The DBM, as chair of the GPPB there are built-in provisions within the law that ensure fair and agency in charge of the rationalization program of the competitionandwidercoverageofparticipation,suchasthe government,issettoapprovetheguidelinesforthecreation publicationandpostingofbidnoticesatthePhilGEPSwebsite, ofProcurementUnits,dependingonthenumberandamount publicbiddingattheLGUlevelstillfailstoattainasufficient ofprocurementtransactionshandledbytheentity.However, levelofcompetitiveness.Thereareanumberofcontributing thereisnosystematicmatchingofskillsagainstrequirements factors. for competitive recruitment. Moreover, some staff required · Contractorsarerequiredtoundergoaccreditationpriorto toundertakeprocurementactivitiesonanadhocbasishave participating. insufficientknowledgeorhavenoaccesstoprofessionalstaff · Somecitygovernmentsrequiresuppliersandcontractors thatcanprovidetheknowledge. tosecurealocalbusinessregistration,effectivelyexcluding thoselocatedoutsidethecity. 74. Performance at the National Level.Institutionalpolicies · Competitionislimitedbecausesuppliersarenotinterested andproceduresconsistentwiththenewprocurementlawexist inthesmallamountsofLGUcontractsandtheproject atNGAs,particularlyatthecentraloffices,indicatingsufficient locationsmaynotbeconvenient. capability to implement the intended procurement reforms. · NotallLGUsvisitedwereawareofthePhilGEPSwebsite Competitive bidding since the GPRA's implementation has andnotallarepostingtheresultsofbidding. shown substantial savings. The DPWH reported an average · PublicofficerswithintheLGUshavereportedcollusion reductionof15to20percentofcontractcostwhencompared amongbiddersandbetweenbiddersandofficials,aswell aspoliticalinterference. withbudgetestimates.TheDOHreportedanaveragereduction · Publicofficershavealsoreportedmonopoliesestablished of27percentinthepricesofpharmaceuticalsduetoincreased bysomepharmaceuticalcompaniesforpublicpurchasing competition.Asof2006,theDepEdhadrealizedatotalof ofmedicinesandmedicalequipment. Php2.6 billion in savings, with an average reduction of 50 percentinthepriceoftextbooksthatallowedachievementof 3 76.Whilethelawrequiresthatprocurementshouldasarulebe In the case of both NGAs donebypublicbidding,inalmostallLGUs,alternativemodes ofprocurementarestillpreferred,particularlyshopping,direct and LGUs, recordkeeping contractingandcontracts"byadministration."Onereasonfor practices vary from one thismaybethatinseveralLGUs,especiallythesmallerones, officialsagreedthattransactionssubjectedtopublicbidding agency to another, as there endupcostingmore,andtheyfeelthatcontractsinsmall- is no integrated policy on sizedLGUsarenotworththeextratimeanddocumentation. For small contracts, like the construction of artesian wells the creation, identification, and some barangay maintenance works, seeking registered classification, retrieval, contractorsmayattimesbecomemorecostly,especiallyinthe caseofsmallLGUswheretherearelimitedchoices.Thelength receipt and transmission, oftimecontractorsmustwaitforpaymentalsodiscourages storage and protection, participation,sincesmallcontractorsdonothavethenecessary resources. disposition and preservation, or sharing of information 77.Goodprocurementperformanceatthenationalgovernment levelistheresultofeffectivetrainingprogramsofferedatthe and records. nationallevel.Likewise,poorperformanceattheLGUlevels reflectstheinadequacyoftrainingprogramsthatdonotmeet local government demands. The private sector is excluded fromtrainingaltogether.Recommendations: (a) The national inprocurementtransactiondocumentsinordertomaximize training program should be improved as a short-term solution its value. Recommendation: The GPPB should immediately and should include potential private sector bidders. (b) The establish norms for safekeeping of records and documents Professionalization Program, which is the long-term solution, related to transactions and contract management. A disclosure should be expedited. policy should be issued. 78. Recordkeeping. The Commission on Audit has issued Results of the BLI Assessment guidelinesthatenumeratetheprocurementrecordsthatmust 79.Theabovefindingsarebasedprimarilyonfieldvisitsand bekeptforauditingpurposes.However,inthecaseofboth the APPI assessment of the pilot agencies, and provide a NGAsandLGUs,recordkeepingpracticesvaryfromoneagency ground-levelviewofthedifficultiesandissuesthatarefaced toanother,asthereisnointegratedpolicyonthecreation, in actual procurement operations that hamper procurement identification,classification,retrieval,receiptandtransmission, reform.Indicator6receivedascoreof5outofapossible12 storage and protection, disposition and preservation, or points,or42percentcompliance,forapartialachievementof sharingofinformationandrecords.NeithertheGPRAnorthe baselinesandahighlevelofriskbecauseoftheprocurement GPMs provide for systematic records management, and no operationsandpracticesthatneedfurtherimprovementsto commonstandardshavebeensettomaximizeutilityandavoid correctsubstantialweaknessesandgapsatboththenational duplication and repetitive operations. None of the agencies andlocallevels.Table8providesasummaryoftheratingsfor sampledhadsystematicallymanagedtheinformationrecorded thisassessment. Table 8: Summary of Scores for Indicator 6, Pillar III Sub-Indicators Score Max. Score 6(a)­Thelevelofprocurementcompetenceamonggovernmentofficials withintheentityisconsistentwiththeirprocurementresponsibilities 1 3 6(b)­Theprocurementtrainingandinformationprogramsforgovernment officialsandforprivatesectorparticipantsareconsistentwithdemand 2 3 6(c)­Thereareestablishednormsforthesafekeepingofrecordsanddocuments relatedtotransactionsandcontractmanagement 0 3 6(d)­Thereareprovisionsfordelegatingauthoritytootherswhohavethe capacitytoexerciseresponsibilities 2 3 TotalScore 5 12 Rating 5/12 or 42%; Level of Achievement is Partially Achieved. 32 Functionality of the competition is limited due to monopolistic or oligopolistic Public Procurement Market features in important segments of the market. In works contracts, the trend is that many bidders submit expression Findings of intent to bid, but few actually submit bids. There is a 80. Effective mechanism for public-private sector perception that collusion or rigging of bids is common, partnership.Inaprocurementprocess,therearetwoactors, particularlyforbigticketcontracts.Anotherreasonforthelow thebuyerandtheseller.Theacquisitionofgoods,worksor competitionrateistheperceptionthatgovernmentprocesses serviceswillnotbecompleteifthesetwoactorsarenotableto ingeneral,andprocurementinparticular,arecumbersomeand cometoanagreement.Recognizingthis,theGPRAprescribes bureaucratic.Procuringentitieshavedifficultyinattractinga variousrulesthatcreatealevelplayingfieldforprospective larger number of legitimate bidders. Recommendation: A bidders,basedontwogoverningprinciples:transparencyin strategic communication plan that would change the behavior the procurement process and contract implementation, and and attitude of the private sector should be implemented. competitiveness fostered by extending equal opportunity to Quality training programs for the private sector should be private contracting parties who are eligible and qualified to included as part of the national training and professionalization participate.Transparencyandaccesstoinformationonpublic programs. biddingisassuredthroughpostingofnoticesinthePhilGEPS, nationalnewspapersandinotherconspicuouspublicplaces. 84. Constraints to Market Access.Manyconstraintsinhibit Toenhancetransparency,thelawmandatesthepresenceof privatesectoraccesstothepublicprocurementmarketand two observers, "one from a duly recognized private group reduce competition even for small contracts. Among the in a sector or discipline relevant to the procurement at multiple constraints identified by the assessment team are: hand,andtheotherfromanon-governmentorganization." tedious payment processes, the intervention of politicians Competitivenessisstronglyencouragedbytherequireduseof in the procurement process, cumbersome procurement standardbiddingdocuments,formsandcontracts,andgeneric requirements, difficulties in securing licenses and permits, specifications,reducingdiscretioninthebiddingprocess,and and lack of access to credit. In the 2006 survey conducted byensuringfulldisclosureoftheawardandpost-qualification by SWS on the effectiveness of the procurement law, five criteria. To further ensure a level playing field, a private factorswereidentifiedbyrespondentsasprobablereasonsfor sectorrepresentativeisappointedasavotingmemberofthe delaysintheimplementationofgovernmentprojects:corrupt GPPB,andtheaccreditationofanumbrellaorganizationfor governmentofficials(55percent);lackoffunds(55percent); consultantsisalsoprovidedintheGPRA. corruptcontractors(43percent);lackofcoordinationbetween government officials and contractors (29 percent); and red 81.However,statisticsshowedthatanaverageofonlythree tape(16percent). biddersparticipateinpublicbiddings,indicatingtheabsence of a competitive market. One reason is lack of knowledge 85.Constraints in the Procurement of Textbooks.Inthe byprivatecompaniesofhowthepublicprocurementsystem procurement of textbooks by the DepEd, the losing bidders operates, because Government has not included them in protested the award even though the winning bid met its training program. Recommendation: The bidders and the specifications and requirements for content, quality of other interested private sector companies, particularly small materials,andprinting.DespitetheWB'sthoroughreviewof businesses, should be encouraged to attend training programs theprocessanddocuments,thelosingbiddersevidentlyused on the procurement system. theinfluenceofsomepoliticianstoraisetheirproteststothe level of a Congressional inquiry, making this procurement a 82. Private Sector Organizations.Threemajorgroupsof muchpublicizedevent.Notcontentwiththepoliticalarena, tradeorganizationshaveaninterestinthepublicprocurement thelosingbiddersbroughtthecasetothecourts,questioning system:(i)twoprominentassociationsofcivilworkscontractors, the propriety of the awards and the application of the WB who number over 8,000: the Philippine Contractors' ProcurementGuidelines.Althoughthelowercourtsidedwith Association(PCA)andtheNationalContractorsAssociationof thelosingbidders,thehighestcourtoftheland,theSupreme thePhilippines(NACAP);(ii)suppliersortraders,mostofwhom Court,reversedthelowercourt'sdecisionandruledinfavor aremembersofthePhilippineInstituteofSupplyManagement oftheproprietyoftheawardandtheapplicationoftheWB (PISM);and(iii)registeredconsultants,whomaybemembers Guidelines,ineffectclarifyingthattheWBLoanAgreement oftheConfederationofFilipinoConsultantsoroftheCouncil isaninternationalorexecutiveagreementasprovidedforin of Engineering Consultants of the Philippines (CECOPHIL). theGPRA. Theseorganizationshaveanimportantroletoplayinkeeping theplayingfieldlevel. 86.Constraints in Civil Works Projects.Acaseofcollusion in DPWH procurement contracts resulted in three failed 83. However, the private sector dealing with the public biddings. The recommendations of award for two contract procurement market appeared to be relatively weak and packageswererejectedbytheWBonthegroundsofexcessive 33 bidpriceandunbalancedbids,andDPWHwasrequestedto appliedforforeignfundedprocurement. Recommendation. investigate the matter but found no evidence of collusion To improve competition, development partners recommend amongthebidders.Asubsequentrebiddingtookplaceafter that empirical data be gathered and presented to Government theprojectcostestimateswererevisedupwardsbyabout10 demonstrating that eligibility screening, even though percent.Whenthebidscameinhighagain(about30percent complemented by a strong postqualification process, is less higherthantherevisedcostestimates),theWBagainrejected effective than pre-qualification, and that an independent theawardrecommendationsforthesamereasons.Thetwo review be conducted on the effectiveness of eligibility screening rejectedpackageswerethenredesignedintothreepackagesby requirements in the Philippines, in particular for documents changingthepavementtypes,andathirdbiddingtookplace. that are not related to the technical and financial capacity of This time, the results for each package showed the lowest the bidder. bidderssubmittingbids15percentabovethecostestimates, with the losers' bids in each case quite closely bunched 89. Approved Budget for the Contract or Bid Ceiling. together and significantly higher than the lowest bidders' GPRA mandates imposition of an Approved Budget for the bid. The analysis of the bid data presented unmistakable Contract (ABC) that sets a price ceiling; any bids that are evidenceofcollusionineachofthethreepackages,andthe abovetheABCareautomaticallyrejected5.TheGovernment's recommendationsofawardwererejectedforthethirdtime. rationale for this rule is that it helps contain the incidence ofcorruptandcollusiveactivities.Sofar,theGPPBhasbeen 87.Constraints to Contracting in LGUs.Thefixedandlimited satisfiedwiththeresultofthemandatoryimpositionofABCin alllocallyfundedcontracts.However,thesituationisdifferent termofofficeofthelocalchiefexecutive(threeyears,witha forforeign-fundedcontracts,whereABCisnotanacceptable maximumofthreeterms),coupledwiththetimetakentobuild rulebecauseitlimitscompetition.InthePhilippines,theCPAR localprocurementcapacity,areamongtheissuesconfronting foundthattheaveragenumberofbidsisthree,toofewto localgovernments.However,theroleoftheprivatesectoris achieverealcompetitionforpubliccontracts.Forthisreason, alsoafactor.Misbehaviorofcertaincontractorscanresultin TheWBdoesnotacceptABCforICB,andADBandJBICdo rejection of bids and delays in completing bidding, slowing notacceptitfortheirlocalcompetitivebiddingmethodeither6 project implementation to the detriment of rural residents. (theWBdoesallowABCasbidceilingundercertainconditions TheLGUofPanaon,MisamisOccidental,respondedtosuch forNCB). asituationbycreatingan"IslandofGoodGovernance."This LGUrejectedbidsthatclusteredabovethepre-bidestimates 90.TheABCruleimposesparticularlimitationsininternational andofferedidenticalunitpricesformostitems,submittedby biddingbecauseinternationalfirmsfacehighercoststhanlocal contractors who had obtained bid securities from the same onesandABCdoesnotalwaystakethisintoconsideration. entity.Butprovingcasesofcollusionremainsdifficult,sodespite TheCPARcarriedoutananalysisofbidpricesinrelationto theLGU'scommendableefforts,theseerringcontractorshave engineers'estimatesandApprovedBudgetfortheContract been allowed to continue bidding in Panaon until collusion (ABC),basedonaNovember2004studyreportoncontractors' is adequately proven and the appropriate sanctions are qualificationandbidpricesthatcoveredtheprocurementof imposed. DPWH from 2002 to 2004 of 164 contracts funded by the WB,ADBandJBIC.TheCPARanalysisfoundthatthelowest 88.Pre-qualification and Eligibility Screening.Underthe evaluated bids (LEB) for foreign-funded contracts were 1.3 procurementlawanditsimplementingrulesandregulations, timestheABC(seeFigure3).Thereasonsforthevariancewere pre-qualification is replaced by an eligibility check and a identifiedasfollows: strong post-qualification process. To lessen subjectivity, a a.materials,equipmentandlaborcostsquotedbythewinning pass/fail evaluation is applied during eligibility check based contractorsarehigher; onadefinedsetoflegal,technicalandfinancialcriteria.Only b.theindirectcostormark-upishigherthanthestandardset biddersthatpasstheeligibilitycheckareallowedtosubmita bytheGOP. bid3.Thereafter,thewinningbidundergoesverificationand validationduringpostqualificationtoensurethatithaspassed 91.Internationalpracticerejectssuchpricecontrolmechanisms alltherequirementsandconditionsasspecifiedinthebidding becausepricecontrolisinappropriateinamarketsystem,where documents4. However, the development partners believe contractpricesshouldbesetthroughopencompetition.Infact, thateligibilityscreening,likeuseofABC,resultsinrestricting ABCcanactuallyencouragecollusionamongasmallnumber competitionandhascontributedtothelowobservednumber ofbidders.Thus,thedevelopmentpartnersbelievethatthe ofcompetingbidders(anaverageofthreepercontract).The bidceilingshouldbeabolishedonceGovernmentissatisfied eligibilitycheckrequired,amongotherthings,submissionof thatitscurrentpurposeinlimitingtheincidenceofcollusive documents that did not provide evidence of the technical, financialandlegalcapacityofthebidder,and,abiddermight 3Section 23 of the Government Procurement Reform Act, Republic Act No. 9184 be disqualified for non-submission of a minor documentary 4Section 34, Id. 5Section 5(a) of the Government Procurement Reform Act, Republic Act No. 9184 requirement.Forthesereasons,eligibilityscreeningcannotbe 6Procurement Guidelines of ADB, JBIC and WB 34 bidding environment has been served. Recommendation: limits have been in practice, (ii) and an analysis of whether the Development partners recommend that empirical data be current low participation of bidders is the result of imposing a gathered and presented to Government demonstrating that bid ceiling, and (iii) a report on the effectiveness of the ABC ABC-type price ceilings do not provide long-term benefits. rule in relation to contract administration and the quality of This analysis should be accompanied by the results of three completed works. The Study will also cover variation orders other empirical studies (i) a comparison of cost or engineer's resulting to substantial cost increases in the contracts awarded estimates with ABC to determine how reasonable the ABC using ABC. Figure 3: Analysis of Approved Budget Ceiling and Lowest Evaluated Bid DPWH Foreign-Assisted Projects (200-2004) Pesos Millionin (LEB) Bid Evaluated Lowest ApprovedBudgetCeiling(ABC)inMillionPesos WB ADB JBIC KFAED Results of the BLI Assessment marketplace.Theprivatesectorisrelativelyweak,competition 92.Indicator7wasgivenascoreof4pointsoutofmaximum is limited because of monopolistic or oligopolistic features scoreof9points,or44percentlevelofcompliance,indicating inimportantsegmentsofthemarketandbecausethereare partial achievement as several areas in the functionality of constraintstoaccesstothepublicprocurementmarket.Table9 the public procurement system need further improvement. providesasummaryoftheratingsforthisassessment. Governmentneedstopromoteprogramsthatbuildcapacity among private companies, including small businesses, and offer training to help firms enter the public procurement Table 9: Summary of Scores, Rating for Indicator 7, Pillar III International Standard/Sub-Indicators Score Max. Score 7(a)­Thereareeffectivemechanismsforpartnershipsbetweenthepublic andprivatesector 2 3 7(b)­Privatesectorinstitutionsarewellorganizedandabletofacilitate accesstothemarket 1 3 7(c)­Therearenomajorsystemicconstraints(e.g.inadequateaccessto credit,contractingpractices,etc.)inhibitingtheprivatesector'scapacity toaccesstheprocurementmarket 1 3 TotalScore 4 9 Rating: 4/9 or 44%;Level of achievement is Partially Achieved. 35 Contract Implementation creates an Arbitration Machinery for Construction Disputes. and Completion The GPRA further provides that the parties may agree in writingtootheralternativemodesofdisputeresolution.The Findings settlementofdisputesthrougharbitrationisincorporatedin 93. Contract Administration. The General Conditions theFormofContractsinthePBDs.TheGovernmentaccepts of Contract of the PBDs and the Guidelines on Contract internationalarbitrationforinternationalcompetitivebidding, Implementation provide procedures for final acceptance, solongasthisprovisionisincludedintheconditionsofthe inspection,testing,qualitycontrol,andcontractamendment loanagreementandcontractdocuments.However,thereisno for each type of procurement. The standard clauses are systemtomonitorthefinalresolutionandoutcomeofdispute based on internationally accepted standards and largely resolutions. harmonized with those of the WB, ADB, and JBIC. Quality controlproceduresforspecifictypesofgoods(books,drugs, 95. Enforcement of Dispute Resolution Process. The computers)arenormallyspecifiedinthecontractdocuments. Philippines is a member of the New York Convention on Quality control is carried out through the agencies' own EnforcementofArbitralAwards,whichtreatsanarbitralaward testingfacilitiesorbycompetentoutsidefirms.IntheDPWH, as final, unless an appeal is filed on pure questions of law construction supervision for foreign-assisted infrastructure before an appellate court within a given period. The GPRA projects is normally done by independent engineering firms providesthatarbitralawardsareappealablebywayofPetition incoordinationwithgovernmentsupervisorsandinspectors. for Review to the Court of Appeals on questions of law. A For government-funded infrastructure projects, construction partymayalsogotocourtforenforcementoftheaward. supervisionisdonebyqualifiedgovernmentsupervisorsand inspectors.However,whilepaymentschedulesarewrittenin Result of the BLI Assessment contracts, final payments for completed deliveries or works 96.TheabovefindingssupporttheBLIassessmentresults. generally take a long time to be released, often extending A good assessment score was achieved for this indicator at beyondthecontractprovisions.Thedelayisduetocautious 7pointsoutofpossible9,or78percentcompliance.Except handlingbytheprocuringentityoftheinspectionprocessand fortheelementof"finalpaymentbeingprocessedpromptly documentation review. Recommendation: Procedures for asstipulatedinthecontract",thepublicprocurementsystem final payment should be streamlined and the changes should meetsallotherelementsofgoodcontractadministrationand be reflected in the Generic Procurement Manual. implementation. While all the elements of a good dispute resolutionprocessaremet,includingenforcingtheoutcome 94. Dispute Resolution. The GPRA provides for disputes thereisnomechanismformonitoringtheoutcomeofdispute arising from contract implementation to be submitted for resolutioncases.Table10providesasummaryoftheratings arbitration under the Arbitration Law (RA 876), replaced by forthisassessment. the Alternative Dispute Resolution Act (RA 9285), which is consistent with generally accepted practices for neutrality of arbitrators, due process, expediency, and enforceability. Pillar IV: Integrity and Transparency of Public AlternativeDisputeResolutionprovisionsmayberesortedto Procurement System bypartiesuponmutualagreementanditisassumedthatboth partieswillhonorthedecisionrenderedbythedulyappointed 97.PillarIVlooksatwhetherthepublicprocurementsystem authority.Forconstructiondisputes,ExecutiveOrderNo.1008 operates with integrity, has adequate internal controls, Table 0: Summary of Scores and Rating for Indicator 8, Pillar III Sub-Indicators Score Max. Score 8(a)­Proceduresareclearlydefinedforundertakingcontract administrationresponsibilitiesthatincludeinspectionandacceptance procedures,qualitycontrolprocedures,andmethodstoreviewandissue contractamendmentsinatimelymanner 2 3 8(b)­Contractsincludedisputeresolutionproceduresthatprovidefor anefficientandfairprocesstoresolvedisputesarisingduringthe performanceofthecontract 3 3 8(c)­Proceduresexisttoenforcetheoutcomeofthedisputeresolutionprocess 2 3 TotalScore 7 9 Rating: 7/9 or 78%; Level of achievement is Subtantially Achieved. 36 sufficientappealsmechanisms,andhasappropriatemeasures ofCOA,asidefromauditingthebooksofaccounts,include inplacetoaddressthepotentialforcorruption.Graph4shows promulgation of accounting systems, which it carried out theBLIassessmentlevelsbasedonfourindicators. in 2001 through the issuance of the National Government AccountingSystem(NGAS).TheNGASisnowbeingusedby Graph 4 - Integrity and Transparency of the Public Procurement System allNGAsandLGUs7.WhiletheCOAconductspost-auditof MAX. SCORE SCORE transactions,italsocarriesoutspecialfraudaudit.TheCOA doesnothaveprosecutorialfunctions,althoughitmayinitiate 60 criminal, civil or administrative action by filing a complaint 50 54 beforetheappropriatebody,suchastheDepartmentofJustice 40 ortheOfficeoftheOmbudsman.Criminalprosecutionsare 36 30 initiated by the Ombudsman as a complainant, with COA 20 21 providing the evidence or witnesses for the prosecution. 17 0 15 15 ComplaintsbroughtbyprivatepartiesgenerallyattachaCOA 8 9 3 0 2 reportasavitalcomponentofthecomplaint. Pillar IV Indicator 9 Indicator 10 Indicator 11 Indicator 12 The Integrity Effective Efficiency of Degree of Ethics and and Transparency Control Appeals Information Anti-Corruption 99. Enforcement and Follow-up on Audit Findings and of Procurement and Audit Mechanism Access Measures System System Recommendations. Records of the COA National Capital Region office from 2004 to 2006 show that an average of 56percentofallnoticesofdisallowancewereprocurement (9) Internal control and audit: The elements of quality, related.However,disallowanceswithfinalityarefew,asthe reliabilityandtimelinessoftheinternalandexternalcontrols cases tend to linger on at various stages of appeal, further arepartiallyachieved.InternalAuditUnitsneedtobecreated aggravated by the length of time between the discovery of inallentitiesorstrengthened,andenforcementoftheGPRA anomaliesbyCOAandthefilingofacase(upto12months). usingtheauditingsystemneedstobeimproved. AcomparisonofrecordsatCOAandtheOmbudsmanfound (10) Appeals mechanism: Efficiency and integrity of the that COA's mandated task of monitoring the cases referred existingappealsmechanismpartiallyachievesthebaseline to the Ombudsman for prosecution is not being effectively elementsofawell-functioningpublicprocurementsystem, undertaken,andthatthereisnocomprehensivedatabaseof exceptthattheindependenceoftheadministrativereview procurementandotherrelatedcases.Muchweighthasbeen bodyisnotassured. placed on interagency cooperation among the Civil Service (11)Accesstoinformation:Althoughthequality,relevance, Commission (CSC), COA and the Ombudsman that was easeofaccessandcomprehensivenessofinformationonthe supposedtodeliverresultswithrespecttotheprosecutionof publicprocurementsystemsubstantiallymetthebaselines, cases.Internally,however,theCOAregionalofficesthatwere makingtheinformationavailablehasnotbeeneffectivein supposedtosubmitcomprehensivereportstotheHeadOffice changingbehavior.Thereisanurgentneedtoimplementa oncasesfiledandpendinghavenotgenerallybeenperforming strategiccommunicationstrategytoincreaseawarenessof thistask.RecordsattheOmbudsmanshowthattherewere theprocurementlaw. onlyafewinstanceswhencasesorcomplaintswerebrought (12)Ethicsandanti-corruption:Thenatureandscopeofthe totheOmbudsmanbyCOA,butthisdoesnegatethefactthat anticorruptionprovisionsinthepublicprocurementsystem COAplaysasignificantroleintheprosecutionofcases. substantiallymetthebaselines,assufficientethicsandanti- corruptionmeasuresareinplace. 100.FinancialauditsarecarriedoutannuallybyCOAaspart ofitsmandatetoreporttoCongressandthePresidentonthe Internal Control and Audit accountsofallagenciesandinstrumentalitiesofgovernment. Procurementauditisnotyetgivenenoughfocusinmostof Findings the audit programs because most auditors have inadequate 98. Legal Framework. The 1987 Constitution provides for knowledgeofthelaw,itsimplementingrules,theharmonized an independent Commission on Audit (COA) that has the biddingdocumentsandcontractforms,andtheprocurement powertoauditallaccountspertainingtogovernmentfunds manuals;andthereisnoprocurementauditguidetoactas nationwide,includingprocurement-relatedtransactions.COA thebasisforincludingprocurementauditintheannualaudit isrequiredtosubmitanannualreportofeachentity'sfinancial program.Mostauditorsarenottrainedtocarryoutrisk-based statementstotheLegislativeBranchintimeforreviewpriorto audit tailored for risk management. Recommendation: deliberationoftheproposedannualbudgetappropriation.The A procurement audit guide should be developed and GovernmentAuditingCode(RA1445)andtheGovernment implemented by COA, with particular focus on the audit of AccountingandAuditingManualdiscusstheproceduresfor the implementation of the GPRA. A training program on internalcontrolandmanagementofallfinancialtransactions procurement should be developed and implemented for and define the system of checks and balances. The powers auditors, with the procurement audit guide as a primary 37 Procurement audit is not control rules and regulations should be finalized and approved for roll-out nationwide. DBM and PAGC should collaborate to yet given enough focus in ensure satisfactory performance of internal control systems in most of the audit programs government, particularly in implementing and enforcing the procurement law. because most auditors have inadequate knowledge of 102.AWBIDFGrantissupportinganefforttostrengthenIAUs foreffectiveprocurementmonitoringandenforcementthatis the law, its implementing beingimplementedbythePresidentialAnti-GraftCommission (PAGC).Underthisproject,theGovernmenthasmappedthe rules, the harmonized creationofIAUsnationwide,includinginLGUs,assessedthe bidding documents and qualityoftheinternalauditfunction,andwilldevelopaquality assessmentguideforperiodicinternalagencyoversight.The contract forms, and the projectwillalsodevelopaninternalauditmanualfornational procurement manuals; and agenciesthatwillbeinaccordancewithinternationalstandards and also incorporate national internal control rules and there is no procurement regulations.Completionoftheprojectwill,attheagencylevel, audit guide to act as closethelooponprocurementimplementation,asitisexpected thattheIAUswillregularlyadvisetheheadoftheprocuring the basis for including entityofanyinadequacyinprocurementcontrolsandpromptly submitreportsofdeviationfrompoliciesandstandards.Thiswill procurement audit in the significantlycontributetotheimplementationofprocurement annual audit program. reformsattheagencylevel. 03. Internal Audit Units in LGUs.Morethan65percentof LGUs(citiesandmunicipalities)donothaveIAUs.Wherethey training material, and both the guide and the training should havebeencreated,thequalityofperformanceisnotonapar include a risk-based approach to audit. The professionalization withinternationalinternalauditingstandards.Someofthese program of GPPB is expected to include COA auditors as unitsarecommonlyreferredtoaspre-auditunitsandareactually participants. thedivisionsundertheOfficeoftheAccountantinchargeof theconductofpre-audit.AllLGUsthathadestablishedanIAU 0. Internal Audit Units in National Agencies. Under admitted that they have not yet conducted a procurement a 2003 Administrative Order, each agency is mandated to system audit. Most of the findings of internal auditors are strengthen internal control through the creation of Internal notformallycommunicated,buttreatedinformallyas"inside Audit Units (IAUs) with adequate personnel and budgetary information."Governmentprocurement,asitispracticedin provision.AsofJanuary2007,56percentofNGAs,52percent theLGUs,isstillfarfromfulfillingtheprovisionsandintentof ofSUCsand73percentofGOCCshadcreatedIAUs8.However, thelaw,howeverneithertheinternalnortheexternalauditors onlyanaverageof28percentoftheseunitsarefunctioning have come up with a comprehensive audit of procurement inaccordancewithinternationalstandards.IntheAPPIreview systemsinordertoidentifyareasofsignificantdeviationand of 10 pilot agencies, seven had established internal control thecausesandconsequencesofnon-compliance. unitsforannualauditofprocurementactivities,buttheywere found to be mostly performing pre-audit and checking of 04.Auditors' Procurement Training.Auditorsplayamajor role in ensuring that the appropriate controls support the completenessofsupportingdocuments,whichdoesnotmeet internationalinternalauditingstandards.Recommendation: implementationofthepublicprocurementsysteminaccordance withthelegalandregulatoryframeworkandthatappropriate Where they are lacking, IAUs should be created. Where they measuresareinplacetoaddressthepotentialforcorruptionin have been set up but are not performing in accordance with thesystem.However,itwasreportedthatmostfieldauditors standards, they should be strengthened. It would be timely ofCOAarenotproperlytrainedintheGPRA,itsimplementing to factor this requirement into the ongoing rationalization rulesandregulations,biddingdocuments,formsandstandard of public administration. An Internal Audit Manual that contracts, the generic procurement manuals, and internal incorporates international standards and the local internal controlfeaturesthattheyaresupposedtoassessduringaudit. Todate,thereisnoprocurementauditguidetostandardize 7e-NGAS, the computerized version of NGAS developed by COA, was rolled-out beginning 2003. As of 30 input to the annual audit program. Recommendation: A September 2008, 196 NGAs and 141 LGUs have completed its installation. 8DBM and PAGC continue to collaborate to ensure the systematic issuances of internal control guidelines and Procurement Audit Guide should be developed to guide the internal audit manuals. Also, DBM issued a circular last 14 April 2008 advising all agencies that they could create conduct of auditors, and training in its implementation should and activate IAUs pending approval of their Rationalization Plans. be conducted for all auditors on a regular basis. 38 Result of BLI Assessment More than 65 percent 05.The above findings support the BLI assessment results. Thescoreis8outof15points,for53percentcompliance, of LGUs (cities and or partial achievement of the baselines. An adequate legal municipalities) do not have framework, organization, policy and procedures for internal andexternalcontrolexist,butthereisnospecificperiodicrisk IAUs. Where they have assessment or controls tailored to risk management. Audits arecarriedoutannually,butresponsetoorimplementation been created, the quality of oftheauditors'recommendationcantakeuptoayear.The performance is not on a par creationofanInternalAuditUnitineachagencyismandated, butmostagencieshavenotcompliedwiththisrequirement, with international internal andthosethathavearenotperforminginaccordancewith auditing standards. international standards. There is no internal audit manual to guide internal auditors. While auditors have general knowledgeoftheGPRA,theyarenotsupportedbyspecialists onprocurement,becausethereisnotrainingforauditorson 07.Administrative Review.Reviewofdecisionsiscurrently procurement. Table 11 provides a summary of the ratings. lodgedwiththeOfficeofthePresidentwhich,byvirtueofthe President'sbroadadministrativesupervisoryandreviewpowers undertheAdministrativeCodeof1987,hasauthoritytogrant Efficiency of Appeals Mechanism remediesforprocurement-relateddecisionsmadebyheadsof procuringentities.TheGPRAfurtherstatesthatdecisionsofthe Findings headsoftheprocuringentitiesaresubjecttojudicialreview, 06.Due process. TheGPRAprovidesthatprotestsintheform anddesignatestheRegionalTrialCourtashavingjurisdiction. of "motions for reconsideration" with respect to decisions However,thereisnoindependentadministrativereviewbody involving contractor eligibility and qualification may be filed toconductareviewofappealedcomplaintsasrequiredbythe withtheprocuringagency'sBAC.Themotionsaredecided, standards.Theprotestmechanismisalsoviewedasineffective basedonthefacts,withinsevendays;ifthemotionisdenied, and is not utilized in view of the high and non-refundable thebiddermayfileaprotestinwritingwiththeheadofthe protestfees.Recommendation:A study should be conducted procuring entity. Protests are resolved strictly on the basis to review existing policies and procedures related to complaints of BAC records. Procuring entity heads have the authority and appeals in light of best practice in other countries, and toresolvetheprotestandrenderafinaldecisionuptothe to consider the designation of an independent administrative limit of their approving authority. The decision of the head body, tapping an existing administrative review body with the oftheprocuringentityisnormallyconsideredfinal,andthe appropriate mandate, and setting reasonable protest fees. procurementprocessproceedstothenextsteps. Table : Summary of Scores for Indicator 9, Pillar IV Sub-Indicators Score Max. Score 9(a)­Alegalframework,organization,policy,andproceduresforinternal andexternalcontrolandauditofpublicprocurementoperationsare inplacetoprovideafunctioningcontrolframework 2 3 9(b)­Enforcementandfollow-uponfindingsandrecommendations ofthecontrolframeworkprovideanenvironmentthatfosterscompliance 2 3 9(c)­Theinternalcontrolsystemprovidestimelyinformationoncompliance toenablemanagementaction 1 3 9(d)­Theinternalcontrolsystemsaresufficientlydefinedtoallow performanceauditstobeconducted 2 3 9(e)­Auditorsaresufficientlyinformedaboutprocurementrequirements andcontrolsystemstoconductqualityauditsthatcontributetocompliance 1 3 TotalScore 8 15 Rating: 8/15 or 53%; Level of achievement is Partically Achieved. 39 08.Publication of decisions:Thepublicationofdecisions Access to Information ondisputesresolvedbytheprocuringentityisnotmandatory andislefttothediscretionofthereviewbodies,makingaccess Findings difficult. Recommendation: A mechanism, which could be .Publishing Procurement Information.Severalreadily the subject of an executive issuance, should be developed andwidelyaccessiblesystemsarenowprovidingprocurement to publish the decisions of the BACs and entity heads on information. PhilGEPS, the primary and definitive source of procurement-related disputes and protests. information on government e-procurement, now offers an electronicbulletinboard,e-catalogue,andsuppliers'registry. 109.Complaintreviewbody.TheGPRAprescribesthatappeals Exceptforbarangays,70percentofallpublicprocuringentities fromthedecisionoftheHeadofProcurementEntitybefiled areregisteredasPhilGEPSusers.Whilenotallagenciessubmit eitherwiththeOfficeofthePresidentorthejudicialcourts. theirprocurementinformationtothePhilGEPSoravailofits OECDhasclarifiedthatthebodyshouldbeanindependent services, and the required Internet technology is accessible administrativereviewbody.TheOfficeofthePresidentisnot in only about 30 percent of the whole country, cyberspace an independent administrative review body, neither are the modernizationisspreadingsofastthatthenewtechnology judicialcourts.Inthisregard,thepublicprocurementsystem shouldovertakeotherchannelsofcommunicationinashort is not meeting the standards. Recommendation: A study time. Investing in modernization has proven to be a good should be conducted to determine whether there is a need to decisionbyGOP. create an independent complaint review body in accordance with international standards. 112. The GPPB website (www.gppb.gov.ph) provides informationonpolicies,guidelines,issuancesonprocurement, Result of BLI Assessment andbidopportunitiesthatgovernmentagenciesarerequired 0. The above findings support the BLI assessment topost.Itpublishesthenamesofcompaniesandfirmsthat results. Thisindicatorscored9outofapossible15points, areblacklistedURBandsuspended.TheUniformGuidelines for60percentachievementlevel.TheGPRAprescribesthat onBlacklisting(UGB)requiresallagenciestopublishblacklisted thedecisionsofentityheadsandtheOfficeofthePresident, companynamesontheGPPBwebsite. asappealbodies,shouldbebasedonfactsandrenderedwith authority and enforceability under the law. The complaints 3. Public Perception Survey on the Effectiveness of reviewsystemisefficient,butthecomplaintreviewbodyisnot the GPRA.The2006surveyconductedbylocalsurveyfirm independentandautonomous.Whilethesystemoperatesina SWSonthepublicperceptionoftheeffectivenessoftheGPRA fairmanner,itdoesnotresultincorrectiveremediesbutonly revealedthatonly13percentofthegeneralpublicisaware insanctionsandpenalties.Decisionsare notrequired tobe oftheprocurementlawafterfouryearsofimplementation. publishedandaccessisdifficult.Table12providesasummary TheresultisalarmingtoGOPbecausetheGPRAwasprimarily ofthesefindings. designed to be an anti-corruption measure, with stiff penaltiesforsimpleprocurementgraftandmisbehavior,the shortest of which is imprisonment of at least six years. The lesspeopleknowaboutit,thelessvaluewilltheGPRAadd Table 2: Summary of Scores for Indicator 0, Pillar IV Sub-Indicators Score Max. Score 10(a)­Decisionsarerenderedonthebasisofavailableinformation,and thefinaldecisioncanbereviewedandruleduponbyabodyorauthority withenforcementcapacityunderthelaw 3 3 10(b)­Thecomplaintreviewsystemhasthecapacitytohandlecomplaints efficientlyandameanstoenforcetheremedyimposed 3 3 10(c)­Thesystemoperatesinafairmanner,withoutcomesofdecisions balancedandjustifiedonthebasisofavailableinformation 2 3 10(d)­Decisionsarepublishedandmadeavailabletoallinterestedparties andtothepublic 1 3 10(e)­Thesystemensuresthatthecomplaintreviewbodyhasfullauthority andindependenceforresolutionofcomplaints 0 3 Totalscore 9 15 Rating: 9/15 or 60%; Level of achievement is Partially Achieved. 40 tothefightagainstcorruption.Adireneedthereforeexists 117.Ininstitutingmeasurestoreduceprocurementcorruption, forGPPBtoquicklydisseminateprocurementinformationvia theGPRArequiresbidderstodiscloseinwritingwhetherthey communicationchannelsthatwillreachabroadmajorityof arerelativesoftheheadoftheprocuringentityuptothethird citizens.GPPBhasaddressedthisimportantissuebydeveloping civildegree.TheGPRAprovidesfortheissuanceofblacklisting aStrategicCommunicationPlan,withWBsupport.Theplanis guidelines,aswellassanctionsandpenaltiesforcivil,criminal discussedfurtherinthenextsection.Recommendation:The andadministrativecases.ThePBDscontainadequateprovisions proposed Strategic Communication Plan should be approved onfraudandcorruptionintheInstructiontoBiddersandthe and implemented, with the support of development partners. GeneralConditionsofContract. Adequate resources should be allotted to ensure its success. 8. Defined responsibilities, accountabilities and 4.Public disclosure.Civilsocietyhasbeenclamoringfora penalties. TheGPRAclearlydefinesthecoverageoffraudand systematicandrationalizeddisclosurepolicyforprocurement corruption,andhasveryspecificprovisionsontheresponsibilities information and how specific bids relate to budgeted ofpublicofficialsandprivateentities.Italsocoversoffenses, public expenditures. However, there is no disclosure policy penalties,civilliabilities,andadministrativesanctionsthatmay on procurement-related information. Recommendation: A beimposedonerringpublicofficialsorsuppliers,contractors, disclosurepolicyonprocurement-relatedinformationshouldbe and consultants. The GPMs discuss the conditions when formulated,approvedbyGPPB,andimplementednationwide conflictofinterest,interventionofactivepublicofficialsand byallprocuringentities. otherrelatedoffensesmayarise,alongwiththecorresponding penalties.TheAnti-GraftandCorruptPracticesActprohibits Results of BLI Assessment the intervention of former public officials in procurement 115.Theindicatorscored2outof3points,or67percent. mattersinwaysthatbenefitthem,theirrelatives,andbusiness Although there is an electronic government procurement orpoliticalassociates,financiallyorotherwise,forareasonable systemandprocurementinformationispublished,accessibility periodoftimeafterleavingoffice. islimiteddueto:(a)technologylimitationsinfar-flungareas; (b)lackofcoordinatedandconsistentlyimplementedstrategic 9. Evidence of enforcement. Records from the anti- communications;(c)lackofcompliancebysomeagencieswith corruption agencies provide evidence of a few cases where therulesonpublication;(d)absenceofadisclosurepolicy. laws on corrupt practices have been enforced and of many Table13providesasummaryoftheratings. morethathavenotbeenactedon. (i) The Office of the Ombudsman investigated 38 Ethics and Anti-corruption Measures procurement-relatedcasesfrom2004to2006forvarious violationsoftheAnti-GraftandCorruptPracticesAct(RA Findings 3019issuedinJune1955),CodeofConductandEthical 16. Ample Legal and Regulatory Provisions Addressing StandardsforPublicOfficialsandEmployees(RA6713issued Corruption.Thelawsandregulationsaddressingcorruption inNovember1989)andGPRAissuedinJanuary2003.Some include the Anti-Graft and Corrupt Practices Act, RA 3019, oftheseinvestigationshaveresultedinthedismissalfrom issued as early as 1955, the Code of Conduct and Ethical serviceorsuspensionofpubliccareerofficialsandelected StandardsforPublicOfficialsandEmployeesissuedin1989, officials.However,alargenumberofcomplaintshavenot and the most recent GPRA to address public procurement beenactedupon,andsomecasestakeaverylongtime: corruption, issued in 2003. These are adequate laws to someofthecasespendingbeforetheSandiganbayan(the implementgoodgovernanceandpreventcorruption.Theissues Philippines'anti-graftcourt)werefiledmorethantenyears ariseintheimplementationandenforcementoftheselaws, ago. The low enforcement capacity of the Ombudsman's andtheDepartmentofFinance,theOfficeoftheOmbudsman specialprosecutionofficeandthatofthecourtsisamajor and the Presidential Anti-Graft Commission have recently concern. begunconcertedeffortstoaddresstheseissuesthroughseveral (ii) The PAGC investigated 37 procurement-related cases programs,suchasRunAfterTaxEvaders,RunAfterSmugglers, from2001to2006,resultinginthedismissalfromserviceof LifestyleChecks,IntegrityDevelopmentReviews,andIntegrity somehigh-rankingpoliticalappointees. DevelopmentActionPlansofcorruption-ladenagencies. (iii)Inlinewithitslegalmandate,from2004to2006,COA­ Table 3: Summary of Scores for Indicator , Pillar IV Sub-Indicators Score Max. Score 11­Informationispublishedanddistributedthroughavailablemedia withsupportfrominformationtechnologywhenfeasible 2 3 Rating is 67%; Level of achievement is Substantially Achieved. 4 NationalCapitalRegionhad43noticesofdisallowance:6 imposedbytheagenciesonerringsuppliersofgoods,services casesfortheyear2004,27casesfor2005,and10cases andconsultingservices.Someofthereasonscitedarestaffand for2006.Morethanhalfofthesewereprocurementrelated timeshortagesandtediousnessoftheprocedures. (24cases),withvaluesinvolvedrangingfromPhp100,000 toPhp279,144,701.Ofthetennoticesofdisallowancein 122.ThesituationisevenmorecriticalintheLGUs,where 2006,onehadbeenlifted,onehadbecomefinal,andthe blacklisting is rarely undertaken. Field visits found no LGUs restareinvariousstagesofappeal.Noticesofdisallowance with internal systems or procedures for blacklisting bidders, arebeingusedasbasisfortheinitiationofadministrative suppliers,contractorsorconsultants.NotallLGUsareawareof orcriminalactionsagainsterringgovernmentofficialsand GPPBblacklistingguidelines,andthosethatareaware,seldom employees. comply. While some LGUs admitted that there are some (iv) The Senate Blue Ribbon Committee investigated such suppliersandcontractorswhofailtoperformafteranaward high-profile procurement cases as the Commission on Electionpollcomputerizationcontract,whichtheSupreme hasbeenmade,theyaresimplyreprimanded. CourtnullifiedforrunningcontrarytotheGPRArequirement ofpublicbidding;theBatangasPortlandacquisitionproject; 23. GOP Performance on Blacklisting. As of March 31, andtheInternationalAirportPassengerTerminalIIIProject. 2006,therewere182blacklistedconstructorsforinfrastructure projectsontheGPPBlist,with78blacklistedby8different Unsuccessfulprosecutionanddelaysinthetrialofprocurement- agenciesand104byPCAB.Ofthoseblacklistedbygovernment relatedcasesareduetoinadequatecapacityandtrainingand agencies,63werefromDPWH,4fromMetropolitanWaterworks tofailuretodetectfraudinprocurementandgatherproper andSewerageSystem,3fromNationalPowerCorporation,3 evidence. Recommendation: A special training program from National Housing Authority, 2 from National Irrigation should be developed on procurement contract fraud detection, Administration, and one each from Philippine Food Drugs evidence gathering, and prosecution techniques. The target Authority, DOH, and PPA. The most common grounds for participants should be investigators, prosecutors and auditors. blacklistingconstructorsbygovernmentagencieswere: ·rescissionofcontractduetofailuretocompleteproject(33 20. Special measures: Blacklisting and suspension of percent), erring bidders, suppliers, and contractors.Asrequiredby ·abandonmentofproject(16.7percent), theIRR-A,theGPPBissuedGuidelinesfortheBlacklistingof ·failuretocomplywithcontractualobligationsoranylawful Erring Bidders, Suppliers, and Contractors in August 2004. instructions(14.1percent), Complianceisgoodforinfrastructureprojects,largelybecause ·intolerablenegativeslippageofmorethan15percent(12.8 theDPWHistheonlyagencywithspecificinternalprocedures percent), forblacklistinginfrastructureconstructors.Atpresent,thelist ·falsificationofpublicdocuments(11.5percent),and ofblacklistedcontractorsisavailableandupdatedregularlyat ·qualityofmaterialsnotcomplyingwithspecifications,poor theGPPBwebsite,whereGPPBhaspublishedmorethan250 performance,orunsatisfactoryqualityofwork(9.0percent blacklistedorsuspendedfirms,andthislistissubmittedand combined) activelymonitoredbythePhilippineConstructorsAccreditation Board(PCAB).Theprocessofblacklistingiscoordinatedwith OfthoseblacklistedbyPCAB,56licenseswererevoked,20 theConstructionIndustryAuthorityofthePhilippines(CIAP), suspended,and28deniedlicenses.Themostcommontypes which is mandated by the Contractors' Licensing Law to ofoffensesofPCABblacklistedconstructorswere: conducttheblacklistingofcontractorsandthecancellationof theirlicensesbasedonspecifiedoffenses. ·misrepresentationoftechnicalemployees(58.6percent), ·misrepresentationoffinancialqualifications(21.1percent), 121. However, the UGB has very limited application, and ·misrepresentationoftrackrecord(9.6percent), lacks the coordinated enforcement tools to be effective. ·submissionofspuriousorfalsifieddocuments(5.8percent), The UGB can effectively strengthen the provisions of the and GPRA for administrative penalties, only if mechanisms for ·abandonmentofproject(1.9percent). its implementation are in place and functioning. Without a concerted effort by all government agencies, the mere 24. Application of national blacklisting to MDB-funded existenceoftheguidelinesisnodeterrenttoerringsuppliers, projects. Thenationallyblacklistedfirmsarenotautomatically contractors or consultants. Unfortunately, there is a clear blacklisted in MDB-funded projects. Since the imposition of indication of limited compliance by most agencies with such sanction against a firm triggers an inquiry and review blacklistingproceduresandinthesubmissionoftheirblacklists oftheprocessleadingtotheblacklist,dueprocessisbeing totheGPPB.Itislikewiseclearthatpenaltieslinkedwiththe observed;useofblacklistinginMDB-fundedprojectswould blacklisting process, such as contract termination, forfeiture furtherrequirethatthegroundsforblacklistingareacceptable ofsecurities,andimpositionofliquidateddamages,arenot totheMDBsandthattherulesaredisclosedtothepublic. 42 Recommendation:A study should be conducted to review While Government the UGB with the objective of strengthening its enforcement mechanism and align it with international good practice. has a number of anti- corruption programs in 25.Special Anti-Corruption Program.Differentagencies have their own anti-corruption programs. The Ombudsman place implemented by (OMB)istheprimarygraftbusterundertheConstitutionand hasembarkedonanumberofanticorruptioninitiatives. several anticorruption ·LifestyleCheckofpublicservants,wheretheactualassets agencies, these measures ofofficialsholdingsensitivepositionsarecomparedwith theirincomefromgovernmentservice.TheStatement are not coordinated and ofAssetsandLiabilitiesmandatedbylawtobe synchronized to achieve annuallyfiledwiththeOmbudsmanisabasicdocument forinvestigationsincasetherearelargedisparitiesbetween results. assetsandsalaryincome. ·AmorestructuredandelaborateapproachistheIntegrity DevelopmentReview(IDR),whichlooksathow 28.CSO and Private Sector Participation in Procurement governmentagenciesareaddressingcorruptionand Biddings.Thelandscapeofpublicservicedeliveryhasbeen governanceissuesinternally.TheIDRhasbeenpilotedin17 changing.Wheregovernmentwasoncethesoleactorinthe agenciesanditisexpectedtobecomearegularprogramto arenaofpublicservicedelivery,nowadays,citizensareboth addresssystemicissuesofcorruption. beneficiariesandactiveparticipants.Non-stateorcivilsociety ·AMulti-SectoralAnti-CorruptionCouncilwaslaunchedin organizations(CSOs)aretakingtheinitiativewheregovernment March2007involvingtheExecutiveDepartment,the isabsentorwheretheprivatesectordoesnotfinditprofitable SenateandHouseofRepresentatives,Judiciaryand to participate. The GPRA recognizes the significance of the ConstitutionalBodies,LGUs,andCSOs.TheCouncilserves CSOsandhasgiventhemacriticalroleinpublicprocurement, astheconsultativeandcoordinatingbodyfortheNational providingfortheirparticipationasobserversatallstagesof Anti-CorruptionProgramofAction. publicbidding. 126.AsthearmofthePresidentforimplementingtheanti- 129.AprivatesectorrepresentativesitsintheGPPBandin corruptionprogramoftheExecutiveBranch,PAGClaunched its TWG, to provide private sector inputs in discussions on in2005theIntegrityDevelopmentActionPlan,whichaimsto procurementpolicies,procedures,andconcerns.Representatives identifyspecificmeasuresneededtoavoidgraftandcorruption, from professional organizations and non-government includingdetectionandpreventionactivitieswithinanagency. organizationsserveasobserversintheBACsofgovernment Sofar,morethan50agenciesareparticipatinginthisplan.The agenciestoensuretransparencyintheprocurementprocess. DepartmentofFinance(DOF)implements,throughtheBureau These include, among others: PCA, Philippine Chamber of ofInternalRevenue,theRunAfterTaxEvadersprogramaiming CommerceandIndustry,PhilippineInstituteofCivilEngineers, todiscover,investigateandpenalizetaxevaders,andthrough NACAP, Philippine Institute of Certified Public Accountants, the Bureau of Customs (BOC), the Run After Smugglers andtheConfederationofFilipinoConsultingOrganizationsof program aiming to catch smugglers of goods through the thePhilippines.TheTransparencyandAccountabilityNetwork, portsandensurethatdutiesarecollected. theCatholicBishops'ConferenceofthePhilippines,theMakati BusinessClub,andtheNationalCitizens'MovementforFree 127. While Government has a number of anti-corruption ElectionsaresomeofthemoreactiveCSOsthatsendtheir programs in place implemented by several anticorruption representativesasobservers. agencies,thesemeasuresarenotcoordinatedandsynchronized to achieve results. Recommendation: A covenant among 130. AlthoughtheGPRA'sobjectiveofensuringtransparency the oversight agencies (GPPB, COA, PAGC, DBM and the inprocurementbymeansofmandatingCSOobserversinthe Ombudsman) should be agreed upon to strengthen the biddingprocessislaudable,itsimplementationisnotproducing coordinative linkages, monitoring and enforcement of audit thedesiredimpactontheground.Moreover,itssustainabilityis findings, and compliance with the procurement law. The atriskunlessseriousremedialmeasuresareintroducedbythe covenant could be supported by the creation of a procurement GPPBandtheCSOsthemselves.Recommendation:A list of sub-working group under the PDF Working Group on activities to increase CSO participation was agreed on at the Governance and Anti-corruption. Special training programs August 8, 2007 CPAR consultation workshop (see Annex 5). on fraud detection for purposes of prosecution should be This list should become the basis for a study to be undertaken developed and conducted, targeting investigators, prosecutors on sustaining the involvement of CSO observers in the bidding and auditors. process, including contract implementation. 43 3. Mechanism for Reporting Fraudulent, Corrupt The 2006 SWS survey on or Unethical Behavior. The anticorruption agencies have establishedchannelsforreceivinginformationfromthepublic the GOP's procurement onfraudulent,corruptorunethicalbehavior.TheOmbudsman system revealed that the hasembarkedonacommunicationcampaignusingtheradio andprintmediatoinformandencouragethepublictoreport public perceives the level of suchbehavior.Thereportmaybemadeinwriting,anonymously or otherwise, addressed to a given Ombudsman Office, or corruption in government throughthepublicassistancehotlinesusingsecuredtelephone contracts to be the same as lines. PAGC also encourages written complaints containing information on corrupt behavior of particular government it was five years ago, about officials, which it then investigates. DPWH has a policy of the same time that the placingprojectbillboardstoinformthepublicaboutspecific construction projects in conspicuous places at construction GPRA was passed. sites,providingaphonenumberorlocationwhereconcerns abouttheprojectmaybereported. oftheGPRAthoughtitisnoweasiertopunishgovernment 32. Code of Conduct. The Code of Conduct and Ethical officialsresponsibleforirregularitiesingovernmentcontracts Standards for Public Officials and Employees issued in comparedtoaboutfiveyearsago.Alargeproportionofall November1989providesfornormsofconductandspecifies respondents(55percent)saidthattheywouldreportincidents prohibitedactsandtransactionsonthepartofpublicofficials, ofcorruptiontothemedia,andnearlyasmany(46percent) includingthoseinvolvedinpublicfinancialmanagementand said it was important for people to know the procurement procurement.TheCodedefinesaccountabilitiesandfinancial reformlawsandregulations.Morethan40percentarewilling disclosure. Compliance with this Code is obligatory, with to join a citizens' group or a CSO to monitor government administrativeorcriminalconsequencesfornon-compliance. biddingprocedures.And23percentsaidtheywillrefuseto voteforcorruptpoliticians.Annex 4providesasummaryof 33.Public PerceptionSurveyonProcurementCorruption. theSWSsurveyresults. Despite the adequacy of the anti-corruption laws and 35. Desired Impact for the Strategic Communication regulationsandthepresenceofanti-corruptionagencies,the Plan. Thechallengeistodevelopaninformedbeliefthatthe publicperceptionofcorruptionishigh.The2006SWSsurvey GPRAisnotonlyintendedtoworkagainstcorruption,butthat on the GOP's procurement system revealed that the public ittrulydoesso.Theobjectiveistochangebehaviorsothat perceivesthelevelofcorruptioningovernmentcontractsto citizensbecomemorevigilantandlesstolerantofcorruption, bethesameasitwasfiveyearsago,aboutthesametimethat private sector bidders come to respect the integrity of the theGPRAwaspassed.TheSWSsurveyalsofoundthatonly13 procurementsystem,andpublicprocurementofficialsfollow percentoftherespondentswereawareoftheGPRA.About35 thelawandregulationsforthesakeofgoodpublicservice. percentofmorethan700Filipinofirmssurveyedinthe2004 Regular publication of the results of audit and monitoring WB/ADBInvestmentClimateSurveyreportedcorruptionasa would document that procurement reform is indeed being majorconstraintindoingbusinessinthePhilippines,second implementedsuccessfully.ThisisthedesiredimpactofGPPB's only to macroeconomic instability. The recently published proposedStrategicCommunicationPlan.However,whilethe October 2007 World Governance Indicator reported that Government has allotted some funds from its own budget, the control of corruption is lower in the Philippines than in itisnotenoughfornationwideroll-out.Recommendation: comparableEastAsianeconomies. Adequate resources should be provided for the Strategic Communication Plan in MDB projects as part of technical 34. Optimism for the GPRA. Despite the low awareness assistance for capacity building. One way of implementing the ratings and continuing negative public perception of Plan to the subnational levels would be to support activities governmentbiddings,tworesultsfromthe2006SWSsurvey sponsored by the powerful university network, Knowledge provideencouragingsignsthatthepubliciswillingtohelp. for Development Centers, who have a high level of interest in A large majority (76 percent) believe that the GPRA can procurement reform and have already requested information help reduce corruption in government contracts. Among with the objective of organizing procurement training at local the13percentwhoareawareoftheGPRA,87percentof level Public Information Centers. thembelievethatitcanhelpreducegovernmentcorruption. Significantly, the survey indicated that 73 to 77 percent of Result of the BLI Assessment Filipinosagreewiththereformmeasuresincorporatedinthe 136.TheabovefindingssupporttheBLIassessmentresults. GPRA,with42to49percentsayingthatthesereformsare TheGPRA'slegalandregulatoryframeworkonanticorruption definitelyneeded.Further,42percentofthosewhowereaware fullyachievesbestpracticestandards.Thelegalandregulatory 44 systems define the responsibilities, accountabilities and Adequate resources should penalties for individuals and firms found to have engaged in fraudulent or corruption practices. However, evidence of be provided for the Stretegic enforcementisfewandfarbetween.Thefullimpactofexisting Communication Plan in MDB measuresisnotyetachievedbecausethesemeasuresarenot yetfullyintegratedacrossanti-corruptionagenciestoensure projects as part of technical coordinated action and prevent overlapping and conflicting assistance for capacity actions. There are several CSOs working as observers and dialoguewiththeGOPisfrequent,buteffortssofarhavehad building. One way of limitedimpact.Therearemechanismsinplaceforreporting fraudulent,corrupt,orunethicalbehavior,buttheiraccessibility implementing the Plan to the andreliabilityundermineandlimittheirusebythepublic.There subnational levels would be isacodeofethicsforpublicservantswithadministrative,civil andcriminalpenaltiesfornon-compliance.Table14providesa to support activities summaryofthesefindings. sponsored by the powerful university network, 137.TheCPARWorkingGroupandtheWBCPARTeamhave Knowledge for Development thoroughly analyzed the obvious inconsistency between the BLI Ratings and the prevailing public perception of a high Centers. levelofcorruptioninprocurementandwiththeSWSsurvey findingsthatonly13percentofthepublicisawareofthenew procurementlawanditsintendedbenefits.Theinconsistency inherentinthecurrentsituation,theWorkingGroupandCPAR makesbettersensewhenviewedalongsidetheparadoxfrom Teamcarefullyreviewedtheratingsofthesub-indicatorsand whichitstems:muchprogresshasbeenmadeinprocurement ratedthemconservatively.Onereasonforthehighratingisthat reformintermsofrulesandregulationsbutimplementation theindicatorfocusedonprocessandnotonresults.Itwould andenforcementarestillweak,andtheobjectivesofthereform havebeendifferentifsomesub-indicatorsonenforcementand have not been fully achieved. Mindful of the contradictions resultingoutcomeshadbeenincluded. Table 4: Summary of Scores for Indicator 2, Pillar IV Sub-Indicators Score Max. Score 12(a)­Thelegalandregulatoryframeworkforprocurement,including tenderandcontractdocuments,includesprovisionsaddressingcorruption, fraud,conflictofinterest,andunethicalbehaviorandsetsout (eitherdirectlyorbyreferencetootherlaws)theactionsthatcanbe takenwithregardtosuchbehavior 3 3 12(b)­Thelegalsystemdefinesresponsibilities,accountabilities,and penaltiesforindividualsandfirmsfoundtohaveengagedin fraudulentorcorruptpractices 3 3 12(c)­Evidenceofenforcementofrulingsandpenaltiesexists 2 3 12(d)­Specialmeasuresexisttopreventanddetectfraudandcorruption inpublicprocurement 2 3 12(e)­Stakeholders(privatesector,civilsociety,andultimatebeneficiaries ofprocurement/end-users)supportthecreationofaprocurement marketknownforitsintegrityandethicalbehaviors 2 3 12(f)­Thecountryshouldhaveinplaceasecuremechanismforreporting fraudulent,corrupt,orunethicalbehavior 2 3 12(g)­ExistenceofCodesofConduct/CodesofEthicsforparticipants thatareinvolvedinaspectsofthepublicfinancialmanagement systemsthatalsoprovidefordisclosureforthoseindecisionmakingpositions 3 3 Totalscore 17 21 Rating: 17/21 or 80%; Level of achievement is Substantially Achieved. 45 Building Roads to Prosperity An efficient system of roads and bridges linking the country's 72 provinces is necessary for economic growth. External monitoring initiatives have also been put in place, including Road Watch, a civil society undertaking that monitors the performance of the road sector and the impact of road projects with a strong focus on anti-corruption and good governance. Moreover, the Government Procurement Reform Act requires the involvment of civil society organization in the bidding process, a demonstration of transparency in the public procurement system. 46 III. COUNTRY RISK ASSESMENT 138. Combining the levels of achievement against BLI the status of the country's public procurement systems as internationalstandardforthefourkeyresultareasorPillars, comparedwithinternationalstandards. thePhilippinepublicprocurementsystemisratedasmedium ormoderaterisk,basedonthefollowing: 39. Risk Analysis. While the GPRA appeared to have Pillar I:LegislativeandRegulatoryFrameworkscored86 substantiallymetthebaselinesforagoodprocurementlegaland percentofbaseline(fullachievement),Lowrisk; regulatoryframework,anumberofrisksintheimplementation Pillar II:InstitutionalFrameworkandManagementCapacity andenforcementofthelawremain.Theprivatesectorisnot scored 69 percent of baseline (substantial achievement), yetconfidentofalevelplayingfield,althoughmeasuresare MediumorModeraterisk; nowinplacetoaddresstheissuefromthenationaltothesub- Pillar III:ProcurementOperationsandPublicProcurement MarketPerformancescored53percentofbaseline(partial nationalgovernmentlevel.Thereareindicationsthatsomeof achievement),Highrisk;and the bidders are cornering markets or colluding to win bids. Pillar IV: Integrity and Transparency of the Public Procurement monitoring and collection of data to evaluate Procurement System, scored 68 percent of baseline performancearenotyetfullyinplaceasthePhilGEPSisnotyet (substantialachievement),MediumorModeraterisk. fullyimplementedandcomplianceisnotyetatasatisfactory level. The law is being enforced and violators punished by InFigure1,comparingthecountryscore(whiteinnerdiamond) several anti-corruption bodies that are not fully coordinated toaperfectscore(blackouterdiamond),indicatesataglance inordertoensuresuccessfulenforcement.Thesustainability Figure 1. Graphical Representation of the BLI Pillars for the Philippine Public Procurement Systems in 2006 2006 Assessment of the Philippine Procurement System I The Legislative and Regulatory Framework Pillar IRR-B Foreign Assisted Projects 25.00% International Competitive 20.00% 15.00% 10.00% The Integrity and Institutional Framework 5.00% II IV Transparency of the Public and Management Capacity Procurement System 0.00% Follow-thru in Compliance Monitoring Internal Audit Pillar -Improve Compliance Pillar Role of Observers -Generation and Analysis of Data Linkage PhilGEPS as transparency tool Maximum Score Procurement Operations and 2006 Country Score III Public Procurement Market Performance Professionalization Pillar Record Keeping Private Sector Ownership 47 Sustainability of the CSO theOECD-DAC12BLIindicatorscameupwithanaggregate involvement as observers BLI score of 67 percent at the country level. This would translatetoaMediumriskforthenationalagenciesandHigh in the bidding process is riskforLGUs'procurementasshowninTable15. an issue. Overall, the public 140. Mitigating the Risk. At the country level, the CPAR awareness on the law is Working Group included risk-mitigating activities in a very low at 13%, and this comprehensiveActionPlantoImprovethePublicProcurement System,presentedinthelastchapterofthisreport.Measures was analyzed as due to intendedtomitigatethecountryprocurementriskinforeign- assistedprojectsfinancedbyloansandgrantsareaddressed poor communication of intheprocurementarrangementsfortheseprojectsandare the reform down to the presentedinthenextchapter.TheyincludetheuseofPhilippine countrysystemsthroughtheadoptionofharmonizedbidding grassroots level. documents,formsandmanuals,andtheuseofGOP'sPhilGEPS. Foreign technical assistance to support these measures in the area of strengthening implementation and enforcement of the system is reflected in the funding resources pledged oftheCSOinvolvementasobserversinthebiddingprocessis by development partners indicated in the Proposed Action anissue.Overall,thepublicawarenessonthelawisverylow Plan.Specificprojectprocurementriskwillbebasedonthe at13%,andthiswasanalyzedasduetopoorcommunication projectcapacityassessmentnormallyconductedduringproject ofthereformdowntothegrassrootslevel.Whilethelegal preparation.Moreover,ananti-corruptionplanonprocurement framework has been strengthened, implementation and isnormallydiscussedandagreedwiththeimplementingagency enforcementareweak.Againstthisbackdrop,theCPARusing andincorporatedintheLoanAgreement. 48 Table 5: Level of Risk Per Indicator Level of Risk ACHIEVEMENT MITIGATING MEASURES INDICATOR LEVEL Nat'l LGU 1.Presenceanduseoflegaland SA­75% L L FormulateIRR-Btocoverforeignassisted regulatoryinstrumentfromhighest procurement. leveldowntodetailedregulationand biddingdocuments 2.Existence,availability FA­100% L M SimplifiedBarangayandLGUbidding andqualityofimplementing documentsandmanualswillbedevelopedand regulationsanddocumentation implemented. 3.Procurementmainstreamedintothe SA­75% M M Developmentandissuanceofclearguidelines publicsectorgovernancesystem onmulti-yearplanlinkedtoannualbudget,and PFMmanual. 4.Presenceofafunctionaland FA­92% L L ProvidemoreresourcestoGPPB-TSOforan normative/regulatorybody expandedrole. 5.Existenceofinstitutionaldevelopment PA­42% H H Strengthenmonitoringandevaluation capacity performance;developPhilGEPSPhases2to 5;acceleratetheprofessionalizationprogram; upgradethequalityoftrainingforprocurement andprocurementaudit 6.Operationaleffectivenessand PA­42% H H Establishandimplementarecordsmanagement efficiencyofthesystematthe system;deepenCSOsandprivatesector entitylevel awarenessandinvolvementinthesystem. 7.Positivemarketresponseto PA­44% H H Conductregularprivatesectortrainingon procurementsolicitations procurement;strengthentrain-the-trainers program;upgradethecostestimatingprocess; reduceeligibilityrequirementstocompriseonly technicalandfinancialcapacity. 8.Existenceofcontractadministration SA­78% M H Monitorprogressofdisputeresolutioncases; anddisputeresolution strengthencontractimplementationmonitoring byCSOs. 9.Existenceofeffectivecontroland PA­53% H H Establishacovenantofcoordinationamong auditsystem oversightagencies;mainstreaminternalcontrol andinternalauditsysteminentities. 10.Efficientappealmechanism PA­60% H H Studythecreationofanindependent administrativereviewbody;publishresolution ofcomplaintsdecidedbyheadsofentities. 11.Accesstoinformation SA­67% M H Implementthestrategiccommunicationplan. 12.Presenceofethicsandanti- SA­80% M M Establishacovenantofcoordinationamong corruptionmeasures anti-corruptionbodies;developadatabaseon fraudcases;conductspecialtrainingprograms onfrauddetection;developamechanism tofollow-upreportedirregularitiesbyCSO observers. CountryAverage 67% M H 49 Empowering Young People through Knowledge College students are trained to monitor government procurement by accessing on-line the Philippine Government Electronic Procurement System (PhilGEPS) and reporting perceived anomalies to partner government agencies and civil society groups. 50 IV. Foreign-Assisted Projects Legal Basis agreementwithinthepurviewofSection4oftheGPRA.Onthis 141.Section3(ScopeandApplication)oftheGPRAprovides basis,theSupremeCourtstatedthattheMDB'sprocurement that"[T]hisActshallapplytotheprocurementofinfrastructure guidelinesagreeduponintheloanorgrantagreementhave projects,goodsandconsultingservices,regardlessofsource primacyontheconductandimplementationofthebidding/ of funds, whether local or foreign by all branches and procurementprocessforforeign-assistedprojects. instrumentalitiesofgovernment....Anytreatyorinternational or executive agreement affecting the subject matter of this Harmonization Act to which the Philippine government is a signatory shall 142.InJanuary2003,theGOPanditsdevelopmentpartners, be observed." Therefore procurement based on a treaty particularly ADB, JBIC and the WB, agreed to harmonize or international or executive agreement will follow the six procurement areas in order to reduce transaction costs, procurementproceduresspecifiedinthetreatyoragreement. simplify procedures, facilitate decision-making and reduce ThequestionofwhetherJBIC,ADB,andWBloanagreements capacity-buildingcostsforforeign-assistedcontracts.TheWB's shouldbeconsideredastreatiesorinternationalorexecutive movetowardsfurtherrelianceonPhilippinecountrysystems agreementswasbroughtbeforetheSupremeCourt,andon will depend largely on completion of these harmonization June8,2007,theCourtruledthatsuchloanagreementsdo activities.Sincethen,fourofthesixareashavebeencompleted indeed partake the nature of an executive or international orareunderway,asshowninTable16. Table 6: Update on Harmonization Activities for GOP AREA UPDATE AS OF JUNE 30, 2007 Expected Funding Completion Support Date 1.ImplementingRulesandRegulations IRR-Aissuedfordomesticfundedcontractsin December2009 USAIDand September2003.Foreign-assistedprojectsare WB-IDF coveredbySection4oftheGPRAandSection6of theHarmonizedGPMs.IRR-Bagreedtobedrafted andissued. 2.Biddingdocumentsforworks,goods PBDsissuedinAugust2004.WorksandGoods Done WB andconsultingservices. DocumentsharmonizedwithADB,JBICandWorld Bank.ConsultingServiceharmonizedwithWB. 3.Trainingandcertificationprogram Includedintheprofessionalizationstudy December2008 WB-IDF 4.Procurementmanual GPMissuedinJuly2006.Mandatoryadoptionin Done USAIDand January2007. ASEM2Grant 5.Procurementreportingformat IncludedaspartoftheGPM. Done ASEM2Grant 6.Registrationandlicensingprocedures ItwasagreedtopursuethisbetweenDPWHand Nottobedone witheligibilityscreening. CIAP/PCAB,withoutMDBinvolvement. 5 Regulations useofHarmonizedPBDsandtheSUCsusetheHarmonized 43.Implementing Rules and Regulations B.Whileforthe PBDsasthematerialsfortrainingonbiddocumentpreparation. pastfouryearsMDB-fundedprojectshavebeensatisfactorily The use of the same document by the GOP for its public implementedonthebasisofSection4oftheGPRAandSection biddingandbytheMDBsfortheirNCBshasfacilitatedtraining 5oftheGPMs,therearealsoprojectsthatarefundedfrom andreduced,ifnoteliminated,confusionintheapplication bilateral and other sources. In view of recent controversies, oftheprocurementrules.However,challengeshavearisenin therearenowrequestsfromvarioussectorstoincludeinthe implementingPBDuseintheregions,districtsandtheLGUs, harmonization activities, the drafting of the IRR-B to cover wherethedocumentswerefoundtobetoocomprehensive exclusivelyprocurementunderforeign-assistedprojects,which andtheprocedurestootediousforsmalllocalprocurements. willincludenotonlytheODAfromtheMDBs,butalsothose SimplifiedPBDsforsmallprocurementsuptocertainthresholds frombilateralsources,asprovidedforinSection1ofIRR-A: arebeingdevelopedandwillbeharmonizedwithMDBsprior "[T]heIRR-Bforforeignfundedprocurementactivitiesshallbe tonationwideroll-out. the subject of a subsequent issuance." The proposed CPAR ActionPlanincludesthedrafting,finalizationandissuanceof Procurement Manuals IRR-B. 46.Harmonization of the GPM.Thedevelopmentofthe GPMsprovidedtheopportunitytoharmonizepreviousmultiple Bidding Documents procurementguidelinesandmandatethisonestandardseries 44. Philippine Bidding Documents as Harmonized with ofmanualstobeusedbyallagenciesandentities.Priorto ADB, JBIC and WB.Thecountry'sProcurementHarmonization the issuance of the GPMs, a number of large procuring ProgramtookabigleapforwardwiththeissuanceofGPPB entities had their own internal procurement guidelines and procedures, others used a compendium or compilation of Resolutions in August 2004 and January 2005, requiring procurement-related issuances, and every WB project had a mandatoryuseofthePBDsforWorksandGoodsasharmonized separateprocurementmanualthatwasannexedtotheProject withADB,JBICandWBforNCBmethod,andforConsulting Operations Manual. Procurement practitioners in agencies ServicesasharmonizedwiththeWB.Themandatoryuseof like DENR, DepEd, DOH and DPWH were referring to two thedocumentsnationwidebyallprocuringentitiesstartingin or more procurement manuals, which could be inconsistent June2005isenforceablebylawbasedonSection6andArticle andconfusing.Theprocessofmanualharmonizationlasted VIoftheGPRA.Fromthefirstidentificationofconflictingrules ayear--fromMay2004toMay2005--includingpilottesting for each document, to workshops and discussion meetings, theGPMsinsixnationalagencies,oneGOCC,andoneLGU. andthentofinalcompromisestoharmonizetheconflicting The harmonized GPMs were declared acceptable for use in rules,ittook19monthstofinishtheFirstEditionofthePBDs, MDB-financedprojectsthroughajointletterdatedSeptember whichthenbecamethefirstharmonizedbiddingdocuments 14,2006,signedbythecountrydirectorsandrepresentatives issuedwithintheEastAsiaandPacificRegion.Themagnitude ofADB,JBICandWB.Itbecameeffectiveformandatoryuse ofthisachievementisdocumentedinTable17. startingJanuary2007. 45. Assessment of the Effectiveness of the Harmonized 147.Whileitwouldbeprematuretomeasuretheeffectiveness Philippine Bidding Documents. The August 2004 First of the Harmonized GPMs, the following outcomes are Edition of the Harmonized PBDs was updated in a Second expected: Edition in May 2005. The MDBs prescribed the use of the ·HavingasinglesetofGPMsfacilitatesoperationalactions harmonizedPBDsforNCBinallprojects,effectiveuponthe fortherulesmandatedintheGPRAanditsIRR-A,which issuanceoftheJointLetterfromtheMDBsadvisingtheGPPB includestheMDB-fundedprojects. of its acceptability in May 2004. Since then, procurement ·TheGPMsprovideaveryinformativereferenceandguide arrangementswithNCBmethodautomaticallyprescribethe topublicprocurementpractitionersandadministrative Table 7: Number of Conflicting Paragraphs in the PBDs Number of Conflicting Paragraphs BIDDING DOCUMENTS WORKS GOODS CONSULTING SERVICE Originalnumberofconflictingparagraphs 128 145 171 Harmonizedparagraphs 101 117 162 Remainingun-harmonizedparagraphs 27 28 9 Percentharmonized 79% 81% 95% 52 staff,includingtheheadoftheprocuringentity. by70percent.Thisreductionwasachievedbycomparingthe ·Theyprovideacleardefinitionofroles,responsibilities,and nationalrulesagainsttheChecklistofAcceptableRuleswhich accountabilitiesintheprocurementprocess. wasissuedasAnnexAoftheMay2002WBCPARGuidelines, ·Theyserveasthesoleprocurementdocumentspecifying taking into consideration implementation experience during controlmeasurestobeusedasauthoritativereference 2000-02. Following this comparison, the revised NCB intheirregularorspecialauditsbyinternalandexternal Procurement Annex to the loan agreement is proposed to auditors. bechangedtoreflectanupdatedlistofunacceptablerules as shown Annex 8A. As the CPAR was carried out in close AnassessmentontheeffectivenessoftheharmonizedGPMs collaboration with the ADB, ADB's National Competitive shouldbeconductedafterayearofmandatoryadoption. Bbiddingannextotheirprocurementplanisalsoprovidedas Annex8.Harmonizationwillcontinue,andexperienceduring Acceptable Private and Commercial Practices thefirstyear'suseofthedocumentswillopenfurtheravenues 148.Procurementpracticesintheprivatesectorgenerallyadopt forgreaterharmonization. competitivemethods,usuallyviatheInternetsincetheJune 2000passageoftheE-CommerceLaw(RA8792).Commercial Procurement Method Threshold firmsmakeuseofBayantrade,aprivatelyrunenterprisefor 50. Thresholds per Contract for Procurement Methods. onlinee-procurementofgoodsandservicesthatcompetitively Progress in harmonization between the GOP and its selects the lowest complying offers, and of the suki or developmentpartnersisconsideredtohavebeensuccessful accreditation/registration system, where companies list their because it has resulted in closer alignment of country and preferredsuppliers,contractorsandserviceprovidersingood MDBsystems.Thereductioninthenumberofunacceptable standing,andsolicitcompetitionfromthoselisted.Company ruleshasresultedinagreaterrelianceoncountrysystems.The policymayalsorequirethemtobuydirectlyfromtheirown firststeptowardsthisoutcomewasthepassageofagood affiliatedorsubsidiarycompanies,whichisnotcompetitivebut legislativeandregulatoryframeworkthatpromotedtheuseof keepsprofitswithinthecompany.Inthelattercase,theBank acceptabletoolsandprocedures:theprocurementmanuals, willnotacceptthepracticeasitconnotesconflictofinterest, thebiddingdocumentsandforms,thee-procurementsystem, exceptwhenthesubsidiarycompanyactsasprocurementarm and the national training program for NCB. However, this andtheprocessundertakeniseconomicandefficient. CPARhaspointedtohighriskintheareaoftheinstitutional capacityandoperationsinthemarketplace,inparticular:(a) NCB Procurement Annex implementation, monitoring and enforcement; (b) capacity to the Loan Agreement building;and(c)linkagetopublicfinancialmanagement.The 49.Remaining Differences from WB Rules.Priortothe adoptionofharmonizedrulesandthegreateruseofcountry issuance of the Harmonized PBDs and GPMs, the WB Loan systemsistoorecentfortheirfullimpacttobecomprehensively Agreement Annex to the Procurement Schedule for WB- assessed.Inthisregard,theWB'sandADB'sfiduciarythresholds financed projects in the Philippines identified 27 national areshowninTable18. procurementrulesforWorksandGoodsandsixforConsulting Servicesasunacceptableduetonon-conformancewithbest Anti-Corruption Measures in WB Projects practices.Whileharmonizationhasnotyetresolved100percent 151. It is often said that the issue of governance in the ofthesedifferences,ithasdrasticallyreducedthenumberof Philippinespresentsaparadox.Thereisastrongpresenceof non-conformingrulesfrom27forWorksandGoodsto8or civilsocietyinthecountry,anopenmedia,andhighlycapable Table 8: Amount of Threshold per Contract ITEM CATEGORY CURRENT AMOUNT ICB Works OverUS$5million Goods OverUS$1million NCB Works OverUS$100,000to$5million Goods(a) OverUS$100,000to$1million Shopping WorksandGoods NotmorethanUS$100,000 NationalConsulting Shortlisting ConsultingServices NotmorethanUS$200,000 (a)ADB NCB threshold for Goods is set between US$500,000 and US$1 million depending on the project 53 individuals working in public administration. Nonetheless, Governance in the corruption remains a critical barrier to the achievement of good governance. Governance indicators from a cross- Philippines presents a countrydatabaseindicatethat,despitedemocraticprocesses, paradox. While there is indicatorsfortheruleoflaw,politicalstability,andcontrolof corruptionarelowerinthePhilippinesthanincomparableEast a strong presence of civil Asian economies. Additionally, about 35 percent of Filipino firmssurveyedinthe2004ADB/WBInvestmentClimateSurvey society, an open media and reportedcorruptionasamajorconstrainttodoingbusiness highly capable individuals inthePhilippines,secondonlytomacroeconomicinstability. Corruption and collusion, particularly in procurement, also in public administration, pose significant challenges for government expenditures, corruption remains a critical includingthosefinancedbytheWB.Itisthereforenecessary fortheWBtoknowhowtheGovernmentisrespondingto barrier to achieving good procurement corruption and what specific strategies the programhasemployedtohelpmitigatetheriskofcorruption governance. inprocurement. 152. Project Appraisal Documents for projects in the WB portfolioforthePhilippinesthatwereapprovedstartinginFY A country-specific action plan for mitigating risks identified in 2007havethereforeincludedananti-corruptionactionplanas the capacity assessment of the implementing agencies would partoftheWB'sfiduciaryresponsibility.Oncediscussedwith become the basis for discussion with the agency and borrower theimplementingagency,themeasuresareincorporatedinto in finalizing the project-specific procurement anti-corruption the agency's customized procurement manual or operation plan. manualandarereferencedintheloanorgrantagreement. Whileeachprojectwillhaveitsownimplementationset-up Use of Philippines Country System andanti-corruptionplan,itwouldbehelpfultohaveaguide 154.The2003ParisDeclarationemphasizestheimportance fortheassessmentandpreparationofanti-corruptionaction of strong procurement and financial management systems plans for procurement. Recommendation: A procurement in enabling more and better support from development anti-corruption guide or manual specific to the Philippines' partners. As a signatory of the Declaration, the GOP has public procurement system should be developed by the WB stronglycommittedtoimprovingdevelopmenteffectivenessin Procurement Team to assist project procurement specialists and severalareas,includingthealignmentandharmonizationof task team members during project preparation. Once cleared procurementsystems.TheframeworkofthePhilippinespublic by the Regional Procurement Manager, the anti-corruption procurementsystemisnowcloselyalignedwithinternational guide or manual would be issued as a country directive for bestpractices,resultingfromtheharmonizationofthebasic the preparation of procurement arrangements for new WB toolsforprocurement:(a)alawanditsimplementingrules, projects in the Philippines. which contain most of the best features of international procurement principles and standards, as suggested by 153. The anti-corruption plan would consolidate the anti- internationalexperts;(b)PBDsharmonizedwithADB,JBICand corruptioninitiativesmentionedintheCPARandwouldalso theWB;(c)GPMsharmonizedwithADB,JBICandtheWB; incorporatetheWB'sGACstrategy,including: (d)acceptabilityoftheelectronicprocurementsystemforuse (a) mandatory adoption of PhilGEPS and its user guide inMDB-fundedprocurement;and(e)jointdeliveryoftraining under NCB once these have been successfully piloted and programs. assessed by the WB and ADB; (b) customization of the Generic Procurement Manual for 155. The results and impacts of these aligned activities in implementing agencies and for LGUs; MDBprojectsare:(a)increasedthresholdsforlocalornational (c) the strict use of bidding documents and contract forms; competitivebiddingmethods;(b)reduceddifferencesinrules (d) the application of fraud and corruption policies of the for public bidding that are indicated in the NCB Annex to Government and WB; theloanagreement,makingiteasiertoattainprocurement (e) the involvement of civil society organizations as proficiencyregardlessoffundingsource;(c)useofharmonized observers in the bidding process, as mandated by law, and bidding documents that facilitate the work of bidders, as observers in contract implementation. procurement staff, members of the BAC, and auditors; (d) streamlined processes as a result of the adoption of GPMs thatapplytoallprojectsregardlessoffundingsource;and(e) 54 As a signatory of the GPPB'sagencyprocurementperformanceindicator(APPI) Paris Declaration, the GOP systemtoarriveatajointriskratingandintegratedmeasures toimprovethecapacityoftheprocuringentity; has strongly committed to ·theuseoftheHarmonizedPBDsforGoodsandWorks; ·theuseoftheHarmonizedGPMsaspartoftheproject improving development operationmanual.TheGPMmaybecustomizedtobe effectiveness in several specifictotheorganizationalandoperationalneedsofthe procuringentity,subjecttotheapprovaloftheGPPB; areas, including ·theuseofPhilGEPSastheprimarysourceofprocurement the alignment and information,particularlyinadvertisingforinvitationtobid andpostingofawards; harmonization of ·jointprocurementtrainingprogramsforNCB,the procurement systems. procurementdocuments,formsandmanuals,and alternativemethods;and ·theadoptionofanti-corruptionmeasuresinprocurement basedonaprocurementcapacityassessmentofthe implementingagencyandtheresultingprocurement strengthenedmonitoringofcompliancethroughtheuseofe- fiduciaryarrangements.Theanti-corruptionmeasures procurementresultingfromtheacceptabilityofPhilGEPSfor willincorporateestablishedanti-corruptionmeasuresof MDBprojects.Theharmonizationshortensthelearningcurve theGovernment,includingtheparticipationofCSO for new procurement practitioners and enables auditors to andprivatesectorobserversduringthebiddingand pinpointthoseaccountableateachprocurementstep. contractimplementationstages. 156. Given these advances, all procurement arrangements in WB-assisted projects as recorded in the Project Appraisal Documentwillprovidefor: ·theloanagreementtocontaintherevisedNCBProcurement AnnexasshowninAnnex7tothisCPAR; ·jointprocurementcapacityassessmentusingprimarilythe 55 Empowering Poor Communities The KALAHI-CIDDS program of the Department of Social Welfare and Development aims to empower 4,000 communities in 183 of the country's poorest municipalities by strengthening popular participation in grassroots governance. Over 10,000 villagers, local government staff and project shaff have been trained in project planning, technical design, financial management, procurement and fiduciary ovesight. It has the highest rate of community cost-sharing among all Official Development Assistance projects in the country. 56 V. Action Plan 157. The Proposed Action Plan to Improve the Public In view of scarce resources Procurement System shown on the following pages was developedbytheCPARWorkingGroupfromtheBLIexercise and limited capacity, the at the Canyon Woods Workshop in Batangas, Philippines, CWG prioritized the key held in May 2007. The matrix of the proposed action plan incorporates the agreed recommendations of the CWG, result areas as follows: (a) indicatestheresponsibleagenciesandentities,andprovides implementing the strategic for timelines to accomplish the action. The plan takes into accountachievementsandongoingactionsthatwereagreed communication plan; (b) duringthesecondupdateofthe2002CPARandthathave strengthening of monitoring beenmonitoredsincethatupdate,carriedoutin2005(see Annex 9.) and enforcement institutions and mechanisms; 158. Inviewofscarceresourcesandlimitedcapacity,theCWG prioritized the key result areas as follows: (a) implementing (c) strengthening of the strategic communication plan; (b) strengthening of capacity on procurement; monitoringandenforcementinstitutionsandmechanisms;(c) strengtheningofcapacityonprocurement;(d)improvements (d) improvements in in procurement processes and procedures; (e) enhancing procurement processes and linkages between financial management and procurement; and(f)developmentofcomplaintandreviewmechanismsfor procedures; (e) enhancing procurementrelateddisputes.Thespecificactionsincludedin linkages between theActionPlanwerepresentedtothePDFWorkingGroupon GovernanceandAnti-CorruptioninitsmeetingofAugust2, financial management 2007.ThePDFSub-WorkingGrouponProcurementaccepted and procurement; and (f) the handling of the implementation of the activities in the ActionPlaninitsmeetingofSeptember12,2007. development of complaint and review mechanisms for procurement related disputes. 57 Action Plan for Philippine Public Procurement System KEY RESULT AREA RECOMMENDED ACTION/MEASURE BLI INDICATOR a.DevelopandImplementStrategicCommunicationPlan 11a) I. Communications Strategy forProcurementReform b.Formulateadisclosurepolicyonprocurementrelated 11(a) information a.Establishacovenantamongoversightagencies(GPPB, 8(c), COA,PAGC,DBM,OMB)tostrengthencoordinative 9(b), linkagesonmonitoringandenforcementofaudit 12(d) II. Strengthening of Monitoring findings,andcompliancewiththeprocurementlaws, and Enforcement Institutions andsupportedbythecreationofaprocurement and Mechanisms sub-workinggroupunderthePDFgovernanceand anti-corruptionprogram b.Establishandoperationalizearecordsmanagement 6(c) systemforprocurementandcontractmanagement transactions.Replicatecurrentgoodpracticessystems (costestimationprocess,documenttracking) c.Completeandmainstreaminternalcontrolsystems 9(c) forallgovernmentagencies d.Implementphases2to5ofPhilGEPS 4(c), 5(b) e.DevelopDatabaseonProcurement-RelatedFraudCases 8(c), 12(c) f.Developandstrengthenfeedbackorprocurement 5(b) monitoringsystemattheagencyandnationallevels g.Developsystemsfortheanalysisofprocurement-related 5(b) informationandlinkagewithothergovernment-related databasesforpolicy-makinganddecision-making purposes 58 RESPONSIBLE SPECIFIC WEAKNESSES ENTITY FUNDING SOURCE SCHEDULE Lackofacommunicationplanfordissemination GPPB Possiblefundingtoberaised June2007- ofinformationonprocurementreform beforethePDFWorking MediumTermDraft GrouponGovernanceand Plan Anti-Corruption(GAC) Absenceofpolicyontheprotectionand/or GPPB,TAN GOP,raisetoPDFWG December2010 disclosureofproprietary,commercial,personal onGAC orfinancialinformationofacommercialand sensitivenaturerelatedtoprocurement. Weakmonitoringofoutcomesofdispute GPPB,COA,PAGC, Possiblefundingtoberaised December2007 resolutioncases. DBM,OMB beforethePDFWorking Complianceofonlyfewagencieswiththe GrouponGAC internalcontrolprocedures. Theanticorruptionprogramrequiresbetter coordinationatahigherlevelandthereareno specialmeasurestopreventanddetectfraudand corruptioninpublicprocurement. Lackofestablishednormsforthesafekeepingof GPPB,COA GOP,WB(IDFforInternal December2007 recordsanddocumentsrelatedtoprocurement Audit-August2007) transactionsandcontractmanagementthatmust bekeptattheoperationallevel. Althoughtherearewrittenstandardsforthe PAGC,DBM WB,AusAID December2007- internalcontrols,thereisnoperiodicreporting Completionof tomanagementtoensurecompliancewiththe GovernmentInternal standards. AuditManuals June2008- PilotTestingand Customizationof Manuals StrengthenInternal AuditUnits. Lackofcompliancewithrequirementtosubmit PhilGEPS,PS,GPPB WBIDFGrantapproved. April2008-2011 procurementinformation.Feedbackmechanism ADB'sTechnicalAssistance hasnotbeenestablishedtomonitorprocurement Grantbeingprocessed. activities. Lackofprocedurestomonitoroutcomesof GPPB,COA, GOPpossiblefundingtobe December2008 disputeresolutioncases. PAGC,DBM,OMB raisedbeforethePDFWG Thereisnoorganizedinformationonthenumber GAC ofgraft-relatedcasesfiled,prosecutedand resolved. Lackofcompliancewithrequirementtosubmit GPPB,InternalAudit WB(IDFforInternalAudit- December2009 procurementinformation.Feedbackmechanism Units,Procurement August2007 hasnotbeenestablishedtomonitorprocurement Units,CSO activities. Lackofanalysisofprocurementinformation GPPB,InternalAudit WB(IDFforInternalAudit- December2009 carriedoutonanationalscale. units,Procurement August2007) units,CSO 59 Action Plan for Philippine Public Procurement System KEY RESULT AREA RECOMMENDED ACTION/MEASURE BLI INDICATOR h.StrengthenorganizationalcapacityofGPPB-TSOtomonitorand 4(c) enforceprocurement-relatedlaws i.Developmechanismforutilization/optimizationofobserver'sreports 12(f) III. Strengthening of Capacity a.Pilottheadoptionofvalueengineeringasapolicyforselected 1(b), on Procurement infrastructureprojectscostingoverP50M 6(a) b.ImplementtheProfessionalizationProgramonProcurement 5(c), includingcostestimationandvalueengineering 6(a) c.Conductofregulartrainingprogramsonpublicprocurement 6(b),7(a),12(d) forprivatesectorbidders d.Developprocurementauditguideandconductofregular 5(d),9(e) trainingprogramsforexternalauditorsonprocurement lawsandprocedures e.Developmanualandtrainingprogramsforthirdparty 6(b) observers(CSO)intheprocurementprocess f.Developandconductspecialtrainingprogramsonfrauddetection 12(d) forpurposesofprosecution(target:investigators,prosecutors, auditors) g.Developperformancemanagementsystemsforprocurementunit 5(d) andstaff 60 RESPONSIBLE SPECIFIC WEAKNESSES ENTITY FUNDING SOURCE SCHEDULE AlthoughtheGPPBdoesnothavetojustifyits DBM GOP activitiesbeforeCongress,itsfinancialstabilityis notsecuredbythelegalframework. Weakcompliancewiththerequirementto GPPB,OMB,COA EU(existing),Possiblefunding December2009 submitobservers'reports;lackofmonitoringof fromTAF enforcementoffollow-upactiontaken. TheMedium-TermPhilippineDevelopmentPlan DPWH,DOTC,GPPB GOP(DPWHandDOTC December2007- providesfortheapplicationofvalueengineering andNEDAInfracom budget) Startofpilot-testing ininfrastructureprojectstoensurethemostcost- ofselectedGOP efficientdesignsandavoidoverpricingofprojects fundedinfrastructure andthereisaneedtojumpstartsuchapplication projects (DPWH,DOTC,PPA) December2008- IssuanceofGuidelines byNEDA Thereisaneedtodevelopasustainablestrategy GPPB WB(IDFGranton December2008 todevelopthecapacityofgovernmentofficialsto Professionalization) understandandimplementtheprocurementrules andregulations. Absenceoforganizedeffortstoaddressthe DTI,Phil-GEPS GOP,ADB January2008-start capacityofsmallandmediumenterprisesto training encouragetheirparticipationinprocurement andtohelpnewentriesintoprocurement marketplace. Needtostrengthenknowledgeofauditorson COA WB December procurement. 2008­2010 Needtoexpandthenetworkofthird-party GPPB,CSO Possiblefundingtoberaised observersandstrengthentheircapacityto beforethePDFWorking participateintheprocurementprocess. GrouponGAC Needtotraininvestigators,prosecutorsand GPPB,OMB,COA Possiblefundingtoberaised December2008 auditorsonfrauddetection beforethePDFWorking GrouponGAC Needtodefinetheskillsandknowledge GPPB,CSC,DBM, RaisetoPDFWGonGAC December2010 competencyrequirementsforspecialized CESB procurementjobsandtomonitoragency compliancewithstandards.. 6 Action Plan for Philippine Public Procurement System KEY RESULT AREA RECOMMENDED ACTION/MEASURE BLI INDICATOR IV. Improvements in Procurement a.Reviewandformulateimplementingrulesandregulations 1(b)(c) Processes and Procedures forforeign-fundedprocurementactivities(IRR-B),including harmonizationofblacklistingguidelineswithIFIs b.Reviewandformulateimplementingrulesandregulations 1(c) forlocallyfundedspecializedprocurementsforICBincluding harmonizedbiddingdocuments(IRR-A)(armsandammunition, pharmaceuticals,informationtechnology) c.Reviewdetailedengineeringguidelineswithregardtostandards anddetermineaccountabilityfornon-complianceamong governmentagenciesandconsultants d.Streamlineandharmonizelicensingandregistration 7(a)(b)(c) proceduresforcivilworks e.Developprocurementmanuals,standardbiddingdocuments 1(b) forLGUsconsistentwithbudgeting,accountingandauditing procedures f.Developsimplifiedprocurementguidesforbarangaysconsistent 1(b) withfinancialmanagementguidelines V. Enhancing Linkages Between a.Developclearguidelinesformulti-yearcontractsthat 3(a) Financial Management and willintegratebudgeting,expenditure,and Procurement procurementprogram b.Developagenericfinancialmanagementmanualthatincludes 3(b),8(a) procurementandlogisticsprocesseswithfinancialmanagement VI. Development of Complaint a.Reviewpoliciesandproceduresforprocurement-relatedcomplaints 1(h),10(e) and Review Mechanisms for andappealscovering: Procurement Related Disputes 1.Bestpracticesofothercountries 2.Creationofanindependentadministrativereviewbody 3.Tappingofanexistingadministrativebody withtheappropriatemandate 4.Reasonablenessofamountofprotestfees b.Developmechanismstopublishdecisionsonprocurementrelated 10(d) disputes(ofHOPEonprocurementrelatedprotest) 62 RESPONSIBLE SPECIFIC WEAKNESSES ENTITY FUNDING SOURCE Schedule Lackofimplementingrulesandregulations TWG,PDF WB Oneyear governingprocurementofforeign-funded June2008-July2009 projects Thelegalframeworkdoesnotprovideforthe extensionoftimeframesevenifforeignbidders areexpectedtocompete. Lackofimplementingrulesandregulations GPPB GOP Baseguidelines andharmonizedbiddocumentsforspecialized One(1)year procurements Harmonization One(1)year Someagenciesdonotcomplywithguidelineson COA WBIDFgrantsupportingCOA December2007­ detailedengineeringguidelines onvariousauditactivities DPWHprojects approved. Includetheothersin thelonglistofCOA Manyconstraintsinhibitprivatesectoraccessto DTI December2007 theprocurementmarket,suchasdifficultiesin PCABlicensing gettinglicensesandpermits. Differencesinprocurementpracticesand GPPB,LGULeagues, ADBHarmonizationTA December2007 operationsoflocalgovernmentunitswerenot COA,DBM ECgrant reflectedintheprovisionsoftheexistinglaw. Harmonization March2008 Barangayofficialssaytheprocurementlaw GPPB,LGULeagues, WBandADB December2008 maynotbeapplicabletothenatureoftheir COA,DBM procurements. Agenciesdonotpreparemulti-yearplansthat GPPB,DBM GOP December2007 arelinkedtotheannualbudgetprocessortothe preparationofannualprocurementplans. Thereisnolinkbetweenfinancialmanagement DBM,COA ECGrant December2008 systemandtheprocurementsystemtoensure enforcementoflaw. Lackofindependentadministrativebodyor GPPB Possiblehiringof December2008 specialcourttoreviewprocurementrelated internationalconsultant complaintsandappeals tobefundedbytheWorld Bank Existenceofpoliciesthatdiscouragefilingof protest(protestfeerequirement) Decisionsarenotmandatedtobepublishednor GPPB RaisetoPDFWGonGAC December2010 postedinthewebsite. 63 Annex : Composition of the CPAR Working Group Country Champions and Other In-Country PeterGianan,DepartmentofScienceandTechnology Stakeholders MariaLourdesBaua,DepartmentofTradeandIndustry UndersecretaryLauraPascua,DBM,Chairperson IreneoVizmonte,DepartmentofTrade AssistantDirectorGeneralRubenReinoso(representedby VenancioSantidad,DepartmentofTransportation Engr.ElmerDorado),NEDA,Co-Chairperson andCommunication DirectorEstanislaoGranadosDBM,Vice-Chairperson MarkJalandoni,OfficeoftheOmbudsman DepartmentagenciesandobserversoftheGPPBandtheir AdorPaulino,OfficeoftheOmbudsman representatives CyrilRamos,OfficeoftheOmbudsman TheGPPB-TSO,ledbyitsExecutiveDirectorRubyAlvarez ConstanciadeGuzman,PresidentialAnti-GraftCommission Representativesfromtheleaguesofbarangays, CharitoAlvarado,PresidentialAnti-GraftCommission municipalities,citiesandprovinces ArcadioCuencoJr.,CommissiononAudit Representativesfromtheprivatesectorprofessional RosaClemente,JoeleEayte,PhilGEPS organizations Dr.FiorelloEstuar,PrivateSectorRepresentative Representativesfromcivilsocietyorganizations Government Procurement Policy Board ­ Development Partners: Technical Support Office TheWorldBank: PiaZ.Ruiz CeciliaVales(TaskTeamLeader),DominicAumentado, SygridPromentilla ReneSd.Manuel,NoelSta.Ines,CeciliaVerzosa, MariaAgathaSindico EvelynQuirante CheloAnneCruz Consultants:JoseSyquia,Jr.,SofronioUrsal,Alice MilaManalastas Tiongson,CiprianoRavanes,HeidiMendoza, BryanBigalbal MaricelLopez,RosarioLarracas,DennisSantiago, DennisLorneNacario RobertoDollar LizaVega WarrenPaulNicdao Collaborating Development Partners: ADB:MichielVanderAuwera,RobertRothery, CandiceMcDeigan,GaliaIsmakova,JovenBalbosa PARTICIPANTS TO VARIOUS MEETINGS: JBIC:TakashiBaba,FleridaChan USAID:GilDy-Liacco Civil Society/Professional Organizations AusAID:AngusBarnes,JohnAlikpala,RoselaAgcaoili BelSalonga,BarangayForbesPark EC:PieterRobben,EmilyMercado,RogerdeBacker JoseConcepcion,BarangayForbesPark UN:EthelCapunoandMyleneCaraig ErnestoBurdeos,CBCP-LAIKO CIDA:LynetteCorcino JoseLugay,CBCP-LAIKO IOM:MyleneCaraig MiaZafra,CBCP-LAIKO TAF:StevenRood,MaribelBuenaobra,KyJohnson EliseoEvangelista,COFILCO AnthonySeptimo,FOCIG Government Procurement Policy Board Members DondonParafina,G-Watch and Resource Persons NestorMalapajo,Jr.,NAMFREL ArcadioCuencoJr.,CommissiononAudit ManolitoMadrasto,PCA RamonBacani,DepartmentofEducation EduardoRamirez,PICE AidaCarpentero,DepartmentofEducation KristineTapiz,RFMFoundation FranciscoDelfin,DepartmentofEnergy JunioRagragio,DPEM Atty.CriseldaFunelas,DepartmentofEnergy VincentLazatin,TAN LorraineSanchez,DepartmentofFinance KathySantos,CAC AlexanderA.Padilla,DepartmentofHealth CrispinitaValdez,DepartmentofHealth Local Government Organizations ConnieLiberan,DepartmentofHealth HazelBeniza,LCP ReynaldoBungubung,DepartmentofInteriorand EdTiongson,LB LocalGovernment HonorioAlumno,LMP MarichelleLim,DepartmentofInteriorandLocalGovernment AlexVillano,LPP ErnestoMatibag,DepartmentofNationalDefense JaydeQuiroz,PDF AntonioMolano,Jr.,DepartmentofPublicWorksand Highways Private Sector Professional Organizations MarioBravo,DepartmentofScienceandTechnology AlexDacanay,SGV CarmelitaLlames,DepartmentofScienceandTechnology GilGarcia,Sycip,SGV RebeccaSarmenta,SGV OlyAnastasio,Sycip,SGV 64 Annex 2: WB Loan Portfolio and Lending Program A. World Bank Loan Portfolio SECTOR PROJECT NAME EFFECTIVENESS CLOSING NET LOAN DATE DATE Amount (US$M) . ACTIVE LOANS EASHD 2ndWomen'sHealth&SafeMotherhood 12/28/2005 06/30/2012 16.00 Nat.Prog.Supp.forHealthReform 03/27/2007 06/30/2011 110.00 NationalBasicEducation 01/01/2007 12/31/2011 200.00 EC-TrustFundsforHealthSector 06/04/2007 12/31/2010 8.6 Subtotal - EASHD 334.6 EASRE AgrarianReformCommunitiesDevelopment2 06/04/2003 12/31/2008 50.00 DiversifiedFarmIncome&MarketDevelopment 10/29/2004 06/30/2009 60.00 LandAdministrationandManagementII 10/11/2005 03/31/2011 19.00 OzoneDepletionSubstance(MontrealProtocol) 10/06/1994 06/30/2010 30.00 LagunadeBayInstitutionalStrengthening 04/02/2004 01/31/2009 5.00 MindanaoRuralDevelopmentProgram2 07/03/2007 12/31/2012 83.80 NPS-Environment&NaturalResourcesManagement 11/27/2007 12/31/2012 50.00 Subtotal - EASRE 297.80 EASTE MetroManilaUrbanTransport 12/06/2001 03/31/2009 60.00 BicolPowerRestorationProject 5/21/2008 07/30/2008 12.9 NationalRoadsImprovementProject 12/31/2012 232.0 RuralPowerProject 05/06/2004 12/31/2009 10.00 ElectricCooperativeSystemLossReduction(GEF) 05/05/2004 12/31/2011 12.00 Subtotal - EASTE 326.90 EASUR LGUFinance&Development 02/28/2000 06/30/2008 60.00 LGUUrbanWater&SanitationProjectAPL2 05/16/2002 11/30/2008 15.0 StrategicSupp.Loc.Dev&Inv.Proj. 02/28/2007 06/30/2012 100.00 ManilaThirdSewerageProject 03/06/2006 06/30/2010 64.00 Subtotal - EASUR 239.0 EASSD Kalahi-CIDSS 12/16/2002 06/30/2009 100.00 ARMMSocialFund 05/19/2003 06/30/2008 33.60 MindanaoTrustFund 3/30/2006 12/31/2010 3.0 Subtotal - EASSO 36.60 EASPR JudicialReformSupport 12/04/2003 12/31/2009 21.90 LEGES NPSTaxAdmin.Reform 06/25/2007 12/31/2011 11.00 Subtotal - EASPR 32.90 SUBTOTAL - ACTIVE LOANS ,367.8 2. GEF-supplements to projects (not counted separately in the system) RuralPowerProject(GEF) 05/06/2004 12/31/2009 9.00 GEF-ENRMP 11/27/2007 12/31/2012 7.00 ManilaThirdSewerage(GEF) 02/06/2008 11/30/2012 5.00 SUBTOTAL - GEFs 2.0 TOTAL- FY07 ACTIVE PORTFOLIO ,388.8 CLOSED in FY07 RuralFinance3 05/06/1999 09/30/2007 147.50 WaterDistrictsDevelopment 09/10/1999 12/31/2006 17.80 NationalRoadImprovements&Management 07/07/2000 03/31/2007 150.00 SocialExpenditureManagement2 12/11/2002 06/30/2007 100.00 CommunityBasedResourcesDevelopment 10/06/1998 06/30/2007 38.00 MMURTRIP(GEF) 12/06/2001 12/31/2007 1.3 SUBTOTAL - CLOSED 454.6 65 B. World Bank Lending Program BANK BUDGET FUNDED PROJECT NAME COST/LOAN (US$M) FY08 P079935 2ndNationalRoadImprovementandManagementProgram 232 P106262 BicolPowerRestorationProject 12.9 FY09 P101581 PrivateSectorDevelopmentSupportfortheCalambaLaguna 140 NorthSouthHighway P082144 NationalSectorSupportforSocialWelfare 50 P097445 LocalGovernmentSupportforPerformanceGrants 70 P096822 LocalGovernmentSupportforRegionalWaterSupply 50 P096821 LightRailTransitLine1SouthExtension 260 P105325 SecondJudicialReformSupportProject 40 P107630 NationalProgramSupportforGovernmentFinancialIntegrated 10 ManagementInformationSystem P108904 LocalGovernmentSupportforWater(DevelopmentBankofthe 50 Philippines3) P088926 NationalProgramSupport-ParticipatoryIrrigationDevelopment 50 Project P071119 ManilaWestWaterNetwork 125 P095375 PartialRiskGuaranteetoPower 250 P101763 DevelopmentPolicyLoan2 250 FY0 P108836 NationalProgramSupport-DisasterManagement 30 P108835 PasigRiverUrbanRehabilitation 50 P078252 NationalProgramSupport-AgrarianReform 60 66 B. World Bank Lending Program NON-BANK BUDGET FUNDED PROJECT NAME COST/LOAN (US$M) FY09 P096836 GlobalEnvironmentalFacility-MindanaoRuralDevelopment 7 Program2-CoastalMarine P106732 EthanolPlantWaste - P090966 PrototypeCarbonFund-BurgosWindProject - P106260 ManilaBusDispatch - FY0 PersistentOrganicPollutantsContaminated 2 P106890 UnintentionalPersistentOrganicPollutantsRelease 10 P106885 ClimateChangeAdaptation 5 P101076 67 Proposed Action Plan for Philippine Public Procurement System Annex 3: Summary of APPI Assessment Scores for 0 Agencies (as of June 22, 2007) BLI MAJOR CRITERIA BIS INDICATOR NAME BIS INDICATOR NAME BLI INDICATOR INDICATOR DPWH DEPED PILLAR I ­ The Legislative and Regulatory Framework . Strategy (6%) 1.AgencyProcurement ReformStrategy(40%) Indicator1 2.40% 2.40% 2.Strategicpolicyinitiativesoutlined bytheagency(30%) None 1.80% 0.00% 3.Key/Strategicprocurement issues(30%) None 0.00% 0.00% TotalforStrategy 4.20% 2.40% PILLAR II ­ The Central Institutional Framework and Management Capacity Agency 4.HumanCapital(60%) 5(c) 9.60% 9.60% Professionalization 5.UseoftheGovernment Measures (6%) ProcurementSystem(G-EPS)(20%) 5(b) 3.20% 3.20% 6.Legalincentivestoprocurement officersandemployees(20%) None 1.40% 0.00% TotalforAgencyProfessionalization 14.20% 12.80% PILLAR III ­ The Procurement Operations and Market Practices Organizational Structure (6%) 7.BACandBACSecretariat(40%) None 6.40% 6.40% 8.Hierarchicalstructureof agency(30%) 6(d) 1.60% 4.80% 9.Standarddocumentation andprocedures(30%) 2(e),2(b), 4.80% 4.80% 6(c) TotalforOrganizationalStructure 12.80% 16.00% Agency Procurement On Competition (0%) Process (30%) 10.Methodofprocurement used:Shopping(30%of10%) None 3.00% 0.00% 11.LimitedSourceCompetition/ None 2.00% 0.00% Shopping(20%of10%) 12.Directcontracting(20%of10%) None 2.00% 0.00% 13.Biddersparticipation(15%of10%) 7(b) 0.00% 0.00% 14.Timeforpreparationof bids(15%of10%) None 1.50% 1.50% TotalforCompetition 8.50% 1.50% 68 DOH AFP DND NPC CITY OF DILG DENR BIR AVERAGE MARIKINA STORES 2.40% 2.40% 2.40% 2.40% 2.40% 2.40% 2.40% 2.40% 2.40% 1.80% 0.00% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.44% 1.80% 0.00% 1.80% 1.80% 0.00% 1.80% 1.80% 1.80% 1.08% 6.00% 2.40% 6.00% 6.00% 4.20% 6.00% 6.00% 6.00% 4.92% 0.00% 0.00% 0.00% 0.00% 9.60% 0.00% 0.00% 0.00% 2.88% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 0.00% 3.20% 0.00% 0.00% 1.40% 0.00% 0.00% 3.20% .92% 3.20% 6.40% 3.20% 3.20% 14.20% 3.20% 3.20% 6.40% 7.00% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 4.80% 4.80% 4.80% 4.80% 1.60% 4.80% 4.80% 4.80% 4.16% 4.80% 3.20% 4.80% 4.80% 4.80% 4.80% 2.40% 3.20% 4.24% 16.00% 14.40% 16.00% 16.00% 12.80% 16.00% 13.60% 14.40% 14.80% 3.00% 0.00% 0.00% 3.00% 3.00% 0.00% 3.00% 3.00% 1.80% 2.00% 0.00% 0.00% 2.00% 2.00% 0.00% 0.00% 2.00% 1.00% 2.00% 0.00% 0.00% 2.00% 2.00% 0.00% 0.00% 2.00% 1.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1.50% 0.00% .15% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 8.50% 1.50% 1.50% 8.50% 8.50% 1.50% 6.00% 8.50% 5.45% 69 Annex 3: Summary of APPI Assessment Scores for 0 Agencies (as of June 22, 2007) Proposed Action Plan for Philippine Public Procurement System MAJOR CRITERIA BIS INDICATOR NAME BIS INDICATOR NAME BLI INDICATOR BLI DPWH DEPED INDICATOR On Transparency (0%) 15.Advertisementofbidnoticesand publicationofawards(70%of10%) 1(c) 7.00% 7.00% 16.Postingofallprocurement opportunities,activities,awardsin G-EPS(30%of10%) 5(a) 1.50% 0.00% TotalforTransparency 8.50% 7.00% On Efficiency (0%) 17.ProcurementsinAP (30%of10%) 3(a) 0.00% 3.00% 18.Timeforpublicbidding (25%of10%) 6 2.50% 2.50% 19.Timeforbidevaluation (15%of10%) None 1.50% 0.00% 20.Biddingprocesscancelled None 1.50% 1.50% (15%of10%) 21.Latepayments(15%of10%) 3(b) 0.00% 0.00% TotalforEfficiency 5.50% 7.00% Total for Agency Procurement Process 22.50% 5.50% Effectiveness (6%) 22.AwardpriceslowerthanABC None 6.40% 6.40% 23.Contractamountincrease(30%) None 4.80% 4.80% 24.NumberofProtests(10%) 1(h) 1.60% 1.60% 25.Timetoresolveprotests(10%)(10)b 1.60% 1.60% 1.60% 26.Actiontakenonprotest(10%) 10(c) 1.60% 1.60% Total for Effectiveness 6.00% 6.00% PILLAR IV ­ The Integrity of the Public Procurement System Accountability 27.Internalauditunits(60%) 9(a) 9.60% 9.60% Measures (6%) 28.Systemsandprocedurestohearand 10(b) 6.40% 6.40% documentadministrativecases(40%) TotalforAccountabilityMeasures 16.00% 16.00% TOTALAGENCYRATING 85.70% 78.70% 70 DOH AFP DND NPC City of DILG DENR BIR Average Marikina Stores 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 3.00% 0.00% 0.00% 3.00% 1.50% 0.00% 0.00% 3.00% 1.20% 10.00% 7.00% 7.00% 10.00% 8.50% 7.00% 7.00% 10.00% 8.20% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 3.00% 3.00% .9% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 0.00% 1.50% 2.50% 0.00% 1.50% 1.50% 1.50% 1.50% 1.15% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 0.00% 1.50% 0.00% 0.00% 0.00% 1.00% 1.50% 1.50% .55% 4.00% 7.00% 6.50% 4.00% 5.50% 6.50% 10.00% 10.00% 6.60% 22.50% 5.50% 5.00% 22.50% 22.50% 4.00% 23.00% 28.50% 20.25% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 4.80% 4.80% 4.80% 4.80% 4.80% 4.80% 4.80% 4.80% 4.80% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 9.60% 9.60% 0.00% 9.60% 9.60% 0.00% 0.00% 9.60% 6.72% 6.40% 6.40% 0.00% 6.40% 6.40% 0.00% 0.00% 6.40% 4.48% 16.00% 16.00% 0.00% 16.00% 16.00% 0.00% 0.00% 16.00% 11.20% 79.70% 70.70% 56.20% 79.70% 85.70% 56.20% 61.80% 87.30% 74.17% 7 Annex 4: SWS Survey Results on the Effectiveness of the % WHO SAY GPRA WILL HELP REDUCE CORRUPTION IN GOV'T, BY CLASS AND SECTOR OF EMPLOYMENT Public Procurement System Class Sector of Employment TOTAL RP ABC D E PRIV SELF GOV'T. [Excerpt from February 2007 report, "Public Opinion on 100% 97 EMPL. 96 Procurement Reform" 87 83 84 84 85 81 83 80% 76 76 76 75 3% Aware of the Government Procurement Reform Act 74 (GPRA) Gov't. employees are more 60% Based on survey results, only one in ten (13%) of Filipinos are sanguine about GPRA aware of the Republic Act No. 9184, or the Government Procurement Reform Act. Most of the respondents who are 40% awareoftheGPRAbelongtoclassesABC(26%)andarecollege graduates(30%).WHATDOESABC,D,EMEAN?WHEREARE 20% COLLEGEGRADUATES? 0% AWARENESS OF GPRA, BY AREA, CLASS AND AGE Total Aware Total Interviews Aware of GPRA Total Interviews Aware of GPRA Inter- of views GPRA Q106. Do you think this law will help reduce corruption in government contracts? 13% Total Philippines November 24-29, 2006 National Survey 19% NCR 10% Balance Luzon 17% Visayas Interestingly,outofthoseawareoftheGPRA,morerespondents 14% Mindanao belonging to class E are optimistic about the anti-corruption 26% ABC 10% D featuresoftheGPRA,with97%whobelievethatthelawcan 16% E lessencorruption.OmbudsmanMarcelo,therefore,recommends 11% 18-24 that the communication strategy should not take for granted 11% 25-34 Filipinos belonging to the class E. He believes that Filipinos 16% 35-44 belongingtoclassEmaybetappedtobeobservers.Hecites,as 16% 45-54 13% 55+ examples,thenon-governmentalorganizationsinlloilowhich,in partnershipwiththeOmbudsman,havefiledcasesagainsttheir localgovernmentofficialsforprocurementrelatedcases. 0% 5% 10% 15% 20% 25% 30% Q105. We have a law that provides for the standard rules in public bidding for government projects Further, more government employees are optimistic about the to guarantee that all contractors are given equal opportunity to join and win a government contract. impactofGPRAinlesseningcorruption.Fouroutoffive(83%) This is called the Government Procurement Reform Act or RA 9184. Have you heard or read something about it? of government employees, whether aware of the GPRA or not, believe that the GPRA can help reduce corruption. More November 24-29 2006, National Survey importantly,almostall(96%)ofthegovernmentemployeeswho areawareoftheGPRAbelievethatitcanhelpreducecorruption Further, compared to other sectors of employment, more ingovernment. respondentsemployedbythegovernmentareawareoftheGPRA constituting29%;whilethoseemployedintheprivatesectoror 73% to 77% Agree with Reform Measures in the GPRA areself-employedcomprise18%and11%,respectively.However, Toensureanopen,competitive,andtransparentpublicprocurement the29%awarenessratingforgovernmentemployeesisstilllow system,theGPRAprescribespublicbiddingasageneralmodeof consideringthattheGPRAisbeingimplementedbythepublic procurement.Further,theGPRAmandatesthatallinvitationsto sectorandthatthetrainingprogramoftheGPPB-TSOisprimarily bidmustbepublishedinanewspaperofgeneralcirculationandin aimedateducatinggovernmentemployees. governmentWebsites.Namesofwinningbiddersandtheamount of contracts awarded to them must likewise be posted in the 76% Optimistic that GPRA Can Reduce Corruption PhilippineGovernmentElectronicProcurementSystem(PhilGEPS). Nevertheless, 76% of total respondents believe that the GPRA Governmentagenciesarealsomandatedtoinviteobserversfrom can help reduce corruption in government contracts. Further, non-governmentorganizationsandprofessionalassociations. 87%ofthe13%respondentswhoareawareoftheGPRAbelieve ThesearesomeofthereformmeasuresincorporatedintheGPRA that implementation of the law can help reduce corruption in inordertoenhancetransparencyandlessencorruptioninpublic government.Allstakeholdersseethesefiguresasveryencouraging procurement.Surveyresultsindicatethataboutthree-fourths signs. (73-77%)ofFilipinosagreewiththesemeasures,withpluralities (42-49%)ofthemwhosaytheyaredefinitely needed. 72 Moreover,mostoftherespondentswhobelievethatthesereform EVALUATION OF EFFECTIVENESS OF SPECIFIC WAYS TO REDUCE CORRUPTION IN GOV'T CONTRACTS measures are definitely needed belong to classes ABC and are college graduates. Also, it appears that older people (aged 55 The gov't should always... 100% It is too much andabove)feelmorestronglyabouttheneedtoimplementthese 5 4 5 5 6 5 trouble measures. 15 16 80% 18 17 18 20 It might just help 3.4. Public Perception on Effectivity of GPRA ToexaminethepublicperceptionontheeffectivityoftheGPRA 28 60% 28 28 30 30 29 Somewhat withrespecttoreducingcorruptioningovernmentcontracts,and important accountability and transparency, SWS asked the respondents' opiniononabatteryoftrendquestions.Onthewhole,trends 40% arepositivewithoneexception.Pluralitiesofthegeneralpublic agreethatcomparedtoaboutfiveyearsago,whenGPRAwasnot 49 48 20% 46 45 43 42 Definitely yetimplemented,itisnoweasiertomakegovernmentofficials needed accountable for irregularities in government contracts, to get 0% information about government biddings, contractors are now Use Publish in Have Buy from Put on its Put on its more on time in completing government contracts, and public public newspapers biddings lowest Websites Websites bidding opportunities observed bidder the winning opportunities to bid the by NGOS given the bidders & to bid in officersarenowmorecarefulintheuseofgovernmentfunds.bU gov't quality how much gov't contracts it needs they bid contracts moreofthosewhosaythatcorruptioningovernmentcontractsis moreprevalentnowthanaboutfiveyearsago. November 24-29, 2006 National Survey Whenfurtherdissectedaccordingtoarea,surveyresultsindicate BATTERY OF TREND QUESTIONS: thatmorerespondentsfromNCRandBalanceLuzonfeelstrongly COMPARED TO ABOUT FIVE YEARS AGO... abouttheneedtoadoptthesereformmeasures.Ontheother AGREE UNDECIDED DISAGREE NET hand, the least number of respondents who believe in these It is now easier to reformmeasuresarefromMindanao. punish gov't officials responsible for 42 28 26 +16 irregularities in gov't contracts It is now easier for anyone % WHO SAY SPECIFIC WAYS TO REDUCE CORRUPTION who wants to bid on a gov't contract 33 35 25 +8 IN GOV'T CONTRACTS ARE DEFINITELY NEEDED, BY AREA to get info. about the bidding People who have contracts with the gov't are now more on 34 35 26 +7 time in completing 80% NCR BAL LUZ VIS MIN % It is DEFINITELY NEEDED that their contracted work the gov't should always...to reduce corruption in gov't contracts Public officers are now careful in the use of public funds in gov't 35 29 33 +2 60% 5755 contracts 53 52 54 47 48 48 49 48 46 49 46 49 46 Corruption in gov't contracts is now 40% 38 29 30 37 37 39 4342 39 41 less common -8 36 34 Trends are positive, with one exception November 24-29, 2006 National Survey 20% 0% Use Publish in Have Buy from Put on its Put in public newspapers biddings lowest websites the websites bidding opportunities observed bidder winning opportunities to bid in gov't by NGOs given the bidders to bid in any contracts quality it & how much gov't contracts needs they bid November 24-29, 2006 National Survey 73 Annex 5: Recommendations and Agreements on CSO Participation ISSUES RECOMMENDATIONS COMMENTS/AGREEMENTS . Sustaining participation Financialsupport. Financialsupportshouldcomeoutside EnsurethecommitmentoftrainedCSOs ofthegovernment.Theorganization toparticipateinactualmonitoring,by shouldtakecareoftheexpensesofthe establishingoperatingnetworksoutside deploymentoftheirownmembersin MetroManila. observingpublicbidding. Qualitymonitoringoftrainingsandtrained ThegovernmentshouldinformtheCSOs observers,andthepossibilityofcoming ofalternativesourcesoffunding. upwitharegistrationsystemtoensure Onepercentofearningsfromsaleofbid thatonlyappropriatelytrainedobservers documentsshouldbespentontraining areinvited. CSOs,ratherthanasfinancialincentives. Considerthepossibilityofenteringinto Observersshouldbearmedwithuser- anagreementbetweenchurch-based friendlychecklistsduringbiddings,sothat organizationsactingasobserversinLGUs. lesseffortisspentinhavingtodevelop Explorethepossibilityoftappingthe DiagnosticReports.Thiswillalsoprovide servicesofgraduatingstudentsandthe asingleformatthatreadilyprovides othersinacademe. thenecessarydatatorelevantoversight agencies. Networkswouldhavetobeestablished toprocessthedatafromtheobservers' checkliststogenerateinformation. Theretireescanalsobetapped. 2. Absence of clear procedures in the Reiteratetheprovisionofthelaw ApledgeofcommitmentfromCSOsand selection of observers (especially in regardingtheselectionofobservers,and theGOPisneeded. the LGUs) improvetheexistingguidelinesinorderto increasetheparticipationofappropriate observers. 3. Absence of a guide in observing Developaguideontheconductofthird Reportsshouldnotonlycoverthe public biddings partyobservation,definingtherole procedures,butalsotheactualconditions/ ofobserversinrelationtopromoting problems,e.g.,fundingproblems, transparencyandaccountability. attendanceofBACsmembers. Issuestandardcheckliststhatare Astandardchecklistandanarrative user-friendlytoobservers,butprovide observation. substantialinformationformonitoringand Observersshouldnotbeconsideredas policyagencies. votingmembers,becausethemomentthey becomevotingmembers,theyimmediately gainaninterestinthebiddingandlose theirthirdpartyobjectivity. 4. Trained observers not being invited See#2above. See#2above. 5. Observers in the LGUs are not Developtrainingprogramsforobservers trained on the law outsideMetroManila. InformingtheLGUsoftheneedtotrain theirobservers. AnLGUsshouldbemotivatedtointoa MOAwithaCSOthathasadeepnetwork nationwide.See#3above. 74 Annex 5: Recommendations and Agreements on CSO Participation ISSUES RECOMMENDATIONS COMMENTS/AGREEMENTS 6. Quality of training Agovernmentagencyshouldbeincharge Centralmanagementisneededinorder ofaccreditingCSOtrainingprograms, tosetthefocus,andmanagethewhole withemphasisnotonlyoncompliance program.Provideforanavenueto withprocurementrulesandprocedures, consolidatefindings.Trainingsusingthe butmoreonidentifyingRED FLAGS vernacularinthecaseofthebarangays. andprevalentmodesofcircumventing Customizedtrainingsforbarangays. controls. 7. Absence of mechanism for Institutionalizeamechanismforgathering, Thereportwillbeself-servingifonlythe maximizing observers' report summarizingandestablishingtrends BACandthelocalchiefexecutivewouldbe basedonexistingreports. furnishedwithcopiesofthese. PublicationofsuccessstoriesofCSOs. Analliance/coalitionofCSOsshouldbea CreationofnetworksoftrainedCSO forcetoreckonwith,astheysynthesizethe observersarmedwitheasy-to-use reports,andrateagenciesbasedonthese. checklistsandstandardreportingformats EmpoweringtheCSOsthrutheuseoftheir reports. Thealliance/coalitionofNGOsshouldbe nationwidesothatanoversightagencycan easilytouchbasewithanobserverinthe region. 8. Improving feedback handling GPPBandotheroversightagencies See#7above. mechanism toenterintoanagreementto institutionalizingfeedbackhandling mechanisms.Thismaybeconductedafter consultationwithCSOs. Utilizationofthechecklistsandstandard reportingformatsforinformation generationbyacentralizedagency,such astheGPPBandtheOmbudsman. 75 ANNEX 6: UNACCEPTABLE GOP PROCUREMENT RULES A. CHECKLIST COMPARING NCB PROCEDURES AND WB AND ADB POLICIES ISSUES YES NO WB AND ADB POLICY REMARKS 1.Arethereeligibilityrestrictions / Notallowed Therearepreferencesonnationality basedonnationalityofbidder ofbiddersinthelaw.Tobe and/ ororiginofgoods(otherthan retainedintheNCBAnnexasan primaryboycotts)? unacceptablerule 2.Arethereprimaryboycottswhich / Onlyprimaryboycottsare Thelawhasnopolicyonboycott. areestablishedbylaw? acceptable Acceptable ADB:Noboycottsareallowed 3.Arebiddingopportunities / WB:Requiredforallpublic Thelawmandatesadvertisementof advertisedinthelocalpress? bidding. allpublicbiddingsandpostingin ADB:Requiresadvertising PhilGEPSforallprocurement. above$500,000forgoodsand Acceptable $1millionforworks. 4.Areprospectivebiddersallowed / Required LatestGPPBdirectiveshortened atleast30daysforbidpreparation thebidpreparationtimeless (exceptforcommodities/small than30daysforpublicbidding. goodscontracts)? Unacceptable. 5.Arecontractors/suppliers / Required Thelawmandatesforeligibility prequalifiedforlarge/specialized screening(ES)process,buttheES contracts? requireslonglistofdocuments thatcoulddisqualifiybiddersfor non-submissionofoneunnecessary document. Unacceptable 6.Areminimumexperience,technical Required Yes,theminimumrequirements andfinancialrequirements(for areexplicitlystatedinthebidding pre-orpost-qualification)explicitly documents.Acceptable statedinthedocuments? Thereisaregistrationofcontractors thatcapturesbasicqualification Registrationshouldnotbeused / Required data. asasubstituteforadvertisement Acceptable whenopencompetitionisrequired. However,whenadvertisingfor civilworks,borrowerscould indicatetherequiredminimum categoryofcontractorspecifiedin theregistrationsystem. 7.Isaninvitationtoprequalify / Required Advertisementforpublicbidding advertisedforeachprocurement isrequired. involvinglargeorcomplexpotential Acceptable contracts? 76 Annex 6: Unacceptable GOP Procurement Rules A. CHECKLIST COMPARING NCB PROCEDURES AND WB AND ADB POLICIES ISSUES YES NO WB AND ADB POLICY REMARKS 8.Arejointventureswithlocalfirms / Notallowed Foreignfirmsareencourage, requiredforforeignfirms' butnotrequiredtojointventure eligibility? withlocalfirms.Acceptable. 9.Arejointventurepartnersjointly / Required. Yes.Acceptable andseverallyliable? 10.Aretheresetlimitationstothe / Notallowed Thelawdoesnotsetlimitation. numberoffirmswhocanbidfo Acceptable acontract? 11.Areparastatalsallowedtobid? / Acceptableonlyifthey(i)are Parastatalsfollowcommerciallaw, financiallyautonomous,(ii) areautonomousandindependent operateundercommerciallaw, asprovidedintheirCharter. and(iii)areindependentfrom Acceptable borroweranditspurchasing/ contractingauthority. 12.Arebiddersrequiredtoregister / Shouldbediscouraged. Thereisaseparatelawonlicensing withalocalorfederalauthorityas Acceptableonlyifregistration andregistrationforcontractors apriorconditionforbidding? criteria,processandcost anditrequireslicensingpriorto reasonable/efficientandqualified submissionofbids.Unacceptable. foreignfirmsarenotprecluded ToberetainedintheNCBAnnex fromcompeting. 13.Areextensionstobidvalidity / Acceptableonlyifjustifiedby Yes,theyareallowedtoextend allowed? exceptionalcircumstances onlyforvalidreasons. Acceptable. 14.Arethererestrictionsonthe / Notallowed,exceptwhenbidders Therearenorestrictionsonthe meansofdeliveryofbids? havetosubmitphysicalsamples. meansofdeliveryofbids,hence Thentheycanberequiredto acceptable. deliverbidsbymail,bycourier,by hand,etc. 15.Ispreferencegiventosuppliers / Notallowed. Flaglawandprovincialpreferences orcontractorsbasedonregion areprovidedinthelaw. orlocalityofregistration,small Unacceptableandtoberetainedin size,ethnicownership,etc.? theNCBAnnex. 16.Arethererestrictionsonsourcesof / Notallowed,exceptforunskilled Therearenorestrictionson laborandmaterial? labor,ifavailablelocally. sourcesoflaborandmaterialsin thelaw.Acceptable.Theprovision inthecurrentNCBAnnexshould bedeleted. 77 Annex 6: Unacceptable GOP Procurement Rules A. CHECKLIST COMPARING NCB PROCEDURES AND WB AND ADB POLICIES ISSUES YES NO WB AND ADB POLICY REMARKS 17.Ispublicbidopeningrequired? / Required Yes,openpublicbiddingisthe Doesitoccurimmediatelyor primarymodeofprocurement. closelyfollowingthebidsubmission Acceptable deadline? 18.Isa"twoenvelope"bid / Shouldbediscouraged.Allowed Whilethelawrequirestwoor openingprocedurepermittedfor onlyif(i)domesticlawprecludes threeenvelopes,theenvelopesare procurementofgoodsorworks?9 useofoneenvelopeand(ii) requiredtobeopenedonthesame providedadequatesafeguards dayonthesamebidopeningevent. NOTE:ADBallowstwoenvelope againstretainingsecondenvelope Transparencyisachieved.This bidding. unopenedareincorporatedin practiceisacceptable. thetwoenvelopeproceduresand effectivebidprotestmechanisms arealreadyinplaceforthedue processingofbidcomplaints. 19.Isautomaticrebiddingrequiredif / Acceptable,providedall Thelawallowsawardtoonlyone toofewbidsarereceived? responsivebiddersareallowedto bidprovideditisresponsive.Thisis bid,theprocessisefficientandno acceptable. seriousdelaysresult. 20.Is"bracketing"usedinbid / Notallowed. ABCisusedasceiling.Itisallowed evaluations?10 byWBundercertainconditionsas indicatedinAnnex8.3.Therefore Onlyifquantifiedinmonetary acceptableprovidedtheconditions terms aremet.ADBdoesnotallowit. Arebidevaluationcriteriaotherthan Yes,theyareallowedprovided priceallowed? quantifiable.Acceptable. 21.Isawardmadetolowestevaluated / Required Thelawmandatesthatawardbe qualifiedandresponsivebidder? madetothelowestcalculatedand responsivebid.Acceptable. 22.Arepricenegotiationsconducted / Notallowed,exceptwherethe Thelawprohibitsnegotiationwith with"winning"bidderspriorto bidpriceissubstantiallyabove lowestcalculatedandresponsive contractsignature? marketorbudgetlevelsandthen bidder.Acceptable. onlyifnegotiationsarecarried outtotrytoreachasatisfactory contractthroughreductionin scopeand/orreallocationofrisk andresponsibilitywhichcan bereflectedinareductionin ContractPrice.(SeeGuidelines para2.60) 9All technical envelopes are opened first and, after review, price envelopes of all or only qualified/responsive bids are opened in the second round. 0Rejection of bids outside a range or "bracket" of bid values. 78 Annex 6: Unacceptable GOP Procurement Rules A. CHECKLIST COMPARING NCB PROCEDURES AND WB AND ADB POLICIES ISSUES YES NO WB AND ADB POLICY REMARKS 23.Arepriceadjustmentprovisions / Notrequired,butrecommended Priceadjustmentisallowed generallyused? forworkscontractsofoneyearor forextraordinaryinflation, moreindurationwhendomestic fortuitouseventorextraordinary inflationrateishigh. circumstancesperGPPBRes. 07-2004datedJuly22,2004. Acceptable 24.Arethetermsandconditionsused / Required(tobeacceptablethey Thesizeandnatureofthecontract ingoodsandworksprocurement shouldbebalanced,reasonable, arethebasesforthetermsand generallyappropriateforthesizeand andclearlyaddressthemost conditionsspecifiedinthebidding natureofcontractintended? importantissuesthatleadto documents.Acceptable. problemsduringperformance, e.g.riskallocation,payment, inspection,completion/ acceptance,insurance, warrantees,changes,contract remedies,forcemajeure, governinglaw,termination,etc.) 25.Arecontractscope/conditions / Acceptable,buttheBank's Acceptable.RetaintheruleinNCB modifiedduringimplementation? approvalisrequiredforchanges Annexthatforcontractssubject inthosecontractsthatwere topriorreview,15%ormore subjecttopriorreviewunderthe modificationshouldbesubjectto LoanAgreement. priorreview. 79 Annex 7: Review of WB's NCB Procurement Annex CURRENT VERSION RESULT OF REVIEW USING PROPOSED CHANGES CHECKLIST 1.Eligibilityscreeningshallnot Eligibilityscreeningisnotacceptable. Nochange. beapplied.However,bidsthat Retainthesamewording. donotcontainanyofthefollowing documentswillnotpassthe documentarycompliancecheck: (a)evidenceoftherequired financial,technicalorproduction capability;(b)auditedfinancial statements;(c)creditlineorcash depositcertificate;(d)bidsecurity; and(e)authorityofthebid signatory 2.Incaseofprequalification,ifany Thereisnoprequalificationprocessunder Fordeletion. bidderisdeniedaccessto theProcurementLaw.EligibilityScreening thebiddingprocessforreasons processperSection23ofthelawis unrelatedtoitsfinancialand similartoaprequalificationprocesswhere technicalqualificationstoperform thedocumentarysubmissionsrelevant thecontract,priorconcurrenceof tothequalificationofthebiddersare theBankshallbesought. screenedusingpassorfailcriteria.Since prequalificationisnon-existentinthelaw, thissuperfluous. 3.Aceilingmaybeapplied Followingharmonizationprocess,ceiling Aceilingmaybeappliedtobidprices tobidprices,withprior isnowallowedprovidedfourconditions providedthefollowingconditionsaremet: concurrenceoftheBankinadvance aremet,whichshouldbeindicatedinthe (a)Biddingdocumentsareobtainablefree ofbidding.However,theApproved Annex. ofchargeonafreelyaccessiblewebsite. BudgetEstimatemaybedisclosed (b)Theagencyhasproceduresinplaceto ensurethattheABCisbasedonEngineer's intheadvertisementorinthe Estimate;(c)Theagencyhastrained biddingdocuments. costestimatorsonestimatingpricesand analyzingbidvariance;(d)theagencyhas establishedasystemtomonitorandreport bidpricesrelativetoABCandEngineer's estimate. 4.Domesticorregionalpreferences Provincialpreferencesandgeneral Nochange. willnotbeappliedintheevaluation preferencesarestillineffect.Retainthisin ofbids,andotherpreferencein theNCBAnnex. effectinthePhilippineswillnotbe usedexceptwithpriorconcurrence oftheWB. 5.Suppliersandcontractorswillnot Thereisnorequirementinthelawor Fordeletion. berequiredtopurchaseonlylocal theIRRtopurchaseonlylocalgoodsor goodsorsuppliesormaterials. suppliesormaterials.Hencethisshouldbe Acceptable.Theprovisioninthecurrent NCBAnnexshouldbedeleted. 80 Annex 7: Review of WB's NCB Procurement Annex CURRENT VERSION RESULT OF REVIEW USING PROPOSED CHANGES CHECKLIST 6.Incaseofcontractsforprior Acceptable.RetaintheruleinNCBAnnex Nochange. review,modificationexceeding thatforcontractssubjecttopriorreview, 15%ofcontractamountand 15%ormoremodificationshouldbe materialschangesintheconditions subjecttopriorreview. duringimplementationrequireprior Bankconcurrence. 7.Foreignsuppliersandcontractors Unacceptable. Nochange. shallbeallowedtoparticipate,if interested,withoutfirstbeing requiredtoassociatewith,or enterintojointventure,withlocal firms.Moreover,foreignbidders shallbeallowedtobid,even withoutregistration,licensing,and othergovernmentauthorizations, leavingtheserequirementsfor afterawardandbeforesigningof contract 8.Forworkscontract,theexperience Basedonexperience,thisrequirementis Nochange. qualificationrequirementshallbe: usefultoensurecontractorcapability. (a)atleastonepreviouscontract at80%oftheestimatedcostof thecontractbeingprocured;and (b)anannualturnoverfromall worksaveragedoverthelastthree yearsequalto100%ofthe estimatedcostofthecontract beingprocured. 8 Annex 8A: World Bank's NCB Requirements 1.Eligibilityscreeningshallnotbeapplied.However,bidsthatdonotcontainanyofthefollowingdocumentswillnot passthedocumentarycompliancecheck:(a)evidenceoftherequiredfinancial,technicalorproductioncapability; (b)auditedfinancialstatements;(c)creditlineorcashdepositcertificate;(d)bidsecurity;and(e)authorityofthe bidsignatory. 2.Aceilingmaybeappliedtobidpricesprovidedthefollowingconditionsaremet:(a)Biddingdocumentsare obtainablefreeofchargeonafreelyaccessiblewebsite.(b)Theagencyhasproceduresinplacetoensurethat theABCisbasedonEngineer'sEstimate;(c)Theagencyhastrainedcostestimatorsonestimatingpricesand analyzingbidvariance;(d)theagencyhasestablishedasystemtomonitorandreportbidpricesrelativetoABC andEngineer'sestimate. 3.Domesticorregionalpreferenceswillnotbeappliedintheevaluationofbids,andotherpreferenceineffectinthe PhilippineswillnotbeusedexceptwithpriorconcurrenceoftheBank. 4.Incaseofcontractsforpriorreview,modificationexceeding15%ofcontractamountandmaterialschangesinthe conditionsduringimplementationrequirepriorBankconcurrence. 5.Foreignsuppliersandcontractorsshallbeallowedtoparticipate,ifinterested,withoutfirstbeingrequiredto associatewith,orenterintojointventure,withlocalfirms.Moreover,foreignbiddersshallbeallowedtobid,even withoutregistration,licensing,andothergovernmentauthorizations,leavingtheserequirementsafteraward andbeforesigningofcontract. 6.Forworkscontract,theexperiencequalificationrequirementshallbe:(a)atleastonepreviouscontractat80% oftheestimatedcostofthecontractbeingprocured;and(b)anannualturnoverfromallworksaveragedoverthe lastthreeyearsequalto100%oftheestimatedcostofthecontractbeingprocured. 7.AlternativeprocurementmethodsdefinedintheimplementingrulesandregulationssuchasLimitedSource Bidding,DirectContractingandShoppingareacceptable.Theuseoftheotheralternativemethodswillrequire priorBankconcurrence. 8.Aperiodofatleast30daysforbidpreparationshallberequired. 82 Annex 8B: ADB's NCB Annex to Procurement Plan 1.General 5.Preferences Theprocedurestobefollowedfornationalcompetitive (a)Nopreferenceofanykindshallbegiventodomestic biddingshallbethosesetforthinRepublicAct9184of biddersorfordomesticallymanufacturedgoods. theRepublicofthePhilippines,effective26January2003, (b)Suppliersandcontractorsshallnotberequired andImplementingRulesandRegulations,effective topurchaselocalgoodsorsuppliesormaterials. 8October2003,withtheclarificationsandmodifications (c)ForeignsuppliersandcontractorsfromADBmember describedinthefollowingparagraphsrequiredfor countriesshallbeallowedtoparticipate,ifinterested, compliancewiththeprovisionsoftheProcurement withoutfirstbeingrequiredtoassociatewith,orenter Guidelines. intojointventurewith,localfirms. (d)ForeignsuppliersandcontractorsfromADBmember 2.Eligibility countriesshallbeallowedtobid,withoutregistration, (a)Eligibilityscreeningshallnotbeapplied.However,bids licensing,andothergovernmentauthorizations,leaving thatdonotcontainthefollowingdocumentswillnot compliancewiththeserequirementsuntilafteraward passthedocumentarycompliancecheckifaspecific andbeforesigningofacontract. requirementofthebiddingdocuments:(i)evidenceof therequiredfinancial,technicalorproductioncapability; 6.Experience Qualification (ii)auditedfinancialstatements;(iii)creditlineor Foraworkscontract,theexperiencequalification cashdepositcertificate;(iv)bidsecurity;and(v)authority requirementshallbe:(i)atleastonepreviouscontractat ofthebidsignatory. 80%oftheestimatedcostofthecontractbeingprocured; (b)Nationalsanctionlistsmaybeappliedonlywithprior and(ii)anannualturnoverfromallworksaveragedoverthe approvalofADB lastthreeyearsequalto100%oftheestimatedcostofthe contractbeingprocured. 3.Advertising BiddingofNCBcontractsestimatedat$500,000ormore 7.Bid Security forgoodsandrelatedservicesor$1,000,000ormorefor Whererequired,bidsecurityshallbeintheformofabank civilworksshallbeadvertisedconcurrentlywiththegeneral guaranteefromareputablebank. procurementnoticesonADB'swebsite. 8.Contract Amendment 4.Price Ceiling ADB'sconcurrenceshallbeobtainedbeforeapproving Theapprovedbudgetforthecontract(ABC)maybe modificationstocontractsunderimplementationwhere published,butitshallnotbestatedorimpliedthatbid (i)thevalueofthemodificationexceeds15%ofcontract pricesshallnotexceedtheABC,orthatbidevaluationwill amount,or(ii)itresultsinmaterialchangestothe inanywaytakeintoaccounttheABC.TheABC,budgetary conditionsofcontract. allocation,ceilingprice,orsimilarestimatesofcontract valueshallnotbeusedtorejectbidswithoutprior 9.Member Country Restrictions concurrenceofADB. BiddersmustbenationalsofmembercountriesofADB, and offeredgoodsmustbeproducedinmembercountries ofADB. 83 Annex 9: Status of Actions Agreed in 2005 CPAR Update (as of November 2007) INDICATOR SPECIFIC WEAKNESS Existence of institutional development 1.Contractawardinformationnotavailableandaccessibleintheexistingsystem capacity. 2.Sustainablestrategyisnotyetdevelopedtoprovidetrainingadviceandassistancetodevelopthe capacityofgovernmentandprivatesectorparticipantstounderstandtherulesandregulations andhowtheyshouldbeimplemented. 3.Lackofsystemsandproceduresforcollectionandmonitoringofnationalprocurementstatistics 4.Lackofqualitycontrolstandardstoevaluateperformanceofstaffandaddresscapacity developmentissues Efficient procurement operation and 5.Atthecontractingentitylevel,thelevelofprocurementcompetenceamonggovernment practice officialswithintheentityisnotyetconsistentwiththeirprocurementresponsibilities 6.Atthecontractingentitylevel,theprocurementtrainingandinformationprogramsimplemented forgovernmentofficials,aswellasforprivatesectorparticipantsisnotyetconsistentwith demand. 7.Whileadministrativesystemsexistatthecontractingentitylevel,theydonotadequatelysupport monitoringprocurementperformanceinmostagencies. 84 CURRENT ACTIVITIES/ACTIONS TO BE UNDERTAKEN RESPONSIBLE AGENCIES, FUNDING AND TIMETABLE BeingdoneandmonitoredbyGPPBTSO-GPPBissuedletterstonon-complyingentities GPPB­TSO;PhilGEPSwithfunding remindingallheadsofprocuremententitiesandBACstopostinPhilGEPSawardsof assistancefromADB-WB contract. a)Ongoing,implementationofnationaltrainingthetrainersprogramforagenciesand GPPB,SUCs,PCAcarriedinthisCPAR. LGUs. b)Ongoingasmedium-termapproachtocapacitybuildingistoaccreditStateUniversities andColleges,includingtheNationalDefenseCollege; c)Ongoing,asthedevelopmentoflong-termplantoprofessionalizeprocurementasa careerforpractitioners. d)To be done -privatesectortrainingtobeincludedinthetrainingand professionalizationprogram. To be done- GPPB,carriedinthisCPAR a)Developactualperformanceindicatorsandimplementasystemfordatacollectionand informationanalysisfromcontractingentitiesuptoGPPB; b)ReplicateappropriateBIStoassessnationalagenciesandLGUs,asmanagementtool. To be done-Includesettingupofqualitycontrolstandardstoevaluatestaffperformance GPPB-TSO,carriedinthisCPAR. andaddresscapacitydevelopmentissuesintheprofessionalizationprogrammentionedin No.2(c). a)LinktoNo.2. GPPB,carriedinthisCPAR b)To be done­conductoftrainingprogramtoimproveofskillsinestimatingpricesand analyzingbidvariances. c) To be doneasfollow-uptoValueEngineering(VE)Briefingsare:(i)toenhancecapacity forvalueengineeringfocusingmoreonupstreamreviews;(ii)issuanceofguidelinesto agenciesfortheuseofVE. a)Ongoing,shouldbelinkedtoNo.2.Expansionofthetrainingshouldbedonetomeet GPPB,carriedinthisCPAR demand. b)To be done-Thetrainingprogramshouldincludetheprivatesectorandthecivil societyobservers. a)LinktoNo.3. GPPB,ProcurementService­PhilGEPS b)OngoingdevelopmentofG-EPSwillprovideonlineinformationoncommonlyused Office­ongoingimplementation.The suppliesprocurementsuchasprices,contractsperformance. agreedactioniscarriedinthisCPAR, c)To be done-Collectionoftechnicalspecificationsonnon-commonlyusedsupplies withfundingassistanceADBandWB. suchasdrugs,catalogueanddisseminateonline. d)To be done-­Stand-alonestudyoncomparisonofbidpricesforcommon procurement items,suchasclassrooms,medicalsupplies,watersupplyandbooksprocuredbys electedagencies. e)Ongoing.ImplementationofE-Procurementasatransactionaltool. f)To be doneasfollow-uptorecommendationsintheSecurityReport:(i)discuss procurementsecurityrelevancewithBSPandOfficeofInsuranceCommission,and(ii) issueguidelinesonselectivereputablesuretycompanies. 85 Annex 9: Status of Actions Agreed in 2005 CPAR Update (as of November 2007) INDICATOR SPECIFIC WEAKNESS 8..Inadequateinternalcontrolmechanismsforundertakingprocurementoperationsatthe contractinglevel. Functionality of the Public Procurement 9.Theparticipationrateofbiddersinresponsetocompetitivetenderinvitationsisnotconsistent Market withthecapacityofthemarketplace.Lessuseofcomplaintandprotestmechanisms. Effective control and Audit System 10.Lackofenforcementandfollow-uponfindingsandrecommendationsfromthe controlframework. 11.Theinternalcontrolsystemdoesnotprovidetimelyinformationoncompliancetoenable managementaction. Degree of Access to Information 12.WhilethelawrequirespublicationintheG-EPS,websitesandnewspapers,thefullaccessto informationbythecivilsocietyisnotyetfullyinstitutionalized. 13.Systemdoesnotexistyettocollectkeydatarelatedtoperformanceoftheprocurementsystem andtoreportregularly. 14.SomeagenciesandLGUsarenotmaintainingrecordstovalidatedata. 86 CURRENT ACTIVITIES/ACTIONS TO BE UNDERTAKEN RESPONSIBLE AGENCIES, FUNDING AND TIMETABLE a)Done -implementationofProcurementManualinallagenciesandharmonizationwith a)ProcurementManualissuedin donors. January2007;Pilottestingin6 b)To be done­(i)strengthentheinternalcontrolmechanismatagencylevelby: agenciesdone. enforcingthelawthatmandatescreationofinternalauditunits;(ii)prepareinternal b)IDFGrantonStrengtheningInternal auditmanualonprocurement;and(iii)implementationofatrainingprogramfor Auditon-going;IAmanualbeing internalauditors. drafted). a)To be done-intensiveinformationdisseminationandfamiliarizationonthenew CommunicationPlantobedeveloped lawtotheprivatesectorandcivilsocietytobringtrustandconfidenceinthenewsystem. andimplementedbyGPPB,asagreed b)To be done-supporttoprivatesectorinitiativesontrainingsonthenewsystem. inthisCPAR. c) To be done-includeprivatelearninginstitutionsinaccreditationofprocurement traininginstitutestocatertoprivatedemand. d)To be done-issuanceofapolicythatadvertisementsshouldincludekeyevaluation criteria. a)Ongoing.ImplementtheGuidelinesforSuspensionandBlacklistingofBidders, a)&b)Done.Guidelinesbeing SuppliersandConstructors.DonorswillreviewforpossibleadoptioninFAPs. implemented.Listofblacklisted b)To be done-StrengthentheroleofPresidentialAnti-GraftCommissioninensuringthat suppliersandcontractorspublished procurementauditisinstitutionalizedthroughtheinternalauditunitsofeachagency. intheGPPBwebsite Trainingonfraudexaminationandaudit. (www.gppb.gov.ph). c)To be done­(i)COAshouldincludeaspartofitsAnnualReportanassessment c)COAwilldevelopandimplement ofadequacyofinternalcontrolmechanisminweakagencies;and,(ii)trainingof ProcurementAuditGuide. investigatorsonfraudexaminationandaudit. d)trainingofOmbudsmanstaff d)To be done­ProvideactiveassistancetoOmbudsmanforsuccessfulprosecutionof carriedinthisCPAR. procurementcases. To be done­Agenciesshouldinstituteadequateinternalcontrolmechanismtoensurethat DBM,underAusAIDfunding,is timelyinformationareprovidedtoagencymanagement.LinktoNo.10. developinginternalcontrolsystem. a)Ongoing.SupporttoPWIinimprovingtrainingdesignanddeliveryforBACcivilsociety TheseactionsarecarriedinthisCPAR observers(CSOs). aspartofCommunicationStrategy. b)To be done-InformationsupportsystemfortrainedBACCSOs. c)To be done-AdministrativesupporttothenewcoalitionofBAC-CSOs. LinktoNo.3. CarriedinthisCPAR. To be done-Issuanceofguidelinesforproperrecordmanagementfornationalagencies CarriedinthisCPAR andLGUs.PreparetheTORandhireconsultant. 87 Annex 0: Key Source Documents DevelopmentAcademyofthePhilippines,December2006."Anti-CorruptionInitiativesinthePhilippines:Creating VirtuousCirclesofIntegrityandAccountability,"ManilaPhilippines. C.Virata&Associates,Inc..,May2006."StudyonDesignandCostAnalysisofJBICODALoan-AssistedProjects inthePhilippines,"Makati,Philippines. Campos,J.Edgardo&JoseLuisSyquia,2006."ManagingthePoliticsofReformOverhaulingtheLegalInfrastructure ofPublicProcurementinthePhilippines,"WorldBankWorkingPaperNo.70. Joint Document of the Government of the Philippines, The World Bank and the Asian Development Bank, Philippines,April30,2003."ImprovingGovernmentPerformance:Discipline,EfficiencyandEquityinManaging PublicResources,APublicExpenditure,ProcurementandFinancialManagementReview,"Manila,Philippines. OECD-DAC/WBProcurementRoundTable,January2005."GoodPracticePapersonStrengtheningProcurement CapacitiesinDevelopingCountries" OECD-DAC/WBProcurementRoundTable,July17,2006."MethodologyforAssessmentofNationalProcurement Systems,Version4" PhilippineCommissiononAudit,January2007."AssessmentoftheLevelofImplementationofRepublicActNo. 9184intheLocalGovernmentUnits,"QuezonCity,Philippines. PhilippineCountryTeam,WorldBankEastAsiaandPacificDepartment,June21,2007."CountryAssistance StrategyProgressReport,"Manila,Philippines. SocialWeatherStation,November2006."PublicOpiniononProcurementReforms,"QuezonCity,Philippines. SocialWeatherStation,June2007."TransparentAccountableGovernance:The2007SWSSurveyofEnterprises onCorruption,"MakatiCity,Philippines. TheWorldBank,May23,2002.RevisedCPARProcedures,OPCPR,WashingtonDC. TheWorldBank,March2003."PhilippinesCountryProcurementAssessmentReport,"Manila,Philippines. TheWorldBank,August2005."PhilippinesCountryProcurementassessmentAssessmentReport,2ndUpdate," Manila,Philippines. Ursal,Sofronio,2006"Anti-GraftGuidebook,"QuezonCity,Philippines. Verzosa, Cecilia Cabanero, 2005. "Counting on Communication, The Uganda Nutrition and Early Childhood DevelopmentProject,"TheWorldBank,WashingtonDC. 88 1818 H Street, NW, Washington, DC 20043 USA Website: www.worldbank.org World Bank Office Manila 23rd Floor, The Taipan Place F. Ortigas Jr. Road, Ortigas Center Pasig City Philippines Telephone: (63-2) 637-5855 Website:www.worldbank.org.ph International Finance Corporation 11th Floor, Tower One, Ayala Triangle Ayala Avenue, Makati City Philippines Telephone: (63-2) 848-7333 Website: www.ifc.org The World Bank in the Philippines Supporting Islands of Good Governance