By ROEL R. LANDINGIN
Philippine Center for Investigative Journalism

Second of three parts

FOR ANTONIO Molano Jr. and other government engineers at the Department of Public Works and Highways (DPWH), it felt like being in "Groundhog Day," the Bill Murray movie about a cynical TV reporter who kept reliving the same day over and over again.

Over a span of four years, Molano and his colleagues at the DPWH bids and awards committee (BAC) held three rounds of bidding for two World Bank-funded road projects in Mindanao and the Visayas.

Each time, all the bids exceeded estimated costs by wide margins. Each time, virtually the same set of construction companies won the first and second rounds.

The road projects were part of Phase 1 of the $305-million National Road Improvement and Management Project (NRIMP) that the World Bank was supporting with a $150-million loan. Unhappy with the high bids, the World Bank rejected the bid outcomes not once or twice, but thrice.

The DPWH went to great lengths to boost competition in the bidding for the road-building projects. At one point, "an independent call line outside the DPWH was established for any party to report any deviation from the process," says Molano. "We invited civil society groups such as Procurement Watch and the Volunteers Against Crime and Corruption as observers."

But these and other measures proved to be no match to the persistence and power of some suppliers to dictate their terms on bids for government infrastructure contracts, often in defiance of government rules and policies.

The contractors’ doggedness underscores the huge and lucrative merits of building foreign-assisted projects, and is among the symptoms of what Rodolfo Lozada Jr., a Senate star witness in the National Broadband Network (NBN) scandal, has called a "dysfunctional" government procurement system.

Some of the construction firms that took part in the controversial projects were also among the most successful bidders for government public-works contracts. This is evident in a report prepared by the Construction Industry Authority of the Philippines and Philippine Domestic Construction Board (CIAP-PDCB) that the Philippine Center for Investigative Journalism (PCIJ) analyzed.

Nine mostly Chinese and local construction firms that joined the ill-fated bids for the road projects were also the big players in many other projects funded by foreign money.

These nine firms accounted for 46 percent of the total value of civil-works contracts of ongoing or completed foreign-assisted projects between 2004 and 2006, the CIAP-PDCB’s Constructors Performance Evaluation System report showed.

Bid-rigging and corruption were suspected by the World Bank, which carried out a year-long investigation into the matter. Last November, the Bank deferred approval of a $232-million loan for the national roads project’s second phase, pending completion of its probe.

But contractors and government officials alike say foreign lenders like the World Bank may also be to blame for the apparent corruption plaguing official development assistance (ODA)-funded projects.

International financial institutions had thumbed down a Philippine proposal to impose a cap on bids for these projects. Instead, the lenders have insisted on exempting foreign-assisted projects from new Philippine procurement rules that disallow bids above the so-called approved budget contract (ABC), the estimated cost that is calculated by third-party consultants at considerable expense.

Invitation to collusion

Manolito Madrasto, executive director of the industry group Philippine Contractors Association, says the industry itself is supporting the government’s efforts to convince ODA donors to adopt Philippine procurement rules.

He says the absence of caps on bids for these projects is a virtual invitation to collusion.

"Anybody who bids beyond (the ABC) in the Philippine setting is automatically out of the running," he points out. "Under World Bank (rules) there is no limit. You can even put in 10 times if you want. If the bidders talk to each other, is there a way to stop it?"

Cipriano Ravanes Jr., an independent procurement expert, agrees that putting a cap on bidding may be necessary, given the rampant collusion and overpricing in the local contracting industry. "If the approved budget contract reflects market price, it will protect the government," he says. "But even if the ABC is overpriced, it can still help because it imposes a limit."

In June 2002, the DPWH issued a department order stating that bids for civil works and supply contracts above 15 percent of the approved budget contract would be rejected outright. Then Public Works Secretary Simeon Datumanong noted that awarded contracts for foreign-assisted projects were higher than approved costs by an average of 15 percent, with some going as high as 30 percent.

Country managers of the Japan Bank for International Cooperation (JBIC), Asian Development Bank (ADB), and World Bank promptly wrote a joint letter opposing the order, reminding Datumanong that the imposition of contract price ceilings violates their procurement guidelines.

The order was not implemented because of the lenders’ objections.

More "groundhog days"

Without the caps, DPWH’s Molano could only have more "groundhog days," even as he and his colleagues scamper to implement stricter procedures for the biddings on infrastructure projects.

Up to now, Molano can only shake his head over their efforts in trying to prevent any shenanigans in the two road projects in Visayas and Mindanao. After the World Bank rejected the results of the first bidding, Molano and company changed some of the procedures for the second bidding. Among these were the disqualification of one of the bidders and the removal of the pre-qualification requirement.