Among the kleptocratic absurdities inflicted in 2009 one that elicited the most responses was the existence of a corruption cartel involving our highest officials, their relatives and “relevant local media” as described by the World Bank’s Department of Institutional Integrity. Karl Garcia recalled in particular a judicial decision that unintentionally predicates perpetuation, providing as it does virtual insulation from anti-corruption and overpricing controls.
The decision rendered in the bellwether case of Abaya versus Ebdane where a petition for certiorari and prohibition to nullify a May 27, 2004 resolution issued by the Bids and Action Committee of the Department of Public Works and Highways (DPWH) had quietly set precedents of far-reaching consequences. The resolution recommended awarding to a Chinese state corporation the rehabilitation of a 79.82 kilometer road in Catanduanes.
The approved budget for the contract was Php 738,710,563.67. The bid awarded was Php 952,564,821.71 or 26% higher than the budget. The petition considered the resolution in violation of Section 31 of Republic Act 9184 that set ceiling prices for bids.
The petition for nullification was however dismissed following the brocard of pacta sunt servanda in international law that specifically states within Section 4 of RA 9184 that “any treaty or international or executive agreement affecting the subject matter of this Act to which the Philippine government is a signatory, shall be observed”.
In this case, the creditor, the Japan Bank for International Cooperation (JBIC) was considered an adjunct of the Japanese government. The loan between the DPWH and JBIC fell under Section 4 of RA 9184, thus overshadowing budgetary parameters set in Section 31.
Following the liberalism effectively supplied, had the folks behind the North Rail project and the notorious ZTE broadband band fiasco (NBN-ZTE) concocted similarly capitalized deals then jurisprudence might underlie fudges beyond budget limits.
Some view law as a manner to control against wrongs. Others see it as a license. Where overpricing and fudges are concerned, this decision differentiates between infrastructure projects funded by private debt against those coursed through executive agreements and treaties where “agreements must be kept” regardless of budget parameters.
Infrastructure projects funded through the Samurai bond route, Official Development Assistance (ODA) for as long as these do not involve state adjuncts, the World Bank, the International Monetary Fund, the Asian Development Bank and the general banking system fall under the first category.
Banker’s prudence necessitates the chemistry of cost and capacity to repay. These are checked and balanced, and are scrutinized as to viabilities and repayment – the latter, a function of state revenues and economic wherewithal.
Controls are provided by budgetary boundaries, requisite limits on spending and repayments as well as parameters on what can and cannot be burdened on an already financially-wrung, thoroughly taxed and systemically-squeezed public.
Within the second category of executive agreements and treaties, funding fudges are effectively limitless. The consequences of the differences, similarly infinite. Costs can escalate beyond requisites and economic realities. The public burdened immeasurably, their backs broken by debt.
While the courts are innocent of fudging folly, the consequences of innocence may not be blameless where we might be victimized by infrastructure projects overpriced beyond our economic capacities to repay. Projects such as the ZTE NBN deal, tucked and snuck under the legally hairy armpits of an executive agreement are allowed vast parameters under Section 4 of RA 9184.
In the ZTE NBN project, the U.S.-based Arescom contractor proposed US$ 135 million, Amsterdam Holdings proposed US$ 240 million under a build, operate and transfer scheme, while the ZTE proposal was for US$ 329.5 million under a straight debt financing plan.
For the US$ 530 million North Rail project, the original debt was designed for a complete cargo and commuter transport system. It was eventually for a shorter narrow-gauge commuter railway whose total 64 kilometer project was deemed overpriced by US$ 15 million relative to a 2,000 kilometer railway system in China that had cost only US$ 1.8 million per kilometer.
The “Executive” character of these deals is at the center of the logic in granting immunity from limitations on cost and repayments. That is likewise the reason for these fiascos as constants in the periodic impeachment complaints arrayed against Gloria Arroyo.
But should treaties and executive agreements be above public interest where these unnecessarily burden?
Senator Richard Gordon recently said that from one-third to a half of public works funds are lost through inefficiencies and corruption. Should treaties and executive agreements be the default development route, that estimate may be on the low side.
Popularity: 2% [?]
And on and on and on . . .
The legal profession here is among the most creative of crafts, I think, where the essence of law as a way to delineate right from wrong is ignored in favor of finding loopy holes into which a great deal of cash can be crammed.
Joe
Dear Joe,
Shakespeare had it right when he advocated how creative lawyers might be treated.
Dean
Thanks Dean!
They made the system work that way. In order for them to steal the
funds without you knowing.
Dear Hyden,
Right!
Dean
Pickpockets will distract you first. Before they go on and
pick your pocket. Then, they confuse you by passing your
wallet from one pickpocket to another pickpocket. It is the
same tactic these people are doing to us for our taxes.
so, in abaya vs ebdane, why did the govt push through with the project when the lowest bid is higher that the target bid? presumably (i’m not sure), it would make sense that the target bid be close to what it would cost for the govt to do it themselves. the goal of bidding then would be to find a supplier whose cost is lower than what the govt would be able to accomplish on its own.
i guess my question is, if the cost of the infra is bigger than the target, why push through with the project? why not just say “thanks, but no thanks”?
Dear GabbyD,
Karl might be more familiar with the Catanduanes road development than me. The reason for not saying “no thanks” is the same as that in Hyden’s mind.
Kaya mas-masarap ang tsokolate kapag may “fudge” sa tuktok.
Dean
Gab,
na dismiss ang kaso. sa ihahighlight ko
di umubra sa SC ang dahilan ng petitioner na hindi pwedeng maconsider na executive agreement or treaty ang loan sa isang Japanese Bank.
Tapos yung project daw na pinayagan maipagpatuloy ay di pa signed into law ang RA 9184.
Tapos di daw pwede gamitin ang Implementing rules dahil s implementing rules(irr-a)ay pang locally funded lang
wala pang for foreign funded implementing rules(irr-b) hanggang ngayon. Ang dahilan nga ay ang section 4 ng procurement act.
http://sc.judiciary.gov.ph/jurisprudence/2007/feb2007/167919.htm
Naging”precedent nga ang decision sa Abaya vs Ebdane.
Sa
http://www.gppb.gov.ph/laws_rules08/laws/DOJ Opinion on NBN.pdf
na ngayon ay burado na
nagbigay ng opinion ang doj secretary sa dotc secretary nung time ng nbn zte hearings.
I saved some of it.
‘While the courts are innocent of fudging folly,…”
Ano daw? Well, the Executive Fudge could not happen if we truly have independent judges, auditors, Bids and Awards Committees (BAC) and even senators. Remember, a lot of oversight functions are inserted into RP budget legislation.
The mix is more like Banana ‘Splits.’
Dear Phil,
I say “innocent”, you might say “ignorant”. You say tomatoe, I say tomato.
Dean
I think congress must approve foreign agreements that will commit the national treasury. It cannot be the sole prerogative of the executive department.
Dear Macapili,
Congressional approval is needed in all “treaties”. But when it is dressed up as an executive agreement such as the North rail and the ZTE NBN was, then even a cerification from the Treasury that we might not have the funds to repay will not stop the deal.
Dean
Gab,
This was the practice before the procurement act.
Previously, BAC members of agencies were allowed excessive use of
discretionary criteria as they were allowed to decide on bid offers using the standards of quality and price. Experts pointed out that it is difficult to measure quality and its trade off with price since it requires too much subjectivity, which, in turn, exposes the process to legal challenges.
The absence of a cap on price adjustments and change orders was often taken advantage by unscrupulous contractors. Bidders for public works projects frequently submitted ridiculously low bids and once awarded the contract, would submit extra work and change orders—resulting in increases in contract price. Meanwhile, the practice of setting a floor price aside from being inefficient prevented the government from taking advantage of potential savings from lower bids.
With the GPRA, the practice of setting a floor price was eliminated. The
approved budget for a contract (ABC) is now being used as the ceiling. The ABC is made public at the time the Invitation to Bid is published. A cap on price adjustments and change orders is also imposed. The law stipulates that change orders are limited to 10 percent of total project cost. If change orders exceed 10 percent of the project cost, which usually results from a faulty design, the cost of such change in the design will be charged against the designer.
(reference:senate economic planning office policy brief aug 2008)
I tell you ridiculously low bids is no longer just the issue, the ABC can also become an issue . Setting a low ABC will still force the bidders to compromise quality of the project by sourcing sub standard materials.
Basta may gusot may lusot.
******
I will correct my self om the irr.
a consolidated irr has been drafted.
[gppb.gov.ph/irrb/indexIRRB.asp]
for this vicious cycle to end, the only recourse is to trust our institutions and to proceed with caution .
Another school of thought.
What we all the other look away mas aasenso ba tayo?
Madami nagsasabi just to trust our government instead.
Sana daw maganda na ang railways natin from north to south.(luzon)
Sana daw napakinabangan ang NBN.
But the problem is trust is earned. The benefit of the doubt is a luxury.
‘What we all the other look away mas aasenso ba tayo?”
edit
what if we all look the other way,mas aasenso ba tayo?
salamat karl. mukhang ilang taon na natin pinaguusapan to ah!
everything u’ve said here makes sense.
my point is simple: bidding is supposed to generate the cheapest way to buy something/make something.
the ABC, ceiling bid, whatever, works to cap the spending of this thing based on some sort of reasonable criteria.
the fact that the lowest bid is higher than the ceiling is prima facie evidence that the ‘thing’ costs too much and should be scrapped, at least temporarily. i’m surprised this isnt an automatic feature of the bidding law, regardless of who finances it (foriegn public funds, private, etc.)
natatandaan ko nga Gab,
napag usapan na natin ito dati lampas isang taon na.
Your concern has merit ,but even if the project for bidding is clean to begin with,you should leave an allowance for price fluctuations,so I guess chances are prices can go above the ceiling.
for example after they set their invites for the bid with a set prices and gave a two week deadline,
what if within those two weeks the price of one variables spiked beyond forecasts, like the price of steel or cement for example?
that is very possible.But of course we can see or feel if there is a glaring overprice even with those scenarios.
Maybe when the law was crafted they have considered your concern,but we already have an idea how bills become laws.
“Senator Richard Gordon recently said that from one-third to a half of public works funds are lost through inefficiencies and corruption.”
Oh yeah? My question to Sen. Gordon: Why are you called an “administration senator”?
Dear Bert,
He said that in a forum where he was defending Bayani Fernando as his choice for Veep and one who understood the DPWH as he was going to give Bayani the DPWH portfolio should they win.
Contextually those should inflame you even more.
Can I join you in raising hellfire and brimstone?
Dean
At the very least, I would assumed as fact Dean having read “ADB’s Anticorruption Policy” as contained in that July 2, 1998 policy paper.
The point is, corruption, if ever it rears its ugly head, could be taken care of.
In other words, ADB can do the following courses of action, namely: blacklist, suspend, cancel (loan or grant), lower lending. This is even more true for the World Bank and the International Monetary Fund.
This said, why cry wolf?
Hi Primer,
I am a member of the “ADB Forum”, an NGO that constantly keeps the ADB under wtachful scrutiny and on its feet. They have realtively been more cautious now than the WB-IMF.
If one were to go through the WB Integrity Departments list of blacklisted companies, these are mostly Chinese state-corporations through which the government has found a way to contract with bypassing the WB, IF and the ADB and instead going through the various development assistance [packages offered by the Chinese government. Both the ZTE and the Northrail deal followed that sidestreet ( or better still, estero).
Dean
P.s. On crying wolf, it is us sheep who are crying wolf. Since these debts escalate and compel higher taxes, fees and other universal levies, I think the least that us sheep can do is cry wolf now and then.
Dean (again)
Hi, Dean,
I’m Herman Tiu Laurel and I’m interested to share you some of my views related to politics. Is it possible that i can hv your email add and mine is htlfam@yahoo.com. Looking forward to your soonest reply. My cellphone number 0917 865 8664. thank you and best regards.